Canadian Debt Relief Glossary

A credit account with no missed payments, no delinquencies, and a positive payment history. Accounts in good standing improve your credit score and demonstrate reliability to future lenders.

Money a business owes to suppliers or vendors for goods or services received but not yet paid for. This is a standard business liability, not consumer debt.

Money owed to a business by customers for goods or services provided on credit. This represents expected future income for the business.

Interest that has accumulated on a debt or loan but has not yet been paid. It continues to grow daily or monthly based on the loan's interest rate and outstanding balance. Unpaid accrued interest can be capitalized (added to principal), increasing the total debt owed.

Example: A credit card balance of $5,000 at 19.99% APR accrues approximately $2.74 in interest per day.

A mortgage with an interest rate that changes periodically based on a benchmark index. In Canada, these are called variable-rate mortgages. Rates typically adjust when the Bank of Canada prime rate changes, which can lead to payment increases if rates rise.

A denial of credit, reduction in credit limit, or unfavorable change in loan terms based on information in your credit report. Creditors must notify you and provide the reason along with credit bureau contact information.

A written statement made under oath and signed before a notary public or commissioner of oaths. Affidavits are used in legal proceedings, including debt collection lawsuits and bankruptcy filings in Canada, to swear that facts stated are true.

The process of paying off a loan through regular, scheduled payments over time. Each payment includes both principal and interest. A fully amortized loan is completely paid off by the end of the loan term.

Example: A 25-year mortgage is amortized over 300 monthly payments.

A yearly charge imposed by a credit card issuer for the privilege of holding and using the card. Annual fees in Canada range from $0 to $500+ depending on card benefits and rewards programs.

The yearly cost of borrowing expressed as a percentage, including interest and certain fees. In Canada, credit cards typically display APR ranging from 12.99% to 29.99% for purchases and higher rates (often 24.99%+) for cash advances.

Example: A credit card with 19.99% APR costs $19.99 per year in interest per $100 of debt carried.

A financial product that pays a fixed or variable income stream over a set period or for life, typically purchased from an insurance company. In Canada, certain annuity payments may be protected from creditors under provincial exemption laws.

A professional assessment of a property's market value, conducted by a licensed appraiser. Canadian lenders require appraisals before approving mortgages or home equity loans to ensure the property is worth the loan amount.

Anything of value you own: cash, bank accounts, real estate, vehicles, investments, retirement accounts (RRSPs, TFSAs), personal property, or business interests. In Canadian bankruptcy or consumer proposal proceedings, non-exempt assets may be liquidated to repay creditors.

The legal transfer of a debt from the original creditor to a third party, such as a collection agency or debt buyer. The new owner (assignee) has the same rights to collect the debt as the original creditor under Canadian law.

Canada. The formal legal document you file with a Licensed Insolvency Trustee (LIT) to declare bankruptcy under the Bankruptcy and Insolvency Act (BIA). When you "assign" your assets, the LIT becomes responsible for administering your bankruptcy estate.

U.S. term only. A legal protection in U.S. bankruptcy that immediately halts collection actions.

Canadian equivalent: Stay of Proceedings.

A person allowed to make charges on someone else's credit card but not legally responsible for payment. In Canada, being an authorized user can help build credit history if the primary cardholder maintains good payment habits.

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A credit profile characterized by low credit scores (typically <620 in Canada), payment delinquencies, charge-offs, collections, bankruptcies, or high credit utilization. Bad credit results in:

• Loan denials or subprime rates
• Higher interest rates (30%+ for credit cards)
• Larger security deposits for rentals or utilities
• Difficulty obtaining cell phone contracts or rental housing

Recovery: Consistent on-time payments, debt reduction, and time (6-7 years for most negative items in Canada).

Debt that is unlikely to be repaid and is written off by the creditor as a loss. For consumers, having debt classified as "bad" typically means it has been charged off or sold to collections.

The amount of money owed on a credit account at any given time, including principal, interest, and fees.

Moving debt from one credit card to another, usually to take advantage of a lower interest rate or promotional period. Canadian credit cards typically offer:

• 0% APR for 6-12 months on balance transfers
• Balance transfer fees of 1-3% (lower than U.S. at 3-5%)

Example: Transferring $10,000 to a card with 0% APR for 10 months and a 1% fee costs $100 upfront but saves significant interest.

A mortgage with low monthly payments for a set term followed by a large balloon payment. Less common in Canada than the U.S., but may be offered by private lenders.

Risk: If you cannot refinance, you may face foreclosure or power of sale.

A large, lump-sum payment due at the end of a loan term. Common in commercial loans and some private mortgages.

See Levy (Bank Levy).

The legal status of a person or entity that has filed for bankruptcy and is undergoing the bankruptcy process. In Canada, you remain "bankrupt" until you receive a discharge from your Licensed Insolvency Trustee, typically 9–21 months for first-time bankrupts.

A legal proceeding under Canada's Bankruptcy and Insolvency Act (BIA) that allows individuals or businesses unable to repay debts to eliminate most debts under the supervision of a Licensed Insolvency Trustee (LIT). See bankruptcy in Canada for details.

Canada - How It Works:

• File an Assignment in Bankruptcy with a Licensed Insolvency Trustee (LIT)
• A Stay of Proceedings immediately stops most collection actions
• Attend two mandatory financial counseling sessions
• Surrender non-exempt assets to the LIT for liquidation
• Pay surplus income (if applicable) for 9-21 months
• Receive discharge, eliminating most unsecured debts

What Canadian Bankruptcy Does:

• Discharges most unsecured debts (credit cards, personal loans, payday loans, medical bills, tax debt over 1 year old)
• Stops wage garnishment, collection calls, and lawsuits immediately
• Provides a legal fresh financial start

What Canadian Bankruptcy Does NOT Do:

• Eliminate secured debts unless you surrender the collateral (car, home)
• Erase child support, alimony, court fines, or student loans less than 7 years old
• Remove bankruptcy from Equifax/TransUnion for 6-7 years (first bankruptcy)

Cost: Minimum $1,800-$2,500 in trustee fees plus surplus income payments if income exceeds OSB thresholds.

Discharge timing:

• First-time bankrupt, no surplus income: 9 months
• First-time bankrupt with surplus income: 21 months
• Second bankruptcy: 24-36 months
• Third+ bankruptcy: Court-determined

U.S. Comparison: Canada has no "chapters" (Chapter 7, 13, etc.). Canadian bankruptcy is a single unified process under the BIA, more similar to U.S. Chapter 7.

Canada. The federal law governing personal and corporate bankruptcy, consumer proposals, receiverships, and restructurings. Enacted in 1985 and administered by the Office of the Superintendent of Bankruptcy (OSB). Updated in 2026 with modernization rules including:

• Consumer proposal debt limit increased to $325,000 (from $250,000)
• Summary administration asset threshold increased to $15,000 (from $10,000)
• Annual inflation adjustments to key thresholds
• Digital filing and e-signature capabilities

U.S. only. Federal law enacted in 2005 that reformed U.S. bankruptcy. Not applicable in Canada.

U.S. only. Title 11 of the United States Code governing U.S. bankruptcy cases.

Canadian equivalent: Bankruptcy and Insolvency Act (BIA).

U.S. only. Specialized federal courts handling U.S. bankruptcy cases.

Canada: Bankruptcy matters are handled administratively by Licensed Insolvency Trustees under OSB supervision. Court involvement only occurs if creditors oppose discharge or for complex disputes.

An official release from the legal obligation to repay discharged debts. In Canada, discharge is granted by the Licensed Insolvency Trustee (LIT) unless a creditor, the Superintendent, or the trustee opposes it.

Canadian Timing:

• First bankruptcy, no surplus income: Automatic after 9 months
• First bankruptcy with surplus income: Automatic after 21 months
• Second bankruptcy: 24-36 months
• Opposed discharge: Court hearing required

What's Discharged: Credit cards, personal loans, payday loans, most tax debt (>1 year old), utility bills, medical debt, unsecured lines of credit.

What's NOT Discharged: Child/spousal support, court fines, debts from fraud, student loans <7 years from studies, secured debts.

All legal or equitable interests the bankrupt holds in property at bankruptcy filing. In Canada, the Licensed Insolvency Trustee administers this estate, liquidates non-exempt assets, and distributes proceeds to creditors.

Property and assets protected from seizure in Canadian bankruptcy. Exemptions vary significantly by province:

Common Canadian Exemptions:

• Clothing and household furnishings: Necessary items (no specific dollar limit in most provinces)
• Tools of trade: $10,000-$20,000 depending on province
• Vehicle: $5,000-$10,000 equity (varies by province; $7,500 in Ontario)
• RRSPs: Fully exempt except contributions in last 12 months
• Principal residence equity: Varies ($10,000 in Ontario; $40,000 in Alberta; $12,000 in BC)
• Life insurance: If beneficiary is spouse, child, parent, or grandchild
• Personal injury settlements: Up to certain limits
• Farm equipment: Varies by province for farmers

Provincial Variation Examples:

• Ontario: Tools of trade up to $14,180; motor vehicle up to $7,117; principal residence up to $10,783
• Alberta: Principal residence up to $40,000; personal property up to $4,000; motor vehicle up to $5,000
• British Columbia: Household goods up to $4,000; motor vehicle up to $5,000; principal residence up to $12,000 (or $9,000 if other land)
• Quebec: Uses Civil Code; more generous exemptions including unlimited RRSP protection

The formal submission of an Assignment in Bankruptcy and supporting documents to begin bankruptcy proceedings with a Licensed Insolvency Trustee (LIT) in Canada.

U.S. term. In Canada, this is called an Assignment in Bankruptcy.

See Licensed Insolvency Trustee (LIT) - the correct Canadian term as of 2015.

The period between billing statements for a credit account in Canada, typically 28–31 days for credit cards.

A monthly summary of credit account activity required by Canadian consumer protection laws, showing:

• Previous balance
• New charges and payments
• Interest and fees
• Minimum payment due and due date
• Available credit and credit limit

Latin term meaning "in good faith" or genuine. In Canadian debt law, refers to legitimate debts or creditors as opposed to fraudulent claims.

An individual or entity that receives funds from a lender with the obligation to repay the principal plus interest according to agreed terms.

A short-term loan (typically 3-12 months) used to "bridge" a financial gap. Common in Canadian real estate when buying a new home before selling the current one.

Characteristics: Interest rates of 6-12%+, secured by current property, due when existing property sells.

A financial plan allocating expected income to expenses, savings, and debt repayment. Licensed Insolvency Trustees and credit counselors in Canada help create budgets as part of mandatory financial counseling.

Canada. The sale of a substantial portion or all of a business's inventory or assets outside ordinary business. Regulated under provincial bulk sales acts (Ontario Bulk Sales Act, BC Business Practices and Consumer Protection Act) to protect creditors from fraudulent asset transfers.

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Canada. A federal Crown corporation that insures eligible deposits at member financial institutions up to $100,000 per depositor per insured category. In bankruptcy, CDIC-insured deposits are protected.

Tax debt owed to the federal government. CRA has extraordinary collection powers:

• Can garnish wages without court order
• Can freeze and seize bank accounts
• Can place liens on property
• Can offset future tax refunds and government benefits

In bankruptcy: Tax debt over 1 year old is dischargeable. Recent tax debt (<1 year) survives bankruptcy. CRA is a preferred creditor in proposals and bankruptcy.

In consumer proposals: CRA often accepts proposals if the offer exceeds what they'd receive in bankruptcy.

One of the "5 Cs of Credit." Canadian lenders assess capacity through:

• Gross Debt Service (GDS) ratio
• Total Debt Service (TDS) ratio
• Employment stability
• Income verification

One of the "5 Cs of Credit." Capital refers to your net worth, assets, savings (RRSPs, TFSAs), and investments. Canadian lenders view strong capital as security.

Unpaid interest added to principal balance, increasing total debt owed. Common in Canadian student loans during repayment assistance periods.

Example: $1,000 unpaid interest capitalized on a $20,000 OSAP loan raises principal to $21,000.

The legal contract between credit card issuer and cardholder. In Canada, must comply with federal Cost of Borrowing regulations requiring clear disclosure of:

• Interest rates
• Fees
• Grace periods
• Minimum payments
• Rights and responsibilities

A loan taken against a credit card's available credit via ATM, bank teller, or convenience checks. Canadian cash advance costs:

• Interest rate: Typically 24.99% to 29.99% (higher than purchases)
• No grace period: Interest starts immediately
• Fees: 2-5% of advance or $5-$10 minimum
• Daily ATM limit: Usually $500-$1,000

Avoid cash advances - among the most expensive forms of credit.

