Requirements for Insolvency Counselling in Canada

Understanding the Requirements for Insolvency Counselling in Canada

The Government of Canada has implemented new regulations concerning the compulsory insolvency counselling sessions that are a part of every insolvency proceeding. These sessions are vital in providing debtors with the necessary tools for future financial management. This article aims to decode the intricacies of these new requirements and provide a comprehensive guide to Requirements for Insolvency Counselling in Canada.

The Introduction of Directive 1R4

The Office of the Superintendent of Bankruptcy (OSB) has introduced Directive 1R4 to regulate insolvency counselling sessions. As of October 1, 2018, all insolvency proceedings managed by a Licensed Insolvency Trustee (LIT) must adhere to this directive. This rule applies to both newly filed and ongoing insolvency proceedings.

The Importance of Insolvency Counselling

Insolvency counselling is a crucial part of bankruptcy, Consumer Proposal, or division one proposal in Canada. These sessions are mandatory and primarily educational, aiming to equip the debtor with the necessary skills for future financial management. Without these sessions, the debtor will not receive their bankruptcy discharge or Consumer Proposal certificate of compliance.

These sessions can be administered by the LIT or a registered BIA counsellor designated by the LIT. For a BIA counsellor to qualify, they must meet several requirements set by the Canadian government.

The Education and Experience Requirements for BIA Counsellors

In order to qualify as a BIA counsellor, the proposed individual must meet certain educational and experience requirements:

 

High School Diploma: The counsellor must have a high school diploma.

Relevant Courses: They must have successfully completed either the Insolvency Administration Course from the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) or at least two relevant post-secondary courses in mathematics, finance, accounting, or business administration.

Professional Development: They must undertake to complete seven and a half hours of appropriate professional development training annually.

Insolvency Counselling Course: They should have successfully completed the Practical Course on Insolvency Counselling (PCIC) from CAIRP.

Curriculum Knowledge: They must demonstrate knowledge of the BIA insolvency counselling curriculum as specified in the directive and according to requirements specified by the OSB.

Insolvency Counselling Experience: They must have obtained experience in providing insolvent counselling through a minimum of fifty counselling sessions.

 

Competency Validation and Insurance Coverage

Apart from the educational and experience requirements, the BIA counsellor should also meet other criteria:

 

Competency Validation: They must possess the necessary competencies and be known to the LIT to be of good character. The LIT must personally validate the counsellor’s capabilities, knowledge, skills, and proficiency during their direct observation of the counsellor conducting a minimum of three counselling sessions.

Liability Insurance: The counsellor must be covered by the LIT’s professional liability insurance or have their own adequate professional liability insurance.

 

The Components of a Credit Counselling Session

Every credit counselling session includes a predetermined list of educational items. These are divided into two sessions:

 

Session 1 – Consumer and Credit Education: This session covers money management, spending and shopping habits, warning signs of financial difficulties, and obtaining and using credit.

Session 2 – Identification of Roadblocks to Solvency and Rehabilitation: This session aims to help debtors identify their strengths and weaknesses with regard to money management and budgeting skills, understand their behaviour in financial management and consumption habits, and make them aware of resources that can help them achieve and maintain economic stability.

 

However, the Government of Canada has now implemented rules to streamline the process. These rules outline when, where, and how the sessions should be given.

The New Rules for Insolvency Counselling Sessions

The new rules specify who can administer the sessions, what the sessions should cover, where they should be conducted, when they should take place, and how they should be conducted.

Who Can Conduct Insolvency Counselling Sessions

As per the new rules, insolvency counselling sessions can now only be administered by LITs or registered and eligible BIA insolvency counsellors that have been pre-registered and approved by the OSB. The sessions cannot be administered by individuals involved with financing and lending services to individual bankrupts or consumer debtors, or those employed by, associated with, or acting as an Intermediary or a Referral Arranger.

What the Sessions Should Cover

Individuals undergoing any of the three insolvency proceedings in Canada are required to complete two insolvency counselling sessions per insolvency.

Where the Sessions Take Place

The counselling sessions must be completed in person at the authorized LIT office where the original insolvency assessment was completed and signed. However, under special circumstances, the counselling sessions may be completed virtually by video.

When the Sessions Take Place

The counselling sessions must be administered at specific times during the insolvency proceeding. The first session must take place within 10 to 30 days from the insolvency date, while the second session must be completed within 60 days to 210 days from the insolvency date. A minimum of 30 days must separate each session.

How the Sessions Should Be Conducted

The new rules prohibit extra charges for insolvency counselling sessions. The debtor should never be charged for these mandatory sessions. However, it is worth noting that the LIT will receive a fee for each session, which is paid by the creditors, not the debtors.

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