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A Glossary of Canadian Bankruptcy Terms
Dictionary – A
Complete and without conditions. For example, a bankrupt, usually after nine months receives an Absolute Order of Discharge, which means all of his debts, with certain exceptions, are wiped out.
Abstract of Title:
A chronological history of property showing the chain of title from its original grant to the present ownership.
Any clause in a contract which spells out that when certain actions are taken, the clause comes into effect. A common acceleration clause is the clause in a lease that says if a company goes into bankruptcy, three months rent is due as a preferred claim.
The act of accepting something, usually a contract. For example, an offer is made to some person that that person buys certain goods for a certain amount of money. If the person to whom the offer is made agrees, then the offer is considered to be accepted.
Goods that are installed in or affixed to other goods.
A bill which has passed through the various legislative steps and, hence, has become law.
A proceeding in a Court of law where one person seeks a Court Order for the enforcement of that person’s or company’s rights.
The delay or postponement usually to another time of a meeting or action.
The date on which parties agree that certain financial adjustments will be made to a contract. For example, on the sale of property, there is an adjustment date set which is the time for the costs, such as property taxes, water, etc., to be apportioned between the purchaser and the vendor.
Administrator of Consumer Proposal:
A trustee or a person appointed or designated by the Superintendent of Bankruptcy to administer consumer proposals.
A statement by a person in which the person states that to the best of his or her knowledge, the facts in question are true. An affidavit is sworn before a Notary, Commissioner for Taking Oaths, lawyer or some other judicial officer who can administer oaths.
After Acquired Property:
Property of a bankrupt acquired between the date of bankruptcy and prior to the bankrupt’s discharge from bankruptcy.
A person who has received, usually by appointment, the power to act on behalf of another.
Agent – Section 427 of the Bank Act:
A person, usually a Trustee in Bankruptcy, appointed by a bank to realize on its security as defined under Section 427 of the Bank Act. The security covered is inventory.
An amount given to one spouse by another while they are separated or divorced.
To make void or to cancel.
To ask a more senior Court or person to review a decision of a subordinate Court or person.
The act of showing up in Court as either plaintiff, defendant, accused, or any other party to a Court action.
The act of making a request usually of the Court, for example, an application to have a bankrupt discharged.
Application for a Bankruptcy Order: ( Petition):
The application made under the Bankruptcy and Insolvency Act for the Court to hand down a Receiving Order (Bankruptcy Order) stating the person is in bankruptcy. In an amendment dated December 15, 2004 this term was changed to Application for a Bankruptcy Order.
The act of designating, or the acquisition of some, responsibility or position. For example, the Court can appoint a Trustee as Receiver of some property.
Things attached to real property or, by their nature, belonging with real property; e.g., an easement or a right of way.
A dispute resolution mechanism, whereby an independent neutral third party is appointed to hear and consider the merits of the dispute, and who renders a final and binding decision called an award.
The act of dealing with a person who is not a relative but an independent third party.
The amount of money by which a contract or obligation is in default.
The valuing of a thing or property.
An interview conducted by a trustee or an administrator of a consumer proposal before a bankruptcy or a consumer proposal is made. Its purpose is to evaluate the debtor’s financial situation, explain the options available and discuss the merits and the consequences of the debtor’s choice.
A thing, chattel, resource or item or piece of property owned or controlled by a person or company.
To give or to transfer responsibility to another.
Assignment into Bankruptcy:
The act of a person who places himself or his company into bankruptcy pursuant to the Bankruptcy and Insolvency Act.
To turn over; e.g., rent; a tenant agrees to recognize a new party as landlord.
First-time bankrupts receive an automatic discharge nine months after they became bankrupt unless it is opposed by either a creditor, the trustee or the Superintendent of Bankruptcy.
Dictionary – B
A person who, in British Columbia, is appointed under the Debt Collection Act who will act or assist any other person to repossess, cease or distraint pursuant to conditions set out in various Acts.
A person who has made an assignment or against whom a receiving order has been made, or the legal status of that person.
The state of being bankrupt.
Bankruptcy Order (Receiving Order):
An Order handed down by the Court following the successful petition to have a person or company placed into bankruptcy. In an amendment dated December 15, 2004 this term was changed to Bankruptcy Order from Receiving Order.
The person who is in receipt, or will be in receipt, of some asset, thing, or thing of value. For example, a person can make a will naming someone, usually their spouse, as beneficiary of their estate.
Where a person has the right of enjoying use and advantage of another’s property.
