Licensed Insolvency Trustees in Canada: What They Do and How to Find One

Debt Solutions

Licensed Insolvency Trustees in Canada: What They Do and How to Find One

Mar 20, 202619 min read

What Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is a federally regulated professional who is authorized by the Office of the Superintendent of Bankruptcy (OSB) to administer insolvency proceedings under the Bankruptcy and Insolvency Act (BIA). LITs are the only professionals in Canada who can file consumer proposals and personal bankruptcies on your behalf. They serve as officers of the court and are bound by strict ethical and professional standards, making them fundamentally different from debt consultants, credit counsellors, or debt settlement companies.

If you are struggling with unmanageable debt in Canada, understanding what a Licensed Insolvency Trustee does, how to find a reputable one, and what to expect from the process is essential knowledge. This guide covers everything you need to know — from the initial free consultation to the completion of your insolvency proceeding, along with costs, timelines, and practical advice for choosing the right LIT for your situation.

The role of the Licensed Insolvency Trustee has evolved significantly. Prior to 2015, these professionals were known as “Bankruptcy Trustees” or “Trustees in Bankruptcy.” The name change to Licensed Insolvency Trustee was made to better reflect the full range of services they provide, which extends well beyond bankruptcy to include consumer proposals, informal debt restructuring advice, and financial counselling.

The Role of Licensed Insolvency Trustees in Canada

Licensed Insolvency Trustees occupy a unique position in Canada’s financial landscape. They are simultaneously advocates for the debtor, protectors of creditors’ rights, and officers of the court. This triple mandate means they must act with fairness and impartiality while helping you find the best solution for your debt situation.

Core Services Provided by LITs

A Licensed Insolvency Trustee provides the following key services:

How LITs Differ From Other Debt Professionals

One of the most important distinctions for Canadians to understand is how Licensed Insolvency Trustees differ from other professionals who work in the debt relief space. This distinction matters because using the wrong professional can cost you thousands of dollars in unnecessary fees and may delay your debt relief.

Some companies advertise debt relief services and charge thousands of dollars in upfront fees, only to refer you to a Licensed Insolvency Trustee — who would have provided a free consultation directly. These middlemen add no value and are not regulated in most provinces. If anyone asks you to pay before you have met with a Licensed Insolvency Trustee, that is a major red flag. Go directly to a LIT instead. The consultation is always free, and you will receive unbiased advice about all your options.

Consumer Proposals vs. Bankruptcy: Understanding Your Options

The two formal insolvency proceedings that a Licensed Insolvency Trustee can administer are consumer proposals and personal bankruptcy. Understanding the differences is critical to making the right choice for your financial situation.

Consumer Proposals: The Most Popular Option

A consumer proposal is a legally binding agreement between you and your creditors, administered by a Licensed Insolvency Trustee, where you agree to pay a portion of your debt over a period of up to 5 years. The creditors agree to accept this reduced amount as full settlement and stop all collection actions, including wage garnishments and interest charges.

Key features of consumer proposals:

• You keep all your assets, including your home, vehicle, and investments
• Interest stops accruing on all debts included in the proposal
• Creditors cannot take legal action against you once the proposal is filed
• You typically pay 20% to 50% of what you owe, depending on your income and assets
• Maximum debt limit is $250,000 (excluding your mortgage on your principal residence)
• Payments can be structured monthly over up to 60 months
• Appears on your credit report as an R7 rating for 3 years after completion

Personal Bankruptcy: When It Is the Right Choice

Personal bankruptcy is a legal process where you surrender certain assets in exchange for the discharge of most of your debts. While it carries a greater stigma, bankruptcy can be the most appropriate option in certain circumstances.

Key features of personal bankruptcy:

• Most unsecured debts are discharged (eliminated)
• Certain debts are not dischargeable — student loans less than 7 years old, child support, court fines, and debts arising from fraud
• You may lose some assets, but provincial exemptions protect essential property
• If you have surplus income (above the OSB threshold), you must make surplus income payments
• A first-time bankruptcy with no surplus income is discharged in 9 months
• A first-time bankruptcy with surplus income is discharged in 21 months
• Appears on your credit report for 6 years after discharge (first bankruptcy) or 14 years (second bankruptcy)

How to Find and Verify a Licensed Insolvency Trustee

1. Search the OSB's Official Directory

   The most reliable way to find a Licensed Insolvency Trustee is through the Office of the Superintendent of Bankruptcy’s official directory at ic.gc.ca. This directory lists every licensed trustee in Canada, along with their office locations and contact information. You can search by province, city, or the trustee’s name. Only individuals and firms listed in this directory are legally authorized to administer insolvency proceedings.



