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Insolvency Terms: A Glossary

Crowe MacKay & Company has a team of Licensed Insolvency Trustees that offer debt solutions to clients in Vancouver and Surrey. Terms used under the Bankruptcy and Insolvency Act might not be clear to some clients who have not gone through the process of consumer proposal or bankruptcy before. We have provided a glossary of terms with easy-to-understand definitions. 

Browse the definitions below to better understand the terms related to insolvency and bankruptcy. 



Act of Bankruptcy

An act committed by a debtor as defined under the Bankruptcy and Insolvency Act, and most commonly when a debtor no longer meets his liabilities as they become due. A creditor with a provable claim of $1000 or above 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, who is in charge of 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.


Assets in the context of bankruptcy mean all the property belonging to the debtor available for distribution for the general benefit of creditors (for paying debts).

Assignment in Bankruptcy

A voluntary assignment of all of his property by an insolvent person to an Insolvency Trustee for the general benefit of creditors.

Automatic Discharge

See Discharge from Bankruptcy




A person who acts on behalf of another person for the repossession or seizure of property.


A natural person or legal entity, which has made a voluntary assignment in bankruptcy or against whom a receiving order has been filed.


The state of being bankrupt or the fact of becoming bankrupt.

It is a federal statute governing bankruptcy and insolvency in Canada, which is applicable to all provinces and territories.




Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is the national professional organization representing Insolvency Trustees, receivers, agents, monitors and consultants in insolvency matters.


Canada Revenue Agency (formerly known as Canada Customs and Revenue Agency (“CCRA”)

Certificate of Full Performance of Proposal

A document issued by the trustee or administrator once a debtor has fully performed his obligations within the scope of 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 (Canadian Association of Insolvency and Restructuring Professionals) to those who meet the Association’s standards for admission, complete the prescribed course of study and pass the required examinations.


Property that is pledged as security against a debt.

Conditional Discharge

Discharge From Bankruptcy

Conditional Sale

The sale of goods where the buyer gets possession of goods or property but does not get a title to them until specific conditions are fulfilled.

Consolidation Order

A consolidation order is an order handed down by a provincial court in specific provinces 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 consumer debtors 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 the 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 the prudent use of consumer credit and budgeting principles, in developing successful strategies for achieving financial goals and overcoming financial setbacks, and where appropriate, making referrals to deal with non-budgetary causes of insolvency (e.g.:addiction, marital and family problems, gambling, etc.).


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




A specific amount due by agreement or otherwise.


One who owes money to another.

Deemed Trust

A trust established by statute. For instance, the income tax deducted at source as prescribed by the Income Tax Act is deemed to be held in trust for the Crown.


Failure to pay or perform a legal or contractual obligation.

Discharge From Bankruptcy

The release of a debtor from the obligation to repay his debts. A bankrupt’s discharge may be automatic, suspended, conditional or absolute or he may also be refused discharge.

Automatic Discharge

A debtor whose discharge is not opposed by the Superintendent of Bankruptcy, the Insolvency Trustee or a creditor and who has not refused 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 surplus income into the bankruptcy estate as per the standard established by the OSB (Office of the Superintendent of Bankruptcy).

Order of Absolute Discharge

This official document issued by the court relieves the debtor of the debts incurred before he declared bankruptcy, taking into consideration the exceptions provided for 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 the debtor to pay an amount to his Insolvency Trustee for distribution to his 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, providing the trustee with a statement of his affairs showing the particulars of his assets and liabilities, the name of all his creditors, etc.




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


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


All the property of a person, or, 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 any other concerned person in accordance with conditions prescribed in the Bankruptcy and Insolvency Act.

Exempt Asset

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




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

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.




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



Informal Restructuring

Informal restructuring or workout is a contractual arrangement adopted during a company’s difficult financial time. It allows for restructuring the company’s debt contracts to avoid defaults through private negotiations with all or some of the creditors.


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 incapable of paying 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 Licensed Insolvency Trustee appointed by the court to safeguard the assets of the estate and perform such other functions as the court may order for such time period as the court may determine.



Joint and Several Liability

The liability of more than one individual that may be enforced against all of them by a joint action or against any one of them by an individual action.


A formal decision issued by a court on a matter under its consideration.




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.


