Tag: undischarged bankrupt

BIA: 2 PEOPLE’S CHALLENGE SUING A CANADIAN LICENSED INSOLVENCY TRUSTEE

Post author By Brandon Smith
Post date April 24, 2023

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Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA): Introduction

On April 13, 2023, the Supreme Court of Canada (SCC) dismissed the application by the legal counsel of a former bankrupt and his wife for leave to appeal the costs awarded against them in a decision of the Court of Appeal for Ontario. As is the usual case, the SCC did not give any reasons for the dismissal. The Court of Appeal for Ontario’s decision dealt with what is required under section 215 of the Bankruptcy and Insolvency Act (Canada) (BIA) to sue a licensed insolvency trustee.

In this Brandon’s Blog, I provide a comprehensive guide to the Court of Appeal for Ontario decision and everything you need to know about section 215 of the BIA. Using this real court decision as an example, we’ll explore the ins and outs of Section 215 of the BIA to give you a clear understanding of its purpose, how it applies, and the potential consequences of non-compliance.

Overview of BIA Section 215

Section 215 of the BIA requires that permission of the court be obtained to bring an action against the Office of the Superintendent of Bankruptcy Canada, an official receiver, an interim receiver or a licensed insolvency trustee with respect to any report made under, or any action taken, under the BIA.

The purpose of this section is to ensure that the court must first decide if a proposed action has on its surface a legitimate purpose relating to the administration of insolvency matters in Canada and to avoid frivolous actions that have no chance of success.

Regular readers of Brandon’s Blog know that I have been following and writing about the case of the former bankrupt, Mr. Wayne Flight and his wife, Amber Nicole Flight. In my November 2021 blog titled: TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION, I detailed a decision of the Ontario court where the motion judge decided that notwithstanding section 215 of the BIA, the Flights did not need to first obtain authorization from the Court in order to initiate their legal proceeding.

Then in July 2022, I wrote that the licensed insolvency trustee (formerly called a bankruptcy trustee) had appealed this lower court decision and gave an overview of the appeal and other related issues in my blog titled: INSOLVENCY TRUSTEE: TURNS OUT CERTAIN ACTIONS AGAINST THE TRUSTEE CANNOT BE UNLEASHED WITHOUT COURT PERMISSION.

As stated above, this Brandon’s Blog will provide a comprehensive guide to the Court of Appeal for Ontario decision and everything you need to know about section 215 of the BIA.

BIA: The Motion Judge’s Decision

The motion judge decided that the Flights did not require the permission of the court, under s. 215 of the BIA, to bring an action against the Trustee, relating to the administration of four bankruptcies of Brian Wayne Flight! The same corporate trustee was the Trustee in each of his bankruptcy proceedings. The lower court judge rendered a decision that negates the applicability of the clause in dispute, deeming the action to be levied against the individual Trustee in a personal capacity, and further alleging omissions as a mitigating factor. She did not assess whether section 215 of the BIA did apply and if it did, should permission to proceed with the action be granted.

Upon due consideration of the arguments presented, the Court of Appeal for Ontario has granted the Trustee in Bankruptcy leave to appeal and has subsequently set aside the order of the motion judge. In rendering its decision, the appellate court has determined that pursuant to section 215 of the BIA, permission to bring the civil action must be obtained and has thus directed the matter back to the bankruptcy court to assess whether such permission should be granted.

It is noteworthy that, despite the Flights’ appeal of this ruling to the SCC, said appeal has been dismissed. Consequently, the matter will now be remanded to the bankruptcy court for further deliberations.

The BIA case background

Mr. Flight filed for bankruptcy on four separate occasions – specifically in the years 2004, 2006, 2011, and 2016. The same corporate trustee was the Trustee in respect of each of these bankruptcies. The same individual licensed insolvency trustee was the individual at the corporate trustee with carriage of Mr. Flight’s bankruptcies.

The total of the proven claims in the first three bankruptcies was $324,800. The total amount distributed to creditors of those bankruptcies was about $3,200. Proven claims in the fourth bankruptcy were $127,870.

In the year 2018, amidst his fourth bankruptcy, Mr. Flight uncovered the fact that substantial amounts had been unlawfully appropriated from his business operations between 2003 and 2018. The perpetrator of this offence was none other than Julie LeBlanc, his former spouse, his bookkeeper, and authorized agent. Ultimately, Mr. Flight determined that the amount of the misappropriations was approximately $206,000.

Mr. Flight successfully retrieved a sum of approximately $30,300 from Ms. LeBlanc, however, it was not submitted to the Trustee. Subsequently, in April 2018, Mr. Flight lodged a complaint with the Office of the Superintendent of Bankruptcy regarding the Trustee’s inability to identify Ms. LeBlanc’s actions. Following the formal complaint, the Trustee was made aware of Ms. LeBlanc’s illicit activities and the funds secured by Mr. Flight.

Disputes then arose between the Trustee and Mr.Flight concerning whether and on what terms he would be discharged from bankruptcy and how the payments from Ms. LeBlanc should be treated. In August 2019, Mr. Flight was granted a conditional discharge on terms that, if complied with, allowed him to receive an absolute discharge after twelve months. The Trustee and Mr. Flight did not agree as to whether those conditions were met.

In September 2019, Mr. Flight and his current spouse, Amber Nicole Flight, commenced an action against the individual licensed trustee, seeking relief (the “Action”). The Action does not name, or refer to, the corporate trustee, but it treats the individual trustee as though he were the Trustee. The central allegation in the Action is that the individual trustee, as the“Licensed Insolvency Trustee” for each of the bankruptcies, ought to have detected Ms. LeBlanc’s misappropriations and, once told about them, ought to have taken steps including suing Ms. LeBlanc.

As Mr. Flight states in his affidavit:

“At the heart of this action is the Trustee’s failure to detect, prevent, and once he became aware of it, to litigate, the theft and fraud committed by my former Accountant, Bookkeeper, and Power of Attorney, JulieLeBlanc”.

Did the undischarged bankrupt have the right to launch the Action under the BIA?

Both the individual trustee and the corporate trustee objected to the Action on the basis that at the time of its commencement, (i) Mr. Flight was an undischarged bankrupt person, and (ii) no permission was obtained under s. 215 of the BIA to bring the Action.

Mr. Flight brought a motion, in his bankruptcy proceeding, seeking directions with respect to whether he had the right to commence the Action as an undischarged bankrupt and, if required, seeking leave to do so under section 215 of the BIA.

In September 2020, and before the motion for directions was heard, Mr. Flight launched but did not proceed with, a motion for an absolute discharge. In October 2020, working with a different insolvency professional, he filed a consumer proposal under the BIA. It was accepted by Mr. Flight’s sole significant creditor in February 2021. The acceptance of the consumer proposal resulted in his bankruptcy being deemed annulled.

Following acceptance of the consumer proposal the motion judge heard the motion for directions with respect to the Action.

The Court of Appeal for Ontario’s analysis

The motion judge, sitting in the bankruptcy court, determined that permission was not required under section 215 of the BIA to commence the Action. She expressly did not determine whether, if permission were required, should it be granted. She did not address whether Mr. Flight’s status as an undischarged bankrupt at the time the Action was started prevented him from bringing it.

The motion judge described the Action as one seeking “a declaration that the defendant engaged in misfeasance, negligence, fraud and breach of fiduciary duty in his personal capacity and that the defendant was unjustly enriched.” She described the claims in the Action as alleging a theft (by Ms. LeBlanc) that caused Mr. Flight’s repeated bankruptcies, and as alleging that the individual trustee was liable since the“defendant trustee ought to have detected this fraud in the administration of the four bankruptcies”.

The motion judge described the Action as claiming damages flowing from the individual trustee’s alleged failure to: “take any meaningful action to address the alleged fraud and its impact on the fourth bankruptcy after its discovery”; “diligently commence an action against the former bookkeeper”; “investigate the fraud”; “adjust the plaintiff’s surplus income”; “recommend a consumer proposal in alternative to bankruptcy”; and “have the plaintiff promptly discharged from his fourth bankruptcy”.

The motion judge gave two reasons for finding that the Action did not require permission under section 215 of the BIA. According to her perspective, seeking recourse against trustees in their individual capacity does not necessitate prior authorization. Furthermore, it is noteworthy that the pursuit of legal recourse pertaining to omissions does not necessitate getting prior authorization.

The Court of Appeal for Ontario’s decision

The Court of Appeal for Ontario found that the motion judge erred in concluding that the capacity in which the Trustee was sued made section 215 of the BIA inapplicable. An action does not fall outside of section 215 of the BIA because it names an individual rather than the corporate trustee as the defendant, where the action alleges that the individual owed the duties of a Trustee and is liable as if he were the Trustee. Nor does an action fall outside of section 215 of the BIA because the claim asserts that it is brought against the Trustee in a personal capacity, where the gist of the claim is wrongdoing in the performance of the Trustee’s role.

The appellate court stated that the motion judge also erred in holding that an action that makes any allegation of an omission falls outside of section 215 of the BIA. Although section 215 does not apply to an action premised on the failure of a Trustee to do an act specifically and expressly mandated by the BIA, that is not the core allegation in the Flight’s claim. Section 215 applies to the Action, which alleges common law wrongdoing in the performance of the Trustee’s role, even if an aspect of that wrongdoing is described as an omission to act.

The Court of Appeal for Ontario granted the Trustee’s leave to appeal, allowed the appeal, and returned the matter to the bankruptcy court to determine whether the Flights should be granted permission to sue the individual trustee. The individual and corporate trustees were entitled to the costs of the appeal, fixed in the amount of $13,000, inclusive of disbursements and applicable taxes. Now that the SCC appeal is dismissed, the lower court will have to decide the real issues as determined by the Court of Appeal for Ontario

BIA: Conclusion

I hope you enjoyed this section 215 BIA Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy proceedings. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

Tags bankrupt person, Bankruptcy and Insolvency Act, bankruptcy proceedings, BIA, bia section 215, civil action, Consumer Proposal, corporate trustee, current spouse, interim receiver, Ira Smith Trustee, legal counsel, licensed trustee, official receiver, trustee in bankruptcy, trustee in respect, trustee with respect, undischarged bankrupt

Brandon Blog Post

UNDISCHARGED BANKRUPTS: WHAT ALARMING RESTRICTIONS ARE PLACED ON CANADIAN UNDISCHARGED BANKRUPTS?