The movement of money in and out of accounts. Essential for debt repayment capacity assessments by Licensed Insolvency Trustees when evaluating whether bankruptcy or consumer proposal is appropriate.

Canada. Official document issued by the Office of the Superintendent of Bankruptcy confirming a person has completed bankruptcy and is discharged from debts. This document:

• Ends bankruptcy status
• Confirms debt discharge (with exceptions)
• Is required for certain employment, professional licenses, or travel
• Does not remove bankruptcy from credit report (remains 6-7 years)

U.S. only. Liquidation bankruptcy in the United States. Not applicable in Canada.

Canadian equivalent: Personal bankruptcy under the BIA, which functions similarly to Chapter 7 (asset liquidation and debt discharge).

U.S. only. Reorganization bankruptcy primarily for U.S. businesses. Not applicable in Canada.

Canadian equivalent: Division I Proposal or CCAA (Companies' Creditors Arrangement Act) for corporations.

U.S. only. Repayment plan bankruptcy for individuals in the United States. Not applicable in Canada.

Canadian equivalent: Consumer Proposal, which serves a similar function (structured repayment to creditors while avoiding bankruptcy).

One of the "5 Cs of Credit." Canadian lenders assess character through:

• Credit report from Equifax or TransUnion Canada
• Payment history
• Past bankruptcies or consumer proposals
• Collections or judgments

A payment card requiring full monthly payment. Less common in Canada than the U.S. Example: American Express charge cards (not Cobalt or other revolving products).

A debt written off as uncollectible by the creditor after 180 days of non-payment. In Canada:

• Credit reporting: Remains on Equifax/TransUnion for 6 years from last activity
• Legal status: You still owe the debt
• Typical action: Sold to collection agency or debt buyer
• Tax: May be reported as income (though rarely enforced for consumers)
• Score impact: Severe (-100 to -150 points)

See Charge-Off.

A loan secured by movable personal property (vehicle, manufactured home, equipment) rather than real estate. In Canada, governed by provincial Personal Property Security Acts (PPSA). If you default, lender can seize the chattel.

Provincial courts handling non-criminal disputes including:

• Small claims (Ontario: up to $35,000; BC: up to $5,000)
• Superior Court debt collection lawsuits
• Garnishment proceedings
• Foreclosure and power of sale

A court order requiring payment of money. In Canadian debt collection, creditors sue in Small Claims Court or Superior Court to obtain judgments, which allow:

• Wage garnishment (provincial limits apply)
• Bank account seizure
• Writ of execution against property
• Registration as a lien

Duration: 10-20 years depending on province; renewable.

Credit issued for a specific amount with fixed repayment. Once repaid, the account closes. Examples: car loans, personal loans, mortgages.

Fees paid when completing a Canadian mortgage or real estate purchase, typically 1.5-4% of purchase price:

• Land transfer tax (provincial; Ontario also has Toronto municipal tax)
• Legal fees ($1,000-$2,500)
• Title insurance ($250-$400)
• Home inspection ($400-$700)
• Appraisal ($300-$500)
• CMHC insurance premium (if <20% down)

A person who jointly applies for credit and shares equal legal responsibility. Both incomes and credit histories are considered. Both are fully liable. Common for Canadian mortgages, car loans, and joint lines of credit.

A person jointly liable for a debt. See Co-Borrower and Co-Signer.

A person who signs a loan agreement and guarantees repayment if the primary borrower defaults. In Canada, co-signers:

• Are fully liable for the entire debt
• Have their credit affected by payment history
• Have no ownership rights to the asset
• Cannot be released without lender consent

Risk: If primary borrower defaults or files bankruptcy/consumer proposal, co-signer remains 100% liable.

Property or assets pledged as security for a loan. Under Canadian law (provincial PPSA), lenders perfect security interests by registration. If borrower defaults, lender can seize and sell collateral.

Examples: Home (mortgage), car (auto loan), equipment (business loan).

The legal claim a secured creditor holds over pledged collateral until debt is repaid.

A debt transferred to a collection agency. In Canada:

• Credit reporting: Appears as "collection" notation for 6 years from date of last activity
• Score impact: Severe (-100+ points)
• Legal rights: Collection agency has same rights as original creditor
• Regulations: Must comply with provincial Collection and Debt Settlement Services Acts

A third-party company hired by creditors to recover unpaid debts. Canadian collection agencies must:

• Be licensed in the province where they operate
• Comply with provincial collection practices acts
• Follow regulations prohibiting:
  • Harassment or threats
  • Calling before 7 AM or after 9 PM (varies by province)
  • Contacting employer or family (except to locate you)
  • Misrepresenting legal status
  • Charging unauthorized fees

Provincial regulators:

• Ontario: Registrar of Collection and Debt Settlement Services
• BC: Consumer Protection BC
• Alberta: Service Alberta
• Quebec: Office de la protection du consommateur

Violations: File complaint with provincial regulator; may pursue civil action for damages.

A civil lawsuit filed in provincial court to obtain judgment for unpaid debt.

Canadian Process:

1. Creditor files Statement of Claim (Superior Court) or Plaintiff's Claim (Small Claims)
2. Debtor served with court documents (must respond within 20-30 days depending on province)
3. If no response: Default judgment granted
4. If response: Examinations, settlement negotiations, or trial
5. Judgment allows enforcement: garnishment, seizure, or lien

Defense: Always respond. Possible defenses include statute of limitations, debt paid, debt not owed, creditor lacks standing.

General term for debt recovery efforts by original creditors or third-party agencies.

Illegal agreement to defraud creditors by hiding assets or falsifying information. In Canadian bankruptcy, collusion is a criminal offense under BIA section 198-204, punishable by up to 5 years imprisonment.

Debt incurred for business purposes, as opposed to consumer debt.

Interest calculated on principal plus accumulated interest. Standard for Canadian credit cards, lines of credit, and most consumer debt.

Example: $10,000 at 20% APR compounded monthly for 1 year = $12,194.

A loan combining multiple debts into one. Canadian options:

• Personal consolidation loan: Banks, credit unions (typically 8-18% APR)
• Home equity loan: 3-7% but secures debt against your home
• Debt consolidation program: Through credit counseling agencies

Caution: Extending the term increases total interest paid. If secured by home, default can lead to foreclosure/power of sale.

Credit for personal, family, or household use (not business). Includes credit cards, personal loans, car loans, mortgages, payday loans, retail financing.

Professional financial guidance offered by nonprofit agencies accredited by Credit Counselling Canada. Services include:

• Free confidential budget counseling
• Debt management plans
• Financial literacy education
• Referrals to Licensed Insolvency Trustees if needed

Not to be confused with: For-profit debt settlement companies.

Nonprofit organizations providing financial counseling and debt management plans. Look for accreditation by Credit Counselling Canada.

Debt for personal or household purposes: credit cards, medical bills, personal loans, payday loans, utility bills. Excludes business debt.

Financial products for individuals: credit cards, personal loans, car loans, mortgages, retail financing.

Canada. Insolvency of an individual consumer, resolved through bankruptcy or consumer proposal under the BIA.

Canada. A legally binding debt settlement arrangement under Division II of the Bankruptcy and Insolvency Act (BIA). Administered by a Licensed Insolvency Trustee (LIT). Learn more: consumer proposal explained and find a Licensed Insolvency Trustee for a free consultation.

How It Works:

1. Meet with Licensed Insolvency Trustee for free consultation
2. LIT prepares proposal offering to repay portion of debt (typically 25-50%) over up to 5 years
3. Proposal filed; Stay of Proceedings stops collection actions immediately
4. Creditors have 45 days to vote (approved if majority by dollar value agree)
5. Make monthly payments to LIT for up to 5 years
6. Upon completion, remaining debt is legally discharged

2026 Eligibility (Updated OSB Rules):

• Total debt less than $325,000 (excluding mortgage on principal residence)
• Increased from $250,000; adjusted annually for inflation starting 2026
• Must be insolvent (unable to pay debts as due)

Advantages:

• Keep all assets (home, car, RRSPs, tax refunds)
• Interest stops immediately
• Typically repay 25-50% of debt
• Less damage to credit than bankruptcy (R7 rating; removed 3 years after completion)
• No surplus income payments
• Can pay off early without penalty

Disadvantages:

• Creditors must accept (>50% by dollar value)
• Cost: 20% of payments go to LIT as fees
• If you miss 3 payments, proposal is annulled
• Still reported negatively on credit (though less than bankruptcy)

Acceptance Rate: Approximately 80-85% of proposals are accepted by creditors.

Credit Impact: Reported as R7 ("making payments through arrangement to settle debts"); removed 3 years after completion (vs 6-7 years for bankruptcy).

Cost: No upfront fees. LIT fees (typically 20% of payments plus HST) are built into monthly payment.

Federal and provincial laws protecting Canadians from unfair practices:

• Federal: Cost of Borrowing (Interest Act), Competition Act
• Provincial: Consumer Protection Acts, Collection and Debt Settlement Services Acts, PPSA
• Quebec: Consumer Protection Act (stricter regulations)

Attorney fee arrangement where payment is contingent on winning. Common in debt collection defense and consumer rights litigation in Canada.

Debt that becomes due only if a specific event occurs:

• Co-signed loans (liable only if primary borrower defaults)
• Guarantees
• Pending legal judgments

Bankruptcy/Proposal: Contingent debts must be disclosed to Licensed Insolvency Trustee.

Credit card checks treated as cash advances. Canadian costs:

• Same as cash advances: immediate interest at 25-30% APR
• Cash advance fee (3-5%)
• No grace period

Avoid - among most expensive credit.

Canada. Document issued after completing two mandatory financial counseling sessions required during bankruptcy or consumer proposal. Certificates are required for:

1. First counseling session: Within 60 days of filing (bankruptcy) or proposal filing
2. Second counseling session: Before discharge

Licensed Insolvency Trustees provide counseling or refer to qualified counselors. Topics include budgeting, credit use, financial warning signs.

U.S. Chapter 13 term only. Not applicable in Canadian consumer proposals or bankruptcy. Canadian secured creditors generally retain full secured claim.

Verification of professional qualifications. For Licensed Insolvency Trustees, includes:

• CIRP (Chartered Insolvency and Restructuring Professional) designation
• Passing national exam
• Oral board examination
• Licensing by Office of the Superintendent of Bankruptcy

The ability to borrow money or access goods/services with promise of future payment.

Legal contract between borrower and lender. In Canada, must comply with Cost of Borrowing disclosure regulations.

Formal request for credit requiring disclosure of personal, employment, and financial information for lender assessment.

Small loans ($500-$2,000) designed to build credit. Less common in Canada than U.S. Canadian alternatives:

• Secured credit card
• Small RRSP loan from credit union
• Become authorized user on responsible person's card

Agency collecting and selling consumer credit information. Canada has two:

• Equifax Canada
• TransUnion Canada

Both provide credit reports and credit scores (Equifax Beacon Score, TransUnion CreditVision). Regulated federally under PIPEDA (Personal Information Protection and Electronic Documents Act).

Revolving credit account allowing borrowing up to set limit. Canadian credit cards:

• Purchase APR: 12.99% to 29.99% (19.99% typical)
• Cash advance APR: 24.99% to 29.99%
• Grace period: 21 days interest-free if pay full balance
• Regulation: Cost of Borrowing regulations require clear disclosure

See Consumer Credit Counseling.

Certified professional providing financial guidance. In Canada, look for:

• Accreditation by Credit Counselling Canada
• Nonprofit status
• Free or low-cost services
• No promises of quick fixes

Warning: Avoid for-profit "debt settlement" companies charging large upfront fees.

Information lenders must provide under Canadian Cost of Borrowing regulations:

• APR
• Dollar cost of borrowing
• Payment schedule
• Total amount to repay
• Fees and penalties

Complete credit history record maintained by Equifax and TransUnion Canada including:

• Personal information (name, address, SIN, DOB)
• Credit accounts (tradelines)
• Payment history
• Public records (bankruptcies, consumer proposals, judgments)
• Inquiries (hard and soft)
• Collections

Security measure restricting credit report access. In Canada:

• Available through Equifax and TransUnion
• Typically costs $5-$10 per bureau (or free if identity theft victim)
• Prevents new credit applications
• You control with PIN

Also called "credit lock" or "security freeze."

Lender, creditor, or financial institution extending credit.

Record of borrowing and repayment behavior used to calculate creditworthiness and credit scores.

Request to view credit report.

Types:

• Hard inquiry: Credit application; lowers score 2-5 points for 12 months; visible to lenders
• Soft inquiry: Pre-approval, self-check, employment check; no score impact; not visible to other lenders

Canadian consideration: Multiple mortgage inquiries within 14-45 days count as single inquiry.

