House of Commons Hansard #85 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was israel.

Topics

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

Reform

Herb Grubel Reform Capilano—Howe Sound, BC

Mr. Speaker, I may not be right all the time but I am consistent. On issues like that I like to be consistent, of course.

In my own judgment the best thing that Quebec can do is move from its rather socialist current program to where the role of government in Quebec is much smaller. If I were asked I would say if Quebec tomorrow turned itself into the Hong Kong of North America, welfare would shoot up enormously.

Imagine having a much lower tax rate because your services are much smaller. Imagine having the lowest corporate tax rate in North America. You would have so much capital flowing in wanting to pay these low tax rates you would have higher revenue than you have at the current rate. On top of that you would have huge employment effects from all of them.

My problem is that I am not worried about Canada erecting trade barriers to Quebec if it chose to be stupid enough to choose sovereignty; what worries me is from the evidence that I have seen coming from the French tradition of dirigisme from the French tradition of big government, everything can be engineered to the perfect world.

I am not optimistic that Quebec will choose to move in the direction of being the Hong Kong of North America. I am worried that Quebec will choose to be more like the Albania of North America, and that saddens and worries me a great deal.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

Reform

Jim Silye Reform Calgary Centre, AB

Mr. Speaker, coming from Calgary, I believe in a market driven economy. I believe in free enterprise. I believe in the law of supply and demand.

However, there are a lot of provinces in our confederation that appear to favour supply management and supply management tariffs. Would the member please outline for me what the argument is by these provinces that believe in supply management tariffs and supply management in protecting and preserving these rather than eliminating these. What is the argument in keeping it and is it hurting or helping Canadians?

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

The Deputy Speaker

The hon. member for Capilano-Howe Sound, briefly.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

Reform

Herb Grubel Reform Capilano—Howe Sound, BC

I have only a minute?

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

The Deputy Speaker

The member is a good economist and I am sure he can do this in a minute and a half.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:30 p.m.

Reform

Herb Grubel Reform Capilano—Howe Sound, BC

I have one choice. I can just refer my distinguished colleagues to a little booklet I have published on this subject which I was told has been used in undergraduate courses in this country. It has put me in a lot of trouble with those interest groups that believe that marketing boards are good for the consumer. That is, at any rate, their line.

I just cannot believe that a system increases the value of farms and quotas to such an extent that it is now more costly to buy the right to sell milk at an inflated price than it costs to buy the land, the farm and the animals. There is something very wrong.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:35 p.m.

The Deputy Speaker

Is the House ready for the question?

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:35 p.m.

Some hon. members

Question.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:35 p.m.

The Deputy Speaker

Is it the pleasure of the House to adopt the motion?

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:35 p.m.

Some hon. members

Agreed.

Canada-Israel Free Trade Agreement Implementation ActGovernment Orders

12:35 p.m.

An hon. member

On division.

(Motion agreed to, bill read the second time and referred to a committee.)

The House proceeded to the consideration of Bill C-5, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Income Tax Act, as reported with amendments from a committee.

Bankruptcy And Insolvency ActGovernment Orders

October 10th, 1996 / 12:35 p.m.

The Deputy Speaker

There is one motion in amendment listed in the Notice Paper at report stage of Bill C-5, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Income Tax Act.

Motion No. 1 will be debated and voted on.

I will now put Motion No. 1 to the House.

Bankruptcy And Insolvency ActGovernment Orders

12:35 p.m.

Bloc

Stéphan Tremblay Bloc Lac-Saint-Jean, QC

moved:

Motion No. 1

That Bill C-5, in Clause 104, be amended by replacing lines 32 to 39 on page 62 with the following:

"104. Section 177 of the Act is repealed."

Mr. Speaker, I am very pleased to speak today on this piece of legislation to amend the Bankruptcy and Insolvency Act, and specifically on the clause relating to student loans. In fact, this is why I decided to wear the crest of the university closest to my riding, the Université du Québec à Chicoutimi, which is located in the riding of my colleague from Chicoutimi.

When an individual declares bankruptcy, the court usually makes an order of discharge, which releases the individual from all claims or, in other words, from his or her debts. However, section 178, appendix I, provides for six claims that are not released from

by an order of discharge. The bankrupt is thus required to pay off his or her debts in spite of his or her bankruptcy.

Clause 105 of the bill adds a paragraph to section 178 of the Act that stipulates that any debt or obligation in respect of a loan made under a federal or provincial student loans act cannot be discharged if the bankruptcy occurred before the date on which the bankrupt ceased to be a student or within two years after the date on which the bankrupt ceased to be a student.

