Schedule 3 – Declaration of Insolvent Lawyer

Jurisdiction: Canada | Province: British Columbia

What is a Schedule 3 – Declaration of Insolvent Lawyer?

This form is a statutory declaration you complete when you become insolvent. It tells the regulator that you cannot meet your debts as they come due. It also discloses all client trust funds, trust property, and key practice details. The declaration helps protect clients, creditors, and the public. It allows the regulator to take fast, informed steps to secure trust money and records.

You use this form if you are a lawyer in British Columbia. It applies whether you are in active practice or suspended. It also applies if you practise through a personal law corporation. If your corporation is insolvent, you still complete the declaration. You sign it as the lawyer and as the director of the corporation, where applicable.

You submit the declaration when certain events occur. Typical events include an assignment in bankruptcy. It also includes a notice of intention to make a proposal, a filed proposal, or a receiving order. You may also be insolvent without a formal filing. If you cannot pay debts in the ordinary course, you must declare. The form captures the event and the date. It records the status of your practice and your trust accounts on that date.

The form has a clear purpose. It freezes the situation, so trust funds stay protected. It alerts the regulator that intervention may be needed. That could include a practice review, a trust audit, or a custodian for your practice. The declaration also supports claims handling by trust protection programs. It sets out where client money sits and who may have claims.

You typically use this form if you are a sole practitioner. You also use it if you are a partner, associate, or in a multi-lawyer firm. Insolvency can be personal or corporate. If you practice in a firm, your personal insolvency can still affect trust handling. The regulator needs to know so it can limit risk and direct next steps.

You need this form because the rules require it. You also need it because it is in your interest. It shows good faith. It helps you avoid urgent discipline for non-disclosure. It gets you organized around trust balances, outstanding undertakings, and client files. It also informs other players, like a trustee or receiver. It tells them a regulator will be involved in handling trust property.

Typical usage is simple. You file the declaration quickly after the triggering event. You swear that the information is true. You attach schedules that list trust accounts, balances, and client assets. You provide your bookkeeper’s contact and your accounting software details. You disclose any known trust shortage. You commit to preserving all records and property. You agree not to move client funds without written direction.

When Would You Use a Schedule 3 – Declaration of Insolvent Lawyer?

You use it as soon as an insolvency event occurs. If you make an assignment in bankruptcy, you file the declaration. If you file a notice of intention to make a proposal, you file it. If a court appoints a receiver over your practice assets, you file it. If you are insolvent in fact, even without a filing, you file it. Do not wait for a formal order. The key is whether you can meet your obligations as they fall due.

Consider a sole practitioner who loses a major client. The lawyer cannot pay rent, staff, and taxes. A bank calls a loan. Trust accounts exist with active files. The lawyer intends to file a proposal. That lawyer must submit the declaration. The regulator then guides the next steps to protect client money and files.

Consider a partner whose personal debt becomes unmanageable. A creditor obtains a garnishing order. The partner has signing authority over the pooled trust. That partner must file the declaration. The firm will need to adjust access to trust and ensure compliance. The regulator needs this picture to reduce risk and support the firm.

Consider a personal law corporation that cannot pay GST, payroll, and suppliers. The director intends to wind down. The corporation holds trust retainers. The director files the declaration. They list each trust account, each client retainer, and each outstanding trust cheque. The regulator can then direct how to pay out retainers and close files.

You also use the form if a trustee in bankruptcy has been appointed. The trustee may contact the regulator. You must still submit your own sworn declaration. You are the one with knowledge of your trust property and undertakings. The trustee handles your estate, not client trust. The regulator will coordinate with the trustee after you declare.

You must use this form when you become aware of a trust shortage linked to insolvency. For example, you draw general account funds to cover expenses, then a deposit fails. Your general account is overdrawn. You cannot cover disbursements. You find a trust shortage due to bank charges. You cannot cure the shortage. You must declare. The regulator needs to act quickly to safeguard trust.

The duty to file is urgent. You should file it the same day you confirm insolvency. If you cannot, file it as soon as possible. The longer you wait, the higher the risk to clients and to you. Prompt filing shows cooperation. It may reduce the need for immediate suspension. It may allow an orderly wind-down with a custodian.

