Why are Bankruptcy Trustees Now Called Licensed Insolvency Trustees?
Trustees in bankruptcy/bankruptcy trustees across Ontario and Canada recently had their name changed. They began being legally referred to as Licensed Insolvency Trustees (“LITs”) instead. While the change may seem insignificant to some, the implications have greater depth. The following questions most plaguing consumers were compiled to help explain the reasoning better.
Q: What are LITs and What Do They Do?A: A LIT can help you with financial problems by assessing the best course of action to take in your unique situation to reduce or eliminate debt. This may simply involve debt counselling and helping you learn budgeting techniques to improve your financial situations. Or, the LIT can help you to obtain a debt consolidation loan, file a consumer proposal, a division I proposal, or file for bankruptcy. Your LIT will prepare the documentation needed, represent you in court and mediate between you and your creditors as needed. When a debt solution is chosen, your LIT will oversee the plan and help to ensure your payments are made to your creditors.
Q: What Code of Ethics Does a LIT follow?
A: A LIT is a professional who must follow specific regulations that protect consumers. The official Code of Ethics is part of the BIA, and it includes a section on advertising standards for LITs, such as mandating the use of the correct terms to distinguish themselves from unlicensed trustees.
Q: When Did the Change Take Place?
A: Although the change took effect in April 2016, it was initially announced in December 2015 as part of a new directive issued by the Office of the Superintendent of Bankruptcy (OSB).
Q: Who Made the Change?
A: The OSB and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) shared in the decision and proactivity to make the change to licensed insolvency trustees to help clarify what this role does. The new term broadens the scope beyond just helping individuals with debt file for bankruptcy. The old term had a negative connotation, whereas insolvency is somewhat gentler and encompasses more possibilities of one’s actual circumstances.
Q: What is the Bankruptcy & Insolvency Act (the “BIA”)?
A: The BIA is organized into 14 different sections that explain the operations of the various choices for consumers and businesses when dealing with financial difficulties. It also indicates the role of Office of the Superintendent of Bankruptcy (the “OSB”) and its representatives, as well as trustees, creditors, consumers, and the court. Overall, the purpose of the BIA is to help protect both consumers and creditors, while ensuring the other bodies run properly.
Q: Why did the Name Change?
A: Changing the name to focus more on the overarching term “insolvency” instead of the more specific term “bankruptcy” helps to explain the broadened scope of what trustees do. The name change will appeal to more consumers who may otherwise believe the sole focus and only option is bankruptcy and it will give the LIT profession greater regard.
Adding the term “licensed” was intended to distinguish the LIT from alternative businesses or individuals who attempt to advertise themselves as having the same expertise as an LIT when they do not.
Q: How Does the Name Change Protect Consumers?
A: The name change will help protect consumers by making the distinction between a licensed professional and an unlicensed professional clearer. Studies show that Canadians are commonly unaware of the differences between a licensed and unlicensed provider. A 2015 Ipsos Reid poll, conducted on behalf of CAIRP, showed that a large proportion of Canadians don't know which professionals have a license and which professionals don’t. According to the poll, sixty percent of Canadians mistakenly believed that employees of debt settlement companies and credit counselling agencies are federally or provincially licensed debt-relief professionals.
Additionally, since insolvency individuals who are licensed are regulated by the OSB, consumers who turn to them will also benefit overall in fees they pay. LIT’s fees are regulated and the initial consultation with an LIT is usually free of charge. Unlicensed professionals will charge for the initial consultation and more money overall and often ultimately refer consumers to an LIT when they realize they cannot perform the work needed themselves. With the distinction made in name, the consumer who is already overwhelmed by debt is likely to save time and money by turning to a licensed professional first.
Q: What is the difference between a LIT and a Chartered Insolvency and Restructuring Professional (CIRP)?
A: Although not all CIRP certification holders are LITs, all LITs must have a CIRP designation. As members of the CAIRP, they are considered specialists in helping individuals through various insolvency and overall debt issues. Individuals who are not LITs but attempt to sell themselves as debt experts will also not have the important CIRP designation that indicates and verifies their education and agreement to withhold the profession’s high standards to help consumers.
Contact Our LITs in Ontario at Harris & Partners Inc.
Qualified advice is available at Harris & Partners Inc. in you are struggling with your debt. LITs are the only professional licensed by the federal government to manage debt restructuring under the BIA. A LIT, acting as a proposal administrator or trustee in Toronto, Oshawa, Hamilton or elsewhere in Ontario at our firm can arrange a consumer proposal or bankruptcy filing for you. Contact us for debt help at 1-800-268-8093.