What Is The Difference Between A Bankruptcy Trustee And A Licensed Insolvency Trustee?

What Is The Difference Between A Bankruptcy Trustee And A Licensed Insolvency Trustee?

If you’re Canadian and have been doing your research about debt relief options, such as bankruptcy or a Consumer Proposal, you may have heard the term “Bankruptcy Trustee” and the term “Licensed Insolvency Trustee” and wondered what the difference between these is and which of them you should seek out. You may have even noticed that they appear to be used interchangeably, and that’s because… they are the same thing. At least, in Canada.

The proper terminology for a professional designated to provide bankruptcy and Consumer Proposal services in Canada is Licensed Insolvency Trustee. Only a Licensed Insolvency Trustee is legally allowed to provide these options, so if you are considering either of these options you must speak to a Licensed Insolvency Trustee.

However, the term Licensed Insolvency Trustee only came into use in 2016. Prior to then, such professionals were referred to as a “Trustee in Bankruptcy” or a “Bankruptcy Trustee”. The two biggest reasons why the terminology was changed are:

  • Using the word “Licensed” in the term makes it clear that the individual or firm you are dealing with requires a license to offer the services (which they obtain only by going through a rigorous training and examination process and which requires adherence to important rules and codes of conduct to maintain), and they should be able to provide you with proof of that license if requested. Prior to this, there was concern that unlicensed (and therefore unqualified) parties were taking advantage of consumers’ lack of understanding of this requirement.
  • Use of the word “Bankruptcy” in the term was somewhat misleading, as designated insolvency professionals are licensed to provide bankruptcy as well as several other types of insolvency services. For example, they are also the only parties licensed to provide Consumer Proposals, which are a less severe and less stigmatized way to manage overwhelming debt. People looking to avoid the last resort of bankruptcy were often not aware that a “Bankruptcy Trustee” could provide other options.

So now that you know that a “Bankruptcy Trustee” is a Licensed Insolvency Trustee (LIT), let me tell you a little more about LITs:

Who can be a Licensed Insolvency Trustee?

The Canadian government extends an LIT license to individuals who have proven to be:

  • Of good character and reputation
  • Financially solvent
  • Proven to know the rules and regulations contained in the Bankruptcy and Insolvency Act and capable of applying that knowledge to various situations (as determined by examinations).

Most LITs are also Chartered Insolvency and Restructuring Professionals (CIRPs), which means we are members of an association of LIT professionals. LITs are often also CPAs.

LITs are not employed by the government. They are independent professionals who are continually monitored by the government, the courts, and their relevant professional associations.

What do LITs do?

An LIT is an unbiased independent party that facilitates an insolvency process. The tasks they perform can be broken down into three main areas:

  • Providing assistance to individuals, companies, creditors, and other interested parties.
  • Ensuring the integrity of the insolvency process, sort of like a referee.
  • Technical facilitation of the insolvency process such as preparing and filing documents, managing communication between parties, and acting as trustee for any funds brought into the process.

Who should contact an LIT?

Anyone looking for information or advice on how to deal with debt that feels overwhelming can contact an LIT. Most LITs offer free consultations, and they are required to give you an unbiased review of options.

If you’d like a more detailed explanation about Licensed Insolvency Trustees, see our blog post What is a Licensed Insolvency Trustee? If you would like to speak with an LIT, Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee serving the southern Alberta region. We regularly help individuals, including business owners, review their options for dealing with their debt. For a free, no-commitment consultation, contact us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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Frequently Asked Questions

No, a Licensed Insolvency Trustee is an impartial facilitator who communicates with all parties to make sure the process is transparent, and that everyone is following the required rules so that the process is orderly and predictable.

  • Typically, LITs focus on either consumer solutions or corporate solutions.
  • Consumer solutions include Consumer Proposals and bankruptcy.
  • Corporate solutions include Division I Proposals, bankruptcy, receivership, and plans under the CCAA (Companies Creditors Arrangement Act).

Charla Smith has experience delivering all of these options, so if you would like information on any of them, please contact us to find out more.

It can be hard to identify a debt consultant when you're viewing their advertising or website. Sometimes you might think you are dealing with a LIT. Debt consultants often refer to Consumer Proposals and sometimes imply that this is a service they can provide, even though they cannot.

According to Directive 33, issued by the Superintendent of Bankruptcy, "Licensed trustees shall identify themselves using the professional designation “Licensed Insolvency Trustee” or the acronym “LIT” in all communications or representations falling within the purview of a licensed trustee under the BIA".

Therefore, if it is not immediately clear that the company or individual is a Licensed Insolvency Trustee, chances are they are not. For a list of valid Licensed Insolvency Trustees, try the Find an active Licensed Insolvency Trustee page on the Government of Canada's website. Or, contact us and we can help you make sure you're dealing with a legitimate company.

Reach out to us. You can make an inquiry directly from our website by clicking here, or you can call or text us at 1-403-899-3890. We will respond quickly, and work with you to find a good time for the meeting.

Nothing. We offer free consultations to anyone looking to review their options for dealing with their debt. If we decide together that one of the services we provide is the right option for you, there will be payments you need to make in connection with that, but that will occur only after you have made a decision and signed the formal documents.


With our experience and our caring approach, we will help you find the best option for debt relief based on your unique situation - from advice on talking to your creditors to a consumer proposal or bankruptcy, and everything in between. We are here to lift the burden caused by overwhelming debt. 

Contact us today at 1-403-899-3890‌ for a FREE, no-commitment meeting, and let us guide you to regaining your financial footing.

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