Facing financial difficulties or unmanageable debt can be overwhelming, but seeking help from a Licensed Insolvency Trustee (LIT) can support you on your journey to a fresh financial start. If you’ve been looking into debt relief options, you’ll likely be aware that there are a number of solutions available. The most powerful forms of debt relief in Canada include filing a consumer proposal or bankruptcy. Consumer proposals are a popular bankruptcy alternative and can reduce your unsecured debts by up to 80%, while bankruptcy can eliminate your debts completely. Both of these debt relief solutions are legal, and can only be filed by Licensed Insolvency Trustees – the only professionals in Canada legally able to file all forms of debt relief. At Spergel, the ‘get rid of debt’ people, we have helped over 100,000 Canadians to begin fresh financial futures, and we understand that many Canadians are worried about hidden costs and fees when it comes to gaining debt relief. In this article, we delve into Licensed Insolvency Trustee fees and the laws determining how Licensed Insolvency Trustees are paid when you work with one so you know what to expect when seeking assistance.

What is a Licensed Insolvency Trustee?

Before diving into fees, let’s clarify the role of a Licensed Insolvency Trustee. LITs are federally regulated professionals authorized to administer various debt relief solutions under the Bankruptcy and Insolvency Act. They provide guidance and support to individuals and businesses facing financial challenges, offering solutions such as bankruptcy, consumer proposals, and credit counselling. The role of a Licensed Insolvency Trustee involves assessing each client’s financial situation, providing tailored advice, and guiding them through the process of debt resolution. LITs prioritize the best interests of their clients, working to achieve a fresh financial start while ensuring fairness and transparency throughout the insolvency process.

How do Licensed Insolvency Trustee fees work?

Contrary to popular belief, Licensed Insolvency Trustees aren’t able to set their own fees and rates. In fact, they must follow calculations and rules set by the federal government when filing consumer proposals or bankruptcy for individuals. Licensed Insolvency Trustee fees are then taken from the funds that have been paid into the bankruptcy estate or consumer proposal, meaning that there is no additional fee for a Licensed Insolvency Trustee. Instead, their fees are set by the Bankruptcy and Insolvency Act (BIA), and there is no fee for service, unlike lawyers, for instance. This is to ensure fairness and transparency. Licensed Insolvency Trustee fees drawn from the funds of a bankruptcy estate or consumer proposal are essential for the services provided throughout the debt resolution process. These fees cover administrative costs, professional expertise, and compliance with legal requirements. Here’s a summary of what the funds will cover:

• Initial consultation – reputable Licensed Insolvency Trustees will offer a free initial consultation to assess your financial situation and discuss potential solutions. This consultation allows you to understand your options and make an informed decision about moving forward.
• Administration – the funds will cover the administrative costs associated with managing your file, including paperwork, communication with creditors, and other necessary tasks. Administration fees are included in the overall cost of the debt resolution process.
• Disbursements – in addition to administration, there may be disbursements incurred during the process, such as court filing fees or credit report fees. These costs are typically outlined upfront and are separate from Licensed Insolvency Trustee fees.
• Government surcharge – a government surcharge is applied to all funds distributed to creditors through bankruptcy or a consumer proposal. This surcharge is used to fund the Office of the Superintendent of Bankruptcy (OSB), which oversees the insolvency process.

Licensed Insolvency Trustees are committed to transparency and accountability when it comes to fees. They are required to provide you with a detailed breakdown of all costs associated with their services, ensuring you have a clear understanding of what you’re paying for.

What do Licensed Insolvency Trustee fees cover?

During a consumer proposal or bankruptcy filing, there are costs and fees that need to be paid directly by your Licensed Insolvency Trustee, and are covered as part of the manageable monthly payments you make on a consumer proposal, or your estate in a bankruptcy so that you barely recognize the cost. These costs might cover the following:

• Government filing fees to make a consumer proposal or bankruptcy;
• Credit counselling sessions;
• Preparation and filing of income tax returns;
• Personal Property Registry Search charges.

Several factors can influence the total cost of Licensed Insolvency Trustee services, including the complexity of your financial situation, the chosen debt relief option, and the amount of debt involved. It’s essential to discuss fees with your LIT during the initial consultation to understand the total cost and any payment options available.

