Recently the Office of the Superintendent of Bankruptcy (“OSB”) announced that it is modernizing its Insolvency Record Search function including the elimination of the $8.00 fee charged to the general public.

The announcement of the fee elimination caused a bit of concern by some in the insolvency community thinking that insolvency records could now be searched by anyone, for free.  It was suggested that this would eliminate the confidentiality of an individual declaring bankruptcy or filing a consumer proposal and that nosy neighbours would have free access to the database of insolvency filings.

The elimination of the fee has been endorsed by some, primarily those who may benefit from it being eliminated, credit counselling firms and debt advisors, who are direct competitors of the Licensed Insolvency Trustee.  They have stated that the only debt relief option available where a consumer’s privacy is protected is credit counselling.  Not so fast.  Every debt management program is recorded on your credit record, just like a bankruptcy and a consumer proposal. So, I don’t know how the privacy is being protected.

But hold on.  Is this really an issue? Is it much ado about nothing?  Is this Chicken Little crying out the sky is falling?  In my view, it is not.

The $8 fee per search was never an impediment for anyone to search the database.  If someone really wanted to know about an individual’s insolvency, they would pay the fee.  The elimination of the fee, coupled with the enhanced search requirements being proposed by the OSB, will still keep the insolvency process free from the nosy neighbours.

The OSB has indicated that the proposed Insolvency Record Search system will include modern safeguards to protect the personal information of debtors.  Some of the new protections which are not available in the current system which will protect disclosure of personal information:

• Personal information disclosed about an insolvent person will be limited to that entered by the searcher. Personal information entered will only be confirmed, not provided in a search result. Searchers will need to know the first, last name, and date of birth of a debtor in order to obtain confirmation of an individual insolvency.
• The new system will no longer provide access to insolvent debtor records that do not match the search criteria (e.g. lists of names).
• For each correct search, a reduced amount of personal information will be returned in the public search results. For example, home addresses and full postal codes will no longer be included in search results as they are in the current system.
• The public record search retention period for information will be reduced to 10 years post-discharge.
• The new system will include technologies designed to reduce the potential for unintended uses of insolvency information (e.g. machine-based searches).

From what I know about the OSB, I would be surprised if this mandate was undertaken without some regard to the privacy of the individual debtor. The OSB has stated that it has consulted with the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) throughout the development of the new system, and has addressed comments received to date. The design will maximize protection of personal information while also meeting the specific needs of LITs, in fulfilling their insolvency estate administration and legislative requirements.

It should be noted that the OSB has no plan to propose to remove the $8 fee from the current system prior to its being retired from service.

The full OSB article about this can be viewed here.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

As you may recall in previous newsletters, we reported about the Office of the Superintendent of Bankruptcy’s (OSB) report into what is perceived to be abuses by Credit Counsellors/Debt Advisors and business arrangements with Licensed Insolvency Trustees (LIT)s.  In its 2017 newsletter, the OSB indicated that would be making legislative changes to address its concerns.

On October 16, 2017, the OSB released its draft Directive on counselling.  This is the first of its overall plan and it is seeking input from stakeholders by November 24, 2017.  In most consumer insolvencies, there are two mandatory counselling sessions required for all debtors.

Some of the changes that are proposed are:

• The LIT shall fulfill their obligation to provide insolvency counselling personally, or by designating, on a specific insolvency estate, another LIT or an individual who has been registered against the LIT’s license.
• Counselling is to be held only at the LIT’s office. The location is to be an authorized office of the LIT and not the office of a third party who is not licensed by the OSB.  There are some exceptions to this but only with the approval of the OSB.
• Counsellors must be registered against the LIT’s license.
• The counsellor must meet certain education requirements in order to be registered, have adequate professional liability insurance and must take annual professional development.

Any individual is ineligible to be registered as a counselor if:

1. They are in a real, potential or perceived conflict of interest;
2. They are engaged in or involved with the provision of financing and lending services to individual bankrupts or consumer debtors including, but not limited to, credit rebuilding services, loans in various forms, and insurance;
3. They are employed by, associated with or acting as a Third-Party Debt Advisor; (A Third Party Debt Advisor is defined as an individual or organization who, in return for direct or indirect consideration, acts as an advisor to a debtor or an intermediary between debtors and LITs. This includes those who derive consideration or a benefit from selling insolvent debtors a range of services before, during, or after an insolvency filing under the BIA. Such services may include, but are not limited to: financial evaluations, representation, restructuring services, credit rebuilding, loans in various forms, or insurance); or,
4. They are employed by, associated with or acting as a Referral Arranger. (A Referral Arranger is defined as an individual or organization in the debt advisory industry (whether for-profit or not-for-profit) that participates in a formal or informal referral arrangement with an individual LIT or corporate LIT).