Bill of Exchange:
A legal document, such as a cheque, where one person in writing specifies that a third party will pay a person a specific sum of money at a specific time, or upon demand.
Bill of Lading:
A document received by a transportation company acknowledging that it has received certain goods and, for the purpose of transportation, serves as title to that property.
Bill of Sale:
An agreement in writing signifying that one person for a specific sum of money has acquired specific assets.
Accounts receivables owned by a company.
In good faith; genuine; without fraud or deceit.
The action that a supplier of goods or services, in respect of construction, can take by filing an entitlement against that property for monies he is owed. Refer to the Builder’s Lien Act.
Dictionary – C
CAIRP (Canadian Association of Insolvency and Restructuring Professionals):
The Canadian Association of Insolvency and Restructuring Professionals is the national professional organization representing 913 general members acting as trustees in bankruptcy, receivers, agents and consultants in insolvency matters. There are also another 430 members (in the articling, life and corporate categories). The Association is a non-profit corporation, established in 1979 to “advance the practice of insolvency administration and the public interest related to it”. The CAIRP website is: http://www.cairp.ca/
That body of Court decisions that act as precedents in the interpretation of various Acts. In some cases, the rule is not in statute books but can be found as a principle of law established by a judge in some recorded case.
Canada – Bank of Canada.
Certificate of Indefeasible Title:
Certificate obtained from land titles office indicating charges and encumbrances against a particular piece of property.
CCAA – Companies’ Creditors Arrangement Act:
An Act under which proposals or arrangements or compromising of debt is structured. For a company to be eligible to file under the CCAA, it must have at least $5 million in debt.
An encumbrance, lien or financial obligation that is attached to some property. For example, a person who files a lien against a piece of property might say that he has a charge against that property.
Assets that are movable and not attached to land or real property.
An interest that is given by one person in, say, a piece of property such as a piano to another person to secure a debt.
Chose In Action:
The right of property in intangible things which are not in one’s possession, but that are enforcible through legal or Court action, such as debts, insurance claims, shares in a company, pensions and salaries.
Claim Provable In Bankruptcy:
Any claim or liability that is provable in a proceeding under the Bankruptcy and Insolvency Act.
The cancellation of an action. For example, a one year claw back will be in effect for RRSPs in provinces without RRSP exemption laws. In other words, RRSP contributions made in the 12 months prior to bankruptcy (in those provinces) will be taken into the bankruptcy estate.
A certificate issued by a statutory body signifying that they are not owed any money in regards to a certain file or company.
Property that has been given or committed in order to guarantee a loan.
A secret agreement and co-operation for a fraudulent or deceitful purpose.
Commissioner of Oaths:
Commissioner for taking affidavits in a province as authorized by provincial statute.
A written order of a Court directing that someone be confined to prison, normally issued as a result of non-compliance with a previous Court order.
A person (defined under the Income Tax Act) who is cohabitating with an individual in a conjugal relationship and has been so for a period of at least one year.
That date on which the transfer of title is to be made.
A contractual condition that is required to be met before a contract can be completed.
Conflict of Interest:
The circumstance of a person who finds that one of his activities, interests, etc. may have a contrary interest on another of his interests or activities.
To comply with a specified use, particularly involving real estate zoning by-laws.
To hand over or give possession of an asset to someone.
A natural person who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the person’s principle residence, do not exceed $250,000 or such other maximum as is prescribed.
Goods that are used or acquired for use primarily for personal, family or household purposes.
A simplified form of Proposal available to debtors owing less than an amount prescribed under the Bankruptcy and Insolvency Act. In 2013 the amount was $250,000.00, excluding a mortgage on the principal residence.
That fee which a person, often a lawyer, is entitled to per agreement upon the successful completion of some action. For example, a lawyer can take on an action for, say, 25% of the proceeds which he would only be entitled to if the action is successful.
The setting off of mutual debt. For example, if a company owes $100 to another company that is owed $30 by that company in turn, the company is allowed to set off the $30 against the $100 and make a net payment of $70.
An oral or written agreement between two or more parties which is enforceable by law. In order to be valid, a contract requires an offer, an acceptance of that offer and, in common-law jurisdictions, consideration.
That act which transfers property from one person to another.
Individuals are required to take counselling from trustees or administrators when they file for bankruptcy or make consumer proposals. If they do not take counselling they may not be discharged from bankruptcy or have their consumer proposal satisfied.
That person who has a claim, preferred, secured or unsecured, provable under the Bankruptcy and Insolvency Act.
