News

Tax Refunds in Bankruptcy

David Wood · December 15, 2023 ·

Supreme Court of British Columbia rules on Tax Refunds in Bankruptcy.

In a decision released December 14, 2023, the Supreme Court of British Columbia ruled that any tax refunds that a bankrupt may be entitled to prior to bankruptcy, due to the application of a Disability Tax Credit, vest in the Trustee and that the tax refunds are properly considered an asset of a bankrupt.

In the case of Re: Lynk, the bankrupt challenged the right of the Trustee to retain any tax refunds that pre-dated the bankruptcy, that were received as a result of the bankrupt applying for, and being approved for, a Disability Tax Credit (“DTC”) on her annual tax returns. The Court also stated that the application of the DTC is not a refund itself, as many refer to it as, but a non-refundable tax credit that reduces an individual’s taxable income which may be applied to that person’s taxable income. The application of the DTC gives rise to a Tax refund, not a “Disability Refund”. Nothing more, nothing less.

The result of this case also confirms the correctness of the Position Paper published by the Office of the Superintendent of Bankruptcy that states that any tax refunds that arise as a result of the application of the Disability Tax Credit are property of the Bankrupt.

The takeaway is that DTC’s are not refunds. They are tax credits that, when applied, may give rise to a tax refund. But a DTC in itself is not a refund as so many term it as. It further confirms that tax refunds for years that pre-date the bankruptcy are property of the bankrupt and vest in the Trustee.

Student Loans – Single Date Approach

David Wood · May 10, 2023 ·

May 2023

BC Court of Appeal confirms single date approach to discharging Student Loans through a consumer proposal or bankruptcy.

Flag of the Province of British Columbia

A recent decision by the BC Court of Appeal confirmed that BC will continue to follow the single date approach when considering whether or not a Student Loan is dischargeable through either a consumer proposal or a bankruptcy.

In the recent decision of Re: Piekut (2023 BCCA 181) the Court declined to change the single date approach to a multiple date approach when considering if Student Loans are discharged in either a consumer proposal or bankruptcy and continued to follow the current jurisprudence that was established in 2015 in the BC Decision of Re: Mallory (2015 BCSC 5).

Background

Currently, the Bankruptcy and Insolvency Act (“BIA”) legislation provides that if a bankrupt ceases to be a student within seven years of the filing of a bankruptcy, the debt will not be discharged at the end of the bankruptcy. This section also applies to individuals who have filed proposals.

If it has been greater than seven years from the date of a bankruptcy or a proposal, then the debt would be dischargeable.

We understand that Student Loans Regulations considers the End of Study date to be when an individual ceased or ceases to be a student. This date doesn’t mean the last day you attended school. It is the date that the government considers to be the last date of the program you were last enrolled in. It also includes both full-time and part-time attendance.

A student loan may be discharged if the student makes a “hardship” application to have the student loan discharged in a bankruptcy or proposal. The criteria is that more than five years has elapsed post-study but less than seven years has elapsed from the filing of the bankruptcy or proposal (more on that later in a subsequent paper).

The debtor in this case raised the issue of whether the BC should continue to use a “single date” approach as decided in Mallory or a “multiple date” approach when determining whether a student loan is discharged under s. 178(2) of the BIA which has been adopted in other jurisdictions.

The Court of Appeal rejected the multiple date method of determining when an individual ceased to be a student and confirmed that Mallory was of sound reasoning. It also stated that decisions in other jurisdictions decided subsequent to Mallory that adopted the multiple date method didn’t identify any error in the Mallory analysis and did not find them persuasive despite having a different outcome. It stated that decisions in other jurisdictions did not adequately consider the structure and the language of S178(1)(g) nor the differences between the English and French versions of the BIA.

So the question is, “Does a student who is in-and-out of school, with or without student loans for each (or any) session, reset the clock each time they enroll in subsequent studies”.

For example, if you file a bankruptcy or proposal and have student loans that are more than seven years old, but in the meantime, have gone back to school and self-funded those studies, within seven years of the insolvency filing, when have you ceased to be a student. Is it from the time you ceased to be a student on the first loan, or when you went back to school on the self-funded studies.

In BC the Court of Appeal confirmed that indeed the clock does reset as decided in Mallory and confirmed in Piekut. The end result is that the student loan survived the proposal and was not discharged under the BIA.

There has been no word on whether leave to the Supreme Court of Canada will be sought.

If you have Student Loan debt that is unmanageable, contact us today. We offer a free no-obligation consultation where we will look at all your debts with you and help you decide if a bankruptcy or consumer proposal makes sense to deal with your student debt.

