Bankruptcy Glossary
Source: Strategis
Administrator of consumer proposals
A trustee in bankruptcy or a person
appointed by the Superintendent
of Bankruptcy to administer consumer
proposals. The Provinces of British
Columbia, Saskatchewan , Nova Scotia
and Prince Edward Island provide
this service.
Assessment
Before you make a final decision
on making a consumer proposal or
on declaring bankruptcy, the administrator
of consumer proposals or the trustee,
as the case may be, will perform
an assessment. The purposes of this
assessment are to evaluate your
financial situation, to provide
you with an explanation of the options
available to you and to discuss
with you the merits and the consequences
of your choice.
Bankrupt
The legal status of a person who
declares bankruptcy.
Bankruptcy
A legal process, regulated by the
Act, by which you may be discharged
from most of your debts. The purpose
of the Act is to permit an honest,
but unfortunate, debtor to obtain
a discharge from his or her debts,
subject to reasonable conditions.
When you declare bankruptcy, your
property is given to a trustee in
bankruptcy who then sells it and
distributes the money among your
creditors. Your unsecured creditors
will not be able to take legal steps
to recover their debts from you
(such as seizing property or garnisheeing
wages).
Bankruptcy and Insolvency Act (the
Act)
Federal law which regulates bankruptcy
and proposal proceedings in Canada
. This law falls under the responsibility
of the Office of the Superintendent
of Bankruptcy at Industry Canada
.
Bankruptcy Court
Court in which a judge or registrar
will decide on the bankrupt's application
for discharge and other insolvency
matters.
Consolidation Order
Available to residents of British
Columbia , Alberta , Saskatchewan
, Nova Scotia or Prince Edward Island
. A Consolidation Order sets out
the amount and the times when payments
are due to the court. The court
will distribute your payments to
your creditors. This part of the
Bankruptcy and Insolvency Act (Part
X: Orderly Payment of Debts) lets
you pay off your debts over three
years and frees you from creditor
harassment and wage garnishment.
Unlike bankruptcy, you do not lose
your assets.
Consumer proposal
A proposal you can make under the
Bankruptcy and Insolvency Act to
your creditors to modify your payments,
such as reducing the amount of your
debts, extending the time you have
to pay off the debt, or providing
some combination of both.
Co-signers
Your bankruptcy does not cancel
the responsibility of anyone who
has guaranteed or co-signed a loan
on your behalf. For example, if
your parent co-signed a loan for
you, that parent would be liable
to pay the loan in full even if
you decide to file for bankruptcy.
Counselling
Should you decide to make a consumer
proposal or declare bankruptcy,
the Bankruptcy and Insolvency Act
requires that counselling be provided
to you. This counselling must be
given by a counsellor registered
with the Office of the Superintendent
of Bankruptcy.
Creditor
A person, institution or business
to whom money is owed.
Debt consolidation loan
A loan that combines or "consolidates"
your debts into one loan. The lender
will pay off all your debts and,
in return, you make monthly payments
to that one lender.
Debtor
A person who receives a loan or
an advance of goods and services
in exchange for a promise to pay
at a later date.
Exempt property
In a bankruptcy, you must assign
all your assets to the trustee,
except for exempt property (such
as basic furniture, tools-of-trade
and, under certain circumstances,
the goods and services tax credit
payments). Exempt property will
vary from province to province.
Your trustee can tell you what these
are.
Insolvent person
One who is unable to meet financial
obligations as they become due.
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.
Legal action
Although legal actions or most garnishments
against you stop on the date you
declare bankruptcy or file a proposal,
criminal actions and some civil
matters, such as actions in matrimonial
matters, are not affected by the
bankruptcy or proposal. In a proposal,
no creditor can, without permission
of the court, start or continue
any legal action until the proposal
is either withdrawn, refused, annulled
or until the administrator has been
discharged. In the case of a bankruptcy,
no creditor may, without permission
of the court, start or continue
any legal action until the trustee
has been discharged.
Mediation
A way of resolving conflict between
two or more individuals. In the
course of a bankruptcy, the parties
involved in a disagreement can agree
to work with an impartial and independent
person, called a "mediator",
who will help them settle their
dispute instead of going to court.
Generally, the mediator is an employee
from one of the Superintendent of
Bankruptcy's Division Offices. Mediation
is more flexible, speedier and less
costly than a formal court decision.
It allows people affected by the
bankruptcy to be directly involved
in deciding how their disagreement
will be settled. In bankruptcy,
mediation is available to resolve
two types of disputes: disagreements
over the amount of money the bankrupt
will pay to the trustee for the
benefit of the creditors during
the bankruptcy (called surplus income);
and disagreements regarding the
conditions that the trustee has
recommended for a bankrupt's discharge.
Official Receiver
A federal government employee in
the Office of the Superintendent
of Bankruptcy and an officer of
the court with specific duties under
the Bankruptcy and Insolvency Act.
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.
Payments and Surplus Income
Immediately after becoming bankrupt,
you should no longer be required
to make payments to your creditors.
However, while you are an undischarged
bankrupt, you are required to make
payments to your trustee for distribution
to your creditors. Remember, you
have a duty to inform your trustee
of any material change in your financial
situation (for example: an income
tax refund, a new job, or the birth
of a new family member). At the
beginning of the bankruptcy, the
trustee determines the amount that
you will be required to pay. This
amount may be adjusted during the
administration of your bankruptcy
if there is a change in either your
total income or personal or family
situation. The trustee sets the
amount of payment by taking into
account your total income, the standards
issued by the Superintendent of
Bankruptcy, and your personal and
family situation.
Secured Creditor
A creditor who has taken some measure
to protect themselves and holds
a mortgage, pledge, lien or similar
instrument on, or against, your
property. If they are not paid,
they can enforce their claims by
recovering the assets on which they
hold security.
Superintendent of Bankruptcy
A federally appointed official who
oversees the administration of the
Bankruptcy and Insolvency Act in
Canada.
Trustee in Bankruptcy
A person licensed by the Superintendent
of Bankruptcy to administer proposals
and bankruptcies. The trustee represents
your creditors and is an officer
of the court. However, the trustee
can give you information and advice
about both the proposal and bankruptcy
processes and make sure that your
rights, as well as those of the
creditors, are respected.
Unsecured Creditor
A creditor who does not have any
security for the debt owing to them.
Voluntary Deposit scheme
For Quebec residents, the Voluntary
Deposit scheme (better known as
the "Lacombe Law") is
similar to a Consolidation Order.
You must make a monthly payment
based on your income and number
of dependents, to the court. This
service is usually available at
the local courthouse.
Windfalls
Unexpected money, including lottery
winnings and inheritances. Windfalls
occurring during the period of a
bankruptcy must be turned over to
the trustee for distribution to
your creditors.
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