News Flash! October 25, 2007. Bankruptcy Reform is back on track. The Conservative government reinstated the Bankruptcy Reform package on Thursday, October 25, 2007, in a motion that was approved by all parties. The bankruptcy package had died when parliament was last prorogued.
Bankruptcy Reform in Canada has been subject to many delays since it was rushed through the House and the Senate on November 25, 2005, just before the adjournment of parliament for an election that brought the Harper Conservatives to power.
The major changes proposed by Bankruptcy Reform are:
1. Guaranteed payment for wages and vacation pay owing, in the six months prior to bankruptcy or a receivership, to a maximum of $3,000 per employee;
2. All registered retirement savings plans and registered retirement income funds will be exempt from seizure in a bankruptcy. Currently only employer sponsored plans and retirement savings plans offered through insurance companies are exempt from seizure, in the provinces of BC, Alberta, Ontario, New Brunswick, Nova Scotia and PEI. The other provinces have passed provincial legislation to make RRSPs and RRIFs exempt;
3. Student Loans will be eligible to be written off in a bankruptcy if the student has terminated his studies seven or more years ago. This is a decrease from the current ten-year wait;
4. Debtors who have surplus income, in accordance with directives issued by the Superintendent of Bankruptcy, will no longer be eligible for an automatic discharge after nine months. They will be required to stay in bankruptcy a further 12 months and to continue making surplus income payments to the trustee.
Second time bankrupts, with surplus income, will be required to stay in bankruptcy and make surplus income payments for a total of three years. This is tougher than the current laws, which sees a second time bankrupt discharged on a sliding scale, with postponement of discharge tied largely to how long it was between bankruptcies.
The Senate is expected to hold exhaustive reviews of the proposed legislation including hearing submissions from stakeholders and other interested parties.
You can read more about Bankruptcy Reform at this link.
