Directive No. 1R4
Counselling in Insolvency Matters
Directive No. 1R5 replaces Directive No. 1R4 as of January 31, 2020.
127 KB, 2 pages
(Supersedes Directive No. 1R3 issued on , on the same topic.)
- In this Directive,
- “Act” or “BIA” means the Bankruptcy and Insolvency Act;
- “Assign” means the selection by an LIT of a BIA Insolvency Counsellor who is registered against the LIT’s licence, to provide insolvency counselling on a specific insolvency filing;
- “Bankrupt” is as defined in section 2 of the Act;
- “BIA Insolvency Counsellor” means an individual registered by an LIT with the OSB and for whom the LIT is accountable, whom the LIT may assign to provide insolvency counselling on a specific insolvency filing in fulfillment of the LIT’s duties pursuant to subsection 157.1(1) and paragraph 66.13(2)(b) of the Act, and in accordance with this Directive;
- “Debtor” is as defined in section 2 of the Act;
- “Insolvent person” is as defined in section 2 of the Act;
- “Intermediary” means a third-party individual or organization who, in return for direct or indirect consideration, provides advice to insolvent persons in relation to the BIA or to any aspect of the insolvent persons’ finances, or acts as a go-between with insolvent persons and LITs. This includes those who derive consideration or a benefit from selling insolvent persons a range of services before, during, or after an insolvency filing under the BIA. Such services include, but are not limited to: advocacy, preparing information for a debtor in relation to an insolvency proceeding, representation, restructuring services, credit rebuilding, loans in various forms, or insurance;
- “Licensed Insolvency Trustee (LIT)” means a trustee or licensed trustee, as defined in section 2 of the Act and an administrator of consumer proposals as defined in section 66.11 of the Act;
- “LIT’s authorized office” means an office that has been registered with the OSB and is distinct and physically separate from any office of an individual who is: (a) ineligible to be registered against an LIT’s licence pursuant to paragraph 12 of this Directive; and, (b) an unlicensed third party operating in the debt advisory industry;
- “LIT-in-Charge” means, where an LIT firm operates under a corporate licence, the individual LIT authorized to act on behalf of the corporate LIT in respect of the corporate licence;
- “OLAA” means the OSB Licence Administration Application;
- “OSB” means the Office of the Superintendent of Bankruptcy;
- “PCIC” means the Practical Course on Insolvency Counselling, a course offered by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and recognized by the OSB as confirming that individuals possess: (a) the knowledge and ability to perform BIA insolvency counselling; and, (b) knowledge of the BIA insolvency counselling curriculum;
- “Referral Arrangement” means an arrangement characterized by a pattern of activity whereby an individual or organization directs debtors to specific LITs for a professional engagement, and as consideration for the referrals, the LIT demonstrates a pattern of providing for their BIA insolvency counselling obligations by directing all or a proportion of their individual bankrupts or consumer debtors to the individual or organization that arranged the referrals. Referral arrangements may also arise from other direct and indirect exchanges of consideration;
- “Referral Arranger” means an individual or organization in the debt advisory industry (whether for-profit or not-for-profit) that participates in a formal or informal referral arrangement with an individual LIT or corporate LIT;
- “Register” is the act of attesting and verifying that an individual meets the registration requirements defined in this Directive. Once registration is validated, the OSB shall consider the conduct and actions of the registered individual with regard to the delivery of insolvency counselling services and compliance with this Directive as if it were the conduct of the LIT, with regard to any and all obligations associated with the LIT’s licence;
- “Rules” means the Bankruptcy and Insolvency General Rules made pursuant to subsection 209(1) of the Act;
- “Third-party office” means the office of a registered third-party BIA Insolvency Counsellor.
Authority and Purpose
- This Directive is issued pursuant to the authority of paragraphs 5(4)(b) and (c) of the Act and in accordance with section 157.1 and paragraph 66.13(2)(b) of the Act.
- Subsection 157.1(1) and paragraph 66.13(2)(b) of the Act require that the LIT provide, or provide for, counselling for an individual bankrupt or consumer debtor in accordance with directives issued by the Superintendent.
