Insolvency involves a lot of paperwork. All of these forms and documents can become quite confusing at times, so we thought we’d write a blog post with information for creditors out there who have received a creditor’s package; perhaps for the first time.
There are generally two types of creditors who Trustees in Bankruptcy send notices to. The first are the usual suspects: major banks, collection companies, and claims processing centres. These groups are very familiar with the bankruptcy and insolvency process, understand their rights and obligations, and need no assistance to complete the paperwork that they receive from the Trustee. This post is for the second group; individuals and businesses who are rarely related to bankrupt or insolvent individuals.
Arguably the most important form, a Proof of Claim or Form 31, is used by creditors to prove to the Trustee what is owed to them by attaching evidence as “Schedule A”. Evidence can be an agreement, statement of account, or other document to support your claim. Be sure to sign the proof of claim, and have your signature witnessed by an individual of at least 18 years of age. If you have any questions about your specific type of claim, don’t hesitate to contact the Trustee for clarification. In general, most creditors are unsecured creditors with no priority which you can indicated under section 4 of the form.
If a creditor’s proof of claim is rejected by the Trustee the creditor must apply to court within 30 days if it wishes to dispute the Trustee’s disallowance. If you have any questions about this very important form, don’t hesitate to contact the Trustee in Bankruptcy or Proposal Administrator.
You may appoint a proxy to represent you by signing and returning the proxy form. Your proxy can represent you in person at meetings, or in writing.
Voting letters are sent to every creditor in a consumer proposal, but never in a bankruptcy. 45 days after a consumer proposal is filed, the proposal administrator tabulates the votes to see if the proposal was accepted or rejected by the creditors. Creditors possessing at least 50% of proven claims must accept the proposal for it to pass. Once accepted, all creditors are bound by it; even those who voted to reject it.
The Trustee or Proposal Administrator works for neither the creditors nor the debtor. They are officers of the court who act as referees while enforcing the laws of insolvency. They aim to strike the delicate balance sought by the law to provide fairness to both debtors and creditors under challenging circumstances.
The Trustee or Proposal Administrator must call a meeting of creditors when creditors possessing at least 25% of proven claims request so. These meetings provide an excellent venue for creditors to voice their questions or concerns directly to the Trustee. The debtor must always attend these creditor meetings.
Inspectors can be appointed at a meeting of creditors. These inspectors represent the general body of creditors and meet with the Trustee more regularly to provide approval and direction.
Creditors can oppose a bankrupt or Trustee’s discharge if they are unsatisfied. Perhaps they believe that the debtor has committed an offence unbeknownst to the Trustee, or they believe that the Trustee’s fees are too high in a Division 1 Proposal or Ordinary Administration (fees are highly regulated in Consumer Proposals or Summary Administration Bankruptcies). If unsatisfied, a creditor’s first step should be to contact the Trustee in Bankruptcy and discuss the matter, after which they may decide to file their opposition. A creditor can apply to court to have any act, or decision of the Trustee reversed or modified. This ability to oppose is an important aspect of the bankruptcy system that provides additional transparency and all parties’ voices to be heard.
The most important take away from this article should be that Trustees work for neither the debtor or creditors and that they are responsible to uphold the integrity of the bankruptcy system as a whole. As a creditor, don’t view them as your advocate or adversary, simply as the referee.
If you have received notification of a bankruptcy or consumer proposal from Welker and Company and have any questions, don’t hesitate to contact us. We’re always happy to help, and aim to make the somewhat complicated process as straight forward as possible.