We have looked at the Scottish and American approaches to personal insolvency discharge. We can examine the approach taken by Canada (pictured).[1] Just as our American cousins have excelled at scholarship on the personal side of the subject, our Canadian cousins have also embarrassed English and Welsh academia with the wealth of scholarship on the personal side.[2] Professor Jacob Ziegel is the leading light of this scholastic spring.[3] Canada has a relatively long heritage in viewing what they would call personal bankruptcy as a fresh start, rehabilitation mechanism. As Ben-Ishai has observed, “The fresh start has been a central feature of the Canadian consumer bankruptcy system since the first part of the 20th Century.”[4] This was of course not always the case in Canada. For example, Ontario’s An Act Respecting Assignments for the Benefit of Creditors 1885, did not include a debt discharge provision, neither did the insolvency laws of provinces such as New Brunswick (1895) or Nova Scotia (1898).[5] This core feature of personal insolvency law was introduced at a Federal level in 1919 after much stringent debate as Telfer has shown.[6]
The modern Canadian position on discharge is interesting. As with the English Legislature’s recent reduction in the period of automatic discharge to one year maximum, the Canadian legislature has also undertaken a similar reform activity, albeit as far back as 1992, with Canadian automatic discharge occurring a minimum of nine months after the bankruptcy order in cases where there are little income or assets to satisfy the creditors.[7] Ziegel has postulated that the reduction in automatic discharge in both jurisdictions is a, “realistic response to the mounting number of consumer insolvencies.”[8] The learning experience of going through the process of bankruptcy has been highlighted by one commentator in the context of the fresh start nature of Canadian bankruptcy policy. Ben-Ishai notes that following bankruptcy, “an individual is free from her debts and, at the same time, she retains her experiences, knowledge and values, which can contribute to her becoming a productive member of society again…”[9] It is this sort of rhetoric that has pervaded English and Welsh approaches to personal insolvency law, as highlighted above. Whilst this sentiment is of course correct, English and Welsh policy makers have perhaps placed too much emphasis on the learning experience of entrepreneurs and neglected the consumer bankrupts that Ben-Ishai identifies.
Canadian personal insolvency law[10] also provides for automatic mandatory discharge from bankruptcy (Libération de faillite).[11] In Canadian law discharge can however be: automatic, suspended, conditional or absolute.[12] As with English and Welsh law, a debtor may also be refused a discharge due to opposition of the Superintendent of Bankruptcy, a creditor or the debtors trustee.[13] Debtor education is also a feature of Canadian personal insolvency law, as with the American position.[14] If a bankrupt has not neglected or refused debt counselling they can be automatically discharged after nine, twenty one, twenty four or thirty six months. This time period is staggered by reference to whether or not the debtor is going through a first or second bankruptcy and by the debtor’s acceptance of the period before discharge, as well as potential creditor opposition. For example, a first time bankrupt would be automatically discharged nine months from their bankruptcy order unless the debtor had agreed to spend further time as a bankrupt or waived the right to this automatic discharge entitlement.[15]
As with the English and Welsh position with IPOs, Canadian debtors may be expected to pay a portion of their future income into the bankruptcy estate.[16] The staggering of discharge by the Canadians has much to teach English and Welsh policy makers.
[1] On Canadian personal insolvency law generally see: Ziegel, J. & Duggan, AJ & Telfer, TGW. Canadian Bankruptcy and Insolvency Law: Cases, Text and Materials. Emond Montgomery Publications Ltd, Toronto, 2003. On Canadian bankruptcy history see: Telfer, TGW. A Canadian ‘World without Bankruptcy’: The Failure of Bankruptcy Reform at the end of the Nineteenth Century (2004) Australian Journal of Legal History, vol.8, pp.83-108.
[2] See, inter alia: Ziegel, J. Consumer Bankruptcies (1972) Chitty’s Law Journal, vol.20, no.10, p.325; Schwartz, S. The Empirical Dimensions of Consumer Bankruptcy: Results from a Survey of Canadian Bankrupts (1999) 37 Osgoode Hall L.J. 83; Honsberger, J. The Nature of Bankruptcy and Insolvency in a Constitutional Perspective [1972] Osgoode Hall Law Journal, vol.10, no.1, 199-207; Report of the Study Committee on Bankruptcy and Insolvency Legislation, Canada (1970); Schwartz, S & Anderson, L. An Empirical Study of Canadians Seeking Personal Bankruptcy Protection. Industry Canada, Ottawa, 1998; Ziegel, J. Comparative Consumer Insolvency Regimes – A Canadian Perspective. Hart Publishing, Oxford, 2003;
[3] For his most recent foray into the arena see: Ziegel, J. Facts on the Ground and Reconciliation of Divergent Consumer Insolvency Philosophies (2006) vol.7, Theoretical Inquiries in Law, No.2, pp.299-321.
[4] Ben-Ishai, S. One Paradox of the Bankruptcy Fresh Start: Government Student Loans, in: Sarra, J. (Ed). Annual Review of Insolvency Law 2005. Thomson Carswell, Toronto, 2006, at page 444. Hereafter referred to as Ben-Ishai Paradox.
[5] See: Telfer, TGW. A Canadian ‘World without Bankruptcy’: The Failure of Bankruptcy Reform at the end of the Nineteenth Century (2004) Australian Journal of Legal History, vol.8, pp.83-108, at page 92.
[6] On the evolution of debt discharge in Canada see: Telfer, TGW. Access to the discharge in Canadian Bankruptcy Law and the New Role of surplus Income: A Historical Perspective, in: Rickett, CEF & Telfer, TGW (Eds). International Perspectives on Consumers’ Access to Justice. 2003, at page 231.
[7] Bankruptcy and Insolvency Act, RSC, ch B-3 (1985).
[10] Bankruptcy and Insolvency Act, RSC, ch.27 (1992)
[12] For a discussion on Canadian discharge provisions see: Telfer, TGW. Access to Discharge in Consumer Bankruptcy Law and the New Role of Surplus Income: An Historical Perspective, in: Rickett, CEF & Telfer, TGW (Eds). International Perspectives on Consumers’ Access to Justice. Cambridge University Press, Cambridge, 2003.
[13] Opposition to discharge is rare as Ramsay has shown with some 85.4% passing unopposed in 1994. See: Ramsay, IDC. Individual Bankruptcy: Preliminary Findings of a Socio-Legal Analysis (1999) 37 Osgoode Hall L.J. 15, at page 34.
[14] This fetter on discharge was introduced in 1992. See: Bankruptcy and Insolvency Act, R.S.C 1985, c.B-3, s.157.1(1) and (3)
[15] See: An Act to amend the Bankruptcy Act, S.C. 1992, c.27, s.168(1).
[16] As required by the Office of the Superintendent of Bankruptcy Canada Directive No.11: Surplus Income, 30 October 2000, revised edition, 26 January 2005.
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