- Consistent with relevant BIA provisions that apply to an LIT, the purpose of this Directive is to:
(a) Identify the accountability and duties of an LIT with regard to providing, or providing for, insolvency counselling;
(b) Establish the requirements necessary for an LIT to register a BIA Insolvency Counsellor whom the LIT may assign to provide insolvency counselling on a specific insolvency filing, an individual for whom the LIT accepts responsibility with regard to the provision of insolvency counselling; and,
(c) Establish the required content and process for the delivery of insolvency counselling to an individual bankrupt or consumer debtor.
Accountability for Insolvency Counselling
- Having satisfied all the requirements to obtain a licence to act as an LIT, an LIT is qualified under and by virtue of the Act to provide insolvency counselling to individual bankrupts or consumer debtors.
- An LIT is accountable for the provision of insolvency counselling to each individual bankrupt and consumer debtor on whose behalf he or she has filed an insolvency proceeding. The accountability of the LIT is the same regardless of whether they provide counselling, or provide for it.
- The LIT is required to maintain knowledge of the insolvency counselling curriculum, consistent with paragraphs 24 through 26 of this Directive.
- An LIT shall fulfill their obligation to provide insolvency counselling personally, or by assigning on a specific insolvency filing: (a) an individual who has been registered as a BIA Insolvency Counsellor against his or her LIT’s licence/corporate licence; or, (b) another LIT. The LIT that filed the insolvency proceeding is accountable for the insolvency counselling provided by the assigned individual.
Obligation to Comply with the Act, Rules and Trustee Code of Ethics
- In accordance with the conditions and requirements of the Act, Rules (including the Trustee Code of Ethics) and this Directive, when providing for insolvency counselling, an LIT shall, in particular:
(a) avoid any influence, interest or relationship that impairs, or appears in the opinion of an informed person to impair, their professional judgment;
(b) never directly or indirectly pay to a third party a commission, compensation or other benefit in order to obtain a professional engagement or accept, directly or indirectly from a third party, a commission, compensation or other benefit for referring work relating to a professional engagement, including, for example, a referral arrangement;
(c) not engage in any business or occupation that would compromise their ability to perform any professional engagement or that would jeopardize their integrity, independence or competence;
(d) not obtain, solicit or conduct any engagement that would discredit their profession or jeopardize the integrity of the bankruptcy and insolvency process; and,
(e) ensure that their assigned BIA Insolvency Counsellor adheres equally to the high standards of ethics and professionalism that apply to the LIT, with regard to carrying out insolvency counselling functions with competence, honesty, integrity, impartiality and due care.
Registration of a BIA Insolvency Counsellor
Registration (Individual Licence)
- Using the OLAA, an LIT is required to register against their individual licence any individual whom they propose to rely on as a BIA Insolvency Counsellor with regard to the fulfillment of their BIA obligations for the provision of insolvency counselling.
- An LIT shall not register against their licence any individual whom they know, or should reasonably suspect, does not meet the eligibility requirements in paragraph 12 or is ineligible to be registered pursuant to paragraph 13 of this Directive.