Everybody knows that it costs a lot of money to go to college or university. The costs are constantly going up, year after year. Students have to work and get a summer job. That is fine, except that some students have trouble making both ends meet, and, at times, this is almost impossible. They cannot repay their student loans, which may reach around $30,000, or even higher for the students who are from remote areas and have to move to Montreal, for instance, to study and have to pay for an apartment, over and above their tuition fees. All of this costs a lot of money.

When there is no other way out, a student has the right, like any individual or small business in this country, to go bankrupt. However, this new bill says that they will no longer be able to do so.

Some people may say: "Of course, students go to university, spend years studying and then, when the time comes to pay back their student loans, they can look at all their debts and decide to go bankrupt. And then, the government has to foot the bill".

Of course, some may think that, but I have personally met with members of student associations from Quebec, who told me this is not so. Going bankrupt is not an option for them. You cannot think that you can snap your fingers and all your student loans will have disappeared. This is a very sensitive issue. Yes, there may have some abuse in some areas, like anywhere else, but I think this is a sensitive issue, because what we are talking about here is education and that, to me, is not an expense for our country, or should I say for both our countries, but rather an investment. But I do agree that it is expensive.

This bill raises some concerns. Could it lead some students to be afraid of attending post-secondary institutions? One has to wonder about that, especially since ten years ago students had the right to go bankrupt, that is obvious. But then, the situation back then was different. After graduating from university, it was much easier for students to find a job and therefore to repay their loans.

According to the government, there are much too many bankruptcies today. These are not voluntary; people have no choice. Most of the time, young people go bankrupt because they cannot make both ends meet. Thus, it is rather a pity to look at the situation this way.

Furthermore, we know there was some disagreement in the task force, in particular concerning the special immunity for student debts and its possible effect on access to higher education, as I mentioned earlier.

So, why am I against the government's proposal? Clearly, the government went along with the task force's proposal without asking itself what really was behind this change. For the government, mere fiscal considerations took precedence over the logic of the proposal.

Is education an expense or an investment? Sure, when we promise to cut the deficit, we have to make all kinds of cuts, I agree, but cutting funding for education may not necessarily have a negative impact now and allow us to boast, a couple of years from now, that we have reduced the deficit. However, I worry-and this is quite legitimate at my age-about possible negative effects in the long run, since education is a long term investment.

Moreover, I think this proposal is discriminatory. The government gives special treatment to student debts, which it does not do for other similar categories of debts owed to the government. Section 178 of the act lists other categories of debts that cannot be released by an order of discharge.

However, these other categories apply to people such as defrauders, convicted offenders who have to pay a fine, people who default on their alimony payments, people who obtained property under false pretences, and now the government is adding students to that list. Wow! This is putting students who, I think, are the future of our nation in the same boat with convicted offenders and people who default on their alimony payments.

The government is including students in the same category as these people who break the law and who do not respect court orders. Treating students like this is totally unacceptable and discriminatory.

Moreover, this proposal was made without a careful study of the situation. All the government did was look at the figures and say: "The student bankruptcy rate is increasing and it must be because of abuse. Therefore, we will take away their right to declare bankruptcy". It did not take a close look at what is really going on and did not take the economic climate into account.

Some blamed students, saying that they party a lot, they travel, etc. Not all students do that. Yes, some students are well off, they use their parents' car to go to school and have no problem at all going to university. But what concerns me is those who are not in that situation and who will be affected by this bill. It is thought that there are abuses, so it is decided to cut assistance to students, but there has been no study or survey to look at what prompts students or graduates to declare bankruptcy.

Given the rate of unemployment and the economic difficulties facing young people, it is somewhat cynical to claim that students are deliberately declaring bankruptcy. Therefore, in the absence of a serious study of the reasons why students or those who have just completed their studies declare bankruptcy, it is completely irresponsible to introduce a discriminatory, unfair and inequitable measure on the mere strength of an increase in the number of bankruptcies among those with student loans.

Furthermore, this increase is probably due to the poor economic situation in which young people find themselves, to the high rate of unemployment they are experiencing and to increases in tuition fees that are not unrelated to federal government cuts. Members will recall the Axworthy reform. I took part in a march to protest these measures. All this is having the repercussions we see.

I could also speak about the last question I put to the Minister of Human Resources Development about the Young Canada Works Program. There were $60 million remaining and the government did not seem to know where, to spend them is not how I should put it, but to invest them. This is what makes me wonder today.

It is in light of these facts that we have moved the amendment to eliminate this paragraph. I hope that the government will not turn a deaf ear and that it will keep one foot in reality. We have been told that a university education is an investment in our future that will lead to a job. I would agree that that is still the case and I recommend it. But the good old days are gone, and now that the economic situation is worse, we are making it harder for students.

