For most individuals and businesses, declaring bankruptcy is a once-in-a-lifetime event. Not surprisingly, many have little idea what to expect. Our post this week provides a brief, general overview of the process for those considering bankruptcy as a means of dealing with insolvency.
In a previous post, we talked about one landmark bankruptcy case in Alberta which could ultimately result in both the public and industry players covering the costs for abandoned wells left behind by insolvent oil and gas companies.
An insolvent business has options other than bankruptcy. One such option is to pursue a proposal under the Bankruptcy and Insolvency Act. This temporary shelter affords the business an opportunity to devise a new plan or proposal to make to its creditors to manage debt while working to regain financial stability. In a successful proposal, unsecured creditors achieve a better recovery, and the debtor company is able to continue operating and avoid bankruptcy. However, not all proposals are successful, and a number of factors can cause a proposal to fail.
In our last post, we looked at scenarios in which an individual bankrupt may be automatically discharged from bankruptcy. In other cases, however, the bankrupt is not entitled to an automatic discharge and an application for discharge must be brought in Court, before the Registrar in Bankruptcy.
At the end of a court receivership, the final step is usually an application for orders approving their accounts including fees, and formally discharging them as receiver. In the past, such discharge orders included broad releases, absolving the receiver from any liability, present or future, for any action taken (or not taken) during the receivership.
The last stop in an individual's bankruptcy is their discharge from bankruptcy. Once discharged, a debtor will (with some exceptions) be free of the debts for which he or she originally sought protection. While a corporate bankrupt will not be discharged until all the corporation's debts are repaid in full, a personal bankrupt may be discharged following the distribution of assets, even where debts remain unpaid. In the majority of cases, discharge is automatic.
In our post last week, we examined a few examples in which bankruptcy creates new priorities – advancing some creditors ahead, while bumping others further down the line. Since the bankrupt estate may not have enough assets to go around, the Bankruptcy and Insolvency Act BIA), prescribes a set order for repaying creditors. Our post this week examines theses eight classes.
Under ordinary circumstances, certain creditors enjoy a favoured standing in the realization pecking order. For example, federal and provincial legislation may create preferred rights in respect of debts such as collected but unremitted taxes and unpaid wages. However, once a debtor is bankrupt, a new hierarchy for creditors will govern.
It's almost two years late, but the launch of B.C.'s Civil Resolution Tribunal (CRT) may well prove to be worth the wait for the province's 1.5 million residents living in strata properties. The new online platform began accepting claims in mid-July and is poised to end strata disputes quicker, cheaper and more conveniently than going through the courts.