Credit reporting agencies collect information about consumers’ financial affairs and sell this information to their clients. Credit ratings are set by creditors who pass this information to the reporting agencies. It consists of a nine-point rating scale, for example: R1 indicating that payment was made on time; R2 that payment was made 30 days late, but not more than 60 days; and R9 indicating a bad debt or one that has been placed for collection and it also applies to bankruptcy.
That point in time where a contract or agreement triggers certain clauses in that contract. For example, when a bank appoints an Agent pursuant to its General Security Agreement, all the assets of the company in question, that are not secured by other creditors, are captured by that General Security Agreement.
Dictionary – D
Cash compensation awarded by a Court to offset losses or suffering caused by another person’s negligence or fault.
Date of the Initial Bankruptcy Event:
In respect of a person, it means the earliest of the date of filing or making: an assignment into bankruptcy; a proposal; a Notice of Intention to Make a Proposal; the first petition for a Receiving Order.
Security instrument evidencing a debt due from one party to another, payable on demand or otherwise, which can be a fixed and/or floating charge on assets and which can grant the lender broad powers to recover the amount due upon default, including the appointment of a receiver or receiver-manager.
A person who owes money, goods or services to another.
Debts not Released by Order of Discharge:
These are found in subsection 178(1) of the Act. They include: an award for damages in respect of an assault; a claim for alimony, or for support of a spouse or child; a debt arising out of fraud; any court fine; or debts or obligations for student loans when the bankruptcy occurs while the debtor is still a student or within ten years after the bankrupt has ceased to be a student.
A provisional decision of the Court that does not have absolute effect until certain conditions are met.
The name given to the final and conclusive Court Order after the condition of a “decree nisi” is met.
A trust that is established by statute to be in effect even though there may not be any actual asset or monies held in that trust. For example, Revenue Canada in a bankruptcy or insolvency situation takes the position that it has a deemed trust covering source deductions that they claim rank even ahead of certain secured creditors.
In fact, rather than in law; e.g. de facto trustee.
Failure to pay or otherwise perform obligations under a contract.
To delay to a future time.
According to law.
To ask for with authority; claim as a right.
A letter usually from a lawyer on behalf of a client that makes a demand for payment or some other action which is in default. Under the Bankruptcy and Insolvency Act, a financial institution before it takes any action must give demand and notice of intention if it intends to enforce its security and must wait 10 days before it can enforce its security by, say, the appointment of a Receiver or Agent.
Subsection 5(4) of the Act empowers the Superintendent to issue directives. Every person to whom a directive is issued must comply with the directive. Directives may be issued concerning: counselling; the administration of the Act; any decision of the Superintendent pursuant to this Act; the carrying out of the purposes and provisions of this Act and General Rules; the criteria to be applied by the Superintendent in determining whether a trustee licence is to be issued to a person and governing the qualifications and activities of trustees; and prescribing the form of any document that is to be prescribed by the Act and the information to be given therein. Subsection 68(1) requires that a directive be issued by the Superintendent to establish the standards for determining the portion of total income of an individual bankrupt that exceeds that which is necessary to enable the bankrupt to maintain a reasonable standard of living.
To refuse or to set aside. For example, the Trustee in Bankruptcy, under the Bankruptcy and Insolvency Act, can disallow a claim submitted by a creditor.
To cancel or relieve a person of an obligation or responsibility.
Discharge of Bankrupt:
For bankrupts who do not qualify for the automatic discharge, the trustee is required within one year from the beginning of the bankruptcy to apply to the court for a hearing of the application for a discharge.
The court official has several options from which to choose. At the hearing, the court decides whether to postpone the hearing to a later date, refuse the discharge, or issue any of the following orders:
- Order of absolute discharge which relieves the bankrupt of the debts incurred before the bankruptcy, except for the exceptions provided in the Act.
- Order of conditional discharge where certain conditions must be met before an absolute order of discharge is issued.
- Order of suspended discharge where the court orders a delay before the discharge becomes effective.
The act of denying, refusing, renouncing or repudiating an interest that one might have in some item.
The act of ending, terminating or winding up of a company or state of affairs.
The right that a landlord has to seize the property of a tenant on the premises being rented and sell that property for payment of rent arrears.
Under the Bankruptcy and Insolvency Act it refers to those monies paid by a Trustee in Bankruptcy to the creditors.
Deferred Profit Sharing Plan.
