How Does a Licensed Insolvency Trustee Get Paid?

Understanding how a licensed insolvency trustee gets paid can seem complex. However, you can confidently make informed decisions about your financial future by shedding light on the process and regulations governing their fees. Are you ready to navigate the ins and outs of LIT fees and learn how they can help you achieve financial stability?

Key Takeaways

  • Licensed Insolvency Trustees (LITs) fees are regulated by the Bankruptcy and Insolvency Act, ensuring fairness and consistency.

  • The cost of personal bankruptcy in Canada typically ranges from $1,800 to $2,300, with monthly payments ranging from $100 to $180. Consumer proposal fees are calculated based on a percentage of total debt with a maximum fee of 20%.

  • Choosing a LIT requires credentials/expertise evaluation and evaluating their approach & reputation among clients & peers.

A person filing for personal bankruptcy in a court of law
An image showing a licensed insolvency trustee receiving payment for their services, explaining how does a licensed insolvency trustee get paid without requiring any upfront payment.

Understanding Licensed Insolvency Trustee Fees

It’s important to comprehend the fee structure of a Licensed Insolvency Trustee (LIT), which is formed under the regulations of the Bankruptcy and Insolvency Act (BIA) and government tariffs. A bankruptcy trustee, a Licensed Insolvency Trustee, plays a crucial role in this process. When working with licensed insolvency trustees, it’s essential to understand their responsibilities and the services they provide.

LIT fees are derived from the funds paid into a consumer proposal or bankruptcy. This ensures your fees are fair, consistent, and aligned with federal government regulations.

Bankruptcy and Insolvency Act Regulations

When providing insolvency services, LITs must adhere to the rules and procedures outlined in the BIA. This includes the consumer proposal process and various insolvency services.

The BIA regulations ensure that LITs follow a standardized approach when administering insolvency services, ultimately protecting you, the debtor, from potential malpractice and ensuring a fair and just process.

Government Tariffs For LIT Services

Fees for LIT services, such as personal bankruptcy and consumer proposals, are determined by government tariffs. This tariff system guarantees consistency and fairness in the costs of insolvency services, regardless of which LIT you choose.

For example, the maximum fee that can be charged for administering a summary bankruptcy is subject to an upper limit set by the government to ensure reasonableness.

Costs Involved in Personal Bankruptcy

Personal bankruptcy fees are determined by a government tariff, which considers any required surplus income payments and asset realizations in a bankrupt’s estate during the bankruptcy filing process.

Knowledge of the costs related to filing bankruptcy, specifically personal bankruptcy, assists in making an informed decision about the appropriateness of this debt relief option for your financial circumstances.

Standard Bankruptcy Costs

The typical cost for personal bankruptcy in Canada is as follows:

  • Range: $1,800 to $2,300

  • Payment: Paid in installments over nine months

  • Monthly payment: Typically ranges from $100 to $180, depending on the presence of other assets to be recovered, such as tax refunds or general credits.

Surplus Income Payments

Surplus income payments are additional costs that may apply to individuals with income above a certain threshold, as determined by the BIA. If your earnings exceed the government-mandated limit, you must contribute half of that income to your bankruptcy estate.

Consequently, the LIT’s financial compensation increases with higher repayments to creditors under personal bankruptcy.

Consumer Proposal Fees and Process

A consumer proposal is a popular alternative to bankruptcy, allowing you to repay a portion of your outstanding debt to unsecured creditors within an agreed-upon timeline. When faced with financial difficulties, considering bankruptcy or consumer proposal options can help you find the best solution for your situation.

LIT fees for consumer proposals are calculated as part of the payment agreement reached with creditors, ensuring transparency and fairness.

Fee Calculation

LIT fees for consumer proposals are derived from the payments made to creditors, with a maximum fee of 20% of the total debt. This fee structure provides a clear and consistent approach to LIT compensation, ensuring you are not overcharged for their services.

A Licensed Insolvency Trustee discussing bankruptcy and insolvency act regulations

No Upfront Payment is Required

When filing a consumer proposal, you do not need to make any upfront payments to the LIT. The trustee fees are incorporated into the payment agreement reached with creditors, ensuring you can focus on repaying your debt without worrying about additional costs.

This makes filing a consumer proposal much simpler and more affordable.

