Bankruptcy Basics

Before we begin, we should correct one general misconception.Bankruptcy is just one possible outcome of a process that begins when a person or company is facing a financial crisis.

So, let's start at the beginning.

The insolvency process is a legal proceeding that is dealt with under the provisions of the Bankruptcy and Insolvency Act, an Act that is administered by the Office of the Superintendent of Bankruptcy (this office).

If a person or company is unable to meet its debt obligations, it is said to be insolvent.

When that happens, there are three main Bankruptcy options: 

• Bankruptcy - This is where assets of an individual or company are liquidated and the proceeds are given to people who are owed money. (Some assets are exempt from liquidation, depending on the province.)

• Proposal - This is where an offer is made to people who are owed money in an effort to settle the debt.

• Receivership - This usually happens to companies, not individuals. This is where a secured creditor (often a bank or other large creditor represented by a receiver) comes in and generally takes control of the assets of the company.

There are also three main players: 

• Debtor - The person or company that owes the money.

• Creditor - The person or company that is owed the money.

• Trustee - The people who are licensed to administer the proceedings.

If you think you are in trouble financially, your first step should be to find a trustee who will determine if you are, in fact, insolvent. Trustees may be found in the telephone directory or by using our Trustee Database . If you are facing insurmountable debt, trustees will be able to help you through the process.

While there are many variables, the general time frame for first time consumer bankruptcies is nine months. For company bankruptcies or for those who have faced bankruptcy before, there is no general time frame.

Creditors can verify if a bankruptcy or proposal has been filed, and who the trustee is, by using the OSB's Insolvency Name Search service. In addition, to find information on your rights, as a creditor, during an insolvency, including how to become an inspector, visit the Creditors section of this web site.

For more information, we invite you to visit our list of Frequently Asked Questions by Creditors or Frequently Asked Questions by Debtors .