Bankruptcy and Insolvency – Family Property Division – Provable Claim
Family Law – Division of Family Property – Bankruptcy
The respondent applied pursuant to s. 69.4 of the Bankruptcy and Insolvency Act (BIA) to the court seeking an order that the stay of her family property claim, caused by the petitioner’s assignment in bankruptcy, be lifted and the matter be permitted to continue but only with respect to property exempt from seizure by the trustee. The petitioner petitioned for divorce in 2008 and the respondent filed her answer and counter-petition in 2014. The petitioner sought equal division of the matrimonial home and the matrimonial property and in his property statement he set the value of all assets at $1,200,800 with total debts of $391,900. The respondent sough an unequal division of the family property and ascribed a higher value to the real estate but was not able to provide values of the petitioner’s registered saving plans. In May 2014 the respondent successfully applied for interim spousal support in the amount of $7,500 per month. On June 23, 2014, the petitioner filed an assignment in bankruptcy. In November 2013, the trustee had given notice of a proposal to creditors but the list of creditors had not included the respondent. The trustee’s statement of affairs listed the petitioner’s assets and valued them at $1,099,600, which included the value of assets jointly held with the respondent as well as property categorized as exempt. The latter included the household furnishings, personal effects, the Saskatchewan Pension Plan, two RRSPs, two life insurance policies, a truck, computer and tools, estimated as having a value of $158,600. The list did not include the petitioner’s interest in the family home. The trustee took the position that his interest was not exempted and proposed that all real property, including the family home, be sold or that the respondent acquire the petitioner’s interest in the properties from the bankrupt estate. The respondent argued that she should be able to pursue her family property claim with respect to the exempt assets and that her claim would have no impact on the assets within the estate but for her right to file a provable claim for those assets. The trustee contended that the respondent’s application was improperly before the court as she was neither a creditor to the estate nor was she a director of a corporation with an interest in the estate. The stay should not be granted because the respondent had no vested title or interest in the assets with the trustee for the benefit of the creditors. The assets consisted of all of the property in the petitioner’s name as well as his interest in the jointly held property that by virtue of the bankruptcy had become severed from the respondent’s interest. Without a judgment for a liquidated sum, the respondent had no claim or interest in any of the property. Further, the respondent had not produced any evidence that she was prejudiced by the stay.
HELD: The court found that the respondent’s family property claim was provable in bankruptcy pursuant to ss. 121 and 135 of the BIA. Her claim arose before the date of the bankruptcy and at the date of the property division application. As a creditor, the respondent’s provable claim was stayed by s. 69.3(1). The court granted the application to lift the stay of proceedings in respect of the respondent’s claim for an unequal division of family property only with respect to the division of assets exempt from seizure. The court found that the continued operation of the stay would prejudice the respondent because it would prevent her from pursuing her family property claim in respect of exempt assets. With respect to the non-exempt assets, the court found that a lifting of the stay was not required because it had found that her family property claim was a provable claim in bankruptcy, which she could pursue similar to any other creditor. The court had jurisdiction to hear the matter on the basis of s. 183 of the BIA.