Ontario Superior Court of Justice

Court File Number: BK-24-3075270-33
Date: 2025-04-01

In Bankruptcy and Insolvency
In the Matter of the Consumer Proposal of Danny Angelatos of the Community of Frankford, in the Province of Ontario

Before: Stanley J. Kershman

Counsel:
Samantha Galea, Licensed Insolvency Trustee
Danny Angelatos, Debtor, Self-represented
Todd R. Christensen, for the creditor, Canadian Tire Bank

Heard: 2025-02-18, Ottawa

Reasons for Decision

Introduction

[1] This is a motion brought by msi Spergel Inc. (“Administrator”) in the Proposal of Mr. Danny Angelatos (“Mr. Angelatos” or “Debtor”) seeking to approve his Consumer Proposal dated May 1, 2024 (“Proposal”). The Canadian Tire Bank (“CTB” or “Bank”), a creditor of Mr. Angelatos, opposes the approval.

Factual Background

[2] Mr. Angelatos is married with four children and owns a home with his spouse Christina Angelatos as joint tenants at 156 Trent Street, Frankford, Ontario (“Property”). One of the children has special needs. They have lived at the Property for a number of years. The house has a mortgage of approximately $189,000. According to a Purview valuation, the property is valued at $450,000.

[3] Mr. Angelatos ran into financial difficulty and met with the Administrator and filed the Proposal. The Proposal was approved by majority of the unsecured creditors. The admitted unsecured claims total $63,016.88 of which $13,114.99 is owed to CTB.

[4] Under the terms of the Proposal, Mr. Angelatos is to pay $28,000 by making 56 payments of $500 each and make a lump sum payment of $36,800 by month 60.

[5] The Administrator seeks to obtain court approval of the Proposal. CTB opposes court approval claiming that Mr. Angelatos is not eligible to make one because:

1. his assets are greater than his liabilities, and
2. his creditors (or at least CTB) are prepared to make arrangements with him to pay the debt over a period of time without interest.

Issues

1. Is Mr. Angelatos eligible to make the Proposal under the provisions of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA”)?
2. Are the terms of the Proposal reasonable and fair to the Debtor and the creditors?

Issue #1: Is Mr. Angelatos eligible to make the Proposal under the provisions of the BIA?

Administrator’s Position

[6] The Administrator argues that the definition of an “insolvent person” is set out in s. 2 of the BIA and that Mr. Angelatos satisfies the criteria set out in subsection (a).

[7] The Administrator argues that Mr. Angelatos meets the test that he is unable to meet his obligations as they generally become due and therefore, falls within the definition of a person who is eligible to file a proposal.

Bank’s Position

[8] The Bank argues that Mr. Angelatos is not eligible to make the Proposal because his assets are greater than his liabilities. It argues that once his share of the equity in the Property is included, Mr. Angelatos has sufficient assets to pay his unsecured creditors in full. It also argues that the creditors would be paid in full from a bankruptcy.

[9] The Bank argues that Mr. Angelatos is unable to refinance his home because his co-owner refuses to provide consent to refinance the Property notwithstanding the fact that there is equity in the Property. According to the Bank, assuming the Property is worth $450,000, after the disposition cost of 10% and deducting the mortgage of $189,000, where the joint tenancy is severed, the realizable equity for Mr. Angelatos’ 50% interest in the Property is more than $108,000.

Analysis

[10] Section 2 of the BIA includes the definition of an “insolvent person” and reads as follows:

insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and
(a) who is for any reason unable to meet his obligations as they generally become due,
(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due

[11] Based on the definition of an “insolvent person” under s. 2 of the BIA, one of three criteria must be satisfied for Mr. Angelatos to be considered insolvent. In this case, the Administrator argues that Mr. Angelatos meets the first criteria – that he is for any reason unable to meet his obligations as they generally become due.

[12] The Bank argues that the court must go back to the definition of whether Mr. Angelatos was eligible to make the Proposal when it filed it with the Official Receiver. It argues that Mr. Angelatos was not an insolvent person because he does not meet the criteria in subsection (c) of the definition.

[13] The court interprets s. 2 of the BIA to mean that Mr. Angelatos must satisfy at least one of the three criteria in that definition to be considered an insolvent person.

