Division 1 Proposals and COVID-19
How is my Division I Proposal Affected by the COVID-19 Coronavirus?
On March 25, 2020, the Office of the Superintendent of Bankruptcy (“OSB”) issued temporary guidance to Licensed Insolvency Trustees (“LITs”) entitled LIT Flexibility During the COVID-19 Pandemic:
“LITs are encouraged to exercise their professional judgment in using as much flexibility as possible to avoid unintended harm or prejudice in the current circumstances” and “to determine where flexibility within existing rules can be of most benefit to individual consumer and commercial debtors impacted by the pandemic.”
Also on March 25, 2020, various federal Acts were amended by a Bill entitled An Act respecting certain measures in response to COVID-19. There were no amendments to the Bankruptcy and Insolvency Act (the “Act”) and all provisions relating to Division I proposals remain in effect without additional relief for debtors affected by the COVID-19 pandemic.
The Act provides that:
The default of a provision of a Division I proposal can be remedied within 30 days of the due date; or
The default can be waived by the:
Creditors if there are no Inspectors.
If the default isn’t remedied within 30 days and isn’t waived by the Inspectors or Creditors, within 30 days of the end of the 30-day remedy period (so effectively within 60 days of the default date), the LIT must notify the Creditors and the OSB. The Division I proposal debtor is:
Left in limbo if there’s no application to Court for an Order to annul the Division I proposal; or
Deemed to have assigned him- or herself into bankruptcy if the Court orders the Division I proposal annulled.
If your financial circumstances have changed as a result of COVID-19 and you’re uncertain about your ability to comply with the payment terms of your Division I proposal, we recommend:
Speaking with your LIT as soon as you think there might be a problem.
Maintaining your regular payments, if possible.
Requesting that your LIT convene a meeting of Inspectors or Creditors to request a waiver of default.
Amending your Division I proposal.
To answer your questions about how Division I proposals are affected by the rapidly changing economic conditions, and to support you through any personal financial challenges you may be facing, we’ll be hosting regular online office hours. During these online Q&A sessions, there’s no agenda except to address your concerns and answer your Division I proposal questions.
To join, click: https://meetings.ringcentral.com/j/2507129919.
The Next Online Division I Proposal Q&A Session is Scheduled for:
Friday, April 24, 2020 – 12:00 – 1:00 pm PDT
We’re here to help, and we look forward to “seeing” you online to provide answers to all your financial questions. We have faith in our public health care system, our federal and provincial governments, and the strength of the Canadian economy and our financial institutions. Together we will get through this.