Mr. Speaker, I believe I am in need of a reality check here this morning.
The Bloc Quebecois brings in an amendment to deal with fraudulent use of marriage and then the first speech is on student loans and student bankruptcies. The amendment tabled dealing with the Bankruptcy and Insolvency Act, the Creditors Arrangement Act and the Income Tax Act, as the hon. parliamentary secretary mentioned, deals with the fraudulent representation of marriage. The amendment proposes that Bill C-5 repeal section 177 of the Bankruptcy and Insolvency Act.
Reform opposes this Bloc amendment. Before I discuss why we oppose it, I believe it is important for the House to understand the purpose of section 177 of the Bankruptcy and Insolvency Act. Section 177 sets out two situations that could result in a court refusing, suspending or granting a conditional discharge from bankruptcy.
These situations are: first, where the bankrupt made a settlement before or in consideration of marriage and at the time of making the settlement he or she was unable to pay all of his or her debts without the use of the property involved in the settlement; second, where the bankrupt made a covenant or a contract in consideration of marriage for the future settlement of property that would and should be available as security for creditors.
Where it appears to the court that this type of settlement, covenant or contract was made to defeat or delay creditors or was unjustifiable at the time it was made because of the poor financial state of the debtor, the court can refuse, suspend or order a conditional discharge.
This seems entirely appropriate to me. If section 177 is repealed, the door is left open for people to commit fraud, to play fast and loose with their creditors. In fact, are we not saying if section 177 is repealed that fraudulent behaviour is okay, that our society accepts this kind of behaviour.
I do not think anyone would agree that tolerating this kind of behaviour is a good idea. Fraud is a crime. I believe that the legislation should more and more point to the open and straightforward method of doing business that all people understand, appreciate and can live with.
Prevention of fraud can be insured through deterrence. Deterrence keeps this kind of activity from occurring when potential offenders, considering the consequences, decide that to honour their obligations is the best course of action to follow.
Section 177 of the Bankruptcy and Insolvency Act provides a deterrence against those who would unfairly short change their creditors under the circumstances outlined in this section of the act. People should not be using marriage as a means to avoid creditors. Section 177 is consistent with other sections of the Bankruptcy and Insolvency Act dealing with transactions that take place prior to bankruptcy.
For example, section 91(1) of the Bankruptcy and Insolvency Act provides that any settlement of property that takes place within a year before a bankruptcy is still open to the trustee. Section 91(2) provides that any settlement that takes place within five years before a bankruptcy is void if the trustee can prove that the settler required the property included in the settlement to pay his or her debts at the time of making that settlement.
These measures along with section 177 are designed to deal with situations where debtors transfer property to defeat or delay or defraud their creditors.
If we eliminate section 177 of the BIA, what does it say about these other sections of the act as well? It really creates a double standard. It seems to me that what we are saying here is use marriage as a means to unfairly shelter assets from bankruptcy. But it cannot be done under the circumstances outlined in sections 91(1) or 91(2).
Section 177 is needed to safeguard against people using marriage inappropriately to commit fraud. It is also needed to protect
the standard that says no fraud under any circumstances will be tolerated. Section 177, however, does leave the court discretion. The courts may decide.
As members of the House and particularly of the Industry committee will know, I am one of the people who believe that our legislation should not always leave discretion to the minister, to the superintendent of bankruptcies. I would like to see these sections tightened up. But the committee of the House has decided against that. However, I am in favour of this discretionary aspect of section 177.
There are circumstances where the court may decide that what the debtor has done is entirely fair, but this discretion should be left with the courts and section 177 should remain.