Optional insurance paying credit obligations if you become disabled, unemployed, or die. Canadian types:

• Credit life insurance
• Credit disability insurance
• Creditor insurance (mortgages)

Caution: Expensive; often poor value. Independent term life and disability insurance usually cheaper and better coverage.

Maximum borrowing amount on revolving credit. In Canada, lenders must disclose credit limits clearly and cannot automatically increase without permission (under consumer protection rules).

Raising maximum borrowing limit. May require hard inquiry. Lowers utilization ratio if you don't increase spending.

Variety of credit types (revolving, installment, mortgage). Accounts for ~10% of Canadian credit scores. Diverse, well-managed credit is viewed positively.

Service tracking credit reports and alerting to changes. Canadian options:

• Free: Borrowell, Credit Karma Canada (free TransUnion scores)
• Paid: Equifax Complete, TransUnion Credit Monitoring ($15-$30/month)

See Credit Score.

Process of improving credit scores. In Canada:

• Dispute inaccurate information with Equifax/TransUnion
• Pay down high-utilization accounts
• Make on-time payments
• Wait for negative items to age off (6-7 years)

Warning: Beware credit repair scams. Accurate negative information cannot be removed early. DIY credit repair is free.

Detailed document from Equifax or TransUnion Canada containing credit history, accounts, payment patterns, public records, and inquiries.

Access: Entitled to free credit report:

• Online (soft inquiry): Borrowell, Credit Karma (free scores)
• By mail: Request from Equifax/TransUnion (free once annually)
• In person: Visit consumer reporting agency office

Under PIPEDA: Right to access, correct errors, add consumer statements.

See Credit Bureau.

Likelihood a borrower will default. Canadian lenders assess through:

• Credit score (Equifax Beacon, TransUnion CreditVision)
• Debt service ratios (GDS, TDS)
• Employment and income stability
• Assets and net worth

Three-digit number (300-900 in Canada) representing creditworthiness.

Canadian Scoring Models:

• Equifax Beacon Score: 300-900
• TransUnion CreditVision Risk Score: 300-900

Factors:

1. Payment history (35%)
2. Credit utilization (30%)
3. Credit history length (15%)
4. Credit mix (10%)
5. New credit inquiries (10%)

Ranges (Canada):

• Excellent: 760-900
• Very Good: 725-759
• Good: 660-724
• Fair: 560-659
• Poor: 300-559

Lender Thresholds:

• Prime mortgage: 680+
• Subprime mortgage: 600-679
• Deep subprime: <600

Estate planning tool for minimizing estate taxes. Not directly related to Canadian consumer debt relief.

Percentage of available revolving credit in use.

Formula: (Total Balances ÷ Total Limits) × 100

Example: $3,000 balance on $10,000 limits = 30% utilization.

Canadian Optimal: Keep below 30% for good credit; below 10% for excellent. Each card should ideally stay below 30% individually.

Person, business, or institution owed money. Types in Canadian insolvency law:

• Secured creditor: Holds collateral (mortgage lender, car loan)
• Unsecured creditor: No collateral (credit card, personal loan)
• Preferred creditor: Priority by statute (CRA for trust amounts, employee wages)

Canada. Meeting called by Licensed Insolvency Trustee within 21 days of filing bankruptcy or consumer proposal. Creditors can:

• Ask questions about financial affairs
• Vote on consumer proposal acceptance
• Vote on trustee appointment (bankruptcy)
• Request larger dividend examination

Reality: Rarely attended in consumer cases (>95% have no creditor attendance).

U.S. equivalent: 341 Meeting of Creditors.

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Money, goods, or services owed to another party arising from loans, credit cards, unpaid bills, judgments, or other financial obligations.

Loan provision allowing lender to demand immediate full repayment upon default or term violation. Standard in Canadian mortgages and loans.

Company purchasing charged-off or defaulted debts for pennies on dollar, then attempting to collect full amount. In Canada:

• Must be licensed as collection agency in province of operation
• Has same legal rights as original creditor
• Subject to provincial collection practices acts
• Common buyers: CBV Collection Services, IC Credit (ICCS), JC Digging

Process of pursuing payment. Can be conducted by:

• Original creditor (first-party)
• Collection agency (third-party)
• Debt buyer
• Collection lawyer

Canadian Regulation: Provincial collection agency acts set rules for permissible collection practices.

Person or company engaged in collecting debts for others. Must comply with:

• Provincial licensing requirements
• Collection practices acts prohibiting harassment, threats, misrepresentation
• Rules on contact times, frequency, and third-party disclosure

Rights: Can request debt validation; can file complaints with provincial regulators; can sue for violations.

Combining multiple debts into single loan or program. Canadian options:

1. Personal consolidation loan: 8-18% APR from banks/credit unions
2. Home equity loan/HELOC: 3-7% APR but secures debt against home
3. Balance transfer credit card: 0% for 6-12 months, then 19.99%+
4. Debt management plan: Through credit counseling agency; interest reduced/waived
5. Consumer proposal: Legal consolidation; repay 25-50% over 5 years

Caution: Consolidation restructures debt but doesn't eliminate it. Extending term increases total interest.

Structured repayment program through nonprofit credit counseling agency accredited by Credit Counselling Canada.

How It Works:

1. Credit counselor assesses finances
2. Agency negotiates with creditors to reduce/waive interest
3. You make single monthly payment to agency
4. Agency distributes payments to creditors
5. Complete in 3-5 years

Cost: Typically 10-15% of monthly payment as agency fee (or fixed $20-$50/month depending on agency).

Credit Impact: Accounts noted as "enrolled in DMP" (not as damaging as settlement or bankruptcy); removed when accounts paid off.

Acceptance: Voluntary; creditors not legally required to participate.

General term for strategies reducing, restructuring, or eliminating debt:

• Informal: Negotiation, hardship programs, consolidation
• Formal/Legal: Consumer proposal, bankruptcy

Organization offering debt resolution services. In Canada:

• Nonprofit credit counselors: Accredited by Credit Counselling Canada; offer free/low-cost services
• For-profit debt settlement companies: Charge fees (max 10% of original debt in Ontario for single-payment settlements); often damage credit significantly

Warning: Ontario has strict regulations on debt settlement companies (Consumer Protection Act, Part XIV). Many operate in grey area. Always verify credentials and understand fees before engaging.

Modifying debt terms to make repayment manageable:

• Lower interest rate
• Extended payment period
• Reduced principal (settlement)
• Payment deferral

Can be informal (negotiation) or formal (consumer proposal, Division I proposal).

Negotiating with creditors to accept lump-sum payment for less than full balance in exchange for debt forgiveness.

Example: Settle $10,000 credit card debt for $4,000 (40%).

Canadian Requirements:

• Must have lump sum available (typically 40-60% of debt)
• Debt must be in default or near-default
• Creditor must agree (not guaranteed)

Consequences:

• Severe credit damage (R5 "settled" notation; remains 6 years)
• Potential tax liability on forgiven amount >$600 (though rarely enforced)
• May still be sued if creditor refuses
• For-profit settlement company fees (max 10% in Ontario)

Better Alternative for Many: Consumer proposal offers legal protection and often similar or better debt reduction.

Financial metric comparing total debt to total assets.

Formula: (Total Debt ÷ Total Assets) × 100

Lower ratios indicate stronger financial position.

Percentage comparing monthly debt payments to gross monthly income.

Formula: (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

Example: $2,000 debt payments on $6,000 income = 33% DTI.

Canadian Lending:

• Good: <36%
• Acceptable: 36-43%
• High risk: >43%

Mortgage Qualification: Uses GDS (Gross Debt Service) and TDS (Total Debt Service) ratios instead.

Right to require debt collector to prove you owe debt. Under provincial collection acts (and federally through PIPEDA), you can request:

• Original creditor name
• Amount owed and breakdown
• Documentation supporting debt
• Proof collector has authority to collect

Process: Send written request within 30 days of first contact. Collector must pause collection until validation provided.

Payment card linked directly to bank account. Transactions immediately withdraw funds (no credit or borrowing).

Canadian Brands: Interac Debit (domestic), Visa Debit, Mastercard Debit (international).

Canada. See Assignment in Bankruptcy.

Voluntary transfer of property ownership to lender to avoid foreclosure. Less common in Canada than U.S.

Canadian equivalent: Quit claim deed to avoid power of sale.

Failure to meet legal obligations of loan or credit agreement, typically by missing payments or violating terms.

Consequences:

• Acceleration (full balance due immediately)
• Repossession or foreclosure/power of sale
• Lawsuit and judgment
• Severe credit damage (R9 rating)
• Collection actions

Court judgment entered when defendant (debtor) fails to respond to lawsuit within required timeframe (typically 20-30 days in Canadian provinces).

Consequence: Creditor wins automatically; can enforce through garnishment, bank seizure, or property lien.

Prevention: Always respond to court documents, even if you owe the debt. You can negotiate settlement or payment plan.

Amount still owed after collateral is repossessed or foreclosed and sold, if sale proceeds don't cover full debt.

Example: Owe $15,000 on repossessed car that sells for $10,000 = $5,000 deficiency balance.

Canadian Law: Creditor can sue for deficiency in most provinces. Some restrictions in Alberta and Saskatchewan.

Debt or account past due (typically 30+ days overdue). Reported to Equifax/TransUnion in stages:

• 30 days late (R2)
• 60 days late (R3)
• 90+ days late (R4-R5; serious delinquency)
• 120+ days (charge-off; R9)

Formal written notice from creditor or lawyer demanding payment by specific deadline, often preceding lawsuit.

Canadian Context: Often sent before filing Statement of Claim. Provides opportunity to negotiate settlement before legal costs accumulate.

Person you financially support (child, spouse, elderly parent). Considered in Canadian bankruptcy for:

• Provincial exemption amounts
• Surplus income threshold calculations (household size affects OSB standard)

See Pre-Authorized Payment (PAP).

Release from legal obligation to repay certain debts. In Canada:

Bankruptcy Discharge: Granted by Licensed Insolvency Trustee unless opposed. Timing:

• First bankruptcy, no surplus income: 9 months automatic
• First bankruptcy with surplus income: 21 months automatic
• Second bankruptcy: 24-36 months
• Opposed discharge: Court hearing required

Consumer Proposal Discharge: Automatic upon final payment.

Effect: Most unsecured debts legally eliminated. Exceptions: Child support, recent student loans, debts from fraud, secured debts.

Date bankruptcy or consumer proposal officially completes and you're released from discharged debts.

Debt eliminated through bankruptcy or consumer proposal completion. In Canada:

• Credit cards
• Personal loans
• Payday loans
• Lines of credit
• Utility bills
• Medical bills
• Most tax debt (>1 year old in bankruptcy; included in consumer proposals)
• HST/GST debt

Canada. Person who completed bankruptcy and received Certificate of Discharge, released from most debts.

Document required by Canadian Cost of Borrowing regulations providing detailed credit information before commitment.

Income remaining after taxes, essential living expenses, and legally required payments.

Canadian Bankruptcy: Used to calculate surplus income. OSB sets standard amounts based on household size; income exceeding standards results in surplus income payments for 21 months.

Debt you believe you don't owe or contains errors. Rights under provincial consumer protection and PIPEDA:

• Request debt validation
• Dispute with creditor/collector
• Dispute with Equifax/TransUnion if reported on credit

Process: Send written dispute within 30 days. Collector must pause collection until resolved.

Debt of company or individual experiencing financial difficulties and at risk of default or insolvency.

Canada. Formal debt restructuring under Division I of the Bankruptcy and Insolvency Act for:

• Individuals with debt exceeding $325,000 (excluding principal residence mortgage)
• Corporations

More complex than consumer proposal; requires creditor approval and court supervision. Administered by Licensed Insolvency Trustee.

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Penalty for ending contract or paying off loan before agreed term. In Canada:

• Mortgages: Prepayment penalties (IRD or 3 months interest)
• Cell phones: Early termination fees
• Auto leases: Significant early termination costs

Income from employment or self-employment. Used in Canadian bankruptcy surplus income calculations.

Electronic movement of money between bank accounts:

• Interac e-Transfer (peer-to-peer; up to $3,000-$10,000 per transfer)
• Direct deposit (payroll)
• Pre-authorized debits (PADs)
• Wire transfers
• Bill payments

One of two major Canadian credit bureaus (alongside TransUnion Canada). Provides:

• Credit reports
• Equifax Beacon Score (300-900 scale)
• Credit monitoring services

Contact: 1-800-465-7166 or equifax.ca

Difference between asset's market value and amount owed.

