Bankruptcy

Document Sample
Bankruptcy Powered By Docstoc
					                                                    Bankruptcy
                                                                                                Frank Harris
                                                                                               March 3, 2010




Look in
       http://en.wikipedia.org/wiki/Bankruptcy_in_Canada     http://bc.bankruptcycanada.com/

          http://www.bankruptcycanada.com/
for more information. See what a person considering bankruptcy needs to answer:
http://www.bankruptcycanada.com/applicat1.htm


The office of the Superintendant of Bankruptcies gives the following data most recently for
bankruptcies in Canada. The formal definitions of bankruptcy and proposal follow the tables.

                                     Volume                        % Change     12-Month Period Ending
                                                                   Mar.   Apr.
                                                                   2009   2008
                                            March          April               04-30-    04-30-      %
                        April 2009                                  to     to
                                            2008           2008                 2009      2008     Change
                                                                   Apr.   Apr.
                                                                   2009   2009
All Canada                      14 455 14 244 10 933                1.5 32.2 135 927 111 291          22.1
  Bankruptcies                  11 465 11 085              8 627    3.4 32.9 106 459      87 929      21.1
  Proposals                 2 990    3 159    2 306    -5.3 29.7    29 468    23 362       26.1
  Consumers
  Canada                   13 818 13 629 10 218         1.4 35.2 128 786 103 717           24.2
  Bankruptcies             10 936 10 578      8 035     3.4 36.1 100 587      81 672       23.2
  Proposals                 2 882    3 051    2 183    -5.5 32.0    28 199    22 045       27.9
  Businesses                                                   -
  Canada                      637      615      715     3.6 10.9      7 141     7 574      -5.7
                                                               -
  Bankruptcies
                              529      507      592     4.3 10.6      5 872     6 257      -6.2
                                                               -
  Proposals
                              108      108      123     0.0 12.2      1 269     1 317      -3.6
from http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02226.html


                                        Definitions
“Bankruptcy Bankruptcy is a legal process carried out through a trustee in bankruptcy
designed to relieve honest but unfortunate debtors of their debt burden. When individuals are in
bankruptcy, creditors cannot initiate any collection actions against them. At the end of the
process, a first-time individual bankrupt is usually discharged from debts after nine months.
Consumer Proposal If an individual owes less than $75,000 in consumer debt, not
including the mortgage on their principal residence, a consumer proposal can be submitted to
creditors. This formal process is carried out through a trustee in bankruptcy who will put
together an offer to pay creditors a percentage of what is owed to them over a specific period of
time, extend the time the debtor has to pay off the debt or a combination of both. Payments are
made through the trustee, and the trustee uses that money to pay each of the creditors. The
maximum time allotment to pay off the debt is five years.
Division I Proposal             Also known as a “commercial proposal,” this is a formal procedure
available to businesses or individuals — there is no limit with respect to how much money is
owed. This process is carried out through a trustee in bankruptcy who will put together an offer
to pay creditors a percentage of what is owed to them over a specific period of time, extend the
time the debtor has to pay off the debt or a combination of both. Payments are made through
the trustee, and the trustee uses that money to pay each of the creditors.” OSC



All the following charts and data are from the website above, of the Superintendant of
Bankruptcies.

Compare the 22% y/y increase in bankruptcies to April 30, 2009 in Canada with previous year
changes:




page 2                                                                                Bankruptcy
Income and bankruptcy
       A person earning minimum wage, $8 per hour in BC, working a 40 hour week for 50
weeks in a ycar would have a gross income of    $8 40 50 $16,000. Compare that
amount with the average income of persons who file for bankruptcy:




Debt which leads to bankruptcy
       People take on debt from a variety of sources. The chart below illustrates that credit card
debt may be the most toxic.




page 3                                                                                Bankruptcy
       However while the greatest number of people have credit card debt, the greatest amounts
are owed on mortgages, as the next chart illustrates.




        A variety of businesses act as bankruptcy trustees. For example:
http://www.bankruptcy-canada.ca/FAQ.htm
A trustee is defined by the Superintendant as follows:

“Trustee in Bankruptcy               A trustee in bankruptcy is a person licensed by the Office of
the Superintendent of Bankruptcy (OSB) to administer bankruptcy and proposal estates. An
officer of the Court, the trustee has an obligation to look after the rights of the creditors and to
investigate the affairs of the debtor, as required. The trustee also ensures that the rights of the
debtor are not abused.