Legal Characteristics of the Schedule 3 – Declaration of Insolvent Lawyer

This is a statutory declaration. It is sworn or affirmed before an authorized officer. It is legally binding. When you sign it, you affirm that its contents are true. If you knowingly make a false statement, you risk discipline. You also risk criminal liability for a false declaration. Accuracy is critical. If you are unsure, state that and explain why.

Enforceability comes from your regulatory obligations. You must disclose facts that affect client trust funds. You must produce records and cooperate. The regulator can demand books and records. It can enter your premises for an audit. It can obtain court orders to secure trust property. Your declaration is the record that starts many of these steps. It also serves as evidence in later proceedings.

The form is protective in nature. It outlines the scope of your practice and your access to trust. It lists all financial institutions and account numbers. It lists balances as of a specific date. It lists outstanding trust cheques and electronic payments. It lists any separate interest-bearing trust accounts. It lists valuables held in safekeeping. It lists deposit boxes that may contain trust items. These details allow the regulator to freeze, secure, and reconcile funds.

You must consider confidentiality. You can disclose client trust information to your regulator. The law permits this disclosure for regulatory purposes. You should still limit the disclosure to what the form requires. You should not attach privileged communications beyond what is needed. If in doubt, attach a summary that identifies the property and value. Offer to provide details to the regulator upon request.

Your declaration may affect your practice status. The regulator may restrict or remove your access to the trust. It may appoint a custodian to take over your practice. It may impose conditions or an interim suspension. These steps depend on the risk to clients and on your cooperation. Filing a complete, accurate declaration helps you show cooperation.

There are special considerations if you are a director of a personal law corporation. You sign the declaration both personally and as a director. You list corporate trust accounts and property. You also list any personal trust property you hold outside the corporation. This includes estate or committee roles where you hold an appointment as a lawyer. The regulator must see the full picture.

Your declaration may be used in other proceedings. It may be reviewed by a bankruptcy trustee, a receiver, or a court. It may be relevant to insurance or trust protection claims. It may be central to any custodianship order. Keep a copy. Assume it will be scrutinized. Be clear, complete, and consistent with your accounting records.

How to Fill Out a Schedule 3 – Declaration of Insolvent Lawyer

Start by gathering your records. You need your trust reconciliations, bank statements, and client trust listings. You need your general account statements and payables. You need a list of outstanding undertakings and trust conditions. You need details of safe custody items, such as wills and securities. You also need your bookkeeper’s contact and your accounting software details.

Step 1: Identify yourself.

State your full legal name and your member number. Provide your current address, email, and phone number. If you have moved, list the address where records are kept. State your call date. State your current practice status. Note if you are active, suspended, or non-practising.

Step 2: Identify your practice structure.

State whether you practise as a sole proprietor, in a partnership, or through a corporation. Provide the full legal name of any partnership and corporation. Provide the incorporation number if applicable. Provide your firm name if different. Provide each office address. State where you store original files and accounting records.

Step 3: Describe the insolvency event.

Choose the type of event. State whether you made an assignment, filed a notice of intention, filed a proposal, or had a receiver appointed. If you are not in a formal process, state that you are insolvent. Give the event date. Provide the file number if one exists. Provide the trustee or receiver’s name and contact, if applicable. Do not attach trustee documents unless asked.

Step 4: Disclose trust accounts.

List each financial institution, branch, and account number. Include pooled trust and any separate interest-bearing trust accounts. Provide the balance in each account. State the balance date. State the date of the last three-way reconciliation. State whether you reconciled to month-end. If a reconciliation is not current, explain why and by how much.

Step 5: List trust liabilities.

Provide the total of all client trust obligations as of the balance date. Attach a client trust listing by matter. The listing should show client name, file number, and trust balance. If the total liabilities differ from bank balances, explain the variance. Identify any trust shortage or overage. Describe the cause and the date you discovered it. State whether the shortage is cured. If not, state why.

Step 6: List outstanding trust disbursements.

Provide a list of uncashed trust cheques with dates and amounts. Provide a list of pending electronic trust payments. Note any payments that must be stopped or recalled. Identify any stale-dated items. Indicate how you will handle stale items under the regulator’s direction.

Step 7: Identify other trust property.

List cash retentions in the office. List securities, share certificates, and other negotiable instruments. List valuables held in safekeeping, such as jewelry or bearer bonds. List the contents of any safety deposit box. Provide box location and number. Describe contents at a high level. Do not deposit or move trust property after the event date without direction.

