Sunday, September 26, 2021
HomePopularWhat Is Bankruptcy And Insolvency Act

What Is Bankruptcy And Insolvency Act

What Does A Licensed Insolvency Trustee Do During Insolvency Proceedings

What is insolvency law?

A Licensed Insolvency Trustee  is granted a license by the Office of the Superintendent of Bankruptcy. LITs are the only professionals legally authorized to administer a bankruptcy or proposal. An LIT fairly represents you , and makes sure your rights are respected and intact, while also protecting the rights of the creditors. If you file a consumer proposal or bankruptcy, an LIT will support you through the entire process and help you to get your finances back on track in the months or years to follow. 

Receivers And Secured Creditors

Receivers are required to collect and remit the applicable RST on the sale of the debtor’s assets. Unless receivers obtain a valid PEC from the purchaser, they must collect and remit the applicable RST, using the debtor’s existing RST Vendor Permit number. Refer to RST Guide 204 – Purchase Exemption Certificates for more information.

A claim for RST collected or collectable plus penalties and interest accrued after January 1, 1998 takes full priority over all security interests, whether or not the security interest was acquired before that date. All security interests are affected, including, but not limited to, an interest created by, or arising from any of the following:

  • a debenture
  • a charge, deemed or actual trust, or
  • an assignment or encumbrance.

What If Your Business Is Facing Financial Difficulty

Incorporated businesses have a few options when faced with financial troubles: file for a Division | Proposal, CCAA Plan of Arrangement, or bankruptcy.

Unincorporated businesses, such as small businesses and sole proprietorships, must be filed as a personal bankruptcy.

In most cases, there are three general scenarios for business bankruptcy:

  • The business owner filed for bankruptcy of their own accord.
  • They were not successful in resolving their debts through a proposal.
  • A Bankruptcy Order has been filed against the business.

Recommended Reading: How Does Bankruptcy Affect The Economy

Part Xivreview Of Act

Review of Act

  • 285  Within five years after the coming into force of this section, the Minister shall cause to be laid before both Houses of Parliament a report on the provisions and operation of this Act, including any recommendations for amendments to those provisions.

  • Reference to parliamentary committee

     The report stands referred to the committee of the Senate, the House of Commons or both Houses of Parliament that is designated or established for that purpose, which shall

  •  as soon as possible after the laying of the report, review the report; and

  •  report to the Senate, the House of Commons or both Houses of Parliament, as the case may be, within one year after the laying of the Ministers report, or any further time authorized by the Senate, the House of Commons or both Houses of Parliament.

What Is The History Of The Bankruptcy And Insolvency Act In Canada

Insolvency and Bankruptcy Code 2016

The Bankruptcy and Insolvency Act in Canada has a very interesting history. The Bankruptcy and Insolvency Act of Canada has its origins in the Bankruptcy Act of 1919. The Act changed in 1949. In terms of the history of our country, this means the Act is a relatively young piece of legislation. The reason for the enactment is that every modern society has to realize that some of its citizens and businesses will run into financial trouble. A modern and efficient economy has to have the means to help those people and businesses out of their trouble. Everyone deserves a fresh start. To redeploy a companys assets there must be a formal system to allow this to happen.

The Act changed again in 1992, 1997 as well as 2008-2009. The 1992 reforms concentrated on maximizing value for creditors with reorganization and rehabilitation, boosting the fair distribution to employees and providers of goods and services to the bankrupt company.

The 1997 reforms urged consumer debtor responsibility and boosted the reorganization stipulations as well as the administration of the Act. It introduced new sections dealing with the insolvency of securities firms and dealing with global insolvencies.The 2009 reforms, had 4 primary aims:

  • to urge the restructuring of viable, but financially hampered companies;
  • to better secure workers insurance claims for wages and holiday pay;
  • making the bankruptcy system fairer and lower abuse; and
  • to improve the administration of the Canadian bankruptcy system.

Don’t Miss: How To File For Bankruptcy For Credit Card Debt

Canadian Bankruptcy And Insolvency Laws

Canadian bankruptcy and insolvency laws are determined by two major pieces of federal legislationthe Bankruptcy and Insolvency Act, and the Companies’ Creditors Arrangement Actas well as provincial legislation that for example specifies what type of property an individual debtor is entitled to keep during bankruptcy.