The LIT is to meet with all debtors to complete the Insolvency Counselling and Designated Form which appears to mean that this task cannot be delegated to an employee;

There are some points to consider:

1. Will LIT’s designate non-employee counsellors and attest to their qualifications?
2. Will this lead to all counselling only being done by the LIT firm and not any independent counsellors?
3. Will these independent counsellors be travelling to the LITs office to perform the counselling or will LITs be registering the counselor’s office as an authorized location?
4. Will the LIT add the counsellor to their professional negligence insurance and/or will the insurer even allow it?
5. Will the credit counselling/debt advisory industry discontinue its practices of referring individuals to certain LITs or will that somehow change?

It is clear that the OSB is making the LIT more responsible for the counselling and is taking steps to protect debtors from paying unnecessary fees.  What is not clear is that any Third Party Debt Advisor or Credit Counsellor could still refer files to an LIT but not take the counselling in return.  And there is nothing that precludes them from independently contacting the debtor and selling their other services for a fee.

However, these debtors need a place to go to file their consumer proposal and/or bankruptcy. The unfortunate part of it that there are many debt advisory firms out there, whether they are for profits and not for profits, that have slick and/or misleading advertising campaigns or websites that draw the debtor to them first before seeing an LIT.

Will these steps that the OSB is suggesting level the playing field and help inform debtors that LITs are the go to professionals when dealing with debt, who are Licensed by the Federal Government and have the necessary training associated for dealing with debt issues.

Only time will tell.

Boale, Wood & Company Ltd. Is a full service insolvency boutique that assists consumers and businesses in dealing with debt.

Call us.  It’s not too late. (604) 605-3335.

There has been considerable debate as to whether an individual needs an independent debt advisor to file a consumer proposal to “protect” the interest of the debtor and get the lowest consumer proposal possible.

Quite often the discussion boils down to the fees of the LIT.  The argument is that the LIT doesn’t represent the debtor’s best interests as they get paid more if the debtor pays more. The underlying theme is that the LIT wants you to pay as much as you can to obtain a higher fee.  Hence, they say that the LIT is in a conflict of interest.

It has also been suggested that at the initial meeting the debtor might provide information to the LIT that could possibly be used to obtain a larger amount for the creditors, and thus greater fees for the LIT or that going to an LIT without a debt advisor is like being unrepresented in Court.  In my experience, I can’t think of one situation where that would apply.

Other arguments include that independent representation is needed to protect assets without having to also worry about your creditors.  Assets are either exempt pursuant to provincial legislation or they are not.  There should be nothing to hide.

There have been comments that it costs $1,500 to file a consumer proposal.  Not true.  Most LITs require an up front payment, but typically not anywhere near $1,500.

Frankly, none of these assertions could be further from the truth.

Let’s look at the facts:

1. An LIT is an Officer of the Court and is required to balance the interest of all stakeholders and be objective.
2. The Assessment Directive issued by the Office of the Superintendent of Bankruptcy (“OSB”) provides that the LIT shall provide a complete assessment of the debtor’s affairs including assets, liabilities and income AND explain all the options available to the debtor for dealing with their debt. There is your independent assessment.
3. The fees that are paid to the LIT are set by the Government of Canada through the OSB. So the Trustee hasn’t set the fees. The LITs fees are a byproduct of an accepted proposal.  Every LIT gets paid the same in a consumer proposal. And if the LIT is banking on more fees, then objectivity has been lost.
4. The creditors are the ones that vote on the proposal. The LIT has no say in the outcome.
5. The LIT is best positioned to know what creditors want by reason of their experience in administering consumer proposals since 1991. That experience leads us to tell the debtor what may or may not work.
6. The LIT is governed by a Code of Ethics by both its regulatory body, the Office of the Superintendent of Bankruptcy and its professional association, the Canadian Association of Insolvency and Restructuring Professionals (“CAIRP”).

If you have nothing to hide and want a proposal to be accepted to bring certainty to your situation, then you are best served by an LIT and no one else.

