You Owe Money—
When Bankrupts Fail to Respect their Obligations

What are the obligations of a bankrupt?

The main obligations of a bankrupt, as described in the Bankruptcy and Insolvency Act (sections 157.1 and 158), include:

What is considered misconduct?

The most common acts of misconduct are:

  • The bankrupt continued to trade or to borrow after realizing that he/she could not pay his/her debts;
  • The bankrupt caused the bankruptcy, or contributed to it, through reckless speculation or an extravagant lifestyle, gambling or negligence with regard to his/her financial affairs;
  • The bankrupt, although unable to pay his/her debts as they came due, gave undue preference to one of his/her creditors;
  • The bankrupt was guilty of fraud or fraudulent breach of trust;
  • The bankrupt failed to make the payments required by law to the LIT;
  • The bankrupt chose bankruptcy when he/she could have made a proposal to his/her creditors to repay part of the debts;
  • The bankrupt failed to respect his/her obligations as described above.

See the Bankruptcy and Insolvency Act (subsection 173. (1)) for a complete list of acts considered to be misconduct.

How is misconduct reported?

Creditors, LITs and the OSB may oppose the bankrupt's discharge when they believe that the bankrupt has committed one or more acts of misconduct. The Court will review the opposition and render a decision. Learn more about the rights and responsibilities of creditors, LITs and the OSB

What are the consequences of misconduct?

Consequences of misconduct are determined on a case-by-case basis. Misconduct may lead to refusal or suspension of the bankrupt's discharge or granting of a conditional discharge.

Below are summaries of some cases of bankrupts whose conduct was deemed to be inappropriate, as well as the related judgment handed down by the Court.


Case summaries

Summaries are written for ease of understanding. Users wishing full information on the cases should consult the court decision. The court decision prevails.

2013

Opposition to bankrupt's discharge by two creditors
Court No.: 400-11-004311-113
OSB No.: 43-1389770

Background

A self-employed contractor declared debts of $430,000, almost entirely for unpaid taxes and related penalties. About two years before filing for bankruptcy, he sold his share of the family home to his wife, from whom he was separated. He received $106,000 from the sale, which he used to take trips abroad with his wife, as well as to pay for health care for himself. During this period, he continued to receive tax assessments and challenge them, without paying any instalments. After he filed for bankruptcy, he did not appear to cut back on his spending, including leasing a car for close to $600 a month. His discharge was opposed by the provincial and federal tax agencies, which together were owed $425,000.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt has $200,000 or more of personal income tax debt, which represents 75 percent or more of the bankrupt's total unsecured proven claims.
  • Bankrupt contributed to his bankruptcy by unjustifiable extravagance in living.

Court decision

In noting that the marital separation appeared to be a sham to help the bankrupt avoid paying taxes or his trustee, the Court granted a conditional discharge after payment to the estate of $106,000 in minimum annual instalments of $10,600. The bankrupt can receive an absolute discharge as soon as he pays off the entire amount.

Read the Court decision for 400-11-004311-113/43-1389770 (available in French only).

2012

Background

An individual undertook renovations of an apartment building owned by someone else. Although he did not have a contract with the building owner to do the work, there was an agreement in principle with an option to buy the property and he had made some payments toward its purchase. When the individual filed for bankruptcy, he said he owed about $470,000. Proven claims from creditors actually amounted to close to $740,000, most of it relating to the renovations. In addition to underestimating his debts, he did not include all of his assets in his statement of affairs—the police found $25,000 in cash at his residence as well as other items that should have been part of his bankruptcy estate. The trustee and four creditors opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt contributed to his bankruptcy by unjustifiable extravagance in living.
  • Bankrupt failed to perform his duties as a bankrupt imposed under the Act.

Court decision

The Court ordered the bankrupt to pay $150,000 at an annual rate of $15,000 over 10 years. The bankrupt can be discharged only after 10 years, even if he completes payment before that time.

Read the Court decision for 350-11-000040-101/43-146320 (available in French only).


Opposition to bankrupt's discharge by a creditor
Court/OSB No.: 10-3756/11-1397474

Background

A retired woman filed for bankruptcy with debts totalling more than $790,000 in taxes owed to the Canada Revenue Agency (CRA). The tax debt arose seven years earlier after an audit of her tax returns concluded that $502,500 that the woman had transferred from a registered retirement savings plan (RRSP) to a self-directed RRSP had disappeared. She claimed that she was the victim of an RRSP scam, but the CRA said she had used a scheme to avoid paying taxes on the withdrawal. She said that she sold her husband her share of the matrimonial home for $362,500 to generate funds to deal with appeals related to the CRA claim. She also sold 60 gold coins prior to the bankruptcy for approximately $60,000, claiming she used the money for living expenses. However, she did not spend any money on appeals nor did she make any payments toward her tax bill. The CRA opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt has $200,000 or more of personal income tax debt, which represents 75 percent or more of the bankrupt's total unsecured proven claims.

Court decision

The Court ordered a conditional discharge upon payment of $150,000 to the trustee. The bankrupt must file all income tax returns and pay all taxes as required by law.

Read the Court decision for 10-3756/11-1397474.


Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 11-1412432

Background

A woman accumulated debts of $162,000, most of it on 14 credit cards. She indicated that she used funds for shopping and gambling. When questioned under oath by the OSB, this first-time bankrupt admitted that she continued to gamble, but did not want to undergo gambling counselling. She reported having withdrawn about $2,000 from registered retirement savings plans (RRSPs) in the year before her bankruptcy, but the bank confirmed that she actually withdrew $14,500 from her RRSPs. Furthermore, she was not able to explain a payment of $18,000 to one creditor only three months before her bankruptcy. Although she claimed she became aware she was insolvent just before she filed for bankruptcy, she had been using credit from one credit card to pay off another in the months leading up to her bankruptcy. The trustee and the OSB opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is responsible for having less than half the value of her debts covered by the value of her assets.
  • Bankrupt contributed to her bankruptcy by unjustifiable extravagance in living and by gambling.

