NEWS FLASH - July 7, 2008 - The following bankruptcy law changes have gone into force today, Monday, July 7, 2008:
The Wage Earner Protection Program Act (“WEPPA”) and Regulations. The WEPP will compensate individuals for amounts earned, but not paid, during the six months preceding the bankruptcy or receivership of their employers under the BIA. The WEPP will help protect workers by providing a guaranteed payment of a maximum of $2,000 in respect of wages, salaries, commissions or compensation for services rendered, and up to $1,000 in respect of disbursements owing to travelling salespeople incurred should their employer declare bankruptcy. More information can be found at the government website.
Reduction of the student loan discharge period from 10 to seven years. This amendment will apply where the debtor obtains his or her discharge on or after July 7, 2008 (PROVIDED that at the time they filed they had ceased to be student for the required seven years) or becomes bankrupt on or after July 7, 2008. The amendment that will reduce to five years the period a bankrupt will have to wait to make a “hardship” application to have student loan debt or obligation discharged (BIA , s. 178(1.1)) is also now in force. This amendment applies to all debtors notwithstanding when the bankruptcy or the process that results in the bankruptcy is initiated.
Provision of protection of all registered retirement savings plans (RRSP’s, RRIF’s and DPSP’s (Deferred Profit Sharing Plans).
o Contributions made in the 12 months prior to the date of bankruptcy will be recovered (clawed back) for the benefit of the bankruptcy estate for RRSPs in provinces without RRSP exemption laws (BC, Alberta, Ontario, NB, and NS);
o There will be no upper cap on the amount of RRSPs that can be protected;
o There will be no need to set up the RRSPs in a locked in plan to make them eligible for exemption;
o The court will have no jurisdiction to extend the one year claw back period period in an appropriate case.
It is not known when the balance of the new bankruptcy laws will go into force. We have been advise it will be in the later part of this year.
