Category: Brandon Blog Post

Welcome to our weekly blog on financial matters focusing on debt, debt reduction and alternatives to bankruptcy. Our blog is written by our Senior-Vice President, Brandon Smith, who is a licensed trustee in bankruptcy, hence the title, Brandon’s blog.

Brandon writes on topics of interest for individuals and businesses. We hope that you enjoy Brandon’s blog, visit every week to see the new Brandon’s Blog and spend time on our website learning from the information we provide about bankruptcy, debt consolidation, debt settlement, consumer proposals, restructuring and receivership. We also hope you will spend some time on our website – www.irasmithinc.com, finding out more about our Firm and people.

At Ira Smith Trustee & Receiver Inc., we want to help people for Starting Over, Starting Now, living a debt free life.

Brandon Blog Post

PROOF OF CLAIM FORM 31: ESSENTIAL TIPS TO SUCCESSFULLY COMPLETE THE NEW CANADIAN BANKRUPTCY FORM 31

Post author By Brandon Smith
Post date June 24, 2024

Form 31 Proof of Claim Introduction

The Office of the Superintendent of Bankruptcy (OSB) published several amended Forms under the Bankruptcy and Insolvency Act (Canada) (BIA) to promote a more efficient and effective insolvency system, removing some outdated elements and ensuring better data integrity for all stakeholders. These amended Forms were originally set to come into force on July 15, 2024. One of those new forms is the Form 31 proof of claim. This morning, the OSB announced that the effective date has now been pushed back to September 16, 2024.

In this Brandon’s Blog, given the new proof of claim form coming into use effective July 15, I feel I need to update my October 2018 blog titled: FORM 31 PROOF OF CLAIM: HOW TO PROPERLY COMPLETE THE PROOF OF CLAIM. I will compare the new form to the old one as there are substantial changes and advise on how it should be properly completed as we walk through the new form.

Background Information on Form 31 Proof of Claim

Purpose of Form 31 Proof of Claim

Claims of creditors in bankruptcy or restructuring proposal cases are made on a very specific proof of claim form. The purpose of the form is to furnish information about the claim by the creditor against the debtor. It asks for such things as the contact details of the creditor and permission to represent it if it is a corporate body. Additionally, there are interrogatives on debt aspects like the amount due and supporting papers.

The types of claims section encompasses unsecured claims, lessor claims, secured claims, farm or wage earner claims, plan administrator’s claims, director’s liability claims and client claims against their bankrupt securities dealer.

It also inquires whether or not there has been any relationship between the debtor’s recent transactions with the creditor such as recent payments.

One can obtain information regarding an insolvent person’s financial condition and their application for discharge from bankruptcy. There is a caution at the end of this document concerning penalties for making fake claims or giving false statements. The creditor must sign it himself or through the representative. If an affidavit is attached thereto, then it must be sworn by a person who is authorized by law to administer oaths.

Importance of Properly Completing Form 31

The proper completion of Form 31, Proof of Claim, is crucial in the claims process for creditors with substantiated claims. This form serves as a critical document for creditors looking to assert and potentially recover owed debts. Providing accurate and thorough information on this form is essential for creditors to establish a strong foundation for their claims.

Failure to provide complete or accurate information on Form 31 can lead to delays, rejections, or the disqualification of the claim. Therefore, it is imperative for creditors to closely follow the instructions and guidelines stipulated in Form 31. By doing so, creditors can ensure that their claims are accurately documented and processed efficiently within the specified timelines.

Section 1: Understanding the Basics of Form 31 Proof of Claim

Definition of Provable Claim

Section 2 of the BIA contains the definitions. In that section, a provable claim is defined:

“includes any claim or liability provable in proceedings under this Act by a creditor“

What does this mean? it means that a provable claim refers to a debt or obligation owed by a debtor that can be verified and substantiated through documentary evidence. For a claim to be considered provable, it must meet certain criteria established by the Act, including an amount that can be determined, is due and payable at the time of the bankruptcy or within a reasonable period after that, and not be contingent on some other event or unliquidated.

Difference Between Provable and Unliquidated Claims

An unliquidated claim under the BIA refers to a claim for a specific amount of money that has not yet been determined or quantified. This type of claim typically arises when the exact amount owed to a creditor is uncertain or requires further investigation to establish.

In the context of bankruptcy proceedings, unliquidated claims present a challenge as they may complicate the distribution of assets to creditors. To address this issue, mechanisms for resolving unliquidated claims include negotiations, mediation, a disallowance of the claim by the licensed insolvency trustee (formerly known as a bankruptcy trustee) (the “Trustee”) or court proceedings to determine the appropriate amount owed.

Properly handling unliquidated claims is essential for ensuring fair and efficient bankruptcy proceedings under Canadian law.

Identifying False Claims

Ensuring the validity of claims in Canadian bankruptcy proceedings is a crucial element in safeguarding the integrity of the bankruptcy system. Baseless claims hinder the fair distribution of assets to rightful creditors and undermine confidence in the process. The proliferation of meritless claims can result in delays, increased expenses, and potential financial harm to creditors.

It is essential for Trustees to thoroughly evaluate the authenticity of claims to prevent manipulation and dishonesty. Implementing rigorous verification procedures and penalties for unsubstantiated claims are essential strategies for upholding the fairness and transparency of Canadian bankruptcy proceedings.

Section 2: Required Information for Completing Form 31 Proof of Claim

Completing and returning a Form 31 proof of claim is an important phase in the bankruptcy process. They are one of the documents included with the notice of bankruptcy documents sent out by the Trustee to formally notify the creditors of the bankruptcy.

Personal Details of the Creditor

For proof of claim to be properly completed, the creditor must furnish their contact information, encompassing their mailing address, fax number, and email address. Moreover, the creditor must substantiate their legitimacy as a creditor of the debtor and exhibit a thorough understanding of all pertinent details related to the claim. This takes you from the top of the new Form 31 proof of claim down to numbered paragraph #2.

Details of the Claim

It is incumbent upon the creditor to clearly outline the total sum of the outstanding debt owed by the debtor, in addition to any potential counterclaims, accompanied by relevant documentation or substantiating evidence. The new proof of claim form now requires a creditor to verify that the debt remains within the statutory limitations stipulated by the pertinent provincial laws and regulations. In other words, the claim is not statute-barred.

Those details are covered by paragraphs 3 through 5 of the form.

Priority of the Claim

Paragraph 6 is where, as an unsecured creditor, you need to insert the amount for what you believe to be your claim provable in the actual restructuring proposal to creditors or bankruptcy of the person or company. You must also declare whether you do or do not claim a right to a priority. If you do not, this means that you are an ordinary unsecured creditor.

If you are claiming a right to a priority claim as an unsecured creditor, you are stating that you are entitled to a priority of payment ahead of the ordinary unsecured creditors. The new Form 31 proof of claim requires you to identify what type of priority you are claiming.

The various types of unsecured claims that can have priority over ordinary unsecured claims, which are called preferred claims, are, in order of priority:

For a deceased bankrupt, reasonable funeral and testamentary costs.
The claims for wages by a wage earner employee for unpaid wage claims and certain other amounts treated like remuneration for services rendered during the period beginning on the day that is six months before the date of the initial bankruptcy event or the first day on which there was a receiver. This claim is limited to a maximum payment of $2,000, less any amounts paid for their services by the licensed insolvency trustee.
Any shortfall to a secured creditor as a result of the claim for employees’ priority above.
Any shortfall to a secured creditor as a result of the claim of employees paid out for unpaid amounts regarding prescribed pension plans.
Alimony or support payments payable by the bankrupt person under either a court order or an agreement made before the date of the initial bankruptcy event.
municipal taxes levied against a bankrupt’s real property within the two years immediately preceding the bankruptcy not registered as a lien against the property. This preferred claim cannot exceed the value of the bankrupt’s interest in the property.
A lessor for rent arrears for no more than 3 months before the date of bankruptcy and only if stipulated in the lease, a claim for accelerated rent for no more than an additional 3 months. This claim is limited to the amount realized by the Trustee from the property of the bankrupt on those premises. Further, any payment made by the licensed insolvency trustee for accelerated rent shall be credited against any amount the Trustee may owe the landlord for the Trustee’s occupation of those leased premises.
One bill of costs of a lawyer for a judgment creditor who is the first to have garnished or otherwise executed against the property of the bankrupt, but only to a maximum of the amount obtained by the Trustee from the realization of assets from the sale of such property.
Certain government debts.
Claims from injuries to employees of the bankrupt where workers’ compensation legislation does not apply, but only if there is an insurer or surety guaranteeing damages from injuries and up to the maximum guaranteed.

Section 3: Additional Considerations for Completing Form 31 Proof of Claim

There are also specialized claims that a creditor may qualify for.

A Claim of Lessor For Disclaimer of a Lease

In a corporate restructuring under the Proposal provisions of the BIA, the insolvent company can disclaim or resiliate a commercial lease. The insolvent debtor must be able to show that it cannot successfully restructure if it still has to be responsible for that commercial lease. Upon the disclaiming or resiliation of the commercial lease, the landlord is allowed to calculate its claim using the formula and provisions laid out in the BIA.

Valuing a Secured Claim

Secured creditors have the option, though not a mandatory requirement unless stipulated by the licensed insolvency trustee, to file their claim. This process involves the secured creditor completing the proof of claim form, where they estimate the value of the assets linked to their security. Any outstanding amount owed to the creditor beyond the assets’ value is also specified on the proof of claim, thereby converting it into an unsecured claim.

Secured creditors must exercise caution when determining the value of their secured claim. As per subsection 128(3) of the BIA, a Trustee may opt to redeem a security by reimbursing the secured creditor with the security’s assessed value, as indicated by the secured creditor in the proof of claim. A licensed insolvency trustee would only proceed with redemption if they ascertain that the actual value of the assets surpasses the value assigned by the secured creditor to its security.

Moreover, a Trustee must seek an independent legal opinion on the security documents. That is why a Trustee will always ask for proof of security.

*Claim by Farmer**, Fisherman or Aquaculturist*

Claims of farmers, fishermen, and aquaculturists are granted specific privileges for claims under the BIA legislation. This particular category of creditors is entitled to certain rights. In addition to the standard revindication rights, farmers, fishermen, and aquaculturists have a 30-day window following the initiation of bankruptcy proceedings or the appointment of a receiver to submit their claim for products supplied within 15 days before the bankruptcy event. Once the claim is successfully filed, these creditors are granted a primary lien on all the inventory of the insolvent debtor, excluding any inventory that may be subject to another party’s repossession rights.

Claim by Pension Plan for the unpaid amount

I alluded to claims in respect of an unpaid pension amount above. In 2008 the BIA was amended in reaction to several high-profile corporate restructurings and bankruptcies where there were pension payment amounts deducted from employee wages but not remitted to the pension plan. When the employer went bankrupt, the employees’ pension entitlement was negatively affected (think Sears Canada). Pension entitlement is an important component of the overall employees’ remuneration.

Therefore, Parliament mandated a reform where a super-priority is created for claims for unremitted pension contributions outstanding when an employer becomes bankrupt. The kinds of amounts given this super-priority are pension payments deducted from an employee’s wages but not remitted to the pension plan administrator, amounts owed by the employer for the cost of benefits paid by the pension plan and employer contributions to a defined benefit pension plan. What is excluded from this super-priority is any amount needed to reduce an unfunded pension liability.

Claims Against Directors

This kind of claim comes into play when a BIA corporate restructuring proposal provides for the compromise of claims against directors. The kind of claims against directors that a corporate proposal can compromise must have a very specific set of characteristics:

A claim against directors is being compromised in the corporate Proposal.
Arose before the filing of the Notice of Intention To Make A Proposal or the Proposal itself.
Relate to corporate obligations that are director liabilities by operation of law.

They do not include any corporate liabilities that one or more directors may have personally guaranteed as individuals.

Claim of a Customer of a Bankrupt Securities Firm

The BIA delineates precise protocols for the allocation and distribution of cash and securities within a securities firm customer pool fund. The intricacies of this process are highly technical and exceed the purview of this blog post on completing a Form 31 proof of claim. It is essential to understand that distinct provisions are in place for companies of this nature that have filed for bankruptcy.

Complicated or Contingent Claims

There are a variety of claims that by their very nature, produce complications. Just because a claim might be complicated, it does not mean the proof of claim should not be fully completed and filed with the Trustee. It also does not mean that the licensed insolvency trustee does not have to review it to determine if it is admissible or not.

Examples of complicated claims are unliquidated claims discussed above and contingent claims. In a Canadian insolvency case, a contingent claim is a claim that is not yet due and payable but may become due and payable in the future. Contingent claims are often referred to as “contingent debts” or “contingent liabilities.”

A contingent claim may arise in various situations, such as:

A lawsuit or legal action that has not yet been resolved, but may result in a payment or settlement in the future.
A contract or agreement that provides for payment or performance in the future, but only if certain conditions are met.
A guarantee or indemnity that may become payable in the future if a specific event occurs.

When a contingent claim is filed in a bankruptcy or proposal case, the licensed insolvency trustee must handle it in a specific manner. Here are the key steps:

Initial Review: The Trustee reviews the contingent claim to determine its validity and the likelihood of it becoming due and payable in the future.
Assessment of Likelihood of Payment: The Trustee assesses the likelihood of the contingent claim becoming due and payable, considering factors such as the strength of the underlying legal claim, the likelihood of a settlement or judgment, and the potential for future payments or performance.
Valuation of the Claim: The Trustee values the contingent claim, taking into account the likelihood of payment and the potential amount of the payment.
Inclusion in the Statement of Affairs: The Trustee should include a contingent claim in the sworn Statement of Affairs, which is the document that outlines the insolvent debtor’s assets, liabilities, and financial affairs. The creditor would be listed as a contingent creditor. Because at this stage the Trustee has not received a proof of claim to review, it is wise to list the amount of this contingent debt either as “unknown” or with a value of just $1.
Monitoring and Follow-up: The Trustee monitors the contingent claim and follows up with the creditor to ensure that any future payments or performance are made following the terms of the agreement or contract.
Distribution of Funds: If the contingent claim becomes due and payable in a specific amount and the creditor has filed the proof of claim properly, the Trustee needs to include the valued claim in calculating a distribution to the unsecured creditors.

Creditors are required to furnish the licensed insolvency trustee with all essential documentation and information to substantiate their contingent claim. Subsequently, the Trustee will work with the creditor to ensure the appropriate handling of the claim.

Section 4: Procedural Requirements for Submitting Form 31 Proof of Claim

As a creditor, it’s crucial to understand the procedural requirements for submitting a Form 31 Proof of Claim in a Canadian insolvency case. In this section, we’ll delve into the key issues that creditors should be aware of when submitting their Proof of Claim.

Deadline for Submitting Proof of Claim

The deadline for submitting a proof of claim is a critical aspect of the insolvency process. In Canada, creditors have a specific timeframe to file their proof of claim. Until a creditor files a proof of claim with the Trustee, the creditor cannot participate in the insolvency process. Creditors should ensure they submit their proof of claim well within the deadline to avoid any potential issues.

The First Meeting of Creditors in bankruptcy or the Meeting of Creditors in a restructuring proposal takes place 21 days after the date of filing. If a creditor who has a provable claim wishes to vote at the meeting of creditors, then it is important to have filed the fully completed proof of claim, with all supporting backup documentation, in time for the Trustee to be able to review it.

At the meeting of creditors, it is up to the meeting chair to admit or disallow any claim for voting purposes. In a bankruptcy, the creditors vote on several matters, including the appointment of Inspectors. The Meeting of Inspectors normally immediately follows the meeting of creditors. So if a creditor wishes to nominate an Inspector, it has to have filed its claim to be able to vote. To be able to vote for or against a consumer proposal or corporate restructuring proposal, the proof of claim must be filed.

The only other real deadline to file a proof of claim is before the Trustee is going to make a distribution. A Trustee must send each creditor listed on the Statement of Affairs who has not yet filed a proof of claim notice to file a claim before making a final distribution. That notice will have a deadline in it. If the creditor misses that deadline then they are not entitled to receive any dividend from the insolvency estate.

Properly Filing the Form 31

Properly filing the Form 31 proof of claim is a critical step. Creditors must ensure they complete the form accurately and thoroughly, providing all necessary information, including the amount of the debt, the date the debt was incurred, and any relevant documentation. It’s also essential to sign and date the form, as well as attach any supporting documentation. Creditors should also ensure they file the form with the correct office, as specified in the bankruptcy notice.

*Notice of Intention**To Make A Proposal*

In some cases, the insolvent individual or corporation may file a Notice of Intention To Make A Proposal, which provides creditors with advance notice of the impending restructuring proposal. At the Notice of Intention stage, there is not a specific deadline for submitting a proof of claim. A proof of claim is not sent out at this notice stage. After the Proposal is filed and the Trustee sends out the Proposal package to the known creditors, in that package the proof of claim form 31 is provided. Creditors should carefully review the Proposal package and ensure they submit their proof of claim by the specified deadline.

I was involved some time ago in a corporate restructuring case where a financial institution creditor filed a proof of claim and a voting letter using their form at the notice of intention stage. The form was improperly completed and I warned the creditor that its proof of claim was not being accepted and that they must file a new one, properly and fully completed, after they receive the Proposal package from our Firm.

They ignored my warnings and did not do so. I therefore disallowed their claim which meant their vote did not count. They appealed my decision to the Court. The Court agreed with the Trustee. Not only did their vote not count, but because they lost the appeal, they also had to pay our lawyer’s costs!

Notice of Bankruptcy Process

The bankruptcy notification is a crucial document that provides creditors with essential information about the bankruptcy proceedings, including the timeline for submitting a proof of claim. This notification is distributed by the licensed insolvency trustee managing the bankruptcy process and offers creditors a detailed overview of the procedures involved, including the deadline for submitting proof of claims.