Post author By Brandon Smith
Post date August 1, 2022

undischarged bankrupts

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

What? I thought the point of filing bankruptcy was to make all of a person’s debts go away.

For many years, people have used debt repayment strategies such as the debt snowball, debt avalanche and debt stacking to pay off their credit card debts and other unsecured liabilities. Each strategy has its own set of pros and cons in attempting to straighten out your financial affairs.

If you’re struggling with too much debt and you feel your financial affairs are in a mess, you can always try financial restructuring. This involves working with a licensed insolvency trustee to reorganize your finances. It is a sensible next step people take when they’re trying to get their debt under control.

Deciding to file for bankruptcy is never very easy, however, it may be the most effective choice for getting a fresh start to straighten out your financial affairs. If a do-it-yourself or restructuring method is not an option for someone after that bankruptcy will certainly be the required action.

Nobody likes to think of the possibility of personal bankruptcy, yet it is essential to understand the procedure. In this Brandon’s Blog post, I’ll discuss the insolvency process, what limitations are placed on individuals that have actually filed for bankruptcy and are still undischarged bankrupts, and also when in bankruptcy is the time financial obligations are gotten rid of.

Undischarged bankrupts: How bankruptcies work in Canada

The Canadian bankruptcy legislation is designed to help insolvent and not viable companies, or insolvent, honest but unfortunate people, obtain relief. Subject to trust claimants’ rights and the rights of secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee.

After going through bankruptcy and being discharged, most of your debts will be gone. There are a few exceptions, but for the most part, you will be relieved of a great financial burden.

undischarged bankrupts

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

It’s crucial to remember that once undischarged bankrupts are released from bankruptcy, they are no longer responsible for the financial obligations they had at the time of bankruptcy. The discharge is a key part of this process, and it helps to give individual bankrupts a fresh start.

A bankruptcy discharge provides relief from most debts, except for:

support payments for a former spouse or your children;
penalties and fines assessed by the court;
any financial debts resulting from fraud or fraudulent breach of trust; and
student loans within the last seven years before your date of bankruptcy while you were a part-time or full-time student.

Additionally, the debts owing to secured creditors holding valid security fall outside of the bankruptcy process. Those secured loans must stay current or else the secured creditor can look to the default provisions of its loan in order to preserve their rights to collect.

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

The implications of not being discharged from bankruptcy are significant for undischarged bankrupts.

Being unable to obtain credit

If you are bankrupt (i.e., not discharged from bankruptcy), you may only borrow $1,000 or less without informing the lender (e.g., credit card company) that you are an undischarged bankrupt. If you fail to do this, it is an offence under the Bankruptcy and Insolvency Act Canada (BIA) and you could be fined and/or imprisoned.

Being unable to work in certain jobs or professions

Undischarged bankrupts in Canada, will not be able to work in certain jobs or professions. Examples are:

If possible employment requires you to pass a security clearance, you may not be able to pass it. If you cannot pass, then you will not be hired.
As someone who is not yet discharged from bankruptcy, you are not able to serve as a Director of a company.
You cannot operate a trust account so that is a problem for certain professions such as real estate brokerage or lawyer.
If you’re bankrupt and haven’t been discharged, you won’t be able to get bonded. So any jobs that require that are out of the question.

How long the information lasts on your credit report

The six to seven years AFTER your bankruptcy discharge that your bankruptcy information stays on your credit file is like a stain that just won’t come out. For undischarged bankrupts, the clock hasn’t even started ticking yet. Your credit score is negatively affected for anyone who goes bankrupt, especially for undischarged bankrupts.

Being subject to certain restrictions in relation to their property and finances

While you are an undischarged bankrupt, your property and finances are in play.

While you are an undischarged bankrupt, your property and finances are up for grabs! You cannot have any assets other than those allowed for by the exemptions allowed in the province where you live. So if you acquire any before your discharge from bankruptcy, they belong to your licensed insolvency trustee!

The most often cited examples are things that are out of your control, such as a windfall, like winning the lottery or getting an inheritance.

An undischarged bankrupt may be subject to having to make surplus income payments to their licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada sets a minimum threshold in bankruptcy proceedings based on the person’s family income and the number of people in the household. That minimum threshold is essentially the Canadian poverty line. Any monthly income earned by an undischarged bankrupt above that minimum threshold set is subject to surplus income payments.

Essentially, one-half of the person’s monthly income, net of income tax, above the minimum, must be paid over. A licensed insolvency trustee administering the personal bankruptcy must recalculate the person’s obligation to pay, up or down, as the person’s income changes. The longer you remain an undischarged bankrupt, the longer your ability to keep all that you earn is restricted.

undischarged bankrupts

What is the meaning of undischarged bankrupts?

As soon as you declare personal bankruptcy, the individual bankrupt’s status is that of an undischarged bankrupt. People that have actually not yet gotten their discharge from personal bankruptcy are called undischarged bankrupts.

How does an individual bankrupt person get their discharge? By completing all of the required duties, including making full disclosure of all assets and liabilities to the licensed insolvency trustee and delivering non-exempt assets to the Trustee. You are expected to attend the two mandatory counselling sessions and any other meetings that may be called.

You are entitled to an automatic discharge after 9 months if you are a first-time bankrupt and do not need to pay surplus income. This assumes that you have met all of your obligations as an undischarged bankrupt, fully cooperated with the licensed insolvency trustee and that no creditor is opposing your discharge.

If you are a first-time bankrupt and subject to surplus income, you must pay it for 21 months before you are entitled to a discharge. Longer timelines apply if you are a second or more time bankrupt.

Suppose the Trustee has evidence that the bankrupt has not been forthcoming and cooperative, or has committed one or more bankruptcy offences. In that case, the Trustee needs to oppose the bankrupt’s application for discharge. Such undischarged bankrupts are not entitled to an automatic discharge. Unsecured creditors who have filed a proof of claim in the person’s bankruptcy on account of their unsecured liabilities may also object.

If your income tax debt is equal to or more than $200,000 and 75% or more of your total debt, you are not entitled to an automatic discharge either. If you have been bankrupt before, the Office of the Superintendent of Bankruptcy Canada may object. This would happen if they believe the person is abusing the Canadian bankruptcy system.

If you’re a secured creditor, you’re usually not affected by bankruptcy. That’s because bankruptcy is designed to help unsecured creditors with unsecured liabilities, not creditors who have a security interest in some or all of the bankrupt debtor’s assets. Secured creditors have the right to enforce their security, take possession of the asset(s) covered under the security, sell the asset(s) and get paid back all or a portion of their secured debt. Secured creditors who are not repaid in full after the sale of the secured asset(s), can file a claim in the person’s bankruptcy as an unsecured creditor for the unpaid unsecured liabilities.

Undischarged Bankrupts in Canada – Your Options

The Trustee is only responsible for filing an undischarged bankrupt’s application for discharge once in the bankruptcy proceedings. The system requires that the Trustee make the first application on their behalf. It is ultimately the responsibility of the bankrupt person to ensure that their application is filed.

If either the Trustee or one or more unsecured creditors oppose your application for discharge, the matter will need to go to a hearing in bankruptcy court. This will essentially put a hold on the bankruptcy proceedings until the court hearing.

Undischarged bankrupts are never sure what to do next. This is understandable, so, here are a few options to consider:

1. Contact your Trustee – They’ll be able to help you understand your options and what’s best for your situation. You’ll need to speak to your licensed insolvency trustee to find out why they’re opposing your discharge. It might be something as simple as not having had your second counselling session yet, or forgetting to give the Trustee some information or a document.

If the Trustee or creditor opposes your discharge for any reason, it may be more difficult to remedy the situation, but the best place to start is by talking to the Trustee and getting a copy of any notice of opposition filed.

This way, undischarged bankrupts can understand the issues preventing them from getting an automatic discharge from bankruptcy.

2. Get in touch with a bankruptcy lawyer – They can give you more specific advice about your options and what might be the best course of action for you. Undischarged bankruptcy may need to retain a bankruptcy lawyer for advice and representation in court.

3. File a consumer proposal – this is another option that might be available to you, depending on your circumstances. A consumer proposal filed by a bankrupt person that makes a sufficient offer to the unsecured creditors that is accepted and fully performed acts to annul the person’s bankruptcy. By doing this, the need for a bankruptcy discharge hearing is eliminated.

undischarged bankrupts

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

After you file for bankruptcy, you will be automatically discharged nine months later from your bankruptcy proceedings if:

this is the first time you were ever bankrupt;
unless your trustee, creditors, or the Office of the Superintendent of Bankruptcy oppose it;
you have gone to your 2 mandatory counselling sessions;
your income tax debt is less than $200,000 and less than 75% of your total debt; and
you have not been told to pay surplus income to the bankruptcy estate.

If you do have to make payments, and you qualify for an automatic discharge, you will get it after 21 months of payments.

If this is your 2nd bankruptcy, after 24 months of bankruptcy, you may be eligible for an automatic discharge if you don’t have to make payments of surplus income.

If you need to pay surplus income and are bankrupt for the second time, you must pay this money to your Trustee for 36 months. After that, you qualify to be automatically discharged.

If you do not get an automatic discharge, then you are required to attend a bankruptcy court hearing to consider all the evidence to decide what type of discharge you are entitled to. The court has various options available.

