Bankruptcy and Consumer Proposal Dictionary


absolute discharge

An absolute discharge is the release of the bankrupt from his or her debts (with certain exceptions) that existed at the date of bankruptcy.

A written statement of facts sworn under oath in front of an official such as a Notary Public or Commissioner of Oaths.

arm’s length
Describes affairs or transactions between two persons who are free and independent of each other and who are not related or where one party has undue influence upon the other.


Property owned by a person, regarded as having value and available to meet debts, commitments, or legacies

assignment in bankruptcy
The act of a natural person voluntarily assigning all of his or her property to a Licensed Insolvency Trustee so it can be liquidated by the bankruptcy estate for the benefit of the estate’s creditors

automatic discharge
See absolute discharge. When an automatic discharge occurs, the bankrupt doesn’t have to go to court to obtain his or her discharge. A bankrupt is eligible for an automatic discharge if it is the first or second time he or she has filed bankruptcy. If the bankrupt has no surplus income, he or she will be receive her discharge 9 months plus one day after the date of bankruptcy. If the bankrupt has surplus income, she will receive her discharge 21 months after she filed bankruptcy.


This is the legal status of a person who has declared bankruptcy. The status remains until there has been a discharge from bankruptcy.

This is legal process for a person who can no longer pay back debt. The person who owes the debt assigns all assets —with some exceptions —to a Licensed Insolvency Trustee who sells it or uses it to help pay the debt to the creditors.

Bankruptcy and Insolvency Act (BIA)
The law that regulates bankruptcy and insolvency in Canada.

bankruptcy order
A formal Court document that forces a person to assign all assets—with some exceptions—to a Licensed Insolvency Trustee who sells it or uses it to pay the creditors.


Certificate of Full Performance of Proposal
When a debtor fulfils her obligations under a proposal, a Certificate of Full Performance of Proposal is issued by the Licensed Insolvency Trustee. The debtor is released from the debt included in the proposal upon the issuance of the Certificate by the Licensed Insolvency Trustee.

A statement by a creditor that she is owed money by a person.

conditional discharge
A conditional discharge occurs when the Court imposes certain conditions that must be met by the bankrupt before her discharge becomes absolute.

consumer proposal
A formal settlement offer by a debtor to her creditors. The settlement will usually include terms that will allow a debtor to repay a percentage of the debt to her creditors over up to 60 months. A debtor can only file a consumer proposal if her total debts do not exceed $250 000 (not including debts secured by her principal residence).

Counselling is a mandatory requirement under both bankruptcy and consumer proposal proceedings. There are two sessions, and they are designed to assist debtors determine the root causes of their financial difficulties and to teach them to better manage their financial affairs in the future.

Counselling must be provided by a trained counsellor registered with the Office of the Superintendent of Bankruptcy.

A creditor is a person who is owed money, goods or services. A preferred creditor has a first claim to any funds that are available in the trust account of the Licensed Insolvency Trustee. A secured creditor is one who takes collateral for the extension of credit, such as when a car or house is purchased. An unsecured creditor is one who provides credit but does not have any security for the debt owed them.



A specific amount owed by a person (i.e., the debtor) to another person (i.e, the creditor).


A debtor is a person who owes a specific debt (usually money) to another person.

discharge from bankruptcy
The final step in bankruptcy proceedings, a discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy.

A pro rata share of a bankrupt’s estate paid out by the Licensed Insolvency Trustee to creditors who have proven claims against that estate.


All the possessions (i.e., assets) of a person. A trustee is appointed to liquidate the assets for the benefit of the beneficiaries of the estate. In the context of the Bankruptcy and Insolvency Act, the beneficiaries of a bankrupt’s estate would be her creditors.

Formal questioning of the debtor under oath about her financial affairs and conduct before and during her bankruptcy. The examination may be done by a representative of the Office of the Superintendent of Bankruptcy, a Licensed Insolvency Trustee, or a  credito.



A legal process whereby a creditor gets a third party (often an employer or a bank) to turn over a debtor’s property, such as wages or bank accounts.



A person appointed by creditors to represent them during the administration of a bankruptcy or proposal. An inspector assists the LIT and is required to supervise certain aspects of the LIT‘s work.

