the bank has the right to sell the home to pay the debt. If the bank does not sell the home for enough money to cover the mortgage debt, then the bank has a shortfall and the amount of that shortfall is an unsecured claim in the bankruptcy.
Consider this example: The Dominion Bank holds a mortgage against the debtor’s home for $200,000. There are no other mortgages against the debtor’s home. If the debtor defaults in making monthly payments to the bank, the bank has a right through legal process to take the debtor’s home and eventually sell it. If the bank realizes $160,000 towards the $200,000 loan, then $40,000 is the shortfall or deficiency. The bank then has an unsecured claim for the $40,000. However, if the bank sells the home for $240,000, the bank has a $40,000 surplus, and the debtor is entitled to that money. If the debtor were bankrupt for other debts, the trustee would intercept the $40,000.
Second, there are the preferred creditors. These are certain types of creditors that are specifically recognized under the Bankruptcy and Insolvency Act. There are several different types including wage earners, claims under support orders, municipalities for business taxes, and landlords of commercial premises. They receive a preferred place if there is a distribution of monies from the sale of the debtor’s assets. Preferred creditors are reviewed in Chapter 5.
Last, there are ordinary unsecured creditors. These are creditors who do not hold any of the property of the debtor as security for the debt and they are not given any priority or preferred standing in the administration. One example might be a mobile phone service provider. They have no special rights against the debtor or against his or her property. Creditors who obtain judgment against the debtor are also in this group.
3. The Superintendent of Bankruptcy
The Superintendent of Bankruptcy is a person appointed by the Minister of Industry Canada in Ottawa to supervise the administration of all bankruptcies, receiverships, and other matters to which the Bankruptcy and Insolvency Act applies throughout Canada. The Superintendent is appointed as the senior administrator under the Department of Industry and has an office in Ottawa. The Superintendent’s role is to review and monitor the performance of all trustees across Canada as well as review debtor compliance with the Act, its rules, and directives. The Superintendent can also become involved, where necessary, with the administration of any bankruptcy or receivership estate where there may be reason to believe that there are irregularities, or for the protection of the public.
The Superintendent of Bankruptcy and staff, called the Office of the Superintendent of Bankruptcy (OSB), review the conduct and practice of all licensed trustees and bankrupts. The Office of the Superintendent keeps statistics of all bankruptcies and proposals for Statistics Canada.
The OSB is the official licensing board for trustees in Canada. All candidates and trustees must obtain a licence from the Superintendent’s office before they can administer bankruptcies. The OSB, in conjunction with the Canadian Association of Insolvency and Restructuring Professionals, an association of insolvency professionals throughout Canada, work together in setting up a course for students. Jointly, they prescribe the materials and examinations that a person must perform adequately before a licence is granted. There are both written and oral examinations held at least once a year in major centres across Canada for this purpose. The OSB website is www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/home. The website provides useful information about bankruptcy and insolvency, a trustee directory, resources for additional reading, statistics, and other relevant information. The Superintendent’s contact information is set out in Appendix II.
4. The Official Receiver
The Superintendent of Bankruptcy monitors the function and role of trustees through various offices throughout Canada, and is represented by Official Receivers throughout Canada. Each province is a bankruptcy district, and within each district, there may be one or more divisions. Within the division, there are a number of Official Receivers that represent the Superintendent.
Under the Bankruptcy and Insolvency Act, the Superintendent and the Official Receivers are required to perform certain tasks during the administration of the bankrupt’s estate. For example, the trustee’s conduct is monitored by the Official Receiver on behalf of the Superintendent. Any complaint about a trustee is usually given to the Official Receiver in the area where the trustee practises. The Official Receiver chairs the first meeting of creditors in the bankruptcy or under a proposal. However, the Official Receiver can delegate this function to the trustee. Where necessary, the Official Receiver examines the bankrupt or the principal of the bankrupt if it is a corporation concerning the conduct of the bankruptcy, and the disposition of assets that may have been transferred or conveyed before the bankruptcy.
The offices of the Official Receivers are set out in Appendix II.
5. The Bankruptcy Judge
Most consumer debtors who go through the bankruptcy process never appear before the bankruptcy judge. However, if the consumer debtor has been bankrupt before or has been reckless with his or her assets before going into bankruptcy or has incurred significant debt, then it is probable that when the debtor applies to get out, or get discharged, he or she will be required to attend before the registrar or the bankruptcy judge to explain the circumstances surrounding the bankruptcy.
The bankruptcy judge hears many other matters arising out the bankruptcy. One area is that of discharges where the creditors have an opportunity to oppose the debtor’s application. Once the debtor is placed into bankruptcy, the trustee has a duty to file for the bankrupt’s discharge hearing. There is more about discharges in Chapter 14.
6. The Registrar in Bankruptcy
The registrar in bankruptcy is also a court official. The registrar has the authority to rule and judge certain types of cases. Depending on the need, there is usually only one registrar in each province whose office is close to the superior court in the capital. However, there may be deputy registrars in other cities of the province. The deputies have the same authority as the registrar.
In Ontario, there are two registrars who sit in Toronto; there are also deputy registrars, one in London and the other in Ottawa. In Quebec, there are several registrars located in major centres.
The powers of the registrar are set out in the Bankruptcy and Insolvency Act. The registrar can —
• hear cases where both sides have agreed to some solution of a problem;
• examine any person under oath who has knowledge of the bankrupt’s affairs;
• grant orders of discharge; that is, once the debtor is in bankruptcy, the debtor will usually want to get out or get “discharged”; that hearing can take place before the registrar;
• make orders in urgent cases;
• determine matters relating to proofs of claim; and
• fix the fees of the trustee and the fees of the lawyer for the trustee.
With respect to discharge hearings, the court administration determines whether the discharge is heard by the registrar or bankruptcy judge. The registrar also has other powers that are of a more technical nature.
7. The Inspectors
Inspectors are persons who represent the creditors and guide the trustee in the deliberations and actions throughout the administration. Once a bankruptcy occurs, there may be a meeting of
