Articles about credit management and money problems.
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GTA Credit Solutions offers free debt counselling, and a no-cost, no-obligation first consultation, in private, with one of our professional agents.
Glossary of terms
We are providing these definitions to help you better understand your situation in plain language. We have provided only the definition most pertinent to the situations of financial difficulty and bankruptcy. They should not be considered legal definitions.
Absolute Discharge
A court ruling that relieves a debtor from legal responsibility to repay the debts covered under his or her bankruptcy.
Administrator
The person responsible for the administration of a consumer proposal under the Bankruptcy and Insolvency Act. Designated by the Superintendent of Bankruptcy.
Affidavit
A written account of facts sworn to be true under oath before a legally authorized officer such as a notary public or commissioner of oaths.
Arm’s length
Dealings between two parties who are not related by blood or marriage and are presumed to have equal bargaining power are described as being at “arm’s length.”
Application for Bankruptcy Order
The application to a court by creditors in order to force a debtor into bankruptcy.
Assets
Property belonging to the insolvent person that is available for the payment of debts in the event of bankruptcy.
Assignment in Bankruptcy
The assignment by an insolvent person of all his or her property to a bankruptcy trustee for disbursement to his creditors.
Automatic Discharge
A person who files for bankruptcy who has fulfilled all his obligations and completed his required credit counselling, and whose discharge has not been challenged by his trustee, creditors or the Superintendent of Bankruptcy, will be granted an automatic discharge after nine months for a first bankruptcy and 24 months for a second. (Bankrupts required to make surplus income payments will be granted automatic discharge after 21 months for a first bankruptcy, 36 for a second.)
Bailiff
A legal officer to whom a degree of authority has been granted regarding repossession or seizure of property.
Bankrupt
A debtor judged by the court to be insolvent whose property is divided among his creditors under the Bankruptcy and Insolvency Act.
Bankruptcy
The state of an entity (person or business) that is unable to pay incurred debts as agreed.
Bankruptcy and Insolvency Act (or the Act)
The federal statute governing bankruptcy and insolvency in Canada.
Business
A commercial or industrial enterprise.
CAIRP
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is the national non-profit professional organization representing trustees in bankruptcy, receivers, agents, monitors and consultants in insolvency matters.
CRA
Canada Revenue Agency, the government agency responsible for the administration of tax laws.
Certificate of Full Performance or Proposal
Issued by a trustee or administrator to a debtor who has fulfilled his obligations under a consumer proposal.
Charge
A legal claim on a person’s property to secure payment; a lien.
CIRP
A professional designation CAIRP gives to those who meet its standards for membership, complete the designated course of study and pass required exams. It stands for Chartered Insolvency and Restructuring Professional.
Claim Provable
Any outstanding debt of a person declaring bankruptcy at the date of bankruptcy.
Collateral
Assets put up as security against a debt.
Conditional Discharge
A bankrupt may receive a discharge that is automatic, suspended, conditional or absolute, which releases him from obligation to repay his debts. A conditional discharge is dependent on certain conditions being met.
Conditional Sale
A sales of goods in which the buyer receives the property but does not receive title to them until specific conditions are met.
Consolidation Order
Available in some provinces (not Ontario), it sets out the amount and schedule for payments due to the court, which then distributes the payments to your creditors.
Consumer Proposal
A formal arrangement available under the Bankruptcy and Insolvency Act by which a debtor appeals to his creditors to allow repayment over a specific period.
Contingent Claim
In bankruptcy, a provable claim that qualifies as debt only when certain conditions are met.
Corporation
A legal association, usually a business, that exists independent of its members with powers and liabilities distinct from those of its members.
Counselling
A process of learning and assistance available to insolvent persons and/or bankrupts to help them manage their finances, including credit and budgeting.
Creditor
Someone who extends credit. In bankruptcy, specifically someone having a provable claim against the claimant under the Act.
Debt
A specific amount of money due a creditor by agreement.
Debtor
One who owes money.
