The term “bankruptcy trustee” could very well change pretty soon. The Office of the Superintendent of Bankruptcy Canada, the OSB, is indeed presently considering the possibility of replacing it by the new designation “licensed trustee in insolvency and restructuring”.
“Bankruptcy trustee”, an obsolete designation
In 1993, the OSB adopted, for the first time, a directive requiring that trustees advertise themselves clearly as “trustees in bankruptcy” in any type of publicity. At the time, it was definitely appropriate to use the designation “trustee in bankruptcy”. However, the profession really evolved quite a lot since then, to the point that trustees henceforth fulfil many duties related to insolvency:
- bankruptcy trustee;
- consumer proposal administrator;
- receiver;
- under the Companies’ Creditors Arrangement Act (CCAA)
- budget advisor;
- etc.
Based on these facts, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and its members concluded that the term “trustee in bankruptcy” is from now on obsolete. It therefore became necessary to find a new designation that would better reflect the broad range of services that trustees can offer to people facing debt problems.
“Bankruptcy trustee”, a pejorative designation
Furthermore, the word “bankruptcy” is itself notably pejorative. It is associated with failure, with feelings of guilt and shame.
That is why some people definitely refuse, whatever their financial situation may be, to consult a bankruptcy trustee. Frightened by the word “bankruptcy”, they promptly choose to call on “other professionals” in insolvency. It is however worth mentioning that anyone can act as a credit counsellor and that whoever does so has generally no licence to practice such a profession. Given that these people are not CAIRP members and are not ruled by the OSB, they are free to choose whatever designation they like: “budget advisor”, “credit counsellor”, “debt settlement company”, etc. On the one hand, since they look less threatening, such designations put bankruptcy trustees at a disadvantage. And, on the other hand, they attract vulnerable customers, to whom, more than often, they provide inappropriate services to remedy their situation. Even worse, these so-called “professionals” generally charge astronomical fees, and the solutions they recommend offer no protection to their clients:
- the interest charges continue to accumulate;
- the harassment of collection agencies does not stop;
- the garnishment of wages remains possible;
- etc.
If and when the solutions proposed by these “professionals” prove to be ineffective, the debtors finally resign themselves to get in touch with a trustee. In most cases, the state of their personal finances is then even worse than it was before.
The advantages of the “licensed trustee in insolvency and restructuring” designation
After polling its members, the CAIRP recommended to the OSB to adopt the designation “licensed trustee in insolvency and restructuring”.
On the one hand, if it is adopted, this new designation will better reflect the duties fulfilled by the trustees. On the other, the exclusion of the word “bankruptcy” will eliminate the pejorative connotation associated with the previous term. Therefore, the insolvent debtors who were previously afraid to call on a bankruptcy trustee will then perhaps be more inclined to take steps to restore their financial health. Keep in mind that the first consultation with a Ginsberg Gingras trustee is free, and always without obligation.
The history of bankruptcy in Canada
1869 — The Bankruptcy and Insolvency Act (BIA) is adopted.
1950 — The provisions of the BIA are expanded to apply to individuals.
1993 — The OSB adopts a directive requiring that trustees advertise themselves clearly as “trustees in bankruptcy” in any type of publicity.
The 1990s — The consumer proposal materialises, and gradually becomes an alternative to bankruptcy.
2015 — CAIRP recommends to the OSB that the term “trustee in bankruptcy” be replaced by the designation “licensed trustee in insolvency and restructuring”. The OSB must now study this recommendation and make its decision known.