Understanding the role of various stakeholders when you are in debt

Since becoming informed is the first step to returning to financial health, we have described below the role of each person or organization to which a person in debt can turn for help.

What do they do? How can they help you?
Licensed Insolvency Trustee Debt management advisor
Stop interest charges YES Partially
Interrupt a lawsuit instituted by creditors YES NO
Negotiate with creditors to reduce the amount of debts YES Partially
What are their advantages?
Licensed and certified by a professional body YES NO
Fees for individuals’ files managed by law YES NO
Administered and controlled by the government YES NO


What is the role of the Licensed Insolvency Trustee?

Licensed Insolvency Trustee help debtors to straighten out their financial situation and make a fresh start. They have the exclusive right to administer insolvencies under the Bankruptcy and Insolvency Act and to initiate certain legal proceedings. They play a unique role with the various parties involved in the process. They ensure that debtors’ rights are protected without prejudice to creditors’ rights. The Licensed Insolvency Trustee assists debtors in their efforts to correct their situation and negotiates settlement agreements with creditors. In this way, the Licensed Insolvency Trustee ensures that the rights of both debtors and creditors are respected.

How is the Licensed Insolvency Trustee paid?

In the case of a consumer proposal or a summary administration, the fees of a Licensed Insolvency Trustee are prescribed by Bankruptcy and Insolvency Rules. Any amount paid to the Licensed Insolvency Trustee by the debtor is deposited in trust funds that the Licensed Insolvency Trustee administers. A report on the Licensed Insolvency Trustee’s administration (including the fees) is sent to each party and to the Superintendent of Bankruptcy for comment at the end of the process.

What is the Superintendent of Bankruptcy’s role?

The Superintendent of Bankruptcy ensures the enforcement and understanding of the Bankruptcy and Insolvency Act by setting out the rights and duties of Licensed Insolvency Trustee. The Superintendent establishes rules of conduct for Licensed Insolvency Trustee and supports their code of ethics. Moreover, the Superintendent ensures that debtors are properly informed of options enabling them to solve their debt problems.

What is the consumer credit alternative market?

The alternative market consists of finance companies that offer second chance credit services, including chattel mortgages (movable hypothecs in Quebec), lease-purchase options, cheque cashing, pawning, payday loans and instant car loans.

The alternative market is currently unregulated, resulting in questionable practices and sometimes very high interest charges. Moreover, such credit is often added to existing repayments and does not include all the other debts, which multiplies payments or creditors. The Canadian government, however, is trying to rectify the situation so that every citizen has access to fair credit.

N.B.: The expression “first chance credit” mainly refers to people who have never borrowed, while “second chance credit” refers to people who have already gone bankrupt.

What are the fees of private credit counsellors? 

The fees of private credit counsellors are unregulated. Their rates, which often range between $500 and $1,000, are payable at the first consultation meeting. After a first meeting, the advisors may request additional sums. It is therefore strongly recommended to inquire about the fees to be paid and the services offered.

What are the fees for non-profit credit counsellors?

Non-profit credit counsellors add about 10% to refunds that debtors pay to creditors in the form of fees. In addition, they receive fees of about 22% from some creditors, such as banks and credit card companies, when debtors repay their debts.

Provincial and territorial governments are responsible for regulating credit counselling agencies. Most of these organizations have a good reputation. Nevertheless, it is important to be well informed before making use of their services because there is no accreditation, training or legislation certifying their skills.