Personal Debt Solutions Canada - Bankruptcy Terminology
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Terminology General Usage - Bankruptcy and Insolvency Terms
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Administrator of a Consumer Proposal: is a licensed trustee in bankruptcy who is responsible to administer the proposals by managing the assets held in trust. The trustee gives debtors information and advice about both the proposal and bankruptcy processes and makes sure that both the debtor's rights and the creditor's rights are respected.
Assignment: means an assignment into bankruptcy filed with a trustee and the Office of the Superintendent of Bankruptcy; legal writing by which an insolvent person transfers his or her property and certain associated rights and privileges to a Trustee in bankruptcy for the general benefit of creditors
TopB
Bankruptcy: Bankruptcy is a process governed by Canadian Federal Legislation, the Bankruptcy and Insolvency Act, whereby a person assigns his property over to a trustee for the general benefit of his creditors ; means the state of being bankrupt or the fact of becoming bankrupt;
Bankrupt: means a person who has made an assignment or against whom a bankruptcy order has been made or the legal status of that person;
Business Failure: the cessation of business operations because of the inability to pay debts or some other adverse cause
BIA Counsellor: Canadian regulations under the Bankruptcy and Insolvency Act (BIA), require that individuals who counsel debtors in trustees' offices and credit counselling services become registered Insolvency Counsellors.
As a result, the Chartered Insolvency and Restructuring Professional Qualification Program (CQP), through the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), offers the Insolvency Counsellor's Qualification Course - the ICQC.
Bankruptcy Lawyer: Generally this is at term to refer to the person who oversees the bankruptcy process in the United States. In Canada, the bankruptcy process is administered by a Trustee in Bankruptcy who cannot be a lawyer.
Bankruptcy Trustee: Trustee is a professional who is licensed by the Canadian Federal Government supervise all aspects of the Bankruptcy and Insolvency Act, including bankruptcies and consumer proposals.
TopC
Credit Counselling: A process under which 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;
- in developing successful strategies for achieving financial goals and overcoming financial setbacks;
- and at any time, where appropriate, making referrals to deal with non-budgetary causes of insolvency (e.g.: gambling, addiction, marital and family problems, etc.).
Credit counselling is a required duty of a debtor who assigns themselves into bankruptcy.
Outside of a bankruptcy situation, various agencies and individual in Canada offer unregulated services marketing under the general heading of credit counselling
Credit Bureau: A company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc.
Credit Score: A credit score is a numerical summary of the information contained in your credit report. Credit scores typically range from 300 to 850 with higher credit scores being better. Your credit score is calculated based on the information in your credit report. The more negative information in your credit report, the lower your credit score will be
Claim provable in bankruptcy: provable claim, or claim provable includes any claim or liability provable in proceedings under this Act by a creditor;
Collective agreement: in relation to an insolvent person, means a collective agreement within the meaning of the jurisdiction governing collective bargaining between the insolvent person and a bargaining agent;
Corporation: means a company or legal person that is incorporated by or under an Act of Parliament or of the legislature of a province, an incorporated company, wherever incorporated, that is authorized to carry on business in Canada or has an office or property in Canada or an income trust, but does not include banks, authorized foreign banks within the meaning of section 2 of the Bank Act, insurance companies, trust companies, loan companies or railway companies;
Consideration: value given as part of an exchange. The amount paid in accordance with a sales agreement or other contract. In general, for a contract to be binding consideration must have been give and received.
Creditor: means a person having a claim provable as a claim under this Act;
TopD
Date of the bankruptcy: , in respect of a person, means the date of
- (a) the granting of a bankruptcy order against the person,
- (b) the filing of an assignment in respect of the person, or
- (c) the event that causes an assignment by the person to be deemed;
Debt Pooler: "Debt pooler" means a person a personal or business who in the course of business, arranges or operates a debt pooling system.
A "debt pooling system" means an arrangement or procedure under which a debtor pays money to a debt pooler, which is to be distributed or paid, according to a system, by that debt pooler, to 3 or more creditors of the debtor.