Court decision

The Court ordered the bankrupt to pay $23,481 to the trustee for her bankruptcy estate, in minimum monthly payments of $1,000, before she can receive an absolute discharge. She must also file a notice with credit agencies that she cannot apply for credit for 60 months and she must attend at least five gambling counselling sessions.

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Opposition to bankrupt's discharge by the OSB
Court No.: 500-11-038361-107
OSB No.: 41-1201538

Background

A first-time bankrupt declared debts of $176,000; however, his creditors claimed that he owed $219,000. He was examined under oath by the OSB, and his statements were contradicted by the evidence collected by his trustee. For example, he said he used cash advances to pay for only two trips abroad to visit and help pay medical expenses for his ailing parents. However, his credit card statements revealed additional charges of $30,000 to a travel agency and some airlines. At the examination, he revealed under oath that he had withdrawn more than $100,000 in cash advances and bought items on credit that he resold for cash so that he could have money to gamble. He had not identified gambling as one of the causes of his bankruptcy when he was required to list them, even though his trustee had inquired about it. The OSB opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is responsible for having less than half the value of his debts covered by the value of his assets.
  • Bankrupt failed to account for any loss of assets; he cannot explain why there are not enough assets to meet his liabilities.
  • Bankrupt contributed to his bankruptcy by unjustifiable extravagance in living and by gambling.
  • Bankrupt failed to perform his duties as a bankrupt imposed under the Act.

Court decision

The Court refused to discharge the bankrupt from his debts, noting that he claimed to be employed at present and would, therefore, be in a position to prepare a proposal for repaying his creditors.


Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 25-1359676

Background

Within the 12-month period before filing for bankruptcy, a real estate agent used credit cards to purchase goods she knew she couldn't afford. She also took trips to Las Vegas and Disneyland, accumulating debts totalling $200,000. She would then use one credit card to make payments on another. She attributed her financial difficulties to low real estate sales and a lawsuit related to a house she had sold. After she had filed for bankruptcy, she received a $4,000 tax refund and sold some exercise equipment for $900, but did not report receiving these funds to her trustee. When questioned under oath by the OSB, she admitted she spent a lot of money on gambling in the 12 months leading up to the bankruptcy. She also admitted selling goods she had obtained on credit even though she had not paid for them. She used that money to repay family and friends who were supporting her when she had no work. The trustee and the OSB opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is responsible for having less than half the value of her debts covered by the value of her assets.
  • Bankrupt failed to account for any loss of assets; she cannot explain why there are not enough assets to meet her liabilities.
  • Bankrupt contributed to her bankruptcy by unjustifiable extravagance in living and by gambling.
  • Bankrupt failed to perform her duties as a bankrupt imposed under the Act.

Court decision

The Court ordered the bankrupt to pay $35,000 at a rate of $100 per month. In addition, the Court ordered the Canada Revenue Agency to forward all of the bankrupt's income tax refunds directly to her trustee to go toward her payments. The bankrupt must also file a notice with credit agencies that she cannot apply for credit while she is an undischarged bankrupt.


Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 32-1238873

Background

At the time of filing his second bankruptcy, a bankrupt reported $126,000 in debts. He blamed his financial difficulties on costly divorce proceedings, business failure, fluctuating income from commission sales, lump sum demands by creditors and credit mismanagement. His trustee discovered that under his divorce settlement, the bankrupt received $155,000 in equalization payments in the six months before his bankruptcy. When examined under oath by the OSB, the bankrupt could not explain what happened to these funds. In fact, during the same period he was receiving the equalization payments, the bankrupt used his credit cards to pay for a trip for four to Mexico. He also admitted that he bought gifts on credit when he knew he couldn't afford to pay for them. As well, the bankrupt did not complete his second insolvency counselling session as required under the Bankruptcy and Insolvency Act. His trustee opposed his discharge, seeking to obtain funds equivalent to the equalization payments for the bankruptcy estate.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is responsible for having less than half the value of his debts covered by the value of his assets.
  • Bankrupt continued to borrow after knowing he was insolvent.
  • Bankrupt failed to account for any loss of assets; he cannot explain why there are not enough assets to meet his liabilities.
  • Bankrupt contributed to his bankruptcy by unjustifiable extravagance in living.
  • Bankrupt has on a previous occasion been bankrupt.
  • Bankrupt failed to pay the required surplus income to his trustee.
  • Bankrupt failed to perform his duties as a bankrupt imposed under the Act.
  • Bankrupt refused or neglected to receive counselling.

Court decision

The Court ordered a conditional discharge upon payment, within five years, of $31,500 to the trustee for his bankruptcy estate in minimum monthly payments of $250. Until the bankrupt pays the full amount ordered, he must not apply for, obtain or use credit of any kind. The bankrupt must also attend his second counselling session. After the full amount is paid, the bankrupt's discharge is to be suspended for an additional 12 months.

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Opposition to bankrupt's discharge by the trustee, the OSB and a creditor
Court No.: BK-09-1302418
OSB No.: 33-1302418

Background

A chiropractor owned two clinics, where he also employed his wife. According to the bankrupt, his financial difficulties arose because he had hired a tax advisor who was later found guilty of fraud relating to tax returns prepared for 115 clients. After that conviction, the Canada Revenue Agency (CRA) reassessed his taxes, concluding that he owed about $890,000, including penalties and interest. He was also ordered to pay $31,000 in court costs for his unsuccessful appeal of the assessment.

