Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3)

Marginal note:Mediation required — paragraphs 173(1)(m) and (n)

• 170.1 (1) If the discharge of a bankrupt individual is opposed by a creditor or the trustee solely on grounds referred to in either one or both of paragraphs 173(1)(m) and (n), the trustee shall send an application for mediation, in the prescribed form, to the official receiver within five days after the day on which the bankrupt would have been automatically discharged had the opposition not been filed or within any further time after that day that the official receiver may allow.

• Marginal note:Mediation procedure

  (2) A mediation is to be in accordance with prescribed procedures.

• Marginal note:Court hearing

  (3) If the issues submitted to mediation are not resolved by the mediation or the bankrupt failed to comply with conditions that were established as a result of the mediation, the trustee shall without delay apply to the court for an appointment for the hearing of the matter — and the provisions of this Part relating to applications to the court in relation to the discharge of a bankrupt apply, with any modifications that the circumstances require, in respect of an application to the court under this subsection — which hearing is to be held

  • (a) within 30 days after the day on which the appointment is made; or

  • (b) at a later time that is fixed by the court.

• Marginal note:Certificate of discharge

  (4) If the bankrupt complies with the conditions that were established as a result of the mediation, the trustee shall without delay

  • (a) issue to the bankrupt a certificate of discharge in the prescribed form releasing the bankrupt from their debts other than those referred to in subsection 178(1); and

  • (b) send a copy of the certificate of discharge to the Superintendent.

• Marginal note:File

  (5) Documents contained in a file on the mediation of a matter form part of the records referred to in subsection 11.1(2).

Marginal note:Trustee’s report

• 171 (1) On a request therefor by the Superintendent the trustee shall, within two months after the trustee’s appointment or within such longer period as the Superintendent may allow, prepare in the prescribed form and file with the Superintendent a report setting out the following information:

  • (a) the name of the debtor and, where the debtor is a corporation, the names and addresses of the directors and officers of the corporation and, when applicable, the names of the persons who in the opinion of the trustee actively controlled the day-to-day operations of the corporation or the business of the debtor or who in the opinion of the trustee were responsible for the greater proportion of the debtor’s liabilities or under whose directions in the opinion of the trustee the greater proportion of the debtor’s liabilities were incurred;

  • (b) whether in the opinion of the trustee the deficiency between the assets and the liabilities of the debtor has been satisfactorily accounted for or, if not, whether there is evidence of a substantial disappearance of property that is not accounted for;

  • (c) a statement of opinion by the trustee with respect to the probable causes of the bankruptcy, arrived at after consultation with the inspectors and other persons, which shall be expressed as resulting from one or more of the probable causes in the following enumeration:

    • (i) misfortune,

    • (ii) inexperience,

    • (iii) incompetence,

    • (iv) carelessness,

    • (v) over-expansion,

    • (vi) unwarranted speculation,

    • (vii) gross negligence,

    • (viii) fraud, and

    • (ix) other probable cause (to be specified); and

  • (d) a statement of the facts and information on which the trustee relied in arriving at the opinion expressed pursuant to paragraphs (b) and (c).

• Marginal note:Report to persons concerned

  (2) A separate report containing only the information to be given to the Superintendent pursuant to paragraphs (1)(a) and (b) shall be immediately prepared in the prescribed form by the trustee and a copy thereof shall be sent, by prepaid registered or certified mail in an envelope marked “private and confidential”, to each of the persons named pursuant to paragraphs (1)(a) and (b) in the report to the Superintendent.

• Marginal note:Report to official receiver

  (3) After the expiration of two months from the date of filing the report with the Superintendent and not later than three months after that date, the trustee shall file with the official receiver the report prepared pursuant to subsection (2).

