A Bankruptcy Trustee in Ontario plays an important role when it comes to debt restructuring. Bankruptcy Trustees across Canada are appointed by the Superintendent of Bankruptcy to oversee bankruptcy and consumer proposal filings in Ontario.
It is important to understand what a bankruptcy trustee in Ontario is and what his role is with regard to debt restructuring before going to see one directly. The most significant fact that you need to be aware of is that the trustee administers the estate of the debtor as its legal representative, but his financial incentive when a bankruptcy or consumer proposal is filed is to maximize the return to the creditors.
What does this mean to you? Well, when you go to see the Bankruptcy Trustee to make a full financial disclosure, it is no different than going to your creditor to make a financial disclosure. Keep in mind; the role of the Bankruptcy Trustee is to obtain the greatest possible amount of money from you, all to the benefit of your creditors.
Bankruptcy and consumer proposals have, to some extent, become an industry of their own in Ontario. The Bankruptcy Trustee is a court-appointed officer and is supposed to take a neutral role in your bankruptcy or consumer proposal filing; however, they are frequently advertising in the mainstream media as a safe place for you to go for counsel when struggling with debt. This could not be further from the truth.
The truth is, visiting a Bankruptcy Trustee is no different than speaking to the CRA directly about your tax problem without representation from an accountant or a tax lawyer.
In addition to all this, where a consumer proposal is concerned the Bankruptcy Trustee gets paid based on a percentage of the consumer proposal that you file. This makes a consumer proposal more attractive to him from a revenue standpoint, more so than a bankruptcy. We have seen many cases where consumers or business owners have filed consumer proposals as recommended by their respective Bankruptcy Trustees. They subsequently default because they could not afford the payments in the first place, at which point they end up having to file for bankruptcy. In Ontario, ethics have become a real issue in the bankruptcy and consumer proposal business for this very reason.
When you go to a Bankruptcy Trustee, he or she will ask for complete financial disclosure with regard to your income, assets and liabilities. They will try to find as much income and liquidity as possible to drive up the amount of your bankruptcy or consumer proposal, all to the benefit of your creditors. We surmise that in some cases, also to the benefit of their own fees.
Another challenge is that in many cases a consumer will unwittingly omit information when they file for bankruptcy. The Bankruptcy Trustee will often accept whatever information you provide based on your word. Once the bankruptcy or consumer proposal has been filed, the trustee will then engage in a rigorous and determined process to validate your disclosures. If the trustee finds additional income or assets, he or she will adjust the amount of money that you have to pay. In the case of a bankruptcy, what begins as a predetermined length of repayment may snowball into a seemingly endless repayment. You will not be able to get discharged until you have paid the Bankruptcy Trustee all of the money that the trustee believes you owe.
Just as there are accountants and tax lawyers who represent people when they have a tax problem, there are financial consultants who can represent you if you have a debt problem. They can prepare your information, educate you about your choices, administer your paperwork and hold your hand through the process of a bankruptcy or consumer proposal, ensuring that you get a fair deal that protects you.