Many people looking for a solution to their debt problems think about filing for bankruptcy to get immediate debt relief. For many contemplating it as a way out of financial trouble, one of the very first things they usually do is to find a Toronto bankruptcy and insolvency lawyer. It is a common misconception, perhaps because they think that it is the same process as in the United States where a lawyer is needed to file for bankruptcy.
Under the Bankruptcy law in Canada, however, only a Licensed Insolvency Trustee is licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer specific types of insolvency procedures for a debtor. These procedures include:
Bankruptcy – A legal process where assets of an individual or company are applied to pay off creditors.
Consumer Proposal – A legal alternative to bankruptcy where an offer is made to creditors in an effort to settle the debt.
Receivership – A legal procedure available to companies that have financial problems. Assets of the company are turned over to an independent third party receiver or an official appointed by a bankruptcy court or a secured creditor. The Receiver, who must also be licensed as a Licensed Insolvency Trustee by the Office of Superintendent of Bankruptcy, is in charge of liquidating all assets to ensure that as much debt as possible is paid back to creditors.
Insolvency lawyers cannot file a bankruptcy or consumer proposal or act as a Receiver. They can give advice on bankruptcy matters but will have to refer you to a Licensed Insolvency Trustee who can provide more in-depth information and guidance about other debt relief options, in particular, the consumer proposal and bankruptcy processes.
The primary reason why the Canadian bankruptcy system is set up in this way is to help lower the costs associated with filing for bankruptcy or even a consumer proposal. Bankruptcy lawyers are highly specialized in insolvency law, which makes them very expensive. In fact, a big part of costs in any legal proceeding goes towards attorney’s fees. So, by not involving lawyers in the insolvency procedure, all related costs are reduced to the lowest amount possible and, in turn, more money can be paid to the creditors.
Trustees, on the other hand, are mostly professional accountants. Their accounting designation and extensive financial training and experience make them uniquely qualified to provide comprehensive financial advice to people who need help with restructuring their debts. They have licensed debt experts who can guide you not just with bankruptcies and consumer proposals, but with other formal debt relief methods as well to eliminate your debt such as credit counseling or a debt management plan (DMP). Trustees will generally cost you less because their fees are regulated by the federal government.
The primary reason why the Canadian bankruptcy system is set up in this way is to help lower the costs associated with filing for bankruptcy or even a consumer proposal. Bankruptcy lawyers are highly specialized in insolvency law, which makes them very expensive. In fact, a big part of costs in any legal proceeding goes towards attorney’s fees. So, by not involving lawyers in the insolvency procedure, all related costs are reduced to the lowest amount possible and, in turn, more money can be paid to the creditors.
Trustees, on the other hand, are mostly professional accountants. Their accounting designation and extensive financial training and experience make them uniquely qualified to provide comprehensive financial advice to people who need help with restructuring their debts. They have licensed debt experts who can guide you not just with bankruptcies and consumer proposals, but with other formal debt relief methods as well to eliminate your debt such as credit counseling or a debt management plan (DMP). Trustees will generally cost you less because their fees are regulated by the federal government.
In most cases of personal bankruptcies, insolvency lawyers do not get involved at all. Only the Trustee manages the entire insolvency proceeding from start to finish. If the case involves any contentious issue, the trustee will advise that you hire an attorney to challenge the matter and make an argument on your behalf. However, a client may choose to retain an insolvency lawyer throughout the entire proceeding to work alongside the trustee, particularly if the case involves a fairly large amount of money and very complicated financial issues.
If you are undergoing a bankruptcy, a Toronto bankruptcy and insolvency lawyer can give the added protection of providing you with independent legal advice in case you may need it at any point in the process. A specialized attorney can work together with your trustee and give you a double dose of expert opinion on how to resolve your financial problems and ensure that your rights as a debtor are not abused.
If you are undergoing a bankruptcy, a Toronto bankruptcy and insolvency lawyer can give the added protection of providing you with independent legal advice in case you may need it at any point in the process. A specialized attorney can work together with your trustee and give you a double dose of expert opinion on how to resolve your financial problems and ensure that your rights as a debtor are not abused.