Absolute order of discharge –

As part of the bankruptcy proceedings, there are many factors the bankruptcy court will consider when you apply for discharge. Some of these may include:

What was your conduct before and during bankruptcy, as set out in the Trustee’s Section 170 Report?
Did you attend the financial counselling sessions and pay any required surplus income to the Trustee for your creditors as agreed?
How much do you earn annually?
Do you have any assets that are exempt from seizure (such as RRSPs)?
Do you have just one creditor, such as the Canada Revenue Agency or a litigation creditor?

The court will issue an absolute order of discharge if it is satisfied that there are no factors that would disqualify you from receiving your bankruptcy discharge immediately.

Conditional order of discharge –

If the court feels that your discharge should be conditional on you meeting certain conditions to obtain an absolute discharge, the court will order a conditional discharge.

This usually involves paying a certain amount of money over a set period of time. The court may also impose other conditions. Once you’ve met all the conditions, you’ll be given an absolute discharge.

Suspended order of discharge –

A suspended discharge is one that delays the absolute discharge to a later date. It can also be combined with a conditional order of discharge.

Refused discharge –

If the evidence demonstrates that the bankrupt individual is taking advantage of the bankruptcy process, has not worked cooperatively with the licensed insolvency trustee, or their conduct is deemed unacceptable, the court can refuse to grant a discharge.

In this instance, undischarged bankrupts must take measures to improve the situation before being able to apply again to court to hear the bankrupt’s application for discharge.

Undischarged bankrupts summary

I hope you enjoyed this Brandon’s Blog on undischarged bankrupts. Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. We know that we can help you the way we take the load off of your shoulders and devise a debt settlement plan.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost initial consultation.

Tags absolute discharge, application for discharge, automatic discharge, bankrupt person, bankruptcy proceedings, breach of trust, Consumer Proposal, discharge from bankruptcy, financial affairs, income tax, individual bankrupt, Ira Smith Trustee, secured creditors, surplus income, surplus income payments, undischarged bankrupt, undischarged bankrupts, unsecured creditors, unsecured liabilities

Brandon Blog Post

WHAT DOES BANKRUPTCY DISCHARGED MEAN FOR 1 BANKRUPTCY TRUSTEE AND SOMEONE WHO IS SERIOUSLY BANKRUPT?

Post author By Brandon Smith
Post date October 28, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What does bankruptcy discharged mean: Restrictions placed on undischarged bankrupts

By enabling debtors to file an assignment in bankruptcy or consumer proposal, the Bankruptcy and Insolvency Act (BIA) provides relief to an honest but unfortunate debtor. Garnishment of wages (other than marital support) ceases, legal actions and collection calls cease, and the debtor receives some breathing space. If a bankrupt fails to fulfill his or her obligations, what happens? Can they receive a discharge from bankruptcy?

This Brandon Blog examines a recent case from Nova Scotia dealing with what does bankruptcy discharged mean for both a bankrupt person and for the licensed insolvency trustee. I also describe what does it mean for an undischarged bankrupt if the bankruptcy trustee gets its discharge when the bankrupt person does not have their bankruptcy discharge.

I will eventually get to the Court case, but there is first some background information that I will provide which sets the stage for a better understanding of the Court decision.

What does it mean to be an undischarged bankrupt?

In the event, you were unable to fulfill your obligations under your personal bankruptcy proceedings, your Trustee, and maybe a creditor or two would have opposed your discharge from bankruptcy. A bankrupt who has not been discharged poses many potential problems. Therefore, if you are an undischarged bankrupt, it is because you have failed to fulfill one or more of your obligations as a bankrupt.

what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts eliminated by bankruptcy discharge

A bankruptcy discharge means that you have completed your personal bankruptcy process and are no longer legally liable for any outstanding debt you included in the bankruptcy filing (with the exception of a few which I will describe soon). Upon receiving an absolute discharge from bankruptcy (we’ll get to that shortly), you are no longer responsible for any discharged debts.

The discharge in bankruptcy eliminates most of your debts, including unsecured debts such as credit card bills, medical bills, and payday loans. When you are discharged from bankruptcy, not the fact that you filed for bankruptcy, is what eliminates your debts. You need your discharge to get rid of your debts, which explains why it’s so important. That is what does bankruptcy discharged mean, really means.

What does bankruptcy discharged mean: Bankruptcy law can resolve tax debts

As well as the usual unsecured debts mentioned above, if you owe Canada Revenue Agency (CRA) money because you were not able to pay your whole personal income tax obligation when you filed your taxes, then a payment arrangement makes sense.

Collections officers from the CRA contact taxpayers regarding outstanding income tax debt arising from their tax filings and notices of assessment. They attempt to collect from delinquent taxpayers. When you say that you cannot pay the full amount at that time, they will offer you the option of a payment arrangement. The interviewer will ask you about your financial situation and may ask you to submit documents to support your income and expense claims.

They recommend a settlement plan after evaluating the information. Only if all attempts at collection have failed will legal action be taken. You must send the CRA postdated cheques to cover the agreed-upon monthly payment to participate in such a plan. Additional payments can be made if you have money to spare. The interest clock does not stop with a CRA payment plan. Be certain that all your cheques clear the bank as well. The entire payment plan can be cancelled if only one is returned NSF.

Should you enter into a payment plan? Yes. You should demonstrate to CRA that you want to work with them, and avoid tax debt collection activities that will disrupt your life. The most common enforcement activity involves freezing and taking money from your bank accounts, as well as garnishing your salary or wages if you’re employed. If you are a proprietor, they can notify your customers and claim your receivables. Furthermore, a federal judgment can be obtained without your knowledge to place a lien on your home.

You do not need to experience CRA’s more drastic collection methods. Be sure to pay your obligations on time. A tax garnishment, third-party assessment, or an asset lien is never pleasant. The consequences are severe and disruptive. In most cases, CRA only takes this step if you fail to comply with their efforts to enter into and maintain a CRA payment arrangement.

CRA tax debts can be discharged under bankruptcy law if no payment plan can be arranged. If bankruptcy is successfully discharged or a consumer proposal is fully completed, the income tax debt can be eliminated. We assume that CRA hasn’t already obtained a judgment against your interest in your home and registered it against it. Upon doing so, the CRA has successfully turned an unsecured debt into secured debt, and bankruptcy law no longer applies.

Several other things to keep in mind are:

A bankrupt who owes more than $200,000 in personal income taxes and whose personal income tax debt represents at least 75% of their total unsecured proven claims is considered a high-tax debtor. In this situation, you cannot be automatically discharged. It is unavoidable that the Trustee will object to your discharge and there will be a discharge hearing before the Bankruptcy Registrar in the Bankruptcy Courts. Additionally, the CRA will oppose your discharge and will make submissions at your hearing. I am certain you will receive a conditional discharge, at least with the condition that you pay a portion of your income tax debt to the Trustee for distribution among your creditors.
Unremitted employee source deductions owed by a proprietor or partner of an unincorporated business will not be helped by bankruptcy law. Generally, bankruptcy will eliminate HST obligations. For now, CRA ranks the debt as unsecured in a consumer proposal, but as CRA provides the accommodation, it is not a part of bankruptcy law. If the outstanding HST is extremely large, the CRA may argue that since you held the HST in trust for them, it still remains a claim even if you declare bankruptcy. Under Canadian bankruptcy law, they can do this, but I have not seen them do it yet.
Director liability for unremitted employee source deductions or HST is an unsecured claim against you for your personal liability as a Director. Bankruptcy and a properly worded Proposal will both eliminate that debt.
what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts never discharged in bankruptcy

In personal bankruptcy, there are certain types of debts that are not discharged. Section 178(1) of the BIA outlines the following debts that are nondischargeable debt:

Any type of fine, penalty, restitution order, or other order similar to a fine, penalty or restitution order, imposed by a court for an offence, or any kind of debt arising from a recognizance or bond;
Damages awarded by a court in a civil case for:
- bodily injury intentionally caused, or sexual assault, or
- wrongful death as a result of these acts;
the payment of spousal support or an alimentary pension;
any financial obligation or liability arising under a judgment establishing an association or regarding support, maintenance, or an agreement for maintenance and support of a spouse, former spouse, previous common-law partner, or child who is not living with the bankrupt;
a financial obligation or liability that results from fraud, embezzlement, misappropriation or defalcation in a fiduciary capacity or, in the Province of Quebec, while acting as a trustee or administrator;
apart from debts and responsibilities arising from equity claims, any debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation;
unless a creditor had notification or understanding of the bankruptcy and didn’t take reasonable action to prove a claim, the liability for the dividend that a creditor would have received on any provable claim not disclosed to the trustee; or
student loans if the bankruptcy occurred before the bankrupt stopped being a full- or part-time student or within seven years of the date the bankrupt stopped being a full- or part-time student.

***What does bankruptcy discharged mean:* *Absolute discharge vs. conditional discharge and so on and so forth***

In order to obtain a discharge, a bankrupt person must have fulfilled all of their bankruptcy duties. These personal bankruptcy duties include:

providing all books, records or documents to the Trustee that identify the assets and liabilities of the debtor;
prepare and submit to the Trustee within 5 days after filing for personal bankruptcy, unless the Office of the Superintendent of Bankruptcy Canada extends the time, a sworn statement of affairs detailing the person’s assets and liabilities, and for each of the bankrupt’s creditors, their respective names, addresses and the amount owing;
disclose to the Trustee complete details of all dispositions of property within 1 year before the date of the bankruptcy;
make a disclosure to the Trustee of all the details of property disposed of by gift or settlement without adequate valuable consideration within a 5 year time period before the date of bankruptcy;
if a creditors’ meeting is called, attending it;
making any required surplus income payments to the Trustee;
participating in two mandatory financial counselling sessions; and
offering whatever assistance is requested by the Trustee.