Example: Home worth $500,000 with $300,000 mortgage = $200,000 equity.

In Canadian Bankruptcy: Equity in non-exempt assets may be seized. Provincial exemptions protect some equity (e.g., $10,783 in Ontario principal residence).

See Home Equity Loan.

Legal process removing tenant from rental property. In Canada:

• Must follow provincial Residential Tenancies Act
• Requires Landlord and Tenant Board hearing (Ontario) or similar tribunal
• Cannot forcibly remove tenant without legal order
• Common grounds: Non-payment of rent, lease violations

Canada. Court process where judgment creditor examines debtor under oath about income, assets, and ability to pay. Conducted after obtaining judgment to identify enforcement options.

Also called: Debtor examination, judgment debtor examination.

Canada. Property protected from seizure in bankruptcy. Varies significantly by province (see Bankruptcy Exemptions for details).

Income protected from wage garnishment or creditor seizure in Canada:

• Canada Pension Plan (CPP)
• Old Age Security (OAS)
• Guaranteed Income Supplement (GIS)
• Employment Insurance (EI)
• Canada Child Benefit (CCB)
• Provincial social assistance
• Workers' compensation
• Disability benefits (provincial and federal)
• Child support received

Protection: Exempt at source and after deposited in bank account if properly identified.

One of three major U.S. credit bureaus. Does not operate in Canada. Canadian bureaus are Equifax and TransUnion only.

Legal removal or sealing of records. In Canadian debt contexts:

• Credit reports: Inaccurate information can be corrected/removed; accurate negative information ages off naturally (6-7 years)
• Court records: Some judgments can be vacated and records sealed through legal action

Note: Accurate negative credit information cannot be expunged early; must wait for natural aging.

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U.S. law only. Not applicable in Canada.

Canadian equivalent: Consumer protection under provincial Consumer Protection Acts and federal Cost of Borrowing regulations.

U.S. law only. Not applicable in Canada.

Canadian equivalent: PIPEDA (Personal Information Protection and Electronic Documents Act) governs credit reporting, giving Canadians rights to:

• Access credit reports
• Dispute inaccurate information
• Know who accessed reports
• Add consumer statements

U.S. law only. Not applicable in Canada.

Canadian equivalent: Provincial Collection and Debt Settlement Services Acts:

• Ontario: Collection and Debt Settlement Services Act
• BC: Business Practices and Consumer Protection Act
• Alberta: Fair Trading Act
• Quebec: Consumer Protection Act (strictest in Canada)

U.S. agency only. Not applicable in Canada.

Canadian equivalent: Financial Consumer Agency of Canada (FCAC), provincial consumer protection offices.

Charges imposed by lenders beyond interest, including:

• Annual fees (credit cards: $0-$500+)
• Late payment fees ($25-$50)
• Over-limit fees (less common; must opt in)
• NSF/returned payment fees ($40-$50)
• Cash advance fees (3-5% or $5 minimum)
• Balance transfer fees (1-3%)
• Foreign transaction fees (2.5% typical; some cards waive)

U.S. term. In Canada, equivalent scoring models are:

• Equifax Beacon Score (300-900)
• TransUnion CreditVision Risk Score (300-900)

FICO is not used in Canada.

Total cost of credit expressed in dollars, including interest and fees. Required disclosure under Canadian Cost of Borrowing regulations.

Canada. Federal agency protecting consumers of financial services and products. Responsibilities:

• Enforce consumer protection provisions of federal financial legislation
• Investigate complaints about federally regulated financial institutions
• Provide financial literacy resources

Website: canada.ca/en/financial-consumer-agency.html

Significant negative change in financial circumstances impairing ability to meet debt obligations, such as:

• Job loss or income reduction
• Illness or disability
• Divorce or separation
• Death of income earner
• Natural disaster

Canadian Options: Contact creditors for hardship programs; consult credit counselor or Licensed Insolvency Trustee for bankruptcy/consumer proposal assessment.

Loan with interest rate remaining constant throughout term, providing predictable payments.

Example: 5-year fixed-rate mortgage at 5.5% APR.

Temporary reduction or suspension of loan payments granted by lender due to financial hardship.

Canadian Applications:

• Mortgages: Payment deferral (3-6 months typical; interest continues accruing)
• Student loans: Repayment Assistance Plan (RAP) for federal/provincial loans
• Credit cards: Hardship programs reducing minimum payment

Important: Interest typically continues accruing and may be capitalized (added to principal).

Legal process by which mortgage lender seizes and sells property after borrower defaults. In Canada, governed by provincial law:

Provinces Using Foreclosure (Judicial Process):

• British Columbia (also has power of sale option)
• Alberta
• Saskatchewan
• Manitoba
• Quebec
• Nova Scotia

Process:

1. Default (typically 90+ days late)
2. Lender files foreclosure action in court
3. Redemption period (varies by province; 6 months-1 year)
4. If not redeemed: Court grants foreclosure order
5. Property ownership transfers to lender (or sold at court-ordered sale)

Credit Impact: R9 rating; remains on Equifax/TransUnion for 6-7 years.

Alternatives: Contact lender for workout; sell property; file consumer proposal or bankruptcy to stop proceedings.

Cancellation of all or part of debt by creditor, releasing borrower from repayment obligation.

Canadian Tax Consequences: Forgiven debt may be considered taxable income (reported on T4A). Exceptions:

• Forgiveness through bankruptcy or consumer proposal (not taxable)
• Insolvency at time of forgiveness
• Certain student loan forgiveness programs

Intentional deception for unlawful financial gain. In Canadian credit/debt contexts:

• Identity theft
• False statements on credit applications
• Fraudulent conveyance (hiding assets from creditors)
• Bankruptcy fraud (concealing assets, lying under oath)

Criminal Offense: Under Criminal Code of Canada; punishable by imprisonment up to 14 years for fraud over $5,000.

Transferring property or assets to hide them from creditors, often in anticipation of bankruptcy or lawsuit. In Canada, under BIA section 96:

• Trustees can reverse fraudulent transfers
• Lookback period: 1 year (related parties); 5 years (arm's length)
• Property recovered for creditor benefit

Bank account temporarily restricted by:

• Bank (suspicious activity, fraud investigation)
• Court order (garnishment, bank levy)
• CRA (tax debt enforcement)

Impact: Cannot access funds until restriction lifted. In bankruptcy or consumer proposal, Stay of Proceedings typically stops freezes.

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Court-ordered process allowing creditor to collect debt by seizing portion of wages directly from employer before you receive paycheck. See our wage garnishment calculator and how to stop wage garnishment for more.

Canadian Requirements:

• Creditor must sue and obtain judgment (except CRA, Family Responsibility Office for support)
• Judgment creditor obtains garnishment order from court
• Employer legally required to comply

Provincial Limits (Maximum % of Net Income):

• Ontario: 20% (or 50% if support arrears)
• Alberta: 50% (court discretion; typically 30-40%)
• BC: 30% (or 50% if court orders higher)
• Manitoba: 70% can be seized; 30% must remain with debtor
• Quebec: 30% (most debts); 50% (support)
• Saskatchewan: 40%

Exempt Income: CPP, OAS, EI, social assistance cannot be garnished (except for support obligations).

Stopping Garnishment: File consumer proposal or bankruptcy (Stay of Proceedings stops garnishment); pay judgment; negotiate settlement.

U.S. mortgage term only. Not used in Canada.

Canadian equivalent: Disclosure requirements under Cost of Borrowing regulations.

Period during which no interest charged on new purchases if you pay full statement balance by due date. Canadian credit cards typically offer:

• 21-25 days interest-free for purchases
• No grace period for cash advances or balance transfers

Important: Grace period lost if carrying balance from previous month.

Canada. Percentage of gross monthly income spent on housing costs (mortgage principal, interest, property taxes, heating, 50% of condo fees).

Formula: (Monthly Housing Costs ÷ Gross Monthly Income) × 100

Lender Guidelines:

• Maximum 32-35% for insured mortgages (CMHC)
• Maximum 39% for conventional mortgages

Example: $2,400 monthly housing costs on $7,000 income = 34% GDS.

Total income before taxes and deductions. Used in Canadian debt calculations for:

• GDS and TDS ratios (mortgage qualification)
• Surplus income calculations (bankruptcy)

Person who agrees to repay debt if primary borrower defaults. In Canada, guarantors:

• Are fully liable for entire debt
• Can be pursued immediately by creditor (no requirement to exhaust collection against primary borrower first)
• Have their credit affected by loan performance
• Should get independent legal advice before signing

Common Uses: Student loans (parent as guarantor), business loans, rental agreements.

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Written explanation to lender describing financial difficulties and requesting assistance such as:

• Loan modification
• Payment deferral
• Reduced payment plan
• Short sale approval (real estate)

Canadian Tips: Be specific about hardship (job loss, illness); provide documentation; propose realistic solution.

Temporary payment relief offered by creditors to borrowers experiencing financial hardship. Canadian options may include:

• Reduced minimum payments (3-6 months)
• Lower interest rates temporarily
• Payment deferral (skip payments)
• Waived fees

To Qualify: Contact lender proactively; demonstrate hardship; provide documentation (layoff notice, medical documentation).

Canada. Revolving credit line secured by home equity. Canadians can borrow up to 65% of home value (or 80% combined with mortgage).

Features:

• Interest rate: Prime + 0.5% to Prime + 2% (variable; ~7.5-9% as of February 2026)
• Payments: Interest-only minimum; can pay principal anytime
• Draw period: Typically 10-20 years or until mortgage renewal
• Re-advanceable: Can re-borrow as you pay down

Risk: Home is collateral; default can lead to power of sale/foreclosure.

Regulation: OSFI rules limit HELOC to 65% of home value; combined HELOC + mortgage cannot exceed 80% LTV at origination.

Lump-sum loan secured by home equity with fixed interest rate and fixed monthly payments over set term (5-30 years). Also called "second mortgage."

Canadian Interest Rates: Typically 6-12% (higher than first mortgages due to second lien position).

Uses: Debt consolidation, home renovations, major purchases.

Risk: Home is collateral; default can lead to foreclosure/power of sale.

U.S. term. Bankruptcy protection for home equity.

Canadian equivalent: Provincial principal residence exemptions (much lower than U.S.):

• Ontario: $10,783
• Alberta: $40,000
• BC: $12,000 (or $9,000 if own other land)
• Quebec: Higher under Civil Code
• Saskatchewan: $32,000
• Manitoba: $60,000

See Gross Debt Service (GDS) Ratio - the Canadian term.

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Fraudulent use of another person's personal information (Social Insurance Number, credit card, bank account) to obtain credit, goods, or services without knowledge.

Canadian Protection:

• File police report
• Contact credit bureaus (Equifax, TransUnion) - place fraud alert or credit freeze
• Contact Canadian Anti-Fraud Centre (1-888-495-8501)
• Dispute fraudulent accounts
• Report to PIPEDA if organization mishandled your information

Prevention: Monitor credit reports; shred documents; use strong passwords; freeze credit.

See Canada Revenue Agency (CRA) Debt.

Contractual obligation to compensate another party for losses. In credit contexts, co-signers or guarantors provide indemnity to lenders.

Benchmark interest rate used to set variable loan rates. In Canada:

• Prime Rate: ~6.95% (February 2026; set by individual banks based on Bank of Canada policy rate)
• Bank of Canada Policy Rate: 3.95% (February 2026)

Variable Rate Formula: Prime + Margin = Your Rate

Example: Prime (6.95%) + 2% margin = 8.95% APR on variable-rate loan.

See Credit Inquiry.

State of being unable to pay debts as they become due, or having liabilities exceeding assets.

Legal Insolvency in Canada (Under BIA):

• Owing at least $1,000
• Unable to meet financial obligations as they come due
• Liabilities exceed realizable value of assets

Resolution Options:

• Consumer proposal (debt <$325,000 excluding mortgage)
• Division I proposal (debt >$325,000 or businesses)
• Bankruptcy

See Installment Loan.

Loan repaid through scheduled periodic payments (typically monthly) over fixed term. Each payment includes principal and interest.

Canadian Examples:

• Mortgages
• Auto loans
• Personal loans
• Student loans (OSAP, federal student loans)

Contrast: Revolving credit (credit cards, lines of credit).

Cost of borrowing money, expressed as percentage of principal and charged over time.

Canadian Disclosure: Required under Cost of Borrowing regulations in dollar amounts and as APR.

Annual percentage charged for borrowing.

Types:

• Fixed: Stays constant (5-year fixed mortgage at 5.5%)
• Variable: Changes with prime rate (Prime + 0.5%)

Canadian Prime Rate (Feb 2026): ~6.95%

Limit on how much interest rate can increase on adjustable-rate loan.