In the years between the CRA's reassessment and filing for bankruptcy, the bankrupt cashed in $910,000 in Registered Retirement Savings Plans (RRSPs). Also during that period, the bankrupt and his wife drew up a separation agreement in which he transferred to his wife his entire share in family properties. This included the couple's matrimonial home, the two chiropractic clinics, a cottage and eight motor vehicles. However, the bankrupt and his wife remained together in the house, continued working together and quickly reconciled. When he filed for bankruptcy, the bankrupt reported assets of $15,500 against debts totalling $1,365,000, all of which were tax debt. During his examination under oath with the OSB, it became clear that the properties transferred to his wife were considerably undervalued. It was also revealed that he had under-reported his income, falsely reported paying some expenses and failed to disclose to his trustee the transfer of the cottage or cashing in the RRSPs. The discharge was opposed by the trustee, the Office of the Superintendent of Bankruptcy (OSB) and the CRA.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by culpable neglect of business affairs.
  • Bankrupt has failed to perform the duties imposed under the Act.

Court decision

Although the Court stated that the bankrupt could be presumed to have been honest when he retained the tax advisor initially, he could not be considered to be an honest debtor after his tax reassessment. At the very least, he misled the trustee and his creditors about the cottage, the RRSPs and his monthly expenses. The Court also considered the separation to be a sham to hide his assets. The bankrupt was given a conditional discharge upon payment of $75,000, with a minimum instalment of $1,000 per month. In addition, the bankrupt must provide the trustee with a written accounting for the proceeds of his RRSPs and written evidence of the value of the cottage and his chiropractic clinics. If this accounting reveals that more should be paid into the estate, the trustee is required to take the steps necessary to do so.

Read the Court decision for BK-09-1302418/33-1302418.


Opposition to bankrupt's discharge by the OSB
Court No.: 500-11-041565-116
OSB No.: 41-1455795

Background

A man had not been working for four years and was on welfare. Despite his financial situation, he used credit to pay about $50,000 for his brother's wedding overseas. Although he already had at least 10 credit cards, he continued applying for new credit cards, stating on the applications that he was working at his former place of employment. He used the credit cards to obtain cash advances to gamble. In the two months before filing for bankruptcy, he used his credit cards to obtain about $70,000 in cash advances and to buy $12,500 in electronics, appliances and home furnishings. He used some of the cash to repay a loan of $40,000 from a friend. When he filed for bankruptcy, he reported assets of $800 against debts totalling $99,500. The OSB opposed the discharge of this first-time bankrupt.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet liabilities.
  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living.
  • Bankrupt has given an undue preference to any creditors.
  • Bankrupt has been guilty of any fraud or fraudulent breach of trust.
  • Bankrupt has allegedly committed an offence.
  • Bankrupt has failed to perform the duties imposed under the Act.

Court decision

The bankrupt's discharge was refused.

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Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 31-1107000

Background

A man who earned $1,900 per month used credit to pay $30,000 for his wedding overseas. Even though he couldn't afford to pay off the debt, he continued buying items on credit and applying for new credit. He spent $50,000 on household goods. He also borrowed $100,000 against his credit cards to send to family overseas. When he filed for bankruptcy, he had debts totalling $267,000. During his examination under oath with the Office of the Superintendent of Bankruptcy, the bankrupt kept changing his explanation of what happened to items he had bought. The trustee opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is held responsible for having less than half the value of debts covered by the value of assets.
  • Bankrupt continued to borrow after becoming aware of being insolvent.
  • Bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet liabilities.
  • Bankrupt has allegedly committed an offence.
  • Bankrupt has failed to perform the duties imposed under the Act.

Court decision

The Court refused to discharge the bankrupt and ordered him to pay $100,000 to the estate before he can reapply for discharge.


Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 31-1377605

Background

The bankrupt who was an accountant suffered heavy losses in the stock market and began to use credit to pay for further investments. After he was deeply in debt and within a year of declaring bankruptcy, he used credit cards to pay $4,000 for a family vacation. When the bankrupt lost his job, he used a line of credit to pay rent. He had been unemployed for about three months when he filed for bankruptcy, listing debts totalling $220,000. His wife, also unemployed, filed for bankruptcy on the same day. In reviewing bank statements, the trustee found some sizable withdrawals that the man could not remember nor explain, other than to say that he tried to pay down some of his debts. The bankrupt said that he sent $24,000 to his wife overseas, but did not pay any money to the bankruptcy estate. The trustee opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt continued to borrow after becoming aware of being insolvent.
  • Bankrupt brought on, or contributed to, the bankruptcy by rash and hazardous speculations or by gambling.
  • Bankrupt has failed to perform the duties imposed under the Act.

Court decision

The Court ordered a conditional discharge upon payment of $43,631 and providing proof to the trustee that all appropriate government agencies have been notified of the bankrupt's current whereabouts. The discharge was further suspended for three months concurrently.


Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 51-1511748

Background

A man first realized he was insolvent about three years before filing for bankruptcy, when he began using credit to pay for everything. This included obtaining cash advances to pay off other credit cards. With monthly income of about $2,000, he kept paying the minimum balance on his credit cards. He also maintained his lifestyle and did not miss his monthly payments of $1,400 for his vehicle. He moved across the country 16 months before filing for bankruptcy, and received $100,000 clear from selling his home. He used $57,600 of that money to pay for his vehicle, living expenses and the purchase of another vehicle. After the move, he accumulated $178,000 in credit-card debt. In his new location, he managed to meet monthly mortgage payments of $1,600 using money from his girlfriend and parents. During the investigation, the Office of the Superintendent of Bankruptcy (OSB) found evidence in the bankrupt's banking documents that he had repaid a $10,000 loan to his mother within the year before filing his assignment. Both the OSB and the trustee opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living.
  • Bankrupt has given an undue preference to any creditors.

