Discretionary decision-making by trustees in Canada’s personal bankruptcy system

Each year, tens of thousands of Canadians turn to the bankruptcy system for relief from unmanageable debt loads. Bankruptcy provides individuals with a significant benefit, the opportunity to be released from their debts. This release of past debts is called a discharge. The existence of this significant benefit raises the spectre of abuse. Policy makers and the public share an anxiety that unscrupulous individuals may improperly take advantage of the debt relief available in bankruptcy. Bankruptcy trustees, the professionals who administer bankruptcy files, are granted significant discretion to police abuse in the bankruptcy system. When a trustee believes that a debtor should not receive a discharge, the trustee can trigger a court hearing, by filing an opposition to the debtor’s discharge. At the resulting hearing, if the court agrees that the debtor is undeserving, it can deny the debtor’s discharge, delay it, or grant it subject to the debtor fulfilling conditions. This dissertation examines how trustees exercise their discretion when deciding whether or not to file an opposition. To understand how trustees exercise their discretion, this dissertation examines three different types of data. It starts with a synthesis of traditional sources of law including legislation and case law. This synthesis reveals that the traditional sources of law identify both pre-bankruptcy misconduct, and non-compliance during bankruptcy as grounds upon which a debtor’s discharge may be opposed, but do little to constrain or direct the trustees’ discretion. Next it analyzes empirical data, including quantitative data provided by the Office of the Superintendent of Bankruptcy, a branch of the federal government, on all the oppositions filed in 2012, and qualitative interviews undertaken with 40 bankruptcy trustees in 13 communities across Canada. This analysis reveals that oppositions are lodged in about 10% of files. Trustees rarely oppose on the basis of a debtor’s pre-bankruptcy misconduct, most oppositions result from a debtor’s non-compliance during bankruptcy. The dissertation explains how this pattern of oppositions may result from the economic and emotional constraints facing trustees.Law, Peter A. Allard School ofGraduat