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Bankruptcy and Insolvency Archives

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.

Limitation periods, proposals and bankruptcies

On its appointment a trustee in bankruptcy may have the right to initiate various claims on behalf of the estate. Those claims include claims that the bankrupt may have had the right to initiate prior to the bankruptcy, as well as new claims that are unique to the trustee; for example, statutory claims under section 95 (preference claims) or section 96 (claims for transactions at under value) of the Bankruptcy and Insolvency Act (the "BIA").

Defective security agreement found to be enforceable as against bankrupt

The common law provinces each have legislation dealing with the registration of security agreements against personal property. These acts, each of which are named the Personal Property Security Act ("PPSA"), provide a complex but complete code for registering security interests against property, and for determining the priority between various creditors' claims to that property. Proper security can protect a creditor's rights when a debtor goes bankrupt.

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