Bankruptcy In Canada Essay

737 words - 3 pages

Assignment Three

Question One:
What (if any) act(s) of bankruptcy did Mr. X commit? According to the Federal Bankruptcy and Insolvency Act (the “BIA”), section 42.(1)(a), Mr. X committed an act of bankruptcy as he “...in Canada or elsewhere he makes (made) an assignment of his property to a trustee for the benefit of his creditors generally, whether it is an assignment authorized by this Act or not;” he gave his car to his daughter, which, though he gave the car to her before he made the assignment in bankruptcy on July 2, 2003, is also considered an act of bankruptcy according to BIA section 42. (1)(c): “if in Canada or elsewhere the debtor makes a fraudulent gift, delivery or transfer of the debtor’s property or of any part of it;” This may not appear to be a fraudulent act, or an act of bankruptcy unless you realize that Mr. X had contacted his credit card company and stated that he did not have the ability to pay, and told his mortgage company that he could not pay them either. BIA section 42. (1)(g) would also apply: “... if he assigns, removes, secretes or disposes of or attempts or is about to assign, remove, secrete or dispose of any of his property with intent to defraud, defeat or delay his creditors or any of them.”

Question Two:
Mr. X's creditors might be able to reverse the gifting of the car to Mr. X's daughter Jordan. As stated above, Mr. X made statements of bankruptcy/inability to pay his debts to both his mortgage company and to his credit card company, both of whom he owed large sums of money. He then gave his car (owned by Mr. X free and clear and worth $25,000) to his daughter. This would seem to be an act perpetrated by Mr. X to avoid paying his debts.

Question Three:
Under BIA sections 98 parts 1 and 2, the car or the proceeds of the sale of it by the daughter would be the property of Mr. X's creditors. Section 98.1 and 2 state that:
98.1 If a person has acquired property of a bankrupt under a transaction...

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