Licensed Insolvency Trustee in Ontario, Personal Bankruptcy Trustee, Trustee in Bankruptcy, Bankruptcy Lawyer -- what's the difference among these job titles? Which one do you need to file a personal Bankruptcy or Consumer Proposal? Which one is licensed by the Canadian Government? Here's an explainer.
The Bankruptcy and Insolvency Act of Canada (BIA) is a nationwide statute. The BIA regulates bankruptcy and insolvency across Canada. It defines the legal bankruptcy process, among other things, to protect both individuals and their creditors. The BIA regulates:
- Commercial proposals
The BIA has other roles as well. The act also governs over the Office of the Superintendent of Bankruptcy. This federal agency is responsible for regulating bankruptcies in Canada. Its role is to ensure they’re administered in a legal, fair, and orderly manner.
Why Should I Care About the Bankruptcy and Insolvency Act of Canada?
If you’re facing the prospect of personal bankruptcy, you may feel intimidated. But there are actually plenty of courses of action you can take. That’s why it’s important to know what will happen should you declare bankruptcy.
The BIA lays out regulations for more than just the process of declaring bankruptcy. It also regulates which non-exempt assets you own will be subject to seizure. As such, the BIA has a huge influence on your financial future.
If you’re in the unfortunate position of having to consider bankruptcy, it’s best to understand what to expect. Understanding the act will help make the personal bankruptcy process simpler and less stressful.
Business owners should also be aware that the BIA lays out the options you have for business bankruptcy. Incorporated businesses may file bankruptcy through the Companies Creditors Arrangement Act. Sole proprietors and partnerships may file for insolvency as individuals.
How the Bankruptcy Process Works
Bankruptcies and Consumer Proposals are first made through the Licensed Insolvency Trustee (LIT). The LIT will file your bankruptcy.
From the moment your bankruptcy is filed, you will receive the protections laid out under the BIA. These protections (known as a stay of proceedings) remain until the proceedings are completed.
A stay of proceedings protects you from your creditors while you’re going through the bankruptcy process. During this time, most legal actions your creditors could normally take against you will be “stayed”. This means they cannot continue with their legal actions against you.
The stay of proceedings won’t protect you from all legal recourse. But it will offer you several critical protections.
What a stay of proceedings protects you from
- Collection activity from your creditors and the CRA
- Threats of legal action from your creditors
- Court actions that have already been filed by your creditors
- Enforcement of existing court orders against you
Companies facing bankruptcy can opt for either the BIA or the CCAA. But to opt for CCAA restructuring, the company must owe over $5 million and all affiliates must be insolvent.
The CCAA enables businesses to restructure themselves in the face of bankruptcy. During the restructuring process, your indebted company may continue operating. It will also retain possession of company properties.
Your Responsibilities in Bankruptcy
First, you will have to provide your LIT with a list of your debts and assets. They will then file a declaration of bankruptcy. This is done electronically with the Government of Canada through the Office of the Superintendent of Bankruptcy. Your LIT will also send a copy of the paperwork to your creditors so they can file claims.
Your creditors may choose to call meetings with inspectors that they appoint. Should they choose to call meetings, you are required to attend.
You will be required to provide monthly income statements. These statements will be used to determine if you’ll be obliged to make additional payments to your creditors.
You will be required to attend two financial counselling sessions. The sessions will be run by a LIT or another licensed credit counsellor. The licensed counsellor will:
- Walk you through your financial history
- Determine the causes of your bankruptcy
- Provide the education and tools you need to manage money going forward
Assets Involved in the Bankruptcy Process
Apart from assets listed as bankruptcy exemptions, your assets can be vested in the trustee for payment to your creditors. These assets can include land that you own anywhere, including abroad. It also includes other goods and any non-exempt investments you have.
The trustee will then liquidate your non-exempt assets and distribute the proceeds to your creditors. This distribution will follow the priorities listed under the Bankruptcy and Insolvency Act of Canada.
All the property and rights to your property as of the effective date of the bankruptcy vests in the trustee for your creditors. Property can include investments, goods, and land situated anywhere (not just in Canada). The trustee proceeds to liquidate the property and distribute the proceeds to the creditors. Distribution is conducted in accordance with the distribution priorities prescribed under the BIA.
What Comes After the Bankruptcy Process?
The bankruptcy process typically takes several months. Once it’s done, you will receive a Certificate of Discharge/Discharge Order. At this point, all your debts, with a few exceptions, will be wiped.
Reaching this point is typically straightforward. If for whatever reason you’re ineligible for an automatic discharge, you may still receive an Absolute Order of Discharge from a court. The only requirement is that your bankruptcy duties are completed.
Find the Bankruptcy and Insolvency Act of Canada Trustee You Need
Bankruptcy is an intimidating term. But the bankruptcy process doesn’t need to be intimidating.
The right BIA Trustee will understand your situation and will be there to help you understand bankruptcy laws and bankruptcy rules. They will walk you through your questions and concerns. If there is no way to pay off your debts, they can provide a consultation where they will find out which course of action is best for you. The best Licensed Trustees will go over the debt relief options available, up to and including bankruptcy.