Category Archives: Bankruptcy and Insolvency Law



Consumers are often the least important parties in a corporate insolvency. Gift cards are always a potential problem as the consumer has already made the payment, but the receiver has no requirement to honor them. Consider this before making a purchase.

Student Loans


One of questions I get the most is what will happen to my student loans in bankruptcy. In fact, I get this from professionals, students, and lots of other interested people. The basic premise of student loans is that they are not discharged or released under a bankruptcy or a proposal, unless it has been more then 7 years at the time of filing, from the date of the last time you were in school (graduation, end of classes, etc.). If it is less then 7 years but more then 5, we can apply to the Court to release the debts as part of the proposal or bankruptcy.

The factors involved range from whether it was a private or public loan, to what the circumstances surrounding the loan are, and what your own personal circumstances are.

It’s important to talk to a lawyer about this, as often times people in the industry don’t always understand what is released and what is not. If you are unsure, or you have any student loan debt, please feel free to call me. I’m happy to discuss the case with you, and let you know if it is worth pursuing.


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.

Income Tax Discharges…

Many people believe that a person can go bankrupt, and all their debts will disappear..this is simply not necessarily the case, especially if you owe significant tax debts, without any regard for the tax system..

In the bankruptcy of Gordon Charles McRudden [McRudden (Re) 2014 BCSC 217] the Bankrupt owed upwards of $900,000 to the Canada Revenue Agency, and more then 1.1 million dollars overall…
The bankrupt was involved in litigation from a patient who claimed he assaulted. He was sued, and rang up hundreds of thousands of dollars in litigation. Further, he then had GST and Income Tax deductions which he didn’t pay. In 2007, he disposed of his assets, and transferred 600 thousand to his sister. In 2008 he went bankrupt.
He lives in a home assessed at 3 million, and paid no tax or rent, his sister pays him $2,000.00 a month no tax. He also had child support arrears of 300,000.
The CRA objected. This was a first time bankruptcy.
The Trustee asked for a conditional discharge of full repay of taxes, or a refusal. The bankrupt asked for a full discharge.
The registrar reviewed everything, reviewed case law. He stated that not paying tax debt not honest or unfortunate, and that deterrence is the overriding consideration.

He ordered that surplus payments from Feb 1 2007 – Dec 31, 2008 to be paid. He had to pay the estate $69,500.00, supply income and expense statements, and to pay any further income tax and excise tax payments that were left.

Pre-Bankruptcy Court Decisions…



In a recent Ontario Superior Court case, the court confirmed a 1961 superior court decision that a court can not make a declaration as to the survival if a debt, pre-bankruptcy, even if the debt will survive from a person based on a exception under the BIA.

In Bridgemohan v. 2218667 Ontario Ltd 2014 ONSC the court confirm the decision of itself in Kemper Re (1961), 2 C.B.R. (NS) 130 (ONT SC).

The facts are not of particular importance: only that a fraud occurred involving a Contruction Lien Act claim, and the Defendants were found liable.

However, the Plaintiffs sought a declaration from the court that Section 69.3(1) of the BIA didn’t apply, and therefore by extension, the debt would not be discharged by bankruptcy.

The judge denied this request. He stated that this was not a bankruptcy court, and he wouldn’t and shouldn’t make this declaration.

Therefore, if a creditor is trying to pursue this line of action, or a debtor is trying to avoid it, they must go to bankruptcy court.

Please feel free to call me to deal with any problems along these lines.




Over the last couple of weeks, a number of companies have sought Bankruptcy Protection in the USA. Today, Sbarro Pizza, a chain which is both in Canada and the USA has filed for protection from their creditors – See Newspaper Article. Quiznos – the expensive and tasty submarine sandwich store located in Canada and the USA (among other countries) is also preparing to do the same – See Newspaper Article

Unfortunately, in the last number of years, this type of thing has become common-place. Most companies have warning signs before they have to declare bankruptcy. For instance, Quiznos had a massive debt-for equity deal only a couple of years ago which could never have survived.

And while this seems so outside of a regular persons issue it is not. There are lessons that can be learned from this. If you have debt, deal with it early. Don’t wait. If you need to file a proposal, or make a deal with your creditors, do it. If you need to file for bankruptcy, that’s fine.

This article is from 2011, it explains some of the items that can happen if you go bankrupt. Call me if you want to discuss this – I can help and refer you to the right place if I can’t.


