Glossary of Terms Used in Insolvency

These definitions are provided solely for the purpose of facilitating the reader's understanding of the terms used on this website. They are general interpretations only and are not to be considered legal definitions. For specific information on your situation, please talk to a Trustee or a lawyer.

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- A -

Absolute Discharge

See Discharge from Bankruptcy.

Act of Bankruptcy

An act committed by a debtor as defined under the Bankruptcy and Insolvency Act. One of the most common is if a debtor ceases to meet his liabilities generally as they become due. A creditor with a provable claim of $1000 and over may file a petition for a receiving order if the debtor has committed such an act within the six months preceding the filing of the petition.


A person designated by the Superintendent of Bankruptcy, responsible for the administration of a consumer proposal under the Bankruptcy and Insolvency Act.


A voluntary written declaration of facts affirmed or sworn under oath before an authorized officer such as a Notary Public or Commissioner of Oaths.

Arm's Length

Describes dealings between two parties who, amongst other things, are not related by blood or marriage and are presumed to have roughly equal bargaining power.

Application for Bankruptcy Order

An application to a court of law made by creditors in order to put the debtor in bankruptcy.

Certificate of Full Performance of Proposal
A document issued by the Trustee or administrator once a debtor has fully performed his or her obligations under the proposal.


An encumbrance, lien or financial obligation attached to property.


Companies' Creditors Arrangement Act


Chartered Insolvency and Restructuring Professional; a professional designation given by CAIRP to those who meet the Association's standards for admission, complete the prescribed course of study and pass the required examinations.

Claim, Provable

See Provable Claim.


Property that is pledged as security against a debt.

Conditional Discharge

See Discharge From Bankruptcy.

Conditional Sale

The sale of goods where the buyer receives possession of goods or property, but does not receive title to them until specific conditions are fulfilled.

Consolidation Order

In specific provinces, an order handed down by a provincial court to combine the debts of an insolvent person pursuant to the Orderly Payment of Debt Regulations in Part X of the Bankruptcy and Insolvency Act. (See Voluntary Deposit Scheme).

Consumer Proposal

A simplified process to make a proposal for repayment of debt to creditors, available under the Bankruptcy and Insolvency Act to a consumer debtor whose aggregate debts, excluding any debts secured by the person's principal residence, do not exceed the amount prescribed in the Bankruptcy and Insolvency Act.

Contingent Claim

A provable claim in bankruptcy that may or may not become a debt depending upon the result of some future event.


A legal entity (usually a business), distinct from its shareholders, which has the authority to act as a natural person.


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.).


One to whom a debt is owed; in insolvency matters, a person (see definition of “person”) having a claim provable under the Bankruptcy and Insolvency Act.

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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.

Order of Absolute Discharge

This official document issued by the Court relieves the debtor of the debts incurred before the debtor declared bankruptcy, taking under consideration the exceptions provided in the Act.

Order of Conditional Discharge

The Court may impose certain conditions that must be met before a person's discharge becomes absolute. For example, the Court may require you to pay an amount to your Trustee for distribution to your creditors.

Order of Suspended Discharge

The Court orders a delay so that the discharge will not be effective until a certain date.


The proportional share of a bankrupt's estate paid out by the Trustee to creditors who have proven claims against that estate.

Duties of a Bankrupt

Obligations that must be performed by a bankrupt. For example, provide the Trustee with a statement of the bankrupt's affairs showing the particulars of his or her assets and liabilities, the name of all his creditors etc.

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- E -


A claim or liability that is attached to property or some other right that may lessen its value (e.g., a lien or mortgage).


The difference between the market value of an asset and the secured debt against it.


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

Questioning of the bankrupt under oath with respect to the bankrupt's conduct, causes of bankruptcy and disposition of the bankrupt's property. The examination may be conducted by an Official Receiver, a Trustee, a creditor or other interested person in accordance with conditions prescribed in the Bankruptcy and Insolvency Act.

Exempt Asset

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

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- G -


A legal process whereby a creditor requires a third party to turn over to the creditor, a debtor's property such as wages or bank accounts.

General Rules

Rules created pursuant to the Bankruptcy and Insolvency Act for the administration of this statute.


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

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- H -


A right on property given to a creditor as performance for an obligation. The creditor then has a right to follow the property even if it undergoes successive changes of ownership.

