Court File and Parties

Court File No.: 32-1195339
Date: 20121015
Superior Court of Justice – Ontario
(BANKRUPTCY COURT)

Re: IN THE MATTER THE BANKRUPTCY OF STEVEN FRANK FOLK of the City of Mississauga, in the Regional Municipality of Pell, in the Province of Ontario

Before: CUMMING J.

Counsel:
Kristine Holder, for Steven Frank Folk

Heard: OCTOBER 15, 2012

Endorsement

[ 1 ] The moving party Bankrupt, Steven Folk, assigned himself into bankruptcy on April 22, 2009. He appeals the decision of Registrar Nettie dated December 6, 2010. The appeal is unopposed.

[ 2 ] The Trustee received $7465.64 as a government disability tax credit (“DTC”) refund cheque for the tax years 2002 to 2008 to the Bankrupt. The Trustee sought a determination as to whether this refund is properly considered to be “property” within the meaning of s. 67 of the Bankruptcy and Insolvency Act (“BIA”) or “income” within s. 68 thereof.

[ 3 ] Registrar Nettie held that pre-bankruptcy refunds are “property” under s. 67 while post-bankruptcy disability tax credit refunds are s. 68 “income”.

[ 4 ] Deputy Registrar A. M. Diamond has given a cogent analysis of this issue in Bowerbank-Buckley (Re) [2007] O.J. No. 5722 .

[ 5 ] Registrar Diamond cites academic authorities on tax policy who point out that the social policy underlining the tax expenditure inherent to the disability tax credit is to allow disabled persons in effect to retain more of their taxable income than the norm, given the added, extraordinary expenses incurred for persons with a disability.

[ 6 ] Applying the analysis of the Court of Appeal in Landry, Re (2000), 2000 16846 (ON CA) , 50 O.R. (3d) 1 (Ont. C.A.), Registrar Diamond states, at para. 29 of his decision in Bowerbank-Buckley (Re) :

The amendment to section 68 of the BIA to change the wording from wages to “total income” which is then defined in s. 68(2) (a) as “including all revenues of a bankrupt of whatever nature or source”. [sic] As stated in Landry , above, this has the effect of broadening the category. Having concluded that the purpose of the DTC is to augment the income of the parent of a disabled child, it is, to my mind akin to income and should…be dealt with under section 68 of the BIA as income and not section 67 as property of the bankrupt.

[ 7 ] In my view, Registrar Diamond’s analysis is correct. The appeal is allowed. The $7465.64 is properly to be considered as “income” under s. 68 of the BIA . The distribution thereof is to be determined by the Trustee subject to a mediation should the Bankrupt disagree with the Trustee’s determination as to distribution.

CUMMING J.

Date: October 15, 2012