If the bankrupt fulfill all of their duties, then the Trustee will not have a reason to oppose the discharge. If no creditor opposes, then the bankrupt is entitled to an absolute discharge. As already stated, the discharge is what eliminates unsecured debts.

In addition to an absolute discharge, there are other types of discharge under bankruptcy law available to a bankrupt person upon having a discharge hearing:

conditional discharge;
suspended discharge; and
refused discharge.

To read more on the different kinds of discharges available to be applied to a bankrupt person, and for what does bankruptcy discharged mean, take a look at my August 2021 Brandon Blog “A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON“.

what does bankruptcy discharged mean

What does bankruptcy discharged mean: At long last, the Nova Scotia case

The Nova Scotia bankruptcy case deals with the discharge of the Trustee in a personal bankruptcy matter. Once the Trustee brings on the bankrupt’s application for discharge and a discharge Order is made by the Court, and the Trustee completes the rest of the administration of the bankruptcy estate, the Trustee is entitled to a discharge. If the bankrupt did not receive an absolute discharge and has not completed his or her duties, including complying with a conditional discharge order, eventually, the Trustee can still apply for its discharge. Upon the Trustee’s discharge two things occur:

The bankrupt goes into bankruptcy purgatory. No discharge occurs. The Trustee has fulfilled its obligation to present the bankrupt’s discharge request to the court and the court has issued an Order. Whenever the bankrupt wants to prove they have fulfilled all their obligations, obeyed the discharge order, and now deserve an absolute discharge, he or she will need to retain a bankruptcy lawyer and apply to the Bankruptcy Courts.

On the day the Trustee is discharged, the stay of proceedings that had protected the bankrupt from any enforcement action by creditors whose debts were owed at the date of bankruptcy no longer applies. As a result, creditors can now pursue the bankrupt person since the debts have not been eliminated and the stay of proceedings is no longer in place.

It is interesting to examine how far the Registrar in Bankruptcy directed the Trustee in this Nova Scotia bankruptcy case to ensure that all creditors understood that they still had the right to pursue the bankrupt.

The decision in Frost (Re), 2021 NSSC 296 can be boiled down to the following facts:

Mr. Frost went bankrupt.
He failed to fulfill his duties and moved to the UK permanently.
He didn’t inform the Trustee of his new address and telephone number.
His actions left his Trustee and other stakeholders to fend for themselves, explicitly telling the Trustee he wasn’t going to fulfill those duties and didn’t intend to do so.
A hearing was held for the bankrupt’s discharge and Mr. Frost was refused discharge.
The Court previously directed the Trustee to appear before it to be heard on the Trustee’s application for discharge.

The Court concluded that the Trustee completed the administration of the bankruptcy estate and gave the Trustee its discharge. However, the reason why the Registrar in Bankruptcy wanted the Trustee to attend such a hearing was so the Registrar could take things one step further. In the normal course, the Trustee sends out a notice to all those whose proof of claim was admitted of the results of the bankruptcy administration and of the Trustee’s discharge. However, the Registrar wanted to make sure that it was crystal clear to all creditors.

The Registrar wrote a cover letter for the Trustee and directed the Trustee to send it along with the normal statutory notice to creditors (or their debt collectors of record). Here is a copy of that letter:

what does bankruptcy discharged mean

What does bankruptcy discharged mean summary

I hope you found this what does bankruptcy discharged mean Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Brandon Blog Post

DECLARING BANKRUPTCY IN CANADA: NEVER WORRY WHAT TO DO AGAIN WITH THESE AWESOME TIPS

Post author By Brandon Smith
Post date January 11, 2021

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this declaring bankruptcy in Canada Brandon Blog, please scroll to the bottom and click play on the podcast.

***Declaring bankruptcy in Canada*: Introduction**

Declaring bankruptcy in Canada is a legal process through which you may be discharged from your financial obligations (with certain minor exceptions). Its purpose is to permit an honest but unfortunate debtor to obtain a discharge from many financial debts, based on affordable conditions.

The Office of the Superintendent of Bankruptcy (OSB) is charged with the administration of the Bankruptcy and Insolvency Act (Canada) (BIA), the Companies’ Creditors Arrangement Act (CCAA) and their respective rules. All documents associated with filings under either of those Acts can be found at the OSB’s internet site. The OSB likewise licenses and supervises the actions of licensed insolvency trustees (LITs ). LITs are accredited to:

administer the estates of bankrupts;
manage alternatives to bankruptcy such as consumer proposals and commercial proposals in order for debtors to get creditor protection and restructure in order to avoid bankruptcy; and
serve as a monitor under the CCAA.

When can you declare bankruptcy in Canada?

Any insolvent person in financial difficulty can declare bankruptcy in Canada any time through a bankruptcy assignment after they have seen a licensed insolvency trustee and made suitable arrangements for the Trustee to administer handle the bankruptcy administration. The bankruptcy trustee prepares the necessary documents for the debtor to sign for filing for bankruptcy.

The licensed trustee then files certain legal documents with the OSB. The OSB then issues its Certificate to evidence the bankruptcy of the person or company. The date and time indicated on the Certificate are when a voluntary bankruptcy starts.

If you are not able to get a LIT to accept your data, or if you cannot afford to work with a LIT in order to declare bankruptcy in Canada, the OSB’s Bankruptcy Assistance Program might have the ability to help. This is provided that you are not and have actually not just recently been, involved in commercial activities or you are not in jail.

What happens when you declare bankruptcy in Canada?

There are three different avenues that can have someone declare bankruptcy in Canada:

Voluntary assignment – A financially troubled insolvent person or company can make a voluntary assignment in bankruptcy. This is where they voluntarily make a general assignment in bankruptcy for the general benefit of all of their creditors.
Bankruptcy application – A creditor who is owed at least $1,000 on an unsecured basis submits an application to the court for obtaining a bankruptcy order against the debtor and the debtor’s property.
Deemed bankruptcy – When a debtor who has made the choice to start an insolvency process under the BIA to gain debt relief through trying to restructure their unsecured debt, has fallen short to satisfy the requirements for:
1. submitting a Division I proposal;
2. gaining the necessary votes in favour of the proposal from the unsecured creditors; or
3. obtaining court approval for the proposal.

Under a deemed bankruptcy, the moment the debtor fails in one of these ways, the BIA says that the debtor is deemed to have made an assignment in bankruptcy.

The bankrupt is able to earn a living after filing for bankruptcy. For this objective, the bankrupt can work or run a company, after the bankruptcy event. However, an undischarged bankrupt cannot be a director of a company. Also, upon the onset of the bankruptcy, the debtor must turn over to the licensed insolvency trustee, any shares of companies owned by the bankrupt.

The Trustee will send a notice to your creditors informing them of the bankruptcy. If there needs to be a meeting of creditors, the Trustee will hold it. The Trustee will also provide the bankrupt person with two credit counselling/financial counselling sessions with an individual who is an OSB qualified credit counsellor from the Trustee’s office, as part of the overall bankruptcy administration.

As you can see, not every way of declaring bankruptcy in Canada is totally voluntary.

Declaring bankruptcy in Canada: What assets do you lose in bankruptcy?

One of the most important tasks a Trustee has in the entire personal bankruptcy process or corporate bankruptcy process after the debtor chose declaring bankruptcy in Canada is to:

take an inventory of the debtor’s assets;
make sure they are physically secure and insured;
formulate a plan to sell the assets for the most amount possible under the circumstances;
review the financial affairs of the bankrupt, including the household income and financial situation of the bankrupt in a personal bankruptcy filing, and prepare a report to the creditors; and
then pay a dividend to the creditors.

There are however certain exemptions allowed for people. Few are based on federal law. Most are based on provincial law. So exempt assets may differ from province to province. In Ontario, assets that are exempt, and therefore not subject to seizure by a Trustee, are:

The equity in your home of no greater than $10,000.
A vehicle with an equity value of no more than $6,000.
Garments and medical/dental aids.
Household furnishings up to a worth of $13,100.
Tools of the trade with a value of no greater than $11,300.
Pension plans, RRIF, RRSP (other than any kind of RRSP payments made within 12 months of the date of bankruptcy).
Farmers– no greater than $29,100 for animals and also tools & equipment.

Even though someone has decided that filing bankruptcy is the route they must go, there are certain assets they will not have to give up.

Declaring bankruptcy in Canada: Does Bankruptcy clear tax debt in Canada?

The short answer is yes. Income taxes payable calculated on your tax return but not paid is a type of debt that is released when a person gets their bankruptcy discharge. However, you should know that there is a wrinkle for anyone who owes $200,000 or more in income tax debt and if that debt to Canada Revenue Agency (CRA) equals 75% or more of the total unsecured proven claims in the bankruptcy. If that is the case, then that affects the bankrupt’s ability to get a discharge after declaring bankruptcy in Canada.

If it is the person’s first time filing bankruptcy and they do not have to make surplus income payments, then they are still entitled to a discharge after 9 months from the date of bankruptcy. If it is their first time but they do have surplus income payments, then they cannot apply for a discharge until after 21 months.

If this is the person’s second time filing bankruptcy, if they do not have any surplus income payments, then rather than being able to apply for a discharge after 9 months, they must wait 24 months. If they do have surplus income payments, then it is extended to 36 months.

If someone has been bankrupt more than one time before and has at least $200,000 of income tax debt representing 75% or more of the total proven unsecured claims, then regardless of their surplus income payment situation, they must wait 36 months.

Such a bankrupt is called a high tax debtor. A high tax debtor is not entitled to have the Trustee issue an automatic bankruptcy discharge when the time has expired. Rather, there must be a court hearing for the bankrupt’s application for discharge.

CRA will oppose an absolute discharge at least on the basis of the fact that they are a high tax debtor. The Trustee does not have to oppose the discharge on this basis. However, if the bankrupt has failed to live up to any of their duties, including making the required surplus income payment, the Trustee will oppose.