We will therefore vote against this bill, unless our amendment is carried.

Bankruptcy And Insolvency ActGovernment Orders

12:45 p.m.

Saskatoon—Dundurn Saskatchewan

Liberal

Morris Bodnar LiberalParliamentary Secretary to Minister of Industry

Mr. Speaker, the hon. member raised some interesting points on this motion. In particular, he spoke about the bankruptcy of students and the problems that arise in the student population. The government is well aware of the financing which students get during the time it takes them to get a university degree. Many times students spend large sums of money to get university degrees.

However, once a student gets the degree, that is not the time for the student to automatically declare bankruptcy to wipe out the loan. There is a grace period for the first six months after the student leaves university. No payment has to be made. After that first six months, if the student is not in a financial position to make payments and meets the criteria of the legislation, the student can get an extension of that grace period for another 18 months, making it a full two years that a student does not have to make payments on the student loan.

Statistics show that 70 per cent of students who go bankrupt do so during that first two-year period. They are going bankrupt during a period when there is no financial pressure on students to pay back. They have a six-month period of grace and they can get a further 18-month extension.

The argument of the hon. member is quite fallacious. He is saying that students are having difficulties in the first two years after completing studies or leaving university. It is not a wilful abuse by the students. However one has to question declaring bankruptcy during a period of time when there is not a requirement for making payments. It is for that reason we have a two-year period that is required before a student can go through bankruptcy. That is why it has been structured as such in the legislation.

The hon. member stated that the government must remain connected to reality. That is exactly what we have done. The reality is that students should not be going through bankruptcy and declaring their student loans in a bankruptcy if there is no financial pressure on students to do this. There is no requirement for them to make the payments during the first two-year period. Their going through bankruptcy is really not reality. We are bringing this matter back into reality.

It is interesting to note that the opposition to this portion of the bill has not been raised by the students, it has been raised by the hon. member opposite. The students have not been opposed to the two-year period and have not raised opposition at the committee level to this requirement.

I believe many students realize that there is reality. Students realize they have obligations. Many of them who graduate from university have one of the finest assets that can be had. The asset is a degree. It is a ticket to other employment. Allowing them to automatically be able to wipe out such a debt when there is not pressure on them would be grossly unfair.

As well, the amendment would repeal section 177 of the act. It deals with fraudulent marriage contract settlements as being grounds where the court can refuse to discharge a bankrupt individual. Let me read a portion of section 177: "If the debtor becomes bankrupt and it appears to the court that the settlement, et cetera, was made in order to defeat or delay his creditors, the court may refuse or suspend an order of discharge or grant an order subject to conditions in like manner as in cases where the bankrupt has been guilty of fraud".

Surely the hon. member does not want this portion of the legislation to be wiped out. Surely the courts should be allowed, when there are such fraudulent actions, to be able to defeat such

individuals from trying to take this action and prevent them from defeating or delaying creditors who have legitimate claims.

The hon. member's motion would repeal this condition. It would be grossly unfair if a debtor could become bankrupt but has made a fraudulent arrangement in a marriage settlement just to defeat creditors. This is not what we want to see in bankruptcy legislation. This is not what we want to see in our laws.

This legislation will prevent that from happening. It will prevent fraudulent actions such as this. As well, the bankruptcy legislation will prevent students who are not under financial pressure from going into bankruptcy during the first two years.

I should not put it that broadly because students can go into bankruptcy within the first two years. They would just not be able to declare the student loan as part of the bankruptcy. They may have other debts, and that is fine. They can deal with those but not with the student loan itself.

For the reasons I have indicated in dealing with the fraudulent marriage contract settlements and the provision in section 177 that would allow courts to not allow such settlements and for the reasons dealing with the student loans which I have indicated to the House, the government is opposed to this motion. It is the government position that this motion is fallacious and should not be passed.

Bankruptcy And Insolvency ActGovernment Orders

12:55 p.m.

Reform

Philip Mayfield Reform Cariboo—Chilcotin, BC

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.

Bankruptcy And Insolvency ActGovernment Orders

1 p.m.

The Deputy Speaker

Is the House ready for the question?

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1 p.m.

Some hon. members

Question.

Bankruptcy And Insolvency ActGovernment Orders

1 p.m.

The Deputy Speaker

Is it the pleasure of the House to adopt the motion?

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1 p.m.

Some hon. members

Agreed.

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1 p.m.

Some hon. members

No.

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1 p.m.

The Deputy Speaker

All those in favour of the motion will please say yea.

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1 p.m.

Some hon. members

Yea.

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1 p.m.

The Deputy Speaker

All those opposed will please say nay.

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1 p.m.

Some hon. members

Nay.