• Marginal note:Application to court regarding report

  (4) Notwithstanding subsection (3), where before he has filed his report with the official receiver pursuant to that subsection, the trustee is served with a copy of an application to the court, by any of the persons named pursuant to paragraphs (1)(a) and (b) in the report prepared pursuant to subsection (2), to have that report altered in any manner or to dispense with the requirements of subsection (3), the trustee shall not file the report under subsection (3) except as may be directed by the court.

• Marginal note:Altering report to Superintendent

  (5) Where the report to be filed under subsection (3) has been altered in any respect on the direction of the court, the trustee shall inform the Superintendent of any alteration so made, and the Superintendent shall alter the report made to him by the trustee accordingly.

• Marginal note:Exoneration from liability

  (6) The trustee is not liable for any statements made or opinions expressed by him in good faith and made or purporting to be made by him pursuant to this section, nor is any person liable for publishing, or referring to any matters contained in, the report of the trustee to the official receiver if the publication or reference is made after the filing of the report with the official receiver.

Marginal note:Court may grant or refuse discharge

• 172 (1) On the hearing of an application of a bankrupt for a discharge, other than a bankrupt referred to in section 172.1, the court may

  • (a) grant or refuse an absolute order of discharge;

  • (b) suspend the operation of an absolute order of discharge for a specified time; or

  • (c) grant an order of discharge subject to any terms or conditions with respect to any earnings or income that may afterwards become due to the bankrupt or with respect to the bankrupt’s after-acquired property.

• Marginal note:Powers of court to refuse or suspend discharge or grant conditional discharge

  (2) The court shall, on proof of any of the facts referred to in section 173, which proof may be given orally under oath, by affidavit or otherwise,

  • (a) refuse the discharge of a bankrupt;

  • (b) suspend the discharge for such period as the court thinks proper; or

  • (c) require the bankrupt, as a condition of his discharge, to perform such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.

• Marginal note:Court may modify after year

  (3) Where at any time after the expiration of one year after the date of any order made under this section the bankrupt satisfies the court that there is no reasonable probability of his being in a position to comply with the terms of the order, the court may modify the terms of the order or of any substituted order, in such manner and on such conditions as it may think fit.

• Marginal note:Power to suspend

  (4) The powers of suspending and of attaching conditions to the discharge of a bankrupt may be exercised concurrently.

Marginal note:Exception — personal income tax debtors

• 172.1 (1) In the case of a bankrupt who has $200,000 or more of personal income tax debt and whose personal income tax debt represents 75% or more of the bankrupt’s total unsecured proven claims, the hearing of an application for a discharge may not be held before the expiry of

  • (a) if the bankrupt has never before been bankrupt under the laws of Canada or of any prescribed jurisdiction,

    • (i) 9 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 9 months, or

    • (ii) 21 months after the date of bankruptcy, in any other case;

  • (b) if the bankrupt has been a bankrupt one time before under the laws of Canada or of any prescribed jurisdiction,

    • (i) 24 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 24 months, or

    • (ii) 36 months after the date of bankruptcy, in any other case; and

  • (c) in the case of any other bankrupt, 36 months after the date of the bankruptcy.

• Marginal note:Appointment to be obtained by trustee

  (2) Before proceeding to the trustee’s discharge and before the first day that the hearing could be held in respect of a bankrupt referred to in subsection (1), the trustee must, on five days notice to the bankrupt, apply to the court for an appointment for a hearing of the application for the bankrupt’s discharge.

• Marginal note:Powers of court to refuse or suspend discharge or grant conditional discharge

  (3) On the hearing of an application for a discharge referred to in subsection (1), the court shall, subject to subsection (4),

  • (a) refuse the discharge;

  • (b) suspend the discharge for any period that the court thinks proper; or

  • (c) require the bankrupt, as a condition of his or her discharge, to perform any acts, pay any moneys, consent to any judgments or comply with any other terms that the court may direct.