The insolvency process is about full and frank disclosure to your creditors.  If you want your creditors to take a discount on what you owe them, then you need to be prepared to make full disclosure of your situation.  By not disclosing everything to your LIT might mean that they would have changed their advice to you.  As well, any proposal that is obtained by fraud or fraudulent means can be annulled.

Lastly, if you don’t do anything wrong, you won’t get in trouble.

LITs have been administering consumer proposals since 1991 and nowhere has it been stated, by the OSB or other stakeholders that LITs are in a conflict.  The very nature of the role is that of conflict as we answer to many stakeholders.  But we carry out these duties every day without any one complaining.

We have illustrated the nature of our role below;

As is apparent, we answer to many stakeholders.

What you need to make a fair and reasonable proposal to your creditors is the expertise of an LIT who will treat you fairly and give you the straight goods.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

One of the most common questions I receive from a debtor is “Why do I keep receiving statements from creditors when they know I have filed a consumer proposal or a bankruptcy”.  Usually it’s a frantic phone call or email that says, I finished my proposal or bankruptcy and now I receive this statement.  They are still coming after me for payment.

There is no reason to panic.  The reason statements are sent has to do with timing, computer generation, lack of human intervention and legal disclosure requirements and not with pursuing collection.

Timing

When an individual files a consumer proposal or a bankruptcy the Licensed Insolvency Trustee notifies the creditors of such.  In many instances, financial institutions and credit card companies use third party service providers who are tasked with filing the claims with the Licensed Insolvency Trustee and providing information relating to the debt. So it is not the Bank directly who does this work.  So there is a time lag between the Bank actually receiving notification of the insolvency and the sending of statements.

As well, the statements are computer generated every month.  There is no person actually looking at this. And it does take a while for these institutions to do their housekeeping such as closing accounts and to stop sending statements.  Yes there are additional interest charges on these statements but again, these are computer generated and you are not responsible for interest charges after the date of filing.  The Bank will ultimately get around to fixing this.

So it is very common that a debtor files and continues to receive statements for a period after the filing.  It’s all about the timing.

Legislation

Financial institutions are required, by law, to send a statement to the debtor when a payment is received.  In fact, the legislation says that the Bank is not required to send statements if there is no outstanding balance at the end of the period or the credit agreement has been suspended or cancelled and the bank has demanded payment of the outstanding balance.  So in the case of when a bankruptcy or a proposal has been filed, the credit agreement has been cancelled and the bank is no longer required to send statements.  If they receive a payment through the Licensed Insolvency Trustee by way of a dividend, that then triggers the requirement to send a statement and hence, the phone call to the Licensed Insolvency Trustee.

Conclusion

So if you have filed a consumer proposal or a bankruptcy, it is not uncommon to receive statements from creditors after filing.  It is nothing to be concerned about.  If you are compliant with your payments and documents, then you have nothing to fear.

When a person files for personal bankruptcy it is typically a final course of action for an individual in financial difficulty. Your Licensed Insolvency Trustee (LIT) will review your situation and recommend a course of action.  If your debt cannot be resolved through other options like a consumer proposal, your LIT may recommend Bankruptcy. It is a legal process legislated under the Bankruptcy and Insolvency Act within Canada, and is designed to protect you from being bound forever by debts you are unable to repay.

The decision to file for personal bankruptcy is likely a stressful one. The highly qualified LITs at Boale, Wood and Company Ltd. will support you through the entire process, and will ensure you fully understand the various steps involved.

If you are filing for personal bankruptcy for the first time, here is an overview of what to expect during the process:

Initial Consultation

Meeting with an LIT at Boale, Wood & Company Ltd. is free. Together, we will discuss your circumstances, help you understand your options, and determine your best course of action for debt relief. If you decide to file for personal bankruptcy, we will serve as your LIT throughout the duration of the process.

Application Form and paperwork

We will help you properly complete all the required forms and submit them on your behalf.

No More Creditors

Going forward, your LIT will deal with creditors and collection agencies on your behalf. Your debts will be frozen at this point, and no more interest will accumulate.

Asset Review

We will review all personal asset exemptions, assets that are protected from creditors, for which you are eligible.

Monthly Reporting and Payments

During your bankruptcy period, you will be required to report your income on a monthly basis and provide proof of your income (such as paystubs). The LIT will provide the monthly reporting forms. You may be required to pay a small amount on a monthly basis to your LIT.  This amount would be significantly lower than your original debt.

Counselling

You are required to attend two mandatory counselling sessions with your LIT. We will provide valuable information on money management and household budgeting.

