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PROPERTY OF BANKRUPT - Trust property - Exempt assets - Home

Friday, February 03, 2017 @ 2:10 PM  


Appeal by the trustee in bankruptcy for the husband from a declaration proceeds from the sale of his home were exempt from seizure by the trustee. The husband and his former wife were married between 2000 and 2005. The wife and two children remained in the family home post-separation. The home was registered solely in the husband's name. The husband continued to pay all expenses related to the home. In 2006, the husband commenced divorce proceedings. The husband subsequently experienced financial difficulties and arranged for the sale of the home in 2009. The net proceeds from the sale, approximately $29,000, were held in trust pending determination of distribution. Two months later, the husband made an assignment in bankruptcy. In 2010, the husband and the wife agreed she would receive the net proceeds from the sale of the home, subject to any claim by the trustee in bankruptcy. The trustee took the position that the proceeds were non-exempt property and thus challenged the wife's entitlement. The wife applied for interim distribution. The chambers judge found that the husband's sale of the family home was not voluntary, and the proceeds were thus exempt from execution or seizure under s. 2(1)11 of the Exemptions Act, and therefore did not vest in the trustee. The trustee appealed.

HELD: Appeal dismissed. It was settled law that a debtor was entitled to claim an exemption in the proceeds from the involuntary sale of an exempt property. The chambers judge made no reversible error of law, mixed law and fact, or fact in concluding that the sale of the husband's home was not voluntary. The voluntariness analysis involved consideration of the degree of compulsion caused by all financial circumstances a bankrupt faced before deciding to sell. At the time of the sale, the husband's debt exceeded his assets by $350,000 and he was behind in his mortgage payments. He owed support to his wife and children and his creditors included Revenue Canada. Waiting for commencement of foreclosure proceedings would have reduced the proceeds from the sale of the home. The conclusion that the husband had no choice but to sell the family home was unassailable. The chambers judge stated and applied the law correctly, rendering a decision that accorded with Saskatchewan jurisprudence.

Charles v. Hernandez Becerra, [2016] S.J. No. 707, Saskatchewan Court of Appeal, G.R. Jackson, N.W. Caldwell and P.A. Whitmore JJ.A., December 21, 2016. Digest No. 3636-002