Pursuing Claims In Bankruptcy

In a bankruptcy, the bankruptcy trustee is in charge of collecting on any claims held by the bankrupt, and is also given additional powers under the Bankruptcy and Insolvency Act (BIA) to attack transactions entered into prior to bankruptcy. But what happens when the trustee fails or refuses to pursue a claim?

The trustee may feel that the claim has no merit or, more often, that there are insufficient resources in the bankrupt estate to fund the claim. In such cases, a creditor can apply to the court under section 38 of the BIA for an assignment of the trustee's right to pursue the claim.

In the court application, the creditor who is applying must document that the trustee has been requested to take action on the claim and that the trustee has neglected or declined to act. The applicant should also include facts explaining the claim.