To ensure the accurate and complete submission of the claim form, it is advisable to follow the guidelines outlined below in Section 5. Submitting a Form 31 proof of claim is a critical aspect of the bankruptcy process. Creditors must meet the submission deadline, correctly file the form, and provide all necessary information. Understanding the procedural requirements for submitting a proof of claim helps creditors protect their rights and ensure their interests are properly represented throughout the process.

Section 5: Ensuring Accuracy in Completing Form 31 Proof of Claim – A Step-by-Step Guide to Filing a Proof of Claim

As a creditor, it’s essential to know how to complete Form 31, also known as the Proof of Claim, when dealing with bankruptcy or proposal proceedings. The only way for creditor claims to be registered properly is through the filing of a properly and fully completed proof of claim form.

Let me walk you through the step-by-step process of filling out this crucial document.

Step 1: Gather Required Information

Before starting to fill out Form 31, make sure you have the following information readily available:

The name of the bankrupt individual or corporation
The amount of the debt owed to you
The date the debt was incurred
Any relevant documentation, such as invoices or contracts

Step 2: Complete the Header Information

Begin by filling out the header section of the form, which includes:

The name of the bankrupt individual or corporation
The file number assigned to the bankruptcy proceeding

Step 3: Furnish Creditor Details

In this step, kindly provide the following details as the creditor:

Your full name and mailing address
Your business name and registered address (if applicable)
Your contact information, including phone number and email address

Step 4: Specify the Debt

Specify the debt you’re claiming:

The amount of the debt owed to you
The date the debt was incurred
A brief description of the debt, including any relevant details
Completing whether or not you are a secured, claiming a priority or an ordinary unsecured creditor
Make sure that you include the entire claim

Step 5: Provide Supporting Documentation

Attach any relevant documentation to support your claim, such as:

Invoices or receipts
Contracts or agreements
Bank statements or other financial records

Step 6: Sign and Date the Form

Once you’ve completed the form, including completing the proxy form section if the creditor is a corporation, sign and date it in the designated areas.

Step 7: File the Form

Submit the completed Form 31 to the professional trustee administering the bankruptcy, along with any supporting documentation. You can submit the proof of claim by fax, email, snail mail or delivery. The most important reason of course is that if there is going to be a distribution to the creditors, you want to make sure that you have submitted your claim for dividend purposes.

Additional Tips and Reminders

Ensure to maintain a copy of the completed form for your records.
If you’re unsure about any part of the process, consider consulting with a bankruptcy lawyer or the Trustee handling the bankruptcy case . In case of any uncertainties regarding any aspect of the process, it is advisable to seek advice from a bankruptcy lawyer or the Trustee overseeing the bankruptcy case.
File your claim on time to safeguard your rights as a creditor.

By adhering to these guidelines and furnishing precise information, you will complete Form 31 and safeguard your creditor rights throughout the bankruptcy or restructuring proceedings.

Section 6: Common Mistakes to Avoid when Completing Form 31 Proof of Claim

When engaging in the intricate process of submitting a proof of claim to the Trustee, it is imperative to steer clear of common errors that may result in delays, rejections, or potential dismissal of your claim. This section will outline three crucial errors to avoid when completing Form 31 for the proof of claim.

Providing incomplete or inaccurate information on your proof of claim: This can significantly hinder the processing of your claim or result in its rejection. To mitigate this risk, it is crucial to take the following steps:

- Thoroughly review your claim amount to ensure it aligns with your records.
- Verify the accuracy of creditor information, including names, addresses, and account numbers
- Organize your documents coherently and logically to facilitate efficient processing and evaluation.

By paying close attention to these details, you can enhance the accuracy and efficiency of your claim submission process.

Failure to include supporting documentation: This is a significant oversight that can result in the rejection or delay of your claim. To mitigate this risk, it is imperative to adhere to the following guidelines:

- Attach all pertinent supporting documents, including invoices, receipts, and contracts.
- Ensure that all documents are clear, legible, and easily readable.
- Organize your documents in a clear and logical order

Missed Deadlines for Submission: Be sure to allocate extra time for any unforeseen delays or complications when submitting your proof of claim before the deadline. To minimize last-minute stress, make sure to submit your claim well ahead of the due date. By being proactive and avoiding these typical errors, you can streamline the filing process and increase your chances of a successful outcome. Remember to thoroughly review your details, attach all necessary documentation, and submit your claim with ample time to spare. Finally, missing deadlines for submitting your proof of claim can have severe consequences, including dismissal of your claim.

To ensure a successful filing process, it’s important to avoid these common mistakes. Make sure to thoroughly review your information, attach all necessary supporting documents, and submit your claim with ample time before the deadline.

Section 7: Form 31 Proof of Claim FAQs

In this section, we’ll address some frequently asked questions about completing Form 31 proof of claim.

Q1: What is Form 31 Proof of Claim?

A1: Form 31 Proof of Claim is a prescribed form that creditors use to indicate their claim against a bankrupt estate or in a formal restructuring under the BIA. It is a crucial step in the process, as it allows creditors to assert their rights and receive a portion of the available funds.

Q2: Where can I find Form 31 Proof of Claim?

A2: Form 31 Proof of Claim may be obtained from the office of the Trustee or downloaded from the official website of the Office of the Superintendent of Bankruptcy Canada. Make sure you get the most up-to-date version of the form as the new one goes into effect on July 15, 2024.

Q3: What information should I include in Form 31 Proof of Claim?

A3: When completing Form 31 Proof of Claim, you should provide accurate and detailed information, including your name and address, the debtor’s name, the amount of your claim, and any supporting documentation.

Q4: Are there any specific formatting guidelines for completing Form 31 Proof of Claim?

A4: While there are no strict formatting guidelines, it’s important to ensure that your form is neat, legible, and organized. Use clear and concise language, and avoid any unnecessary details. Attach supporting documents in a logical order and label them appropriately.

Q5: Can I submit multiple claims using Form 31 Proof of Claim?

A5: Yes, you can submit multiple claims using Form 31 Proof of Claim. However, you must separate each claim clearly and provide all the necessary information and supporting documentation for each claim.

Q6: Can I make changes to my submitted Form 31 Proof of Claim?

A6: Once you have submitted your Form 31 Proof of Claim, it depends on the change. If it is something very minor, like your phone number, the Trustee will make that change for you. If it is a major change, like the amount you are claiming, it is recommended that you file an amended claim. Therefore, reviewing your form carefully before submission and ensuring its accuracy is crucial. If you need to make corrections or updates, contact the Trustee’s office immediately.

Remember, completing Form 31 Proof of Claim accurately and on time is essential to assert your rights as a creditor and receive a fair distribution from the estate. By following these tips and guidelines, you can navigate the process successfully.

Conclusion

Completing Form 31 Proof of Claim is crucial for creditors seeking to assert their rights in a bankruptcy case. By avoiding common mistakes, including providing inaccurate information, failing to include supporting documentation, and missing submission deadlines, creditors can enhance their chances of a smooth filing process. Remember to double-check all information, attach relevant supporting documents, and submit your claim on time. By doing so, you can ensure that your claim is properly considered and increase your chances of a successful outcome.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

WHAT HAPPENS TO CREDIT CARD DEBT WHEN YOU DIE? A WIDOW’S HUGE VICTORY

Post author By Brandon Smith
Post date June 17, 2024

what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? Introduction

What happens to credit card debt when you die? Credit card debt can’t follow you to the grave but it does live on. It is paid off from estate assets. But if there are no or insufficient assets in the Estate, what then? The traditional thinking and what the bank’s documents say is, that it becomes the responsibility of a joint account holder. That is certainly the advice we gave in our 2019 Brandon’s Blog titled: CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

Remember that classic hit “I Fought the Law” with the epic line, “I fought the law and the law won”? This tune, penned by Sonny Curtis of the Crickets, got a killer cover by the Bobby Fuller Four, hitting the top ten charts back in 1966. Their rendition even snagged a spot at No. 175 on Rolling Stone’s list of The 500 Greatest Songs of All Time in 2004. And to top it off, the Rock and Roll Hall of Fame dubbed it one of the 500 “Songs that Shaped Rock” that same year. Talk about a rock ‘n’ roll anthem! This Brandon’s Blog is about a widow who fought the law and the widow won!

In a recent legal case at the Supreme Court of British Columbia, the Royal Bank of Canada faced off against Carol Smith (no relation to us) in a debt dispute over a Royal Bank Visa credit card balance. The case delves into intricate details, including the primary issue of Mrs. Smith’s liability for the debt accumulated on the credit card. Let’s dissect the facts, arguments, and final judgment in this high-stakes legal showdown.

What Happens to Credit Card Debt When You Die? Credit Card Debt and Death

How Credit Card Debt Is Handled After Death

Two weeks ago, I wrote the Brandon’s Blog: HOW TO PAY OFF CREDIT CARD : CANADIANS NAVIGATING TO HUGE CREDIT CARD DEBT CRISIS. That blog dealt with issues facing credit card holders when they are alive and their unpaid debt, not about a deceased person.

When someone passes away with outstanding credit card debt, the responsibility for repayment typically falls to the deceased’s estate. The Estate Trustee is responsible for notifying creditors of the death, as well as determining the total amount of debt owed and using the assets of the estate to settle the debts.

If the deceased’s estate is unable to cover the full amount of debt, or even before the bank makes that determination, it will make a demand on any joint account holder or supplementary credit card holder. Individuals need to plan and consider the impact of their credit card debt on their estate to ensure a smooth and orderly resolution of their financial affairs after their passing.

Impact of Credit Card Debt on the Estate

Credit card debt can have a substantial effect on an individual’s estate. Creditors possess the legal entitlement to assert claims against the estate to have their outstanding debts paid from its assets. The Estate Trustee is required to adhere to a specific protocol ensuring all estate debts are properly identified, resulting in a delay before beneficiaries can anticipate receiving their allocated shares from the estate. Settlement of estate debts consequently diminishes the total amount distributed to each beneficiary.

If estate debts exceed the value of the estate, the Estate Trustee is well advised to put the estate into bankruptcy and allow whatever assets there are to pay for the bankruptcy process. This will protect the Estate Trustee given his or her liability taken on by being the Estate Trustee. It will also allow the estate assets to be administered according to the law by a licensed insolvency trustee to treat all creditors fairly.

What Happens to Credit Card Debt When You Die? Dealing with Credit Card Debt After Death

Checking for Life Insurance Coverage

The appointed Estate Trustee is advised to promptly inform creditors of the deceased person’s passing and explore any potential insurance coverage that may apply. It is recommended to engage the services of a financial advisor or legal expert to effectively navigate the intricacies involved in settling credit card debt post-mortem. By conducting a comprehensive review of insurance policies and seeking professional assistance, individuals can adeptly handle and resolve any outstanding debt obligations left by the deceased individual.

It is important to first check if the deceased had any insurance coverage that may help cover outstanding debts. This includes checking for credit card balance insurance, mortgage insurance, or any other relevant life insurance policy that may provide coverage. It is advisable to contact the relevant credit card companies, the bank that holds the mortgage and any insurance providers to whom the deceased’s records show payments were made.

Selling Assets to Pay Off Debt

The obvious option in dealing with the debts of the estate when there are sufficient assets, is selling enough of them to pay off the debt. This process involves identifying any valuable assets left behind by the deceased, such as real estate, vehicles, or investments, and liquidating them to generate funds to settle the outstanding debts.

It is essential to collaborate closely with qualified professionals to ensure the legal and ethical execution of this process. By liquidating assets to settle credit card debt and other secured debt or unsecured debt posthumously, one can effectively manage the financial matters of the deceased and facilitate the distribution of remaining assets per the decedent’s directives.

Things become more involved if the deceased wishes specific assets to go to certain beneficiaries, rather than just the cash generated from the sale of all the assets.

The above information is standard for any Estate Trustee to follow, including when we act as an Estate Trustee. But what is the credit card issuer’s position if there is a joint credit card holder? That is what the case of Royal Bank of Canada v. Smith, 2024 BCSC 963 from the Supreme Court of British Columbia is all about.

What Happens to Credit Card Debt When You Die? Introduction to the Case

Let’s dive into the intriguing case between the Royal Bank of Canada (RBC) and a widow, Carol Smith. This legal battle has caught my attention not so much due to the complexities surrounding the debt dispute, but because of the parties involved. Let me walk you through the overview, disputes, and RBC’s application for summary judgment in this case.

Parties Involved

Firstly, we have RBC, the largest financial institution in Canada with a wide reach and unlimited resources. On the other side, we have the widow Carol Smith, the defendant in this case. The contrast between a gargantuan bank and an individual defendant adds an interesting dynamic to this legal conflict.

Debt Dispute and Amount

The crux of the matter lies in a debt dispute over a substantial amount. RBC claimed that Carol Smith owes a total of $51,764.09, including the principal amount and accrued interest on a credit card debt. This significant sum raises questions about the circumstances leading to this debt and the responsibilities of the parties involved.

The bank said the defendant applied for the credit card on February 14, 2001. The deceased Mr. Smith incurred the vast majority of charges on the credit card, and Mrs. Smith made her first charge on June 1, 2015. Over time, the credit limit on the credit card increased, and as of August 25, 2016, the credit limit was $24,000.

The Smiths paid off their monthly credit card balance in full for the first few years, but in late 2016 the balance slowly began to rise. By late 2017 the balance was over the credit limit, and in January 2018 the credit limit was increased to $28,000. Page 7 The last new charges on the card were made in May 2018, and the last automatic payment was made on October 19, 2018.

Purpose of Plaintiff’s Application

The RBC as plaintiff filed for summary judgment under Rule 9-7 of the Supreme Court Civil Rules. This application seeks a swift resolution to the dispute, considering the substantial sum at stake and the nature of the issues involved.

Carol Smith acknowledged the suitability of a summary trial, paving the way for a focused legal process to determine the outcome. Her position was that she rarely used her RBC Visa Credit Card, but when she did, she believed she was an authorized user on her husband’s credit card and he was solely responsible for all balances.

Obviously, like every other court case, it comes down to the evidence.

What Happens to Credit Card Debt When You Die? Facts and Evidence Presented

As I delve into the details presented before the court, which involved the Royal Bank of Canada and the defendant, Carol Smith, a clear picture emerges regarding the credit card dispute at hand. The key elements of the case are:

Details of the primary cardholder and the credit card application: The primary cardholder of the credit card in question was Mrs. Smith’s late husband, Alfred Smith. Upon his passing, the focus shifted to determining Mrs. Smith’s liability for the debt accumulated on the card.
Analysis of the Cardholder Agreement terms and obligations: A meticulous review of the Cardholder’s Agreement terms revealed the responsibilities associated with being a co-applicant or an authorized user. The bank relied upon what it stated were the standard definitions and clauses within the credit card agreement.
Examination of the evidence presented by both parties: The court meticulously examined the evidence put forth by both the plaintiff and the defendant. This included witness testimonies, documentation, and arguments presented to ascertain the facts surrounding the case.

From the application process to the complexities of the Cardholder’s Agreement, each element was meticulously scrutinized to determine the liability of the defendant in the outstanding debt matter. Evaluating evidence and legal arguments provided a comprehensive view of the case, offering insights into the intricacies of credit card disputes and contractual obligations.

What Happens to Credit Card Debt When You Die? Legal Analysis and Arguments

The courtroom environment, characterized by its atmosphere of anticipation and adherence to procedural rules, provides a structured platform for a thorough analysis and scrutiny of the pertinent facts in question.

Evaluation of Mrs. Smith’s Liability and Contractual Obligations

The crux of the matter lies in determining whether Mrs. Smith, as the widow of the primary cardholder, is indeed liable for the substantial debt accumulated on the credit card. The legal framework, as outlined in the Cardholder’s Agreement, forms the basis for defining the extent of her obligations.

The Bank contended that Mrs. Smith, by accepting and using the credit card, implicitly agreed to be bound by the terms and conditions outlined in the Cardholder’s Agreement. However, Mrs. Smith vehemently denies ever applying for the credit card or consenting to its terms, raising crucial questions regarding the validity of her liability.

Comparison with Similar Cases and Legal Precedents

In legal matters as complex as this, precedent plays a significant role in shaping the outcome. Drawing parallels with previous cases, such as Royal Bank of Canada v. Klassen, 2013 BCSC 631 (CanLII), sheds light on the importance of clarity in determining co-applicant status and consent to credit limit increases.

Through a comparative analysis of these cases, it becomes evident that the burden lies on the bank to substantiate Mrs. Smith’s status as a co-applicant and prove explicit consent to credit limit enhancements. Failure to meet this burden could sway the decision in favour of the defendant.

The interpretation of the Cardholder’s Agreement, particularly concerning credit limits and consent to increases, emerges as a focal point in the legal discourse. The agreement’s language regarding express consent to credit limit enhancements becomes a pivotal factor in determining liability.

As I navigate through the nuances of contractual interpretation, the obligation to review monthly statements and identify errors within a specified timeframe adds a layer of complexity to the case. Mrs. Smith’s adamant denial of ever applying for the credit card underscores the need for concrete evidence to establish her contractual obligations.

In the intricate web of legal analysis and arguments, every detail matters. The meticulous examination of Mrs. Smith’s liability, comparison with legal precedents, and interpretation of the Cardholder’s Agreement paint a vivid picture of the intricate tapestry of the legal system.

What Happens to Credit Card Debt When You Die? Comparison with Previous Cases

As I delve into the details of the current case at hand, I can’t help but draw parallels to a significant legal precedent – the Royal Bank of Canada v. Klassen case. This previous case holds valuable insights and implications that can greatly impact the current judgment.