2. Verify the Trustee's Licence and Standing

   Once you have identified potential LITs, verify that their licence is current and in good standing. The OSB directory shows the status of each licence. You can also check whether the trustee or their firm has been subject to any disciplinary actions or complaints. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) also maintains a directory of its members, though not all LITs are CAIRP members.



3. Research Reviews and Reputation

   Look for online reviews on Google, Trustpilot, and other review platforms. Pay attention to patterns in the reviews rather than individual positive or negative reviews. A good LIT will have reviews that mention clear communication, compassionate service, and thorough explanations of options. Avoid trustees with multiple complaints about pressure tactics, lack of communication, or hidden fees.



4. Schedule Multiple Free Consultations

   There is no obligation to go with the first LIT you meet. Schedule consultations with 2-3 different trustees to compare their approaches, communication styles, and the options they recommend. Each consultation should last about 30 to 60 minutes and should include a review of your complete financial situation, a discussion of all available options (not just insolvency proceedings), and clear answers to all your questions.



5. Ask the Right Questions

   During your consultations, ask specific questions to evaluate each LIT. How many consumer proposals has your firm filed in the past year? What is your success rate with creditor acceptance? How will my specific situation be handled? Will I be working directly with the licensed trustee, or primarily with support staff? How do your fees work? What are the total costs I should expect? Are there additional charges for the mandatory counselling sessions?

Major Licensed Insolvency Trustee Firms in Canada

Several national firms operate across Canada, providing LIT services in multiple provinces:

What to Expect at Your First Meeting With a LIT

The free initial consultation is your opportunity to understand your options and assess whether the LIT is a good fit for your needs. Here is what typically happens during a first meeting:

Before the Meeting: What to Prepare

To make the most of your consultation, gather the following information before your appointment:

• A list of all your debts — creditor names, account numbers, and balances
• Recent pay stubs or proof of income (last 2-3 months)
• Your most recent tax return (Notice of Assessment from CRA)
• A list of your assets — home value, vehicle value, savings, investments, RRSPs
• Monthly expense estimates — rent/mortgage, utilities, groceries, transportation, insurance
• Any collection letters, court documents, or wage garnishment notices you have received
• Information about any co-signed debts or joint accounts

During the Meeting

The consultation typically lasts 30 to 60 minutes and follows this general structure:

1. Financial Assessment: The LIT will review your income, expenses, debts, and assets to understand your complete financial picture.
2. Options Discussion: Based on your situation, the LIT will outline all available options, which may include informal debt settlement, a debt management program through a credit counsellor, a consumer proposal, personal bankruptcy, or simply tightening your budget and paying off the debt over time.
3. Recommendation: The LIT will provide their professional opinion on which option they believe is best for your situation and why.
4. Process Explanation: If a consumer proposal or bankruptcy is recommended, the LIT will walk you through the entire process, including timelines, costs, and what you need to do.
5. Questions and Answers: You will have time to ask any questions. There is no pressure to make a decision at the first meeting.

Since the pandemic, most Licensed Insolvency Trustees now offer virtual consultations by phone or video call. This makes it easier to access LIT services, particularly if you live in a rural area or have mobility challenges. Virtual consultations are conducted with the same level of professionalism and confidentiality as in-person meetings, and all documents can be exchanged electronically. Some firms even offer evening and weekend appointments to accommodate work schedules.

Understanding the Costs

One of the most common concerns people have about insolvency proceedings is the cost. Here is a transparent breakdown:

Consumer Proposal Costs

The LIT’s fees in a consumer proposal are regulated by the BIA and are paid from the payments you make under the proposal. You do not pay these fees separately — they come out of your proposal payments. The fee structure is:

• A filing fee of $1,500
• A counselling fee of $170 (for two mandatory sessions)
• 20% of all future distributions to creditors
• A levy payable to the OSB (5% of distributions)

For example, if your consumer proposal payment is $500 per month for 48 months (total $24,000), the LIT fees are built into that $24,000. You do not pay $24,000 plus additional fees. The amount offered to creditors is calculated to cover LIT fees, OSB levies, and still provide a meaningful recovery for creditors.

