Ira Smith Trustee & Receiver Inc.

INSOLVENCY TRUSTEE COURT ORDER: THE FULL POWER OF THE COURT IN ONTARIO REGULATORY PROCEEDINGS

Post author By Brandon Smith
Post date October 6, 2025

Insolvency Trustee Court Order: Introduction

As a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) at Ira Smith Trustee & Receiver Inc. in the Greater Toronto Area, I meet with people and business owners every day who feel overwhelmed by debt. Many believe we only handle bankruptcies. The truth is, our role goes much deeper. We act as a bridge between financial trouble and the Canadian legal system.

From our Vaughan office at 167 Applewood Crescent, Suite 6, we help clients find a secure path through their financial challenges. One of the most powerful tools in this process is the insolvency trustee court order.

These court orders form the backbone of fairness and legality in Canadian insolvency cases. Whether you’re a small business owner looking for a way to save or safely close your business, or dealing with a multi-million-dollar corporate restructuring, court orders protect everyone involved.

Let me share a very recent Ontario court decision. In 2025, the Ontario Securities Commission (OSC) took action against Cacoeli Asset Management and related entities (Cacoeli). This case shows exactly how an insolvency trustee court order can stop improper conduct and protect investors.

In this post, I’ll explain:

What happened in the Cacoeli case and why it matters
How the court decided to appoint a receiver
What a Licensed Insolvency Trustee does under a court order
When you need a court order in insolvency proceedings

Let’s start with the case that brought these issues to light.

The Superior Court’s Insolvency Trustee Court Order Appointing the Receiver

In the recent Ontario court case of, Ontario Securities Commission v. Cacoeli Asset Management, 2025 ONSC 3012, the OSC asked the Ontario Superior Court of Justice for urgent help. They wanted an insolvency trustee court order to take control of the Cacoeli assets before their investigation was even finished. This is a serious step that requires strong reasons.

The Problem: Misused Investor Money

The OSC found that Cacoeli had raised at least $13 million from about 53 investors. Each investor thought their money was going to buy and manage a specific property. Different limited partnerships were created for each unique property.

However, the investigation revealed something troubling. Money meant for one property was allegedly being moved to support completely different properties. This is called “fund diversion.”

Investors who thought their money was buying Property A discovered it might have been used for Properties B, C, or D instead.

What Standard of Proof Was Needed?

Cacoeli’s lawyers argued that appointing a receiver is extremely serious. It takes away the company’s control over its own business. They said the OSC needed to prove a “strong prima facie case” – meaning very strong evidence that laws were broken.

Justice Steele disagreed. She confirmed that for protective orders under Ontario’s Securities Act, the OSC only needs to show “serious concern that there have been possible breaches.”

Why does this matter? It means courts can act quickly to protect investors. They don’t have to wait months or years for a full trial when people’s money is at risk.

Reading the Partnership Agreements

Cacoeli argued that their partnership agreements allowed them to move money around. They pointed to clauses that gave the General Partner power to “invest funds” and “engage in any transaction with affiliates.”

Justice Steele carefully read the agreements. She found that the “Purpose” section was crystal clear. Each partnership existed for one specific reason: to acquire and manage that particular property only.

The broad powers mentioned elsewhere in the agreement could only be used to support that specific purpose. They couldn’t be used to break the fundamental promise made to investors.

This finding confirmed that the fund diversion was serious and possibly illegal.

Why Include All Properties Under One Receiver?

Certain secured creditors held mortgages on specific Cacoeli properties. Some of them asked the court to exclude their properties from the receivership. They wanted to seize and sell those properties themselves.

Justice Steele said no. She ordered the insolvency trustee court order to cover all Cacoeli properties and companies.

Why? Excluding properties would create chaos:

Different creditors would fight over different assets
Multiple court cases would overlap and contradict each other
Costs would skyrocket
Small creditors would get nothing

Appointing one Licensed Insolvency Trustee as the court-appointed receiver guaranteed central oversight, coordination, and fairness for everyone.

Insolvency Trustee Court Order: The Court of Appeal Upholds Investor Protection

Cacoeli appealed Justice Steele’s decision. The case went to the Court of Appeal for Ontario. A panel of three justices – Hourigan, Zarnett, and Pomerance – reviewed the lower court decision in Ontario Securities Commission v. Cacoeli Asset Management Inc., 2025 ONCA 654 (CanLII).

The Main Argument on Appeal

Cacoeli made the same argument again. They insisted that appointing a receiver was so powerful that courts should require the higher “strong prima facie case” standard of proof.

The Court of Appeal’s Strong Response

The Court of Appeal rejected this argument completely. Their reasoning matters for anyone dealing with financial regulation:

Public protection comes first: Requiring a high standard of proof would “impede the public protection mandate of the OSC”
Early action is essential: A high standard would make it “impossible for the OSC to obtain receivership at the early stages of an investigation when the facts are not fully known.”

This is a clear message from Ontario’s highest court: when protecting the public is the priority, courts will allow regulators to act fast using an insolvency trustee court order – even before every detail is fully investigated.

The receivership order acts as a protective shield, not a final punishment.

The Final Decision

The Court of Appeal found “no question that the OSC has established a serious concern” about possible legal breaches.

The appeal was dismissed. The original insolvency trustee court order appointing the receiver remained in force.

Cacoeli was ordered to pay the OSC $15,000 for the costs of the appeal.

The Foundational Role of a Licensed Insolvency Trustee in Canada

Who Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is the only professional in Canada authorized to administer bankruptcies and consumer proposals. In addition, only LITs can act as a receiver, be it private or court-appointed under an insolvency trustee court order.

We are not lawyers. We are officers of the court.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in the field
Pass demanding written and oral examinations
Demonstrate expertise in financial assessment, accounting, and insolvency law

This high standard allows us to act as impartial administrators of insolvency estates. Think of us as neutral referees. Our job is to balance the rights of:

The debtor (the person or company owing money)
The creditors (the people or companies owed money)

The Law That Guides Everything We Do

The first piece of legislation that covers every action a Licensed Insolvency Trustee takes is the federal law: the Bankruptcy and Insolvency Act Canada (BIA).

The BIA is the ultimate authority for virtually all consumer and corporate insolvency proceedings in Canada. It:

Lays out the rules for debt relief
Sets the framework for proposals (which help restructure debt)
Defines the powers and duties of trustees

Very large corporate restructurings are usually done under a different federal law, the Companies’ Creditors Arrangement Act (CCAA).

The BIA and CCAA are our playbooks. The courts are the referees who make the final calls. Provincial laws also apply, but the federal BIA governs all Licensed Insolvency Trustees.

Federal Oversight: The Office of the Superintendent of Bankruptcy

Unlike most private professionals, Licensed Insolvency Trustees are constantly supervised by a federal regulator: the Office of the Superintendent of Bankruptcy Canada (OSB).

The OSB’s job is to ensure that Canada’s insolvency system is fair, efficient, and that trustees perform their duties with integrity.

This creates two layers of oversight:

The OSB (administrative supervision)
The Courts (judicial supervision)

This dual oversight gives the public and creditors confidence in the system. We must report all significant actions to the OSB. For many major decisions, we seek court approval through an insolvency trustee court order.

Our Core Responsibilities

Whether helping an individual consumer get a financial fresh start through a personal insolvency process or managing a complex corporate wind-down, our core responsibilities stay the same:

Secure Assets: Take possession and control of all assets belonging to the debtor (subject to provincial exemptions for individuals and the rights of trust claimants and secured creditors)

Investigate Financial Affairs: Examine the debtor’s finances, including transactions before the insolvency filing, to ensure fairness

Realize Value: Sell assets in a way that maximizes returns for creditors

Distribute Funds: Distribute money collected to creditors according to the priority rules in the BIA and/or as approved by the court through an insolvency trustee court order

Report: Provide detailed financial reports to creditors, the OSB, and the court

Understanding the Necessity of an Insolvency Trustee Court Order in Insolvency Proceedings

What Is an Insolvency Trustee Court Order?

A court order is a written ruling by a judge that must be followed. In insolvency, an insolvency trustee court order is an official directive that either:

Grants the Licensed Insolvency Trustee specific powers, or
Approves a significant decision or action

In the Cacoeli case, the Ontario Superior Court of Justice issued an insolvency trustee court order appointing a receiver. This order gave the receiver legal authority to seize control over all assets and properties of the Cacoeli companies.

Why Court Involvement Is Essential

Courts aren’t involved just to follow bureaucratic procedure. They serve two critical purposes:

Neutrality and Impartiality: Insolvency creates conflict. A judge provides a neutral, binding decision that everyone must respect. This ensures no single party unfairly benefits.

Legal Compliance: By reviewing the Trustee’s requests and issuing an order, the court confirms that proposed actions follow the BIA and other relevant laws strictly.

What Requires Court Approval?

Not every action a Licensed Insolvency Trustee takes requires a judge’s approval. The insolvency trustee court order appointing the receiver gives certain discretionary powers, such as handling routine matters, including administrative disbursements.

However, any major decision that impacts the fundamental rights of debtors or creditors must be sanctioned by an insolvency trustee court order. This creates a clear line between day-to-day administration and actions requiring judicial authority.

Key Scenarios Requiring a Licensed Insolvency Trustee to Obtain an Insolvency Trustee Court Order

Many actions taken by a Licensed Insolvency Trustee in a court-supervised receivership require court permission through an insolvency trustee court order. Here are the most common situations:

Approval of Trustee Fees and Administrative Costs

Our fees are strictly regulated through a process called “taxation.” The ultimate fees and costs must be approved by the court through an insolvency trustee court order.

This is a critical check to ensure the estate isn’t being overcharged. It protects creditors from excessive fees eating into their recovery.

Authorizing Unusual or Complex Transactions and Asset Sales

A key duty of a Licensed Insolvency Trustee is to liquidate (sell) assets. However, court approval is required when the transaction is:

Unusual: Selling a non-standard asset or unique piece of real estate

Complex: Selling an entire business as a “going concern” (a live business that continues operating)

Controversial: When one or more stakeholders object to the sale price or terms

In these cases, the Trustee must provide sufficient evidence to a judge for an insolvency trustee court order to approve the transaction.

Resolving Disputes Among Stakeholders

The Trustee may face disputes such as:

A party claiming ownership of an asset under the receiver’s control
A dispute over the validity or priority of different security interests
Creditors disagreeing about distribution

When these disputes can’t be settled through negotiation, the Trustee brings a motion to court. A judge issues an insolvency trustee court order that settles the matter legally and definitively.

In the Cacoeli case, secured creditors wanted their properties excluded from the receivership. Justice Steele rejected this request. She stated the receivership must cover all properties to prevent chaos among creditors. This is a prime example of the court resolving a major stakeholder dispute.

Approving Debtor Proposals and Restructuring Plans

The goal of a business proposal under a BIA Division I Proposal or major corporate restructuring under the CCAA is to financially restructure the company to save it and as many jobs as possible.

A significant insolvency trustee court order is always required for final approval of a Division I restructuring proposal or restructuring plan. The court confirms that the plan is fair, reasonable, viable and calculated for the general benefit of all creditors.

Modifying, Annulling, or Terminating Insolvency Proceedings

Sometimes a debtor’s situation changes. They may need to alter their original plan based on changed circumstances. Or the Trustee may discover an issue that warrants ending the insolvency proceeding entirely, as the original plan is no longer viable.

A judge must review the facts and issue an insolvency trustee court order to modify, annul, or terminate the proceeding.

Addressing Trustee Liability or Allegations of Misconduct

If any stakeholder alleges that a LIT has breached their duties or acted improperly, the matter goes before a judge.

The court must issue an order to investigate the claim. If necessary, the court can order compensation or disciplinary action against the Trustee. This ensures absolute accountability.

The Far-Reaching Significance of Judicial Oversight in Insolvency

Protecting the Interests of All Parties

Judicial oversight is about trust. By demanding an insolvency trustee court order for critical actions, the system provides comfort to all parties:

Debtors know the process is being handled legally

Creditors know assets can’t be sold cheaply or favour one creditor over another

The Public knows the integrity of capital markets is being enforced, as the Court of Appeal confirmed in the Cacoeli case

Ensuring Transparency, Accountability, and Due Process

Every court motion becomes part of a public record. This transparency ensures every stakeholder can review the trustee’s actions.

The process also provides due process – the right to be heard. Any party can attend a hearing and object to a proposed action.

Upholding Public Confidence in the Canadian Insolvency System

Canada’s entire economy relies on:

The ability of businesses to take risks
The ability of creditors to enforce their rights

According to Industry Canada’s publication “Fresh Start: A Review of Canada’s Insolvency Laws“:

Insolvency legislation is a key component of Canada’s marketplace framework legislation that governs commercial relationships for both consumers and businesses. Certain and reliable rules provide security for investors and lenders that, in turn, influences the cost and availability of credit in the Canadian marketplace.

When the system fails, the court restores order. They are the clear, final legal instrument that upholds the integrity of the process and ensures public faith in financial markets and debt restructuring.

The Ultimate Framework for All Decisions

Regardless of the unique facts of any case, every judicial decision is rooted in federal and provincial law. Judges interpret the law to deliver their orders, making it the ultimate framework for every action taken by a Licensed Insolvency Trustee.

Consequences of Acting Without a Necessary Insolvency Trustee Court Order

Potential Ramifications for the Licensed Insolvency Trustee

A trustee who ignores the need for an insolvency trustee court order faces serious consequences:

Personal Liability: The trustee could be held personally responsible for any financial loss to the estate caused by unauthorized action

Disciplinary Action: The court and the OSB could impose sanctions, fines, or, in severe cases, the OSB could revoke the LIT’s license

Voided Actions: The action itself (such as an asset sale) could be reversed or voided by a subsequent court decision, creating chaos and cost

Adverse Impacts on the Insolvency Estate and Stakeholders

When a Licensed Insolvency Trustee acts outside the BIA or without proper authorization, the entire estate suffers:

Increased Costs: The estate incurs significant costs fighting legal challenges and correcting unauthorized actions

Delayed Proceedings: Disputes and legal challenges drag out the process, delaying final distribution of funds to creditors

Loss of Confidence: Creditors and debtors lose faith in the insolvency administration, leading to an unnecessarily hostile environment

Section 37 of the BIA provides that any person aggrieved by any act or decision of a Licensed Insolvency Trustee can apply to court to reverse or alter that act or decision. The court also has the authority to sanction the trustee.

Frequently Asked Questions: Insolvency Trustee Court Order

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is the only professional in Canada who can legally administer receiverships, bankruptcies and consumer proposals. We used to be called trustee in bankruptcy, but the name changed to better reflect our broader role.

Think of us as a bridge between your financial troubles and the Canadian legal system. We’re officers of the court, which means we have a legal duty to be fair and impartial.

Only Licensed Insolvency Trustees can act as receivers, whether privately appointed or through an insolvency trustee court order.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in insolvency work
Pass demanding national examinations
Demonstrate expertise in insolvency law, accounting, and financial assessment

This ensures that every LIT has the knowledge and skills to handle complex financial situations fairly.

What does a Licensed Insolvency Trustee actually do?

Whether we’re helping someone with personal debt or managing a complex corporate restructuring or bankruptcy, our core responsibilities stay the same:

Secure Assets: We take control of all assets belonging to the debtor. This protects them from being hidden or sold improperly. (Some assets are exempt, and trust claimants and secured creditors keep their rights.)

Investigate Financial Affairs: We carefully examine the debtor’s financial transactions made before filing for insolvency.

Realize Value: We sell assets in a way that gets the best possible return for creditors. This might mean selling items individually or selling a business as a going concern.

Distribute Funds: We distribute the money we collect to creditors following the strict priority rules in the Bankruptcy and Insolvency Act. Sometimes, an insolvency trustee court order determines the distribution.

Report: We provide detailed financial reports to the court, creditors, and the Office of the Superintendent of Bankruptcy. Transparency is essential.

What law governs Licensed Insolvency Trustees in Canada?

The primary law that guides almost everything we do is the federal Bankruptcy and Insolvency Act. This is Canada’s main insolvency legislation.

The BIA covers:

Rules for debt relief and bankruptcy
The framework for consumer proposals and corporate proposals
The powers and duties of Licensed Insolvency Trustees
Priority rules for paying creditors
When court orders are required

For very large corporate restructurings (typically companies with debts over $5 million), the federal Companies’ Creditors Arrangement Act often applies instead. The CCAA allows for more flexible restructuring options.

Both laws work together with provincial legislation to create Canada’s comprehensive insolvency system.

Who oversees Licensed Insolvency Trustees?

Licensed Insolvency Trustees operate under two layers of oversight. This dual supervision ensures the system works fairly:

The Courts: Provide judicial supervision and make final decisions on major actions. Courts issue insolvency trustee court orders that authorize significant steps in the process.

The Office of the Superintendent of Bankruptcy Canada: This federal regulator provides administrative supervision. The OSB ensures:

Canada’s insolvency system remains fair and efficient
Trustees perform their duties with integrity
Trustees follow all rules and regulations
Any complaints against trustees are investigated

This two-level oversight gives the public, debtors, and creditors confidence that the process will be handled properly.

What is an insolvency trustee court order?

An insolvency trustee court order is a written ruling issued by a judge that must be followed. It’s a legally binding document.

In insolvency cases, these court orders serve two main purposes:

Grant the Licensed Insolvency Trustee specific legal powers
Approve a significant decision or action that the LIT plans to take

These orders form the backbone of fairness and legality in Canadian insolvency cases. They ensure that major decisions have judicial approval and oversight.

For example, when a receiver is appointed (like in the Cacoeli case discussed in our blog), the insolvency trustee court order gives that receiver the legal authority to take control of assets and manage the insolvency process.

Why do courts get involved in insolvency proceedings?

Courts aren’t just following bureaucratic procedure. They serve two critical purposes in insolvency:

Ensuring Neutrality and Impartiality: Insolvency creates conflict. Creditors want their money. Debtors need protection. The judge provides a neutral, binding decision that everyone must respect. This prevents any single party from benefiting unfairly at the expense of others.

Confirming Legal Compliance: Before issuing an insolvency trustee court order, the court reviews the Applicant’s request carefully. This confirms that the proposed actions strictly follow the BIA and other relevant laws. If something doesn’t comply with the law, the judge won’t approve it.

This judicial oversight protects everyone’s rights and maintains public confidence in Canada’s insolvency system.

When does a Licensed Insolvency Trustee need a court order?

Not every action requires an insolvency trustee court order. We have discretionary powers for routine administrative matters – like paying regular administrative expenses or communicating with creditors.

However, any major decision that impacts the fundamental rights of creditors or debtors must be sanctioned by a court order. Here are the most common scenarios:

Approval of Fees and Costs: Our fees and administrative costs must be approved by the court through a process called “taxation.” This protects creditors from excessive charges eating into their recovery.

Authorizing Complex Transactions: Court approval is required for asset sales that are:

Unusual (non-standard assets or unique properties)
Complex (selling an entire business as a going concern)
Controversial (stakeholders object to the sale price or terms)

Resolving Disputes: When disputes arise – such as someone claiming ownership of an asset, or secured creditors disagreeing about distribution priorities – we bring a motion to court. The judge issues an order that settles the matter legally and definitively.

Approving Restructuring Plans: Final approval of a BIA Division I restructuring proposal or a CCAA corporate restructuring plan always requires a significant insolvency trustee court order. The court must confirm that the plan is fair, reasonable, and has a realistic chance of success.

Modifying Proceedings: If circumstances change and the insolvency proceedings need to be modified, annulled, or otherwise terminated, a court order is required.

Addressing Trustee Issues: If anyone alleges the LIT has breached their duties, the matter goes before a judge who can investigate and order appropriate remedies.

What happens if a trustee acts without getting a required court order?

Ignoring the requirement for an insolvency trustee court order leads to serious consequences for the Licensed Insolvency Trustee:

Personal Liability: The LIT may be held personally responsible for any financial loss to the estate caused by the unauthorized action. This means paying out of their own pocket.

Disciplinary Action: The court or the OSB can impose:

Sanctions
Significant fines
Suspension from practice
In severe cases, complete revocation of the LIT’s license

Voided Actions: The unauthorized action itself – such as an improper asset sale – could be reversed or voided by a subsequent court decision. This creates chaos and additional costs.

Negative Impact on Everyone: Unauthorized actions harm the entire insolvency estate:

Increased legal costs
Delayed proceedings
Loss of creditor confidence
Potential loss of asset value

Section 37 of the BIA specifically allows any person who is aggrieved by an LIT’s decision to apply to court to reverse or alter that decision. The court has full authority to sanction the trustee.

What standard of proof is needed to appoint a receiver in regulatory cases?

This is one of the most important takeaways from the Cacoeli case about insolvency trustee court orders.

When a regulator like the Ontario Securities Commission asks the court for urgent protection, they only need to show “serious concern that there have been possible breaches.”

This is a lower standard than criminal cases or even most civil cases. The court doesn’t need:

Absolute proof of fraud
Complete evidence
A finished investigation

The Court of Appeal for Ontario specifically rejected the argument that regulators must meet a higher “strong prima facie case” standard.

Why does this matter?

This lower standard allows courts and regulators to act quickly through an insolvency trustee court order to:

Protect investors from ongoing harm
Freeze assets before they disappear
Stop improper conduct immediately
Preserve evidence

The insolvency trustee court order appointing a receiver acts as a protective shield, not a final punishment. Full investigations and trials can happen later, but the immediate protection comes first.

Why did the Cacoeli court order cover all properties, even those with secured creditors?

In the Cacoeli case, some secured creditors held mortgages on specific properties. They asked the court to exclude their properties from the receivership so they could seize and sell those properties themselves.

Justice Steele refused this request. The insolvency trustee court order covered all Cacoeli assets and properties without exception.

The Court of Appeal upheld this decision. Here’s why centralized control under one Licensed Insolvency Trustee as receiver was essential:

Prevents Creditor Chaos: If different creditors could seize different assets, they would fight over everything. The process would become a free-for-all with no coordination.

Avoids Multiple Court Cases: Excluding properties would lead to numerous separate legal proceedings, all overlapping and potentially contradicting each other.

Controls Costs: Multiple proceedings mean multiplied legal costs. A single insolvency trustee court order with one receiver keeps costs manageable.

Protects Small Creditors: When secured creditors grab assets first, unsecured creditors and small suppliers are not given a forum. Centralized control ensures everyone is treated fairly according to their legal priority.

Enables Efficient Administration: One receiver can see the whole picture, make coordinated decisions, and maximize value for all stakeholders.

This principle applies to most complex insolvency cases: centralized control through an insolvency trustee court order produces better outcomes than fragmented, competing proceedings.

Insolvency Trustee Court Order Final Thoughts: The Licensed Insolvency Trustee’s Role in a Regulatory Receivership

The insolvency trustee court order is an instrument of authority, protection, and fairness. As Licensed Insolvency Trustees, our job – whether in a standard bankruptcy, a financial restructuring or a specialized receivership like the Cacoeli case – is to impose order and protect stakeholders.

The Cacoeli decisions confirmed two critical points:

Lower Standard for Protection: Courts won’t wait for proof of fraud to a certainty. The “serious concern” standard is enough to appoint an LIT as a receiver quickly. This is essential to freeze assets and prevent further investor harm.

Centralized Control Is Key: The court agreed that the entire portfolio of assets must be placed under one receiver’s control – even properties secured by third parties. This centralized approach, ordered by the court, prevents a fragmented, costly, and unfair outcome for all stakeholders.

Need Help With Debt or Insolvency Issues?

If you’re facing financial challenges – whether personal or business-related – understanding the role of an insolvency trustee court order is just the beginning. At Ira Smith Trustee & Receiver Inc., we’ve helped many individuals and businesses in the Greater Toronto Area find their path to financial recovery.

From our Vaughan office, we provide:

Free, confidential consultations
Expert guidance on bankruptcy alternatives
Consumer proposals that can reduce your debt
Corporate restructuring solutions
Court-supervised receiverships

Contact us today to discuss your situation. Let us help you understand your options and find the best solution for your financial future.

Brandon Smith, Licensed Insolvency Trustee
Senior Vice-President
Ira Smith Trustee & Receiver Inc.
167 Applewood Crescent, Suite 6
Vaughan, Ontario
Greater Toronto Area

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., serving individuals and businesses throughout the Greater Toronto Area. With years of experience in insolvency cases, including financial restructuring, Brandon helps clients navigate complex financial challenges and find sustainable solutions, Starting Over Starting Now.

Tags administrative disbursements, Bankruptcy and Insolvency Act, Cacoeli Asset Management, Companies’ Creditors Arrangement Act, Consumer Proposal, court approval, Court of Appeal for Ontario, court orders, court permission, Division I restructuring proposal, insolvency law, insolvency trustee court order, licensed insolvency trustee, Office of the Superintendent of Bankruptcy Canada, Ontario court decision, Ontario Securities Commission, Ontario Superior Court of Justice, personal insolvency process, trustee in bankruptcy

Brandon Blog Post

TORONTO CONDO MARKET: FROM RETIREMENT DREAMS TO DISTRESS SALES – A COMPLETE 2025 LOOK AT THE DECLINE

Post author By Brandon Smith
Post date September 29, 2025

toronto condo market

The Toronto condo market in 2025 has become a harsh teacher for many investors. What once seemed like a sure path to retirement wealth has turned into financial stress for thousands of people across the Greater Toronto Area.

As a licensed insolvency trustee firm with decades of experience, we’ve seen firsthand how real estate investments can go wrong. The stories I hear every day show just how quickly the Toronto condo market can change lives – and not always for the better. In my practice at Ira Smith Trustee & Receiver Inc., I’ve helped families navigate the aftermath of failed real estate investments.

The current situation reminds me of other market crashes we’ve witnessed. But this one feels different. It’s not just about market cycles – it’s about people who made what seemed like smart financial decisions that have now turned into their worst nightmares.

Toronto Condo Market: The Reality Behind the Numbers

Let me share what’s really happening in Toronto’s condo market right now. The numbers tell a clear story of a market under serious pressure, but behind each statistic is a real person facing real financial stress.

In August 2025, condo prices in Toronto decreased by 7% compared to the same month the previous year. According to its Toronto Housing Market Outlook 2025, Nesto Mortgage Experts reported that the average condo now sells for $571,500 in the city. The Toronto Regional Real Estate Board (TRREB) reveals that July saw GTA’s condo prices hit a four-year low, with the average condo selling for $651,000. Across the entire Greater Toronto Area, the average condo price fell to $642,000, down 5% from 2024. While this might sound like good news for buyers, it’s creating serious problems for people who bought at higher prices.

Here’s what makes this situation unique: there are now over 9,100 active listings for condos for sale in the Toronto area. That’s the highest number ever recorded for August. When the market trend is too many condos and not enough buyers, prices fall. It’s basic supply and demand, but the human cost is enormous.

The sales numbers tell an even more troubling story. According to TRREB, in the first quarter of 2025, Toronto condo sales dropped by 21.7% compared to the same period in 2024. That’s not a small dip – it’s a market in serious decline.

What really concerns me about this real estate market as a financial professional is the “months of supply” number. Right now, there are over seven months of available condo inventory. In a healthy market, you’d see about three to four months of supply. Such oversupply inventory levels mean sellers are competing desperately for the few buyers who are still active.