- In accordance with the OSB registration process, and subject to the OSB’s review, the registering LIT shall demonstrate and attest that the individual to be registered against the individual LIT’s licence meets the following requirements:
(a) has successfully completed either a high school diploma or high school equivalency certificate (having passed the General Educational Development (GED) test), plus one of:
(i) a minimum of three (3) years of relevant practical work experience supporting an LIT or registered BIA Insolvency Counsellor; or,
(ii) a minimum of thirty (30) credit hours of post-secondary study completed in a diploma or degree program from a recognized post-secondary institution;
- Knowledge and Ability to Deliver Insolvency Counselling
(b) has successfully completed the PCIC; or
(c) at the date of issuance of this Directive, held a valid ICQC certificate;
- Knowledge of the BIA Insolvency Counselling Curriculum
(d) has demonstrated a knowledge of the BIA insolvency counselling curriculum as specified in this Directive and according to requirements specified or recognized by the OSB; and,
(e) as personally validated during the LIT’s direct observation of the individual providing a minimum of three (3) counselling sessions pursuant to paragraph 12(f) of this Directive;
- Experience Requirement
(f) has obtained experience in providing BIA insolvency counselling in each of the different required counselling sessions pursuant to this Directive to individual bankrupts or consumer debtors through a minimum cumulative total of fifty (50) counselling sessions acquired:
(i) by delivering insolvency counselling under the direct observation of:
1) the applicant LIT or an LIT of the same firm as the applicant LIT; or,
2) a BIA Insolvency Counsellor registered against an LIT’s licence through the OLAA who already has a minimum of one (1) year of experience in providing insolvency counselling for the applicant LIT or an LIT of the same firm; or,
(ii) by delivering BIA insolvency counselling, as a BIA Insolvency Counsellor previously registered against an LIT’s licence through the OLAA, pursuant to Directive No. 1R4 and within thirty-six (36) months from the date of the application.
- Validation of Competency
(g) possesses the necessary competencies, is known by the LIT to be of good character, and has the capabilities, knowledge, skills, and proficiency to provide BIA insolvency counselling in accordance with this Directive as personally validated during the LIT’s direct observation of the individual providing a minimum of three (3) counselling sessions to individual bankrupts or consumer debtors on whose behalf the LIT has filed an insolvency proceeding;
- Liability Insurance
(h) is covered by the LIT’s professional liability insurance and employee dishonesty (also known as fidelity) insurance; or, in the case of a non-employee, has provided to the LIT current documentation demonstrating that he or she is covered by adequate professional liability insurance of their own;
- Professional Development
(i) undertakes to complete annually three-and-one-half (3.5) hours of professional development training as acknowledged to be appropriate by the LIT.
- An individual is ineligible to be registered against an LIT’s licence as a BIA Insolvency Counsellor if they are directly or indirectly involved in activities that are inconsistent with the LIT’s obligations under the Act and the Rules, including those representing a real, potential or perceived conflict of interest. Activities which preclude an individual’s eligibility to be registered as a BIA Insolvency Counsellor include being:
(a) engaged in or involved with the provision of financing and lending services to individual bankrupts or consumer debtors including, but not limited to, credit rebuilding services, loans in various forms and insurance;
(b) employed by, associated with, or acting as an Intermediary; or
(c) employed by, associated with, or acting as a Referral Arranger.
Registration (Corporate Licence)
- In accordance with the requirements and application process specified in paragraphs 10 to 13 of this Directive, the LIT-in-Charge may register an individual against the firm’s corporate licence (in the OLAA), where one or more LITs within the same firm intend to provide for counselling by assigning the same individual.
- Eligibility for corporate registration of a BIA Insolvency Counsellor is restricted to individuals presenting a low risk to the integrity of the insolvency counselling process, namely those who:
(a) are already validly registered by one of the firm’s individual LITs as a BIA Insolvency Counsellor pursuant to the requirements of the individual registration process specified in this Directive;
(b) are employed by the corporate LIT;
(c) are not employed by, nor receiving compensation from, Intermediaries, Referral Arrangers, individuals who are ineligible to be registered against an LIT’s licence pursuant to paragraph 13 of this Directive, or any other unlicensed third party operating in the debt advisory industry;
(d) do not have professional activities, investments, or financial interests related to insolvent persons; and,
(e) are covered as employees under the corporate LIT’s professional liability and employee dishonesty (also known as fidelity) insurance.
LIT Assigning Duties and Prohibitions
- When assigning a registered BIA Insolvency Counsellor to provide insolvency counselling on a specific insolvency filing, the LIT shall observe the prohibitions specified in this Directive.
- An LIT shall never provide for insolvency counselling by assigning a registered BIA Insolvency Counsellor whose interests may conflict with, or have the appearance of conflicting with, the interests of the individual bankrupt or consumer debtor.
