Provable claim (bankruptcy)

Whether a debt is a provable claim decides whether a creditor can prove it in proceedings under the Bankruptcy and Insolvency Act. You meet the question when a seller or counterparty becomes bankrupt and you owe, or are owed, money. See how to buy assets from an insolvent company.

What the Act says

Section 2 says a claim provable in bankruptcy includes any claim or liability provable in proceedings under the Act by a creditor. Section 121(1) deems all debts and liabilities, present or future, to which the bankrupt is subject on the day of bankruptcy, or may become subject to before discharge by reason of an obligation incurred before it, to be provable. Section 121(2) sends contingent and unliquidated claims to section 135 for the decision and valuation. The CCAA defines a “claim” by reference to a claim provable under section 2 of the BIA.

What to check or ask

• Whether the obligation was incurred before the bankruptcy.
• Whether the trustee has treated a contingent claim as provable and how it was valued.
• How the claim ranks; the regulator defines priority as the order of ranking for payment of provable claims. See proof of claim.