By some measures, Canadian households show higher debt levels than the US peak which preceded the Great Recession.
Canadian debt at pre-recession levels
Bankrupt faces resurrected mortgage debts following discharge
The bankruptcy process is generally considered a means for a person facing an overwhelming debt burden to obtain a "fresh start" through the release of their debts upon discharge from bankruptcy. The Bankruptcy and Insolvency Act prescribes a number of exceptions to that principle, and a recent decision out of Alberta serves as a stark reminder that a bankrupt's conduct can also cause a debt to survive bankruptcy, or even be revived.
Failure to pay judgment results in contempt order
In a recent BC decision, Fitzgerald Living Trust v. Mountainstar Gold, Inc., a judgment against the corporate defendant resulted in jail time for the principal behind the defendant.
CRA deemed trusts for GST/HST and bankruptcy
The Supreme Court of Canada in Callidus Capital Corp. v Canada, 2018 SCC 47, recently held that the dissent ruling of Pelletier J.A. of the Federal Court of Appeal in Canada v Callidus Capital Corporation, 2017 CAF 162, was the correct interpretation of s. 222(3) of the Excise Tax Act, R.S.C. 1985, c. C-36 confirming that CRA loses its right to priority payment over all creditors, even secured creditors, for unremitted GST and HST when the debtor becomes bankrupt.
The facts in this case weren't complicated, Callidus had taken an assignment of the debt and security held by the Bank of Montreal over the assets of Cheese Factory Road Holdings Inc. ("Cheese Factory"). At the time that Callidus took the assignment, Cheese Factory was in default of its obligations and Callidus agreed to forbear from enforcing its rights to execute against Cheese Factory's assets. As part of the forbearance, Cheese Factory later sold one of its properties and paid the proceeds of sale over to Callidus, who applied them to reduce the indebtedness owing to it. Cheese Factory also paid collected rents from its other properties into blocked accounts that were then paid over the Callidus. Days before Callidus received the proceeds of sale, CRA had sent to Callidus a letter claiming a deemed trust on account of unpaid GST and HST and demanding payment. Despite the demand made by CRA, Callidus did not pay to CRA the amount it claimed. Approximately a year and a half later, at the request of Callidus, Cheese Factory made an assignment into bankruptcy. Notwithstanding the bankruptcy, CRA maintained its claim for a deemed trust. Callidus took the position that the deemed trust had been rendered ineffective by the bankruptcy.
Pleading claims that survive bankruptcy
Section 178(1) of the Bankruptcy and Insolvency Act ("BIA") describes various types of debts and liabilities that will survive the discharge of bankruptcy of the bankrupt. In particular, subsections (d) and (e) provide that:
An order of discharge does not release the bankrupt from
(d) any debt or liability arising out of fraud, 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;
(e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
Cooling Vancouver real estate market may spell trouble for overleveraged homeowners
After years of extreme growth, it appears that Vancouver's residential real estate market is beginning to cool down on a longer term basis than the dip of 2016-2017. This could spell trouble for those who have obtained credit against the equity in their homes and have stretched themselves thin in the process.
Limitation period strikes down mortgage
British Columbia's limitation period was shortened in 2013 from six years to two, which means that, as a general rule, the right to sue someone is lost two years after the claim first arose. This shortened deadline continues to catch creditors unawares.
Limitation periods - Discovery by a proposal vs bankruptcy Trustee
For the purposes of raising a limitations defence, is a trustee in bankruptcy deemed to have 'discovered' a potential claim at the time that it was discoverable by them when they were acting as a proposal trustee? This was the question for the Ontario Supreme Court earlier this year in Re. Saran 2018 ONSC 2998.
Exempt assets and discharge from bankruptcy
Section 67(1) of the Bankruptcy and Insolvency Act (the "BIA") describes the property of the bankrupt that will, and will not, be divisible among the bankrupt's creditors. Exceptions include under section 67(1)(b) "any property that ... is exempt from execution or seizure under any laws applicable in the province within which the property is situated and within which the bankrupt resides." These exemptions, often subject to monetary limits, may include the equity in a vehicle or real property occupied by the bankrupt.
Critical illness benefit payment determined to be compensation for "pain and suffering" and exempt from distribution in bankruptcy.
Upon assignment into bankruptcy, a bankrupt's property vests in the bankruptcy trustee to be distributed to creditors. However, the courts have identified certain exceptions to this general principle, including in a recent decision out of Alberta.