- When assigning a BIA Insolvency Counsellor who is not an employee of the LIT’s firm, the LIT shall attest that neither the assigned BIA Insolvency Counsellor, nor an organization or person with which the assigned BIA Insolvency Counsellor has a relationship, is directly or indirectly receiving any other remuneration or consideration from the individual or corporate LIT, other than the amount prescribed for providing the BIA insolvency counselling sessions.
(a) Such conflicts of interest may include, but are not limited to, where the BIA Insolvency Counsellor or an organization or person with which the BIA Insolvency Counsellor has a relationship, has, or may during the administration of the individual bankrupt’s or consumer debtor’s insolvency proceeding, receive any form of payment or remuneration, directly or indirectly from the insolvent person or their creditors, for any financial advisory product or service other than prescribed fees paid to the LIT in respect of BIA insolvency counselling. Such a conflict includes any service provided in the sixty (60) days prior to the filing of an insolvency proceeding.
Providing, or Providing for, Insolvency Counselling
- (1) When providing insolvency counselling or assigning an individually- or corporately-registered BIA Insolvency Counsellor to provide insolvency counselling for a specific insolvency filing, the LIT shall:
(a) meet with the individual bankrupt or consumer debtor to review and complete the Insolvency Counselling Disclosure and Assignment Form (Schedule I);
(b) obtain written consent from the individual bankrupt or consumer debtor before disclosing any information concerning the individual bankrupt’s or consumer debtor’s insolvency to a BIA Insolvency Counsellor who is not an employee of the individual LIT or corporate LIT (Schedule I);
(c) submit to the OSB, prior to the first counselling session, a copy of the Insolvency Counselling Disclosure and Assignment Form (Schedule I), signed by the individual bankrupt or consumer debtor and the LIT; and,
(d) undertake to supervise any assigned BIA Insolvency Counsellor’s delivery of insolvency counselling and validate and attest to its conformance with the process and standards as set out in this Directive.
(2) To ensure a debtor’s informed consent, an amended Insolvency Counselling Disclosure and Assignment Form (Schedule I) shall be submitted to the OSB where:
(a) an LIT decides to reassign insolvency counselling from an employee of the LIT, or corporate LIT, to a third-party BIA Insolvency Counsellor (including an LIT outside the firm); or
(b) an LIT decides to change the insolvency counselling delivery method from that described under paragraph 20(1) of this Directive to a method described under either paragraph 20(2) or 21(1) of this Directive.
(3) With the exception of paragraph 19(2) of this Directive, the LIT shall report any other changes in the provision of insolvency counselling at the conclusion of the process on the Insolvency Counselling Completion Form (Schedule II).
In-person Insolvency Counselling
- (1) As the standard and preferred approach, an LIT shall provide, or provide for, the delivery of insolvency counselling in-person at the LIT’s authorized office, where the LIT finalized the debtor’s assessment.
(2) Subject to paragraph 20(1) of this Directive, when an LIT provides for insolvency counselling using a third party, by exception, and for reasons of geographic proximity to a debtor, in-person insolvency counselling may be provided at the third-party office location of a registered BIA Insolvency Counsellor upon request of the individual bankrupt or consumer debtor, and if the LIT agrees it is feasible and appropriate.
In-Person Insolvency Counselling by Video
- (1) By exception, and for reasons of avoiding significant debtor inconvenience, an individual bankrupt or consumer debtor may request that an LIT provide, or provide for in-person, insolvency counselling via videoconference.
(2) In-person insolvency counselling by video is subject to the following additional conditions:
(a) Both the LIT and the individual bankrupt or consumer debtor have the necessary means and capacity to participate and the LIT agrees it is feasible and appropriate;
(b) The individual bankrupt or consumer debtor only receives insolvency counselling at a location that offers privacy and that is not an office of an individual who is ineligible to be registered against an LIT’s licence pursuant to paragraph 13 of this Directive;
(c) Insolvency counselling via videoconference is provided only on an individual basis and not on a group basis, nor in the presence of an individual who is ineligible to be registered against an LIT’s licence pursuant to paragraph 13 of this Directive.
