nan Bankruptcy No. 4700 Estate Nos. 025924 J.C.R. IN THE QUEEN'S BENCH PROVINCE OF SASKATCHEWAN IN BANKRUPTCY AND INSOLVENCY IN THE MATTER OF THE BANKRUPTCY OF JERRY ABRAHAM GIESBRECHT Jerry Abraham Giesbrecht, bankrupt Anne E. Hardy, for the bankrupt Marla Adams, Deloitte Touche Inc., Trustee JUDGMENT MAURICE J. HERAUF, October 16, 1998 Registrar in Bankruptcy The bankrupt has applied to annul his bankruptcy. Section 181 of the Bankruptcy and Insolvency Act reads as "(1) Where, in the opinion of the court, receiving order ought not to have been made on an assignment ought not to have been filed, the court may by order annul the bankruptcy." The bankrupt`s submission is twofold. Firstly thatthe bankrupt received misinformation or had amisunderstanding concerning the effect of an assignment onthe status of potential builders` lien claimants andsecondly the undervaluation of his assets. Along withthose two grounds the bankrupt also asserts that thebankruptcy proceedings are of no value to him. am not going to repeat the facts in detail. The bankrupt submits that he received wrong legal advice concerning the status of the builders` lien claimants. In essence, he states he "thought" he was advised that the various subcontractors would not be able to pursue claims against the home he was constructing or against himself. Of course, as it turns out the builders` lien claimantshave status akin to secured creditors and can pursue thebankrupt personally for any deficiency that may arise ifthe home is sold and the proceeds divided among theclaimants. On the other hand, the trustee maintains the bankrupt was repeatedly advised or cautioned that bankruptcy may not effect the majority of his creditors, ie: those relating to the construction of his home. With respect to the value of his assets the bankrupt estimated the value of his unfinished home at $40,000.00. He has since obtained appraisals which place the value at up to $150,000.00. The bankrupt is now eligible to obtain mortgage financing of over $96,000.00. One of the conditions for the financing is that the bankrupt get out of bankruptcy. Hence, this application. It should also be mentioned that prior to bankruptcy the bankrupt attempted to deal with his financial problem through the orderly payment of debts. He also considered proposal post-bankruptcy but found out on an informal basis that it would be defeated. There is likely merit to the bankrupt`s contention that the bankruptcy proceedings have been of no value to him. It also appears from the facts that the majority of creditors, who are secured, would also benefit from the bankrupt`s request being granted. If, as the bankrupt states, an annulment of the assignment would allow him to obtain financing it would likely result in these creditors being paid in full, much more expeditiously than it would otherwise take. Certain of the builders` lien claimants have already commenced an action. There are other actions by secured creditors returnable in Queen`s Bench as early as next week. According to the trustee, the bankrupt has been far from model bankrupt. He has yet to file monthlyfinancial statements and has not made payments as agreed tocover the costs of the administration of the estate. have carefully reviewed the decisions relating to this issue including Re Wale (1997) 1996 CanLII 8275 (ON SC), 45 C.B.R. (3d) 15 (Ont. Gen. Div.) and Re Louis Peter Co. (1988), 67 C.B.R. (N.S.) 176 (Ont. S.C.) Section 181 vests wide discretion in the court when considering an application to annul the assignment. have not been convinced that should exercise this discretion in favour of the bankrupt. The bankrupt met the definition of an insolvent personat the date of the assignment. It would be dangerous toset a precedent which would allow an application like thisto be successful because of circumstances that havetranspired post bankruptcy. An improved financial situation and the ability to pay debts in full should not be used as criterion to launch section 181 application. Having come to this conclusion feel compelled to point out other options to the bankrupt. The bankruptwould be entitled to an automatic discharge on November 15,1998. The onus will be on the bankrupt to comply with therequirements of the trustee in order to qualify for anautomatic discharge. The bankrupt also has the ability to apply for anearly discharge before that time as provided for in section168.1(2) of the Act. Once again the bankrupt mustcooperate with the trustee in order to ensure that he hascomplied with his duties in order to avoid an objectionbeing filed by the trustee. In the end result the application by the bankrupt foran order annulling his assignment is dismissed. Registrar in Bankruptcy
The bankrupt applied to annul his bankruptcy on the grounds that he received misinformation or had a misunderstanding concerning the effect of an assignment on the status of potential builders' lien claimants and because his assets had been undervalued. He also asserted that the bankruptcy proceedings were of no value to him as builders' lien claimants have status akin to secured creditors and could pursue the bankrupt personally for any deficiency that may arise if the home is sold and the proceeds distributed among the claimants. The trustee maintained the bankrupt was repeatedly advised or cautioned that bankruptcy may not affect the majority of his creditors. Subsequent appraisals placed the value of his unfinished home at $150,000 rather than $40,000. The bankrupt was now eligible to obtain mortgage financing but first had to get out of bankruptcy. The bankrupt had attempted an orderly payment of debts prior to bankruptcy and had considered proposal post-bankruptcy. HELD: The application for an order annulling the assignment was dismissed. 1)The bankrupt met the definition of an insolvent person at the date of the assignment. It would be dangerous to set a precedent which would allow such an application because of post-bankruptcy circumstances. An improved financial situation and the ability to pay debts in full should not be used as criteria to launch section181 application. 2)The bankrupt had not filed monthly financial statements nor made payments as agreed to cover the costs of the administration of the estate. The onus will be on the bankrupt to comply with the requirements of the trustee to qualify for an automatic discharge on November 15/98 or an early discharge as provided for in s168.1(2).