The trustee's primary duties are to

   •     review the situation and counsel the debtor on available alternatives;
   •     prepare official documentation that is both filed with the OSB and used to notify
         creditors;
   •     ensure the validity of creditors’ claims;

page 4                                                                                   Bankruptcy
   •     ensure that debtors are provided with mandatory counselling and access to mediation
         services if there is a dispute regarding any income they are required to contribute;
   •     sell the debtor's assets, except those exempt from seizure by provincial and federal laws,
         and hold the proceeds in trust for distribution to creditors;
   •     administer the bankrupt estate from beginning to end;
   •     assess the debtor's conduct both before and during a bankruptcy, as well as the cause(s)
         of the bankruptcy; and
   •     make an application for a debtor's discharge (in the case of individual debtors). “ OSC




In Canada student loans are treated differently. According to the OSB,


“Student Loans and Bankruptcy                         (new filings on or after July 7, 2008)
Hardship Provision            If it has been five or more years since you ceased to be a full- or
part-time student, and you are or have been bankrupt, you may make an application to Court for
a discharge of your student loan debts under the “hardship provision.”

The Court will only discharge your student loan debts if it is satisfied that you acted in good faith
in connection with your obligation to repay your student loans, and that you have experienced,
and will continue to experience, financial difficulty that prevents you from repaying these debts.
The Courts also look at how debtors used student loan money, their efforts to complete their
educational program, their efforts to repay the loans and their use of available interest-relief
programs when considering the question of good faith.

Seven-Year Rule             If you declare bankruptcy seven or more years after the date on which
you ceased to be a full- or part-time student, your student loan debts will be eligible for
discharge along with your other debts. Retrospective application of the Seven-Year Rule The
Seven-Year Rule is said to be retrospective. What this means is that the new Seven-Year Rule
also applies to bankrupts who were not yet discharged on July 7, 2008. Note: When you ceased
to be a full- or part-time student is governed by the federal or provincial student loan legislation
applicable to your loan.”

Avoiding bankruptcy
        Industry Canada (IC) has a website http://www.ic.gc.ca/eic/site/oca-
bc.nsf/eng/h_ca02222.html that gives suggestions for seeing the warning signs of insolvency
and dealing with them.
“Canada’s Office of Consumer Affairs (OCA) Money, Credit & Debt
Take Charge of Your Debts Provides information, solutions and tools to assist you with
managing your debt
                          • Warning Signs of Debt
                          • Before Going Further
                          • "Last Resort" Options
                          • Information on Collection Agencies
                          • Credit and Credit Repair
Be Informed About…Debt offers basic information on how to recognize the warning signs of
problem debt and how to take control
                          • HTML Version
                          • Printable version (PDF, 2 123 KB, 6 pages)

page 5                                                                                   Bankruptcy
                                    •    Multimedia presentation”
         Unemployment
                 Unemployment is sometimes a precursor to bankruptcy. The following data is from
         Statistics Canada http://www.statcan.gc.ca/pub/71-001-x/2009005/t001-eng.htm


                                                 Change from                  Percent change from



                   April      May
                   2009      2009                               twelve
                                          last         last                last         last     twelve
                                                               months
                                        month     December               month     December     months
                                                                  ago




                                 in thousands (except rates)




Unemployment      1,464.6   1,548.4     83.8         338.3     433.0         5.7     28.0        38.8


Participation
                    67.4      67.5      0.1          -0.1       -0.4        ...       ...        ...
rate


Unemployment
                      8.0       8.4     0.4           1.8       2.3         ...       ...        ...
rate




         page 6                                                                                Bankruptcy
        Some examples of bankruptcies, from http://www.canadian-money-advisor.ca/credit-
repair-stories.html illustrate the problem.

“STORY: Bankruptcy listing Errors

One of our clients went bankrupt three years ago. Everyone who declares bankruptcy feels terrible about,
and they are penalized for 7 years afterward. It certainly isn't fair if there are even more problems on their
credit reports.

This gentleman's credit score keeps going down every month even though he currently pays his debts on
time. Even if he's gone bankrupt, his credit score should be going up each month if he's paying his bills
and conducting himself properly financially.

