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Legal stuff — bankruptcy laws in Alberta

What legal aspects should I understand regarding bankruptcy or a proposal in Alberta?

The bankruptcy law in Canada requires that any individual considering bankruptcy or a proposal must review certain sections of the Bankruptcy and Insolvency Act. Those exceptions are provided below. One of the trustees or administrators at Grant Thornton Limited would be happy to discuss or explain this information further with you.

Excerpts from the Bankruptcy and Insolvency Act:

Do I need a lawyer?

In the vast majority of personal insolvencies in Canada, lawyers are not used.

A Licensed Insolvency Trustee is licensed by the federal government to administer specific types of insolvency procedures under Canadian law. Most Trustees are chartered accountants - in fact, it is not possible for a practicing lawyer to become a Trustee. Although a number of bankruptcy Trustees have at one time trained to be lawyers and have a law degree.

A number of lawyers have specialized in the area of insolvency law. If there are contested issues in a bankruptcy then a lawyer may be hired to make an argument on behalf of the parties involved. If you do end up needing a lawyer it would be wise to ensure that your lawyer has specialized knowledge in insolvency matters.

The Canadian bankruptcy system has been designed to minimize the costs associated with filing bankruptcy so that as much money as possible may be returned to the creditors. By not requiring lawyers except in the most contentious cases, the cost of bankruptcy is kept as low as possible.

What is bankruptcy fraud in Alberta?

Bankruptcy fraud occurs when people abuse the system and continue to obtain and use credit knowing that they can't repay the money they are borrowing. There are also people who use bankruptcy to get out of situations that they have created themselves through bad faith and fraud.

The Office of the Superintendent of Bankruptcy (OSB) is responsible for supervising the administration of bankruptcy files in Canada and investigating cases where offences may have been committed. It may intervene before the Court in cases where bankrupts have failed to meet their obligations or when their conduct is deemed to be inappropriate. Licensed Insolvency Trustees and creditors may also make representations to the Court in such matters.

The most common offences committed under the BIA and the Criminal Code are when the bankrupt:

  • Fraudulently disposes of property before or after the bankruptcy

  • Makes false entries in a statement of account or hides, destroys or falsifies a document related to his/her property or affairs

  • Obtains credit or any other good through false representations

  • Conceals or fraudulently removes property, or conceals claims or debts

  • Obtains credit or engages in trade without informing the people involved that he/she is bankrupt (a person who is bankrupt and borrows $1,000 or more must inform the lender that he/she is bankrupt)

  • Refuses to respond fully and truthfully to questions posed during an examination held in accordance with the BIA

You can learn more in the Bankruptcy & Insolvency Act (sections 198 to 201) and the Criminal Code.

These answers to frequently asked questions are provided as general information only. Each individual's situation is unique. To speak to someone now call us at 310-8888 for a free, no obligation, confidential consultation.



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