Toronto Condo Market: Understanding the Human Impact

Every week, I meet with people whose lives have been turned upside down by the Toronto condo market crash. These aren’t reckless speculators – they’re teachers, nurses, small business owners, and retirees who thought they were making smart investments.

Take Maria (not her real name), a 52-year-old teacher who came to see me last month. She bought a pre-construction condo in Mississauga in 2021 for $750,000, putting down $75,000 of her savings. The building was supposed to be finished in 2024, but construction delays pushed the completion to 2025. When she finally got the keys, similar units in the building were selling for $600,000.

Maria reluctantly was able to put down the extra cash needed in order to complete the purchase when her mortgage lender reduced the amount they were prepared to lend, given the lower value. The condo is rented out, but she still can’t afford all the monthly payments the rent doesn’t cover on her teacher’s salary, and she can’t sell without taking a massive loss. The stress has affected her health, her relationships, and her ability to do her job effectively.

Or consider James and Patricia (not their real names), who bought three pre-construction condos as their retirement plan. They figured they’d rent them out for income or sell them for profit. Instead, they’re facing monthly carrying costs that, even with all the rental income, don’t come close to covering their expenses. They’re burning through their retirement savings just to keep the properties.

These stories repeat in my office almost daily. Good people who made what seemed like reasonable financial decisions are now facing bankruptcy, divorce, and depression.

toronto condo market

Toronto Condo Market: When Dreams Turn Into Debt – The Basios Story

Take the publicly reported story of Dmitri Basios and his wife. Their story shows how quickly things can change in real estate. In 2020, they put money down on a small Toronto condo for $884,000. They planned to use it for their retirement – either as rental income or by selling it for a profit.

The plan seemed solid. Toronto condos had been rising in value for years. Interest rates were low. The future looked bright. They put down their deposit and waited for the building to be completed.

But when it came time to complete the purchase in 2024, everything had changed. Interest rates had gone up from near zero to over 5%. They couldn’t get financing based on the full purchase price, and even if they could, the monthly payments would have been crushing.

They had no choice but to sell their contract, known as an assignment sale. But they weren’t alone. Many other buyers in similar situations were all trying to sell their contracts at the same time. This flooded the market with desperate sellers.

Their $884,000 condo sold for just $590,000. That’s a loss of almost $300,000. But it gets worse – they’re still legally responsible for the difference. The developer can come after them for the shortfall, plus legal costs and interest.

Basios said it best:

“It’s causing stress and distress and misery.”

This isn’t just one person’s story. I see similar cases every week in my practice. People who thought they were making smart investments now face serious debt problems that could take decades to resolve.

Toronto Condo Market: The Ripple Effect Through Families

What many people don’t realize is how real estate debt affects entire families. When parents face financial ruin from bad condo investments, it impacts their children’s education plans, their ability to help with grandchildren, and their family relationships.

I’ve counselled families where parents lost the family home due to real estate debt. I’ve seen marriages end because of the stress of owing hundreds of thousands of dollars on properties worth far less.

The psychological impact is just as real as the financial impact. People feel ashamed, embarrassed, and angry with themselves. They often isolate themselves from friends and family, making the problem worse.

But here’s what I always tell my clients: you’re not alone, and this isn’t entirely your fault. The real estate industry, the media, and even the government promoted the idea that property values only go up. Many smart, successful people believed this message and made decisions based on it.

toronto condo market

Toronto Condo Market: Why the Toronto Condo Market Crashed

Several things happened at once to create this crisis. Understanding these factors helps explain why so many people are now in financial trouble.

Interest Rates Rose Fast The Bank of Canada raised interest rates from 0.25% in early 2022 to 5% by 2023. That’s one of the fastest rate increases in Canadian history. This made it much harder and more expensive to get a mortgage.

For someone buying a $700,000 condo, the difference between a 2% mortgage rate and a 5% rate is significant in payments. Many buyers simply couldn’t afford the higher payments.

The rate increases also affected developers. Building costs went up dramatically as financing became more expensive. Many projects became financially unviable, leading to construction delays and cancellations.

Too Many Condos, Not Enough Buyers When times were good, developers started building everywhere. The number of new condo projects reached record levels. Everyone assumed the demand would continue forever.

But demand didn’t just slow down – it collapsed. By 2025, there were over 24,000 unsold new condos in the Greater Toronto Area. That’s enough supply to last for years at current sales rates.

Some developers have cancelled projects entirely. In 2024 and 2025 combined, at least 23 major condo projects were cancelled, affecting thousands of buyers and billions of dollars in investments.

Investors Disappeared Many condo buyers were investors, not people planning to live in the units. Some estimates suggest that investors made up 60% or more of pre-construction condo sales during the boom years.

When prices started falling, these investors stopped buying. Without investor money, the whole system broke down. Developers couldn’t get the pre-sales they needed to secure construction financing. The market went into a downward spiral.

The investors who were already committed to purchases found themselves in terrible positions. Many are now trying to get out of their contracts, flooding the assignment market and driving prices down even further.

Economic Uncertainty People are worried about their jobs and the economy. Unemployment has been rising, and many industries are struggling. Even with lower interest rates now, many potential buyers are waiting to see what happens next.

This creates a vicious cycle. The more people worry about the economy, the fewer people buy condos. The fewer people who buy, the lower the prices fall. The more prices fall, the more people worry.

Toronto Condo Market: The Pre-Construction Trap – How It Really Works

One of the biggest problems I see involves pre-construction condos. This is when you put down money for a condo that hasn’t been built yet. For many people, this seemed like a great way to get into the market, but it’s turned into a financial disaster.

Here’s how it used to work: You’d put down a deposit of 15-20% of the purchase price, spread over several payments during construction. You’d wait for the building to be finished, then either move in or sell for a profit. Many people treated this like a sure thing.

The appeal was obvious. You could control an $800,000 condo with just a $120,000 deposit. If the condo went up in value by 20% during construction, you’d make $160,000 on your $120,000 investment. That’s a great return if it works.

But now, many of these deals are falling apart. When the condo is finally built, it’s worth less than what buyers agreed to pay years earlier. Some buyers owe hundreds of thousands more than their condo is worth.

Let me give you a real example from my practice. A client bought a pre-construction condo in 2019 for $950,000. He put down $190,000 in deposits over two years. The building was finally completed in 2024, but similar units in the building were selling for $750,000.

He had a choice: complete the purchase and immediately lose $200,000, or walk away and lose his $190,000 deposit. Either way, he was facing a massive loss. The legal term for this is being “underwater” on your mortgage. It’s a serious financial problem that can lead to bankruptcy if not handled properly.

toronto condo market

Toronto Condo Market: Assignment Sales – The Last Resort

When people can’t complete their pre-construction purchases, they often try to sell their contract to someone else. This is called an assignment sale. The original buyer assigns their purchase contract to a new buyer, hopefully for more than they originally paid.

During the boom years, assignment sales were profitable. People would buy pre-construction, then sell their contract for a quick profit before the building was even finished. Some people made this their full-time business.

But now, assignment sales have become desperation sales. The market is flooded with people trying to get out of contracts they can’t afford to complete. Prices for assignment sales are often 20-30% below the original contract price.

This creates a terrible situation for the original buyers. They’re not only losing their deposits, but they are also responsible for the difference between their original contract price and what the assignment buyer pays.

The legal implications can be complex and expensive. Many buyers don’t understand their rights and obligations, leading to even bigger financial problems down the road.

Toronto Condo Market: Warning Signs You’re in Trouble

As a licensed insolvency trustee, I’ve learned to spot the warning signs early. The sooner you recognize these signs, the more options you’ll have to protect your financial future.

Here are red flags that your real estate investment might be causing financial problems:

Financial Warning Signs:

You can’t make your mortgage payments without borrowing money
You’re using credit cards or loans to cover property expenses
You’re borrowing from retirement savings to cover real estate costs
You’re considering taking money from your children’s education funds
You’re thinking about getting a second mortgage on your family home

Emotional and Physical Warning Signs:

You can’t sleep at night because of money worries
You’re avoiding calls from your lender or real estate lawyer
You’re fighting with your spouse about money
You’re feeling depressed or anxious about your financial situation
You’re avoiding friends and family because you’re embarrassed

Legal and Practical Warning Signs:

You’re thinking about walking away from a deposit or purchase
You’ve received legal notices about your real estate contracts
You’re considering bankruptcy as your only option
You’re being threatened with legal action by developers or lenders
You’re thinking about lying on mortgage applications to qualify for loans

If any of these sound familiar, it’s time to get professional help. Don’t wait until your options are limited.

toronto condo market

Toronto Condo Market: What This Means for Different People

The Toronto condo market crash affects different groups of people in different ways. Understanding where you fit can help you make better decisions about your next steps.

For Current Condo Owners If you own a condo and can afford the payments, you might be okay in the long run. Toronto’s population is still growing, and people need places to live. The city isn’t going anywhere, and neither is the long-term demand for housing.

But if you’re struggling with payments, don’t wait until it’s too late to get help. The sooner you act, the more options you’ll have. Consider speaking with a licensed insolvency trustee before you fall behind on payments.

Some current owners are in situations where they owe more than their condo is worth, but they can still afford the monthly payments. In these cases, it might make sense to stay put and wait for the market to recover, even if that takes several years.

For Potential Buyers This might actually be a good time to buy if you plan to live in the condo for many years and you have a stable income. Prices are lower, and there are more choices than we’ve seen in years.

But make sure you can truly afford the payments, even if interest rates go up again. Don’t stretch your finances just to get into the market. The recent crash shows that property values can fall as well as rise.

First-time buyers now have some advantages. The government has increased the insured mortgage cap to $1.5 million, allowing more people to buy with less than 20% down. But remember, a smaller down payment means higher monthly payments and mortgage insurance costs.

For Investors in Trouble If you’re facing losses on real estate investments, you have options, but time is crucial. Don’t let pride or shame stop you from getting professional advice. The sooner you act, the more options you’ll have.

Some investors are trying to “ride it out,” hoping the market will recover quickly. But this strategy can be dangerous if you’re using credit or depleting savings to cover carrying costs. Sometimes it’s better to cut your losses and protect your family’s financial future.

For Pre-Construction Buyers If you have money tied up in pre-construction projects, you need to understand your rights and obligations. Some contracts allow you to walk away with minimal penalties, while others hold you responsible for the full purchase price.

Don’t assume that a project cancellation is necessarily bad news. In some cases, getting your deposit back might be better than completing a purchase that will result in immediate losses.

Toronto Condo Market: The Broader Economic Impact

The Toronto condo market crash isn’t just affecting individual investors – it’s having broader economic consequences that will be felt for years.

Construction Industry Collapse New condo construction starts in Toronto fell to their lowest level since 2009 in the first half of 2025. This means thousands of construction workers, contractors, and suppliers are losing work.

The construction industry employs over 400,000 people in Ontario. When condo construction slows down, the effects ripple through the entire economy. Equipment suppliers, material manufacturers, and service providers all feel the impact.

Municipal Revenue Shortfalls Cities rely on development charges and property taxes from new condos to fund infrastructure and services. With fewer new projects and lower property values, municipal budgets are under pressure.

This could lead to higher taxes for all residents, reduced services, or delays in important infrastructure projects. The fiscal impact will be felt for years to come.

Banking Sector Stress Banks and other lenders have billions of dollars tied up in real estate loans. While Canadian banks are generally well-capitalized, the scale of the condo market problems is creating stress in the system.

Some smaller lenders and mortgage investment corporations are facing serious difficulties. This could lead to tighter lending standards and reduced credit availability, making it even harder for the market to recover.

toronto condo market

Toronto Condo Market: Government Response and Policy Changes

Various levels of government have implemented policies to try to address the housing crisis, with mixed results.

The federal government has made several changes to mortgage rules, including increasing the insured mortgage cap to $1.5 million and extending amortization periods for some buyers.

Federal Government Initiatives They’ve also implemented stress tests for mortgages, requiring buyers to qualify at higher interest rates than their actual mortgage rate. While this protects borrowers from getting in over their heads, it also reduces the number of qualified buyers.

Provincial Measures The Ontario government has tried to increase housing supply through zoning changes and streamlined approval processes. They’ve also implemented rent control measures and foreign buyer taxes.

However, many of these policies take years to have an effect, and some may have unintended consequences that actually reduce housing supply.

Municipal Actions Toronto and other GTA municipalities have been trying to speed up the approval process for new developments and reduce development charges. But municipal budgets are tight, and there are limits to what they can do.

The reality is that government policies alone can’t fix the fundamental supply and demand imbalances in the market.

Toronto Condo Market: Getting Help Before It’s Too Late

The most important thing to understand is that you don’t have to face financial problems alone. Many people wait too long to get help because they’re embarrassed or hope things will improve on their own.

As a licensed insolvency trustee with decades of experience, we work with people to find solutions before their situation becomes desperate. Sometimes this means negotiating with creditors. Other times it involves formal insolvency proceedings like consumer proposals or bankruptcy.

Consumer Proposals: An Alternative to Bankruptcy Many people do not know about consumer proposals. These can be a good alternative to bankruptcy for people with real estate debt problems.

A consumer proposal allows you to negotiate with your creditors to pay back a portion of what you owe, typically over five years. The rest of the debt is forgiven. This can be especially helpful for people facing large shortfalls on real estate investments.

For example, if you owe $300,000 more than your condo is worth, a consumer proposal might allow you to pay back $100,000 over five years and have the rest forgiven. Your credit will be affected, but much less than with bankruptcy.

Bankruptcy: Sometimes the Best Option While bankruptcy is never anyone’s first choice, sometimes it’s the best way to get a fresh start. If you’re facing overwhelming real estate debt with no realistic way to pay it back, bankruptcy might be the right choice.

The bankruptcy process typically takes nine months for first-time filers, and it eliminates most debts, including real estate shortfalls. While there are consequences, including impacts on your credit rating, it allows you to start rebuilding your financial life.

Early Intervention: The Key to More Options The earlier you seek help, the more options you’ll have. If you’re still current on your payments but struggling, we might be able to negotiate with lenders or restructure your debts.

If you’ve already fallen behind, there are still options, but they become more limited as time goes on. Don’t wait until you’re facing legal action or foreclosure proceedings.

toronto condo market

What Comes Next for the Toronto Condo Market

Looking ahead, the Toronto condo market faces some serious challenges that will affect its recovery timeline.

Supply Pipeline Concerns Builders have cancelled many projects, which means fewer new condos will be available in the coming years. While this might eventually help prices recover by reducing supply, it also means Toronto isn’t building enough housing to meet its growing population needs.

The city needs to add about 40,000 new housing units per year to keep up with population growth. In 2025, it’s on track to build fewer than 25,000 units. This supply shortage will eventually push prices up again, but it might take several years.

Interest Rate Environment The Bank of Canada has started cutting interest rates again. But rate cuts do not work well when people worry about job security and the economy.

Lower rates help with affordability, but they don’t address the fundamental problem of too much supply and too little demand. The market needs time to absorb the excess inventory before any meaningful recovery can begin.

Demographic Trends Toronto’s population keeps growing. Immigration and people moving from other provinces cause this growth. This creates long-term demand for housing, but it might take several years for this demand to absorb the current oversupply.

The federal government has announced plans to reduce immigration targets, which could further slow housing demand in the short term.

Toronto Condo Market: Taking Control of Your Financial Future

If you’re dealing with real estate debt or other financial problems, remember that taking action is always better than doing nothing. Every day you wait, your options become more limited and your problems often get worse.

At Ira Smith Trustee & Receiver Inc., we’ve helped thousands of people in the Greater Toronto Area deal with debt problems. We understand that behind every case is a person or family trying to build a better future.

The consultation process is confidential and free. We’ll review your situation, explain your options, and help you understand the consequences of different choices. There’s no pressure to proceed with any particular course of action – our job is to give you the information you need to make the best decision for your situation.

What to Bring to Your Consultation When you come for a consultation, bring:

Recent statements for all your debts
Information about your real estate contracts and current property values
Your most recent tax return
Documentation about your income and monthly expenses
Any legal notices you’ve received

The more information you can provide, the better we can assess your situation and recommend appropriate solutions.

Protecting Your Family One of the most important things to remember is that your financial problems don’t have to destroy your family’s future. With proper planning and professional help, you can often protect important assets like your family home while dealing with problem investments.

Many people are surprised to learn that bankruptcy doesn’t necessarily mean losing everything. There are provincial exemptions that protect basic assets, and in many cases, people can keep their primary residence while eliminating other debts.

toronto condo market

Toronto Condo Market: Learning from the Market – Lessons for the Future

The Toronto condo market troubles in 2025 offer important lessons for everyone, whether you’re currently dealing with real estate debt or thinking about future investments.

Diversification Matters Many people put too much of their wealth into one investment. While real property can be a good investment, putting all your eggs in one basket is risky, no matter what that basket is.

A balanced approach might include some real estate, but also stocks, bonds, and other investments. This helps protect you if any one investment category performs poorly.

Understand What You’re Buying Pre-construction condos are complex financial instruments, not simple real estate purchases. They involve development risk, market risk, and legal risks that many buyers don’t fully understand.

Before making any major investment, make sure you understand all the risks involved, not just the potential returns. If you can’t afford to lose the money, you probably shouldn’t invest.

Have an Exit Strategy Many investors I meet never planned for what would happen if their investments didn’t work out. They assumed prices would always go up and never considered how they would handle losses.

Before making any investment, think about what you’ll do if it doesn’t work out. How much can you afford to lose? What’s your backup plan? Having these conversations before you invest can save you from financial disaster later.

Get Professional Advice Real estate transactions involve complex legal and financial issues. The cost of professional advice from lawyers, accountants, and financial advisors is usually much less than the cost of making expensive mistakes.

Don’t rely on advice from real estate agents, developers, or other people who have a financial interest in your purchase. Get independent professional advice before making big financial decisions.

Frequently Asked Questions About Toronto Condo Market Problems

Q: I owe more on my condo than it’s worth. What are my options?

A: You have several choices, and the best one depends on your specific situation. If you can afford the monthly payments, you might choose to stay and wait for the market to recover. If you can’t afford the payments, options include selling at a loss, negotiating with your lender, filing a consumer proposal to cover any shortfall to the lender (and to deal with any other unsecured debts), or in extreme cases, bankruptcy. The key is to get professional advice before making any decisions.

Q: Can I just walk away from my pre-construction condo contract?

A: It’s not that simple. Walking away usually means losing your deposit, but you will also be legally responsible for the difference between your contract price and what the developer eventually sells the unit for. This could be hundreds of thousands of dollars. Before walking away, you need to understand your full legal obligations. Some contracts have escape clauses, while others hold you fully responsible.

Q: What’s an assignment sale, and should I try one?

A: An assignment sale is when you sell your pre-construction contract to someone else before the building is finished. Right now, most assignment sales are happening at big losses because there are so many desperate sellers. You might recover some of your deposit money, but you’ll likely still face a significant loss. It might offer a better result than completing the purchase at full price, but you need legal advice to understand the implications.

Q: Will filing bankruptcy get rid of my real estate debt?

A: Yes, bankruptcy will eliminate any shortfall on your real estate debt, including a shortfall from the condo sale. However, bankruptcy has serious consequences, including impacts on your credit rating and potential effects on your employment. Before considering bankruptcy, explore alternatives like consumer proposals, which might achieve similar debt relief with fewer long-term consequences.

Q: What’s a consumer proposal, and how does it work for real estate debt?

A: A consumer proposal lets you negotiate with creditors to pay back a portion of what you owe over up to five years. The rest is forgiven. For example, if you owe $200,000 more than your condo is worth, you might negotiate to pay back $60,000 over five years and have the remaining $140,000 forgiven. It’s often a better option than bankruptcy for people with real estate debt problems. A consumer proposal will only deal with your shortfall to the lender after the condo is sold. It cannot deal with valid mortgage security debt.

Q: My developer cancelled my project. Is that good or bad?

A: It depends on your situation. If you would have lost money by completing the purchase, a cancellation might actually save you from bigger losses. You’ll get your deposit back, though it might take time. However, if you were counting on the condo for housing or investment, you’ll need to find alternatives in a difficult market. The key is understanding what the cancellation means for your specific situation.

Q: Should I use my retirement savings to cover condo losses?

A: Generally, no. Your retirement savings are often protected in bankruptcy and insolvency proceedings, so using them to cover real estate losses could make your overall financial situation worse. Before touching retirement funds, speak with a licensed insolvency trustee about protecting these important assets while dealing with your real estate debt.

Q: Can my spouse be affected by my condo debt problems?

A: If your spouse co-signed the mortgage or pre-construction contract, they’re equally responsible for the debt. Even if they didn’t sign, your debt problems can affect household finances and credit applications. However, each situation is different, and there are strategies to protect innocent spouses from their partner’s real estate debt problems.

Q: How long does the consumer proposal process take?

A: Once filed, a consumer proposal typically takes up to 45 days for creditors to vote on it. If accepted, you’ll make payments for up to five years. The entire process, from initial consultation to completion, usually takes about five to six years. During this time, you’re protected from creditor actions, and interest on your debts stops accumulating.

Q: Will I lose my family home if I file bankruptcy or a consumer proposal?

A: Not necessarily. There are provincial exemptions that often protect your primary residence, especially if there’s little equity in the property. The goal is usually to help you keep essential assets while dealing with problem debts. Each province has different rules, so you need advice specific to Ontario law and your particular situation.

Q: What happens to my credit rating after real estate debt problems?

A: Your credit will be affected, but the impact varies depending on what you choose to do. Missing mortgage payments hurts your credit. Consumer proposals appear on your credit report for three years after completion. Bankruptcy appears for six years after discharge. However, many people are surprised to find they can start rebuilding credit sooner than they expected, especially with professional guidance.

Q: Is it better to try to work things out with the developer or lender on my own?

A: While it’s always worth trying to communicate with creditors, real estate debt problems are complex legal and financial matters. Developers and lenders have teams of lawyers and financial experts working for them. You need professional representation to make sure your rights are protected and you’re getting the best possible outcome.

Q: Can I buy another property after dealing with real estate debt problems?

A: Yes, but it will take time to rebuild your credit and financial capacity. People who file consumer proposals often qualify for mortgages within 2-3 years of completion. Those who file bankruptcy might wait 2-4 years after discharge. The key is working with professionals who can help you rebuild your financial life properly.

Q: What should I do if I’m getting legal notices about my condo debt?

A: Don’t ignore legal notices – they have strict deadlines that could affect your rights. Bring any legal documents to your lawyer immediately. They can help you understand what the notices mean and what options you have to respond appropriately.

Q: Is there any way to predict when the Toronto condo market will recover?

A: Nobody can predict market timing with certainty, but recovery will likely take several years. The market needs to absorb the current oversupply, and economic conditions need to improve. More importantly for people in financial trouble, you can’t wait for market recovery if you’re facing immediate debt problems. Focus on protecting your financial future now rather than hoping for market improvements.

toronto condo market

Conclusion: Hope After the Toronto Condo Market Storm

The Toronto condo market troubles in 2025 have caused real pain for many people, but there’s also hope in these stories. Markets are cyclical, and Toronto remains one of the world’s most desirable places to live and work.

People who get professional help early often find ways to protect their financial future and move forward with their lives. The key is recognizing when you need help and being brave enough to ask for it.

If you’re struggling with real estate debt or other financial problems, don’t wait. The sooner you act, the more options you’ll have. There’s no shame in asking for help – in fact, it’s one of the smartest things you can do.

Your current financial problems don’t define you or your future. What matters is how you respond to them. With the right help and the right plan, you can get through this crisis and build a stronger financial foundation for the future.

Remember, you’re not alone in this struggle. Thousands of people across the Greater Toronto Area are facing similar challenges. The difference between those who recover and those who don’t is often simply reaching out for professional help when they need it most.

At Ira Smith Trustee & Receiver Inc., we’re here to help you navigate these difficult times and find a path forward. Contact us today for a free, confidential consultation. Your future self will thank you for taking action now.

Brandon Smith is a Licensed Insolvency Trustee with Ira Smith Trustee & Receiver Inc., helping individuals and businesses overcome financial challenges. Brandon is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. He serves the Greater Toronto Area. He gives kind and professional help to people with debt problems. He has helped many families navigate financial crises and build stronger financial futures. If you’re struggling with real estate debt or other financial issues, contact our office at (647) 799-3312 for a complimentary consultation.

toronto condo market

Tags assignment sales, bank of canada, bankruptcy alternative, Condo market 2025, Consumer Proposal, Financial problems Toronto, Greater Toronto Area, housing market, interest rates, licensed insolvency trustee, Pre-construction condos, project cancellations, Real estate debt, Real estate investment losses, toronto condo market, Toronto real estate crash, Toronto Regional Real Estate Board

Brandon Blog Post

EX PARTE MOTION BEST PRACTICES: WHY PROPER PROCEDURE MATTERS IN INSOLVENCY CASES

Post author By Brandon Smith
Post date September 22, 2025

ex parte motion

When a company faces financial distress, the path forward often depends on more than just the numbers on a balance sheet. The recent Canadoil Forge Ltd. case from Quebec’s Superior Court demonstrates how procedural fairness and judicial scrutiny can dramatically impact the outcome of receivership applications – even when the underlying financial issues remain largely unchanged. This is especially true when a party applies to the court with an ex parte motion.

As described below, there are two very different court decisions in this one case:

Séquestre de Royal Bank of Canada, 2025 QCCS 2906 (CanLII)

Séquestre de Canadoil Forge Ltd., 2025 QCCS 3066 (CanLII)

As a Licensed Insolvency Trustee who has handled countless corporate insolvency matters, I find this court case particularly instructive. It shows how the manner in which creditors approach the court can be just as important as the strength of their legal position. Let me walk you through what happened and why it matters for any business facing financial difficulties.

Ex Parte Motion Background: A Company in Crisis

Canadoil Forge Ltd. and CFC Canadoil Inc. were companies operating on both sides of the Canada-U.S. border for over four decades. Their main operation was a production facility in Bécancour, Quebec, generating approximately $30 million in annual revenue and employing over 100 people. This wasn’t a small startup – it was an established business with significant economic impact.

The company had two main lenders. The Royal Bank of Canada (RBC) held security over the moveable assets (inventory, accounts receivable, equipment), while Fiera Private Debt Funds (Fiera) held security over the immovable assets (real estate). This dual-lender structure is common in larger commercial financing arrangements, but it can create complications during financial distress.

The Financial Problems Surface

By 2025, several red flags had emerged:

Borrowing base issues: The companies allegedly misrepresented their financial position in calculations used to determine how much they could borrow
Hidden tax debts: Management failed to disclose a payment plan with the Canada Revenue Agency for over $4 million in unpaid payroll deductions
Questionable transactions: A recent payment of over $7 million to Giacomo Sozzi, a director and officer of the companies
Lack of cooperation: Management became uncooperative with the financial advisor, which RBC had appointed in June 2025 to review the company’s finances
Failed refinancing: Expected refinancing fell through, leaving the company without a financial lifeline

When RBC made a demand for repayment of its entire loan – approximately $12.5 million – giving the companies just over 30 days to repay, the stage was set for a receivership battle.