Canadian Mortgages: Typically have maximum rate disclosure but most are fixed for term (1-10 years), so caps less relevant than in U.S. ARMs.

Canada. Prepayment penalty on fixed-rate mortgages calculated as difference between your contract rate and current rate for remaining term, applied to outstanding balance.

Formula: (Contract Rate - Current Rate) × Outstanding Balance × Months Remaining ÷ 12

Example: $300,000 mortgage at 5% with 3 years left; current rate 3.5%

• IRD = (5% - 3.5%) × $300,000 × 36 ÷ 12 = $13,500

Alternative Penalty: 3 months interest (whichever is higher).

Avoiding: Choose variable-rate mortgage (3 months interest max) or wait until renewal date.

Canada. Canadian debit card and e-Transfer system. Interac Debit allows point-of-sale purchases; Interac e-Transfer allows peer-to-peer electronic transfers (up to $3,000-$10,000 per transfer depending on bank).

U.S. only. Bankruptcy filed by creditors against debtor. Not available in Canada - only debtors can file bankruptcy or proposals.

U.S. tax form only. Not applicable in Canada.

Canadian equivalent: T4A slip for debt forgiveness if taxable (though rarely issued for consumer debt).

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Credit account or bank account held by two or more people, each with equal access and full legal responsibility. Both parties' credit affected by payment history.

Risk: If one party defaults or overspends, all parties are 100% liable.

Canadian Note: In bankruptcy or consumer proposal, joint debts require special handling - co-debtor remains liable for full amount.

Legal doctrine where multiple parties are each individually liable for entire debt. Creditor can pursue any or all parties for full payment.

Common in Canada: Joint credit cards, co-signed loans, business partnerships.

Credit granted to two or more applicants who share equal responsibility. Both incomes and credit histories considered; both credit reports affected.

Court-supervised foreclosure process. Used in several Canadian provinces (see Foreclosure for provincial breakdown).

Timeline: Typically 6-18 months in Canada (faster than U.S. judicial foreclosures).

Final court decision determining rights and obligations. In debt collection:

• Judgment for creditor: Debtor must pay specified amount
• Judgment for debtor: Creditor's claim denied

Canadian Enforcement: Garnishment, bank seizure (writ of seizure and sale), land registration as lien.

Duration:

• Ontario: 10 years (renewable)
• BC: 10 years (renewable)
• Alberta: 10 years (renewable)
• Quebec: 10 years

Status of having no income or assets creditors can legally seize to satisfy judgment. In Canada, judgment-proof if you:

• Earn only exempt income (CPP, OAS, EI, social assistance)
• Own only exempt assets
• Have no bank accounts or seizable property

Important: Status can change; if financial situation improves, creditors can resume collection.

Note: Still may want consumer proposal or bankruptcy to discharge debt and stop collection attempts.

Lien subordinate to senior (first) lien; paid only after senior lien satisfied. Examples:

• Second mortgages
• HELOCs (if registered after first mortgage)
• Judgment liens

In Foreclosure/Power of Sale: If proceeds don't cover first mortgage, junior lienholders may receive nothing.

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Penalty charged when payment not received by due date.

Canadian Typical Amounts:

• Credit cards: $25-$40
• Mortgages: $50-$75 (or 3-6% of payment)
• Utilities: $10-$25
• Rent: Maximum set by provincial tenancy acts

Credit Impact: Late fees increase debt; late payments damage credit scores if 30+ days overdue.

Individual, financial institution, or organization providing funds to borrowers with expectation of repayment with interest.

Canadian Types:

• Banks: TD, RBC, Scotiabank, BMO, CIBC, National Bank
• Credit Unions: Province-specific (e.g., Vancity, Meridian, Desjardins)
• Alternative Lenders: Subprime lenders, private lenders
• Payday Lenders: Money Mart, Cash Money (highly regulated)

Legal seizure of funds in bank account to satisfy court judgment. In Canada:

• Creditor obtains judgment
• Creditor gets writ of seizure and sale
• Sheriff or creditor serves garnishment order on bank
• Bank freezes account and pays funds to creditor

Protections: Certain funds exempt (CPP, OAS, EI if properly identified).

Stopping: File consumer proposal or bankruptcy (Stay of Proceedings prevents levy); pay judgment; negotiate settlement.

Financial obligations or debts owed. Includes:

• Loans and mortgages
• Credit card balances
• Lines of credit
• Accounts payable
• Judgments
• Tax debt

Canada. Federally licensed professional authorized to administer bankruptcies and consumer proposals under the Bankruptcy and Insolvency Act (BIA). LITs are regulated by the Office of the Superintendent of Bankruptcy (OSB). Find a Licensed Insolvency Trustee by city or province.

Qualifications:

• CIRP (Chartered Insolvency and Restructuring Professional) designation
• Passed national insolvency exam
• Completed oral board examination
• Licensed by OSB

Responsibilities:

• Assess financial situation and explain options
• Prepare and file bankruptcy or consumer proposal
• Administer insolvency proceedings
• Liquidate non-exempt assets (bankruptcy)
• Distribute payments to creditors
• Provide mandatory financial counseling
• Issue discharge certificates

Formerly Called: Bankruptcy trustee (name changed 2015).

Find a LIT: Search OSB database at ic.gc.ca or contact CAIRP (Canadian Association of Insolvency and Restructuring Professionals).

Consultation: First consultation is typically free and confidential.

Legal claim against property as security for debt. Lienholder has right to seize and sell property if debt not repaid.

Types in Canada:

• Consensual: Created by agreement (mortgage, car loan, PPSA security interest)
• Statutory: Imposed by law (construction/mechanic's lien, tax lien)
• Judgment: Placed after winning lawsuit (registered on title)

Effect: Liens prevent sale or refinance until debt satisfied and lien discharged.

Priority: Registered liens have priority by registration date (except for CRA super-priority for source deductions).

Document releasing lien on property once debt fully paid. Must be registered with land titles office or provincial Personal Property Registry to clear title.

U.S. Chapter 13 term only. Not available in Canadian consumer proposals or bankruptcy. Secured creditors in Canada generally retain full secured claim.

Flexible revolving loan allowing borrowing, repayment, and re-borrowing up to preset limit. Interest charged only on outstanding balance.

Canadian Types:

• Unsecured personal line of credit: Prime + 3-6% (~10-13%)
• Secured line of credit (HELOC): Prime + 0.5-2% (~7.5-9%)
• Student line of credit: Prime + 1-2.5%
• Business line of credit: Prime + 2-5%

Minimum Payment: Typically interest-only.

Process of converting assets into cash, typically to repay creditors. In Canadian bankruptcy, Licensed Insolvency Trustee liquidates non-exempt assets and distributes proceeds to creditors.

Sum of money borrowed from lender that must be repaid with interest according to agreed terms.

Permanent change to loan terms to make payments affordable, typically offered to borrowers in financial distress. Less common in Canada than U.S.

Canadian Alternatives:

• Mortgage renewal renegotiation
• Switching lenders (though may incur penalties)
• Payment deferral programs
• Consumer proposal

Ratio of loan amount to appraised property value or purchase price, expressed as percentage.

Formula: (Loan Amount ÷ Property Value) × 100

Example: $400,000 mortgage on $500,000 home = 80% LTV

Canadian Mortgage Rules:

• >80% LTV: Requires CMHC/Genworth/Canada Guaranty mortgage insurance
• ≤80% LTV: Conventional mortgage; no insurance required
• Maximum for HELOC: 65% LTV
• Maximum combined mortgage + HELOC: 80% LTV

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Date when loan's final payment due and debt fully repaid.

Canadian Mortgages: Maturity date is end of term (e.g., 5 years), at which point mortgage must be paid off or renewed (not end of amortization).

U.S. bankruptcy term only. Income eligibility test for U.S. Chapter 7. Not applicable in Canada.

Canadian Equivalent: Surplus income calculation in bankruptcy (but doesn't prevent bankruptcy; only affects duration).

Canada. Legal claim placed on property by contractors, subcontractors, or suppliers who performed work or provided materials but weren't paid. Governed by provincial statutes:

• Ontario: Construction Act
• BC: Builders Lien Act
• Alberta: Prompt Payment and Construction Lien Act

Priority: Can take priority over mortgages in some circumstances if properly registered within statutory deadlines.

Resolution: Must be paid, bonded off, or litigated to clear title.

Midpoint income level where half of households earn more and half earn less.

Canadian Use: Referenced in bankruptcy surplus income calculations. OSB sets standards based on Statistics Canada data, adjusted for household size.

Smallest finance charge imposed if interest due, typically $0.50-$1.00 on Canadian credit cards.

Smallest amount you must pay on revolving credit account each month to avoid default and late fees.

Canadian Credit Cards: Typically:

• 2-5% of balance, or
• $10 minimum (whichever is greater)
• Plus any overlimit amount
• Plus any past-due amount

Warning: Paying only minimums on $10,000 at 19.99% takes 30+ years and costs $15,000+ in interest.

Fixed or variable amount due each month on installment loan or minimum due on revolving credit.

Loan secured by real estate, used to purchase or refinance property. Lender holds charge on property until loan fully repaid.

Canadian Mortgage Features:

• Amortization: Typically 25 years (30 years if >20% down)
• Terms: 1-10 years (5 years most common); must renew at term end
• Types: Fixed-rate, variable-rate (VRM), adjustable-rate (ARM - rare)
• Prepayment: Most allow 10-20% annual lump sum without penalty
• Default: Leads to power of sale (Ontario, Newfoundland) or foreclosure (other provinces)

Stress Test (as of 2026): Must qualify at higher of:

• Contract rate + 2%, or
• 5.25%

Licensed professional connecting borrowers with lenders. In Canada:

• Licensed provincially (e.g., FSRA in Ontario)
• Access to multiple lenders (banks, credit unions, alternative lenders)
• Compensated by lender (typically) or borrower
• No cost to borrower in most cases

Failure to meet mortgage obligations, typically by missing payments (90+ days) or violating terms (not maintaining insurance, paying property taxes).

Consequences: Power of sale or foreclosure proceedings.

Canada. Insurance protecting lenders from borrower default on high-ratio mortgages (>80% LTV). Required by law for down payments <20%.

Providers:

• CMHC (Canada Mortgage and Housing Corporation) - government
• Sagen (formerly Genworth)
• Canada Guaranty

Premiums: 2.8% to 4.5% of loan amount, depending on LTV. Can be added to mortgage principal.

Borrower Pays Premium: Protects lender, not borrower (unlike mortgage life insurance).

See Mortgage Default Insurance (for high-ratio mortgages) or Mortgage Life Insurance (optional insurance paying off mortgage if you die).

Mortgage Life Insurance: Sold by lenders; often expensive and decreasing coverage. Independent term life insurance usually better value.

Legal document evidencing debt and promise to repay mortgage loan. Specifies:

• Loan amount
• Interest rate
• Payment terms
• Maturity date
• Consequences of default

In Canada, often combined with mortgage charge document registered on title.

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U.S. organization only.

Canadian Equivalent: Credit Counselling Canada - national association of nonprofit credit counseling agencies. Look for member agencies for legitimate Canadian credit counseling.

Loan structure where monthly payments insufficient to cover accruing interest, causing principal balance to increase.

Canadian Context: Rare; may occur in private mortgages or during payment deferral if interest capitalizes.

Income remaining after taxes and deductions ("take-home pay").

Canadian Use: Basis for garnishment calculations and monthly budget planning.

Total assets minus total liabilities.

Formula: Assets - Liabilities = Net Worth

Example: $600,000 in assets - $350,000 in debts = $250,000 net worth.

In Canadian Insolvency: Negative net worth (liabilities exceed assets) indicates technical insolvency.

U.S. Chapter 7 term. In Canada: Most consumer bankruptcies have no realizable assets after exemptions are applied, so trustee doesn't liquidate assets.

Canadian Context: Called "summary administration" if assets <$15,000 (increased from $10,000 in 2026 OSB modernization).

Debt that cannot be eliminated in Canadian bankruptcy and must be repaid:

• Child support and spousal support (always)
• Student loans <7 years from end of studies (dischargeable after 7 years)
• Court fines and restitution orders (criminal matters)
• Debts arising from fraud (proven in court)
• Debts from assault or sexual assault (proven in court)
• Division of family property (some circumstances)

Note: Most consumer debts ARE dischargeable (credit cards, personal loans, tax debt >1 year, medical bills, payday loans).

Property not protected by provincial bankruptcy exemptions and subject to seizure by Licensed Insolvency Trustee for creditor payment.

