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(anglais) Draft Directives from December 12, 1997  

Surplus Income
General Comments:  

  1. We agree with the intended purpose of this; i.e., to provide guidance to trustees in fulfilling their statutory obligations under the Bankruptcy and Insolvency Act. As a general comment, we would like to state that "guidance" should result in consistent and equitable application of the law but should not result in rigid restraints on the trustee's professional judgment. A rigid checklist of criteria or conditions may provide consistency, but not necessarily proper administration of estates.
  2. We support streamlining the bankruptcy and insolvency system and recognize the difficulties that increasing volumes of consumer bankruptcies creates for the courts and the OSB. We wish to state that streamlining should not ignore trustees, since they, along with the courts and the OSB are key components of the system and it is in the public interest that all of the components of the bankruptcy and insolvency system work efficiently and effectively.
  3. We strongly recommend that a directive on Access be issued concurrently with this directive and the directive on Terms of Discharge, and that these directives be linked. These directives should contain a clause that makes it clear that trustees may make voluntary arrangements with bankrupts, to ensure that there is continued access by debtors.

Specific Comments:  

s. 1 &

para 5.(b)

this is not a definition of income; two exclusions are stated, but are they intended to be the only exclusions? the determination of the bankrupts income should be left to the professional judgment of the trustee; e.g., company pension;  

why doesn't income include statutory remittances that are refunded; e.g., a CPP refund for overpayment, which, if it had not been incorrectly deducted, would have been included as income in the first place; we suggest deleting the word "refunded";  

excluding "mandatory deductions paid" from the bankrupt's income may not be correct; the debtor may have generous payroll deduction plans or deductions which may be recovered by the debtor;  

s.s. 6.(1)

this sub-section continues the attempt to define income and expenses, and again, we suggest that this cannot be done by enumerating a finite list; the trustee must have the ability to use professional judgment to make the determination; it appears that the 6 items in this sub-section are not intended to remove the trustee's discretion but this would be clearer if a general clause were added, such as "any other expense that the trustee determines to be non-discretionary"; e.g., car payments or leases where the debtor requires a car for work;  

para 6.(1)(c)

we understand the intent of this paragraph to be that the bankrupt may deduct child care expenses actually paid, but only up to the amount allowed by the Income Tax Act; however, if the bankrupt has a higher income than the non-bankrupt spouse, under the Income Tax Act the bankrupt cannot deduct the expenses; however for purposes of calculating surplus income, we believe that the trustee must deduct actual child care expenses paid by the bankrupt, even if the bankrupt is the spouse with the higher income;  

clarification of this paragraph is required; it should specify that only amounts paid shall be deducted; the limitation could be clarified by saying "... up to the amount deductible by the bankrupt or the bankrupt's spouse under the Income Tax Act."  

s. 6.(2)

this sub-section appears to make it mandatory for the trustee to require proof of any non-discretionary expenses if the trustee questions their validity; the word "proof" may imply evidence of a more formal nature than intended or required in many situations; a verbal response from the bankrupt may be sufficient explanation to resolve the trustee's question; the intent may be more effectively set out in the directive by use of wording such as "The bankrupt shall provide proof, which is satisfactory to the trustee, as to the validity of non-discretionary expenses if the trustee questions the amount or validity of theses expenses."  

s. 7

delete the word "provincial" because this would exclude the Territories; sections 7 & 11 s. 7 refers to the "nine months of the bankruptcy"; s. 11 says payments shall cease on discharge or as otherwise ordered by the court; the Terms of discharge directive (s. 7) refers to a period of twelve months; we assume this is in addition to the nine months of the bankruptcy;  

para 8.(b)

this should probably read "completed [not complete] income statement";  

should this be limited to situations where the bankrupt has surplus income? if there is no surplus income, there is no voluntary payment to be made and there is no need for creditors to have details of expenses  

s. 10 in (a)

replace "should make surplus income payments" with "has surplus income"; in (b) replace "should not make surplus income payments" with "has no surplus income"; it is the Act which requires the payment (s.s. 68(3); the directive only explains how to calculate whether or not the bankrupt has surplus income;  