Deemed Trust
A trust established by law, such as income tax deducted at the source is deemed to be held in trust for the government.
Default
Failure to pay a debt or perform an obligation
Discharge from Bankruptcy
The release of a debtor from any obligation to repay his or her debts. It may be automatic, suspended, conditional or absolute. It may also be refused.
Division I Proposal
Similar to a consumer proposal, for use when debts exceed $250,000 excluding primary residence mortgage; primarily for use by businesses. If accepted, it allows the debtor to repay (or partially repay, as agreed) amounts owing over an agreed-upon period of time.
Dividend
A share of a bankrupt’s estate paid by his trustee to a creditor with a proven claim.
Duties of a Bankrupt
Those obligations that must be met by a bankrupt in order to fulfill the agreement, such as providing the names of all creditors and amounts owed.
Encumbrance
A claim against an asset, such as a lien or a mortgage.
Equity
The difference between the market value of an asset and the debt owed on it, when the market value is greater. Negative equity results when the amount owed exceeds the market value.
Estate
Assets (property) belonging to a person.
Examination
An official receiver, trustee or other party under the Bankruptcy and Insolvency Act may conduct questioning of a potential bankruptcy with regard to conduct, causes and disposition of property.
Exempt Asset
Property not available to the trustee to be disbursed to creditors.
Garnishment
The legal requirement by a creditor for a third party to turn over payment, such as wages turned over to a creditor directly from an insolvent person’s employer.
General Rules
The rules of the Bankruptcy and Insolvency Act.
Guarantor
Someone who takes ultimate responsibility for another’s debt.
Hypothec
A security interest in an asset legally given to a creditor, such that the creditor may follow the asset even through successive changes of ownership to take possession of it or sell it in payment if obligations are not met.
Inspector
An official appointed by creditors to represent their interests before a trustee in proposals and bankruptcies and supervise certain aspects of administration.
Insolvency
The condition of being unable to repay debts as prescribed, or having liabilities that exceed total assets.
Insolvent debtor
A person or business who cannot repay debts as agreed.
Interim Receiver
A court-appointed trustee who safeguards assets during a legal procedure such as bankruptcy.
Joint and Several Liability
Where two or more persons are liable with respect to the same liability, it may be enforced against them either jointly or individually.
Judgment
A judicial decision made by a court.
Levy
A fee payable to the Superintendent of Bankruptcy in order to offset the expense of supervising the administration of an estate.
Liability
Obligation of a debt by a person or business.
Lien
A legal claim on an asset by a creditor, usually lasting until debt on the asset is paid.
Liquidation
The sale of available assets for cash.
Mortgage
A lien on property to secure a debt.
Notice of Intention to Enforce Security
When a creditor holds security on a debt, this is the legal notification of intention to enforce that security. Under the Bankruptcy and Insolvency Act, a creditor must supply a debtor 10 days’ notice.
Notice of Intention to File a Proposal
The first document to be filed with the Official Receiver when a debtor intends to file a proposal; protection afforded the debtor under the Act is then triggered.
Offences
Criminal or quasi-criminal violations of the law as contained in the Act.
Official Receiver
A federal government employee in the Office of the Superintendent of Bankruptcy appointed by the Governor in Council to accept documents filed in proposal and bankruptcies, as well as conduct examinations and chair meetings.
Ontario Execution Act
A provincial act stipulating which assets are exempt from settlement in bankruptcy.
Orderly Payment of Debts
See Consolidation Order.
Order of Absolute Discharge
An official court document issued to a bankrupt freeing him of his obligation to repay those debts incurred before declaring bankruptcy.
Order of Conditional Discharge
An official court document granting a bankrupt freedom from his obligation to repay those debts incurred before declaring bankruptcy subject to certain conditions, such as a payment made to the trustee for disbursement to creditors.
Order of Suspended Discharge
An official court document that will grant a bankrupt freedom from his obligation to repay those debts incurred before declaring bankruptcy effective on a certain future date.
