Bankruptcy and Insolvency Act (BIA) is a legislation enacted in Canada that governs bankruptcy and insolvency proceedings in the country. It serves as a federal law that outlines the legal framework and procedures for individuals, corporations, and partnerships to deal with their debts when they are unable to repay them. The BIA provides a structured and orderly process for debtors and creditors to resolve financial difficulties and distribute assets fairly.
Under the Bankruptcy and Insolvency Act, debtors have the option to file for bankruptcy or propose a formal arrangement with their creditors, known as a proposal or a consumer proposal. Bankruptcy is a legal status where debtors are deemed unable to meet their financial obligations, allowing for the liquidation of their assets to repay a portion of the debts owed. On the other hand, a consumer proposal enables debtors to negotiate an alternative repayment plan, subject to creditor approval.
The BIA is designed to protect the interests of both debtors and creditors. It establishes the roles and responsibilities of licensed insolvency trustees, who are qualified professionals authorized to administer bankruptcy and proposal proceedings. The Act also sets out the rights and obligations of debtors and creditors, including provisions for automatic stay of proceedings, which temporarily halts creditor actions upon filing for bankruptcy or proposal.
Additionally, the BIA sets guidelines for the distribution of assets and the discharge of debts, outlining the order of priority for repayment and the types of debts that may be discharged. It also addresses various aspects of bankruptcy and insolvency, such as seizure and sale of assets, exemptions, licenses, penalties for fraud, and penalties for non-compliance with the Act. Overall, the Bankruptcy and Insolvency Act is a crucial legislation that provides a comprehensive legal framework for debtors, creditors, and licensed insolvency trustees to navigate and resolve
