Mr. Morris Bodnar (Parliamentary Secretary to Minister of Industry, Minister for the Atlantic Canada Opportunities Agency and Minister of Western Economic Diversification, Lib.): Mr. Speaker, last October the House completed third reading of Bill C-5, an act to amend the Bankruptcy and Insolvency Act. We worked hard on the legislation. It was given careful consideration in committee and the House debated several of the key features of this very complex bill.
The legislation is once again before us. I do not think anyone who had been working closely with the legislation would be surprised that it has come back from the other place with further technical amendments to fine tune the framework laws involving bankruptcy and insolvency. These are very complex issues, after all. They benefit from further detailed study. The Senate Standing Committee on Banking, Trade and Commerce has pointed to several areas in which Bill C-5 can be improved.
Before I outline what the amendments are, let me first remind the House of the issues involved and the rigorous process that has gone into producing the bill.
The legislation covers four broad areas: consumer issues, commercial issues, priorities and privileges, and amendments to the Companies' Creditors Arrangements Act, the CCAA. The bill was designed to ensure that when Canadian businesses or consumers need insolvency protection they have a framework law that helps
them make the necessary decisions to get their lives or their businesses back on track again. It was designed to encourage rather than deter risk taking and entrepreneurship.
Bankruptcy laws like other framework laws provide certainty and fairness in the marketplace. In this case, it gives both lenders and borrowers the assurance that their transactions are backed by rules that treat all parties fairly and that allow for innovative solutions.
The legislation provides a framework where businesses in trouble can move away from liquidation and in favour of preserving businesses and jobs. It offers protection to board members so that they are encouraged not to leave the sinking ship. We want them to stay on to make the bold decisions to help reorganize the business.
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Other elements of the legislation relate to the insolvency of farmers and fishermen. To avoid insolvency most farmers and fishermen will turn to other means of employment in the off season. This is a responsible action on their part. Bill C-5 protects farmers and fishermen from being petitioned into bankruptcy during the off season.
The legislation will let insolvent spouses submit a joint proposal for bankruptcy. This will help save time, cut costs and streamline the process. It makes spousal and child support payments provable priority claims.
Under the bill people who have committed sexual or physical assault will not be able to turn to bankruptcy as a way of avoiding damages awarded by the civil courts.
Bill C-5 also addresses consumer bankruptcy. It provides an opportunity for debtor consumers to be rehabilitated quickly and to act responsibly.
Many interests are covered in the legislation. Many Canadians count on our moving expeditiously to pass the amendments and give them the force of law. At stake are the companies that need breathing space to get their affairs in order and take advantage of emerging opportunities.
At stake are the jobs that rely upon a company's ability to carry on paying its debts. At stake are the interest rates and conditions of borrowing at institutions that must consider the risk of not getting their loans repaid.
In summary, the legislation deals with the moral and ethical climate of the marketplace. Canadians want to know that no one is slipping away from financial obligations by using bankruptcy as an easy way out. Canadians want assurance that the piper will be paid.
Let me take a moment to remind the House of the process that has brought us here. In 1992 the Bankruptcy and Insolvency Act, the BIA, was passed after considerable debate both in the House and in committee. This was something of a breakthrough for it was the first time in 40 years that Parliament was able to agree on ways to update the bankruptcy legislation so that would be fair to everyone.
Part of the reason for the success in passing the new BIA in 1992 was the provision that some additional amendments would be reviewed and brought forward to the House again at a later date. To make this happen Industry Canada set up the bankruptcy and insolvency advisory committee. More than 100 private sector insolvency experts participated. They represented consumers, business, lenders, insolvency practitioners and governments. They reviewed the insolvency legislation, identified priority issues and formulated possible solutions to them.
More than 100 private sector insolvency experts participated in the process. With the benefit of their expertise Bill C-109 was introduced during the last session of Parliament in November 1995. It sought to fine tune the amendments made in 1992 and introduced new features involving commercial and consumer insolvency.
Hon. members will recall that the bill died on the Order Paper but was reintroduced as Bill C-5 shortly after the new session commenced. When the bill went to the Standing Committee on Industry, insolvency practitioners from various interests came forward to make further suggestions. By the time the legislation came back to the House for third reading some 70 technical amendments had been added to the bill.
I will give a few examples of the changes made in committee. Under the amendments it is now very clear that among all claims for environmental damage only crown claims will have priority. The scope of spousal claims was amended so that the claims covered had to be claims pursuant to orders or agreements made when the spouses were living separate and apart and before the bankruptcy proceedings began.
In committee the bill was amended so that the review period for both the BIA and the CCAA was decreased from seven to five years. None of these amendments changed the basics of the legislation. We dealt with these amendments at third reading and the bill was passed.
When the legislation went to the other place it was referred to the banking, trade and commerce committee. The senators had an opportunity to reconsider some of the presentations made earlier by the insolvency experts. They heard further opinions on some of the amendments that had been passed by the House.
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As a result of those deliberations the legislation has come before us once again with additional technical amendments passed by the other place. These amendments do not change the original intent of the bill. Nor do they upset the balance that has been struck among the competing interests involved in insolvency. Rather they are technical amendments. They involve the fine tuning of framework laws where changing a word may be important for the interpretation of the law.