Integrity and Quality Validation
- Consistent with the debtor’s agreement in the Insolvency Counselling Disclosure and Assignment Form (Schedule I), in the case of exceptions identified under paragraphs 20(2) and 21(1) of this Directive, the LIT shall ensure the quality and integrity of BIA insolvency counselling through the retention of an audio record of the counselling session for a temporary period. Audio records shall be retained and available for validation by the OSB on request, for a minimum period of forty-five (45) days following the counselling session. Records shall be kept in a secure location and securely destroyed on a regular basis following the expiry of the retention period.
Request for Variance
- Where extraordinary circumstances may prevent insolvency counselling from being performed in accordance with paragraphs 20(1) and (2) or 21(1) of this Directive, the LIT shall request to vary the delivery by completing and submitting to the OSB, via E-Filing, a Request for Variance Form (Schedule III).
Standards and Insolvency Counselling Curriculum
- The counselling referred to in section 157.1 and paragraph 66.13(2)(b) of the Act shall consist of the following two sessions:
(a) a first session to be conducted, in accordance with paragraph 25 of this Directive,
(i) between 10 and 60 days following the date of the initial bankruptcy event or the filing of a consumer proposal, or
(ii) within 10 days following the first meeting of creditors held pursuant to paragraph 57(c)(i) of the Act where a Division I Proposal was refused by the creditors; and
(b) a second session to be conducted, in accordance with paragraph 26 of this Directive, not before the end of a 30-day period after the first session 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.
First Counselling Session — Consumer and Credit Education
- In the first session, the LIT or assigned BIA Insolvency Counsellor shall present information to provide the individual bankrupt or consumer debtor with consumer advice in the areas of:
(a) money management;
(b) spending and shopping habits;
(c) warning signs of financial difficulties; and
(d) obtaining and using credit.
Second Counselling Session — Identification of Roadblocks to Solvency and Rehabilitation
- The second session is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and requires that the LIT or assigned BIA Insolvency Counsellor:
(a) follow up on the application by the individual bankrupt or consumer debtor of the principles presented in the first session, to assist the individual bankrupt or consumer debtor to better understand his or her strengths and weaknesses with regard to money management and budgeting skills;
(b) where appropriate, assist the individual bankrupt or 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 may help him or her achieve and maintain economic stability; and,
(c) cooperatively with the individual bankrupt or 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.
Completion of Insolvency Counselling Requirements
- On completion of all insolvency counselling sessions, the LIT shall:
(a) submit to the OSB a copy of the Insolvency Counselling Completion Form (Schedule II) signed by the individual bankrupt or consumer debtor and the LIT attesting and confirming that all insolvency counselling sessions have been provided in accordance with the requirements, process and standards as set out in this Directive; and,
(b) retain, in accordance with section 68 of the Rules, copies of all documents sufficient to demonstrate compliance with the conditions set out in this Directive for a minimum duration of four (4) years after the LIT’s discharge. Copies of these documents shall be provided to the OSB upon request.
- Section 131 of the Rules prescribes the fees and expenses that may be charged for counselling.
- Once the LIT provides the insolvency counselling to the individual bankrupt or consumer debtor, he or she may withdraw from the estate trust account, to his or her benefit, the prescribed amount for the payment of the specific counselling session.
- Where an LIT provides for insolvency counselling using a registered BIA Insolvency Counsellor who is not an employee, the counsellor shall receive remuneration from the LIT only in accordance with, and in the amount specified in the tariff prescribed by the Rules.
- Where an LIT provides for insolvency counselling using a registered BIA Insolvency Counsellor, he or she shall not make any payment prior to the counselling services having been provided, at which point the LIT may withdraw from the estate trust account and remit to the assigned BIA Insolvency Counsellor the prescribed amount for the payment of the specific counselling session.