How It Works For You

The federal government established The Bankruptcy and Insolvency Act to help unfortunate, honest citizens with their financial trouble. Sometimes referred to as the bankruptcy act, it was created to protect the rights of you and your creditors, and informs trustees and the court of their responsibilities, powers, and duties.

Don’t Miss: How To Be A Bankruptcy Lawyer

Is There A Program That Will Pay Me Some Of The Wages Owing If My Company Is Bankrupt

The federal Wage Earner Protection Program , offers some compensation to eligible employees who are owed money from a bankrupt employer or one who is in receivership.

To access this program you must file an application for payment with Service Canada.

For more information on the WEPP, call Service Canada at 1-800-622-6232.

For further information about the ESA please contact the Ministry of Labour, Training and Skills Developments Employment Standards Information Centre:

Greater Toronto Area: 4163267160

Tollfree Canadawide: 18005315551

TTY for hearing impaired: 18665678893

Understanding The Bankruptcy And Insolvency Act

BANKRUPTCY AND INSOLVENCY ACT CANADA PDF: BANKRUPTCY ACT CANADA

You may be familiar with the term insolvency, but do you know what it means? When individuals face unfortunate circumstances and can no longer repay their debts, two legislated debt solutions  can relieve them of their debt obligations:  

  • consumer proposal or 
  • bankruptcy 

 In Canada, insolvency is a legal process governed by legislation called the Bankruptcy and Insolvency Act. For many people, the technical nature of the regulations and the process of a consumer proposal or bankruptcy can feel overwhelming, but the basics arent so difficult to understand. If youre interested in understanding the debt relief options available to you, or youre considering seeking professional help with your debt, the information below can get you started. 

Recommended Reading: How To Get A Credit Card After Filing Bankruptcy

Criminal/penal Case Court/osb No: 31

Background

An individual had been unemployed for a period of time, but somehow obtained financing to purchase a property, which he later abandoned. The property was then sold by the mortgagor who took a loss on the sale. When the individual filed for bankruptcy, his statement of affairs listed unsecured liabilities of more than $213,000. When he was examined under oath by the OSB, the bankrupt could not explain how he was able to obtain the financing while being unemployed nor the circumstances surrounding the property purchase. Also, the bankrupt could not answer questions about the financing nor the assets of three short-term businesses he had started.

Summary of offences of the bankruptFootnote 2

  • The bankrupt disposed of property fraudulently.
  • The bankrupt did not fully and truthfully answer questions when examined under oath.
  • The bankrupt failed to comply with his duties under the BIA.

Court decision

The bankrupt pleaded guilty to three offences under the BIA and received an 8-month conditional sentence. He must also pay restitution orders of $78,000 to the Canada Mortgage and Housing Corporation and $100,000 to his trustee.

What Is The Difference Between Insolvency And Bankruptcy

Insolvency and bankruptcy are two terms that are often closely associated when talking about debt. However, they have very different meanings. Insolvency refers to a financial state, while bankruptcy is a legal procedure. The Bankruptcy and Insolvency Act  is the law regulating insolvency and bankruptcy in Canada.

Also Check: Does Bankruptcy Get Rid Of Irs Debt

What A Stay Of Proceedings Will Stop

Regardless of the process you choose, a stay of proceedings will be filed on your behalf. You will receive creditor protection, which means that creditors cant take any further legal action against you. Essentially, a stay of proceedings tells creditors that you are working with an LIT to resolve your debt, and so legal actions against you should be stopped. That means a few practical things for you, as a debtor: 

  • Interest payments are frozen. 

H New Provisions Of The Civil Code Of Qubec

BANKRUPTCY AND INSOLVENCY ACT CANADA: BANKRUPTCY LAW FAQ ...

Although the new provisions are not part of the subject of this paper, it seemed useful to reproduce them in Table No. 3 of the Appendix. Some have been discussed above. As for the others, in particular, article 1392 on lapse of offer in the event of bankruptcy, article 2159 on the liability of the mandatary, article 2775 on the continuation of a hypothecary creditor’s administration even in the case of the debtor’s bankruptcy, and finally article 2990 on the trustee’s certificate for publication purposes, they pose no problems of a constitutional nature in my view, except that they could, in certain cases, come into conflict with federal legislation.

