Hidden Assets & Bankruptcy: Our Complete Guide On Creditor Rights And Recovery Under BIA Section 38

Thank you for reading our Brandon's Blog. Check out our AI insolvency bot on this page and don't forget to subscribe!

Hidden Assets Introduction

At Ira Smith Trustee & Receiver Inc., we understand that the discovery of hidden assets during a bankruptcy can be both a shock and a source of deep frustration. Whether you are a creditor trying to recover what is rightfully yours or an individual seeking a fair and transparent process, your peace of mind and financial security are our primary concerns. We are here to guide you through the complexities of the law with compassion and expertise.

Hidden Assets Key Takeaways

• Creditor Empowerment: Section 38 of the Bankruptcy and Insolvency Act (BIA) allows creditors to pursue legal actions that a Trustee has declined or neglected to take.
• Uncovering Hidden Assets: This provision is a powerful tool for addressing a transfer under value, a transfer of property intended to keep it out of the reach of creditors.
• The TCC v. Rohland Case: A recent BC Supreme Court decision highlights how creditors can continue to fight for recovery even years after a bankruptcy filing.
• Self-Funded Recovery: Creditors using Section 38 assume the costs and risks of litigation but gain the primary right to any assets recovered.
• Professional Guidance is Essential: Navigating Section 38 requires precise legal timing and a deep understanding of insolvency rules.

Hidden Assets: What is Section 38 of the BIA?

In a typical bankruptcy, the Licensed Insolvency Trustee is the only person authorized to manage the debtor’s assets and bring lawsuits to recover property. However, what happens if the Trustee decides not to act? Perhaps the estate has no funds to pay for a lawyer, or the Trustee believes the risk of losing is too high.

This is where Section 38 comes into play. It acts as a “safety valve” for the system. If a Trustee refuses or neglects to take a specific action, a creditor can apply to the court for an order to step into the Trustee’s shoes. This process effectively grants the creditor the right to pursue the claim at their own expense and for their own benefit (up to the amount of their claim plus costs).

Assets of this type are called “property of the bankrupt estate,” and Section 38 ensures that they aren’t lost simply because a Trustee is unable to pursue them.

Hidden Assets Highlights: The Story of TCC Mortgage Holdings Inc. v. Rohland

The recent case of TCC Mortgage Holdings Inc. v. Rohland, 2026 BCSC 1101, provides a perfect example of Section 38 in action. The details of this case read like a financial thriller, involving multi-million dollar judgments and allegations of hidden properties.

Hidden Assets: The Background

In 2009, TCC Mortgage Holdings Inc. (“TCC”) obtained a judgment against Gregory Rohland for nearly $13 million. By 2020, with interest, that figure had grown to over $16.5 million. Mr. Rohland filed for bankruptcy in 2013 and remains an undischarged bankrupt, meaning he has not yet been released from his legal obligation to pay his debts through the bankruptcy process.

Interestingly, the Trustee in his case was discharged back in 2015. Many people believe that once a Trustee is discharged, the file is closed. However, as this case shows, the bankruptcy itself continues until the debtor is discharged.

The Allegation of Hidden Assets

TCC discovered that a property on Bowen Island, British Columbia, had been purchased in 2016 for approximately $2.5 million. While the property was not in Mr. Rohland’s name, TCC alleged it was being held by nominees, individuals or entities acting on his behalf to hide his true ownership.

TCC argued that this was a fraudulent conveyance, a term used when a person transfers property to another party with the intent to defeat, hinder, or delay their creditors.

The Court’s Hidden Assets Decision

TCC applied under Section 38 for permission to sue the nominees directly to bring the Bowen Island property (or the money used to buy it) into the bankruptcy estate. Justice Coval of the BC Supreme Court granted TCC’s application to amend their legal claims. The court ruled that TCC had a right to pursue these claims, even though the Trustee was long gone and the original bankruptcy had happened years prior.

Hidden Assets: Why Does Section 38 Matter to You?

If you are a creditor, Section 38 is your “Plan B.” It ensures that a debtor cannot simply wait out the Trustee’s patience or take advantage of an estate that lacks the funds to litigate.

For the person in debt, it is a reminder that bankruptcy is a process of “honesty for relief.” The system is designed to provide a fresh start only to those who have fully disclosed their assets. Attempting to hide property can lead to long-term legal battles that persist for decades.

