Directive No. 1R3
Coming into force September 18, 2009

Counselling in Insolvency Matters

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Version signed by the Superintendent: Directive No. 1R3 (PDF Format, 4 MB, 12 pages)

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Issued: August 14, 2009

(Supersedes Directive No. 1R2 issued on December 21, 1994, on the same topic)

Short Title

1. Counselling Directive.

Interpretation

2. In this Directive,

• "Act" means the Bankruptcy and Insolvency Act;
• "counselling" means to assist and educate bankrupts and/or relatives of bankrupts, or consumer debtors, on good financial management, including prudent use of consumer credit and budgeting principles; in developing successful strategies for achieving financial goals and overcoming financial setbacks; and, at any time, where appropriate, in making referrals to deal with non-budgetary causes of insolvency (i.e. gambling, addiction, marital and family problems, etc.);
• "date of initial bankruptcy event" means the date pursuant to section 2 of the Act;
• "OSB" means the Office of the Superintendent of Bankruptcy;
• "qualified counsellor" means an individual (independent counsellor authorized by the trustee, a trustee, an administrator of consumer proposals, and an employee of a trustee or administrator of consumer proposals) who has obtained the qualifications and skills to provide financial counselling to a debtor, consumer debtor, bankrupt or relative of a bankrupt;
• "relative" means an individual connected by blood relationship, marriage or common-law relationship, or adoption, to the bankrupt, and includes same-sex partners;
• "Rules" means the Bankruptcy and Insolvency General Rules made pursuant to subsection 209(1) of the Act;
• "trustee" means a trustee licensed under section 13.1 of the Act and an administrator of consumer proposals as defined in section 66.11 of the Act.

Authority and Purpose

3. This Directive is issued pursuant to the authority of paragraphs 5(4)(b) and (c) of the Act.

4. The purpose of this Directive is to establish the minimum content of the counselling stages and associated tasks.

Policy

5. The counselling referred to in section 157.1 and paragraph 66.13(2)(b) of the Act shall consist of the following two stages:

(a) a first stage to be conducted, in accordance with paragraph 6(1) of this Directive,

(i) between 10 and 60 days following the date of the initial bankruptcy event,

(ii) within 10 days following the first meeting of creditors held pursuant to subparagraph 57(c)(i) of the Act where a Division I Proposal was refused by the creditors; and

(b) a second stage to be conducted, in accordance with paragraph 7(1) of this Directive, not before the end of a 30-day period after the first stage and no later than 210 days following the date of the initial bankruptcy event, in the case of a bankrupt, or of filing a consumer proposal, in the case of a consumer debtor.

Standards

First Counselling Stage — Consumer and Credit Education

6. (1)

(a) In the first stage, the qualified counsellor shall present information to provide the bankrupt and/or relative, or a consumer debtor, with consumer advice in the areas of:

(i) money management;

(ii) spending and shopping habits;

(iii) warning signs of financial difficulties; and

(iv) obtaining and using credit.

(b) With the agreement of the bankrupt and/or relative, or consumer debtor, this stage may be conducted in a group presentation. A group shall be more than two but no more than 20 participants.

Second Counselling Stage — Identification of Roadblocks to Solvency and Rehabilitation

7. (1) The second stage is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and requires that the qualified counsellor:

(a) follow up on the application by the debtor of the principles presented in the first stage to assist the bankrupt and/or relative, or a consumer debtor, to better understand his or her strengths and weaknesses with regard to money management and budgeting skills;

(b) assist, where appropriate, the bankrupt and/or relative, or a consumer debtor:

(i) to identify the non-budgetary causes (such as gambling abuse, compulsive behaviour, substance abuse, employment and marital or family difficulties) that may have contributed to his or her financial difficulties;

(ii)to better understand his or her behaviour in financial management and consumption habits; and

(iii) to make him or her aware of the existence of resources that will help him or her achieve and maintain economic stability; and

(c) cooperatively with the bankrupt and/or relative, or a consumer debtor, develop recommendations and alternatives for a financial plan of action that, if appropriate, may include referral for specialized counselling to deal with non-budgetary causes of insolvency.