The court will make a conditional order of discharge. At least one of the conditions will be to pay a certain amount to the Trustee for the benefit of the unsecured creditors. The amount depends on the unique circumstances of that bankrupt, but you can assume that the amount will be about 25% of the income tax owing.

So anyone how has income tax debt and is contemplating declaring bankruptcy in Canada, needs to look at their total liabilities carefully. If at all possible, you do not want to be a high tax debtor when declaring bankruptcy in Canada.

***Declaring bankruptcy in Canada*: What debt does bankruptcy not cover?**

Some people think that in a personal bankruptcy filing, the bankruptcy filing itself is what eliminates the person’s debts. That is wrong. At the moment of declaring bankruptcy in Canada, nothing actually happens to your debts. It is the person’s discharge from bankruptcy that “discharges” the person from their debts.

Yet, there is still a category of debts that are not covered and not discharged when a personal bankruptcy discharge occurs. The debts that are not covered or discharged, are outlined in section 178(1) of the BIA. These such debts are:

any type of penalty, fine, restitution order or other order comparable in nature to a penalty, fine or restitution order, enforced by a court in regard of an offence, or any kind of debt developing out of a recognizance or bond;
any damages award by a court in civil process for:

( i) physical injury intentionally caused, or sexual assault, or

( ii) wrongful death resulting therefrom;
any type of financial debt or responsibility for spousal support or alimentary pension;
any kind of financial obligation or liability developing under a judgment establishing an association or about support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, previous common-law companion or child not living with the bankrupt;
any type of financial obligation or liability occurring out of fraudulence, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;
any financial debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation, apart from a debt or responsibility that arises from an equity claim;
liability for the dividend that a creditor would have been qualified to receive on any kind of provable claim not disclosed to the trustee unless the creditor had notification or understanding of the bankruptcy and fell short to take reasonable activity to confirm the claim; or
student loans if the bankruptcy filing happened before the person stopped being a full or part-time student or within seven years after the day on which the bankrupt stopped to be a complete- or part-time student

Declaring bankruptcy in Canada summary

I hope you enjoyed this declaring bankruptcy in Canada Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore. The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of this seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags alternatives to bankruptcy, avoid bankruptcy, Bankruptcy and Insolvency Act, commercial proposals, Companies’ Creditors Arrangement Act, consumer proposals, Corporate Bankruptcy, credit counselling, credit counsellor, declaring bankruptcy in canada, filing for bankruptcy, financial counselling, financial difficulty, Ira Smith Trustee, licensed insolvency trustee, Office of the Superintendent of Bankruptcy, personal bankruptcy, undischarged bankrupt

Brandon Blog Post

BANKRUPTCY DISCHARGE CERTIFICATE CANADA: THE COMPLETE HAPPY STORY OF YOUR BANKRUPTCY DISCHARGE

Post author By Brandon Smith
Post date October 5, 2020

If you would like to listen to the audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Bankruptcy discharge certificate Canada introduction

What is a bankruptcy discharge? When a bankrupt is discharged from bankruptcy, he/she gets a bankruptcy discharge certificate Canada. The individual is launched from the legal responsibility to repay financial debts that existed on the day that the bankruptcy was filed. This is true other than for certain financial debts that are not discharged when the insolvent receives his/her discharge which I will go over listed below.

Usually, only personal bankrupts are discharged from bankruptcy. Companies that are bankrupt remain that way. The only method a company can exit from bankruptcy is if the claims of creditors are paid off with interest. This never occurs. If it could, the company would have submitted a restructuring strategy under either the Bankruptcy and Insolvency Act (Canada) (BIA) or the Companies’ Creditors Arrangement Act (Canada) (CCAA).

Therefore, the balance of this Brandon’s blog will talk about an individual person who receives a bankruptcy discharge certificate Canada.

**Who can issue a bankruptcy discharge certificate Canada?**

Only a Canadian licensed insolvency trustee (Trustee) can carry out the bankruptcy administration and then provide the bankruptcy discharge certificate Canada. If neither the Trustee nor a creditor opposed the discharge and the Trustee issued the certificate, that means the bankrupt individual satisfied all of their obligations without the need for a court hearing.

If either the Trustee or a creditor opposes the discharge of the bankrupt individual, by issuing a notice of opposition to discharge, that indicates:

In the case of a Trustee opposition, that means the bankrupt did not fulfill all of their duties as an undischarged bankrupt when the time came for the Trustee to make that determination if the bankrupt is entitled to a discharge.
One or more creditors believe there is information that needs to be evaluated by the court to determine what kind of discharge from bankruptcy the person should get if any.

The court would then determine what type of bankruptcy discharge the bankrupt should receive:

absolute – entitled to an immediate discharge;
conditional – can obtain a discharge after fulfilling one or more conditions;
suspended – the bankrupt’s discharge will occur at a later date and is combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
refused – the bankrupt’s discharge is such that the court refuses to hear the application; or
“no order” – the Trustee advises the court that notwithstanding the time period has elapsed, the bankrupt has not properly fulfilled all of his or her duties and the bankrupt has failed to respond to the Trustee’s requests. In this case, once the “no order” order is issued, the Trustee is at liberty to seek its discharge (more on this below).

Once the bankrupt person has fulfilled the conditions set by the court and/or the suspension period has ended, the Trustee can then issue the bankruptcy discharge certificate Canada.

Bankruptcy discharge certificate Canada: How long will I be bankrupt?

For a 1st time bankrupt person, many will certainly qualify for an automatic discharge after 9 months.

If you have been bankrupt before a second bankruptcy discharge will not be able to get a discharge in 9 months. Your bankruptcy will be prolonged. A 2nd bankruptcy lasts for a minimum of 24 months. If you have surplus income, a second-time bankrupt will not have the ability to get a bankruptcy discharge certificate Canada for 36 months.

For a 3rd time bankrupt, the timeline is the same as the 2nd time bankrupt. Nonetheless, it is more probable that there will be resistance to that bankrupt’s discharge by the Trustee or one or more creditors. The court can prolong the time in whichever means it believes is most suitable.

Bankruptcy discharge certificate Canada: Who tells my creditors that I am discharged from bankruptcy

The Trustee will notify the Office of the Superintendent of Bankruptcy (OSB) that the individual has been released from bankruptcy. The Trustee advises the OSB by filing a copy of the bankruptcy discharge certificate Canada. The Trustee advised the creditors that the insolvent is qualified to a discharge unless an opposition is filed in the bankruptcy notification sent out to all creditors.

The Canadian credit bureaus, Equifax Canada and TransUnion Canada are notified because they pay the OSB to get Canadian bankruptcy information. The credit bureaus then update all credit files with the corresponding bankruptcy info, including discharges.

Bankruptcy discharge certificate Canada: What debts are not forgiven and will survive my bankruptcy?

What debts cannot be discharged? A bankruptcy discharge certificate Canada provides the discharge of all unsecured debts, except for:

matrimonial or children support payments;
fines or penalties mandated by the court;
claims arising from fraud or fraudulent breach of trust;
student loan debt if less than 7 years have actually passed since the bankrupt stopped being a part-time or full-time student.

These kinds of debts survive bankruptcy and are not released. The person will need to continue paying those financial obligations according to their terms. All other debts are discharged and do not have to be paid.

Also, any debts that are properly secured by one of your assets, such as a house mortgage or car financing, are not released as a result of your bankruptcy or your bankruptcy discharge certificate Canada.

Bankruptcy discharge certificate Canada: What if my creditors still contact me and try to get me to pay them?

If the creditors are consistently calling you and demanding settlement, supply them with a duplicate of your bankruptcy discharge certificate Canada. If the creditor states they were not aware of your bankruptcy, also offer them a duplicate of your sworn statement of affairs revealing them listed as a creditor.

If they are listed, then the Trustee sent them a notice of bankruptcy including a form 31 proof of claim to complete and return to the Trustee.

Bankruptcy discharge certificate Canada: What does trustee discharge mean?

After the Trustee has fully completed the administration of the bankruptcy estate, the Trustee is entitled to its discharge. The Trustee must prove to the OSB that it has completed the administration. This includes providing the OSB with a copy of the Final Statement of Receipts and Disbursements to get the Superintendent’s comment letter.

Then the Trustee must provide the final statement, the comment letter, and other documents to the court to prove that the administration is complete, get the final statement approved, and taxed. When that happens, the court issues the Trustee’s discharge order. The Trustee then files that order with the OSB and closes its file.

It is possible for the Trustee to receive its discharge while the bankrupt remains undischarged. This happens either when the result of the bankrupt’s discharge hearing results in a “no order” (see definition above) or sufficient time has elapsed showing the bankrupt is not going to fulfill the conditions to get a discharge. In this case, the Trustee is at liberty to get its discharge.

Once the Trustee gets its discharge, an undischarged bankrupt loses the protection of the automatic stay of proceedings that were invoked upon the bankruptcy occurring. Once this protection is lost, the creditors are at liberty to once again pursue the bankrupt person for collection on the debts owing.

Bankruptcy discharge certificate Canada: what if I fail to include one of my creditors in my bankruptcy?

If I failed to remember to include one of my creditors in my bankruptcy do I need to pay them? If your Trustee hasn’t been discharged yet, simply tell the creditor to call your Trustee to participate in your bankruptcy.

If your Trustee has actually been discharged then the creditor is qualified to be paid the same returns (% of the debt) your other creditors obtained from your bankruptcy. You will need to pay this amount.

If you intentionally omitted the lender from your bankruptcy (the obligation is on the lender to verify this) after that the lender can ask the court to enable their financial obligation to survive, and if successful, you will need to pay the full amount.

Bankruptcy discharge certificate Canada: What are the benefits of keeping my bankruptcy discharge papers?

As reviewed above, after you have actually successfully finished every one of your bankruptcy responsibilities and any kind of conditions of discharge, you will receive your discharge from bankruptcy. When you get your bankruptcy discharge your Trustee will give you a bankruptcy discharge certificate Canada.