The First Ex Parte Motion Application: August 19, 2025 – A Procedural Ex Parte Order Disaster

RBC’s first attempt to obtain an interim receivership ex parte order was a textbook example of how not to approach the court. Here’s what went wrong in the case of Séquestre de Royal Bank of Canada, 2025 QCCS 2906 (CanLII:

Ex Parte Motion Applications: High Risk, High Reward

An “ex parte” application means only one party, the one who filed the Notice of Motion, making the emergency motion before the judge – the Applicant, is before the court. In this case, it was RBC as Applicant through its lawyers. Fiera’s lawyers were also in attendance. The debtor companies, which were the Respondents, weren’t notified or given a chance to present their side of the story. While such applications are permitted in urgent situations, they come with strict requirements.

Justice Morin of Quebec’s Superior Court was clearly uncomfortable with this approach from the outset. As he noted:

“Although an application for interim receivership may proceed on such a basis, the Court should be mindful that unless it is presented with strong evidence suggesting that the mere service of the application may severely further the depreciation of the creditors’ position, it should be wary of deciding such a proceeding based solely on a one-sided version of a complicated storyline.”

Inadequate Preparation and Disclosure

The procedural problems were glaring:

The court received the application materials in the “wee hours of the night” before a 2:00 PM hearing
The proposed interim receiver’s report was provided only three hours before the hearing
An amended version of the report arrived just one hour before the hearing began
Both bankruptcy rules and local court directives require materials to be filed at least one day before the hearing

This rushed approach violated basic procedural requirements and left the judge without adequate time to review complex materials involving a company with over 100 employees and $30 million in annual revenue.

The Duty of Full and Frank Disclosure

When applying ex parte, lawyers have what courts call a “super-added duty” to present not just their client’s case, but also any facts that might favour the other side. Justice Morin found this obligation wasn’t met. Most notably, RBC’s lawyers failed to notify the debtors’ insolvency counsel, even though they knew experienced practitioners represented the companies.

The court cited a Quebec Court of Appeal’s prior decision, emphasizing that an ex parte motion should be “taken sparingly, and only then on full disclosure and in circumstances where it is demonstrated that notice to other parties would undermine the purpose of the proceeding.”

Overreaching Relief Sought

RBC wasn’t just seeking to preserve assets – they wanted sweeping powers that went far beyond typical interim receivership temporary orders:

Full control over business operations
Power to suspend operations and lay off employees
Authority to issue subpoenas and examine company officers
A broad stay of proceedings
A $300,000 administrative charge ranking ahead of other creditors

As Justice Morin observed:

“This is far beyond the typical conservatory measures of an interim receivership order aimed at securing the property of the Debtors subject to the Bank’s collateral.”

The Business Was Still Viable

Critically, the evidence showed the business remained profitable. Draft audited financial statements indicated the company earned almost $4 million in profit for the year ending January 31, 2025, recovering from a $136,000 loss the previous year (caused by a strike and plant fire). The company was projecting operational profitability on a 13-week rolling basis.

This viability made the court especially reluctant to grant intrusive relief that could jeopardize ongoing operations and the livelihoods of over 100 employees. The court was not prepared, based on this ex parte motion, to make an ex parte order that would cause irreparable harm.

ex parte motion

Reasons Justice Morin Dismissed RBC’s First Ex Parte Motion Application

Justice Morin dismissed RBC’s application for several interconnected reasons:

Procedural unfairness: The ex parte motion approach wasn’t justified given the circumstances
Inadequate evidence of urgency: No showing that immediate action was necessary to prevent asset dissipation. The professionals involved did not take the additional steps necessary in this ex parte motion to make it clear to the court that this was an urgent motion deserving of not giving the other party notice.
Overreaching relief: The powers sought exceeded what was appropriate for interim receivership
Viable business operations: The company remained profitable and operational
Impact on stakeholders: Over 100 employees and numerous trade partners would be affected

The judge emphasized that interim receivership is meant to be “a short-lived band-aid, an interim measure, a safeguard ex parte order aimed at preserving the secured creditor’s rights and interests.” It’s not a tool for taking over a functioning business without proper justification and process.

The Second Ex Parte Motion Application: August 29, 2025 – A Different Story

Just 10 days later, RBC and Fiera returned to court with a joint application in Séquestre de Canadoil Forge Ltd., 2025 QCCS 3066 (CanLII). This time, the outcome was dramatically different. Justice Morin granted the interim receivership temporary order, noting:

“Whereas the first act was precipitated, this second act is far more convincing.”

Key Factors Distinguishing the Second Application

Several key factors distinguished the second application:

Proper Notice and Process The Applicants’ Notice of Motion was served in advance, the debtors were notified of the motion and had an opportunity to respond through experienced insolvency counsel. While they didn’t consent to the receivership, they didn’t actively oppose it either.
Management Resignation All directors and officers of the Canadian entity had resigned by the time of the second hearing, effectively leaving the company without leadership.
Acknowledgment of Financial Reality The debtors’ counsel confirmed they had attempted to find a commercial solution but couldn’t secure the funds needed to continue operations.
Joint Creditor Action Fiera joined as a co-applicant, presenting a united front from the major secured creditors rather than RBC acting alone.
Inadequate Response from Debtors The sworn declaration filed by the debtors failed to address key concerns raised in the applications. As Justice Morin noted, it offered “nothing in this document offers a structured explanation” regarding:

The company’s insolvency
Alleged misrepresentations to lenders
Next steps for addressing creditor concerns
A potential restructuring path
The purpose of the $7 million payment to Mr. Sozzi
Why were tax debts misrepresented

The Judge’s Ongoing Concerns

Even though the second ex parte motion application succeeded, Justice Morin highlighted several troubling aspects that insolvency professionals should note:

Court Concerns Over Employee Treatment

The court expressed serious concern about how employees were handled:

“100 employees are currently working at the Bécancour Plant, having no idea of what is going on in this Courtroom and the impact any Judgment of this Court will inevitably have on their livelihood as early as next week.”

The judge was particularly critical of management informing employees “à la dépêche” (hastily) that they wouldn’t need to come to work the following week, calling this approach inappropriate for an insolvency situation.

Dual Receiver Inefficiency

Initially, both RBC and Fiera wanted to appoint separate receivers for different asset classes. Justice Morin rejected this approach, emphasizing proportionality principles now embedded in Quebec’s Civil Code of Procedure. He noted that in a case where operations would likely be stayed pending a sale process, “the appointment of two receivers would add an unnecessary layer of complexity” and would cost more despite professional assurances to the contrary.

Need for Clear Direction

The court demanded clarity on several operational questions that the creditors hadn’t adequately addressed:

Would operations continue, or would there be mass layoffs?
Was the business viable with available receipts and cash?
What kind of sale and investment solicitation process was planned?
What were the timeline milestones?

These questions highlight the importance of having a clear post-appointment plan, not just a strategy for obtaining the receivership ex parte order.

Fiduciary Duties to All Stakeholders

Justice Morin reminded all parties that receivers are court officers owing fiduciary duties to all stakeholders, not just the secured creditors who initiated their appointment. This reflects modern insolvency practice, where value maximization for the entire stakeholder group is prioritized over narrow creditor interests.

ex parte motion

Key Ex Parte Motion Lessons for Businesses and Professionals

This case offers several important lessons for companies facing financial distress and the professionals who advise them:

For Distressed Companies:

Transparency is crucial: Attempting to hide problems from lenders typically backfires. The misrepresentations and lack of disclosure cited in this case became central to the creditors’ loss of confidence.
Professional help matters: Engaging experienced insolvency counsel early can help navigate complex situations and maintain creditor relationships.
Response quality counts: When facing serious allegations, a comprehensive, structured response addressing each concern is essential. Generic blame-shifting rarely persuades courts.
Employee communication: If insolvency proceedings become likely, having a proper communication strategy for employees is both ethically important and legally relevant.

For Lenders and Creditors:

Process matters: Even with strong substantive grounds, procedural shortcuts can derail applications and damage credibility with the court.
Proportionality is key: Courts increasingly scrutinize whether the relief sought matches the actual risks and circumstances.
Stakeholder impact: Modern insolvency law requires consideration of all affected parties, not just secured creditor interests.
Full disclosure obligations: Ex parte motion applications require complete candour, including facts that might favour the other side.

For Insolvency Professionals:

Preparation is essential: Last-minute filings and inadequate documentation create unnecessary risks and court skepticism.
Clear post-appointment plans: Courts want to see specific strategies for value preservation and maximization, not vague intentions.
Cost efficiency: Multiple professionals should be justified by clear benefits, not just creditor convenience.
Communication protocols: Establishing proper channels between professionals and stakeholders prevents confusion and builds confidence.

The Broader Context: Modern Insolvency Practice

The Canadoil case reflects broader trends in Canadian insolvency law. Courts are increasingly sophisticated about commercial realities and expect high standards from insolvency professionals. The emphasis on proportionality, stakeholder protection, and procedural fairness has grown significantly.

This evolution benefits the overall system by:

Encouraging early intervention and negotiated solutions
Protecting employment and business relationships where possible
Ensuring professional accountability
Maintaining public confidence in insolvency processes

However, it also means that creditors and professionals must be more diligent in their approach. The days of routine ex parte orders and creditor-focused solutions are largely over.

ex parte motion

Practical Implications for Your Business

If your company is experiencing financial difficulties, the Canadoil case highlights the importance of:

Early Professional Engagement: Don’t wait until a crisis hits to engage qualified insolvency professionals. Early intervention provides more options and better outcomes.

Transparent Communication: Maintaining open dialogue with lenders, even when delivering bad news, is generally preferable to surprises discovered through investigation.

Comprehensive Planning: Whether pursuing informal workouts, formal proposals, or liquidation, having detailed plans with clear timelines and stakeholder consideration is essential.

Employee Considerations: Your workforce is both a key asset and a significant stakeholder. Proper communication and treatment during distress can preserve value and goodwill.

Frequently Asked Questions About Ex Parte Motion in Business Insolvency

1. What is an ‘ex parte’ motion, and why is it considered a high-risk legal tool in insolvency?

For any director or creditor involved in a corporate restructuring, understanding the high-stakes nature of an ex parte motion isn’t just strategic—it’s essential for survival. An ex parte motion is a legal procedure where only one party, the Applicant seeking relief, appears before a judge. The other party, the Respondent, is not notified of the hearing and is therefore not present to provide their side of the story.

Courts are inherently wary of these motions precisely because of this one-sided nature. As Justice Morin noted in the Canadoil case, a court should be cautious about “deciding such a proceeding based solely on a one-sided version of a complicated storyline.” The risk of making a significant ruling based on incomplete information is substantial. Given this risk, courts impose exceptionally strict requirements on any party bringing an ex parte application, particularly concerning the duty of full and frank disclosure.

2. What is the “duty of full and frank disclosure” required in an ex parte motion?

This duty is the primary safeguard against the inherent procedural unfairness of a one-sided hearing. In an ex parte application, lawyers have what is known as a “super-added duty” of disclosure. This means they are obligated to present not only the facts that support their client’s case but also any material facts that might favour the absent party. This is one of the highest ethical bars in law, and as the Canadoil case shows, failing to clear it has immediate and severe consequences for an applicant’s credibility.

The first Canadoil application serves as a clear example of a failure to meet this high standard. RBC’s lawyers were aware that the debtor companies were represented by experienced insolvency counsel, yet they failed to notify them of the hearing. Citing the Quebec Court of Appeal, the court reiterated that an ex parte motion should be “taken sparingly, and only then on full disclosure.” Failing to meet this critical obligation was a central reason the bank’s first attempt to secure a receiver was rejected.

3. Why did the court initially reject the bank’s request for an interim receiver in the Canadoil case?

The failure of RBC’s first application provides a powerful lesson in the importance of procedural diligence and proportionality. Justice Morin dismissed the motion based on a combination of procedural errors and substantive overreach, which can be summarized as follows:

• Procedural Unfairness: The motion was fundamentally unfair due to its rushed nature. The proposed interim receiver’s report was provided only three hours before the hearing, with an amended version arriving just one hour before it began. This violated court rules requiring materials to be filed at least one day in advance and left the judge with inadequate time to review a complex file.

• Inadequate Evidence of Urgency: The bank failed to provide strong evidence that notifying the debtors would cause further depreciation of assets. The court was not convinced that the situation was so urgent that it justified sidestepping the normal court process and denying the other party a chance to be heard.

• Overreaching Relief Sought: The powers RBC requested went far beyond the typical purpose of an interim receiver, which is meant to be a “short-lived band-aid” to preserve assets. RBC sought sweeping control, including the authority to suspend operations, lay off employees, and issue subpoenas, which the court deemed disproportionate.

• Ongoing Business Viability: Evidence showed that the company was not defunct but was, in fact, profitable. Audited financial statements indicated a profit of nearly $4 million for the year ending January 31, 2025, and the company was projecting continued operational profitability.

• Impact on Stakeholders: The court explicitly considered the significant negative impact the requested order would have on the company’s more than 100 employees and its various trade partners, who would be blindsided by such a drastic measure.

The combination of these procedural missteps and the excessive nature of the relief sought doomed the first application, demonstrating that even a creditor with legitimate concerns must approach the court with fairness and respect for process.

4. What key factors led to the success of the second receivership application just ten days later?

The success of the second application, filed jointly by RBC and Fiera, illustrates how correcting procedural flaws and responding to new developments can completely change a legal outcome. The underlying financial issues remained, but the context and process were fundamentally different.

Proper Notice and Process: The second time, the debtors were properly served with the motion and were represented by their own experienced insolvency counsel. While the debtors did not consent, they also did not actively oppose the motion, addressing the primary procedural defect of the first hearing.
Change in Management: A critical new development had occurred: all directors and officers of the Canadian company had resigned. This left the business without any leadership, creating a genuine urgency to appoint a receiver to take control and preserve assets.
Acknowledgment of Financial Reality: The debtors’ own counsel acknowledged in court that they had been unable to find a commercial solution or secure the necessary funds to continue operations, effectively conceding the company’s financial predicament.
United Creditor Front: The second application was brought jointly by RBC and Fiera, the two primary secured lenders. This presented a united front and demonstrated to the court that the key financial stakeholders were aligned on the necessary course of action.
Inadequate Debtor Response: Justice Morin was highly critical of the sworn declaration filed by the debtors. He noted that it failed to provide a “structured explanation” for a number of critical issues, including: the company’s insolvency, the alleged misrepresentations to lenders, the company’s next steps, a potential restructuring path, the purpose of the $7 million payment to Mr. Sozzi, and why tax debts were misrepresented. This lack of a substantive defence critically weakened their position.

While this second application was successful, the judge still raised significant concerns about the handling of the matter, particularly regarding the treatment of key stakeholders like employees.

5. How do courts in modern insolvency cases view the impact on employees?

The court’s focus on the employees in the Canadoil case reflects a broader and important trend in Canadian insolvency law: a growing emphasis on considering the interests of all stakeholders, not just secured creditors. The judge’s perspective shows that the human impact of an insolvency proceeding is a relevant and material factor in the court’s decision-making process.

Justice Morin expressed direct concern, stating: “100 employees are currently working at the Bécancour Plant, having no idea of what is going on in this Courtroom and the impact any Judgment of this Court will inevitably have on their livelihood as early as next week.” He was particularly critical of how management informed the workforce “à la dépêche” (hastily) about a work stoppage, calling the approach inappropriate. This judicial scrutiny makes it clear that the manner in which a company’s workforce is treated during a period of financial distress is not a private matter but a factor that can influence a court’s evaluation of an insolvency application. This stakeholder-focused approach provides important lessons for any business owner navigating financial challenges.

6. For a distressed business owner, what are the most critical takeaways from the Canadoil case?

The Canadoil saga offers a clear roadmap of what to do—and what not to do—when a business is facing significant financial challenges. For any director or owner, this case highlights several critical lessons for navigating a crisis effectively.

• Prioritize Transparency: Attempting to hide problems, such as the undisclosed payroll tax debts in this case, inevitably erodes lender confidence and ultimately backfires in court. In my experience, what lenders fear most isn’t bad news; it’s surprises. This case is a perfect illustration of that principle.

• Engage Professionals Early: The involvement of experienced insolvency counsel is not a sign of failure but a strategic necessity. These professionals can help navigate complex creditor relationships, ensure procedural fairness, and prevent costly missteps that can jeopardize the company.

• Provide Substantive Responses: When faced with serious allegations from creditors, generic denials or attempts to shift blame are unpersuasive to a court. A comprehensive, structured, and evidence-based response that directly addresses each concern is required to be taken seriously.

• Develop an Employee Communication Strategy: The proper and ethical treatment of employees is more than just a moral duty; it is a legally relevant factor that courts consider. A well-planned communication strategy for your workforce is critical for preserving value and demonstrating responsible leadership.

Ultimately, the most effective strategy for preserving a company’s value and achieving the best possible outcome is to engage with financial problems proactively, transparently, and with the guidance of qualified professionals.

ex parte motion

Conclusion: Why Process and Substance Both Matter in an Ex Parte Motion

The Canadoil case demonstrates that in modern insolvency practice, how you seek relief through an ex parte motion can be as important as what you’re trying to achieve. RBC had legitimate concerns about the companies’ financial condition and management conduct in both applications. The underlying facts didn’t change significantly between August 19 and August 29, 2025.

What changed was the process. The failed ex parte motion highlighted the importance of proper procedures, adequate disclosure, and genuine urgency. The second application succeeded by following proper notice requirements and addressing the court’s concerns about stakeholder impact and proportionality. Even with these improvements, Justice Morin identified significant issues with how the situation was handled.

For businesses facing financial distress, this case underscores the value of engaging experienced professionals early and maintaining transparent relationships with stakeholders. For creditors considering an ex parte order, it demonstrates that even strong legal positions require proper presentation, complete disclosure, and consideration of broader impacts.

The insolvency system works best when all parties approach it with professionalism, transparency, and respect for established procedures. The Canadoil case shows both what can go wrong when these standards aren’t met in ex parte motions and what becomes possible when they are.

Final Ex Parte Motion Thoughts

Running a company in the GTA isn’t easy. The key is recognizing problems early and getting professional help when you need it.

As a Licensed Insolvency Trustee with extensive experience helping GTA companies, I’ve seen them recover from seemingly impossible situations. With the right approach, your business can not only survive current challenges but also emerge stronger and more profitable.

Remember, seeking help isn’t a sign of failure – it’s a smart business decision that can save your company, protect your employees’ jobs, and preserve your investment in your business.

If you’re ready to take the next step, contact a Licensed Insolvency Trustee today. Your business and your peace of mind are worth the phone call.

If your business is facing financial challenges, don’t wait until it’s too late. Early intervention provides more options and better outcomes. Contact Ira Smith Trustee & Receiver Inc. today to discuss your situation confidentially and explore your options.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with an overwhelming debt crisis, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your options.

Licensed Insolvency Trustee Services in GTA

Free consultation available:

No obligation to proceed
Complete review of your Canadian business debt and credit situation
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both a debt crisis and credit score problems.

As a licensed insolvency trustee in the Greater Toronto Area, I tell consumers and business owners to see financial problems not as failures but as challenges. Proper guidance can solve them. By knowing the warning signs of insolvency and getting professional advice early, many people and businesses find a way forward. They can restructure, make strategic changes, or wind down in an orderly way that protects future chances.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help Canadian entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of a debt crisis. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

Personalized Debt Relief Solutions

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your Canadian company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President of Ira Smith Trustee & Receiver Inc. With extensive experience in corporate insolvency and restructuring matters, Brandon assists businesses and individuals in navigating financial distress throughout the GTA and Ontario. For confidential consultation regarding your business’s financial situation, contact Ira Smith Trustee & Receiver Inc.

ex parte motion

Brandon Blog Post

A CANADA TRUSTEE’S COMPLETE VIEW OF CANADA’S ‘TWO-SPEED’ ECONOMY: WHY CONSUMER INSOLVENCIES ARE SOARING WHILE CORPORATIONS AREN’T

Post author By Brandon Smith
Post date September 15, 2025

Canada trustee

The economy, much like a highway during rush hour, can move at different speeds. For some, it’s a smooth, open road. For others, it’s a gridlock of financial stress and mounting debt. As a Canada Trustee, I just read the new 2024-25 Annual Report from the Office of the Superintendent of Bankruptcy (OSB). It shows that Canada’s economy is looking more and more like this “two-speed” highway.

On one side, we have everyday Canadians and small businesses facing a significant increase in financial trouble requiring help with debt solutions. On the other hand, large corporations appear to be cruising along, handling economic bumps with ease. This striking difference is at the heart of the OSB’s 2024-25 Annual Report. It tells a powerful story about why more people are struggling and what the country’s official insolvency watchdog is doing about it.

This blog post will explore the key findings of the report, dive into the reasons behind this two-speed economy, and explain the important role of a Canada Trustee in helping people navigate these challenging times.

The Numbers Tell the Story: A Tale of Two Economies

The most surprising and important finding in the OSB’s report is the clear split between consumer and corporate financial health. The numbers don’t lie.

First, let’s look at the side of the road where most people are stuck: the world of consumer debt.

The OSB accepted 143,864 insolvency filings in the 2024-25 fiscal year.
This represents a notable increase of 7.6% from the year before.

To put this into perspective, an insolvency filing is when an individual or a small business officially asks for help with their debts, usually through a bankruptcy or a consumer proposal. Both these administrations occur under the Canadian Bankruptcy and Insolvency Act (BIA). A 7.6% jump in one year is a significant red flag. It points to a growing number of Canadians who are feeling the squeeze and can no longer keep up with their financial commitments.

Now, let’s look at the other side of the highway, where the big companies are. The OSB also tracks filings under the Companies’ Creditors Arrangement Act (CCAA). The CCAA is a law used by large corporations that need to restructure and reorganize their business when they are in serious financial trouble.

There were only 70 CCAA filings in 2024-25.
This is actually a decline of 2.8% from the previous year.

This is the core of the “two-speed” economy. The number of everyday people needing help is climbing fast, while the number of big companies in distress is going down. This trend suggests a Canada where financial stability depends heavily on your size. If you are a large, well-established company, you have been able to navigate recent economic challenges. But if you’re an individual, a family, or a small business, the ride has been much bumpier.

Why Are More Canadians Drowning in Debt?

The OSB report doesn’t go into a deep analysis of the “why” behind these numbers, but it points to some key factors that are widely recognized as the main drivers of financial stress. These are not new headlines, but their combined effect has been felt more deeply this year.

Inflation and the Rising Cost of Living: We’ve all felt it at the grocery store, the gas pump, and in our monthly bills. Inflation means that our money doesn’t go as far as it used to. For many families, this has made it harder and harder to afford the necessities of life. When prices for food, housing, and transportation keep climbing, it leaves less money for everything else, making it difficult to pay off existing debts.
High Interest Rates: Over the past couple of years, central banks have raised interest rates to try and control inflation. While this is a necessary step for the economy, it has a direct and painful effect on anyone with a mortgage, car loan, or credit card debt. Higher interest rates mean that more of your money goes toward interest payments and less goes toward paying down the actual debt. This can turn a manageable debt load into an impossible one very quickly. A higher interest rate on a mortgage can add hundreds, or even thousands, of dollars to a person’s monthly expenses, putting immense pressure on their budget.

When you combine these two factors, you get the perfect storm for consumer financial distress. A family might be earning the same income, but their expenses are higher, and the cost of servicing their debt is higher. Something has to give, and for many, that “something” is their ability to stay on top of their financial obligations. It’s a situation where hard work and careful budgeting are simply not enough to keep up with the rising costs. This is often the point where people begin to look for solutions and seek the help of a Canada Trustee.

Why Are Big Companies Staying Afloat?

The other half of the story is why large corporations seem to be faring so much better. While the OSB report does not provide a detailed explanation for this, we can draw some logical conclusions based on the nature of a large business.

Large companies are often more resilient to economic headwinds than small businesses or individuals. They have some advantages that help them ride out the storm:

Financial Resources: Large corporations typically have significant cash reserves and better access to credit. This means they can absorb higher costs and interest rates more easily. They can borrow money at lower rates and for longer terms than an individual.
Diversification: Many big companies operate in multiple industries or regions. If one part of their business is struggling, another part might be thriving, helping to balance things out.
Ability to Absorb Costs: Large companies have more power to pass along increased costs to their customers without losing them. They also have the resources to find ways to cut costs in their own operations, such as by streamlining processes or using new technology.

This creates a clear imbalance. While a single person might be overwhelmed by a credit card payment jump of $50, a large corporation can absorb an increase of millions of dollars in interest payments without having to file for protection. The system is designed to allow large corporations to handle big economic swings, but it leaves individuals and small businesses much more exposed. This is why the role of a Canada Trustee becomes so crucial.

Introduction: Understanding the Role of a Trustee in Canada

The OSB’s report mentions that a Canada Trustee is a key figure in the country’s insolvency system. But what exactly are licensed insolvency trustees, and what do they do? The term “trustee” is used to describe a professional who holds property and acts on behalf of others. This role is a foundation of Canada’s legal and financial system.

What is a Canada Trustee? Defining the Core Concept

Licensed Insolvency Trustees are federally regulated professionals. They help people and businesses with serious debt problems. They are the only professionals allowed to handle insolvencies in Canada. The OSB report shows they play a key role during financial hardship. They act as a link between a person in debt and their creditors. The person who gives the property to the trustee is called in this case, a bankrupt.

The Foundation of Trust: Legal Framework and Fiduciary Duty

The most important part of being a Canada Trustee is the “fiduciary duty.” The word “fiduciary” comes from a Latin word that means “trust,” and this is the core of the relationship. A trustee has a legal and moral obligation to always act with honesty, loyalty, diligence, and prudence. They must put the interests of the beneficiaries or creditors ahead of their own. This means they must avoid any personal conflicts of interest and not try to profit from their role. The trustee must also be ready to account for everything they do, keeping accurate records of all financial transactions concerning the trust property.

Why Canada Trustees are Essential in the Canadian Landscape

Trustees are an essential part of the Canadian legal landscape because they provide a way for someone to manage important assets or affairs for another person, especially if that person is unable to do so themselves. A trustee can be appointed in a will, chosen through a separate trust document, or appointed by a court. For instance, a trustee can be appointed to manage an inheritance for a minor or to handle the finances of an adult who is no longer capable of making their own decisions and handling their financial situation on their own.

Canada trustee

The Diverse Landscape of Trusteeship in Canada

While the blog focuses on the Licensed Insolvency Trustee, it’s important to know that the term “trustee” covers a wide range of roles in Canada.

Licensed Insolvency Trustees (LITs): Navigating Financial Hardship

This is the specific type of Canada Trustee that the OSB report focuses on. A Licensed Trustee is a professional who specializes in helping individuals and businesses with serious debt problems. They are the only professionals legally authorized to administer insolvencies in Canada. As the OSB report shows, they play a critical role in times of financial hardship, acting as a link between a person in debt and their creditors.

