Werkman (Re), 2016 ABQB 6

Court of Queen ’ s Bench of Alberta Citation: Werkman (Re), 2016 ABQB 6 Date: 20160104 Docket: BE03 1679745 Registry: Edmonton In the Matter of the Bankruptcy of Ronald Werkman _______________________________________________________ Reasons for Judgment of L. A. Smart , Registrar in Bankruptcy _______________________________________________________ Introduction [ 1 ] Mr. Werkman filed a Division I Proposal on October 24, 2012. It was refused resulting in him being deemed bankrupt on November 16, 2012. The cause of the bankruptcy is described as “CRA debt interest and penalties.

New CRA debt while employed for a corporate company that my ex-wife owned”. At the date of the bankruptcy, Mr. Werkman was 48 years old, self-employed as a tile installer, divorced and a family of one. This is his second bankruptcy having previously received a discharge in April, 1991. No information or particulars with respect to his earlier bankruptcy have been provided. [ 2 ] There are total proven unsecured claims of $417,818.94 in this bankruptcy.

In that amount is a claim for unpaid income taxes of $301,906.78 for the years 2001 to 2011 being $196,302.85 in personal income tax and the balance of $105,603.93 in penalties and interest. This tax debt represents 72.25% of the total proven unsecured claims short of the 75% threshold required for s.172.1 of the Bankruptcy and Insolvency Act , RSC 1985, B-3 as am. to apply. In addition, there is a proven claim for unpaid GST of $78,120.87 and payroll remittances of $29,705.68 amounting to total tax related debt of 98% of proven claims. [ 3 ] Under the proposal Mr.

Werkman was to contribute $90,000 at the rate of $1500 per month. In the s. 170 Report, the Trustee reported that the monthly income of the Bankrupt at the date of bankruptcy was $4500 and at the date of the report down to $1916.53. On February 12, 2015, the Trustee reported that Mr. Werkman had not provided his monthly income and expense statements for December, 2012 through to May, 2013 and for the months of October and November, 2014 as well as having failed to provide income verification for the entire reporting period.

Although the Trustee recommended in his report a conditional discharge on that date, the matter was adjourned. The Bankrupt was ordered to provide his income and expense information, provide the trustee with documents necessary to file his 2012 pre-assignment and post assignment income tax returns, and file his 2013 and 2014 income tax returns and provide copies to the Trustee.

[ 4 ] When this matter returned to court the Trustee provided an Amended Report to the Court which indicated that Mr. Werkman had complied with the earlier directions of the Registrar. Attached to Trustee’s report as an exhibit is a consolidated statement of monthly and income expenses. That report is still deficient information for December, 2012 through to May 13, 2013 in that income is not reported and expenses are described as unknown. From June 2013 through to July 2014 and for October and November 2014 income was reported at the identical amount of $1916.55.

Identical expenses of $1590 are reported for June 2013 to July 2014 and unknown for October and November, 2014. In August and September, 2014 his income dropped to $950 and $783.50 respectively. As a result of his monthly rent dropping in half to $500, his expenses for each of those months was reported at $1090.

Discharge Recommendations [ 5 ] The Trustee in his report “with due regard to the circumstances noted above and the nature of the bankrupt’s debt, the Trustee recommends that the bankrupt shall pay the sum of $8900 representing the balance owing pursuant to the Voluntary Payment Agreement (VPA) and also be required to contribute an additional sum of $6000 to the estate for the general benefit of the creditors.” There had been previously remitted $3600 under the VPA and $1500 as a Proposal Payment when it was filed. In result, the total financial contribution to the estate would be $20,000.

No explanation or rationale was provided for the additional $6000 payment. [ 6 ] Canada Revenue Agency has objected to Mr. Werkman’s discharge. CRA calculated that a further sum of $131,400 would need to be paid into the estate for it to recover 50% of the taxes owing without regard to penalties and interest. It argues that in the circumstances despite Mr. Werkman’s most recently reported income, it is a just amount having regard to the nature of the underlying obligation. In 2012, Mr. Werkman’s income was $79,081.

His recently filed income tax returns for 2013 and 2014 disclose income of $16,100 and $24,150, respectively. Discussion [ 7 ] According to the s. 170 Report, Mr. Werkman continues to be self-employed. When making his proposal he provided a cash flow statement to the Trustee indicating the ability to pay $1500 per month. His income at the date of his bankruptcy was $4500 per month. The information provided to the court does not disclose his first six months of income and expenses but quite remarkably discloses income of precisely $1916.55 and expenses of precisely $1590 for virtually every month thereafter.

When the Trustee was asked if any specific inquiries had been made of Mr. Werkman that would assist in explaining his income following bankruptcy, he responded that they had asked the usual questions or, in other words, no. [ 8 ] Mr. Werkman was advised by the Trustee that he should be in attendance. He did not attend. He did not comply with his duties until he was ordered to do so. Despite his tax liabilities and failure to file previous returns in a timely manner, he did not file his 2013 and 2014 when due. He has made no financial contribution to the bankruptcy estate for at least the last 12 months.

I have little confidence in the income and expense statements given to the Trustee. They may well meet the formal obligation of the Bankrupt and allow the Trustee to tick off the box that it has been performed but that is all they appear to do. Based on what is before me, I am not prepared nor do I consider myself able to make a decision as to the appropriate terms to be set on this discharge application. Conclusion [ 9 ] The application for discharge of the Bankrupt is adjourned indefinitely.

The Bankrupt is at liberty to reapply upon the provision of further evidence to support his disclosed income during the course of the bankruptcy and with respect to his financial prospects for the future. Whether this bankruptcy remains a

Summary Administration or is converted to an Ordinary Administration, the Trustee shall apply to me on notice to the creditors and the Office of the Superintendent of Bankruptcy for taxation of his accounts. Dated at the City of Edmonton, Alberta this 04 th day of January, 2016. L. A. Smart Registrar in Bankruptcy Appearances: Z. Alam

MNP Ltd. for the Trustee George Body Department of Justice Canada for CRA