Dictionary – E
The right held by one person to make use of the land held by another person for a limited interest. For example, a utility have an easement over a piece of real property which allows that utility to have, for example, electrical power lines running over that property.
The date an agreement comes into force.
Flowing out; e.g., an effluxion of funds.
Those charges or the security that attaches to any kind of property. For example, if there is a mortgage on a piece of property, then the property is said to be encumbered by that mortgage.
This is a well-known American doctrine that permits a court to determine that a secured creditor is not entitled to the benefit of its normal priority position in an insolvency. It is not law in Canada.
This refers to the excess that the value of a piece of property has over any charges or encumbrances against that piece of property.
The holding on to of money or a written document, such as shares or a deed, until certain conditions are met by the two contracted parties.
Under the Bankruptcy and Insolvency Act, the name given to the file or bankruptcy estate.
A person’s own acts, statement of facts or acceptance of facts which preclude his later making claims to the contrary.
Trustees in Bankruptcy are subject to the Codes of Ethics under:
- CAIRP, The Canadian Association of Insolvency and Restructuring Professionals;
- The Bankruptcy and Insolvency Act, and
- Canadian Professional Accountants.
For one party only. Ex parte refers to those proceedings where one of the parties has not received notice and therefore is neither present nor represented in a court of law.
Examination For Discovery:
A legal proceeding whereby one party examines the party on the other side, usually under oath for the purpose of confirming facts and perhaps obtaining admissions from that other party.
To carry out.
The exemptions refer to the property that a person going bankrupt is allowed to keep. The levels of the exemptions are set by the province or the territory and relate to the equity that is in the asset in question. The exemptions for each province and territory is listed here.
To strike out; to obliterate, erase or mark for deletion.
Dictionary – F
Fair Market Value:
That hypothetical value of a piece of property, given a willing purchaser and a willing vendor, and a reasonable amount of time for the property to be exposed to sale.
Title to ownership without restriction or limitation. For example ownership of land in fee simple means the land is owned out right as compared to a person who leased land.
Sometimes considered to be synonymous with the word Trustee. A fiduciary holds certain rights which he or she must exercise for the benefit of the beneficiary.
Final Statement of Receipts and Disbursements:
This document, prepared by the trustee, must contain a complete account of all moneys received by the trustee out of the property of the bankrupt or otherwise, the amount of interest received by the trustee, all moneys disbursed and expenses incurred and the remuneration claimed by the trustee, together with full particulars, description and value of all property of the bankrupt that has not been sold or realized, setting out the reason why the property has not been sold or realized and the disposition made thereof. Once approved by the inspectors, it is submitted to the Superintendent for comments.
Form prescribed under the Personal Property Security Act setting out essential information such as the name of the debtor and the collateral; the secured party must file the financing statement at the Personal Property Registry to perfect a security interest by registration.
First Meeting of Creditors:
The meeting called by the Trustee in Bankruptcy to consider the affairs of the bankrupt or a debtor under a proposal. NOTE: Under the Bankruptcy and Insolvency Act, as amended on September 30, 1997, there is not a meeting of creditors required for simple personal bankruptcy cases, unless the Superintendent of Bankruptcy or creditors holding 25% of the proven claims request one.
Those assets that are attached to or are part of a building, or are fixed to land.
A type of security interest that charges the debtor’s property but does not specify particular assets or pieces of equipment until the security interest or instrument is crystallized.
That action that a lender will take to repossess and sell a piece of property for defaults in mortgage payments.
Under the Bankruptcy and Insolvency Act, this is the preferring by a debtor of one or more creditors over others by the payment to those creditors of some extraordinary amounts of money. Under the Bankruptcy and Insolvency Act, the Trustee can, under certain circumstances, set aside fraudulent preferences up to three months prior to the date of bankruptcy in the case of arm’s length parties and one year in the case of non-arm’s length parties. The Provinces also have Acts that can set aside these transactions.
Goods which are comprised of many identical parts. For example, a bushel of grain, a barrel of apples or oil, which can be easily replaced by other identical goods. One of the tests of whether items are fungible or not is whether they can be sold by weight or number.
Dictionary – G
The seizure of property, monies, earnings, receivables belonging to a debtor that are in the hands of a third party.
Official Government (both Provincial and Federal) publication in which public notices and statutory regulations are advertised. Published by Queen’s Printer.
To increase by subsequent bidding by an individual with effect of annulling any previous offer.
General Security Agreement (GSA):
A contract under which all the personal property of a debtor is pledged as security to a lender.