That paper is proof that you have actually formally been launched from your financial debts that were included in your bankruptcy. As already stated, particular financial obligations can’t be discharged in bankruptcy. Also, any type of debts that you sustain after the day of your bankruptcy are your responsibility as well as are not eliminated by your bankruptcy discharge.

Bankruptcy discharge certificate Canada: How long does my credit score take to recover from bankruptcy?

Your bankruptcy will stay on your credit report for 6 years from the date your bankruptcy discharge certificate Canada is issued. If you have actually been bankrupt more than once, then it might be reported for approximately 14 years from the date of your discharge.

Having actually removed your financial obligation problems by getting your bankruptcy discharge certificate Canada, most individuals see they now have the ability to construct a more powerful financial future. Unless you urgently need to purchase a house for the very first time or buy an auto, you need not also bother with getting approved credit to take on debt right away. Many find they have the ability to live without credit considering that they have a more powerful cash flow than prior to bankruptcy. They are now able to start saving.

While you remain in bankruptcy, you are learning to live your life without credit. You are living essentially on a cash basis. You are not spending more than you make. Your Trustee is advising you to do so on an after-tax basis so that you will not have a nasty surprise when tax time comes.

Bankruptcy discharge certificate Canada: 2 simple steps to improve your credit score after your discharge from bankruptcy

This remains for the first 2 or three years after you have actually completed the bankruptcy process. Throughout this time access to credit will be restricted.

We encourage all our bankrupts, once discharged, to immediately start rebuilding their credit. You can slowly start rebuilding your credit through 2 simple steps:

Apply for a secured credit card. This kind of credit card works on the basis that you deposit money against the card with the secured credit card issuer. You then use the credit card like any other. If you pay it off each month, this gets reported to the credit bureaus. This proper use of this credit helps to improve your credit score. If you do not pay the card off when due, the issuer takes the money from your deposit to pay it off.
Take out a small RRSP or TFSA loan. The funds are deposited into your RRSP or TFSA. Make monthly payments against the loan so that the principal and interest are all fully repaid within 1 year. Start small. The important thing is that you do what your cash flow allows. The fact that you are current on your loan is reported monthly to the credit bureaus. This helps to improve your credit score.

Keep in mind that if you do not stay current in paying off your secured credit card balance or your loan, this will further hurt your credit score. The idea is that you have saved this money each month so that you are able to make the monthly payment.

Bankruptcy discharge certificate Canada summary

To declare personal bankruptcy is a major life event. However, it is a necessary thing to rid yourself of crippling debt. Most people who declare bankruptcy have been faced with a major life event. The main examples are illness, pay cuts, job loss, or divorce. It is not your fault. I hope this bankruptcy discharge certificate Canada Brandon’s Blog has given you helpful information.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges.
It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Bankruptcy, bankruptcy and insolvency act canada, bankruptcy discharge, bankruptcy discharge certificate, bankruptcy discharge certificate canada, Companies’ Creditors Arrangement Act, discharged from bankruptcy, form 31 proof of claim, how long does my credit score take to recover from bankruptcy, licensed insolvency trustee, Office of the Superintendent of Bankruptcy, OSB, trustee, undischarged bankrupt, what debts cannot be discharged, what if I forgot to include one of my creditors in my bankruptcy

Brandon Blog Post

UNDISCHARGED BANKRUPT: WHAT YOU NEED TO KNOW ABOUT BANKRUPTCY DISCHARGE

Post author By Brandon Smith
Post date December 2, 2019

If you would prefer to hear an audio version of this undischarged bankrupt Brandon’s Blog, please scroll down to the bottom and click on the podcast

Undischarged bankrupt introduction

I recently read a Manitoba court decision issued in late October about the position taken by a judgment creditor in an undischarged bankrupt’s hearing. The creditor holding the judgment realized that the bankrupt’s discharge would discharge that debt. So, they tried to convince the court that their debt fit into one of the limited classes of debt that is not discharged by the bankrupt discharge.

That court case reminded me that is not so unusual. Many times a creditor who holds a judgment against the undischarged bankrupt tries to bootstrap their position. One of the leading cases cited by the Manitoba court is a 2018 decision from the Court of Appeal for Ontario.

The purpose of this Brandon’s Blog is to describe the bankruptcy discharge process, the position taken by the judgment creditor and what the Court has to say about that.

How bankruptcies work in Canada

The Canadian bankruptcy legislation is open for an insolvent and not viable company, or the insolvent, honest but unfortunate person can obtain relief. Subject to trust claimants’ rights and secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee). In return, the bankrupt person can have all of their debts discharged, subject to certain exceptions.

The bankruptcy discharge is amongst the primary advantages of relief under the Bankruptcy and Insolvency Act (Canada) (BIA). The discharge is vital to the bankruptcy procedure. Debtors, after bankruptcy, can wipe the slate tidy as well as begin over. This is a central concept under the BIA law. That is the essence of the bankruptcy discharge meaning.

A bankruptcy discharge is when the bankrupt is released under Canadian bankruptcy law from his or her financial debts as part of the bankruptcy discharge procedure. Some people think that it is the declaring for bankruptcy that releases the insolvent from obligation. This is not the case, it is the discharge that releases a bankrupt from debt.

A bankruptcy discharge provides the discharge of all unsecured debts, except for:

support payments to a previous partner or children;
penalties or fines enforced by the Court;
financial debts arising from fraud or fraudulent breach of trust;
student loans if less than seven years have actually passed since the bankrupt stopped being a part-time or full-time student.

Can an undischarged bankrupt leave the country?

If you are an undischarged bankrupt, you can travel. There are no restrictions on you leaving or returning to Canada if you are travelling for work or on vacation. Just make sure that your travel plans do not interfere with your legal obligation and your duties in your personal bankruptcy case, including:

attending a meeting of creditors (if one is required);
showing up for your mandatory counselling sessions;
submitting your monthly income reports to the Trustee;
remitting any surplus income payments you are required to make;
providing your financial information to the Trustee so that your pre and post-bankruptcy income tax returns can be filed;
being able to respond to any inquiries from your Trustee; and
attending in Court for your bankruptcy discharge hearing in an opposed discharge application.
undischarged bankrupt

Undischarged bankrupt: What is an undischarged debt?

When a bankrupt is discharged from bankruptcy, the individual is released from the legal obligation to repay their different types of debt that is unsecured and existed on the day that the bankruptcy was filed, except for the following types of original debt:

Alimony or support payments to a previous spouse or for the children;
Fines or monetary penalties imposed by the Court;
Financial obligations arising from fraud, misappropriation or defalcation; or
Student loans if less than seven years have actually passed since the person stopped being a full or part-time student.

So other than for the small category of debts that are not discharged, once the bankrupt is discharged from their bankruptcy, they do not have to make payments on debts that existed at the date of bankruptcy.

Undischarged bankrupt: Trustee opposed the discharge

A first-time bankrupt, who does not need to pay surplus income, is entitled to an automatic discharge after 9 months. This assumes that they have lived up to all of their obligations as an undischarged bankrupt and fully cooperated with the LIT. If this first-time bankrupt is subject to surplus income, then they must pay it for 21 months before they are entitled to a discharge. Longer timelines apply for a second or more time bankrupt.

If the Trustee has evidence that the bankrupt has not been forthright and fully cooperative, or has actually committed one or more bankruptcy offences, then the Trustee has a duty to oppose the bankrupt’s discharge.

Notice of opposition to discharge

Similarly, any unsecured creditor can oppose the bankrupt’s discharge. The grounds of opposition would likewise be evidence of lack of honesty or that one or more offences have been committed. The process for a creditor opposing the discharge of the bankrupt is by filing a notice of opposition to discharge.

In either a Trustee or creditor opposed discharge, the bankrupt’s application for discharge must be heard in Bankruptcy Court. For more on the discharge process, you can read about it in one of my previous Brandon’s Blogs.

The judgement creditor

Often, a judgment creditor thinks they have a higher position in the pecking order than other unsecured creditors because they have a judgment. They may have even registered the judgement against the title to real estate owned wholly or partially by the defendant. Unfortunately, upon the bankruptcy of a person, all enforcement proceedings on a judgment must stop.

The judgment for a debt, in bankruptcy, is merely a piece of paper that proves you have unsecured debt. Nothing else. Anyone who understands the litigation process knows that there is a big difference between getting a judgment and collecting on it.

Judgement creditors may take a keener interest in the bankruptcy proceedings, including opposing the discharge from bankruptcy. The reasons for this are twofold:

The judgment creditor has already spent time in court, money on legal fees and still has not collected their debt, so they are more invested in this person’s bankruptcy than someone who did not go the court route.
They are hoping that they can somehow fit their money judgment only into a position where they can claim that the debt is one not released by an order of discharge.

It is this second reason that this Manitoba court case, and the Court of Appeal for Ontario decision relied upon by the Manitoba court, revolves around.

Undischarged bankrupt: Can more evidence be introduced by a judgment creditor at the discharge hearing?

Most judgements that I see in a debt settlement program under the BIA or bankruptcy tend to fall into the same category. A service or good was supplied and not paid for. A contract was entered into and was breached. That is just normal business. There is no fraud, embezzlement, misappropriation, defalcation, fraudulent misrepresentation or fraudulent breach of trust.

It is simply someone owes money and didn’t pay. The plaintiff entered all of the evidence they thought was important, the defendant either defended or allowed for default judgment to be obtained because they did not defend. Regardless, the court ordered the defendant to pay the money.

The judgement creditor was unpaid and then one day received the Trustee’s notice of bankruptcy in the mail. The judgment creditor was incensed. The creditor took an active interest in the bankruptcy proceedings and maybe even served as a bankruptcy inspector. The bankrupt person is now entitled to apply for his or her discharge from bankruptcy.

