Licensed Insolvency Trustee

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Glossary


Assets
Assets are property that are owned that have some value, such as a house, car, furniture, investment or cash.

Assignment in Bankruptcy
The formal process of “going bankrupt” is to make an “assignment in bankruptcy”. In its simplest form, an assignment in bankruptcy is when someone who is having financial problems works with a Trustee to complete and file official documents in order to be declared bankrupt and to be relieved of responsibility for debts.

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.

Bankruptcy
Bankruptcy is (only) one option to help someone with money problems to get a fresh financial start. Bankruptcy is a liquidation process in which the trustee sells property that is not exempt from seizure.  The assets exempt from seizure by a trustee in bankruptcy vary by province.

Consumer Proposal
A Consumer Proposal is an alternative to bankruptcy.  Once entered into a Consumer Proposal is a legal process that is binding on the debtor and his creditors.  In most Consumer Proposals the debtor offers to pay her creditors a percentage of what is owed to them.  Payments are made over a negotiated period of time. The amount to be paid depends on the individual’s specific situation and the amount of money you make.

Co-signer
A co-signer is someone who signs a loan with another person. Generally, the co-signer guarantees that if the person who signs the loan cannot repay the loan, the co-signer will repay it himself or herself.

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 Rating
When creditors are deciding if they should lend you money, they generally look at your credit rating to learn about your credit history and to help them decide if you will be able to repay them. Your credit rating is a recorded history of dealings with members of the Credit Reporting Agency (usually Equifax and Trans Union).

Debt
A specific sum of money due by agreement or otherwise.

Debtor
One who owes money to another.

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.

Estate
All the property of a person; the file in bankruptcy.

Exempt Asset
Assets defined as exempt by provincial legislation that are not available to the trustee for the benefit of creditors.

Garnishment
When you fail to pay creditors the money you owe them, they may apply to Court to seek a “garnishment” against you. This legally allows them to seize your salary, money in your bank account, or other money you own to repay your debt.

Guarantor
A person (see definition of "person") who takes on financial responsibility for another's debt.

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.

Judgement
A formal decision, or Order of a Court deciding a lawsuit.  A Judgement will state the Court’s decision on the amount of a claim against a defendent.

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.

Operating Expenses
These are the expenses businesses must pay on a day-to-day basis to remain in operation – such as rent, utilities, etc.

OSB
Office of the Superintendent of Bankruptcy, an agency of Industry Canada. The Office of the Superintendent of Bankruptcy supervises the administration of the Bankruptcy and Insolvency Act. The OSB has Division Offices throughout Canada.

Preferred Creditor
A creditor who has been given priority under the Bankruptcy and Insolvency Act over other creditors in the distribution of dividends.

Principal Residence
Your principal residence is the home in which you (and your family) live most of the time. It can be a house, condominium, mobile home, or even a houseboat.

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.

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 Claim
A Statement of Claim is a document filed with the Court to start a formal legal proceeding.  It will outline the reasons why a person is being sued and provide some explanation of the debt or other damages claimed.

Statutory Expenses
These are expenses that either businesses or individuals are required to pay by law, such as payroll deductions or GST.

Surplus Income
Every year, the Office of the Superintendent of Bankruptcy publishes Standards providing the Trustee with a matrix to determine if a bankrupt can afford to contribute any money to their creditors while they are bankrupt.  Any money that a bankrupt person earns above the amounts set out in the Standards is called “surplus income” whether it is actually left over or not.

Trustee / Trustee in Bankruptcy
A Trustee in Bankruptcy is a person who is licensed under the Bankruptcy and Insolvency Act.  Trustees must have a certain amount of education, experience, and training to be licensed to act as Trustees. Trustees get paid for their services, and their fees are regulated by legislation.

Unsecured Creditor
A creditor who advances credit without taking any rights against the property of the debtor.

Tax Returns and Tax Credits
All Canadians are required to file tax returns in accordance with the Income Tax Act.  Credits may be deducted for GST paid and various provincial tax credits, etc. that the person may be eligible to receive when filing a tax return.

Windfalls
An unexpected amount of money such as a inheritance, or lottery winnings is referred to as a windfall.

Writ of execution
An official order of the Court directing the Sheriff to seize cash or other property.