Traditionally when people think of a Trustee in Bankruptcy they think of Bankruptcy. The fact is that the main focus of Trustees in Bankruptcy has changed in recent years. In the past, if you had severe financial problems, you may have thought that Bankruptcy was the only way out and so you would seek out a Trustee in Bankruptcy. So what has changed?
In recent years, the Bankruptcy Laws have changed making it more difficult to file for Bankruptcy and making Consumer Proposals a much more attractive option for people who struggle with debt. Also, Trustees in Bankruptcy have begun advertising much more aggressively, the term Credit Counselling is now being used. Let me be very clear Trustees do not offer Credit Counseling services, more on this later. If you don’t know what a Trustee in Bankruptcy is then you may misunderstand this advertising and think that when you are contacting a Trustee in Bankruptcy you are going to be offered a full menu of financial options. Generally speaking, the only two programs that Bankruptcy Trustees can offer are; Bankruptcy or a Consumer Proposal. So what’s the big deal if you end up at a Bankruptcy Trustee’s office? Maybe a Consumer Proposal or Bankruptcy was what you had in mind anyway. Going to a Bankruptcy Trustee may in fact be a big deal because if you buy into the debt solutions offered, a Trustee does not in fact represent you and you alone through the process. A Bankruptcy Trustee has a legal obligation to represent both you and your creditors but mostly your creditors. This means that if you want to file a Bankruptcy or Consumer Proposal it is the trustee’s responsibility to ensure that your creditors get a fair deal and that they are able to get as much money out of you as possible. Here is a really great example from a Trustee In BC. A single mom (Mary) with 2 children under the age of 10 goes to a British Columbia Trustee in Bankruptcy and is told her best option is to file a Bankruptcy, Mary believes the Trustee in Bankruptcy as she was referred to the Trustee in Bankruptcy by her Bank for advice on how to deal with her debts.
The British Columbia Trustee in Bankruptcy asks Mary to complete a document where she has to provide detailed financial information on her income and assets. Mary owns a small condo in Surrey that she has owned for 9 years, she has a mortgage for $275,000 and has been told by her realtor that the current value is not much more than the mortgage balance as the condo needs a lot of work, she enters a value of $300,000 based on what her Realtor has told her. The information Mary provides to the Trustee in Bankruptcy for her home is with a value of $300,000 and a mortgage of $275,000 this is what she indicates on the form provided by the Trustee in Bankruptcy. The British Columbia Bankruptcy Trustee allows her to file for bankruptcy based on the financial disclosure that Mary has made. Based on the provided and accepted information Mary has provided she files for Bankruptcy. The Trustee in Bankruptcy confirms with Mary what her expected monthly payments will be over the 9 month Bankruptcy term. The British Columbia Trustee in Bankruptcy has an administrative team team which reviews the Bankrupt’s assets in month 8 of the 9 month process and without provocation from creditors, the British Columbia Trustee in Bankruptcy later deems that Mary’s home is worth $400,000, not $300,000. The British Columbia Trustee in Bankruptcy writes to Mary and advises her that she owes an additional $100,000 in her Bankruptcy due the increased realizable equity in her home which has to be paid to her creditors or else the British Columbia Trustee in Bankruptcy will have to oppose her discharge. Mary could not pay the additional $100,000 required and eventually the Trustee forced the sale of Mary’s home.Mary lost her home and eventually her children because she could not provide a stable home. Bankruptcy was not Mary’s best option. Filing for Bankruptcy or filing a Consumer Proposal without representation is similar to being accused of a crime and defending yourself without legal representation.Where a Trustee in Bankruptcy is concerned, it may not the best choice to go to them directly without seeking independent financial advice. Instead, speak with a qualified Financial Adviser/Planner to ensure that you have explored all of your financial options, to ensure that you make complete disclosure and to determine your personal exposure so that nothing comes up and finally to ensure that the best possible deal is negotiated with the Trustee in Bankruptcy before you enter in a Bankruptcy or Consumer Proposal; Once the documents are signed it is too late to back out.
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