Bankruptcy is defined as a legally declared inability of an individual or an organization to pay its creditors. Therefore, the bankruptcy/ debts law provides a development plan that allows debtor to resolve his/ her debts by division of all the assets amongst his creditors.
Bankruptcy/ debts come under Bankruptcy and Insolvency act and are applicable to businesses and individuals. It is a federal law therefore, a federal agency is responsible for ensuring that all the legal process is carried our in a fair and orderly manner.
Some major parts of the law are:
Duties of trustees
Trustees are made in order to keep a track of all the actions and carry them in a proper manner. Some of the duties of the trustee in bankruptcy are to:
Review the file for any fraudulent preferences or reviewable transactions
Chair meetings of creditors
Sell any non-exempt assets
Object to the bankrupt's discharge
Distribute funds to creditors
Creditors' meetings
Trustee calls the first meeting of creditors for the following purposes:
To consider the affairs of the bankrupt
To affirm the appointment of the trustee or substitute another in place thereof
To appoint inspectors
To give such directions to the trustee as the creditors may see fit with reference to the administration of the estate.
Consumer proposals
A person is free to file a consumer proposal as an alternative to bankruptcy. It is a kind of negotiated settlement between debtor and creditors. Some major points of the proposal include:
• A typical proposal involves that debtor will make monthly payments for maximum five years and pay back all the debt to creditor.
• The creditors have 45 days to accept or reject the proposal
• Such kind of proposal can only be made with debts exceeds $5,000 but are less than $75,000