Mr. Speaker, I am pleased to rise on behalf of the constituents of Newton—North Delta to participate in the debate on Bill C-55. I will be splitting my time with the hon. member for Kootenay—Columbia.
The bill makes many changes to the law governing bankruptcy and insolvency. The changes include the creation of the wage earner protection program act to ensure employees of bankrupt companies receive their unpaid wages in a timely manner. There is the reduction from 10 years to 7 years in the period during which a student debt may not be discharged through bankruptcy. Locked in RRSPs would no longer be part of the assets which may be taken in a bankruptcy. There are changes to encourage the restructuring of viable but financially troubled companies. Also, income trusts will now be covered.
Most of the major proposed changes are ones recommended in the report of the Senate banking committee published in November 2003. Many of the committee's recommendations, however, especially regarding consumer debt, have been watered down or not included in the bill.
In Canada every week dozens of companies declare bankruptcy and close down. There is a threat of interest rate hikes in the near future. This is bad news for indebted Canadians. Excessive borrowing by many households over the past few years suggests that they have little freedom to absorb economic shocks with higher interest rates or skyrocketing home heating costs.
A 1% jump in consumer borrowing rates would cost non-mortgage-holding Canadians an average of $35 per month and mortgage holders an average of $130 per month. These seemingly small sums could be catastrophic for today's highly leveraged households. As legislators we must keep all of this in mind as we consider changes to the nation's bankruptcy laws.
The wage earner protection program is the centrepiece of Bill C-55. The program is intended to help protect workers by providing a guaranteed payment of wages owed up to $3,000 should their employer declare bankruptcy. Right now workers' claims for unpaid wages rank after secured creditors' claims. As a result, many employees have to wait from one to three years to get a small portion of the wages owed to them, generally 13¢ per dollar on average. Under the proposed program affected workers could make their wage claim immediately and should receive their money about six weeks later.
The government has made changes to the ranking of who gets paid first to put wages ahead of secured creditors. As a result, employees will get up to $2,000 in back wages before the banks are paid.
Just last week there was a constituent in my office who had lost wages owed to him when his employer went bankrupt. Over the last couple of years with lumber mills closing in British Columbia as a consequence of the softwood lumber dispute and which the government has failed to do anything about, there have been many others who have visited my office with similar complaints.
Workers of bankrupt businesses are often the most vulnerable. They work in low wage jobs and live from paycheque to paycheque to keep a roof over their heads and food on the table. The wage earner protection program is a good idea whose time should have come long ago.
Putting workers ahead of secured creditors, however, may reduce the amount of money banks are willing to lend to businesses. In the short term this could result in an increase in the number of small business bankruptcies. Lending institutions may have to adjust lines of credit or demand loans because they feel they are undersecured. Already it is difficult for small businesses to borrow money in Canada and we know that small businesses are the engine of our economy.
If it becomes more challenging, the small businessman will either falter or they may not get off the ground. This change to the bankruptcy law would also reduce what companies can spend to buy inventory and fill orders which, ultimately, could cost more jobs.
The government estimates that the cost of this WEPP program could reach $50 million per year. Given the government's track record on managing taxpayer dollars, such as the gun registry, the HRDC boondoggle or the sponsorship scandal, it is likely that the cost will be even higher.
In its report, the Senate banking committee recommended that student debt be eligible to be erased in a bankruptcy five years after the student has completed his or her studies. This is very important because many students in Canada depend on loans to further their education. In cases of hardship, the recommendation was that the court be allowed to discharge student loan debt in a period of time shorter than five years.
Bill C-55 does not go as far as recommended by the committee. Instead, the government proposes amending the law to allow student loans to be eligible to be written off in a bankruptcy if a student has terminated his studies seven or more years ago. In cases of undue hardship, a bankrupt may apply to court to obtain a discharge of the student loans after five years.
Most trustees in bankruptcy and insolvency lawyers believe that this proposed amendment should be changed to allow student debt to be erased in the same timeframe as the other dischargeable debt; that is, when the bankrupt is discharged.
The law as it stands and the proposed amendment are discriminatory. It is also in violation of one of the major tenets of Canadian bankruptcy that an honest but unfortunate debtor deserves a fresh financial start.
Half of the students in college and university are borrowing at record levels to finance their education hoping their investment will pay off. Loans are becoming essential for many students, as soaring tuition fees make it necessary and nearly impossible for youth to afford school through summer jobs or part-time work alone.
Last year the average tuition fee in British Columbia was nearly $5,000 but few students make more than $10 an hour. On average, students graduating with bachelor degrees owe more than $20,000 in government debt, not including private loans. This year the Liberals increased student loan limits from $165 to $210 per week. Higher student loan limits and higher tuition costs ensure that students will continue to graduate with higher debt loads.
I am disappointed to see that Bill C-55 neglects to offer protection to firms as well as to students to the extent that it should be needed.
The Conservative Party generally supports some of the amendments. We will be seeking further clarification on the impact these proposed changes will have on Bill C-55 when we review the bill in committee.