Court decision

The Court ordered a conditional discharge upon payment of $20,000 to the estate, including any income tax refunds. This amount is intended to cover the $10,000 preferential payment to his mother and $10,000 in restitution for the bankrupt's abuse of credit cards. The Court established an eight-year payment plan, but the bankrupt has the right to prepay at any time.

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Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 11-1514900

Background

A woman had 21 credit cards, and every month she paid off any money owing. With a zero balance on her credit cards, she took a trip to Las Vegas. In her two weeks there, she used the credit cards to make purchases and more than 130 cash withdrawals that amounted to $193,000. Two months later, she filed for bankruptcy. During her examination under oath with the Office of the Superintendent of Bankruptcy (OSB), she said that the cash was not for gambling but for an investment that was supposed to pay back a 30-percent return. She could not identify the investment company nor the hotel that held the investment seminar. When she filed for bankruptcy, she had no assets. The trustee and the OSB opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by rash and hazardous speculations or by unjustifiable extravagance in living.

Court decision

The Court ordered that the bankrupt must pay $30,000 before she can be discharged and must provide her trustee with monthly income and expense statements for three years. She must also file a notice with national credit-reporting agencies that she cannot apply for credit for five years.

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Opposition to bankrupt's discharge by the trustee and a creditor
Court/OSB No.: 35-1393934

Background

An individual failed to keep records or submit tax returns for his business for a period of over seven years on the basis that he could not afford the audits required. When he filed for bankruptcy, this first-time bankrupt had unsecured debts of $615,000, including more than $200,000 in back taxes. His trustee and the Canada Revenue Agency opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt did not keep proper books and records for the business.

Court decision

The Court suspended his discharge for six months and ordered him to pay $100,000 to the bankruptcy estate. Upon the latter of the payment of $30,000 towards the conditional amount or the period of suspension, the bankrupt will be eligible to receive an absolute discharge on the condition of consenting to a judgment in favour of the trustee for the balance owing under the conditional order.


Opposition to bankrupt's discharge by the OSB
Court/OSB No.: 41-1308169

Background

A man who had been bankrupt before was living solely on welfare and family allowance payments. However, when he applied for credit cards, he said he was working and that he earned more than double his actual income. The man obtained more than 25 credit cards, gradually building up a debt of $74,000. In the year before his bankruptcy, he charged an additional $94,000 on credit, including more than $60,000 in cash advances. Some items that he bought on credit were sold or given away, including some that he sold after he had filed for bankruptcy. During his examination under oath with the Office of the Superintendent of Bankruptcy (OSB), he explained that he had had a drinking problem that made him gamble and spend wildly, and that he did not remember what he had bought or what he had done with the cash. The OSB opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by gambling.
  • Bankrupt has been guilty of any fraud or fraudulent breach of trust.
  • Bankrupt has allegedly committed an offence.

Court decision

The Court refused to discharge the bankrupt.

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Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 33-1497267

Background

After losing her job, a woman sold a property to pay back a $50,000 loan from her sister and gambled with the remaining $20,000 she received from the sale. Although she was unemployed, she continued to gamble heavily. She indicated that to pay for her gambling, she obtained money from lines of credit, cash advances from credit cards or the sale of items she bought on credit, as well as from borrowing money from people she knew. Over four years, she accumulated debts of more than $215,000, continuing to gamble even after she knew she was insolvent. When she filed for bankruptcy, she reported $500 in assets. She continued to borrow money to gamble after her assignment into bankruptcy. Her trustee opposed the discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by gambling.
  • Bankrupt has failed to perform the duties imposed under the Act.

Court decision

The Court ordered the bankrupt to pay $21,000 to the estate and banned her for life from casinos anywhere in the world. She was also ordered to attend gambling-addiction counselling, and must show the Court that she completed the required sessions. After all of these conditions are met, the bankrupt will receive an absolute discharge.


Opposition to bankrupt's discharge by the trustee and a creditor
Court/OSB No.: 42-1002551

Background

An individual who had been previously bankrupt was operating a business with a partner. After resigning as president of the company, the individual stayed on to look after customer relations. He assumed that the other partner was looking after accounting. Tax liabilities accumulated such that when the individual declared bankruptcy, he owed $48,000 to Revenu Québec. While he was bankrupt and not yet discharged, the individual operated another business for which he was collecting, but not remitting, taxes owed. His trustee, as well as Revenu Québec, opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by culpable neglect of business affairs.
  • Bankrupt has on a previous occasion been bankrupt.

Court decision

The Court ruled that the bankrupt demonstrated negligence and carelessness in managing his business affairs, and attributed his insolvency to violation of tax laws and not to any cause beyond his control. The Court reiterated that the Bankruptcy and Insolvency Act should not be used as a quick and easy way for a person to be discharged from his/her debts and absolved of any responsibility. Accordingly, the Court discharged the bankrupt conditional upon payment of $54,500.

Read the Court decision for 42-1002551 (available in French only).

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Opposition to bankrupt's discharge by the trustee
Court/OSB No.: 41-0899110

Background

A man whose only sources of income were welfare and child tax benefits incurred debts of more than $100,000 on 17 credit cards, mainly within the five-month period leading up to his bankruptcy. To obtain access to credit, this first-time bankrupt, who had been unemployed since 1999, would declare yearly income of $48,000 on credit-card applications. The trustee opposed his discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living.

