What is a Licensed Insolvency Trustee and What is Their Role in Bankruptcy and Consumer Proposals?

Learn About the Role a Licensed Insolvency Trustee Plays in Debt Relief Solutions

Serious or overwhelming debt is a problem that demands expert advice. There are many so-called experts out there who claim to be able to help you manage or eliminate your debt. But as with any field, not all of these experts are created equal. Before you seek out services from someone to help you conquer your debt, make sure you know what they can and cannot do for you.

What Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is a person who is licensed by the government to advise people who may be insolvent (unable to pay back all their debts) and are in need of debt relief. They are trained and qualified to guide you through either a bankruptcy or a consumer proposal.

Why Do You Need One for Bankruptcy and Consumer Proposal?

Anyone who decides to undertake a consumer proposal or file for bankruptcy must work with an LIT, as they are licensed by the Office of the Superintendent of Bankruptcy, a federal government department, to administer those proceedings, which are regulated under the Bankruptcy and Insolvency Act.

What Does an LIT Do During Bankruptcy Filing?

An LIT will:

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  • Help you complete the required paperwork and then submit it to the government to begin the bankruptcy process.
  • Notify your creditors and deal with them on your behalf, so that collection calls and wage garnishments are stopped and any legal proceedings against you are stayed.
  • Sell your assets and hold the proceeds in trust to be distributed to your creditors.
  • Calculate whether you have surplus income and, if so, determine the amount you must legally pay towards your creditors and collect those monthly payments.


Also, as part of your bankruptcy, you must attend two credit counseling sessions—these may be offered by your LIT or by another provider.

What Does an LIT Do During a Consumer Proposal?

During the consumer proposal process, an LIT will:

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  • Help you develop your consumer proposal, in which you offer to pay creditors a percentage of what you owe them and/or ask for an extended repayment period.
  • File your consumer proposal with the government and present it to your creditors for approval.
  • Attend a meeting of your creditors, if one is requested.
  • Collect your monthly or lump-sum payments (depending on your agreement) and hold these funds in trust to be distributed to your creditors.


As part of your consumer proposal, you are also required to attend two credit counseling sessions, which may be offered by the LIT or another accredited counselor.

How Does a LIT Compare to a Debt Consultant/Credit Counsellor?

LITs are not the same as debt consultants or credit counsellors. In fact, they differ on four major points.


An initial consultation to determine your options with an LIT is typically free. There are costs associated with filing for bankruptcy or a consumer proposal, but those costs are set by the government and your LIT is paid from the funds collected during the process, not an additional cost to you. Some debt consultants or credit counsellors may be not-for-profit, but many will charge upfront for their services. Be aware that there are regulations around how much they can charge you and when.

LITs Are Federally Regulated

All LITs are regulated by the government and must have proper training and undertake ongoing professional development. The Bankruptcy and Insolvency Act sets out their role and they are overseen by the Office of the Superintendent of Bankruptcy. Debt consultants and credit counsellors are not regulated professions, so anyone can call themselves one and set up a business as such, no matter their qualifications.

LITs Must Follow Strict Professional Requirements

LITs are also Chartered Insolvency Restructuring Professionals (CIRPs) and have rules of professional conduct, a code of ethics and professional development requirements.

Only LITs Can Administer Bankruptcies and Consumer Proposals

A debt consultant or credit counsellor can help you examine your debts and make a plan to repay them. They can also talk to your creditors on your behalf and ask them to reduce your interest rate or give you longer to repay them. But if you want to make a consumer proposal or file for bankruptcy, you must work with an LIT to administer the process.

The Takeaway

If you need advice about handling your debt, there’s plenty of it out there. But if you think you might need to make a consumer proposal or file for bankruptcy, it’s best to start by talking with an LIT who knows the most about these processes and can help and support you every step of the way.

Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee based in Ottawa. We service Ottawa and most of eastern Ontario. We have helped thousands of individuals and couples successfully resolve their debt challenges since 2002. Its passion – its mission – is your health and well-being!