The judgment creditor is unhappy because they now know that they are receiving either nothing or a small dividend from the Trustee compared to the debt to be written off. So they now oppose the bankrupt’s discharge and try to get new evidence submitted to the Bankruptcy Court to somehow prove that their judgment is a claim that is not extinguished by the person’s bankruptcy discharge.

This is what the Court of Appeal decision was all about. Can you introduce new evidence at a bankruptcy discharge hearing?

The case I am referring to, Lawyers’ Professional Indemnity Company v. Rodriguez, 2018 ONCA 171 (CanLII). The appeals court said that the answer is no. You can read the entire decision here if you like. The Court of Appeal essentially said that the Court is allowed to look at:

the judgment
the proof that would certainly have been entered as evidence at the time in the pleadings
as well as that evidence which has been led in the bankruptcy discharge hearing

to analyze whether the judgment debt falls within an exclusion to the general discharge rules. The Court also said that in a bankruptcy discharge hearing, the application judge was limited to looking at the judgment, the pleadings, the statement of claim and any statement of defence, to determine whether the judgment fell into the class of those debts not released by a discharge from bankruptcy. New evidence is not allowed.

This finding has been followed and further clarified. It is now apparent that the only purpose of a bankrupt’s application for discharge is to consider the bankrupt’s application. It is not a forum to attempt to advance new or amended claims.

Undischarged bankrupt summary

I hope you enjoyed this Brandon’s Blog on the undischarged bankrupt. Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

undischarged bankrupt

Brandon Blog Post

OSAP BANKRUPTCY IS NOT AS SIMPLE AS YOU MIGHT THINK

Post author By Brandon Smith
Post date May 29, 2019

OSAP bankruptcy Introduction

I have written before on the issue of the difficulty in discharging student loans through bankruptcy. Bankruptcy will certainly not release your student loans debt until you’ve been out of full or part-time studies for 7 years. It is also question and answer #8 in our TOP 20 PERSONAL BANKRUPTCY FAQS found on our main website. In Brandon’s Blog, I want to drill down into the issue of an OSAP bankruptcy.

What is OSAP?

The Ontario Student Assistance Program (OSAP) is a financial assistance program that can assist students in spending for college or university.

OSAP provides money via:

Grant: cash you do not need to repay
Loan: a loan you are required to pay off when you’re done college or university

OSAP can assist your spending for:

tuition
books and supplies/equipment
student fees billed by an institution
living expenditures
childcare

Amongst the various categories of people who are not eligible for OSAP, one is those people who have filed for either personal bankruptcy or a consumer proposal. As you might imagine, the rules surrounding OSAP bankruptcy are not simple. Let’s do some drilling down now!

Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal

If the student has been discharged from bankruptcy or fully completed a consumer proposal, she or he does not require to offer any type of supporting paperwork in order for their OSAP application to be reviewed.

If the student is an undischarged bankrupt or has not completed the consumer proposal, the student must supply a letter from their licensed insolvency trustee (formerly called a bankruptcy trustee) or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

Discharged and the student is not presently enrolled in studies

If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the Bankruptcy and Insolvency Act (Canada) (BIA) no longer applies to the student loans.

In this situation, the student needs to supply:

evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order

Discharged and continuing a program of study

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the BIA no longer applies to the student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program they were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply:

evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Undischarged bankrupt or has not yet fully completed the consumer proposal

If the student is an undischarged bankrupt or has not successfully completed a consumer proposal, the processing of the student’s OSAP application will not be completed until the student gives evidence that they have no amount owing on any student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program the were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply a letter from their licensed insolvency trustee or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

The student will also need to supply a:

letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Summary

I hope you now understand that the whole area of OSAP bankruptcy and student loans in either a bankruptcy or consumer proposal is not as simple as you might have originally thought. This is especially the case if the student is continuing his or her studies.

Do you have too much debt? Are you in financial distress? Do you not have adequate funds to pay your financial obligations as they come due?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only professionals accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags bankrupt, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, Consumer Proposal, consumer proposal administrator, date of bankruptcy, discharged from bankruptcy, filing date, Ira Smith Trustee, licensed insolvency trustee, national student loans service centre, osap, osap bankruptcy, student loan, student loan debt, student loans, student loans debt, undischarged bankrupt

Brandon Blog Post

DEBT RELIEF IN CANADA: BANKRUPTCY COURT SALUTES CANADIAN MILITARY VETERAN

Post author By Brandon Smith
Post date September 12, 2018

Debt relief in Canada: Introduction

I recently read a decision of the Bankruptcy Registrar of the Supreme Court of Nova Scotia in Bankruptcy and Insolvency that really inspired me. It got me thinking about the sacrifices our men and women in the military make for all Canadians. This particular Court decision, also made me think of sometimes they need our help for debt relief in Canada.

Debt relief in Canada: The case

The case I refer to is Durdle (re), 2018 NSSC 206, released August 31, 2018. The first two paragraphs of the Registrar’s decision, I found especially poignant:

“[1] This Court routinely considers situations in which the Bankrupt is indebted to the people of Canada, through tax or other liabilities to the State. As a matter of general policy, these obligations have a higher moral and sometimes legal priority than to private creditors as they are borne by all of us, as citizens and fellows of Society; and because the public generally must bear the share not paid by someone else. The collective public is an involuntary creditor in the result.

[2] What, then, is the situation when that is reversed – when it is the people of Canada who are indebted to the individual? Should compensation paid out as a consequence be considered divisible among creditors in an insolvency?”

Debt relief in Canada: The facts

Master Corporal Durdle was a career soldier. He spent 24 years in the military, retiring at the age of 45 years old. Master Corporal is now 49 years old and suffers from military service induced post-traumatic stress disorder (PTSD). He remains under professional care. He is in need of debt relief.

On November 13, 2013, Master Corporal Durdle filed an assignment in bankruptcy. This was his second bankruptcy and therefore, he was not entitled to an automatic discharge from bankruptcy. The purpose of the Court hearing was for the Court to consider what form of bankruptcy discharge he should be entitled to. In this second bankruptcy, there were minimal non-exempt assets and unsecured creditors totaling $73,476.76.

In 2014 while an undischarged bankrupt, Master Corporal Durdle received taxable income, including:

$16,778 from a wage loss replacement plan;
A rehiring allowance of $28,107.04, including $19,675 in severance pay;
Pension income of $23,594.10;
Disability income of $49,289; and
$3,624 in employment income.

The decision the Court had to make was, as the guidelines existed in 2014, how much if any of this 2014 taxable income should be considered “surplus income”? ira smith bankruptcy trustee vaughan

Debt relief in Canada: The Court’s thinking

The Registrar made a point of saying:

“…I wish to be clear that nothing should be taken as putting military debtors on a different footing than a civilian. The rule of law, including that of civil contract, is one of the core values we hold as Canadians, and which is protected by our men and women in uniform. What is, however, on a different footing is the debt we owe those men And women when they are injured or ill in the discharge of those Duties.”

Debt relief in Canada: The Registrar’s analysis

The Registrar went through a very thoughtful analysis of the law. He considered it in connection with the various types of 2014 taxable income:

Wage loss replacement plan – Wrongful termination awards would normally be included in total income, as would pay in lieu of notice. The Registrar, however, went on to comment that in this case, the wage loss replacement plan was not termination pay or pay in lieu of notice but rather, pay because Master Corporal Durdle’s PTSD prevented him to continue serving. The Registrar concluded that this amount should not be considered as income in accordance with Section 68 of the Bankruptcy and Insolvency Act (BIA). Therefore, the Registrar also concluded that this amount should not be included in the calculation of surplus income.

Rehiring allowance – The Registrar applied the same logic for this payment. He decided that it should not be included in the calculation of surplus income. He decided that this payment was a result of Master Corporal Durdle’s PTSD preventing him from continuing to serve in the military.

Pension income – The Registrar could not determine whether this income was solely a benefit due to Master Corporal Durdle’s PTSD or not. However, it did factor into the Registrar’s ruling.

Disability income – The Registrar considered this income in light of previous Court decisions involving lump sum awards. This included under a Workers’ Compensation Plan. The Registrar went on to review the actual Federal statute under which the payment was made to him, the Veterans Well-being Act (S.C. 2005, c. 21). The Registrar concluded that this amount would not be included in the calculation of surplus income.

Employment income – The Registrar concluded that this amount is included in the surplus income calculation.

Debt relief in Canada: The Court’s decision

The Registrar concluded that if he includes the pension income ($23,594.10) and of course the employment income ($3,624) (less statutory deductions), Accordingly, Master Corporal Durdle’s income falls under the Superintendent of Bankruptcy threshold for 2014. Accordingly, Master Corporal Durdle had no surplus income to pay when considering Section 68 of the BIA.

Since this was Master Corporal Durdle’s second bankruptcy, he was not entitled to an absolute discharge. Therefore, the Registrar did not impose any conditions on his discharge, but rather, suspended his discharge for one day.

Debt relief in Canada: Sometimes understanding and kindness is required

The Registrar was obviously moved by Master Corporal Durdle’s service to Canada. He also considered his current plight brought on by service-related PTSD. The Registrar followed the law and also showed his understanding and kindness of this sad situation.

If you have financial difficulties, whether brought on by a medical cause or for any other reason, you need to seek professional advice from a Firm that will show you the understanding and kindness you deserve. The Ira Smith Trustee Team has seen many cases of personal and corporate financial distress. We understand your pain and we know how to alleviate it; with understanding and kindness.

Our strategy for every single business and person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get your debt settlement and back on the road to leading a healthy and stress-free life. Contact the Ira Smith Team today.

