Our glossary will guide you through language we may know like the back of our hands, but that others may not—like what insolvent means, for example.
Arm’s Length transaction
Is a transaction between persons upon whom there are no bonds of dependence, control or influence.
Assignment to Trustee
A debtor can formally assign all of his or her property to a bankruptcy trustee who will sell the property or use it to pay a debt.
Bankruptcy and Insolvency Act (BIA)
The federal law that regulates bankruptcy and insolvency in Canada.
Consumer Proposal Administrator
A bankruptcy trustee or person appointed or designated by the Office of the Superintendent of Bankruptcy to administer consumer proposals.
Counselling from a counsellor registered with the Office of Superintendent of Bankruptcy to help a debtor understand how the debt occurred and to help him or her better manage his or her finances in the future.
The person or business who has a preferred, secured or unsecured claim provable under the Bankruptcy and Insolvency Act.
Creditor rights and collection methods
Creditor rights and collection methods refer to the various types of methods a creditor may use to collect on debts due to them. These methods include such procedures as judgements, garnishing orders, notices of intention to enforce security, bankruptcy applications and numerous others.
A default is a failure to meet an outstanding obligation as it becomes due. Typically, a default in obligations of payment is a serious sign that a company needs to consult with a Licensed Insolvency Trustee.
Directors liability refers to certain liabilities that personally fall onto directors of insolvent corporations as a result of that company’s inability to satisfy amounts due. Directors liabilities can be extended to numerous debts, including: outstanding source deductions, wage arrears, severance termination, GST amounts, environmental liabilities as well as numerous others.
Discharge from Bankruptcy
A debtor is released from the legal obligation to pay a debt – with some exceptions – as of the bankruptcy filing date.
Under the Bankruptcy and Insolvency Act, a dividend is the proportional share of a bankrupt`s estate paid by the bankruptcy trustee to creditors with proven claims.
Charge or claim against property that remains in effect until the debt is satisfied or the issue is resolved with the other party. In the case of a mortgage, it is said that the property is encumbered by that mortgage.
The value of an asset or interest above the amounts owed on it, such as charges or encumbrances against that property.
Estate inspectors are nominated and appointed by an ordinary resolution at a creditors’ meeting. Any person may act as an estate inspector with the exception of those who are a party to a contested action against the debtor. The estate inspector’s role is to provide authorization and supervision to bankruptcy administrations.
Property which a bankruptcy trustee cannot take ownership of to satisfy debts, such as property held in trust for other persons, GST credit payments and prescribed payments relating to the debtor`s family`s essential needs, and other exempt property as defined the provincial or territorial law where the debtor resides.
A legal process where a creditor gets a third party (e.g., employer or bank) to release the debtor`s property (e.g., wages or bank accounts) in order to satisfy a debt.
Goods and services tax
The Goods and Services Tax (GST) is a Canadian value-added tax levied on most goods and services sold for domestic consumption. The tax is levied to provide revenue for the federal government. GST holds certain priorities depending on the specific type of insolvency engagement and may have a significant impact on realizations to certain classes of creditors.
An individual or entity who takes responsibility for another`s debt or performance under a contract, if the other fails to pay or follow through.
An individual is insolvent if he or she cannot satisfy creditors or discharge liabilities because of debt exceeding assets or because of an inability to pay debts as they mature.
A person appointed by creditors at the first of subsequent meeting of creditors, as part of a committee, to work with a trustee or administrator and oversee his or her handling of a proposal or bankruptcy administration.
A decision by the court that resolves controversy by determining the rights and obligations of the parties.
An legal obligation for which a person is responsible, such the amount owed by a debtor to a creditor for goods, services, taxes, etc.
Licensed Insolvency Trustee (“LIT”)
The Trustee is an individual or corporation who holds a license issued by the Office of the Superintendent of Bankruptcy and as such is authorized to act in administering bankruptcies, proposals, receiverships, and Companies’ Creditors Arrangement Act proceedings. The LIT acts as an officer of the Court in its administrations and, as such, works for the general benefit of all stakeholders.
