Bankruptcy Basics Flashcards
Collective Proceedings Model
Uses Trustee to streamline process, orderly distribution of assets
Receivership
Commercial, benefit of secured creditors
Trustee
- Actively administers bankrupt estate
- Federal licensee
- Prepare estate inventory
- Gathering & realizing assets
- Distributing proceeds
- Final accounting to creditors/court
If banks are excluded from the BIA, may they make a claim against a debtor?
Yes, using Selkirk
Person under BIA
Individual
Corporation
Partnership
Co-Operative
NOT a bank/financial institution
Insolvency
Pre-requisite of Bankruptcy
Insolvent Person
- Resides/Operates business in Canada
- Owns property in Canada
- Debts more than $1,000
- Meets one condition of Insolvency Test
BIA s 2
Insolvency Test
- Unable to meet obligations - Forward Looking Cash Flow Test
- Has ceased paying obligations - Backward Looking Cash Flow, objective.
- Assets not enough to pay obligations (Balance Sheet, inc. exempt/illiquid assets)
ONLY NEEDS TO MEET ONE
Bankruptcy Order
Involuntary
BIA s43(1)
Assignment in Bankruptcy
Voluntary
Act of Bankruptcy
At least one must have occurred within the previous 6 months.
10 possibilities (BIA s 41(1) (a)-(j)
Locality of Debtor
Application/Assignment must be made in place where debtor holds majority of their property.
Any Canadian property can make you insolvent under the BIA, but to use the Candadian bankruptcy scheme the debtor must hold the majorityof their property in Canada.
Secured Creditor
Will apply for bankruptcy order only if undersecured, will become an unsecured creditor for the difference between property value and secured amount.
BIA s43(2)
Debts
- Liquidated - known amount
- Unliquidated - unknown, i.e tort judgment.
- Unliquidated creditors cannot trigger a bankruptcy order
