The usual procedure for corporations to submit their application for bankruptcy has similarities to personal and small business bankruptcy applications.
To give you an idea of the steps you need to undertake, we’ll have a quick rundown of them below:
- Search and have a meeting with a Licensed Insolvency Trustee
- The Licensed Insolvency Trustee will do some evaluation
- A piece of advice will be given by the Licensed Insolvency Trustee
- The Licensed Insolvency Trustee will make a filing of the required documents with the OSB
- The creditors will be notified that you are aiming for a bankruptcy filing
- The assets of the corporation and the daily management will be transferred to the Licensed Insolvency Trustee
- There are some creditors who may possess special claims in priority to other creditors
- Liquidation of the corporate assets will take place. The sales will be used to pay the creditors
- There might be a creditor’s meeting to help ask for more data regarding the declaration of bankruptcy
- It is a possibility that the OSB will ask for further evaluation of what might happen in the bankruptcy case
- Once the payments are completed, a bankruptcy case might be tagged as done
What are creditor classes?
When it comes to business bankruptcy, there might be a particular creditor class that is a particular choice over business assets. The payment will be made beforehand to the creditors. Preferences will be given if the funds accumulated from business assets liquidation are divided and then given by the trustee.
Secured Creditors
A receiver will commonly have the task to liquidate secured assets. This is very common for businesses such as banks or even individuals that have a secured creditor.
There are instances wherein the Licensed Insolvency Trustee will check out things for the unsecured creditors. On the other hand, payment will be collected on secured assets as a priority to the unsecured ones.
The selling will be implemented in a form of public sales such as auctions. Private sales are also the best means to liquidate assets.
What is right to repossess goods?
In various situations, the BIA gives the privilege to repossess goods as long as the suppliers are tagged as unpaid and unsecured. However, there are criteria that you should meet to be qualified:
- There must be a letter of demand that is sent to the purchaser, receiver, or trustee regarding repossession. This must be done within 15 days after the bankruptcy of the business was declared. As long as the business was qualified for bankruptcy, it could be considered.
- The timespan of the delivery of goods must be within a month before the day on which bankruptcy is foreseen or filed.
The goods must also meet the following criteria when demand is sent to the Licensed Insolvency Trustee by the supplier:
- The business, receiver, or trustee is in the possession of the supplier
- The full payment is not yet achieved and the goods must be distinguishable
- Its state must not be altered in any way
- Never resold to any individual or organization
- Payment completion was not done abruptly by the business, receiver, or trustee after the supplier’s demand was made
The supplier must repossess the goods if the business Licensed Insolvency Trustee or receiver acknowledges that right. This is only applicable within 10 days upon getting the notice but can be extended upon agreement.