Priority Of Creditors In Bankruptcy

Under section 70 of the Bankruptcy and Insolvency Act (BIA), when a debtor assigns into bankruptcy, or is adjudge a bankrupt by a court, and subject to the rights of secured creditors and other provisions of the BIA, all of the debtor's non-exempt assets pass to and become vested in a Licensed Insolvency Trustee. The trustee will realize on the assets and, together with any other proceeds generated in the course of the bankruptcy, distribute the proceeds to creditors. However, not all creditors are treated equally.

Priority rankings under the Bankruptcy and Insolvency Act

Pursuant to section 136 of the Act, proceeds from the sale of assets are distributed to repay creditors in the following order: