Glossary of Terms

A

Absolute Discharge

A final release from bankruptcy, freeing the debtor from the obligation to repay debts covered under the bankruptcy.

Administration Fee

A fee charged by a Licensed Insolvency Trustee (LIT), after you file, to manage a bankruptcy or consumer proposal.

Administrator

An individual authorized by the Superintendent of Bankruptcy to oversee and manage the administration of a consumer proposal in accordance with the Bankruptcy and Insolvency Act.

Assets

In the context of bankruptcy, this refers to all the debtor’s property that can be used to pay off debts, distributed for the general benefit of creditors.

Assignment in Bankruptcy

A voluntary assignment of all assets by an insolvent individual to a Licensed Insolvency Trustee for the collective benefit of their creditors.

Automatic Discharge

An automatic discharge releases a bankrupt individual from most debts at the end of the bankruptcy term, provided they meet all legal obligations, such as insolvency counselling sessions, income and expense forms, and payments, with no objections from creditors or the trustee.

B

Bankrupt

An individual or corporation that has voluntarily filed for bankruptcy or has been placed into bankruptcy by a receiving order.

Bankruptcy

A legal process in which an insolvent person or business assigns assets to a Licensed Insolvency Trustee in exchange for debt relief.

BIA (Bankruptcy and Insolvency Act)

A Canadian federal law that regulates bankruptcy and insolvency, applicable across all provinces and territories.

Budgeting

A financial strategy to track income and expenses, often used to avoid or recover from debt.

C

CAIRP (Canadian Association of Insolvency and Restructuring Professionals)

The Canadian Association of Insolvency and Restructuring Professionals is the national organization that represents Insolvency Trustees, receivers, agents, monitors, and consultants specializing in insolvency matters.

CRA (Canada Revenue Agency)

The CRA is the government agency responsible for administering tax laws and regulations in Canada. It oversees the collection of taxes, the distribution of benefits, and the enforcement of tax compliance. The CRA also handles various government programs, such as the Canada Child Benefit and the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit.

Certificate of Full Performance

A certificate of full performance is issued by a Licensed Insolvency Trustee once an individual has fully met the terms of their consumer proposal, including making all required payments. It marks the successful completion of the proposal, releasing the individual from the remaining debts covered by it.

Collateral

Collateral is property or assets that a borrower pledges to a lender as security for a loan or debt.

Conditional Discharge

A conditional discharge is a court order that releases an individual from the remaining debts under specific conditions. It typically occurs after a bankruptcy discharge, but the individual must meet certain requirements, such as completing additional payments or adhering to particular behaviors over a set period.

Consumer Proposal

A legally binding agreement negotiated with creditors to repay a portion of debts over time while avoiding bankruptcy.

Credit Counselling

Professional guidance on managing debts and improving financial literacy.

Credit Report

A detailed record of a person’s credit history, including debts, repayment behavior, and credit inquiries. It is used by lenders to assess an individual’s creditworthiness.

Creditor

An individual or institution to whom money is owed, such as banks, credit card companies, or other lenders.

D

Debt

Debt is money owed by one party to another, often from borrowing, and must be repaid according to agreed terms, which may include interest. It can be secured or unsecured.

Debt Consolidation

Combining multiple debts into a single loan or repayment plan, often with lower interest rates.

Debtor

An individual who owes money to another.

Default

The inability to meet or fulfill a legal or contractual obligation.

Discharge From Bankruptcy

The formal release from the obligation to repay debts in bankruptcy.

Dividend

The portion of a bankrupt individual’s estate that the trustee distributes to creditors with validated claims against the estate.

Duties of a Bankrupt

Obligations that must be performed by a bankrupt. For example, provide the trustee with a statement of the bankrupt’s affairs showing the particulars of his or her assets and liabilities and attend two insolvency counselling sessions.

E

Encumbrance

A claim or liability tied to property or another right, which may reduce its value, such as a lien or mortgage.

Equity

he value of an asset (like a home) after deducting any debts or liens against it.

Estate

The property of a person, or, the file in bankruptcy.

Exempt Assets

Items protected from seizure during bankruptcy, such as necessary clothing or tools of the trade, depending on provincial laws.

G

Garnishment

A legal process where a portion of an individual’s wages is taken to repay creditors.

Good Faith

Honest intentions in financial dealings, particularly when proposing debt repayment plans.

Guarantor

Someone who agrees to take responsibility for another person’s debt or obligation if they fail to repay it. If the borrower defaults, the guarantor is legally required to step in and fulfill the commitment.

H

Household Income

The total income from all members of a household, used to calculate surplus income in bankruptcy.

I

Inspector

Inspectors are selected by creditors to act on their behalf in dealings with the trustee during the management of proposals and bankruptcies. With their expertise, inspectors assist the trustee and are responsible for overseeing specific aspects of the trustee’s administration.

Insolvency

The inability to pay debts as they come due or having liabilities that exceed assets.

Interest Rate

The percentage charged on borrowed money or earned on savings.

J

Joint and Several Liability

The responsibility shared by multiple individuals, which can be enforced collectively through a joint action or individually through a separate action against any one of them.

Judgment Debt

A debt confirmed by a court decision, which may allow creditors to take enforcement actions.

L

Liability

A financial obligation or debt incurred by an individual or a business, which can include unpaid taxes, wages, accounts payable, etc.

Licensed Insolvency Trustee (LIT)

The only professional authorized to administer bankruptcies and consumer proposals in Canada.

