The moment you declare bankruptcy is the time of your life when you will have to familiarize yourself with a licensed insolvency trustee. This is inevitable under the Bankruptcy and Insolvency Act and that is why you must be able to understand how their fees work.
First and foremost, it’s important to understand the nature of the work a trustee in bankruptcy does for you. Although they are professionals at least versatile, their profession is strictly regulated by law and they must follow a large number of protocols to complete your file. Here is a brief explanation of their role in your bankruptcy filing and a presentation on the operation of their fees.
What role does the trustee play in bankruptcy, consumer proposal or bankruptcy?
The role of a licensed insolvency trustee is not the same before a bankruptcy as during. In fact, before declaring bankruptcy, the trustee acts as financial advisor responsible for doing everything to avoid such an avenue. He will explore the different options that may be applicable to you and try to get you back on track. In other words, he will try to fix your finances.
However, the deal changes somewhat when you choose the bankrupt option. From the time this procedure is filed with the Office of the Superintendent of Bankruptcy until your release, the trustee will have various duties and obligations. He will speak on your behalf to your creditors who will no longer have the right to contact you directly.
He also has the mandate to take care of all the legal formalities that accompany the bankruptcy process, such as the filing of documents, the required reports and everything related to technical aspects. He also has the task of accompanying you to your release! But how much will these services cost you? How are fees for a service calculated for as unique as this one?
In fact, you should know that the fees of a trustee in bankruptcy are set by the Bankruptcy and Insolvency Act . Indeed, in order to protect people in a vulnerable financial situation, the law provides that trustees will be paid according to the type of service they offer, namely a bankruptcy, a consumer proposal or any other process that they are allowed to perform.
We therefore offer an explanation of the different pricing of a licensed insolvency trustee according to the service they offer!
A bankruptcy is considered ordinary if the so-called “realizable” assets are valued at more than $ 15,000. This can be as much personal as corporate without the trustee’s fees changing.
Indeed, the trustee’s fees for ordinary bankruptcy are at least simple to calculate. He is entitled to 7% of the realized assets of the bankrupt. Realized assets are the property (or all the bankrupt’s possessions with a monetary value) that was seized by the trustee to pay the creditors.
It is also possible that the trustee is entitled to additional remuneration granted by the creditors of the bankrupt after approval of the court! However, this remuneration must have been voted by a majority of the creditors before being approved by a judge.
In the end, although the trustee owes the bankrupt himself to pay, the payment is made through the remaining assets of the bankrupt. So you have no reason to worry about not being able to pay your trustee, the law has everything planned for you!
What differentiates the summary bankruptcy from ordinary bankruptcy? The valuation of the remaining assets of the bankrupt and the fact that summary bankruptcy is the most popular option of both. Indeed, while ordinary bankruptcy applies to any bankrupt with assets of $ 15,000 or more, the bankruptcy summary is reserved for bankruptcies below this amount.
The calculation of fees is more complex for a summary bankruptcy than usual because of the low value of the remaining assets:
- – All of the first $ 975 in revenue belongs to the trustee in bankruptcy.
- -35% of revenues between $ 975 and $ 2000 accrue to the trustee.
- -50% of the receipts over $ 2,000 also go to the trustee in bankruptcy.
It is this complex calculation that allows the trustee to receive adequate fees, but adapted to the precarious situation of the bankrupt who no longer has many assets.
Specific mandates are all those not specifically mentioned in our list (bankruptcy, proposal, etc.). In such circumstances, the trustee in bankruptcy is free to set his fees as he sees fit as any professional.
It is this procedure that applies if you consult a trustee for financial advice. He will charge you his time according to his hourly rate, so you will pay for the time he devotes to you!
Among the specific mandates the trustee can perform are mediation, voluntary deposit with the Court of Québec and simple financial advice.
Voluntary deposit is a way to avoid bankruptcy by giving a portion of your salary back to the Court for redistribution among your creditors. This is a common payment agreement that you will have to follow to the letter.
Some trustees also specialize in mediation during bankruptcy. This relatively new phenomenon now allows parties involved in bankruptcy to communicate directly with one another without having to resort to the trustee constantly. The latter is always at the forefront of all the battle that is bankruptcy, but its role in mediation is a guide.
Mediation occurs mainly when parties do not agree on the excess income the bankrupt must pay for the benefit of his creditors or on the bankruptcy process itself.
What is the outcome of successful mediation? Successful mediation results in the ratification of an “agreement resulting from mediation”. This agreement will establish the payment criteria that the bankrupt must respect.
What is the outcome of an unsuccessful mediation? In the event that the parties fail to come to an agreement in this process, the insolvency trustee will apply to the court to have the matter decided. Everything will be decided at a hearing convened by the court.
For specific corporate mandates , the trustee may use its expertise to determine the viability of a business, propose a reorganization and provide business-specific advice. It can also assist parties trying to resolve their financial dispute, the company and its creditors sometimes numerous.
The trustee can also act as receiver! Receivership involves hiring a trustee to seize the collateral by way of security. The trustee will therefore be responsible for seizing and selling the seized property for the benefit of the creditors. It is imperative to be an accredited trustee to act as receiver, and this step is part of the long list of particular mandates that they have the power to accomplish!
The consumer proposal is the perfect way for a debtor to avoid declaring bankruptcy. It consists of submitting a reduced payment offer to the creditors in order to leave the remaining part. This is a complex process that requires the involvement of a trustee at each step, and that is why you need to know how its fees for such a service work.
The payment of fees during a consumer proposal is very simple:
- -The trustee will receive the first $ 1,500 at the end of the proposal.
- -The trustee will then receive 20% of the amounts distributed to creditors that exceed the $ 1,500.
So you see that these fees are not excessive, which makes the consumer proposal all the more interesting as an alternative to bankruptcy.
Proposal to approve
What distinguishes the consumer proposal from the proposal convention? The second is reserved for companies under the Companies’ Creditors Arrangement Act.
The establishment of fees for a debt proposal is significantly different from the other methods of financial recovery and debt settlement mentioned above. In fact, the fees of the trustee in a bankruptcy proposal are negotiated between the debtor and the trustee himself.
If an agreement is reached between the two, it must be approved by the creditors of the same debtor. This agreement is also subject to the approval of the court which will analyze the legality and conformity of the process with the prescribed rules.
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