GLOSSARY

 

Assessment: Many Licensed Insolvency Trustees are set up to have senior members in their firm do most of the leg work in meeting with the debtor, gathering information, arranging the signing process, and delivering counselling.  Before any bankruptcy, consumer proposal or Division 1 proposal can be commenced, the debtor must meet with a licensed bankruptcy trustee who shall conduct an assessment of the individual debtor and be responsible for the administration of the file.  It is this minimum assessment process that separates bankruptcy trustees from the huge body of counsellors, consultants, debt consolidators, and credit counsellors that attempt to compete with trustees.

Assignment:  The most common "act of bankruptcy" is the making of a voluntary assignment in bankruptcy, where the debtor assigns their "property" to a Licensed Insolvency Trustee pursuant to the Bankruptcy and Insolvency Act.  There must be an "act of bankruptcy" before a bankruptcy can occur.

Automatic discharge: See "discharge" below.  A first-time bankrupt is eligible for an automatic discharge after 21 months into their bankruptcy, but this is reduced to 9 months if they do not have, on average throughout the first 7 months of the bankruptcy, surplus income.  For second-time bankrupts, replace 21 with 36 and replace 9 with 24.

CAIRP: The Canadian Association of Insolvency and Restrucuring Professionals, of which more thna 95% of bankruptcy trustee in Canada are members.  It is a professional organization providing a course of study for articling trustees, demanding ethical conduct of its members and is a strong voice for ongoing improvement in Canadian insolvency law.  Trustees that are members of CAIRP are granted the prestigious CIRP designation.

CIRP: Chartered Insolvency and Restructuring Professional.  The desgination granted to trustees by CAIRP.

Consumer proposal: a plan to settle one's debts as allowed under Canada's Bankruptcy and Insolvency Act. contract established between a debtor and their creditors.  About 50% of all filings in Canada are consumer proposals; about 50% are personal bankruptcies.

Discharge: a bankrupt is released (discharged) from their debts when either (a) all oppositions have been dealt with by the Court or (b) the date for the automatic discharge arrives without there being any opposition. Receiving your discharge is your real goal in going bankrupt - to get rid of your debts and receive a fresh start.

Inspector: At a meeting of creditors in your bankruptcy or proposal proceeding, creditors can elect persons (I.E. inspectors) to represent creditors and give instructions and assistance to your Trustee.

Property:  Extremely important in the administration of bankruptcies (versus proposals) is the question of what assets the bankrupt will effectively lose to the trustee and to their creditors.  A person becomes bankrupt most commonly by transfering their property to their Licensed Insolvency Trustee, so it's important to know just what "property" is. "Property" is basically everything the the bankrupt has and might receive (I.E. windfalls) before they are discharged from bankruptcy except whatever they are allowed to keep, which are referred as as "exemptions" which are established by the laws of the province where the debtor resides.

Proposal to creditors: a proposal is an offer to creditors asking creditors to agree that the debtor will be relieved of their debts upon completion of the proposed plan.  The content of this offering has certain minimum requirements but is otherwise open to the creativity of the author.

Resolution: When bankruptcies occur or consumer proposals are made, the affected creditors are given rights, including making decisions on the administation of that filing.  The the decision is made based simply on the majority of dollar amounts that are voted then this is an "ordinary resolution".  This is the most common type of voting by creditors.  For example, to determine whether a consumer proposal is been accepted by creditors, a vote may be called and the outcome would be determined by ordinary resolution - the larger the claim the greater the vote.  Bankruptcy trustees are very familiar with how different creditors vote on consumer proposals and are consquently well-informed on creating successful proposals to creditors.

Special resolution:  The insolvency system, governed by the Bankruptcy and Insolvency Act, allows for creditors to substitute one Licensed Insolvency Trustee for another in the administration of a bankruptcy proceeding.  To be carried, a motion to substitute a Licensed Insolvency Trustee requires acceptance by at least 75% of the votes cast by unsecured creditors.  These motions and sustiututions are rare.

Summary administration bankruptcies: Most bankruptcies are "summary administration" meaning that the Superintendent of Bankruptcy has determined the assets available for creditors will be less than $15,000. There is no advertisement in the newspaper and, unless the creditors request, no inspectors and no meeting of creditors.  There are various steps that simplify the trustee's administration.

Superintendent of Bankruptcy: Appointed at the pleasure of the Minister of Industry, from offices and delegates across Canada the Superintendent ensures the complete integrity of the bankruptcy and proposal processes.  Collectively, Trustees hold in trust close to one trillion dollars and someone has to watch over them!  

Transfer at Undervalue: Some types of transactions into which a bankrupt person may have entered prior to their bankruptcy can be reversed (actually, "voided") if it can be shown that the transfer was unfair.  These include transfers made within the previous 12 months to persons with whom the bankrupt person is related, or within the previous 3 months if they were not related.  The effective result is that the transfered asset is recovered and generally shared between creditors.

Trustee: There are a lot of different types of trustees but we are referring to a person (including a corporation) who is a Licensed Insolvency Trustee (previously named Trustee in Bankruptcy) pursuant to the Bankruptcy and Insolvency Act


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