[14] Having reviewed the definition of an “insolvent person”, the court finds that if any one of the three criteria is met, then Mr. Angelatos meets the definition of an “insolvent person”.

[15] In this case, the court finds that Mr. Angelatos meets the definition of an “insolvent person” under s. 2(a) of the BIA because he is “for any reason, unable to meet his obligations as they generally become due”.

[16] The Bank relies on the case of Derksen (Re) (1995), 34 C.B.R. (3d) 252 (M.B.Q.B.) and argues that this case should be applied to show that Mr. Angelatos is not eligible to make a proposal. In that case, a husband and wife filed consumer proposals under s. 66.11 of the BIA and sought to have their proposals approved by the court. The secured creditors were to be paid in full. The unsecured creditors would receive approximately 18% to 19% on the dollar after fees.

[17] The Administrator in that case indicated that the court should consider that in the event of a bankruptcy, a majority of the assets would be exempt from seizure under relevant Saskatchewan legislation. The court agreed with the Administrator’s position on the exemption.

[18] Ultimately, the court did not approve of the consumer proposals because the applicants’ assets were greater than the liabilities after taking into consideration the equity in the principal residence.

[19] When Derksen was decided in 1995, the definition of a “consumer debtor” in the BIA (prior to the 1997 BIA amendments) read as follows: “an insolvent natural person who has aggregate debts, excluding any debts secured by the person’s personal residence did not exceed $75,000 or such other maximum as is prescribed”.

[20] In Derksen, several of the creditors did not approve of the proposal and the proposal was disallowed.

[21] The court finds that Derksen was decided prior to the 1997 amendments to the consumer proposal provisions in the BIA. The definition of an “insolvent person” was changed in the 1997 amendments, expanding the definition of an “insolvent person”. While Mr. Angelatos has more assets than liabilities, he still meets the first criteria of an insolvent person in that he is, for any reason, unable to meet his obligations as they generally become due.

[22] Therefore, the court finds that Derksen can be distinguished from the present case and does not apply.

[23] The Bank also relies on Kormos v. Fast, 2019 ONCA 430, 71 C.B.R. (6th) 167.

[24] In Kormos, there was an application to annul the assignment in bankruptcy made by the respondent claiming that she was not an insolvent person, and that her assignment was an abuse of process.

[25] The Court of Appeal for Ontario found that the respondent was not an insolvent person because her assets greatly exceeded her liabilities and were available to satisfy those liabilities. At paragraph 13, the court said that the respondent did not meet any of the criteria of an “insolvent person”.

[26] The court finds that in the present case, the Debtor can satisfy the first criteria of the definition of an “insolvent person” as he is for any reason unable to meet his obligations as they generally become due. The court finds that Kormos is distinguished from the present case because while the respondent in that case did not meet any of the criteria of an insolvent person, the Debtor does.

[27] Based on this analysis, the court finds that Mr. Angelatos is an insolvent person pursuant to s. 2 of the BIA and is eligible to make the Proposal.

Issue #2: Are the terms of the Proposal reasonable and fair to the Debtor and the creditors?

Administrator’s Position

[28] The Administrator argues that under the circumstances, the terms of the Proposal are fair to Mr. Angelatos, the Debtor, because he will be able to make the payments over a period of 60 months (i.e., five years) and will be able to make the payments in an orderly fashion considering his family’s financial situation. The terms of the Proposal are also fair to the creditors because there would be a return to them of 73%.

Bank’s Position

[29] The Bank argues that the Proposal is not fair to either the Debtor or the creditors. It argues that it is not fair to the Debtor because the money that he is using to pay the Administrator could be used to pay the creditors which would pay them in full. It argues that the only beneficiary of the Proposal is the Administrator because the fees and disbursements to the Administrator would be over $20,000.

[30] The Bank argues that the Proposal is unlikely to succeed because it calls for a balloon payment of $36,800 at the end of five years and no explanation is provided at how the Debtor will pay for it.

[31] Lastly, it argues that the Administrator does not explicitly state in the Proposal that the yield to unsecured creditors will be less than 100 cents on the dollar and if in fact they will only be receiving a yield of 73% on the dollar.