Court decision

The Court ordered the bankrupt to pay $20,000 to the estate.

2011

Background

A school teacher used her credit cards to invest in a restaurant managed by her spouse, accumulating $190,000 in debts. Although the business generated little or no profit for three years, she bought a new house requiring a monthly payment of $3,000. The couple was eventually locked out of the restaurant by the landlord for rent arrears. During her examination under oath by the OSB, she explained that she could not provide her trustee with the restaurant's records or its computer system because she and her husband had been locked out. The trustee opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is responsible for having less than half the value of her debts covered by the value of her assets.
  • Bankrupt continued to borrow after knowing she was insolvent.
  • Bankrupt failed to account for any loss of assets; she cannot explain why there are not enough assets to meet her liabilities.
  • Bankrupt contributed to her bankruptcy by rash or hazardous speculations.

Court decision

The Court granted a conditional discharge upon payment of $19,712.48 of outstanding surplus income to the trustee, in minimum monthly payments of $500, and an additional $20,000 representing her share of the equity in the family home.


Opposition to bankrupts' discharge by the trustee
Court No.: 31-1263620
OSB No.: 31-1269022

Background

A husband and wife, while supporting their teenaged daughter, were earning about $1,800 a month. The husband was self-employed and had been bankrupt once. After remortgaging their house to consolidate their loans, they went on a two-year spending spree. They used credit cards for cash advances and purchases totalling $147,000 for the husband and $70,000 for the wife. About six months before filing for bankruptcy, the husband had a heart attack and was diagnosed with a chronic illness. The couple averaged over $8,500 a month in expenses; $800 of the monthly bill was for gas even though the husband had no work. When they filed for bankruptcy, they blamed the economy and their health problems for their financial difficulties, reduced household income and unmanageable debt load. The trustee opposed their discharge.

The decision to oppose the bankrupts' discharge was based on a number of facts,Footnote 1 including:

  • Bankrupts continued to borrow after becoming aware of being insolvent.
  • Bankrupts have failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet liabilities.

Court decision

The Court found the bankrupts' behaviour a very serious abuse of credit. The husband's discharge was suspended for a year and he was ordered to pay $20,000 to the estate. As a first-time bankrupt, the wife's discharge was suspended for six months, during which time she must begin paying $5,000 to the estate. After their discharge, they are both banned from applying for, acquiring or using credit for five years.

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Opposition to bankrupt's discharge by the trustee
Court/No.: 31-1414288

Background

Some two years before filing for bankruptcy, a woman realized she could not pay her debts but kept using credit cards to pay for living and other personal expenses. This included $15,000 to divorce her first husband. Using credit, she sent about $50,000 overseas to help pay for her second husband's medical expenses and to help him immigrate to Canada. She said she was defrauded of $72,000 in a scheme to borrow more money to relieve her debt. She also gambled regularly although she was unsure how much this contributed to her debt. Following her second husband's arrival in Canada, they separated after a few months—she had assumed that once he was in Canada he would help her to repay her debts. When she declared bankruptcy, she owed about $220,000 but had only $3,000 in assets. The trustee opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt continued to borrow after becoming aware of being insolvent.
  • Bankrupt brought on, or contributed to, the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living or by gambling.

Court decision

The Court suspended the bankrupt's discharge for six months. During that time, she must begin paying $20,000 to the estate, with a minimum monthly instalment of $200. For 10 years after her discharge, she must stay away from casinos and not apply for, acquire or use any credit card.


Opposition to bankrupt's discharge by the OSB
Court/OSB No.: 41-1363231

Background

A first-time bankrupt whose main family income was a welfare cheque of $1,100 per month incurred $96,000 in credit-card debt, half of it within six months prior to her bankruptcy. She reported obtaining $40,000 using credit cards, which she loaned to her son to pay down his debt. She admitted to declaring work income varying from $25,000 to $47,000 on credit-card applications, while her sole income was the welfare cheque. During her examination under oath with the Office of the Superintendent of Bankruptcy (OSB), she said she wasn't aware of anyone within her family who had ever gone bankrupt. However, OSB records indicate that her husband, daughter, son-in-law and brother have all filed for bankruptcy in the past. The OSB opposed her discharge.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living.

Court decision

The bankrupt's discharge was refused.


Opposition to bankrupt's discharge by a creditor
Court No.: 700-11-002892-096
OSB No.: 41-1231678

Background

A woman took out a $50,000 line of credit to finance her university education. Shortly after she graduated and started working, she and her partner purchased a condominium. They had a baby and decided to sell the condominium and to buy a new house, taking on a $314,000 mortgage even though the woman was on maternity leave and was receiving only 55 percent of her salary. Within a year, she filed for bankruptcy with debts of close to $95,000. She stated that she chose bankruptcy instead of a consumer proposal because it meant making nine payments of $650 instead of 60 payments of $650. The bank opposed the discharge, arguing that she could have made a viable proposal as her education—paid for through the line of credit—could provide her with a good salary.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt could have made a viable proposal.

Court decision

The Court found that the principal reason for the bankruptcy was the couple's decision to buy a new house instead of repaying their creditors first. Taking into account all of the facts, the Court ordered the woman to pay $18,000, in monthly instalments of at least $355, before she can be discharged.

Read the Court decision for 41-1231678 (available in French only).

