The Canadian Bankruptcy Process can be a rollercoaster of expectations. A bankrupt may believe the he or she is free of creditors only to find that some debts may survive a bankruptcy discharge. Or a discharge may be granted on condition of payment of a monetary amount the Bankrupt hoped would not happen or at least not for the amount the court ordered. A bankruptcy may even in the appropriate circumstances be annulled. Bankrupts may believe they don’t have to worry about lawsuits which are stayed ,only for creditors ,under the right circumstances, moving successfully to obtain leave to proceed. Claims the Bankrupt may have thought are in the rear view mirror , are not, as the trustee allows them as claims provable in bankruptcy. Expectations for a “Fresh start” become frustrated as the start as not as “Fresh” and as quick as expected.
The Bankrupt’s expectations may take further rollercoaster rides. Bankrupts may not have disclosed certain assets, example, share certificates or accounts receivable, only to find that the Trustee’s report reflects the Bankrupt’s lack of financial disclosure. It seemed like a discrete asset that no one would find, until somebody did. The Bankrupt may believe that they don’t have to worry about Creditor A in the Bankruptcy process who was taken care of prior to bankruptcy only for the court to establish a fraudulent preference in the right circumstances. Bankrupts who expect to travel through the process armed with bad faith, dishonest and misappropriating behaviour soon recognize that the Bankruptcy process is built on integrity and such behaviour is not valued and expectations of a quick fresh start are defeated. Bankrupts might believe the income they make after bankruptcy is there only to find there is surplus income which should be shared. Transfers made by the bankrupt at undervalue are put under the bankruptcy microscope and those transfers are not as free and clear as may have expected.
Not all defeated expectations are a product of bad faith, fraudulent or other types of behaviour of the same flavour. Some bankrupt’s expectations are deflated for other reasons. The honest but unfortunate bankrupt will have an easier navigation path through the Bankruptcy process than the dishonest one. Temptations to go off or remain off the integrity path will lead to detours in the forest, with legal consequences the bankrupt may not expect.*
William Poulos, Barrister
* This blog is not a substitute for legal advice. Should you require legal advice, a lawyer should be consulted to advise of the specific circumstances of your case.