Bankruptcy in Canada

Duties of trustees

Some of the duties of the trustee in bankruptcy are to:

Review the file for any fraudulent preferences or reviewable transactions

Chair meetings of creditors

Sell any non-exempt assets

Object to the bankrupt's discharge.

Creditors' meetings

Creditors become involved by attending creditors' meetings. The trustee calls the first meeting of creditors for the following purposes:

To consider the affairs of the bankrupt

To affirm the appointment of the trustee or substitute another in place thereof

To appoint inspectors

To give such directions to the trustee as the creditors may see fit with reference to the administration of the estate.

Consumer proposals - an alternative to personal bankruptcy

In Canada, a person can file a consumer proposal as an alternative to bankruptcy. A consumer proposal is a negotiated settlement between a debtor and their creditors.

A typical proposal would involve a debtor making monthly payments for a maximum of five years, with the funds distributed to their creditors. Even though most proposals call for payments of less than the full amount of the debt owing, in most cases the creditors will accept the deal, because if they don’t, the next alternative may be personal bankruptcy, where the creditors will get even less money.

The creditors have 45 days to accept or reject the consumer proposal. Once the proposal is accepted the debtor makes the payments to the Proposal Administrator each month, and the creditors are prevented from taking any further legal or collection action. If the proposal is rejected, the debtor may have no alternative but to declare personal bankruptcy.

A consumer proposal can only be made by a debtor with debts in excess of $5,000 to a maximum of $75,000 (not including the mortgage on their principal residence). If debts are greater than $75,000, the proposal must be filed under Division 1 of Part III of the Bankruptcy and Insolvency Act.

The assistance of a Proposal Administrator is required. A Proposal Administrator is generally a licensed trustee in bankruptcy, although the Superintendent of Bankruptcy may appoint other people to serve as administrators.

According to the Superintendent of Bankruptcy, in 2005 84,638 consumers filed a summary administration personal bankruptcy, and 16,554 individuals filed a consumer proposal

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