P.E.I. Supreme Court extends bankruptcy protection during pandemic

Companies have more time to file paperwork,and people may be able to defer court-ordered debt payments.

Courts across Canada are doing the same for those struggling financially

'For debtors or creditors, it gives everyone a little more time,' says one insolvency trustee. (Steve Bruce/CBC)

P.E.I. has joined Ontario in extending extra protection during the COVID-19 pandemic to people facing bankruptcy.

The P.E.I. Supreme Court has declared a period of emergency from mid-March to the end of June. Companies have more time to file paperwork and individuals can defer court-ordered debt payments in bankruptcy and insolvency matters.

"Without this court order, to give them a little more wiggle room if you like, they were in danger," said Walter MacKinnon, a licensed insolvency trustee with MNP Ltd. in Charlottetown. "For debtors or creditors, it gives everyone a little more time."

Justice James Gormley of the P.E.I. Supreme Court issued the order April 30. It follows a similar order by the Ontario Superior Court of Justice, and was initiated by Canada's federal bankruptcy regulator.

The P.E.I. court order dealt specifically with the case of a Charlottetown woman in bankruptcy protection. The woman had been making monthly payments of $1,040 in what the courts call a "consumer proposal" to settle her personal debts.

Under the proposal, the woman would over five years pay back about $68,000 of the $160,000 debt she carried when she initiated the court process in 2018. The woman lost her income in late March when the business where she worked shut its doors.

The woman asked the court to defer her payments for April, May and June. The court agreed, and extended the deferral for as many as five payments, until the end of December. The order applies not just to this woman, but to all active consumer proposals in P.E.I.

CBC News is not identifying the woman to protect her privacy. The court case also involved BDO Canada, the woman's insolvency trustees.

Economic impact of COVID-19

In a written affidavit, the woman's trustees warned the court of a coming spike in defaults.

"With the unprecedented economic impact of COVID-19 ... defaults in payments in existing consumer proposals will rise significantly," wrote André Bolduc, an Ottawa-based licensed insolvency trustee for BDO Canada.  

In Charlottetown, MacKinnon has noticed an increase in the number of Islanders looking for information on bankruptcy protection.

"A lot of the debtors who have a debt load that will be troublesome are treading water right now," said MacKinnon. He expects other provinces will adopt similar protections.

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