RBC claimed that its normal practice in the credit card application process was to send a copy of the Cardholder’s Agreement to the cardholders together with the credit cards. RBC further stated that Mrs. Smith breached her agreement with it and that Mr. and Mrs. Smith are jointly and severally liable for the amount owing.

Mrs. Smith denies being a co-applicant and submits that she never expressly consented to any increases to the credit limit. Mrs. Smith denies ever applying for a Bank credit card and further denies ever agreeing to the terms of the Cardholder’s Agreement. If she were a co-applicant, Mrs. Smith or Mr. Smith would need to have given express consent to the credit limit increases.

Reference to the Royal Bank of Canada v. Klassen Case and Its Implications

Looking back at the Royal Bank of Canada v. Klassen case, it becomes evident that there are striking similarities in the issues raised. In that case, the Bank sought judgment against Mr. Klassen for a credit card issued to Ms. Faa. Mr. Klassen’s defence rested on the premise that he was only an additional user on Ms. Faa’s account, not a co-applicant.

The Court’s ruling in the Klassen case highlighted the importance of clear documentation and evidence. As Mr. Klassen denied signing the Co-Applicant Form, the Bank’s failure to produce this crucial document cast doubt on the entire case. The Court ultimately sided with Mr. Klassen due to the lack of concrete evidence supporting the Bank’s claims.

Analysis of the Similarities and Differences in the Two Cases

Now, shifting the focus to the current case, the Court grappled with similar contentious points. Just like in the Klassen case, the issue of co-applicant status and liability comes to the forefront. The bank’s assertions regarding Carol Smith’s involvement with the credit card and the associated liabilities raise key questions that need to be addressed.

One notable similarity between the two cases lies in the burden of proof placed on the bank. In both instances, RBC is tasked with substantiating the claims against the defendants. However, the nuances in each case, particularly regarding the application process and consent to terms, present distinct differences that warrant careful examination.

what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? The Final Judgment

Reflecting on the case of Royal Bank of Canada v. Smith, it is essential to delve into the intricate details that led to the final judgment and conclusion, which holds immense significance for all parties involved.

Summary of the Court’s Decision and Reasoning

Having closely examined the evidence presented before the court, it became evident that RBC sought a substantial sum from Mrs. Smith, following the debt accumulated on a credit card. However, after a thorough analysis, it was concluded that the bank failed to produce the actual documentation to establish Mrs. Smith’s liability for the outstanding balance and accrued interest on the card. The court meticulously considered the Cardholder’s Agreement terms, the lack of concrete evidence, and the nuances of Mrs. Smith’s involvement in the credit card application.

Implications of the Judgment on the Parties Involved

The judgment in this case carries profound implications for both the Royal Bank of Canada and Mrs. Smith. It underscores the importance of clear documentation, individual liabilities, and the burden of proof in financial disputes. The Bank’s evidence was what the normal practice of the bank is and what the Cardholder’s Agreement says. However, there was one big problem. RBC was unable to provide a cogent explanation for the Bank’s failure to produce the actual application for Mrs. Smith’s credit card.

For the bank, it serves as a reminder of the necessity to adequately substantiate claims and prove liabilities. On the other hand, for Mrs. Smith, it signifies a just outcome that vindicates her in the face of financial allegations.

What Happens to Credit Card Debt When You Die FAQs

The answers below of course must be considered with the above case in mind.

What happens to credit card debt after death in Canada?

The treatment of credit card debt upon death remains consistent in Canada. It is typically settled using funds from the deceased individual’s estate. In cases where a co-signer is present on the credit card account, they may assume responsibility for the full amount owed.

What happens to debt if someone dies with no estate?

In the circumstance where an individual passes away with outstanding debts and lacks sufficient assets to settle them, typically, those debts will remain unpaid. An exception to this would be if the deceased had jointly signed for the debt with another party, in which case the co-signer would assume responsibility for repayment of the remaining balance.

Do not pay back a creditor if it’s not a requirement. Is this true for credit card debt after death?

Creditors have the legal right to pursue the assets of the deceased individual’s estate to settle outstanding credit card debts post-mortem. It is important to note that the obligation to settle these debts generally does not extend to other family members unless they have specifically co-signed on the credit account in question.

Can credit card debt be transferred to another party after death?

Credit card debt is not transferable to another party unless that party was a co-signer on the account or as part of a joint account. Following the passing of the account holder, the responsibility for settling the credit card debt lies with the deceased’s estate, which must address this obligation before distributing assets to beneficiaries.
what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die Conclusion

One of the pivotal takeaways from this case is the significance of contractual obligations and the need for explicit consent in financial agreements. More importantly, it shows the need to be able to produce the actual documents you are relying upon. It underscores the critical role of evidence and clarity in establishing liabilities. Additionally, it highlights the importance of due diligence in legal proceedings and the weight of proof in matters of debt and financial responsibility.

I hope you enjoyed this what happens to credit card debt when you die Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

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Brandon Blog Post

REAL ESTATE RECEIVER NAVIGATES REAL ESTATE INSOLVENCY: A COMPREHENSIVE GUIDE

Post author By Brandon Smith
Post date June 10, 2024

real estate receiver

Real Estate Receiver Introduction to Real Estate Insolvency

Commercial real estate markets are constantly evolving, and with the recent upswing in defaulted real estate loans on commercial properties, lenders and borrowers are facing unprecedented challenges. I have observed the current market conditions from our ongoing real estate receiver files with keen interest. The landscape is evolving, presenting both challenges and opportunities for developers, lenders and real estate investors alike.

In this Brandon’s Blog post, from my perspective as a real estate receiver, I delve into the intricacies of the growing sector of real estate insolvency, offering (hopefully) valuable insights for both owners and lenders. This includes the challenges faced by developers, the growing demand for remedies in distressed properties, and the overall market dynamics. Join me as I explore the remedies available to navigate through these turbulent times.

Real Estate Receiver Overview of the Current Market Conditions

The real estate sector is currently navigating through dynamic market conditions that have been shaped by various factors. The recent upswing in defaulted commercial real estate loans serves as a signal of a continued downward trend in the market cycle. Developers, especially those with ongoing residential condominium projects, find themselves particularly vulnerable to unexpected upheavals.

Challenges Faced by Developers with In-Progress Projects

Developers face challenges during the construction phase. Delays, spiking costs, and inflation in construction expenses have eroded profit margins, leading to financial strains on developers.

Developers of residential real estate typically need to presell a significant portion of units to secure financing.
Construction cost inflation and pandemic-related disruptions have further complicated project economics.
Delays in construction schedules have been a common occurrence.

Developers in the real estate market are struggling with unprecedented challenges, with many facing insolvency issues. Adapting to changing market conditions and mitigating financial risks has become paramount. Legal experts note a growing demand for remedies across all types of distressed properties, highlighting the urgency in finding solutions to support developers and real estate investors.

Developers must navigate these challenges effectively by exploring various options such as mezzanine lending, private lending, and workout agreements. The evolving market dynamics require a proactive approach to address financial distress and ensure the successful completion of projects.

Growing Demand for Remedies in Distressed Properties

The growing demand for remedies in distressed properties underscores the need for collaborative efforts between lenders and borrowers to resolve defaults. Workout agreements and restructuring of loans offer potential solutions to mitigate financial risks and stabilize projects facing insolvency.

“It’s essential to establish trust and cooperation between borrowers and lenders to navigate through financial challenges effectively.”

Partnerships such as the conversion of mezzanine loans into equity demonstrate innovative approaches to address insolvency issues and support project completion. By exploring alternative solutions, stakeholders in the real estate sector can work towards sustainable outcomes and mitigate potential losses.

Real Estate Receivership: Challenges in Residential Condominium Economics

In my role as a real estate receiver, I am intrigued by the complexities of residential condominium project economics, particularly in the face of obstacles such as construction delays and escalating costs. These variables can substantially affect the financial viability of such projects, necessitating developers to implement targeted risk mitigation strategies.

Impact of Construction Delays and Cost Inflation

One of the most critical aspects affecting condo projects is the occurrence of construction delays and cost inflation. During the construction phase, when financing is fixed, any delays can lead to financial strain as developers cannot generate income until the project’s completion. Typically, developers aim to presell a significant percentage of units to secure financing. However, the recent spike in construction costs, coupled with delays, has eroded profit margins.

Statistics Canada reported substantial inflation in construction costs.
Delays in project timelines can lead to increased expenses and reduced profitability.
Preselling units becomes challenging when costs cannot be accurately predicted.

Strategies for Developers to Mitigate Financial Risks

Developers facing these challenges must consider various strategies to safeguard their investments and navigate through uncertain economic conditions. Some effective risk mitigation strategies include:

Diversifying funding sources to reduce dependency on a single financing option.
Implementing robust project management techniques to minimize delays and cost overruns.
Engaging in transparent communication with stakeholders to manage expectations effectively.
Conversion of mezzanine loans into equity.

Real Estate Receiver: Power of Sale vs. Foreclosure Process

When it comes to handling defaulting real estate loans, there are various legal mechanisms available to lenders and borrowers to manage real property insolvency situations effectively without the need for a real estate receiver. In this section, I will compare the processes of power of sale and foreclosure, explore key scenarios where each approach may be beneficial, and discuss the legal considerations that both lenders and borrowers need to take into account.

Comparison of Power of Sale and *Foreclosure Proces**ses*

Both power of sale and foreclosure are methods that lenders can use to recover funds from defaulted borrowers. The key difference between the two lies in the execution and outcome of the process.

Power of Sale: This approach allows lenders to sell the property without involving court proceedings. It is authorized under Ontario’s Mortgages Act and is generally faster and less costly compared to foreclosure. Lenders have the right to sell the property to recoup the outstanding debt, with any surplus earnings returned to the borrower and any shortfall being the responsibility of both the borrower and any guarantors of the borrower’s mortgage financing.
Foreclosure: In a foreclosure action, lenders take ownership of the property in exchange for the debt owed. This process involves court proceedings, starting with a statement of claim issued by the creditor. Foreclosure can be challenged by the borrower, and in some cases, the court may convert it to a judicial sale, allowing other parties to benefit from any potential surplus proceeds.

Key Scenarios for Each Approach

The choice between the power of sale and foreclosure may depend on the specific circumstances of the defaulting loan and the goals of the lender or borrower.

Power of Sale: This method is often preferred when quick action is required to recover funds. It is suitable for situations where the market value of the property is likely to cover the debt, and lenders want a faster resolution.
Foreclosure: Foreclosure may be more appropriate when the debt exceeds the property value, or when disputes regarding the validity of a sale are likely. Turning foreclosures into judicial sales provides added oversight and protection for borrowers, allowing for a fair distribution of proceeds.

Legal Considerations for Lenders and Borrowers

Both lenders and borrowers need to navigate various legal requirements and considerations when dealing with the power of sale and foreclosure processes.

Lender Responsibilities: Lenders must adhere to statutory and contractual obligations, including providing notification to borrowers and ensuring fair market value in property sales. They have the right to pursue borrowers for any remaining debt after the property sale.
Debtor Rights: In cases of insolvency, borrowers have the right to contest the sale and request evidence of its legitimacy. They may insist that lenders provide proof that the sale price accurately reflects the property’s true market value, supported by appraisals and appropriate marketing efforts.

The decision between utilizing the power of sale and pursuing foreclosure should be based on the specific circumstances of the defaulted loan, the characteristics and interests of all involved parties, and the desired outcomes for both lenders and borrowers. A comprehensive understanding of the variances and consequences associated with each approach is essential for effectively navigating insolvency scenarios within the real estate sector.

Real Estate Receiver: Workout – The Collaborative Solution

As a real estate receiver, I believe it’s crucial to understand the various mechanisms available to address mortgage defaults and insolvency in addition to a real estate receivership enforcement action in dealing with real estate assets. One such approach that has traction in the right circumstances in dealing with a real estate distressed asset is the concept of workouts as a collaborative solution to resolving defaults. Let’s delve into the key components of a workout plan and forbearance agreements.

Exploring the Concept of Workouts as a Collaborative Approach

When creditors and debtors face insolvency or defaults, engaging in a workout plan can offer a mutually beneficial solution. Unlike traditional enforcement measures like foreclosure or power of sale, workouts emphasize collaboration and finding a middle ground that works for both parties. This approach is based on trust, cooperation, and a shared goal of resolving financial difficulties.

Key Components of a Workout Plan and Forbearance Agreements

A workout plan typically involves amending the original loan agreement or creating a forbearance agreement to outline the terms and conditions for resolving the default. It requires a thorough assessment of the situation, a solid plan to address the financial issues, and a commitment to openness and transparency between the borrower and lender. By setting clear objectives and timelines, both parties can work towards a viable solution that avoids costly legal proceedings.

*Real Estate Receiver**: A Detailed Overview of a* *Real Estate Receiver**ship*

When comparing receivership with judicial sales and foreclosure processes, it becomes apparent that each approach has its unique advantages and challenges. Receivership, often court-appointed, involves a licensed insolvency trustee acting as the receiver overseeing the property’s recovery and sale to recoup funds owed. While more time-consuming and costly than the power of sale or foreclosure, court-appointed receivership offers a structured way to handle complex real estate insolvencies. Due to the complexity, a real estate receiver requires extensive powers from the court.

Challenges and benefits arise for both lenders and borrowers in the realm of receivership. Lenders may face the risk of insufficient property sale proceeds, prompting the pursuit of borrowers for remaining loan amounts. On the flip side, borrowers have the legal right to challenge the validity of a power sale and must ensure the property’s sale price reflects its market value to protect their interests.

Receivership serves as a court-supervised controlled process that aims to maximize gross sales proceeds and prioritize creditors’ claims transparently and efficiently. By applying to the court to appoint a receiver to handle property recovery and distribution, the complexities of insolvency can be managed effectively, safeguarding the interests of all stakeholders involved.

What is a receivership and how does it function in Canada’s legal framework?

Within the legal landscape of Canada encompassing matters of commercial contention, there is the intricate notion of receivership. This process entails the designation of one of the two types of receivers; either a privately-appointed receiver or a court-appointed receiver. A receiver is vested with the authority to assume dominion over a business’s array of assets and properties. This authority arises from situations of monetary default on their secured loans.

It is prudent to retain awareness that the role of a receiver can only be filled by a licensed trustee for assuming the mantle of a receiver within the confines of Canada’s legal expanse.

The fulcrum upon which the inception of the receivership mechanism pivots is usually the inability of secured creditors to recoup their financial outlay from a debtor, who in turn is incapacitated in discharging its pecuniary obligations.

The receiver becomes vested with the possession and control of the assets, affects their liquidation, and subsequently allocates the ensuing sale proceeds among the cadre of creditors within the hierarchy delineated by the legal ladder of priority of claims. A court-appointed real estate receiver may also need to retain other real estate experts such as property managers, appraisers and real estate agents.

As an instrumental constituent of the commercial legal architecture in Canada, the receivership process endeavours to safeguard the vested interests of both creditors and debtors. It offers creditors the avenue to recoup either the entirety or a portion of their outstanding amounts due.

Concurrently, beleaguered commercial entities are afforded the prospect of either orchestrating a financial reconfiguration that extricates them from the quagmire of their fiscal problems or facilitating the divestiture of assets with the aspiration of facilitating the uninterrupted continuity of the business, but under new ownership. It, therefore, emerges as an indispensable instrument within the gamut of the Canadian legal paradigm, upholding the equilibrium of economic constancy.

Who is an approved buyer in the context of a receivership sale?

In the detailed context of a receivership sale, an approved buyer describes an individual or entity that has effectively met the specific requirements stated by the designated receiver. These standards encompass a variety of variables, including financial disclosure, a shown understanding of the sale’s terms and conditions, and the tried and tested capacity to finalize the purchase quickly. Usually, the recognition of an approved buyer takes place within a defined bidding procedure, in which potential purchasers compete to meet these developed requirements.

Once identified, an approved buyer ends up being subject to the terms and terms laid out within the sale arrangement. It is the receiver’s responsibility to ensure that the sale is carried out with a commitment to fairness and transparency. This consists of the duty to pick an approved buyer who not only can efficiently wrap up the real estate transaction but also can enhance the overall value of the assets that are being sold.

The fiduciary responsibility of the receiver is paramount throughout this process. The receiver is obliged to act in the very best interests of all parties, which encompasses lenders and other stakeholders. For that reason, the receiver’s duty surpasses the simple identification of an approved buyer; it includes securing the integrity of the sale, guaranteeing fairness for all parties, and ultimately maximizing the value that can stem from the assets being sold within the context of the receivership.

The role of *secured creditor**s and their rights in receiverships*

In the world of Canadian receiverships, secured creditors play an essential function in identifying the destiny of troubled companies. Recognizing their rights is essential in going through this complex landscape. Secured creditors have the legal authority to take enforcement proceedings against the assets covered by their security and have a higher priority in payment contrasted to unsecured creditors. They can either privately appoint or apply to the court for the appointment of a receiver.

The court-appointed receiver acts as a neutral party in charge of taking care of and selling the assets. The secured lenders have the right to challenge court-approved buyers if they think the receivership sale process is unfair or if they have a better deal. Nonetheless, safeguarding their legal rights within receiverships calls for a detailed understanding of the legal complexities and efficient timing associated with receiverships.

A secured creditor plays a crucial duty in the sale process. As the main financial stakeholder given their claim against the secured assets, the secured creditor has a vested interest in the result of the sale procedure. The court-appointed sale procedure includes the marketing and sale of the debtor’s assets and properties, which inevitably establishes the amount of funds that will be available to pay against the secured debt.

For that reason, the secured lender has a significant interest in guaranteeing that the sale procedure is conducted in a way that optimizes the recuperation of funds. The secured creditor’s beneficial interest in the sale procedure is shown in their capability to approve or reject the sale of assets in a private appointment and carries a level of weight with the court for a court-approved sale. This power allows them to protect their economic interests and ensure the very best feasible result from the sale process.

