Directive No. 16R (Pre-1992)

Preparation of the statement of affairs

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Directive No. 16R

MB, 12 pages

Issued:

Reissued:

Purpose

This Directive revises and replaces Directive #16 issued as well as any previously issued policies on this matter.

Background

  1. The Statement of Affairs is one of the most important documents for the administration of the estate and one on which a variety of users, the Court, the trustee, the creditors, the inspectors and the Official Receiver, base their decisions.
  2. Although the Statement of Affairs is the debtor's statement, the trustee often assists in its preparation on the basis of the information provided by the debtor. As the preparation of the Statement of Affairs is normally done by the trustee, the time spent is a normal and acceptable charge to the estate.
  3. Whereas financial statements prepared by professional accountants will normally be prepared in accordance with generally accepted accounting principles, such is not the case for a Statement of Affairs where there are no guidelines. There are concerns that the manner in which it is prepared in numerous instances leads to confusion and misunderstanding.
  4. The multiplicity of ways in which assets and liabilities have been treated for the purpose of the preparation of the Statement of Affairs have often led to a distorted picture of the actual situation of the debtor leading to unreliable criteria on which decisions by the creditors, the Official Receiver and the trustee are made.

    Guidelines

  5. While assisting a debtor in preparing his Statement of Affairs, trustees are expected to make an effort by using their experience and skill to improve the full disclosure of all the necessary information and help the debtor to provide information which is proper and as accurate as possible, having regard to the circumstances and to the provincial exemptions and legislation.
  6. Form 74A – Statement of Affairs of a Non-Business Bankrupt is to be used for all consumer debtors and non-business bankruptcies whether the estate is administered under the summary administration provisions or under the regular provisions of the Act. Form 74 – Statement of Affairs is to be used for all other proceedings.
  7. Where a partnership is involved, a Statement of Affairs must be prepared for the business as well as for each of the partners making an assignment.
  8. For the purpose of this Directive,
    1. a consumer debtor is defined as an individual:
      • who has no business assets; and
      • who is not currently active in business; (commissioned salespersons or individuals in similar occupations should be classified as consumer debtors)
    2. indebtedness resulting from guarantees or endorsements of a corporation or a third party operating a business does not constitute a debt arising out of the operation of a business.
  9. Notwithstanding paragraph 6, in those cases where the use of the alternate form could be more appropriate, the trustee shall consult the Official Receiver as to the acceptability of using the alternate form.
  10. In completing the Statement of Affairs or the Statement of Affairs of a Non-Business Bankrupt:
    1. the full name and complete address of each creditor is to be shown, additional creditors not shown on the list should be shown as a separate list;
    2. where the exact or approximate amount owed or where the value of the asset is not known, the "best estimate" of the amount involved is to be included and the debtor is to refrain from using a question mark in the "estimated dollar value of assets" or the "amount of debt" columns of Form 74A or in the "assets" or "liabilities" columns of Form 74;
    3. in those cases where it is not possible to determine an amount because of its contingent nature, an explanation is to be provided as to why an amount cannot be indicated (i.e. – tax refund unknown, judgment not yet rendered);
    4. where a property is jointly or partially owned, the situation is to be reflected in the Statement of Affairs with the debtor's share of the property, the share of the secured encumbrances that he is directly responsible for as well as any possible contingent claims as he is, with the other co-owner(s), jointly and severely responsible for all of the encumbrances against the property;
    5. where the debtor cannot ascertain if an amount is or could be owed to a creditor, but wants to include the said creditor. The creditor should be shown on the Statement of Affairs as a supplementary creditor without any amount or question mark in the dollar amount column;
    6. appendices "A" and "B" indicate how individual elements of assets and liabilities are to be dealt with or presented on the Statement of Affairs;
    7. the appendices attached to the Statement of Affairs are to be fully completed to provide all the details to substantiate the amounts appearing on the front page of the Statement of Affairs; and
    8. the front page of a business Statement of Affairs (Form 74) should be sent to creditors with the notice to creditors of the first meeting and the list of creditors. In the case of a Non-business Statement of Affairs (form 74A), the Statement of Affairs and all the appendices are to be sent to the creditors.