In summary, these are the changes proposed by the other place. Section 2.1 of the BIA specifying when the date of bankruptcy occurs has been simplified. The other place has clarified when a consumer proposal administrator must notify creditors of impending default. The French and English versions of section 50(15) of the BIA have been harmonized. The provisions of the BIA and CCAA have been expanded to cover persons who manage a company when the directors have resigned or have been removed.
With the amendments it is now clear that the investments of a securities firm in its subsidiaries go into the consumer pool fund under part XII. The amendments enable companies or affiliated groups of companies with debts of at least $5 million to use the CCAA. They require a company seeking a CCAA stay order to show that it is acting in good faith and with due diligence. The amendments provide a due diligence defence for monitors of CCAA petitions when they prepare their reports on the finances of debtor companies.
These amendments demonstrate the effectiveness of the parliamentary system. The system is working. From the outset we have sought to pass a balanced piece of legislation, one that is fair to all parties and one which will provide a solid foundation for bankruptcy and insolvency framework law for years to come. The other place has helped us to meet those objectives with their technical amendments.
The fundamental principles and structure of the bill remain intact. Canadian bankruptcy law will continue to provide a framework where it is preferable for consumers or businesses to reorganize their affairs rather than declare bankruptcy.
The bill continues to emphasize the importance of measures to promote consumer rehabilitation. It continues to create an environment where consumers can act as responsible citizens. Above all, the legislation continues to promote fairness for both creditors and debtors.
It is time for us to pass the legislation, as amended, so that Canadians can begin to benefit from its provisions. I hope all members will join me in supporting it.
[Translation]
Mr. Pierre Brien (Témiscamingue, BQ): Mr. Speaker, my colleague across the way is going to be disppointed. He is asking all members of the House to support the final version of Bill C-5, but I have to tell him not to count on our support.
We have before us technical amendments from the other place, which aim at clarifying the meaning of some legal words-which is very important-and at making the translation match the original, something which had been overlooked at the first two readings of the bill.
I am very disappointed to see that one of the proposals and main arguments of the Bloc Quebecois on this matter-and we have nothing against adjustments being made to the Bankruptcy and Insolvency Act-is that part of this bill directly targets students and makes them alleged abusers. I will explain why.
In Clause 178, two more categories of debt from which a bankrupt cannot be discharged following a discharge order are added. Of course, these two categories are referred to in Section 105(2)-where it is added, in paragraph g) that any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students cannot be discharged where the date of bankruptcy occurs before the bankrupt ceases to be a student or within two years after he ceases to be a student.
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That means the law is given a lot more teeth, but we must be aware that adjustments were made to the Bankruptcy Act in 1992. At that time, the government had chosen to change the law so that government loans would no longer be considered senior debt obligations, and would be treated like any other loan. Why are we now making an exception in the case of students? Why not make exceptions for other kinds of debts where a lot of money is lost due to bankruptcies?
The focus is specifically on students, which leads us to conclude that the government is assuming that students act in bad faith.
Let us talk also of the sums at stake. About $60 million are lost to students' bankruptcies. Surely the government cannot assume that all the students responsible for these $60 million losses acted in bad faith. On close analysis, it is a rather small percentage. Of course, there may be cases of bad faith here and there. That can happen. To recover a few million dollars, however, the government is singling out students.
How is it possible, when the government is losing money with some obscure loans, equity loans, that are made through various regional development agencies and whose terms are never really made public? Members will also recall government financial assistance to big business. In the automotive industry, I can think of one case where the government lost huge sums of money. I remember another case where, after some rather dubious interpretation of the law-the government had received contradictory legal opinions-the revenue department sided with two families that had transferred $2 billion worth of assets to the United States to avoid paying capital gains tax. They got back a few hundred millions out of these two transactions.
The government overlooks such cases, but when it comes to students, it is going to pass legislation with real teeth, which will put incredible pressure on them. It did not try to look at the issue
the other way around. Why is it that so many students are going bankrupt? There might be consequences.
For the last few years, we have witnessed the restructuring of tuition fees, and an increase in what students have to pay. Their share is a lot bigger than in the past; they borrow more; the proportion between loans and grants has now been reversed; the number of loans is higher; it now costs more to study because students must pay much higher tuition fees since the ban on their increase has been lifted. I am thinking about Quebec where fees are now comparable to what they are in other provinces.
Studying does cost more nowadays, especially as students must have their own computer. Therefore, there are specific loans available to them to buy the computer equipment they need to complete their studies.
When they graduate, often they cannot find a job, and when they do, more often than not it is not very stable work and unfortunately many go bankrupt. One should not think that going bankrupt is of no consequence. It haunts you. You are labelled as some who has gone bankrupt. Try to go to a financial institution to borrow money a few years down the line. Try to go around with a credit record of this kind later on; it does not make your life easy.
