Newsletter - February 2011
Did you know? The bankruptcy and insolvency act was amended on September 18th, 2009
One of the objectives of the new Bankruptcy and Insolvency Act (the BIA) is to prefer the filing of a consumer proposal instead of considering bankruptcy in a situation where the debtor would be able to file a viable proposal.
The new BIA now distinguishes first bankruptcy from second or more bankruptcies.
The following summarizes the amendments made to the BIA regarding consumers' cases.
Currently, the delay of a bankrupt's discharge is determined following three criterions:
- surplus income or not;
- first, second or more bankruptcy;
- amount and percentage of their tax liabilities.
Before 1997, the amount paid monthly to the trustee by the bankrupt was determined by an agreement between the trustee, the debtor and the creditors.
Then, in 1997, the BIA introduced the superintendent's grid to clarify and standardize the determination of the amount to be paid monthly to the trustee by the bankrupt. The standard prescribed by the superintendent is based on the low income cut-off published and updated every year by Statistics Canada. It also helps avoid conflicts between the bankrupt and its creditors regarding the amount to be paid to the trustee. It is a simple calculation. If the bankrupt has a surplus income, he must give it to the trustee without any justification regarding his expenses.
Since September 18th, 2009, trustees face different situations:
- bankrupts without a surplus income will be eligible to an automatic discharge on the expiry of 9 months after the date of the bankruptcy;
- bankrupts with a surplus income will be eligible to an automatic discharge on the expiry of 21 months after the date of the bankruptcy;
- bankrupts of a second bankruptcy without surplus income will be eligible to an automatic discharge on the expiry of 24 months after the date of the bankruptcy;
- bankrupts of a second bankruptcy with surplus income will be eligible to an automatic discharge on the expiry of 36 months after the date of the bankruptcy;
- bankrupts of a third bankruptcy or more have no delay. The bankrupt can file an application for discharge after 12 months.
Trustees must evaluate the bankrupt's financial situation to determine whether the payments prescribed at section 68 of the BIA to be made at least on the two following occasions during bankruptcy:
- at the creation of the file and on the 8th month in the case of a first bankruptcy where the bankrupt is eligible to automatic discharge;
- at the creation of the file and on the 23rd month in the case of a second bankruptcy where the bankrupt is eligible to automatic discharge;
Moreover, in the case of a bankrupt who is not eligible to automatic discharge, the trustee must evaluate the income when making a report under section 170 of the BIA.
NEXT NOVELTY : FISCAL BANKRUPTCIES
When a bankrupt has income tax liabilities of more than $200,000 and representing at least 75% of the proven unsecured claims, the bankrupt is precluded from its right of being automatically discharged (1st and 2nd bankruptcy).
He must then appear before the court to be discharged at the expiry of the following periods:
- 9 months (1st bankruptcy without surplus income);
- 21 months (1st bankruptcy with surplus income);
- 24 months (2nd bankruptcy without surplus income);
- 36 months (2nd bankruptcy with surplus income);
- 36 months (3rd bankruptcy or more, with or without surplus income).
In addition, the new BIA gives a protection to the bankrupt against the termination, amendment or forfeiture of any agreement, including a security agreement, by reason only that the debtor is insolvent or bankrupt. Thus, a debtor will be able to keep his house, car or other assets, as long as there is no equity to the mass of creditors. This amendment is good news to the debtors; no need to verify the secured creditor's position as to whether it'll withdraw its loan or not.
Rules regarding consumer proposals were also amended. The prescribed amount of the eligible debts went up from $75,000 to $250,000, still excluding the principal residence's mortgage. The amendments made to the BIA also allow a cancelled consumer proposal to be resumed by the administrator or the court on certain terms and conditions.
RRSPs are exempt from seizure with the exception of the contributions paid during the twelve months period preceding the bankruptcy.
Persons who became bankrupt seven years following the end of their studies will not be released from their study debts.
RICHARD CORSILLI, B.A.A., CIRP
Bankruptcy Trustee, Verdun
The associates and personnel are proud to announce that co-founder and president Claude B. Gingras was chosen by the "Chambre de commerce de Gatineau" as personality of the year 2010 for his corporate presence and his engagement in the community.
Congratulations Claude!
Mr. Richard Corsilli is trustee in bankruptcy in our office located in Verdun at 4110, Wellington, suite 303, Verdun (Quebec) H4G 1V7, 514-847-0180 .
For additional information on this topic or any other insolvency matter, please contact one of our trustees. The contact information and e-mail addresses of our professionals are available on our Web site at www.ginsberg-gingras.com.
Ginsberg Gingras & Associates Inc. is a member of the DFK Canada Inc., DFK International and is associated with the accounting firm of Ginsberg Gluzman Fage & Levitz, LLP Chartered Accountants.
** This article does not constitute any legal advice. It is offered for information purposes only. Since every case is different, the advice of a qualified professional should be sought in each situation. **