The Superintendent of Bankruptcy

Wally Clare


Appendix "A"

Assets and liabilities of the debtor are to be shown in the manner indicated under the individual captions

Statement of affairs of a non-business bankrupt

(Form 74A)

Assets

  1. Cash on hand: Moneys turned over to the trustee by the debtor at the time of the assignment is to be shown (on hand or in the bank).
  2. Furniture: Where there is a provincial exemption, the amount of such exemption should be shown under "description". Any part-interest of the debtor in the property should be indicated. The debtor's estimated realizable dollar value of the asset is to be shown in the dollar column.
  3. Personal effects: (may include jewellery, collections, works of art, fur coats, cameras, etc…): Where there is a provincial exemption, the amount of such exemption should be shown under "description". Any part-interest of the debtor in the property should be indicated. The debtor's estimated realizable dollar value of the asset is to be shown in the dollar column.
  4. C.S.V. of insurance policies: The life insurance policies should be examined. The C.S.V. should be shown with "exemption" if preferential beneficiary or where the estate is not the beneficiary.
  5. Stocks, bonds: (also includes fully paid or subscribed CSB): All securities and negotiable instruments, even if deemed to be without any value, should be seized by trustee. The net realizable value of the various stocks is to be shown with an appropriate description.
  6. Real estate: Indicate the municipal address; if sole owner, part-owner or joint tenant; and if partly or fully encumbered. For land, a short legal description instead of the municipal address could suffice. The value to be shown is the realizable value of the property.

    Should the real property or other property be under litigation it is still to be shown as an asset with the off-setting encumbrance on the liability side, regardless of the interest or equity of the debtor where the debtor is still the registered owner. Where the proceedings are entirely executed and neither the debtor nor the trustee have any recourse to retake possession of the asset, the property is not to be shown as an asset. As to the related lien, only the eventual shortfall on the disposal, if applicable, is to be shown. Where there is a provincial exemption, the amount of such exemption should be shown under "description".

  7. Motorized vehicles: Indicate the year, model and serial number and if partly or fully encumbered. Reference to a recognized value publication (black book) to determine the value of automobiles would be acceptable. The value to be shown is the estimated realizable value.
  8. Recreational equipment: (includes campers, trailers, boats, hunting equipment, etc…) Indicate the full description, year, model and serial number. The value to be shown is the estimated realizable value.
  9. Estimated tax refund: Refers to the refund receivable as a result of the previous year's tax return for which the refund has not yet been received as of the date of the assignment. Where a reasonable estimate has been made of the pre-bankruptcy tax refund, it can also be included but must be so identified.
  10. Other assets: Includes all other assets not shown above such as accounts receivable, R.R.S.P., amounts receivable as a result of litigation, reversionary or other interests under wills, or interest of the debtor in any transaction. The value to be shown is the estimated realizable value.

Liabilities

  1. Unsecured: All unsecured debts, including the unsecured portion of debts owing to preferred and secured creditors.
  2. Secured creditors: Only the secured portion of the debts is to be shown in this column. Where the value of the property under lien is less than the total liability, the excess portion of the debt is to be shown as unsecured. The particulars of the security on the encumbered assets is also to be shown at the bottom of appendix A.
  3. Preferred creditors: Preferred portion of debts are to be shown in this column. Where the debtor cannot ascertain if an amount is or could be owed to the creditor but wants to include the said creditor (i.e. Revenue Canada), no dollar amount is to be shown. Where a deemed trust liability may exist, the amount expected to rank against the estate is to be shown therein.
  4. Contingent and Unliquidated: An explanation of the nature and amount of the claim with the amount of proven claims estimated to rank for a dividend is to be provided. Similar treatment is to be given to guarantees. Where the debtor has given a third party guarantee or endorsement, the nature of the guarantee or endorsement is to be explained.