As far as I am concerned, I find it difficult to believe that students are systematically going to use provisions in the Bankruptcy Act to avoid paying their student loans and beat the system, because they know that they will have to pay the consequences for the rest of their lives. Furthermore, you can be sure that financial institutions will make them pay the price. They will certainly put a note on their credit record and keep it there for a long time and students will have a hard time erasing it.
The government, probably under pressure from the same financial institutions, based on the conclusions of a task force which was created but did not agree on the issue, now says: ``Finally, we will strengthen the controls for the students so that they cannot declare bankruptcy while they are studying and for two years afterwards''.
It is difficult for us to support such a bill, in spite of all its other positive aspects, and even with the technical adjustments our brave colleagues from the other House made in order to improve it.
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How is it that these wise members of our society were not concerned by the students' status or situation?
I also want to stress the fact that the Bloc Quebecois did make a declaration on this issue during its convention, this past weekend. The party had asked its parliamentarians and its convention to fight against provisions such as these. We did so in the past, we are doing it now and we will continue to do so. I repeat that five years ago, in 1992, the law was amended so that government claims would no longer be considered as senior debt obligations. Now we are reversing that decision and aiming directly at students.
I already mentioned that clause 178 adds two other categories of undischargeable debts. I will mention some of the six categories of people targeted by that section to show whom we are comparing students with. There are those guilty of fraud or condemned to a fine, those who failed to pay support or alimony, those who obtained property under false pretences, and so on and so on. Now, we will have a new category. Added to this list of offenders, we will now have students.
We would have liked it if, along the way, the government had realized its mistake, had realized how low it was stooping just to get some money. As I said earlier, it cannot expect to recover $60 million, because it is impossible that all student bankruptcies are fraudulent, as the government seems to imply.
A government anxious to recover a few hundred thousand dollars or a few million dollars should have, if such was the goal, done the same with the money given out through regional development agencies. These very often give money based on political criteria, and repayment is often doubtful. Studies are presently being conducted on this very subject, and the auditor general already dealt with these government agencies, often highly politicized, which do not have a very high degree of effectiveness.
Why did we not look at these if the goal was to recover money? Why did we not look at all the loans given by the Department of Industry, the terms of which are rarely made public, described as ``equity loans'' and very often changed into government contributions which never get repaid.
On the other hand, something that is a little, and even quite outrageous, is that, since it came into office, the government opposite has systematically made cuts in transfers to the provinces. We have to understand what the purpose of those transfers was. That program, now called the Canada social transfer, used to be divided into three programs.
There were transfers to the provinces for health, welfare and post-secondary education. The government has systematically reduced its cash transfers to the provinces. Because they were cash transfers, it has reduced them substantially. Since post-secondary education and education were among these programs, the Quebec government and other provincial governments now receive less money. They must make budget cuts to grants to institutions which, in turn, have no choice but to make a number of cuts, and also increase tuition fees and students' contributions to their own studies.
On one hand, the government cracks down harder on them and, on the other hand, it now treats them like cheaters. It is surprised that several of them now go bankrupt because their student loan debts are much higher than there were a few years ago, combined with a job market that gives them very few opportunities at this time, because of various factors, particularly an economic situation that is far from being good. Even when they do get into the labour force, many have a precarious status. In almost every area, employers make sure that these young people do not get a full time job, because it is less costly to give them contracts, resulting in all this financial uncertainty for young people in the labour force.
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We wonder why young people are not goods consumers, why people are not buying more, why the birth rates are lower. We ask ourselves all kinds of questions. But given the financial insecurity caused by job insecurity among young people, it is no wonder.
This government desperately lacks imagination. The best it could think of was some temporary measures, some goodies included in its budget in an attempt to deflect attention from the permanent cuts that were made. They included a few stopgap measures in terms of tax credits for students and all that, but who are they kidding. Everyone can see through their game and see the connection between these temporary programs and the fact that we are in the fourth year of the Liberal mandate.
They even make it clear from the outset that these measures will only be temporary, while the cuts will be permanent. People can see for themselves, and the Liberals should not delude themselves into thinking that they can pull the wool over the eyes of the people in the next election campaign. We will be there to remind them.
For all these reasons, we will be unable to support Bill C-5. And the changes proposed by the senators are certainly not the kind that would win us over. One of the major flaws of Bill C-5, with regard to student bankruptcy, has still not been addressed.
I hope they will see the error of their ways and reconsider, but for the time being, in spite of the wishes expressed by the previous speaker, they cannot count on our support. On the contrary, they can count on us to bring this up again in the weeks to come, when we will certainly be on the campaign trail.
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Mr. John Williams (St. Albert, Ref.): Mr. Speaker, we certainly seem to be proceeding at an alarming speed this afternoon after the last couple of days when legislation seemed to be moving down the pipeline rather slowly. I think this is the third piece of legislation that is being disposed of this afternoon, if not the fourth.
I understand the government is not letting the dust accumulate on the approval by the House of the HST. I thought I heard we are being called to the other place this afternoon because Royal Assent is going to be granted to some bills. I presume the HST will be one of them, considering the fact that April 1 is the implementation date for the HST. I believe I am correct in saying it is April 1. I am sure the government is quite relieved to see the end of debate on that matter. It has been able to put the lid on it quite successfully if I may say so.
