Directive No. 6R - Assessment of an Individual Debtor

Issued: April 30, 1998
(Supersedes Directive No. 6 previously issued on December 21, 1994 and partially amended March 22, 1995)

Short Title

1. Assessment Directive.

   Interpretation

2. In this Directive,

   "Act"

   means the Bankruptcy and Insolvency Act;

   "administrator"

   means an administrator of consumer proposals as defined in section 66.11 of the Act;

   "assessment"

   means the first stage of the insolvency process, providing for a financial appraisal interview, a description of statutory and non statutory options available to an individual debtor and, discussing and reviewing with that debtor the merits and the consequences of his/her choice;

   "Rules"

   means the Bankruptcy and Insolvency Rules made pursuant to subsection 209(1) of the Act.

   Purpose and Application

3. This Directive establishes the duties and responsibilities of trustees and administrators in performing the assessment.

   Policy

4. Subject to sections 5 and 6, this Directive, issued pursuant to the authority of paragraphs 5(4)(b) and (c) of the Act, states that trustees and administrators are responsible for the performance of the assessment in accordance with the standards described herein.
5. Trustees and administrators may delegate only those tasks stated in section 9 of this Directive.
6. Those individuals, delegated by trustees or administrators to perform the tasks stated in section 9, must satisfy the requirements listed in Schedule II of this Directive.
7. During the course of an assessment, when trustees or administrators identify the need for referral for non budgetary counselling, they shall encourage the debtor to attend such counselling and attendance is at the debtor's discretion.
8. The assessment must be completed prior to the filing of an assignment in bankruptcy or the making of a proposal.

   Standards

9. For the purpose of the assessment, the individual conducting the assessment, or the relevant portion thereof, shall inquire about the debtor's property and financial affairs and shall:
   1. prepare, on the basis of information obtained from the debtor, a complete statement of the debtor's financial affairs setting forth the details of:
      1. the debtor's assets;
      2. the debtor's liabilities;
      3. a detailed current monthly income and expense statement, including all income, gross and net; and all expenses, including special needs expenses, alimony, support or maintenance payments, transportation costs, medical and prescription expenses; and
      4. conveyances, preferences and settlements of real or personal property of the debtor;
   2. discuss with the debtor his/her views respecting the debtor's immediate problems, evaluate the extent and nature of the problems facing the debtor, review approaches for dealing with those problems;
   3. identify and discuss generally the options available to debtors for resolving financial difficulties, including a discussion of the rights and responsibilities of debtors and creditors under each of the following options:
      1. non-legislative debt settlement arrangements;
      2. an Orderly Payment of Debts under Part X of the Act, or similar option under provincial legislation, where applicable;
      3. a consumer proposal under Division II of Part III of the Act;
      4. a proposal under Division 1 of Part III of the Act; and
      5. an assignment in bankruptcy under section 49 of the Act;
   4. explain the general meaning of the following credit and insolvency matters where pertinent to the circumstances:
      1. garnishment;
      2. co-signers;
      3. credit rating;
      4. assets;
      5. legal action;
      6. payments;
      7. windfalls;
      8. tax returns;
      9. tax credits;
      10. mediation;
      11. the discharge process and types of discharge order.
10. Where the above tasks were delegated and the debtor considers a solution under the Act (excluding Part X), the trustee or, in the case of a consumer proposal, the administrator shall, in person, complete the assessment with the debtor.
11. To assist in choosing the appropriate option pursuant to the Act, the trustee or administrator shall discuss and review with the debtor:
    1. the debtor's views of the situation;
    2. the merits and consequences of the pertinent options;
    3. the rights and responsibilities of the debtor in a bankruptcy or a proposal;
    4. the specific effect of relevant credit and insolvency matters, as they relate to the debtor's circumstances (e.g.: wage garnishments, co-signing, credit rating, taxes, fees);
    5. the possible outcome of the discharge process as it may relate to the debtor's circumstances including the trustee's statutory responsibility to report on any fact, matter or circumstances which may, if an opposition is filed, justify the Court's refusal to grant an absolute order of discharge.;
    6. the responsibility of a bankrupt to contribute surplus income to the estate, where appropriate; and
    7. the type and nature of counselling adapted to the debtor's needs that will be offered to assist in the rehabilitation.
12. If at any time during the course of the above process, the debtor chooses an option to which the Act does not apply, the process, as described herein, ceases and an Assessment Certificate will not be required.

