A recent ruling in the Ontario Court of Appeal means that 407 ETR highway debts can now be included in a bankruptcy or a consumer proposal under the Bankruptcy and Insolvency Act (BIA). In the past, people filing either a bankruptcy or a proposal were discharged from all their unsecured debts, but the MTO would withhold a new vehicle permit (“sticker”) when it came time for the person to renew unless payment of 407 debt was made in full. Effectively, this meant that that particular debt had not really been discharged.
In our practice we have seen plenty of situations in which 407 debt existed, sometimes as much as $15-20,000. In a few cases, the fact that there was significant 407 debt prevented that individual or business from filing a bankruptcy or proposal since it would not have made much sense to go to all that trouble and still have to pay a large debt. That license plate sticker being withheld is a real eye-opener!
Now, in large part thanks to a class-action lawsuit, the courts have rules otherwise and 407 debts are treated as any other unsecured debt in either a bankruptcy or proposal.
This means anybody with significant 407 debt owing should not be prevented from eliminating debts in a legal action under the BIA.
The ruling cites the spirit of the BIA (a federal law), which is intended to offer an “honest but unfortunate debtor” a chance at a fresh start following a filing.