Analysis

[32] Sections 66.24(1) and (2) of the BIA read as follows:

Court to hear report of administrator, etc.
66.24 (1) The court shall, before approving the consumer proposal, hear the report mentioned in paragraph 66.23(c) and, in addition, shall hear the official receiver, the administrator, the consumer debtor, any opposing, objecting or dissenting creditor or other interested party, and such further evidence as the court may require.

Refusal to approve the consumer proposal
(2) Where the court is of the opinion that the terms of the consumer proposal are not reasonable or are not fair to the consumer debtor and the creditors, the court shall refuse to approve the consumer proposal, and the court may refuse to approve the consumer proposal whenever it is established that the consumer debtor
(a) has committed any one of the offences mentioned in sections 198 to 200; or
(b) was not eligible to make a consumer proposal when the consumer proposal was filed with the official receiver.

[33] The court finds that the legislation specifically gives the court the final say in determining whether the terms of the Proposal are reasonable. The legislation uses the word “opinion”.

[34] The legislation uses the words “terms of the consumer proposal are not reasonable, or not fair to the consumer debtor and the creditors”. The court finds this to mean that the terms of the Proposal must be reasonable and fair to both the Debtor and the creditors for the Proposal to be approved by the court.

[35] Therefore, the court has the final say as to whether the Proposal should be approved based on reasonableness and fairness to the Debtor and the creditors.

[36] The Administrator’s report to the creditors states: “That the Administrator did not make a recommendation on this proposal, and we left it up to the individual creditors to assess whether it was in their best interests to accept.”

[37] The court understands why the Administrator included these comments and takes the position that it does. The comments were based on the Debtor’s instructions, as well as his attempt to deal with the refinancing of the Property.

[38] As to the argument that the creditors will not get 100 cents on the dollar, no one would expect a Proposal Administrator to work without compensation. From the court’s perspective, it is implicit that the Administrator would be paid for doing the work and any thought that they would not be paid for doing the work is unreasonable. All of the creditors in this case are sophisticated lenders, either being banks, credit card companies or the CRA, and the court makes a finding to this effect.

[39] Furthermore, the compensation to the Administrator is mandated in the BIA. Sophisticated lenders always know that there are fees charged in proposals, so the Bank’s argument that there is a hidden cost to the Proposal fails.

[40] The Bank questions where the Debtor is going to get the balloon payment at the end of five years to complete the Proposal. The court finds that the question does not require an answer at this time. In any event, the creditors knew of the balloon payment at the end of five years, and a majority of them nevertheless voted in favour of the Proposal. If Mr. Angelatos does not make his balloon payment at the end of the five years, he will be in default and will have to consider his options at that time.

[41] Section 66.24(2) of the BIA reads, “Where the court is of the opinion that the terms of the Proposal are not reasonable or are not fair to the consumer Debtor and the creditor….” The court finds this to mean that it is ultimately the court that determines whether the terms of the Proposal are reasonable and fair to both the Debtor and the creditors.

[42] The Bank relies on a number of cases to support the argument that the Proposal is not fair to both the Debtor and the creditors.

[43] First, in Laquerre (Re), 2014 SKQB 68, 439 Sask. R. 312, a debtor made a consumer proposal while in bankruptcy. The bankruptcy trustee objected and requested that the court review the proposal pursuant to s. 66.22(1) of the BIA. The court approved the proposal as the unsecured creditors would recover more under the proposal and the only person who would benefit from the debtor remaining in bankruptcy was the bankruptcy trustee.

[44] The Bank argues that distilling the principal from Laquerre and applying it to the current circumstance at hand, the court should refuse the Proposal where the only person benefitting from it is the Administrator.

[45] The court rejects the Bank’s argument about Laquerre applying in the current circumstances. The factual matrix in Laquerre bears no resemblance to the factual pattern in this case. Furthermore, the court finds that the argument by the Bank is not reasonable.

[46] An Administrator must be compensated for their services and the value added in a consumer proposal is the stay of proceedings pursuant to s. 69.2 of the BIA.

[47] The Bank also relies on Schryburt (Re), 2011 ONSC 880, 74 C.B.R. (5th) 311. In that case, the court refused to approve a proposal on the basis that “a Proposal that may yield to unsecured creditors less return per dollar than a bankruptcy proceeding in the same matter cannot be considered fair”: at para. 30.