• Marginal note:Factors to be considered

  (4) In making a decision in respect of the application, the court must take into account

  • (a) the circumstances of the bankrupt at the time the personal income tax debt was incurred;

  • (b) the efforts, if any, made by the bankrupt to pay the personal income tax debt;

  • (c) whether the bankrupt made payments in respect of other debts while failing to make reasonable efforts to pay the personal income tax debt; and

  • (d) the bankrupt’s financial prospects for the future.

• Marginal note:Requirements if discharge suspended

  (5) If the court makes an order suspending the discharge, the court shall, in the order, require the bankrupt to file income and expense statements with the trustee each month and to file all returns of income required by law to be filed.

• Marginal note:Court may modify after year

  (6) If, at any time after the expiry of one year after the day on which any order is made under this section, the bankrupt satisfies the court that there is no reasonable probability that he or she will be in a position to comply with the terms of the order, the court may modify the terms of the order or of any substituted order, in any manner and on any conditions that it thinks fit.

• Marginal note:Power to suspend

  (7) The powers of suspending and of attaching conditions to the discharge of a bankrupt may be exercised concurrently.

• Meaning of personal income tax debt

  (8) For the purpose of this section, personal income tax debt means the amount payable, within the meaning of subsection 223(1) of the Income Tax Act without reference to paragraphs (b) to (c), by an individual and the amount payable by an individual under any provincial legislation that imposes a tax similar in nature to the income tax imposed on individuals under the Income Tax Act, including, for greater certainty, the amount of any interest, penalties or fines imposed under the Income Tax Act or the provincial legislation. It does not include an amount payable by the individual if the individual is or was a director of a corporation and the amount relates to an obligation of the corporation for which the director is liable in their capacity as director.

Marginal note:Facts for which discharge may be refused, suspended or granted conditionally

• 173 (1) The facts referred to in section 172 are:

  • (a) the assets of the bankrupt are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities, unless the bankrupt satisfies the court that the fact that the assets are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities has arisen from circumstances for which the bankrupt cannot justly be held responsible;

  • (b) the bankrupt has omitted to keep such books of account as are usual and proper in the business carried on by the bankrupt and as sufficiently disclose the business transactions and financial position of the bankrupt within the period beginning on the day that is three years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;

  • (c) the bankrupt has continued to trade after becoming aware of being insolvent;

  • (d) the bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet the bankrupt’s liabilities;

  • (e) the bankrupt has brought on, or contributed to, the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of the bankrupt’s business affairs;

  • (f) the bankrupt has put any of the bankrupt’s creditors to unnecessary expense by a frivolous or vexatious defence to any action properly brought against the bankrupt;

  • (g) the bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included, incurred unjustifiable expense by bringing a frivolous or vexatious action;

  • (h) the bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included, when unable to pay debts as they became due, given an undue preference to any of the bankrupt’s creditors;

  • (i) the bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included, incurred liabilities in order to make the bankrupt’s assets equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities;

  • (j) the bankrupt has on any previous occasion been bankrupt or made a proposal to creditors;

  • (k) the bankrupt has been guilty of any fraud or fraudulent breach of trust;

  • (l) the bankrupt has committed any offence under this Act or any other statute in connection with the bankrupt’s property, the bankruptcy or the proceedings thereunder;

  • (m) the bankrupt has failed to comply with a requirement to pay imposed under section 68;

  • (n) the bankrupt, if the bankrupt could have made a viable proposal, chose bankruptcy rather than a proposal to creditors as the means to resolve the indebtedness; and

  • (o) the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court.

• Marginal note:Application to farmers

  (2) Paragraphs (1)(b) and (c) do not apply in the case of an application for discharge by a bankrupt whose principal occupation and means of livelihood on the date of the initial bankruptcy event was farming or the tillage of the soil.

Marginal note:Assets of bankrupt when deemed equal to fifty cents in dollar

174 For the purposes of section 173, the assets of a bankrupt shall be deemed of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities when the court is satisfied that the property of the bankrupt has realized, is likely to realize or, with due care in realization, might have realized an amount equal to fifty cents on the dollar on his unsecured liabilities.