In Canada, consumer proposals or personal bankruptcies must be administered by a licensed bankruptcy trustee. Bankruptcy trustees are not lawyers. Bankruptcy lawyers do not—unlike in the US—administer bankruptcies. If you decide to declare bankruptcy, a bankruptcy trustee must file the paperwork for you.
Bankruptcy trustees are licensed by the Office of the Superintendent of Bankruptcy. They abide by the Code of Ethics for Trustees in Bankruptcy, which ensures the high standard of services they provide. These services include financial counselling, as a thorough discussion of all your financial options is the important first step in resolving your financial situation.
The role of bankruptcy trustees
Trustees are bankruptcy specialists, and many bankruptcy trustees are professional chartered accountants with extensive financial training. Their first duty is to fully explain all your debt relief options. They will also explain Canada’s bankruptcy and insolvency laws.
Bankruptcy trustees are the only agents who can administer your bankruptcy or proposal, so beware of debt consultant companies who promise to do this for a fee. These companies will often take your fee then refer you to a bankruptcy trustee. Bankruptcy trustees will offer you a free and confidential consultation.
Bankruptcy trustees will help analyze your finances and will explain your options. You may not need to declare bankruptcy, as you may be able to make a legal consumer proposal.
Consumer proposals consist of an agreement between you and your creditors, mediated by your trustee, for you to make certain payments. All proceedings against you are ceased if your creditors vote to accept the proposal.
The role of bankruptcy lawyers
Practicing lawyers are unable to become bankruptcy trustees. Bankruptcy lawyers specialize in insolvency law. In Canada, bankruptcy lawyers are usually engaged on business files or to provide individuals advice in complicated situations. In our legal system, lawyers for each side present their client’s side of an argument, and the Court makes the decision based on these arguments. Lawyers are not needed in the majority of personal bankruptcy cases, as usually there is no legal argument over the debts you owe or the assets you possess.
If your trustee deems there are contentious issues with your debts or assets, your trustee will suggest you to seek legal advice.