8. (1) On completion of each stage of counselling, the qualified counsellor shall:

(a) complete and sign the Counselling Certificate (Schedule I (first stage) or Schedule II (second stage));

(b) request that the bankrupt or consumer debtor sign the Acknowledgement (Schedule I (first stage) or Schedule II (second stage)) indicating that counselling has been provided; and

(c) where applicable, send to the trustee the Counselling Certificate for retention as part of the estate file of the bankrupt or consumer debtor.

(2) On request by the official receiver, the trustee shall provide the official receiver with a copy of the certificate referred to in paragraph 8(1)(c) of this Directive.

(3) Once the trustee has executed, or received from the qualified counsellor, the certificate referred to in paragraph 8(1)(c) of this Directive, the trustee may withdraw from the trust account to his or her benefit, or remit to the qualified counsellor, the prescribed amount for the payment of the specific counselling stage.

General

9. No fee or expense shall be paid from the estate trust account for counselling resulting from a referral mentioned in paragraph 7(1)(c) of this Directive.

10. Where the qualified counsellor provides counselling to a relative of a bankrupt, such counselling shall be provided at the same time as the counselling provided to the bankrupt.

11.(1) Subject to paragraph 11(2), each counselling stage shall be conducted in person by a qualified counsellor.

 (2) In exceptional cases, where the bankrupt and/or relative, or the consumer debtor, resides in a remote area and where the counselling cannot be performed in person, the Designated Senior Bankruptcy Analyst may waive the requirement of paragraph 11(1) provided that the trustee ensures that resource materials are made available to the bankrupt and/or relative, or the consumer debtor, prior to counselling.

Coming into Force

12. This Directive comes into force on the day on which subsection 1(1) of Chapter 36 of the Statutes of Canada, 2007, comes into force. This Directive, applies only to a person who, on or after the day on which subsection 1(1) of Chapter 36 of the Statutes of Canada, 2007, comes into force, is described in one of (a) – (f) listed below:

(a) the person becomes bankrupt;

(b) the person files a notice of intention;

(c) the person files a proposal without having filed a notice of intention;

(d) a proposal is made in respect of the person without the person having filed a notice of intention;

(e) an interim receiver is appointed in respect of the person's property and all or part of the person's property comes into the possession or under the control of the interim receiver; or

(f) all or part of the person's property comes into the possession or under the control of a receiver.

As such, in order to determine whether Directive No. 1R3 applies to a particular insolvency file, the question that needs to be asked is whether one of the "triggering events" described in (a) – (f) occurred on or after the coming into force date.

Enquiries

13. For any questions pertaining to this Directive, please contact your local OSB office.

James Callon
Superintendent of Bankruptcy

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Schedule I

Counselling Certificate
First Stage

File number

To:Superintendent of Bankruptcy

from:
Name of qualified counsellor

Re:
Name of bankrupt or consumer debtor

Date:
Date of counselling

I, the undersigned, hereby certify that I have complied with the terms of Paragraph 6 of Directive No.1R3, Counselling in Insolvency Matters.

Dated at , this day of , .

Signature of qualified counsellor

Acknowledgement

I, the undersigned, have attended an individual or group (cross out word that does not apply) session presented by the above-mentioned qualified counsellor and understand the information that was presented to me.

Dated at , this day of , .

Signature of bankrupt or consumer debtor

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Schedule II

Counselling Certificate
Second Stage

File number

To:Superintendent of Bankruptcy

from:
Name of qualified counsellor

Re:
Name of bankrupt or consumer debtor

Date:
Date of counselling

I, the undersigned, hereby certify that I have complied with the terms of Paragraph 7 of Directive No.1R3, Counselling in Insolvency Matters.

Dated at , this day of , .

Signature of qualified counsellor

Acknowledgement

I, the undersigned, have consulted with the above-named qualified counsellor and acknowledge receiving and understanding the counselling referred to in this certificate.

Dated at , this day of , .

Signature of bankrupt or consumer debtor

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