Becoming a Licensed Insolvency Trustee (LIT) is a fairly long and arduous process. However, it is a very rewarding and stable career choice. A LIT has an enormous amount of responsibility, and therefore the government has strict standards before they allow someone to enter the profession.
This article will discuss everything you wanted to know about the process of becoming a LIT and the challenges as well as the outlook facing these insolvency professionals in the future.
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Becoming A Licensed Insolvency Trustee
The Superintendant of Bankruptcy (which is Industry Canada) is responsible for granting licenses to LIT’S, as described in Directive No. 13R6, LIT Licensing.
The minimum qualifications for someone to get a license are:
- be of good character and reputation,
- be solvent;
- successfully complete the courses
- pass an Oral Board of Examination.
Let’s look at each of these more closely.
Federally Regulated Insolvency Counsellor
To be of good character – The specific requirements the superintendent looks at is whether you have had a criminal offence for which you have not been pardoned. If you have one then the superintendent has the discretion to deny you a license.
Be solvent. If you are going to be counselling companies and consumers about managing their finances the Superintendant wants to know whether you have declared bankruptcy or filed a consumer proposal. You should be on solid financial footing.
Pass the Courses – The Canadian Association of Insolvency & Restructuring Professionals is a non-profit organization that is responsible to develop courses, and train insolvency professionals to have a high standard of care and integrity. As such they have developed 3 courses that one needs to complete in order to become a Licensed Insolvency LIT. These courses will take a dedicated individual 2 years to complete as long as they pass everything on time.
Pass the Oral Board Exam – The Oral Board Exam is administered by the OSB. It is an oral exam where you will deliver a response to 6 questions to a panel of 3 people, the superintendent of bankruptcy, an insolvency LIT, and an insolvency lawyer. If you pass this exam then you are provided with a full license or a partial license.
Challenges To Become A Licensed Insolvency Professional
Once granted the license the Superintendant will put you on a probationary period for 24 months. This probation will limit the type of files that you can handle while you learn the ins and outs of the profession. It is a rigorous process for someone to go through so it is very important that you have the passion, will, and desire to motivate you when things get difficult.
The biggest challenge to become a LIT is passing the amount of education and courses that you will need to take.
A LIT needs a solid background in accounting. Most, in fact, are Chartered Accountants. To become a CA requires a university degree, plus another 2 years to get your designation. Once you complete the designation you will need to take another 2 years to get a Chartered Insolvency & Restructuring Professional designation. Then after that, you are going to need to pass the Oral Board Exam.
Licensed Insolvency Professional Debt Relief Options
So to become a Licensed Insolvency LIT can take up to 8 years! And that is if you pass all of the coursework and exams. If you happen to fail which is very likely due to the 50% fail rate of the National Insolvency Exam, then you are going to have to tack on more time.
One of the other challenges is finding a firm that is going to provide a breadth of training for you to get the experience that you require to get a full license. It is important to find a boutique firm that will provide corporate and consumer work so that you can get exposed to different scenarios.
Lastly, it may be difficult to find employment. Insolvency is a cyclical business and if you choose to live in an area that has a low insolvency rate then you may not have a steady job.
Granted A Licence From the Superintendent Of Bankruptcy
One of the largest concerns for the profession is the ability to attract new talent. As outlined above the qualification is gruelling and takes a long time to complete. According to the Superintendant of Bankruptcy, there were only 30 candidates to challenge the oral board exam last year. Of the 30, 24 were granted licenses.
This is down dramatically from 52 in 2014. There is also the concern that the average age of a Licensed Insolvency Trustee is 56 years old. With retirement looming the older LITs are going to need to bring in attractive talent somehow.
Although LITs are ageing and new LITs are not blistering the market, there is no concern for the industry anytime soon. According to the national LIT directory, there are 1,067 licensed insolvency LITs in Canada. In 2015 there were 125,000 consumer insolvencies. That works out to an average workload of 117 insolvency filings per LIT. Assuming that each proceeding takes 3 hours of LIT time, there is still plenty of capacity for the existing LITs to handle the workload.
Office Of The Superintendent
A very significant event occurred in April 2016. The title “Licensed Insolvency LIT” (LIT) replaced the older “Bankruptcy LIT”. What impact this will have on the profession is still yet to be seen. The community hopes that the name change will enable consumers to get clear. Further, the public should know all the services of a LIT. This is instead of the public just seeing them as offering bankruptcy services.
Insolvency rates are stabilizing at around 4% per 1000 people since a peak of 5.8% in 2009. There is bad news for Canadians. It is one of the highest leveraged countries in the world. Further, we have a debt to equity ratio of 164%. Also, we have an average credit card debt load of $25,000.
Author: Alistair Vigier is the CEO of ClearWay Law