Tags automatic discharge, Bankruptcy and Insolvency Act, Bankruptcy and Insolvency Act (BIA), bankruptcy discharge, BIA, debt relief, debt relief canada, debt relief in canada, Durdle, Ira Smith Trustee, PTSD, Raffi A. Balmanoukian, registrar, second bankruptcy, Supreme Court, surplus income, suspended discharge, undischarged bankrupt

Brandon Blog Post

PONZI SCHEME CRIMINALS: CANADIAN PONZI SCHEME GUY WHO RUINED LIVES SENTENCED TO 7 YEARS FOR MASSIVE PONZI SCHEME

Post author By Brandon Smith
Post date May 2, 2018

Ponzi scheme criminals: Introduction

We now have a Canadian to add to the long list of Ponzi scheme criminals. A Ponzi scheme is a fraud perpetrated on unsuspecting parties in which belief in the success of a non-existent enterprise through the payment of quick returns to the first investors from money invested by later investors.

Ponzi scheme criminals: What is a Ponzi scheme?

The name comes from the swindling ways of an Italian born con man in the late 1890’s and early 1900’s – Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi – known in North America as Charles Ponzi. The most famous of the modern-day Ponzi scheme criminals is Bernard (Bernie) Madoff, who is serving 150 years in prison for his multi-billion dollar Ponzi scheme.

Ponzi scheme criminals: Canadian Wade Robert Closson, Ponzi scheme criminal

Canadian Wade Robert Closson, a 48-year-old Sturgeon County, Alberta resident was recently sentenced to seven years in jail for executing a Ponzi scheme. He was originally charged in over 80 counts of fraud. Mr. Closson plead guilty to 53 counts. Most of the fraudulent activities encompassed more than one victim, typically a husband and wife pair. Several of them were present in Court and read their victim impact statements. Others were read on behalf of the victims.

Ponzi scheme criminals: His swindle has caused financial devastation

Many of the victims were discussing feelings of shame. They have experienced overall financial devastation. Some are now still working at the ages of 83, not being able to retire. As a result of the fraud perpetrated upon them by Mr. Closson, they cannot afford to take a vacation or go out for a dinner.

Ponzi scheme criminals: With friends like Mr. Closson……….

Mr. Closson was actually friends and even related to many of the victims. Most of them are talking about the loss of trust in their friend, in humanity and their ability now to relate to other human beings.

He preyed on his friends and relatives, who recruited from their social circles to invest with Closson. A number who lost money in the scam lost more than $100,000 with one suffering a loss of over $600,000. This included cash from a credit line and their RRSP. Closson took $80,000 of that amount out of the couple’s accounts without their authorization.

Ponzi scheme criminals: Essentially, it was a mortgage scam

The overall size of the fraud itself was $11 million dollars that ran through the Ponzi scheme. The Crown was able to prove losses of about $6 million dollars. That is what was in the agreed statement of facts.

The Court heard how Mr. Closson ran the Ponzi between 2006 and 2013. He operated two firms, Optam Holdings Inc. (Optam) and Infinivest Mortgage Investment Corporation (Infinivest), which both entered into bankruptcy in 2013. Closson would take the cash invested in Infinivest to pay off the investors in Optam.

When Optam applied for bankruptcy it detailed about $10 million in liabilities spread out among 69 creditors. The biggest one was Infinivest, which Optam owed $4 million.

ponzi scheme criminals

Ponzi scheme criminals: He recruited friends and family to be on his sales team

Closson made use of the cash to pay himself around $1.185 million throughout the period of the fraud. He used an unspecified amount of money for at least one vehicle, credit cards and golf club. Mortgage payments for his mother-in-law and father-in-law too.

He incentivized people to bring in others into his scheme by paying a commission to his buddies and family members. He invested in various other companies, including a financial investment in a firm that operated a lumber mill in Nicaragua. This investment did not work out well either.

Ponzi scheme criminals: The sentencing

In Court, Closson apologized for his activities and requested the forgiveness of the 20 victims who attended Court for the sentencing!

Justice Belzil ordered Closson to pay restitution of $5.8 million he lost in the Ponzi plan together with a fine of $10,600. He is banned for life from trading in securities.

The Ponzi plan spurred an examination by the Alberta Securities Commission which fined Closson $1 million and banned him from trading in the Province of Alberta in 2015. Up until now Closson has made no payments.

“It is one thing to be taken advantage of by a stranger but this was a trusted friend,” Justice Paul Belzil said when sentencing Mr. Closson.

Ponzi scheme criminals: Wade Closson, the undischarged bankrupt

Closson and his spouse have both filed for bankruptcy on March 27, 2013. He remains an undischarged bankrupt with a hearing set for his discharge from bankruptcy. No doubt that hearing was adjourned until the outcome of the criminal trial was known. Even if Mr. Closson does one day receive a discharge from bankruptcy, the Court fine and the restitution Order, because the restitution is a liability arising out of fraud, will follow him for the rest of his life.

How the bankruptcy discharge process works has been a topic of several of my blogs in the past, including, BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION.

Ponzi scheme criminals: Do you have too much debt?

Have you taken on debt that you cannot repay as a result of being swindled from a Ponzi scheme? Have you been swindled and now don’t have enough cash to meet all your debts? Are you facing financial problems for any other reason? The Ira Smith Team can develop a restructuring plan for you.

Debt problems are stressful and confusing. The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.

Our debt settlement plan process can ease this stress. The Ira Smith Team has a great deal of experience in helping people avoid bankruptcy while resolving their debt problems. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put you back on a healthy profitable path, Starting Over, Starting Now.

ponzi scheme criminals 0 — Ponzi scheme criminals

Tags Bankruptcy, bankruptcy discharge, bankruptcy discharge process, bernard madoff, bernie madoff, charles ponzi, closson, Debt, debt problems, fraud, Ira Smith Trustee, ponzi, ponzi scheme, ponzi scheme criminals, RRSP, undischarged bankrupt, wade closson

Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA): Introduction

Overview of BIA Section 215

BIA: The Motion Judge’s Decision

The BIA case background

Did the undischarged bankrupt have the right to launch the Action under the BIA?

The Court of Appeal for Ontario’s analysis

The Court of Appeal for Ontario’s decision

BIA: Conclusion

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

Undischarged bankrupts: How bankruptcies work in Canada

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

Being unable to obtain credit

Being unable to work in certain jobs or professions

How long the information lasts on your credit report

Being subject to certain restrictions in relation to their property and finances

What is the meaning of undischarged bankrupts?

Undischarged Bankrupts in Canada – Your Options

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

Absolute order of discharge –

Conditional order of discharge –

Suspended order of discharge –

Refused discharge –

Undischarged bankrupts summary

What does bankruptcy discharged mean: Restrictions placed on undischarged bankrupts

What does it mean to be an undischarged bankrupt?

What does bankruptcy discharged mean: Debts eliminated by bankruptcy discharge

What does bankruptcy discharged mean: Bankruptcy law can resolve tax debts

What does bankruptcy discharged mean: Debts never discharged in bankruptcy

What does bankruptcy discharged mean: Absolute discharge vs. conditional discharge and so on and so forth

What does bankruptcy discharged mean: At long last, the Nova Scotia case

What does bankruptcy discharged mean summary

Declaring bankruptcy in Canada: Introduction

When can you declare bankruptcy in Canada?

What happens when you declare bankruptcy in Canada?

Declaring bankruptcy in Canada: What assets do you lose in bankruptcy?

Declaring bankruptcy in Canada: Does Bankruptcy clear tax debt in Canada?

Declaring bankruptcy in Canada: What debt does bankruptcy not cover?

Declaring bankruptcy in Canada summary

Bankruptcy discharge certificate Canada introduction

Who can issue a bankruptcy discharge certificate Canada?

Bankruptcy discharge certificate Canada: How long will I be bankrupt?

Bankruptcy discharge certificate Canada: Who tells my creditors that I am discharged from bankruptcy

Bankruptcy discharge certificate Canada: What debts are not forgiven and will survive my bankruptcy?

Bankruptcy discharge certificate Canada: What if my creditors still contact me and try to get me to pay them?

Bankruptcy discharge certificate Canada: What does trustee discharge mean?

Bankruptcy discharge certificate Canada: what if I fail to include one of my creditors in my bankruptcy?

Bankruptcy discharge certificate Canada: What are the benefits of keeping my bankruptcy discharge papers?

Bankruptcy discharge certificate Canada: How long does my credit score take to recover from bankruptcy?

Bankruptcy discharge certificate Canada: 2 simple steps to improve your credit score after your discharge from bankruptcy

Bankruptcy discharge certificate Canada summary

Undischarged bankrupt introduction

How bankruptcies work in Canada

Can an undischarged bankrupt leave the country?

Undischarged bankrupt: What is an undischarged debt?

Undischarged bankrupt: Trustee opposed the discharge

Notice of opposition to discharge

The judgement creditor

Undischarged bankrupt: Can more evidence be introduced by a judgment creditor at the discharge hearing?

Undischarged bankrupt summary

OSAP bankruptcy Introduction

What is OSAP?

Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal

Discharged and the student is not presently enrolled in studies

Discharged and continuing a program of study

Undischarged bankrupt or has not yet fully completed the consumer proposal

Summary

Debt relief in Canada: Introduction

Debt relief in Canada: The case

Debt relief in Canada: The facts

Debt relief in Canada: The Court’s thinking

Debt relief in Canada: The Registrar’s analysis

Debt relief in Canada: The Court’s decision

Debt relief in Canada: Sometimes understanding and kindness is required

Ponzi scheme criminals: Introduction

Ponzi scheme criminals: What is a Ponzi scheme?

Ponzi scheme criminals: Canadian Wade Robert Closson, Ponzi scheme criminal

Ponzi scheme criminals: His swindle has caused financial devastation

Ponzi scheme criminals: With friends like Mr. Closson……….

***What does bankruptcy discharged mean:* *Absolute discharge vs. conditional discharge and so on and so forth***

***Declaring bankruptcy in Canada*: Introduction**

***Declaring bankruptcy in Canada*: What debt does bankruptcy not cover?**

**Who can issue a bankruptcy discharge certificate Canada?**