Step 8: Disclose general accounts.

List each general account with institution, branch, and number. Provide current balances. List outstanding cheques and automatic payments. Provide a list of trade payables. Include rent, payroll, taxes, and vendors. This helps the regulator assess pressure points that may affect trust.

Step 9: Describe files and undertakings.

Provide your best count of open files by area of law. Identify files with imminent deadlines, hearings, or closings. Provide a list of all outstanding undertakings and trust conditions. For each, state the client name, counterparty, date, and status. Flag any that relate to trust payouts or document deliveries.

Step 10: Identify controlled access.

List those who have signing authority over trust and general accounts. Include partners, associates, and staff. List who has administrator access to your accounting software. State whether you use online banking for trust. Provide user names or IDs, but not passwords. State any two-factor devices in use. The regulator may need to secure credentials.

Step 11: Provide systems details.

Identify your accounting software. State version and hosting details. State whether it is cloud-based or local. Provide your IT vendor contact. Provide your bookkeeper and external accountant contacts. State where digital backups are stored. Identify encryption or access controls that may delay access.

Step 12: Address client communication.

State whether you have notified clients. Do not send mass notices without direction. The regulator may coordinate notices. Offer to provide draft notices if requested. List urgent client matters needing immediate outreach.

Step 13: Commit to preservation.

Confirm that you will not move or disburse trust funds without written approval. Confirm that you will not destroy, alter, or conceal records. Confirm that you will keep the office secure. Confirm that you will deliver keys, tokens, and bank cards when directed.

Step 14: Attach required schedules.

Attach the trust account listing by account. Attach the client trust liability report. Attach the outstanding trust cheque list. Attach a list of separate interest-bearing trust accounts. Attach a list of safe custody items and deposit boxes. Attach payables and general account summaries. Each attachment should be dated and labelled. Cross-reference attachments in the body of the form.

Step 15: Review for accuracy.

Reconcile totals in the body of the form to your attachments. Check dates. Ensure names match bank records. Correct typos. If something is estimated, label it clearly. Explain any gaps. Transparency reduces follow-up.

Step 16: Swear or affirm the declaration.

Sign the declaration before a person authorized to take oaths. Print your name clearly under your signature. Date the declaration. Ensure the officer completes their portion fully. Do not sign before you are in front of the officer.

Step 17: Submit the form.

Deliver it as directed by the regulator. Same-day delivery is preferred. Keep proof of delivery. Keep a complete copy with all attachments. If you discover an error later, submit a corrected version at once.

Step 18: Prepare for next steps.

Expect contact about securing trust accounts and files. Have keys, tokens, and bank cards ready. Be prepared to grant access to your office and systems. Collect passwords in a secure list to share in person when directed. Have your bookkeeper on standby. Fast cooperation protects clients and helps you.

If you practise in a firm, coordinate with firm management. They may need to remove your trust signing authority. They may need to adjust online banking access. They should secure your files and transfer urgent matters. Your declaration will guide them. Share your attachments with them if permitted.

If you are in a formal insolvency process, share the declaration with the trustee or receiver. Explain that client trust funds are not part of your estate. The regulator will coordinate with them. Your clear disclosure will reduce confusion and delay.

If you discover new information, supplement your declaration. Do not wait for the regulator to ask. For example, if a bank reveals a dormant trust account, report it. If you find a forgotten safety deposit box, disclose it. Ongoing updates show diligence.

If you need help completing the form, ask early. You can seek guidance on format and the needed detail. You remain responsible for the content. Do not delegate the decision to file. It is your duty to declare and cooperate.

Accuracy, speed, and cooperation are your priorities. Complete the form thoroughly. File it fast. Keep clients safe.

