Pursuing Claims in Bankruptcy

Bankruptcy claims can be a labyrinthine process, but with the right knowledge and preparedness, creditors can effectively navigate this terrain. This comprehensive guide will offer a detailed walkthrough of the process of pursuing claims in bankruptcy.

Understanding Bankruptcy

In its most basic form, bankruptcy is a legal status whereby an individual or corporation is unable to meet their financial obligations.

The Role of the Debtor in Bankruptcy

In the context of bankruptcy, the debtor is the individual or corporation who is unable to pay their debts. The debtor’s non-exempt property is surrendered to a trustee in bankruptcy, who then sells the property and distributes the proceeds among the creditors.

Voluntary vs Involuntary Bankruptcy

Bankruptcy can be either voluntary, where the debtor initiates the process, or involuntary, where a creditor forces the debtor into bankruptcy through a court procedure.

The Proof of Claim Form: A Key Step in Pursuing Claims in Bankruptcy

To recover the money owed, a creditor must complete and submit a Proof of Claim to the trustee. This form includes the creditor’s contact information, the amount owed, the basis of the claim, the ranking of the claim, and any supporting documents that prove the claim.

The Role of the Trustee

The trustee reviews the Proof of Claim and decides if the claim will be allowed in full or in part. A creditor has the right to appeal a rejected claim within 30 days to the court.

The First Meeting of Creditors

The Trustee is required to send a notice of the bankruptcy and a notice of the First Meeting of Creditors to the bankrupt and any known creditors within five days of appointment. This meeting is a platform where creditors can question the Trustee and bankrupt, review the Trustee’s preliminary report and examine the bankrupt’s affairs.

Distribution of Assets

After the Trustee has liquidated all of the bankrupt’s property, a final statement of receipts and disbursements is prepared, along with a dividend sheet. This sheet lists the creditors who will receive dividends and the amount they are entitled to.

Order of Payout

The order of payout generally follows a specific ranking: CRA Trust Claims, certain employee super-priority claims, secured claims, Trustees fees and legal costs, and finally, unsecured claims.

Special Considerations for Employees and Unions

If the creditor is an employee of the bankrupt company, they may be eligible for the Wage Earner Protection Program (WEPP), which pays out certain claims for unpaid wages, vacation, severance, and termination pay.

The Super Priority Claims

The Bankruptcy and Insolvency Act provides for super priority claims regarding unpaid wages/compensation and unpaid pension contributions.

Personal Liability of Directors

In some cases, it is possible for employees and Unions/Union Trust Funds to sue directors of bankrupt corporations personally for any unpaid wages and monthly remittances/benefits.


Pursuing claims in bankruptcy is a complex process, but with the right knowledge and legal advice, creditors can navigate this process effectively. Always consult with a knowledgeable lawyer, especially if the claim is for a Union/Union Trust Fund regarding unpaid monthly contributions/remittances and pension contributions.

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