Changes To Bankruptcy Act September 18 2009

 Three significant changes to the Bankruptcy and Insolvency Act will be coming into force on September 18th, 2009. Firstly, the limit on Consumer Proposals is raised from $75,000 to $250,000. This number refers to the individual’s debt other than mortgages on the principal residence. While this is not a huge change (since one could always file a Division 1 proposal) it will help to streamline the process for those making proposals. Secondly, and much more significant, is that individuals with income in excess of the surplus income guidelines will no longer be able to get an automatic discharge if a first time bankrupt and/ or will have they time they are required to remain in bankruptcy extended if they are second or third time bankrupt. A first time bankrupt with surplus income will, it appears, be required to make payments for at least 21 months (an additional year on top of the current nine months);A second time bankrupt will remain in bankrupt for at least 24 months and, if they have surplus income, will be required to make payments for 36 months. It does not appear that there will be any ability to make a lump sum payment in respect to surplus income and to be discharged prior to the extended time periods, although the process to be followed in such cases is not yet clear. Finally, individuals owing more than $200,000 of debt to Canada Revenue Agency where this debt constitutes over 75% of total debts will not be eligible for an automatic discharge, but must make a court application. Depending on the province, it can be many months before one can even get in front of the courts. The Office of the Superintendent of Bankruptcy has not yet released the rules related to the above changes so we are not entirely certain how the processes relating to the above will work, but clearly these changes will have a major impact on how long individuals may remain in bankruptcy. Please contact any of our insolvency professionals to discuss your situation immediately if you believe these changes could impact on you. Ian Schofield MNP Regina 306-790-7904