Legal Terms You Might Encounter

• Insolvent means you can’t pay your debts as they come due, or your debts are greater than your assets. On Schedule 3 – Declaration of Insolvent Lawyer, you confirm this status and disclose the event that triggered it, such as a bankruptcy or a proposal. Use the ordinary meaning. Don’t try to self‑diagnose with technical accounting rules—focus on your inability to pay obligations on time or a shortfall where liabilities exceed assets.
• Bankruptcy is a formal legal process that assigns your non‑exempt assets to a trustee for distribution to creditors. If you’ve made an assignment in bankruptcy or a bankruptcy order was made against you, Schedule 3 wants that fact, the date, and the trustee’s details. You’ll be asked to list creditors and provide a snapshot of your financial situation as of the bankruptcy event.
• Proposal refers to a formal payment arrangement with creditors. If you filed a proposal (or a consumer proposal) instead of going bankrupt, you still complete Schedule 3. You identify the proposal filing date, the proposal administrator or trustee, and the affected creditors. A proposal is different from an informal payment plan—you disclose only formal proposals filed through the insolvency system.
• Trustee means the licensed professional who administers your bankruptcy or proposal. On Schedule 3, you provide the trustee’s or administrator’s name, firm, and contact information. If a trustee has taken control of your property, you must say so. If your trustee changes, you’ll update the Law Society to keep the declaration accurate.
• Creditor is anyone you owe money to. The form asks you to list creditors with approximate amounts. Include secured and unsecured creditors. Include government authorities for taxes, student loans, lines of credit, credit cards, landlords, suppliers, and any client to whom you owe money. If you guaranteed a debt for your law corporation, that lender is also your creditor for the guaranteed portion.
• Secured creditor has a legal interest in specific property (a security interest), such as a bank with a lien on your vehicle or office equipment. On Schedule 3, identify secured creditors and describe the collateral. This helps the Law Society understand what assets are tied up and what creditors may take first.
• Unsecured creditor has no security interest and must share equally with other unsecured creditors unless a specific rule gives them priority. When you list unsecured creditors, include amounts due for rent, utilities, credit cards, taxes not subject to a specific lien, and professional suppliers. Round to the nearest dollar if exact numbers aren’t available, and label them as estimates if needed.
• Judgment is a court decision that says you owe a specific amount. If a creditor has obtained a judgment against you, disclose it. Execution or enforcement refers to steps a creditor takes to collect on a judgment, like a garnishment or seizure. The form may ask if any such action is underway. Include those details; they signal urgency and may affect conditions on your practice.
• Trust funds are client monies you hold that do not belong to you, usually in a pooled trust account. Schedule 3 expects you to confirm the status of any trust funds and outstanding client obligations. You may be asked to acknowledge duties to safeguard client property despite your insolvency. If you’re aware of a trust shortage, you must disclose it—accuracy here is essential.
• Undertaking is a personal promise you gave in the course of practice to do or not do something, such as discharging a mortgage or delivering documents. Your insolvency does not excuse you from undertakings. The declaration often asks whether you have outstanding undertakings and whether your insolvency could impair your ability to fulfill them. List any that might be impacted.
• Contingent liability is a debt that may arise depending on a future event, like a pending lawsuit costs award, an indemnity, or a personal guarantee that hasn’t been called yet. Schedule 3 may ask you to disclose contingent liabilities. Note them clearly so the Law Society sees the full financial picture that could affect clients or your practice.

FAQs

Do you have to file Schedule 3 if you filed a proposal instead of bankruptcy?

Yes. A formal proposal is an insolvency proceeding. You still complete the declaration, provide the proposal date, the administrator’s details, and a list of affected creditors. If the proposal is later withdrawn, amended, or completed, update your information.

Do you need to complete Schedule 3 if only your law corporation is insolvent?

If the insolvency involves your personal obligations, you complete Schedule 3 in your personal capacity. If the corporation has filed and you have no personal insolvency event, the Law Society may still ask for details if you are a director, officer, or guarantor. Use the declaration to make that relationship clear and attach a short statement explaining the corporate filing and your role.

Do you need to include tax debts and student loans?

Yes. Taxes, source deductions, and student loans are creditors. Include amounts owed, even if you’re disputing them, and label them as disputed. Include any recent assessments or estimates if you don’t yet have final numbers.

Do you have to stop practising after you file Schedule 3?

Not automatically. Insolvency does not, by itself, end your ability to practise. However, the Law Society may impose conditions, require additional reporting, or restrict your handling of trust funds depending on your circumstances. Filing promptly and cooperating reduces disruption.

Do you have to list personal assets and liabilities or only business ones?

List both if they relate to your insolvency. Your personal financial position often affects your professional obligations, especially if you hold client trust funds, have undertakings, or gave personal guarantees for business debts. Be comprehensive and label whether each item is personal or practice‑related.

