Everything You Need to Know About the Examination of Bankrupts
Bankruptcy law is complex and can be overwhelming for those who find themselves navigating its intricacies. One aspect that often causes confusion is the Examination of Bankrupt. This article will provide a comprehensive overview of everything you need to know about this process.
Understanding the Examination of Bankrupt
The Examination of Bankrupt is a legal procedure provided under bankruptcy law. In essence, it is an opportunity for the Official Receiver, a representative of the Superintendent of Bankruptcy, to question a bankrupt person under oath.
Although this may sound intimidating, it’s worth noting that these examinations are not common. They occur in approximately one out of every 300 personal bankruptcies. Most of these examinations are scheduled randomly by the Official Receiver. However, those with exceptionally high debt levels may have a slightly higher likelihood of being chosen for an examination.
The Purpose of the Examination by the Official Receiver
The examination serves two primary purposes.
Examination of the debtor’s financial circumstances:
- The Official Receiver can ask direct questions to the debtor about the causes of their financial difficulty.
- They can also probe about the debtor’s financial history and specific debts, assets, and transactions that occurred before the bankruptcy declaration.
Monitoring insolvency activity in the region:
- The Official Receiver can observe industry trends, such as increased usage of payday loans, or the emergence of new lenders in the market.
- They can ask questions about the debtor’s experience before meeting with a Licensed Insolvency Trustee (LIT).
- They can query the debtor’s experience in meetings with the LIT.
Location of the Examination
Examinations are usually conducted in person by an Official Receiver in a government office. However, in some cases, they may be scheduled immediately prior to a creditors’ meeting in commercial or highly contentious cases.
Bankrupt individuals must attend any meeting related to their bankruptcy, including these examinations. This is one of the duties of a bankrupt. Failure to attend an examination can result in opposition to a bankrupt’s discharge, so it’s crucial to attend these meetings.
Examination by the LIT or Creditors
The Bankruptcy & Insolvency Act also allows a Licensed Insolvency Trustee or creditor to examine a person under oath. However, these types of examinations are extremely rare. They are typically limited to complex bankruptcies or situations where the trustee or creditors suspect that the bankrupt person has not fully disclosed all assets or dealings with assets prior to the bankruptcy.
If a creditor believes there is a need for an examination and one has not been requested by the trustee or Official Receiver, the creditor can apply to the court, under section 163(2) of the Bankruptcy & Insolvency Act, for an order to examine the debtor, the trustee, or any other inspector or creditor.
While it’s understandable to feel nervous about being questioned about your financial affairs before bankruptcy, it’s essential to remember that honesty is the best policy. If you have been transparent in your filing, you have nothing to fear. Most examinations fall under the “randomly selected” category, often due to very high debt, and result in no further investigation or actions.
Conclusion
Navigating the path of bankruptcy can be challenging, but understanding each step can alleviate some of the stress. The Examination of Bankrupt is one of these steps. Although it may seem daunting, remember that these examinations are rare and are simply a tool for the Official Receiver to understand your financial situation better and monitor broader insolvency trends. As long as you have been honest in your filing and comply with all duties, you should have nothing to worry about.
