Debts not discharged by Bankruptcy

Transcription

1 Katherine Wellburn Murray Jamieson Jennifer McCracken Campbell, Saunders Ltd.

2 Proposals Property of the Bankrupt Discharge of the Bankrupt Procedure Debts not discharged by Bankruptcy

3 Minister of National Revenue v. Harris, 2014 NSSC 417 Proposal listed pre-proposal CRA debt $10, tax filing determined debt $48,932. Trustee disallowed CRA s claim- income should have been prorated. CRA appealed disallowance. CAIRP standard not followed.

4 On appeal, court found Trustee s disallowance was not reasonable. Debtor did not file a provisional income tax return. No evidence to determine when income was earned. Trustee and Debtor were bound by the proposal and CRA s tax debt listed at $10,000.

5 Re Wilcox, 2014 NSSC 291 (Registrar Cregan) Trustee provided provisional income tax return pre-proposal debt of $107,200. CRA had no record of the filing of the 2012 return and assessed penalties and interest. Court accepted Trustee s evidence that return was filed prior to deadline. Actual pre return showed tax debt of $116,100. CRA submitted the proposal debt should be capped at provisional amount.

6 Trustee applied for declaration that CRA was bound by the proposal. Court found no statutory authority for CAIRP standard or any internal CRA directive. Court directed pre-proposal debt was the actual tax debt of $166,100. CRA could not add riders and claim additional penalties and interest.

7 Re Schultz, 2014 ABQB 432 (Registrar Schulz) The OSB opposed court approval of proposal. Term of in the absence of appointed inspectors, the Trustee of this proposal shall have the power to extend the time for making of any payment required. Court deleted clause because it conflicted with the BIA.

8 Re Snow, 2014 ABQB 592 (Registrar Robertson) Prior to bankruptcy couple moved out of residence to live with family. After wife returned to work, planned to move back to residence. Trustee disallowed exemption claim as bankrupt did not occupy premises. Court found property met definition of principal residence and claim was allowed.

9 Re Bolt, 2014 BCSC 2095 (Master Baker) Bankrupt beneficiary of estate receiving inheritance in stages. Balance to be given on 45 th birthday in Court held that inheritance was property that vested in the Trustee. Trustee must wait until 2020 to see if bankrupt attains 45 th birthday.

10 Re Barter, 2015 BCSC 83 (Master McDiarmid) OSB issued negative comment letter and taxation hearing was required for the summary administration estate. Issue with Trustee s handling of GST credits and communication about real Estate. Trustee s fees were reduced by 10%.

11 Trustee retained BCLICATC after the date of the bankrupt s discharge. BCLICATC paid in April, 2014 resulted from the bankrupt s 2012 income tax return, the year of bankruptcy. Trustee submitted the credit acquired prior to discharge. OSB relied on its Position Paper. Court found credits were acquired prior to dischargethe payment date was irrelevant.

12 Re Mutch, 2014 ABQB (Registrar Smart) Husband and wife assigned and each received conditional orders of discharge. Life insurance of $145,000 and RRSP of $14,000 named wife beneficiary. Wife argued that exemption extended as spousal beneficiary. Court found property vested as afteracquired property. Funeral expenses treated as preferred claim.

13 Re Wilson, 2014 ONSC 3146 (Registrar Short) Prior to a failed proposal, assets of the bankrupt s business were sold to a friend. Bankrupt remained employed by the company and was provided a company car. Filed I&E reports that showed no surplus income. More than statutory minimums were deducted from his pay and would result in income tax refunds.

14 Discharge opposed by two largest creditors. Bankrupt s daughter was also employed by the company and also earned $60,000 as acting director of the company. Court concerned bankrupt could file outstanding income tax returns and obtain substantial tax refunds. Director s salary and excess deductions if imputed as notional income would significantly alter surplus income. T4 slip made no reference to the company car.

15 Directive of surplus income provides for deducting statutory minimums. Court recalculated surplus income to take into account tax refunds and director s salary. Conditional order of $55,000. Court awarded costs to opposing creditor of $10,000, payable as first charge, due to diligence and significant information provided by the opposing creditor.

16 Re Rivers, 2013 BCSC 324 (Sewell, J. on appeal from Master Baker) Bankrupt appealed an order that he be discharged after two year suspension and $200,000 conditional. 100% of proven claims to the CRA, totalling $2,100,000. Debt arose from acting as facilitator in RRSP stripping scheme. CRA assessed for income tax on advances as they were not bona fide loans.

17 Court upheld Master Baker s decision. Bankrupt was not an innocent victim- he had benefited from a deliberate scheme to avoid paying taxes. He avoided obvious red flags and had been breathtakingly obtuse. It was reasonable he could comply with the conditional order and he had been intentionally underemployed since his bankruptcy.

