Individuals able to provide debt relief services under the Bankruptcy & Insolvency Act (BIA) in Canada are licensed by the federal government through the Office of the Superintendent of Bankruptcy (OSB). In December of 2015, the OSB announced a significant change in the designation of these professionals from Trustee in Bankruptcy to Licensed Insolvency Trustee or LIT. This change takes place effective April 1, 2016, although firms and individuals may choose to use the new designation immediately if they notify the OSB of their intention to do so in writing.
The OSB has been reviewing trustee advertising and designation directives for some time. The primary reason was to reduce the amount of confusion for consumers as to who was licensed to provide the full range of debt restructuring services available to consumers under the BIA. Those services include not only personal bankruptcy, but also a debt settlement option called a consumer proposal. Currently, almost half of all insolvency filings in Canada by individuals are a consumer proposal.
Licensed Insolvency Trustees are still required to help an individual who is seeking debt restructuring advice understand all of their available options, even those options not covered by the Bankruptcy & Insolvency Act. The use of the title Bankruptcy Trustee made it hard for consumers to understand that only licensed Bankruptcy Trustees could file a consumer proposal. Adding to the confusion, trustees were also able to call themselves Consumer Proposal Administrators under the BIA. In addition, many unlicensed debt consultants advertise ‘government’ debt settlement programs, which are really consumer proposals, despite the fact that these debt advisors are not licensed to provide these services. These debt consultants can, in fact, only refer their prospective client to a licensed trustee (now LIT) to file a consumer proposal, but would do so only after the debt consultant charged the client an unnecessary fee, since most trustees (LITs) provide a free consultation. Once the new designation is fully implemented, it is hoped that this will provide significant clarity and security for individuals seeking debt restructuring advice.
While the new designation changes the name from Bankruptcy Trustee to Licensed Insolvency Trustee, it does not change the duties, responsibilities and code of ethics that LIT’s must adhere to in order to be licensed. Licensed Insolvency Trustees are still required to help an individual who is seeking debt restructuring advice understand all of their available options, even those options not covered by the Bankruptcy & Insolvency Act.
It is likely that firms and individual trustees will adopt this name change over the next year. While the name change is effective April 1, 2016, trustees will have 12 months to change all forms of advertising, including their websites. It will also take the consumer some time to recognize the new designation and for that reason, firms will likely use both forms interchangeably on their websites for a period of time.
It is always important when you are looking for debt advice that you talk with a qualified, reputable professional. A full list of Licensed Insolvency Trustees in Canada can be found on the OSB’s website.