[48] A full reading of the case indicates that part of the court’s reasoning to refuse approval was because of certain irregular voting procedures. The court is satisfied that based on the three-criteria test of an “insolvent person” under s. 2 of the BIA, while the Debtor does not meet the test of the liabilities being greater than the assets, he does meet the test that he is, for any reason, unable to meet his obligations as they generally become due.

[49] Therefore, the court is not prepared to follow the reasoning in Schryburt.

[50] The Bank further relies on Sumner Co. (1984) (Re), 79 N.B.R. (2d) 191 (N.B.Q.B.). The Bank says that the court must look beyond the wishes of a majority of creditors when considering a proposal and that the court should reject a proposal, despite being approved by majority of the creditors after an examination of the proposal reveals it to be “drafted to serve the interest of people and corporations, other than the unsecured creditors”.

[51] While in the Angelatos case, the language of the Administrator’s report could have been clearer, it is clear to the court that the payment of $64,800 was to be the total amount paid by the debtor and that the Administrator’s fees would be deducted from that amount. In Form 48, the Debtor specifically says, “I have accumulated debt slowly and over time, and can no longer manage it, given the high interest repayments, and the steep cost of living. As such, I make this consumer proposal, hoping to satisfy my creditors by offering 100% of what I owe (gross) in an attempt to settle my debts and regain financial stability.”

[52] This wording specifically points out that the amount being paid is a gross amount.

[53] Sophisticated creditors would understand that “gross” means that from the money paid, the Administrator’s fees and disbursements would be deducted.

[54] Furthermore, Form 47 specifically sets out that the Administrator’s fees and disbursements will be paid out of the money paid by the Debtor.

[55] As discussed, the court notes that in Form 48, being the Report of the Administrator, the Administrator did not make a recommendation in relation to the Proposal and left it up to the individual creditors to assess whether it was in their best interest to accept the Proposal.

[56] As sophisticated creditors, the court finds that they made the decision to vote in favour of the Proposal. The only creditor to vote against the Proposal was the Bank.

[57] Mr. Angelatos is married and owns a home, the Property, with his spouse, Christina Angelatos, as joint tenants. He has been on long-term disability and will be for the foreseeable future. He has four children, including a child with special needs. They have lived in the home for a number of years. Furthermore, the children attend school in the area of the home.

[58] The home is located in the village of Frankford in Eastern Ontario. The evidence is that the current home and its location suit the needs of the family.

[59] Mr. Angelatos argues that he is not able to refinance the Property because his co-owner, his wife, will not consent to the refinancing. The court finds that title is held by both Mr. Angelatos and his wife as joint tenants. The court also finds that Mr. Angelatos’ wife, being a joint tenant, has the right to refuse the refinancing of the Property.

[60] In the event of a bankruptcy, the Administrator would have to step into the shoes of the bankrupt and would have to deal with the co-owner. The joint tenancy would be severed because of the bankruptcy and the Administrator and the co-owner would be tenants in common. If the co-owner still refuses to refinance the home, the Licensed Insolvency Trustee (“LIT”) may seek to partition and sell the Property with one half of the net proceeds paid to the Administrator and the other half of the net proceeds to the co-owner. The court finds that the cost of an application to sever pursuant to the Partition Act, RSO 1990, c P.4 would be in excess of $7,500 plus disbursements and HST. Furthermore, it will take time to sell the Property and would displace a family of six people, who under current market conditions would in all likelihood have difficulty finding a new place to own, and the potential of finding a house to rent which would be suitable for this particular family would be low.

[61] If the LIT does not wish to sell the property itself, it could grant a s. 38 order under the BIA to any creditors who wish to step into the shoes of the LIT and commence the partition and sale action. That will take more time and increase costs. The court estimates that the costs of doing this will be in excess of $15,000 plus disbursements and HST and will take between 6 and 12 months.

[62] The court believes that the only entity that will benefit from a partition and sale application and a s. 38 action would be the lawyers performing these services.