Estate Trustees (Executors): Stewarding Legacies

An Estate Trustee, often called an executor, is a person named in a will to manage and settle the affairs of someone who has died. Their duties are numerous, including making funeral arrangements, locating all of the deceased’s assets, paying off any debts and taxes, and finally, distributing what is left to the beneficiaries as directed by the will.[8, 9] It is a legally demanding role that requires careful attention to detail.

The Public Guardian and Trustee (PGT): Protecting Vulnerable Interests

Each province has a Public Guardian and Trustee, a government office created to protect the legal and financial interests of the most vulnerable people in society.[10, 11, 12, 13] The PGT acts as a trustee of last resort when there is no trusted family or friend available to do so.[10, 13] This includes protecting the interests of mentally incapable adults, children under a certain age, and deceased or missing persons when no one else can administer their estate.

Professional Trustees and Trust Companies: Specialized Asset Management

For those with large or complex estates, or when family conflicts are a concern, a professional trustee or trust company can be appointed to handle the trust property. These are professional fiduciaries—often a trust department of a bank or a private trust company—that are fully staffed with experts in law, taxes, and finance. They offer expertise and impartiality and can take on the day-to-day work of managing a trust.

Judicial Trustees: Court-Appointed Oversight

In some cases, a court may appoint a judicial trustee.] This happens when a person with mental or physical challenges needs help with their finances, and there is no one else to step in. A judicial trustee is authorized by the court to manage a person’s money and property, ensuring their bills are paid and their needs are met.

Core Responsibilities and Fiduciary Duties of a Trustee

Regardless of the type, every Canada Trustee is held to a high standard of conduct and has specific duties that are legally binding.

The Paramount Fiduciary Duty: Acting in the Best Interest of Beneficiaries/Creditors

An Estate Trustee, also called an executor, is named in a will to manage and settle a deceased person’s affairs. Their duties include making funeral arrangements, finding all assets, paying debts and taxes, and distributing what is left to beneficiaries as the will directs. This role requires careful attention to detail. The licensed trustee firm, Ira Smith Trustee & Receiver Inc., also acts as a court-appointed independent Estate Trustee.

Prudent Management of Trust Property and Assets

A Canada Trustee has a duty to manage and invest the assets they control responsibly and prudently. This means they must make informed decisions and act as a careful person would in similar circumstances. They must avoid risky or speculative investments and must treat all beneficiaries fairly.

Legal Compliance and Regulatory Adherence

A trustee must always follow the law. This can be complex, as a Canada Trustee must comply with a range of federal and provincial laws, as well as the terms of any will or trust document. For example, an Estate Trustee must ensure that all debts and taxes are paid before distributing assets, or they could face personal liability. In Ontario, the Trustee Act comes into play.

Reporting, Disclosure, and Accountability

A trustee must keep detailed and accurate records of all transactions and be ready to show these to the beneficiaries at any time. This “duty to account” is a crucial part of their role, ensuring that they are transparent and accountable for their actions. If a trustee fails in their duties, they can be removed by the court and ordered to pay for any losses.

Trustee Remuneration: Compensation for Services Rendered

Trustees are entitled to be paid for their services.] How much they are paid is usually determined by the will or trust document, or if not specified, it is decided by provincial law or the court. For example, the Public Guardian and Trustee of British Columbia charges prescribed fees for their services, typically ranging from 3% to 5% of the estate’s value.

Canada trustee

Navigating Financial Challenges: How Trustees Provide Debt Relief

As the OSB report highlights, the need for debt relief is growing. This is where the Licensed Insolvency Trustee becomes the most relevant kind of Canada Trustee for many people.

Understanding Financial Difficulties and Debt Problems

The first step in seeking help is acknowledging the problem. The OSB report shows that more Canadians are facing a financial gridlock due to factors like high interest rates and the rising cost of living. When you find yourself unable to pay your bills, a Licensed Insolvency Trustee is the professional to consult.

Options for Individuals: Consumer Proposals and Personal Bankruptcy

While consumer credit counselling can help many Canadians manage their debts, sometimes your financial situation requires more powerful legal solutions. When your debt load exceeds what you can realistically repay through traditional methods, consumer proposals and personal bankruptcy offer legal protection and genuine fresh starts.

As a Licensed Insolvency Trustee serving the Greater Toronto Area, I help people understand when these formal insolvency options become necessary alternatives to credit counselling. These government-regulated processes can eliminate or significantly reduce your debts while protecting you from creditor actions – something that consumer credit counselling services cannot legally provide.

If you’re facing overwhelming debt that exceeds 40% of your annual income, dealing with aggressive collection actions, or finding that minimum payments aren’t making a real dent in your balances, it may be time to explore these more comprehensive debt relief solutions that only Licensed Insolvency Trustees can administer:

Consumer Proposals: A consumer proposal is a legally binding offer to your creditors to pay back a portion of what you owe over a set period (up to five years).
Personal Bankruptcy: This is a legal process that allows you to be released from your debts and get a fresh financial start.

A Licensed Insolvency Trustee ensures that your rights are protected throughout these processes.

Corporate Insolvency and Restructuring

Beyond personal debt, a Licensed Insolvency Trustee also plays a key role in helping businesses that are in financial trouble. They can help companies reorganize and restructure their debt, which can save the business and its jobs. The OSB report’s mention of a decline in corporate filings suggests that this part of the economy is holding steady, but the service remains critical for businesses in distress.

Choosing the Right Canada Trustee for Your Specific Needs

The type of Canada Trustee you need depends entirely on your situation. Knowing who to turn to is the first step toward finding a solution.

When to Consult a Licensed Insolvency Trustee

You should consult a Licensed Insolvency Trustee when you are facing debt problems that you cannot solve on your own. They are the only ones who can legally help you with options like a consumer proposal or bankruptcy. A consultation with an LIT is free and will help you understand your situation and your legal options without any obligation.

When to Plan for an Estate Trustee/Executor

This is a step you should take when you are planning your will. Naming a trustworthy and competent person or company as your Estate Trustee is crucial for ensuring that your wishes are carried out and your beneficiaries are protected.

When the Public Guardian and Trustee May Be Involved

The PGT is an office of last resort. This means you should only expect them to be involved if there is no other suitable person to act as a trustee for a vulnerable individual or an estate. If you are worried about a family member who needs help, but no one is available to act, you can contact the PGT’s office.

When to Engage a Professional Trustee or Trust Company

A professional trustee is a good choice if you have a large and complex estate, or if you anticipate conflicts between family members after your death. They can provide professional expertise and impartiality, which can save a lot of stress and family disputes in the long run.

Key Factors in Trustee Selection

When choosing any type of Canada Trustee, remember to consider factors beyond just a personal relationship. Trustworthiness is a given, but you should also look for someone with the right skills, knowledge of tax and legal requirements, and the ability to act prudently and impartially.

Canada trustee

Regulatory Oversight and Professional Standards for Canadian Trustees

The different types of trustees in Canada are held accountable by various regulatory bodies and legal frameworks, ensuring they maintain high professional standards.

Licensed Insolvency Trustees (LITs): As the OSB report makes clear, LITs are strictly regulated by the Office of the Superintendent of Bankruptcy. The OSB conducts office visits, initiates compliance actions, and launches professional conduct investigations to ensure that LITs are following all the rules.
Estate Trustees: The duties of an Estate Trustee are regulated by provincial laws and overseen by the courts. If a trustee fails in their duties or mismanages an estate, the courts can remove them and hold them personally responsible for any losses.
Public Guardian and Trustee (PGT): These are government-appointed roles, and their authority and duties are set out in provincial laws.] They are held to the highest ethical and legal standards.
Trust Companies: Trust companies, which are often a part of a bank, are highly regulated entities.[16] They are regulated at the federal level by organizations like the Financial Consumer Agency of Canada (FCAC) and the Office of the Superintendent of Financial Institutions (OSFI).

Canada Trustee Conclusion

The OSB’s 2024-25 Annual Report shows that Canada’s economic reality is difficult for a growing number of people. In this “two-speed” economy, the role of a trusted professional like a Canada Trustee is more important than ever. Whether you need help with debt, are planning your will, or are a family member of a vulnerable person, knowing who these professionals are and how they can help is the first step toward securing your financial future.

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost-of-living and debt challenges and move towards a more secure and hopeful financial future.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your debt relief options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt relief options affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

As a licensed insolvency trustee serving the Greater Toronto Area, I encourage consumers and business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of insolvency and seeking professional advice early, many people and businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

Canada trustee

Brandon Blog Post

CONSUMER CREDIT COUNSELING CANADA: OUR COMPLETE GUIDE ON COSTS, BENEFITS & ALTERNATIVES

Post author By Brandon Smith
Post date September 8, 2025

consumer credit counseling

Are you struggling with debt and feeling overwhelmed by financial stress? Consumer credit counseling might seem like the answer, but recent government investigations reveal that some debt advisory services may cost you more than they save.

As a Licensed Insolvency Trustee serving Toronto, Mississauga, Brampton, and Markham for decades, I’ve helped many people in the Greater Toronto Area navigate their debt challenges. In this comprehensive guide, I’ll explain what consumer credit counselling really offers, how to find legitimate help, and what alternatives might be better suited to your situation.

Navigating Financial Stress: Understanding Consumer Credit Counseling

Financial difficulties affect millions of Canadians every year. The stress of mounting bills, collection calls, and uncertain futures can feel overwhelming. Consumer credit counseling presents itself as a solution, but understanding what it truly offers is crucial for making informed decisions about your financial future.

What is Consumer Credit Counseling?

Consumer credit counseling involves working with a certified credit counselor to address your debt problems. These services typically include:

Reviewing your complete financial situation
Creating personalized budgets and payment plans
Providing financial education and money management skills
Negotiating with creditors on your behalf
Offering ongoing support throughout your debt repayment journey

The goal is to help you regain control of your finances while avoiding more drastic measures like bankruptcy.

Who Can Benefit from Consumer Credit Counseling?

Consumer credit counseling can be helpful for people who:

Have steady income but struggle to manage multiple debts
Want to learn better budgeting and money management skills
Feel overwhelmed by financial decisions
Need help negotiating with creditors
Want to avoid bankruptcy or consumer proposals

However, consumer credit counseling isn’t right for everyone. If your debt is too high relative to your income, or if you’re facing immediate legal action from creditors, other debt relief options might be more appropriate.

The Empathetic Approach to Debt Relief and Financial Wellness

Legitimate consumer credit counseling recognizes that financial problems often involve more than just money. Good credit counselors understand the emotional stress of debt and provide compassionate, judgment-free support.

What empathetic counseling includes:

Active listening without blame or shame
Personalized solutions that fit your unique situation
Emotional support during difficult financial decisions
Education that empowers rather than overwhelms
Realistic timelines that consider your circumstances

The Foundation of Financial Recovery: What is Consumer Credit Counseling?

Understanding the fundamentals of consumer credit counseling helps you make informed decisions about whether it’s right for your situation.

Defining Consumer Credit Counseling

Consumer credit counseling is a service that helps people manage debt through education, budgeting assistance, and debt management plans. Legitimate consumer credit counseling agencies are typically non-profit organizations that charge minimal fees or offer free services.

Core components include:

Financial assessment and budget analysis
Debt management plan creation
Creditor communication and negotiation
Financial education and skill building
Ongoing support and monitoring

The Role of a Credit Counsellor: Your Trusted Financial Advisor

A qualified credit counsellor serves as your advocate and educator. They should:

Assess your situation objectively without pushing specific solutions
Educate you about all available options, not just their services
Communicate clearly in language you understand
Respect your decisions and provide unbiased advice
Maintain confidentiality about your financial information

Red flag: Be cautious of counselors who immediately push expensive services or demand upfront payments.

Emphasizing Non-Profit Credit Counseling Organizations

Non-profit consumer credit counseling agencies often provide the most trustworthy services because they:

Focus on education rather than profit
Charge minimal fees (often $20-50 for services)
Receive funding from creditors and donations
Must meet strict accreditation standards
Provide transparent fee structures

Examples of reputable non-profit agencies in Canada:

Credit Canada Debt Solutions
Non-Profit Credit Counselling Service
Provincial consumer credit counseling services

Initial Debt Evaluation: A Holistic Review of Your Financial Situation

The first step in consumer credit counseling involves a comprehensive review of your finances. This should include:

Complete debt inventory: All credit cards, loans, and other obligations
Income analysis: All sources of regular income
Expense review: Fixed and variable monthly expenses
Asset assessment: Property, investments, and valuable possessions
Credit report review: Understanding your credit history and score

This evaluation helps determine whether credit counseling is appropriate or if other debt relief options would work better.

consumer credit counseling

Why Choose Consumer Credit Counseling? Beyond Just Paying Off Debt

Credit counseling offers benefits that extend beyond simple debt repayment, addressing the root causes of financial stress.

Alleviating Financial Stress and Improving Mental Health

Financial problems create significant stress that affects your entire life. Quality credit counseling helps by:

Providing clarity about your financial situation
Creating realistic plans that reduce anxiety about the future
Offering emotional support during difficult times
Teaching coping strategies for financial stress
Restoring hope that your situation can improve

Studies show that people who complete credit counseling programs report significant improvements in their mental health and overall well-being.

Gaining Control Over Your Finances and Achieving Financial Freedom

Credit counseling helps you develop skills and habits that lead to long-term financial stability:

Better budgeting skills that prevent future debt problems
Improved money management through practical tools and techniques
Understanding of credit and how to use it responsibly
Emergency planning to handle unexpected expenses
Goal setting for future financial objectives

Receiving Personalized Financial Education and Budgeting Guidance

One of the most valuable aspects of consumer credit counseling is the education component. You’ll learn:

How to create and stick to realistic budgets
Strategies for reducing expenses without sacrificing quality of life
How to prioritize debt payments for maximum impact
Ways to increase income through career development
Long-term financial planning techniques

Stopping Collection Calls and Protecting Your Consumer Rights

When you enter a debt management plan through consumer credit counseling, creditors typically agree to stop collection activities. This provides immediate relief from:

Constant phone calls and letters
Threats of legal action
Stress and anxiety from creditor harassment
Confusion about your rights as a debtor

However, it’s important to understand that this protection isn’t automatic and depends on creditor cooperation.

Your Path to Financial Stability: The Step-by-Step Credit Counseling Process

Understanding what to expect from consumer credit counseling helps you prepare for success and identify quality services.

Step 1: The Confidential Debt Evaluation and Budget Counseling Session

Your first meeting with a credit counselor should be comprehensive and confidential. During this session:

Complete financial review: Every debt, income source, and expense
Credit report analysis: Understanding your current credit standing
Budget creation: Realistic monthly spending plan
Option exploration: All available debt relief strategies
Initial recommendations: Preliminary advice based on your situation

Important: This initial consultation should be free or very low cost (under $50).

Step 2: Crafting Your Personalized Debt Management Plan (DMP)

If a debt management plan is appropriate for your situation, your counselor will:

Calculate affordable payments based on your budget
Contact creditors to negotiate terms and interest rates
Consolidate payments into one monthly amount
Set realistic timelines for becoming debt-free
Explain all terms clearly before you commit

Key point: You should never feel pressured to sign up immediately. Take time to review and understand all terms.

Step 3: Communication and Advocacy with Creditors

Your credit counselor will serve as your advocate with creditors, working to:

Negotiate lower interest rates (often 0-10% instead of 18-25%)
Waive late fees and penalties that have accumulated
Stop collection activities during plan participation
Establish reasonable payment terms you can actually afford
Provide regular updates on your progress

Step 4: Ongoing Support, Financial Education, and Achieving Debt Free Status

Throughout your debt management plan, quality credit counseling includes:

Regular check-ins to monitor progress and address challenges
Continued education through workshops and resources
Budget adjustments when your circumstances change
Credit rebuilding guidance as you approach debt freedom
Graduation planning for maintaining financial health after completion

Most debt management plans take 3-5 years to complete, with many people becoming debt-free faster through improved financial habits.

consumer credit counseling

Debt Management Plans (DMPs) Explained: Key Benefits and Considerations

Debt management plans are the primary tool used in credit counseling, but they’re not right for everyone.

What Types of Debts are Included in a DMP?

Debt management plans typically include all unsecured debt:

Credit cards (all major issuers usually participate)
Store credit cards and retail financing
Personal loans from banks and credit unions
Medical debt and professional service bills
Some collection accounts (depending on the creditor)

Debts usually NOT included:

Secured debts (mortgages, car loans)
Government debts (taxes, student loans)
Court judgments and garnishments
Debt to family and friends

How DMPs Can Offer Interest Relief and Lower Monthly Payments

The primary benefits of debt management plans include:

Reduced interest rates: Often lowered to 0-10%
Waived fees: Late charges and over-limit fees eliminated
Single payment: One monthly payment instead of multiple bills
Fixed timeline: Clear end date for becoming debt-free
Creditor cooperation: Reduced collection activities

Example: Sarah owed $25,000 on five credit cards with an average interest rate of 22%. Through a DMP, her rate dropped to 8%, reducing her monthly payment from $890 to $520 and cutting three years off her repayment time.

The Impact of a DMP on Your Credit Score: Myth vs. Reality

There are many misconceptions about how debt management plans affect credit scores:

Myths:

“DMPs destroy your credit score”
“It’s as bad as bankruptcy on your credit report”
“You can’t get credit while on a DMP”

Reality:

DMPs may initially lower your score by 50-100 points
Your score typically recovers within 12-18 months
The impact is much less severe than bankruptcy or debt settlement
Many people see improved scores as they pay down debt
You can often qualify for new credit after 12 months of on-time payments

Comparing Your Options: Credit Counseling vs. Other Debt Relief Solutions

Understanding all your options helps you make the best choice for your specific situation.

Credit Counseling vs. Debt Consolidation Loans

Credit Counseling:

No new loan required
Works with existing creditors
Provides education and support
Minimal fees (usually under $100)
Available even with poor credit

Debt Consolidation Loans:

Requires qualifying for a new loan
May offer lower interest rates
No ongoing support or education
Higher fees (origination fees, interest)
Difficult to qualify with damaged credit

Best for: Credit counseling works better if you can’t qualify for a low-interest consolidation loan or need ongoing support.

Credit Counseling vs. Debt Settlement

Credit Counseling:

Pays creditors in full (with reduced interest)
Minimal impact on credit score
Creditors cooperate with the process
Non-profit options available
Educational focus

Debt Settlement:

Attempts to pay less than full balance
Severely damages credit score
Creditors may not cooperate
High fees (15-25% of debt)
No guarantee of success

Warning: Debt settlement companies often charge high fees with poor results and significant credit damage.

Credit Counseling vs. Bankruptcy and Consumer Proposal

Credit Counseling:

No court involvement
Pay debts in full (with concessions)
Less severe credit impact
Keep all assets
No public record

Bankruptcy/Consumer Proposal:

Legal court process
Debt is eliminated or significantly reduced
More severe credit impact (6-7 years)
May lose some assets
Public record of filing

When bankruptcy/proposals are better:

Debt is too high relative to income
Facing immediate legal action
Need immediate creditor protection
Assets at risk of seizure

As a Licensed Insolvency Trustee, I can help you understand when these legal options might be more appropriate than credit counseling.

The DIY Approach: Self-Managed Debt Repayment

Some people successfully manage debt repayment on their own using strategies like:

Debt snowball: Paying minimum on all debts, extra on smallest balance
Debt avalanche: Paying minimum on all debts, extra on highest interest rate
Balance transfers: Moving debt to lower-interest credit cards
Direct creditor negotiation: Working with creditors yourself

DIY works best when:

You have strong self-discipline
Your debt load is manageable
You understand financial principles
You don’t need emotional support

Credit counseling is better when:

You need structure and accountability
You want professional creditor negotiation
You need financial education
You benefit from ongoing support
consumer credit counseling

Warning Signs: Avoiding Problematic Consumer Credit Counseling Services

Unfortunately, not all debt advisory services have your best interests in mind. Recent government investigations have revealed serious problems in Canada’s debt advisory marketplace.

Government Investigation Reveals Serious Issues

In December 2023, Canada’s Office of the Superintendent of Bankruptcy (OSB) released a position paper on The Adverse Effects of the Debt Advisory Marketplace on the Insolvency System. This position paper detailed the environment of problematic debt advisory practices. Since then, over 100 complaints have been filed against debt advisors.

Major problems identified:

Charging fees for services that should be free
Misrepresenting themselves as government officials
Requiring upfront payments before providing help
Threatening to cancel debt solutions if clients stop paying

The Hidden Costs of Questionable Debt Advisors

The financial impact has been significant. Between December 2023 and April 2025:

Debt advisor involvement in bankruptcy cases dropped 59%
Monthly fees paid to advisors fell from $2.1 million to $1.2 million
This represents nearly $1 million monthly in unnecessary fees paid by struggling Canadians

Real example: One client was instructed to put debt advisor fees on credit cards, then include that new debt in their bankruptcy filing – a practice that may violate Canadian criminal law.

Red Flags to Watch For

Immediate warning signs:

Demands for large upfront payments
Claims they work “with the government”
Promises to “eliminate your debt” quickly
High-pressure sales tactics
Won’t provide clear fee information
Prevents direct communication with Licensed Insolvency Trustees

Common misleading tactics:

“You must pay us first” – False. You can contact Licensed Insolvency Trustees directly.
“We can get better deals than trustees” – Trustees have legal authority that debt advisors don’t have.
“Pay us or your proposal will fail” – Often a scare tactic without legal basis.

Finding Legitimate Consumer Credit Counseling Help

How to Identify Quality Credit Counseling Services

Look for these characteristics:

Non-profit status or transparent fee structure
Accreditation from recognized organizations
Free or low-cost initial consultations
Educational focus, not just debt management
Clear explanations of all options, not just their services
Willingness to refer you elsewhere if appropriate

Questions to Ask Any Credit Counseling Agency

Before committing to any service, ask:

“What are all your fees, and when do I pay them?”
“Are you accredited, and by whom?”
“What happens if I can’t make my payments?”
“How will this affect my credit score?”
“Can you provide references from past clients?”
“What other debt relief options should I consider?”

Better Alternatives: Licensed Insolvency Trustees

As a Licensed Insolvency Trustee, I’m legally required to:

Provide free initial consultations
Explain all debt relief options objectively
Offer services at government-regulated rates
Maintain strict professional and ethical standards
Provide legal protection through bankruptcy and consumer proposal processes

Full Disclosure: Ira Smith Trustee & Receiver Inc. operates independently and has no relationships with unregulated debt advisory services.

consumer credit counseling

My Professional Experience and Qualifications

As a Licensed Insolvency Trustee serving the Greater Toronto Area for decades, I’ve helped thousands of individuals and families overcome financial challenges. My approach combines legal expertise with a genuine understanding of the emotional stress that debt creates.

My credentials include:

Licensed by the Office of the Superintendent of Bankruptcy
Certified Insolvency and Restructuring Professional (CIRP) by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
Former senior banker with extensive credit and lending experience
Regular community education contributor on financial topics
Maintaining my continuing education in debt advisory and financial restructuring matters

My commitment: Every client receives honest, transparent advice tailored to their unique situation. I believe in empowering people with knowledge and supporting them through the recovery process.

Frequently Asked Questions About Consumer Credit Counseling

Q: Will consumer credit counseling hurt my credit score?

A: Quality credit counseling may initially lower your score by 50-100 points, but this recovers within 12-18 months as you pay down debt. The impact is much less severe than bankruptcy, debt settlement, or continuing to miss payments.

Q: How much does legitimate consumer credit counseling cost?

A: Non-profit credit counseling typically charges $20-50 for initial setup and $20-40 monthly for debt management plans. Be very wary of services charging hundreds or thousands of dollars upfront.

Q: Can I get out of a debt management plan if my situation changes?

A: Yes, you can exit a DMP at any time. However, creditors may reinstate original interest rates and fees. Discuss exit strategies with your counsellor, before starting.

Q: Will my creditors definitely agree to a debt management plan?

A: Most major credit card companies participate in DMPs, but participation is voluntary. Your counselor should be upfront about which creditors typically cooperate.

Q: Is consumer credit counseling better than bankruptcy?

A: It depends on your situation. Credit counseling works well if you have steady income and manageable debt levels. Bankruptcy might be better if your debt is too high relative to income or you’re facing immediate legal action.

consumer credit counseling

Taking Action: Your Next Steps Toward Financial Recovery

If You’re Considering Consumer Credit Counseling

Research thoroughly – Look for accredited, non-profit agencies
Get multiple consultations – Compare approaches and fees
Ask detailed questions – Understand exactly what you’re paying for
Review alternatives – Make sure counsellingcounsellor is your best option
Start with free resources – Many educational materials are available at no cost

If You Think You Need More Comprehensive Help

Sometimes consumer credit counseling isn’t enough. You might benefit from legal debt relief options like consumer proposals or bankruptcy if:

Your debt exceeds 40% of your gross annual income
You’re only making minimum payments with no progress
Creditors are threatening legal action
You’re using credit to pay for necessities
Financial stress is severely impacting your health or relationships

Free Consultation Available

If you’re dealing with overwhelming debt in the Greater Toronto Area, I invite you to book a free, no-obligation consultation with me. During our meeting, we’ll:

Complete review of your debt and financial situation
Explanation of how different solutions might affect your credit
Discussion of immediate steps you can take
Honest assessment of whether consumer credit counseling or other options are best for you
Clear answers to all your questions in a counselling language you understand

What makes my approach different:

We have years of experience with Canadian debt relief
Legal authority to implement solutions that debt advisors cannot
Regulated fees with no hidden costs
Genuine commitment to your long-term financial health
Comprehensive support throughout your recovery process

Conclusion: Making Informed Decisions About Consumer Credit Counseling

Consumer credit counseling can be a valuable tool for debt relief, but only when you choose the right service provider and understand all your options. The key is distinguishing between legitimate, educational counselling services and expensive programs that duplicate services available elsewhere for free.

Remember these crucial points:

Quality consumer credit counseling focuses on education and empowerment
Non-profit agencies typically offer the most trustworthy services
Be extremely cautious of high upfront fees or pressure tactics
Licensed Insolvency Trustees can provide legal solutions that counselors cannot
Your current financial situation doesn’t define your future possibilities

Whether you choose credit counseling, work with a Licensed Insolvency Trustee, or pursue other debt relief options, the most important step is taking action. Financial problems rarely improve on their own, but with the right guidance and commitment, you can overcome debt challenges and build lasting financial stability.

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost of living and debt challenges and move towards a more secure and hopeful financial future.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Vaughan, Markham, and surrounding areas, I’m here to help you understand your options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. Ira Smith Trustee & Receiver Inc. is a Licensed Insolvency Trustee serving Toronto, Vaughan, Mississauga, Brampton, Markham, and the entire Greater Toronto Area. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

consumer credit counseling

Brandon Blog Post

THE STRUGGLE IS REAL, CANADIAN COST OF LIVING ON THE RISE: NAVIGATING DEBT IN CANADA’S NEW REALITY

Post author By Brandon Smith
Post date August 25, 2025

cost of living

Introduction: Understanding Canada’s Cost of Living Landscape

Life in Canada used to mean certain dreams were within reach: a comfortable home, food on the table, and savings for a secure future. But for many Canadians, due to the cost of living over recent years always rising, those dreams feel further away than ever. The Canadian cost of living has skyrocketed, placing immense pressure on families, individuals, and businesses alike. It’s a reality that’s leaving millions of Canadians feeling squeezed, stressed, and struggling with debt.