- To maintain the registration of a BIA Insolvency Counsellor, the LIT shall, when fulfilling his or her annual licence renewal requirements using the OLAA, validate that:
(a) all information relating to the BIA Insolvency Counsellors registered against his or her licence is accurate and up to date; and,
(b) he or she has retained documentation demonstrating that each registered BIA Insolvency Counsellor has completed three and a half (3.5) hours of appropriate professional development training in the previous twelve (12) months.
- Where a registered individual is not assigned by an LIT to provide insolvency counselling for a period of two (2) consecutive calendar years, the registration of the BIA Insolvency Counsellor may be considered to be expired and removed from the LIT’s profile, after notification to the LIT, at the discretion of the OSB.
- (1) In accordance with the established process, an LIT or the LIT-in-Charge may, at any time, cancel the registration of any BIA Insolvency Counsellor whom they have previously registered against their individual or corporate licence.
(2) For clarity, instances of failure to comply with the requirements of this Directive remain the responsibility of the LIT, and survive an LIT’s cancellation of a registration of any individual the LIT previously registered pursuant to this Directive.
- The Registry of Licensed Insolvency Trustees maintained on the OSB website, pursuant to paragraph 11.1(1)(c) of the Act, shall include the names of BIA Insolvency Counsellors registered against LITs’ licences.
- Complaints raised against any assigned BIA Insolvency Counsellor shall be treated by the OSB as a complaint against the LIT who assigned the BIA Insolvency Counsellor.
- Failure by the LIT to provide, or provide for, insolvency counselling in full conformance with this Directive may result in one or more of the following consequences:
(a) Restriction of the individual LIT’s licence or corporate LIT’s licence, preventing them from applying to register, assigning or renewing the registration of one or more BIA Insolvency Counsellors;
(b) Increased supervision and monitoring of an individual or corporate LIT’s provision of insolvency counselling;
(c) Taxation of LIT's counselling fees;
(d) Taxation of LIT’s estate fees, where, for example, the LIT’s assigned BIA Insolvency Counsellor or a person or organization associated with the assigned BIA Insolvency Counsellor solicits and receives any form of remuneration from the individual bankrupt or consumer debtor, other than the amount provided from the estate for insolvency counselling;
(e) Initiation of a professional conduct investigation and proceeding where warranted.
- In registering an individual against their licence pursuant to paragraph 10 of this Directive, and in lieu of the Education Requirement in paragraph 12(a) of this Directive, the LIT may attest and demonstrate that the individual:
(a) was registered as an Insolvency Counsellor with the OSB at the date of issuance of this Directive; and,
(b) has five (5) years of related work experience.
- In registering an individual against an LIT’s licence pursuant to paragraph 10 of this Directive, and in lieu of the Experience Requirement in paragraph 12(f) of this Directive, the LIT may attest and demonstrate that the individual:
(a) was registered as an Insolvency Counsellor with the OSB at the date of issuance of this Directive; and,
(b) has provided a minimum of fifty (50) counselling sessions under the Act for an LIT in the twenty-four (24) months prior to the date of issuance of this Directive.
Insolvency Counselling Education
- Until such a time as enrollment in the PCIC opens, Insolvency Counsellor’s Qualification Course (ICQC) certificates earned after the date of issuance of this Directive will be recognized as meeting the requirements of paragraph 12(c) of this Directive.
Coming into Force
- As of October 1, 2018, this Directive, together with the requirement to use the related Forms as prescribed in Schedules I, II, and III, comes into force and revokes and replaces Directive No. 1R3, Counselling in Insolvency Matters.
Registration of BIA Insolvency Counsellors prior to Effective Date
- On or about June 1, 2018, and prior to October 1, 2018, LITs are required to register any BIA Insolvency Counsellors they intend to rely on to provide for counselling, in accordance with the requirements in paragraphs 10-15 and paragraphs 38-40 of this Directive. To facilitate a smooth transition, access to the individual and corporate registration processes will be offered in accordance with a schedule established by the OSB.
- For any questions pertaining to this Directive, please contact the Office of the Superintendent of Bankruptcy at firstname.lastname@example.org.
William R. James
Superintendent of Bankruptcy
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