While bankruptcies and consumer proposals are two common practices for Canadians looking to deal with problematic debts, they can also be somewhat confusing or misunderstood. One of the most common misconceptions comes with regard to who a bankruptcy trustee represents. This blog aims to clear the confusion.
In the simplest terms, a personal bankruptcy in Canada is a legal process whereby a bankruptcy trustee is appointed to administer your estate and distribute any assets to your creditors. With a consumer proposal, a financial calculation is done based on your income and assets and a proposal is put forth to your creditors based on a sum that you would pay back. In this case, a trustee administers the proposal with your creditors.
While it may sound, in both circumstances, as though they represent you, the reality is more complex.
A trustee is a legally appointed official, regulated by the government. They are required to represent all parties involved, namely the debtor and the various creditors. This means that, while the trustee does represent you, they are also required, by law, to represent your creditors as well. Their job is to administer your estate to ensure all parties are satisfied.
Another issue arises with regard to payment, specifically in the case of a consumer proposal. With a consumer proposal, since a bankruptcy trustee is paid based on the size of the proposal (the total sum to be repaid), there is some motivation to obtain a higher payout from you.
Since a bankruptcy trustee is the only person who can legally administer a bankruptcy or consumer proposal in Ontario, you can’t remove them from the equation. However, you can obtain your own representation to help you work through the process, a person who will help protect you and your assets. A financial consultant can examine your current financial circumstances, determine, in consultation with you, your financial abilities as far as repayment, and help structure the negotiation with the trustee to ensure the best possible deal. Furthermore, working with a financial consultant will give you access to the trustees they’ve worked with in the past, ones they know to be trustworthy.
Our aim here is not to disparage bankruptcy trustees. There are many reputable, trustworthy trustees out there willing to do their best to achieve a satisfactory solution for all involved. However, it is always smart to have your own representation. Just as you would never head to trial without a lawyer, the same should be said for this financial situation.
If you’re considering bankruptcy as a debt solution, DebtCare is the best place to start.
Call us today for a free consultation to discuss your options: 1 (888) 890-0888.