Discharge

Once your bankruptcy is over, you will be officially discharged from Bankruptcy (see our article on bankruptcy discharges).  You will have no further responsibility for the debts listed on your bankruptcy subject to certain exceptions.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

Being in debt is stressful no matter how much you owe. If doesn’t matter if you owe $10,000 or $100,000, if you can’t pay it, it’s stressful. Debt issues not only can have an impact on your credit and your financial well-being, but the stress of being in debt can also trigger relationship or heath related issues.

If you find yourself overwhelmed by debt, you want to make sure you have the right Licensed Insolvency Trustee to help you through this difficult and highly stressful situation.

So what should you look for in a Licensed Insolvency Trustee (“LIT”)?

Non- judgmental

Perhaps the most important trait in a quality LIT is their ability to be non-judgmental and allow you to maintain your dignity. An LIT should be willing to look beyond the numbers and paperwork to understand your specific situation without blame. It’s about moving forward, not looking back.
Being in debt can make you feel extremely vulnerable. You want an LIT who can help you understand what to expect during the process, and who will support you every step of the way.

Experience and Accreditation

Naturally, when you entrust an advisor to help you with your financial difficulties, you expect them to have a solid understanding and knowledge of the various debt relief options, implications, and eligibility requirements. Our LITs have years of experience helping people just like you through their financial troubles. In fact, we’ve helped thousands of people to resolve their debt and get a fresh start.

Don’t Settle for Second Best

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause. We are experts at what we do.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

The final and most important step in the bankruptcy process is your discharge from bankruptcy.  The discharge from bankruptcy is the legal mechanism that relieves you of your obligations to repay the debts that existed at the date of bankruptcy.  If you don’t receive your discharge, the debt doesn’t go away.  At Boale, Wood & Company Ltd., we cannot stress enough the importance of getting your discharge.

One of the common misconceptions made by people declaring bankruptcy is that they are under the impression that the filing for bankruptcy gets rid of the debt.  Not so.  On the day you file for bankruptcy, you are protected from collection action by your creditors.  There is an automatic “stay” which prevents your creditors from continuing or starting collection action against you.  However, your creditors still exist; they just can’t do anything to you.  Your debts don’t go away until you receive your discharge. That’s why your discharge is so important, because it’s necessary to eliminate your debts.

How Long Will I Be Bankrupt?

The length of your bankruptcy is determined by four main factors.  These factors may change under certain circumstances which affects the length of the bankruptcy.

1. If this is your first bankruptcy

If this is your first bankruptcy, then you will be eligible for an automatic discharge after 9 months subject to the surplus income threshold.

2. If you have been bankrupt before

If you have been bankrupt before you will not be eligible for a discharge in 9 months. Your bankruptcy will be a minimum of 24 months subject to the surplus income threshold.

3. If you have surplus income.

If you have surplus income that exceeds the minimum amount set by the government, your bankruptcy can be extended for a longer period of time. If you are a first time bankrupt and your surplus income is over the income threshold, you would be eligible for an automatic discharge after 21 months (as opposed to 9 months). If you are a second time bankrupt, you would be eligible for an automatic discharge after 36 months. The extension of time o ones bankruptcy is set out in the legislation.  It’s not at the discretion of the Licensed Insolvency Trustee (“LIT”).

4. If you are not eligible for an automatic discharge.

Your discharge from bankruptcy will happen automatically if

• the discharge is not opposed by your LIT, a creditor or the Office of the Superintendent of Bankruptcy (“OSB”);
• you have attended the mandatory financial counseling sessions;
• this is your first or second bankruptcy; and
• you have made all required payments.

There are, however, a few reasons why you would not receive an automatic discharge.  It is due to an opposition to your discharge.  The most common reasons for opposition are:

• You did not complete your duties. This is the most common reason why people do not receive an automatic discharge. In other words, you did not do everything you were supposed to do such as provide the LIT with proof of your income each month;
• You did not attend your counseling sessions – these sessions are mandatory to obtain your automatic discharge;
• You did not provide your tax information – the LIT is obligated to file your tax returns in certain instances; and
• You did not make the required payments.

If you did not perform your duties, you are not eligible for an automatic discharge.  In order to get discharged, a Court application is required.

ALERT: Complete your duties!  If you are having problems meeting your obligations to the LIT, speak to them immediately. It’s not hard. It is a process and you must complete the process. We are here to help you every step of the way but we can’t do it for you and once you start it is in your own best interest to complete the process.