Ordinary Resolution
At a meeting of creditors, each dollar owed in allowed claims gets one vote; an ordinary resolution is carried by the majority of votes.
OSB
Office of the Superintendent of Bankruptcy, responsible for the supervision of the administration of the Bankruptcy and Insolvency Act.
Person
A human being, partnership or corporation recognized by law as having the same rights and duties as a human being (referred to as a “natural person”).
Power of Attorney
A legal document allowing an individual to act as an agent for another person.
Preferential Treatment
A creditor given priority under the Act over other creditors.
Preferred Creditor
One who is given priority over other creditors in the disbursement of dividends under the Act.
Priority
The order in which creditors are ranked for payment under the Act.
Proof of Claim
Documentation accepted by the trustee as provided by a creditor as a basis for paying dividends.
Provable Claim
Liability of a debtor for a debt incurred before bankruptcy.
Property
Assets, whether money, goods or land, whether movable or immovable.
Proxy
Official authority given by a creditor for another to represent his interests in meetings and to exercise the creditor’s right to vote.
Quorum
The minimum number of creditors who must, either in person or by proxy, by present in order to conduct a legally binding vote.
Receiver
The person who takes possession of assets of a debtor pursuant to a security agreement, usually for the purpose of selling those assets.
Registrar
An officer of a provincial court appointed by the Chief Justice as specified under the Act.
Related Persons
People (generally blood related, married, adopted or common-law), corporations, shareholders or directors deemed not to deal with one another at arm’s length.
RESP
Registered Education Savings Plan
RHOSP
Registered Home Ownership Savings Plan
RRSP
Registered Retirement Savings Plan
Secured Creditor
Someone who extends credit based on the condition that if the debtor fails to meet repayment obligations, the creditor regains possession of the item for which the loan was made, such as a lien or a mortgage.
Security
An asset pledged against the fulfillment of an obligation such as the payment of a loan.
Seizure
Legally taking possession of an asset.
Sheriff
A legal officer such as a bailiff charged with the execution of a writ or other legal process under the Act with respect to property of a debtor.
Solvency
The ability to pay debts as they are due.
Special Resolution
A resolution decided by a majority vote of creditors (three-quarters in value) with proven claims at a meeting of creditors.
Statement of Affairs
A balance sheet or financial statement of a bankrupt showing estimated value of assets and liabilities, including creditors and amounts owed.
Statement of Receipts and Disbursements
Details of receipt and disbursement of funds, interest received, fees charged by a trustee, dividends distributed to creditors and particulars of unsold property.
Stay of Proceedings
Upon filing bankruptcy, a proposal or a notice of intention, the prohibiting of further action against a debtor or his property for recovery of a provable claim.
Superintendent of Bankruptcy
The federally appointed official who oversees the administration of the Bankruptcy and Insolvency Act.
Surplus Income
The portion of a bankrupt’s income required to be paid into the bankruptcy estate during bankruptcy.
Suspended Discharge
A court ruling that relieves a debtor from legal responsibility to repay the debts covered under his or her bankruptcy on a specified future date.
Taxation of Accounts
Application for court approval of the fees and disbursements of a trustee, interim receiver or legal counsel.
Trust
The holding of assets by one person at the request of another for the benefit of a third.
Trustee in Bankruptcy
One who administrates bankruptcy and proposal estates by licence from the Superintendent of Bankruptcy.
Unsecured Debt
Money owed to a creditor who holds no security (i.e. lien or mortgage) on the assets of the debtor.
Unsecured Creditor
One who advances credit without holding security (i.e. lien or mortgage).
Voting Letter
The document by which a creditor with a provable claim registers his vote during proposal proceedings.
We’re just a phone call away.
Call us at 310-7700 (no area code), email us, or use our online assessment form, and today could be the day you begin to put your financial problems behind you.
GTA Credit Solutions offers free debt counselling, and a no-cost, no-obligation first consultation, in private, with one of our professional agents.
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