Bankruptcy laws in Ontario, Canada

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What legal aspects you should understand regarding bankruptcy or a proposal in Ontario?

Do I need a lawyer if I file bankruptcy?

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

A Trustee in bankruptcy is licensed by the federal government to administer specific types of insolvency procedures under Canadian law. Most Trustees are professional accountants, although number of lawyers have specialized in the area of insolvency law. If any issues are contested in a bankruptcy then a lawyer may be hired to make an argument on behalf of the parties involved. Keep in mind that if you do need a lawyer they should have 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. The cost of bankruptcy is kept as low as possible by not involving lawyers except in the most contentious cases.

What is bankruptcy fraud?

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. They may be in financial difficulty because 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. Trustees in bankruptcy 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 goods 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.

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