trustee. There is seldom a creditors’ meeting in consumer bankruptcies. If a meeting is held, the creditors appoint representatives amongst themselves to discuss the bankrupt’s financial affairs with the trustee. Those representatives are called inspectors. In most cases, those representatives are present at the first meeting of creditors.
Under the Bankruptcy and Insolvency Act, there can be a maximum of five inspectors appointed. Usually, there is an odd number so that a deadlock vote does not occur, although the trustee may vote in the case of a tie. In consumer bankruptcies, there are usually no inspectors since there are no assets or very few assets to administer. Inspectors are paid a nominal amount for each meeting that they attend. Meetings are held to —
• discuss the method and the mechanics of the sale of the bankrupt’s assets,
• investigate the affairs of the bankrupt,
• authorize any examination of the bankrupt or others,
• authorize lawsuits to void transactions, and
• generally assist the trustee in making decisions.
The trustee relies on the advice of the inspectors since they represent the creditors. They are usually knowledgeable persons who supplied the bankrupt with goods, services, or money, and generally know much about the bankrupt’s business and affairs.
8. Others
There are other people who are involved in the bankruptcy process. However, while the debtor may not come into contact with them, the debtor may hear about them throughout the process. For example, there is the bailiff who represents the landlord; the bailiff locks the doors of the tenant debtor if the tenant fails to pay the rent. Then there is the inventory counter, and the liquidator and auctioneer who sells the debtor’s assets at an auction or at a private sale.
In both the Official Receiver’s office and in the bankruptcy office of the superior court of the province, there are staff members who assist in processing the bankruptcy documents for the public record and assist in conducting searches. They coordinate the times for the court proceedings. In the trustee’s office, there are clerks and estate managers who assist the trustee in interviewing and in completing the reports that are required in each bankruptcy estate. Many unseen people are involved.
Chapter 3
Time Sequence in the Bankruptcy Process
There are several major steps to processing the bankruptcy paperwork when going through bankruptcy from beginning to end. These steps are highlighted in this chapter. After reading this book or parts of it, the consumer debtor may have questions that are not answered and therefore, should make up a list of questions to ask the trustee in bankruptcy before the papers are signed and filed. In addition, and depending on the consumer debtor’s particular problems, the consumer debtor may want to see a lawyer first who has experience in this area, or an accountant who may have a general background in dealing with bankruptcy and insolvency situations. The consumer debtor should definitely consult a lawyer before the papers are signed and filed because once they are filed with the Official Receiver’s office, the lawyer will not likely be able to reverse the process and the lawyer’s advice as to whether the bankruptcy route was proper will be too late.
As mentioned in previous chapters, there are ways to avoid bankruptcy including negotiating with the creditors on an informal basis or making a formal proposal under the Bankruptcy and Insolvency Act. These and other choices are discussed further in Chapter 9.
For a visual of the time sequence involved in bankruptcy, see Figure 2.
Figure 2: Time Sequence
1. Contact a Trustee
Once bankruptcy is chosen, contact a trustee. A trustee is licensed from the federal government under the Bankruptcy and Insolvency Act to assist and prepare the papers for bankruptcy on behalf of individuals, partnerships, and corporations. The consumer debtor can contact a trustee at several different sources. Many large accounting firms throughout Canada have divisions or separate corporations dealing with bankruptcy and related matters. As such, they will have a corporate licence to deal with bankruptcies. Larger accounting firms may not have a department that deals with consumer bankruptcies. Intermediate and smaller accounting firms and even smaller partnerships and sole proprietors will have licences from the federal government to administer bankruptcies. These firms will be able to handle a consumer bankruptcy.
Alternatively, the consumer debtor may be referred to a trustee through his or her own accountant or lawyer, or the debtor may have heard about a particular trustee through online advertising, free newspapers, word of mouth, and in the Yellow Pages online or in print. While all trustees are qualified and have the same licence, some trustees deal with specialty areas while others do not. For example, a sole practitioner may deal only with consumer bankruptcies whereas a large accounting firm may not deal with consumers at all, but with business restructurings, or perhaps both. Where possible, it is always best to go to a trustee that has been recommended by another person: lawyer, accountant, or friend.
When selecting a trustee, it is important to feel compatible with the person with whom the consumer debtor is working. The trustee’s role is to assist the debtor in this bankruptcy process and to make sure that the debtor goes through the bankruptcy process with as less discomfort as possible. However, the trustee is not the consumer debtor’s friend. The trustee is an officer of the court under the Act to represent both the consumer debtor and the creditors. In other words, the trustee must be even-handed with both the consumer debtor and the creditors. The trustee has a job to perform that may conflict with the consumer debtor’s expectations. Sometimes, personality conflicts may arise and once the bankruptcy proceedings have started, it is very unlikely that the consumer debtor can switch to another trustee.
For the average consumer bankruptcy, going to a recommended professional may not amount to much difference. But in more complicated matters, an individual will want the relationship to be compatible rather than confrontational. If the consumer debtor has or anticipates problems with respect to taking bankruptcy protection, the consumer debtor should see a lawyer first.
The consumer debtor should also shop around for the cost of the trustee’s services. While all the trustees have the same duties to perform, some charge more. For consumer bankruptcies, the fees and disbursements, or costs, could range from $1,500 to about $3,000. The cost varies depending on the number of visits that the debtor makes to the trustee’s office, the duration of those visits, the experience of the people handling the case, the number of creditors that have to be notified, the problems relating to the debtor’s assets, the determination of exempt assets, the level of income, and other factors. Often, the consumer debtor does not have all the bills, invoices, and statements needed to prepare the forms. Obtaining these documents may take some additional time and therefore increase the fees.
These costs are paid from the consumer debtor’s bank account if there are sufficient monies to cover them, or they can come from the sale proceeds of the debtor’s assets or from third party guarantors. The amount of costs is also controlled under the Act. The trustee must have its costs reviewed or taxed by the registrar when it applies for its own discharge. Some trustees allow the consumer debtor to pay a monthly sum until the bill is paid. If the consumer debtor does not pay the full amount of