Recommended Reading: What Is Bankruptcy Code In India

Settlement Of The Insolvent Person’s Estate

The trustee/receiver must first realize the amount of the proceeds from the property that is available for payment to the different classes of creditors, and different rules apply according to the type of proceeding. They are summarized as follows:

Starting with the property under the possession or control of the insolvent person

Type

The estate is then settled, using the priority of claims outlined in the BIA.

The BIA’s definition of property is quite broad:

“property” means any type of property, whether situated in Canada or elsewhere, and includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, as well as obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property;

As a consequence, the Supreme Court of Canada has ruled that direct payment clauses in contracts do not release the contractor from its obligations to the trustee of the estate.

What Is The Purpose Of The Bankruptcy & Insolvency Act

The BIA is legislation established by the federal government to assist honest Canadian citizens who are unfortunate enough to run into financial difficulties. It protects the rights of indebted individuals and their creditors and ensures that trustees and the court live up to their responsibilities and duties.

Bankruptcy law gives a person who is struggling financially two options: come up with a financial proposal, or file for bankruptcy.

Also Check: How To File Bankruptcy In Texas Without An Attorney

Recognition Of Foreign Proceeding

Application for recognition of a foreign proceeding

  • 269  A foreign representative may apply to the court for recognition of the foreign proceeding in respect of which he or she is a foreign representative.

  • Documents that must accompany application

     Subject to subsection , the application must be accompanied by

  •  a certified copy of the instrument, however designated, that commenced the foreign proceeding or a certificate from the foreign court affirming the existence of the foreign proceeding;

  •  a certified copy of the instrument, however designated, authorizing the foreign representative to act in that capacity or a certificate from the foreign court affirming the foreign representatives authority to act in that capacity; and

  •  a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative.

  • Documents may be considered as proof

     The court may, without further proof, accept the documents referred to in paragraphs and as evidence that the proceeding to which they relate is a foreign proceeding and that the applicant is a foreign representative in respect of the foreign proceeding.

  • Other evidence

     In the absence of the documents referred to in paragraphs and , the court may accept any other evidence of the existence of the foreign proceeding and of the foreign representatives authority that it considers appropriate.

  • Translation

  • Order recognizing foreign proceeding

    Orders

    History Of The Bankruptcy And Insolvency Act

    The Big Picture – Insolvency & Bankruptcy Code Bill

    Enacted in 1869, the first Canadian bankruptcy act was known as An Act respecting Insolvency and only covered traders.

    It was not until 1919, with the Bankruptcy Act of 1919, until bankruptcy was available for all individuals, corporations, and other entities.

    The Bankruptcy and Insolvency Act that we know today was not enacted until 1992.

    In 1992, when the Act was renamed the BIA provisions for consumer proposals were made.

    The Act was again updated in 1998 to deal with the discharge of student loan debt in insolvency.

    The last update to the BIA went into force in 2009, which established the Wage Earner Protection Program, which allows compensation to employees of bankrupt companies or companies that were placed in receivership under the BIA.

    The BIA also governs the Companies Creditors Arrangement Act in Canada.

    If someone wants to make a proof of claim the Bankruptcy & Insolvency Act covers it.

    The BIA covers insolvency law, how the insolvency proceedings work and how the stay of proceedings works for consumers who are unable to pay their debts as they become due.

    Don’t Miss: How To File Bankruptcy In Iowa For Free

    History Of The Us Bankruptcy Code

    The first bankruptcy law in the United States came into being in 1800. This law was repealed in 1803 and was followed by the Act of 1841. The 1841 law was repealed in 1843 and was succeeded by the Act of 1867, which was amended in 1874 and was later repealed in 1878. The Nelson Act of 1898 became the first modern bankruptcy legislation in the country.

    The next modern bankruptcy law was enacted in 1978 by the Bankruptcy Reform of 1978. The  Bankruptcy Abuse Prevention and Consumer Protection Act is the most recent amendment to the 1978 law.

    Are There Any Other Bankruptcy Acts

    As well as the Bankruptcy and Insolvency Act, each province has its own law that deals with bankruptcy slightly differently. Should there ever be any discrepancies between provincial law and federal law, federal law will overrule. If you are looking to learn more about commercial bankruptcy, theCompaniesâ Creditors Arrangement Act covers everything you need to know about companies gaining debt relief.

