Holding the high ground: The position of secured creditors in consumer bankruptcies and proposals

Abstract

This article examines the position of secured creditors in the event of a consumer debtor's bankruptcy or the filing of a consumer proposal, as determined by the federal and provincial laws of Canada. Secured creditors in Canada are in a remarkably powerful position relative to other claimants in bankruptcy and to their counterparts in the United States. Their rights of realization against the collateral are essentially unaffected by the initiation of either a consumer bankruptcy or proposal. Moreover, recent judicial developments appear to further enhance secured creditors' rights of enforcement, both against the in personam payment obligation and against the bankrupt's property after his or her discharge. This article is available in Osgoode Hall Law Journal: http://digitalcommons.osgoode.yorku.ca/ohlj/vol37/iss1/12 HOLDING THE HIGH GROUND: THE POSITION OF SECURED CREDITORS IN CONSUMER BANKRUPTCIES AND PROPOSALS© By TAMARA M. BUCKWOLD* This article examines the position of secured creditors in the event of a consumer debtor's bankruptcy or the filing of a consumer proposal, as determined by the federal and provincial laws of Canada. Secured creditors in Canada are in a remarkably powerful position relative to other claimants in bankruptcy and to their counterparts in the United States. Their rights of realization against the collateral are essentially unaffected by the initiation of either a consumer bankruptcy or proposal. Moreover, recent judicial developments appear to further enhance secured creditors' rights of enforcement, both against the in personam payment obligation and against the bankrupt's property after his or her discharge. Cet article examine la position des cr6anciers garantis dans le cas d'une faillite de consommateurs d6biteurs ou la r6clamation par une proposition de consommateurs, tels que d6termin6s par les lois f6d6rales et provinciales au Canada. Les cr6anciers garantis sont dans une position de force remarquable par rapport aux autres plaignants en faillite et par rapport A leurs homologues aux Etats-Unis. Leurs droits de r6alisation contre le collat6ral ne sont essentiellement pas affect~s ni par l'initiation d'une faillite de consommateurs ni par une proposition. En plus, des d~veloppements juridiques r6cents semblent favoriser davantage le renforcement des droits des cr6anciers garantis, a ]a fois contre l'obligation de paiement in personam et contre la propri6t6 de la personne en failliteapr-s son acquittement.