[63] There is also the question of how much the Bank would be able to realize from the sale of the Property. The court notes that no appraisal of the Property has been provided. Only a Purview valuation has been provided which shows a value of $450,000. This is not an appraisal. The court finds that a Purview valuation is not an appraisal for the purposes of determining the equity in the Property under the BIA.

[64] The Bank argues that the Administrator’s fee of $20,301 would not be necessary if Mr. Angelatos obtained refinancing. The court finds that he cannot obtain the financing because the co-owner will not consent to it.

[65] Assuming that the court’s figures are correct, the cost of the partition action and the s. 38 order will, in the court’s estimate, be over $15,000 plus HST of $1,950, or altogether $16,950, plus disbursements, which would be close to $20,000 or more. The difference in costs between the Proposal and a bankruptcy with a partition and sale application would be minimal.

[66] The Bank argues that it is prepared to make arrangements with Mr. Angelatos so that he can pay his debt to the Bank over a period of time and no interest would be payable. When questioned by the court about whether the Bank had written confirmation from all of the other creditors that they would be in agreement to a stay of proceedings, to collect reasonable monthly payments, and to not charge interest, the Bank said that it might be able to do so, but there was nothing in writing from any of the other creditors.

[67] The court notes that one of the advantages of a proposal is that pursuant to s. 69.2 of the BIA, a stay of proceedings is in place until such time as the completion or default in the proposal. This allows for an orderly payment by a debtor of his/her debts.

[68] In Houlden, Morawetz and Sarra’s Bankruptcy and Insolvency Law of Canada, 4th ed. (Toronto: Thomson Reuters, 2009), § 5:278 states as follows:

One of the objects of the Bankruptcy and Insolvency Act is to provide for the orderly and fair distribution of the property of a bankrupt among his or her creditors on a pari passu basis: R. v. Fitzgibbon, 78 C.B.R. (N.S.) 193 (S.C.C.).

Sections 69, 69.1, 69.2 and 69.3 are designed to prevent proceedings by a creditor that might give the creditor an advantage over other creditors. The provisions create a stay ipso facto on the filing of a notice of intention or of a proposal or consumer proposal or on bankruptcy by prohibiting a creditor from instituting or continuing the proceedings mentioned in the sections without the leave of the court: Re Cohen, 29 C.B.R. 111, aff’d 29 C.B.R. 163 (Ont. C.A.); 3031085 Nova Scotia Ltd. v. Classic Freight Systems Ltd., 2002 NSSC 151, 34 C.B.R. (4th) 313.

[69] In this case, the only way that Mr. Angelatos can ensure that he can pay his debts in an orderly manner is by filing a proposal, obtaining a stay of proceedings, and complying with the terms of the proposal. The lack of a stay of proceedings mechanism does not provide Mr. Angelatos with certainty that no creditor will proceed against him while trying to pay his debts in an orderly fashion.

[70] The court finds that the benefit of the stay of proceedings, particularly based on the facts of this case, including Mr. Angelatos being on long-term disability as well as having four children (one of whom is a child with special needs), has a value which, although intangible, gives Mr. Angelatos the ability to pay his debts as set out in the Proposal in an orderly and timely fashion.

[71] The court finds that the only way that Mr. Angelatos can keep the creditors in place without charging interest and with payment provisions is through the BIA, either as a consumer proposal or bankruptcy. In this case, Mr. Angelatos has chosen a consumer proposal.

[72] Based on this analysis, the court finds that the Proposal is reasonable and fair to the Debtor based on his financial circumstances and his spouse’s refusal to refinance the Property and reasonable and fair to the creditors based on their approval of the Proposal.

Conclusion

[73] Based on the findings in this case, the court finds that:
a. Mr. Angelatos was eligible to file the Proposal, and
b. the Proposal terms are reasonable and fair to the Debtor and the creditors.

[74] Accordingly, the Proposal is approved.

Costs

[75] While neither party has argued the issue of costs, the court finds that the Administrator was successful and the Bank was not. Bearing in mind the relevant factors set out in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including success on the motion and the time spent, the court finds that the Administrator shall have its costs on a partial indemnity basis of $950 inclusive of disbursements and HST, payable by the Bank within 30 days.

[76] Order accordingly.

Stanley J. Kershman
Date: 2025-04-01