    If you want to learn more about the Bankruptcy and Insolvency Act, or are looking to file bankruptcy, speak to Spergel. Our experienced Licensed Insolvency Trustees have helped over 100,000 Canadians become debt free. Book a free consultation with us today â you owe it to yourself.

    Read Also: What Is Epiq Bankruptcy Solutions Llc

    Application For Bankruptcy Order

    Bankruptcy application

    • 43  Subject to this section, one or more creditors may file in court an application for a bankruptcy order against a debtor if it is alleged in the application that

    •  the debt or debts owing to the applicant creditor or creditors amount to one thousand dollars; and

    •  the debtor has committed an act of bankruptcy within the six months preceding the filing of the application.

  • If applicant creditor is a secured creditor

     If the applicant creditor referred to in subsection is a secured creditor, they shall in their application either state that they are willing to give up their security for the benefit of the creditors, in the event of a bankruptcy order being made against the debtor, or give an estimate of the value of the applicant creditors security, and in the latter case they may be admitted as an applicant creditor to the extent of the balance of the debt due to them after deducting the value so estimated, in the same manner as if they were an unsecured creditor.

  • Affidavit

     The application shall be verified by affidavit of the applicant or by someone duly authorized on their behalf having personal knowledge of the facts alleged in the application.

  • Consolidation of applications

     If two or more applications are filed against the same debtor or against joint debtors, the court may consolidate the proceedings or any of them on any terms that the court thinks fit.

  • Withdrawing application

     An application shall not be withdrawn without the leave of the court.

  • My Company Has Filed For Protection Under The Companies’ Creditors Arrangement Act How Does This Affect Me What Should I Do

    The Bankruptcy and Insolvency Act: A Layman

    The Companies Creditors Arrangement Act is a federal statute that allows insolvent corporations that owe more than $5 million to creditors to restructure their debt. In a typical CCAA case, a corporation will propose an arrangement with its various creditors to compromise its debts, known as a Plan of Arrangement. A court-appointed monitor supervises the restructuring process under the CCAA.

    You should contact your employer and the monitor for information and assistance. If you are represented by a union, you should contact your union for information and assistance

    For more information on the CCAA call Service Canada at 18006226232.

    Disclaimer: This resource has been prepared to help employees and employers understand some of the minimum rights and obligations established under the Employment Standards Act, 2000 and regulations. It is not legal advice. It is not intended to replace the ESA or regulations and reference should always be made to the official version of the legislation. Although we endeavor to ensure that the information in this resource is as current and accurate as possible, errors do occasionally, occur. The ESA provides minimum standards only. Some employees may have greater rights under an employment contract, collective agreement, the common law or other legislation. Employers and employees may wish to obtain legal advice.

    Read Also: How Long Does Bankruptcy Stay On Credit Report

    Bankruptcy And Insolvency Act

    • An Act respecting bankruptcy and insolvency
    CitationRSC 1985, c. B-3
    Enacted by
    Assented to1985

    The Bankruptcy and Insolvency Act is one of the statutes that regulates the law on bankruptcy and insolvency in Canada. It governs bankruptcies, consumer and commercial proposals, and receiverships in Canada.

    It also governs the Office of the Superintendent of Bankruptcy, a federal agency responsible for ensuring that bankruptcies are administered in a fair and orderly manner.

    Scheme Of Distribution List

    136 Subject to the rights of secured creditors, the proceeds realized from the property of bankruptcy take priority of payment as follows:

    In the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;

    The costs of administration, in the following order,

    The expenses and fees of any person acting under a direction made under paragraph 14.03,

    The expenses and fees of the trustee, and

    Legal costs;

    The levy payable under section 147;

    The amount of any wages, salaries, commissions, compensation, or disbursements referred to in sections 81.3 and 81.4 that was not paid;

    The amount equal to the difference a secured creditor would have received but for the operation of sections 81.3 and 81.4 and the amount actually received by the secured creditor;

    The amount equal to the difference a secured creditor would have received but for the operation of sections 81.5 and 81.6 and the amount actually received by the secured creditor;

    Claims in respect of debts or liabilities referred to in paragraph 178 or , if provable under subsection 121, for periodic amounts accrued in the year before the date of the bankruptcy that is payable, plus any lump sum amount that is payable;

    The fees and costs referred to in subsection 70 but only to the extent of the realization on the assets eligible thereunder;

    You May Like: Which Statement Regarding Bankruptcy Is Not True

    What Bankruptcy Options Are Available Under The Bia

    For individuals there are 3 possible insolvency proceedings they can choose to deal with their debt.