A Licensed Insolvency Trustee discussing Division 1 Proposals and Restructuring
A person signing a consumer proposal agreement

Other Types of Insolvency Services and Fees

Licensed Insolvency Trustees (LITs) also administer other insolvency services, such as Division 1 proposals and restructuring, for companies or individuals with significant assets.

Comprehending the fees linked to these alternative services can guide you in making an optimal decision for your financial circumstances.

Division 1 Proposals and Restructuring

LITs, acting as debt consultants, offer tailored debt relief solutions for businesses through Division 1 proposals and restructuring.

A Division 1 proposal is a legally binding agreement that allows debtors to negotiate debt repayment with unsecured creditors, providing a bankruptcy alternative.

Time Tracking and Fee Approval

LITs carefully track their time spent on insolvency filings and submit their fees for approval upon completion of the process. This ensures that the fees charged align with the amount of work required and that the LIT is held accountable for their services.

Additionally, it safeguards against the LIT overcharging for their services.

Transparency and Accountability in LIT Fees

Measures are in place to ensure transparency and accountability in LIT fees and services. The Code of Ethics for Trustees, found in the BIA, outlines the standards that LITs must comply with. At the same time, the Office of the Superintendent of Bankruptcy (OSB) maintains a record of all complaints and ensures compliance with BIA regulations.

Government Oversight

LITs are regulated by the OSB, which ensures compliance with BIA regulations and ethical guidelines. The OSB has created policies and procedures regulating various industry aspects. This includes restrictions on surplus income, processes for court proceedings, as well as a code of ethics trustees must adhere to.

This oversight guarantees that LITs adhere to the highest professional standards and act in their best interest.

Statement of Receipts and Disbursements

The Statement of Receipts and Disbursements is a final accounting document providing complete consumer transparency. This document is reviewed and approved by the Government of Canada branch that regulates LITs, ensuring that the fees and services provided are transparent and fair.

Choosing the Right Licensed Insolvency Trustee

Choosing the appropriate LIT is key to receiving the most advantageous advice and debt relief solutions. Assessment of their credentials, expertise, approach, and reputation allows you to confidently select the right professional to help you achieve financial stability.

Credentials and Expertise

LITs must possess the following qualifications:

  • A minimum of three years of experience in the insolvency field

  • Completion of a recognized insolvency program

  • Passing a series of examinations

  • Approval by the OSB (Office of the Superintendent of Bankruptcy)

An evaluation of an LIT’s qualifications, training, and experience can assist in determining their effectiveness in dealing with your financial situation.

Approach and Reputation

When deciding, consider the LIT’s approach to debt relief, communication style, and reputation among clients and peers.

A professional and courteous LIT who thoroughly explains the process and is available to answer any questions can make a significant difference in your journey to financial stability.


Understanding the fee structure and regulations governing Licensed Insolvency Trustees is crucial for making informed decisions about your financial future. By exploring the various services, costs, and transparency measures in place, you can confidently choose the right LIT to guide you toward financial stability and a fresh start.

Frequently Asked Questions

How do licensed insolvency trustees make money?

Licensed Insolvency Trustees make money through fees calculated and drawn from the funds paid into each bankruptcy estate or Consumer Proposal. The initial LIT fee comprises two separate draws ($750 upon filing and $750 upon court approval) as soon as Proposal funds become available, which come from the payments submitted by the debtor for the benefit of creditors.

How does the LIT get paid?

LITs are paid through a percentage of the consumer proposal payments calculated by the tariff. This fee is part of the total recovery for unsecured creditors, offering a better result than bankruptcy. By utilizing a Licensed Insolvency Trustee (LIT), consumers can restructure their debt and avoid bankruptcy. This allows them to keep their assets and maintain their credit

What is a consumer proposal?

A consumer proposal is an offer to creditors to pay a portion of the debt over an agreed-upon timeline, providing relief from overwhelming financial obligations.

What is the difference between a consumer proposal and personal bankruptcy?

A consumer proposal allows you to repay a portion of your debts, while personal bankruptcy requires liquidating assets to pay off creditors.

What measures are in place to ensure transparency and accountability in LIT fees?

The Code of Ethics for Trustees and oversight from the Office of the Superintendent of Bankruptcy help to ensure transparency and accountability in LIT fees, upholding BIA regulations and ethical guidelines.