The bankruptcy process may be divided into three stages:
Initiation of the bankruptcy process:
- Where debts of an individual, excluding debts secured by the individual's principal residence, are not more than $250,000, an insolvent debtor may file a consumer proposal with his creditors.
- For debt greater than this amount, a Division I Proposal can be filed.
- Prior to filing a Proposal under Division I, the insolvent individual may file a notice of intention to stay the creditors so that a Division I proposal can be filed with the Office of the Superintendent of Bankruptcy prior to the expiration of 30 days of the filing of the Notice of Intention
- Filing a Proposal under Division I is a serious decision, because an insolvent person will be placed into bankruptcy if the proposal is voted down by the creditors or not approved by the Court.
- If the Consumer Proposal is not accepted by the creditors or the consumer proposal is not a viable option, an insolvent person may either voluntarily assign himself into bankruptcy or be involuntarily petitioned into bankruptcy by his creditors. How Bankruptcy and Consumer Proposal Works in Canada -Click Here
- The legal proceedings and creditor’s attempts to enforce the debts are stayed, no person is allowed to initiate or to continue existing legal actions against the bankrupt nor to enforce existing court orders (other than secured creditors who are allowed to enforce their security)
Between bankruptcy and discharge
The bankrupt must:
- deliver all his property, credit cards and records that are under his possession or control to the bankruptcy trustee
- attend before the official receiver (if requested to do so) for examination under oath with respect to his conduct, the causes of his bankruptcy and the disposition of his property
- prepare and submit to the trustee a statement of the bankrupt’s affairs in the prescribed form (also known as the Statement of Affairs)
- aid the trustee in making an inventory of his assets;
- disclose to the trustee all property disposed of within the previous year (including how, to whom and for how much) that was not in the normal course of business or for reasonable personal expenses
- disclose to the trustee all property given or settled without adequate valuable consideration within the previous five years
- attend the first meeting of his creditors, and, when required, attend other meetings of his creditors or of the inspectors, or attend on the trustee
- submit to such other examinations under oath with respect to his property or affairs as required
- aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors
- execute any documents that may be required
- examine the correctness of all proofs of claims filed, if required by the trustee
- in case any person has to his knowledge filed a false claim, disclose the fact immediately to the trustee
- inform the trustee of any material change in the bankrupt’s financial situation
- generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, the bankruptcy rules, or by court order
- until his application for discharge has been disposed of and the administration of the estate completed, keep the trustee advised at all times of his place of residence or address.
A bankrupt must also remit to the trustee the amount of his income that is determined to be surplus to his needs, for the benefit of the estate.
Determination of property in the bankruptcy estate
Contributions made to Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), and Deferred Profit Sharing Plans (DPSPs) in the twelve months prior to the date of bankruptcy will be recovered for the benefit of the bankruptcy estate in provinces other than British Columbia, Alberta, Ontario, New Brunswick, and Nova Scotia (where they are exempt from seizure under applicable provincial legislation). The court can extend the one year recovery period where it is considered appropriate.