Nevin (Re), 2010 ABQB 811

Court of Queen ’ s Bench of Alberta Citation: Nevin (Re), 2010 ABQB 811 Date: 20101216 Docket: BK01 092108 Registry: Calgary Between: In the Matter of Judith Marlene Nevin _______________________________________________________ Memorandum of Decision of J.B. Hanebury, Registrar in Bankruptcy _______________________________________________________ [ 1 ] Ms. Nevin seeks to be discharged from bankruptcy. Over a period of approximately 5 years she has paid the trustee an amount equal to nine months surplus income.

The trustee does not oppose her discharge but asks that it be conditional on the payment of a total of 21 months income. [ 2 ] Ms. Nevin opposes that application arguing that: her surplus has been miscalculated; her situation is unfortunate and she cannot pay more; she has been rehabilitated; and, to require a further payment from her is not supported by the principles behind the Bankruptcy and Insolvency Act . [ 3 ] The Act provides that the registrar may require the bankrupt to pay funds as a condition of discharge which can be further surplus income for a specific period of time or a specific amount.

Facts [ 4 ] There is no doubt that the bankrupt has suffered through some very unfortunate circumstances. Ms. Nevin is disabled as a result of an accident and lives on income from an annuity and a pension totalling $7,650.00 per month. She was assigned into bankruptcy in 2005 and required to pay surplus income of over $3500.00 per month. The primary cause of her bankruptcy was gambling.

[ 5 ] Subsequent to her assignment she sought treatment for both the gambling and ongoing depression. She continues on medication to deal with the latter. [ 6 ] She and her husband separated in 2007 and he assumed the day to day care of their two granddaughters, who have lived with them for many years. He then quit his job and Ms. Nevin paid him $3,770.00 per month for the support of the children, now teenagers. Both suffer in differing degrees from fetal alcohol syndrome. Mr. Nevin makes just over $500 per month from pension income. Ms.

Nevin provides cares for the two girls on weekends and in the summer. [ 7 ] The trustee questioned when funds were first paid to Mr. Nevin under this arrangement as the written assignment was dated January, 2008. Ms. Nevin claimed that she had paid Mr. Nevin the funds since early 2007. [ 8 ] Mr. Nevin was put on the witness stand and said that their arrangement predated the agreement and commenced in early 2007. It was formalized when their house was sold and they ceased living together. The trustee advised that the sale of the house occurred in mid 2007. [ 9 ] In addition to her payment to Mr. Nevin, Ms.

Nevin has ongoing expenses for her father and herself. She provided a budget to substantiate her claim that she cannot pay further monies to her trustee with the sum remaining. Analysis [ 10 ] Ms. Nevin’s counsel first argued that her income should not include any payment made as a result of her accident for pain and suffering. The bankrupt said that she believed that her annuity was in part a payment for pain and suffering. [ 11 ] Unfortunately the documentation available in relation to her accident does not indicate whether any portion of the annuity paid to her is in relation to pain and suffering.

She did receive some $200,000.00 as a lump sum payment at the time of the settlement of her claim. The purpose of this sum is also not known. [ 12 ] Her counsel suggested the court arbitrarily set an amount of her annuity to be attributed to pain and suffering: Re Mostajo 2006 CanLII 35001 (ON SC) , [2006] 26 C.B.R. (5 th ) 45 (Ont. Reg.). He relied as well on Re Anderson 2004 ABQB 349 (CanLII) , [2005] 2 C.B.R. (5 th ) 27 (Alta. Registrar) a case where the court would not consider a payment for future income in its calculation of surplus.

That is not the situation before this court. [ 13 ] The onus is on the bankrupt to establish that the monthly income from her annuity is exempt in part. She has not done so. [ 14 ] Had there been no lump sum payment made to her, it would be likely that a portion of her annuity income should be exempt. As she received a lump sum payment, I am not satisfied that the payments from her annuity should be discounted for the purpose of calculating her surplus income. Therefore, the payment of her surplus income has been properly calculated. [ 15 ] Ms.