The timelines and stages of a receivership sale: The role of the approved buyer in Canadian receiverships

In Canadian receiverships, the role of the approved buyer is essential to the successful outcome of a receivership. In a court-appointed receivership, approved buyers are court-approved purchasers who typically offer the highest and most beneficial bid for the debtor company’s assets. They play a crucial role in maximizing the value of the distressed company and ensuring the best outcome for all parties involved. Their timely participation in the receivership process is instrumental in achieving sale finality and ultimately shaping the fate of the distressed entity.

In the world of Canadian receiverships, the involvement of court-approved buyers functions as a cornerstone in supporting an equitable and clear process. This essential process makes certain that every interested party can take part in the bidding process for the assets being sold. The result of this bidding process finishes with the choice of the best overall bidder. This mechanism of operation is rooted in concepts of justness, striving to eliminate any type of unnecessary benefit that a solitary party might have over others.

When a company is placed into receivership, the assigned receiver assumes command over the assets as well as operational elements of the business. The purpose behind the orchestration of a receivership sale revolves around the liquidation of the firm’s holdings to get them out of the insolvent troubled company and into the hands of a buyer who can maximize their value. The timing and stages integral within receiverships have a level of fluidity depending upon the intricacy and complexity of the business’s operations and assets.

Generally, the receiver’s starting point is the meticulous groundwork and strategy in setting up the sale procedure. Typically, the initial stage involves the preparation and marketing of the sale of the assets. This is followed by the negotiation and acceptance of offers from interested parties. In court-appointed receiverships, once an offer is accepted, the sale is subject to court approval and then the transfer of ownership is completed.

As this complex process unravels, the receiver must follow rigid lawful as well as regulatory requirements, thereby promoting an environment of impartiality and transparency that emphasizes a fair sale process. In its totality, the underlying purpose of a receivership sale opens up as the optimization of the company’s asset values, a pursuit carried out in the service of all stakeholders’ well-being.

Real Estate Receiver: What the Court Requires To Approve A Real Estate Receivership Sale

Being involved as a bidder in real estate receivership sales can be both exciting and daunting, laden with unique challenges and opportunities. Let’s delve into the intricacies of what the Court requires for the legal process to approve a particular sales process and sale of assets when the company is in receivership.

The Soundair principles

The Soundair principles are a collection of lawful standards developed by the Court of Appeal for Ontario in 1991 in the case of Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). All Canadian courts follow these principles.

The Soundair principles are aimed at creating fairness and transparency in the sale of assets throughout real estate receivership cases. Thirty-one years later, it is still the leading case in Canadian insolvency asset sales rules and regulations. These concepts guide courts in evaluating whether the sale procedure carried out by a receiver has been fair and suitable.

Here are the Soundair principles in detail:

Diligent Efforts to Secure the Best Price: The receiver/trustee is obliged to exert sensible efforts to secure the highest possible price for the assets for the general benefit of creditors. This entails thoroughly advertising the assets for sale, soliciting competing bids, and ensuring that prospective purchasers have sufficient information to submit proper offers to purchase. The goal is to get the highest sales price possible under the circumstances, to maximize the return for the benefit of creditors.
Fairness and Integrity in the Sale Process: It is essential to give all interested parties an equivalent opportunity to join the sales process and to avoid any potential purchaser from obtaining an unreasonable edge. Transparency and impartiality are vital, and conflicts of interest cannot be tolerated.
All Stakeholders’ Interests: The receiver/trustee must look out for the interests of all parties, secured creditors and unsecured creditors, shareholders, and any other appropriate stakeholders. It is very important for the licensed insolvency trustee to avoid preference for any party and to strive for a fair equilibrium of the interests among everybody affected because the company is insolvent.
Input from significant creditors: This is a crucial consideration for the licensed insolvency trustee. While the trustee retains the ultimate decision-making authority, it is essential to carefully weigh and consider the recommendations and preferences of major creditors. Given that these creditors will bear financial implications based on the sale outcomes, their input carries substantial significance in the decision-making process.

Application of the Soundair principles

In practice, when a sale of assets is held because the company is in receivership, there are two stages of court review. First, the licensed insolvency trustee needs to get approval for the actual sales process itself. Then, the Court will review the process as implemented by the licensed insolvency trustee.

The Court’s reviews are to ensure conformity with these Soundair principles. This is the case if this is not a sale at arm’s length purchaser. The court will take into consideration the following elements:

Marketing Efforts: How the assets were advertised and marketed, including the period and reach of the advertising and marketing initiatives.
Number and Quality of Offers: The variety of offers obtained and whether they reflect reasonable market price. To assist the Court in determining the reasonableness of the offers received, the Trustee must provide evidence to the Court. An independent appraisal of the assets and other market data is the normal kind of evidence usedwhat a fair valuation of the assets is.
Transparency: Whether the sale process was conducted fairly and transparently, with appropriate details provided to all possible purchasers.
Stakeholder Consultation: Whether the licensed insolvency trustee has spoken with and taken into consideration the views of significant creditors and other stakeholders.
Authorization of Sale: Whether the proposed sale is supported by the significant creditors or as a minimum, is not being opposed.

The Soundair principles assist when a company is in receivership, in guaranteeing that the sale of assets in an insolvency context is carried out in a fashion that maximizes value, keeps fairness, and appreciates the interests of all the major stakeholders. By adhering to these concepts, the court aims to supply confidence in the integrity and fairness of the process and protect the rights of all stakeholders.

Real Estate Receiver FAQs on Real Estate Receivership and Insolvency

What is a Real Estate Receiver? Answer: A real estate receiver is a court-appointed licensed insolvency trustee individual or firm responsible for managing, operating, and sometimes selling a property that is in financial distress. The receiver acts as a neutral third party to preserve the value of the property for the benefit of creditors and stakeholders.
What is Real Estate Insolvency? Answer: Real estate insolvency occurs when a property or the owner of a property is unable to meet financial obligations. This often leads to legal proceedings where creditors seek to recover owed amounts, potentially resulting in foreclosure or receivership.
When is a Receiver Appointed in Real Estate Cases? Answer: A receiver is typically appointed when a property is in financial distress, and there is a risk of losing significant value. This can occur during foreclosure proceedings, bankruptcy cases, or other situations where the property’s income and management are compromised.
What Are the Duties of a Real Estate Receiver? Answer: The responsibilities of a real estate receiver encompass overseeing the daily activities of the property, collecting rental payments, maintaining the property, facilitating required repairs, and occasionally coordinating the property’s readiness for potential sale. The primary objective of the receiver is to optimize the property’s value and uphold equitable treatment of all stakeholders.
How Does the Receivership Process Work? Answer: The receivership process commences upon the issuance of a court order appointing a receiver. The receiver assumes control of the property, evaluates its condition, and executes a management strategy. Regular reports are submitted to the court, and the receiver adheres to the court’s instructions until the property is stabilized, sold, or resolved in another manner.
What Are the Benefits of Appointing a Receiver? Answer: Appointing a receiver offers numerous advantages, including the stabilization of distressed properties, prevention of waste and loss, and provision of a neutral party to impartially manage the property. This can prove highly beneficial to creditors, owners, and tenants alike, safeguarding the property’s value and potentially optimizing its worth.
Can Property Owners Regain Control of Their Property After Receivership? Answer: Yes, property owners can regain control of their property if they resolve the financial issues and the court approves the termination of the receivership. This often requires paying off debts, restructuring finances, or meeting other conditions set by the court.
What Happens to Tenants During Receivership? Answer: Tenants generally continue their leases under the receivership. The receiver collects rents and manages the property as usual, ensuring that the property remains operational. Tenants may experience improved management and maintenance under a receiver’s oversight.
How Are Receivers Compensated? Answer: Receivers are compensated from the income generated by the property or from the proceeds of a property sale. Their fees and expenses must be approved by the court and are given priority over both secured and unsecured creditor claims by the court.
What Is the Difference Between Receivership and Foreclosure? Answer: Receivership and foreclosure are distinct legal processes in real estate management. Foreclosure refers to a legal action taken by a lender to recover the outstanding loan balance from a borrower who has defaulted on payments, often leading to the sale of the property. On the other hand, receivership entails the appointment of an impartial third party to oversee and stabilize the property, to potentially prevent foreclosure, maintain the property’s value and ultimately sell it.
Can a Receiver Sell the Property? Answer: Yes, a receiver can sell the property if authorized by the court. The sale process is usually supervised by the court to ensure it is conducted fairly and that the proceeds are distributed according to the court’s directives.
What Challenges Might a Receiver Face? Answer: Challenges include dealing with neglected maintenance, unpaid taxes, existing liens, tenant disputes, and market conditions. The receiver must navigate these issues while adhering to legal requirements and court orders.
How Long Does a Receivership Last? Answer: The duration of a receivership is contingent upon the intricacy of the case, the state of the property, and the objectives of the receivership. The timeline can range from several months to multiple years.
Who Can Request the Appointment of a Receiver? Answer: Interested parties such as creditors, lienholders, property owners, or other relevant entities have the option to seek the appointment of a receiver. The court will evaluate such requests by taking into account the specific circumstances and the necessity of safeguarding the property’s value.

These FAQs provide a comprehensive overview of key concepts related to real estate receivership and insolvency.

Real Estate Receiver Conclusion

I hope you have enjoyed this real estate receiver Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

HOW TO PAY OFF CREDIT CARD: CANADIANS NAVIGATING TO HUGE CREDIT CARD DEBT CRISIS

Post author By Brandon Smith
Post date June 3, 2024

how to pay off credit card

How to pay off credit card: Introduction to understanding the credit card debt crisis in Canada

The financial services researchers at TransUnion Canada (TransUnion) have recently reported a concerning trend among Canadians. Many households struggle to keep up with the rising cost of living and higher interest rates, leading to a significant increase in credit card debt. A recent report revealed that more Canadians are only able to make the minimum monthly payments on their credit cards, indicating a growing financial strain and not knowing how to pay off credit card debt.

The data from the TransUnion report paints a stark picture of the challenges faced by Canadian consumers. With the cost of living on the rise and interest rates climbing, individuals are finding it increasingly difficult to manage their credit card payments. The percentage of Canadians making only the minimum monthly payment has surged, showcasing the financial pressure many households are under.

Stagnant household incomes are failing to keep pace with inflation and interest rate hikes, pushing individuals towards relying on credit cards to bridge the financial gap. This shift in consumer behaviour has significant implications for long-term financial stability and underscores the importance of financial literacy and responsible money management.

The total consumer debt in Canada reached a staggering $2.38 trillion in the first quarter, a notable increase from the previous year. This surge in debt is a result of various factors, including the cost-of-living crisis and the influx of newcomers and Gen Z individuals entering the credit market for the first time.

Particularly concerning is the 30% increase in outstanding credit card balances among the Gen Z cohort compared to the previous year. This uptick highlights the challenges younger consumers face in understanding and managing credit responsibly, making them more vulnerable to financial hardships.

Interestingly, millennials currently hold the largest portion of debt in the country, accounting for about 38% of all debt. This demographic’s increased credit needs as they reach significant life milestones, such as homeownership and starting families, contribute to their substantial debt burden.

Despite these challenges, there is a sense of cautious optimism about the resilience of the Canadian consumer base. While there are concerns about missed payments among vulnerable populations, there is a belief that the market will eventually stabilize. Anticipated interest rate cuts could potentially alleviate some of the financial burdens for households over time.

Managing credit card debt and navigating the complex financial landscape in Canada requires informed decision-making and prudent financial planning. By understanding the factors contributing to the credit card debt crisis and taking proactive steps toward financial health, individuals can work towards achieving greater stability and security in their financial future.

How to pay off credit card: TransUnion Report analyzing the factors leading to credit card debt

Analysis of the percentage of Canadians making minimum *monthly payment**s on* credit cards

One striking revelation from the report is the concerning trend of an increasing number of Canadians resorting to making only the minimum monthly payments on their credit cards. The data indicates that the percentage of individuals opting for this minimum payment approach has risen by eight basis points, now standing at 1.3% compared to the previous year.

This trend paints a picture of households grappling with the mounting cost of living and the surge in interest rates, which poses a significant challenge in keeping up with financial obligations. Stagnant household incomes failing to match inflation and interest rate hikes have pushed many towards relying on credit cards to bridge the widening financial gap.

It is crucial to recognize the implications of perpetually making minimum payments on credit cards and not figuring out how to pay off credit card debt. This habit can easily spiral into accumulating debt and destabilizing one’s financial standing over time. Financial literacy and responsible money management are paramount in navigating these tumultuous waters and ensuring long-term financial stability.

Insights into the total consumer debt in Canada and the trends observed

The total consumer debt in Canada, as outlined in the report, amounts to a staggering $2.38 trillion in the first quarter, demonstrating a slight uptick from the previous year. This surge can be attributed to various factors, with the cost-of-living crisis and the influx of newcomers and Gen Z individuals venturing into the credit market for the first time playing significant roles.

Of particular interest is the notable 30% increase in outstanding credit card balances among the Gen Z cohort from the previous year. This points towards a learning curve for younger consumers as they navigate their initial experiences with credit, potentially rendering them more vulnerable to financial hurdles.

Moreover, millennials emerge as the segment with the largest debt share in the country, responsible for about 38% of the total debt. This can be attributed to their evolving credit needs as they reach pivotal life stages such as homeownership, starting families, and acquiring auto loans.

Despite these challenges, there is a glimmer of optimism regarding the resilience of the Canadian consumer base. While concerns loom over missed payments among vulnerable populations, there is a prevailing belief that the market will eventually stabilize. Anticipated interest rate cuts could alleviate some financial burdens gradually, offering hope for households navigating these financially turbulent times.

However, interest rate cuts will have to be significant for Canadians’ non-credit card debt to free up more cash in their budget to put towards credit card debt. Credit card rates of interest charged will always be high no matter where the Bank of Canada sets rates. So interest rate cuts themselves won’t help people figure out how to pay off credit card debt unless it creates a significant lowering of their non-credit card debt payments.

The financial landscape in Canada is intricate and dynamic, requiring individuals to navigate prudently to secure their financial future. With insightful reports such as this, we are equipped with the knowledge to make informed decisions and steer toward a path of financial stability and security.

How to pay off credit card: Impact on different generations

Credit card debt trends among generations

Gen Z Individuals: The report revealed a substantial 30% increase in outstanding credit card balances for the Gen Z cohort compared to the previous year. This surge signifies that younger consumers are just beginning to navigate the world of credit, learning to utilize it responsibly while meeting their monthly obligations. Gen Z’s entry into the credit market for the first time has significantly contributed to this rise in credit card debt.
Millennials: Currently holding the largest share of debt in the country at about 38%, millennials have distinct credit needs as they progress through significant life stages. As they start families, purchase homes, and take out auto loans, their debt composition has shifted from primarily credit cards to more diverse financial products.
Other Generations: Beyond Gen Z and millennials, other generations display varying levels of credit card debt influenced by their unique financial behaviours and responsibilities. It is crucial to analyze the reasons behind these differing debt levels to gain a comprehensive understanding of the financial landscape across different age groups.

Exploring reasons behind varying levels of debt

Each generation’s approach to credit card debt and how to pay off credit card debt is a reflection of their financial circumstances, habits, and economic conditions. Factors contributing to the varying levels of debt among different age groups include:

Financial Literacy: Understanding personal finance and the implications of credit card usage is essential. Generational differences in financial literacy levels may impact how individuals manage their credit card debt.
Income Disparities: Discrepancies in household incomes across generations can influence debt levels. Higher debt among certain age groups may stem from limited earning potential or challenges in keeping pace with inflation.
Life Stage Expenses: As individuals progress through life stages, such as buying homes or starting families, their financial needs evolve. These transitions can lead to increased credit card usage and debt accumulation.
Economic Conditions: External factors like interest rate fluctuations, cost of living changes, and overall economic stability play a significant role in shaping debt trends among different generations.

By examining these underlying reasons, we can gain valuable insights into the diverse approaches to credit card debt management among Gen Z, millennials, and other generations. It’s essential for individuals to be mindful of their financial decisions, seek financial education, and proactively address their debt to achieve greater financial stability regardless of their age group.

How to pay off *credit card**: Importance of* credit, financial literacy and financial planning

As a licensed insolvency trustee, I understand the importance of financial literacy in managing all debt, including, how to pay off credit card debt. In any consumer insolvency process, it is mandatory for the person going through either a consumer proposal process or a bankruptcy, to attend two credit counselling sessions with me. Individuals must comprehend the implications of only making minimum payments on their credit cards, as it can lead to accumulating debt, financial instability and never being able to know how to pay off credit card debt that is out of control.

Role of financial literacy in managing credit card debt

Financial literacy empowers individuals to make informed decisions about credit card usage.
Understanding interest rates, payment terms, and fees can help in managing credit card debt effectively.
By improving financial literacy, individuals can avoid falling into the trap of only making minimum payments.

Canadians need to prioritize financial health and seek out resources and support to manage debt effectively. By taking proactive steps to address their financial situation, individuals can work towards achieving greater financial stability and security in the future.

Tips for improving financial literacy

Educate yourself on financial terms and concepts to make better money decisions.
Create a budget and track your expenses to understand where your money is going.
Seek guidance from financial experts or attend financial literacy workshops to enhance your knowledge.
Avoid unnecessary debt and practice responsible borrowing and spending habits.
Stay informed about changes in the financial market and adapt your financial strategies accordingly.

By enhancing your financial literacy and making informed financial decisions, you can take control of your credit card debt and secure a more stable financial future. Remember, knowledge is power when it comes to managing your finances effectively.

How to pay off credit card: Strategies for managing how to pay off credit card debt

I have witnessed the challenges that many Canadians face when it comes to how to pay off credit card debt. It’s essential to address this issue effectively to ensure financial stability and security for the future.

