A
- Act of Bankruptcy
An act committed by a debtor as defined under the Bankruptcy and Insolvency Act. One of the most common is if a debtor ceases to meet his liabilities generally as they become due. A creditor with a provable claim of $1000 and over may file a petition for a receiving order if the debtor has committed such an act within the six months preceding the filing of the petition.
- Affidavit
A voluntary written declaration of facts affirmed or sworn under oath before an authorized officer such as a Notary Public or Commissioner of Oaths.
- Application for Bankruptcy Order
An application to a court of law made by creditors in order to put the debtor in bankruptcy.
- Arrears
Money that is owed and should have been paid earlier.
- Assets
In the context of bankruptcy it means all the property of the debtor available for distribution for the general benefit of creditors (available for paying debts).
- Assignment in Bankruptcy
Voluntary assignment by an insolvent person of all of his property to a trustee for the general benefit of creditors.
B
- Bailiff
A person who acts on behalf of any other person in the repossession or seizure of property.
- Bankrupt
A natural person or corporation who has made a voluntary assignment in bankruptcy or against whom a receiving order has been made.
- Bankruptcy
The state of being bankrupt or the fact of becoming bankrupt.
- Bankruptcy and Insolvency Act (BIA)
Bankruptcy and Insolvency Act, a federal statute governing bankruptcy and insolvency in Canada, which is applicable to all provinces and territories.
- Bankruptcy Estate
A legally separate entity when a person or company is declared bankrupt is known as a bankruptcy estate. The estate includes all assets owned by the debtor, surplus income payments, tax refunds, etc. at the time of bankruptcy and are managed by the Trustee to benefit creditors.
C
- Certificate of Full Performance of Proposal
A document issued by the trustee or administrator once a debtor has fully performed his or her obligations under the proposal.
- Collateral
Property that is pledged as security against a debt.
- Conditional Sale
The sale of goods where the buyer receives possession of goods or property but does not receive title to them until specific conditions are fulfilled.
- Consolidation Order
In specific provinces, an order handed down by a provincial court to combine the debts of an insolvent person pursuant to the Orderly Payment of Debt Regulations in Part X of the Bankruptcy and Insolvency Act.
- Consumer Proposal
A simplified process to make a proposal for repayment of debt to creditors, available under the Bankruptcy and Insolvency Act to a consumer debtor whose aggregate debts, excluding any debts secured by the person’s principal residence, do not exceed the amount prescribed in the Bankruptcy and Insolvency Act.
- Contingent Claim
A provable claim in bankruptcy that may or may not become a debt depending upon the result of some future event.
- Counselling Session
A process under which the services of a qualified counsellor are made available to assist and educate bankrupts and/or relatives of bankrupts, or consumer debtors, on good financial management, including prudent use of consumer credit and budgeting principles. During these sessions, at any time, where appropriate, may make referrals to deal with non-budgetary causes of insolvency (e.g.: gambling, addiction, marital and family problems, etc.).
- Creditor
One to whom a debt is owed; in insolvency matters, a person having a claim provable under the Bankruptcy and Insolvency Act.
D
- Debt
The specific sum of money due by an agreement or otherwise.
- Debt Consolidation
A form of debt refinancing that involves taking out one loan to pay off multiple other debts. Commonly this refers to a personal finance process of individuals addressing high consumer debt.
- Debtor
One who owes money to another. Commonly used in Insolvency documents.
- Deemed Trust
A trust established by statute. For example, income tax deducted at source as prescribed by the Income Tax Act is deemed to be held in trust for the Crown.
- Discharge from Bankruptcy
The release of a debtor from the obligation to repay his or her debts. A bankrupt’s discharge may be automatic, suspended, conditional or absolute. A bankrupt may also be refused discharge.
– Absolute Discharge:
It is effective immediately when it is granted by the Bankruptcy Court and means that you are no longer responsible for the debts you had, except for those Debts “not released” described below.– Adjourned Discharge:
Any objection to the granting of a discharge order will, in most cases, cause the hearing to be postponed to a later date.– Conditional Discharge:
Conditions may be imposed by the Court that will have to be met before your discharge becomes absolute. For example, you may have to pay a certain sum of money to the Trustee for distribution to your creditors.– Suspended Discharge:
The court orders a delay so that the discharge will not be effective until a certain date.– Refused Discharge:
While the Court has the right to refuse a discharge, it rarely exercises this power. - Dividend
The proportional share of a bankrupt’s estate paid out by the Trustee to creditors who have proven claims against the estate.