That value attributed to a business that is not tangible, but arises from the reputation, expertise, service or some other intangible that attaches to the business and makes it have more worth than just the value of its assets.
A person who pledges collateral for the contract of another or who guarantees to pay a certain debt of a debtor if the debtor defaults.
Dictionary – H
To mortgage or pledge without delivery of title or possession. To place or leave an item of property in the custody of another.
Dictionary – I
A right or a title in property that cannot be made void or cancelled by any past event, error or omission in the title.
The act of one party protecting or guaranteeing protection, or freedom from liability, of a third party for actions of that party.
Any deed, written contract or sealed agreement.
A mandatory or prohibitive order or judgment issued by a Court.
A person not able to pay debts generally as they become due.
A person who is not bankrupt and whose liabilities exceed his assets and/or ability to pay.
The BIA contains a statutory definition that differs from this general definition as follows: “means a person who is not bankrupt and who resides or carries on business in Canada whose liabilities to creditors provable as claims under the Bankruptcy and Insolvency Act amount to at least $1,000.00 and
(a) who is, for any reason, unable to meet his obligations as they generally become due, or
(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
(c) the aggregate of whose property is not, at a fair valuation, sufficient or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due.”
A person appointed by creditors at the first or subsequent meeting of creditors, as part of a committee, to examine and give direction to the trustee’s administration of the estate of the bankrupt. Inspectors may also be appointed pursuant to the provisions of a proposal.
A temporary Court Order intended to be of limited duration, usually until the Court has had an opportunity of hearing the full case and the opportunity of making a Final Order.
A dividend paid to creditors before the estate is finalized.
The placing of funds in the Courts by a person when there are two or more competing claims for those monies.
An itemized bill showing goods purchased or services provided together with the charges and terms. An invoice is a bill of sale.
By the fact itself.
Ipso Facto Clause:
An “ipso facto clause” is a contractual term that generally allows a creditor to terminate a contract or a supply of service if an individual enters into proceedings under an insolvency statute.
Dictionary – J
The act of walking away from an underwater mortgage by mailing your keys back to the bank.
Paragraph 155(f) of the Act, provides that in circumstances specified in directives of the Superintendent, the estates of individuals who, because of their relationship, could be reasonably be dealt with as one estate may be dealt with as one estate.
Joint and Several Liability:
The liability of more than one person for which each person may be sued for the entire amount of the damages.
The situation where two or more persons are equally owners of a property.
A formal decision, sentence or Order of a Court of Justice.
A term to describe assets protected from being seized by a creditor. i.e. assets a creditor cannot seize by going to court and getting a judgement.
Dictionary – L
Those assets which are attached to a building and cannot be removed from any property being leased.
Any legal obligation for which a person is responsible.
Licensed Insolvency Trustee:
The name was changed, effective April 1, 2016, from “Trustee in Bankruptcy” to “Licensed Insolvency Trustee”.
Security for the holder against a debtor’s assets, usually arising by operation of law rather than express contract between the parties.
Compensation for non-performance or loss which is cash or easily converted into cash.
A dispute that results in formal Court action or a law suit.
Slang expression meaning “Business Review”.
Letter of Comment:
This refers to the letter from the Superintendent commenting on the trustee’s statement of receipts and disbursements. When the statement needs to be taxed, this letter must be placed by the trustee before the taxing officer.
Under the Bankruptcy and Insolvency Act the government has imposed a levy (in 1997 equal to 5%) over all dividends paid to creditors. Therefore, if a creditor is entitled to a $100 dividend, he will only get $95 with $5 being paid to the government.
Dictionary – M
The obligation that one person has to contribute in part or in whole to the cost of living of another person.
Federal registry for registering title documents against ships.
See: Builder’s lien and Repairer’s lien.
An alternate dispute mechanism whereby the mediator acts as a facilitator assisting the parties in coming to a mutually agreed settlement. Under the Bankruptcy and Insolvency Act, mediation can be used, for example, if a creditor or the Trustee opposes a bankrupt’s discharge.
Misappropriation of Funds:
The wrongful taking of funds by a person to whom funds are entrusted.
To describe or present incorrectly, improperly or falsely.
A person or firm appointed to review and report on, without controlling or approving, the day-to-day transactions of a business. Particulars of the engagement are usually set out in an exchange of letters, an agreement or court order.
An interest given on real property to guarantee the payment of a debt or execution of some action.
