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TRUSTEES IN BANKRUPTCY

Bankruptcy Estate s are administered by Trustees In Bankruptcy . Their duties include:
  • Preparing the bankruptcy documents that assign the person into bankruptcy;

  • Reviewing the file for any Fraud ulent preferences or reviewable transactions;

  • Chairing meetings of Creditor s;

  • Selling any available assets;

  • Performing counselling for the Debtor s; and

  • Recommending whether the bankrupt should be Discharge d.



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 with another;

  • To appoint inspectors;

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


The trustee works with the owners of the company in drafting a proposal that presents a "win - win" situation for both the company and the creditors. Typically, the creditors are asked to give up their rights to the monies owing to them, in exchange for an offer by the company to pay so many cents on the dollar (say, 25 or 50 or 75 cents) over time.

Creditors vote on accepting or rejecting the proposal at a creditors' meeting held approximately 21 day after the proposal is filed. In order to be accepted at least two thirds in dollars and 50% plus one in number of eligible creditors who vote must accept the proposal. The Court must also approve the proposal. If the proposal is accepted by the creditors, and approved by the Court, then all unsecured creditors and all secured creditors are bound by the proposal — not just the creditors who voted in favour of the proposal. If the proposal does not receive the required number of votes, or if the Court does not approve the proposal, the company is bankrupt effective on the date of the creditors' meeting. The debts are discharged, once the proposal is successfully completed.


PERSONAL BANKRUPTCY AND PERSONAL PROPOSALS


Personal bankruptcy

Each Province And Territory sets the exemptions for Equity in Asset s that cannot be seized in a bankruptcy or personal proposal. The bankruptcy exemptions vary widely. For example, equity in a home in Alberta is exempt from seizure to the amount of $40,000. In Ontario , there is no exemption for a home.

Debts are erased when the bankrupt is discharged, usually in nine months. In the case of a personal proposal, the debts are erased when the proposal is successfully completed. The following debts, however, are not erased:


Personal proposals

A debtor can make a "personal proposal" to his or her creditors, thus avoiding bankruptcy. Personal proposals are for those people who have funds available to make some payments to their creditors. Trustees have the duty to advise a debtor whom they think, has the ability to make a personal proposal. If the debtor does not file a proposal, the trustee will oppose his or her discharge, and recommend that the debtor remain in bankruptcy for a further year, and continue making payment during that time. Eligible debts are erased upon the satisfactory completion of the personal proposal.


BANKRUPTCY REFORM

Bankruptcy reform legislation has been passed into law with Senate approval and Royal Assent on November 25, 2005. The new law will not come into force until June 30, 2006 at the earliest.

The Senate committee expressed its disappointment in the "fast tracking" of the legislation that did not allow it to hear the many groups that were scheduled to make representations. As a result the Senate Committee received assurances that there would be the opportunity for the Senate Committee to review the legislation in early 2006 and that the legislation would not come into force until June 30, 2006 at the earliest. The Minister of Industry, David L. Emerson, confirmed this in a letter dated November 24, 2005.