Debt Management Plan: A formal agreement between debtor(s) and creditors(s). Debt Management Plans help reduce outstanding, unsecured debts at a reduced level over a fixed period of time to help regain control of finances.
Debt Management Plans are individually tailored based on what can be realistically afforded on a monthly basis. To achieve an accurate figure, an income and expenditure test will establish what monies are coming into the household and what is being paid out. Income and expenditure includes everything, such as rent/mortgage, secured loans, utility bills, and essential living expenses (food & TV license etc.). Once the income and expenditure is completed, the leftover amount is your disposable income which is divided amongst creditors through a Debt Management company.
Debtor: includes an insolvent person and any person who, at the time an act of bankruptcy was committed by him, resided or carried on business in Canada and, where the context requires, includes a bankrupt;
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. (from osb.ic.gc.ca)
Director's Liability: the personal obligation or liability of a director of a corporation that arises pursuant to stature. Director's liability normally arises where the corporation has failed to pay its source deductions, certain taxes, wages or prescribed employee benefits, or alternatively, where the corporation has failed to comply with environmental or similar regulations.
Distrain: the statutory remedy and legal process available to landlords whereby they may seize the assets of a defaulting tenant that are located in the leased premises, in a satisfaction of unpaid rent.
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.
- Automatic Discharge
A debtor whose discharge is not opposed by the Superintendent of Bankruptcy, the trustee or a creditor and who has not refused or neglected to receive counselling, is automatically discharged after 9, 21, 24 or 36 months, depending on whether it is a first or second bankruptcy. The discharge also depends on whether or not the bankrupt is required to pay a portion of his or her surplus income into the bankruptcy estate per the standard established by the OSB. - Order of Absolute Discharge
This official document issued by the court relieves the debtor of the debts incurred before the debtor declared bankruptcy, taking under consideration the exceptions provided in the Act. - Order of Conditional Discharge
The court may impose certain conditions that must be met before a person's discharge becomes absolute. For example, the Court may require you to pay an amount to your trustee for distribution to your creditors. - Order of Suspended Discharge
The court orders a delay so that the discharge will not be effective until a certain date.
Director: means those in respect of a corporation other than an income trust, means a person occupying the position of director by whatever name called and, in the case of an income trust, a person occupying the position of trustee by whatever name called;
TopE
Encumbrance: a legal claim on an asset. An encumbrance is normally registered in accordance with relevant provincial law.
Equity: means the excess value of an asset over its encumbrances.
Estate: means the total possession and property of a persona, family or corporation; a view of the bankrupt's property in its entirety. It is the legal concept whereby a Trustee in bankruptcy operates as Trustee of the estate of a bankrupt.
Excess Income (see Surplus Income)
TopF
Financial collateral: means any of the following that is subject to an interest, or in the Province of Quebec a right, that secures payment or performance of an obligation in respect of an eligible financial contract or that is subject to a title transfer credit support agreement:
- (a) cash or cash equivalents, including negotiable instruments and demand deposits,
- (b) securities, a securities account, a securities entitlement or a right to acquire securities, or
- (c) a futures agreement or a futures account;
Foreclosure: means the legal process whereby an asset (usually a house) is recovered by a secured creditor after the debtor has defaulted on a payment. Normally, the debtor does not have the right to redeem (sell themselves) the foreclosed asset and any subordinated secured creditors can lose their security interest. The secured creditor takes possession of the asset and can either offer it for sale (Order Nisi) or keep it in payment of the debt (Order Absolute)
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Garnishment: A legal procedure by which a creditor can collect what a debtor owes by reaching the debtor's property when it is in the hands of someone other than the debtor.
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Insolvent person: means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and
- (a) who is for any reason unable to meet his obligations as they generally become due,
- (b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
- (c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;
L
Liabilities: Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable etc.
Legislation: A proposed or enacted law or group of laws.
