Before diving too far into my experience with bankruptcy and sharing all sorts of information on working with trustees, I wanted to explain what a bankruptcy trustee is and what they even do. Do you need one? Can you do it on your own? In short: no, any legally binding bankruptcy-related product requires a bankruptcy trustee (now Licensed Insolvency Trustee I guess) to file it for you.
When struggling with debt, consumers usually consider filing bankruptcy (note this article does not cover corporate insolvency or business bankruptcy). This is a legal debt management option available to individual consumers, businesses, charities and learning institutions among other types of organizations. Bankruptcy gives consumers relief from the burden of debt. It will also bar creditors and collection agencies from making threatening phone calls to the debtor in a bid to recover their funds.
The Role of Bankruptcy Trustee
Before you file bankruptcy, you must decide which bankruptcy chapter is suitable for you. A Chapter 7 involves liquidation of assets belonging to the debtor. However, the debtor must not have a significant source of income. If the debtor has a stable job, Chapter 13 bankruptcy should be considered. In case of a business entity with a considerable monthly income, Chapter 11 bankruptcy should be considered. It is the responsibility of the bankruptcy trustee to decide which chapter is best suited for each debtor. On top of all of this there are also things called a consumer proposal in Ontario that can be an alternative to bankruptcy! More on that later when I dive into more details on consumer proposals and the difference with them.
Since there are people who may want to take advantage of bankruptcy to avoid paying their debts, even when they are able to, the bankruptcy trustee must be able to distinguish between legitimate applications from fraudulent applications and take the necessary action. For this reason, bankruptcy trustees must be experts in finance, business or law among other related fields. Typically they have business backgrounds and an accounting designation.
For more information on what a bankruptcy trustee is and most importantly who they work for (what’s their end game and why are they involved), check out the below YouTube video I saw the other day. It’s open and honest and speaks to the question well.