One of the key strategies to manage credit card debt is to avoid making only the minimum monthly payments. While it may seem convenient in the short term, it can lead to accumulating debt and financial instability over time. Instead, I recommend paying more than the minimum amount whenever possible to reduce the overall balance.

Furthermore, creating a budget and tracking expenses can help individuals gain a better understanding of their financial situation. By identifying areas where spending can be reduced or eliminated, it becomes easier to allocate more funds toward paying off credit card debt.

Seeking support and resources for debt management is also crucial. Whether it’s through financial counselling services, debt consolidation programs, or online resources, there are various options available to help individuals navigate their debt repayment journey effectively.

Another effective strategy is to prioritize debt repayment by focusing on high-interest credit card balances first. By tackling these debts aggressively, individuals can save money on interest payments and make significant progress towards becoming debt-free.

Lastly, maintaining open communication with creditors can be beneficial. Exploring options such as negotiating lower interest rates or setting up a structured repayment plan can make it more manageable to pay off credit card debt on time.

How to pay off credit card: Navigating the path to financial freedom

For practical tips on how to pay off credit card debt, I invite you to read my January 2021 blog “PAYING DOWN DEBT: MY 7 ESSENTIAL YET EASY HACKS TO BE DEBT FREE“. Here are a few more tips to follow to help keep debt under control.

Establishing healthy *spending habit**s and avoiding excessive debt*

Developing sound spending habits and avoiding excessive debt is crucial for maintaining financial stability and ensuring long-term security. This necessitates exercising discipline and making responsible decisions when it comes to managing one’s finances. Prioritizing essential needs over-indulgent desires and crafting a comprehensive budget that aligns with one’s income and expenses are essential steps in this process.

It is imperative to resist the allure of impulsive purchases and diligently establish a savings plan as a safeguard. Additionally, vigilantly monitoring credit card usage and diligently repaying debts on time can effectively prevent the accumulation of burdensome debt, along with its associated interest and fees. By setting achievable financial objectives and adhering to prudent spending practices, individuals can successfully evade the perils of indebtedness and forge a solid foundation for a financially secure future.

Making timely payments and avoiding credit card balances

Ensuring prompt payment and refraining from accumulating credit card balances are essential for upholding a favourable financial standing. As responsible individuals, comprehending the repercussions of delayed payments and excessive credit card balances on our credit score and overall financial well-being is imperative. By making punctual payments, we not only evade penalties and interest charges but also substantiate our dependability and creditworthiness to lenders.

Consequently, this can yield improved credit terms and future opportunities. Equally significant is the avoidance of burdensome credit card balances, as they can detrimentally impact our credit score and trigger a perilous cycle of indebtedness. Through the practice of prudent expenditure and timely payments, we can accomplish financial stability and establish a robust groundwork for our prospective financial aspirations.

Building a strong credit history and improving credit rating

Establishing a robust credit history and enhancing creditworthiness is paramount for individuals striving for financial stability and future financial prospects. An impeccable credit history showcases prudent financial practices, thereby paving the way for diminished interest rates on loans, increased credit limits, and heightened chances of loan approvals.

To construct a formidable credit history, it is imperative to ensure punctual payments, maintain minimal credit card balances, and refrain from excessive account openings. Furthermore, consistently monitoring credit reports and rectifying any inaccuracies or disparities can significantly bolster credit ratings. By adopting proactive measures and adhering to responsible financial management, individuals can forge a solid credit history and elevate their creditworthiness, thereby securing a more promising financial future.

How to pay off credit card FAQs

What is the best method to pay off credit card debt?

Determining the optimal method for credit card debt repayment is contingent upon individual preferences and financial circumstances. The debt avalanche strategy prioritizes the repayment of debts with the highest interest rates first, whereas the debt snowball approach involves tackling the smallest debts initially. It is recommended to select the method that aligns with your personal goals and is most feasible for you to accomplish promptly.

How can I lower my interest rates on credit card debt?

One effective strategy for reducing interest rates on credit card debt involves consolidating your debt through a lower-interest-rate personal loan. By leveraging this approach, you can potentially minimize interest expenses, accelerate debt repayment, and enhance your financial standing.

What steps can I take to pay off credit card debt quickly?

To pay off credit card debt quickly, it’s important to first review your budget and reconsider daily spending habits. Consider packing a lunch instead of buying one each day and reconsider subscriptions that automatically come out of your account each month. Paying off high-interest debt as soon as possible and paying close attention to bill payments to avoid late charges can also help speed up the debt repayment process. Additionally, organizing your debt and choosing a method like the debt avalanche or debt snowball method can help you pay off debt efficiently.

How to pay off credit card: Conclusion

I hope you enjoyed this how to pay off credit card Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

COMPANY IS BANKRUPT: A COMPLETE GUIDE TO BANKRUPTCY SALES FOR BUYERS

Post author By Brandon Smith
Post date May 27, 2024

company is bankrupt

An Introduction to Company Is Bankrupt Asset Sales

On May 13 of this year, I published Brandon’s Blog titled: NAVIGATING THE STALKING HORSE OFFER LEGAL MAZE: THE TOOL SHED BREWING BANKRUPTCY PROTECTION EXPERIENCE. This week I am expanding on that specific Brandon’s Blog to comment on bankruptcy asset sales in general.

For anyone interested in strategic acquisitions and investment opportunities, exploring bankruptcy sales can offer a unique avenue to acquire assets at distressed pricing. In this Brandon’s Blog, I delve into the intricacies of bankruptcy sales, particularly focusing on buying assets when a company is bankrupt in Ontario, to provide you with a comprehensive understanding of the process and considerations involved.

Types of Bankruptcy

Let’s embark on this journey together to unlock the potential of acquiring assets through bankruptcy sales. When I use the term “bankruptcy sale”, I mean all the various types of bankruptcy or insolvency processes. It could be in the context of a sale of assets by a court-appointed receiver or even the company that has filed for restructuring under bankruptcy protection and is looking to sell assets out of the ordinary course of business.

For this Brandon’s Blog, you can consider it to mean any court-supervised insolvency process, be it out of a sale of assets when the company is bankrupt or in receivership under the Bankruptcy and Insolvency Act (Canada) (BIA). The issues are the same be it a bankruptcy or receivership.

When delving into the realm of bankruptcy sales, one encounters a landscape that offers both challenges and opportunities. The allure of acquiring distressed assets at potentially discounted prices is undeniable. Picture this: a sales process setting where bidders, including yourself, have the chance to engage in a fair competition, armed with the ability to conduct due diligence and submit bids for coveted assets. Such is the essence of a bankruptcy sale.

A bankruptcy sale isn’t just a run-of-the-mill transaction; it is a meticulously structured process governed by legal frameworks and case law. The principles applied from the leading case law act as a guiding light, laying down the procedures for sales that occur outside the typical course of business. It sets the stage for a structured process where the highest or best bid, subject to stakeholder approval, court approval, or both, emerges victorious.

The pivotal role of court approval in sale transactions cannot be overstated. It serves as the ultimate checkpoint, ensuring that the sale is conducted by the law and safeguarding the interests of all parties involved. Court approval is not merely a stamp of approval. The Court will only add its layer of legitimacy and finality to the transaction after it is satisfied that all legal standards have been met, assuring buyers of the validity of their acquisitions and unsuccessful buyers that the process was fair and transparent.

In the realm of bankruptcy sales, one must navigate the terrain with caution. While the prospect of purchasing assets free and clear of all creditor claims and liens is enticing, there are caveats to consider. Assets are typically sold in an “as-is, where-is” condition, with limited assurances from the licensed insolvency trustee who is the seller. The pace of proceedings is expedited, leaving little room for post-closing recourse or exhaustive due diligence.

Balancing these nuances is crucial for bidders eyeing strategic acquisitions in the bankruptcy sales arena. It requires a blend of foresight, adaptability, and a keen understanding of the intricacies of the process. Join me as we unravel the layers of bankruptcy sales and explore the dynamic landscape governing these kinds of transactions in Canada.

Benefits and Downsides of Court-Supervised Sales When a Company is Bankrupt

As someone deeply involved in the field, I often find myself exploring the nuances of court-supervised sales, delving into their advantages and potential pitfalls. Let’s take a closer look at the intricacies of this unique opportunity.

Advantages of Purchasing Assets through Court-Supervised Sales

When I consider the benefits of acquiring assets from court-supervised insolvency process sales, one key advantage stands out – the opportunity to acquire assets at potentially distressed pricing. This presents a unique chance to make strategic acquisitions at potentially lower costs, providing a competitive edge in the market.

Moreover, the level playing field offered by court-supervised sales allows bidders to engage in fair competition, conduct thorough due diligence albeit in an environment where as much information as you would like may not be available, and submit bids directly to the licensed insolvency trustee. The ability to purchase assets free and clear of the company’s financial obligations and the secured debts and unsecured debts, with the transaction receiving court approval, provides a sense of finality and security that is highly valuable in such transactions.

Limitations and Challenges in Court-Supervised Sales

However, in the realm of Court-supervised sales, you need to be acutely aware of the limitations that come with this process. Assets in bankruptcy sales are always sold “as-is, where-is,” with such limited representations and warranties from the licensed insolvency trustee seller, there are essentially none. This, coupled with the fact that the licensed insolvency trustee was not the operator of the business utilizing those assets where the company was bankrupt. This makes due diligence both critical and yet challenging. The expedited timeline and lack of post-closing recourse further adds complexity to the transaction.

Additionally, since the company is bankrupt the buyer needs to bid without the safety net of due diligence and financing contingencies, which can be a daunting prospect. Balancing these limitations against the potential benefits requires a keen eye for detail and a strategic mindset.

Balancing Pros and Cons for Strategic Bidders

For strategic bidders, finding the equilibrium between the pros and cons of court-supervised sales is crucial. Evaluating the cost-benefit ratio, understanding the bidding process, and complying with the court-approved terms and conditions of sale are all essential steps in the process.

Navigating this complex landscape requires a strategic approach. By weighing these factors thoughtfully, the buyer must aim to make informed decisions that lead to successful and accretive acquisitions through the court-supervised sales process.

Company is Bankrupt: Tactical Considerations for Potential Bidders

If you are someone considering participating in a bankruptcy sale, understand the unique opportunity it presents to potentially acquire assets at favourable pricing. This process allows you to compete on a level playing field with other bidders, conducting due diligence and submitting bids directly to the licensed insolvency trustee.

One significant advantage of a bankruptcy sale is the ability to purchase assets free and clear of all creditor claims and liens, as finalized through court approval. The money you pay as the winning bidder stands in place of the assets. However, there are essential aspects to consider before diving into this opportunity.

Cost-Benefit Analysis of Participating in the Sale Process: Before getting involved, you need to evaluate the cost versus benefit of participating in the sale process. Understanding the potential risks and rewards is crucial for making informed decisions.

Key Elements of the Bidding Procedures: To make a successful bid, you must ensure that it meets all the necessary criteria and complies with the bidding procedures governing the bankruptcy sale. This requires attention to detail and a clear understanding of the requirements.

Strategies for Successful Participation in Bankruptcy Sales: To navigate the bankruptcy sale process effectively, you need to develop strategies that can help you stand out among other bidders. This involves setting clear goals, assessing the competition, and being prepared to act decisively.

By considering these tactical aspects carefully, you can position yourself for a successful experience in a bankruptcy sale. It’s about weighing the pros and cons, understanding the process, and strategizing effectively to make the most out of this unique opportunity.

Company is Bankrupt: What the Court Requires

Being involved as a bidder in bankruptcy sales can be both exciting and daunting, laden with unique challenges and opportunities. Let’s delve into the intricacies of what the Court requires for the legal process to approve a particular sales process and sale of assets when the company is bankrupt or in receivership.

The Soundair principles

The Soundair principles are aimed at creating fairness and transparency in the sale of assets throughout bankruptcy or receivership cases. Thirty-one years later, it is still the leading case in Canadian insolvency asset sales rules and regulations. These concepts guide courts in evaluating whether the sale procedure carried out by a receiver (or a trustee in bankruptcy) has been fair and suitable.

Here are the Soundair principles in detail:

Diligent Efforts to Secure the Best Price: The receiver/trustee is obliged to exert sensible efforts to secure the highest possible price for the assets for the general benefit of creditors. This entails thoroughly advertising the assets for sale, soliciting competing bids, and ensuring that prospective purchasers are provided with sufficient information to submit proper offers to purchase. The goal is to get the highest sales price possible under the circumstances, to maximize the return for the benefit of creditors.

Fairness and Integrity in the Sale Process: It is essential to give all interested parties an equivalent opportunity to join the sales process and to avoid any potential purchaser from obtaining an unreasonable edge. Transparency and impartiality are vital, and conflicts of interest cannot be tolerated.

All Stakeholders’ Interests: The receiver/trustee must look out for the interests of all parties, secured creditors and unsecured creditors, shareholders, and any other appropriate stakeholders. It is very important for the licensed insolvency trustee to avoid preference for any party and to strive for a fair equilibrium of the interests among everybody affected because the company is bankrupt.

Input from significant creditors: This is a crucial consideration for the licensed insolvency trustee. While the trustee retains the ultimate decision-making authority, it is essential to carefully weigh and consider the recommendations and preferences of major creditors. Given that these creditors will bear financial implications based on the sale outcomes, their input carries substantial significance in the decision-making process.

Application of the Soundair principles

In practice, when a sale of assets is held because the company is bankrupt or in receivership, there are two stages of court review. First, the licensed insolvency trustee needs to get approval for the actual sales process itself. Then, the Court will review the process as implemented by the licensed insolvency trustee.

Marketing Efforts: How the assets were advertised and marketed, including the period and reach of the advertising and marketing initiatives.

Number and Quality of Offers: The variety of offers obtained and whether they reflect reasonable market price. To assist the Court in determining the reasonableness of the offers received, the Trustee must provide evidence to the Court. An independent appraisal of the assets and other market data is the normal kind of evidence usedwhat a fair valuation of the assets is.

Transparency: Whether the sale process was conducted fairly and transparently, with appropriate details provided to all possible purchasers.

Stakeholder Consultation: Whether the licensed insolvency trustee has spoken with and taken into consideration the views of significant creditors and other stakeholders.

Authorization of Sale: Whether the proposed sale is supported by the significant creditors or as a minimum, is not being opposed.

The Soundair principles assist when a company is bankrupt or in receivership, in guaranteeing that the sale of assets in an insolvency context is carried out in a fashion that maximizes value, keeps fairness, and appreciates the interests of all the major stakeholders. By adhering to these concepts, the court aims to supply confidence in the integrity and fairness of the process and protect the rights of all stakeholders.

Company is Bankrupt: Navigating Contracts and Leases

When it comes to Court-approved sales in bankruptcy proceedings, sometimes some contractual commitments or leases are in place. Even though the company is bankrupt or in receivership, a purchaser of the assets may need some or all of those contracts or leases to make the purchasing of those assets make sense. Expressed another way, having the assets may not be enough.

Having the rights and responsibilities that come with those contracts and leases may be required. Navigating contracts and leases is a crucial aspect that requires careful consideration and strategic decision-making. Let’s delve into some key points related to this intricate process.

Options Regarding Contracts and Leases

There are 2 primary options regarding contractual commitments and leases: rejection or assignment and assumption. Each option comes with its own set of implications and considerations that need to be weighed meticulously. Making the right choice can significantly impact the outcome of the sale process and the overall success of the bankruptcy proceedings.

Practical Challenges Regarding Contracts and Leases

There are some practical challenges regarding contracts and leases as follows:

Rejection: If there are contracts or leases that a purchaser does not require, this is the simplest. The purchaser will not purchase the licensed insolvency trustee’s right, title and interest, if any, in those obligations. By not purchasing those rights, the purchaser will simply not deal with them. The licensed insolvency trustee, acting as the receiver or bankruptcy trustee, will either ignore them or will formally reject them. Any rejection or repudiation will occur as part of the sales process.

Any claims by the party that contracted with the debtor company will be an unsecured claim caught in the court-supervised insolvency process as against the company and therefore, as against the pool of money obtained through the sales process. The Court will ultimately approve the distribution of funds by the Trustee, so the lessor/contracting party will be out of the money if the secured creditors suffer a shortfall.

Assumption and Assignment: One major challenge is determining whether contracts and leases can be assigned to the purchaser. In many cases, contracts contain anti-assignment clauses that prohibit transfer without consent from the other party.

Termination Rights: Contracts and leases might have termination clauses that can be triggered by the insolvency or the sale itself, complicating the continuity of these agreements.

Negotiating Consents: Obtaining necessary consents from counterparties to contracts and leases can be time-consuming and uncertain. Counterparties may demand changes to terms or additional payments as a condition for their consent. These negotiations normally are in addition to the process of purchasing the assets and do not involve the licensed insolvency trustee administering the sales process because the company is bankrupt or in receivership.

Legal Challenges: Even if a Trustee can theoretically assign a contract or lease, the counterparties might contest this in court, leading to potential delays and additional legal costs.

Successfully navigating contracts and leases in Canadian insolvency court-supervised sales requires a comprehensive understanding of the legal framework, meticulous attention to detail, and strategic decision-making. By carefully evaluating the options available, addressing challenges proactively, and adhering to legal requirements, potential purchasers can enhance the efficiency and efficacy of the sale process, ultimately maximizing the value of assets and securing a successful outcome in the proceedings.

Company is Bankrupt: Considerations for Governmental Approvals and Regulatory Reviews

Certain industries are regulated under provincial or federal government licenses or approvals. Purchasing the assets when a company is bankrupt or receivership is not enough to operate the business itself. The business operations require government approval. It is of paramount importance to navigate governmental approvals and regulatory reviews. These considerations are not mere formalities but critical steps that can significantly impact the success of the sale process.

