Assignment in bankruptcy
It is a legal term used in the context of the Bankruptcy and Insolvency Act. It refers to a voluntary action taken by an insolvent debtor to transfer all his seizable assets to a licensed insolvency trustee, with the intention of distributing them among his creditors. In other words, it’s a way for an individual or a business to officially acknowledge that they cannot meet their financial obligations. Here are a few points to note about the transfer of assets:
- Acknowledgment of Insolvency: By proceeding with a transfer of assets, the debtor recognizes that he is insolvent, meaning he is unable to repay his debts as they become due.
- Role of the Trustee: When a transfer of assets is made, a trustee takes possession of the debtor’s (seizable) assets. The trustee is responsible for the liquidation of these assets and the distribution of funds to creditors.
- Consequences for the Debtor: After making a transfer of assets, the debtor is relieved from most of his debts, though there might be certain exceptions (for example, debts resulting from fraud, owed alimony, etc.).
- Impact on Credit: The transfer of assets will have a negative effect on the debtor’s credit score. It will remain on his credit report for several years, but when it’s the best solution, this consequence is less severe than doing nothing.
- Alternatives: Before proceeding with a transfer of assets, a debtor should consider other options, such as debt consolidation or a consumer proposal, depending on the circumstances.
It is important to consult an insolvency professional such as a trustee before making a decision regarding a transfer of assets or any other option related to insolvency.