Insolvency Counselling was introduced in an amendment to the Bankruptcy and Insolvency Act (BIA) in 1992 to promote debtor rehabilitation and to help debtors avoid repeat bankruptcies. Under the Insolvency Counselling program, Licensed Insolvency Trustees (LITs) and BIA Insolvency Counsellors (Insolvency Counsellors) provide information and educate individual bankrupts or consumer debtors (debtors) on sound financial management practices and help identify the non-budgetary causes of their insolvency.
In 2018 and 2019 the OSB made a series of amendments to the Insolvency Counselling Directive in an effort to enhance and modernize the Insolvency Counselling program by establishing registration requirements for Insolvency Counsellors, enhancing flexibilities for the delivery of counselling, updating the insolvency counselling curriculum, and adding additional performance data to help measure the effectiveness of the program.
In its oversight capacity, the OSB has an interest in understanding what conditions are correlated with the optimal insolvency counselling outcomes. To support this, the OSB has completed a review of the performance data received to date Footnote 1. The purpose of this report is to share the OSB’s analysis of the performance data and to encourage LITs and Insolvency Counsellors to consider ways, where necessary, to enhance their delivery of insolvency counselling to increase its usefulness for debtors.
Usefulness of Insolvency Counselling
At the conclusion of insolvency counselling sessions, debtors are asked if they feel the information “…received during [their] counselling sessions will be useful in helping [them] avoid future financial difficulties”. Debtors’ perception of the usefulness of the insolvency counselling sessions is generally very high. Approximately 63% of debtors indicated the insolvency counselling sessions were “very useful” and 35% of debtors indicated the sessions were “somewhat useful”. This suggests that the insolvency counselling program is having a positive impact on debtors.
Figure 1: Do you feel that the information you received during your counselling sessions will be useful in helping you avoid future financial difficulties?
It is important to consider the limitations of the data provided via the counselling forms as they are not anonymous and debtors are being asked by the LIT/Insolvency Counsellor to rate the usefulness of sessions provided by that LIT/Insolvency Counsellor. Debtors may be less willing to indicate that insolvency counselling sessions were not useful to the individual delivering those sessions. That said, the analysis points to opportunities to improve results.
The analysis below is broken down by the following characteristics: (i) use of the optional online modules, (ii) the length of sessions, (iii) how counselling was provided, and (iv) insolvency counselling outputs. This dataset provides an interesting look at what may contribute to successful insolvency counselling sessions and how LITs could enhance their insolvency counselling service offerings.
Optional Online Insolvency Counselling Modules
The revisions to the Insolvency Counselling modules added an optional online component that may precede sessions with Insolvency Counsellors. The objective of the online modules is to facilitate and enhance the in-person insolvency counselling experience for debtors. The online content is intended to relieve LITs and Insolvency Counsellors of the burden of delivering generic financial literacy content needed by many debtors, thereby providing additional flexibility to meet each debtor’s unique needs.
The use of the modules has trended slightly upwards since they were introduced in 2019. Overall, 47% of debtors used one or more of the optional online modules prior to their session with the LIT/Insolvency Counsellor and 30% of debtors completed all the online modules Footnote 2. The budgeting module is the most commonly used, with 42% of debtors completing it.
The use of the online modules prior to the insolvency counselling sessions is associated with higher perceived usefulness of insolvency counselling from debtors. The more modules a debtor completed, the more likely they were to indicate that the insolvency counselling was very useful. LITs and Insolvency Counsellors should continue to encourage and facilitate means for debtors to take advantage of the online modules.
Figure 2: Percentage of Debtors that Completed the Online Modules by Month
|# of Online Modules Completed||Very useful||Somewhat useful||Not very useful||Not useful at all|
Length of Session
The most common duration for insolvency counselling sessions is 15 to 30 minutes. There is a correlation between the duration of the session and debtors’ perceived usefulness of insolvency counselling. Debtors who had longer sessions were more likely to indicate the sessions are “very useful”. Debtors who had a shorter session were more likely to indicate “somewhat useful” in their response. The OSB encourages LITs and Insolvency Counsellors to spend 30 minutes per session to increase the usefulness of insolvency counselling.
Figure 3: Distribution of the Length of Counselling Sessions
|Length of Session||Very useful||Somewhat useful||Not very useful||Not useful at all|
|Less than 15 Minutes||59.5%||37.4%||2.4%||0.7%|
|15 to 30 Minutes||64.6%||34.4%||0.7%||0.2%|
|30 to 45 Minutes||59.3%||40.2%||0.5%||0.0%|
|45 Minutes to an hour||72.8%||26.4%||0.7%||0.1%|
|More than an hour||87.2%||12.2%||0.4%||0.2%|
How Insolvency Counselling was Provided
COVID-19 has had a significant impact on how counselling is offered. Prior to March 2020, approximately 74% of counselling sessions were conducted in-person at the LITs office. After March 2020, 73% of counselling sessions were completed via telephone and 17% were conducted via videoconference.
Debtors indicated that counseling was most useful when offered by videoconferencing and, counter-intuitively, counselling was least useful when conducted in the LITs office. It is unclear why counselling at the LITs office was considered less useful. The OSB encourages LITs and Insolvency Counsellors to respect debtors’ preferences and make use of videoconferencing software, when requested, to increase the perceived usefulness of insolvency counselling sessions.
|Delivery Method||Very useful||Somewhat useful||Not very useful||Not useful at all|
Insolvency Counselling Outputs
The revisions to Directive 1R6 require the LIT/Insolvency Counsellor to develop a budget and list of financial goals by end of the insolvency counselling session, unless those outputs are irrelevant to the needs of the debtor. Approximately 74% of debtors completed both a budget and financial goal setting by the end of the second session. Debtors who completed both a budget and list of financial goals were more likely to perceive insolvency counselling as very useful. The OSB encourages LITs and Insolvency Counsellors to complete the Budgeting template and the Financial Goal setting template by the end of the counselling sessions to increase the perceived usefulness of insolvency counselling sessions.
|Outputs||Very useful||Somewhat useful||Not very useful||Not useful at all|
|Completed a Budget Only||52.8%||46.4%||0.7%||0.1%|
|Completed a List of Financial Goals Only||52.2%||45.9%||1.5%||0.4%|
Insolvency counselling appears to have a positive impact on debtors and most debtors found insolvency counselling sessions useful. The OSB’s analysis found the following factors are corelated with increased perceived usefulness from debtors: the use of the online modules, 30 minute insolvency counselling sessions, insolvency counselling by videoconference, and completion of both a budget and financial goals. LITs and Insolvency Counsellors should examine this information to determine how they can improve their counselling offerings.
The OSB will continue to review insolvency counselling performance data to help measure the effectiveness of the program in support of the financial rehabilitation of debtors.