At Ira Smith Trustee & Receiver Inc., we see firsthand how the rising cost of living affects everyday people and companies. It’s not just a feeling; the numbers prove it. More than four out of ten Canadians (45%) say the cost of living is their number one concern. This isn’t just about small worries; it’s about basic survival. When the price of food, housing, and everything else goes up, and wages don’t keep pace, something has to give. Often, that “something” is financial security, leading to a reliance on credit and, eventually, a heavy debt burden.

This Brandon’s Blog explores the deep impact of Canada’s rising cost of living on consumers, entrepreneurs, and businesses. We’ll look at the unsettling statistics that show just how close many are to financial breaking point, their inability to save for the future, and the struggle to afford even the most basic necessities. More importantly, we’ll discuss practical steps and real solutions for managing debt and finding a path to financial stability, no matter how tough things seem.

The Everyday Battle: Cost of Living and Financial Survival

Imagine trying to keep your head above water when the tide keeps rising faster than you can swim. That’s how many Canadians feel about the cost of living. In 2025, a family of four in Canada needs between $4,000 and $6,000 each month just to cover basic expenses, and in big cities like Toronto or Vancouver, that can jump to $6,500 to $7,500. For someone living alone, monthly costs are often $2,000 to $3,500, possibly reaching $3,900. These aren’t luxury budgets; this is the cost of living for normal people’s housing, food, and transportation.

The main reason for this financial strain is inflation – meaning prices for goods and services keep going up; this causes the rising cost of living. This has led to something called “consumer debt,” which hit a whopping $2.5 trillion in late 2024 and kept climbing to $2.58 trillion by mid-2025. This isn’t just people buying new cars or big screen TVs; many are using credit cards to pay for groceries or their utility bills. The average non-mortgage debt per person reached $22,147 in mid-2025.

Younger Canadians, those under 36, are feeling this cost of living pain even more. They’re racking up higher credit card debt and are more likely to miss payments on their loans. Nearly 1.4 million Canadians missed a credit payment in the second quarter of 2025, a noticeable jump from the year before. This isn’t just about money; it’s also taking a huge toll on mental health. In 2024, nearly 4 out of 10 Canadians (38%) felt mental health struggles because of financial stress, and almost half (49%) were losing sleep worrying about money. When you’re constantly worried about how to pay for basic life necessities, it’s hard to feel secure or healthy.

This constant rising cost of living financial worry also affects how people feel about their future. Many Canadians are losing hope that they’ll ever get ahead. They might feel embarrassed or alone, but it’s important to remember that this is a widespread problem. Three out of five Canadians say their stress and anxiety come from debt. This makes it clear that the high cost of living isn’t just an economic issue; it’s a social and personal crisis affecting the well-being of millions.

cost of living

Living Paycheque to Paycheque: A Widespread Reality

The idea of living “paycheque to paycheque” means that all the money you earn goes directly to your bills and expenses, with little to nothing left over. For many Canadians, this isn’t just a saying; it’s their daily reality. A recent survey from H&R Block Canada in spring 2025 painted a stark picture: 85% of Canadians are living paycheque to paycheque. This is a huge leap from just a year before, when 60% reported the same. This dramatic increase shows how quickly things are changing and how deeply the rising costs are affecting people’s ability to save and feel financially safe.

Other studies back this up. A Leger poll in late 2023 found that 47% of Canadians were in this situation, and the Canadian Payroll Association previously reported it was around 48%. Regardless of the exact number, the message is clear: almost half, and possibly much more, of working Canadians are spending everything they earn, with no wiggle room.

Why is this cost of living problem happening? It’s a mix of things:

Inflation: As mentioned, prices for everything are going up.
Rising Interest Rates: If you have loans or a mortgage, the cost of borrowing money has increased, meaning more of your paycheque goes towards interest payments due to the increase in loan and mortgage costs.
High Rent and Home Prices: Housing costs are a massive expense for most, taking a huge bite out of income.
High Taxes: Taxes also reduce the amount of money people have left to spend or save.

Many Canadians, 82% in fact, are worried that their income simply isn’t growing fast enough to keep up with these rising costs. Some even say their paycheque isn’t enough to cover their basic expenses. This isn’t just a problem for people with lower incomes; it’s affecting middle-class families, young professionals just starting out, and even retirees who thought they were prepared.

When you’re living paycheque to paycheque, there’s no room for unexpected cost of living problems. A sudden car repair, a dental emergency, or a lost job can quickly send someone into a deep financial hole. It’s a cycle that’s hard to break, and it fuels stress and anxiety, making it even harder to make clear financial decisions.

No Emergency Savings: A Dangerously Thin Safety Net

When you’re living paycheque to paycheque, building an emergency fund feels impossible. And the statistics show that for many Canadians, it truly is. Around 41% to 50% of Canadians do not have an emergency fund at all. This means they have no savings to fall back on if something unexpected happens. To put it another way, about 46% of Canadians don’t have enough emergency savings to cover three months of essential expenses. This number has worsened over time, dropping from 64% in 2019, who had a three-month buffer, to 55% in 2024.

This lack of savings makes Canadians incredibly vulnerable. What happens if your car breaks down and needs a $500 repair? What if you have a sudden medical bill?

In late 2022, about one-quarter of Canadians (26%) said they couldn’t cover an unexpected $500 expense. This was more common for women (29%) than men (24%).
Around half of all Canadians (50% to 51%) would struggle to cover a surprise $1,000 expense. Some even admit their budget is so tight they couldn’t handle any unexpected bills.
Canadians are worried they couldn’t handle unexpected costs of $1,000 or more.

This is a terrifying situation. It means that a small bump in the road can become a financial disaster. Instead of savings, many Canadians are forced to rely on high-interest credit cards or loans when an emergency hits, digging themselves deeper into debt. More than one-third (35%) of Canadians would use a small loan or credit card for an emergency, and 27% are taking on debt just to cover their basic monthly needs.

The reasons for this are clear:

High Cost of Living: With so much money going to rent, food, and other necessities, there’s simply nothing left to save.
High Debt Levels: Many Canadians are already carrying record levels of personal debt, leaving little room for saving.
Lack of Financial Know-How: Some people struggle with budgeting and planning, even if they have some money left over.
Job Insecurity: The fear of losing a job also makes people hesitant to save, as they might need that money sooner rather than later.

It’s a vicious cycle where a lack of savings leads to more debt, making it even harder to build up savings in the future.

cost of living

The Retirement Dream Fades: Unable to Save for the Future

Beyond immediate emergencies, the long-term future is also a major concern for Canadians due to the high cost of living in Canada. The idea of a comfortable retirement, free from financial worry, is becoming a distant dream for many. Recent surveys show just how deep this anxiety runs:

Fear of Running Out of Money: A survey in August 2024 found that 61% of Canadians are worried they’ll run out of money in retirement. This worry is even higher for younger adults (ages 28 to 44, at 67%) and women (66%). Another survey in early 2025 reported that over three-quarters of Canadians (76%) share this fear because of rising prices.
Belief in Never Retiring: A truly concerning statistic from April 2025 showed that among Canadians who aren’t retired yet, 59% believe they will never be in a financial position to retire. And 66% think they’ll have to keep working even after they retire to make ends meet. For single Canadians, nearly half (45%) feel that saving for retirement is almost impossible.
Lack of Preparedness: Almost 40% of Canadians over 50 feel they aren’t financially ready for retirement. Many haven’t even started saving: 49% hadn’t put any money aside for retirement in the past year, and 39% said they had never saved for retirement.

The main reasons for this grim outlook are, again, the high cost of living and existing debt. When most of your income goes towards daily necessities and paying off bills, there’s little left to put into long-term savings like Registered Retirement Savings Plans (RRSPs). In fact, polling data from February 2025 showed that only 39% of Canadians planned to put money into their RRSP in 2025, a 10% drop from the year before. One in ten Canadians simply can’t afford to invest in their RRSP at all.

Canadians also feel they need more money to retire comfortably than ever before. Their retirement savings goal has jumped from $700,000 to $900,000 in just one year. Some even think they need $1.54 million. But the average Canadian’s retirement savings, not including pensions or home equity, is only around $272,000. This is a huge gap between what people have and what they feel they need.

This struggle to save for retirement isn’t just about numbers; it’s about peace of mind and the promise of a dignified older age. When people feel like they can never stop working, it affects their health, their relationships, and their overall happiness.

Feeding the Nation: Food Costs and Grocery Bills

When financial pressures mount, the first things to feel the squeeze are often the most basic. For a growing number of Canadians, affording these essentials has become a daily struggle.

Food Insecurity: The Empty Plate Problem

Food insecurity means you don’t have enough money to buy enough healthy food. It’s a problem that’s getting worse in Canada.

Millions Affected: In 2024, a staggering 10 million people in Canada’s ten provinces, including 2.5 million children, were living in households that didn’t have enough food. This means over a quarter of the population (25.5%) is food-insecure. This is the third year in a row this number has gone up, reaching a record high.
Rising Food Bank Use: The demand for food banks is at an all-time high. In March 2024, there were over 2 million visits to food banks across Canada. That’s a huge 90% increase compared to March 2019. Think about it: one-third of all food bank clients are children, and for the first time, nearly one in five (18.1%) food bank users are people whose main source of income is employment. This shows that even people with jobs are struggling to put food on the table.
Why It’s Happening: The main reason is simple: lack of money. Food prices have soared due to an increased cost of living. From 2021 to 2022, food bought from stores went up by an average of 9.8% across the country. Experts predict another 3% to 5% increase in food prices for 2025, meaning the average family of four could spend an extra $801.56 on food. When housing costs eat up so much of a budget, there’s simply less left for groceries.
Who Is Most Affected: Certain groups face this cost of living problem more than others. People in lone-parent families, especially those led by women, racialized groups (like Black Canadians), and Indigenous people often experience much higher rates of food insecurity. If you’re living in poverty, your chances of being food insecure are significantly higher.

Food insecurity isn’t just about hunger; it has serious impacts on health, leading to more illnesses, anxiety, depression, and even a shorter lifespan. It also affects children’s ability to learn and thrive.

cost of living

Decoding Housing Costs: The Biggest Budget Factor

For many Canadians, affording housing prices, like food, has become a daily struggle.

Housing Affordability: No Place to Call Home Comfortably

Housing costs are arguably the biggest driver of the cost of living and, therefore, financial stress for Canadians. Whether you own or rent, real estate prices are making it incredibly difficult to live comfortably.

Unaffordable Housing: In 2022, Statistics Canada reported that more than one in five Canadian households (22%) were spending 30% or more of their income on shelter. This is the widely accepted line for “unaffordable” housing. For renters, it was even worse, with 33% spending too much on rent, compared to 16.1% of homeowners. By March 2024, the average mortgage payment for a home was eating up almost half (47.9%) of the typical household’s income. In Toronto and Vancouver, it was a shocking 73.1% and 72.0% respectively!
Homeownership Out of Reach: The dream of owning a home is fading fast. In 2019, nearly 60% of Canadian households could afford a regular condo. By 2023, that number dropped to 45%. For a single-family home, only 26% of households could afford one. Young Canadians are particularly affected, with 72% wanting to buy a home, but nearly half (45%) feel it’s hopeless. A Habitat for Humanity Canada survey in November 2024 revealed that 70% of Canadians believe owning a home has become impossible.
Sacrificing Necessities for Housing: The most heartbreaking part of the housing crisis is that people are cutting back on other essentials to keep a roof over their heads. The Habitat for Humanity Canada survey indicated that 59% of Canadians, and 75% of renters, are sacrificing basic needs like food, clothing, and even education just to pay for housing.
Mental Health Toll: The housing crisis is also hurting people’s minds. Two-thirds of renters and one-third of homeowners say their the is negatively affected by housing costs. Young people are even considering leaving Canada or delaying starting a family because of how expensive housing is.
Rental Market Squeeze: If buying is impossible, renting isn’t much easier. There’s a severe shortage of affordable rental units. Since 2018, the average rent for a two-bedroom place has gone up 70% faster than wages. Renters with children are deeply worried about rent increases and even losing their homes.
Fear of Losing Your Home: A shocking 57% of Canadians, whether they own or rent, are afraid they might lose their home if their financial situation changes. This fear is highest among younger Canadians and low-income households.

The combination of rising food and housing cost of living creates a daily struggle for survival, pushing more and more Canadians into debt and despair.

The Ripple Effect: How Rising Costs Hurt Canadian Businesses and Entrepreneurs

It’s not just individuals who are struggling with Canada’s high cost of living and rising debt; businesses and entrepreneurs are feeling the pressure too. When consumers have less money to spend because their wages aren’t keeping up with high prices, it impacts businesses, especially small and medium-sized enterprises (SMEs).

Challenges for Businesses:

Rising Operational Costs: Just like families, businesses face higher costs for almost everything. This includes raw materials needed to make products, the wages they pay their employees, and energy bills. A Statistics Canada study reported that approximately 65.4% of businesses are expected to face cost-related challenges in mid-2025. The inflation rate is expected to be a major hurdle for almost half of all businesses.
Increased Borrowing Costs: When interest rates go up, it costs businesses more to borrow money. This makes it harder for them to repay existing loans or get new funding to grow. Many small businesses rely on lines of credit, which are directly tied to the Bank of Canada’s interest rates.
Rising Delinquency Rates: More businesses are falling behind on their payments. Over 56,000 businesses missed at least one financial payment in the second quarter of 2024, a 10.2% increase from the year before. The rate of businesses missing payments by 60 days or more also increased. A big reason for this is that businesses are struggling to pay back government loans they took out during the pandemic (like CEBA loans).
Reduced Investment and Productivity: When money is tight and borrowing is expensive, businesses often cut back on plans to buy new machinery or equipment. This affects overall business investment and can lead to lower productivity for the country as a whole.
Pandemic Debt Burden: Many businesses are still weighed down by debt from the COVID-19 pandemic. The average small business debt related to the pandemic was estimated at $139 billion in August 2021. With higher debt servicing costs, many are finding it hard to catch up. Business insolvencies (when a business can no longer pay its debts) jumped by over 41% in 2023, the biggest increase in 36 years. Many of these insolvencies were linked to struggles with CEBA loan repayments.
Sector-Specific Stress: Certain industries are feeling the pinch more than others. Transportation, construction, and retail businesses are facing major financial stress. For example, nearly 4.3% of transportation businesses missed payments for over 60 days in Q2 2024.

When individuals struggle, businesses also suffer. Less consumer spending means less income for businesses, which can lead to layoffs, reduced growth, and even business closures. It’s an interconnected web where the financial health of one group affects the other.

cost of living

Finding a Way Forward: Strategies for Managing Financial Hardship

Facing overwhelming debt and the rising cost of living can feel impossible, but there are always options. The key is to take action and seek professional help. You don’t have to face this alone.

For Individuals:

Understand Your Money: Create a Budget: This is the first and most important step. You need to know exactly how much money is coming in and where every dollar is going. Write down all your income and all your expenses, from rent and groceries to your morning coffee. The Financial Consumer Agency of Canada (FCAC) has useful tools like a Budget Planner that can help. This step helps you see where you can cut back.
Cut Down Expenses: Once you have your budget, look for areas where you can spend less. Even small changes add up. Can you cook more at home instead of eating out? Can you cancel subscriptions you don’t use? Every dollar saved is a dollar that can go towards debt or an emergency fund to meet unexpected expenses.
Make a Debt Repayment Plan: Don’t just pay the minimum on your credit cards. High-interest debts are like a hole in your pocket. Focus on paying off the debts with the highest interest rates first (called the “debt avalanche” method) or tackle the smallest debts first to gain momentum (the “debt snowball” method). Having a plan makes it less overwhelming.
Avoid New Debt: This might seem obvious, but it’s crucial. Before borrowing more money, think about all your other options. If you’re struggling to pay current bills, taking on more debt will only make things worse.
Build an Emergency Fund (Even a Small One): Even if you can only save a small amount each week or month, start building a safety net. This fund can prevent you from using credit cards when unexpected costs arise. Aim for at least $500 to start, then work towards three months of living expenses.
Talk to Your Creditors: If you’re having trouble making payments, don’t ignore your creditors. Call them. Many lenders have hardship programs or might be willing to work with you on new payment terms. It’s always better to be proactive than to let things spiral out of control.
Seek Professional Advice: This is where a Licensed Insolvency Trustee (LIT) comes in. An LIT like Brandon Smith from Ira Smith Trustee & Receiver Inc. is a financial professional regulated by the Canadian government. They are the only professionals who can provide advice on all debt solutions, including the formal options under the Bankruptcy and Insolvency Act. They can help you understand your situation, explore all your options, and guide you to the best solution for you.

For Businesses:

Assess Your Financial Health: Get a clear picture of all your business debts, including interest rates, payment schedules, and what you owe.
Prioritize and Consolidate Debts: Focus on paying off high-interest business debts first. You might also consider consolidating multiple debts into a single, easier-to-manage loan if the terms are better.
Optimize Cash Flow: Ensure you’re invoicing clients on time and following up quickly on unpaid bills. Negotiate payment terms with your suppliers if possible. Maintaining a healthy cash reserve is crucial for unexpected costs.
Increase Revenue and Reduce Spending: Look for ways to boost sales, maybe by exploring new markets or introducing new products/services. At the same time, cut unnecessary costs without harming the quality of your products or services.
Look for Government Programs and Grants: The Canadian government offers various programs, grants, and alternative financing options for businesses. Research what’s available that might fit your situation.
Seek Professional Business Financial Advice: Just like individuals, businesses can benefit greatly from professional financial advisors. They can help create a budget, identify areas for improvement, and explore debt solutions tailored for businesses. A Licensed Insolvency Trustee also deals with corporate insolvencies and can guide formal business debt relief options.

Government Resources and Debt Relief Options

The Canadian government understands that people and businesses face financial challenges due to the cost of living. You could be excused from thinking that the government doesn’t care because you aren’t seeing any federal government programs that either reduce the cost of living or provide Canadians with more disposable income to meet the rising cost of living. The federal government does offer various resources and regulated programs to help.

Formal Debt Relief Options (Overseen by a Licensed Insolvency Trustee):

The federal government regulates two main legal solutions for debt forgiveness under the BIA. These are serious options that can offer a fresh start, but they must be managed by a Licensed Insolvency Trustee (LIT).

Consumer Proposal: This is a legal agreement between you and your creditors to pay back a portion of your debt over a period of up to five years. It can reduce your overall debt by up to 80%, and once accepted, your creditors cannot charge interest or penalties. It also stops collection calls and wage garnishments. A consumer proposal is a powerful tool that allows you to avoid bankruptcy while still dealing with your debts. Many Canadians find this a good way to get out of overwhelming debt while keeping their assets.
Bankruptcy: If a consumer proposal isn’t the right fit, bankruptcy is another legal process that provides debt relief. It’s typically a last resort, involving the surrender of non-exempt assets (some assets, like certain pension funds or tools for your job, are “exempt” and protected). Bankruptcy also stops collection actions and can provide a fresh financial start. Both consumer proposals and bankruptcy are overseen by an LIT to ensure fairness and adherence to the law.

Financial Consumer Agency of Canada (FCAC): This government agency offers excellent online tools and calculators, including a Budget Planner and a Financial Goal Calculator. They also have a free 12-module course called “Your Financial Toolkit” that covers a wide range of personal finance topics.
Government Aid Programs: For individuals facing income loss, programs like Employment Insurance (EI), the Canada Recovery Benefit (CRB), and the Canada Emergency Response Benefit (CERB) have provided crucial support during tough times.
Student Loan Forgiveness Programs: Some provinces offer programs to help with student loan debt, such as the BC Loan Forgiveness Program or the Quebec Loan Remission Program. It’s worth checking if your province has such initiatives.
CPA Canada’s Financial Literacy Program: Chartered Professional Accountants of Canada (CPA Canada) offers unbiased financial literacy education through various resources like publications, podcasts, and free in-person sessions delivered by financial professionals.
Bank of Canada’s Financial Education Resources: The Bank of Canada provides a list of trustworthy Canadian and international websites with financial information on topics like inflation, banking, and personal finance.
cost of living

Beyond the Numbers: Taking Control and Moving Forward

The statistics paint a challenging picture for Canadians struggling with the cost of living and debt. From living paycheque to paycheque with no emergency savings to the inability to plan for retirement or afford basic necessities like food and housing, the pressure is immense. Entrepreneurs and businesses are also caught in this financial squeeze, facing rising costs and increasing rates of delinquency.

But knowing the problem is the first step towards a solution. The most important takeaway is that you are not alone, and help is available. Ignoring debt won’t make it disappear; it will only grow and cause more stress.

Key Takeaways and Actionable Advice:

Acknowledge the Problem: The high cost of living is real, and it’s impacting almost everyone. Don’t feel ashamed or embarrassed by financial difficulties.
Take Proactive Steps: Start with a budget. Know where your money goes. Look for ways to reduce expenses, even small ones.
Prioritize Debt Repayment: Focus on high-interest debts first. If you have multiple debts, a strategy like debt avalanche or snowball can help.
Build Your Safety Net: Even if it’s slow, start putting money into an emergency fund. Every dollar helps create a buffer against unexpected costs.
Communicate, Don’t Hide: If you can’t pay your bills, talk to your creditors. They might be able to help you adjust your payments.
Seek Professional Help Immediately: This is perhaps the most crucial advice. A Licensed Insolvency Trustee (LIT) like Brandon Smith at Ira Smith Trustee & Receiver Inc. can provide expert, unbiased advice on all your debt options. They can explain consumer proposals, bankruptcy, and other strategies in a way that makes sense, helping you choose the best path to get rid of your debt and regain control of your financial life. This advice is completely confidential and can be the first step towards truly rebuilding your financial future.
Prioritize Your Well-being: Financial stress takes a heavy toll. Remember to take care of your mental and physical health. Lean on your support network and consider professional help if needed.

Cost of Living Conclusion

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost of living and debt challenges and move towards a more secure and hopeful financial future.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

cost of living

Tags Bankruptcy, Canada Pension Plan, canadian cost of living, consumer proposals, cost of living, food prices, housing costs, housing prices, inflation rate, interest rates, Ira Smith Trustee, mortgage costs, mortgage payments, real estate prices, unexpected expenses, utility bill

Brandon Blog Post

SMEs INSOLVENCY IN THE GTA: PROVEN STEPS TO RESCUE AND RESILIENCE FOR TORONTO AREA BUSINESSES

Post author By Brandon Smith
Post date August 18, 2025

sme

Running small and medium enterprises (SMEs) in the Greater Toronto Area has never been easy. However, many business owners are currently facing some of the toughest challenges in decades. Rising costs, changing customer habits, troubling macroeconomic variables and supply chain problems are putting serious pressure on companies across the GTA.

If you’re a business owner struggling to keep up with bills or watching your debt pile up, you’re not alone. More importantly, you have options that can help save your business and protect your employees’ jobs.

As a Licensed Insolvency Trustee firm that has worked with many GTA businesses over the past decades, we’ve seen companies bounce back from what seemed like impossible situations. This Brandon’s Blog will show you the warning signs to watch for, the steps you can take to protect your business, and when to seek professional help.

What Are SMEs and Why Do They Matter to the GTA?

SMEs are the backbone of Ontario’s economy. In Canada, we define these businesses by how many people they employ:

Small businesses: 1 to 99 employees
Medium-sized businesses: 100 to 499 employees
Large businesses: 500 or more employees

SMEs make up over 99% of all businesses in Ontario. In the GTA alone, these companies employ more than 2.5 million people. They run the restaurants where we eat, the shops where we buy clothes, the tech companies building new apps, and the manufacturing plants making products we use every day.

When SMEs struggle, entire communities feel the impact. That’s why helping these businesses survive tough times isn’t just good for individual owners – it’s essential for keeping the GTA economy strong.

The Perfect Storm: Why 2025 Is Especially Tough for GTA Businesses

Several factors are hitting GTA businesses at the same time, creating what experts call a “perfect storm” of challenges.

Rising Operating Costs

Everything costs more now. Rent in the GTA has jumped significantly over the past few years. A small retail space in downtown Toronto that cost $3,000 per month in 2022 might now cost $4,200 or more. Manufacturing businesses are paying 25-30% more for raw materials compared to two years ago.

Labour costs are also climbing. While this is good news for workers, it puts pressure on business owners who are already stretched thin. Many SMEs in the service sector have had to increase wages to attract and keep good employees.

Supply Chain Disruptions

Getting products and materials has become a major headache. A restaurant owner in Mississauga recently told me it now takes three weeks to get equipment parts that used to arrive in three days. A clothing retailer in North York said some of their popular items are backordered for months.

These delays caused by macroeconomic variables don’t just frustrate customers – they tie up cash that businesses need for other expenses. When you have to pay for inventory weeks before you can sell it, cash flow becomes a serious problem.

Changing Consumer Behaviour

Customers are spending differently than they did before. Some are more price-sensitive and shop around more. Others want everything delivered or available online. Many prefer to buy locally but expect the same convenience they get from big retailers.

For SMEs, adapting to these consumer behaviour changes while managing tight budgets is extremely challenging. A family-owned hardware store might need to build an e-commerce website and offer delivery – investments that strain already limited resources.

Economic Uncertainty

Monetary policy decisions, trying to deal with inflation, interest rate changes, a cost-of-living crisis and global trade tensions, create an uncertain business environment. This makes it harder for business owners to plan and make smart financial decisions.

sme

The Numbers Don’t Lie: Insolvency Trends in the GTA

Warning indicators show that business insolvencies in the GTA climbed from 0.4 per 1,000 businesses in 2021 to 0.7 in 2023. While that sounds small, it represents hundreds of local businesses closing their doors because of the business debt crisis.

Source: Canadian Association of Insolvency and Restructuring Professionals (CAIRP), July 5, 2024, media release titled: “Q1 2024 Canadian Insolvency Statistics”.

The sectors seeing the most trouble include:

Retail businesses (especially small independent stores)
Restaurants and food services
Manufacturing companies with fewer than 50 employees
Construction and renovation companies
Personal services (salons, fitness centers, etc.)

But here’s what’s important: many of these businesses could have been saved with earlier intervention. In my practice, I’ve found that companies that seek help when they first notice problems have a much better chance of survival than those that wait until they’re facing bankruptcy.

Red Flags: Early Warning Signs Your Business Needs Help

Recognizing financial problems early gives you more options to fix them. Here are the warning signs I tell every business owner to watch for:

Cash Flow Problems

You’re consistently late paying suppliers or employees
You’re using credit cards or credit lines to pay basic operating expenses
You’re borrowing from one creditor to pay another
Your bank account balance stays low or goes negative regularly

Declining Performance

Sales have dropped for three months in a row
Profit margins are shrinking even when sales stay steady
You’re losing customers to competitors
Key employees are leaving for better opportunities

Operational Struggles

You can’t get trade credit from suppliers and they’re demanding cash upfront
Equipment is breaking down, and you can’t afford repairs
You’re behind on rent, utilities, or loan payments
Tax remittances are late or missed entirely

Personal Stress Indicators

You’re losing sleep worrying about the business
You avoid looking at financial reports
You’re using personal credit cards for business expenses
Family relationships are suffering due to business stress

If you’re experiencing several of these warning signs, it’s time to take action. The good news is that acknowledging problems is the first step toward solving them.

sme

Your Options: What Licensed Insolvency Trustees Can Do for SMEs

Many business owners think that calling a Licensed Insolvency Trustee means their company is finished. That’s not true. We have several tools that can help businesses recover and thrive.

