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3. Application / Bankruptcy Order
Terms in this set (10)
Under what circumstances can a creditor make an application to the Court for a bankruptcy order?
The creditor must allege (and be prepared to prove to the Court's satisfaction):
1. the debtor owes at least $1,000; and
2. the debtor has committed an act of bankruptcy within 6 months preceding the application
What is required for a secured creditor to file an application for a bankruptcy order against a debtor?
1. the secured creditor must state in its application that it is willing to give up its security for the benefit of the creditors of the estate if a bankruptcy order is made;
2. the secured creditor's debt exceeds the value of its security by $1,000.
3. the debtor has committed an act of bankruptcy within 6 months preceding the application
Against whom does a creditor make a bankruptcy application if it is a sole proprietorship?
The application is made against the individual who operated the business and not he proprietorship.
An application cannot be filed against any individual who meets what criteria?
1. whose principal occupation and means of livelihood is fishing, farming, or the tillage of soil; or
2. who works for wages, salary, commission or hire, at a rate of compensation not exceeding $2,500 per year and who does not carry on business on his own account.
***These individuals can still make a voluntary assignment
Under which circumstances does the applicant not need to establish that there is debt other than his own as proof of the act of bankruptcy?
1. the creditor is the only creditor, or a significantly large creditor, of a debtor who has failed to meet repeated demands for payment.
2. fraud on the part of the debtor makes it imperative that the processes of the BIA are set in motion immediately for the protection of the whole class of creditors.
3. the debtor admits that he is generally unable to pay his creditors.
The application must be filed in the court having jurisdiction in the locality of the debtor. The BIA defines "locality of a debtor" as what?
1. where the debtor has carried on business during the year immediately preceding the bankruptcy; or
2. where the debtor has resided during the year immediately preceding the bankruptcy.
*****If the debtor does not carry on business or has not resided in Canada during the year immediately preceding the bankruptcy, the locality is defined as where the greater portion of the property of the debtor is situated.
When will the court dismiss a bankruptcy application?
1. if it is not satisfied with the proof of the facts alleged in the application;
2. if it is not satisfied with the service of the application;
3. if it is satisfied by the debtor that he is able to pay his debts; or
4. if it is satisfied that no order should be made for other sufficient cause.
What must a debtor file if he intends to dispute an application?
1. a notice setting out the statements in the application that he intends to dispute (served 2 days before the date of the hearing set out in the application);
2. the grounds of his dispute; and
3. his address for service.
On what grounds can a debtor dispute an application?
1. if he can prove that he has not committed an act of bankruptcy; or
2. if he can prove (via financial statements or other evidence) that he is able to pay his debts.
What reasons does the court consider improper reasons for filing an application?
1. to allow a trustee to review preferences or fraudulent transactions, when the rights of action may be statute-barred;
2. to prevent the squandering or dissipation of assets and to secure an equitable distribution of the debtor's property amongst its creditors;
3. to ascertain the amount of loss for insurance or other reasons; and
4. to permit creditors to avail themselves of the provisions of the BIA that may enhance their positions by giving them certain priorities that they would not otherwise enjoy.
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