So you’ve filed your personal bankruptcy or consumer proposal with a Licensed Insolvency Trustee but for whatever reason, you haven’t been happy with the service you’ve received. Is it possible to replace your Trustee?
This will depend on the type of engagement you’re currently undergoing.
Your proposal hasn’t yet been approved
If you’ve filed a consumer proposal and it’s been deemed approved by your creditors and the bankruptcy court (i.e., it’s been more than 60 days since the day your proposal was filed and no meeting of creditors has been called), then you’re stuck with your Trustee.
However, if your consumer proposal has not yet been deemed approved by your creditors and the bankruptcy court (i.e., it’s been less than 60 days since you filed your proposal), you can request that your Trustee withdraw your proposal before the 60 day period expires. Here is what you would do:
- Send an email request to your Trustee to withdraw your proposal. It’s important that you do this rather than just making a phone call because you want to have a paper trail as evidence that you made such a request.
- Your Trustee will be required to file with the Office of the Superintendent of Bankruptcy a form called “Form 52 – Notice of Status of Consumer Proposal”. She’ll indicate on that form that your proposal has been withdrawn. A copy of that form must be sent by the Trustee to both yourself and your creditors.
It’s important to note that from the day you filed your proposal, your creditors were legally prohibited from commencing or continuing any legal action against you to recover their debts (called a “stay of proceedings”).
However, once your proposal has been withdrawn, this stay is lifted and your creditors’ legal rights against you automatically revive. Therefore, it’s important that you meet with another Trustee and file your consumer proposal with him as soon as possible.
Your proposal was refused by your creditors
Perhaps the first Trustee didn’t properly evaluate the likelihood of your proposal’s success in being accepted by your creditors. If your consumer proposal was refused by your creditors, you can attempt to file another consumer proposal with another Trustee.
Unlike a consumer proposal, once a bankruptcy has been filed, you are in no position to change Trustees. As a general rule, you are stuck with her throughout the entire bankruptcy process.
There is one situation where you can circumvent this: you can file a consumer proposal while you’re in bankruptcy and if it’s deemed approved by your creditors and the bankruptcy court, your bankruptcy will be annulled.
And there’s nothing that requires you to file a consumer proposal with your current Trustee. You can choose to file your proposal with another Trustee. There are however two caveat to doing this:
- If inspectors were appointed in your bankruptcy proceedings, a majority of those inspectors will need to give you approval to file a consumer proposal. Inspectors are people chosen from among your creditors who supervise your Trustee’s administration of your bankruptcy proceedings.
- Your creditors will only approve your proposal if you and your new Trustee can demonstrate that they would get more money from the proposal than what they’d get if you were to continue with your bankruptcy.
This post should not be interpreted as legal advice or a legal opinion. Please consult your Fong and Partners Inc. advisor to review your own particular circumstances.
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