    Viable Proposals

13. For the purpose of paragraph 170.1(2)(c) of the Act, the trustee shall determine whether or not the debtor has the potential to file a viable proposal by considering the following factors:
    1. the debtor
       1. has sufficient property available to make a "lump sum payment" proposal, or
       2. has surplus income in accordance with the Directive on Surplus Income, and also has the capacity at the time of assessment to sustain continued payments to a proposal for a period of time;
    2. the family or personal situation of the debtor;
    3. the financial situation of the debtor;
    4. the number and type of creditors of the debtor, both secured and unsecured;
    5. the likelihood of acceptance of a proposal by the creditors, and;
    6. whether the return to creditors from a potential proposal would be greater than the returns from a bankruptcy.
14. Where the trustee determines the debtor has the potential to file a viable proposal, the trustee shall inform the debtor of the trustee's duty pursuant to paragraph 16 of this Directive.
15. Where the trustee determines the debtor has the potential to file a proposal, but where it is unlikely that a proposal would be viable because of other circumstances, the trustee shall describe those circumstances in the section 170 report.
16. Where the trustee determines the debtor has the potential to file a viable proposal, and the debtor chooses to file an assignment in bankruptcy rather than a proposal, the trustee shall comment in the section 170 report that a viable proposal could have been filed, and recommend that the bankrupt be discharged with conditions.

    Assessment Certificate

17. At the end of the assessment, the trustee or administrator shall execute the Assessment Certificate, in the form set out in Appendix "A", and shall:
    1. request the bankrupt or consumer debtor to sign the acknowledgement portion of the Certificate, confirming that an assessment has been provided, identifying the statutory option chosen to deal with his/her financial situation and confirming that the consequences of his/her choice have been explained thoroughly to him/her;
    2. retain the above-mentioned Assessment Certificate as part of the estate file of the bankrupt or debtor; and,
    3. provide the Official Receiver with a copy of the Assessment Certificate referred to in paragraph (b) as follows:
       1. when bankruptcy is the option, at the time of filing the assignment;
       2. when a proposal is the option, at the time of filing the proposal; or
       3. where a notice of intention is filed, at the time of filing the notice of intention.

    Exceptions

18. 1. The section 10 requirement that a trustee completes the assessment of a debtor's options for resolving the debtor's financial situation in person do not apply:
       1. in designated areas if;
          1. the duties imposed by section 9 are discharged in person by an individual registered with the District Assistant Superintendent for this purpose, and
          2. the trustee discharges his/her section 11 duties by a telephone or video conference interview with the debtor;
       2. where, in the opinion of the District Assistant Superintendent, extraordinary circumstances exist, the District Assistant Superintendent may allow, to ensure access and availability, an alternative method to be used in conducting assessment interviews.
    2. In this section "designated area" means an area as identified from time to time by the District Assistant Superintendent:
       1. in which there is no trustee available to conduct assessments in person; and,
       2. to which no trustee from another area is willing to travel for the purposes of conducting assessments in person.
    3. The District Assistant Superintendent shall maintain a list of "designated areas" for his/her district and distribute it to trustees in his/her district, the Superintendent and all other District Assistant Superintendents.

The Superintendent of Bankruptcy
Marc Mayrand

Explanatory Note

1. The remuneration prescribed by sections 128 and 129 of the Rules includes the fees for the first assessment; for ordinary estates or Division l proposals the fees for the first assessment are included in the remuneration taxed by the court.

Appendix "A"

Assessment Certificate

Appendix "A" (PDF Format)

Appendix "B"

Individual Assisting in The Assessment

1. Starting January 1, 1995, only trustees and administrators of consumer proposals will be authorized to provide the assessment. However, registered individuals may be authorized to provide part of the assessment as described in the Assessment Directive.

   Qualification of Registered Individuals

2. In order to be registered with the District Assistant Superintendent ("DAS") to provide that portion of the assessment which may be delegated, the following conditions will apply:
   The trustee or the administrator of consumer proposals shall certify to and obtain approval from the DAS that the individual delegated to conduct the assessment:
   1. has and continues to have an employee or agent relationship with the trustee; and
   2. has demonstrated and continues to demonstrate that he/she has the character, ability, integrity, knowledge, experience and skills to perform the assessment adequately having regard to:
      1. length of relevant experience;
      2. formal training or courses of study.
   The trustee or administrator shall advise the DAS in writing of any reason or change which would make the registered individual ineligible for certification. This notice will be provided within 10 days of the trustee becoming aware of its occurrence.