What's happening is that TransUnion is still counting his debts which were declared in his bankruptcy as
still 'outstanding'. At this point they're showing as 3 years delinquent. This is making his credit score go
down each month because apparently his debts are getting more and more past due. These debts were
extinguished with the bankruptcy. They shouldn't be reporting.

TransUnion has done nothing to fix this problem even though we've pursued it with top government
levels. We feel that you need to be exceptionally cautious with any information that TransUnion is
reporting about you even if you haven't gone bankrupt.”


The CBC reports http://www.cbc.ca/canada/edmonton/story/2009/03/11/edm-pocklington.html

“Peter Pocklington arrested in California for bankruptcy fraud Last Updated:
Wednesday, March 11, 2009 | 7:06 PM MT

page 7                                                                                           Bankruptcy
Peter Pocklington, former owner of the NHL's Edmonton Oilers, was arrested on charges of
bankruptcy fraud Wednesday morning at his home near Palm Springs, Calif., said the office of
the U.S. Attorney, Central District of California. Pocklington, 67, who was born and raised in
London, Ont., was arrested without incident by FBI special agents, the office said in a news
release. In conjunction with the arrest, FBI agents executed two search warrants — one at
Pocklington's home and the other at two storage units owned by him. The two-count indictment,
which was unsealed Wednesday, accuses Pocklington of making false statements in bankruptcy
and making false oaths and accounts in bankruptcy. Pocklington appeared in U.S. District Court
in Riverside, Calif., on Wednesday afternoon. He was ordered to remain in custody until
Friday, when, prosecutors said, they will argue to keep him behind bars until his trial because
they believe he is a flight risk and may have access to money in off-shore accounts. Pocklington
has pleaded not guilty to both counts and is slated to go to trial May 5.

Not all assets disclosed, indictment alleges Pocklington filed for personal bankruptcy in the
U.S. in August. In his petition, he listed debts of about $19.6 million and assets of only $2,900,
which included $300 in clothing and shoes, according to the news release. The indictment
alleges Pocklington did not tell the Bankruptcy Court about all of his assets, it said. "It first
came to our attention when he filed the bankruptcy petition in a federal court here in southern
California last summer claiming not quite $20 million in debts but only about $3,000 in assets,"
said Thom Mrozek, public affairs officer for the U.S. Attorney General's office. "Those two
numbers were just too disparate and raised red flags by people monitoring bankruptcy court
proceedings." According to the news release, the indictment alleges that Pocklington "failed to
disclose to the Bankruptcy Court two bank accounts at Palm Desert National Bank (PDNB) for
which he has sole signature authority, as well as the contents of the storage units in Palm
Desert." It also alleges that in the seven months before his bankruptcy hearing in September
2008, Pocklington "allegedly wrote a series of checks on a PDNB account in the name of
'Dempsey Investment Corp.,' an entity that he failed to mention in the bankruptcy petition."
Court documents also allege that Pocklington gave a creditor a piece of art, a rug and a desk
from his storage locker in an attempt to settle part of a court judgment against him. In total, the
value of all three items was $80,000, the documents allege. None of the allegations has been
proven in court.

Ex-NHL team owner had glory years If convicted of both counts, Pocklington would face a
statutory maximum 10-year sentence. Pocklington, who owned the Oilers through the years the
team won its five Stanley Cups, is still remembered by many fans in Edmonton as the man who
traded Wayne Gretzky to the L.A. Kings in 1988. Pocklington sold the Oilers in 1998 to a group
of Edmonton business people who banded together to keep the team in the city, an arrangement
that remained in place for a decade until pharmacy billionaire Daryl Katz took over ownership
last year. Pocklington also ran for the leadership of the federal Progressive Conservative party in
1983, a contest won by Brian Mulroney, who later became prime minister.”

Pocklington's fraud trial headed for its fifth delay
Brent Jang
From Tuesday's Globe and Mail
Published on Tuesday, Mar. 02, 2010 12:00AM EST
Last updated on Tuesday, Mar. 02, 2010 3:42AM EST

page 8                                                                                  Bankruptcy
Canadian financier Peter Pocklington's criminal trial for bankruptcy
fraud is headed for its fifth delay. An official in the U.S.
Attorney's Office said yesterday that the prosecutor has asked the
United States District Court to postpone the trial, which was
scheduled to begin next Tuesday in Riverside, Calif. Mr. Pocklington,
who was charged last March, has pleaded not guilty to a two-count
felony indictment for bankruptcy fraud in California. In court
papers, assistant U.S. attorney Sean Lokey filed an application for
an order to seal documents. Mr. Pocklington, the former owner of the
Edmonton Oilers, filed for personal bankruptcy in August, 2008, but
he is being accused of concealing assets. http://www.theglobeandmail.com/report-on-
business/pocklingtons-fraud-trial-headed-for-its-fifth-delay/article1486336/?



