Question 1

How is it possible for a business to reduce and perhaps transfer the legal risks of bankruptcy associated with all aspects of financing its enterprise?

Accepted Answer

By following expert advice and carefully reviewing financing contracts, a business can identify potential legal risks and take steps to mitigate or transfer them, such as through insurance or contractual agreements.

Question 2

How does a creditor provide formal notice to the trustee of the amount owed and the nature of the debt?

Accepted Answer

A creditor provides formal notice to the trustee of the amount owed and the nature of the debt through a proof of claim. This document is filed in bankruptcy proceedings to assert the creditor's right to receive a distribution from the bankruptcy estate.

Question 3

In what way are a debtor,a creditor,and a trustee treated similarly under the Bankruptcy and Insolvency Act?

Accepted Answer

Under the Bankruptcy and Insolvency Act, debtors, creditors, and trustees can all commit criminal violations known as bankruptcy offences if they engage in fraudulent or dishonest conduct related to the bankruptcy process.

Question 4

Which of the following would strongly support an exception to a settlement violation of the Bankruptcy and Insolvency Act?

Accepted Answer

Valuable consideration paid for a good faith transfer indicates that the transaction was legitimate and not intended to defraud creditors, which can be an exception to a settlement violation under the Bankruptcy and Insolvency Act.

Question 5

What is the nature of a relationship in which a business sells inventory to a customer to which it is not related or connected in anyway?

Accepted Answer

An arm's length transaction is one in which the parties involved are independent and on an equal footing, such as a business selling inventory to an unrelated customer. This ensures that both parties act in their own self-interest and are not subject to any undue influence from the other.

Question 6

What official is appointed by creditors to act on their behalf and supervise the actions of the trustee in bankruptcy?

Accepted Answer

An inspector is appointed by creditors to supervise the actions of the trustee in bankruptcy, ensuring that the interests of the creditors are properly represented and protected during the bankruptcy process.

Question 7

Which of the following would most likely be applicable to the Canada Revenue Agency with respect to a bankrupt's unremitted payroll deductions?

Accepted Answer

The answer of Which of the following would most likely...

Question 8

Which of the following debts is not discharged by personal bankruptcy?

Accepted Answer

The answer of Which of the following debts is not...

Question 9

What is the name given to the person appointed by creditors to act on their behalf and supervise the actions of the trustee in bankruptcy?

Accepted Answer

The correct term is "inspector." In bankruptcy proceedings, an inspector is appointed by creditors to oversee the actions of the trustee, ensuring that the interests of the creditors are properly represented and protected.

Question 10

What is the significance of a court deeming that a payment made by an insolvent debtor is a fraudulent preference and,as such,is void?

Accepted Answer

When a court deems a payment made by an insolvent debtor as a fraudulent preference, it means that the payment unfairly favored one creditor over others. As a result, the transaction is voided to ensure equitable distribution of the debtor's assets among all creditors. The assets or payments are returned to the debtor's estate to be distributed according to bankruptcy laws, ensuring fairness in the distribution process.

Question 11

Which of the following would most strongly support a type of superior priority when distributing the proceeds of a bankrupt's estate to creditors that allows employees to be paid from a government fund that would then have a subrogated claim against the estate?

Accepted Answer

The Wage Earner Protection Program provides a type of superior priority when distributing the proceeds of a bankrupt's estate to creditors that allows employees to be paid from a government fund that would then have a subrogated claim against the estate.

Question 12

By whom are inspectors typically appointed,with respect to supervising the actions of a trustee,among other things?

Accepted Answer

Inspectors are typically appointed by the bankrupt's creditors to supervise the actions of a trustee in bankruptcy proceedings.

Question 13

Treats 'n More Bakery Inc.expects that bankruptcy proceedings will be commenced against it within the next month,and the owner has just transferred the title of its commercial ovens to her sister.How will this transaction be viewed by the bakery's creditors?

Accepted Answer

This transaction is likely to be viewed as a non arm's length transaction because it involves family members, and such transactions can be scrutinized and potentially reversed by the courts to protect the interests of creditors, especially if it appears to be an attempt to shield assets from creditors in anticipation of bankruptcy.

Question 14

How long after the assignment into bankruptcy should a bankrupt in a first time personal bankruptcy expect to wait before being discharged from bankruptcy?

Accepted Answer

In a first-time personal bankruptcy, the bankrupt can expect to be discharged nine months after the assignment into bankruptcy, assuming there are no objections from creditors, the trustee, or the Superintendent of Bankruptcy.

Question 15

Realizing that the financial health of his business was unlikely to recover from the increased competition in the market,Clive decided to transfer title to his marital home to his wife's name.Six months after the transfer,Clive was less concerned about the personal guarantee he had signed and was preparing to attempt informal negotiations with his creditors.What will be the most likely result?

Accepted Answer

Transferring assets to avoid debts can be seen as a fraudulent transfer, which can lead to creditors petitioning for bankruptcy against the debtor.

Question 16

Which of the following is a distinguishing characteristic of a preferred creditor,with respect to distributing the proceeds of a bankrupt's estate to creditors?

Accepted Answer

Preferred creditors are paid according to their order of priority, which is a distinguishing characteristic in bankruptcy proceedings. They do not necessarily have a security interest in a particular asset, nor are they guaranteed a minimum recovery amount.

Question 17

What legislation specifically affects conveyances of real or personal property made with the intent to,among other things,default or defraud a bankrupt's creditors?

Accepted Answer

Provincial fraudulent conveyances legislation specifically addresses conveyances made with the intent to defraud creditors, including in bankruptcy situations.

Question 18

As between an unpaid supplier who recently delivered inventory,the trustee for its expenses,the Canada Revenue Agency (CRA)for unpaid remittances and an unpaid employee,which creditor has first priority upon bankruptcy?

Accepted Answer

The answer of As between an unpaid supplier who recently...

Question 19

What are fraudulent preferences,reviewable transactions,and fraudulent conveyances?

Accepted Answer

Fraudulent preferences, reviewable transactions, and fraudulent conveyances are categories of payments or transactions made prior to bankruptcy, often scrutinized to ensure they were not made to unfairly prefer one creditor over others or to hide assets from the bankruptcy estate.

Question 20

Grundy's employer recently assigned itself into bankruptcy,leaving Grundy unpaid in the amount of $1,800 for back wages.Which category of creditor describes Grundy?

Accepted Answer

Grundy falls into the category of a preferred creditor because employees owed back wages by a bankrupt company are often given priority in the distribution of the company's remaining assets, making them preferred creditors.

Quiz 27: Bankruptcy and Insolvency