Perry Krieger & AssociatesAct 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.
Arms Length: Describes dealings between two parties who, amongst other things, are not related by blood or marriage and are presumed to have roughly equal bargaining power.
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: A voluntary assignment by an insolvent person of all of his property to a trustee for the general benefit of creditors.
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.
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.
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: 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.).
Creditor: One to whom a debt is owed; in insolvency matters, a person having a claim provable under the Bankruptcy and Insolvency Act.
Debt: A specific sum of money due by agreement or otherwise.
Debtor: One who owes money to another.
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.
Dividend: The proportional share of a bankrupt’s estate paid out by the trustee to creditors who have proven claims against that estate.
Equity: The difference between the market value of an asset and the secured debt against it.
Guarantor: A person who takes on financial responsibility for another’s debt.
Inspector: Inspectors are 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.
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.
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 time period as the court may determine.
Liabilities: Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable etc.
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.
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.
Person: 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.
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.
Provable Claim: Any liability of the debtor for a debt incurred before the date of the bankruptcy.
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.
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.
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 Person: 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.
Secured Creditor: A person holding an instrument 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 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.
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 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.
Statement of Receipts and Disbursements: A statement detailing the receipt and disbursement of funds, interest received, fees charged by the trustee, 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.
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.
Trustee in Bankruptcy: A person licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.
Unsecured Creditor: A creditor who advances credit without taking any rights against the property of the debtor.