An American files for bankruptcy Even the rich go bankrupt, as the following story
illustrates: from http://blogs.citypages.com/blotter/2009/06/denny_hecker_fi.php

An example from Canada http://myvesta.ca/2579/my-wife-went-bankrupt-last-year-and-now-
she-has-20-payday-loans-and-is-in-trouble-again-michael Addiction and bankruptcy are related
in this example.

“Dear Steve, My soon to be ex wife and I went bankrupt in May 2008, mainly because of her
excessive spending, gambling and check writing. She is now over 35,000 in debt again and
trying to hit me up for large sums of money (I do not have) to bail her out.

I dont know any way for her to get out of this mess. Between personal loans, 20 payday loans,
and check floating everywhere it is a mess. If not for our 9 year old son, I would let her go to jail,
but that’s not an option if we can avoid it. Is there anyway she could consolidate debts or get
help? Michael”

Dear Michael, This is a classic example of why most money problems are the symptom and not
about the money. Your soon to be ex-wife has an addictive illness that is causing here to spend
past her ability to repay. Unless those underlying addictions are treated with counseling and drug
therapy, this cycle will simply repeat itself.

Bailing her out will only enable her behavior. Unfortunately, this is much like a drug or alcohol
problem. Until the person recognizes they have a problem and agrees to seek treatment for it, you
can’t solve this issue. Truly what you need is an intervention. She needs to understand how her
actions are impacting others and leading her to harm others. You may need to get your son out
of there until she is ready to face this issue. I would locate a local mental health professional that
specializes in the treatment of addiction and explain the situation to them. You can then work
together to invite your ex-wife into treatment. It is very important that you regularly check your
consolidated credit report to watch for fraud and identity theft by her. Use this consolidated
credit report, it’s the one I trust and use. As her access to money gets choked off, she will
become more and more desperate. As evidenced by her bad check writing. It is not uncommon

page 9                                                                                   Bankruptcy
for people in such a situation to fraudulently open credit cards and loans in the names of family
members to get more money to feed the compulsion or addiction.

All I can say with certainty right now is that your wife has an adrenaline addiction and it is either
an escape to mask something else or it is chemically feeding her brain to allow her to reach a
state she wants. Compulsive shopping, where the person does not return the items, and gambling
are both exhilaration exercises. Even getting your wife to seek help through either Debtors
Anonymous or Gamblers Anonymous would be a beneficial first step if she is ready to admit she
has a problem and take some action. Otherwise, the best thing you can do is let her crash and
burn and be there to help her get treatment. Her compulsion is stronger than your ability to
reason with her. Big hug. Steve”

“Retail bankruptcies seen picking up                                        June 11, 2009
NEW YORK (Reuters) - As U.S. retailers prepare for the upcoming back-to-school and holiday
shopping seasons, there may also be an uptick in the number of retailers that are preparing for a
trip to bankruptcy court, two retail experts said this week.

Retailers, still shell-shocked from the wave of chains that filed for bankruptcy and were forced to
liquidate last year, have been trying their best to avoid bankruptcy, the experts told the Reuters
Global Retail Summit in New York. But this year's holiday season is not expected to be any better
than in 2008, so a growing number may find themselves with no savior but bankruptcy.

"I expect that the numbers of bankruptcies are going to increase throughout the year as retailers
now have to start spending money to increase inventory for Back-to-School and the Christmas
season and they don't have the necessary funds," said Matthew Bordwin, managing director at
KPMG Corporate Finance, who works with troubled retailers.

"I think you would expect to see more in the third quarter and fourth quarter and definitely
following Christmas," Bordwin said. He said he was surprised there were only a handful of retail
bankruptcies so far in 2009, as consumers have not been much more willing to open their
wallets.” CON'T http://www.reuters.com/article/GlobalRetail09/idUSTRE55A7F920090611




page 10                                                                                  Bankruptcy

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:16
posted:3/18/2012
language:
pages:10