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The duties of a bankrupt are mostly common sense and in most cases the path to discharge is relatively free of stress and conflict.
Canadian bankruptcy law lays out the duties of a bankrupt, establishes bankruptcy offences, and sets rules under which bankrupts are discharged.
The Duties of a Bankrupt
The debtor’s duties are mostly common sense and in most cases the path to discharge is relatively free of stress and conflict.
Major Duties of a Bankrupt to Complete
When you decide to file for bankruptcy, the trustee will give you a list of your major duties in writing, which include the following:
* Monthly payments required;
* Monthly income and expense reports to be completed;
* Detail of the two counselling sessions you must attend;
* Tax return information required;
* Creditors’ meeting date (if required);
* Any other items forming part of your duties.
You must also cooperate with the trustee for all reasonable things that the trustee asks you to do.
Complete List of the Duties of a Bankrupt
Section 158 of the Bankruptcy and Insolvency Act (the BIA, or, simply “the Act”) spells out in great detail what duties of a bankrupt are and what the penalties are for breach of those duties. The bankrupt must perform the following duties:
* Deliver all non-exempt property to the trustee or an authorized agent;
* Deliver all credit cards to the trustee for cancellation;
* Deliver to the trustee all books, records, and documents relating to his or her property or affairs, including:
– Title papers (deeds);
– Insurance policies;
– Tax records;
– Tax returns; and
– RRSP information.
* Attend before an official receiver for the purposes of being examined on the following areas:
– Causes of bankruptcy;
– Disposition of property.
* Within 5 days following the bankruptcy, submit a sworn statement of affairs to the bankruptcy trustee. If the complexity of the task is beyond the bankrupt’s capabilities, the official receiver can authorize a qualified person to assist;
* Provide all assistance to the trustee in making an inventory of his or her assets;
* Disclose the following matters with regard to the disposition of property during the year preceding bankruptcy or longer, if the court orders:
– The property disposed;
– How the property was disposed of;
– To whom the property was transferred;
– Consideration (payment) of the disposition;
– Whether the disposition was made in the ordinary manner of trade;
– Whether any of the proceeds were used for other than reasonable personal expenses.
* Disclose to the trustee all property disposed of by way of gift or settlement without adequate valuable consideration within five years preceding the bankruptcy;
* Attend the first meeting of creditors, if called, and submit to examination;
* Attend other meetings of his or her creditors and inspectors, or attend meetings called by the trustee;
* Submit to other examinations under oath as required, with respect to the bankrupt’s property or affairs;
* Aid in the realization of property (sale of non-exempt assets) and distribution of proceeds, including executing any required documents and examining proofs of clams for correctness;
* Inform the trustee of any material change in his or her financial situation;
* Keep the trustee informed of his or her address during the bankruptcy process;
* Do all such things as the trustee may “reasonably require” or as directed by the court. (“Reasonably require” is an effective reference for trustees looking for authoritative support in requesting performance on the part of reluctant bankrupts.)
In the case of a corporation, either the officer executing the assignment or an officer or person in control of the corporation, specified by the official receiver, shall perform all of the duties of a bankrupt as if that officer or person were the bankrupt.
Failure to do so will carry the same consequences as for an individual bankrupt.
The BIA imposes a minimum standard of conduct of all participants involved with a bankruptcy estate.
If the bankrupt is a corporation, every officer, director, or agent of the corporation who directed or authorized the commission of an offense is liable as if he or she had committed the offense personally.
The Act outlines various offenses for which criminal proceedings may be undertaken against a bankrupt, a trustee in bankruptcy, or other persons.
A bankrupt who commits any of these offenses may have his or her discharge refused, suspended, or granted conditionally. A bankrupt who fails without reasonable cause to do any of the things required of him or her is guilty of a bankruptcy offense.
A bankrupt is guilty of an offense where he or she:
* Makes a fraudulent disposition of his or her property before or after the date of the initial bankruptcy event;
* Refuses or neglects to answer fully or truthfully all proper questions put to him or her in an examination under the Act;
* Makes a false statement or knowingly makes a material omission in a statement or accounting;
* After or within one year immediately preceding the date of the initial bankruptcy event, conceals, destroys, mutilates, falsifies, makes an omission in or disposes of or is privy to such acts, from books or documents affecting or relating to his property or affairs, unless the bankrupt can prove he or she had no intent to conceal the state of affairs;
* After or with one year immediately preceding the date of the initial bankruptcy event, obtains credit or any property by false representations made by him or her or made by any other person to the bankrupt’s knowledge;
* After or within one year immediately preceding the date of the initial bankruptcy event, fraudulently conceals or removes any property of a value of $50 or more or any debt due to or from the bankrupt; or
* After or within one year immediately preceding the date of the initial bankruptcy event, pawns, pledges or disposes of any property that he or she has obtained on credit and has not paid for, unless in the case of a trader the pawning, pledging, or disposing is in the ordinary way of trade and unless in any case the bankrupt proves that he or she had no intent to defraud.
The Act further provides that an undischarged bankrupt who engages in a trade or business or obtains credit for more than $500 without disclosing that he or she is an undischarged bankrupt is also guilty of an offense.
A person has also committed an offense where he or she has been bankrupt or has made a proposal in the past, and has not kept adequate records as defined in the Act in the period of two years before the initial bankruptcy event.
Bankrupts are rarely aware of these provisions and it is the duty of a trustee to advise a bankrupt of these provisions.
These offenses can be prosecuted in both bankruptcy court and criminal court as they are classified as criminal offenses. The prosecutions may also be brought after the bankrupt is discharged.
If you have any questions about bankruptcy or consumer proposals you can set up a FREE consultation with our trustees, who are in every province and territory in Canada: or call Bankruptcy Canada direct: 1-877-879-4770.