A basic guide to Bankruptcy and Insolvency Law

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The Bankruptcy and Insolvency Law in Quebec, Canada, offers protection to those individuals and businesses that find themselves in difficult financial situations. The law is a very important part of the federal legislation that establishes the rights and duties of those who are going through economic imbalances.

However, the Act establishes a number of principles and procedures that also protect creditors. In Québec, the Act is supplemented by a series of provincial laws that establish the basic principles for administering insolvency cases from all perspectives. 

In this guide, we explain the main aspects of how its provisions work.

What is bankruptcy and insolvency law?

The Bankruptcy and Insolvency Law (also known as the BIA) is a federal law that governs the insolvency of individuals and businesses in Canada. 

This law is composed of two parts. First, it establishes the procedures to be followed by creditors to recover money owed to them by an organization or individual. Second, it also establishes procedures to assist insolvent individuals in managing their financial situation.

In Quebec, as in the rest of Canada, the BIA establishes a number of principles that include:

  • Debtors’ liability for the debt.
  • Enabling creditors to recover money owed to them by insolvent debtors.
  • The protection of debtors’ assets for the benefit of creditors.
  • The establishment of procedures to enable debtors to emerge from insolvency.

Who is regulated by the BIA in Quebec?

In Quebec, bankruptcy and insolvency law applies to all natural and legal persons in insolvency. This includes companies, corporations, individuals, personal businesses, trusts and non-profit organizations. 

The BIA is therefore a personal bankruptcy law and business bankruptcy law. It is applicable both to persons who are in a situation of actual insolvency and to those who are threatened with insolvency. That is, who for various reasons could become bankrupt in the short or medium term.

Broadly speaking, the mechanisms of bankruptcy and insolvency law can begin to apply in the event that there is a debt of $1,000 or more that cannot be paid.

What happens when you enter an insolvency situation?

When a company or natural person enters into a bankruptcy or insolvency situation in Quebec, the insolvency courts require the appointment of a bankruptcy trustee to administer the insolvency case.

This person, a licensed and authorized professional, must carry out the planning of a debt financing program in accordance with the bankruptcy and insolvency law

Depending on the case of the specific person or company, it may suggest different routes to follow for debt consolidation. A consumer proposal, a voluntary deposit or a bankruptcy discharge are some of the alternatives. 

It is important to note that the assigned trustee will be able to have access to 

How does bankruptcy and insolvency law apply in Quebec?

In Quebec, the BIA is applied in a manner similar to the way it is applied in the rest of Canada. This means that the courts must follow the procedures established by the BIA to deal with insolvency cases. 

These procedures include: 

  • The establishment of insolvency administration and insolvency financing procedures.
  • The determination of the amount of debt owed by a debtor to creditors.
  • The establishment of insolvency payment procedures.
  • The establishment of a series of provisions aimed at protecting creditors and the debtor. 

Finally, it is important to know that during proceedings governed under the bankruptcy and insolvency law, they may also be subject to proceedings under the winding-up and restructuring act or the companies creditors’ agreement act.

Since these are specialized issues that must be dealt with in detail, it is advisable to be accompanied from the beginning by a good team of advisors. 

If you want to solve your financial problems with peace of mind, Poupart Syndic is at your disposal, contact us!

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