Appendix "B"

Statement of affairs – business

(Form 74)

Assets

  1. Stock-in-trade: Indicate the fair market value. Fair market value on the Statement of Affairs is interpreted as the best estimate by the debtor of the forced sale value of the merchandise. Any encumbrances should be disclosed.
  2. Trade fixtures: Same as (a) above. Where these assets are immovable by location and there is no realizable value, a notation to this effect should appear on the pertinent schedule or on the front page of the Statement of Affairs.
  3. Book debts: The total amount of receivables and the amount to produce according to the best estimate of the debtor is to be shown. Particular attention is also to be given to any right of set-off so as not to distort the amount to be realized.
  4. Bill of exchange: Provide the detail thereof on the schedule attached to the Statement of Affairs. The estimated amount expected to be realized is to be shown.
  5. Cash in bank: Amount of money in the bank account(s) of the debtor to be turned over to the trustee.
  6. Cash on hand: Amount of money remitted by the debtor to the trustee in the form of a deposit (i.e. cash, credit cards slips, undeposited cheques).
  7. Livestock: Same as (a) above.
  8. Machinery, equipment and plant: Same as (a) above. See also item (i) immediately below regarding encumbrances.
  9. Real estate: The value to be shown is the estimated realizable value. Also indicate if sole owner, part-owner or joint tenant, and if partly or fully encumbered. On the pertinent schedule, indicate the municipal address; (for land, a short legal form description instead of the municipal address will also suffice) and all required details.

    Should the real property or other property be under litigation, it is still to be shown as an asset with the off-setting encumbrance on the liability side, regardless of the interest or equity of the debtor where the debtor is still the owner. Where the proceedings are entirely executed and neither the debtor nor the trustee have any recourse to retake possession of the asset, the property is not to be shown as an asset. As to the related lien, only the eventual shortfall on the disposal, if applicable, is to be shown.

  10. Estimated realizable value of securities in hand of secured creditors: A full description and location of the securities is to be provided on an appendix to the Statement of Affairs.
  11. Furniture: Same as (a) above. Where the debtor is an individual and there is a provincial exemption, the amount of such exemption will be shown on the pertinent schedule. Where the debtor has only a part-interest in the property, it should be indicated. The realizable dollar value estimated by the debtor is to be shown in the dollar column.
  12. Life insurance policies: The cash surrender value is to be shown. Where the estate is not the beneficiary, it should be indicated and a realizable value of "nil" is to be shown.
  13. Reversionary or other interests under wills: Where beneficiary or remainder-man of a deceased person, indicate the name of the deceased. If the amount to be received cannot be determined, indicate "indeterminate". If an amount can be estimated, indicate the approximate amount involved.
  14. Other property: Could include assets such as motor vehicles, R.R.S.P., patents, trade marks, joint interest in property. The estimated realizable value is to be shown. For details as to individual elements, also refer to the Statement of Affairs of a Non-Business Bankrupt where applicable.

Liabilities

  1. Unsecured: All unsecured debts, including the unsecured portion of debts owing to preferred and secured creditors.
  2. Secured creditors: Secured portion of debts to be shown in this category. Where the value of the property under lien is less than the total liability, the excess portion of the debt is to be shown as unsecured. The particulars of the security on the encumbered assets is also to be shown.Footnote 1
  3. Liabilities on bills or notes endorsed…: The amount expected to rank for dividend is to be shown.Footnote 1
  4. Preferred creditors: Preferred portion of debts are to be shown in this category. Footnote 1 Where the debtor cannot ascertain if an amount is or could be owed to the creditor but wants to include the said creditor (i.e. Revenue Canada), no dollar amount is to be shown. Where a deemed trust liability may exist, the amount expected to rank against the estate is to be shown therein.
  5. Contingent and Unliquidated: An explanation of the nature and amount of the claim with the amount of proven claims estimated to rank for a dividend is to be provided. Similar treatment is to be given to guarantees. Where the debtor has given a third party guarantee or endorsement, the nature of the guarantee or endorsement is to be explained.

Important notice:

The HTML version of this Directive is not the official version. In the event of an inconsistency between the HTML and PDF versions of this Directive, the PDF version prevails. Users are required to exercise due diligence with respect to the HTML version.

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