para 10.(b)

this is intended to allow a trustee to receive payments from a bankrupt who has no surplus income as calculated under the directive, but is "able" to pay because his expenses are minimal or is "willing" to pay; this should read "willing or able" the bankrupt who is able to pay should pay, whether or not he is "willing"; the payment should not be at the whim of the bankrupt; conversely, the bankrupt who, on a strict calculation under the directive does not have surplus income as defined, but is "willing" to pay, should be allowed to do so;  

s. 11

this invites creditors to oppose the bankrupt's discharge as a device to prolong the surplus income payments, even though they have little chance of the court ordering a conditional discharge; we recommend that the OSB monitor the number of oppositions and the reasons, to determine whether this section is being abused;  

this section should state that the cessation of surplus income payments shall not interfere with or prevent the bankrupt from continuing to make voluntary payments to the trustee pursuant to a previously agreed arrangement; this provision must also tie into the directive on Access;  

this section should say that the obligation to make surplus income payments (as fixed by the trustee) ceases upon discharge, but that final payment can take place post-discharge; e.g., the bankrupt's final payment covers the month of May, it is actually sent June 1, the bankrupt is discharged June 2 and the trustee receives it June 5;  

s. 12

the second paragraph says "the bankrupt's surplus income payment shall be initially obtained from the appropriate provincial standard under Appendix A by considering the number of income-earning persons and the total monthly income."; this may unintentionally restrict "persons" in Appendix A to those who are "income-earning", in calculating surplus income;  

delete the word "provincial" because this would exclude the Territories;  

we refer you to the November 29, 1996 submission by the Manitoba Insolvency Association on a previous draft; we agree with the MIA's comments under the heading "Proportionate Income for non-bankrupt family members; the previous directive said "Where the bankrupt has a partner, that person will not be expected to contribute part of his or her income for the benefit of creditors."; we agree with this statement and also suggest that responsibility for the family and household expenses should be shared equally by the bankrupt and his or her partner; the calculation in the current directive increases the surplus income payment where the bankrupt's non-bankrupt partner has a higher income; the MIA suggested calculation provides an alternative which gives effect to the principle of the bankrupt and his or her partner being equally responsible for family expenses, 50 - 50; [attached is an example from the MIA submission of November 29, 1996 comparing the results of applying the previous draft directive's formula and the MIA's proposed formula];  

following is a direct quote from the MIA submission:  

"Using our preferred calculation, the enclosed example indicates that, in the same scenario outlined above, the required payment when the bankrupt is earning $2,000 is $375 and when the bankrupt is earning $1,000 the required payment is nil. We believe that this interpretation is equitable. Some may argue that the standard of living may be affected in this scenario, however, if the standard needs to be lowered because the bankrupt has the debt, that is fair as the bankrupt has been living above his means. If , on the other hand, the non-bankrupt partner can afford to take the family to Disneyland for Christmas after paying her share of the expenses, this too is fair.  

We do not believe that any consideration should be given to who benefitted from the credit. If the credit grantor was not prudent enough to obtain the partners signature, they are not able to attach his/her income as the partner did not take responsibility for the account, credit card, etc."  

s. 13

to calculate the averaged income for the period requires obtaining the information before 9 months have expired; in cases of an uncooperative bankrupt the trustee is forced to object, often without payment of fees, pay court fees and spend a day in court; this is another example of the process being de-streamlined for the trustee;  

the bankrupt should be encouraged to set aside funds, if possible for payment of surplus income once the averaged income for the period is determined; our reading of his section is that it is mandatory for the trustee to recommend a conditional discharge at the end of the period when the surplus income is calculated; if the bankrupt is able to make a lump sum payment, the directive should allow for an automatic discharge; the example shows the bankrupt receiving $18,000 in the ninth month of bankruptcy; it would appear that the surplus income payments for the nine months could be made and there is no need for a conditional discharge solely in respect of surplus income;  

