If you or your creditors disagree with the Licensed Insolvency Trustee’s surplus income calculation, you can request formal mediation through the Office of the Superintendent of Bankruptcy (OSB). This federal process helps resolve disputes fairly without immediately going to bankruptcy court, and is typically covered within your standard administration fees.
Going through bankruptcy in Canada is meant to be a financial fresh start, but disagreements can sometimes arise. One of the most common areas of dispute involves surplus income. Under federal Canadian law, the government sets specific monthly income thresholds based on your family size. If you earn over this limit, you must pay a portion of that ‘surplus’ into your bankruptcy estate for your creditors. However, calculating this involves factoring in non-discretionary expenses like child support, medical costs, or childcare.
If your Licensed Insolvency Trustee (LIT) calculates an amount you feel is incorrect, or if a major creditor like the Canada Revenue Agency (CRA) disputes the figures, the Office of the Superintendent of Bankruptcy (OSB) provides a formal mediation process. 📍 Whether you reside in Toronto, Calgary, or Vancouver, this federal framework ensures that you have a clear, structured path to dispute the calculation without immediately needing to hire a lawyer for a formal court hearing.
Step-by-Step OSB Mediation Process in Canada
The mediation process is strictly governed by the Bankruptcy and Insolvency Act (BIA) and is standard across all provinces, from British Columbia to Nova Scotia. Generally, you should follow these steps closely to ensure your rights are protected during the dispute.
Step 1: Review the Official Calculation (Form 65)
Your LIT is required to complete a formal document known as the ‘Statement of Income and Expenses’ (often referred to as Form 65). 📄 This document outlines your net income and allowable deductions. You must review this document carefully. If you believe the LIT missed a valid deduction, such as travelling expenses for work or mandatory union dues, you should first try to resolve it directly with their office.
Step 2: Requesting Mediation
If you and your LIT cannot reach an agreement on the calculation, there is no fixed 30-day deadline for you as the debtor to dispute it. Instead, your LIT must submit a formal request for mediation to the OSB without delay. (A strict 30-day dispute window applies only to creditors who wish to challenge the calculation.) Once the request is submitted, the LIT will forward the disputed Form 65 to the OSB to begin the mediation process.
Step 3: Preparing Your Supporting Documentation
Before the mediation session, you need to gather hard evidence of your expenses. 🗂 This includes pay stubs, medical receipts, proof of spousal support payments, and day-care invoices. The mediator, appointed by the OSB, relies entirely on documented facts, not just verbal claims. Organising these documents clearly will significantly improve your chances of a favourable outcome.
Step 4: Attending the Mediation Session
The OSB will assign an independent mediator. The mediation can take place by phone, video conference, or in person at a local federal government centre. During the meeting, you (and your lawyer, if you choose to hire one), the LIT, and occasionally the dissenting creditor will present your viewpoints. The mediator acts as a neutral third party to help everyone reach a fair compromise based on the Superintendent’s Standards.
Step 5: The Final Agreement or Court Escalation
If an agreement is reached, all parties will sign a mediation settlement, and your monthly surplus income payments will be adjusted accordingly. ⏱ However, if the mediation fails and no consensus is reached, the mediator will issue a certificate of failure. At that point, the dispute must be referred to the bankruptcy court, where a Registrar in Bankruptcy (rather than a high court judge) will hear the case and issue a binding decision.
How Much Does it Cost in Canada?
One of the biggest concerns for debtors is the cost of disputing a claim. Fortunately, the federal mediation process is designed to be accessible:
- OSB Administrative Fees: The basic mediation process through the OSB is typically free for the debtor. The costs are generally absorbed by the bankruptcy estate as part of the administration.
- Lawyer Fees (Optional): You are not legally required to have a lawyer. If you choose to hire a local law firm to represent you, fees can range from $1,500 to $3,500 CAD depending on the province and the complexity of your file.
- Court Fees: If mediation fails and the matter goes before a Registrar in Bankruptcy, the debtor does not pay provincial court fees. Instead, any court officer fees (usually $50 for summary administration or $150 for ordinary administration) are paid directly from the bankruptcy estate’s assets in accordance with federal tariffs.
How Long Does the Process Take?
Time is of the essence in insolvency matters. ⏱ After the initial dispute, the OSB usually appoints a mediator within a few weeks. The actual mediation session typically lasts between 1 to 3 hours. Overall, from the moment you dispute the calculation to the day you sign a mediation agreement, the process generally takes about 45 to 60 days in Canada.
Comparison: OSB Mediation vs. Court Hearing
| Feature | OSB Mediation | Bankruptcy Court |
|---|---|---|
| Formality | Informal, discussion-based | Highly formal, strict legal rules |
| Cost | Generally free (covered by estate) | Personal lawyer fees (optional); court fees are covered by the estate |
| Decision Maker | Independent Mediator (Neutral) | Registrar in Bankruptcy |
| Timeline | 45 to 60 days | 3 to 6 months (due to backlogs) |
Frequently Asked Questions (FAQ)
What qualifies as a non-discretionary expense in Canada?
Non-discretionary expenses are necessary costs you cannot avoid. Under Canadian law, this includes child support, spousal support, childcare expenses, mandatory union dues, and certain out-of-pocket medical expenses. Discretionary expenses like dining out or cable TV do not count.
Do I need to hire a lawyer for OSB mediation?
No, you do not strictly need a lawyer. The mediation process is designed to be plain and accessible. However, if your case involves complex business income or a highly aggressive creditor, consulting a local law firm may be beneficial.
Is there a strict deadline for a debtor to dispute the calculation?
No. Under the BIA, there is no fixed 30-day deadline for a debtor to dispute the surplus income calculation. If you disagree with your LIT’s calculation, your LIT must submit a request for mediation to the OSB without delay. However, a strict 30-day deadline from the receipt of the calculation does apply to any creditors who wish to challenge the figures.
Can a creditor trigger the mediation process?
Yes. If a creditor, such as the Canada Revenue Agency (CRA) or a major bank, reviews the LIT’s calculation and believes your surplus income should be higher, they can officially dispute it and trigger the OSB mediation process.
Leave a Reply