How much do I have to pay to file bankruptcy?

If you meet with a Licensed Insolvency Trustee and they agree that your income indicates that you do not need to pay surplus income and it’s your first time filing bankruptcy, it could cost around $2,700 for a personal bankruptcy filing. Often, this can be made more manageable by making monthly payments across approximately a nine month bankruptcy period. If your income instead allows you to repay a portion of your debts and avoid filing bankruptcy, a consumer proposal is often a popular alternative among Canadians. In a bankruptcy, a basic breakdown of the rough costs and fees would look as follows based on the federal rules:

• $2,700 to be paid over a nine month bankruptcy period
• Licensed Insolvency Trustee fees to be paid from this include:
  • $100 administrative allowance
  • $170 credit counselling sessions
  • $1,684 Licensed Insolvency Trustee’s allowable fee
  • TOTAL: $1,954
• Additional charges:
  • $86 federal government filing fee
  • $215 levy to the Office of the Superintendent of Bankruptcy
  • $98 government GST
  • $347 possible creditor distribution
• GRAND TOTAL: $2,700

In line with bankruptcy laws, this example factors in all the services offered by your Licensed Insolvency Trustee and their support team.

How much do I have to pay to file a consumer proposal?

It’s much harder to give an exemplary figure for a consumer proposal, given that each is very dependent on personal circumstances. Consumer proposal fees are tariff-based in line with federal legislation, and are drawn from whatever your creditors are set to receive in line with your consumer proposal. This means that your creditors essentially pay the fee, and there is no additional fee from you when filing a consumer proposal, other than your monthly repayments. There is no other amount due to pay to your Licensed Insolvency Trustee at any point.

Licensed Insolvency Trustee fees: FAQs

Here are some of the most commonly asked questions we receive about Licensed Insolvency Trustee fees here at Spergel:

Do Licensed Insolvency Trustees get paid in Canada?

Yes, Licensed Insolvency Trustees in Canada are paid for their services. LITs charge fees for the professional expertise, administrative tasks, and compliance with legal requirements involved in administering debt relief solutions. These fees are regulated by the government to ensure fairness and transparency. While LITs may offer a free initial consultation to assess a client’s financial situation, they typically charge administration fees and may also incur disbursements such as court filing fees or credit report fees during the debt resolution process. These fees are built into the debt relief solution costs. It’s important for individuals seeking assistance from LITs to discuss fees during the initial consultation to understand the total cost and any payment options available.

How do Licensed Insolvency Trustees get paid in Canada?

Licensed Insolvency Trustees in Canada are compensated for their services through various mechanisms. They typically charge fees for their professional expertise and administrative tasks involved in managing debt resolution processes. These fees may include administration fees, which cover the costs of paperwork, communication with creditors, and other necessary tasks. Additionally, LITs may incur disbursements, such as court filing fees or credit report fees, which are passed on to the client. It’s important to note that LIT fees are regulated by the government to ensure fairness and transparency. Clients are provided with a detailed breakdown of all costs associated with LIT services, and LITs are committed to discussing fees openly during the initial consultation to ensure clients understand the total cost and any available payment options.

How much do insolvency practitioners charge?

The fees charged by insolvency practitioners (or Licensed Insolvency Trustees) can vary depending on the complexity of the case and the services provided. Insolvency practitioners typically charge for their professional expertise and the administrative tasks involved in managing insolvency processes. These fees may include an initial consultation fee, administration fees for handling paperwork and communication with creditors, and disbursements for expenses such as court filing fees or credit report fees. It’s important for individuals seeking assistance from insolvency practitioners to discuss fees during the initial consultation to understand the total cost and any available payment options. Additionally, fees charged by insolvency practitioners are subject to regulation to ensure fairness and transparency in the insolvency process.

Navigating financial challenges can be daunting, but Licensed Insolvency Trustees are here to help. By understanding how Licensed Insolvency Trustee fees work and what they cover, you can make informed decisions about your financial future. If you’re facing debt problems, book a free consultation with a reputable Licensed Insolvency Trustee at Spergel today.

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