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Opposition to bankrupt's discharge by a creditor
Court No.: 700-11-011000-090
OSB No.: 41-1083184

Background

An individual took out a student loan while attending a professional private school. After graduating, he worked for three years but never made a payment against the loan. He then decided to change careers, quitting his job to return to school. He applied for a new student loan and paid the interest that had accumulated on his first student loan. After graduating, he looked for a job for several months and finally started a business without paying back his student loans. After two years, he changed jobs and began earning a salary of $68,000 a year. He lost his job months later and filed for bankruptcy. This first-time bankrupt had debts of $146,000, including $120,000 in student loans.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt is held responsible for having less than half the value of debts covered by the value of assets.

Court decision

The Court found that the bankrupt never intended to pay back his student loans. The Court ordered him to pay $50,000 to the bankruptcy estate before he can be discharged.

Read the Court decision for 700-11-011000-090/41-1083184 (available in French only).


Opposition to bankrupt's discharge by the trustee
Court/No.: 31-1182271

Background

An individual, separated from his wife, was paying legal expenses, child support and expenses for two households. He paid $240,000 for a new business, arranging a loan through a broker whom he said he could not name. Within three months, the business premises had been locked up by the landlord and the inventory was gone. The individual did not report the theft to the police because he claimed he could not prove that he owned the business. The bankrupt admitted to spending $10,000 gambling, but could not account for $120,000 of used credit. At the time of his bankruptcy, the individual had debts of $562,000, including $300,000 accumulated in the year prior to the bankruptcy.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt did not keep proper books and records for the business.

Court decision

The Court ordered the bankrupt to pay 25 percent of all proven claims and not to apply for, acquire or obtain any form of credit for five years. The Court ordered a suspended discharge for 24 months after the conditions are met.

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Opposition to bankrupt's discharge by a creditor and the OSB
Court/No.: 33-1409737

Background

A Canadian property manager owned rental properties in Florida. He did not pay the taxes owing on the rental income he earned. During his examination under oath with the Office of the Superintendent of Bankruptcy, he admitted that he transferred the properties to a numbered company and later to a business associate to avoid having the Canada Revenue Agency (CRA) foreclose on them. After he had not paid the taxes for more than 10 years, the CRA seized his disability benefits to cover his tax debt. The CRA recovered back taxes in this way for two years until he filed for bankruptcy. He said the reasons for his bankruptcy were his disability and loss of his pension. The bankrupt said he was retired and not earning income. In fact, he was still managing real estate in Florida and living there rent-free much of the year. When he filed for bankruptcy, he still owed $750,000 in taxes.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by culpable neglect of business affairs.

Court decision

The Court ordered the bankrupt to pay $375,000 to the bankruptcy estate before he can be discharged.


Opposition to bankrupt's discharge by the trustee and a creditor
Court/OSB No.: 11-1321002

Background

In the 10 years leading up to his bankruptcy, the self-employed bankrupt failed to file his income tax return or pay the taxes owed for his business, including $20,000 in GST remittances. At one point, he owed $150,000, with $111,000 owed to the Canada Revenue Agency, and he had assets of $4,000. When he filed for bankruptcy, this first-time bankrupt advised that marital separation and overwhelming tax debt led to his bankruptcy. At the time of his application for discharge, his estimated monthly income was $3,000, with the possibility to earn close to $5,000 monthly in a stronger economy.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by culpable neglect of business affairs.

Court decision

The Court found that the bankrupt wilfully ignored his tax commitments, taking advantage of the fact that his taxes were not deducted at source. An aggravating factor was that the bankrupt failed to account for the GST he had collected over 10 years. Because of the bankrupt's age and to encourage his rehabilitation, as a condition of his discharged he is required to pay only 50 percent of his tax debt over seven and a half years, for a total of $55,000. He also must file his income tax, GST and HST returns on time, and make timely payments.

Read the Court decision for 11-1321002.


Request by a creditor for the annulment of a bankruptcy by the Court
Court No.: 500-11-039140-104
OSB No.: 41-1346608

Background

An individual, married with two young children, had a medical doctorate and was in his fourth year of residency in neurosurgery. He was earning about $50,000 a year and had accumulated debts of about $248,000, including $190,000 owed on a line of credit. He asserted that he was suffering from psychological distress because of his debts and had fears of not being able to pay rent or to buy food and clothes for his family. He decided to file for bankruptcy even though his creditors had not asked for repayment. One of the creditors (the bank) asked the Court to annul the bankruptcy. The Court agreed that bankruptcy was inappropriate in the circumstances.

The decision to annul the bankruptcy was based on a number of facts, including:

  • The BIA provides honest but unfortunate debtors with a way to make payments against obligations that are due or past due.
  • This was a pre-emptive bankruptcy, because no creditors had demanded immediate payment or expressed concern about repayment—the stress was due to the future prospect of paying back the debts, not due to harassment by creditors.
  • The individual made no effort to work with his creditors to find a solution.
  • The individual was in a position to earn a considerable income once he completed his residency.

Court decision

The bankruptcy was annulled. The individual appealed the decision, but the appeal was refused.

Read the decision on the request to appeal the decision for 500-11-039140-104/41-1346608 (available in French only).

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Opposition to bankrupt's discharge by the OSB
Court/OSB No.: 41-1321643

Background

An individual had been earning $2,000 a month working at a restaurant. He was laid off when the restaurant was sold, and he then started using credit cards to support himself. He began using credit to gamble and buy goods he could not afford. He exaggerated his income on credit applications in order to receive additional credit cards. He used his credit cards to fund a $23,000 spending spree while he was out of the country, and to buy more than $10,000 of jewellery before leaving on his trip. Eventually, he owed 15 creditors almost $315,000, including a tax debt of about $76,000. He then filed for bankruptcy.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by gambling.

