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The Bankruptcy & Insolvency Act

October 4, 2022

The Bankruptcy & Insolvency Act (“BIA”) is the enabling legislation that allows people to file Proposals and Bankruptcies.  The BIA is administered by Licensed Insolvency Trustees, who are in turn overseen by the Office of the Superintendent of Bankruptcy, which operates under the auspices of Industry Canada.

Debt Consultants and Credit Counsellors are neither qualified nor licensed to provide either Proposal or Bankruptcy services.  In fact, most Debt Consultants are simply taking advantage of two factors 1. Fear – people are afraid to talk with “Bankruptcy Trustees”, and 2. The mistaken belief that there are other “Government Programs”, or that Trustees represent creditors.

The reality is that LITs are caught in a very paradoxical position, from a Debtor’s perspective we may appear to represent the Creditors in that we collect money from Bankrupts and Proponents and at times we are required to seize and sell property.  On the other side of the coin, from the Creditor’s point of view, we may appear to represent Debtors, because we help them to reduce or eliminate their debts and keep property that is exempt from seizure.

The fact is that LITs do not represent either Creditors or Debtors, the BIA requires that we remain neutral when dealing with either.  LITs are Administrators of the BIA, and really nothing more than that.  The BIA itself is a very complex piece of legislation that deals with the equitable rights of the parties to an insolvency proceeding.

Rule 39 Trustees shall be honest and impartial and shall provide to interested parties full and accurate information as required by the Act with respect to the professional engagements of the trustees.

Although the BIA, like other Acts, strives to codify processes, much of the legislation is left open to interpretation by Creditors, Debtors, LITs, the Superintendent and ultimately the Courts.  Like with other laws there is a lot of wriggle room for challenges and changes.

The most important takeaway for Consumers is that LITs are officers of the Court and are imbued with the necessary authority (license) to assist Debtors in taking advantage of the debt relief that comes from filing a Proposal or Bankruptcy.  To get meaningful, legal, and appropriate debt relief call your local LIT – you can search the Office of the Superintendent of Bankruptcy’s list of local LITs by clicking on this link.

Almost all LITs offer free initial consultations, these meetings are used to determine the best options available for you and your family, under the BIA, and to provide you with an outline of expectations.  It is imperative that you provide your LIT with good factual information in order to avoid surprises later on.  Whether you chose to file a Bankruptcy or a Proposal there will be consequences, both good and bad.

The Bad News:

The bad news is that you will be required to forfeit current access to most forms of credit, except mortgaged debt.  Your credit score may drop lower than it already is.  You will have to comply with certain rules that require some form of action on your part.

The Good News:

The good news is that legal actions against you will stop, so will garnishees of income and accounts.  Your creditors will stop calling you.  Your monthly payments will be easier to manage.   Your credit score will start to improve shortly after you have filed your Bankruptcy or Proposal.  If you do everything required of you in a timely fashion it is unlikely that you would ever need to attend court. 

Call us today, 519-646-2222, to get some “Good News” happening in your life.