Myth: Talking to a Licensed Insolvency Trustee Will Hurt Your Credit

Key Takeaways

• Talking to a Licensed Insolvency Trustee (LIT) does not affect your credit score. Consultations are not reported to credit bureaus or creditors.
• Credit bureaus only record information from lenders and courts, not conversations, consultations, or advice‑seeking.
• A consultation is private, free, and no‑obligation. Nothing is filed and nothing appears on your credit report unless you choose to proceed with a formal solution.
• Avoiding help can cause far more credit damage: missed payments, collections, and rising balances all hurt your score, while speaking to a trustee does not.
• Only formal filings (consumer proposals, bankruptcies, court judgments, collections) are reported to credit bureaus.
• Getting advice early protects your financial future. It helps you understand your options before your credit deteriorates.
• A consultation is simply a conversation, not a commitment.

“I’d like to get some professional advice about my debt, but I’m afraid even talking to a trustee will show up on my credit report.” This fear stops thousands of Canadians from getting help every year; often until their financial situation becomes far more serious than it needed to be.

There’s a widespread misconception that simply speaking with a Licensed Insolvency Trustee (LIT) will damage your credit score. In reality, an initial consultation does not appear on your credit report, does not affect your credit rating, and isn’t shared with your creditors. While the conversation isn’t confidential in the same way as lawyer‑client privilege; meaning you’re expected to be truthful about your financial situation, the fact that you met with a trustee isn’t reported anywhere. Getting advice early can actually help protect your credit by preventing missed payments, collections, and escalating debt.”

This article breaks down how credit reporting actually works, what trustees do (and don’t) report, and why reaching out for help is one of the safest steps you can take. If you want to understand the process firsthand, you can also explore what to expect when meeting with a Licensed Insolvency Trustee.

How Credit Reporting Actually Works

To understand why consultations don’t affect your credit, it helps to know how credit reporting functions in Canada. Credit bureaus like Equifax and TransUnion collect information from lenders, banks, and financial institutions, not from professionals you speak to for advice.

What Credit Bureaus Track

Credit bureaus record:

• Payment history (on‑time, late, or missed payments)
• Credit utilization
• Account balances
• Credit limits
• Collections activity
• Court judgments
• Bankruptcies and consumer proposals
• Hard credit inquiries from lenders

They do not track:

• Conversations
• Consultations
• Advice‑seeking
• Budgeting appointments
• Meetings with a licensed insolvency trustee

Credit bureaus only record events that lenders or courts formally report.

The Mechanics of Credit Reporting

Here’s how information actually gets onto your credit report:

1. A lender, creditor, or court submits data to the credit bureau.
2. The bureau verifies and records the information.
3. The event appears on your credit file.

The OSB does not report anything unless you formally file a consumer proposal or bankruptcy. A consultation alone does not trigger any reporting.

Consultation vs. Filing

This is the most important distinction and the source of the myth.

Speaking with a trustee is not the same as filing a consumer proposal or bankruptcy. One is a conversation. The other is a legal process.

What Happens During an Initial Consultation

A first meeting with a licensed insolvency trustee is:

• Confidential
• Private
• No‑obligation
• Free
• Focused on understanding your situation

During the consultation, the trustee will:

• Review your income, debts, and expenses
• Explain your options
• Answer questions
• Provide guidance
• Help you understand whether you need a formal solution

Nothing is filed. Nothing is reported. Nothing appears on your credit.

When Credit Reporting Actually Occurs

Credit bureaus are only notified when:

• You file a consumer proposal
• You file for bankruptcy
• A court judgment is issued
• A creditor sends an account to collections

A consultation does not trigger any of these events.

The Cost of Avoiding Professional Advice

Ironically, avoiding a trustee because you’re worried about your credit often leads to more credit damage, not less.

How Continued Debt Problems Impact Credit

While you wait:

• Interest accumulates
• Minimum payments become harder to maintain
• Missed payments appear on your credit report
• Accounts may go to collections
• Your credit score drops month after month

These events have a far greater impact on your credit than speaking with a trustee ever could.

The Financial Cost of Delayed Action

Delaying help often leads to:

• Higher total debt
• More interest paid
• Increased stress
• Fewer available options
• A longer recovery timeline

By the time many people finally reach out, their credit has already taken significant damage; damage that could have been prevented with early guidance.

What Actually Affects Your Credit Score

Here’s what does impact your credit:

• Late or missed payments
• High credit utilization
• Accounts sent to collections
• Court judgments
• Consumer proposals
• Bankruptcies
• Hard credit checks from lenders

Here’s what does not impact your credit:

• Talking to a licensed insolvency trustee
• Asking for advice
• Attending a consultation
• Exploring your options
• Budgeting or credit counselling sessions

If you want to understand how debt affects credit, you can read our guide on credit score fears and debt consolidation.

From Consultation to Decision

After your initial meeting, you’ll have time to think through your options. There is no pressure and no obligation to proceed with any formal filing.

Typically, the next steps include:

• Reviewing the information you received
• Asking follow‑up questions
• Comparing your options
• Deciding whether you want to move forward

If you choose to file a consumer proposal or bankruptcy, only then does the OSB notify the credit bureaus, because the law requires it. But if you decide not to file, nothing is reported and your credit remains unaffected.

A consultation is simply a conversation, not a commitment.

How We Can Help

The idea that talking to a licensed insolvency trustee will hurt your credit is a myth and a harmful one. A consultation is confidential, private, and has zero impact on your credit report. In fact, reaching out early is one of the best ways to protect your financial future, prevent further credit damage, and understand your options before things get worse.

If you’re feeling overwhelmed by debt, you don’t have to navigate it alone. Book a free, confidential consultation with Farber’s Licensed Insolvency Trustees today and explore your options.