Personal Bankruptcy: Term Dictionary
This glossary will provide definitions for terms that are often used in the debt management field. We hope that these definitions will clarify some of the uncertainties that you might have in relation to debt resolutions.
Bankruptcy:
The state of being bankrupt or the fact of becoming bankrupt.
Bankrupt:
A natural person or corporation who has made a voluntary assignment in bankruptcy or against whom a receiving order has been made.
Collateral:
Property that is pledged as security against a debt.
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.
Counselling:
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.).
Collection Agency:
A party that acts as an agent of the creditor to collect the debt.
Co-Signer:
A person who signs (a document) jointly; to endorse (another’s signature), as for a loan.
Credit Rating:
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities.
Debt:
A specific sum of money due by agreement or otherwise.
Debtor:
One who owes money to another.
Discharge from Bankruptcy:
The release of a debtor from the obligation to repay his or her debts. A bankrupt’s discharge may be automatic, suspended, conditional or absolute. A bankrupt may also be refused discharge.
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
Debt Consolidation:
The action of combining several loans or liabilities into one loan. Put another way, debt consolidation is the process of taking out a new loan to pay off a number of other debts. Most people who consolidate their debt are usually doing it to attain a lower interest rate, or the simplicity of a single loan. Also known as a “consolidation loan”.
Equity:
The difference between the market value of an asset and the secured debt against it.
Garnishment:
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.
Guarantor:
A person (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)who takes on financial responsibility for another’s debt.
Insolvency:
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.
Judgement:
A formal decision issued by a court on a matter under its consideration.
Legal Action:
A judicial proceeding brought by one party against another; one party prosecutes another for a wrong done or for protection of a right or for prevention of a wrong.
Liabilities:
Financial obligations or debt of an individual or a business, including unpaid taxes, salaries, accounts payable etc.
Lien:
A legal right or interest that a creditor has in a debtor’s property, lasting usually until the debt that it secures is satisfied.
Mediation:
An action in mediating between parties, as to effect an agreement or reconciliation.
Mortgage:
A lien against property, which is registered on title, that is granted to secure an obligation such as a debt.
Property:
Includes money, goods, land and every description of property, whether real or personal, situated in Canada or elsewhere.
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.
Tax Return:
The tax form used to file income taxes.
Tax Credits:
Deductions and exemptions only reduce the amount of your income that is taxable. Tax credits reduce the actual amount of tax owed.
Unsecured Creditor:
A creditor who advances credit without taking any rights against the property of the debtor.
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