Agreements to Pay the Trustee's Fees and Disbursements under Section 156.1 of the Bankruptcy and Insolvency Act

Context and Issue

This document is intended to provide guidance regarding agreements to pay the trustee's fees and disbursements under section 156.1 of the Bankruptcy and Insolvency Act (BIA) and Rule 58.1 of the Bankruptcy and Insolvency General Rules (Rules).

Section 156.1 was added to the BIA in 2009 to provide a mechanism through which individuals who may otherwise have difficulty paying the costs associated with a bankruptcy administration can access the insolvency system by entering into an agreement to pay the trustee's fees and disbursements over a longer period of time, specifically over an additional 12 months after the bankrupt's discharge. These agreements are intended solely for individuals who are first-time bankrupts and who are not required to make payments to their estate under section 68 of the BIA.

In this paper, the Office of the Superintendent of Bankruptcy (OSB) provides information on the expected elements of an agreement under section 156.1 and clarifies the OSB's position regarding how these agreements should be used, in order to ensure consistent interpretation and application of section 156.1 of the BIA and Rule 58.1.

  1. The agreement must be entered into on a voluntary basis.

An agreement under section 156.1 is voluntary. Specifically, section 156.1 of the BIA provides "… the bankrupt may enter into an agreement with the trustee to pay the trustee's fees and disbursements … ." (emphasis added)

  1. The individual must be in bankruptcy for the first time.

Section 156.1 of the BIA provides that only an individual who has never before been bankrupt under the laws of Canada or of any prescribed jurisdiction may enter into an agreement with the trustee under section 156.1.

  1. The bankrupt must not be required to make payments under section 68 to the estate.

An agreement under section 156.1 may be entered into any time before the bankrupt's discharge provided that the bankrupt is in bankruptcy for the first time and, at the time of signing the agreement, is not required to make payments under section 68 of the BIA to his or her estate.

An agreement under section 156.1 may be entered into with a first-time bankrupt who was required to make payments under section 68 of the BIA to his or her estate at the outset of the bankruptcy, but who is no longer required to make payments under section 68 of the BIA due to a change in his or her financial circumstances at the time of entering into the agreement – keeping in mind that money from the estate must be applied to satisfy the agreement and that as soon as the estate funds reach $1,800, the agreement will have been satisfied.

  1. The total amount required to be paid under the agreement cannot exceed $1,800.

Section 156.1 of the BIA states that the total amount required to be paid under the agreement cannot be more than the prescribed amount. Pursuant to Rule 58.1(1), the prescribed amount for the purpose of section 156.1 of the BIA is currently $1,800, including goods and services tax and harmonized sales tax (GST/HST).

  1. Money from the estate must be applied to satisfy the agreement.

Rule 58.1(2) provides that subject to section 136 of the BIA, money from the estate of the bankrupt shall be applied to satisfy the amount to be paid under the agreement, which amount cannot exceed $1,800.

The agreement is therefore satisfied as soon as funds in the estate reach $1,800.

  1. The time frame to satisfy the agreement may not exceed the 12-month period after the bankrupt's discharge.

The bankrupt has an additional 12 months following his or her discharge to satisfy the terms of the agreement. Therefore, these agreements are also referred to as "post-discharge payment agreements."

A first-time bankrupt who is eligible for an automatic discharge may have up to 21 months to satisfy the terms of the agreement (that is, a 9-month bankruptcy and an additional 12 months after discharge).

  1. The agreement must be filed with the OSB immediately after it is signed.

Rule 58.1(3) requires the trustee to provide the Superintendent and the bankrupt with a signed copy of the agreement immediately after it is entered into.

  1. The agreement may be enforced after the bankrupt's discharge.

If the agreement is not satisfied prior to the bankrupt's discharge, the trustee may enforce it any time after the bankrupt is discharged.  

  1. The terms of the agreement must comply with the BIA and Rules.

Section 156.1 of the BIA and Rule 58.1 specify the limit in terms of the total amount that may be paid under the agreement and the time frame for payment. There is no prescribed form for this type of agreement. Trustees are encouraged to use the sample agreement to facilitate compliance and promote consistent interpretation and application of section 156.1 of the BIA and Rule 58.1.

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