Business Debt Solutions

Informal Arrangements: Sometimes the best solution is working directly with creditors to create payment plans everyone can live with. I’ve helped businesses negotiate extended payment terms, reduced interest rates, or even partial debt forgiveness.

Division I Proposals Under the Bankruptcy and Insolvency Act: This legal process allows businesses to offer creditors a portion of what they owe in exchange for debt forgiveness. For example, a company owing $200,000 might propose to pay $60,000 over three years, with the remaining debt eliminated.

For larger SMEs, this process can restructure significant debt while allowing the business to keep operating. The company presents a plan to creditors for reducing debt and improving operations.

Asset Protection Strategies

We can help protect valuable business assets during financial difficulties. This might include:

Separating personal and business assets
Restructuring how the business owns property or equipment
Creating payment priorities that protect essential operations

Cash Flow Management

Licensed Insolvency Trustees don’t just handle debt – we also provide practical advice on managing money better. This includes:

Creating realistic budgets and forecasts
Identifying unnecessary expenses to cut
Improving collection of accounts receivable
Negotiating better terms with suppliers

Real SMEs Success Stories from GTA Businesses

Let me share some examples of how early intervention saved local businesses. (Names and details have been changed to protect privacy.)

The Family Restaurant That Survived the COVID-19 Crisis

Maria and Giuseppe owned a popular Italian restaurant in Toronto. When the pandemic hit, their revenue dropped by 75%. They owed $85,000 to suppliers, were three months behind on rent, and had maxed out their credit lines.

Instead of giving up, they contacted us. We worked with their landlord to defer rent payments and negotiated payment plans with key suppliers. We also helped them apply for government relief programs they didn’t know existed.

Today, their restaurant is thriving again. They’ve paid off most of their pandemic debt and even opened a second location in Vaughan.

The Tech Company That Restructured

This company employed 35 people in developing cutting-edge technology solutions for managing business operations for companies. When their biggest customer cancelled a major contract, they faced $450,000 in debt they couldn’t pay.

We helped them file a Division I Proposal that reduced their debt to $95,000, payable over four years. This gave them breathing room to find new customers and improve their operations. They also worked on diversifying their customer base to reduce future risk.

Two years later, the company has grown and is more profitable than before their financial crisis.

sme

Building a Stronger Business: Practical Steps for SME Owners

Whether your business is struggling now or you want to prepare for future challenges, these strategies can help build resilience:

Improve Financial Management

Track Everything: Use accounting software to monitor your finances daily, not just when tax time comes around. Many problems become obvious when you look at the financial ratios and other important numbers regularly.

Create Cash Flow Forecasts: Predict your income and expenses for the next 6-12 months. This helps you spot potential problems before they become crises.

Separate Business and Personal Finances: Never mix business and personal expenses. This creates confusion and can cause serious legal problems if your business faces insolvency.

Diversify Your Revenue

Find New Customers: Don’t rely too heavily on one or two big customers. If you lose them, your entire business could be at risk.

Add New Products or Services: Look for ways to serve your existing customers better or attract new ones. A plumbing company might add drain cleaning services. A bakery might start catering events.

Explore Online Sales: Even if you’re primarily a brick-and-mortar business, having an online presence can help you reach more customers and provide additional revenue during slow periods.

Strengthen Supplier Relationships

Pay Bills on Time: Good relationships with suppliers can be a lifeline during tough times. Companies that consistently pay promptly often get better terms and more flexibility when needed.

Diversify Suppliers: Don’t depend on just one supplier for critical materials or products. Having backup options protects you from supply chain disruptions.

Negotiate Better Terms: Ask for extended payment terms, volume discounts, or seasonal adjustments that match your cash flow patterns.

Invest in Your Team

Cross-Train Employees: Make sure multiple people can handle essential tasks. This reduces the risk of operational problems when key employees leave.

Focus on Customer Service: Excellent service helps you keep customers even when competitors offer lower prices.

Plan for Succession: Have a plan for what happens if you become unable to run the business due to illness, injury, or other circumstances.

When A SME Should Call a Licensed Insolvency Trustee

Don’t wait until you’re facing bankruptcy to seek professional help. Consider calling a Licensed Insolvency Trustee if:

You’re using credit to pay operating expenses
You’re behind on tax payments or employee wages
Suppliers are demanding cash payments up front
You’re considering borrowing against personal assets to keep the business running
You’re losing sleep worrying about money

What to Expect from Your First Consultation

Most Licensed Insolvency Trustees offer free initial consultations. Here’s what typically happens:

Financial Review: We’ll look at your debts, assets, cash flow, and overall financial situation. Bring recent financial statements, a list of creditors, and any legal documents you’ve received.

Options Discussion: We’ll explain all available options, not just insolvency procedures. This might include debt negotiation, restructuring, or operational changes.

Action Plan: If you decide to work together, we’ll create a specific plan with clear steps and timelines.

Ongoing Support: We provide ongoing advice and support throughout the recovery process.

sme

The Importance of Acting Early For SMEs

I can’t stress this enough: the earlier you seek help, the more options you have. Businesses that wait until they’re facing immediate closure have fewer alternatives and often face more expensive solutions.

Early intervention can:

Preserve more jobs
Maintain better relationships with suppliers and customers
Protect personal assets
Reduce stress on you and your family
Increase the chances of business survival

Your Next SME Steps

If you’re a SME owner in the GTA facing financial challenges, don’t wait for things to get worse. Here’s what you should do:

Assess Your Situation Honestly: Look at your financial statements and identify specific problems. Write down your concerns and questions.
Gather Your Financial Information: Collect recent financial statements, tax returns, creditor lists, and any legal documents you’ve received.
Contact a Licensed Insolvency Trustee: Schedule a consultation to discuss your options. Most initial meetings are free and confidential.
Explore All Options: Don’t assume bankruptcy is your only choice. Many businesses can be saved with the right intervention.
Take Action: Once you understand your options, implement a plan quickly. Delaying action usually makes problems worse.
sme

Frequently Asked Questions About SME Insolvency in the GTA

What exactly counts as an SME in Ontario?

In Canada, we classify businesses by how many people work for them. A small business has between 1 and 99 employees, while a medium-sized business employs 100 to 499 people. Companies with 500 or more workers are considered large enterprises.

This might seem like just paperwork, but it matters a lot. SMEs make up over 99% of all businesses in Ontario. In the GTA, they employ more than 2.5 million people. These are the companies you interact with every day – your local coffee shop, the accounting firm down the street, the manufacturing plant in your neighbourhood. When SMEs struggle, entire communities feel the impact.

Why are GTA businesses facing so many problems right now?

Several big challenges are hitting local businesses at the same time. Think of it like a perfect storm where everything goes wrong together.

First, costs keep going up. A small store in downtown Toronto that paid $3,000 monthly rent in 2020 might now pay over $4,000. Manufacturing businesses are paying 25-30% more for raw materials than they did two years ago.

Second, getting supplies has become a nightmare. A restaurant owner in Mississauga told me equipment parts that used to arrive in three days now take three weeks. This ties up money that businesses need for other things.

Third, customers are shopping differently. They want online ordering, fast delivery, and competitive prices. For a small business, adding these services while managing tight budgets is extremely tough.

Finally, everything feels uncertain. Interest rates, inflation, and global trade issues make it hard for business owners to plan ahead confidently.

How can I tell if my GTA business is in financial trouble?

Watch for these warning signs that I see in businesses before they call my office:

Money problems: You’re consistently late paying suppliers or staff. You’re using credit cards to cover basic expenses like rent or utilities. Your bank account stays low or goes negative regularly.

Declining sales: Revenue has dropped for three months straight. You’re losing customers to competitors. Profit margins are shrinking even when sales stay the same.

Operational issues: Suppliers want cash upfront instead of giving you credit terms. Equipment breaks down, and you can’t afford repairs. You’re behind on rent, loan payments, or tax remittances.

Personal stress: You’re losing sleep worrying about money. You avoid looking at financial reports because they’re too depressing. You’re using personal credit cards for business expenses.

If several of these sound familiar, it’s time to get professional help. The good news is that recognizing problems early gives you more options to fix them.

What can a Licensed Insolvency Trustee do for my business?

Many business owners think calling me means their company is finished. That’s completely wrong. I have several tools that can help businesses recover and even grow stronger.

Debt solutions: I can work with your creditors to create payment plans everyone can accept. Sometimes this means extending payment terms, reducing interest rates, or even getting partial debt forgiveness. For larger debts, we might use formal proposals under bankruptcy law that legally reduce what you owe.

Asset protection: I help separate your personal and business assets so your family home isn’t at risk if the business struggles. We can also restructure how your company owns equipment or property to better protect valuable assets.

Cash flow help: Beyond handling debt, I provide practical advice on managing money better. This includes creating realistic budgets, identifying expenses to cut, improving how you collect money from customers, and negotiating better terms with suppliers.

The key is getting help early when you have more options available.

What steps can I take right now to protect my SME business?

Whether your business is struggling or you want to prepare for future challenges, these strategies help build strength:

Get your finances organized: Use accounting software to track money daily, not just at tax time. Create cash flow forecasts for the next 6-12 months to spot problems early. Never mix business and personal expenses – this creates confusion and legal problems.

Don’t put all your eggs in one basket: Find new customers so you’re not too dependent on one or two big accounts. Add new products or services that serve your existing customers better. Even traditional businesses benefit from having some online presence.

Build strong supplier relationships: Pay bills on time to maintain good relationships. Have backup suppliers for critical materials. Negotiate payment terms that match your cash flow patterns.

Invest in your team: Cross-train employees so multiple people can handle essential tasks. Focus on excellent customer service to keep customers even when competitors offer lower prices. Have a plan for what happens if you can’t run the business due to illness or other circumstances.

When should I call a Licensed Insolvency Trustee for help?

Don’t wait until you’re facing bankruptcy. Contact a professional if:

You’re using credit to pay basic operating expenses
You’re behind on tax payments or employee wages
Suppliers are demanding cash payments instead of giving you credit
You’re thinking about borrowing against your house to keep the business running
You’re losing sleep worrying about money problems

The earlier you get help, the more options you have. Businesses that wait until the last minute often face more expensive solutions with fewer choices.

What happens during my first meeting with you?

Most Licensed Insolvency Trustees, including myself, offer free initial consultations. Here’s what typically happens:

We review your finances: I’ll look at your debts, assets, cash flow, and overall financial situation. Bring recent financial statements, a list of who you owe money to, and any legal documents you’ve received.

We discuss all your options: I’ll explain everything available to you, not just bankruptcy procedures. This might include debt negotiation, business restructuring, or operational changes that could solve your problems.

We create an action plan: If you decide to work together, we’ll make a specific plan with clear steps and realistic timelines.

You get ongoing support: I don’t just file paperwork and disappear. Many trustees provide advice and support throughout your recovery process.

Everything we discuss is completely confidential. My job is to find the best path forward for your specific situation.

How much does it cost to work with a Licensed Insolvency Trustee?

The first consultation is always free. For ongoing services, costs depend on what your business needs. Generally, we bill based on hourly fees. Formal proposals under bankruptcy law have to be approved by the court. More often than not, it is paid from money you would have paid to creditors anyway.

Many business owners are surprised to learn that professional help often costs less than continuing to struggle alone. When we successfully reduce your debt or improve your cash flow, the savings usually far exceed any fees. The fees are even more reasonable when the restructuring Proposal calls for your unsecured creditors to pay the fees for your SME restructuring!

I always explain all costs upfront so there are no surprises. The goal is to help your business become profitable again, not add to your financial burden.

Why is acting quickly so important for GTA businesses?

I can’t stress this enough: the sooner you seek help, the more we can do for your business. Companies that contact me when they first notice problems have many more options than those who wait until they’re facing immediate closure.

Early action can:

Save more jobs for your employees
Preserve better relationships with suppliers and customers
Protect your personal assets like your family home
Reduce stress on you and your family
Dramatically increase your chances of business survival
sme

Final SME Thoughts

Running a SME business in the GTA isn’t easy, but thousands of SME owners successfully navigate financial challenges every year. The key is recognizing problems early and getting professional help when you need it.

As a Licensed Insolvency Trustee with extensive experience helping GTA SME businesses, I’ve seen companies recover from seemingly impossible situations. With the right approach, your business can not only survive current challenges but also emerge stronger and more profitable.

Remember, seeking help isn’t a sign of failure – it’s a smart business decision that can save your company, protect your employees’ jobs, and preserve your investment in your business.

If you’re ready to take the next step, contact a Licensed Insolvency Trustee today. Your business and your peace of mind are worth the phone call.

Free consultation available:

No obligation to proceed
Complete review of your Canadian business debt and credit situation
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both a debt crisis and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

sme

Tags business insolvencies, cash flow, company insolvencies, consumer behaviour, credit lines, financial ratios, financial statements, inaccessibility of finance, insolvency rates by sector, insolvency statistics, insolvency trend, interest rates, labour shortage, macroeconomic variables, small and medium enterprises, sme, smes, trade credit, warning indicators

Brandon Blog Post

ONTARIO ESTATE ADMINISTRATION: WHY ONTARIO ESTATE LAWYERS CHOOSE INDEPENDENT ESTATE TRUSTEES

Post author By Brandon Smith
Post date August 11, 2025

Ontario Estate Administration has become more complex. The recent Stewart Estate case shows why smart estate lawyers choose independent trustees. This protects clients and ensures smooth management of the deceased person’s estate.

Ontario Estate Administration: Role and Responsibilities of an Executor

In Ontario Estate Administration, the person who manages an estate is called an “estate trustee” (formerly called an “executor”). This role comes with important legal duties that many people don’t fully understand when they accept the position.

Gathering and Protecting Assets

The first job of an estate trustee is to find and secure all the deceased person’s property. This includes:

Bank accounts and investments – Contact all financial institutions
Real estate – Secure properties and arrange insurance
Personal belongings – Inventory valuable items like jewelry, art, or collections
Business interests – Identify any company shares or partnerships
Digital assets – Access online accounts, cryptocurrencies, or digital files

Estate trustees must act quickly to protect these assets. Leaving a house empty without insurance or failing to secure bank accounts can lead to losses. If assets are lost due to poor protection, the trustee may be personally responsible for the value.

Applying for Probate

Most estates need a Certificate of Appointment (probate) from the Ontario Superior Court. This legal document proves the trustee has authority to act for the estate.

The probate process involves:

Filing the original will with the court
Completing detailed court forms about the estate’s value
Paying probate fees (1.5% of estate value over $50,000)
Notifying all beneficiaries and potential creditors

Getting probate can be a lengthy exercise, depending on the estate’s complexity and whether it is the extremely busy Toronto court or elsewhere in Ontario. During this time, many assets remain frozen, creating cash flow problems for the estate.

Managing Estate Finances

Estate trustees become responsible for all the deceased person’s financial debts. This includes:

Paying Debts and Bills

Funeral expenses (priority payment)
Outstanding credit card balances
Utility bills and property taxes
Medical expenses and care facility costs

Tax Responsibilities

File the deceased’s final and any other outstanding income tax returns
File estate tax returns if income is earned after death
Pay all income taxes, capital gains taxes, and penalties
Obtain CRA Clearance Certificate before final distributions

Investment Management Estate assets may need professional management, especially if the estate remains open for months or years. Poor investment decisions or leaving money in low-interest accounts can reduce the estate’s value.

Communicating with Beneficiaries

Estate trustees must keep beneficiaries informed throughout the process. This legal duty includes:

Initial notification – Tell beneficiaries about their inheritance within a reasonable time
Regular updates – Provide progress reports on estate administration
Financial reporting – Share detailed accounts of income, expenses, and distributions
Final accounting – Present complete financial records before closing the estate

Poor communication is one of the biggest sources of estate disputes. Beneficiaries who feel left in the dark often become suspicious and may challenge the trustee’s actions in court.

Ontario Estate Administration: Probate Process in Ontario

The probate process in Ontario can be complex and time-consuming. Understanding each step helps estate lawyers advise their clients about potential challenges and when professional trustee services might be needed.

Initiating the Process

The probate process begins when someone dies and leaves a will. The named estate trustee must decide if probate is required. Not all estates need probate, but most do if they include:

Real estate owned solely by the deceased
Bank accounts or investments over $25,000
Assets that require court authority to transfer

Timeline Considerations Estate trustees should start the probate process within weeks of death. Delays can cause problems with:

Asset protection and insurance coverage
Bill payments and property maintenance
Beneficiary expectations and family relationships

Required Documents Before starting, trustees need:

Original will and any codicils
Death certificate (multiple certified copies)
Complete list of estate assets and their values
List of all debts and liabilities

Evaluating Assets

Accurate asset valuation is crucial for probate fees and tax planning. Estate trustees must obtain current market values for all estate property.

Real Estate Valuation

Hire qualified appraisers for property assessments
Consider recent comparable sales in the area
Account for any unique features or conditions
Remember that tax assessments are usually lower than market value

Financial Assets

Get statements showing balances on the date of death
Value investment portfolios at market prices
Include all registered accounts (RRSPs, TFSAs, pensions)
Don’t forget about foreign assets or accounts

Personal Property

Obtain professional appraisals for valuable items
Include vehicles, jewelry, art, and collectibles
Consider both insurance value and fair market value
Document everything with photos and written descriptions

Filing the Application

The probate application goes to the Ontario Superior Court of Justice. This legal process involves several steps and strict requirements.

Court Forms and Fees

Complete Form 74.4 (Application for Certificate of Appointment of Estate Trustee With A Will) or Form 74.20 (Application for Certificate of Appointment of Estate Trustee Without A Will)
Pay probate fees: 1.5% of estate value over $50,000
Submit required affidavits and supporting documents
Provide notice to all beneficiaries and potential creditors

Review Process The court registrar reviews applications for:

Completeness and accuracy of all forms
Proper valuations of estate assets
Valid signatures and witness requirements
Compliance with notice requirements

Processing Time Simple estates typically take 6-8 weeks for probate approval. Complex estates with disputes or missing information can take several months.

Distributing Assets

Once probate is granted, estate trustees can begin distributing assets to beneficiaries. However, this must be done carefully to avoid personal liability.

Payment Priority Debts must be paid in this order:

Funeral and burial expenses
Estate administration costs
Secured debts (mortgages, car loans)
Unsecured debts (credit cards, personal loans)
Gifts to beneficiaries

Timing Considerations

Wait for the creditor claim period to expire (usually 6 months)
Obtain CRA Clearance Certificate before final distributions
Keep sufficient funds for unexpected expenses or claims
Document all payments with detailed records

Distribution Methods Assets can be distributed as:

Cash payments from estate bank accounts
Transfer of specific property items
Sale of assets with proceeds distributed
A combination of cash and property transfers

Handling Taxes and Disputes

Tax obligations and family disputes are two of the biggest challenges estate trustees face. Both can create significant personal liability.

Tax Responsibilities Estate trustees must handle multiple tax filings:

Final tax return for the deceased (due April 30 or 6 months after death)
Estate tax returns for income earned after death
Clearance certificate application to CRA
Provincial tax obligations and filings

Common Tax Pitfalls

Missing filing deadlines (results in penalties and interest)
Incorrect valuation of assets for capital gains
Failing to claim available deductions or credits
Distributing assets before tax clearance

Managing Disputes Family conflicts often arise during estate administration:

Beneficiaries questioning trustee decisions
Disputes over asset valuations or distributions
Challenges to will validity or interpretation
Complaints about communication or transparency

When Disputes Escalate Estate litigation can be expensive and time-consuming. Common issues include:

Beneficiaries seeking trustee removal
Claims for financial compensation from trustee personally
Court applications for direction on will interpretation
Family members blocking estate administration

The Growing Problem: When Ontario Estate Administration Goes Wrong

Being an estate trustee in Ontario carries serious legal and financial risks. Many people don’t realize they can be personally liable for estate debts, tax bills, and administration mistakes. This personal liability can cost trustees thousands of dollars from their own pockets.

The Stewart Estate case, decided by the Ontario Superior Court of Justice and Court of Appeal for Ontario in 2025, perfectly illustrates these risks. What started as a simple will became a 30-year legal nightmare involving:

$462,000 in unexpected tax bills
Family property disputes
Questions about trustee personal liability
Massive legal costs

This case shows why estate lawyers across Ontario are increasingly recommending independent estate trustees for complex files.

The Stewart Estate: A Case Study in Estate Complications

The Original Plan

William Stewart wrote his will in 1989. His plan seemed straightforward:

His wife Edith would receive a life interest in his property
After Edith’s death, two sons would buy the family farms at fixed low prices
One son’s mortgage would be forgiven

What Went Wrong

Life threw curveballs that William couldn’t predict:

The Mortgage Assignment (1994)
The estate transferred Robert’s mortgage to Edith. This simple administrative task later stopped the mortgage forgiveness William had planned.

Unexpected Death (2018)
Robert died before his mother Edith. Since Robert had no children, his wife Lynn inherited his rights to the farm.

Changed Circumstances
Edith lived 24.5 years after William died. During this time:

The Winfield Farm value jumped from $90,000 to $1,120,000
The Robert Farm increased from $50,000 to $617,500
These price increases created a massive capital gains tax bill

The Tax Crisis
When Edith died, the estate faced a $462,000 tax bill. The estate didn’t have enough cash to pay. The farms meant as gifts to family might need to be sold to pay the Canada Revenue Agency (CRA).

Ontario Estate Administration Court Decisions: Key Lessons for Estate Lawyers

Ontario Superior Court Ruling (2025 ONSC 2275)

Gift Timing Matters
The court ruled that Robert’s gifts became legally his when William died, not when Edith died. This decision used the “presumption of early vesting” – a legal principle that gifts usually take effect when the will-maker dies.

Administrative Actions Have Consequences
The mortgage forgiveness failed because the mortgage was assigned to Edith. Once she owned it, William’s estate couldn’t forgive it. This shows how administrative choices can override a will’s original intentions.

Estates Must Pay Debts First
The court gave the estate trustee power to sell the farms at current market value, not the outdated prices in the will. The estate’s debts had priority over specific gifts to beneficiaries.

Personal Liability Remains Unclear
Most importantly for trustees, the court didn’t rule on whether the trustee was personally liable for tax decisions. This uncertainty creates ongoing risk for estate trustees.

Ontario Estate Administration: Court of Appeal Decision (2025 ONCA 575)

The Court of Appeal quickly denied the beneficiaries’ request to stop the farm sales. The court prioritized:

Efficient estate administration
Paying the estate’s debts
Preventing CRA seizure of assets

This decision strongly supports estate trustees who make difficult but necessary decisions to protect estate solvency.

Ontario Estate Administration: The Hidden Risks Estate Trustees Face

Fiduciary Duties

Estate trustees must:

Act in all beneficiaries’ best interests
Avoid conflicts of interest
Manage assets carefully
Keep detailed records
Communicate clearly with beneficiaries

Personal Liability Risks

Trustees can be personally responsible for:

Asset mismanagement – Poor investment or property decisions
Ignoring professional advice – Trying to handle complex issues alone
Premature distributions – Paying beneficiaries before clearing all debts
Tax mistakes – Missing deadlines or making poor tax decisions
Poor communication – Failing to keep beneficiaries informed
Unnecessary litigation – Pursuing costly legal battles

The CRA Clearance Certificate

Before making final distributions, trustees must obtain a Clearance Certificate from the CRA. Without this certificate, trustees remain personally liable for any unpaid estate taxes up to the value of assets they distributed.

High-Risk Situations

Complex assets – Farms, businesses, or valuable real estate requiring specialized management
Significant tax liabilities – Large estates with potential CRA issues
Family conflicts – Beneficiaries already disagreeing or threatening litigation
Outdated wills – Old documents that don’t reflect current circumstances
Reluctant trustees – Named trustees who lack time, capacity, or willingness
Conflict of interest – Trustees who are also major beneficiaries

Benefits of Independent Estate Trustees

Neutrality
Independent trustees have no family relationships or personal interests. They can make difficult decisions without bias or favouritism.

Professional Expertise
Estate trustees understand:

Complex estate laws and tax laws and elections
Asset valuation and management
Legal procedures and deadlines
Negotiation with government agencies

Risk Protection
Professional trustees assume personal liability, protecting your clients from financial risk.

Efficiency
Independent trustees can move estates forward even when beneficiaries disagree or try to delay administration.

Court Preference
Courts often prefer independent trustees in contentious matters, showing your proactive approach to conflict resolution.

Why Estate Lawyers Partner with Smith Estate Trustee Ontario

At Smith Estate Trustee Ontario, we understand the challenges estate lawyers face. Our experience includes:

Many years of handling complex insolvency and estate matters
Licensed by the Office of the Superintendent of Bankruptcy
Extensive experience with high-value and contentious estates
Strong relationships across Ontario
Proven track record in complex tax and asset management situations

Our Approach

We work collaboratively with estate lawyers to:

Assume trustee liability and responsibilities
Handle day-to-day estate administration
Manage beneficiary communications and conflicts
Navigate complex tax situations
Allow lawyers to focus on legal strategy and advice

Results for Your Practice

Partnering with us means:

Protected clients who avoid personal liability
Efficient estate administration even in complex cases
Reduced stress on grieving family members
More time for you to focus on legal work rather than administration
Enhanced reputation for providing comprehensive solutions

Frequently Asked Questions About Independent Estate Trustees and Ontario Estate Administration

What is the difference between an estate trustee and an executor in Ontario Estate Administration?

In Ontario Estate Administration, “estate trustee” is the legal term that replaced “executor” in 1995. They mean the same thing – the person responsible for managing someone’s estate after death. Many people still use “executor,” but the courts and legal documents use “estate trustee.”

Estate lawyers should consider recommending independent trustees when:

The estate has complex assets like businesses or farms
Family members are already fighting or threatening legal action
The named trustee lacks time, skills, or willingness to serve
There are significant tax liabilities or CRA issues
The trustee is also a major beneficiary (creating a conflict of interest)
The estate involves multiple provinces or countries

How much does an independent estate trustee cost?

Professional trustee fees in Ontario typically range from 2.5% to 5% of the estate’s total value. The exact fee depends on:

Estate size and complexity
Time required for administration
Level of family conflict or disputes
Special skills needed (tax planning, business management)
Court involvement or litigation

While this seems expensive, it often saves money by avoiding costly mistakes, family litigation, and personal liability claims.

Can family members remove an independent trustee once appointed?

Removing an estate trustee requires a court application and valid legal grounds, such as:

Breach of fiduciary duty
Conflict of interest
Inability to perform duties
Loss of required qualifications

Simply disagreeing with trustee decisions is not enough. Courts prefer to keep qualified trustees in place rather than create delays and additional costs.

What happens if an estate trustee makes a mistake that costs the estate money?

