When a bankruptcy occurs, the relevant date in the proceeding is different depending on how the bankruptcy occurred and the issue to be addressed by the trustee in bankruptcy.
When the bankruptcy occurs as a result of a debtor filing an assignment in bankruptcy, the date of bankruptcy is pretty straightforward.
It is the date that the assignment is accepted by the superintendent of bankruptcy.
All matters in connection with the bankruptcy administration are determined by this date.
However, if the bankruptcy occurs as a result of a refused Division I proposal or pursuant to an application for a bankruptcy order, the relevant date is the date of the initial bankruptcy event rather than the actual date of bankruptcy.
The Bankruptcy and Insolvency Act defines the date of the initial bankruptcy event as the earliest of the day on which any one of the following is made, filed or commenced, as the case may be:
a) An assignment by or in respect of the person;
b) A proposal by or in respect of the person;
c) A notice of intention by the person;
d) The first application for a bankruptcy order against the person who thereafter filed a notice of intention but did not file a proposal or the proposal filed was refused, both cases resulting in a deemed assignment;
e) An application for a bankruptcy order other than in d) above; or
f) Proceedings commenced under the Companies’ Creditors Arrangement Act.
The most common issues that arise when the date is relevant concerns when the stay of proceeding commences; the date that creditors’ claims are determined; and the date that is used to determine whether preferential payments or transactions at undervalue can be pursued by the trustee under the BIA.
The claims of creditors are determined as at the date that the assignment is filed or the bankruptcy order is made.
This is also the date that the stay of proceeding is effective unless the debtor had previously filed a notice of intention or a proposal that failed, resulting in the bankruptcy.
The BIA imposes limitations regarding the time periods preceding a bankruptcy that a trustee can pursue preferential payments or transactions at undervalue.
The time periods are determined by the date of the initial bankruptcy event as defined above rather than the date of the bankruptcy order or deemed assignment.
The above is an overview of the how the dates of certain proceedings affect the bankruptcy administration.
Legal counsel or a trustee in bankruptcy should be consulted for further details on this subject.
» Wayne K. Palmer is a senior manager in BDO’s Brandon office. He is responsible for both the consumer and commercial practices in Brandon and surrounding areas, including Boissevain, Minnedosa, Neepawa and Dauphin. Wayne has more than 25 years experience in the financial recovery services field.
Republished from the Brandon Sun print edition August 24, 2013