Asset

Items that you own such as a house, motor vehicle, furniture, bank account, investments, life insurance policies, etc.

Assignment in Bankruptcy

This is the process whereby you voluntarily assign yourself into bankruptcy.

Bankruptcy

It is a legal process performed under the bankruptcy and insolvency act which relieves you of most debts and legal proceedings while protecting you from your creditors.

Bankruptcy and Insolvency Act

The federal law which governs and regulates bankruptcy’s, proposals and other related insolvency proceedings in Canada. Designed to help the honest debtor deal with overwhelming debt.

Consumer Proposal

An option that allows you to legally reduce the amount of your debts, extend the time to pay or a combination of both. This becomes a legally binding contract on the creditors and it also provides debtors with protection from creditors.

Co-signer

Someone who agrees to sign a loan agreement with you, so that if you are unable to pay the loan they will have to. This is usually required if you have a new or bad credit rating. A bankruptcy or proposal proceeding does not cancel or eliminate the responsibility of the co-signer.

Credit Bureau

The credit bureau is an independent agency that maintains records regarding your credit history and makes it available to lending institutions and other members. The two main credit bureaus in Canada are equifax and trans union.

Credit Rating

Similar to a report card this is an indication to a lender if you are a good credit risk. (see more under the credit bureaus section).

Creditor

The person or company that you owe money to.

Debt

When you owe someone for something.  (the landlord for rent, the bank for a car payment or the utility company for the power.) Having debt is not always a problem but having more debt than you can afford to pay may become a problem. Having more debts than you can handle may render you insolvent.

Debtor

The person that owes the money.

Equity

The difference between what something is worth and how much you owe on it. If your car is worth $15,000.00 and you owe $12,000.00, you have $3,000.00 equity in your car.

Exempt Assets

Under the Bankruptcy and Insolvency Act and provincial legislation there are rules that protect certain assets. Please see the exemption section under the question and answer section for a more complete list of exempt assets.

Garnishee/Garnishment

When you fail to pay your creditor for a debt that you owe, they may seek to garnish you. The creditor asks the court to order a third party to turn over to the creditor any of the debtors property such as money in your bank account or a percentage of your wages.

Industry Canada

The federal government department that oversees the bankruptcy and insolvency industry in Canada.

Insolvency

The condition of being unable to pay debts as they become due or having more liabilities than assets.

Inspector

A person(s) appointed by the creditor (might also be the creditor) to represent the creditors and provide guidance to the trustee during a bankruptcy or proposal.

Judgment

A court’s final determination of the rights and obligations of the parties in a case. Upon receiving judgment, a creditor may then obtain a garnishee summons or a writ of enforcement to garnish wages or bank accounts or to attempt seizure of assets.

Liabilities

Another term for debt. The state of being legally obligated or accountable. You are liable for rent.

Meditation

During the course of a bankruptcy there could be a disagreement between the trustee, the debtor or a creditor regarding the amount of surplus income that is required to be paid by the bankrupt for his creditors. The mediator is an employee from the office of the superintendent of bankruptcy who will attempt to have the disputing parties reach a mutually satisfactory solution to avoid lengthy and expensive court proceedings. This is a rare occurrence.

Official Receiver

A title given to a federal government employee from the Office of the Superintendent of Bankruptcy. This person is also an officer of the court and they have the authority to chair creditor meetings, accept bankruptcy and proposal filings, approves trustee’s accounts and examine bankrupts under oath. The official receiver generally supervises the trustee and oversees the administration of the bankruptcy and insolvency act to ensure compliance.

Secured Creditor

If you have pledged assets or collateral to a bank or a company for a debt, then they are a ‘secured’ creditor.

Seizure

The act of taking possession of assets such as a bank account or a vehicle.

Surplus Income

At the beginning of the bankruptcy the trustee will review your financial situation and determine if you are required to make a monthly payment to your ‘bankrupt estate’ for the benefit of your creditors. The amount of surplus income is based on the ‘standard’ as established by the office of the superintendent of bankruptcy. The ‘standard’ sets out the amount of net income the bankrupt is able to retain in order to support the family. The ‘standard’ is uniform across Canada and is enforced by the superintendent and the courts.

The Bankruptcy and Insolvency Act

The federal law that governs bankruptcy and insolvency proceedings in Canada. All parties including the Insolvency Trustee, the debtor, the creditors, the government and the courts must abide by the laws. If you are interested in reading the complete act, it is available on the Industry Canada website.

Trustee

(Insolvency Trustee) this is the person responsible for administering a bankruptcy or a proposal. They are licensed by the Superintendent of Bankruptcy under the bankruptcy and insolvency act and are well educated and experienced to deal with your financial problems. The trustee is a neutral party who represents the creditors, is an officer of the court and will ensure that your rights are respected. Please be aware that some people advertise themselves as credit counselors or debt counselors, they are not trustees.

Statement of Claim

A document filed with the court to start legal proceedings to recover money owed.

Unsecured Creditor

A person or business that you owe money to but holds no security. An example would be a credit card company, a utility company or the income tax department.

Writ of Execution

A court order directing the sheriff or the bailiff to enforce a judgment by seizing and selling your assets.

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