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What is mediation?
Mediation is a way of resolving conflict between two or more people. The parties involved in the disagreement agree to work with an impartial person called a mediator who helps them settle their dispute.
Why is mediation included in the consumer bankruptcy process?
The mediation process is more flexible and less costly than formal court proceedings. It allows the people who are affected by the bankruptcy to be directly involved in deciding how their disagreement will be settled.
Who is the mediator?
The mediator may be an employee of the Office of the Superintendent of Bankruptcy or someone else with training and experience in mediation.
What does the mediator do?
The mediator will help the parties explain their point of view and discuss ways to settle the disagreement. The mediator's role is to help the parties communicate. To reach an agreement, all parties must understand what issues are in dispute and what each party wants or needs. The mediator does not decide what the settlement will be. The parties decide that together.
The mediator explains the mediation process including the rules for rescheduling and adjournment. The mediator is not allowed to act as a legal counsel to any party involved in the mediation.
What is the Licensed Insolvency Trustee (LIT)'s role in the mediation?
The LIT's role is to provide guidance to people who are affected by the bankruptcy.
Who may attend the mediation session?
The bankrupt, the LIT, the creditor (if it was the creditor who asked for mediation) and the mediator will participate in the session. The parties present at the mediation session should have signing authority and bring all pertinent documentation.
When can mediation be used to resolve disputes?
Mediation can be used to resolve two types of disputes:
- when there is a disagreement about the amount that the bankrupt, who has surplus income, is required to pay creditors; or
- when opposition to the discharge is based on the fact that the bankrupt has failed to comply with the requirement to make surplus income payments, or if the bankrupt could have made a viable proposalFootnote 1 and has chosen bankruptcy rather than a proposal as a solution to debt.
1. Surplus Income Mediation
At the beginning of the bankruptcy, the LIT determines whether the bankrupt has any surplus income, taking into consideration the standards issued by the Superintendent of Bankruptcy, the bankrupt's total income, and their personal and family situation. Surplus income is the amount of total income a bankrupt receives that exceeds the amount needed to maintain a reasonable standard of living. If the LIT concludes that the bankrupt has surplus income, the LIT will set the amount that they must pay into the bankruptcy estate. This amount may be adjusted during the administration of the bankruptcy if there is a change in either the bankrupt's total income or personal or family situation.
Who can request surplus income mediation?
- If the bankrupt does not agree with the amount of surplus income to be paid, the LIT must request mediation.
- If any of the creditors do not agree with the amount of surplus income to be paid, they may ask for mediation by submitting a written request to the LIT.
2. Discharge Mediation
Toward the end of a bankruptcy, where the discharge of an individual bankrupt is opposed by a creditor or the LIT on the grounds that the bankrupt has not made the required surplus income payments or has chosen bankruptcy instead of a proposal as a solution to debt, the LIT must ask the Office of the Superintendent of Bankruptcy for mediation.
What happens if the parties reach an agreement?
Mediation is successful when all the parties reach an agreement. The parties sign a "mediation settlement agreement." The bankrupt will be required to comply with all conditions of the agreement.
What happens if the parties cannot agree?
1. Surplus income mediation
If mediation fails, the LIT may apply to the court to fix, by order, the amount the bankrupt is required to pay the bankruptcy estate.
2. Discharge mediation
If mediation fails or the bankrupt does not comply with the conditions of the mediation settlement agreement, the LIT asks the court for a hearing to decide the matter.
Questions? Need more information?
Contact a Licensed Insolvency Trustee or the nearest Office of the Superintendent of Bankruptcy.