We have seen a couple of other pieces of legislation go through and now we are on the Bankruptcy Act. In question period today I made reference to the fact that bankruptcies are at a record high in Canada this year, courtesy of this government of course.
Obviously the government controls the economy and the government manages or mismanages the economy, whichever way we would like to put it. As a result of the lack of jobs, the incomes of Canadians are being eroded and eliminated in many cases. The Minister of Human Resources Development is cutting back on unemployment insurance payments. Some provinces are cutting back on welfare.
Some provinces depend on video lottery terminals for their revenue. They appear to have become addicted to the revenue just as the gamblers become addicted to the machines. A young lady in my riding worked for a bankruptcy trustee. She told me not long ago that today the number one reason for people going bankrupt is the VLTs, the video lottery terminals. These terminals are destroying families. They are destroying people's ability to earn incomes. They have lost everything and when they have lost that, they have also lost the capacity to work on a regular basis and that destroys families. It is devastating.
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What is this government doing about it? We know it is bringing out a policy to address what it calls child poverty. Child poverty is caused by families in poverty and this government continues to tax, tax, tax families in poverty so that it can stand up here and tell us how great it is in bringing down the deficit. This is a tragedy.
A single person who makes $6,500 or more pays tax. How can anybody who is earning $6,500 even look after themselves without starting to make a contribution to the government? It is impossible in this day and age yet that is what is happening. The government says: ``Okay, you make $6,500, you start paying money into the general revenue fund of the government'', so it can turn around and devise some program to put the money back into the system to help people and children in poverty.
That is part of the problem in Canada and the fact that we have this great tragedy of high unemployment. If we were to leave the money with the people, they would be better off. We would require less government. People would be spending more money which
would create more jobs and we would have less people unemployed. Less people unemployed means more people are paying taxes and less people are consuming taxes. The spiral effect goes on and on and on. The beneficial effects go on and on.
That is why we have argued so long in this House at least for a recognition by this government that the time is at hand where we can look forward to some tax relief. The budget is going to be balanced in two years. The Reform Party has put forth a plan to balance the budget in two years. I was on a local television show with one of the parliamentary secretaries who had said that under the Liberal plan the budget will be balanced in two years. There we have it. It is now confirmed.
The Reform Party has said that we must have some light at the end of the tunnel. We must tell people that there is an opportunity of lower taxes. That is what the Reform Party would like to provide. Unfortunately, the message I am starting to hear from that side of the House is that a balanced budget means now there is an opportunity to spend more money. That is the last thing Canadians want to hear.
In his budget the Minister of Finance said that he has exceeded his deficit reduction targets. We will not get into how because there were some debatable accounting methods to do that. Nevertheless, he is ahead of his deficit reduction targets but he is still a long way from a balanced budget.
The minister had the audacity to say that he is going to take 25 per cent of this extra money that he calls it and is going to devise new programs to spend it. He has thrown a few dollars in the direction of health care. When one stops to consider how much he has cut out of health care, $5 billion to $7 billion in the last three years, I am sure it is to save face and his reputation that he has thrown a little bit of money in that direction.
Nonetheless, the minister has now made this policy direction that 25 per cent of all extra money is going to be spent so that it will take longer to get a balanced budget. There is no doubt in my mind that when he does achieve this balanced budget he is not going to commit 25 per cent to new spending, he is going to commit 100 per cent to new spending. Therein lies the fact that Canadians can have no hope of lower taxes from the Liberal government.
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The other day that other minuscule party released its platform. It talked about tax relief but it could not figure out its numbers either. In typical Mulroney fashion, the Tories are going to give some tax relief to the lower income families and they are going to give big relief to the high income families and the poor middle income families are going to get squeezed again.
Why do I say that? Quite simply, when he released the platform the other day, the leader of that party said that they are going to increase the basic exemption for individuals, which of course he copied from us, but that is not only the point. He is going to drop the tax rate for the low income bracket by 2 per cent and of course they get the benefit of the higher exemption. He is going to drop the rate for the middle class by 2 per cent and he is going to drop the rate for the highest class by 4 per cent.
As I said, it is typical Mulroney type politics: grab the middle class who have a little bit of money to pay, say that it is alleviating the problems of the poor and let the super rich off the hook. That is the type of policies Canadians do not want to hear either because that is patently unfair.
That is why we have record high bankruptcies. About 100,000 people are going to see their lives in tatters by the end of this year because they have gone bankrupt.
Bill C-5 is one of those things to tighten the screws on some people, but not everybody though. Somebody gets off the hook. Of course that is the Government of Canada.
When someone goes bankrupt and they have debts that they cannot pay, the Bankruptcy Act wipes these debts off and gives the person with the debt problem a fresh, clean start. A fresh start. We have heard that term from the Reform Party before and we see it cropping up in other areas. A fresh start indeed.
There is one small exception: student loans. If the person has student loans, they do not get wiped away. The government says it cannot afford to do without getting those repaid. But every other private lender, banker, accounts payable, MasterCard, Visa, you name it, have lost their money because this government legislates these things out of existence. The debtor gets off the hook. He gets a fresh start, a clean slate, but student loans remain. Of course the person has an investment in education and the student loans have provided that investment in education. Let us look at that type of education.
