Bankruptcy is a legal process by which you may be discharged from most of your debts. Its purpose is to permit an honest, but unfortunate debtor to obtain a discharge from most debts, subject to reasonable conditions.
There are three different ways to go into bankruptcy:
- voluntary assignment - where insolvent persons make an assignment of all their assets for the general benefit of all creditors;
- involuntary assignment - when a creditor files a petition in a provincial court for a receiving order against the debtor's assets, known as being petitioned into bankruptcy; and
- deemed bankruptcy - when a debtor, who has commenced the insolvency process, has failed to meet the requirements for filing a Division I proposal in bankruptcy under the Bankruptcy and Insolvency Act or has failed to adhere to the provisions provided within the proposal after it has been filed and accepted by the creditors/court.
You or your representative (trustee/administrator) may have to send a copy of the court-issued Assignment in Bankruptcy, a Bankruptcy Notice, or a document titled First Meeting of Creditors to your Regional Intake Centres for Insolvency (RICI).
Usually, the business number (BN) of a bankrupt client will be closed after discharge.
Rights of a bankrupt
The bankrupt has the right to earn a living. For this purpose, the bankrupt is allowed to engage in or continue a taxable business activity outside of the estate, after a bankruptcy.
For more information on how bankruptcy will affect your business, see Bankruptcy - Business structures.
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