A virtual meeting is available via Zoom or Microsoft Teams. Or we can chat on the phone or by email. If you would like an in-person consultation, we can arrange that as well. We have offices in Vancouver and Surrey.

Call us. It’s not too late!
(604) 605-3335
www.boalewood.ca

Can I Pursue an Undischarged Bankrupt for Collection?

admin · January 4, 2018 ·

Yes you can. However, you must wait until the Licensed Insolvency Trustee is discharged.

When a person goes into bankruptcy a Stay of Proceedings is issued.

The Stay of Proceedings protects the debtor from any collection activity by his unsecured creditors. When the debtor receives their discharged, all his unsecured debts, with a few exceptions, are erased.

You can pursue an undischarged bankrupt once the trustee is discharged. The key word being undischarged.

In rare cases a debtor is not discharged, usually because he fails to meet the obligations imposed on him by the Bankruptcy and Insolvency Act, namely duties, or payments pursuant to a mediation agreement or conditional order of Discharge.

Once the trustee is certain the debtor is not going to honour his obligations the trustee can and should proceed to seek his own discharge from the bankruptcy.

At this point the Stay of Proceedings is lifted and creditors are revived. So, all creditors can pursue the bankrupt for debt collection just as though he was never in bankruptcy.

Insolvency Searches

David Wood · January 4, 2018 ·

Recently the Office of the Superintendent of Bankruptcy (“OSB”) announced that it is modernizing its Insolvency Record Search function including the elimination of the $8.00 fee charged to the general public.

The announcement of the fee elimination caused a bit of concern by some in the insolvency community thinking that insolvency records could now be searched by anyone, for free. It was suggested that this would eliminate the confidentiality of an individual declaring bankruptcy or filing a consumer proposal and that nosy neighbours would have free access to the database of insolvency filings.

The elimination of the fee has been endorsed by some, primarily those who may benefit from it being eliminated, credit counselling firms and debt advisors, who are direct competitors of the Licensed Insolvency Trustee. They have stated that the only debt relief option available where a consumer’s privacy is protected is credit counselling. Not so fast. Every debt management program is recorded on your credit record, just like a bankruptcy and a consumer proposal. So, I don’t know how the privacy is being protected.

But hold on. Is this really an issue? Is it much ado about nothing? Is this Chicken Little crying out the sky is falling? In my view, it is not.

The $8 fee per search was never an impediment for anyone to search the database. If someone really wanted to know about an individual’s insolvency, they would pay the fee. The elimination of the fee, coupled with the enhanced search requirements being proposed by the OSB, will still keep the insolvency process free from the nosy neighbours.

The OSB has indicated that the proposed Insolvency Record Search system will include modern safeguards to protect the personal information of debtors. Some of the new protections which are not available in the current system which will protect disclosure of personal information:

Personal information disclosed about an insolvent person will be limited to that entered by the searcher. Personal information entered will only be confirmed, not provided in a search result. Searchers will need to know the first, last name, and date of birth of a debtor in order to obtain confirmation of an individual insolvency.
The new system will no longer provide access to insolvent debtor records that do not match the search criteria (e.g. lists of names).
For each correct search, a reduced amount of personal information will be returned in the public search results. For example, home addresses and full postal codes will no longer be included in search results as they are in the current system.
The public record search retention period for information will be reduced to 10 years post-discharge.
The new system will include technologies designed to reduce the potential for unintended uses of insolvency information (e.g. machine-based searches).

From what I know about the OSB, I would be surprised if this mandate was undertaken without some regard to the privacy of the individual debtor. The OSB has stated that it has consulted with the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) throughout the development of the new system, and has addressed comments received to date. The design will maximize protection of personal information while also meeting the specific needs of LITs, in fulfilling their insolvency estate administration and legislative requirements.

It should be noted that the OSB has no plan to propose to remove the $8 fee from the current system prior to its being retired from service.

The full OSB article about this can be viewed here.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

David Wood voted Top Three Licensed Insolvency Trustee

admin · January 4, 2018 ·

David Wood is pleased to have been selected as one of the Top Three Licensed Insolvency Trustees in Vancouver BC., for the second year in a row by Three Best Rated. As well, he has been chosen one of the Top Three Trustees located in Surrey, and New Westminster BC by the same firm.

Boale, Wood & Company Ltd., has been selected one of the Top Three Licensed Insolvency Trustees in Coquitlam.

Too much debt.

Call us. Its not too late.

(604) 605-3335