We heard the minister of immigration tell us in the last few days about how we have exceeded the targets on immigration for highly skilled people coming into this country. Why? The minister says it is because there is a shortage of highly skilled people in this country. Why? Because we only give student loans for one year in this technical field and sometimes it takes three and four years to train people. They do not get the benefit of student loans to finish their education to make sure they are properly trained. Then we turn around and bring people in from abroad and deny Canadians jobs. We deny them the high tech jobs which are the high paying jobs, which are the high tax paying jobs and the jobs that would allow them to enjoy a quality of life with a family.
We do not give them the tools. We leave them high and dry with half an education. We leave them high and dry and they end up going bankrupt. That is why the student loans do half the job and bankruptcy sometimes is the end of the road for these young people rather than a brand new career.
About two weeks ago Statistics Canada released its latest statistics. Young people are giving up on having a career rather than getting their foot on the ladder and saying: ``The future is bright. I have my whole life ahead of me. I now have my education. Everything is onward and upward''. After two and three years of fighting to get a job, after two and three years of having doors slammed in their faces because they do not have the experience or they do not have the education or they do not have both, they do not get their feet on the ladder and they ask, what is the point? They are destined to a life of poverty. They are destined to a life of being on and off welfare and unemployment insurance because we do not train our young folk. It is a shameful situation.
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Mr. Szabo: Mr. Speaker, I rise on a point of order. I note that the member has mentioned it is a shameful situation. I thought the House might like to know that a great Canadian, Elvis Stojko, has landed the quad-triple and won the gold medal in the World Figure Skating Championships.
The Acting Speaker (Mr. Milliken): I am sure that is welcome news, but I am also sure the hon. member would agree with me that it is not a point of order.
Mr. Williams: Mr. Speaker, I am sure we in the Reform Party would like to add our congratulations to Mr. Stojko on winning the gold medal. I am glad he will not have to pay tax on the gold. However I am sure, if any money comes along with it, that the federal government will want to share in his success. Unfortunately that is the other side of the coin. It is always a good news and bad news situation, but we do congratulate him. I am glad the member interrupted my speech to bring that to our attention.
Bill C-5 has been around for a long time. It has been to the other place and has been returned with amendments. There are pages of amendments. We wonder why we have to rely on the other place to do the work of the government. We have an untold number of public servants who write legislation. They bring it to the House in essence as a final stage for what in many cases is just a rubber stamp approval. The government does not allow an open debate. It invokes closure and time allocation. That is it and the deed is done.
Sometimes the government allows us to speak for a limited amount of time. We did in this case and then we sent the bill to the other place. The senators took a look at it and found pages of mistakes. They sent it back to the House so that we could deliberate once more.
The government could have done its homework when it heard the committee references. It could have made the necessary changes and we would not have had to rely on the other place. That also applies to the previous bill which presumably will receive royal assent this evening. The government has had to capitulate and agree with the changes made by the other place to have the legislation in place before April 1.
Bill C-5 is a huge technical bill that addresses the tragedy of Canadians. I hoped the government would bring in legislation that provided hope, inspiration and a future for Canadians rather than a bill that addresses tragedy.
Mr. Morris Bodnar (Parliamentary Secretary to Minister of Industry, Minister for the Atlantic Canada Opportunities Agency and Minister of Western Economic Diversification, Lib.): Mr. Speaker, the comments of the hon. member were most interesting. He has related the bill to everything but space travel. I am sure if I gave him a few minutes he would relate it to space travel as well and bring the Canadarm into the discussion and tell us how it relates to Bill C-5, the bankruptcy and insolvency legislation.
He made some interesting comments related to student loans. I find it most interesting that the Reform member would be damning the government on changes to the bankruptcy provisions as they relate to student loans, especially since the matter went through committee. It was not just for a matter of minutes. The committee hearings continued for days and days as we heard from many witnesses.
Lo and behold the hon. member supported the provisions of the bill dealing with student loans that were supported by his colleague. Today he stands and is opposed to the provisions on students.
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With respect to student loans, between 1990 and 1995 the losses to the Canadian taxpayer due to student loan bankruptcies increased from $20 million to over $60 million. The data show that 65 per cent to 70 per cent of all student loan related bankruptcies occurred within the first two years of leaving school.
The interesting part is that during these first two years when students leave a learning institution-and I see the pages are quite interested in this-there is not much pressure on them to pay any loans. If they are not financially in a position to pay they can get extensions for up to two years and not have to make payments. During this period when there is no pressure on students to make payments, 65 per cent to 70 per cent of the bankruptcies occur.
The object of the legislation and the amendment is to prevent students from going through bankruptcy and wiping out their debts just after they get an education and just before they take employ-
ment. It is a matter that was supported by the hon. gentleman's colleague in committee.
In the 24-month grace period that students have after finishing school they do not have to make payments. It would seem rather strange that students would be going through bankruptcy during this time when there is no pressure on them to go bankrupt.