Dictionary – N
Notice of Disclaimer – Lease:
In a proposal, the company may disclaim a lease or, in other words, state that it does not require that lease and is cancelling it. The proposal must indicate one of the options that is given to the landlord for him to file a claim as follows actual losses resulting from the disclaimer or the lesser of:
(i) three years rent, or
(ii) the aggregate of the rent provided for in the lease for the first year of the lease following the date on which the disclaimer becomes effective and 15% of the rent for the remainder of the term of the lease after that year.
Unable to locate assets.
Dictionary – O
A solid affirmation to tell the truth, oftentimes sworn in front of a Notary or Commissioner for Taking Oaths.
A person deemed to be an officer of the Court who reports to the Superintendent of Bankruptcy and performs duties as specified by the Bankruptcy and Insolvency Act.
A command of a Court or Judge.
A decree or judgment free from restriction or limitation.
Orderly Payment of Debts:
A scheme governed by Provincial Court to allow a debtor to pay his debts in accordance with the sections under Part X of the Bankruptcy and Insolvency Act.
A judgment or decree that will become final on a particular date unless set aside or invalidated by certain specified contingencies. In mortgage foreclosure actions, it is the order of the Court which accelerates the amount due under the mortgage document.
Order of Sale:
Legal status pursuant to a Court Order whereby a person can obtain the authority to arrange a sale, subject to Court approval, with the sale proceeds being available to satisfy valid encumbrances.
A general creditor with no priority or security.
Upset or change around; e.g., if certain security is proven to be invalid.
Dictionary – P
Equally and without preference. This term is often used in bankruptcy proceedings where creditors are said to be paid pari passu, or each creditor is paid pro rata in accordance with the amount of his claim.
An action that has to be taken before a security interest is secured.
Property that is not real property; things moveable, also known as chattels.
Petition (Application for a Bankruptcy Order):
An application that is made under the Bankruptcy and Insolvency Act for the Court to hand down a Receiving Order (Bankruptcy Order) stating the person is in bankruptcy. In an amendment dated December 15, 2004 this term was changed to Application for a Bankruptcy Order.
A person who initiates a case in Court. That person may also be referred to as the Claimant, Petitioner or Applicant. The person who is being sued is generally called the Defendant or Respondent.
That time that is mutually agreed that the person buying property will take ownership, control or possession of it.
Charge for an unpaid debt, enforced by having physical custody of the asset to which the lien applies.
To affix a notice to a post, wall or the like; to supply or put up; e.g., post a bond.
To place after in order of importance; to put off to a later time.
Power of Attorney:
An instrument authorizing another to act as one’s agent or attorney.
Power of Sale:
The right to sell land when a mortgage is in default.
PPSA – Personal Property Security Act:
The system, for example, in British Columbia and most common-law provinces, whereby a person is required to register any interest that he has in the property of another before the security is valid. The Registry can therefore be used if an institution is considering taking security on various assets, or if a person is contemplating purchasing an item such as a vehicle and wants to ensure that he purchases it free and clear of any encumbrances.
An original writ commanding the defendant to do the thing required; also an order addressed to the Clerk of the Court requesting him to issue a particular writ.
Preference or Preferred Creditors:
Those creditors, in the Bankruptcy and Insolvency Act specified in Section 136, that rank ahead of ordinary or unsecured creditors. Some preferred creditors are employees for wages, and a landlord for some specified rental arrears.
Report presented by the trustee at the first meeting of creditors which details trustee’s finding with regard to taking possession of the debtor’s records and property; conservatory and protective measures; any legal proceedings undertaken or proposed to review provable claims, anticipated realization, and projected distribution.
The term given to the fact that the information is in a directive issued by the Superintendent of Bankruptcy.
On the face of it or at first sight.
To divide proportionately amongst people having a claim.
Provided for free.
An unconditional, written, signed promise to pay a certain amount of money on demand or at a certain date defined in the future.
Proof of Claim:
A prescribed form that will be sent along with the notice of bankruptcy or notice of proposal. Creditors are required to fill out and return this form to the trustee, or to the administrator of the consumer proposal, in order to prove their claim. If a meeting of creditors is called, those creditors wishing to vote at the meeting must file their proof of claim with the trustee before the time set for the opening of the meeting.
Includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, and whether situated in Canada or elsewhere, and includes obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property.