Importance of Regulatory Approvals in Bankruptcy Sales: In the realm of bankruptcy sales, regulatory approvals play a pivotal role in ensuring that the transaction complies with all necessary laws and regulations. These approvals act as safeguards to protect the public. A prudent purchaser will make such regulatory approvals a buyer’s condition to purchase the assets.

Sometimes, such as my receivership file I referenced in my stalking horse Brandon’s Blog, we purposely made it a condition that the buyer is solely responsible for obtaining the necessary regulatory approval and not obtaining it is not a reason the purchaser can rely upon to not complete the transaction. The reason we did this is because we did not want the sale of assets to be conditional on obtaining regulatory approval. In such a circumstance, the purchaser must understand this and have a high expectation that they will be approved.

Transition Services Agreements for Regulated Industries: Operating in regulated industries adds another layer of complexity to bankruptcy sales. A sophisticated purchaser will recognize that they may need a transition services agreement as a crucial mechanism to facilitate the seamless transfer of assets while adhering to industry-specific regulations and requirements. These agreements outline the terms under which services will be provided post-sale, ensuring continuity and compliance.

Navigating Foreign Purchasers and Regulatory Requirements: Dealing with foreign purchasers introduces a host of additional challenges, particularly in terms of regulatory compliance. Understanding and adhering to the specific requirements imposed by different jurisdictions is vital to the sale’s success. Navigating these regulatory landscapes demands meticulous attention to detail and a comprehensive understanding of international laws. As the licensed insolvency trustee seller, it would be my preference to not sell to a foreign purchaser and have the sale hung up for a lengthy time pending the outcome of the regulator’s review of the suitability of the foreign purchaser.

Being mindful of these aspects is not just a matter of legal obligation but a strategic imperative. Failing to secure necessary approvals or overlooking regulatory nuances can derail the entire sale process, leading to potential legal repercussions and financial setbacks.

As someone immersed in the complex world of bankruptcy sales, I recognize the delicate balancing act required to maneuver through governmental approvals and regulatory reviews successfully. A purchaser needs to be informed, proactive, and meticulous in its approach, aiming to navigate these intricate processes with precision and expertise. If I must recommend a foreign purchaser in the sale of assets used in a regulated industry, I must have confidence in the purchaser’s ability to navigate the governmental approval process.

Company is Bankrupt: Addressing Liabilities Affecting Bankruptcy Sales

It’s important to recognize the significance of addressing potential liabilities throughout the process. One key aspect that stands out is the need for thorough identification and mitigation of these liabilities, ensuring a smooth and successful acquisition. As stated above, most liabilities of the company are caught in the bankruptcy estate or receivership process.

The sales of assets vests them out of the company to the purchaser and the money obtained from the sale stands in its place. The licensed insolvency trustee must then make its recommendation to the Court for the distribution of the money as the priorities require.

However, sometimes some liabilities may on a practical level make it difficult to use the assets as an operating business, without addressing certain liabilities. Here are some essential talking points to consider:

Identification and Mitigation of Potential Liabilities: Before diving headfirst into a bankruptcy sale, it’s crucial to conduct a comprehensive review of potential liabilities associated with the assets up for acquisition. Identifying any existing or potential risks early on allows for strategic planning to mitigate these liabilities effectively.

Thorough Due Diligence and Legal Counsel Consultation: Engaging in thorough due diligence, possibly with the support of legal counsel, can provide valuable insights into the liabilities that may not be immediately apparent. Legal experts can offer guidance on navigating complex legal frameworks and ensuring compliance with regulatory requirements.

Understanding Exceptions to ‘Free and Clear’ Asset Sales: While the concept of purchasing assets ‘free and clear’ in a bankruptcy sale may seem straightforward, it’s essential to be aware of exceptions that could impact the transaction. Certain liabilities, such as environmental issues, may not be absolved despite the ‘free and clear’ nature of the sale. Also, the business may be reliant on one or two essential suppliers and without their cooperation, it will be impossible to operate a business utilizing those assets.

The concerns and interests of such creditors who cannot be replaced going forward in the business operations and their respective unsecured creditors’ claims must be addressed before completing the purchase of the assets.

By paying close attention to these critical aspects, potential buyers can approach bankruptcy sales with a well-rounded strategy, safeguarding their interests and minimizing potential risks. Collaborating with legal experts and conducting in-depth due diligence are pillars of success in navigating the complexities of bankruptcy sales.

Company is Bankrupt: The Insolvency Process and Sale Order Approval

When diving into the world of bankruptcy sales, there is a mix of thrill and caution that comes with the territory. It’s a realm where opportunities to acquire assets at distressed pricing collide with the need for strategic decision-making and quick actions. You see, a bankruptcy sale isn’t your run-of-the-mill transaction – it’s a structured process overseen by the Bankruptcy Court, designed to ensure fairness and transparency for all parties involved.

As I take you through the stages where the company is bankrupt, the bankruptcy process, the role of the Bankruptcy Court in sale order approval, and the key milestones in bankruptcy asset sales, you’ll start to see the intricate dance that occurs in the world of distressed asset acquisitions.

Stages of the Bankruptcy Process

Filing for Bankruptcy: It all begins with the company filing for bankruptcy (or being placed into a court-supervised receivership) overseen by the Bankruptcy Court.

Approval for the Sales Process Including the Bidding Procedures: Once the company is bankrupt or in a court-supervised receivership, the licensed insolvency trustee will seek approval for the sales process including the bidding procedures from the court, setting the stage for the asset sale process.

Marketing Assets: With the court’s approval, the licensed insolvency trustee starts marketing the assets to potential buyers, generating interest and gathering bids for the distressed assets.

Receiving Bids: Prospective buyers submit their bids, each vying for the opportunity to acquire the assets through the bankruptcy sale process.

Application to Court: The licensed insolvency trustee administering the bankruptcy or receivership process, will make its application to the Court, filing its evidence, which includes a Report to the Court explaining how the Court-approved sales process was conducted, the results of the process and the bids received, showing how the Soundair principles were adhered to and recommending a specific offer to be approved,.

Finalizing Sale with Court Approval: The sale approval order, once issued by the Bankruptcy Court, finalizes the transaction, paving the way for the transfer of assets to the successful bidder.

Each stage in the insolvency process plays a crucial role in the successful sale of distressed assets, ensuring that the interests of all stakeholders are protected and that the process remains transparent and fair.

Role of Court Resulting in the Sale Approval Order

The Court acts as the guardian of the bankruptcy or receivership process, overseeing the sale approval order and ensuring that all legal requirements and considerations are met. Its role is pivotal in maintaining the integrity of the asset sale process, providing a level playing field for prospective buyers and all stakeholders.

When a sale order is presented to the Court for approval, the court scrutinizes the terms of the transaction, ensuring that it aligns with the laws and the best interests of the parties involved. By granting the sale approval order, the court adds a layer of legitimacy and finality to the asset sale, safeguarding the rights of the buyer and seller.

Key Milestones and Deadlines in Bankruptcy Asset Sales

Deadlines are a crucial aspect of any bankruptcy or receivership asset sale, dictating the pace and efficiency of the process. Key milestones and deadlines serve as guideposts throughout the sale process, ensuring that each step is taken within the specified timeframe to maintain the momentum and integrity of the transaction.

From the initial filing for bankruptcy or receivership to the finalization of the sale order, adhering to these milestones and deadlines is essential for a smooth and successful asset sale. These markers not only provide clarity and structure to the process but also instill confidence in all parties involved, signalling a well-managed and efficient transaction.

Company is Bankrupt Conclusion: Key Takeaways for Successful Asset Acquisitions

As we wrap up our discussion on successful asset acquisitions in bankruptcy sales, let’s reflect on the pivotal points that can guide us toward making informed and strategic decisions in this unique process:

Firstly, navigating bankruptcy proceeding sales requires a nuanced understanding of the key considerations that come into play. Assets are sold “as-is, where-is,” with limited warranties and protections for buyers. This necessitates a careful evaluation of the risks and rewards before participating.
Secondly, being well-informed is crucial when participating. The competitive nature of these sales demands swift decision-making and strategic bidding strategies. Having a clear grasp of the process and a thorough assessment of the assets can give bidders a competitive edge.
Lastly, the guiding principles for acquiring distressed assets successfully revolve around finding the balance between opportunity and risk. Whether you are a strategic investor or a financial bidder, understanding the intricacies of bankruptcy sales and aligning your acquisition strategy with your overall goals is key to driving value from these transactions.

I hope you have enjoyed this company is bankrupt Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags asset sale, bankruptcy estate, bankruptcy proceeding. types of bankruptcy, bankruptcy process, bankruptcy trustee, benefit of creditors, company is bankrupt, contractual commitments, fair valuation, financial obligations, insolvency trustee, legal process, sale at arm, secured creditors, secured debts, unsecured claim, unsecured creditors

Brandon Blog Post

PAYCHEQUE TO PAYCHEQUE LIFESTYLE: THE HUGE DISCONNECT BETWEEN THE BANK OF CANADA AND EVERYDAY CANADIANS

Post author By Brandon Smith
Post date May 20, 2024

Paycheque to Paycheque Introduction

Living paycheque to paycheque has become a harsh reality for many Canadians, despite the Bank of Canada’s optimistic economic outlook. In this Brandon’s Blog, I delve into the stark contrast between the Bank of Canada’s perception of how households are coping with higher interest rates and the actual struggles faced by everyday Canadians trying to meet their cost of living in Canada.

The term “savings guilt” has emerged as more households find themselves unable to save for the future due to rising living costs and stagnant incomes. Let’s explore this disconnect and shed light on the challenges of living paycheque to paycheque in today’s economic landscape.

Understanding the Concept of Living Paycheque to Paycheque

Definition of Living Paycheque to Paycheque

Living paycheque to paycheque refers to a financial situation where individuals rely solely on each paycheque to cover their expenses. It used to mean that those people were left with little to no savings or emergency funds. Today in our rising cost and higher interest rate environment, it means that more people are having trouble even meeting their required monthly living expenses and certainly nothing to handle emergency expenses.

This lifestyle often leads to financial stress, limited flexibility, and a constant struggle to make ends meet. Individuals living paycheque to paycheque may find it challenging to plan for the future, handle unexpected expenses, or break free from the cycle of paycheque dependency. It highlights the need for better government policies, financial management, savings habits, and support systems to help individuals build a more secure financial foundation.

Real-Life Factors Influencing People Living Paycheque to Paycheque

A person’s financial stability is greatly influenced by a myriad of factors, which can exhibit significant variations. These factors, ranging from personal circumstances such as the security of employment and income levels to external forces like prevailing economic conditions and market trends, hold the power to mould the financial management strategies of individuals. Furthermore, lifestyle choices, spending habits, and the pursuit of financial objectives also exert a profound impact on the decision-making processes. Acquiring a comprehensive understanding of these factors becomes indispensable in effectively addressing the challenges associated with living paycheque to paycheque, and in making judicious financial choices that pave the way towards a more secure future.

Factors Affecting Living Paycheque to Paycheque

When it comes to facing financial challenges, it’s crucial to delve deeper into the root causes that contribute to these obstacles. As a financial adviser who has worked closely with clients grappling with savings guilt and living paycheque to paycheque, I understand the multifaceted nature of these struggles.

One significant aspect of understanding the root causes of financial challenges is identifying the external factors at play. It’s common for individuals to feel personally responsible for not being able to save enough, but the truth is that the affordability crisis is largely influenced by factors beyond our control. The rising cost of essential expenses such as bills, housing, and food coupled with stagnant household incomes can create a daunting financial landscape that makes saving a challenging feat.

Cost of Living in Canada

The increasing cost of living poses a significant worry for numerous Canadians, amplifying the difficulties of living from one paycheque to another. From skyrocketing housing prices to escalating grocery costs, day-to-day expenses continue to surpass income growth, leaving individuals grappling to make ends meet. This financial burden not only affects immediate financial stability but also restricts long-term savings and investment prospects.

With the ongoing rise in the cost of living, more Canadians find themselves compelled to prioritize necessities over discretionary spending, further perpetuating the cycle of dependence on their paycheques. Tackling this issue necessitates a comprehensive approach that takes into account both macroeconomic policies and personal financial management strategies.

Income Disparities and Inflation

Income disparities and inflation exacerbate the challenges faced by Canadians living paycheque to paycheque. As income inequality widens, many individuals struggle to keep up with the rising cost of living, leading to a cycle of financial instability. Inflation further erodes the purchasing power of these individuals, making it increasingly difficult to make ends meet. The combination of stagnant wages and increasing expenses creates a significant burden on those already living on the edge. Addressing these issues is crucial to ensure a more equitable society where all individuals have the opportunity to achieve financial security and stability.

Increasing Consumer Debt

Many Canadians are currently facing the reality of living paycheque to paycheque due to the continuous increase in the cost of living. This unfortunate financial situation has led to a significant surge in consumer debt across the country. Recent statistics reveal that core working-age households, specifically those aged 35 to 64, had the highest debt-to-income ratios in the fourth quarter of 2023. For individuals aged 55 to 64 years, the ratio stood at 160.5%, while for those aged 35 to 44 years, it reached a staggering 247.9%. The debt burden for core working-age households grew at a faster pace than their disposable income, particularly for those aged 55 to 64, as higher debt charges offset their employment income gains.

This concerning trend is directly linked to the rising costs of housing, transportation, and other essential expenses. Struggling to meet their basic needs with limited income, individuals are compelled to rely on credit cards and loans. Unfortunately, this dependence on credit has paved the way for a never-ending cycle of debt, hindering individuals from attaining financial stability.

Addressing this issue requires the attention of policymakers and financial institutions. Solutions must be found to alleviate the burden of living paycheque to paycheque and to effectively tackle the escalating consumer debt in Canada.

Overview of the Bank of Canada’s Role in the Paycheque to Paycheque Lifestyle

Overview of the Bank of Canada

The Bank of Canada assumes a pivotal role in shaping the economic landscape of the nation through the formulation of monetary policies and diligent monitoring of key economic indicators. Serving as the central bank, its primary objective revolves around upholding price stability and fostering a robust economy. By making informed decisions concerning interest rates and inflation targets, the Bank of Canada exercises a significant influence over borrowing costs, investment choices, and the overall trajectory of economic growth.

Nevertheless, it is crucial to acknowledge the evident disparity between the Bank’s perception of how Canadian households are coping with higher interest rates and the harsh reality of numerous families living paycheque to paycheque. This pronounced discrepancy underscores the imperative for a more profound comprehension of the challenges faced by ordinary Canadians.

The Bank of Canada Disconnect to the Canadian Reality

Senior Bank Deputy Governor Carolyn Rogers recently emphasized at a news conference that households seem well-positioned to manage their financial obligations effectively despite the changing interest rate environment.

The Bank of Canada’s view is that during the pandemic, many households and businesses bolstered their liquid assets, providing them with a cushion to navigate economic uncertainties. The trend of mortgage borrowers with flexible rate mortgages making advance lump sum payments highlighted a strategic approach towards debt management, further strengthening their financial positions.

The way the Bank of Canada sees the Canadian economy, while the discussion around lowering borrowing costs is pertinent, as policymakers they are focused on inflation; their focus is on macroeconomics, not microeconomics. They are betting on Canadian households to be able to withstand higher interest rates for an extended period to focus on reducing Canadian economic,recession risks.

The way the Bank of Canada sees it:

Canadians are proactively adjusting to higher interest rates to maintain financial stability.
Households have demonstrated resilience in servicing their debts even amidst rising costs.
The rise in wages and savings has played a crucial role in improving debt management practices.

Yet, one of the primary concerns highlighted by the Bank of Canada is the vulnerability of non-mortgage borrowers, particularly those with high-interest debt made up mainly of credit card and auto loan current debt payments. The central bank’s report indicates that a significant proportion of non-mortgage borrowers are struggling to meet their credit obligations, with some surpassing pre-pandemic levels of payment delinquency. This underscores the importance of monitoring the financial health of all types of borrowers, not just those with mortgages. It also highlights the disconnect between the central bank and everyday working Canadians.

Looking ahead, the forthcoming decisions by Governor Tiff Macklem and his team regarding interest rates are crucial. The upcoming period will offer insights into their view on the effectiveness of policy measures in sustaining economic stability.

Strategies for Breaking the Paycheque to Paycheque Cycle

Mental Health First: Understanding the Root Causes

When it comes to facing financial challenges, it’s crucial to delve deeper into the root causes that contribute to these obstacles. As a licensed insolvency trustee who has worked closely with clients grappling with savings guilt and living paycheque to paycheque, I understand the multifaceted nature of these struggles.

One significant aspect of understanding the root causes of financial challenges is identifying the external factors at play. It’s common for individuals to feel personally responsible for not being able to save enough. Still, the truth is that the affordability crisis is largely influenced by factors beyond our control. The rising cost of essential expenses such as utilities, taxes, housing, and food coupled with stagnant household incomes can create a daunting financial landscape that makes saving a challenging feat.

Chantel Chapman, the CEO and co-founder of Trauma of Money located in British Columbia, aptly points out the importance of questioning the origins of our shame and guilt surrounding financial struggles. Many individuals allocate a substantial portion of their income towards meeting basic needs, leaving little room for emergency savings or investment. This financial strain can lead to feelings of inadequacy and health issues, especially when comparing your household finances to others who appear to effortlessly save.

Moreover, external factors like economic fluctuations, high rental costs, and interest rates can significantly impact an individual’s ability to save. Research conducted by Coast Capital revealed that a considerable segment of the Canadian population experiences financial shame, which can take a toll on mental and emotional well-being. It’s crucial to break free from this guilt cycle by acknowledging and challenging these negative self-perceptions.