Court decision

The Court found that the bankrupt's behaviour was neither honest nor unfortunate. Therefore, his discharge was refused.


Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 11-1343807

Background

An individual continued to use credit for extravagant purchases even after he knew he was insolvent. He sold $7,700 worth of items bought on credit but did not use the money received to pay down his debts. This first-time bankrupt owed almost $420,000 to 23 creditors. He claimed his bankruptcy arose from insufficient self-employment earnings. He also omitted to mention two of his credit cards to the trustee.

The decision to oppose the bankrupt's discharge was based on a number of facts,Footnote 1 including:

  • Bankrupt continued to borrow after becoming aware of being insolvent.

Court decision

The Court suspended the bankrupt's discharge for 24 months, ordered the bankrupt to pay the bankruptcy estate for the full amount of items purchased on credit and sold to a third party, and barred the bankrupt from applying for credit for 60 months.

2010

Background

Two bankrupts filed jointly for their second bankruptcy. The husband had been injured and unable to work for several months; the wife had been laid off. Even after they realized that they were insolvent, they continued to use their credit cards for trips and extravagant items. They followed a pattern of exaggerating their income on their credit applications, spending to the limit of their credit cards and paying the minimum balance. In nine months, they accumulated an additional $100,000 in credit card debt, for a total debt amounting to $145,000. At the time of applying for discharge, the husband was working again and the wife had just finished working for eight months, as well as having completed training to increase her employment prospects.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupts brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living.

Court decision

The registrar found that the conduct of the bankrupts was reprehensible as they exhibited extravagance, eccentricity and recklessness. The Court suspended the bankrupts' discharges concurrently for a period of five years or until payment of $21,000 is made to the trustee, whichever occurs first. The Court indicated that the terms of this discharge take into account the public interest, financial morality, the integrity of the insolvency system and rehabilitation of the bankrupts.

Read the Court decision for 48-11-000026-089/42-1114106 (available in French only).


Opposition to bankrupt's discharge by the OSB
Court No.: 500-11-038771-107
OSB No. 41-1237330

Background

The bankrupt, with a reported income of $23,000, had acquired 20 credit cards and incurred upwards of $207,000 dollars of debt. He deliberately wrote cheques with insufficient funds to make payments on the credit cards. The bankrupt later established a shell company that he used to justify travel to different countries, where he supposedly bought telephone equipment destined to be resold in Canada. He used his credit cards as working capital to pay for the trips and goods. He sold the goods and equipment at a fraction of what he paid for them. He also made extravagant purchases, such as a diamond for $9,150. He bought a condominium for $133,000 using one of his credit cards for the down payment and, again using his credit cards, he made mortgage payments for 11 months.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by culpable neglect of business affairs.

Court decision

The Court found that the bankrupt did, indeed, frustrate his creditors through deceitful financial practices and that such conduct was an aberration. To protect the public from such abusive conduct and to dissuade others who, like the bankrupt, might be tempted to take advantage of the insolvency system, his discharge was refused.

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Opposition to bankrupt's discharge by the trustee, a creditor and the OSB
Court No.: 500-11-037769-094
OSB No.: 41-1228039

Background

The bankrupt had 24 credit cards. When he applied for credit cards in May and June of 2005, his declared income varied from $40,000 to $80,000 a year. However, the bankrupt later testified that he earned $30,000 annually from 2004 to 2006. The bankrupt also took expensive trips abroad when he was under financial hardship, using his credit cards to make purchases or to obtain cash advances. He would buy goods on credit and resell them. He would pay off his credit cards by cheque and then use the cards to buy goods or to obtain cash advances before the cheques bounced. When he filed for bankruptcy, he had accumulated over $329,000 of debt owed to 20 creditors.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt has been guilty of any fraud or fraudulent breach of trust.

Court decision

The bankrupt's discharge was refused as the Court determined that he caused his bankruptcy through unpardonable and reprehensible behaviour.


Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 31-1210759

Background

The bankrupt admitted to knowing that he was in financial trouble at least two years before declaring bankruptcy. However, in the year or so before declaring bankruptcy, the bankrupt applied for and obtained two more credit cards on which he accrued an additional $52,900 of debt. The bankrupt acknowledged that he provided false financial information to obtain credit. Also, the bankrupt stopped paying his creditors 11 months prior to declaring bankruptcy. One month later, he used his new credit card to travel abroad, spending $3,000 for the flight and $20,000 to purchase gifts. Within three months of returning from his trip, he declared bankruptcy, with $292,000 of debt. In addition, the bankrupt cashed in $23,000 of his Registered Retirement Savings Plans (RRSPs), which he did not disclose in his sworn statement to the trustee.

The debtor claimed that he sent $75,000 to his family abroad during the two-year period before bankruptcy to pay medical expenses, make financial support payments and pay ransom for a kidnapped brother. None of these claims could be supported by evidence of any kind. Also, according to the bankrupt, approximately half of his total debt could be attributed to gambling and accrued interest.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by gambling.

Court decision

The Court ordered the bankrupt to pay $35,000 to the estate through minimum monthly payments of $150. He was further banned from gambling and from obtaining credit for five years, and was required to send notices to this effect to two credit-reporting agencies and to the Ontario Lottery and Gaming Corporation. In addition, the bankrupt was required to undergo at least six sessions of gambling counselling, which must meet the trustee's satisfaction. His discharge was suspended for a year, concurrent to the above conditions being met.

