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Vancouver Business Bankruptcy, Insolvency and Restructuring Law Blog

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 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.

Court costs awarded against trustee in bankruptcy personally

The general rule in court proceedings is that the losing party must pay the successful party's costs: not their actual legal costs, but a contribution to those costs based on a tariff of charges.

Where one of the combatants is a trustee in bankruptcy, the Bankruptcy and Insolvency Act provides that the trustee is not personally liable for such costs; any award of costs against the trustee must be satisfied from the assets in the bankruptcy estate.

No New Consideration Required for Modification to an Agreement

In a recent case out of the BC Court of Appeal, Rosas v Toca 2018 BCCA 191, the court altered the law surrounding contractual modifications to an existing agreement. Until now, in order for a modification to an existing contract to be legally binding, it has been required that there be some new consideration flowing between the parties. Consideration has been required in order to draw the line between gratuitous or morally based promises and those that were legally enforceable. 

Examination of bankrupts

When a debtor becomes bankrupt, there may be suspicion as to whether the bankrupt has made full disclosure of all assets or dealings with the bankrupt's assets prior to the bankruptcy. The bankrupt's conduct prior to discharge may also be in issue. The trustee in bankruptcy has the obligation to make inquiries, but if the bankrupt is uncooperative, or if information is required from someone other than the bankrupt, more aggressive steps may be required.

Secured lenders receiving payments in good faith without notice obligated to remit debtor's unpaid GST

A recent decision of the Federal Court of Canada should stand as a reminder that a borrower's unpaid taxes can take priority over secured lenders.

In Her Majesty the Queen v the Toronto-Dominion Bank, 2018 FC 538, the debtor had unpaid GST debts of approximately $68,000. In 2010, the debtor obtained loans from the Toronto-Dominion Bank (the "Bank"), all of which were secured against his home.

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