BANKRUPTCY AND INSOLVENCY LAW IN CANADA: CASES, MATERIALS, AND PROBLEMS
Chapter explains how creditors can make claims in a bankruptcy and Chapter deals with
the claims of secured creditors, who are often referred to as “strangers to the bankruptcy.”
Chapter sets out the ranking of creditors and the manner for distribution of proceeds in a
bankruptcy. Chapter deals with one particular issue that often arises in a corporate bank-
ruptcy — liability of corporate directors.
Chapter could in itself be the basis of a complete course and it provides a detailed
examination of consumer bankruptcy issues.
Chapters through to take us through commercial reorganizations under the Com-
panies’ Creditors Arrangement Act, RSC , c C- (CCAA). Chapters deals with the Bank-
ruptcy and Insolvency Act, RSC , c B- (BIA) corporate and consumer proposals. Chapter
examines the law of receiverships. Chapter , the concluding chapter, addresses inter-
national insolvency issues.
B. Bankruptcy Terminology
Under the BIA, the terms “bankruptcy” and “bankrupt“ are conned to straight liquidation
proceedings under Part III of the Act and a “bankrupt” is the subject of a “bankruptcy order.“
All other proceedings under the BIA are known as insolvency proceedings (hence the title
of the Act, the Bankruptcy and Insolvency Act) or are identied by the part and division of the
BIA under which the proceedings are brought. The subject of these proceedings is referred
to as a “debtor.” Importantly, however, unlike the British Insolvency Act , c , the BIA
draws no distinction between corporate and personal or individual bankruptcies. All liquid-
ation bankruptcies are basically governed by the same rules. The term “reorganization” is
not actually used in the BIA or the CCAA to describe non-liquidation proceedings designed
to enable an insolvent business to stay alive or to enable an insolvent individual to avoid
the stigma of bankruptcy by reaching an agreement with the debtor’s creditors to pay o all
or part of the indebtedness over a period of years. Instead, BIA, Part III, Division and BIA,
Part III, Division , speak of commercial and consumer proposals, respectively; the object of
proceedings under the CCAA is referred to as an “arrangement.” However, “reorganization”
(or, increasingly commonly, “restructuring”) are the non-technical terms frequently used to
describe proceedings under BIA, Part III, Division , and the CCAA, and they are used in the
same sense in this casebook.
The US Bankruptcy Code draws no terminological distinction between straight bank-
ruptcy and reorganizational proceedings. All are referred to as “bankruptcy” or “case” pro-
ceedings, and particular bankruptcy proceedings are usually identied by the Code chapter
under which they are brought — for example, Chapter for straight liquidations, Chapter
“Bankrupt” is dened in BIA, s. The expression is of Italian origin, banke rota or bancarupta, and was
used in the Italian city states in the Middle Ages to describe the breaking of the bench of a merchant
who had defaulted on his debts: see the Tassé Report, extracted below in this chapter.
To avoid needless repetition and unless otherwise indicated, references in notes in the casebook to
bankruptcy proceedings cover all types of bankruptcy and insolvency proceedings under the BIA and
American terminology has also been picked up by Canadian media and it is common for news reports
to refer to a Canadian company seeking “bankruptcy protection” under the CCAA even though
the CCAA is quite independent of the BIA. What is meant is that a stay of proceedings is in eect
precluding creditors from suing or invoking remedies against the debtor company while the company
is preparing a plan of reorganization to put before its creditors or is preparing to sell its assets.