Nevin also argues that she is in a most unfortunate situation and to require her to pay more would offend the principles of the Bankruptcy and Insolvency Act . [ 16 ] The principles underpinning the Act have been mentioned frequently in the case law. In Ament (Re) 2006 CanLII 30583 (ON SC) , [2006] O.J. No. 3538 (Ont. S.J.), the court discussed the need to consider and balance: the ability of an honest but unfortunate debtor to make a fresh start; the right of creditors to be repaid; and, the need for the public to have confidence in the bankruptcy system. Honest but Unfortunate Debtor

[ 17 ] Ms. Nevin’s situation is unfortunate. That cannot be disputed. She is disabled and with her husband undertook the care of her two grandchildren, who have themselves medical issues. [ 18 ] Regardless of her misfortune, the Act provides that when gambling is a factor in a bankruptcy, that conduct is subject to censure. Section 172(2) provides that in such a situation the court shall refuse the discharge, suspend it or make it conditional on payment, a consent judgment or such other terms as the court directs. While Ms.

Nevin is in an unfortunate situation, the legislation makes it clear that her conduct cannot be condoned. Right of the Creditors to be Repaid [ 19 ] Ms. Nevin has over $100,000.00 in debts and they appear mostly linked to credit cards. [ 20 ] A compelling order was obtained requiring Ms. Nevin to pay $25,800.00 toward her surplus income for the first 9 months. A

section 68 garnishment order was also obtained. Despite these orders, it took almost five years to collect that sum. Had Ms. Nevin paid as required, she could have sought her discharge four years ago. [ 21 ] The trustee has now collected $77,000.00 in payments, part of which is a result of the sale of Ms. Nevin’s residence. Due to Ms. Nevin’s non-cooperation, the trustee incurred fees in the course of collecting this sum with the result that the realization by the creditors will be less. [ 22 ] In 2008, the trustee applied for Ms. Nevin’s discharge and the payment of further surplus income.

Just before the application he received a copy of the aforementioned written arrangement between Ms. Nevin and her husband that provided that half of her income would go to him for the support of their grandchildren. [ 23 ] Ms. Nevin failed to pay her surplus on time, failed to co-operate, incurred further trustee costs and then her circumstances changed with the separation from her husband. The income that would have been available had she completed her duties in a timely way, is no longer available. As a result of her behaviour, a reduced amount is available for the creditors.

Public Confidence in the Bankruptcy System [ 24 ] To ensure the maintenance of public confidence in the bankruptcy system, the right balance must be struck in weighing the factors to be considered. [ 25 ] In this case, the Act makes it clear that Ms Nevin’s conduct is subject to censure. Her financial situation resulted from her gambling. She is not entitled to an absolute discharge.

The only question is whether her discharge should be suspended or subject to the payment of further income. [ 26 ] While there is merit to her argument that she required funds to assist with her granddaughters, no accounting of how much was required prior to or after her separation from Mr. Nevin was provided. Mr. Nevin said that he could not work once they separated as he had to look after the girls. However, the girls spend considerable time with Ms. Nevin as well and no reason was given why Mr. Nevin could not work during those periods. Mr. Nevin was put on the witness stand.

When asked if copies of his tax returns were available, he advised that he had not filed returns for some years. [ 27 ] Ms. Nevin and Mr. Nevin have not convinced this court that further income should not be paid.

[ 28 ] The trustee notes that the Nevins’ arrangement happened in early or mid 2007, some 18 to 24 months after her bankruptcy and prior to that time she would clearly have had sufficient funds to pay further surplus into her estate. Even now, after deducting the sum she pays to her former husband to care for the girls, Ms. Nevin has surplus income. Her income is almost double that prescribed by the Superintendent’s Guidelines. Conclusion [ 29 ] Ms. Nevin has dealt with a number of unfortunate circumstances, has overcome her gambling problem and is dealing with her ongoing problem with depression.

Balancing this against her former and present income, Ms. Nevin must pay a further sum into her estate for the benefit of her creditors in order to maintain public confidence in the bankruptcy system. In light of Ms. Nevin’s circumstances and income she is granted a discharge from bankruptcy conditional upon the payment of a further $12,000.00. This outstanding sum is to be paid at the rate of at least $300.00 per month and must be paid in full by December 31, 2012. The monthly minimum amount has been set at a sum insufficient to pay this outstanding sum within the allotted two years in order to provide Ms.

Nevin with some flexibility in the arrangement of her financial affairs. Heard on the 07 th day of December, 2010. Dated at the City of Calgary, Alberta this 16 th day of December, 2010. J.B. Hanebury Registrar in Bankruptcy Appearances: Daniel K. Jukes Miles Davison LLP for the Judith Marlene Nevin John I.P. (Jack) Cameron Cameron . Okolita Inc Trustee