In Canada, bankruptcy has a very precise, legal meaning. A person or business entity is bankrupt only if (a) they have made a formal assignment into bankruptcy; (b) they were declared bankrupt by the Court on an application by a creditor; or, (c) they have filed a Proposal under the Bankruptcy and Insolvency Act that was rejected by the creditors or by the Court. Once bankrupt, the assets and property of the bankrupt, subject to limited exceptions, vests in a trustee in bankruptcy. The trustee will then realize on the assets and distribute the proceeds to the creditors on a pro rata basis (subject to certain priorities).
Bankruptcy is often seen as “the end”. However, that is not necessarily the case. Whether bankruptcy has occurred or is pending, we act to protect our clients’ rights, while maintaining and maximizing value in return.
R. Graham Phoenix