Appendix A

basing the guidelines in Ontario on population only and not region will cause inconsistency and inequity; Oshawa is west of Toronto but there are smaller cities in between; the guidelines assume that it is cheaper to live in the small cities closer to Toronto than it is to live in Oshawa;   


 

Terms of Discharge

General Comments:

  1. As a matter of public policy in providing access and in rehabilitating the debtor, we support the procedure which we understand has been recommended by the JCB subcommittee on Access. This will allow the bankrupt to fulfil his obligations and minimize the need to use the courts.
  2. This directive should not prevent trustees from opposing the discharge of bankrupt's who do not have surplus income and who do not respect their voluntary agreements to pay fees. We also note with concern that the courts are not consistent in whether or not they will grant a conditional order for fees.
  3. This directive is based on the assumption that a proposal is "better" than a bankruptcy. Is there any research to prove that filing a proposal does more to rehabilitate the debtor than bankruptcy? Do creditors benefit more by proposals? We are not venturing an opinion here, but are emphasizing that our efforts to improve the bankruptcy and insolvency system should have a solid foundation in research and fact.

Specific Comments:

s. 4

this provides for the trustee's recommendation becoming the conditional discharge where the bankrupt agrees; does a court file have to be opened?  

s. 5

add additional reasons allowing the trustee to recommend a conditional discharge; this will increase the opportunities for the bankrupt and trustee to agree without going to court; e.g., failure to provide information required to prepare the pre and post-bankruptcy tax returns;  

add a paragraph (d) to read "the bankrupt did not respect a voluntary agreement to pay,"; this will also require the word "or" to be added after paragraph (c);  

para 5.(c)

is it mandatory for a bankrupt with surplus income to file a proposal? please refer to our comments relating to the proposed addition to the directive on Assessment;  

s.s. 7.(1)

as stated above in the comments on the Surplus Income directive, we assume this is in addition to the 9 months of bankruptcy; there is a potential for trustee shopping in that the trustee can inform the bankrupt that if the surplus income payments are not made, the trustee will recommend a condition requiring payments for a period of substantially less than 12 months; there should be a minimum 6 month period in addition to the 12 month maximum period;   


 

Viable Proposals

General Comment:

  1. Is this a suitable subject for a directive, which has the force of law? Perhaps it would be more appropriate as a policy statement or guideline. Our general comment on the directive on Terms of Discharge also applies here. This proposed addition assumes that a proposal is better than bankruptcy. If the debtor's choice of bankruptcy is allowed by the Bankruptcy and Insolvency Act, can the debtor be penalized by directive for choosing bankruptcy rather than a proposal?
  2. "Viable" in this proposed addition to the Assessment directive means "viable" from the creditor's perspective only. Viability should also look at the bankrupt's situation. The issues of cost, rehabilitation and benefit to the debtor are ignored. The directive should state explicitly that the trustee has an obligation to consider the effect of a proposal on the debtor's personal financial situation when coming to a conclusion as to the viability of a proposal.
  3. We would hope that the directive will be applied so that where the creditors will not accept a proposal, the trustee is not forced to oppose the discharge of the bankrupt but professional judgment that a proposal was not viable, will be accepted.

Specific comments:

s. 16

how does the trustee determine what exceptional circumstances are; examples would be helpful; how much is a viable proposal? what is the term? as noted in our general comments, a proposal has to be viable not only for the creditors, but for the debtor; all debtors with surplus income will be able to give a dividend to creditors but a proposal is not always the best solution for the debtor (because of delay in restoring his or her credit rating or because the debtor wishes to apply for a licence as a trustee in bankruptcy ); this may take away the debtor's right to choose bankruptcy over a proposal; if the new tariff gives the trustee a higher fee, the debtor will be suspicious of the trustee who says "if you choose bankruptcy I will oppose your discharge;  

in our comments on paragraph 5.(c) of the directive on Surplus Income, we raise the question as to whether it is mandatory for a bankrupt with surplus income to file a proposal; we hope that the answer is "no"; the bankrupt will have difficulty in accepting that the trustee must act to penalize him for choosing what, to the debtor, is clearly the best alternative; i.e., bankruptcy;   


