In October 2019, personal insolvencies in Canada hit a 10-year high.
With financial pressures increasing and more and more people worrying about money, it’s likely that bankruptcies and consumer proposals will become more commonplace in the future.
If you’re considering filing for bankruptcy, it’s important to be aware of common terms and phrases.
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Here are 10 bankruptcy definitions.
Bankruptcy is a legal process, which permits individuals to be discharged from unsecured debts under the Bankruptcy and Insolvency Act.
Once you file for bankruptcy, you will be protected from creditors.
A consumer proposal is often considered as an alternative to bankruptcy.
A proposal is drawn up by a licensed insolvency trustee (LIT) and presented to the debtor’s creditors.
The plan, which is legally binding, is designed to benefit both the creditor and the debtor.
Creditors receive a portion of the outstanding payment and debtors eliminate unsecured debts.
Bankruptcy discharge is a term used to describe the completion of the bankruptcy process.
Once the discharge has been confirmed, the debtor will be freed from any obligations to cover debts included in the bankruptcy and they will be protected from creditors.
Certificate of completion
The certificate of completion confirms the release of the debtor from their debts.
It is presented once the individual has fulfilled all their duties.
Automatic stay of proceedings
Once you file for bankruptcy or a consumer proposal, you enter an automatic stay of proceedings.
During this period, creditors cannot contact you or chase you for money and your wages cannot be garnished.
The stay of proceedings begins on the date you file a consumer proposal or bankruptcy.
Licensed insolvency trustee
A licensed insolvency trustee (LIT) oversees the process of filing for bankruptcy or a consumer proposal.
An LIT is an officer of the court, and they must adhere to guidelines and regulations set out by the OBS (Office of the Superintendent of Bankruptcy).
A bankruptcy estate is a term used to describe the property of the debtor.
This property is subject to realization or seizure from the date the individual files for bankruptcy.
It’s often assumed that you lose everything when you go bankrupt, but this is not the case.
There is a list of exemptions, which is designed to help people stay afloat and get back on track.
The items and values vary according to the region, but examples include household items and clothing, a vehicle, and tools and equipment used for work purposes.
It is possible for two people, usually a couple, to file for bankruptcy together.
This is known as joint administration and it can help to reduce the cost.
Surplus income payment
A surplus income payment is the fee paid by the debtor.
The amount depends on the size of the family, income and expenses, and it is paid into the bankruptcy estate.
The value of payments is calculated according to the Bankruptcy and Insolvency Act.
If you’ve investigated bankruptcy, you may have come across terms and words you haven’t heard of before.
If you have any questions, or you need advice, why not get in touch with us today?
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