The Canadian insolvency process is geared to deal with gambling debts or any debt resulting
from addiction. Not only can it deal with the debts caused by borrowing money to feed
an addiction, but it is also uniquely positioned to deal with the person's total rehabilitation.
When the person hits rock bottom with debts they cannot repay and no more credit to keep
borrowing to feed the addiction, a licensed insolvency trustee (LIT or Trustee) (formerly
called a bankruptcy trustee) is positioned to help not only with the debt issues but
also the rehabilitation issues.
My firm has been involved in helping people out of their debt problems arising from addiction
issues. The most common are gambling, alcohol and drug addictions. Professionals have referred
us their family members suffering because of an addiction.
I will draw on my own personal case studies and specifically refer to a recent decision
of the Supreme Court of Nova Scotia in Bankruptcy and Insolvency in Donaldson (Re), 2019 NSSC
33.
Gambling debts: What the LIT is expected to do
As part of the free consultation provided by a LIT to an insolvent person pre-filing,
the LIT is expected to identify the addiction as one of the causes of insolvency. It will
also be noted on the person’s initial filing documents in filing either a consumer proposal
or for bankruptcy. The Canadian insolvency system is geared towards giving the honest
but unfortunate consumer a fresh start.
In cases of addiction, the LIT must also point the person to community resources to aid in
healing the person with the addiction to lead a sober life. This must be a precondition
for any LIT to support the addicted person’s consumer proposal or discharge from bankruptcy.
This is how my practice works and as you will see, is also the view of the Court in the
Donaldson case.
Gambling debts: The Donaldson facts
Gloria Donaldson and Wayne Donaldson are fourth-time bankrupts. This is their 5th experience with
the Canadian insolvency process as one of their filings was a consumer proposal. Although
they made separate filings, it really should have been a joint filing and the issues and
Court decision applied to both of them.
Gloria and Wayne were 65 and 73, respectively. The Court holding their discharge hearing
found both Gloria and Wayne to be forthright, honest and trustworthy. Yet, this is the 4th
bankruptcy and the 5th use the Bankruptcy and Insolvency Act, RSC 1985, c. B-3, as modified
(BIA).
They declared the source of this bankruptcy as an overextension of credit on substantial
house improvements. They did not list gambling. However, Registrar Balmanoukian found that
there is no doubt on the evidence before him that gambling was a significant factor to
at least speed up driving the Donaldsons to this 5th insolvency filing.
The Donaldsons filings spanned a duration of nearly 40 years. They are seniors. Their
future income is restricted, by age and health.
Gambling debts: The bankruptcy discharge will not be easy
A 4th bankruptcy is a really major issue. Without a doubt, also for applications including
third-time bankrupts the Courts have revealed an unwillingness in providing the bankrupt's
discharge. At the very least not without an extensive suspension or similar burdensome
terms.
A 4th bankruptcy is a clarion call to the Court and its officers that these people should
never come before the Bankruptcy Court again. The issues need to be fixed.
Gambling debts: The bankruptcy discharge must serve a purpose
The proof is clear that Mr. and Mrs. Donaldson did not have the possibility of having sources
with which to pay any kind of meaningful amount on their considerable debt. The passage of
time and their health and wellness have actually prevented this. Nevertheless, that does not
imply that the Court can only enforce a token wag of the finger and a reprimand “do not
do it ever again”.
What the Registrar decided is frankly, something that the LIT should have already done. When
I am faced with potential bankrupts whose debt has arisen as a result of spending money
they did not have on their addiction, this is what I tell them. I say that if they wish
to have any chance of having a discharge from bankruptcy, then they need to get themselves
into a rehab program immediately. Gamblers Anonymous and AA are two that we regularly
refer clients to. We also tell them that for discharge purposes, they will need to have
their sponsor verify to us, in writing, that they have regularly attended and continue
to attend meetings to help themselves.
This way, by the time we come to Court, we can prove rehabilitation has already begun.
Gambling debts: The Registrar’s decision
So the Registrar ordered that the Donaldsons:
Shall attend such counselling for gambling abuse and/or addiction for such period as
is necessary to obtain an opinion from a qualified counsellor or medical professional that both
of the Donaldsons are able to conduct themselves without going back to gambling in any way
Refrain from gambling in any form, and further that they enrol and remain enrolled in the
voluntary exclusion program with Casino Nova Scotia
Absolutely stop obtaining credit from any lender in any form, except as approved in
advance and in writing by the Trustee Disclose and subject to any provincial exemptions,
turn over to the Trustee any property of either or both of them that comprises "property of
the bankrupt" within the meaning of the BIA between the date of the Donaldsons' bankruptcies
and their discharge Upon compliance with the foregoing for a period
of at least five years from the date of the decision, the Donaldsons may make a further
application for discharge.
Gambling debts: Do you have too much debt?
Do you have too much debt? Are you worried that the future interest rate hikes will make
presently affordable commitments entirely unmanageable? Is the discomfort, tension and
anxiousness presently detrimentally affecting your health and wellness as well as health?
If so, call the Ira Smith Team today for your free consultation and to make sure that we
can begin assisting you to return right into a healthy, balanced, hassle-free life.