What is a Bankruptcy?

Bankruptcy is a legal process under the Bankruptcy and Insolvency Act (BIA) that helps individuals or businesses eliminate most unsecured debts when they cannot pay. It provides a fresh start by stopping collection actions and wiping out qualifying debts.

Licensed Insolvency Trustees (LIT) in Canada

  • In Canada, the only professionals legally authorized to administer a bankruptcy or consumer proposal are Licensed Insolvency Trustees (LITs).

⚠️ Beware of Debt Consultants:

  • Companies advertising as “Debt Consultants,” “Credit Coaches,” or “Debt Settlement Firms” cannot file bankruptcy or proposals. If you hire them, they will eventually refer you to an LIT—often charging extra fees for the referral.

1. Who is a Licensed Insolvency Trustee (LIT)?

An LIT is a federally regulated professional licensed by the Office of the Superintendent of Bankruptcy (OSB).

  • Impartial Role: LITs act as officers of the court, ensuring fairness for both you and your creditors.
  • Qualification: Most have an accounting background and must pass a rigorous federal exam process that takes years to complete.

2. Can a Lawyer File Bankruptcy?

  • No. Bankruptcy is a legal process, but lawyers cannot file it.
  • Lawyer’s Role: They may provide legal advice or represent you in court if a creditor challenges your bankruptcy, but they cannot administer filings or manage trust funds.

3. What the LIT Does for You?

Once you choose an LIT, they handle everything:

  • Stops the Stress: Files a “Stay of Proceedings” to stop creditor calls and wage garnishments.
  • Manages Communication: You never speak to creditors again—LIT handles all contact.
  • Distributes Payments: You pay the LIT monthly (in a proposal), and they distribute funds fairly.
  • Counselling: Two mandatory financial counselling sessions to help rebuild credit.

4. Why Choose Bankruptcy?

  • Best for low income and no assets
  • Faster reset (as little as 9 months)
  • Impact on Credit
  • Consumer Proposal: Removed 3 years after last payment
  • Bankruptcy: Stays 6–7 years (14 years for second bankruptcy)

✅ Important: To file either option, you must speak with a Licensed Insolvency Trustee (LIT). They are the only professionals legally allowed to administer these processes in Canada.