A Small Victory in the Fight For Fairness in Bankruptcy Rules

As a licensed bankruptcy trustee at Hoyes, Michalos & Associates I have one main responsibility: My job is to make sure that everyone understands and follows the rules outlined in the Bankruptcy & Insolvency Act. If you are in financial trouble, my firm is committed to explaining all of your options before you decide to file a consumer proposal or file personal bankruptcy. If you are a creditor and owed money, we also make sure that you receive what you are entitled to, but also that you follow all of the rules.

So what do I do if I don’t believe the rules are fair? I follow the rules, but I also do everything in my power to change the rules that don’t make sense. Ted Michalos and I were the only independent trustees asked to testify before the Senate Banking Committee as they contemplated changes to the bankruptcy rules. We argued in favour of rules that would be more fair to the average Canadian in financial difficulty.

When reviewing the new bankruptcy rules that were set to come into force on September 18, 2009, we noticed a big problem: Without warning, the government decided to require all bankrupts to disclose their highest level of education. It became a requirement that you were forced to disclose to your creditors if you were a high school dropout, or if you didn’t finish university. Governments often make stupid decisions, but this decision was about as bad as it gets.

I understand that if you are going bankrupt, you must disclose your debts, and your assets, and your income. Without that information your creditors cannot evaluate your case. But do your creditors need to know whether or not you graduated from high school? Probably not.

Although no-one from the government will explain it to me, I assume that some bureaucrat somewhere decided it would be interesting to do a study of education levels, so they quietly slipped it onto the paperwork bankrupts must fill out.

I found that to be offensive, and most people we dealt with found it very embarrassing having to declare their educational status.

As soon as we discovered this dirty little trick, we took action.

On September 10, 2009, I sent an e-mail to the Superintendent of Bankruptcy (the government official responsible for administering all bankruptcy rules) asking why this requirement was implemented, and stating my objection to it. (About a week later one of his staff replied to me that they were “working on it”).

On September 14, 2009 we issued a press release in an attempt to bring attention to this new rule.

Over the next few days we spoke to the media, and continued to make calls to the government in an attempt to get them to change this rule.

Then, finally, on Saturday morning, September 26, 2009 we received word that the government had quietly changed the rule. Debtors were no longer required to disclose their educational status on their bankruptcy paperwork. Interestingly, the government did not admit to the mistake; they have to this day not issued any official communication on the matter. I was informed by the company that makes the computer software we use; the government told them the form was changing, and they told us.

It would be nice if the government would issue an apology for the mistake, but I’m satisfied that the rule was changed.

[UPDATE: Posted September 30: the government didn't apologize, but they did publish their justification for their actions; you can read it on the OSB web site]

I don’t take credit for the rule change. I made my views known, and fortunately many others did as well, which forced the government to change.

Our commitment will continue to be very simple and straightforward: we will explain all of the rules, and follow them, and continue to fight for changes when we believe the rules are unfair.

Want proof? If you are having financial problems, call our office today at 310-PLAN, or try our free on-line evaluation (we will respond to your request in a few hours during the day), or e-mail us for more information or to set up a free initial consultation. We will explain your options, and we will explain the rules, and then you can decide what option will work best for you. And I’ll keep fighting for fairness for all Canadians in financial trouble.

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