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


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




A lien against property registered on title, that is granted to secure an obligation such as a debt.



Notice of Intention to Enforce Security

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

Notice of Intention to File a Proposal

A legal document filed with the Official Receiver stating that the debtor intends to file a proposal. This document must include the name and address of the Licensed Insolvency 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 sets off the protection granted to insolvent debtors under the Bankruptcy and Insolvency Act.




The provisions relating to offences and sanctions are contained in Part VIII of the Bankruptcy and Insolvency Act. These are criminal or quasi-criminal violations of law; a person guilty of an offence is liable to a fine or imprisonment.

Official Receiver

The Official Receiver is a federal government employee in the Office of the Superintendent of Bankruptcy and is appointed by the Governor in Council. The Official Receiver, among other things, accepts the documents that are filed relating to proposals and bankruptcies, examines bankrupts under oath and chairs meetings of creditors.

Orderly Payment of Debts

A procedure prescribed in Part X of the Bankruptcy and Insolvency Act, governed by provincial courts, which allows a person to pay his debts.

Ordinary Resolution

A resolution carried by the majority of votes (one vote for each dollar of debt) of claims of creditors at a creditors’ meeting; disallowed claims do not have votes.


Office of the Superintendent of Bankruptcy, an agency of Industry Canada. The Office of the Superintendent of Bankruptcy supervises the administration of the Bankruptcy and Insolvency Act. The OSB has Division Offices throughout Canada.




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

Plan of Arrangement

A plan of arrangement is a written proposal sanctioned by the court that permits an insolvent company to reorganize itself to restructure or compromise its liabilities. It must be approved by a majority of creditors to become a binding settlement.

Power of Attorney

A legal instrument setting out explicitly an individual’s authority to act as the agent of the person giving him 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 with regard to the distribution of dividends.


The order in which creditors are ranked for payment of provable claims 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 Licensed Insolvency 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 as per conditions other than the existing terms. It is a formal agreement pursuant to the Bankruptcy and Insolvency Act.


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




The minimum number of creditors who must be present in person or by proxy in order to conduct business or to take a vote. At a creditors’ meeting, one creditor present, in person or by proxy, who has duly proven a claim with the Licensed Insolvency Trustee prior to the meeting, constitutes a quorum.




A person who has taken possession of substantially all of the inventory, accounts, receivables or the other property of the debtor pursuant to a security agreement. “Receiver” also refers to a person who has been appointed privately pursuant to a security agreement or by an order of the court for the protection or collection of property that is the subject of diverse claims, usually to seize and sell the debtor’s property.


An Officer of a provincial court appointed by the Chief Justice vested with the powers and jurisdiction as specified under the Bankruptcy and Insolvency Act.

Related Persons

Persons who are connected by a blood relationship, marriage, adoption or common-law partnership; while so related, they are deemed not to deal with each other at arm’s length. The Act provides that the definition of related persons may be extended to corporations, shareholders and directors in certain specified situations.


Registered Education Savings Plan


Registered Home Ownership Savings Plan


Registered Retirement Savings Plan



Secured Creditor

A person holding an instrument such as a mortgage or a lien on or against the whole or part of a debtor’s property 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 the bailiff and any other officer charged with the execution of a writ or any other process pursuant to 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 creditors’ meeting 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 to them.

Statement of Receipts and Disbursements

A statement detailing the receipt and disbursement of funds, interest received, fees charged by the Licensed Insolvency 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 initiate or continue any action, execution or other proceedings 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 Office of the Superintendent of Bankruptcy.

Suspended Discharge

See Discharge from Bankruptcy



Taxation of Accounts

Application for court approval of the fees and disbursements of the trustee, interim receiver or legal counsel.


A property interest held by one person at the request of another for the benefit of a third party.

Trustee in Bankruptcy

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



U.S. Chapter 11 Proceeding

U.S. Chapter 11 proceeding refers to the 11th chapter of the United States Bankruptcy Code which allows organizations to restructure their debts and obligations while staying in business. It is also known as bankruptcy protection.

Unsecured Creditor

A creditor who advances credit without taking any rights against the debtor’s property.



Voting Letter

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




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


Require Assistance?

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If you require immediate assistance, please get in touch with us by phone at (604) 689 3928 or email at

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