We live in a rapidly changing economy and our legislation, including bankruptcy legislation, needs to adapt to those changes. To ensure that bankruptcy in Canada continues to meet the needs of both consumers and creditors, Industry Canada conducts a review of insolvency rules and legislation every five years. As part of the process they ask industry experts, and any interested party, to submit suggestions for improvement to the rules and regulations contained in the Bankruptcy and Insolvency Act (BIA).
At Hoyes Michalos we take our responsibility to the insolvency industry, and affected debtors and creditors, very seriously. During the last detailed review of insolvency legislation, Hoyes Michalos was the only independent bankruptcy trustee firm asked to appear for a full hour before the Senate Standing Committee on Banking, Trade and Commerce. Represented by founders Doug Hoyes and Ted Michalos, we argued for rules that would be more reasonable for the average Canadian, not for the banks.
This year once again we prepared a detailed submission to the government, outlining our suggested improvements to insolvency legislation in Canada. We outlined several suggested changes to current bankruptcy rules which we feel would better serve Canadians:
- We believe that license denial rules should be prohibited for debts that would otherwise be discharged by bankruptcy. For example, 407 ETR currently denies your license plate renewal if you owe money to them in a bankruptcy. We believe that 407, or any other licensing body, should be treated like all other creditors, and their debts and powers should be discharged in bankruptcy or a consumer proposal.
- Under current law an RESP is seized in bankruptcy except in Alberta. The BIA does not exempt RESP contributions however recent amendments to provincial legislation made certain RESP savings exempt in that province. We recommended that RESPs should be exempt from seizure in bankruptcy in Canada under the Bankruptcy and Insolvency Act, except for contributions in the previous year. This would make the legislation consistent with the current RRSP rules and consistent across Canada. Exempting RESPs from seizure in a bankruptcy would provide necessary protection for savings set aside by Canadian families for their children’s education.
- Currently under bankruptcy law student loans are only dischargeable in bankruptcy if they are over seven years old. That is excessive for many former students, and prevents them from getting a fresh start. We advocate a variable period, so if you get a four year university degree, your student loans would be dischargeable four years after graduation if you declare bankruptcy. In any event the maximum period would be five years.
We have many other detailed suggestions that would improve the efficiency of the system and benefit debtors.
What Do We Expect to Happen?
On October 27, 2014, James Moore, the Industry Minister, the minister responsible for bankruptcy legislation, released his report to Parliament. A parliamentary committee now has one year to review the report and report back to Parliament. What is likely to happen?
The answer will depend on whether or not the government chooses to move quickly and introduces legislative changes prior to the expected federal election date of October, 2015. Not only must the government introduce legislation, but it must also pass through committee, pass three readings in the House of Commons and Senate, and receive royal assent prior to the election. Based on my experience with government, that’s a very short time frame. I have e-mailed Minister Moore for his comments, and will report back if and when I receive his response.
I have no inside knowledge, but if I had to predict I would guess that the government will change the license denial and RESP rules, but will leave most other bankruptcy rules unchanged.
Regardless, we will continue to fight for fair rules for all Canadians, to allow people in need to receive a fresh start.