Legal counsel: means any person qualified, in accordance with the laws of a province, to give legal advice
TopM/N
Notice of Intention to File a Proposal: is a legal document filed with the Superintendent of Bankruptcy with the assistance of a Trustee, which gives an insolvent debtor time to put together a Proposal because creditors cannot sue or seize assets of the debtor until the Proposal is filed. The debtor can either file a Proposal or eventually file for bankruptcy
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Office of the Superintendent of Bankruptcy: A part of the federal government under Industry Canada who has been appointed to oversee the administration of the Bankruptcy and Insolvency Act
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Person: Under the Bankruptcy and Insolvency Act includes a partnership, an unincorporated association, a corporation, a cooperative society or a cooperative organization, the successors of a partnership, of an association, of a corporation, of a society or of an organization and the heirs, executors, liquidators of the succession, administrators or other legal representatives of a person;
Personal Property Security Act : Personal Property Security Acts (PPSA) are registries set up in certain provinces (Ontario, New Brunswick, Nova Scotia, Saskatchewan, British Columbia, Newfoundland, Northwest Territories, Manitoba and Yukon), at which secured creditors register the security interest the have in assets of the company or person they lent money to.
Registration serves as a public notice that the interest exists against the collateral.
PPSA's do not provide for registration of all secured assets. For example, the BC registry does not accept builders or warehousemen liens, judgments, real property mortgages, or motor vehicle ownership.
Petitioning into Bankruptcy: This is when a creditor applies to the Court to have an individual debtor adjudged a bankrupt. One purpose of the Bankruptcy and Insolvency Act ("the Act") is to provide for the orderly and fair distribution of the property of a bankrupt amongst his or her creditors. Petitioning a debtor into bankruptcy provides a mechanism under which all non-exempt assets can be divided fairly among all creditors.
Property: means any type of property, whether situated in Canada or elsewhere, and includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, as well as obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property;
Proposal means:
- (a) in any provision of Division I of Part III, a proposal made under that Division, and
- (b) in any other provision, a proposal made under Division I of Part III or a consumer proposal made under Division II of Part III
and includes a proposal or consumer proposal, as the case may be, for a composition, for an extension of time or for a scheme or arrangement;
TopQ/R/S
Statement of Affairs: 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.
Statute: A written law passed by a legislative body. The main Bankruptcy Statute in Canada is the Bankruptcy and Insolvency Act (BIA)
Surplus Income: For each month that a debtor is in the bankruptcy process, he or she must inform the trustee how much money they make each month. The federal governments establish a list of income levels for households based on the number of people living in each house. If the household's income exceeds the level set by the government then additional payments must be made to the trustee during the bankruptcy.
Secured creditor: means a person holding a mortgage, hypothec, pledge, charge or lien on or against the property of the debtor or any part of that property as security for a debt due or accruing due to the person from the debtor, or a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable, and includes
- (a) a person who has a right of retention or a prior claim constituting a real right, within the meaning of the Civil Code of Quebec or any other statute of the Province of Quebec, on or against the property of the debtor or any part of that property, or
- (b) any of
- (i) the vendor of any property sold to the debtor under a conditional or instalment sale,
- (ii) the purchaser of any property from the debtor subject to a right of redemption, or
- (iii) the trustee of a trust constituted by the debtor to secure the performance of an obligation,
if the exercise of the person's rights is subject to the provisions of Book Six of the Civil Code of Quebec entitled Prior Claims and Hypothecs that deal with the exercise of hypothecary rights;
Superintendent: means the Superintendent of Bankruptcy appointed under subsection 5(1) of the Bankruptcy and Insolvency Act
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Taxation: The formal quasi-judicial review of a bill of costs or other determination of costs payable by one litigant to another. In bankruptcy situation this refers to the review by the court of the trustee's or legal fees in an insolvency file.
Transfer at undervalue: means a disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor;
Trustee or "licensed trustee": means a person who is licensed or appointed under the Bankruptcy and Insolvency Act