We like the changes to the bankruptcy laws which: 1) Cancels the stay of proceeding when the trustee is discharged; 2) Prevents lenders from cancelling certain contracts when a person files bankruptcy or a proposal; 3) Requires debtors to attend counselling before a consumer proposal is completed and the remaining debt erased and 4) Raises the threshold for consumer proposals from $75,000 to $250,000.

The new bankruptcy laws, which were rushed into law on November 25, 2005, just before the defeat of the Liberal government on November 28, 2005, will not come into force until June 30, 2006 at the earliest. The Senate was promised the opportunity to review the legislation and hear the scores of experts and special interest groups who were scheduled to make submissions. There is the hope that this flawed legislation will not be enacted without significant changes.

Cancellation of the Stay of Proceeding When the Trustee is Discharged: (Subsections 69.3 (1.1)) This change makes it clear that once a trustee is discharged the stay of proceedings is terminated. One of the effects of this is that if a bankrupt is not discharged from bankruptcy and the stay of proceeding is cancelled upon the discharge of the trustee then there is no protection provided that person and the creditors can pursue him or her for the outstanding debt. This change reinforces the integrity of the Canadian bankruptcy system.

Preventing Lenders from Cancelling Certain Contracts when a Person Files Bankruptcy or a Proposal: (Subsections 66.34 and 84.2) This change places limits on the exercise of “ipso facto contract clauses” in bankruptcy. This will prevent the punitive and spiteful actions of some lenders who, as a matter of course, cancel all contacts of a person who enters into bankruptcy even if the contract is current.

Requiring the debtor to Attend Counselling before a Consumer Proposal is Completed: (Subsection 66.38) This was always the intention but was overturned by the courts because the wording was not specific. This now makes it clear that a person who has refused or neglected to receive counselling will not receive a Certificate of full performance.

Raising the Threshold for Consumer Proposals from $75,000 to $250,000: This opens up consumer proposals to more debtors.

The Canadian Association of Insolvency and Restructuring Professionals; CAIRP, supports these changes.

The Report of the Senate Committee on Banking, Trade and Commerce November, 2003, recommended these changes.

This entry was posted on Tuesday, March 21st, 2006 at 6:18 pm and is filed under Bankruptcy Reform. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.