Canadian Examples:

• Cash and bank balances exceeding minimal exemptions
• Vehicles exceeding exemption ($5,000-$10,000 depending on province)
• Home equity exceeding exemption
• RRSPs contributed in last 12 months
• Investments (non-registered; TFSAs)
• Recreational property/cottages
• Valuable collections (art, jewelry exceeding reasonable personal items)
• Tax refunds for current year

U.S. term. In Canada, called Power of Sale in provinces where it exists (Ontario, Newfoundland, PEI).

Debt where lender can only seize collateral; no deficiency judgment possible.

Canadian Context: Extremely rare. Alberta has limited anti-deficiency protection for residential purchase mortgages in certain circumstances. Saskatchewan has some protections for farmland.

Most Canadian debt is recourse (lender can sue for deficiency after selling collateral).

Official authorized to witness signatures, administer oaths, and certify documents.

Canadian Use:

• Required for affidavits in bankruptcy proceedings
• Required for notarizing legal documents
• Quebec: Notaries have broader legal powers than other provinces

Formal written notice from lender to borrower stating loan terms violated (typically missed payments) and requiring cure within specified timeframe or facing foreclosure, repossession, or legal action.

Canadian Context: Often precedes power of sale proceedings or repossession.

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Canada. Federal agency within Innovation, Science and Economic Development Canada that:

• Regulates Canadian insolvency system
• Licenses and supervises Licensed Insolvency Trustees
• Maintains public records of bankruptcies and proposals
• Sets surplus income standards
• Investigates complaints and misconduct
• Provides consumer resources

Website: ic.gc.ca/eic/site/bsf-osb.nsf/eng/home

2026 Modernization Updates:

• Consumer proposal debt limit increased to $325,000 (adjusted annually for inflation)
• Summary administration asset threshold increased to $15,000
• Enhanced digital filing capabilities
• Streamlined processes for straightforward cases

Legal duty to perform an act, typically to pay money owed under contract or agreement.

See Revolving Credit.

Canada - Alberta, Saskatchewan, Nova Scotia, PEI only. Court-supervised debt repayment program through provincial government. Allows repayment of 100% of debt over ~3 years with no interest.

How It Works:

1. Apply through Court of Queen's Bench (Alberta) or similar provincial program
2. If approved, make single monthly payment to government administrator
3. Administrator distributes to creditors
4. Interest stops accruing
5. Creditors cannot take legal action

Eligibility:

• Must be resident of province offering OPD
• Have regular income
• Debts must be unsecured consumer debts

Comparison to Consumer Proposal: OPD requires repayment of 100% of debt (no reduction); consumer proposal typically 25-50%.

Upfront fee charged by lenders to process and fund loan, typically 0.5-2% of loan amount.

Canadian Context: Less common than U.S. Mortgages typically have setup/administration fees ($200-$500) rather than percentage-based origination fees. Personal loans may have origination fees (1-5%).

Lender or mortgage broker who initially creates loan. May sell or transfer loan to another lender or investor after funding.

Total amount currently owed on loan or credit account, including principal, accrued interest, and fees.

Penalty charged when credit card balance exceeds credit limit.

Canadian Context: Less common; most issuers declined over-limit transactions after 2010 consumer protection reforms. If allowed (must opt in), fees typically $10-$30.

Negative bank account balance caused by withdrawals exceeding available funds.

Canadian Overdraft Protection:

• Must apply for coverage
• Typically $250-$1,000 limit
• Interest charged (Prime + 2-5%; ~9-12%)
• May have monthly fee ($4-$5)

Cost Without Protection: NSF (non-sufficient funds) fee $40-$50 per transaction.

Arrangement where property seller acts as lender. Less common in Canada than U.S. due to robust traditional mortgage market.

When Used:

• Buyer cannot qualify for bank mortgage
• Unique properties
• Family transactions

Terms: Negotiated; typically higher interest rates and shorter amortizations than bank mortgages.

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Payment less than full amount due. Canadian creditors may accept partial payments but:

• Often apply to interest and fees first, not principal
• May not prevent further collection action
• In some provinces, accepting partial payment may restart statute of limitations

Credit Cards: Partial payments above minimum keep account in good standing but accrue interest on remaining balance.

Account or payment not paid by due date. Typically reported to credit bureaus after 30 days past due.

Canadian Credit Reporting:

• R1: Paid as agreed
• R2: 30 days late
• R3: 60 days late
• R4: 90 days late
• R5: 120+ days late
• R9: Charge-off, collection, or bankruptcy

Method creditors apply payments to debt portions. Under Canadian regulations (Cost of Borrowing):

• Payments above minimum: Must be applied to highest-interest balance portion first
• Minimum payment: Applied to interest, fees, then principal

Record of whether credit obligations paid on time, late, or missed. Most important factor in Canadian credit scores (35% weight).

Positive History: All payments on time
Negative History: 30+ days late reported to Equifax/TransUnion; remains 6 years.

Arrangement to repay debt through scheduled installments, negotiated with creditor or collection agency.

Canadian Context: Can be informal (agreed with creditor) or formal (debt management plan through credit counseling agency, consumer proposal through LIT).

Total required to fully satisfy and close loan, including:

• Remaining principal
• Accrued interest through payoff date
• Any prepayment penalties (mortgages, closed loans)

Canadian Mortgages: Request payoff statement (also called discharge statement) 30 days before intended payoff date. Includes:

• Principal balance
• Interest to payoff date
• Prepayment penalty (if applicable)
• Discharge fees ($250-$350)
• Administration fees

Written statement from lender specifying exact payoff amount and date through which valid (typically 10-30 days).

Canadian Term: Also called "discharge statement" or "payout statement" for mortgages.

Short-term, high-cost loan (typically $100-$1,500) due on next payday, usually within 2 weeks.

Canadian Costs (Provincial Maximums as of 2026):

• Ontario: $15 per $100 borrowed (391% APR)
• BC: $15 per $100 borrowed
• Alberta: $15 per $100 borrowed
• Quebec: $14 per $100 borrowed
• Manitoba: $17 per $100 borrowed

Example: Borrow $500, repay $575 in 14 days = $75 fee = 391% APR.

Regulation: Provinces strictly regulate payday lending (Criminal Code exemption required).

Warning: Payday loans trap borrowers in debt cycles. Explore alternatives: talk to bank about overdraft protection, emergency credit line, or contact nonprofit credit counselor.

In Bankruptcy/Proposal: Payday loans are unsecured debt and dischargeable.

Higher interest rate imposed by credit card issuers as penalty for late payment or other violations.

Canadian Context: Less common than U.S. Most Canadian issuers cannot arbitrarily raise rates on existing balances due to consumer protection regulations. New purchases may have higher rates if you default.

Interest rate applied per billing period.

Conversion:

• Monthly periodic rate = APR ÷ 12
• Daily periodic rate = APR ÷ 365

Example: 19.99% APR = 1.666% monthly periodic rate = 0.0548% daily rate.

See Bankruptcy (Canadian section above).

Promise by individual to repay business debt if business cannot. Common when small businesses borrow.

Canadian Risk:

• Business default makes you personally liable
• Creditors can pursue personal assets (home, savings, wages)
• Personal guarantee debt included in bankruptcy or consumer proposal
• Banks often require personal guarantees from business owners

Canada. Federal law governing how private sector organizations collect, use, and disclose personal information.

Credit Reporting Applications:

• Right to access credit report
• Right to dispute inaccurate information
• Right to know who accessed credit report (last 3 years)
• Right to add consumer statement (100 words)
• Credit bureaus must investigate disputes (30 days)
• Obsolete information must be removed (bankruptcies after 6-7 years, consumer proposals after 3 years post-completion)

Complaints: Office of the Privacy Commissioner of Canada.

Unsecured installment loan for personal use, typically $1,000-$50,000 with fixed interest rates and 1-7 year terms.

Canadian Interest Rates (2026):

• Prime borrowers: 7-12%
• Good credit: 12-18%
• Fair credit: 18-25%
• Poor credit: 25-47% (near legal maximum)

Uses: Debt consolidation, major purchases, home improvements, unexpected expenses.

Canada (all provinces except Quebec). Provincial legislation governing security interests in personal property (movable assets like vehicles, equipment, inventory).

Key Features:

• Registration system for secured creditors
• Priority rules (generally, first to register has priority)
• Allows creditors to perfect security interest
• Provides rules for seizing collateral on default

Quebec Equivalent: Civil Code provisions on hypothecs.

Legal document authorizing another person (attorney-in-fact or "attorney for property" in Ontario) to act on your behalf in financial or legal matters.

Types in Canada:

• General: Broad authority for financial matters
• Continuing/Enduring: Remains effective if you become incapacitated
• Specific/Limited: Authority for specific transactions only

Bankruptcy Context: POA holder may have authority to file bankruptcy/consumer proposal on behalf of incapacitated person with court approval.

Canada - Ontario, Newfoundland, PEI. Foreclosure alternative where mortgage lender sells property without court supervision after borrower defaults.

Process (Ontario Example):

1. Default (typically 90+ days late)
2. Lender issues Notice of Sale (45 days to cure)
3. If not cured: Lender lists property for sale
4. Property sold (typically below market value)
5. Proceeds applied to mortgage debt
6. Surplus (if any) returned to borrower
7. Deficiency (if any) remains borrower's debt

Timeline: Typically 6-9 months from first missed payment.

Credit Impact: R9 rating; remains on credit report 6 years.

Stopping: Pay arrears; sell property yourself; file consumer proposal or bankruptcy (Stay of Proceedings stops power of sale).

Other Provinces: Use judicial foreclosure instead.

Preliminary lender determination that you qualify for credit up to specified amount, based on credit check and income verification.

Canadian Mortgages: Pre-approval typically:

• Valid 90-120 days
• Rate hold included (protects from rate increases during validity period)
• Not binding on lender (final approval requires property appraisal, employment verification, etc.)
• Requires hard credit inquiry

Value: Strengthens purchase offers; accelerates closing; provides rate protection.

Automatic withdrawal from bank account to pay bills or debt on scheduled date.

Canadian Regulation: Must provide signed authorization; can cancel anytime with written notice to biller (10 days advance notice for recurring; can also contact bank to place stop payment).

Common Uses: Mortgage payments, loan payments, utilities, subscriptions.

Period after mortgage default but before foreclosure/power of sale completed. Homeowners can:

• Pay arrears and fees to cure default
• Sell property
• Negotiate loan modification
• File consumer proposal or bankruptcy (stops proceedings)

Canadian Timeline: Typically 45 days (power of sale provinces) to 6-18 months (foreclosure provinces).

Fee for paying off loan early. In Canada:

Mortgages:

• Fixed-rate: Higher of (a) 3 months interest, or (b) Interest Rate Differential (IRD) - can be $5,000-$30,000+
• Variable-rate: Typically 3 months interest only
• Open mortgages: No penalty

Other Loans: Personal loans and car loans may have prepayment penalties if closed term; most consumer loans are open.

Avoiding:

• Choose variable-rate mortgage or open mortgage
• Time payoff for end of term
• Stay within annual prepayment privilege (10-20%)

Informal estimate of borrowing amount based on self-reported income and assets without verification or credit check.

Difference from Pre-Approval: Pre-qual is informal estimate; pre-approval involves credit check and verification.

Unethical lending practices exploiting borrowers through excessive rates, hidden terms, or loans borrower cannot afford.

Canadian Examples:

• Payday loans (though now regulated)
• High-cost installment loans (30-47% APR)
• Subprime car financing (20-29% APR)
• Private mortgages with excessive fees

Protection: Shop multiple lenders; understand total cost; read disclosures; seek credit counseling if overwhelmed.

Contractual right to make extra payments or pay off Canadian mortgage without penalty.

Typical Privileges:

• Lump sum: 10-20% of original principal per year
• Payment increase: 10-20% of regular payment amount
• Double-up payments: Pay up to double regular payment anytime

Value: Paying extra $100/month on $400,000 mortgage at 5% saves ~$40,000 interest and shortens amortization by 5+ years.

Interest rate Canadian banks charge most creditworthy customers. Set by individual banks based on Bank of Canada policy rate.

As of February 2026: ~6.95% at major banks (varies slightly by institution)

Use: Basis for variable-rate products:

• Variable-rate mortgages: Prime - 0.5% to Prime + 0%
• HELOCs: Prime + 0.5% to Prime + 2%
• Lines of credit: Prime + 1% to Prime + 6%

Changes: Typically follows Bank of Canada policy rate changes (announced 8 times/year).

Original amount borrowed or remaining loan balance, excluding interest and fees.

See Principal.