- Duties of a Bankrupt
Obligations that must be performed by a bankrupt. For example, provide the LIT with a statement of the bankrupt’s affairs showing the particulars of his or her assets and liabilities, the name of all his creditors etc.
E
- Encumbrance
A claim or liability that is attached to property or some other right that may lessen its value, e.g. a lien or mortgage.
- Equity
The difference between the market value of an asset and the debt secured against it.
- Exempt Assets
Assets defined as exempt by provincial legislation that are not available to the Insolvency Trustee for the benefit of creditors.
F
- Family Unit
Any person, in addition to the debtor, who may or may not live in the same household, and benefits from either the incurred or income earned by the bankrupt or who contributes to such expenses or income.
- Family unit adjustment
The adjustment to the surplus income based on the percentage of the bankrupt’s available monthly income to the family unit’s available income.
- First Meeting of Creditors
Meeting called by the LIT to consider the affairs of the bankrupt or debtor in a Consumer Proposal, to affirm the appointment of the trustee, to appoint inspectors, and to give such direction to the LIT as the creditors may see fit.
G
- Garnishment
A legal process whereby a creditor requires a third party to turn over to the creditor, a debtor’s property such as wages or bank accounts.
- General Security Agreement
A contract under which all the personal property of a debtor is pledged as security to a lender; (not used in all provinces).
- Guarantor
A person (see definition of “person“) who takes on financial responsibility for another’s debt.
I
- Insolvency
The condition of being unable to pay debts as they become due, or in the ordinary course of business, or having liabilities that exceed the total value of assets.
- Insolvent
A person who is unable to pay debts as they become due in the ordinary course of business, or having liabilities that exceed the total value of assets.
- Insolvent Person
A person is considered to be insolvent when they have ceased to pay their debts in the ordinary course of business, cannot pay their debts as they become due, or the amount of their debts exceed the fair value of their assets.
- Inspector
Inspectors can be appointed by creditors to represent them before the trustee during the administration of proposals and bankruptcies. They are expected to assist the trustee by virtue of their experience and are required to supervise certain aspects of the trustee’s administration.
- Interim Receiver
A Trustee appointed by the court to safeguard the estate assets and perform such other functions as the court may order for such a time period as the court may determine.
J
- Joint and Several Liability
The liability of more than one individual that may be enforced against them all by a joint action or against any one of them by individual action.
- Judgement
A formal decision issued by a court on a matter under its consideration.
L
- Lending Agreement
An agreement, usually in writing, between a borrower and a lender that sets out the terms of the loan between two parties.
- Levy
A fee payable to the Superintendent of Bankruptcy for the purpose of defraying the expenses of the supervision by the Superintendent in the administration of estates.
- Liabilities
Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable etc.
- Licensed Insolvency Trustee/Trustee
A person licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.
- Lien
Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable etc.
- Liquidation
The act of converting assets to cash, especially in bankruptcy or in the dissolution of a business.
M
- Mortgage
A lien against property, which is registered on title, that is granted to secure an obligation such as a debt.
N
- Non-Discretionary Expenses (NDE)
Expenses listed in Directive 11R2, most common of which are child support, spousal support, childcare, medical expenses and some employment related costs. (See Directive 11R2 for a complete list)
- Notice of Intention to File a Proposal (NOI)
A legal document filed with the Official Receiver stating that the debtor intends to file a proposal. The document is to include the name and address of the LIT who has consented in writing to act as the Trustee under the proposal and the names of the creditors who are owed $250 or more and the amounts of their claims. The filing of this document triggers the protection afforded to insolvent debtors under the Bankruptcy and Insolvency Act.
O
- Offences
The offences and sanctions provisions are contained in Part VIII of the Bankruptcy and Insolvency Act. These are criminal or quasi-criminal violations of law; a person guilty of an offence is liable to a fine or imprisonment.
- Official Receiver
The Official Receiver is a federal government employee in the Office of the Superintendent of Bankruptcy and appointed by the Governor in Council. The Official Receiver, among other things, accepts the documents that are filed in proposals and bankruptcies, examines bankrupts under oath and chairs meetings of creditors.
- Order
The command of a Court or Judge.
- Orderly Payment of Debts
In certain provinces, a procedure prescribed in Part X of the Bankruptcy and Insolvency Act, governed by provincial courts, which allows a person to pay debts.
- Ordinary Resolution
A resolution carried by the majority of votes (one vote for each dollar of debt) of claims of creditors at a meeting of creditors; disallowed claims do not have votes.
