There's quite a few similarities when you compare bankruptcy in the United States and Canada side by side. The Canadian process for insolvency however has some unique rules and laws to it. Canada has three territories and ten provinces. This is where responsibility for laws are determined. When you file for bankruptcy in Canada, it goes to the jurisdiction of the federal government. There's two different acts that you'll need to be familiar with before visiting a bankruptcy lawyer. First, there's the Companies' Creditors Arrangement Act and second, there's the Bankruptcy and Insolvency Act. This is where the province laws come in because this is going to determine how various agencies can handle your assets and what they can collect from you. It's going to be different depending on the province you need to file bankruptcy in.Do You Need A Bankruptcy Lawyer?
In the United States, you have to obtain a lawyer to handle your bankruptcy process. In Canada however, this isn't required or necessary. When you want to make a consumer proposal or file for bankruptcy, you can do it yourself. A practicing lawyer by law, cannot obtain a license to file for bankruptcy on your behalf or a consumer proposal. For businesses, the Bankruptcy and Insolvent Act still apply. It doesn't matter if they've established themselves as a corporation or a proprietorship, this is a common method to help fix company debt problems. If the company is rather large and the debt problem is complex, then they can use the Companies' Creditors Arrangement Act as well to handle large bankruptcy cases.Types of Canadian Bankruptcy
In the United States, you have a bankruptcy called Chapter 7. Chapter 7 is basically a personal debt relief option and sometimes, small businesses are allowed to file under Chapter 7 as well. Chapter 7 is the equivalent of what's known as a Summary Bankruptcy in Canada. These two bankruptcies are the most common type of bankruptcies used in the United States and Canada.
Summary Bankruptcy – When an individual (sometimes a small business) is unable to pay back debts they owe, they start going through the process of a summary bankruptcy which is also known as a personal bankruptcy. It's the quickest option for immediate debt relief and will release the individual from debts they currently owe.
Consumer Proposal – Unlike a summary, your debt problems don't just go away with a consumer proposal. This is a proposal that is sent to debt collectors that will attempt to negotiate the amount you owe to the collector. It's much better to collect something rather than collecting nothing so more often than not, you can negotiate a deal with your collectors. Depending on the amount owed, you may be eligible for a payment plan of up to five years to pay off your debt, rather than accumulating interest on debts currently owed.
The United States equivalent is the Chapter 13 bankruptcy. A Chapter 13 bankruptcy doesn't free someone or a business from their debt owed but allows them to make small payments over time to eventually pay it back.
Lastly, Canada has what's known as the Division 1 Proposal or CCAA. The Division 1 option is most often used by companies but individuals can pursue this option to. This pertains to people and companies with a rather large amount of debt. What the Division 1 allows debt collectors to do is re-structure how much they're owed and how much they expect in regular payments. Sometimes, the company can just outright pay a settlement of the debt and be done with it. Not only that but companies under Division 1 have immunity against creditors while they gain their financial stability back.
There's two different kinds of laws in Canada, there's public and private. Public laws cover any laws that will affect society. For example, there's administrative laws, constitutional laws and criminal laws that everyone has to follow in order to keep society civil and safe.
Constitutional Laws – These are the laws that deal with the interpretation of the constitution by the court system of Canada.
Administrative Laws – These are laws that deal with the Canadian legal and government agencies. All agencies and governing bodies of Canada have to follow administrative laws to operate in Canada.
Constitution of Canada - This is the main and overlooking law of Canada. The Constitution of Canada basically defines the different levels of power for each branch of the Canadian government. The Parliament of Canada is responsible for dividing up the power of laws between territories and provinces. When dealing with federal laws, the federal government usually only deals with cases that affect Canada as a whole. If there's a national defense issue, a financial issue or an immigration policy change, the federal government is who would handle that.
Freedoms - There's a legislature called the Canadian Charter of Rights and Freedoms that protects citizens' rights. The Supreme Law of Canada has allowed the Canadian Charter of Rights and Freedoms to overrule all other legislations for their province. This applies to not just the provinces but the Parliament as well. Essentially, this should protect all citizens from violation of government actions or laws. One great thing about Canadian law is that if you feel you've been improperly treated by a governing body or law, you can pursue your charter rights and go to a nearby court.
On that same note, the Charter while having a lot of pull over provinces has some limits as well. You cannot commit a crime so extreme that it would prevent you from federal punishment. The Parliament and your local provincial legislature has the power to limit your rights if they feel you are a danger to the area around you or the people around you. This ensures that society is functioning as properly as it can without criminals roaming the streets.
The Charter Protection & Your Rights - It's important to know which of your rights are protected under the Charter. There's essentially three different freedoms protected under your Charter.