 

Trustee Licencing

General Comments:

  1. Sections 34 and 35 in Part II and s. 38 in the Appendix "A" raise the general issue of the exercise of discretion by the Superintendent of Bankruptcy. In the interests of more certainty and transparency as to the exercise of this discretion, we would like to see some general guidelines on the situations when this discretion will be exercised and how it will be exercised.
  2. We understand that each province is a bankruptcy district and would like to know how to determine if any have been divided into bankruptcy divisions under s.s. 12 (1) of the Act. There is some concern that s. 34 in Part II could be used to restrict competition in a particular area if the issuer of the licence (Superintendent of Bankruptcy) felt that it was over-serviced by trustees. This deprives bankrupts of their choice in selecting a trustee and deprives trustees as to their choice of where to do business.
  3. Conversely, s. 35 in Part II may be used to issue a licence to a person who has not met the standard of qualification required of other trustees.
  4. Does this directive continue the practice of enacting blanket provisions for all trustees to deal with a minority of trustees. Please see our comments on Forms (XX3) and (XX4).
  5. When the directive has been completed we are prepared to assist in reviewing the forms.

Specific Comments:

s. 2

definitions would it be possible to add to the definition of professional engagements, "[...pursuant to the Act] or any other federal or provincial legislation;"  

Part I - Pre-requisite Qualifications

s. 9

many CAIRP members believe that a former bankrupt should never be eligible to receive a licence; para 9. (a) if s. 9 remains in the directive, paragraph (a) would have the effect of causing a person who filed a proposal to wait longer than a discharged bankrupt to be eligible for a licence; this contradicts the assumption in the other directives that proposals are better than bankruptcies;  

para 9. (c)

making completion of the Counsellor's Qualification Course mandatory is inconsistent with paragraph 17. (c) which provides for a licence to be limited to corporate bankruptcies or corporate proposals;  

para 9. (e)

add to this paragraph examples of professional organizations such as CAIRP, law societies, institutes of chartered accountants; "disciplinary action" requires more precision; we believe ongoing investigations should be disclosed, even though they have not or may not result in action being taken against the applicant; an applicant who has just been readmitted to a professional organization would be able to answer that he or she is not subject any current disciplinary action;  

we suggest that this be divided into two parts; i) the applicant is not subject to any investigations into this or her conduct and ii) disclose any disciplinary measures taken in the last five years for professional misconduct;  

s. 12 & s. 13

while these sections are stated not to limit s. 11, we wonder if they may have that effect; a criminal record for theft under, while not an indictable offence would be considered by most members of the public to be cause for not issuing a licence; similarly, perjury may not be a crime of an economic or commercial nature but a conviction for this offence would be inappropriate for an officer of the court;  

these sections could be deleted or expanded; the latter would be preferable because it demonstrates publicly the high standards expected from a trustee;  

para 20. (a)

does "individual trustee" include inactive and honorary trustees? is it misleading and potentially harmful to the public to have a trustee operating a practice under the name of an inactive or honorary trustee?  

para 20. (b)

"accounting firm" is too generic; public accountants are not licensed or regulated uniformly in Canada; this may open the door to use of names such as "AAA Accounting";  

Part II - Conditions to Practice

s. 27

what does the phrase "... a corporate trustee must have at its service [emphasis added] at all times and in each district..." mean?  

s. 29

this used to read "professional responsibilities"; we believe this should read both "responsibilities and liabilities";  

Part III - Maintenance of a Trustee Licence

s. 40.

will this require a trustee who has more than one resident office and centralized books and records, to decentralize? is this a case of making additional rules for all trustees because of difficulties experienced with a few trustees?  

a second point is that most firms store records off-site because it is too expensive to store them on the premises; this includes electronic data as well as paper records;;  

Appendix "A" - Licensing Process

s. 35

where there is only one trustee, can he give a blanket acceptance of the designation by the corporate trustee?  