Personal Bankruptcy Costs

The base cost of a first-time personal bankruptcy with no surplus income is approximately $1,800. This covers the LIT’s administration fee, the two mandatory counselling sessions, and the OSB levy. If you have surplus income (income above the OSB threshold), you will make surplus income payments for a longer period. The surplus income thresholds for 2026 are updated annually and vary based on family size:

The Consumer Proposal Process: A Detailed Walkthrough

Since consumer proposals are the most common insolvency filing in Canada, here is a detailed walkthrough of the entire process:

1. Filing the Proposal

   After your consultation and the decision to proceed, the LIT prepares the consumer proposal documents. This includes a detailed listing of all your debts, a statement of your income and expenses, and the proposed payment terms. Once you sign the documents, the LIT files the proposal with the OSB. Filing triggers an immediate stay of proceedings, which stops all collection calls, wage garnishments, and legal actions by creditors.



2. Creditor Voting Period (45 Days)

   Creditors have 45 days to review the proposal and vote to accept or reject it. A consumer proposal is deemed accepted unless a majority in dollar value of proven creditors request a meeting of creditors. In practice, the vast majority of consumer proposals are accepted without a meeting. If a meeting is called, creditors vote and the proposal is accepted if a majority in dollar value votes in favour.



3. Making Your Payments

   Once accepted, you make your monthly payments to the LIT according to the terms of the proposal. Payments can typically be made by pre-authorized debit, post-dated cheques, or online banking. The LIT distributes these payments to your creditors after deducting their fees and the OSB levy. During this period, interest stops on all debts included in the proposal.



4. Mandatory Counselling Sessions

   You are required to attend two financial counselling sessions administered by the LIT or a designated counsellor. The first session covers budgeting and money management. The second session covers the warning signs of financial difficulty and strategies to avoid future problems. These sessions are educational and non-judgmental.



5. Completion and Certificate

   Once you have made all your payments and completed your counselling sessions, the LIT issues a Certificate of Full Performance. This is your proof that the consumer proposal has been completed and that the debts included in the proposal have been satisfied. The notation on your credit report (R7) will remain for 3 years after the certificate is issued.

Provincial Exemptions: What You Keep in Bankruptcy

If you do file for bankruptcy, provincial laws determine what assets you are allowed to keep. These exemptions vary significantly across Canada:

Under federal law (the BIA), all RRSP, RRIF, and DPSP contributions made more than 12 months before the date of bankruptcy are fully exempt from seizure. This means your retirement savings are protected even if you file for bankruptcy. Only contributions made in the 12 months immediately before filing can be claimed by the trustee. This is one of the strongest asset protections in Canadian insolvency law and is an important factor when deciding between a consumer proposal and bankruptcy.

Red Flags When Choosing a Licensed Insolvency Trustee

While the vast majority of LITs are ethical professionals, there are warning signs to watch for:

• Pressure to file immediately: A good LIT will give you time to consider your options. If they pressure you to sign paperwork at the first meeting, consider seeking a second opinion.
• Not discussing all options: LITs are required to discuss all debt relief options, not just consumer proposals and bankruptcy. If they jump straight to a filing without considering alternatives, that is a concern.
• Upfront fees before consultation: The initial consultation must be free. If anyone asks for payment before meeting with a licensed trustee, they may be an unlicensed intermediary.
• Guaranteeing specific outcomes: No LIT can guarantee that creditors will accept a consumer proposal. If they promise a specific result, be skeptical.
• Poor communication: If the office is difficult to reach during the initial stages, communication is unlikely to improve after you file.
• Not verifiable in the OSB directory: Always confirm that the trustee is listed in the OSB’s official directory. Anyone not listed is not a Licensed Insolvency Trustee.

After Your Insolvency Proceeding: Rebuilding Credit

Completing a consumer proposal or bankruptcy is not the end of your financial journey — it is a new beginning. Here is what you can expect for credit rebuilding:

Timeline for Credit Rebuilding:

• You can begin rebuilding credit immediately after filing (not just after completion)
• A secured credit card is the most accessible starting point — available from most major banks with a deposit of $200 to $500
• After 1-2 years of responsible credit use, you may qualify for unsecured credit products
• Many people achieve a credit score above 700 within 2-3 years of completing their consumer proposal or receiving their bankruptcy discharge
• Some mortgage lenders will consider applications as early as 2 years after a consumer proposal discharge, though terms may be less favourable

Frequently Asked Questions About Licensed Insolvency Trustees

Final Thoughts

Licensed Insolvency Trustees serve a vital role in Canada’s financial safety net. They provide the expertise, legal authority, and professional oversight needed to help Canadians navigate overwhelming debt through structured, fair processes. Whether you ultimately file a consumer proposal, declare bankruptcy, or discover a different solution altogether, the free consultation with a LIT is the most important first step you can take. It costs nothing, carries no obligation, and gives you the information you need to make an informed decision about your financial future. If debt is keeping you up at night, reach out to a licensed trustee — the path forward may be clearer than you think.