A Bankruptcy Trustee. Setting the Record Straight.

Category: Personal Bankruptcy (6) comments

Most people don’t really understand what a bankruptcy trustee is, who they work for, or how they get paid.  It is not complicated, but there’s so much misinformation on the internet that I thought it was worth a few minutes of our time to set the record straight.

bankruptcy trustee

First and Foremost: I Am Licensed

Bankruptcy trustees are licensed by the Office of the Superintendent of Bankruptcy (an operating unit of Industry Canada) to administer bankruptcies and consumer proposals in Canada.  The vast majority are professional accountants by training, but in the last decade people from quite diversified backgrounds have entered the profession.  To become a trustee you must first complete a specific regimen of training and pass and two levels of written examination.  The final exam is before an Oral Board where the candidate must demonstrate their competence to perform the tasks required of a trustee.

To be sure the professional you are dealing with is a licensed bankruptcy trustee see if they are listed in the government’s Bankruptcy Trustee Registry.

I Have A Duty To All Stakeholders

Once licensed, a bankruptcy trustee become an officer of the Court, with a duty of care to all of the different stakeholders in the insolvency process.  You don’t hire a trustee in bankruptcy – you attend at a trustee’s office and they assist you with the process of filing either bankruptcy or a consumer proposal. The trustee is actually appointed by an Official Receiver (or in some cases the Court) to administer your file.  Official Receivers are all employees of the Office of the Superintendent of Bankruptcy.

So who does the trustee work for – you or the Official Receiver?  Both and neither.  Your trustee is responsible to see that you have been advised what all of your duties and responsibilities are when you file either bankruptcy or a consumer proposal.  Your trustee reports all of their actions (after the fact) to the Official Receiver who signs off on the work before your trustee gets paid.  Trustees also have a responsibility to your creditors – to see that they are aware of the process and comply with their responsibilities (like to stop trying to collect from you).  In addition, there is the Court and the general public that also have an interest is what happens with your file.  These are all of the stakeholders that as officers of the Court trustees ‘work for”.

I Am Not A Bankruptcy Lawyer

Trustees are not government employees.  Trustees cannot be practising lawyers. There is in fact a difference between a bankruptcy trustee and a bankruptcy lawyer. To file bankruptcy, you see a trustee. Bankruptcy lawyers deal mostly with complicated case law.

Trustees cannot be bankers or other types of lenders.  When a person is licensed as a trustee they cannot be actively involved in any other business or profession that might conflict with their duties as a trustee.

My Fees are Set By Legislation

So how does a trustee get paid?  The law in Canada clearly sets out how trustees get paid for any work that they do.  In most personal bankruptcies (called Summary Administrations) trustee are paid a tariff – a percentage of the money collected during the bankruptcy.  When you file you will be required to make some sort of payment into your bankruptcy as part of your duties.  All the money you pay, plus any other money recovered by your trustee goes into a central “pot” and at the end of the bankruptcy it is divided up based on very specific rules.  That is how and when your trustee gets paid.

When you file a consumer proposal, all of your payments go into a trust account.  From this account a bankruptcy trustee is paid a preparation fee, and then the trustee receives an administration charge from each of the creditors when money is paid out of the trust.  All of this is set out clearly in the law – the fees and charges are regulated and should not vary from the set amounts.

Hopefully that clarifies what a trustee is, who they work for and how they get paid.  If you ever speak to someone about your financial problems and they ask you for payment “upfront” odds are they are not a bankruptcy trustee, rather they are some sort of debt consultant that will refer you to a trustee once you’ve paid their fee.

If they try to sell you a ‘government program’ and don’t tell you what it is, chances are again they are an intermediary who will refer you to an actual bankruptcy trustee.

Save your money and ask directly “Who Are You?“.  Are you a licensed bankruptcy trustee? If they are not, you should consider speaking to someone that is.

By the way, all the advisors on Bankruptcy Canada are licensed bankruptcy trustees, chosen to participate on this site because they have a strong reputation in their local communities.

Trustee in Bankruptcy - Canada

Leave A Comment

  1. Very Low, Fixed Income Senior

    Oct. 19, 2014 – I filed for bankruptcy in 2013 and obtained my automatic discharge on December 22, 2013. I paid my bankruptcy trustees $100 cash and 17 months of post-dated cheques for a total of $1,800 – the figure I said I would pay them and the same figure stated on all my bankruptcy papers so paid them in full at the end of August 2014. However, they are still taking my GST/HST credit payment away from me which they said would be used only if I did not pay them in full. For 3 years, I have not received one GST/HST credit payment despite being a low income senior the entire time but more so after I declared bankruptcy? Since this is now Oct. 2014, 20 months later, why would the bankruptcy trustee be entitled to take anything at all from me but especially my GST/HST credit payments as I think this is just plain wrong?-thanks

  2. Lissa Merry

    Is it safe to deal with a bankruptcy trustee to safeguard the property? What are the factors that should be considered while selecting a trustee?

    1. Ted Michalos Post author

      Licenced insolvency trustees are officers of the Court, licenced by the federal government to administer proposal and bankruptcy files for individuals and businesses. Sounds pretty official doesn’t it? As an LIT I am biased, but we should be your best source for information about insolvency law in Canada and the practical implications of filing a consumer proposal or bankruptcy. In regards to safe guarding property, an LIT will protect the things that you own that are exempt under the law – personal possessions, furnishings, tools of the trade, cars and houses to some extent. It depends on the facts of your situation. Perhaps most importantly, because LITs are licenced by the federal government and serve as officers of the Court you have options if you think you have been mistreated by a trustee.

      How do you select a trustee? I’d start with a google search to see if the trustee has client reviews – what have other people said about the trustee in the past. Then I’d meet with them in person to determine how confident and comfortable you are with the trustee. While you are at it, how accessible was/is the trustee? Were they easy to contact? Did they respond quickly to any questions or concerns that you may have? Selecting a trustee is an important decision – you need to trust the person you’ve selected is sincerely interested in helping you…

  3. Betty

    What does it mean when a Trustee has his name on your land registry? Also, can a Trustee change the amount you owe from 1 day to the next. Also, my house was appraise at a certain amount when I filed for bankruptcy, and now appraised at a higher amount…Does that mean that the amount I owe can increase as well?

    1. J. Douglas Hoyes

      Hi Betty. These are questions you should ask your trustee. Based on what you have said it would appear that you owned a house at the time you filed bankruptcy, so the trustee registered on title. The trustee’s job is to realize the equity in your house for the benefit of your creditors, so you should discuss this with your trustee to see how they plan to proceed.


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