When you or your business is already in distress because of your surmounting debt, finding out how much insolvency trustees get paid may be another burden. To alleviate your concerns as a debtor on this matter, the Canadian law has put a cap on the fees that these trustees may charge you.
What are insolvency trustees?
An insolvency trustee is a professional who can help you face bankruptcy or insolvency proceedings, such as a consumer and commercial proposal. Formally called Licensed Insolvency Trustee (LIT), they’re federally regulated and licensed through the Office of the Superintendent of Bankruptcy (OSB).
Simply, they’re debt advisors who can guide you in filing a bankruptcy under the law, including dealing with your creditors on your behalf. Also, once you engage with an LIT, any action in court by your creditors may also be stayed, and no further cases can be filed against you.
How do insolvency trustees get paid?
Unlike any other professionals, insolvency trustees are paid according to what is provided under the Bankruptcy and Insolvency Act (BIA). Since they’re federally regulated, it also follows that their fees are also regulated.
The BIA has expressly provided information on how to compute the fees of LITs, which includes what services these fees are for. Generally, payments of insolvency trustees are earned from the funds paid to every individual bankruptcy estate or Consumer Proposal.
Here’s a video that explains how insolvency trustees are paid:
We’ll explain more about these below. In any case, you can also consult with a Lexpert-ranked best insolvency lawyers in Canada if you want to know more about paying LITs.
Fixed fees for Consumer Proposals
For Consumer Proposals, including its administration and counselling for the directives of the OSB, the BIA General Rules (BIAGR) states that the LIT fees are computed as follows:
-
when consumer proposal is filed: $750 payable on the filing of a copy of the consumer proposal
-
when consumer proposal is approved: $750 payable on the approval of the consumer proposal by the court
-
when creditors’ money is distributed: 20% of the amount distributed to creditors under the consumer proposal, which is payable when the amount is distributed
-
costs of counselling: $85/session if counselling is provided on an individual basis, and $25/person/session if it’s provided on a group basis
-
filing fees: $114.88 fee for filing of a consumer proposal with the official receiver, as adjusted by the Service Fees Act (SFA)
-
fee payable to the registrar: a single fee of $50 paid to the registrar
-
other fees: the applicable federal and provincial taxes for goods and services
Fixed fees in Ordinary or Summary Administrations
If you’re thinking of filing for bankruptcy, it will involve either summary or ordinary administration of your estate:
- ordinary: assets are estimated to be greater than $15,000
- summary: assets are estimated at $15,000 and less
Administration applies when you’re not considering a Consumer Proposal, or the provisions of the BIA on Consumer Proposal don’t apply to you. Knowing which option is appropriate for your situation, whether it’s insolvency or bankruptcy, can be consulted with an insolvency lawyer or LIT.
Ordinary Administrations
If the estate administration is only ordinary, the payment for an insolvency trustee may be decided at any meeting of the creditors by ordinary resolution. However, if it has not been decided, it may be inserted in the trustee’s final statement, to an amount not exceeding 7.5% of the assets actually realized, after paying all the secured creditors. This may be subject to court review, which has the power to increase or decrease any amount to be paid to the insolvency trustee.
Summary Administrations
Still under the BIAGR, the following are the fixed fees you need to pay your insolvency trustee when engaging them for a summary administration under a bankruptcy process:
-
Trustee’s fees for services: calculated on the total receipts remaining, after deducting necessary disbursements and paying the secured creditors:
- 100% on the first $975 or less of receipts
- 35% on the receipts exceeding $975, but not exceeding $2,000
- 50% on the receipts exceeding $2,000
- Additional fees for services: in addition to the amount arrived at in the above-mentioned percentages, a trustee can also claim:
- costs of counselling: $85/session if counselling is provided on an individual basis, and $25/person/session if it’s provided on a group basis
- filing fees: $86.16 if never been bankrupt before under Canadian or foreign laws, or $172.34 if otherwise, payable at the filing an assignment or making of a bankruptcy order
- fee payable to the registrar: a single fee of $50 paid to the registrar
- administrative disbursements: a lump sum of $100
- other fees: the applicable federal and provincial taxes for goods and services
Some rules on how insolvency trustees get paid
As standardized by the federal government through the OSB, here are some rules that insolvency trustees follow as regards the payment of their services:
- your first consultation with a trustee is usually free of charge
- a trustee is not allowed to fix their own rates or fees
- trustee payments are drawn from your administered estate or Consumer Proposal
Filing a complaint with the OSB is possible if you have any dispute with your LIT. The OSB will then review and assess the merits of your complaint. After investigation, the LIT may be disciplined, either by suspending or cancelling their license. This is in addition to any other legal action that can be taken against them, either civilly or criminally.
What is the difference between an insolvency trustee and a lawyer?
Insolvency trustees or LITs are the only professionals authorized by the government to administer insolvency proceedings, such as consumer proposals and bankruptcies. On the other hand, an insolvency lawyer can help you with anything else court-related, especially when cases are filed against you by your creditors.
In any case, when you’re confronted with a legal problem, either of these professionals will say if they’re allowed to handle such a dispute. Otherwise, they will gladly refer you to the other.
Consult with the best law firms for insolvency litigation in Canada as ranked by Lexpert to learn more about how insolvency trustees get paid.