Under the Bankruptcy and Insolvency Act there are two types of proposals that can be made. A proposal filed under Division I, which is applicable to companies and any individual who wants to avail himself of it. There are also “consumer proposals”, which are a special type of proposal that a consumer can avail himself of but only if his debts, excluding mortgages on real property, do not exceed $150,000. One of the main features of a consumer proposal is that if the creditors do not accept the proposal, the person is not automatically bankrupt as in a Division I proposal.
All those debts of a bankrupt outstanding as of the date of the bankruptcy.
Claims that have been filed in the proper manner with evidence to prove what is owed and subsequently accepted by the Trustee in Bankruptcy and used as the basis for the payment of dividends when there are monies to distribute.
Under the Bankruptcy and Insolvency Act a written statement can be made whereby a creditor appoints another person to act on his behalf in a creditors meeting and any other matters pertaining to that bankruptcy.
Purchase Money Security Interest (PMSI – pronounced “pimzee”):
A security that a person takes in property, such as inventory for example, that secures payment with regard to those assets of all or part of its purchase price.
Dictionary – Q
A deed releasing interest in real property. Sometimes, when a Trustee has real property vested in him pursuant to the bankruptcy and there is no equity in that property, he may quit claim it to the mortgage holder, thereby saving the mortgage holder time and expense. The Trustee should charge the mortgage holder for executing this deed.
Under the Bankruptcy and Insolvency Act there must be one person present, either in person or by proxy, at a meeting of creditors before the meeting is considered to be a properly constituted one and hence can carry on with the business of the meeting.
Dictionary – R
Having a rightful place on the list of claims for a bankrupt estate.
Immovable property such as a building and land.
An agreement between a debtor and a creditor whereby a debtor revives a pre-bankruptcy debt, for which the debtor was discharged under section 178 of the Act.
The amount of money received from the sale of assets.
A person or corporation appointed by a person who holds a debenture or other security agreement, giving that person authority to take possession of and sell the asset(s) specified in the debenture. A Receiver cannot manage or operate a company for more than 14 days.
Certificates given by a Receiver or Receiver-Manager to secure borrowings required by the Receiver or Receiver-Manager. Any debt secured by a Receiver’s Certificate has a first charged over the property, ranking ahead of any other secured charge.
Similar to Receiver above, except the Receiver-Manager can manage or operate the company.
Receiver of Rents:
An individual who is appointed by the Court to enforce the collection of rent as is specified in the charge on the property.
Receiving Order (Bankruptcy Order):
An Order handed down by the Court following the successful petition to have a person or company placed into bankruptcy. In an amendment dated December 15, 2004 this term was changed to Bankruptcy Order.
Redemption of Security:
Subsection 128(3) of the Act, allows the trustee to redeem a security on payment to the secured creditor of the debt or the value of the security as assessed, in the proof of security, by the secured creditor. Before doing so, the trustee will ensure that there is a benefit for the estate.
An Officer of the Supreme Court appointed by the Chief Justice and empowered to deal with various matters as set out in the Bankruptcy and Insolvency Act.
Remuneration of Trustee:
In estates under summary administration and in consumer proposals the trustee’s, or administrator’s, fees and expenses are set by the Bankruptcy and Insolvency Rules.
In all other cases, the remuneration of the trustee falls under the provisions of section 39 of the Act. Subsection 39(1) states that the remuneration of the trustee shall be such as is voted to the trustee by ordinary resolution at any meeting of creditors. Where the remuneration is not fixed pursuant to subsection 39(1), subsection 39(2) states that the remuneration shall not exceed seven and one-half per cent of the amount remaining out of the realization of the property of the debtor after the claims of the secured creditors have been paid or satisfied. Subsection 39(5) empowers the court to increase or reduce the remuneration.
A mechanic or other person who, by bestowing money, skills or material on any chattel, is entitled to a lien on the chattel, which empowers that person to sell the chattel if he is not paid within a prescribed period of time.
The party who responds to a claim filed in Court against him by a Plaintiff or the person who is being sued. Another term for the Respondent is the Defendant.
Under the Bankruptcy and Insolvency Act it is common for the Trustee in Bankruptcy to ask for a retainer before he accepts an appointment. There is also a special type of retainer called a Third Party Retainer, whereby funds are put up that secure the fees and disbursements of the Trustee but are returned to the party putting up the funds if the Trustee realizes enough out of the estate to cover the fees and costs and, in the case of a proposal, returned to the party putting up the funds if the proposal is refused by the creditors or not approved by the Court.
Registered Retirement Income Fund.
Registered Home Ownership Savings Plan.
Registered Retirement Savings Plan.
