Directive No. 1R2

Counselling in Insolvency Matters

Issued on December 21, 1994

This Directive applies to trustees and administrators of consumer proposals acting for individuals who make a consumer proposal and trustees acting for individuals who become bankrupt after December 31, 1994. For the above purposes, this Directive supersedes Directive No. 1R (issued June 1, 1993).

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, making referrals to deal with non-budgetary causes of insolvency (e.g.: gambling, addiction, marital and family problems, etc.);
• "effective date of bankruptcy" means the date on which the bankrupt filed an assignment with the official receiver or the date on which the bankrupt became a bankrupt as a result of a receiving order being issued, or of a proposal under Division I of Part III of the Act being terminated before completion;
• "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 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

3. Section 157.1 and paragraph 66.13(2)(b) of the Act state that trustees shall provide, or provide for, counselling.

4. This Directive, issued pursuant to the authority of paragraphs 5(4)(b) and (c) of the Act, establishes that the trustee is responsible for ensuring compliance with this Directive and that the individual performing the counselling, as described herein, must be a qualified counsellor.

Purpose and Application

5. (1) This Directive:

(a) describes the minimum content of the counselling stages and associated tasks;

(b) subject to subsection (2), applies to trustees acting for individuals who make a consumer proposal or become bankrupt after December 31, 1994.

 (2) Counselling obligations incurred on or before December 31, 1994, pursuant to Directive No. 1R (issued June 1, 1993) shall continue to be governed by the provisions of Directive No. 1R.

Policy

6. 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 subsection 7(1) of this Directive,

(i) between 10 and 60 days following the effective date of bankruptcy or the filing of a consumer proposal, or

(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.

(b) a second stage to be conducted, in accordance with subsection 8(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 effective date of bankruptcy in the case of a bankrupt or of the filing of a consumer proposal in the case of a consumer debtor.

Standards

First Counselling Stage — Consumer and Credit Education

7. (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.

 (2) On the completion of the first stage, the qualified counsellor shall:

(a) complete and sign the Counselling Certificate (Schedule l);

(b) request the bankrupt or consumer debtor to sign the Acknowledgement (Schedule I), indicating that counselling has been provided; and

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

 (3) On request by the Official Receiver, the trustee shall provide the Official Receiver with a copy of the certificate referred to in paragraph 2(c).

(4) Once the trustee has executed, or received from a qualified counsellor, the certificate referred to in paragraph 2(c), the trustee may withdraw from the trust account to his / her benefit, or remit to the qualified counsellor, the prescribed amount for the payment of the first stage.

Second Counselling Stage — Identification of Road Blocks to Solvency and Rehabilitation

8. (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 the consumer debtor, to better understand his/her strengths and weaknesses with regards 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 / her financial difficulties;

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

(iii) to make him/her aware of the existence of resources that will help him/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 which, if appropriate, may include referral for specialized counselling to deal with non-budgetary causes of insolvency.

 (2) When the bankrupt or consumer debtor has satisfied the requirements of this stage, the qualified counsellor shall:

(a) complete and sign the Counselling Certificate (Schedule II);

(b) request the bankrupt or consumer debtor to sign the Acknowledgement (Schedule II), 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.

 (3) On request by the Official Receiver, the trustee shall provide the Official Receiver with a copy of the certificate referred to in paragraph 2(c).

 (4) Once the trustee has executed, or received from the qualified counsellor, the certificate referred to in subsection 2(c), the trustee may withdraw from the trust account to his / her benefit, or remit to the qualified counsellor, the prescribed amount for the payment of the second stage.

General

9. No fee or expense shall be paid from the estate trust account for counselling resulting from a referral mentioned in paragraph 8(1)(c).

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.

 (1) Subject to subsection (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 District Assistant Superintendent (DAS) may waive the requirement of subsection (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.

George F. Redling
Superintendent of Bankruptcy

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Explanatory Note

(This note is not part of the Directive)

1. It is recognized that counselling services should be provided by skilled and qualified individuals and that standards be established for the delivery of the service.
   In this respect, it is suggested that everyone, including trustees, take a training program if they wish to provide counselling. A training program should establish a level playing field as to the skills and qualifications of the individuals who will be providing counselling services.
   The establishment of standards is meant to reinforce and facilitate the rehabilitation of all individual debtors. Standards will establish a uniform structure for the delivery of content.
   The implementation of the above recommendations will ensure that individual debtors facing financial difficulties will receive professional advice from qualified people, who will assist them in adopting more responsible practices with respect to financial matters and avoiding reoccurrence.
2. Interim measures are proposed to ensure an orderly transition to the qualification requirements. The time frame should be of sufficient duration to ensure the long term plan is well in place.
   Between January 1, 1995, and December 31, 1996, the counselling stages may be provided by persons to whom the trustee or administrator has delegated the counselling functions. Delegates shall provide the counselling in accordance with this Directive. Trustees and administrators are, however, responsible for ensuring that the Counselling Directive is complied with.
   As of January 1, 1997, only those individuals meeting the prescribed requirements will be allowed to provide counselling.
3. The fees for providing counselling are prescribed in section 117 of the Rules.

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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 Section 7 of the Counselling Directive:

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 which 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 Section 8 of the Counselling Directive.

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