It should be noted as well that Bill C-5 does not prevent students from going bankrupt when they leave school at all. They can go bankrupt as much as they want during that two-year period. The only difference under Bill C-5 is that student loan debts are not dischargable when the bankruptcy occurs within that two-year period after leaving school. They cannot be discharged on the student loan. They can be discharged on everything else. They can be discharged on credit cards if credit card companies gave them credit cards. Lo and behold many of them do.
I recall back in the olden days, as my children would tell me, when I was going to university. I was getting credit cards sent to me without applying for them and with no job. Maybe there is reason students can go bankrupt and declare them.
Student loans are applied for. They are for an education. They are for developing an asset which results in a degree, a certificate or diploma being obtained by students from an institution of higher learning. And what do they do? They go bankrupt within the first two years.
After the two years it is a different story. At that point students who have not found employment are deep in debt and can go through bankruptcy. It does not help their credit rating but it certainly is something they can do.
Bill C-5 encourages students to seek some temporary relief under the student loan program and to utilize the 24-month grace provision of relief from repayment which will be increased to 36 months of relief under the measures announced recently in the budget.
The students are under less pressure because of the good graces of the Minister of Finance in the way he handled matters in helping students. Again it is to help students get on their feet, not to get away from obligations they are legally obliged to pay because of a commitment on their part.
In a bankruptcy one declares assets. They become part of the bankrupt's estate. However students cannot declare a degree. They take it with them after the bankruptcy. They have a degree. They have an education but they want to wipe out the debts in some cases. There are legitimate cases of bankruptcy. That is why it is such a short period. If they cannot find employment then they obviously will be able to declare bankruptcy.
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Does the hon. member condone students tending to their education, not commencing payments immediately upon obtaining their degree, leaving a learning institution, not paying their debts, going through bankruptcy and then taking a job? Does he condone such behaviour?
Mr. Williams: Mr. Speaker, I enjoyed the member's comments. Even if I did wander over many subjects I did not raise the subject of ice skating. That was a point of order by another member.
I heard what the member for Saskatoon-Dundurn had to say. But I will tell him about a college in the United States that publishes a newsletter. He may be aware of it. It is called Imprimis. It is a little liberal arts college in the state of Michigan which does not accept students with U.S. federal government student loans. It is a long story and I will not go into explaining why. It is a matter of principle.
The member seems to want to know so I will tell him. It goes back to the late sixties. At that time there was great social upheaval in the United States regarding discrimination. The department of health, education and welfare said that it was time to stamp out discrimination. Like our Liberal government it said that it would count everybody according to categories. Then it would ensure everybody filled out all forms to ensure everybody was meeting the criteria and the categories were filled. It had so many coloured, so many cripples, so many this and so many that. They were all there.
This was the first college in the United States that more than a 100 years ago graduated a coloured person, the very first coloured person to graduate in the United States. It was also the university that granted the very first degree to a woman in the United States. It said that merit was the only thing that applies to it. It was colour blind and everything else blind, but if students did not want to work hard they should not bother showing up.
The department of health, education and welfare the college to fill out the forms showing how many people according to all the categories it had. The college said it would not do that because it went on merit and did not care about background.
The case wound its way through the courts all the way to the Supreme Court of United States which said that the college had to fill out the forms because it was in receipt of federal funds.
The college indicated that it would not accept any more grants from the federal government. Then the court said the college was in receipt of federal funds because student loans were given to students to pay their tuition fees. The college argued that it was in receipt of the money as were the local apartment owner who rents apartments to students and the local corner store that sells groceries to them.
The college has absolutely no defaults on its student loans. It provides a first class education and its students have no problems finding jobs. Unemployment is half the rate down there as it is here.
To answer the member's question, there is no doubt in my mind that students would far rather have jobs than declare bankruptcy. Their credit rating and ability to get a mortgage will be seriously affected if they go bankrupt. Their ability to buy cars when they have jobs is affected because they went bankrupt. Therefore I totally reject the member's argument that people have a choice. The point is they cannot find jobs.
(1645)
Mr. Tony Valeri (Lincoln, Lib.): Mr. Speaker, it is a pleasure and an honour to speak to Bill C-5, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Income Tax Act.
This bill, along with other bills introduced in the House, targets and supports the concerns that Canadians have articulated to members right across the country.
After listening to the hon. member across the way, the Reform Party continues to focus on what is wrong with this bill and often what is wrong with this country. I find that instead of continuing on that focus, instead of continuing to focus on the negative, constituents have often said to me it makes much more sense that we focus on building the country and helping Canadians with their future.
The health of the Canadian marketplace depends on maintaining a balance between competing interests. Framework laws establish the rules of the marketplace in which buyers and sellers as well as lenders and borrowers can make their transactions with the confidence that the law will treat them fairly. That is fundamental and something this bill addresses very clearly.
The bankruptcy laws must protect the interests of borrowers, lenders, insolvency practitioners and Canadian workers whose jobs may depend on effective reorganization of businesses. These interests of the parties are so varied and complex that over the decades bankruptcy laws have proved very difficult to reform.
