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Bankruptcy and Insolvency Archives

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.

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.

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.

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.

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