Question 1

Any Canadian corporation with outstanding issues of bonds may avail itself of the Companies' Creditors Arrangement Act, rather than make an assignment in bankruptcy under the Bankruptcy and Insolvency Act.

Accepted Answer

The Companies' Creditors Arrangement Act allows Canadian corporations with outstanding bond issues to restructure their debts and avoid bankruptcy, making it a viable alternative to the Bankruptcy and Insolvency Act.

Question 2

Where debts exceed $1,000, an insolvent person is upon petition of creditors, a bankrupt person.

Accepted Answer

This statement is true. When a person's debts exceed $1,000 and they are unable to pay their debts as they become due, their creditors can petition the court to declare them bankrupt.

Question 3

When an asset subject to a security interest fails to satisfy the debt owing to that creditor that creditor ranks as a preferred creditor to the balance of the estate.

Accepted Answer

The answer of When an asset subject to a security...

Question 4

An inspector is agent for the bankrupt, overseeing the dealings of the trustee.

Accepted Answer

The answer of An inspector is agent for the bankrupt,...

Question 5

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Trade Creditors share pro rata on the basis of "cents on the dollar" of their claims.

Accepted Answer

Trade creditors usually share pro rata on the basis of "cents on the dollar" of their claims in a bankruptcy scenario where the debtor has not made a proposal to its creditors.

Question 6

No claim against the remaining assets of a bankrupt person is stronger than that of the Crown.

Accepted Answer

The answer of No claim against the remaining assets of...

Question 7

Once a person is petitioned into bankruptcy, a personal balance sheet at that moment would show zero assets.

Accepted Answer

The answer of Once a person is petitioned into bankruptcy,...

Question 8

In the absence of fraud, a bankrupt with an estate of $62,000 and general debts of $107,000 is as liable to receive a discharge as a bankrupt with an estate of $27,000 and general debts of $7,000.

Accepted Answer

The answer of In the absence of fraud, a bankrupt...

Question 9

If on bankruptcy the bankrupt's cash account rests at zero, even secured creditors will receive nothing.

Accepted Answer

The answer of If on bankruptcy the bankrupt's cash account...

Question 10

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Municipal taxes take priority over trade creditors in the distribution of the assets of the bankrupt firm.

Accepted Answer

Municipal taxes have priority over trade creditors in the distribution of assets according to the Bankruptcy and Insolvency Act.

Question 11

A proposal to creditors, if rejected by them, creates automatically a bankrupt in the proposer-debtor.

Accepted Answer

The answer of A proposal to creditors, if rejected by...

Question 12

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. The employees of the company are treated in the same manner as the trade creditors for the payment of the entire amount of their wage claims.

Accepted Answer

The answer of Ratner's Service Centre encountered financial setbacks over...

Question 13

Under the Bankruptcy and Insolvency Act, a person in financial difficulty has three distinct routes upon which a start toward a resolution of their problems can commence; two of them are voluntary, and one is involuntary.

Accepted Answer

The Bankruptcy and Insolvency Act provides for voluntary routes of consumer proposal and bankruptcy, as well as an involuntary route of bankruptcy initiated by creditors.

Question 14

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Any funds remaining after the claims of the employees, the trustee, and the municipality, would be distributed to the trade creditors.

Accepted Answer

Ratner's decision not to make a proposal to its creditors means that it will likely be forced into bankruptcy. In this case, the distribution of any remaining funds will be determined by the Bankruptcy and Insolvency Act, and trade creditors may not necessarily be the first in line to receive payment, depending on the priority of the different types of claims.

Question 15

Consider this estate: Assets of $135,000, which includes a boat valued at $38,000 subject to a security interest of $60,000. The government is owed tax arrears of $7,000, and Smith an unsecured creditor is owed $120,000. Smith will receive $90,000.

Accepted Answer

The total debt owed in this estate is $187,000 ($60,000 + $7,000 + $120,000). This exceeds the value of the assets ($135,000), leaving a deficit of $52,000. Therefore, Smith will not receive $90,000 and the estate is insolvent. The distribution of assets will be determined by the bankruptcy or insolvency laws of the jurisdiction.

Question 16

George's sole proprietorship is nearing insolvency rapidly. He goes to New York for six months to solicit funds for a bailout. His worried creditors petition his bankruptcy. They will fail.

Accepted Answer

The fact that George's creditors petition his bankruptcy does not guarantee that they will succeed. It depends on various factors, such as the amount of debt and the available assets to cover it.

Question 17

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Expenses of the trustee take priority over municipal taxes in the distribution of assets of the bankrupt firm.

Accepted Answer

The answer of Ratner's Service Centre encountered financial set backs...

Question 18

Where a formal proposal made by a debtor is rejected by his or her unsecured creditors, the debtor is deemed to be insolvent.

Accepted Answer

The answer of Where a formal proposal made by a...

Question 19

A corporation becomes a legal bankrupt when its total liabilities exceed total assets.

Accepted Answer

The answer of A corporation becomes a legal bankrupt when...

Question 20

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Under the Bankruptcy and Insolvency Act, employees have first priority claims against the assets of the bankrupt firm.

Accepted Answer