18 Re Robb, 2015 ABQB 34 (Registrar Smart) Filed a proposal prior to bankruptcy. Failed to file or pay taxes for seven years, including the time when he was making payments toward his proposal. Annual income of $77,000. Tax debt was $208,000 and 72.5% of proven unsecured debt. Court found interest of creditors and integrity of BIA warranted more focus. Conditional discharge of $100% of proven tax debt.

19 Re Chenier, 2015 BCSC 40 (Master Baker) Second time bankrupt thwarted attempts of Trustee to realize on assets. Gave unconvincing evidence regarding theft and vandalism of residence. Burned books and records of his business. Failed to produce documents regarding the sale of assets or corporate records. Trustee recommended a one year suspension.

20 Trustee asserted he committed several offences under the BIA by failing to protect a significant asset, failing to report assets or property and failing to keep proper books of account. Official Receiver also concluded offences were committed. Court held a conviction was not necessary to take into account an allegation of a bankruptcy offence contained in Trustee s report. Application adjourned until bankrupt could convince the Court of his sincere and genuine efforts.

21 Re Ross, 2014 SKQB 352 (Registrar Thompson) Major creditor obtained default judgment that comprised 99% of debt in bankruptcy. Bankrupt did not comply with financial disclosure obligations in post judgment execution proceedings. Bankrupt was single, 33 years old, lived with parents and had net monthly income of $2,100.

22 Assignment to avoid paying judgment debt is more reprehensible than assignment to avoid general debts. Trend for court to order 50% or more of the judgment debt as a condition of discharge. Court gave less weight to the Bankrupt s financial means when determining the court order. Bankrupt was required to pay $34,000 in instalments of $200 per month for 14 years.

23 Re Sordi v. Sordi, 2014 ONSC 5998 (Patillo, J) Bankrupt dentist whose practice declined. Incurred significant fees in his matrimonial proceedings. Largest creditor was former spouse who was owed costs for equalization payment. During bankruptcy and up to discharge hearing, accumulated arrears in support obligations of $190,000.

24 Could not order discharge conditional upon payment of outstanding spousal support obligations. Debts arose after bankruptcy and would not be released by an order of discharge. Discharge was suspended for one month.

25 Re Swystun, 2014 SKQB 232 (Registrar Thompson) Discharge of second time bankrupt opposed by Trustee and former spouse. Former spouse had a civil judgment against bankrupt. Bankrupt disposed of assets before spouse could collect on judgment. A week later, filed bankruptcy.

26 Failed to make full disclosure on statement of affairs and at the Official Receiver s examination. Bankrupt received large income tax refunds due to large overpayments of income tax, CPP and EI benefits. Ex-spouse s debt was 52% of proven claims. Court found bankrupt had abused the process and made assignment to avoid exwife s claim. Conditional order of $17,238 and costs of $2,500 were ordered in favour of his exspouse.

27 Re Rose, 2014 NSSC 292 (Registrar Creegan) After assignment, became entitled to disabilty award of $88,000. Bankrupt chose lump sum payment and Trustee agreed it was an exempt asset. Trustee took position funds formed income under section 68 and the bankrupt should pay half into the estate.

28 Court found award related to loss suffered and was in the nature of general damages. Award was not a substitution for income or past or future wages. Court found award should not be included as part of the bankrupt s total income. To maintain integrity of the system, the Court discharged the bankrupt on condition he pay $5,000.

29 Re Faulks, 2014 BCSC 2098 (Master Bouck) Bankrupt did not disclose small claims action brought against him. Continued to defend and pursued a counterclaim. Creditor obtained judgment and execution was stayed after Court was advised of bankruptcy. Creditor submitted proof of claim for amount of judgment including out of pocket expenses.

30 Court approved Trustee s decision to make appointment of inspector subject to resolution of provable claim. The Trustee s decision to allow the claim in the amount of provincial court judgment was upheld. Creditor had no enforceable claim for costs. Since her claim had been determined, she could act as inspector.

31 Re Scott, 2014 ONSC 5566 (Kershman J.) Court granted the application of spouse to lift the stay of proceedings. Continue her claim in family law proceedings. Obtain remedy against his pension, RRSPs and other exempt assets. Continuation of spouse s claim would not prejudice estate assets. Division of exempt assets could continue.

32 Division of non-exempt assets would only proceed to determine the amount owing to spouse so she could file claim in bankruptcy. Court granted a conditional order of discharge for bankrupt. Ordered Trustee to keep estate active for further 18 months.

33 Re Stoochnoff, 2014 BCSC 1420 (Master McDiarmid) Bankrupt made application under hardship provisions of BIA. Canada Student Loans only responded by fax to the Registry a few days prior to the hearing. Bankrupt drove 180 km to attend hearing. Adjournment for parties to attend by phone and ensure materials properly exchanged.

34 Bankrupt unable to complete studies due to psychiatric problems. Did not benefit from her education and was working as a cashier. Made efforts to obtain interest relief and interest payments. Filed bankruptcy three years after completing school. Court found she had shown good faith and continued to experience financial difficulties. Court ordered the loans be discharged.

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