Meeting of Creditors
A bankruptcy trustee may call a meeting with the creditors to examine the debtor`s financial affairs in order to discuss a consumer proposal or the bankruptcy administration or as per the written request of 25 percent of the creditors holding 25 percent of the value of the proven claims
Not at arm’s length transaction
Transaction where one off the parties may exercise a control, influence or moral pressure of the other party.
Notice of Intention to Enforce Security
A notice of intention to enforce security is a formal demand notice sent by secured creditors with respect to their security. Typically, these notices are sent to debtors in the event that there has been a default payment or the breach of specific covenants detailed in their lending agreement with the debtor. These notices have a 10-day expiry period and, should a debtor receive a notice, they should immediately consult a Licensed Insolvency Trustee.
A federal government employee of the Office of the Superintendent of Bankruptcy who accepts the documents required for a proposal or bankruptcy, examines bankrupts under oath, and chairs meetings of the creditors.
Personal guarantees are guarantees in which an individual agrees to be responsible for the financial obligations of a debtor or borrower to a lender, in the event that the debtor or borrower fails to pay an amount owing under the loan, a creditor may pursue a guarantor for any deficiencies.
A preference occurs when an unsecured creditor sells goods or lends money to a debtor without taking security and, before bankruptcy, receives payment or takes security or a transfer of property from the insolvent debtor and other creditors are not afforded the same treatment. In bankruptcies and proposals, a preference may be reviewed and voided by the Trustee.
A formal offer by a debtor to creditors to settle debts under conditions other than their original terms.
An person appointed by the court or behalf of a creditor to take control of the a debtor`s assets and income for review and inventory of what may be distributed to creditors and what is exempt
An Officer of the Supreme Court empowered to hear and act in matters under the Bankruptcy and Insolvency Act.
Secured debt is debt backed or secured by assets to reduce the risk associated with lending. A common example of a secured debt instrument is a mortgage. In this particular example the asset securing the debt would be a debtor’s residence or piece of real property. If the borrower defaults on repayment, the bank seizes the house, sells it and uses the proceeds to pay back the debt.
Source deductions are the withheld portion of an employee’s earnings that are to be remitted by an employer to the Canada Revenue Agency for income tax withholdings, CCP and EI (as well as the employers required contributions). These amounts form what are called deemed trust claims in an insolvency context and hold a special priority over all types of creditors, including secured creditors. Source Deductions can have a significant impact on a company’s ability to restructure.
Statement of Affairs
A financial statement showing the debtor`s assets and liabilities, including their estimated values and names and addresses of creditors. This statement is usually presented at the beginning of the process.
Statement of Receipts and Disbursements
A financial statement prepared by the bankruptcy trustee indicating receipt of property (including interest), fees and disbursements charged by the trustee, what has been paid to creditors, and the particulars of what property remains unsold. This statement is usually presented at the end of the process.
Stay of Proceedings
A stay of proceedings immediately prevents creditors from starting or continuing a legal action against a debtor and occurs upon filing bankruptcy or a proposal.
Stay of proceedings
A stay of proceedings is a stopping of a judicial proceeding. When a debtor files an assignment into bankruptcy, a Notice of Intention to file a Division I Proposal or files a Division I Proposal under the Bankruptcy and Insolvency Act, certain creditors may be prevented from continuing or commencing action against the debtor and its property.
Transfer at Undervalue
A transfer at undervalue is a disposition of property or provision of services for which no consideration is received by the debtor, or for which the consideration received is conspicuously less than the fair market value of the consideration given by the debtor. In bankruptcies and proposals, a TUV may be reviewed and voided by the Trustee.
Trustee in Bankruptcy
A federal official licenced by the Office Superintendent of Bankruptcy to administer bankruptcies and proposals.
Unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien or secured to specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment. A common example of unsecured debt would be the trade payables of a company.
Thanks for your help and in making a very uncomfortable situation comfortable!Reg A.