Understand the basics

September 30, 2020

We feel that it is important that you should understand the basics when you are thinking about filing a bankruptcy or a proposal.  Here are some basic terms to help you along.  People who owe money are called “debtors”, people who cannot pay their bills as the become due or who could not pay their debts after selling their property are called “insolvent” and people who have either filed a voluntary assignment into bankrupt or have been petitioned into bankruptcy by a creditor through the court are called “bankrupts”.


 means a person who has made an assignment or against whom a bankruptcy order has been made or the legal status of that person;

debtor includes an insolvent person and any person who, at the time an act of bankruptcy was committed by him, resided or carried on business in Canada and, where the context requires, includes a bankrupt;

insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

  • (a) who is for any reason unable to meet his obligations as they generally become due,
  • (b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
  • (c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;

You can be all three at the same time, you could be a debtor who is insolvent and who is also bankrupt.  But you can be neither bankrupt nor insolvent unless you are first a debtor.   However, just because you are an insolvent debtor does not mean you are bankrupt.

In order to “qualify” to file a bankruptcy or a proposal you must owe at least $1,000 and not be able to pay that debt.  Having said that it would surely be an extremely rare circumstance indeed in which a Licensed Insolvency Trustee would recommend such a filing.  Most of the time smaller, even hard to manage debts of such values can more easily be resolved with some negotiated payment arrangement.

For more information about bankruptcies and proposals call the office at 519-646-2222