Bankruptcy
- Geographical
Interpretations
Canada: continued
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
creditorsas 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
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