Tis’ the season…for debt

Jan 26th, 2015 | By FCT

The role of a trustee in debt recovery.

Now that the fun-filled hustle and bustle of the holidays is over, the cold hard reality of all those holiday bills settles in. The creditors that helped finance all that “holiday magic” want their money.

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 be forced to declare bankruptcy.

This is the busy season for recovery professionals and trustees in bankruptcy and it’s anything but merry for those they serve.

According to Industry Canada, when comparing December 2013 to January 2014:

•    The total number of insolvencies (bankruptcies and proposals) in Canada increased by 8.2 per cent;
•    Bankruptcies increased by 2.3 per cent; and
•    Proposals increased by 16.5 per cent.

What is a trustee in bankruptcy?

A trustee in bankruptcy 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 trustee in bankruptcy 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

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

Categories: Mortgage
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