Stay of Proceedings in Bankruptcy


In the bankruptcy of Scott Marasse, the registrar in Saskatchewan ruled on an order seeking leave for the Bank of Montreal (‘BMO’) to be able to proceed against a bankrupt. BMO contended that the bankrupt contined to borrow money on an unsecured line of credit, and to keep it in good standing, even though they knew that BMO would closwe it when it discharged the interest against the home which the loan had been secured against. BMO stated that this was an unsecured loan, the bankrupt knew or ought to have known, and that it rose to the level of fraud.
The registrar in her determination reviewed the law on the Stay under both Section 69.5 of the BIA, and pre-69.5.
In Re Bookman, (1983) 47 C.B.R. (N.S.) 144, Registrar Ferron explained that the bankruptcy stay’s purpose is to ensure that the trustee is able to administer a bankruptcy estate in an orderly fashion, without having to concern itself with complications arising from lawsuits against the bankrupt.
Following Bookman, the Ontario Supreme Court provided further guidance in Re Advocate Mines Ltd. (1984), where it categorized the types of claim that might support an application to lift the bankruptcy stay
In First Choice Capital Fund Ltd. v. First Canadian Capital Corp., 178 Sask. R. 100 (Sask. Q.B.), Baynton J. endorsed the Advocate Mines Ltd. categories of claim in the context of an analysis under s. 69.4 of the current BIA.
In Re Ma, 2001 CanLII 24076 (ON CA),the Ontario Court of Appeal revised the test for a declaration rendering the bankruptcy stay inoperable and in the course of doing so, explained that the test requires the establishment of something less than a prima facie case. According to the court, it involves an assessment of whether sound reasons, consistent with the scheme of the BIA exist to lift the stay.
The Superior Court, In 2011 in Mawji , confirmed that consideration of the merits of a proposed action may be appropriate if the merits are relevant to assessing whether “sound reasons” for lifting the stay exist in para. 4. But Mawji SC also confirmed that the onus of the applicant is low at the preliminary stage of the leave application
All these factors must be used to assess whether
(a) BMO a person likely to be materially prejudiced by the continued operation of the bankruptcy stay?
(b) If the answer to (a) is yes, then is it apparent that the action has little prospect for success?

The Registrar granted BMO’s application.

Bankruptcy, it can affect the famous as well!

When a person declares bankruptcy, a moratorium (stay) is put in place to preserve the integrity of the process. There are certain provisions of the Bankruptcy and Insolvency Act (BIA) that allow for the court to lift the moratorium, and allow for cases to proceed. There is a similar provision in the United States bankruptcy code, which stops actions from continuing.

Bill Clay Crafton Jr. filed for bankruptcy in the United States in September .He was a financial adviser to many, including NFL player Matt McCoy and Philadelphia Phillies Pitcher Cole Hamels. They were granted leave to pursue an action against Crafton… see thislink or this link more details.

The law suit was brought for breach of fiduciary duty, constructive fraud, fraud, deceit, fraudulent misrepresentation…there were losses for over $7.6 million dollars.
This just serves as a reminder for 2 questions that I get quite often. In Canada, if there is an action against you, or brought against you, and you have recently declared bankruptcy, the court will grant leave for the case to continue more often than not.

In Canada, if you commit fraud, and you have filed for bankruptcy or filed a proposal, the proposal or the bankruptcy may not shield you. If the court decides that whatever you have done falls under the exclusions under Section 178 of the BIA, then the action will continue.

Manager's Liability…what it means to me as a bankrupt…


I recently read an article in The Lawyers Weekly related to Employment Law, and the impact that a fiduciary relationship may have when charges are brought. The case that was referenced in the article was Navrab Investments Inc. v. Vaidyan [2012] O.J. No. 5704. The specific facts of the case are not important… a person was sued by his company for theft. He was stealing from the till. He was a manager of some sorts, and the company alleged that this gave rise to a level of fiduciary duty. Meaning that he was in a relationship of trust and confidence, and he had a duty to uphold that. He was stealing from the till, and using his position to right off the money he took as ‘void’ entries. Needless to say he was found guilty.

What’s very interesting is that the lawyer for the company asked that the order specifically refer to this fact, and asked for a declaration that the order survives bankruptcy under a section 178(1)(d) of the Bankruptcy and Insolvency Act.  While the company’s lawyers felt that this was pertinent, it’s not clear that this type of declaration is needed. – but rather – its more expedient. If it’s in the order that the judgment would survive bankruptcy on the basis of fraud, then it would be tough to argue that this was not what the judge had intended. The ramifications here are that any person in a position that could be interpreted as instilling “trust and confidence” should be careful in their actions. The bankruptcy process, as all other law, is intended to be beneficial to people who are honest. If you steal, or cheat, then it will catch you.