    1. Bankruptcy

    Personal bankruptcy is a legal procedure available to Canadians to be discharged from the obligation to repay the eligible debts that were in place when the bankruptcy was filed. In exchange for the elimination of their debts, the bankrupt surrenders certain assets and, depending on their income, may make additional surplus income payments.

    2. Consumer Proposal

    A consumer proposal is an offer to creditors to pay a percentage of what is owed. Creditors vote on the proposal; they can choose to accept or reject it. In a proposal the debtor does not surrender any assets.  Instead, they make the agreed upon proposal payments over a period of up to five years. Once all the terms of the consumer proposal are met, the debtor is legally released from the debts included in the proposal.

    3. Division I Proposal

    A Division I proposal is more commonly thought of as a commercial proposal although it is an insolvency option available to individuals when their debts exceed $250,000.

    Overview Of The Bankruptcy Process

    What is the Insolvency & Bankruptcy Code, and why Modi govt’s changes to it are bold | ep 216

    Both a bankruptcy and consumer proposal can only be made through a Licensed Insolvency Trustee or LIT. Once filed, the debtor receives protection under the BIA until they complete all requirements of the proceeding.  This bankruptcy protection is known as a stay of proceedings.

    Stay of Proceedings

    A Stay of Proceedings is a legal benefit of bankruptcy that provides debtors with . Upon filing a bankruptcy or proposal, creditors can no longer continue with most legal actions against the debtor. Their proceedings are stayed.

    How a Stay of Proceedings Works

    The debtor will supply the trustee with a list of all legal actions against them and the parties involved are given notice that a filing for a proposal or a bankruptcy has been made and that the stay is in place.

    What a Stay of Proceedings Will Immediately Stop

    • Wage garnishments .
    • Collection activity, including activity by the CRA.
    • Threats of legal action against the debtor for money owed to the creditors.
    • Court actions that have already been filed by the creditors.
    • Enforcement of court orders with respect to judgments already issued against the debtor.

    What a Stay of Proceedings Wont Do

    Motion to Lift the Stay of Proceedings

    Read Also: How Many Bankruptcies Has Donald Trump

    Is Their Equal Treatment For All Unsecured Creditors

    This is always an interesting question. The answer is also confusing to many lay people. The answer is both no and yes. I will explain. There are two types of unsecured creditors; preferred unsecured and ordinary unsecured. Many people forget this.

    All ordinary unsecured creditors ARE treated equally. Their claims rank equally. The licensed insolvency trustee paying a dividend to the ordinary unsecured creditors, they will all receive theirs in proportion share. The calculation is based on their respective ordinary unsecured claims.

    The preferred unsecured creditors ARE NOT treated equally. The Bankruptcy and Insolvency Act Canada section 136 sets out the scheme of distribution for the rank of the claims. Payment to preferred creditors ALWAYS happens BEFORE payment to ORDINARY creditors.

    How The Bankruptcy And Insolvency Act Can Work For You

    The Bankruptcy and Insolvency Act   regulates the law on bankruptcy and insolvency in Canada.

    The act details how different legal options will work, while defining the role of the Superintendent of Bankruptcy, their representatives– official receivers, the courts, Trustees, creditors, and consumers have.

    The Act was established by the federal government in Canada to support citizens amidst their financial difficulties.

    Also known as the Bankruptcy Act, it was brought in to protect the rights of both consumers and creditors, while informing Trustees and courts about their powers, responsibilities, and duties.

    Need Help Reviewing Your Financial Situation?Contact a Licensed Trustee for a Free Debt Relief Evaluation

    Don’t Miss: Will Bankruptcy Get Rid Of Irs Debt

    The Bankruptcy And Insolvency Act

    The Bankruptcy and Insolvency Act governs all bankruptcies and proposals that take place in Canada. Sometimes informally referred to as “the Bankruptcy Act”, for individuals it is designed to help “honest but unfortunate debtors” overcome their financial challenges.

    The act defines the roles and protects the rights of everybody involved in a bankruptcy or proposal proceeding, including the Superintendent of Bankruptcy, his or her representatives, the court, trustees, creditors, and debtors.

    RELATED ARTICLES

    Most Popular