Estate trustees can be personally liable for losses caused by their mistakes or negligence. Common examples include:

Distributing assets before paying all debts and taxes
Making poor investment decisions without proper advice
Missing important tax deadlines or elections
Failing to properly maintain estate property
Not obtaining required court approvals

Professional trustees carry insurance to protect against these risks, while individual trustees usually don’t.

How long does estate administration typically take in Ontario Estate Administration?

Simple estates with few beneficiaries and no disputes typically take 12-18 months. Complex estates can take several years, especially if they involve:

Business valuations and sales
Real estate in multiple locations
Family litigation or will challenges
Tax disputes with CRA
Foreign assets or beneficiaries

Independent trustees often complete administration faster because they work full-time on estate matters and have experience with complex issues.

What is a CRA Clearance Certificate, and why is it important?

A CRA Certificate of Clearance confirms that an estate has paid all its income taxes. Without this certificate, estate trustees remain personally liable for any unpaid taxes up to the value of assets they distributed to beneficiaries.

Getting clearance typically takes 4-6 months after filing all required tax returns. Many trustees make the mistake of distributing estate assets before receiving clearance, creating personal financial risk.

Can an independent trustee be appointed if the will names someone else?

Yes, courts can appoint independent trustees even when the will names family members. This happens when:

The named trustee declines to serve
The named trustee becomes incapacitated
Conflicts of interest arise
Family disputes make neutral administration necessary
The estate becomes too complex for the named trustee

Estate lawyers can apply to court for trustee replacement or can work with named trustees to bring in professional assistance.

What qualifications should estate lawyers look for in an independent trustee?

Key qualifications include:

Professional licensing (Licensed Insolvency Trustee, lawyer, or accountant)
Specific estate administration experience
Knowledge of Ontario estate administration and recognizing tax issues
Professional liability insurance
Bonding and regulatory oversight
Experience with similar estate types and values
Strong references from other lawyers and clients

How do independent trustees handle beneficiary disputes?

Professional trustees use several strategies to manage conflicts:

Neutral communication
– No family relationships or emotional involvement
Clear documentation
– Detailed records of all decisions and transactions
Regular reporting
– Frequent updates to keep everyone informed
Professional mediation
– Early intervention to resolve disputes
Court applications
– Seeking judicial direction when needed

Their neutrality often helps de-escalate family tensions and allows estates to move forward efficiently.

Ontario Estate Administration Conclusion: Protecting Your Clients and Your Practice

The Stewart Estate case demonstrates that even simple wills can become complex nightmares. Personal liability for estate trustees is real and growing. Smart estate lawyers now recommend independent trustees to protect clients and ensure smooth estate management.

Don’t wait for your clients to face a Stewart Estate situation. Consider recommending Smith Estate Trustee Ontario for your challenging files. We provide the expertise, neutrality, and risk protection your clients need.

Contact Smith Estate Trustee Ontario today. We can support your estate practice and protect your clients from hidden risks in estate administration.

About the Author
Brandon Smith is a Licensed Insolvency Trustee with years of experience handling complex financial and estate matters in Ontario. Smith Estate Trustee Ontario is part of Ira Smith Trustee & Receiver Inc. We provide independent estate trustee services to lawyers and families across Ontario

Contact Information
Smith Estate Trustee Ontario
Part of Ira Smith Trustee & Receiver Inc.

167 Applewood Crescent #6, Concord, ON L4K 4K

P: (647) 799-3312

E: brandon@irasmithinc.com

Brandon Blog Post

BUSINESS DEBT CRISIS OPTIONS COMPLETELY EXPLAINED BY A TORONTO LICENSED INSOLVENCY TRUSTEE

Post author By Brandon Smith
Post date August 4, 2025

debt crisis

The Greater Toronto Area is facing its worst business debt crisis in decades. As a licensed insolvency trustee who has helped many GTA businesses navigate financial challenges, I’m seeing alarming trends that every business owner needs to understand.

The GTA Business Landscape: Canada’s Economic Powerhouse Under Pressure

Toronto is Canada’s business and financial capital. It is the second-largest financial centre in North America. Our diverse economy spans technology, manufacturing, retail, hospitality, and professional services. This diversity usually protects us during downturns, but today’s debt crisis and the need for GTA business debt relief are hitting all sectors.

The IBISWorld Ontario Economic Overview report shows the numbers that tell the story:

Commercial banking generates $117.9 billion in revenue
Retail trade employs 884,368 people in Ontario
Professional services support 562,343 workers
Manufacturing provides 560,630 jobs

Yet despite this economic strength, a June 2025 IPSOS poll found that only 26% of Toronto residents say our economy is in good shape. Most concerning? 41% believe we’re heading in the wrong direction – away from economic prosperity.

How COVID-19 Started Toronto’s Debt Crisis

The Initial Shock That Changed Everything

When COVID-19 hit in March 2020, Toronto’s downtown core emptied overnight. Restaurants, hotels, retail stores, and service businesses saw customers disappear. Some sectors lost 25% of their business immediately.

The Canadian government responded with the Canada Emergency Business Account (CEBA) program. The Government of Canada has reported that over 898,000 Canadian businesses received $49 billion in emergency loans. At the time, this felt like a lifeline.

But here’s what many business owners didn’t realize: CEBA wasn’t free money. It was a loan with a delayed payment schedule.

Permanent Changes That Hurt Businesses

COVID-19 didn’t just create a temporary problem. It permanently changed how people work and shop:

Remote work became permanent – Downtown Toronto office vacancy hit 18.2%
Online shopping exploded – Many customers never returned to physical stores
Business travel disappeared – Hotels and restaurants lost corporate clients
Consumer habits shifted – People became more price-conscious and cautious

Source: The Toronto Metropolitan University June 5, 2025 media release titled “New Economic Report Underscores Urgency to Revitalize Downtown Toronto”.

These weren’t temporary changes. They represent a “new normal” that many businesses still struggle to adapt to.

debt crisis

Current State of the Debt Crisis: The Numbers Are Alarming

The CEBA Cliff Hit Hard

Business failures in Canada jumped by 87.2% in early 2024 – the biggest increase in 37 years. This debt crisis spike happened right after the CEBA loan forgiveness deadlines passed.

Source: The Canadian Association of Insolvency and Restructuring Professionals (CAIRP), July 5, 2024, media release titled: “Q1 2024 Canadian Insolvency Statistics”.

Here in Toronto, CAIRP stated that GTA business insolvency rates climbed from 0.4 per 1,000 businesses in 2021 to 0.7 in 2023. While that sounds small, it represents hundreds of local businesses closing their doors because of the debt crisis.

Source: Canadian Association of Insolvency and Restructuring Professionals (CAIRP) July 5, 2024 media release titled: “Q1 2024 Canadian Insolvency Statistics”

Most Failures Are Permanent Closures

Unlike consumer debt problems, which often involve payment plans, business failures are mostly bankruptcies. This means permanent closure, not restructuring. Business owners are giving up entirely rather than trying to reorganize.

Rising Delinquencies: A Warning Sign of Worse to Come

The debt crisis isn’t just about businesses that have already failed. Over 309,000 Canadian businesses missed at least one credit payment in early 2025 – that’s 11.3% of all businesses with credit.

For GTA businesses, these are some missed payment rates:

Restaurants and hospitality: 16.9%
Retail stores: 13.2%
Overall business loans 60+ days overdue: 3.4%

Ontario leads the country in business payment debt crisis problems, with an 18.8% increase year-over-year.

Why Businesses Can’t Pay Their Bills

Customer spending is down. The average consumer cut credit card spending by $107 per month in early 2025. When your customers have less money, your revenue drops.

Operating costs keep rising. Food costs are up 5.8%, rent up 6.0%, and wages up 4.8%. Profit margins are getting squeezed from both sides.

Household debt is crushing consumers. Canadian consumer debt hit $2.55 trillion. Ontario homeowners saw mortgage payments jump by over $680 monthly after renewal. When families are financially stressed, they stop spending on non-essentials.

CEBA loans are now due. As of January 19, 2024, 161,000 businesses still owed $7.8 billion in CEBA loans. Interest started charging at 5% annually, turning “emergency help” into another monthly payment. Outstanding CEBA loans are due for full repayment on or before December 31, 2026.

New Regulatory Pressures Adding to Business Costs

While the government talks about cutting red tape, Toronto businesses face new municipal-level regulations that add costs:

New Rules Taking Effect

Toronto nightclub licensing changes (January 2025)
Digital platform worker protections (July 2025) – affects delivery and ride-share businesses
New building codes (January 2025) – impacts construction companies
“Renoviction” bylaws (July 2025) – add costs for landlords
Civil litigation procedure changes – increases legal costs

Each regulation may be well-intentioned, but they all add compliance costs when businesses can least afford them.

The Pandemic’s Effects Still Linger

Consumer Behaviour Changed Forever

In our practice, we see businesses still struggling with permanent shifts in customer behaviour:

Customers shop differently now:

More online shopping, less in-store browsing
Greater focus on local businesses
More price-conscious decision-making
Delayed major purchases (cars, appliances, travel)
Higher expectations for health and safety

Businesses must operate differently:

Heavy investment in technology and e-commerce
Flexible work arrangements affect office space needs
Enhanced health and safety measures
More resilient supply chains
Higher service level expectations

The Technology Investment Burden

Every business now needs robust online capabilities. This means ongoing costs for:

E-commerce platforms
Cloud-based systems
Process automation
Cybersecurity
Staff training

For businesses already struggling with a debt crisis, these necessary investments create additional financial pressure.

debt crisis

Economic Pressures: The Double Hit of Recession and Inflation

Inflation Squeezes Profit Margins

Even though headline inflation dropped to 3.8% nationally, key business costs remained high:

Food prices: up 5.8%
Shelter costs: up 6.0%
Overall consumer prices: up 11.4% over two years

Toronto businesses face a cruel math problem: costs rise faster than what customers can pay.

Recession Fears Become Reality

Ontario’s economic growth fell to just 0.8% in 2025, with unemployment rising for eight straight quarters to 7.5%. When unemployment rises, consumer confidence falls, and spending drops further.

The vicious cycle: Higher costs → Higher prices → Fewer customers → Lower revenue → Unable to pay debts

Tightening Credit Markets Make Everything Worse

High interest rates created a credit crunch that hit businesses hard:

Borrowing became expensive: 63% of businesses say high interest rates prevent expansion or investment.

Credit demand dropped: 6% fewer businesses applied for new credit in early 2025. New credit card applications fell 10.3%.

Consumer credit tightened: When customers can’t get credit, they spend even less at your business.

Mortgage renewal shock: Ontario homeowners face mortgage renewal shocks. Payments increase by an average of $680 monthly. This leaves less money for extra spending.

Managing Financial Crises: What Works?

Cash Flow Management Must Be Daily

In this debt crisis, managing cash flow isn’t a monthly task – it’s a daily survival skill.

Track money every day:

Check bank balances each morning
Use a 13-week cash flow forecasting financial model
Know exactly what’s due when
Plan every payment carefully

Speed up money coming in:

Accept all payment methods (cards, e-transfer, mobile)
Offer discounts for quick payment (2% for 10 days)
Call overdue customers personally
Send invoices immediately

Slow down money going out:

Pay critical suppliers first (those who could shut you down)
Use electronic payments to control timing
Negotiate payment plans before you’re in trouble
Consider temporary hour reductions before layoffs

Strategic Payment Prioritization

When cash is tight, not all debts are equal. Here’s the priority order I recommend:

Payroll and source deductions (CRA will shut you down)
Critical suppliers (those who keep you operating)
Rent and utilities (you need a place to operate)
Secured loans (they can seize collateral)
Unsecured loans and credit cards (last priority)

Strategies for Addressing the Debt Crisis

Debt Restructuring Options That Work

Informal arrangements: Sometimes you can negotiate with creditors before formal proceedings. Recent success: a dining establishment reduced its monthly payments from $12,000 to $4,000.

Consumer proposals: If you’ve personally guaranteed business debts, this can reduce personal liability by up to 80%.

Business proposals: For companies, a formal proposal can reduce payments to all creditors simultaneously, thereby eliminating a debt crisis.

Strategic bankruptcy: Sometimes, closing one business cleanly allows you to start fresh without old debts following you.

Asset Management Approaches

Smart asset management can generate cash and reduce the debt crisis:

Sale-leaseback arrangements: Sell equipment or property, then lease it back. This generates immediate cash while keeping operational assets.

Asset liquidation: Sell non-essential assets. That unused equipment or excess inventory can become debt payments.

Intellectual property monetization: You can make money from intellectual property by licensing your processes, customer lists, or trademarks for ongoing income.

Real estate optimization: Consider subleasing unused space, downsizing, or moving to cut overhead costs.

debt crisis

Closing the Funding Gap: Where to Find Money

Government Programs Still Available

Canada Small Business Financing Program:

Up to $1 million in loans
Government backs 85% of lender risk
Better rates than regular business loans
Available through most banks and credit unions

Business Development Bank of Canada (BDC):

Patient capital for struggling businesses
Industry-specific expertise
Flexible repayment terms
Will work with businesses other lenders won’t touch

Ontario-specific programs:

Advanced Manufacturing and Innovation Competitiveness (AMIC)
Canadian Digital Adoption Program (CDAP)
Various regional development funds

Alternative Financing When Banks Say No

Invoice factoring: Sell your accounts receivable for immediate cash (typically 80-90% of invoice value).

Merchant cash advances: Get cash now based on future credit card sales (expensive but fast).

Peer-to-peer lending: Online platforms connect you directly with individual investors.

Revenue-based financing: Repayments are based on monthly revenue rather than fixed payments.

Crowdfunding: Crowdfunding works well for businesses that serve customers directly and have strong stories.

Learning from Denmark: How Copenhagen Handles Debt Better Than North America

Denmark, especially Copenhagen, does things differently – and better in many ways.

As a licensed insolvency trustee, I’ve seen what works and what doesn’t. Denmark’s approach offers real lessons for Canadian businesses struggling with a debt crisis.

How Denmark’s Government Manages Money (And What Businesses Can Learn)

Denmark keeps things simple and clear when managing government debt. Here’s what they do right:

They Have Clear Fiscal Oversight Rules In Denmark everyone knows who’s responsible for what. The Finance Minister makes the big decisions. The Danish National Bank handles the day-to-day money management. No confusion, no finger-pointing.

Everything Is Out in the Open Danish debt management is transparent. They publish their plans, explain their decisions, and stick to clear goals. This builds trust with lenders and keeps borrowing costs low.

They Plan for Problems The Danish National Bank actively watches for risks. They don’t just hope things work out – they prepare for trouble before it happens.

They Focus on Long-Term Costs Instead of looking for quick fixes, Denmark focuses on keeping borrowing costs low over many years. They accept some risk to achieve better long-term results.

How Denmark Helps People With Too Much Debt

Denmark’s consumer debt relief system is much simpler than ours:

One Program, Not Many Unlike Canada, where people might get confused by multiple options, Denmark has one clear debt relief program. Everyone knows how it works.

Pay What You Can, Then You’re Done People pay back what they can afford for five years. After that, the remaining debt disappears. It’s that simple.

This approach reduces stress and gives people a clear path to financial freedom.

What Danish Business Debt Rules Teach Us

Denmark has clear rules for dealing with a business debt crisis:

Clear Collection Process When businesses can’t pay, there’s a step-by-step process everyone understands. No surprises, no unclear rules.

Fair Bankruptcy System If a business truly can’t continue, bankruptcy is available. But there are clear requirements – you can’t just walk away from debts without a good reason.

Some Debts Come First When paying back creditors, certain debts get priority – like employee wages and government fines. This protects workers and ensures fair treatment.

Four Key Lessons for Toronto Businesses

After studying Denmark’s system, here are the most important lessons for GTA businesses:

1. Have Clear Financial Rules Just like Denmark’s government, your business needs clear financial procedures. Know who makes spending decisions. Set borrowing limits. Create rules for paying suppliers.

Whenever we do a financial restructuring under either a BIA Proposal or a CCAA Plan of Arrangement, businesses with clear financial procedures survive crises better than those making it up as they go.

2. Manage Risk Before Problems Start Denmark doesn’t wait for a debt crisis – they plan. Your business should do the same.

Ask yourself:

What could go wrong with my cash flow?
Which customers might stop paying?
What happens if my biggest supplier demands cash only?
How would a recession affect my business?

3. Be Open About Your Financial Situation Denmark’s transparency builds trust and keeps borrowing costs low. The same works for businesses.

Be honest with:

Your bank about cash flow challenges
Suppliers about payment timing
Key customers about any service issues
Your accountant about all financial concerns

I’ve seen businesses get better deals from creditors simply by being upfront about their situation.

4. Think Long-Term Economic Resilience, Not Just Survival Denmark focuses on long-term borrowing costs, not just immediate needs. Businesses should think the same way.

Don’t just ask: “How do I pay this month’s bills?” Instead, ask: “How do I build a business that can handle future challenges?”

This might mean:

Accepting higher costs now for more reliable suppliers
Building cash reserves instead of maximizing current profits
Investing in systems that reduce future risks
Developing multiple revenue streams

Why These Lessons Matter for Canadian Businesses

Denmark’s approach works because it’s predictable and fair. Everyone knows the rules. There are clear consequences for breaking them. People can plan.

Canadian businesses facing debt crisis often struggle because:

Rules seem to change constantly
Different creditors want different things
No one explains the options clearly
Business owners feel lost and alone

Denmark’s system shows there’s a better way.

Applying Danish Lessons in Your Business

You can start using Danish-inspired approaches today:

Create Financial Transparency

Prepare monthly financial reports (even simple ones)
Share appropriate information with key stakeholders
Document your financial decision-making process
Keep clear records of all business debts and payments

Develop Risk Management Habits

Review your biggest financial risks monthly
Create backup plans for your most important suppliers
Maintain relationships with multiple lenders
Build cash reserves when times are good

Establish Clear Procedures

Write down who can authorize spending
Create a priority list for paying bills during tight times
Develop criteria for extending credit to customers
Set clear policies for managing business debt

When Danish-Style Approaches Aren’t Enough

Sometimes, despite good financial management, businesses still face an overwhelming debt crisis. That’s where professional help becomes necessary.

As a licensed insolvency trustee, I help businesses when:

Clear procedures aren’t enough to solve cash flow problems
Risk management didn’t prevent a major crisis
Transparency reveals more problems than solutions
Long-term thinking shows the business isn’t viable

Even then, Danish lessons help. Transparent businesses, planned, and managed risks professionally, have more options when a crisis hits.

The Bottom Line for Toronto Businesses

Denmark proves that simple, clear, fair approaches to debt work well. Their success comes from:

Clear rules everyone understands
Transparency that builds trust
Risk management that prevents problems
Long-term thinking over quick fixes

You can apply these principles whether your business is thriving or struggling. The earlier you start, the better your results will be.

If your business is already in debt crisis, these Danish lessons can still help guide your financial recovery. Combined with professional advice from a licensed insolvency trustee, they provide a roadmap back to financial health.

debt crisis

When to Call a Licensed Insolvency Trustee

Don’t wait until creditors are knocking down your door. The best outcomes happen when business owners seek help early.

Call immediately if:

You’re using credit cards for business expenses
Missing any loan payments
CRA is demanding payment
Suppliers put you on cash-only terms
Considering borrowing against your home
Losing sleep over business finances

What to expect in our first meeting:

Free consultation and options review
Honest assessment of your situation
Clear explanation of all solutions
No pressure to file if other options exist

Your Action Plan: Recovery Is Possible

Toronto’s business debt crisis is serious, but recovery is always possible with the right approach. I’ve guided hundreds of GTA business owners through financial difficulties.

Your immediate next steps:

Face the numbers honestly – create that daily cash flow tracker
Get professional help – talk to a licensed insolvency trustee
Communicate proactively – call creditors before they call you
Focus on cash flow – every decision should consider cash impact
Plan for recovery – what will your business look like post-crisis?

Remember: The longer you wait, the fewer options you have. But even in the worst situations, there’s usually a path forward.

Why Experience Matters in a Debt Crisis

Not all insolvency trustees understand business; some focus only on the consumer market. We specialize in owner-managed business insolvencies, working in the GTA and the wider Ontario market. We know local conditions and have relationships with Toronto-area lawyers, accountants, banks, and others. We know which solutions work for different business types.

Our approach is straightforward: preserve what can be saved, eliminate what can’t, and help you move forward with confidence.

debt crisis

Frequently Asked Questions About Toronto’s Business Debt Crisis

Answers from Ira Smith Trustee & Receiver Inc., Licensed Insolvency Trustee with years of experience helping GTA businesses

What is the current state of Toronto’s business debt crisis?

Toronto is facing its worst business debt crisis in decades. The numbers are shocking, and every business owner needs to understand what’s happening.

Here’s the reality: Business failures in Canada jumped 87.2% in early 2024 – the biggest increase in 37 years. Right here in Toronto, business closures climbed from 0.4 per 1,000 businesses in 2021 to 0.7 in 2023. That represents hundreds of local businesses shutting their doors permanently.

What’s really concerning is that over 309,000 Canadian businesses missed at least one credit payment in early 2025. That’s more than 1 in every 10 businesses struggling to pay their bills. Ontario leads the country in payment problems.

How did COVID-19 contribute to the debt crisis, and what permanent changes did it bring?

COVID-19 didn’t just create a temporary problem – it permanently changed how business works in Toronto. As someone who helped many businesses through the pandemic and since then, we saw this transformation firsthand.

The Initial Shock When lockdowns hit in March 2020, downtown Toronto emptied overnight. Restaurants, hotels, retail stores, and service businesses lost customers immediately. Some sectors saw 25% revenue drops in weeks.

The government launched the CEBA program, giving $49 billion in loans to nearly 900,000 businesses. At the time, this felt like a lifeline. However, many business owners didn’t realize that CEBA wasn’t free money – it was a loan with delayed payments.

Permanent Changes That Hurt Businesses The pandemic created a “new normal” that many businesses still can’t adapt to:

Remote work became permanent – Downtown Toronto office vacancy hit 18.2%
Online shopping exploded – Many customers never returned to physical stores
Business travel disappeared – Hotels and corporate catering lost their biggest clients
Consumer habits shifted – People became more price-conscious and cautious about spending

The Technology Investment Burden Every business now needs strong online capabilities. This means ongoing costs for e-commerce platforms, cloud systems, and staff training. For businesses already struggling with a debt crisis, these necessary investments create additional financial pressure.

In our practice, we see businesses that survived the initial COVID shock but are now failing because of the costs of adapting to these permanent changes.

What are the main reasons businesses are struggling to pay their bills?

After helping many GTA businesses, we see the same problems over and over. It’s not just one issue – multiple factors are hitting businesses at the same time.

Customers Have Less Money Your customers are financially stressed too. Average credit card spending dropped $107 per month in early 2025. When families cut back on spending, your revenue drops immediately.

Consumer debt in Canada hit $2.55 trillion. Ontario homeowners saw mortgage payments jump after renewal. When your customers are struggling with their own bills, they stop spending on non-essentials.

Operating Costs Keep Rising While customer spending drops, your costs keep climbing:

Food costs: up 5.8%
Rent and utilities: up 6.0%
Employee wages: up 4.8%

This creates a profit squeeze from both directions – less revenue coming in, more costs going out.

CEBA Loans Are Now Due This is a big one many business owners forgot about. As of January 2024, 161,000 businesses still owed $7.8 billion in CEBA loans. These loans now charge 5% annual interest. What felt like “emergency help” became another monthly payment.

New Regulations Add Costs Toronto keeps adding new rules that sound good but cost money:

New nightclub licensing requirements
Digital platform worker protections
Updated building codes
“Renoviction” bylaws for landlords

Each regulation adds compliance costs when businesses can least afford them.

How do tightening credit markets and inflation make the debt crisis worse?

High interest rates created a perfect storm that’s crushing Toronto businesses. Let me explain how this works.

Borrowing Became Expensive Our entrepreneurial business clients say high interest rates prevent them from expanding or investing. When you can’t borrow money to grow or even maintain your business, you’re stuck.

The Mortgage Renewal Shock Ontario homeowners face payment increases averaging $680 monthly when their mortgages renew. This leaves families with even less money to spend at local businesses.

The Inflation Squeeze While national inflation dropped to 3.8%, key business costs stayed high:

Food prices: up 5.8%
Shelter costs: up 6.0%
Overall prices: up 11.4% over two years

The Vicious Cycle Here’s how it all connects: Higher costs force businesses to raise prices → Higher prices mean fewer customers → Fewer customers means lower revenue → Lower revenue makes it impossible to pay debts.

Add unemployment rising for eight straight quarters to 7.5%, and you have a situation where businesses face higher costs and fewer customers at the same time.

What cash flow management strategies work for struggling businesses?

Cash flow management isn’t a monthly task anymore – it’s daily survival. Here’s what actually works, based on my experience with hundreds of struggling businesses.

Track Money Every Day Check your bank balance every morning with your coffee. Use a simple 13-week cash flow forecast to know exactly what’s due when. This isn’t busy work – it’s survival.

Speed Up Money Coming In

Accept all payment methods (credit cards, e-transfer, mobile payments)
Offer 2% discounts for payments within 10 days
Call customers with overdue accounts personally
Send invoices the same day you deliver goods or services

Slow Down Money Going Out

Pay critical suppliers first (those who could shut you down)
Use electronic payments to control timing
Negotiate payment plans before you’re in trouble
Consider temporary hour reductions before layoffs

Priority Order for Tight Times When cash is extremely tight, pay in this order:

Payroll and government deductions (CRA will shut you down)
Critical suppliers (those who keep you operating)
Rent and utilities (you need a place to work)
Secured loans (they can seize your assets)
Unsecured loans and credit cards (last priority)

What debt restructuring and financing options actually work for businesses in trouble?

We use every option available to help Toronto area companies conquer GTA busines insolvency. Here’s what actually works in real situations.

Debt Restructuring Options

Informal arrangements – Sometimes I can negotiate directly with creditors. Last month, I reduced a restaurant’s monthly payments from $12,000 to $4,000.
Consumer proposals – If you’ve personally guaranteed business debts, this can reduce your personal liability by up to 80%.
Business proposals – For larger companies, we can propose reduced payments to all creditors at once.
Strategic bankruptcy – Sometimes closing one business cleanly lets you start fresh without old debts following you.

Asset Management That Generates Cash

Sale-leaseback – Sell your equipment or building, then lease it back. This generates immediate cash while keeping what you need to operate.
Asset liquidation – That unused equipment or excess inventory can become debt payments.
Intellectual property licensing – License your processes or customer lists for ongoing revenue.
Real estate optimization – Sublease unused space or downsize to reduce overhead.

Financing When Banks Say No

Canada Small Business Financing Program – Up to $1 million with government backing
Business Development Bank of Canada – They’ll work with businesses other lenders won’t touch
Invoice factoring – Sell your unpaid invoices for immediate cash (usually 80-90% of value)
Revenue-based financing – Repay based on monthly sales rather than fixed payments

What can Toronto businesses learn from how Denmark handles a debt crisis?

After studying international approaches to a business debt crisis, Denmark offers four practical lessons for Toronto companies.