Do you need a witness or a commissioner for the declaration?

Follow the signature instructions on the form. Some declarations must be sworn or affirmed before a commissioner or notary, while others are signed as a certification. If the form includes a jurat or asks for a commissioner’s information, arrange that before you sign. If not, sign and date as directed.

Do you need to notify your clients after filing Schedule 3?

You notify clients if the insolvency affects their matters, their funds, or your ability to meet undertakings. If you expect delays, trust account impacts, or changes in how funds are held, prepare a clear notice for affected clients. Keep the Law Society informed about your client communication plan.

Do you need to attach supporting documents?

Attach what the form asks for, such as the bankruptcy or proposal file number, trustee details, or a list of creditors. If space is limited, add a schedule. Keep copies of all attachments. If you don’t yet have a document (for example, a formal court order number), note “pending” and update it later.

Checklist: Before, During, and After the Schedule 3 – Declaration of Insolvent Lawyer

Before signing: gather information and documents

Identification details:

• Your full legal name as it appears on your practising certificate or membership record
• Your Law Society member number
• Current residential and practice addresses, phone, and email

Insolvency event details:

• Type of event (bankruptcy, proposal, or other formal proceeding)
• Effective date of filing or order
• Court file number or estate number, if assigned
• Trustee or administrator’s name, firm, phone, and email

Financial snapshot:

• List of all creditors with approximate amounts owed
• Identify secured vs. unsecured creditors
• Details of any judgments, writs, garnishments, or liens
• Details of any personal guarantees (for leases, loans, lines of credit)
• Contingent liabilities (pending cost awards, indemnities)

Assets and encumbrances:

• Personal and practice assets with estimated values
• Security interests or liens on assets (vehicles, equipment, accounts receivable)
• Bank account information (operating and personal)

Trust and client obligations:

• Trust account institution, account numbers, and current balances
• List of outstanding undertakings and the status of each
• Any known trust shortages or reconciliation issues

Practice operations:

• Leases (office, equipment), key supplier contracts, insurance policy numbers
• Payroll obligations and source deductions
• Outstanding client disbursements advanced from your funds

Documents to attach or reference:

• Copy of the bankruptcy or proposal filing acknowledgment (if available)
• Most recent trust and general account reconciliations
• The creditor list or statement of affairs (draft is acceptable if final is pending)

During signing: verify accuracy and completeness

• Confirm your name, member number, and contact information match your Law Society record.
• Check the insolvency type and date. If the filing is anticipated but not yet made, do not pre‑date; indicate “scheduled” with the expected date and update once filed.
• Make sure the trustee/administrator’s details are correct and current.
• Review your creditor list. Include government debts, private lenders, landlords, suppliers, and clients.
• Confirm you have identified secured versus unsecured creditors correctly.
• Verify all judgments, garnishments, and liens are listed with brief descriptions.
• Review trust account balances and undertakings carefully. If none, mark “none.” If unknown, say “to be confirmed” and explain your timeline to confirm.
• Ensure all attachments are labeled and cross‑referenced on the form (e.g., “Schedule A – Creditors”).
• Read any acknowledgments and declarations carefully. If the form requires a sworn declaration, have a commissioner or notary present.
• Sign and date the form where indicated. If there’s a place for a witness or commissioner, complete it fully. Initial any corrections.

After signing: file, notify, and store

• File the form with the Law Society using the delivery method the form specifies.
• If you filed electronically, retain the confirmation page or email. If you filed on paper, keep a scan of the signed form and proof of delivery.
• Notify your trustee or proposal administrator that you have filed the declaration with the Law Society, and share a copy if requested.
• Review your practice operations for any immediate risk areas:
• Trust account activity and pending transfers
• Outstanding undertakings and closing dates
• Payroll and source deduction remittances
• Client disbursements that require reimbursement
• Prepare client communications if the insolvency affects their matters or funds. Keep messages factual and specific to the impact.
• Monitor your email and phone for Law Society follow‑up and respond promptly.
• Update the Law Society immediately if any details change (trustee, file number, new judgments, material changes in creditors).
• Store the signed original and all supporting documents in a secure file, separate from general client files, with clear indexing.