Debt paid first in Canadian bankruptcy proceedings, ahead of unsecured creditors:

• Bankruptcy administration costs (LIT fees)
• Secured creditors (to extent of collateral value)
• Preferred creditors:
  • CRA for source deductions (employee withholdings)
  • Employee wages (up to $2,000 per employee)
  • Municipal property taxes
  • Landlord for 3 months rent arrears

Ordinary unsecured creditors (credit cards, personal loans, medical bills) rank last and receive pro-rata share of remaining funds (often $0.00-$0.05 per dollar).

U.S. bankruptcy term. In Canada, creditors file "Proof of Claim" in Division I Proposals and receiverships, but not typically in consumer proposals or summary bankruptcies (LIT relies on information provided by debtor and credit bureaus).

See Consumer Proposal or Division I Proposal - Canadian terms for debt restructuring arrangements under BIA.

Provincial consumption tax in some Canadian provinces:

• BC: 7% PST (separate from GST)
• Saskatchewan: 6% PST
• Manitoba: 7% RST (Retail Sales Tax)
• Quebec: 9.975% QST (Quebec Sales Tax)

Other Provinces: Use HST (Harmonized Sales Tax combining federal GST and provincial portion).

Bankruptcy/Proposal: PST/QST debts owed to province are included and dischargeable.

Canada - Consumer Proposal Term. Required payment to Licensed Insolvency Trustee starting immediately upon proposal filing and continuing monthly until creditor vote (45 days).

Purpose: Demonstrates good faith to creditors; funds held in trust pending proposal acceptance.

If Proposal Accepted: Provisional payments become regular proposal payments.

If Proposal Rejected: Provisional payments returned to you (minus LIT fees for work done).

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U.S. bankruptcy term only. Not applicable in Canadian bankruptcy.

Canadian Context: In bankruptcy, you can choose to keep secured assets (car, home) by continuing payments, but there's no formal "reaffirmation" process. If you stop paying, secured creditor can seize collateral.

See Accounts Receivable.

Legal process where court-appointed receiver takes control of business's or individual's assets to protect creditor interests.

Canadian Context: Typically used for secured creditors enforcing security under PPSA or for businesses in financial distress. Administered by Licensed Insolvency Trustee acting as receiver.

Debt where lender can pursue borrower personally for deficiency if collateral doesn't cover full amount.

Canada: Most debt is recourse. Lender can sue for deficiency after repossession/foreclosure/power of sale.

Limited Exceptions: Alberta has some anti-deficiency protection for residential purchase mortgages; Saskatchewan has farmland protections.

Replacing existing loan with new loan, typically to:

• Lower interest rate
• Reduce monthly payment
• Change from variable to fixed rate
• Access equity (cash-out refinance)
• Consolidate debt

Canadian Mortgage Refinance:

• Can refinance up to 80% LTV
• Incurs prepayment penalty if breaking term early (can be $5,000-$20,000+)
• Requires new approval, appraisal ($300-$500)
• Legal fees ($800-$1,500)

Break-Even Analysis: Calculate months to recover refinance costs through payment savings.

Canada. Tax-advantaged savings plan for children's post-secondary education.

Bankruptcy Protection: RESPs are generally exempt from seizure in bankruptcy under federal provisions, regardless of provincial exemptions.

Canada. Account converting RRSP to income stream in retirement (required by age 71).

Bankruptcy Protection: RRIFs are generally exempt from seizure in bankruptcy, like RRSPs.

Canada. Tax-advantaged retirement savings account.

Bankruptcy Protection:

• Contributions older than 12 months: Fully exempt from seizure
• Contributions in last 12 months: Not exempt; may be seized by LIT

Consumer Proposal: RRSPs are not seized (keep all RRSP savings regardless of contribution timing).

Strategy: Many people file consumer proposal instead of bankruptcy specifically to protect recent RRSP contributions.

Arrangement renting property with option to purchase at predetermined price after specified period.

Canadian Context: Regulated in some provinces; often high effective interest rates and unfavorable terms. Loss of rental payment credits if don't complete purchase.

Warning: Consult lawyer before entering rent-to-own agreement.

Canada - Student Loans. Federal and provincial program reducing or eliminating student loan payments for borrowers experiencing financial hardship.

Eligibility: Based on income and family size.

Benefits:

• Stage 1: Reduced or $0 payments for up to 6 months (renewable); government pays interest
• Stage 2 (after 5 years in Stage 1 or 10 years post-study): Government begins paying down principal

Application: Through NSLSC (National Student Loans Service Centre) or provincial counterpart.

Bankruptcy Alternative: For those struggling with student loans <7 years old (non-dischargeable in bankruptcy).

Structured schedule for repaying debt. Can be:

• Informal (negotiated with creditor)
• Debt management plan (through credit counseling agency)
• Consumer proposal (legal, through Licensed Insolvency Trustee)
• Court-ordered

Seizure of collateral by secured creditor after borrower defaults.

Canadian Process (Vehicles):

1. Default (typically 2-3 missed payments)
2. Demand letter/Notice of Intention to Seize
3. Repossession (often by tow truck without warning if vehicle on public property)
4. Storage and sale at auction
5. Deficiency judgment if sale doesn't cover debt

Rights:

• Ontario: 15-day redemption period (pay arrears + costs to get vehicle back)
• Other Provinces: Vary; some have redemption rights

Credit Impact: R8 or R9 rating; remains 6 years.

Avoiding: Contact lender for payment arrangement; file consumer proposal or bankruptcy (Stay of Proceedings stops repossession).

See Debt Restructuring.

Charge imposed when payment returned due to insufficient funds (NSF).

Canadian Banks: $40-$50 per returned payment.

Creditors: May also charge $25-$40 returned payment fee.

Consequences: Late fees, account penalties, credit damage if payment remains unpaid.

Loan for homeowners 55+ allowing borrowing against home equity without monthly payments. Loan repaid when you sell, move to care, or die.

Canadian Providers: HomeEquity Bank (CHIP Reverse Mortgage), Equitable Bank.

Features:

• Age: 55+ (federal rules; varies by lender)
• Loan Amount: Up to 55% of home value (depends on age, property location, type)
• Interest Rate: 6-8% (higher than regular mortgages)
• No Monthly Payments: Interest compounds and adds to loan balance
• Repayment: When home sold or borrower deceased

Costs:

• Setup fees: $1,500-$2,500
• Appraisal: $300-$500
• Legal fees: $1,000-$1,500
• Early prepayment penalties if repay within 3-5 years

Risks:

• Interest compounds; loan balance grows rapidly
• Reduces/eliminates home equity for heirs
• May not have funds for long-term care
• Difficult to move (penalties)

Alternative: HELOC, downsizing, selling home.

See Revolving Credit.

Credit that can be used repeatedly up to set limit, with option to pay in full or carry balance.

Canadian Examples:

• Credit cards
• Personal lines of credit
• Home equity lines of credit (HELOCs)

Features:

• Borrow, repay, re-borrow up to limit
• Interest charged only on outstanding balance
• Minimum payment required monthly
• No set repayment term

Contrast: Installment loans (fixed payments, closed-end, set term).

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Court document stating judgment fully paid. Must be filed with court to remove judgment from public records and credit reports.

Canadian Process: After paying judgment in full, request Statement of Satisfaction from creditor/lawyer; file with court ($100-$200 filing fee); send copy to Equifax and TransUnion.

Loan secured by home equity, subordinate to first mortgage. If default, first mortgage paid first from sale proceeds.

Canadian Interest Rates: 6-12% (higher than first mortgages due to increased risk from junior lien position).

Uses: Debt consolidation, home renovations, investment property down payment.

Risk: Junior position means higher interest rates and potential total loss if first mortgage forecloses and property underwater.

Credit card backed by cash security deposit (typically $500-$2,500) held by issuer as collateral.

Canadian Options: Most major banks offer secured cards.

Purpose: Build or rebuild credit with minimal risk to issuer.

Features:

• Deposit typically equals credit limit
• Normal interest rates (19.99% typical)
• Reports to Equifax/TransUnion as regular credit card
• After 12-18 months good payment history, may convert to unsecured (deposit returned)

Best For: Rebuilding credit after bankruptcy, consumer proposal, or for newcomers to Canada.

Creditor who holds collateral as security for debt. If borrower defaults, secured creditor can seize and sell collateral.

Canadian Examples:

• Mortgage lender (home as collateral)
• Auto loan lender (vehicle as collateral)
• PPSA secured creditor (equipment, inventory)

Priority: Paid before unsecured creditors in bankruptcy (to extent of collateral value).

Debt backed by collateral. If default, lender can repossess or foreclose.

Canadian Examples:

• Mortgages (secured by real estate)
• Auto loans (secured by vehicle)
• Secured lines of credit (HELOC secured by home)
• Equipment loans (secured by equipment)

In Bankruptcy/Proposal: Secured creditors retain rights to collateral. You can:

• Surrender collateral (debt discharged to extent of collateral value; deficiency becomes unsecured)
• Keep and continue paying
• In consumer proposal: Negotiate with secured creditor (they can vote)

Legal claim on collateral granted to lender to secure debt repayment. In Canada, perfected by registration under provincial Personal Property Security Act (PPSA).

Alberta. Provincial regulatory agency overseeing collection agencies, consumer protection, and fair trading.

Complaints: File complaints about debt collectors violating Alberta Fair Trading Act.

See Debt Settlement.

Credit-builder loan offered by credit unions, secured by savings account or GIC.

How It Works: Credit union lends $1,000-$5,000 and deposits into savings account. You make monthly payments. Upon completion, receive saved amount plus interest.

Purpose: Build credit and savings simultaneously.

Provincial enforcement officer executing court orders including garnishments, writs of seizure and sale, and evictions.

Debt Collection Role: Creditor with judgment requests sheriff to:

• Garnish wages
• Seize and sell property
• Execute writs

Sale of property for less than mortgage balance, with lender approval. Alternative to foreclosure/power of sale.

Canadian Requirements:

• Financial hardship
• Property value less than mortgage balance
• Lender agreement (not guaranteed)
• Full financial disclosure

Credit Impact: R7 or R9 rating (less damaging than foreclosure but still severe); remains 6 years.

Deficiency: Lender may waive deficiency as part of short sale approval, or may pursue deficiency depending on negotiation.

Process: List with realtor; submit short sale package to lender; negotiate offer; lender approves/denies.

Interest calculated only on principal balance, not on accumulated interest.

Formula: Interest = Principal × Rate × Time

Canadian Context: Rare in consumer lending; most use compound interest (daily or monthly).

Canada. Nine-digit identifier for government programs and tax purposes.

Credit Context:

• Required for credit applications
• Used by credit bureaus to match credit files
• Protected information (creditors must safeguard under PIPEDA)
• Never share SIN unless legally required

Legal time limit for creditors to sue to collect debt. After expiry, debt becomes "time-barred" and unenforceable through courts (though debt still legally exists).

Canadian Provincial Limits (from date of last acknowledgment or payment):

• Ontario: 2 years
• BC: 2 years (6 years for secured debt)
• Alberta: 2 years
• Saskatchewan: 2 years
• Manitoba: 6 years
• Quebec: 3 years
• Nova Scotia: 2 years
• New Brunswick: 2 years
• Newfoundland: 2 years
• PEI: 6 years

Important:

• Making payment or acknowledging debt can restart limitation period
• Limitation period is defense in lawsuit (must be raised by debtor)
• Time-barred debt still reported on credit report if within reporting period (6 years from last activity)

Collection Rights: After statute expires, collectors can still contact you requesting payment but cannot sue. You can send cease-and-desist letter.

Canada. Legal protection under BIA that immediately halts most collection actions when you file bankruptcy or consumer proposal.

What Stops:

• Wage garnishment
• Bank account seizure
• Collection calls and letters
• Lawsuits (existing ones stayed; new ones cannot be filed)
• Power of sale/foreclosure proceedings
• Utility disconnection for arrears
• Repossession attempts

Exceptions (Creditors Can Still):

• Secured creditors can pursue collateral in some circumstances (requires court permission in bankruptcy)
• Family Responsibility Office can continue enforcement of support orders
• Criminal court proceedings continue

Duration:

• Consumer proposal: Until proposal completed or annulled
• Bankruptcy: Until discharged

U.S. Equivalent: Automatic Stay.

Loan to pay for post-secondary education expenses.