In developing the bill, which was introduced in November 1995 as Bill C-109 and later reintroduced as Bill C-5, the government benefited from the input of the bankruptcy and insolvency advisory committee. The committee included representatives of consumers, businesses, lenders, insolvency practitioners and governments. More than 100 private sector insolvency experts participated in the process.
When the party across the way puts forward its arguments that this bill is essentially flawed I point to the process that this bill has gone through. I point to the process that allowed consumers, representatives of consumers, business, lenders, insolvency practitioners and governments to come forward and provide the necessary technical information that allowed this bill to go forward with the recommended changes.
Bill C-5 is certainly a large and very complicated bill that makes changes to a complex area of law. As one would expect, many suggestions for improvements of a technical nature were made by the insolvency law stakeholders after the original bill. The government and the House committee considered these suggestions carefully and based them on about 70 amendments which were incorporated in the bill before its passage in the House in October 1996.
Among these amendments were measures to clarify that only crown claims for the costs of repairing environmental damage are covered by priorities established in both the BIA and the CCAA. The amendments also provided how these priorities may be exercised.
There are also clarifications that the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act provisions, which allow for the compromise of claims against directors, will apply only to claims against directors arising before the start of the reorganization proceedings.
(1650 )
A further clarification was made concerning the scope of spousal claims. These were recognized and given priority only where spouses were living separate and apart when bankruptcy proceedings started.
With respect to the bankruptcies of securities firms, there was an addition of provisions specifying that contractual and secured creditor rights are not affected by part XII and a clarification of how value in eligible financial contracts is be allocated between the general fund and the customer pool fund established under part XII, and further protections for an eligible financial contract counter party who has deposited securities with a bankrupt firm.
The bill is certainly a very complicated, technical bill and one that insolvency practitioners are very familiar with and in all cases is indispensable when consumers and companies are faced with the prospect of bankruptcy.
In addition to the amendments I mentioned, the bill has come back from the Senate following a review by the standing Senate committee on banking trade and commerce. The industry committee heard witnesses and testimony on this bill. The Senate committee on banking, trade and commerce also heard numerous witnesses representing different points of view. However, they all agreed on the broad principles Bill C-5 represents.
The principle is that the health of the Canadian marketplace certainly depends on maintaining the very important balance between competing interests.
Here are a few of the technical amendments recommended by the Senate banking committee. The amendments do not change the original intent of the bill, nor do they upset the balance that has been struck among the competing interests involved in insolvency. They involve the fine tuning of framework laws where changing a word may be important for the interpretation of law.
Measures included: to simplify section 2.1 of the Bankruptcy and Insolvency Act, which specifies when the date of bankruptcy occurs; to clarify when a consumer proposal administrator must notify creditors of impending default; to harmonize the French and English versions of section 50(15) of the Bankruptcy and Insolvency Act.
The changes also extend the provision allowing the compromise of claims against directors to cover persons who manage a corporation when all directors have resigned or been removed.
The amendments also lower the threshold for access to the CCAA to $5 million in debts from the $10 million originally specified in Bill C-5 and allow consolidated applications by affiliated companies.
The amendments also require a company seeking a stay under the CCAA to show that it is acting in good faith and with due diligence. I think it is very important that when a company is seeking that stay it show it is acting in good faith and with due diligence because these are very difficult times that companies go through with respect to organization and it impacts consumers and suppliers. It is important that the act clearly specify and allow this type of thing to occur.
(1655)
The changes also provide a good faith and due diligence defence for CCAA monitors in relation to their preparation of reports on the finances of debtor companies.
The changes make a number of clarifications. In particular, they clarify that under part XII of the act, a securities firm's investments in its subsidiary go into the customer pool fund.
These amendments made by the Senate further improve the bill. The government supports all these proposed amendments and believe that they deserve the support of the House.
The business community and all consumers are affected by the changes in this act. The changes are as a result of the hard word of the industry committee. The Parliamentary Secretary to the Minister of Industry spoke earlier on this bill. The kind of work the parliamentary secretary has been doing on this bill in committee is certainly very reflective of the end product that we have before us today.
Witnesses provided the technical input for these changes and these changes are reflective of the challenges faced by Canadians who are sometimes confronted with the prospect of bankruptcy.
As I sat in the House listening to the speaker before me, it often came to mind that perhaps the member thought that Canadians set bankruptcy as a goal. Canadians engage in enterprise and business to improve their situation, provide employment opportunities for other Canadians and, in some situations, whether it is a company or a consumer, they are faced with uncontrollable circumstances where bankruptcy is an alternative that must be considered.
This act lays out the framework and the balance to ensure that there is a balance between competing interests and that the framework laws establish the rules of the marketplace in which buyers, sellers, lenders and borrowers can make their transactions with the confidence that the law will treat them fairly.
The parliamentary process has in my opinion worked very effectively and in a manner that provided a particular change in this act that will benefit all those individuals who in some way are affected by Bill C-5.
The Acting Speaker (Mr. Milliken): It is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Saskatoon-Clark's Crossing, child poverty.
The Acting Speaker (Mr. Milliken): It being five o'clock, the House will now proceed to the taking of the deferred division on the amendment to the motion to concur in the Senate amendment to Bill C-70.
