de Vries Litigation
By Elaine Yu
March 10th, 2025
Sometimes, an estate’s debts and liabilities are greater than its assets. When that occurs, an estate trustee should consider assigning the estate into bankruptcy.
This is for the protection of the estate trustee, as he or she may otherwise become personally liable for the estate’s unpaid debts and liabilities.
If an estate is successfully assigned into bankruptcy, a bankruptcy trustee is appointed, and the estate trustee is discharged and no longer at risk of the aforementioned liabilities.
In Canada, an insolvent estate can only be assigned into bankruptcy with the court’s permission. This is specifically outlined in Section 49(1) of the Bankruptcy and Insolvency Act (BIA).
In determining whether an estate meets the definition, an estate trustee should be prepared to show the court that they have made adequate inquiries to locate and gather all the estate assets and obtained fair market valuation of these, a list of the estate’s creditors and debts owed to each.
Unfortunately, the task of putting together a list of the estate’s assets, liabilities, and obtaining updated valuations for each can be extremely time consuming. It can also be an expensive task that can require out of pocket expenses from the estate trustee personally.
