Question from a creditor
I will try to keep this short, though it’s a long story. My ex-wife declared bankruptcy some time ago. At the time she hadn’t quite married her now second husband. I am also the sole inspector on the estate.
Long story short, her debts at the time:
– she owed me a $22,000 bill of costs from a custody trial
– two separate Visa accounts totalling $23,000
– about $1000 in taxes to Revenue Canada
– about $7000 in legal fees
The first Licensed Insolvency Trustee explained to me that her then common-law partner had co-signed on the Visa accounts so as guarantor, the debts went to him and were not considered creditors. He also stated creditors had to prove claims within a certain timeline early on. The law firm never proved their claim. She got married almost immediately after declaring bankruptcy.
I opposed the discharge and was successful in getting an order for the $22,000, payable over four years. We asked for that amount, due to the fact that we were under the impression there were no other creditors.
Fast forward. The first trustee retired and there is now a second one handling the estate. I have received $4100 in interim payments and she has just recently paid the remaining amount in full.
However, suddenly her husband has just proven two claims for the amount he owed to Visa and now the current trustee has given me a draft final disbursement statement whereby her husband will be paid out the lion’s share of the remaining monies. In effect, this actually means that she is getting back over a third of her court-ordered amount payable to the estate.
My questions:
– How can a guarantor who voluntarily and knowingly co-signs for credit, suddenly become a creditor to the estate to recoup monies?
– Given the marriage situation, how can it be allowed under bankruptcy law that effectively, through marriage, she will get back some of what is supposed to be dispersed to creditors?
– Does the husband legitimately become eligible as a creditor, as he was not her husband at the time of the initial bankruptcy?
– Does the superintendent of bankruptcies (BC) act as an arbiter if an inspector does not approve the final disbursements? If not, how are these disputes resolved?
You are asking complicated questions that are beyond the scope of this web site. I suggest you discuss this in more detail with the trustee, and if you are not satisfied with the trustee’s explanation, contact a bankruptcy lawyer to advise you.
Regarding the co-signed debt, it appears that your ex’s new husband co-signed prior to the bankruptcy, therefore he was fully liable for the debt. Your ex did not owe him anything, and therefore he is not a creditor in her bankruptcy, unless there are some other facts we are not aware of.
Yes, you can contact the Superintendent of Bankruptcy and discuss your concerns with them as well.