Call in the members.
(1725)
(The House divided on the amendment, which was negatived on the following division:)
Goodale
Guay
Guimond
Landry
Lefebvre
McKinnon
Ménard
Mifflin
Murphy
Phinney
Picard (Drummond)
Pillitteri
Rocheleau
Sauvageau
Scott (Fredericton-York-Sunbury)
Stewart (Brant)
Tremblay (Lac-Saint-Jean)
Ur
Vanclief
Venne
The Acting Speaker (Mr. Milliken): I declare the amendment lost.
[English]
Mr. Volpe: Mr. Speaker, I know my absence during the vote left a gaping hole on the government side. Had I been here to fill it I would have most definitely voted with the government.
[Translation]
Mrs. Lalonde: Mr. Speaker, unfortunately I could not be here for the beginning of the vote. I would ask you to record me as having voted like my party.
Mr. Loubier: Mr. Speaker, I had the same problem. I arrived late, but I would like to be recorded as having voted with my party.
The Acting Speaker (Mr. Milliken): The next division is on the main motion.
Mr. Kilger: Mr. Speaker, now that we are all here, you will find there is unanimous consent that the members who voted on the previous motion be recorded as having voted on the motion now before the House, with Liberal members voting yea.
Mrs. Dalphond-Guiral: Mr. Speaker, members of the official opposition will vote nay.
[English]
Mr. Frazer: Mr. Speaker, Reform Party members present will oppose this motion.
Mr. Axworthy (Saskatoon-Clark's Crossing): Mr. Speaker, I too oppose this motion.
[Translation]
(The House divided on the motion, which was agreed to on the following division:)
Fewchuk
Finlay
Fontana
Gaffney
Gagliano
Gagnon (Bonaventure-Îles-de-la-Madeleine)
Gallaway
Gerrard
Godfrey
Guarnieri
Harb
Harvard
Hickey
Hopkins
Hubbard
Iftody
Jackson
Karygiannis
Keyes
Kilger (Stormont-Dundas)
Kirkby
Knutson
Kraft Sloan
Lee
Lincoln
MacLellan (Cape/Cap-Breton-The Sydneys)
Malhi
Maloney
Marchi
Marleau
Martin (LaSalle-Émard)
McCormick
McLellan (Edmonton Northwest/Nord-Ouest)
McTeague
Minna
Mitchell
Murray
O'Brien (London-Middlesex)
O'Reilly
Pagtakhan
Parrish
Patry
Payne
Peric
Peters
Peterson
Pettigrew
Proud
Reed
Regan
Richardson
Rideout
Ringuette-Maltais
Robichaud
Robillard
Serré
Sheridan
St. Denis
Steckle
Szabo
Telegdi
Valeri
Volpe
Walker
Wells
Whelan
Wood
Young
Zed-101
Tremblay (Lac-Saint-Jean)
Ur
Vanclief
Venne
The Acting Speaker (Mr. Milliken): I declare the motion carried.
(Motion agreed to.)
The Acting Speaker (Mr. Milliken): Pursuant to order made earlier this day the House will now proceed to the taking of the deferred recorded division at the second reading stage of Bill C-82, an act to amend certain laws relating to financial institutions.
Mr. Kilger: Mr. Speaker, I believe if you would find unanimous consent that members who voted on the previous motion be recorded as having voted on the motion now before the House, with Liberals members voting yea.
[Translation]
Mrs. Dalphond-Guiral: Mr. Speaker, official opposition members will be voting nay.
[English]
Mr. Frazer: Mr. Speaker, in order to move the bill to committee, Reform Party members present will support this motion.
Mr. Axworthy (Saskatoon-Clark's Crossing): I oppose this motion, Mr. Speaker.
(The House divided on the motion, which was agreed to on the following division:)
Harb
Harvard
Hickey
Hopkins
Hubbard
Iftody
Jackson
Jennings
Karygiannis
Keyes
Kilger (Stormont-Dundas)
Kirkby
Knutson
Kraft Sloan
Lee
Lincoln
MacLellan (Cape/Cap-Breton-The Sydneys)
Malhi
Maloney
Marchi
Marleau
Martin (LaSalle-Émard)
Mayfield
McCormick
McLellan (Edmonton Northwest/Nord-Ouest)
McTeague
Minna
Mitchell
Morrison
Murray
O'Brien (London-Middlesex)
O'Reilly
Pagtakhan
Parrish
Patry
Payne
Peric
Peters
Peterson
Pettigrew
Proud
Reed
Regan
Richardson
Rideout
Ringuette-Maltais
Robichaud
Robillard
Schmidt
Serré
Sheridan
Solberg
Speaker
St. Denis
Steckle
Szabo
Telegdi
Valeri
Volpe
Walker
Wells
Whelan
White (North Vancouver)
Williams
Wood
Young
Zed-113
(Motion agreed to, bill read the second time and referred to committee.)
The Acting Speaker (Mr. Milliken): It being 5.30 p.m., the House will now proceed to the consideration of Private Members' Business as listed on today's Order Paper.