You will also not receive an automatic discharge if one of your creditors (the people you owe money to) opposes your discharge.  This is a rare occurrence, but it could happen.  If they object, a Court hearing is held, and the judge will decide whether or not you will be discharged and what type of discharge would be appropriate in the circumstances.

For a third time or more bankrupt, a Court application is required to obtain a discharge.

Again, be sure to complete all your duties so that you receive your discharge from bankruptcy, and officially eliminate your debts.

The length of the bankruptcy is summarized in the following table:

Benefits of being discharged

As previously stated, the discharge from bankruptcy is the final and most important step.  There are a number of benefits from being discharged.

• You are no longer bankrupt. You have no further obligations under the Bankruptcy and Insolvency Act;
• You can become a Director of a Corporation or be the Power of Attorney for someone;
• The clock starts ticking on the time period of when the credit bureau clears your record of having gone bankrupt;
• You will receive relief from all your debts except for the most serious debts such as:
  • Court imposed fines;
  • Child support, alimony and other maintenance payments owed;
  • Student loans in certain situations
  • And some others.

What are the consequences of not getting discharged?

There are times where an individual doesn’t receive their discharge from bankruptcy.  They may not have completed their duties, or their discharge was opposed by a creditor or the OSB.   Maybe they had personal issues to the extent that they just couldn’t carry out their responsibilities.

So now what?  Contact your LIT and find out why you did not get discharged and what you have to do to get your discharge. The LIT may want a fee for reopening your file. If you had a bad relationship with your LIT he may not want to deal with you. If this is the case you may have to retain an insolvency lawyer to go to Court to get your discharge.

What if you do nothing?

If a person does not get a discharge from bankruptcy, the LIT will close their file. This has important consequences for you. Once the LIT is discharged, the protection from your creditors, which you so desperately needed at the outset of the bankruptcy, is gone and the creditors’ rights are revived.  That means that they can pursue you for the original debt, plus interest, as if you had never been bankrupt.

You are still an undischarged bankrupt and subject to the requirements of the Bankruptcy and Insolvency Act including the duties and the offences under the legislation.

Lastly, information pertaining to bankruptcy remains on an individual’s credit file for specified time periods following the discharge. So if you don’t get discharged, the time to get the information off your credit report has not started.

This is the worst possible result.

Here is how to get your bankruptcy discharge if it has been a few years since you went into bankruptcy:

So now it has been a while since you talked to your LIT and the creditors are after you.  Now you are ready to proceed and get your discharge.  How do you go about it?

1. Contact your LIT – it is important for you to talk to your LIT. They would be in the best position to assist you in getting your discharge.  If your LIT doesn’t want to assist you (once they have been to Court they are not required to assist you further) you need to find someone who will.  Call another LIT to see if they would assist you.
2. Have available the LIT’s Report (170 Report) – this is the report where the LIT reviewed how you conducted yourself prior to and during your bankruptcy. This report outlines the conditions that have to be met in order for you to receive your discharge.If you do not have this report you can get a copy at the Bankruptcy Court, in the area you filed your bankruptcy.   You may also get a copy of the report from the LIT if the LIT is willing to go through his records to find the report.  The LIT, if he is willing to get the report, will likely charge you for this service.  If you are not sure who your LIT was contact the Office of the Superintendent of Bankruptcy.In British Columbia, the Court Order will usually specify what is required to be done.  You can get a copy of this Order from the Bankruptcy Court.
3. Have available what is required to meet the conditions outlined in the LITs report or the Court Order – If you had to pay a certain amount of money make sure you have it available or are ready to start making the monthly payments.   If you had to meet other conditions such as providing proof of income, tax information and so forth, make sure that is available.
4. Make arrangements to attend at Court – Ask your LIT to do this. There will likely be an additional charge for this.  The LIT may refuse to do this. Then you will need to retain a lawyer to represent you or represent yourself at Court. However, this is usually beyond the ability of most individuals who don’t know the rules or how to present the facts to the Court. The BC Supreme Court has published a guide on how to do it yourself.  This publication can be found here.
5. Consider filing a consumer proposal with another LIT – if you do this and it’s accepted by the Creditors, you don’t need to be discharged from bankruptcy. The legal effect of an accepted proposal is to annul the bankruptcy. Although the insolvency legislation provides for this, they are hard to do and usually don’t work.

If you are an undischarged bankrupt and need a discharge, we may be able to assist you.

Call us.  It’s not too late. (604) 605-3335