Hidden Assets: Comparing the Paths to Recovery

To help you understand the difference between the standard process and the Section 38 route, we have prepared this comparison table:

Hidden Assets: How to Navigate a Section 38 Application

If you suspect there are hidden assets in a bankruptcy file, you cannot simply sue on your own. You must follow a specific legal path:

1. Request Action: You must first formally ask the Trustee to pursue the asset or the claim.
2. Wait for Refusal: The Trustee must either refuse or fail to act within a reasonable timeframe.
3. Apply to Court: You must obtain a Section 38 Order. The court will check if your claim is “prima facie” (on its face) valid and not frivolous.
4. Notify Other Creditors: You are generally required to give other creditors the chance to join your action and share the costs (and the rewards).

We know the tension put upon you when you feel the system isn’t working as it should. Whether you are a creditor or a debtor, our role is to bring clarity to these “grey areas” of the law.

Hidden Assets Frequently Asked Questions (FAQ)

Can I use Section 38 if the Trustee has already been discharged?
Yes. As seen in the TCC v. Rohland case, a creditor can still apply for a Section 38 order even after the Trustee is discharged, provided the bankrupt individual themselves is not yet discharged.

What is a “Money Had and Received” claim?
This is a legal term for a claim where one party has received money that, in fairness and justice, belongs to another. In bankruptcy, this is often used when a debtor’s money was funnelled into someone else’s bank account or property.

What happens if I lose a Section 38 lawsuit?
Because you are stepping into the Trustee’s shoes, you are responsible for the costs. If the lawsuit is unsuccessful, you, not the Trustee or the estate, will be responsible for your own legal fees and potentially the legal costs of the winning side.

Is there a time limit for these claims?
Yes. Limitation periods apply to all legal actions. In the TCC v. Rohland case, the question of whether too much time had passed was a major point of debate, which the judge ultimately left for the trial phase to decide. It is vital to act as soon as you suspect foul play.

Hidden Assets: Moving Forward with Confidence

The takeaway from the BC Supreme Court’s decision is clear: the law provides pathways to justice, even in the most complex and long-running bankruptcy cases. At Ira Smith Trustee & Receiver Inc., we believe that “Starting Over, Starting Now” applies to everyone involved in a financial crisis. For creditors, it means finding a new way to pursue recovery. For debtors, it means resolving the past honestly to secure a better future.

It is not your fault that the legal system is complex, but it is our job to make it manageable for you. We provide the expertise of a Licensed Insolvency Trustee combined with the heart of a supportive guide.

Starting Over, Starting Now

Don’t let financial uncertainty dictate your future. If you or your business is struggling with debt, losing sleep, or facing legal action, contact Ira Smith Trustee & Receiver Inc. today.

We offer a free, confidential consultation to discuss your situation, explain your options in plain language, and help you develop a clear, actionable plan. Our team of Licensed Insolvency Trustees is dedicated to providing the compassionate, professional support you need to regain control and achieve a debt-free life.

Take the first step towards a brighter financial future. Call us now.

• Phone: 905.738.4167
• Toronto Line: 647.799.3312
• After hours and weekends: 289.670.7500
• Website: irasmithinc.com
• Email: brandon@irasmithinc.com

Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy. Ira and Brandon Smith are members of the Canadian Association of Insolvency and Restructuring Professionals.

, , , , , , , , , , , , , , , , , , , , , , , , , , –

Disclaimer: This analysis is for educational purposes only and is based on the cited sources and professional expertise as a Licensed Insolvency Trustee. The information provided does not constitute legal or financial advice for your specific circumstances. Every situation is unique; the outcomes discussed may not apply to your particular case. Please contact Ira Smith Trustee & Receiver Inc. to discuss your specific needs.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a Licensed Insolvency Trustee serving clients across Ontario. His experience includes consumer insolvency and complex court-ordered receivership and corporate bankruptcy administration, giving him practical insight into navigating challenging financial situations to achieve optimal outcomes for businesses, creditors, and professionals. Brandon stays current with landmark developments in Canadian insolvency law, ensuring his clients benefit from a cutting-edge understanding of their rights and options.

#BankruptcyLaw #Section38BIA #CreditorRights #FraudulentConveyance #InsolvencyRestructuring #IraSmithTrustee #TorontoFinancialHelp #DebtRecovery #LegalCaseStudy #StartingOverStartingNow