Forms

Forms (XX3) & (XX4)

is there any need to provide the names and addresses of all bank branches; again, we question if this a general requirement to address a few isolated occurrences?  

  


 

January 30, 1998 - Letter from R. O. Sanderson, FCA, CIRP - CAIRP Chair  

Ms. Micheline Raymond Superintendent of Bankruptcy Industry Canada Bankruptcy Branch Jean Edmonds Tower South 8th Floor 365 Laurier Ave. West Ottawa, ON K1A OC8  

Dear Micheline:  

re: draft directives dated December 12, 1997 

Attached to this letter are the combined comments of the CAIRP and provincial insolvency associations. Because of the tight timing to enact the directives, we have not been able to engage in full consultation with our members but we believe that the comments will have a high degree of acceptance by our members. In order for you to assess the comments, I will outline the process we conducted to review the directives:  

  • the Consumer Debtor Practice Committee held a telephone conference call to provide comments  
  • a first draft of comments was reviewed by the CAIRP Executive Committee and provincial insolvency association presidents in a telephone conference call  
  • the CAIRP Executive Committee gave the draft further review at a face to face meeting  
  • provincial insolvency association presidents took a week to consult with their respective boards/members as best as they could and then provided additional comments to CAIRP  
  • CAIRP produced final comments.  

We believe that this process has reduced the number of separate submissions which you will receive and that you can give greater weight to the comments contained herein. For example, both the Saskatchewan Insolvency Practitioners Association and the Manitoba Insolvency Association will be sending letters dealing only with the surplus income guidelines for their respective provinces. They have provided their other comments to CAIRP.  

We trust that our comments will be useful and that they result in amendments to make the directives as effective as possible. We believe that it would be useful to have a discussion so that there is no misunderstanding as to the intent of any of our submissions.  

We are pleased to participate in the process of improving the bankruptcy and insolvency system.  

Yours very truly, Canadian Association of Insolvency and Restructuring Professionals/ Association canadienne des professionnels de l'insolvabilité et de la réorganisation R. O. Sanderson, FCA, CIRP Chartered Insolvency and Restructuring Professional CAIRP Chair  

SURPLUS INCOME 

General Comments: 

1. We agree with the intended purpose of this; i.e., to provide guidance to trustees in fulfilling their statutory obligations under the Bankruptcy and Insolvency Act. As a general comment, we would like to state that "guidance" should result in consistent and equitable application of the law but should not result in rigid restraints on the trustee's professional judgment. A rigid checklist of criteria or conditions may provide consistency, but not necessarily proper administration of estates.  

2. We support streamlining the bankruptcy and insolvency system and recognize the difficulties that increasing volumes of consumer bankruptcies creates for the courts and the OSB. We wish to state that streamlining should not ignore trustees, since they, along with the courts and the OSB are key components of the system and it is in the public interest that all of the components of the bankruptcy and insolvency system work efficiently and effectively.  

3. We strongly recommend that a directive on Access be issued concurrently with this directive and the directive on Terms of Discharge, and that these directives be linked. These directives should contain a clause that makes it clear that trustees may make voluntary arrangements with bankrupts, to ensure that there is continued access by debtors.  

Specific Comments: 

s. 1 &  

para 5.(b) this is not a definition of income; two exclusions are stated, but are they intended to be the only exclusions? the determination of the bankrupts income should be left to the professional judgment of the trustee; e.g., company pension;  

why doesn't income include statutory remittances that are refunded; e.g., a CPP refund for overpayment, which, if it had not been incorrectly deducted, would have been included as income in the first place; we suggest deleting the word "refunded";  

excluding "mandatory deductions paid" from the bankrupt's income may not be correct; the debtor may have generous payroll deduction plans or deductions which may be recovered by the debtor;  

s.s. 6.(1) this sub-section continues the attempt to define income and expenses, and again, we suggest that this cannot be done by enumerating a finite list; the trustee must have the ability to use professional judgment to make the determination; it appears that the 6 items in this sub-section are not intended to remove the trustee's discretion but this would be clearer if a general clause were added, such as "any other expense that the trustee determines to be non-discretionary"; e.g., car payments or leases where the debtor requires a car for work;  