By recognizing the connection between our thoughts and physical responses, we can begin to untangle the source of our guilt. Distinguishing between internal and external guilt is a pivotal step in regulating our nervous system and paving the way for practical solutions. Seeking support from friends, undergoing budget reviews, and adjusting spending priorities are effective strategies for combating financial guilt.

It’s essential to de-personalize guilt and understand that everyone’s financial journey is unique. The culture of comparison, amplified by social media, can further exacerbate feelings of inadequacy and financial guilt across various age groups. Young individuals may feel pressured to save for major milestones like purchasing a home, parents may grapple with securing their children’s future, and individuals nearing retirement may worry about meeting their savings goals.

Overcoming savings guilt necessitates a shift in mindset, heightened self-awareness, and a readiness to challenge societal norms of comparison and perfection. By reevaluating our relationship with money, acknowledging external influences, and taking proactive steps toward financial well-being, we can liberate ourselves from the cycle of guilt and forge a path toward a more secure financial future.

Creating a Household Budget and Sticking to It

Another essential strategy for alleviating ‘savings guilt’ is setting realistic savings goals and budgeting monthly payments effectively. It’s important to create achievable milestones for personal finances that reflect your income, expenses, and long-term aspirations. By breaking down savings targets into manageable increments, the process becomes less daunting and more attainable.

Preparing a realistic monthly budget and sticking to it s also key for both living within your means and for successful savings management. By tracking income and expenses, individuals can identify areas where adjustments can be made to optimize savings potential. Implementing strategies such as automatic transfers to a savings account or cutting back on non-essential expenses can contribute significantly to reaching financial goals.

Taking the initiative to actively participate in financial planning and actively seeking expert advice can result in gaining a clear understanding and enhanced assurance when making important financial choices.

Establishing attainable savings targets and effectively managing one’s budget are essential measures in addressing feelings of guilt associated with saving money. By adopting these approaches and actively making sound financial decisions, individuals can conquer the burden of ‘savings guilt’ and pave the path towards a more stable and secure financial future.

While cutting expenses and adopting frugal practices can aid in the savings process, exploring alternative avenues to increase earnings is equally important. Leveraging employee benefits, focusing on long-term financial objectives, and tracking progress can instill a sense of direction and purpose in one’s financial journey. It’s crucial to get creative with income streams and consider options like taking on second jobs or side hustles to bolster financial stability.

Prioritizing Debt Repayment and Building an Emergency Fund

Living paycheque to paycheque has become a common reality for many Canadians. Surveys have reported that about half of Canadians are $200 or less away from financial insolvency every month. This highlights the importance of household budgeting, the need for debt repayment and creating an emergency fund.

But where will this money come from when it is costing Canadians all or more than their entire paycheques for necessities? With rising living costs and stagnant wages, it is crucial for individuals and families to carefully manage their finances. A well-planned household budget can help individuals track their expenses, prioritize spending and save for future goals. Additionally, establishing an emergency fund can provide a safety net for unexpected expenses such as job loss, medical emergencies, or home repairs. Canadians need to prioritize budgeting and creating an emergency fund to avoid financial instability and build a secure financial future.

However, right now, the data suggests Canadians do not have the means to save for financial freedom as they still need to borrow on credit cards and lines of credit to make up for an income gap.

Government Programs and Support

Prime Minister Justin Trudeau is also focused on macroeconomic issues and ignoring the message about affordability we get daily. In his April 2024 address to the Canadian Chamber of Commerce, he underscored the importance of intergenerational opportunity. He emphasized Canada’s role as a global leader, particularly in innovation, artificial intelligence, clean energy and technology. His remarks resonated strongly, emphasizing the critical role of proactive engagement in shaping a brighter future for Canada and the world. Big on words, short on solutions.

To address the growing issue of more Canadian households living paycheque to paycheque, policymakers should consider implementing measures such as increasing the minimum wage to reflect the rising cost of living, providing tax incentives for saving and investing (instead of just raising revenue to try to pay for the massive deficits the Liberal federal government has been running for years) and offering real affordable housing options. Additionally, financial education programs should be integrated into school curriculums to improve financial literacy from a young age. By taking these steps, policymakers can help alleviate the financial burden on Canadian households and promote a more sustainable and secure financial future for all citizens.

Paycheque to Paycheque FAQs

Why are so many Canadians living paycheque to paycheque?

Many Canadians are living paycheque to paycheque due to the rising cost of living, stagnant wages, and high levels of debt.

What lifestyle changes can help alleviate end-of-month stress for those living paycheque to paycheque?

Some lifestyle changes that can help include cutting back on unnecessary expenses, meal planning to reduce food costs, and finding ways to increase income through side hustles or part-time work.

How can budgeting techniques help those living paycheque to paycheque?

One can enhance their financial management skills and effectively allocate their funds by employing various budgeting strategies. Techniques, such as formulating a monthly budget, meticulously monitoring expenses, and establishing financial objectives, enable individuals to gain better control over their finances and effectively prioritize their expenditures.

What are some ways to increase income for those living paycheque to paycheque?

Increasing income can be achieved through finding a higher-paying job, taking on freelance work, selling unused items, or investing in education or skills training to enhance career opportunities.

How can managing debt be a challenge for those living paycheque to paycheque?

Managing debt can be challenging for individuals living paycheque to paycheque as it can be difficult to make regular payments and reduce debt while also covering essential living expenses. Finding ways to lower interest rates, consolidate debt, or seek financial counselling can help in managing debt effectively.

Paycheque to Paycheque Conclusion

We must address the stark reality of Canadian households living paycheque to paycheque. The disconnect between the Bank of Canada’s perception and the lived experiences of everyday Canadians demands urgent attention. To alleviate the financial burdens and “savings guilt” faced by many, a call to action for improved economic policies is essential. By implementing targeted measures that address income disparities, rising costs of living, and promoting financial literacy, we can pave the way for a more financially secure future for all Canadians. It is time for policymakers to prioritize the well-being of their citizens and enact meaningful change.

I hope you have enjoyed this paycheque to paycheque Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

NAVIGATING THE STALKING HORSE OFFER LEGAL MAZE: THE TOOL SHED BREWING BANKRUPTCY PROTECTION EXPERIENCE

Post author By Brandon Smith
Post date May 13, 2024

stalking horse offer

Stalking Horse Offer Introduction

In Brandon’s Blog post, I provide an in-depth analysis of the stalking horse offer in the context of bankruptcy protection, drawing insights from a recent ruling by the Alberta Court in the case of Tool Shed Brewing. By examining the various elements that influence court decisions regarding such offers and the intricacies of managing a stalking horse sales process, I aim to shed light on this complex legal subject.

Through an examination of Tool Shed Brewing’s situation and an ongoing stalking horse case of mine, this article offers readers a comprehensive understanding of the challenges, nuances, and legal aspects involved in navigating the complexities of bankruptcy protection.

What is a Stalking Horse Offer?

Definition and Purpose of a Stalking Horse Offer

In an insolvency or bankruptcy proceeding, a stalking horse offer serves as an initial bid on the assets of a distressed company.

This offer sets a floor price for the assets, exposed to a public marketing process, and encourages other potential buyers to submit higher bids. The company typically chooses the stalking horse bidder in financial distress and plays a crucial role in the solicitation and investment solicitation process (SISP).

Benefits of a Stalking Horse Offer

By providing a baseline offer, the stalking horse offer aims to maximize the value of the company’s assets and streamline the sale process. Understanding the nuances of stalking horse offers is essential for companies navigating bankruptcy protection cases to secure the best possible outcome.

stalking horse offer

Stalking Horse Offer: Understanding the Stalking Horse Bid Process

How a Stalking Horse Bidder is Selected

In the business world, a stalking horse bidder is often used in the context of mergers and acquisitions or an insolvency or bankruptcy process to help facilitate the sale of a company (M&A) or the company’s assets (insolvency/bankruptcy process). The party selected to make the stalking horse offer is selected by the target company’s management team to submit an initial offer for the company or its assets, to start the bidding process.

The selection of a stalking horse bidder is a strategic decision, often based on their financial stability and expertise in the industry. Many times in an insolvency process, the stalking horse bidder may already be a stakeholder of the insolvent company. It is not unusual for a secured creditor, a major investor or a group affiliated with current management to make the stalking horse offer.

The stalking horse bidder serves as a starting point for other interested parties to make their bids, hopefully driving up the value of the company or its assets and maximizing the potential sale price. Careful consideration and due diligence are taken in selecting a stalking horse bidder to ensure the best outcome for all parties involved.

Factors Considered in Choosing a Stalking Horse Bidder

When considering a stalking horse bidder, several factors must be carefully evaluated to make an informed decision. The first and most crucial factor is the bidder’s financial stability and ability to fulfill their obligations. This includes their credit rating, cash flow, and previous track record in similar transactions. Additionally, the bidder’s strategic fit with the company and their long-term goals must be taken into account.

Other important factors include their experience in the industry, their proposed purchase price, and any proposed contingencies or conditions. It is also important to thoroughly review the bidder’s proposed plans for the company or the assets post-acquisition. By carefully considering all of these factors, it ensures that the right party has been chosen to make the stalking horse offer which is not only financially capable but also aligned with achieving the goals of the stalking horse sales process.

Importance of a Stalking Horse Bid in Attracting Other Bidders

A stalking horse bid plays a crucial role in attracting other bidders in a competitive bidding process. It is a preliminary bid made by a buyer to set a minimum price for the assets being sold. This bid serves as a starting point for other potential buyers to make their offers, creating a competitive environment.

A stalking horse bid also demonstrates the seriousness and commitment of the buyer, making it more likely for other bidders to take the opportunity seriously. Moreover, it provides a benchmark for fair market value, ensuring that the insolvency process results in the estate receiving the best possible price for the assets under the circumstances. In summary, a stalking horse bid catalyzes a successful and competitive bidding process.

In setting the floor price, the licensed insolvency trustee needs to be able to justify that price, amongst all the other details of the stalking horse offer. The use of appraisals will help the Trustee in justifying the stalking horse offer price as well as the ultimate sales price when seeking the approval of the court for both the SISP and the ultimate sale.

Stalking Horse Offer: Stalking Horse Bid Agreement

Contents and Terms of a Stalking Horse Bid Agreement

A stalking horse bid agreement is a legal document that outlines the terms and conditions of a potential acquisition or sale of a company’s assets. The contents of a stalking horse bid agreement include a detailed description of the assets being sold, the purchase price, and any conditions or contingencies that must be met for the sale to be completed. It also outlines the responsibilities and obligations of both the buyer and the seller. Additionally, the agreement may include confidentiality and non-disclosure terms to protect sensitive information. This agreement serves as a framework for the bidding and negotiation process, providing structure and protection for all parties involved.

In a court-appointed receivership I am involved in right now, we are using the stalking horse offer process in the court-approved SISP. The agreement we obtained court approval for is in a typical format used in insolvency or bankruptcy proceedings to facilitate the sale of a distressed company’s assets.

To give you a better idea of the content and terms in a stalking horse bid agreement, the main headings in the stalking horse offer asset purchase agreement we developed with our legal counsel are:

ASSETS TO BE SOLD AND PURCHASED

Assumed Liabilities
Assignments Requiring Consent
Purchase Price
Allocation of
Purchase Price
Bid and Auction Procedures

REPRESENTATIONS AND WARRANTIES

Receiver’s Representations and Warranties
Purchaser’s Representations and Warranties
“As Is, Where Is”

COVENANTS

Covenants of the Receiver
Covenants of the Purchaser

CONDITIONS AND TERMINATION

Conditions for the Benefit of the Purchaser
Conditions for the Benefit of the Receiver
Waiver of Condition
Termination
Effect of Termination

CLOSING ARRANGEMENTS

Closing
Receiver’s Closing Deliveries
Purchaser’s Closing Deliveries
Confidentiality
Delivery of Receiver’s Certificate

COMPETING BIDS AND SALES PROCESS

The Sale Process
Break Fee

stalking horse offer

Stalking Horse Offer: Agreement for Expense Reimbursement and Breakup Fee

In a stalking horse offer, the seller may agree to cover certain expenses incurred by the stalking horse purchaser during the negotiation process. The seller always offers a breakup fee if the party making the stalking horse offer turns out not to be the buyer because the SISP produces a better offer.

This agreement for expense reimbursements and breakup fees, which are also called topping fees, is a common practice in the world of mergers and acquisitions and insolvency/bankruptcy process stalking horse sales, as it protects both parties involved. The potential buyer can gain a competitive advantage by being the first to make an offer while being compensated for incurring the time and expense of doing its due diligence and exposing its offer to the marketplace if the deal does not go through.

This type of agreement is typically negotiated carefully and is an important aspect of the overall SISP.

Stalking Horse Offer: The Importance of a Court-Approved Stalking Horse Agreement

A Court-Approved Stalking Horse Agreement and a Court-Approved SISP, are crucial tools in the process of a bankruptcy sale. The agreement allows a potential buyer, known as the “stalking horse,” to set a floor purchase price for the assets being sold. This not only ensures a fair and transparent bidding process but also provides a level of protection for the debtor’s estate. By setting a minimum bid, the stalking horse agreement prevents lowball offers and encourages competitive bidding, ultimately maximizing the value of the assets for the benefit of creditors. Furthermore, obtaining bankruptcy court approval for this agreement enhances the validity and credibility of the SISP.

Therefore, a Court-Approved Stalking Horse Agreement and SISP are of utmost importance in facilitating a successful bankruptcy sale.

Stalking Horse Offer: The Auction Process and Other Bidders

In the court-appointed receivership SISP I am running, using this sales process resulted in competition among bidders. We ended up having two Qualified Bidders (as defined in the SISP documents); the stalking horse bidder and one of the other parties who made an offer. Following the terms of the SISP bidding procedures, both Qualified Bidders were given the limited time allowed for in the sales process to advise if they wished to participate in an auction process. Both Qualified Bidders advised they would participate.

I held the auction on the day and time stated in the SISP documents. The result was that the price got bid up to a point where the stalking horse bidder dropped out of the auction.

As I am in court tomorrow seeking approval of a sale to the other bidder and not the stalking horse transaction, I can’t provide any specific details in this blog. What I can say is:

This buyer originally made a low-ball offer before we were in a position to offer the assets for sale
. For many reasons, the offer was rejected.
The stalking horse offer price is 2.75 times the offer we rejected. The price achieved through the auction process is 1.5 times the stalking horse bid price.

The details contained herein and in our court material prove that the stalking horse sales process worked well in this case.

Stalking Horse Offer: Introduction to Tool Shed Brewing Company Inc.

Now let me take you on a journey through another real-life case through the fascinating world of Tool Shed Brewing Company Inc. (Tool Shed). This company ran a craft beer brewery and a restaurant.

Tool Shed had financial struggles that ultimately led to its bankruptcy protection filing. Despite their creative endeavours in the craft beer industry, Tool Shed found themselves grappling with substantial debts and financial obligations.

Tool Shed’s operations revolve around the production and distribution of both alcoholic and non-alcoholic beverages to various retailers and restaurants. The valuable assets were non-assignable licenses and permits issued by the Alberta Gaming, Liquor and Cannabis Commission. Tool Shed considered these assets as the pillars of their business.

stalking horse offer

Stalking Horse Offer: The Bankruptcy Protection Filing Through A Notice of Intention To Make A Proposal

In January 2024 the CRA took legal action against Tool Shed, highlighting the pressing financial crisis. Faced with the stark reality of its financial obligations, Tool Shed took a decisive step by filing a Notice of Intention To Make A Proposal under the Bankruptcy and Insolvency Act (Canada) (BIA), appointing a licensed insolvency trustee as their proposal trustee.

With the weight of financial distress looming over them, Tool Shed sought avenues for recovery, leading to the approval of a stalking horse bid by 2582568 Alberta Inc., a company owned by Tool Shed’s CEO, James Costello. However, this move faced opposition from individual investors and secured creditors, John Donovan and Juliana Bourne, who presented a competing bid through 2594617 Alberta Ltd.

February 12, 2024, played a crucial role in setting the stage for the ensuing developments. Tool Shed went to the Alberta court seeking an order not only to extend the timeline for filing a proposal but also for the approval of the interim financing by the Costello Company, and initiating the sales process, including the approval of the 2582568 Alberta Inc. offer. Despite the objections of the Donovan group, the court approved the relief requested by Tool Shed, including the SISP and the Costello offer approval.

The Stalking Horse Bid and Approval Application

The proposal trustee ran the SISP and then applied to court As the narrative unfolded, intense deliberations ensued, as Tool Shed faced the impending threat of bankruptcy. The contentious discussions revolving around the SISP transaction application brought to the fore the divergent viewpoints of stakeholders, including the Donovan Group and the Costello Company.

The Donovan Group raised many issues in opposing the approval of the sale to the Costello Company. There were also many issues affecting the court process, some of which were outside of the control of the stakeholders.

The road to approval is rarely smooth, and Tool Shed’s case is no exception. With opposing voices from the Donovan Group, who also were investors in Tool Shed, the Approval Application process became a battleground of conflicting interests.

As the clock ticked towards the crucial hearing date, scheduling issues and the need for more time loomed large. The delicate dance of legal procedures and the strategic moves of involved parties heightened the drama surrounding the fate of Tool Shed and the Stalking Horse Bid.

The twists and turns in the Approval Application process serve as a testament to the intricate nature of financial dealings and the resilience required to navigate through turbulent waters. With each challenge faced head-on, Tool Shed’s fate teeters on a knife-edge, awaiting the final verdict on the Stalking Horse Bid.

stalking horse offer

Stalking Horse Process: The Challenges Faced During the Approval Application Process

Standing of the Parties

The issue of standing was raised, where the Costello investors and the Donovan Group asserted their standing as secured creditors. The application continued on the basis that they had standing, as there was no objection from Tool Shed.

