Directive No. 15

Coming into force September 18, 2009

Trustee Consultation Fees in Bankruptcies and Proposals

Issued: August 14, 2009

(Supersedes Directive No. 4 issued on July 23, 1993, on the same topic)

Interpretation

1. In this Directive,
   • "Act" means the Bankruptcy and Insolvency Act;
   • "consultation" 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, making referrals to deal with non-budgetary causes of insolvency (e.g., gambling, addiction, marital and family problems, etc.) 
   • "consultation fees" include any fees for services that a trustee may be called upon to perform with regard to an administration;
   • "OSB" means the Office of the Superintendent of Bankruptcy;
   • "related persons" are those defined in section 4 of the Act, as well as employees, employers or associates of the trustee and firms in which the above individuals or the trustee may have an interest;
   • "Rules" means the Bankruptcy and Insolvency General Rules;
   • "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

2. This Directive is issued pursuant to the authority of paragraphs 5(4)(b) and (c) of the Act.
3. The purpose of this Directive is to provide guidelines to trustees in regard to consultation fees. Specifically, it addresses whether a payment made to the trustee prior to the filing of an assignment in bankruptcy or proposal constitutes a consultation fee outside the purview of the bankruptcy or proposal process, or whether it forms part of the continuing process leading up to the actual bankruptcy or proposal.

Policy

Services of a trustee

4. It is legitimate and acceptable for a trustee to expect financial compensation from a debtor for consulting services provided, where the individual does not file an assignment in bankruptcy or a proposal with the trustee, the consultation being for the purpose of an appraisal of the individual's situation and of the solutions available.
5. Where a debtor files an assignment in bankruptcy or a proposal with the trustee after paying a consultation fee to the trustee or to a related party, the amount paid, if received within sixty (60) days prior to the date of bankruptcy or the earlier of the filing of the notice of intention under subsection 50.4(1) of the Act or a proposal, shall be:
   • (a) considered as part of the continuing process leading up to the actual bankruptcy or the proposal;
   • (b) deposited in the estate trust account; and
   • (c) declared as an asset in the debtor's Statement of Affairs.
6. The preliminary consultation work already done is an acceptable time charge to the estate in accordance with section 131 of the Rules.
7. Where the amount paid was received from a third party and was so treated at the time of receipt, it will be treated pursuant to the requirements of the Directive No. 16, Third-Party Deposits and Guarantees.

Coming into Force

8. 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. 15 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

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

James Callon
Superintendent of Bankruptcy