The cold, hard reality of debt

Feb 9th, 2016 | By FCT

The role of a trustee in debt recovery

Although the fun-filled hustle and bustle of the holidays is long past, the reality of all those holiday bills still lingers. The creditors that helped finance all that “holiday magic” several months ago want their money and they want it now…

Promises make debt, and debt makes promises.
Dutch Proverb

When a debtor is not able to pay their debts when they become due, they may seek credit counselling to create a proposal for repayment. Or, depending on how dire the situation, the debtor may speak with a trustee in order to file a proposal or declare bankruptcy.

This is the busy season for recovery professionals and trustees in bankruptcy and it’s anything but merry for those they serve. Over the holidays, the average Canadian tends to accrue more debt, sometimes more than they can handle. But unlike January 2014, the news wasn’t all bad in January 2015.

According to the Office of the Superintendent of Bankruptcy Canada, when comparing December 2014 to January 2015:

  • The total number of insolvencies (bankruptcies and proposals) in Canada decreased by 3.0 per cent;
  • Bankruptcies decreased by 9.8 per cent; and
  • Proposals increased by 5.6 per cent.

This is a marked change from the previous year where all of the above had increased. You can view a more detailed breakdown of monthly and annual insolvency reports, here.

What is a licensed insolvency trustee?

A licensed insolvency trustee is licensed by the Office of the Superintendent of Bankruptcy to administer bankruptcies and proposals under the Bankruptcy and Insolvency Act in Canada. Considered an officer of the Court, their role is to ensure that a debtor’s rights are not abused, and that the rights of the creditors are upheld. Bankruptcy trustees serve both the debtor and creditor.

A creditor is an individual or organization that lends someone —a debtor — money. Creditors can be any of the following:

  • Banks
  • Credit unions
  • Credit card companies
  • Payday loan companies
  • Private lenders

Upholding the rights of the creditors means that a licensed insolvency trustee shall:

  • Evaluate a debtor’s behaviours and affairs before and during the bankruptcy
  • Sell a debtor’s assets, hold the money in trust and distribute to creditors
  • Ensure a creditor’s claims are legitimate
  • Process all appropriate paperwork
  • Administer the bankruptcy or proposal process from beginning to end

A trustee must also ensure the rights of the debtor are not violated at any time during the process. Examples of violations include being:

  • Forced to pay more than what is actually owed
  • Subject to additional fees added to the loan agreement
  • Threatened with physical harm or law suits
  • Physically harmed
  • Called repeatedly and/or at unreasonable times
  • Spoken to with obscene language
  • In contact with friends and family of the debtor

Making and achieving resolutions

Through moderation, co-operation and adherence to proper regulatory practices, it is possible to achieve a resolution that benefits everyone.

So what do you think was the reason for the shift in numbers when comparing January 2014 and January 2015? And how do you think this year, will compare? Have your say by commenting below.

Categories: Mortgage
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