Dictionary – S
The status a creditor has when he has security or a right in some property that he can sell or realize on.
Something given or pledged to a person who is lending money in order to secure or guarantee payment of that debt.
A verbal or written agreement between a secured party and a debtor giving the secured party a security interest in personal property; a written agreement is not necessary if the secured party is in possession of the collateral.
Seize or Sue:
That phrase referring to a concept that, in Alberta and in British Columbia under the Personal Property Security Act, allows a secured creditor, in regard to consumer goods, to either seize or sue for the goods but not do both. For example, a financial institution holding security over a vehicle that is used for personal use and not for business can on default either seize that vehicle and sell it in satisfaction of its debt or sue the person for what is owed, but cannot do both.
The transferring of property to another person or a gift. Under certain circumstances, settlements are void against the Trustee and are brought back into the bankruptcy estate.
A dollar realization on assets that is not sufficient to clear the debt completely.
Adjourned without giving any future date of meeting or hearing.
Small Claims/Small Claims Court:
A Court which has simplified rules, thus encouraging non-lawyers to attend at the Court without legal representation. In British Columbia, the amount that can be considered in a small claims action is $10,000 or less.
A term under the Bankruptcy and Insolvency Act whereby voting is carried out, for example when creditors accept or refuse a proposal. In order for the Special Resolution to pass, of those creditors who vote there must be in excess of 2/3 of the dollars voting in favour and a simple majority in number of the creditors voting in favour.
A lien or security interest in a specific piece of property that can be distinguished from other pieces of property. For example, security over a vehicle.
(US term – This strategy is seldom used in Canada) This is the name given to the party submitting the first bid to purchase assets. The stalking horse bid can be used to solicit interest from other bidders and also acts as a floor for what will be realized at an auction.
Statement of Affairs:
The listing of a debtor’s assets and liabilities and sworn under oath by the debtor before a lawyer or Commissioner for Taking Oaths.
Statement of Receipts and Disbursements:
A statement prepared in the matter of receivership or agency appointment or a bankruptcy appointment, whereby the realizations and disbursements are set out.
The current state of affairs, or current position.
Stay of Proceedings:
The stopping or preventing of legal actions undertaken. In the Bankruptcy and Insolvency Act, there is a stay of proceedings in the case of a bankruptcy or in the case of a proposal. This stops all legal actions against the company or person.
The legal right that a person or corporation has when he pays someone’s debt to recover that money from the debtor.
Superintendent of Bankruptcy:
A federally appointed official who oversees the administration of the Bankruptcy and Insolvency Act in Canada. The Superintendent is responsible for: supervising the administration of estates in bankruptcy, commercial reorganizations, consumer proposals and receiverships; maintaining a publicly accessible record of bankruptcy and insolvency proceedings; recording and investigating complaints regarding possible wrong doing by someone involved in the insolvency process; licensing of private sector trustees to administer estates and appointing administrators of consumer proposals; setting and enforcing professional standards for the administration of estates.
The Superintendent’s Web site address is: http://osb-bsf.ic.gc.ca
Under the Bankruptcy and Insolvency Act a summary administration bankruptcy is a consumer bankruptcy defined as a bankruptcy where the free and clear assets are less than $10,000. Summary administration bankruptcies have stream lined procedures, making them less costly to administer.
Payments required, if any, to be made by a bankrupt to the trustee for distribution to creditors. The amount of the payment is fixed by the trustee, at the beginning of the bankruptcy, having regard to the standards established by the Superintendent and to the personal and family situation of the bankrupt. This amount is subject to change if there are material changes in the personal or family situation of the bankrupt, or if the official receiver so recommends.
Dictionary – T
The person under the Bankruptcy and Insolvency Act who administers bankruptcy and proposal estates.
Trustee’s Report on the Bankrupt’s Application for Discharge (also known as the 170 Report):
The trustee must prepare a report in the prescribed form with respect to the affairs of the bankrupt, the causes of the bankruptcy, the manner in which the bankrupt has performed the duties imposed under the Act or obeyed the orders of the court, the conduct of the bankrupt both before and after the date of the initial bankruptcy event, whether the bankrupt has been convicted of any offence under the Act, and any other fact, matter or circumstance that would justify the court in refusing an unconditional order of discharge. This report needs to be approved by the inspectors or provide the reasons why the inspectors did not approve it. The trustee is required to send a copy of this report to the creditors who have requested it.
Dictionary – U
Creditors who do not have any security for the debt owing to them.
Excessive or illegal interest rates.