Canadian Bankruptcy ABC
Personal bankruptcy is a legal proceeding administered under and governed by the Bankruptcy and Insolvency Act (BIA). In Canada, only bankruptcy trustees can perform and administer a bankruptcy proceeding. Their job is to help people through the process so that they can obtain relief from creditors (people or companies that they owe money to) and get a fresh start in life.
A person usually becomes bankrupt by making a voluntary assignment into bankruptcy, (i.e. the person having financial difficulties wants to file for bankruptcy to obtain financial relief and the decision to become bankrupt is voluntary). By making a voluntary assignment into bankruptcy, the person having the financial problem will have the opportunity to choose the bankruptcy trustee that he or she wishes to file bankruptcy with. Most bankruptcy trustees offer free initial consultations.
In some situations, creditors may commence a legal proceeding by making a petition for a bankruptcy order. The purpose of this proceeding is to request that the court declares the individual bankrupt.
Should this happen, the creditor will approach a bankruptcy trustee who is willing to consent to act as bankruptcy trustee and an application will be made to the court requesting that the person be declared bankrupt.
If the court finds that an act of bankruptcy has occurred, it will issue an order declaring that the person is bankrupt. The most common act of bankruptcy happens when the person owes more than CAD 1,000 and the person is failing to meet his or her obligations generally as they fall due.
There are two types of bankruptcy administrations. A summary administration is a streamlined process for individuals and is the
most common type of bankruptcy for individuals. Ordinary administration is the process generally used where there are significant assets available to creditors. In summary administrations, there is no notice placed in the newspaper and often creditor meetings are not required.
In a summary administration, if the discharge is opposed by a creditor, the bankruptcy trustee, or the Office of Superintendent of Bankruptcy (OSB), a discharge hearing will be scheduled.
At a hearing for a discharge, the court can reach one of the following orders:
a) Absolute Discharge: this official document discharges the debtor from bankruptcy and relieves him or her from the debt obligations incurred prior to the assignment into bankruptcy;
b) Order of Conditional Discharge: the court may impose certain conditions that must be met before a discharge becomes absolute. For example, the court may require the debtor to pay an amount to the bankruptcy trustee for distribution to the creditors. When the debtor has complied with the terms set out by the court the bankruptcy trustee will apply to the court to get an absolute order of discharge;
c) Order of Suspended Discharge: in the case of a repeat bankrupt the court may order a suspension delaying the discharge so it will not become effective until a later date; and,
d) Refused Order of Discharge: in the event that the debtor refuses to co-operate with the bankruptcy trustee or has committed an offense under the BIA, the court may refuse the discharge of the bankrupt (although this is rare).
Upon receiving a discharge from bankruptcy a debtor will be relieved of his or her debt obligations occurring prior to your assignment in bankruptcy. Please take advantage of a free initial consultation with a qualified bankruptcy trustee to find out more on how to resolve a financially difficult situation.