SUPREME COURT OF NOVA SCOTIA IN BANKRUPTCY AND INSOLVENCY. Citation: Gruszczynski (Re), 2018 NSSC 198

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1 SUPREME COURT OF NOVA SCOTIA IN BANKRUPTCY AND INSOLVENCY Citation: Gruszczynski (Re), 2018 NSSC 198 In the Matter of: The bankruptcy of Kazimierz Jan Gruszczynski Date: Docket: No Registry: Halifax Judge: Heard: Raffi A. Balmanoukian, Registrar August 24, 2018, in Halifax, Nova Scotia Counsel: Kimberley A. Burke, for the Trustee, BDO Canada Limited Kazimierz Gruszczynski, personally

2 Page 2 Balmanoukian, Registrar: [1] This is an application for an order setting terms for the discharge of the Bankrupt, and an order directing payment of funds pursuant to Section 68 of the Bankruptcy and Insolvency Act, RSC 1985, c. B-3, as amended (the BIA ). [2] Mr. Gruszczynski appeared personally and made submissions, as did Kimberly A. Burke for the Trustee. [3] The Bankrupt, now 60, had previously been bankrupt in He received an absolute discharge in [4] The Trustee candidly advised the Court that the Bankrupt had been cooperative throughout in filing his budgetary information and, where practicable, paying a portion of the calculated surplus income he was obliged to pay pursuant to Section 68 of the BIA. As of the time of the Trustee s Section 170 report, those payments totalled $8,531. According to the Trustee s calculations, a balance of $35, remained to be paid (the Trustee also seeks $ in a postbankruptcy income tax refund, apparently to defray that calculated outstanding balance).

3 Page 3 [5] Mr. Gruszcynski s principal submissions were, first, that he would be unable to pay this balance at the rate submitted by the Trustee ($844 per month); second, the calculated surplus did not take into account certain of his medical expenses; third, that he had had significant additional health issues over and above those which precipitated his departure from the work force (the public and private disability insurance from which is now his income); fourth, that he had incurred significant unforeseen expenses, most notably a bereavement trip to Poland; fifth, that his spouse has had to leave the work force, placing additional financial strain on the household (including an expensive vehicle lease incurred while she had work travel obligations); and sixth, that he incurred a lump sum tax liability as a result of receiving retroactive CPP disability. While he received and had to pay 100% of that retroactive payment to his private insurer, the tax liability thereon was his. [6] None of this was disputed in any meaningful way by the Trustee, including that $844 per month would be difficult for the Bankrupt to service. The only real point of contention was whether all of the Bankrupt s medical expenses (about $5000 last year for income tax purposes) were non-discretionary medical expenses for the purposes of the BIA surplus income calculations.

4 [7] While I do not accept that the Bankrupt s situation is as dire as he may submit, I also accept that several elements weigh in his favour. Page 4 [8] As a second-time bankrupt with surplus income, his obligation to pay into the estate ran for 36 months instead of the 21 months it would have for a first time bankrupt (Section 168.1(1)(b)(ii)). While that payment period is mandated by statute, I believe I can take into account the fact the prior bankruptcy is some 30 years ago, as a factor against any assertion that the Bankrupt has treated the process as the proverbial clearing house for debt in setting the terms of his discharge now. [9] I also believe I can take into account the Bankrupt s age and health issues. [10] The Bankrupt declared no assets other than exempt personal effects, and real property in which there is no realizable equity. [11] Finally, I believe I can take into account the Bankrupt s cooperation in the bankruptcy process. It has not been cavalier. [12] Against that, I must weigh the fact that this is, indeed, a second bankruptcy, and his income exceeds the standards set out by the Superintendent. As a starting point, when income should have been, but was not, paid into the estate during the

