The Canadian bankruptcy regime was designed with two key
purposes in mind – provide options to 'honest but
unfortunate' debtors struggling with an unmanageable financial
load and create an orderly means for creditors to recover amounts
owed them. With the potential for abuse ever present, the Office of
the Superintendent of Bankruptcy (OSB) has ways and means to detect
and deal with offenders.
What constitutes a bankruptcy offence?
The common theme pervading bankruptcy offences under the
Bankruptcy and Insolvency Act (BIA) is the intent by the debtor to
deceive creditors and escape repayment with impunity. Offences can
Documentation – falsifying a statement
of account or hiding or destroying related documentation
Property – hiding or removing property
or disposing of it at unfair, below-market values before or after
Credit – obtaining credit or good using
false representations or without duly disclosing the bankruptcy to
BIA investigation – failing to cooperate
fully and honestly with BIA examinations
Although the OSB has detection programs in place, bankruptcy
offences are often discovered through complaints made by creditors.
The Licensed Insolvency Trustee (LIT) may also uncover reasons for
suspicion during the course of the bankruptcy process. The OSB may
also learn of underhanded dealings through help by the members of
Whichever means by which an offence comes to light, it must
undergo examination by one of three special investigation units and
always in association with the Royal Canadian Mounted Police
Serious Penalties – Case By Case
Offences under the BIA are punishable in a number of possible
ways. Past cases have often involved imprisonment or other
restrictions on personal liberty, such as probation, house arrest
or curfew orders. Penalties may also include orders to perform
community service or prohibitions from applying for credit. In most
cases, the fraudulent bankrupt is ordered to pay amounts in
restitution to the trustee.
The RCMP regularly reports bankruptcy fraud convictions on its
website and its annals should serve as a warning to those who are
tempted to use bankruptcy as an all-expense-paid free ride out of
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Court of Queen's Bench of Alberta authorized a disposition of a debtor's assets by a receiver immediately upon appointment and without being forced to conduct a marketing process within the receivership proceedings.
The Canadian government has recently changed how it defines
eligible financial contracts. For the derivatives industry, the
new definition appears to give deference to the
over-the-counter commodities market in determining what is an
eligible financial contract.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).