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- I -


Inspectors are appointed by creditors to represent them before the Trustee during the administration of proposals and bankruptcies. They are expected to assist the Trustee by virtue of their experience and are required to supervise certain aspects of the Trustee's administration.


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.

Interim Receiver

A Trustee appointed by the Court to safeguard the estate assets and perform such other functions as the Court may order for such time period as the Court may determine.

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- L -


A fee payable to the Superintendent of Bankruptcy for the purpose of defraying the expenses of the supervision by the Superintendent in the administration of estates.


Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable, etc. 

Licensed Insolvency Trustee 

A person licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.


A legal right or interest that a creditor has in a debtor's property, lasting usually until the debt that it secures is satisfied.


The act of converting assets to cash, especially in bankruptcy or in the dissolution of a business.

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- N -

Notice of Intention to Enforce Security

A legal document under the Bankruptcy and Insolvency Act whereby a secured creditor provides 10 days’ notice to an insolvent debtor of its intention to enforce its security.

Notice of Intention to File a Proposal

A legal document filed with the Official Receiver stating that the debtor intends to file a proposal. The document is to include the name and address of the licensed Trustee who has consented in writing to act as the Trustee under the proposal and the names of the creditors who are owed $250 or more and the amounts of their claims. The filing of this document triggers the protection afforded to insolvent debtors under the Bankruptcy and Insolvency Act.

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- P -


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

Personal Income Tax Debtor

A bankrupt who has $200,000 or more of personal income tax debt and whose personal income tax debt represents 75% or more of the bankrupt's total unsecured proven claims. It does not include an amount payable by the individual if the individual is or was a director of a corporation and the amount relates to an obligation of the corporation for which the director is liable in their capacity as a director. [Bankruptcy and Insolvency Act ss. 172.1(1) 172.1(8)]

Power of Attorney

A legal instrument (document) setting out explicitly an individual's authority to act as the agent of the person giving the power of attorney.

Preferential Treatment

The payment of money or the granting of security by an insolvent debtor that benefits one or more creditors to the detriment of the other creditors.

Preferred Creditor

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


The order in which creditors are ranked for payment of claims provable under the Bankruptcy and Insolvency Act.

Proof of Claim

A creditor's written statement that is submitted to prove the creditor's claim; used as the basis for paying dividends, if accepted by the Trustee.

Provable Claim

Any liability of the debtor for a debt incurred before the date of the bankruptcy.


Includes money, goods, land and every description of property, whether real or personal, situated in Canada or elsewhere.


An offer to creditors to settle debts under conditions other than the existing terms. It is a formal agreement under the Bankruptcy and Insolvency Act.


A document signed by a creditor granting another person the authority to represent them at creditors' meetings. The proxy holder can exercise the creditor's right to vote.

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- S -

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.


Property or asset given or pledged to guarantee the fulfilment of an obligation, e.g. for the payment of a loan.


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


Includes bailiff and any officer charged with the execution of a writ or other process under the Bankruptcy and Insolvency Act or any other Act or proceeding with respect to any property of a debtor.

Special Resolution

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.

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 Receipts and Disbursements

A statement detailing the receipt and disbursement of funds, interest received, fees charged by the Trustee, all the dividends distributed to the creditors and particulars of property that is not sold.

Stay of Proceedings

A bar against any creditor for the recovery of a claim provable in bankruptcy against the insolvent person or the insolvent person's property. No creditor shall start or continue any action, execution or other proceeding for the recovery of such claims.

Superintendent of Bankruptcy

A federally appointed official who oversees the administration of the Bankruptcy and Insolvency Act in Canada.

Surplus Income

The portion of an individual bankrupt's income that is required to be paid into the bankruptcy estate during the bankruptcy as per standards established by the OSB.

Suspended Discharge

See Discharge from Bankruptcy.

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Voting Letter

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

Voluntary Deposits Scheme

For the residents of Québec, a proceeding where the debtor makes a monthly payment based on his income and number of dependents to the court who will distribute these payments to the creditor. (See Consolidation Order).

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- W -


A written guarantee of performance from a vendor to a purchaser stating that the item being sold is good and fit for its intended use by the purchaser.

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Glossary of Terms Used in Insolvency. (2010, September 30). Retrieved from Office of the Superintendent of Bankruptcy website:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as am. by S.C. 2005, c. 47; 2007,c. 36

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