Established by the federal government, the Bankruptcy and Insolvency Act (BIA) establishes the bankruptcy law that governs the responsibilities and rights of all people involved in the bankruptcy process: the Superintendent of Bankruptcy, the official receivers who represent the Superintendent of Bankruptcy, the court, licensed bankruptcy trustees, debtors and creditors.
The intention of bankruptcy law in Canada, as governed by the the rules and regulations in the Bankruptcy and Insolvency Act are to:
- Provide for the financial rehabilitation of insolvent persons;
- Permit an honest but unfortunate debtor to secure a fresh financial start;
- Provide for the orderly and fair distribution of unexempt property of a bankrupt among his or her creditors;
- Allow for the investigation of the affairs of the bankrupt or insolvent person;
- Establish rules that ensure ordinary creditors share equally in the realizations from the bankrupt’s assets.
There are two main types of consumer insolvencies administered under the Canada bankruptcy act:
- Bankruptcy and
- Consumer Proposals. It is important to note that consumer proposals are the only consumer debt settlement program regulated by the federal government through the Bankruptcy and Insolvency Act. Consumer proposals may be filed for debtors owing up to $250,000 (excluding the mortgage on your principal residence); the old limit was $75,000, so more people will now be able to take advantage of this great alternative to personal bankruptcy.
Other bankruptcy legislation has been put in place by individual provinces but the over-riding principle behind all the bankruptcy rules are to protect the rights of insolvent debtors and their creditors. For a list of provincial legislation that may be specific to your area we recommend the website page Bankruptcy Law In Canada.
Please contact a bankruptcy trustee to obtain more information about how bankruptcy law and the Canada bankruptcy act may apply in your situation.