Which one of the following statements about bankruptcy is true?
A) Bankruptcy law is different in every province.
B) Bankruptcy refers to a situation in which a debtor who cannot pay debts transfers his assets to the creditors directly.
C) Bankruptcy law forces a debtor to pay all his debts, regardless of his financial position.
D) All creditors of a bankrupt debtor are treated equally and will receive shares of the assets directly in proportion to how much is owed to each of them.
E) A debtor who has been discharged from bankruptcy is released from his previous financial obligations.

Question

Quizplus · Accepted Answer

When a debtor is discharged from bankruptcy, they are released from their previous financial obligations. Choice A is incorrect because bankruptcy law is federal, meaning it is the same across all provinces in Canada. Choice B is incorrect because in bankruptcy, a trustee is appointed to oversee the sale of assets and distribute the proceeds to creditors. Choice C is incorrect because bankruptcy law recognizes that a debtor may not be able to pay all of their debts and provides for a discharge after certain conditions are met. Choice D is incorrect because priority is given to certain creditors, such as secured creditors or those owed for alimony or child support, before distribution is made to unsecured creditors.

Which One of the Following Statements About Bankruptcy Is True