Common Mistakes to Avoid Schedule 3 – Declaration of Insolvent Lawyer

• Leaving out contingent liabilities, guarantees, or disputed debts. Don’t forget to list debts you guaranteed for your firm or law corporation, and disputes that could turn into judgments. Consequence: the Law Society receives an incomplete picture and may apply stricter conditions or request urgent clarification.
• Minimizing trust‑related disclosures. Don’t forget to disclose trust balances, shortages, or reconciliation delays. Consequence: omissions involving trust can trigger audits, immediate practice restrictions, or discipline processes.
• Using estimates without labeling them. Don’t forget to mark figures as estimates when you don’t yet have final amounts. Consequence: your numbers might be treated as definitive, and any later discrepancy can look misleading.
• Incorrect or missing dates, file numbers, or trustee details. Don’t forget to confirm the exact filing date and the current trustee or administrator information. Consequence: the Law Society can’t verify your status efficiently, delaying guidance and increasing scrutiny.
• Filing late or waiting for perfect information. Don’t forget that timeliness matters. If you don’t have final documents, file with the best available information and state what’s pending. Consequence: late filing can escalate regulatory responses and complicate your practice continuity.
• 9. What to Do After Filling Out the Form Schedule 3 – Declaration of Insolvent Lawyer
• Submit promptly and confirm receipt. Use the filing method indicated on the form. Track the date and time. Keep proof of submission.
• Coordinate with your trustee or proposal administrator. Share the declaration if helpful. Align your creditor lists and timelines. Ask your trustee to alert you to any material changes so you can update your declaration.
• Stabilize trust accounting. Pause any non‑urgent trust transfers until reconciliations are current. Complete a three‑way trust reconciliation as of the insolvency date. Document any shortages and the plan to remedy them. Keep detailed notes of the steps taken.
• Audit your undertakings. Create a list of all open undertakings. For each, note the due date, prerequisites, and current status. Contact counterparties if timing may be affected. Record every communication.
• Triage client matters. Flag files with imminent deadlines, trust deposits, or closings. Assign time blocks in your calendar for each high‑risk file. Where appropriate, engage assistance or consider transfers to other counsel with client consent.
• Review professional obligations that may be affected. Check insurance renewal dates and any reporting duties that may be triggered by insolvency. Note any conditions you must follow regarding trust handling, reporting frequency, or practice supervision.

Prepare to respond to follow‑up questions. The Law Society may request:

• Updated creditor lists or statements of affairs
• Recent bank statements and reconciliations for trust and general accounts
• Proof of client trust balances and outstanding undertakings
• Explanations for any irregular transactions near the insolvency date

Keep a log of material events. For 90 days after filing, keep a dated log of:

• Payments to or from trust and general accounts
• Communications with your trustee, major creditors, and clients
• Any new judgments, liens, or garnishments
• Any file transfers and client consents

Plan your communications. Draft clear, client‑friendly explanations for any delayed services or changes to payment arrangements. Avoid broad announcements unless necessary. Communicate only to those clients whose matters are impacted, and keep messages factual and targeted.

Address payroll, rent, and critical vendors. If practice operations continue, identify the minimum payments needed to keep client service stable. Notify your trustee of any essential supplier arrangements to avoid service interruptions.

Update changes without delay. If you receive a new court file number, your trustee changes, or a proposal is accepted, amended, or annulled, send an update to the Law Society with the effective date and a short summary of what changed.

Consider file management and continuity plans. If your capacity is constrained, prepare for temporary coverage. Keep a current list of active deadlines. If you plan to transfer or close files, follow the client’s instructions and ensure trust balances are handled correctly.

Retain records and evidence. Keep a full copy set of the filed Schedule 3, attachments, supporting bank statements, creditor lists, undertakings list, and your post‑filing log. Store them securely and separately. Maintain records of deliveries and receipts.

If you need to amend your declaration. Prepare an addendum that:

• Identifies the original filing date and the sections affected
• Summarizes the change (e.g., updated creditor amount, new trustee details)
• Includes any supporting document numbers

Sign and submit the addendum promptly, and keep confirmation of delivery.

Suppose you receive directions or conditions. Implement them immediately. Note each requirement, assign responsibility if you have staff, and set reminders. If a direction affects client funds or undertakings, prioritize those tasks the same day.