- OSB
Office of the Superintendent of Bankruptcy, an agency of Industry Canada. The Office of the Superintendent of Bankruptcy supervises the administration of the Bankruptcy and Insolvency Act. The OSB has Division Offices throughout Canada.
P
- Person
Used in legal documents, includes a natural person (human being), a partnership, and a corporation that is recognized by law as having the same rights and duties as a natural person.
- Power of Attorney
A legal instrument (document) setting out explicitly an individual’s authority to act as the agent of the person giving the power of attorney.
- Preferential Treatment
The payment of money or the granting of security by an insolvent debtor that benefits one or more creditors to the detriment of the other creditors.
- Preferred Creditor
A creditor who has been given priority under the Bankruptcy and Insolvency Act over other creditors in the distribution of dividends.
- Proof of Claim
A creditor’s written statement that is submitted to prove the creditor’s claim; used as the basis for paying dividends, if accepted by the Trustee.
- Property
Includes money, goods, land and every description of property, whether real or personal, situated in Canada or elsewhere.
- Proposal
An offer to creditors to settle debts under conditions other than the existing terms. It is a formal agreement under the Bankruptcy and Insolvency Act.
- Proxy
A document signed by a creditor granting another person the authority to represent them at creditors’ meetings. The proxy holder can exercise the creditor’s right to vote.
Q
- Quorum
The minimum number of creditors who must be present in person or by proxy to conduct business or to take a vote. At a meeting of creditors, one creditor present, in person or by proxy, who has duly proven a claim with the Trustee prior to the meeting, constitutes a quorum.
R
- Receiver
A person who has taken possession pursuant to a security agreement of substantially all of the inventory, accounts receivables or the other property of the debtor. “Receiver” also includes a person who has been appointed privately pursuant to a security agreement or by an order of the court for the protection or collection of property that is the subject of diverse claims, usually to seize and sell the property of the debtor.
- Registrar
An Officer of a provincial court appointed by the Chief Justice with the powers and jurisdiction as specified under the Bankruptcy and Insolvency Act.
- Related Persons
Persons who are connected by a blood relationship, marriage, adoption or common-law partnership; while so related, they are deemed not to deal with each other at arm’s length. The Act provides that the definition of related persons extends to corporations, shareholders and directors in certain specified situations.
- Revolving Credit
A loan that calls for a limit on available credit, but within that limit, the borrower can use, repay and reuse the available credit. Eg: Credit Card accounts and Lines of Credit.
S
- Secured Creditor
A person holding an interest such as a mortgage or a lien on or against the whole or part of the property of a debtor as security for a debt due to him from the debtor.
- Security
Property or asset given or pledged to guarantee the fulfilment of an obligation, e.g. for the payment of a loan.
- Seizure
The act of taking possession of property by legal right or process.
- Sheriff
Includes bailiff and any officer charged with the execution of a writ or other process under the Bankruptcy and Insolvency Act or any other Act or proceeding with respect to any property of a debtor.
- Special Resolution
A resolution decided by a majority in number and three-fourths in value of the creditors with proven claims present, personally or by proxy, at a meeting of creditors and voting on the resolution.
- Statement of Affair
The bankrupt’s financial statement or a balance sheet of assets and liabilities showing the estimated value of assets and the names and addresses of creditors and the amounts owed along with other pertinent information.
- Statement of Receipts and Disbursements
A statement detailing the receipt and disbursement of funds, interest received, fees charged by the LIT, all the dividends distributed to the creditors and particulars of property that is not sold.
- Stay of Proceedings
A bar against any creditor for the recovery of a claim provable in bankruptcy against the insolvent person or the insolvent person’s property. No creditor shall start or continue any action, execution or other proceeding for the recovery of such claims.
- Superintendent of Bankruptcy
A federally appointed official who oversees the administration of the Bankruptcy and Insolvency Act in Canada.
- Surplus Income
The portion of an individual bankrupt’s income that is required to be paid into the bankruptcy estate during the bankruptcy as per standards established by the OSB.
T
- Trust
A property interest held by one person at the request of another for the benefit of a third party.
- Trustee / Licensed Insolvency Trustee / LIT
A person licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates. (Corporate and Consumer)
U
- Unsecured Creditor
A creditor who advances credit without taking any rights against the property of the debtor. Eg: credit card companies
V
- Voting Letter
A document in which a creditor with a provable claim registers his vote for or against a proposal.
W
- Warranty
A written guarantee of performance from a vendor to a purchaser stating that the item being sold is good and fit for its intended use by the purchaser.