para 6.(1)(c) we understand the intent of this paragraph to be that the bankrupt may deduct child care expenses actually paid, but only up to the amount allowed by the Income Tax Act; however, if the bankrupt has a higher income than the non-bankrupt spouse, under the Income Tax Act the bankrupt cannot deduct the expenses; however for purposes of calculating surplus income, we believe that the trustee must deduct actual child care expenses paid by the bankrupt, even if the bankrupt is the spouse with the higher income;  

clarification of this paragraph is required; it should specify that only amounts paid shall be deducted; the limitation could be clarified by saying "... up to the amount deductible by the bankrupt or the bankrupt's spouse under the Income Tax Act." 

s. 6.(2) this sub-section appears to make it mandatory for the trustee to require proof of any non-discretionary expenses if the trustee questions their validity; the word "proof" may imply evidence of a more formal nature than intended or required in many situations; a verbal response from the bankrupt may be sufficient explanation to resolve the trustee's question; the intent may be more effectively set out in the directive by use of wording such as "The bankrupt shall provide proof, which is satisfactory to the trustee, as to the validity of non-discretionary expenses if the trustee questions the amount or validity of theses expenses."  

s. 7 delete the word "provincial" because this would exclude the Territories;  

sections 7 & 11 s. 7 refers to the "nine months of the bankruptcy"; s. 11 says payments shall cease on discharge or as otherwise ordered by the court; the Terms of discharge directive (s. 7) refers to a period of twelve months; we assume this is in addition to the nine months of the bankruptcy;  

para 8.(b) this should probably read "completed [not complete] income statement";  

should this be limited to situations where the bankrupt has surplus income? if there is no surplus income, there is no voluntary payment to be made and there is no need for creditors to have details of expenses  

s. 10 in (a) replace "should make surplus income payments" with "has surplus income"; in (b) replace "should not make surplus income payments" with "has no surplus income"; it is the Act which requires the payment (s.s. 68(3); the directive only explains how to calculate whether or not the bankrupt has surplus income;  

para 10.(b) this is intended to allow a trustee to receive payments from a bankrupt who has no surplus income as calculated under the directive, but is "able" to pay because his expenses are minimal or is "willing" to pay; this should read "willing or able" the bankrupt who is able to pay should pay, whether or not he is "willing"; the payment should not be at the whim of the bankrupt; conversely, the bankrupt who, on a strict calculation under the directive does not have surplus income as defined, but is "willing" to pay, should be allowed to do so;  

s. 11 this invites creditors to oppose the bankrupt's discharge as a device to prolong the surplus income payments, even though they have little chance of the court ordering a conditional discharge; we recommend that the OSB monitor the number of oppositions and the reasons, to determine whether this section is being abused;  

this section should state that the cessation of surplus income payments shall not interfere with or prevent the bankrupt from continuing to make voluntary payments to the trustee pursuant to a previously agreed arrangement; this provision must also tie into the directive on Access;  

this section should say that the obligation to make surplus income payments (as fixed by the trustee) ceases upon discharge, but that final payment can take place post-discharge; e.g., the bankrupt's final payment covers the month of May, it is actually sent June 1, the bankrupt is discharged June 2 and the trustee receives it June 5;  

s. 12 the second paragraph says "the bankrupt's surplus income payment shall be initially obtained from the appropriate provincial standard under Appendix A by considering the number of income-earning persons and the total monthly income."; this may unintentionally restrict "persons" in Appendix A to those who are "income-earning", in calculating surplus income;  

delete the word "provincial" because this would exclude the Territories;  

we refer you to the November 29, 1996 submission by the Manitoba Insolvency Association on a previous draft; we agree with the MIA's comments under the heading "Proportionate Income for non-bankrupt family members; the previous directive said "Where the bankrupt has a partner, that person will not be expected to contribute part of his or her income for the benefit of creditors."; we agree with this statement and also suggest that responsibility for the family and household expenses should be shared equally by the bankrupt and his or her partner; the calculation in the current directive increases the surplus income payment where the bankrupt's non-bankrupt partner has a higher income; the MIA suggested calculation provides an alternative which gives effect to the principle of the bankrupt and his or her partner being equally responsible for family expenses, 50 - 50; [attached is an example from the MIA submission of November 29, 1996 comparing the results of applying the previous draft directive's formula and the MIA's proposed formula];  

following is a direct quote from the MIA submission:  

