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407 ETR Debt in Bankruptcy: Supreme Court of Canada Ruling

Historically, if a person declared bankruptcy and had outstanding debts with the 407 ETR, the Province of Ontario would withhold the renewal of the bankrupt individual’s vehicle permit until those debts were paid.

However, during a recent series of court battles, the issue of whether or not it is lawful for the 407 ETR to deny vehicle permit renewals once an individual has filed for bankruptcy was brought before the Supreme Court of Canada.

On November 11, 2015 the Supreme Court ruled that the Province of Ontario’s treatment of 407 ETR debt is incompatible with the fresh start or financial rehabilitation purpose of the Bankruptcy and Insolvency Act.

In the Ontario Court of Appeal ruling on December 19, 2013 the court ruled that “From a debtor’s perspective, and indeed society’s, financial rehabilitation is a primary goal of the bankruptcy regime. At its heart, permitting a creditor to insist on payment of pre-bankruptcy indebtedness after a bankruptcy discharge frustrates a bankrupt’s ability to start life afresh unencumbered by his or her past indebtedness.” (Justice J.A. Pepall)

The Supreme Court ruled that the section of the Ontario Highway 407 Act that deprives a bankrupt person from obtaining a renewal of his/her licence is in conflict with the federal Bankruptcy and Insolvency Act and is therefore not enforceable.

Simply put, debts owing to the 407 at the date of the filing of a bankruptcy are now released.

As many residents of Ontario utilize the 407 ETR to commute to work in the northern and western parts of the GTA – and some might have outstanding debts with the 407 ETR – this ruling is welcome news for those who file for bankruptcy, as it will allow them to continue to travel to their place of employment and not have to worry about their vehicle permit being denied renewal.

This new ruling remains consistent with the foundation of the Bankruptcy and Insolvency Act, which is to provide an honest but unfortunate debtor a release from his/her debts upon receiving a discharge from bankruptcy.

Attached is a link to the decision of the Supreme Court of Canada.

http://scc-csc.lexum.com/scc-csc/scc-csc/en/15623/1/document.do

Finally, the decision will have an impact on other areas of provincial enforcement of debts and will be a subject of future blogs.