Second and third time personal bankruptcies are uncommon, but fourth time bankruptcies are so rare they deserve recognition. The Supreme Court of British Columbia was recently presented with one such instance when Mr. Douglas Kusch applied for a discharge from his fourth bankruptcy.
The facts surrounding Mr. Kusch's application suggest that achieving this rare milestone requires a combination of poor luck, and even worse business acumen. The first of Kusch's bankruptcy occurred when he was self-employed. When his cash supplies were depleted by $30,000 worth of accounts receivables from three different companies, he could no longer continue his operation.
His second bankruptcy arose after the collapse of his mobile home. At that time, he sued the masonry company and proceeded to trial, at which point his lawyer urged him to settle. Kusch refused, and his lawyer passed away the next day resulting in an adjournment. Kusch now states in his fourth application that had his lawyer survived to continue his lawsuit, the second bankruptcy would not have occurred. This explanation for the second bankruptcy is drastically different from the reasons listed at the time of his second bankruptcy.
The third bankruptcy was much more reasonable and arose from the divorce of his wife. His wife made allegations attacking his character. The divorce led to a heated custody battle, in which Mr. Kusch made the logical decision to hire a team of five lawyers to pursue his case despite the expense far exceeding his means. The court proceedings lasted for nine days and Mr. Kusch incurred enormous legal expenses. In spite of the best efforts of his "dream team," the court placed no weight on Mr. Kusch's evidence. This failed attempt resulted in a claim by five different lawyers for fees along with an order to pay child support of $1,500 per month. It wasn't long before Mr. Kusch fell substantially behind in child support payments and began the familiar process of filing.
Mr. Kusch made the decision to once again become self-employed by opening a "homeopathy consulting business." All seemed well until it was discovered that Mr. Kusch had not been paying his taxes and had, in fact, incurred a substantial tax debt leading to bankruptcy number four.
In his fourth application for discharge Mr. Kusch maintained that the first three bankruptcies resulted from circumstances beyond his control. Only in this, his fourth bankruptcy, did Mr. Kusch acknowledge he may have been guilty of some financial mismanagement, albeit only to a limited extent.
Registrar Young was unconvinced Mr. Kusch had learned anything from his previous bankruptcies. As a result, the Registrar adopted the comments of Registrar Baker in Re Willier1. In that case, it was noted that by the time an individual has entered a third bankruptcy, the purpose of the Bankruptcy and Insolvency Act shifts from its remedial objective of assisting well-intentioned but unfortunate debtors to one of protecting society, and in particular, unsuspecting potential creditors. The Registrar ultimately refused Mr. Kusch's discharge, citing concerns that it would only be setting the stage for number five. While the Superintendent of Bankruptcy had asked the court to grant a 15-year suspension, the Registrar was of the view that this was too long. Instead, it was determined that allowing Mr. Kusch to reapply in two years was more appropriate. The Registrar reasoned this probationary period would provide him with an opportunity to demonstrate the acquisition of some financial prudence, which could result in a suspension of less than 15 years.