Have Clear Financial Rules Like Denmark’s government, your business needs clear procedures. Know who can authorize spending. Set borrowing limits. Create rules for paying suppliers.

In my experience, businesses with clear financial procedures survive crises better than those making it up as they go.

Manage Risk Before Problems Start Denmark doesn’t wait for a debt crisis – they plan ahead. Ask yourself:

What could go wrong with my cash flow?
Which customers might stop paying?
What happens if my biggest supplier demands cash only?
How would a recession affect my business?

Be Transparent About Your Situation Denmark’s openness builds trust and keeps borrowing costs low. Be honest with your bank about cash flow challenges, suppliers about payment timing, and your accountant about financial concerns.

I’ve seen businesses get better deals from creditors simply by being upfront about their situation.

Think Long-Term, Not Just Survival Don’t just ask “How do I pay this month’s bills?” Instead ask “How do I build a business that can handle future challenges?”

This might mean accepting higher costs now for more reliable suppliers, building cash reserves, or developing multiple revenue streams.

When should I call a licensed insolvency trustee for help?

Don’t wait until creditors are knocking down your door and you are in full debt crisis mode. The best outcomes happen when business owners seek help early, while they still have options.

Call immediately if you’re:

Using credit cards for business expenses
Missing any loan payments
Getting demands from CRA
Being put on cash-only terms by suppliers
Considering borrowing against your home
Losing sleep over business finances

What to expect in our first meeting:

Complete confidentiality (everything is protected by law)
Free consultation with no obligation
Honest assessment of your situation
Clear explanation of all available options
No pressure to file for bankruptcy if other solutions exist

Why timing matters: The earlier you call, the more options you have. I can often help businesses restructure and continue operating. If entrepreneurs are early enough, perhaps informal workouts are a possibility. Otherwise, perhaps Division I Proposals are the answer. But if they wait too long, your only choice might be permanent closure.

In my years as a licensed insolvency trustee, I’ve learned that business owners who seek help early have the best chance of saving their companies. Those who wait until the last minute often have fewer choices.

Remember: Asking for professional help isn’t admitting failure – it’s taking control of your future and finding the best path forward for your specific situation.

Take Action Today

The Toronto business debt crisis won’t solve itself. But with proper guidance, your business can not only survive but also emerge stronger and more resilient.

If you’re struggling with a business debt crisis, don’t suffer in silence. Contact me for a confidential consultation. We’ll review your situation, explore all options, and create a plan that works for your specific circumstances.

Asking for help isn’t admitting failure – it’s taking control of your future.

As someone who has helped many Canadian businesses and business owners, I’ve seen companies survive and thrive even in the toughest times. The businesses that succeed are those that face reality honestly, adapt quickly, and aren’t afraid to ask for help when they need it.

Free consultation available:

No obligation to proceed
Complete review of your Canadian business debt and credit situation
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both a debt crisis and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

debt crisis

Brandon Blog Post

CASH FLOW CRISIS: HOW ONTARIO BUSINESSES CAN MASTER FINANCIAL RECOVERY IN 2025

Post author By Brandon Smith
Post date July 28, 2025

Cash Flow Introduction

Are you an Ontario business owner staying up at night because your cash flow isn’t covering your bills? You have money coming in, but it’s not arriving when you need it most, such as when payroll is due or suppliers are demanding payment. If you’re nodding along, you’re experiencing what thousands of Ontario entrepreneurs face right now: a cash flow crisis that threatens even profitable businesses.

As a Licensed Insolvency Trustee who has guided many Ontario businesses through financial difficulties over the past 20 years, I’ve seen how quickly cash flow problems can destroy a company. But I’ve also witnessed businesses transform their financial management and emerge stronger than ever.

According to information released by Equifax Canada in June 2025 in its Newsroom release titled “Debt Pressure Building Up for Canadian Businesses“, the numbers tell a troubling story: in Q1 2025, over 309,000 Canadian businesses—11.3% of all credit-active businesses—missed at least one payment due to cash flow issues. This represents the highest rate since the 2009 financial crisis. The report also states that in Ontario, businesses in accommodation and food services are experiencing 16.9% payment difficulties, while retail operations face 13.2% payment problems.

Here’s what I want every Ontario business owner to understand: cash flow problems are solvable. With proper knowledge, the right tools, and sometimes professional guidance, you can master your cash flow and build a financially resilient business. This Brandon’s Blog will show you exactly how to do it.

What is Cash Flow?

Definition and Key Concepts

Cash flow is the movement of money into and out of your business over a specific period. Think of it as the financial heartbeat of your company—money flowing in from customers, flowing out to suppliers, employees, and other expenses. Unlike profit, which can include non-cash items like depreciation, cash flow shows you the actual cash available to run your business.

Many Ontario business owners confuse it with profit, but they’re fundamentally different. You can be profitable on paper while having negative cash, or have positive cash while showing an accounting loss. This distinction is crucial for business survival.

Here’s a real example from my practice: A Toronto small business retailer showed $15,000 in monthly profit but had negative cash because customers paid with credit cards (creating a 2-3 day delay) while staff needed to be paid weekly and suppliers demanded COD payment. The timing mismatch created a cash position crisis despite healthy profits.

Importance of Cash Flow

Cash flow is the lifeblood of your business. Without an adequate level, you cannot:

Pay employees on time
Meet supplier obligations
Invest in growth opportunities
Handle unexpected expenses
Maintain business operations

Strong cash flow management provides several key benefits:

Operational stability: Ensures you can meet all obligations as they come due
Growth funding: Provides resources for expansion without external financing
Emergency preparedness: Creates buffers for unexpected challenges
Negotiating power: Gives you leverage with suppliers and customers
Stress reduction: Eliminates the anxiety of wondering if you can pay bills

According to Statistics Canada’s Canadian Survey on Business Conditions, second quarter 2025, Canada’s challenging business environment is such that 65.4% of businesses cite rising costs as their primary concern. Effectively managing this isn’t just important—it’s essential for survival.

Glossary of Common Cash Flow Terms

Understanding cash flow terminology is crucial for effective financial management in business. Here are the key terms every Ontario business owner should know:

A-C

Accounts Payable: Money your business owes to suppliers and vendors for goods or services purchased on credit. Managing payables strategically helps optimize timing.

Accounts Receivable: Money owed to your business by customers for products or services delivered but not yet paid for. Efficient collection of receivables is crucial for a healthy business.

Accrual Accounting: An accounting method where revenues and expenses are recorded when they occur, not when cash changes hands. This creates the difference between profit and cash.

Capital Expenditures (CapEx): Money spent on acquiring or upgrading physical assets like equipment, property, or technology. These investments are subtracted from operating cash flow to calculate free cash flow.

Cash Conversion Cycle: The time it takes for a business to convert its investments in inventory and receivables back into cash. A shorter cycle means better cash flow.

Cash Flow Forecast: A projection of expected cash inflows and outflows over a specific period, typically 13 weeks or 12 months. Essential for planning and avoiding cash shortages.

Cash Flow from Financing Activities: Cash movements related to funding your business, including loan proceeds, repayments, owner investments, and dividend payments.

Cash Flow from Investing Activities: Cash spent on or received from investments in your business’s future, such as equipment purchases, property acquisitions, or asset sales.

Cash Flow from Operating Activities: Cash generated from your core business operations—the most important indicator of business health.

Credit Line: A pre-approved loan amount that businesses can draw upon as needed. Provides flexibility for managing cash fluctuations.

D-H

Days Sales Outstanding (DSO): The average number of days it takes to collect payment from customers. Lower DSO means faster cash collection.

Depreciation: The gradual reduction in an asset’s value over time. It’s a non-cash expense that affects profit but not cash flow.

Direct Method: A cash flow statement preparation method that lists actual cash receipts and payments, providing clear visibility into cash sources and uses.

Free Cash Flow: Operating cash flow minus capital expenditures. Represents cash available for owners, debt repayment, or reinvestment after maintaining current operations.

HST (Harmonized Sales Tax): The 13% combined federal and provincial sales tax in Ontario. Creates significant cash impacts, especially for businesses with longer collection cycles.

I-N

Indirect Method: A cash flow statement preparation method that starts with net income and adjusts for non-cash items and working capital changes.

Insolvency: The inability of a business to pay its debts as they come due. Requires professional intervention to avoid bankruptcy.

Inventory Turnover: How quickly a business sells and replaces its inventory. Higher turnover generally improves cash flow.

Licensed Insolvency Trustee: A federally regulated professional who helps businesses and individuals deal with debt problems and insolvency procedures.

Liquidity: The ability to meet short-term financial obligations. High liquidity means better cash flow management.

Net Cash Flow: The sum of all cash flows (operating + investing + financing), showing the overall change in cash position.

Net Income: Profit after all expenses and taxes. Different from cash flow because it includes non-cash items like depreciation.

O-Z

Operating Cash Flow Margin: Operating cash flow divided by revenue, expressed as a percentage. Healthy businesses typically maintain margins above 10%.

Payroll: Employee wages and benefits—often the largest fixed expense for Ontario businesses and has a critical impact on the cash position of the business.

Seasonal Variations: Predictable changes in business activity throughout the year that affect the seasonal cash patterns.

Trade Credit: Credit extended by suppliers allowing businesses to purchase goods or services and pay later.

Working Capital: Current assets minus current liabilities. Changes in working capital affects the cash position.

13-Week Rolling Forecast: A detailed cash flow projection covering the next 13 weeks, updated weekly. Essential for short-term cash management.

Types of Cash Flow

Understanding the different types helps you identify where your money is coming from and going to. Each type tells a different story about your business’s financial health.

1. Operating Cash Flow

Operating cash flow represents money generated from your core business operating activities—selling products or services. Cash flow from operating activities is the most important type because it shows whether your business model is generating cash.

Positive operating cash flow means your business operations are generating more cash than they consume. This is essential for long-term sustainability.

Negative operating cash flow indicates your operations are consuming more cash than they generate, which is unsustainable without external funding.

2. Investing Cash Flow

Investing cash flow tracks money spent on or received from investing activities in your business’s future. Cash flow from investing activities include:

Equipment purchases
Property acquisitions
Technology investments
Sale of business assets

Negative investing cash flow often indicates healthy growth, as you’re investing in your business’s future. However, these investments must be balanced against your ongoing operating cash flow capacity.

3. Financing cash flow

This shows money moving in and out related to funding your business. The most common cash flow from financing activities is:

Loan proceeds (positive)
Loan repayments (negative)
Owner investments (positive)
Dividend payments (negative)

4. Free cash flow

Free cash flow is operating cash flow minus capital expenditures. It represents the cash available for owners, debt repayment, or reinvestment after maintaining current operations.

Formula: Free Cash Flow = Operating Cash Flow – Capital Expenditures

Free cash flow is crucial because it shows the cash your business generates after investing in maintaining its productive capacity.

5. Net Cash Flow

Net cash flow is the sum of all cash flows (operating + investing + financing). It shows the overall change in your cash position over a period.

Positive net cash flow means your cash position improved. Negative net cash flow means your cash position declined.

Cash Flow Formulas Explained

Understanding how to do the different calculations will give you powerful insights into your business’s financial health.

1. How to Calculate Operating Cash Flow

Direct Method: Operating Cash Flow = Cash Receipts from Customers – Cash Payments to Suppliers and Employees

Indirect Method: Operating Cash Flow = Net Income + Depreciation + Changes in Working Capital

The indirect method is more commonly used because it’s easier to calculate from standard financial statements of the balance sheet, showing the financial position of the business and the income statement, showing the profit or loss for the fiscal period.

2. How to Calculate Free Cash Flow

Basic Formula: Free Cash Flow = Operating Cash Flow – Capital Expenditures

Expanded Formula: Free Cash Flow = Net Income + Depreciation – Changes in Working Capital – Capital Expenditures

Free cash flow is particularly important for business valuation and understanding your company’s ability to generate cash for owners.

3. Calculating Net Cash Flow

Formula: Net Cash Flow = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow

This calculation shows your overall cash position change during a specific period.

Cash Flow Forecasting Techniques

This forecasting predicts future cash positions based on expected receipts and disbursements. Effective forecasting involves:

13-Week Rolling Forecast: Update weekly, showing details of incoming and outgoing cash for the next 13 weeks
Monthly Forecast: Broader view covering 12-18 months
Scenario Planning: Best case, worst case, and most likely scenarios
Key Forecasting Steps:

Estimate sales based on historical data and market conditions
Project collection timing based on customer payment patterns
Schedule known expenses (payroll, rent, loan payments)
Include variable expenses tied to sales levels
Account for seasonal variations
Update regularly with actual results

Cash Flow Statements

Cash flow statements provide a formal record of your business’s cash movements, offering crucial insights into financial health and operational efficiency.

Direct Method

The direct method lists actual cash receipts and payments:

Cash Inflows:

Collections from customers
Interest received
Other operating receipts

Cash Payments:

Payments to suppliers
Employee wages
Interest paid
Tax payments

The direct cash flow statement method provides clear visibility into cash sources and uses, making it easier to identify improvement opportunities.

Indirect Method

The indirect method starts with net income and adjusts for non-cash items:

Starting Point: Net Income
Add Back: Depreciation, amortization, losses on asset sales
Subtract: Gains on asset sales
Adjust for Working Capital Changes: Changes in accounts receivable, inventory, and accounts payable.

Most businesses use the indirect cash flow statement method because it’s easier to prepare from existing financial statements.

Differences Between Cash Flow and Profit

Understanding the difference between cash flow and profit is crucial for business survival:

Profit (Net Income):

Includes non-cash items like depreciation
Uses accrual accounting (revenue recorded when earned, expenses when incurred)
Can be positive while cash flow is negative
Disclosed in the income statement

Cash flow

Shows actual cash movements
Reflects the timing of cash receipts and payments
Can be positive while showing accounting losses
Does not include any accrual accounting items

Real Example: A Mississauga manufacturing company showed $50,000 quarterly profit but had negative $25,000 cash flow because customers took 90 days to pay while suppliers required 30-day payment terms.

Significance of Cash Flow Analysis

Cash flow analysis provides insights that profit analysis alone cannot offer, making it essential for business decision-making.

Insights into Financial Health

Cash flow analysis reveals:

Operational efficiency: How well your business converts sales to cash
Liquidity position: Your ability to meet short-term obligations
Growth sustainability: Whether growth is self-funding or through external financing activities
Debt capacity: How much additional debt your business can support
Dividend capacity: How much cash is available for owner distributions

Identifying Investment Opportunities

Strong cash flow analysis helps identify:

Expansion opportunities: When you have excess cash for growth
Efficiency improvements: Areas where cash flow can be optimized
Asset investments: Timing for equipment or facility upgrades
Market opportunities: When you can invest in new markets or products

Regular cash flow analysis also helps you avoid overextending during good times and prepare for downturns.

Managing Cash Flow

Effective cash flow management requires different strategies for different business types and situations.

Strategies for Individuals

For sole proprietors and individual business owners:

Separate Business and Personal Finances: Maintain separate accounts to track business cash flow accurately
Pay Yourself a Salary: Regular draws help predict cash needs
Build Personal Emergency Fund: Separate from business reserves
Plan for Tax Payments: Set aside money for quarterly tax obligations

Strategies for Businesses

Accelerate Collections:

Invoice immediately upon delivery
Offer early payment discounts
Implement automated collection systems
Require deposits for large orders

Optimize Inventory Management:

Use just-in-time inventory systems
Negotiate consignment arrangements
Liquidate slow-moving stock
Improve inventory turnover

Manage Payables Strategically:

Negotiate extended payment terms with suppliers
Take advantage of early payment discounts when beneficial
Schedule payments to match cash inflows
Maintain good supplier relationships

Cutting Expenses and Cost Management

Fixed Cost Reduction:

Renegotiate rent and lease agreements
Consolidate facilities where possible
Review insurance coverage for potential savings
Eliminate unused services and subscriptions

Variable Cost Optimization:

Negotiate better supplier terms
Improve operational efficiency
Reduce waste and inefficiencies
Implement cost control systems

Real Example: A Toronto wholesaler reduced monthly expenses by renegotiating its premises lease terms and switching to more efficient suppliers.

Optimizing Credit Utilization

Business Credit Lines:

Maintain credit lines for cash flow smoothing
Use credit strategically, not as a crutch
Pay down balances quickly to maintain capacity
Monitor credit utilization ratios

Supplier Credit:

Negotiate payment terms that match your cash flow cycle
Maintain good relationships to preserve credit access
Use trade credit to bridge cash flow gaps
Monitor supplier payment terms for changes

Utilizing Cash Flow Analysis Tools

Modern technology offers powerful tools for cash flow management and analysis.

Cash Flow Software Options

The Business Development Bank of Canada (BDC) has compiled a listing titled Free and low-cost accounting and invoicing software. They identify 15 different software packages that can fulfill all of your accounting and financial management needs, including the preparation of the Statement of Cash Flows.

Key Features to Look For:

Real-time cash position monitoring
Automated forecasting capabilities
Integration with bank accounts
Customizable reporting
Mobile accessibility

Benefits and Limitations

Benefits of Cash Flow Tools:

Automation: Reduces manual work and errors
Real-time visibility: Instant access to cash position
Forecasting accuracy: Better predictions based on historical data
Scenario planning: Ability to model different situations
Integration: Connects with banking and accounting systems

Limitations to Consider:

Cost: Quality tools require investment
Learning curve: Staff training may be required
Data quality: Tools are only as good as the input data
Complexity: Some tools may be overly complex for small businesses

FREE OFFER: We have put together a basic 13-week cash flow projection in Google Sheets format. It can be either transferred to your Google Drive or downloaded in Excel format for your use. If you would like a copy of it, please tell our AI financial coach, Fiona Ledger, that you would like a copy of our 13-week cash flow projection template and also provide your name and email address and it will be sent to you.

Ontario-Specific Cash Flow Challenges

Ontario businesses face unique challenges that require targeted solutions:

HST Management: The 13% HST creates significant cash impacts, especially for businesses with longer collection cycles. Planning for HST payments is crucial.
Seasonal Variations: Many Ontario businesses experience significant seasonal fluctuations, requiring careful cash planning for slow periods.
Supply Chain Costs: Rising transportation and logistics costs affect cash timing and amounts.
Labour Costs: Minimum wage increases and benefit costs impact cash predictability.
Energy Costs: Fluctuating energy prices affect operational cash, especially for manufacturing businesses.

Warning Signs of Cash Flow Problems

Recognizing early warning signs helps prevent cash crises:

Operational Indicators:

Difficulty making payroll consistently
Delayed supplier payments
Increased reliance on credit lines
Declining cash reserves
Frequent overdraft fees

Financial Ratio Warnings:

Operating cash flow margin below 10%
Increasing days sales outstanding
Decreasing days payable outstanding
Declining current ratio
Negative free cash flow trends

Behavioural Changes:

Delaying equipment maintenance
Reducing inventory levels excessively
Cutting essential services
Avoiding growth opportunities due to cash constraints

Professional Help for Cash Flow Problems

Some cash problems require professional intervention beyond what business owners can handle alone.

When to Seek Help:

Consistently negative operating cash flow
Inability to meet payroll or critical payments
Creditor pressure and collection actions
Need for formal debt restructuring
Considering business closure due to cash issues

How A Licensed Insolvency Trustee Can Help:

Cash flow analysis: Comprehensive review of your financial situation
Debt restructuring: Formal proposals to creditors
Creditor negotiations: Professional representation in discussions
Business reorganization: Structured approach to financial recovery
Insolvency procedures: When necessary, formal bankruptcy protection, financial restructuring or liquidation processes

Real Success Story: A Hamilton company with annual cash deficits worked with our team to restructure supplier payments, implement better collection procedures, and negotiate with creditors through a formal financial restructuring process. Within six months, they achieved positive cash balances and avoided bankruptcy.

Building Long-Term Cash Flow Resilience

Surviving immediate cash problems is just the beginning. Building long-term resilience requires systematic changes:

Diversification Strategies:

Multiple revenue streams
Diversified customer base
Various supplier relationships
Multiple financing sources

Operational Improvements:

Efficient processes and systems
Strong financial controls
Regular performance monitoring
Continuous improvement culture

Financial Planning:

Regular cash forecasting
Scenario planning and stress testing
Emergency reserve building
Strategic investment planning

Government Resources and Support

Ontario and federal governments offer various programs to help businesses with cash challenges:

Ontario Programs:

Federal Programs:

Accessing Support:

Contact local economic development offices
Work with business advisors
Consult with accountants and lawyers
Engage with industry associations

Taking Action: Your Cash Flow Recovery Plan

If you’re facing cash challenges, here’s your action plan:

Immediate Steps (Next 7 Days):

Calculate your current cash position
Create a 13-week cash flow forecast
Contact customers with outstanding invoices
Review and postpone non-essential expenses
Communicate with key suppliers about payment timing

Short-Term Actions (Next 30 Days):

Implement automated invoicing systems
Negotiate extended payment terms with suppliers
Explore alternative financing options
Conduct a comprehensive expense audit
Seek professional advice if problems persist

Long-Term Strategy (Next 90 Days):

Develop comprehensive cash management systems
Build emergency cash reserves
Diversify revenue streams
Strengthen customer relationships
Create contingency plans for various scenarios

Frequently Asked Questions About Cash Flow

General Cash Flow Questions

Q: What’s the difference between cash flow and profit?

A: This is the most common confusion I see among Ontario business owners. Profit is an accounting measure that includes non-cash items like depreciation and uses accrual accounting principles. Cash flow shows actual money moving in and out of your business.

Q: How much cash should my business keep on hand?

A: Most Ontario businesses should maintain 3-6 months of operating expenses in cash reserves. However, this depends on your industry, seasonality, and revenue predictability. Seasonal businesses like landscaping or retail may need larger reserves to cover slow periods.

Q: How often should I review my cash flow?

A: I recommend weekly cash flow reviews for most businesses, with daily monitoring during tight periods. Monthly reviews aren’t frequent enough to prevent cash crises. Use a 13-week rolling forecast that you update weekly.

Q: Can a profitable business go bankrupt?

A: Absolutely. I’ve seen many profitable Ontario businesses fail because they couldn’t manage cash flow. If you can’t pay employees or suppliers when payments are due, profitability won’t save you. This is why cash management is more critical than profit management for business survival.

Cash Flow Forecasting

Q: What’s the best forecasting method for small businesses?

A: Start with a 13-week rolling forecast that you update weekly. This provides enough detail for immediate planning while being manageable for small business owners. Include three scenarios: best case, worst case, and most likely.

Q: How accurate should my cash flow forecasts be?

A: Aim for 85-90% accuracy in the first four weeks, 75-80% accuracy for weeks 5-8, and 70% accuracy for weeks 9-13. Perfect accuracy isn’t possible, but consistent forecasting improves your predictions over time.

Q: What happens if my forecast is consistently wrong?

A: Regular forecast errors indicate problems with your assumptions or process. Common issues include unrealistic sales projections, poor understanding of collection timing, or inadequate expense tracking. Review your historical data and adjust your forecasting methods.

Managing Cash Flow Problems

Q: My business has seasonal cash flow problems. What should I do?

A: Seasonal businesses need specialized cash management. Build cash reserves during strong seasons, establish seasonal credit lines, consider factoring receivables, and negotiate favourable payment terms with suppliers during the off-season. Many successful Ontario businesses use these strategies to smooth seasonal fluctuations.

Q: When should I seek professional help for cash flow problems?

A: Don’t wait until you’re missing payroll or facing creditor pressure. Seek help when you notice consistent negative operating cash, increasing reliance on credit lines, or difficulty making routine payments. Early intervention provides more options and better outcomes.

Q: Can I fix cash flow problems without borrowing money?

A: Often, yes. Many cash problems stem from poor collection practices, inefficient inventory management, or suboptimal payment timing. Before borrowing, try accelerating collections, optimizing inventory levels, and negotiating better payment terms with suppliers.

Collection and Payment Management

Q: How can I collect payments faster from customers?

A: Implement several strategies: invoice immediately upon delivery, offer early payment discounts (2/10 net 30), use automated collection systems, require deposits for large orders, and maintain clear payment terms. Consistent follow-up on overdue accounts is crucial.

Q: Should I offer early payment discounts?

A: Early payment discounts can improve cash flow, but calculate the true cost. A 2% discount for payment within 10 days instead of 30 days equals a 36% annual interest rate. Only offer discounts if the improved cash flow justifies the cost.

Q: How should I handle customers who consistently pay late?

A: Implement a progressive collection process: friendly reminders, formal notices, phone calls, and ultimately, collection agencies or legal action. Consider requiring cash on delivery or deposits from chronic late payers.

Financial Management

Q: What’s the most important cash flow metric to track?

A: Operating cash flow is the most critical metric because it shows whether your core business generates cash. If operating cash flow is consistently negative, you have a fundamental business model problem that needs immediate attention.

Q: How do I calculate my cash conversion cycle?

A: Cash Conversion Cycle = Days Sales Outstanding + Days Inventory Outstanding – Days Payable Outstanding. A shorter cycle means faster cash conversion. Most businesses should aim to minimize this cycle.

Q: Should I use debt to solve cash flow problems?

A: Debt can provide temporary relief but shouldn’t be your primary solution. Use debt strategically to bridge temporary gaps or fund growth that will improve cash flow. Don’t use debt to mask fundamental business problems.

Emergency Situations

Q: What should I do if I can’t make payroll?

A: This is a serious situation requiring immediate action. Contact your bank about emergency credit, consider factoring receivables, speak with employees about temporary arrangements, and seek professional help immediately. Don’t ignore the problem—it won’t resolve itself.

Q: When should I consider bankruptcy or insolvency procedures?

A: Consider formal insolvency procedures when you consistently cannot pay debts as they come due, creditors are taking legal action, or you’re facing business closure. A Licensed Insolvency Trustee can help you understand your options, which may include restructuring rather than bankruptcy.

Q: Can a Licensed Insolvency Trustee help before I’m insolvent?

A: Absolutely. Licensed Insolvency Trustees provide advisory services for businesses facing financial difficulties. We can help with cash flow analysis, creditor negotiations, and business restructuring to avoid insolvency. Early intervention often prevents bankruptcy.

Conclusion: Master Your Cash Flow, Secure Your Future

Cash management isn’t just about survival—it’s about creating the financial foundation for business growth and success. The Ontario business environment is challenging, but with proper cash management, your business can not only survive but thrive.

As a Licensed Insolvency Trustee who has helped many Ontario businesses overcome cash challenges, I’ve seen that businesses with committed owners who implement systematic cash management can overcome even severe financial difficulties.

The key is understanding your cash patterns, implementing proven management strategies, and seeking professional help when needed. Your business represents years of hard work and investment—don’t let cash problems destroy what you’ve built.

Remember, cash problems are temporary and solvable with the right approach. The businesses that succeed are those that take decisive action early and implement systematic improvements to their cash management.

If you’re struggling with business cash flow and debt issues, don’t wait for the situation to worsen. The key is to stay informed, act decisively, and seek professional help when needed. Whether you’re looking to grow your business or navigate financial difficulties, having the right support makes all the difference.

Free consultation available:

No obligation to proceed
Complete review of your Canadian business debt and credit situation
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.