Development

• First enacted in 1919, the Canadian Bankruptcy Act initially focused on the rules of liquidating the assets of an individual who couldn't pay debts to creditors. Canada's present Bankruptcy and Insolvency Act dates back to 1950, with important amendments put into place in 1992, 1997, 2005 and 2007. These amendments outline ways in which debtors can avoid bankruptcy by negotiating debt with creditors, increase protection for workers in bankruptcy, and encourage the restructuring of viable business as an option of bankruptcy. Recent revisions have also been geared to make the system fairer and less susceptible to abuse.
  
  

Current Regulations

• The Bankruptcy and Insolvency Act is composed of 14 parts that define acts of bankruptcy and outline the rights and obligations of the debtor, creditors, the Office of the Superintendent of Bankruptcy, and the courts. Under the act, declaring bankruptcy is one of three options available to the debtor in cases of financial distress; other options are to submit a consumer or commercial proposal to creditors to work out a new payment amount and/or a new payment period.
  
  

Oversight

• Unlike the United States, no dedicated bankruptcy court exists in Canada, but there are a number of judges who have developed a great deal of experience with bankruptcy and insolvency law, and these judges tend to preside over important bankruptcy cases. The Office of the Superintendent of Bankruptcy is a federal agency responsible for the supervision and administration of the Bankruptcy and Insolvency Act, including the licensing of private-sector trustees. Trustees in bankruptcy are "front-line" investigators charged with the duty to look out for the rights of creditors while administering bankruptcy and proposal estates.
  
  

Significance

• The provisions of the Bankruptcy and Insolvency Act allow individuals under extreme financial strain to regroup and become productive members of society. Without this act, rates of poverty and social turmoil could be higher---this would hurt the economy as much as it pulls at the heartstrings. Helping viable companies restructure rather than declare bankruptcy saves jobs and can turn out to be a profitable investment. The Bankruptcy and Insolvency Act also ensures that the public is not hurt when companies offering critical public services run into financial disaster. The bankruptcies of Air Canada, Canada 3000 and General Motors Canada are pertinent examples in this respect.
  
  

Warning

• As noted by Bankruptcy Canada, each Canadian province has its own bankruptcy legislation, which should be consulted in addition to the federal Bankruptcy and Insolvency Act (though in cases of dispute, the federal act will supersede provincial law). It's also important to review the Companies' Creditors Arrangement Act, which details particular arrangements between bankrupt persons and their creditors, as well as the jurisdiction between various levels of government.