The options
Bankruptcy
Bankruptcy is a legal procedure that aims to relieve the debt burden of honest but unfortunate debtors.
Eventually, the bankrupt is released from the obligation to repay the debts he had at the time of his bankruptcy - with some exceptions.
Proposal
A proposal is a procedure whereby the debtor offers to pay a percentage of the debt to its creditors over a specified period of time, to reschedule the repayment of the debt over a longer period of time, or a combination of the two options. The creditors must vote to accept or reject the proposal.
There are two types of proposal:
- the consumer proposal - for individuals with debts of less than $250,000 (excluding mortgage);
- the proposal under Section I - for companies and individuals (regardless of the amount of their debts).
Once the terms of the proposal have been complied with, the debtor is released by law from the obligation to repay the debts covered by the proposal.
Proceedings under the CCAA
The CCAA applies to insolvent companies with debts in excess of $5 million.
Under this federal law, companies seek court protection while they prepare an offer to their creditors for some form of repayment. This short-term protection allows them to restructure their operations and finances.
Proceedings under LACC are under the supervision of the court.
The main stakeholders
The debtor (owes money)
A debtor is an insolvent person who is unable to pay his or her debts as they fall due. A bankrupt is a debtor who has declared bankruptcy.
Responsibilities
The debtor must :
- participate in two financial consultation sessions;
- assisting the authorised insolvency practitioner (IAP) in administering the bankruptcy or proposal.
The bankrupt person must also :
- declare all assets (property) and debts to the IAS;
- inform the IAS of any property disposed of in recent years;
- hand over all their credit cards to the IAS.
Creditors (they are owed money)
Responsibilities
The role of creditors is to :
- to participate and vote in meetings of creditors;
- to appoint inspectors;
- to act asinspectors;
- to inform the IAS of any irregularities on the part of the debtor.
The Licensed Insolvency Trustee (LIT)
The IAS, who is licensed by BSF, is an officer of the court.
Responsibilities
The IAS :
- administers bankruptcy cases and proposals;
- protects the rights of creditors;
- examines the debtor's affairs;
- ensures that the debtor's rights are respected.
The Office of the Superintendent of Bankruptcy (OSB )
The TSO oversees the administration of bankruptcies and proposals under the BIA.
Responsibilities
The BSF:
- maintains a register of proceedings under BIA and CCAA;
- receives and investigates complaints as appropriate;
- issues SAI licences;
- establishes professional standards for the administration of assets and ensures their application.
https://www.ic.gc.ca/eic/site/bsf-osb.nsf/fra/h_br01545.html