The Effects of Declaring Bankruptcy
Section 69.3 of the Bankruptcy and Insolvency Act states:
69.3 (1) Subject to subsections (1.1) and (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy.
(1.1) Subsection (1) ceases to apply in respect of a creditor on the day on which the trustee is discharged.
(2) Subject to sections 79 and 127 to 135 and subsection 248(1), the bankruptcy of a debtor does not prevent a secured creditor from realizing or otherwise dealing with his or her security in the same manner as he or she would have been entitled to realize or deal with it if this section had not been passed, unless the court otherwise orders, but in so ordering the court shall not postpone the right of the secured creditor to realize or otherwise deal with his or her security, except as follows:
(a) in the case of a security for a debt that is due at the date the bankrupt became bankrupt or that becomes due not later than six months thereafter, that right shall not be postponed for more than six months from that date; and
(b) in the case of a security for a debt that does not become due until more than six months after the date the bankrupt became bankrupt, that right shall not be postponed for more than six months from that date, unless all instalments of interest that are more than six months in arrears are paid and all other defaults of more than six months standing are cured, and then only so long as no instalment of interest remains in arrears or defaults remain uncured for more than six months, but, in any event, not beyond the date at which the debt secured by the security becomes payable under the instrument or law creating the security.
In Scott, Re, the court dealt with a husband invoking section 69.3 of the Bankruptcy and Insolvency Act so as to complicate the family law proceedings and wear his wife down.
On a motion brought by his wife to lift the stay, Justice Kershman ruled in her favor and stated that any person affected by section 69.3 of the Bankruptcy and Insolvency Act could apply to the court to have the section deemed inoperable. Justice Kershman outlined the test to have the section deemed inoperable as one that conveys the fact that the affected party is materially prejudiced by its operation, and that it would be inequitable to have the section stay the proceedings.
To learn more about the effects of declaring bankruptcy as well as the services provided by Krol & Krol, call 905.707.3370 today.
