Halifax senior who ‘squandered’ taxman’s money wins fourth bankruptcy discharge
A 69-year-old Halifax man has won a conditional discharge from his fourth bankruptcy even though he spends as much as $350 a month on booze and smokes and budgets another $300 monthly for "live performance."
Paul Stephen Sorochan’s second and third bankruptcies were tax-driven, Raffi A. Balmanoukian, the Nova Scotia Supreme Court’s registrar of bankruptcy and insolvency, said in a written decision dated June 8.
“This, his fourth, cites ‘health/medical issues; business losses,’” Balmanoukian said.
“However, even a cursory examination of his affairs makes it clear that this, too, is a tax-driven bankruptcy.”
Sorochan’s first bankruptcy came in 1983 at the age of 31.
“He received an absolute discharge just over two years later,” Balmanoukian said. “The listed creditor was a commercial bank and his filing was due to a business failure. By all standards, this is a dated and small bankruptcy, even by the standards of the day. I pay it limited weight, except in the context that we are now dealing with the very serious fact that this is Mr. Sorochan’s fourth insolvency, in 33 years.”
His second bankruptcy filing came in 1992, with Sorochan claiming it was “primarily due to a marital breakup,” Balmanoukian said. “However, the trustee’s report cites income tax debts.”
The registrar found round three, in 2003, "especially troublesome.”
"First, it was tax driven in the sense that $77,208 of the $88,448 in unsecured liabilities was to the Tax Man. Second, his discharge obligations were limited, namely payment of $5,808 arising from surplus income. Third, he did not comply with that small item, and the trustee was discharged. A new trustee was appointed in 2011 – eight years later. Then, and only then, did Mr. Sorochan make his third exit.”
Gambling, drink and drugs
Sorochan earned a good income at the time, but the money went to drinking and drugs until 2008, Balmanoukian said.
"He also gambled until 2006. That consumed funds which, in addition to those which should have been earmarked for taxes, did not go to more responsible places. He cited in his third filing that ‘income insufficient to meet debt obligations as they became due, support payments and childcare expenses.’”
Sorochan filed for his fourth bankruptcy in 2016.
“Although the narrative above would suggest that the booze, the drugs, and the dice are all behind him, he did not stay ahead of the Tax Man,” Balmanoukian said.
“When the bankrupt was asked what he thought was the cause of his fourth bankruptcy, Mr. Sorochan explained that it was a combination of dealing with depression which brought on drinking, drugs and gambling.”
Balmanoukian points out that "if he stopped these things between 2006 and 2008, they would not have been issues in the 2016 filing.”
Hundreds of thousands owed in taxes
Sorochan “owed $232,381.69 in personal income tax for the years 2005 through 2012; $37,294.76 in unremitted HST, $3,643.20 in unremitted source deductions (unsecured) and $6,442.67 in ‘deemed trust’ source deductions.”
Balmanoukian notes there were no other large creditors.
“The estate realized $2,893.67 in receipts, of which apparently $2,000 was paid on filing.”
When he filed for his fourth bankruptcy, Sorochan listed “significant health problems, coupled with a breakdown of his second marriage,” said the registrar.
“He says that this left him carrying two households, plus child support. He ‘started using the HST that I was able to collect to keep up with the mounting expenses, with the idea that things would turn around and that I would get on top of it somehow.’ When that didn’t happen, depression and stress followed, topped off by a heart attack. Later, he developed other medical problems requiring surgeries of various types. He found himself ‘couch surfing’ until Community Services stepped in and assisted.”
Balmanoukian acknowledged that health and marital difficulties played a role in Sorochan’s financial troubles, but "he has not rebutted the presumption that he simply reverted to prior delinquencies and defaults, and used money that did not belong to him to fund his own expenses, whatever they may have been."
Sorochan didn’t appear to have made any effort to pay personal tax debt, other than what the Canada Revenue Agency collected from him, said the registrar. “Mr. Sorochan indicated multiple meetings with CRA and ‘every meeting we set up agreements to make regular payments.’ He does not say he complied. He goes on to say that the third-party demands followed, which while not conclusive, suggests to me that the ‘agreements’ were either not adequate, or not fulfilled.”
Is 'dice and vice' in the past?
Balmanoukian found it "difficult to accept that Mr. Sorochan has not used – one may go so far as to say ‘squandered’ – tax funds over the years to fund his lifestyle choices.”
That left the registrar with “very serious questions as to whether the ‘dice and vice’ is firmly in his past."
Sorochan is past retirement age. His declared income is limited to the Canada Pension Plan, Old Age Security "and occasional ‘voice over’ work,” Balmanoukian said.
“He estimates this would bring in about $8,400 a year ($700 a month); his budget for December 2018 also lists $300 per month for ‘live performance.’ His health issues are uncontradicted, although he says he is ‘more stable’ and recovery is ‘slow.’ He spends $225 to $350 per month on alcohol and/or tobacco.”
Sorochan’s financial prospects are limited, Balmanoukian said. "He finds himself in the unenviable position of entering his golden years bereft of gelt.”
Balmanoukian ordered Sorochan to cough up 10 per cent of his gross revenue for four years. He noted those payments should total at least $10,000.
Sorochan also must pay his tax returns when required and provide proof of same.
Balmanoukian ordered him to provide evidence from a qualified medical practitioner “that use of drugs or alcohol (if any) does not pose a health or financial problem to himself.”
He told Sorochan to enroll in the voluntary exclusion program at Casino Nova Scotia.
Sorochan also has to fork over any property “he acquires prior to his discharge; this shall be over and above the payment requirement listed above,” Balmanoukian said.