Automatic Discharge
The legal release of a first-time bankrupt from their debts after 9 months (or 21 months if surplus income is required), granted automatically without a formal court hearing provided all duties are fulfilled.
Canadian Bankruptcy & Debt Relief Dictionary
Clear, plain-language legal definitions for insolvency terms, federal regulations, and credit ratings under the Canadian Bankruptcy and Insolvency Act (BIA).
Canadian Insolvency Jargon Explained
Navigating federal debt laws can be confusing. Use our searchable dictionary below to understand your legal rights, provincial exemptions, credit rating codes, and Trustee procedures.
A
Asset Exemptions
Statutory thresholds set under provincial execution laws that define how much equity in a primary residence, motor vehicle, household furnishings, clothing, and tools of trade you are legally permitted to keep during bankruptcy.
B
Bankruptcy and Insolvency Act (BIA)
The primary federal statute in Canada that governs personal bankruptcy, commercial insolvencies, and Consumer Proposals. The BIA ensures equitable distribution of assets and protects honest, unfortunate debtors.
Bank Freeze (Account Garnishment)
A legal enforcement action where a creditor or the Canada Revenue Agency (CRA) issues a third-party demand to a bank, seizing 100% of the cash sitting in a debtor's bank account.
C
Consumer Proposal
A formal, legally binding proceeding under the BIA where a debtor offers to pay unsecured creditors a negotiated percentage of what is owed over up to 5 years with 0% interest, allowing the debtor to retain all property.
Certificate of Full Performance
The official legal document issued by a Licensed Insolvency Trustee upon the completion of a Consumer Proposal, proving that all terms have been satisfied and legal release of included debts is granted.
CRA Tax Debt
Unpaid personal income tax (T1), GST/HST remittances, payroll source deductions, or CERB overpayments owed to the Canada Revenue Agency. CRA tax debt is fully dischargeable through proposals and bankruptcies.
D
Discharge from Bankruptcy
The final legal order that releases a bankrupt individual from the legal obligation to repay debts that existed on the date the bankruptcy was filed.
E
Equifax & TransUnion
The two major consumer credit reporting agencies operating in Canada that record payment histories, public records, insolvencies, and credit scores.
G
Garnishment (Wage Attachment)
A legal order served on an employer requiring them to deduct a portion of an employee's paycheck (typically 20% to 50%) and remit it directly to a court or the CRA to pay down a debt.
L
Licensed Insolvency Trustee (LIT)
The only officer of the court in Canada federally authorized, licensed, and regulated by the Office of the Superintendent of Bankruptcy (OSB) to administer Consumer Proposals and personal bankruptcies.
O
Office of the Superintendent of Bankruptcy (OSB)
The federal government agency (an arm of Innovation, Science and Economic Development Canada) that regulates the bankruptcy system, supervises LITs, and sets annual Surplus Income standards.
R
R7 Credit Rating
The credit bureau notation applied to debts included in a Consumer Proposal or formal debt settlement plan. An R7 remains on Canadian credit reports for 3 years after the proposal is fully completed.
R9 Credit Rating
The lowest credit rating in Canada, assigned to accounts written off as bad debt, sent to collections, or included in personal bankruptcy. Remains for 6 to 7 years post-discharge for a first bankruptcy.
S
Stay of Proceedings
An automatic legal injunction triggered under Section 69 of the BIA the instant a Consumer Proposal or Bankruptcy is filed. It legally forbids creditors and the CRA from initiating or continuing lawsuits, phone calls, or wage garnishments.
Surplus Income
Mandatory monthly payments paid into a bankruptcy estate required by federal law if a bankrupt household earns more than the net income limits established annually by the OSB.
T
Tax Debt 7-Year Student Loan Rule
The federal statutory provision requiring government student loans to be at least 7 years old (from the date full-time or part-time studies ceased) before they can be completely erased in a Consumer Proposal or Bankruptcy.
U
Unsecured Debt
Debts that are not tied to physical collateral (like a house or car), including credit cards, lines of credit, personal loans, medical bills, CRA tax debt, and payday loans.
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