What is an LIT and How Can They Help With Debt?Nov 21, 2018
Are you looking for help with debt but aren’t quite sure where to start or which option will work be best for you? There’s a ton of debt help advice out there and finding the right solution can be a confusing process. That’s why, for Financial Literacy Month, we thought we would take some time to talk about the role of a Licensed Insolvency Trustee and how they can help you regain control of your debt using straightforward solutions.
What does an LIT do?
There are many debt professionals in Canada. An LIT, however, is a qualified, licensed professional, and they are the only ones legally allowed to file a bankruptcy or consumer proposal in Canada. LIT’s are federally regulated by the Office of the Superintendent of Bankruptcy which means they must meet a certain set of standards in order to practice.
What other services do they offer?
Many Canadians are struggling to pay down hefty debt loads: student loans, credit card debt and everyday expenses all play a role in adding to financial stress. Even though an LIT is qualified to perform insolvencies, the average Canadian struggling with personal debt doesn’t need a formal debt solution. That’s why, when you book a free consultation with an LIT, they will listen to your specific situation and recommend a variety of debt options, including:
- Budgeting – An LIT can council you about how to create a budget, re-work your current budget, help you stick to a budget and how to reduce your expenses. Here’s some great information about how saving and budgeting can help you avoid bankruptcy.
- Credit consolidation – An LIT may ask questions about which debt relief options you’ve tried in the past such as the Debt Snowball Method or DIY debt consolidation. Your LIT may recommend speaking to your financial institution about applying for a debt consolidation loan, which combines all your unsecured debts into a simple and affordable monthly payment.
- Money management – If you’ve got a good budget in place and you have been working to reduce expenses, an LIT may recommend selling some of your assets or increasing your income in order to cover your debt repayment. Sometimes, simply moving money around and reorganising your assets can help relief many of your debts, without necessarily affecting your overall wealth.
What if I need a formal solution?
If all other debt options have been exhausted and you require a consumer proposal or bankruptcy, you’re in good hands. Your LIT will take the time to answer all your questions and address your concerns while guiding you through the process.
Most often, heavy debts (up to $250,000) can be solved by submitting a consumer proposal to your creditors, which is used as the leading alternative to bankruptcy in Canada. It is often the most favourable approach as it allows you to retain all your assets while repaying a portion of your debt over a period of 3-5 years.
If you require a bankruptcy, as a last resort, it’s important to know that you won’t lose everything. There is a specific list of exemptions that you will be allowed to keep through a bankruptcy in order to support your family and your work. Unlike a consumer proposal, you are not required to repay any portion of your debts, giving you a fresh financial start.
Whether you file a consumer proposal or bankruptcy, your LIT works on your behalf each step of the way, dealing with creditors and overseeing the legal proceedings. From the day you file, creditors will be unable to take legal action against you, and all communication will be directed to your LIT.
Where can I find more information about LIT’s?
To learn more about the role of an LIT and how they can help with debt, you can visit the following sites for helpful resources:
- Office of the Superintendent of Bankruptcy Website – Videos explaining the role of an LIT
- Consumer proposal vs. Bankruptcy FAQ’s
- Debt repayment options calculator