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Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 31-1203267

Background

While he was aware that he was in financial trouble, the debtor continued to use credit. He refinanced his house to buy out his wife's share of $25,000 when they separated; he applied for and obtained new credit cards; he relied on additional credit to make minimum monthly payments on credit cards; he used more than $40,000 of credit to pay for rent, gambling and other expenses of another individual; he obtained credit for more than $90,000 to fund his own gambling; he used credit to pay for the support and education of his daughter abroad; he used credit amounting to about $30,000 to pay for his daughter's wedding abroad and $8,000 to buy a car for his son. At the time of his bankruptcy, the debtor, now a bankrupt, had debts of $194,600 and assets of $5,750.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt brought on, or contributed to, the bankruptcy by unjustifiable extravagance in living or by gambling.

Court decision

The Court ordered the bankrupt to pay the trustee $30,000 in instalments over a 69-month period. The Court further banned the bankrupt from obtaining any form of credit for two years and from gambling for five years. Concurrently, the Court suspended his discharge for six months. The Court required that a copy of the Court Order be provided to credit-reporting agencies (Trans Union and Equifax) and to the Ontario Lottery and Gaming Corporation.

2009

Background

Information provided by the bankrupt at the time of filing for bankruptcy with regard to a $200,000 second mortgage, registered against his property less than a year before filing for bankruptcy, was not accurate. Also, the bankrupt did not disclose that he had not received any funds in consideration of granting this mortgage. In addition, the trustee indicated that the bankrupt had been uncooperative regarding dealing with his property. The creditor opposing the discharge provided information to the Court showing that the bankrupt put the creditor to unnecessary expense as the creditor was taking steps to obtain payment. The bankrupt did not appear at the discharge hearing.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt has put any creditors to unnecessary expense by a frivolous or vexatious defence.

Court decision

The Court found that the bankrupt was not only evasive and uncooperative but also disruptive and caused additional expense for creditors. The Court found that he had not rehabilitated himself and as a result of his conduct the Court refused his discharge.

Read the Court decision for 11-250339.


Opposition to bankrupt's discharge by the trustee and a creditor
Court/OSB No.: 32-839458

Background

A second-time bankrupt closed his autobody shop business and became a tow-truck driver for his brother's company. His brother had taken over the bankrupt's autobody shop leases for equipment and the premises. The bankrupt did not disclose to the trustee his half ownership in the family home, nor did he identify as creditors the holders of three mortgages against it. He also did not report the entirety of his income. The bankrupt had served jail time and, with money borrowed from his brother, had paid $50,000 in restitution for fraudulently selling leased equipment worth $400,000. At the time of his application for discharge, the bankrupt had surplus income of $1,000 a month.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt did not keep proper books and records for the business.
  • Bankrupt has been guilty of any fraud or fraudulent breach of trust.

Court decision

While the bankrupt argued that he had already been punished for his crimes, the Court responded that his bankruptcy was a separate issue. The Court refused to grant a discharge to the bankrupt. In addition, before he could reapply for discharge from bankruptcy, the bankrupt was required to either give his defrauded creditors information for recovering their equipment or pay 100 cents on the dollar for their proven claims. The Court further reminded the bankrupt of his ongoing surplus income obligation (payment of part of the surplus to be made to his bankruptcy file) while he remains undischarged.

Read the Court decision for 32-839458.

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Opposition to bankrupt's discharge by the trustee and the OSB
Court/OSB No.: 31-1142522

Background

The bankrupt increased his personal debt by $176,000 within 12 months of filing for bankruptcy, even though he knew he was in financial trouble. The bankrupt claimed that the credit was used to fund a business venture, which he could not prove. During the same period, the bankrupt obtained $32,000 of additional credit. The bankrupt was unable to provide any written documentation to support his claims for how these funds were spent. When he filed for bankruptcy, his business partner had disappeared and his total debt had reached more than $236,000. The bankrupt declared his total assets were less than $9,000, but failed to declare an interest in a property overseas and the disposition of a motor vehicle.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt did not keep proper books and records for the business.
  • Bankrupt continued to borrow after becoming aware of being insolvent.
  • Bankrupt brought on, or contributed to, the bankruptcy by rash and hazardous speculations.

Court decision

The Court found the entire business scheme to be evidence of rash or hazardous speculation. The Court described the venture as "dubious" and "so beyond the reasonable as to verge on unbelievable." There was no documentary evidence to support claims relating to the business scheme. The bankrupt squandered huge sums of money in goods and cash. The Court determined that the bankrupt was completely irresponsible in his use of credit. The Court issued an order refusing the bankrupt's discharge and requiring the bankrupt to provide full details of his interest in his properties abroad.

2007

Background

The bankrupt, who testified he was addicted to gambling, bought a substantial amount of goods on credit, purportedly for the purpose of reselling the goods to raise cash to fund his gambling. He received payment for some of these goods in the form of cheques. Participating in a kiting scheme, the bankrupt used cheques to pay his credit-card account, withdrawing additional funds in the form of cash advances before the worthless cheques bounced. He contributed to his insolvency by gambling, which accounted for all of the $181,000 of debt he incurred.

The decision to oppose the bankrupt's discharge was based on a number of factsFootnote 1 including:

  • Bankrupt continued to borrow after becoming aware of being insolvent.
  • Bankrupt brought on, or contributed to, the bankruptcy by gambling.

Court decision

The Court found that the bankrupt was not unfortunate, having brought all of his financial troubles upon himself, with no real excuse. The Court ruled that gambling was the cause of his insolvency. The bankrupt was required to repay the trustee $41,600 within 20 months. He was banned from gambling and from applying for or using credit for five years. His discharge was suspended for three years, concurrent to the above-noted conditions.

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