One of the duties and responsibilities of filing for either bankruptcy or a consumer proposal is the requirement to attend two financial counselling sessions. The Office of the Superintendent of Bankruptcy (OSB) is currently conducting a review of the credit counselling requirement so we think it is appropriate that we express our opinion on the matter.
First and foremost, we are of the opinion that good credit counselling has the ability to provide a real benefit to the individuals that receive it. Most people in financial difficulty have had some “thing” happen in their life that triggers a crisis. Loss of employment, marital breakdown, business failure – any number of tragedies can bring on money problems. Counselling can’t correct what has gone wrong, but it may reduce the risk that people will repeat the same mistakes with their finances in the future.
There is a difference however between credit counselling and debt relief. Credit counselling should mean helping people look at their budget and helping them build stronger personal finance habits. It should not be just about filing a debt management plan and being a debt collector for the banks.
So here’s how we think credit counselling sessions that are part of your bankruptcy or proposal should be improved.
The current standard requires a person that files either bankruptcy or a consumer proposal to attend two counselling sessions. The first session occurs between day 10 and 90 after filing. The second session occurs at least 30 days after the first, but prior to the discharge, in the case of an individual bankrupt, or of the issuance of the certificate of full performance, in the case of a consumer debtor.
We believe these requirements should be modified as follows:
1) In all cases, the first counselling session should occur within 60 days of filing;
2) In 9 month bankruptcies, the second counselling session should occur at least 30 days after the first and before the expiration of the 7th month after filing;
3) In 21 month bankruptcies, the second counselling should occur at least 90 days after the first and before the expiration of the 12th month after filing. In addition, a third counselling session should occur at least 180 days after the second session and before the expiration of the 19th month;
4) In 36 month bankruptcies, the second session should occur at least 90 days after the first and before the expiration of the 12th month after filing. In addition, a third session should occur at least 180 days after the second session and before the expiration of the 24th month, and a fourth session should occur at least 180 days after the third and before the expiration of the 34th month; and
5) The Court should require an annual counselling session for every year of a Conditional or Suspended Order.
For consumer proposals
a) In all cases the first counselling should occur within 60 days of filing; and
b) There should be a requirement to attend at least one additional counselling session for every 12 month period in the term of the proposal. For example, a 60 month proposal will require a total of 6 counselling sessions, the initial plus 5 additional sessions based on the term of the proposal.
In addition, any Division I proposals filed by an individual (or individuals if joint) should require the same counselling standards as consumer proposals.
The first counselling session should consist of a workbook individuals are required to complete prior to attending the session. This workbook could be completed on-line, or at the request of the debtor, by hardcopy. The workbook should be designed to address basic money management skills, including, but not limited to record keeping, budgeting, longer term financial planning, as well as financial literacy. The objective should be for the debtor to complete the workbook in advance and then for the counsellor to review the debtor’s results. The session should end with a list of expectations or goals to be achieved before the next session(s).
All subsequent counselling sessions should include a review of the expectations and goals that were set at the prior session, as well as a general review of the debtor’s current financial situation and the establishment of a new set of financial expectations and goals going forward.
We note that the fees for counselling have not changed in a very long time. The first counselling session should be in person and might take an hour to complete. The fee for this session should be $150.00. The subsequent sessions could be completed on-line, by phone, or in person and might take 30 minutes. In person sessions should be paid a fee of $75, while on-line and/or phone sessions should be paid a fee of $50.
If all of our suggestions were adopted, the cost for counselling in a five year consumer proposal would increase from the current $192.10 ($170 in fees plus $22.10 in HST) to $593.25 ($525 in fees plus $68.25 in HST) if all of the sessions were performed in person. However with the on-line option they costs would be lower. The benefits however to ensuring that those filing bankruptcy or a consumer proposal gain value from these sessions are well worth the suggested changes.