Understanding certain terms becomes very important when you are sorting out your options and determining what various documents mean. We have identified some of the more common ones and provided a general explanation for your benefit. These may not be worded the same as the exact legal definitions and should only be used for general understanding of these terms in order to understand their use when reading our web site.
Insolvent debtor– A person who is not bankrupt and whose unsecured liabilities to creditors exceed one thousand dollars, and (a) for any reason is unable to meet his obligations generally as they come due; (b)who has ceased paying his obligations in the ordinary course of business as they become due; (c) the aggregate of his property, if sold at fair market value, would not be sufficient to enable payment of all of his obligations, due or accruing due.
Joint and Several liability– A debt that is owed by two or more legal persons. A creditor will have the right to enforce a debt in it’s entirety against all debtors who have accepted the liability until the debt is paid. (For example if two people agree to sign for the lease of a cell phone contract, they are each liable for the whole lease and not just half of the lease each…. If one person defaults, the other party may have to pay the whole debt)
Secured Creditors -A creditor who has taken collateral or secured their obligation with an asset. (For example a mortgage taken for the funds received to buy a house. The house is the security or collateral on the debt. In the event of default, the secured creditor has remedies under provincial legislation and their security agreement to take the asset in lieu of thye non-payment)
Unsecured Creditors– A creditor who has no collateral or security for their debt. (For enforcement purposes, they will be required to utilize the court process.)
Preferred Creditors -A unsecured creditor who holds a priority over other unsecured or secured creditors because of legislation. ( A debt to Canada Revenue Agency for payroll source deductions and a debt to employees both are examples of debts that have priorities in certain situations)
Court Judgement – A court has set or “certified” an amount that you owe to a creditor as of a specific date and the creditor now is able to enforce the debt through legal means.
Statement of Claim – A creditor has filed their claim against you in the courts and have served this document to you. On proof of service, you now have twenty-one days to file a Statement of Defense. In the event that you do not, then the creditor will be granted a “court judgement” as above and be able to enforce their claim through legal means such as seizure of assets or garnishment of wages, etc.