Ontario Barrister and Solicitor Practice Exam

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What does entering into a proposal during bankruptcy imply?

Liquidating assets to pay debts.
An offer is made to settle a debt.
The company ceases operations immediately.
All assets are surrendered to a trustee.

The correct answer is: An offer is made to settle a debt.

Entering into a proposal during bankruptcy does not necessarily mean that the company will cease operations immediately (C) or that all assets will be surrendered to a trustee (D). It also does not necessarily mean that the company will liquidate its assets to pay off debts (A). While these may be potential outcomes of entering into a proposal during bankruptcy, the primary implication is that the company is making an offer to settle its debt. This option (B) is the most likely implication of entering into a proposal during bankruptcy.