"Using our preferred calculation, the enclosed example indicates that, in the same scenario outlined above, the required payment when the bankrupt is earning $2,000 is $375 and when the bankrupt is earning $1,000 the required payment is nil. We believe that this interpretation is equitable. Some may argue that the standard of living may be affected in this scenario, however, if the standard needs to be lowered because the bankrupt has the debt, that is fair as the bankrupt has been living above his means. If , on the other hand, the non-bankrupt partner can afford to take the family to Disneyland for Christmas after paying her share of the expenses, this too is fair. 

We do not believe that any consideration should be given to who benefitted from the credit. If the credit grantor was not prudent enough to obtain the partners signature, they are not able to attach his/her income as the partner did not take responsibility for the account, credit card, etc." 

s. 13 to calculate the averaged income for the period requires obtaining the information before 9 months have expired; in cases of an uncooperative bankrupt the trustee is forced to object, often without payment of fees, pay court fees and spend a day in court; this is another example of the process being de-streamlined for the trustee;  

the bankrupt should be encouraged to set aside funds, if possible for payment of surplus income once the averaged income for the period is determined; our reading of his section is that it is mandatory for the trustee to recommend a conditional discharge at the end of the period when the surplus income is calculated; if the bankrupt is able to make a lump sum payment, the directive should allow for an automatic discharge; the example shows the bankrupt receiving $18,000 in the ninth month of bankruptcy; it would appear that the surplus income payments for the nine months could be made and there is no need for a conditional discharge solely in respect of surplus income;  

Appendix A basing the guidelines in Ontario on population only and not region will cause inconsistency and inequity; Oshawa is west of Toronto but there are smaller cities in between; the guidelines assume that it is cheaper to live in the small cities closer to Toronto than it is to live in Oshawa;  

TERMS OF DISCHARGE 

General Comments: 

1. As a matter of public policy in providing access and in rehabilitating the debtor, we support the procedure which we understand has been recommended by the JCB subcommittee on Access.(1) 

This will allow the bankrupt to fulfil his obligations and minimize the need to use the courts.  

2. This directive should not prevent trustees from opposing the discharge of bankrupt's who do not have surplus income and who do not respect their voluntary agreements to pay fees. We also note with concern that the courts are not consistent in whether or not they will grant a conditional order for fees.  

3. This directive is based on the assumption that a proposal is "better" than a bankruptcy. Is there any research to prove that filing a proposal does more to rehabilitate the debtor than bankruptcy? Do creditors benefit more by proposals? We are not venturing an opinion here, but are emphasizing that our efforts to improve the bankruptcy and insolvency system should have a solid foundation in research and fact.  

Specific Comments: 

s. 4 this provides for the trustee's recommendation becoming the conditional discharge where the bankrupt agrees; does a court file have to be opened?  

s. 5 add additional reasons allowing the trustee to recommend a conditional discharge; this will increase the opportunities for the bankrupt and trustee to agree without going to court; e.g., failure to provide information required to prepare the pre and post-bankruptcy tax returns;  

add a paragraph (d) to read "the bankrupt did not respect a voluntary agreement to pay,"; this will also require the word "or" to be added after paragraph (c);  

para 5.(c) is it mandatory for a bankrupt with surplus income to file a proposal? please refer to our comments relating to the proposed addition to the directive on Assessment;  

s.s. 7.(1) as stated above in the comments on the Surplus Income directive, we assume this is in addition to the 9 months of bankruptcy;  

there is a potential for trustee shopping in that the trustee can inform the bankrupt that if the surplus income payments are not made, the trustee will recommend a condition requiring payments for a period of substantially less than 12 months; there should be a minimum 6 month period in addition to the 12 month maximum period;  

(Comments on Viable Proposals begin on the next page.)  

