You might have heard about bankruptcy and insolvency many times in news or in public talks, do you actually know what does it mean? We have a proper act in Canada which deals with it. Here, we will guide you about the benefits of bankruptcy and insolvency act.
Insolvency is a financial situation where a person cannot pay any of his/her debts. Bankruptcy is a state where a person legally declares that he/she is insolvent (not in the situation to pay off his/her debts). Bankruptcy is the end of the process. A bankrupt will always be insolvent, but an insolvent is not necessarily bankrupted.
Let’s get in deep to understand how this act is beneficial for all. Are you guys curious to know. Let’s dive in then!
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Benefits Of The Bankruptcy And Insolvency Act
- It helps in resolving the issue between creditors and debtor who are insolvent as a whole or in a partial manner
- it provides the liquidation and reorganization process which is independently governed by them
- It also helps to build a proposal between the debtors and creditors to adjust the debts. If it doesn’t happen then under bankruptcy and Insolvency act the assets of the debtor are liquidated and all the earnings are paid according to the scheme
- This help the debtors to overcome the bankruptcy process and do a fresh start up
These points will help you to understand why this act is important. This act helps debtors to start again after settling the bankruptcy process. The office of the Superintended of Bankruptcy supervises the process under the bankruptcy and insolvency act.
Till now we have understood why is this act important and how does it work.
Let’s see the details of the parties involved in this process and what are their responsibilities towards this act.
Are you ready to unfold the details!
- Debtor-who are unable to pay the debts, are also called borrowers
Debtor is the person who needs to pay his/her dues on a specific date and is unable to pay the amount as per the deadlines. They fail to pay in near future also, hence are insolvent. Debtor is the person who files for Bankruptcy.
- Debtor should always disclose the available debts to the licensed insolvency trustee for the bankruptcy process
- Should always help and cooperate in all the procedure for bankruptcy
- Debtor must appear for two financial counseling sessions
- Should give away all the credit cards if any and disclose any property disposed of recently
- Licensed Insolvency Trustee- also known as LIT
They are court officers licensed by Office of the Superintend of Bankruptcy, Canada. They take care of the process by making sure everything is happening as per the process with fair dealing.
- They take care of the rights of the debtors
- They work closely to protect rights of the creditors
- They follow the administrative process of bankruptcy
- They need to carry debtors’ investigation lawfully
- Creditors: to whom money needs to be paid
They are the one who allows the debtors to borrow the funds from them and pay them within the stipulated time. Creditors can be a person, company or an entity. Creditors are termed as lenders. They are the one who lends their money.
- They are assigned inspectors
- They need to attend the creditors meetings
- To inform any irregularity done during the bankruptcy process or by the debtor to the licensed insolvency trustee
- Office of the Superintendent of Bankruptcy: also known as OSB
They work under bankruptcy and insolvency act to administrate and supervise all the bankruptcy cases.
- They are authorized to license the trustees
- All the complaints are recorded and investigated by them
- Maintaining all the records for the bankruptcy
At The End
Always remember, Bankruptcy and insolvency act provides certain rules and regulations which all the parties need to abide during the bankruptcy process. This helps to create a fair environment under which bankruptcy process works smoothly.
With that, hope the shared insights on Bankruptcy and Insolvency Act, its benefits and the parties who are involved in the procedure will help you knowing the act thoroughly.