A–Z Debt & Financial Terms
Understanding debt terminology is the first step toward financial freedom. Browse our comprehensive glossary of Canadian debt terms.
A
Accounts Receivable
Money owed to a creditor by a debtor. When you owe money on a credit card or loan, it's an account receivable for the lender.
B
Bankruptcy
A legal proceeding where a person or business declares inability to pay debts. In Canada, it's governed by the Bankruptcy and Insolvency Act (BIA).
C
Collection Agency
A company hired by creditors to recover unpaid debts. They are regulated provincially in Canada and must follow specific rules.
Consumer Proposal
A legally binding agreement between you and your creditors to pay back a percentage of your debts over a maximum of 5 years, administered by a Licensed Insolvency Trustee.
Credit Bureau
Organizations (Equifax and TransUnion in Canada) that collect and maintain consumer credit information used by lenders.
Credit Counselling
Services that help consumers manage debt through budgeting advice and, sometimes, debt management plans.
Credit Score
A numerical value (300–900 in Canada) representing your creditworthiness, based on your credit history.
Creditor
An individual or institution that lends money or extends credit. Banks, credit unions, and credit card companies are common creditors.
D
Debt Consolidation
Combining multiple debts into a single loan, often with a lower interest rate, to simplify payments.
Debt Management Plan
An arrangement through a credit counselling agency where you make one monthly payment that is distributed to your creditors.
Debt Settlement
Negotiating with creditors to accept a lump-sum payment that is less than the full amount owed.
Default
Failure to repay a loan according to the agreed terms. Defaults negatively impact your credit score.
G
Garnishment
A legal process where a creditor can take money directly from your wages or bank account to satisfy a debt.
H
Hardship Program
Programs offered by some creditors that temporarily reduce payments or interest rates for borrowers facing financial difficulty.
I
Interest Rate
The percentage charged on borrowed money. In Canada, the Criminal Code caps interest at 35% per year for certain products.
J
Judgment
A court decision that legally confirms you owe a debt. Judgments can lead to wage garnishment or liens.
L
Licensed Insolvency Trustee
A federally regulated professional authorized to administer consumer proposals and bankruptcies in Canada.
Lien
A legal claim on your property as security for a debt. A lien must be satisfied before the property can be sold.
Lump Sum Settlement
A one-time payment offered to a creditor to settle a debt for less than the full balance owed.
P
PIPEDA
The Personal Information Protection and Electronic Documents Act — Canada's federal privacy law governing how organizations handle personal information.
Principal
The original amount of money borrowed, not including interest or fees.
S
Secured Debt
Debt backed by collateral (e.g., a mortgage backed by your home or a car loan backed by your vehicle).
Statute of Limitations
The time period after which a creditor can no longer sue you to collect a debt. This varies by province in Canada.
U
Unsecured Debt
Debt not backed by collateral — includes credit cards, personal loans, and medical bills. Most eligible for debt settlement.
W
Wage Assignment
A voluntary agreement to have a portion of your wages sent directly to a creditor.