The inability of a debtor to pay her debts as they become due.




This is a synonym for debt. See the definition of debt above.

A legal right or interest that a creditor has in a debtor‘s property in order to secure a debt, lasting usually until the debt is paid. The most common liens are those against homes for unpaid property tax (by a municipality) and unpaid personal income tax (by the Canada Revenue Agency)


In the context of the Bankruptcy and Insolvency Act, this is a formal settlement facilitated by the Office of the Superintendent of Bankruptcy for the purpose of resolving a dispute between the Licensed Insolvency Trustee and a bankrupt with respect to the surplus income the bankrupt is required to pay to the estate.


official receiver
A federal government employee in the Office of the Superintendent of Bankruptcy who is appointed by the Governor in Council. Among other things, the official receiver accepts the documents that are filed in proposals and bankruptcies, examines bankrupts under oath and chairs meetings of creditors.

Office of the Superintendent of Bankruptcy
The Office of the Superintendent of Bankruptcy ensures a fair and efficient marketplace by protecting the integrity of the bankruptcy and insolvency system for the benefit of investors, lenders, consumers and the public. This is done through the supervision of the administration of all estates and matters under the Bankruptcy and Insolvency Act.

ordinary resolution
A resolution carried by the majority of votes (one vote for each dollar of debt) of creditors.


Includes a human being (natural person), a partnership or a corporation that is recognized by law as having rights and duties.

Power of Attorney
A legal document that sets out an individual’s authority to act on behalf of the person giving the Power of Attorney.

proof of claim
A written statement and supporting documents provided by a creditor to the Licensed Insolvency Trustee that proves a claim by that creditor. Its purpose is to determine how much is paid to the creditor from the bankruptcy or proposal estate as a share of total estate funds.

This is a synonym for assets. See the definition of assets above.

A document signed by a creditor granting another person the authority to either
represent or vote in their place at creditors’ meetings.


The minimum number of creditors who must be present in person or by proxy to hold a legally constituted meeting of creditors.


related persons
Persons who are connected by a blood relationship, marriage, adoption or common law partnership. The Bankruptcy and Insolvency Act states that the definition of “related persons” extends to corporations, shareholders and directors in certain situations.

A formal expression of intent made by creditors at a meeting of creditors. An ordinary resolution is a resolution carried by the majority of votes (one vote for each dollar of debt) of creditors. A special resolution is a resolution decided by a majority in number and three-fourths in value of the creditors with proven claims present, personally or by proxy, at a meeting of creditors and voting on the resolution.


Property or assets given or pledged to guarantee the payment of a loan.

The act of taking possession of property by legal right or process.

Statement of Affairs
This is a sworn statement signed by the debtor that contains a list of her  assets and liabilities, the estimated value of assets, the names and addresses of creditors, and the amounts owed to those creditors.

Statement of Receipts and Disbursements
A statement from the Licensed Insolvency Trustee (LIT) that lays out the list of funds that have been received (including interest), the fees charged by the LIT, all the dividends distributed to the creditors and particulars of property that is not sold. This statement is sent to the estate creditors, the debtor and the Office of the Superintendent of Bankruptcy.

stay of proceedings
Once a person files for bankruptcy or files a proposal, a “stay of proceedings” immediately prevents creditors from either starting or continuing a legal action against the debtor.

surplus income
Amount of a debtor’s total income that exceeds what is necessary to maintain a reasonable standard of living according to the standards set by the Office of the Superintendent of Bankruptcy. The bankrupt must make payments out of this surplus income to the bankruptcy estate for distribution among the creditors.

suspended discharge
A suspended discharge occurs when the Court orders a delay so the bankrupt’s discharge will not be effective until a later date.


taxation of accounts
An application for Court approval of the fees and disbursements of the Licensed Insolvency Trustee or legal counsel.

Assets held by one person at the request of a second person for the benefit of a third person.

Licensed Insolvency Trustee
A person licensed by the Office of the Superintendent of Bankruptcy to administer bankruptcies and proposals.



voting letter
A document in which a creditor with a provable claim registers his or her vote for or against a proposal.