Only creditors have standing in bankruptcy proceedings

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The recent decision in Re Cooke, 2018 SKQB 329, is a reminder that it is only creditors of the bankrupt who have standing in bankruptcy proceedings.

The Bankruptcy and Insolvency Act (“BIA”) defines “creditor” as “a person having a claim provable as a claim under this Act”.

The BIA provides that “claim provable in bankruptcy, provable claim or claim provable includes any claim or liability provable in proceedings under this Act by a creditor”.

In Re Cooke, Ron McLean filed a proof of claim which was later disallowed by the trustee. Mr. McLean did not appeal the disallowance within the requisite period permitted under the BIA. Several months later, well after the expiration of the appeal period, the bankrupt, Ms. Cooke, applied for her discharge from bankruptcy.

Under the BIA, only creditors, the trustee or the superintendent of bankrupt have standing to oppose a bankrupt’s discharge from bankruptcy. Accordingly, when Mr. Mclean sought to oppose the bankrupt’s application for discharge, the court found that he did not have standing as he did not have a provable claim (it having been disallowed), so that he was not a creditor. While sympathetic to Mr. McLean frustrations with the process, Registrar Thompson specifically found that she did not have the authority “to waive the statutory limitation period for appealing a disallowance, which is the only way for Mr. McLean to become a creditor with a provable claim with standing to oppose Ms. Cooke’s bankruptcy discharge.”

The points to take away from Re Cooke include:

  1. A person who claims to be a creditor of a bankrupt must file a proof of claim in order to have standing as a creditor. Failure to file a proof of claim will bar an alleged creditor from participating in the bankruptcy. This will include voting on matters as a creditor, opposing the discharge of the bankrupt, and perhaps most importantly, being able to receive a dividend should one be paid.
  2. If a proof of claim is filed, but later disallowed by the trustee, the alleged creditor must appeal the disallowance within the requisite time. Failure to do so will bar any further participation in the bankruptcy proceedings and process.
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