Bankruptcy is the worst nightmare of any business owner or organization. People see it as the beginning of the end of any business or organization, it is not always the beginning of the end. For individuals bankruptcy can offer a new beginning, personal bankruptcy can offer a person and their family protection from their creditors.
Bankruptcy is a legal process that is usually initiated by a creditor against a debtor that is unable to pay outstanding debts. It begins with the filing of a petition on behalf of a creditor by a bankruptcy lawyer against a debtor. Different countries and states have their own separate bankruptcy law that is peculiar to their environment, this article is tailored towards unveiling the bankruptcy law of Canada.
There are several bankruptcy laws in Canada that will help individuals and business organizations get a fresh start after losing everything to their creditors. These laws were either established by the federal government or province authority. All bankruptcy laws are tailored towards one goal – to preserve the rights of debtors and creditors.
Experts in the field of law are of the opinion that U.S and Canadian bankruptcy laws are similar. However, Canadia’s bankruptcy laws are unique and comprehensive. The Major legislation that covers bankruptcies in Canada is known as the “Bankruptcy and Insolvency Act” (BIA). It does not only cover bankruptcy liquidation, it also takes care of debtor reorganization.
There is another law known as the Companies’ Creditors Arrangement Act (the CCAA). This law helps to restructure larger companies after suffering from bankruptcy. Before a debtor or organization can seek protection of the CCAA, such a company must be insolvent either via liquidity or balance sheet and must have incurred debt worth at least five million dollars.
The emphasis of this article will be on the Bankruptcy and Insolvency Act (BIA), Bankruptcy Canada – personal bankruptcy and how it helps financially troubled and honest citizens with their troubles.
The BIA was established to protect the rights of debtors and creditors as well as informing trustees, courts and other stakeholders of their responsibilities, powers and duties. In order to properly protect the rights of debtors, creditors and other stakeholders, the BIA is organized into 14 different parts; these parts are discussed below;
- Administrative Officials: This is the first part of the Canadian Bankruptcy and Insolvency Act. This part deals with the office of the Superintendent of Bankruptcy, the responsibilities of the office, representative of the office as well as the trustees. The office of the Superintendent of Bankruptcy is saddled with the responsibility of ensuring that parties involved in personal and corporate insolvencies carryout the entire process in accordance with the Bankruptcy and Insolvencies Act of Canada. The OSB licenses regulate and supervises bankruptcy trustees as well as making public records of bankruptcy proceedings and establishes a professional standard for the industry. The OSB is the first point of contact when initiating a bankruptcy petition in Canada.
- Bankruptcy Orders and Assignments: This part of the Canadian Bankruptcy and Insolvency Act deals with the Bankruptcy itself and how to apply for it. It gives the various steps for writing a bankruptcy petition against an individual or organization as well as the conditions that will cause a creditor to petition for bankruptcy.
- Proposals: This aspect of Canadian BIA deals with how a debtor should send a proposal to his creditor, this includes consumer proposal. It also gives a detailed explanation of the roles of a trustee and how to appoint a reliable and professional trustee. One of the most obvious qualifications of a bankruptcy trustee in Canada is to have a license from the office of the Superintendent of Bankruptcy.
- Property of the Bankrupt: The fact that an individual is unable to meet up with the financial obligations he or she has with his or her creditors and other stakeholders doesn’t warrant such individual or organization to be treated unfairly. In view of this, the BIA has a part dedicated to how the property of the insolvent company or individuals will be dealt with.
- Administration of Estates: For individuals or Organizations with several assets and estates, this part of BIA emphasizes how these assets including houses, money and other properties will be handled by creditors and trustees. If there is any action contrary to the provision of the law, any party indulged in such action may be instigating the wrath of the law.
- The rights of the Bankrupt: This part of the BIA deals exhaustively with the rights, responsibilities as well as duties of the bankrupt in the entire insolvency process. It also emphasizes how the law will help the bankrupt reorganize after the proceedings.
- Courts and Procedures: The court itself has a key role to play in the bankruptcy process. Being the custodian of law in Canada, the court has certain duties to fulfill as well as authority to exercise during a bankruptcy process.
- Offences: The BIA also contains what will happen if any party to the bankruptcy defies the procedures and law of BIA. Such offence can attract great punishment, this is why it is good to always be on the right path till the proceedings are completed.
- Miscellaneous: These are important matters that are valid in a bankruptcy process but do not fit into any category. Example of such matter is the rights of banks during bankruptcy proceedings.
- Payment of Debt: The BIA also talks about the alternative to bankruptcy. It explains how debtors and creditors can reach an agreement for orderly payment of debts. If they can both agree on this, then they will be no need for a bankruptcy.
- Secured Creditors and Receivers: This part of BIA explain how to handle secured creditors and receivers during the bankruptcy process. A secure creditor refers to any lender or borrows that takes collateral for the loan, credit or bond issued.
- Securities Firm Bankruptcies: The bankruptcy process of security firms differs from that of an individual and any other corporate organization. This aspect of BIA describes how security firms’ bankruptcy related matters will be handled in Canada.
- International Insolvencies: The BIA also covers how international insolvencies will be handled and the filing procedures.
- General Rules: The Bankruptcy and Insolvency Acts covers the general rules for handling the various process and steps of bankruptcy.
It is important to understand these different aspects of bankruptcy law and how to apply them. However, if you find it difficult to understand, consult a bankruptcy lawyer who will guide you through the entire process. That you are bankrupt doesn’t mean you don’t have rights.
Bankruptcy Canada – personal bankruptcy
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