Bankruptcy and Insolvency Act
The Bankruptcy and Insolvency Act is a dedicated solution created by the government in other to help people that are in dire need of financial assistance. It’s designed to protect the rights of creditors and people in debt. It’s also focused on helping trustees and also informing the court of any duties and powers that they might have.
What’s covered in the Bankruptcy and Insolvency Act?
The Bankruptcy and Insolvency Act covers any person that either carried business in Canada or resides here. It doesn’t apply to insurance companies, railways, loan companies, trust companies and banks. It also governs the receivership proceedings, which means that the receives can be named by the secured creditor. He will enforce his security or he will act under a court order.
In addition, the act is also governing the bankruptcy proceedings, who will be involved voluntarily by a person, by a debtor’s creditors when the debt is more than $1000 and when any other proposal under the act has failed.
What kind of bankruptcy options are available?
These depend most of the time, but usually you have the bankruptcy, consumer proposal or division 1 proposal. Personal bankruptcy is a procedure focused on making the Canadians discharged from paying debts. However, the bankrupt person will surrender assets or they have to make additional income payments.
The consumer proposal is an offer to allow creditors to pay some of what’s owed. The creditors can vote and they agree or not. In this case the bankrupt person doesn’t surrender assets, but they agree to pay up the remaining amount within 5 years. Lastly you get the Division 1 proposal which is more focused on commercial clients, it will be great if your revenue/debt are more than $250000.
How does the Bankruptcy work?
You need to file for bankruptcy. In this case then debtor needs to offer a list with all the assets or debts to the Licensed Insolvency Trustee. The proceedings will start with you filing the bankruptcy documents with the Office of the Superintendent of Bankruptcy Canada. In 5 days the LIT will send a copy of the paperwork to the creditors, they can file claims. At this time the trustee will start liquidating the property and then the proceedings are sent to the creditors based on the distribution properties as well.
The bankrupt person has to attend creditor meetings. They also have to prepare income statements monthly that will determine if additional payments need to be made. On tip of that, the bankrupt person is required to attend two financial counseling sessions made by the LIT. These will help him identify the cause of his/her financial problems so this type of problem can be avoided.
As you can see, the Bankruptcy and Insolvency Act is very important and it clearly defines what you can do in case of personal bankruptcy. It’s a great way to protect people in a lot of debt. On top of that, it comes with a wide range of options, and that alone is very helpful as you rarely have such opportunities.