CAIRP EXCHANGE Consumer Breakout: When the Act is Silent Presenters: Kathy Lenart, Taylor Lebow Inc.

CAIRP EXCHANGE Soon after the date of bankruptcy, Mr. Jones agrees to repurchase the equity in his property for $10,000 (net after exemptions and negotiations), post-discharge, after completing his surplus income payments. During the period when the surplus payments were being made, the market takes a downturn, and the bankrupt now refuses to honour the original agreement. What do you do? A.As you are aware of the state of the real estate market, you reduce the amount payable and make notes in the file explaining your decision. B.Insist on the original amount based on the value at the date of bankruptcy. C.Redirect up to $10,000 from the surplus income account to the equity repurchase, and obtain a conditional order for the balance of surplus. D.Settle with the bankrupt for another amount, and call a meeting of creditors to approve a lower equity payout. E.Something different.

CAIRP EXCHANGE You are reviewing a discharge for a Bankrupt who has met all of his obligations, except it appears he is short $500 on a surplus obligation of $15,500. What do you do? A.Issue the certificate of discharge, as the $500, less than 10% of the requirement, is not material. B.Oppose discharge and request mediation to resolve the discrepancy. C.Oppose discharge and apply to Court for a Conditional Order for $500. D.Issue the certificate of discharge and withhold the certificate until the $500 is paid. E.Something different.

CAIRP EXCHANGE You have a 60-month consumer proposal that was going fine until the debtor missed two payments. Deemed annulment is still a month away, but you are concerned about the deadline for clearing the missed payments. What do you decide? A.As long as the proposal is not behind by three payments, the payments can be made in months 61 and 62. B.Declare the proposal to be in default if it is not completed within 60 months. C.File an amended consumer proposal to account for the arrears, and hope the creditors accept it. D.Bring a motion for court approval of a short extension to the proposal. E.Something different.

CAIRP EXCHANGE Six months before bankruptcy, a recently-separated debtor transferred his share of the jointly-owned matrimonial home to his estranged wife, in lieu of ongoing spousal support, which he was unable to pay on a monthly basis, and without a formal agreement or order. The value of the transferred equity was $80,000. How do you treat the transfer under value? A.Oppose discharge and recommend a significant payment condition. B.Bring a motion to overturn the transfer, since the spousal support will survive bankruptcy. C.Do nothing, as he would have had to pay spousal support anyway. D.Negotiate with the estranged spouse for a settlement. E.Something different.

CAIRP EXCHANGE Mr. Smith, a bankrupt, provides monthly budgets with proof of his income. His non-bankrupt spouse provides her income but refuses to submit supporting documentation. If her income is as stated, there is no surplus income, but without proof you cannot be sure. What do you do? A.Oppose the bankrupt’s discharge. B.Issue a discharge because the bankrupt has complied with his duties. C.Adjust the OSB standard for a family of 2 divided in half, as required by the Directive. D.Accept Mrs. Smith’s income as declared. E.Something different.

CAIRP EXCHANGE A self-employed debtor files a consumer proposal which includes a deemed trust of $5,000 for employee-portion source deductions. No other Crown debts are owed. How do you deal with the deemed trust claim in the consumer proposal? A.With a special clause in the proposal stating that the deemed trust amount will be paid in full within 6 months, outside the proposal. B.Inform the debtor that the deemed trust needs to be dealt with between him and CRA, and that it does not form part of the Proposal. C.As a preferred claim, payable ahead of the unsecured creditors. D.As an ordinary unsecured debt. E.Something different.

CAIRP EXCHANGE A bankrupt declares that he and his four siblings share ownership in real estate in a foreign country. He insists that the property has no value, but he cannot obtain any documentation, as he is not on speaking terms with the siblings, all of whom live in the other country. What do you do? A.Take the Bankrupt’s word for it that the property has no value. B.Oppose discharge pending production of documentation and assistance with realization. C.Advise creditors of their rights under s. 38. D.Contact a local INSOL colleague for their professional opinion. E.Something different.

CAIRP EXCHANGE Fifteen months into a bankruptcy in which surplus income is due, WSIB pays a seriously injured bankrupt $40,000 for wage loss replacement, solely for a period prior to the bankruptcy. What do you do? A.Example 5 of Directive 11R2 says the Trustee seizes the entire benefit, so I seize the entire benefit. B.Section 68 refers to Workers Compensation payments as part of total income, so I use the income formula and take fifty percent of the surplus. C.Hold the funds in trust, and recommend that the bankrupt file a lump-sum consumer proposal with a suitable portion of the amount received. D.Negotiate a settlement with the bankrupt, and call a meeting of creditors for approval. E.Something different

CAIRP EXCHANGE How do you approach previously-exempt RRSP funds withdrawn during Bankruptcy? A.The proceeds are income, subject to surplus income calculations. B.The proceeds are no longer an exempt asset, so the cash value is payable to the estate. C.The proceeds are still exempt. D.Something different.

CAIRP EXCHANGE A consumer proposal is up to date until the end, when the debtor misses the last installment. You cannot reach her to make up the payment. Given that the proposal will never be three months’ payments in arrears, it will never be deemed annulled. What do you do? A.Wait for the debtor to appear. They always show up eventually. B.Make the final payment from the General Account, and issue the Certificate of Full Performance. C.Declare the CP in default after 90 days, and close the file. D.Apply to the court for directions. E.Something different.

CAIRP EXCHANGE A bankrupt reported that he sold his home at fair market value 15 months prior to his assignment, and that his $45,000 proceeds were used to repay debts to three individuals whose names he cannot remember. No funds were paid to institutional creditors. The bankrupt is now currently renting an apartment, and his reported income cannot support a significant payment condition. What can you do? A.Conduct a s. 163 examination, or recommend a s. 161 examination, to obtain the contact information of the recipients. B.Recommend a significant condition on his discharge, regardless of his current inability to pay. C.Recommend a suspension of discharge; the money is long gone and he cannot repay the estate. D.Notify creditors of the preferences, and advise that they consider their options under s. 38. E.Something different.

CAIRP EXCHANGE The bankrupt discloses a GIC with a face value of $10, pledged against a loan to a financial institution where the investment is held. The creditor has not filed a proof of claim and won’t respond to your Notice Requiring Proof of Security or letters claiming the GIC as an asset of the Estate. What do you do? A.Call the institution’s legal department and speak with someone in authority. B.File a complaint with the OSB. C.Apply to the Court for an order declaring the GIC an asset of the Estate, and a declaration that any security held over the GIC by the creditor is not valid against the Estate’s interest. D.Something different.

CAIRP EXCHANGE Your bankrupt is a seasonal worker who is employed only 4 months out of the year. She is on EI for the first 6 months of the bankruptcy and has no surplus income. In months 7 and 8 she has a take home pay of $10,000 for each month. This is enough to trigger surplus income on average and change the bankruptcy to 21 months. However, her income if annualized would not require her to make surplus income payments. What do you do? A.Calculate the surplus for months 7 and 8 only and maintain the procedure for a 9- month bankruptcy. B.Extend the bankruptcy to 21 months and calculate surplus at month 20. C.Annualize the bankrupt’s income, and calculate surplus based on the average monthly income. D.Something different.