Updated: April 2025  |  bremo.io financial guides

Licensed Insolvency Trustees in Canada: What They Do

A Licensed Insolvency Trustee (LIT) is the only type of professional in Canada legally authorized to administer bankruptcy and consumer proposal proceedings under the Bankruptcy and Insolvency Act (BIA). If you are struggling with debt and considering formal insolvency options, an LIT is the professional you need to consult — and the consultation is always free.

What Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is a federally licensed professional regulated by the Office of the Superintendent of Bankruptcy Canada (OSB). They are not debt consultants, credit counsellors, or financial advisors — they are licensed insolvency administrators with legal authority granted by federal statute.

LITs can be accountants, lawyers, or other qualified professionals who have completed the LIT qualification program and passed federal licensing exams. They must adhere to a strict code of ethics and professional standards enforced by the OSB.

What Services Do LITs Provide?

Licensed Insolvency Trustees are authorized to administer:

• Personal bankruptcies — both summary administration (individuals) and Division I (larger estates)
• Consumer proposals — formal debt reduction agreements for individuals with unsecured debt under $250,000
• Division I Proposals — for individuals with over $250,000 in unsecured debt and for businesses
• Corporate bankruptcies and restructurings
• Receiverships — managing assets on behalf of secured creditors

In addition to formal insolvency proceedings, LITs are required to offer a free initial consultation where they review your financial situation and explain all available options — including informal options that do not involve the BIA.

The LIT's Dual Role

One important aspect of a LIT's role that surprises many people: the trustee represents both the debtor and the creditors. Their legal obligation is to the administration of the proceeding fairly and impartially — not to advocate exclusively for you.

However, LITs have an obligation to explain all options to you and ensure you understand the process before proceeding. The initial consultation is genuinely designed to help you understand your choices.

How Are LIT Fees Regulated?

LIT fees are set by federal regulations — not negotiated freely. For bankruptcies and consumer proposals, the fee structure is prescribed by the Bankruptcy and Insolvency Act and related directives from the OSB:

• Bankruptcy: The LIT's compensation is taken from the estate. The base administration cost (~$1,800) plus a percentage of any asset realizations and surplus income flows to the trustee's fees.
• Consumer proposal: The LIT receives a percentage of funds distributed to creditors as they're paid out. There is no separate charge to the debtor above the proposal payments.

This means you will never receive a separate invoice from the LIT for their services in a standard insolvency proceeding. Their compensation comes from the funds already flowing through the process.

How to Find a Licensed Insolvency Trustee

The Office of the Superintendent of Bankruptcy maintains a public registry of all active LITs in Canada. You can search by location at ic.gc.ca. LITs operate in every province and territory, and many offer telephone and video consultations in addition to in-person meetings.

When searching, verify that the professional you are meeting with is an actual LIT — some companies use names like "debt consultants" or "insolvency advisors" but are not licensed trustees.

LITs vs. Debt Settlement Companies

This is a critical distinction for any Canadian dealing with serious debt:

• Licensed Insolvency Trustees: Federally licensed, regulated by the OSB, can legally administer bankruptcies and consumer proposals, fees are regulated, first consultation is free.
• Debt settlement companies: Not federally regulated (some provincial oversight exists in certain provinces), cannot legally file a consumer proposal or bankruptcy, often charge large upfront fees, results are not guaranteed, may damage your credit further.

What to Expect at a Free LIT Consultation

At the initial free meeting, the LIT will typically:

1. Review your full list of debts, creditors, and amounts owed
2. Ask about your income, monthly expenses, and family size
3. Assess your assets and which provincial exemptions apply
4. Explain all your options: informal negotiations, debt management plan, consumer proposal, or bankruptcy
5. Provide an estimate of what each formal option would cost and how long it would take

There is no pressure and no obligation. Most people leave the consultation with a much clearer picture of their options and what the right path forward looks like.