A circumstance in which a debtor is
unable to meet financial obligations to
creditors or when liabilities exceed
realizable assets. A debtor, unable to
satisfy valid financial claims against
himself/herself, may seek the protection of
bankruptcy laws. Alternatively, the
creditors of that debtor may also sue a
debtor in court, obtain a judgment, and seek
to satisfy the judgment by having the
debtor’s assets seized.
The Bankruptcy and Insolvency Act
applies to individuals as well as limited
companies, partnerships, and individual
proprietors who carry on business in Canada.
Bankruptcy is assigned to the jurisdiction
of the federal Parliament under the
Constitution Act and, accordingly, the
Bankruptcy and Insolvency Act is a federal
statute.
The Bankruptcy
and Insolvency Act sets out various types of
conduct that constitute an act of bankruptcy
by a debtor.
Assignment of assets to a trustee
where the repayment arrangement is
unsatisfactory to the creditors.
Fraudulent transfer of assets to a
third party other than a trustee in
anticipation of bankruptcy.
Fraudulent preference or payment by
a debtor that has the effect of settling
the claim of one creditor in preference
to the valid claims of other creditors.
An attempt by the debtor to abscond.
A failure to redeem goods seized
under an execution issued against the
debtor.
Presentation at a meeting of
creditors of a statement of assets and
liabilities disclosing the debtor’s
insolvency or a written admission by the
debtor that he/she is unable to pay
debts.
Any attempt to remove or hide
property.
Notice to any of the creditors that
the debtor is suspending payment of
debts.
Default in any proposal that the
debtor has previously persuaded the
creditors to accept as a means of
forestalling bankruptcy proceedings.
A failure to meet liabilities as
they become due.
The Bankruptcy and Insolvency Act
performs three main tasks for debtors and
creditors.
Establishes a uniform practice in
bankruptcy proceedings throughout the
country.
Provides for an equitable
distribution of the debtor’s assets
among creditors.
Provides for the release or
discharge of an honest, but unfortunate,
debtor from obligations to permit the
resumption of business activities
subject to certain stipulations.
Under bankruptcy, assets
of the debtor vest in the name of the
trustee in bankruptcy.
Every conveyance by a
trustee in bankruptcy requires first that
title to the land be vested in the name of
the trustee. A transmission application is
used in conjunction with an affidavit of the
trustee and a certified copy of the
assignment of receiving order. These
documents are filed in the land registry or
land titles office depending on the
province. Upon the assignment being filed
with an official receiver, the bankrupt
person ceases to have any capacity to
dispose of or otherwise deal with his/her
property.
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