Barter (Re) 2014 BCSC 528
In a recent decision of the Bankruptcy court of British Columbia, Registrar Master Young made a ruling regarding the title of a bankrupt’s property, and the non-exempt portion of the equity that a Trustee is entitled to realize on.
Under Section 71 of the BIA, the property of a bankrupt vests in the Trustee upon a declaration of bankruptcy. Further, Section 74 entitles a Trustee to register title or caution on this property, to claim interest.
I register these cautions and trustee’s interests for Trustee’s, and it is best to do them as soon as possible.
In this case, the Trustee did not register on title immediately, because he believed that there was no realizable equity in the home. He chose not to spend the money from the estate.
Yet, when the bankrupt’s wife was forced to declare bankruptcy as well, and chose a different trustee, that trustee chose to register an interest. She was then offered to buy the equity in the home that belonged to her, for $2,000. She did, and when the husband was made aware of this, he contacted his trustee.
The entire time, the husband had been trying to sell the home. He received an offer around the same time as his wife had bought her share of the equity. When he contacted the Trustee to ask about his wife, he told the Trustee about the offer. The trustee told him he could not sell the property, as it was not his to sell. He offered to sell the property/equity to the bankrupt, for $2,000.00 as well. The bankrupt bought it, and then proceeded to counter offer the sale, which was turned down. The house was ultimately sold for a shortfall on the mortgage.
The bankrupt then asked for his discharge, and asked for the $2,000.00 back from the Trustee.
The court ruled that the Trustee’s conduct fell below the standard, and that the Trustee had to return the funds. The trustee should have explained what the bankrupt was buying. That there was potential for no return, and all of this should have been explained at the beginning of the bankruptcy.
The bankrupt was then granted an absolute discharge.