When you receive a Creditor's Package, it means that one of your clients has filed a proposal or bankruptcy which entitles them to protection under the Bankruptcy and Insolvency Act.
The Creditor’s Package contains certain documents that the Trustee
must send to you to:
- Notify you of the type of proceeding;
- Provide you with details of the financial affairs of the debtor; and ,
- Provide you with the forms needed to participate in the proceeding.
Proposals and bankruptcies are broken down into two subcategories based on certain key factors which are summarized in the table below.
Insolvency Options |
||
| Simplified | Complex | |
| Bankruptcy | Summary Administration Realizable Assets < $10k |
Ordinary Administration Assets > $10k |
| Proposal | Division II (Consumer Proposal) *Debts <$75k |
Division I Debts >$75k |
Why should I read the Creditor’s Package.
All Creditor’s Packages include the details of the debtor’s assets, debts, and cashflow, the personal information needed to identify which of your accounts are affected, and a Notice of Filing which informs you of important requirements and deadlines to participate in the proceedings, including a proof of claim form. In Proposals, the Creditor’s Package will also include a copy of the proposal which details what the debtor is offering to settle their debts and a report on the proposal comparing the merits of the proposal versus bankruptcy.
It is very important that you read these documents so that you are familiar with the financial status of the debtor to enable you to make an informed decision regarding your rights, duties, and options.
It is you, the creditor, who determines the ultimate recovery on your debts. You decide if a proposal is fair and reasonable and you decide if you are willing to accept it. You impact on when a debtor is discharged from their debts. The success of the insolvency process depends on your participation.
Why is it important for you to participate and how do you do so?
It is very important to understand that your right to participate in any decision making and/or receive any potential dividends is dependent on your submission of, and the Trustee’s acceptance of, your Proof of Claim. The Proof of Claim is the formal document that allows you as the creditor to inform the Trustee exactly how much money you are owed (including interest, if applicable) to the date of filing. A copy of the Proof of Claim form is included in the Creditor’s Package complete with instructions for completion. It is very important to include the documents that verify and validate the debt.
Once your Proof of Claim has been filed and accepted, you status changes to a proven creditor which gives you official standing in the proceedings. If you become a proven creditor before any meeting of creditors, then, and only then, do you get the right to vote on such issues as the acceptance of proposals, the appointment of inspectors, the appointment of legal counsel for the estate, and many other potential issues that require creditor guidance and approval.
Until you are a proven creditor, you are not entitled to receive any dividends (payments) from the proceeds of the estate. It is extremely important to understand that if you do not prove your claim, upon completion of the proceedings, the debtor will no longer owe you any money for his debt unless it is for one of the following items which can not be discharged in insolvency proceedings.
- Alimony or spousal support
- Child support
- Student Loans less than 10 years old from the date of completion of studies
- Fines or penalties of the court
- Any debt as a result of fraud that has been proven in court
Regardless of which process you are going through, it is important to understand some important deadlines and events that occur during the proceeding.
For important dates and events in a Bankruptcy, click here.
For important dates and events in a Proposal, click here.
