Bankruptcy - How To Succeed 6

Geographical Interpretations

Canada

Bankruptcy Process

In Canada, the bankruptcy process is divided into three stages:
Initiation
Interim
Discharge

Initiation Stage

An insolvent person may avoid bankruptcy by either establishing mutually acceptable arrangements with the creditors or by filing a consumer proposal which, should a default be incurred, would cause that person to be deemed “bankrupt”.

If the consumer proposal is not accepted by the creditors or it turns out to be not a viable option, then the insolvent person may consider the consequences of assigning himself into bankruptcy. In either case, this may be done on a voluntary basis or involuntarily petitioned into bankruptcy by his creditors.

In the case of a stay of proceedings, existing legal actions against the bankrupt cannot be continued, nor new actions initiated, nor may there be any enforcement of existing court orders. The only exception relates to secured creditors who are allowed to enforce their security.

Interim Stage

The bankrupt transfers his property to the bankruptcy trustee who arranges for its liquidation and distribution amongst the creditors as directed in the priority of distribution scheme in the Bankruptcy and Insolvency Act (BIA).

The bankrupt offers every assistance to the bankruptcy trustee in the process of securing and making available all his properties, eliminating any transactions that were found to be inappropriate, and attending meetings with the creditors.

He agrees to attend compulsory counseling relating to the management of his financial affairs once he has been finally discharged.

He informs the creditors of any changes in his financial circumstances and of the acquisition of any further assets.

Transfers a proportion of his surplus income, together with any property acquired prior to his discharge, to the bankruptcy trustee for liquidation and distribution amongst the creditors.

Discharge Stage

An individual who is bankrupt for the first time is automatically discharged after a period of 9 months provided no notice of opposition to discharge is filed, either by the creditors, the official receiver, or the bankruptcy trustee. Such a bankrupt may also apply to be discharged prior to the expiry of the 9 months period.

In the case of an individual who has been bankrupt on previous occasions, the bankruptcy trustee is able to apply to the bankruptcy court for an order to discharge within a period of three months to one year from the date of bankruptcy. On the other hand, should the bankrupt waive this application by the trustee, he is entitled to apply to the court himself.

In the case of an opposition to discharge, the debtor is entitled to defend himself against such opposition who will attempt to persuade the bankruptcy court that there is a case to be answered.

In the case of first-time bankrupts who are entitled to an automatic discharge, a certificate of discharge may be obtained from the bankruptcy trustee. For those individuals who have been bankrupt on previous occasions, an order of discharge may be obtained from the bankruptcy court. Such a discharge absolves the bankrupt of all bankruptcy claims, except those listed in s.178(1) of the BIA.

In the case of a conditional discharge being granted, the bankrupt is required to comply with the terms set out by the bankruptcy court. Any failure to comply could cause the discharge to be annulled together with the imposition of fines or other measures. The bankruptcy court has the power to refuse to grant a discharge.

Bankruptcy – How To Succeed