In a personal bankruptcy in Canada, a creditor’s meeting is rare, happening in less than 1 in 1000 bankruptcies.
A meeting of creditors’ is required:
- In a summary bankruptcy or consumer proposal, if at least 25% of your creditors, based on the dollar value of their claims, ask for a meeting;
- If requested by the Official Receiver (the representative of the Office of the Superintendent of Bankruptcy);
- In an ordinary administration bankruptcy (required if your realizable assets are worth more than $15,000), business bankruptcy or Division I proposal.
The Official Receiver can also require you meet for an Examination under Oath. While still rare, an examination occurs in roughly 1 out of every 300 personal bankruptcies.
Who can call a creditor’s meeting?
A meeting can be called by your creditors (at least 25% needed), the Official Receiver or the trustee.
Most creditors understand the bankruptcy process and will allow it to play out as filed. However, there are circumstances where your creditors may want to ask you more questions:
- A creditor believes you acted fraudulently in obtaining credit, or selling assets before bankruptcy;
- You owe significant monies to Canada Revenue Agency;
- A creditor has questions regarding the income, assets or other debt obligations you declared in your bankruptcy documents.
Most creditor meetings in summary administrations (most bankruptcies in Canada) are called by related parties, or legal counsel, who expect by doing so they may find additional recoveries.
If a first meeting is required, it must be held within 21 days following the date of filing.
What is the purpose of the First Meeting of Creditors?
The Bankruptcy and Insolvency Act (BIA) specifies the purpose of the first creditors’ meeting:
- To consider the affairs of the bankrupt;
- To affirm the appointment of the trustee or substitute another trustee;
- To appoint inspectors of the estate;
- For the creditors to give directions to the trustee with regards to the administration of the estate.
What happens at a Meeting of Creditors?
The meeting of creditors is usually held at your trustee’s office but can be held at another location. The trustee attends to provide information regarding the administration of the estate. If attending the Official Receiver acts as chairman otherwise he will assign his duties to the trustee.
Before the meeting, your trustee will prepare a preliminary report about your assets and liabilities, the causes of your bankruptcy, estimated realizations and details of any reviewable transactions. This report will be presented to the creditors by the trustee.
Creditors may ask you further questions relating to your financial status and activities leading up to your bankruptcy. They may ask about expenses you claimed to reduce surplus income.
As the bankrupt, you are required to attend and answer questions truthfully. Failure to attend the meeting, without a valid reason such as sickness, is an offense under the Act and can impact your bankruptcy discharge. You can request not to answer questions or provide information that does not bear on your bankruptcy filing.
If you are required to provide further documentation your trustee will advise you before the meeting and can adjourn the meeting for another date if needed.
In a consumer proposal, the meeting of creditors is where the creditors have an opportunity to vote to accept or reject your proposal terms. If no meeting is required, the proposal is automatically approved.
Most examinations of our clients fall under the “randomly selected” reason, almost always due to VERY high debt and result in no further investigation or actions.
What is the trustee’s role at the meeting?
Your trustee’s role is as an officer of the court and middle-man to ensure that the process is fair and equitable to all parties.
It is not necessary to engage a lawyer, although you can if you feel you need legal advice, but it is important to understand that the trustee does not represent you. Your trustee will, however, guide you through process.
The trustee, if acting as chair of the meeting, will ensure all creditors have filed a valid proof of claim and are entitled to vote. They will present their report to creditors and answer questions regarding the administration of the estate.
Most people who file bankruptcy do not need to meet with their creditors. If a meeting is requested, don’t panic. Attend the meeting, answer questions honestly and you will find the process easier than you might expect.