credit counsellor

Why do credit counsellors say Licensed Insolvency Trustees are working for the creditors?

A Quora user asksWhy will a credit counsellor say a Licensed Insolvency Trustee is working for the creditors?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

By “credit counsellor”, I’m assuming that you’re referring to non-profit organizations such as Credit Canada (here in Toronto).

These organizations usually receive their funding from the banks. They are therefore acting as defacto collection agents for the banks so they are literally “working for the creditors”.

The issue of whether the trustee sides with the bankrupt or the creditors usually only becomes an issue if the bankrupt has acted in a dishonest manner to the detriment of his creditors before or during the bankruptcy.

Therefore, if there is a conflict between the bankrupt’s interests and the creditors’ interests, the trustee must side with the creditors. However, in the vast majority of cases where a bankrupt has acted honestly and there are no contentious issues, this issue of whom the trustee is siding with simply isn’t raised.