Lien

A legal claim or interest that a creditor holds in a debtor’s property, typically remaining in place until the associated debt is fully repaid.

Liquidation

The process of turning assets into cash, typically during bankruptcy proceedings or when closing down a business.

M

Mortgage Arrers

Missed mortgage payments that may lead to foreclosure.

N

Non-Exempt Assets

Property that may be sold to repay creditors during bankruptcy.

Notice of Bankruptcy

A formal notification to creditors about a bankruptcy filing.

Notice of Intention to File a Proposal

A legal document submitted to the Official Receiver indicating the debtor’s intention to file a proposal. This document must include the name and address of the Licensed Insolvency Trustee who has agreed in writing to act as trustee for the proposal, along with a list of creditors owed $250 or more and the amounts of their claims. Filing this document activates the protections available to insolvent debtors under the Bankruptcy and Insolvency Act.

O

Orderly Payment of Debts

A process outlined in Part X of the Bankruptcy and Insolvency Act, overseen by provincial courts, that enables individuals to repay their debts.

Outstanding Balance

The remaining amount owed on a debt or loan.

Overdraft

A deficit in a bank account caused by withdrawing more money than is available.

Office of the Superintendent of Bankruptcy (OSB)

The Office of the Superintendent of Bankruptcy, part of Industry Canada, oversees the administration of the Bankruptcy and Insolvency Act. With division offices located across Canada, the OSB ensures consistent supervision and enforcement of insolvency regulations nationwide.

P

Payment Plan

A structured agreement to repay debts over time, often part of a consumer proposal.

Preferential Payment

The transfer of funds or the provision of collateral by an insolvent debtor, favoring one or more creditors at the expense of others

Preferred Creditor

A creditor who has been granted priority under the Bankruptcy and Insolvency Act in receiving dividends before other creditors.

Proof of Claim

A creditor’s written declaration submitted to validate their claim, which, if accepted by the Licensed Insolvency Trustee, serves as the foundation for distributing dividends.

Provable Claim

Any liability of the debtor for a debt that was incurred prior to the bankruptcy date.

Proposal

A proposal to creditors to resolve debts on terms different from the current conditions. This is a formal agreement made under the Bankruptcy and Insolvency Act.

Q

Quorum

The minimum number of creditors required to approve a consumer proposal.

R

Receiver

A receiver is an individual who has taken control of most or all of a debtor’s inventory, accounts receivable, or other property under a security agreement. The term “receiver” also refers to someone privately appointed under a security agreement or by court order to manage or collect property subject to multiple claims, typically for the purpose of seizing and selling the debtor’s assets. A registrar is an official of a provincial court, appointed by the Chief Justice, with the authority and responsibilities outlined under the Bankruptcy and Insolvency Act.

Registrar

An Officer of a provincial court designated by the Chief Justice, who holds the powers and jurisdiction outlined in the Bankruptcy and Insolvency Act.

Repayment Schedule

A timetable outlining how and when debts will be repaid.

RESP

Registered Education Savings Plan

RRSP

Registered Retirement Savings Plan

S

Secured Creditor

A person who holds an instrument, such as a mortgage or lien, on all or part of an individual’s property as collateral for a debt owed to them by the individual.

Secured Debt

Debt backed by collateral, such as a car loan or mortgage.

Seizure

The act of legally seizing property through a formal process or entitlement.

Statement of Affairs

A financial statement or balance sheet outlining the estimated value of the assets, along with a list of creditors, including their names, addresses, and the amounts owed.

Statement of Receipts and Disbursements

A report outlining the receipt and distribution of funds, interest earned, fees charged by the Licensed Insolvency Trustee, dividends paid to creditors, and details of any property that remains unsold.

Statute-Barred Debt

Statute-barred debt refers to a debt that can no longer be legally enforced due to the passage of a specific period of time, as set out by the statute of limitations. Once this time limit has passed, the creditor can no longer take legal action to recover the debt, although the debt itself may still exist. The exact time period varies depending on the jurisdiction and the type of debt.

Stay of Proceedings

A prohibition preventing any creditor from initiating or continuing legal action, execution, or other proceedings to recover a claim that can be proven in bankruptcy against the insolvent individual or their property.

Superintendent of Bankruptcy

A government-appointed official responsible for overseeing the implementation of the Bankruptcy and Insolvency Act in Canada.

Surplus Income

Extra income above a set government threshold that bankrupt individuals must contribute to their estate.

T

Tax Debt

Amounts owed to the Canada Revenue Agency, which may be included in bankruptcy or a consumer proposal.

Trust

A property interest owned by one individual on behalf of another, for the benefit of a third party.

Trustee in Bankruptcy

A Licensed Insolvency Trustee responsible for administering bankruptcy or consumer proposal processes.

U

Unsecured Debt

Debt not tied to specific collateral, such as credit card debt or medical bills.

Undischarged Bankrupt

A person who has filed for bankruptcy but has not yet received a discharge.

V

Voluntary Surrender

The act of willingly handing over an asset to a creditor or trustee.

Voting Letter

A document in which a creditor with a valid and provable claim casts their vote either in favor of or against a consumer proposal.

W

Write-Off

A creditor’s decision to declare a debt uncollectible.

If you or someone you know is struggling with debt, don’t wait—take the first step toward a brighter future by reaching out to a Licensed Insolvency Trustee. They can provide personalized guidance to help you understand your options and determine the best path forward. Book a free, no-obligation consultation today, and begin the journey to put your debt and the stress it brings behind you. You’re not alone, and support is just a click or call away.