5 bankruptcy process, the Bankrupt should generally be required to do so before being discharged. Page 5 [13] The declared unsecured liabilities of $77,042 ($62, proven) are approximately 20% income tax, with the rest to three major financial institutions. While there is a notable amount of public debt, this is not a tax-driven insolvency nor one which appears to be geared towards dodging a particular obligation. [14] I have reviewed the Bankrupt s budgets. Most months show a deficit, although these are in part due to household expenses shown at 100% of that incurred, while not disclosing spousal income when that existed or its contribution to those household expenses. That is the spouse s right, subject to the impact that has on calculation of the Bankrupt s surplus income for the purposes of the Superintendent s Standards under Directive 11R2 from year to year. The budgetary calculations are also are pushed into deficit by the various payments the Bankrupt did pay into the estate pursuant to Section 68 of the BIA. [15] I therefore believe that the first step in the process is to decide how much of the calculated $35, should be paid into the estate, and then to decide at what rate.

6 Page 6 [16] I am satisfied that a recalculation after a minute examination of medical expenses, and which reflected when the Bankrupt became the sole household income, would reduce this $35, somewhat. Given the way in which I propose to dispose of this matter, I do not believe I need to make a finding to the penny. [17] Given the nature and extent of the Bankrupt s unsecured liabilities, the general good faith demonstrated by him, the age of the prior bankruptcy and the fact that this second bankruptcy 30 years later has added fifteen months to the period for which surplus income is payable, I believe a payment to the estate of $20,000 (over and above that already paid into the estate) fairly balances the objectives of debtor rehabilitation, creditor compensation, and integrity of the bankruptcy process. [18] As for the rate of payment, I do not need to decide the level of available income (meaning gross income, less statutory deductions and less nondiscretionary expenses such as medical outlays) with surgical precision; it is sufficient to say that the Bankrupt has surplus income within the meaning of the Superintendent s Standards; and that his budget, while not frugal, is not extravagant. In all, the Bankrupt has paid $8,531 plus a $150 deposit between July 2015 and June 2018, for an average of around $241 per month. Despite my

7 Page 7 comments regarding the Bankrupt s changes to family income, I think he can do better than that. The CPP tax obligation will come to an end, if it has not already (it is not listed in recent budget statements and I note one month contained a significant tax payment). The car lease payment (which appears to be an obligation of the Bankrupt s wife, not the Bankrupt), while unfortunate, cannot trump the Bankrupt s obligations to his estate. I do not propose to examine in minute detail whether the Bankrupt can cut back on groceries, cable, sponsorships (he has a sponsored child) or whatever. As I have said, the budgets appear to be neither frugal nor extravagant. [19] After reviewing all of these factors, I believe a payment rate of $400 per month is both fair and serviceable. That will put the Bankrupt, before accounting for the remaining points I address below, at 50 months to obtain his discharge. That will be some seven years after the assignment in bankruptcy, and in these circumstances that is enough. [20] Naturally, this may be prepaid in whole or in part at any time. The balance outstanding will not carry interest. [21] The Bankrupt shall also pay into the estate any GST/HST refunds, credits, and rebates, Income Tax refunds, and Affordable Living Tax Credits, and the

8 Page 8 Trustee shall be at liberty to provide any employer or payor a copy of the Order to serve by way of garnishment (to the extent such sources are garnishable by law), as per the Trustee s normal form of draft order in these regards. Any amounts so received shall be credited against the balance of the $20,000. [22] Lastly, I would remind the Bankrupt that under Section 172(3) of the BIA, he is at leave after one year of the date of the Order made pursuant to this decision, to apply to modify the Order should he be able to demonstrate that there is no reasonable probability of his being in a position to comply with the terms of the Order. I emphasize being in a position, meaning that he must demonstrate that what he is being called upon to do has proven to be impracticable, not merely inconvenient. Conclusion [23] I order the Bankrupt, as a condition of his discharge and pursuant to Subsection 172(2)( c) of the BIA, to pay into the estate at least $400 per month, plus the sums outlined in paragraph 20 of this decision, to a total of $20,000 for the general benefit of creditors. The first payment shall be within 30 days of the date of the Court order, which the Trustee shall prepare and forward to me for

9 Page 9 signature. Upon reaching that aggregate, Mr. Gruszcynski shall receive an absolute discharge. Balmanoukian, R.