Canadian Types:

• Federal: Canada Student Loans (CSL)
• Provincial: Ontario OSAP, Quebec AFE, etc.
• Private: Banks, credit unions (less common)

Interest Rates (2026):

• Federal/Provincial: Prime rate (no interest while in school; 6-month grace period after graduation)
• Private: 5-12% depending on credit

Bankruptcy Treatment:

• <7 years since end of studies: Not dischargeable in bankruptcy; survive bankruptcy
• ≥7 years since end of studies: Fully dischargeable
• Consumer proposal: Included regardless of timing

Hardship: Can apply for discharge of student loans <7 years old by proving undue hardship (extremely difficult; requires separate court application; 5 years in some provinces).

Alternatives to Bankruptcy:

• Repayment Assistance Plan (RAP)
• Extended repayment (up to 15 years)
• Loan rehabilitation
• Interest relief
• Consumer proposal (includes student loans)

Borrower with poor credit (typically <650 score in Canada) considered high risk, resulting in higher interest rates and stricter terms.

Loan offered to borrowers with poor credit at higher interest rates to compensate for risk.

Canadian Examples:

• Subprime auto loans: 15-29% APR
• Subprime mortgages: 6-15% (often from alternative lenders)
• Subprime personal loans: 25-47% APR

Canada. Simplified bankruptcy process for cases with minimal assets (realizable assets <$15,000 as of 2026 OSB modernization; increased from $10,000).

Features: Reduced administrative requirements; lower costs; faster processing.

Applies To: Over 95% of Canadian consumer bankruptcies.

Court ruling without full trial when no disputed material facts exist. In Canadian debt collection, creditors often seek summary judgment when debt amount and default are undisputed.

Defense: File Statement of Defence raising legitimate defense (statute of limitations, payment, debt not owed, identity error).

Legal document notifying you of lawsuit and requiring response within specified timeframe.

Canadian Response Times (varies by province/court):

• Ontario Small Claims: 20 days
• Ontario Superior Court: 20 days
• BC Supreme Court: 21 days
• Alberta Court of Queen's Bench: 20 days

Critical: Never ignore summons. Failure to respond results in default judgment. Even if you owe debt, respond to:

• Verify debt amount
• Negotiate settlement
• Raise defenses (statute of limitations, payment, etc.)
• Buy time to arrange payment or explore bankruptcy/proposal

Canada. Federal official heading the Office of the Superintendent of Bankruptcy (OSB), responsible for regulating Canadian insolvency system.

Canada. Income exceeding OSB standard amount deemed necessary for basic living expenses. In bankruptcy, must pay 50% of surplus income to creditors.

2026 OSB Standards (Monthly Net Income Thresholds):

• 1 person: ~$2,355
• 2 people: ~$2,932
• 3 people: ~$3,604
• 4 people: ~$4,375
• 5 people: ~$4,964
• Each additional: +$589

Amounts adjusted semi-annually for inflation

Calculation:

1. Calculate monthly net income (after taxes, mandatory deductions)
2. Subtract OSB standard for household size
3. Surplus = Income - Standard
4. Pay 50% of surplus to LIT monthly

Impact on Discharge:

• No surplus income: 9-month bankruptcy
• With surplus income: 21-month bankruptcy (first-time bankrupt)

Example: Single person earning net $3,500/month:

• OSB standard: $2,355
• Surplus: $3,500 - $2,355 = $1,145
• Payment: $1,145 × 50% = $572.50/month for 21 months
• Total paid: $12,022.50

Consumer Proposal Advantage: No surplus income payments; keep all income above proposal payment.

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Expense subtracted from income to reduce taxable income.

Canadian Debt-Related Deductions:

• Mortgage interest: Generally not deductible (except for rental properties, investment properties)
• Investment loan interest: Deductible if borrowed to earn investment income
• Student loan interest: Deductible (federal and provincial)
• Business debt interest: Fully deductible

Note: Unlike U.S., Canadian mortgage interest on principal residence is NOT tax-deductible.

Canada. Tax-advantaged savings/investment account allowing tax-free growth and withdrawals.

Contribution Limit (2026): $7,000 annual (cumulative limit since 2009: $95,000 for those eligible since inception).

Bankruptcy Treatment:

• TFSAs are NOT exempt in bankruptcy (unlike RRSPs)
• LIT can seize TFSA funds to pay creditors
• Consumer Proposal: Keep TFSAs (not seized)

Strategy: Many people file consumer proposal instead of bankruptcy to protect TFSA savings.

Legal claim placed by Canada Revenue Agency (CRA) or provincial tax agency on property when taxes unpaid.

CRA Powers:

• Register lien on real property (land titles)
• File writ or memorial (depending on province)
• Seize assets
• Garnish wages without court order
• Offset tax refunds and government benefits

Priority: CRA has super-priority for source deductions (employee withholdings, HST/GST collected); general tax debt ranks as unsecured or preferred depending on type.

In Bankruptcy: Tax debt >1 year old is dischargeable; recent tax debt (<1 year) survives.

In Consumer Proposal: All tax debt included and negotiable with CRA.

Length of time over which loan must be repaid or interest rate is fixed.

Canadian Mortgages:

• Term: 1-10 years (5 years most common) - period rate is locked
• Amortization: 25-30 years - period to fully repay loan
• Must renew at end of each term until amortization complete

U.S. bankruptcy term only. Mandatory meeting in U.S. bankruptcy where trustee questions debtor.

Canadian Equivalent: Creditors' Meeting - held within 21 days of filing, but rarely attended by creditors in consumer cases.

Canada. Percentage of gross monthly income required to cover all monthly debts plus housing costs.

Formula: (All Monthly Debt Payments + Housing Costs) ÷ Gross Monthly Income × 100

Components:

• Mortgage principal and interest
• Property taxes
• Heating costs
• 50% of condo fees
• All other debt payments (credit cards, loans, car payments, child support)

Lender Guidelines:

• Maximum for insured mortgages: 42-44%
• Maximum for conventional: 44%

Example:

• Housing costs: $2,400
• Other debt payments: $800
• Gross income: $7,000
• TDS: ($2,400 + $800) ÷ $7,000 = 45.7% (too high for most lenders)

Credit account reported on credit report, including:

• Credit cards
• Loans (auto, personal, student)
• Lines of credit
• Mortgages

Each tradeline shows:

• Account type
• Date opened
• Credit limit/loan amount
• Balance
• Payment history (R rating)
• Current status

One of two major Canadian credit bureaus (alongside Equifax Canada).

Products:

• Credit reports
• TransUnion CreditVision Risk Score (300-900)
• Credit monitoring

Contact: 1-800-663-9980 or transunion.ca

Free Credit Report: By mail (annual) or online via Borrowell or Credit Karma.

U.S. law only. Not applicable in Canada.

Canadian Equivalent: Federal Cost of Borrowing regulations and provincial Consumer Protection Acts requiring clear disclosure of:

• APR
• Total cost of borrowing in dollars
• Payment schedule
• All fees

See Licensed Insolvency Trustee (LIT) - correct Canadian term.

Compensation paid to Licensed Insolvency Trustee for administering bankruptcy or consumer proposal.

Bankruptcy:

• Minimum $1,800-$2,500 (varies by province)
• Plus surplus income payments
• Paid from bankruptcy estate or by bankrupt

Consumer Proposal:

• No upfront fee
• Approximately 20% of total proposal payments plus HST
• Built into monthly proposal payment
• Regulated tariff set by BIA

Example Consumer Proposal:

• Proposal: Repay $15,000 over 60 months ($250/month)
• Total payments by debtor: $15,000
• LIT fee: ~$3,000 (20%)
• Net to creditors: ~$12,000

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Secured debt where collateral value less than amount owed.

Example: Owing $25,000 on car worth $15,000 (underwater by $10,000).

In Canadian Bankruptcy:

• Secured creditor's claim limited to collateral value ($15,000)
• Deficiency ($10,000) becomes unsecured claim and discharged

In Consumer Proposal: Undersecured creditor can vote based on total claim but secured claim takes priority.

Canada - Student Loan Discharge. Extremely high legal standard required to discharge student loans <7 years from end of studies in bankruptcy.

Test (varies by province; 5 or 7 years):

1. Cannot maintain minimal standard of living if forced to repay
2. Circumstances likely to persist for significant portion of repayment period
3. Made good faith efforts to repay loans

Reality: Very difficult to prove; requires separate court application; rarely granted. Better options: Repayment Assistance Plan (RAP), consumer proposal, or wait until 7 years elapsed.

Income from sources other than employment:

• Investment income (interest, dividends, capital gains)
• Rental income
• Government benefits (CPP, OAS, EI)
• Gifts and inheritances

Bankruptcy: Included in surplus income calculations.

Creditor with no collateral or security interest. Must sue and obtain judgment to enforce collection.

Canadian Examples:

• Credit card issuers
• Medical providers
• Personal loan lenders
• Utility companies
• Payday lenders
• Collection agencies

In Bankruptcy: Rank as ordinary unsecured creditors; typically receive $0.00-$0.05 per dollar owed.

Debt not backed by collateral. If default, creditor cannot automatically seize property but can sue for judgment.

Canadian Examples:

• Credit cards
• Personal loans
• Payday loans
• Lines of credit (unsecured)
• Medical bills
• Utility bills
• Cell phone contracts
• Tax debt

In Bankruptcy/Proposal: Fully dischargeable (with exceptions like child support, recent student loans).

Owing more on loan than collateral worth. Also called "underwater" or "negative equity."

Example: Owing $30,000 on car worth $20,000.

Problem: Cannot sell or trade without paying difference; refinancing difficult; if repossessed, still owe deficiency.

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See Debt Validation.

Interest rate fluctuating based on benchmark (typically prime rate). Payments increase when prime rises; decrease when prime falls.

Canadian Examples:

• Variable-rate mortgages: Prime - 0.5% to Prime + 0% (payment adjusts with rate changes)
• HELOCs: Prime + 0.5% to Prime + 2%
• Variable-rate personal loans: Prime + 3-8%

Risk: Payment unpredictability, especially in rising rate environment (Bank of Canada raised rates significantly 2022-2023).

Benefit: Typically lower starting rate than fixed; only 3 months interest prepayment penalty.

Canada. Mortgage where interest rate fluctuates with prime rate. Two types:

1. Adjustable-Rate Mortgage (ARM): Payment changes with rate (rare in Canada)
2. Variable-Rate Fixed-Payment Mortgage: Payment stays fixed; ratio of interest vs. principal changes (common in Canada)

2026 Rates: Prime - 0.5% to Prime + 0% (~6.45-6.95%)

Prepayment Penalty: 3 months interest only (much lower than fixed-rate IRD).

Bankruptcy filed by debtor (as opposed to involuntary filed by creditors in U.S.). All Canadian bankruptcies are voluntary - only debtors can file.

Voluntary return of collateral to lender before repossession.

Canadian Process: Contact lender; arrange return of vehicle/property; get written confirmation of surrender.

Credit Impact: R8 or R9 rating (slightly less damaging than repossession but still severe); remains 6 years.

Deficiency: Still typically owe deficiency balance after lender sells collateral.

Advantage: Avoids repossession costs being added to deficiency; demonstrates responsibility.

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Voluntary agreement allowing creditor to collect debt directly from paycheck without court judgment.

Canadian Context: Rare; most wage deductions require court-ordered garnishment. Exceptions: CRA, Family Responsibility Office for support arrears.

See Garnishment (Wage Garnishment) above. Use our wage garnishment calculator to check limits.

U.S. bankruptcy term. Exemption applied to any property up to specified dollar amount.

Canada: No wildcard exemptions. Each province has specific exemptions for specific asset types (home, vehicle, tools of trade, household goods, RRSPs, etc.). Cannot apply unused exemption from one category to another.

Court order directing sheriff to seize and sell debtor's property to satisfy judgment.

Canadian Types:

• Writ of Seizure and Sale (Ontario, most provinces)
• Writ of Enforcement (some provinces)

Process:

1. Creditor obtains judgment
2. Creditor files writ with sheriff
3. Writ registered against land titles (creates lien on real property)
4. Sheriff can seize personal property, garnish wages, levy bank accounts

Duration: 10 years typically; renewable.

Stopping: Pay judgment; negotiate settlement; file consumer proposal or bankruptcy (Stay of Proceedings expires writs).

See Charge-Off.

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Promotional financing with no interest charged for specified period.

Canadian Examples:

• Retail purchases: Furniture, electronics ("Don't pay for 12 months!")
• Auto financing: 0% APR for 24-60 months (manufacturer incentive)
• Medical/dental financing: 0% if paid within 6-12 months

Warning - Deferred Interest: Many Canadian retail promotions charge retroactive interest (often 29.99%) on remaining balance if not paid in full by end of promotional period. Read terms carefully.

Auto 0% Financing: Legitimate (no retroactive interest) but often means forgoing cash rebate. Calculate which is better deal.

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