Hey there, time traveller!
This article was published 22/2/2013 (1584 days ago), so information in it may no longer be current.
When an individual becomes a bankrupt (or in the case of a corporation, the officer or person having control of the corporation), the Bankruptcy and Insolvency Act imposes certain duties on the individual and prescribes penalties in respect of the conduct of the individual both prior to and during the bankruptcy process.
Some of the more common duties and penalties are discussed here.
The most common duties imposed by the bankruptcy legislation are to:
• Make discovery of and deliver all property in the possession of the bankrupt or under his control to the trustee in bankruptcy;
• Deliver to the trustee for cancellation all credit cards issued to and in the possession or control of the bankrupt;
• Deliver all books and records, including title papers, insurance policies and tax records to the trustee;
• If required attend at the Office of the Superintendent of Bankruptcy (federal government agency responsible for the administration of the bankruptcy legislation) for an examination under oath regarding his financial affairs and causes of his bankruptcy;
• Attend at the first meeting of creditors; and
• Attend two mandatory financial counselling sessions.
The trustee will review these duties as well as others with individuals at the outset of the process.
What happens if the bankrupt does not fulfill his duties or has engaged in activity that has been detrimental to the interests of his creditors?
Although the bankruptcy legislation is designed, in part, to provide rehabilitation to an honest but unfortunate debtor, the legislation also imposes penalties on individuals who do not comply with legislation or who have acted in a manner that is detrimental to the interests of creditors and the integrity of the bankruptcy process.
Not only may debtors have their applications for discharge opposed, they could also find themselves convicted of an offence and have penalties imposed by the court. These penalties may include a fine of up to $5,000 and/or imprisonment for a period of up to one year.
Some of the more common offences where, if convicted, could result in a penalty include:
• Failure to comply with the duties imposed by the bankruptcy legislation or the court;
• Making any fraudulent disposition of property;
• Refusing or neglecting to answer questions at an examination;
• Fraudulently concealing or removing any property; and
• Concealing, destroying or falsifying books and records relating to the bankrupt’s property or affairs;
The bankruptcy legislation can be an effective tool to provide individuals with the debt relief they are seeking. However, it can also be used to impose penalties on individuals who act in a manner that is intended to defeat the interests of creditors.
The above does not address all of the duties imposed on bankrupts nor does it discuss all of the offences that may result in penalties being imposed by the court upon conviction.
Individuals are provided with details of the duties imposed on them and the offences that will result in penalties by the trustee and should be reviewing them in detail and discussing any questions they have with the trustee or their own legal counsel.
» 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.