Bankruptcy in Canada

Introduction


Federal Bankruptcy and Insolvency Act (FBIA) controls bankruptcy in Canada. A legal agency headed by the Superintendent of Bankruptcy in the state oversees the implementation of the Act. Also, the agency investigates complaints while maintaining records of bankruptcy.

A lawful proceeding transpires when the liabilities or debts of a firm or person exceed their revenues or resources over a specific duration (Honsberger, Vern and Lewis 58).Besides these policies, Canada has extensively been challenged by the problem of bankruptcy in the last decades. This situation has the potential of affecting the Canada’s social-economic and political state in various ways. The paper evaluates the effects of bankruptcy in Canada by investigating the challenge from diverse perspectives.

The state is somehow relieved when a person declares a state of bankruptcy because this results to discharge of some debts. This is because the practice is characterized with the billing of the assets of these persons to various creditors and courts may inflict restrictions on their borrowing in the future.Furthermore, such individuals must work together with their trustees to ensure that their debts are cleared.

Bankruptcy in Canada has the potential of creating high risk in small businesses and industries. Increased risks result in decreased investment into the economy because investors fear doing business in highly dynamic markets.The deteriorated reputation following a state of bankruptcy affects the economy by causing low turnouts of investors, tourists andunhealthy international trade relations.

An immediate impact of bankruptcy in Canada also includes uncertain creation of Detroit-Windsor tunnel in the future since it is top on the list for sale when it occurs. To maintain the link between the two down towns Windsor has to purchase Detroit’s half. This will necessitate Canadians to maintain transport links with US hence be forced to pay for infrastructure on their own.

Consequences of Bankruptcy in Canada


The apparent consequences of bankrupt in the state are already identifiable. For example, the publication of the Canada’s state of bankruptcy has brought Detroit’s economic problems into light of the world. This has affected the country’s development by lowering it bargaining power in the global fraternity. This is apparent in the activities of their organizations such as Windsor through their association in the cross-border link with automotive assemblies located in metropolitan Detroit.

The crisis resulting from poor relations led to cancelled shifts, layoffs and permanent shutdowns of some plantssince transportation and deliveries of automotive parts were necessary from several trucks crossing Ambassador Bridge daily. This led to job loss to many during the crisis and a very difficult situation to recover to date. This has led to decline in relationship between Detroit and Windsor to date.Rising of fees, retrenchment of public sector employees, selling off asset and slashing basic services such as garbage collection is a scenario in Detroit.

Furthermore, there are no repairs for damaged streetlights and roads with potholes. Ambulance services are minimal and high-rise of joblessness (Bradford 102). The situation highlights the threatening state that Canada is likely to mingle into in the future due to a state of bankruptcy.

When employed individuals declare a state of bankruptcy at an early age, their savings towards retirement turns to be savings for paying debts such as mortgages. This brings a crisis to the country since their retirement investment strategies are doomed as such individualslack capital for generating income after retirement.

Furthermore, those who experienced such a state lag behind in acquiring basic assets before they retire. Poverty results from inability to maintain their households, which translates to poor living standards. Insolvency in Canadian households deprives the stability of the country’s economy. Furthermore,deterioration in credit worth of a household loans and vulnerability of the sector create adverse domestic economic breakdown.

A state of bankruptcy at any time in one’s life endangers his or her ability to invest. This is because individuals identified with bankruptcy at a certain time can hardly receive best credit ratesin the future. This is detrimental, as it remains a permanent markdenoting that one was once bankrupt and every time such individuals applies for credit, they are obliged to disclose their state.

The high rate of bankruptcy in Canada presents a great risk to investors such as banks especially if there is no credit security. Most of those who declare bankruptcy tend to be jobless people with little assets to measure the amount they owe firms. Most of these debts do not comprise of mortgages, but credit cards and bank loans. This means if one branch provides this service to many clients who turn out to be bankrupt; the bank itself will experience a snarl up.

Also, professional trustees are emerging with the rise of bankruptcy. This is creating a commercial ground and a getaway for fraudsters that swindle individuals in the society. This brings about a downfall for those firms that individuals who are bankrupts owe since there is no clear-cut information on how they can maneuver in paying the debt. This is always the case since in any bankruptcy; a trustee is subject to its review whereas the bankrupt has restricted contractual capacity.

In addition, this business has become increasingly dominated by high-volume, sole trustee practices, low-margin and downmarket some metropolitan businesses, offering a range of similar services. Trustees advertise in TV stations and in the newspaper classifieds section. The bankruptcy features many largeadvertisements for trustee firms that claim to offer not only a cash crisis to "caring" approach, but also a number of other financial crisis counseling services.

It is however, essential to note that bankruptcy assumes a vital role in relieving distressed individuals, institutions or states. This is because inefficient firms are thrown out of the economy due to stiff competitions. This is beneficial to consumers since they get goods and services at a cheaper price.

Bank bankruptcy is minimal in Canada since the government protects banks against such occurrences.Companies such as second biggest airlines benefit from filling bankruptcy since the regulations allow them to continue flying as they seek to restructure. However, such companies must invest more and offer their services at reduced prices to get assistance from the government.

Conclusion


In conclusion, the rise in bankruptcy in Canada has given it a bad reputation internationally. It has an acquired a bad picture in international trade sector although the government is striving towards implementing policies that will curb bankruptcy. In essence, bankruptcy in Canada is derailing the development of country’s economy by affecting its relation with other international economies and discouraging investments.

References


Allen, Jason, and Evren Damar. "Household Insolvency In Canada." Bank Of Canada Review (2011): 43-54. Business Source Complete. Web. 31 Oct. 2013.

Ben-ishai, Stephanie. "Involuntary Creditors And Corporate Bankruptcy." U.B.C. Law Review 45.(2012): 253. LexisNexis Academic: Law Reviews. Web. 31 Oct. 2013.

Bennett, Frank. Bennett's A-Z Guide to Bankruptcy: A Professional's Handbook. Toronto: CCH Canadian, 2007. Print.

Bradford,Greenberg. Bradford and Greenberg's Canadian Bankruptcy Act (annotated): Containing References to All Relevant Decisions Rendered by the Courts Throughout Canada. Toronto: Burroughs, 2010. Print.

Honsberger, John D, Vern W. DaRe, and Lewis Duncan. Bankruptcy in Canada. Aurora, Ont: Canada Law Book, 2009. Print.

Loring, John. "Too Much of a Bad Thing: Personal Bankruptcies are Soaring in Canada.SoWhy are so Many Bankruptcy Trustees Finding it Hard to make Ends Meet?" Canadian Business 05 2007: 51-4. ProQuest. Web. 31 Oct. 2013 .

Socrates Media. Bankruptcy: An Action Plan for Renewal. Chicago, Ill: Socrates Media, 2006. Print. Warn, Ken. "Canada 3000 in Bankruptcy Move." Financial Times: 21. Nov 09 2006. ProQuest. Web. 31 Oct. 2013.

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