VIABLE PROPOSALS 

General Comment: 

1. Is this a suitable subject for a directive, which has the force of law? Perhaps it would be more appropriate as a policy statement or guideline. Our general comment on the directive on Terms of Discharge also applies here. This proposed addition assumes that a proposal is better than bankruptcy. If the debtor's choice of bankruptcy is allowed by the Bankruptcy and Insolvency Act, can the debtor be penalized by directive for choosing bankruptcy rather than a proposal?  

2. "Viable" in this proposed addition to the Assessment directive means "viable" from the creditor's perspective only. Viability should also look at the bankrupt's situation. The issues of cost, rehabilitation and benefit to the debtor are ignored. The directive should state explicitly that the trustee has an obligation to consider the effect of a proposal on the debtor's personal financial situation when coming to a conclusion as to the viability of a proposal.  

4. We would hope that the directive will be applied so that where the creditors will not accept a proposal, the trustee is not forced to oppose the discharge of the bankrupt but professional judgment that a proposal was not viable, will be accepted.  

Specific comments: 

s. 16 how does the trustee determine what exceptional circumstances are; examples would be helpful; how much is a viable proposal? what is the term? as noted in our general comments, a proposal has to be viable not only for the creditors, but for the debtor; all debtors with surplus income will be able to give a dividend to creditors but a proposal is not always the best solution for the debtor (because of delay in restoring his or her credit rating or because the debtor wishes to apply for a licence as a trustee in bankruptcy (2)); this may take away the debtor's right to choose bankruptcy over a proposal; if the new tariff gives the trustee a higher fee, the debtor will be suspicious of the trustee who says "if you choose bankruptcy I will oppose your discharge;  

in our comments on paragraph 5.(c) of the directive on Surplus Income, we raise the question as to whether it is mandatory for a bankrupt with surplus income to file a proposal; we hope that the answer is "no"; the bankrupt will have difficulty in accepting that the trustee must act to penalize him for choosing what, to the debtor, is clearly the best alternative; i.e., bankruptcy;  

(Comments on Trustee Licensing begin on the next page.)  

TRUSTEE LICENSING 

General Comments: 

1. Sections 34 and 35 in Part II and s. 38 in the Appendix "A" raise the general issue of the exercise of discretion by the Superintendent of Bankruptcy. In the interests of more certainty and transparency as to the exercise of this discretion, we would like to see some general guidelines on the situations when this discretion will be exercised and how it will be exercised.  

We understand that each province is a bankruptcy district and would like to know how to determine if any have been divided into bankruptcy divisions under s.s. 12 (1) of the Act. There is some concern that s. 34 in Part II could be used to restrict competition in a particular area if the issuer of the licence (Superintendent of Bankruptcy) felt that it was over-serviced by trustees. This deprives bankrupts of their choice in selecting a trustee and deprives trustees as to their choice of where to do business.  

Conversely, s. 35 in Part II may be used to issue a licence to a person who has not met the standard of qualification required of other trustees.  

2. Does this directive continue the practice of enacting blanket provisions for all trustees to deal with a minority of trustees. Please see our comments on Forms (XX3) and (XX4).  

3. When the directive has been completed we are prepared to assist in reviewing the forms.  

 

Mission

 

Former et appuyer ses membres dans la prestation de services-conseils en insolvabilité, en réorganisation et dans d’autres domaines connexes de manière à inspirer au public...

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Vision

 

Les membres de l'ACPIR sont des leaders reconnus dans la recherche de solutions pour les particuliers et les entreprises en difficulté financière.

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Valeurs

 

L'ACPIR et ses membres misent sur le professionnalisme, la confiance et l'objectivité.

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Droit d'auteur 2009 -  L’Association canadienne des professionnels de l'insolvabilité et de la réorganisation.

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