No Denial of Services Even When Filing Bankruptcy in Ontario

Can government deny services to an indebted person after his proper filing for bankruptcy in Ontario? An Ontario judge says “no.”

This was the focus of an Ontario Superior Court hearing in April between the Ministry of Finance and the Superintendent of Insurance for Ontario with defendant Sandra Clarke. While the Ontario government has the right to impose payment of debts, Justice Robert Goldstein rules the Ministry’s act of refusal as a violation of the fresh-start principle upheld by the Bankruptcy and Insolvency Act (BIA).

Payment Advances

Clarke was sued for a Toronto car accident in 1989 that left her passenger injured. The Motor Vehicle Accident Claims Fund sought to collect $55,000 in damages since Clarke couldn’t pay the plaintiff at the time. While paying the Fund the agreed upon sum of $50 a month, she made a consumer proposal in 2009 that regulates debts under $250,000 for a monthly payment amount of, in Clarke’s case, $400.

However, Clarke was an uninsured motorist. Under Section 10 of the Motor Vehicle Accident Claims Act, uninsured motorists whose obligations were paid from the Fund would have their licenses suspended until these arrears are met. This is where the issue boils down.

Court Decision

Despite the Ministry’s arguments, Goldstein made it clear that the provincial government has no right to suspend a person’s privileges due to unpaid debts. The suspension action considered by the Ministry violates federal bankruptcy laws, which are designed to help bankrupt people start over.

Goldstein’s decision, Yamri Tadesse of the Law Times reported, was contrary to a relatively similar case in 2011 between Matthew Moore and the 407 ETR. Having accrued $35,000 in unpaid toll debts, Moore filed and received an absolute discharge. However, the ETR stood by the argument that debts must be paid in full before plate renewal. The court favored the ETR. The difference, Goldstein argued, is that Clarke was paying something to the Fund, whereas Moore had not paid anything to the ETR. In this case, Clarke’s $50 monthly payment prior to bankruptcy helped.

Law experts believe Clarke’s case has sent shudders down the spine of the licensing scheme that has been in effect for more than 70 years. If you can approve a monthly payment schedule for your debts, the government may be less likely to deny you of services and privileges. Ontario debt settlement from Paddon + Yorke, licensed bankruptcy trustees and consumer proposal administrators, will also be of great help.