A bankruptcy trustee is a court appointed officer. Their job is to administer bankruptcies and consumer proposals in Canada – and they do this by representing both you and your creditors. This means that they are expected to get as much as possible from you for your creditors.
Take a look at the typical process and you will see how people get themselves in trouble:
A trustee advertises a financial solution, and you contact them for help (thinking that because you have contacted them that they represent you). However, even though you are the one looking for assistance, they in fact represent both you and your creditors.
Next, the trustee will pitch you on the financial solutions they can provide, which are usually bankruptcy or a consumer proposal. Since a trustee doesn’t make any money if you don’t sign up, things are often very pleasant at the beginning.
At no point during this meeting will they tell you how they get paid, but it is important information. A trustee gets paid based on a tariff (a fee set by the government in the case of bankruptcy, a percentage in the case of a consumer proposal, a percentage of surplus income in the case of a bankruptcy) – this comes out of your monthly payment.
How much you have to pay and the amount of your monthly payments in a proposal and bankruptcy depend on your income and assets – the more income and assets you have, the more you end up paying. In the case of a consumer proposal the amount of proposal you negotiate will be locked in once the proposal is accepted.
In the case of bankruptcy you have to report your income to the trustee each month and they do a calculation called surplus income. If you have income above a certain threshold you will have to pay your trustee 50% of the amount that has exceeded the threshold. In bankruptcy, when there is surplus income (income over the amount defined by the Bankruptcy and Insolvency Act) your bankruptcy will go from being 9 months to 20 months which can make a huge difference.
So, why is being represented when going to a trustee a much smarter idea? Because it gives you the chance to, firstly, openly discuss your information without reprisal or pressure to sign. This representation can mean negotiating a much lower proposal, or a much stronger financial picture with contingencies in place to help you bounce back quickly. Finally, when you have your own representation, you won’t have to deal directly with the bankruptcy trustee – that individual will handle most negotiations and correspondence for you!
Before you call a bankruptcy trustee directly, call DebtCare Canada – we can help keep you protected. Contact us today by calling 1-888-890-0888.