What Is A Bankruptcy Trustee – how are they different than a third party debt consultant?

Often third-party debt consultants will try to sell vulnerable debtors on the fact that they need a third party to represent them in a Consumer Proposal to act on their behalf as the Licensed Insolvency Trustee is working for the creditors and not in the best interest of the debtor. Let me tell you why this is a complete fallacy.


  • A “Licensed” Insolvency Trustee is a professional and an Officer of the court, he is required to act in an honorable fashion and balance the interest of all stakeholders including the debtor.
  • As part of the regulatory directive of the Office of the Superintendent of Bankruptcy, the Trustee is required to make a full assessment of the debtor’s financial situation and their ability to pay their creditors in a Proposal vs the outcome for the creditors if the debtor filed a Bankruptcy. A proposal must be better for the creditors or the proposal has no chance of being accepted. All you need to do is tell the truth about your financial situation, and the rest is a regulated process, why would you need a third party?
  • The Trustee’s fees are paid by the creditors in a proposal, not by the debtor. It is the creditors that either approve or reject a proposal, not the Trustee. There is no reason for the Trustee to suggest a Proposal that the debtor can’t afford to pay or won’t be approved by the creditors. It is a fine balancing act and based on many many years of experience and knowing what creditors are likely to accept. Often, before a proposal is approved by all parties, negotiations are needed to determine the final amount to be paid. The Trustee cannot force either debtor or creditor to accept the number and has no control over the outcome and a third party certainly has no control over this negotiation or outcome.
  • The Licensed Insolvency Trustee is governed by two codes of Ethics. One from the federal government, Office of the Superintendent of Bankruptcy and also by their professional organization, CAIRP (Canadian Association of Insolvency Restructuring Professionals). They are never going to risk their license to practice and their livelihood by acting in an improper manner.
  • Third party debt consultants often will say they are helping to protect the assets of the debtors. There is nothing to protect; under the legislation, they are either exempt from creditor action or not. If they are exempt they are already legally protected. Everything is based on full and frank disclosure; if you are asking your creditors to discount what you owe you need to be honest with them about your ability to pay.
  • A third-party debt consultant cannot file a Proposal on your behalf, they would need to refer you to a Licensed Trustee to do this. They make their fee for this referral and they need to justify their fees.

What is a bankruptcy trustee – find out more about the Licensed Insolvency Trustee from the Government Of Canadawebsite.