Question 1

Martha's business accountant has suggested that because the business is unable to meet its financial obligations as they become due and has little prospect of having sufficient assets to meet those obligations in the future, her business is legally considered insolvent.

Accepted Answer

Insolvency is defined as the inability of a company to pay off its debts as they become due or when the company has more liabilities than assets. If a business is unable to meet its financial obligations and has little prospect of having sufficient assets to meet those obligations in the future, it is considered legally insolvent.

Question 2

The debtor's voluntary assignment to the trustee in bankruptcy of legal title to the debtor's property for the benefit of creditors is legally known as a proposal.

Accepted Answer

The debtor's voluntary assignment to the trustee in bankruptcy of legal title to the debtor's property for the benefit of creditors is legally known as an assignment in bankruptcy, not a proposal. A proposal refers to a formal plan that a debtor submits to their creditors to reorganize their debts and payment schedule.

Question 3

A declining economy, an industry collapse, and a changing market can pose difficulties for healthy companies.

Accepted Answer

Even healthy companies can face challenges due to external factors such as a declining economy, industry collapse or changing market. These factors can impact their revenue streams, profitability and sustainability.

Question 4

One of the purposes of early English bankruptcy legislation that is confirmed in Canada's version is to ensure, if possible, that potentially viable businesses are reorganized so they can continue operating for the benefit of creditors.

Accepted Answer

This statement is true. The purpose of early English bankruptcy legislation was to encourage the reorganization and continuation of potentially viable businesses for the benefit of creditors. This principle has been carried over into modern bankruptcy legislation, including Canada's version.

Question 5

A sale of a bankrupt's assets that can be declared void because it was not made in good faith or for valuable consideration is legally known as a reviewable transaction.

Accepted Answer

The answer of A sale of a bankrupt's assets that...

Question 6

The legal term "bankrupt" is used to denote the legal status of a debtor who has made an application for an assignment in bankruptcy.

Accepted Answer

The answer of The legal term "bankrupt" is used to...

Question 7

A bankruptcy order is a statement filed by a insolvent debtor's creditors claiming that the debtor who has committed an act of bankruptcy owes at least $100 and should be declared bankrupt.

Accepted Answer

A bankruptcy order is issued by a court, not filed by creditors. Creditors may petition for bankruptcy, but the order itself is a legal declaration by the court.

Question 8

Bankruptcy offences are defined by the Bankruptcy and Insolvency Act and may be committed by debtors, creditors, and trustees.

Accepted Answer

Bankruptcy offences are indeed defined by the Bankruptcy and Insolvency Act, and all parties involved in the bankruptcy process, including debtors, creditors, and trustees, can commit such offences.

Question 9

A payment made with the intention of giving a related person priority over at least one other creditor within one year of a bankruptcy order is described under the Bankruptcy and Insolvency Act as a reviewable settlement.

Accepted Answer

Such payments are referred to as "preferential payments" or "preferences" under the Bankruptcy and Insolvency Act, not reviewable settlements. Preferences occur when a debtor gives an unfair advantage to one or more creditors over others shortly before declaring bankruptcy.

Question 10

A debtor must commit one of the specified acts of bankruptcy prior to creditors being in a legal position to petition the debtor into bankruptcy.

Accepted Answer

Creditors cannot petition a debtor into bankruptcy until the debtor has committed one of the specified acts of bankruptcy, such as failing to pay a debt or making a fraudulent disposition of assets.

Question 11

An inspector is a person appointed by the bankruptcy court to act on its behalf and supervise the actions of the trustee.

Accepted Answer

An inspector in the context of bankruptcy is typically appointed by creditors, not the bankruptcy court, to oversee the administration of the bankruptcy estate and assist or advise the trustee, rather than to supervise the trustee on behalf of the court.

Question 12

After reviewing a proof of claim, if there is inadequate evidence either of the debt itself or of its secured status, the receiver may reject the security and its priority of payment.

Accepted Answer

The answer of After reviewing a proof of claim, if...

Question 13

Preferred creditors are generally unsecured creditors who are given priority over the other unsecured creditors under the Bankruptcy and Insolvency Act.

Accepted Answer

Preferred creditors have priority over other unsecured creditors in the distribution of assets during bankruptcy proceedings.

Question 14

Explain the criteria that must be met before a debtor will be recognized as insolvent under the Bankruptcy and Insolvency Act.

Accepted Answer

The answer of Explain the criteria that must be met...

Question 15

The provision of the bankruptcy legislation that bars graduates from being discharged from their student loans for a minimum seven years after graduation has recently been amended to reduce the period to a five-year minimum.

Accepted Answer

The provision regarding the discharge of student loans in bankruptcy has not been recently amended to reduce the period from seven years to five years. The specifics of discharging student loans in bankruptcy can vary by jurisdiction, but there has been no widespread recent amendment to universally reduce such a period.

Question 16

A contractual agreement between the debtor and creditors that allows an insolvent debtor to reorganize and continue in business is legally described as an assignment in bankruptcy.

Accepted Answer

A contractual agreement between the debtor and creditors that allows an insolvent debtor to reorganize and continue in business is actually referred to as a "reorganization plan" or a "Chapter 11 Plan" under the US Bankruptcy Code. An assignment in bankruptcy is a transfer of the assets of the debtor to a trustee or assignee for the benefit of the creditors.

Question 17

In order for a payment made by an insolvent debtor within the six-month limitation period to be declared void, the payment must be shown to favour one or more of the bankrupt's creditors to the detriment of the others.

Accepted Answer

The answer of In order for a payment made by...

Question 18

A discharge of bankruptcy will be withheld from a corporation until all of its debts have been paid in full.

Accepted Answer

The answer of A discharge of bankruptcy will be withheld...

Question 19

Following an act of bankruptcy, a court may issue a bankruptcy order that will declare the debtor to be bankrupt and transfer legal control of the bankrupt's estate to a trustee.

Accepted Answer

This statement is true. After an act of bankruptcy, a court may issue a bankruptcy order that will declare the debtor to be bankrupt and transfer legal control of the bankrupt's estate to a trustee.

Question 20

A proof of claim giving formal notice of the amount owed and the nature of the debt must be provided by a creditor to a bankrupt's trustee.

Accepted Answer

This is true according to bankruptcy laws in most countries. Creditors must submit a proof of claim to the trustee within a specific time frame in order to be considered for payment from the bankrupt's estate. The proof of claim should include information about the amount owed, the nature of the debt, and any supporting documentation.

Quiz 27: Bankruptcy and Insolvency