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Bankruptcy and Insolvency Archives

Bankruptcy, Secured Creditors, and the Superintendent's Levy

All distributions made out of a bankrupt estate are subject to a 5% levy payable to Superintendent of Bankruptcy pursuant to section 147 of the Bankruptcy and Insolvency Act. Generally, this does not impact secured creditors, whose rights are largely unaffected in bankruptcy. However, in Superintendent of Bankruptcy v Business Development Bank of Canada, 2019 MBCA 72, the Manitoba Court of Appeal recently confirmed that in certain circumstances, even a secured creditor's recovery can be subject to the levy.

Ontario Court provides guidance on non-arm's length transactions

A trustee in bankruptcy has special powers to investigate the affairs of a bankrupt estate, and among the greatest of those powers is the ability to review and potentially unwind transactions prior to bankruptcy under section 95 and 96 of the Bankruptcy and Insolvency Act ("BIA").

Transfers to family members upheld following bankruptcy

A transfer of a car to a family member, within one year of the transferor's bankruptcy. Such transactions are regularly set aside in bankruptcy. Even where the transfer was on account of a previous debt owed to the family member, such a transfer would normally be an invalid "preference" under s. 95 of the Bankruptcy and Insolvency Act.

Landlord rights in bankruptcy: Trustee's disclaimer of lease eliminates claim for unsecured damages

Where a tenant is in breach of a commercial lease, a landlord generally has the option to sue the breaching tenant for the unexpired portion of the lease (subject to the landlord's duty to mitigate). However, where a tenant goes bankrupt, the bankruptcy trustee has the power to disclaim the lease under section 30(1)(k) of the Bankruptcy and Insolvency Act ("BIA"). To the surprise of some landlords, this disclaimer will extinguish any right of the landlord to the unexpired term of the lease, save for a preferred three months' accelerated rent claim pursuant to section 136(1)(f).

Supreme Court of Canada finds bankrupt energy company cannot ignore environmental obligations

In a long-awaited decision, the Supreme Court of Canada has overturned the Alberta Court of Appeal, and determined that a bankrupt company does not have carte blanche to ignore its environmental obligations.

Fonts prove forgery

Mark Twain said, "If you tell the truth you don't have to remember anything." That wisdom was driven home in the recent Ontario case McGoey (re), in which a bankrupt tried to prove that two properties registered in his name were actually held by him in trust for someone else, and therefore were not available to his creditors. He produced two trust deeds showing this.

Landlords Must Take Issue with Assignment of Lease Before Court Approval

A recent case out of the Ontario Supreme Court, Re Aeropostale Canada Corp. (Notice of Intention) 2018 ONSC 1468, examined the question of whether a court ordered assignment of a commercial lease pursuant to s. 84.1 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (the "BIA") would include all terms of the lease, including those limited to the original lessee under the lease who was now bankrupt.

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