Issues of Fairness and Integrity

In a previous case, the court considered the situation where the losing bidder had no standing to raise concerns about fairness and integrity in the bidding process.

It was suggested that objections should be given to the court-appointed monitor, but in that specific case, the monitor had already submitted its report and did not address the objections.

In this case, the Proposal Trustee in their correspondence and reports addressed the issues raised by the Donovan Group and the Costello Investors. The Costello Investors and Donovan Group asserted that while the SISP Order was final, the implementation of the SISP Process was unfair and lacked integrity.

The SISP Process established specific requirements for a bid to be considered qualified, including timing, sale proposal, unconditional bid, and being a superior offer. The process also incorporated a definition of assumed liabilities and outlined the assessment and determination of qualified bids.

There appeared to be inconsistencies in the drafting of the SISP Process, specifically in requirements for a qualified bid to be a superior offer and the authority to waive non-compliance. The court interpreted the requirements and determined the reasonable assessment of qualified bids based on the process.

Determination of Superior Offer

The determination of a superior offer was defined based on the credibility, financial viability, and terms of the offer in comparison to the Stalking Horse Agreement. If no qualified bid was a superior offer, the Stalking Horse Bid would be declared the successful bid.

Principles for Disposition Approval

Tool Shed submitted that the factors for approval of the disposition had been met, ensuring the successful assessment of the principles outlined in the leading case for any insolvency or bankruptcy sale process, Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA) (Soundair). The Donovan Group contested that the Soundair principles had not been met and argued against approval of the Stalking Horse Bid.

Stalking Horse Offer: Final Rulings and Approval of the Stalking Horse Bid

Understanding the context leading to these final rulings and approvals is crucial. Tool Shed sought approval for a reverse vesting order for the Stalking Horse Bid. The reverse vesting order process was part of the SISP. This method had to be used to preserve the non-transferable licenses that were so valuable.

Throughout the process, Tool Shed’s financial situation and attempts to restructure debt were under scrutiny. The involvement of various parties, including creditors and investors, added complexity to the proceedings. The court considered crucial factors such as assets, debts, and the impact on all stakeholders.

The court is required to ensure the integrity of the process without delving into the minutiae of operational decisions. Review in receiverships focuses on procedural fairness rather than questioning business decisions.

Consideration of SISP Order The court carefully considered the implementation and compliance with the Sale and Investment Solicitation Process (SISP) order in evaluating the Stalking Horse Bid. The SISP order is a crucial component of the bankruptcy proceedings as it ensures a fair and transparent process for all parties involved.

The court always needs to ensure the integrity of the process without delving into the minutiae of operational decisions. A court review in receivership or bankruptcy cases focuses on procedural fairness rather than questioning business decisions. Here is what the court must consider when asked to approve a sale.

Challenging the SISP Order in the Approval Application

The court ruled that during the Approval Application, the Donovan Group cannot challenge the SISP Order granted on February 12, 2024. Secured creditors were notified per s.65.13(3) of the BIA and the SISP Order granted was not appealed. As a valid and subsisting court order, the Donovan Group cannot now attack the SISP Order.

Reasonableness of Sale Process

The implementation by the Proposal Trustee rather than the structure of the SISP Process was under scrutiny. The court’s role was to ensure fair negotiations and the bidding process. Notwithstanding some glitches in the way the Proposal Trustee carried out the SISP, the court interpreted the results as consistent with the aims of the SISP and found the SISP to have been run reasonably.

Consultation with Creditors

No consultation with creditors was required in the SISP implementation. The court found that the integrity of the process was maintained without creditor involvement.

Effects of Proposed Sale

Parties had prior knowledge of the SISP Process and Stalking Horse Agreement. Consideration of the sale process fairness was previously determined as was the proposed sale under the stalking horse offer. Therefore, it was not a primary concern in the Approval Application.

Soundair Principles

Soundair principles involve specific inquiries by the court. The court performed the applicable analysis for the NOI Proceedings and Approval Application context. The court found that the Soundair principles were met.

Efforts for Best Price

The court found that proper steps were taken to encourage interest in Tool Shed for the best price. No issues were raised regarding the advertising process for the sale.

Access to Information

Concerns were raised by Donovan Group about timely and full access to Tool Shed information. Issues were highlighted regarding asymmetrical access to information due to dual roles. The court did not find that there were any impediments to access to information.

Inadequate Due Diligence Information

Due to resource constraints, certain inquiries from the Donovan Group were unfulfilled. However, the Donovan Group was satisfied with the information passed on by the Proposal Trustee. The court did not feel this impacted the Donovan Group’s ability to make a meaningful bid.

Evaluation of Bid Information

Donovan Group failed to demonstrate they were denied access to different or better information for the Stalking Horse Bid. Considerations by the Alberta Court of Appeal were highlighted for bid evaluation.

Extension of Bid Deadline

The initial bid deadline was set for March 11, 2024, with a requested two-week extension by Donovan Group. The Proposal Trustee granted a three-day extension till March 14, 2024. The court did not find that Donovan Group was prejudiced in any way.

Submission of Preliminary Bid

Donovan Group submitted a conditional bid on March 14, 2024. The bid was rejected for various reasons including conditional nature and incomplete payment obligations.

Rejection of Revised Donovan Bid

Donovan Group submitted an unconditional bid on March 22, 2024. The Proposal Trustee originally rejected the bid citing contraventions of the process and insufficient benefit to stakeholders.

The Donovan Group further revised the bid to satisfy the Proposal Trustee’s concerns. The Proposal Trustee later reviewed and accepted the Revised Donovan Bid.

The court decided that it did not need to deal with the Donovan Group’s complaints regarding the Trustee’s prior rejection reasons as they were not applicable or relevant post-acceptance.

Efforts to Get the Best Price

The Proposal Trustee extended the deadline twice for the Donovan Group, showing fairness. The court found that the Proposal Trustee made efforts to secure the best price without acting improvidently.

Consideration of All Parties’ Interests

The court held that the interests of the losing bidder (Donovan Group), the proponent of the Stalking Horse Bid (Costello Company), and the creditors were all taken into account.

Tool Shed’s interests were also considered by the SISP and the SISP Order.

Assessment of Qualified Bid and Superior Offer

The Revised Donovan Bid diverged from the SISP in the required Assumed Liabilities. The Revised Donovan Bid was therefore not considered either a Qualified Bid or a Superior Offer by the Proposal Trustee.

The court concurred with the Proposal Trustee’s assessment and confirmed that the Donovan Group had no stake in the Sale Approval Process due to its bid not meeting all of the required qualifications.

An image of a stormy dark sky with a ray of light shining through with professional advisors in the foreground to represent corporate financial problems but the hope for a successful restructuring using a stalking horse offer. — *stalking horse offer*

Stalking Horse Offer: The Court’s decision

After the parties finished navigating the legal maze and after the Court’s careful consideration of all arguments and submissions, the Court rendered its decision. The court found that:

The SISP Process was approved and implemented with integrity.

Overall, there was no identified unfairness in the working of the SISP Process.

No unfair actions were attributed to the Proposal Trustee.

The test of the Soundair principles was met.

The Court approved the Stalking Horse Bid as it met the necessary criteria outlined in the SISP. Concerns raised were thoroughly assessed, leading to a decision in favour of the approved bid.

Stalking Horse Offer FAQs

What is a stalking horse bid?

A stalking horse bid refers to an initial overture intended to acquire assets from a financially distressed company, typically one undergoing bankruptcy or seeking bankruptcy protection. The primary objective behind employing a stalking horse bid is to establish a baseline price for the said asset, unveiling the first bid publicly and instigating a competitive bidding procedure.

Where does the term “stalking horse” come from?

The term “stalking horse” originally referred to a horse or an object that hunters would hide behind to approach their prey without being noticed. In the context of business, it now means an initial bidder who sets the groundwork for subsequent bidders in a sale process.

What is a stalking horse candidate in a bankruptcy proceeding?

In a bankruptcy proceeding, a stalking horse candidate is an interested buyer of a bankrupt company that is chosen by the company and presented to the bankruptcy court for approval. The stalking horse candidate sets the initial bid, which other interested bidders cannot go below, essentially dividing the opposition in the bidding process.

What are the benefits of being a stalking horse bidder?

Being a stalking horse bidder allows for control over many aspects of the bidding process and includes fail-safe fees if the bid doesn’t win. However, there are higher initial costs associated with being a stalking horse bidder, such as negotiations and conducting due diligence, which other bidders can then leverage in their bids.

How does a stalking horse sale process work?

In a stalking horse sale process, an initial bidder negotiates a purchase agreement with a distressed or bankrupt company to purchase its assets. The initial bidder sets the terms of the transaction, conducts due diligence on the assets, and establishes a minimum purchase price for other interested parties to bid on. This process aims to maximize the value of the company’s assets in a fair, efficient, and transparent manner.

Stalking Horse Offer Conclusion

In conclusion, navigating the legal maze of stalking horse offers in bankruptcy cases is crucial for companies seeking protection and restructuring. Understanding the intricacies of the process, including the factors considered by the court for approval and the running of a stalking horse sales process, is essential for a successful outcome.

The Tool Shed bankruptcy protection experience serves as a valuable case study, shedding light on the challenges and opportunities presented by stalking horse offers. By seeking expert legal and licensed insolvency trustee counsel and following strategic approaches, companies can effectively navigate the complexities of stalking horse offers and emerge stronger from the bankruptcy protection process.

I hope you have enjoyed this stalking horse offer Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s 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 of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Tags auction process, bankruptcy court approval, bankruptcy process, bankruptcy sale, bankruptcy sale process, bidding procedures, breakup fee, competitive bidding process, distressed company, initial bidder, investment solicitation process, Ira Smith Trustee, stalking horse, stalking horse bid, stalking horse bidder, stalking horse offer, subsequent bidders, Tool Shed Brewing

Brandon Blog Post

BANKRUPTCY AND CRA DEBT STRATEGIES: A COMPREHENSIVE GUIDE ON NAVIGATING DEBT MANAGEMENT AND TAX RELIEF

Post author By Brandon Smith
Post date May 6, 2024

bankruptcy and cra debt

bankruptcy and cra debt

Bankruptcy and CRA Debt Introduction

Finance Minister and Deputy Prime Minister Chrystia Freeland introduced the 2024 Federal Budget on April 16. During her presentation in Parliament, she advised that Budget 2024 will include that any capital gain will be taxed from the current 50% to two-thirds. April 30 was the last day for most Canadians to file their 2022 personal income tax return.

At the end of April, Ms. Freeland announced that Budget 2024 would not include the capital gains tax change. Rather, she will ask Parliament to approve a stand-alone Bill which will include the capital gains tax change, no doubt combined with other initiatives such as more Federal money for access to housing, in a crass move to try to score voter points when the Conservatives vote against the Bill because of the tax increase. So income tax owed to the Canada Revenue Agency (“CRA”) is on everyone’s mind.

Canadian entrepreneurs are up in arms over the Budget 2024 capital gains taxation change. People are concerned over the level of taxation disclosed in their personal income tax returns. Some Canadians do not have the money to pay their calculated income tax payable.

This Brandon’s Blog discusses the complex world of Canadian bankruptcy and CRA debt, along with other potential options, to achieve financial stability. I aim to equip people with the necessary knowledge and strategies to make informed choices.

Definition of Bankruptcy and CRA Debt

Bankruptcy is a legal condition where consumers or companies admit they are unable to pay their outstanding debts. The bankruptcy process is a supervision and administration process overseen by a licensed insolvency trustee and the court. Under the bankruptcy legislation, people and businesses can either: (i) restructure to eliminate their debt by only paying a percentage of the amount owing; or (ii) liquidate most of their assets for the proceeds to be paid to the creditors in priority as outlined in the legislation.

CRA debt is one kind of debt that individuals or companies may owe for unpaid taxes, penalties and interest. Understanding the workings of bankruptcy and CRA debt will help people owing taxes they cannot repay make informed decisions on how to deal with their debts to get back to a financially healthy and stress-free life.

bankruptcy and cra debt

Bankruptcy and CRA Debt: Importance of Debt Management and Tax Relief

Effective debt management and tax relief are crucial aspects of financial stability for individuals facing Canadian bankruptcy and CRA debt. By implementing sound strategies for managing debt and seeking relief from tax obligations, individuals can regain control of their finances and work towards a brighter financial future.

Debt management techniques such as budgeting, debt consolidation, and credit counselling can help individuals navigate the complexities of bankruptcy and CRA debt. Additionally, exploring tax relief solutions such as deductions, payment plans, and professional assistance can alleviate the burden of tax liabilities. Prioritizing debt management and tax relief is key to overcoming financial challenges and achieving long-term financial well-being.

Bankruptcy and *CRA Debt**: Understanding Bankruptcy in Canada*

What is bankruptcy?

Having a solid grasp of how bankruptcy can affect a person is vital for those experiencing financial difficulties. Things such as the different types of bankruptcy, the procedure for initiating bankruptcy proceedings, and the real-life impact it has on a person’s daily life are crucial for anyone considering personal bankruptcy to understand. By examining the intricacies of bankruptcy, I hope you will gain valuable insights into how to effectively navigate this intricate legal process.

Whether contemplating personal or corporate bankruptcy, understanding critical aspects such as which assets can be liquidated by a Trustee, how your debt gets discharged, and creditor negotiations is essential. With the appropriate knowledge and assistance, people can make well-informed choices to manage their debts to head towards a new financial beginning.

*Bankruptcy law**s in Canada*

Bankruptcy laws in Canada are a set of legislation and regulations that govern obtaining bankruptcy protection and the subsequent handling of a person or business’ financial affairs. These laws are designed to provide individuals and companies with a second chance to manage their debts and start afresh.

In Canada, the main governing legislation for bankruptcy is the Bankruptcy and Insolvency Act (BIA), which outlines the procedures and requirements for obtaining relief to restructure debts under either a consumer proposal or a Division I proposal.

If restructuring is not a possibility, the BIA also covers the procedures for what is always the last choice, a liquidating bankruptcy. The BIA also covers the rights and responsibilities of debtors, creditors and insolvency trustees. Additionally, each province has its legislation that may impact the result of bankruptcy under federal laws.

In the case of larger and more intricate corporations, the Companies’ Creditors Arrangement Act (CCAA) presents an additional federal statute to be considered. This legislative provision enables such substantial entities to effectively reorganize their operations and financial matters, thereby ensuring their sustained business activities and provision of employment opportunities for Canadians.

Individuals and businesses alike must gain comprehensive knowledge of these legal frameworks and diligently seek expert counsel before undertaking any bankruptcy-related determinations.

bankruptcy and cra debt

Bankruptcy and CRA Debt

Overview of the CRA

The CRA is entrusted with the pivotal responsibility of overseeing the execution of tax laws and programs on behalf of the Canadian government at the federal level. From 1867 until 1999, the Department of National Revenue, commonly referred to as Revenue Canada bore the responsibility of overseeing tax services and programs. However, in 1999, a comprehensive reorganization took place, resulting in the establishment of the Canada Customs and Revenue Agency (CCRA).

Subsequently, in 2003, the CCRA underwent further transformation, giving rise to the inception of the Canada Border Services Agency (CBSA), thereby altering the agency’s core focus and subsequently prompting its name change to CRA.

The CRA’s mandate revolves around the proficient and equitable collection of taxes, diligent administration of benefits, and rigorous enforcement of tax laws. Additionally, they extend their services to taxpayers by disseminating pertinent information and offering assistance to ensure that Canadians have accurate comprehension and adherence to tax obligations.

Upholding the utmost integrity of Canada’s tax system while fostering voluntary compliance through educational outreach and enforcement measures remains at the forefront of the agency’s priorities. Backed by a devoted team of professionals and leveraging cutting-edge technology, the CRA is steadfastly committed to delivering superlative and exemplary services to the Canadian populace.

Types of debt owed to the CRA

Unpaid taxes result in individuals or businesses facing substantial CRA debt financial obligations. It is important to understand the ramifications associated with such indebtedness, given that it can give rise to severe repercussions including wage garnishment, bank account freezing, or legal repercussions. To mitigate the weight of this debt and avert penalties, it is always highly recommended to stay current in your obligations to CRA.

The Canada Revenue Agency (CRA) collects a range of debts from both individuals and businesses. Among these debts, the most prevalent is income tax owed, which represents the unpaid tax on an individual’s or business’s income. Another significant debt includes the Harmonized Sales Tax (HST) or, in provinces without sales tax, the Goods and Services Tax (GST) owed. These taxes apply to most goods and services supplied within Canada. CRA may also assess the individual Directors for GST/HST and employee source deductions not remitted by the corporation.

Furthermore, individuals and businesses may also encounter debts such as payroll remittance, excise tax, and penalties or interest charges resulting from late or erroneous filings. To ensure compliance and avoid further penalties or potential legal consequences, individuals and businesses must promptly and accurately address these debts on time.

Consequences of CRA debt

Noncompliance with the CRA and the resulting indebtedness can lead to serious problems for both individuals and businesses. Failing to pay your tax obligations to the CRA results in penalties, interest charges, and legal repercussions. These ramifications extend beyond mere financial burdens, encompassing wage garnishments, bank account seizures, seizure of amounts owing to the taxpayer from third parties, and property liens.

The CRA can freeze your assets and conduct audits to recover outstanding debts. The detrimental consequences of indebtedness to the CRA can have far-reaching implications, impairing credit ratings and impeding access to loans or mortgages. It is of utmost importance for individuals and businesses to expeditiously address and resolve any outstanding debt owed to the CRA to avert these severe consequences. Retaining a tax professional to assist in dealing with CRA is always advisable.

Bankruptcy and CRA Debt: Exploring CRA Debt Solutions in Canada

Informal Debt Settlements

When you seek an informal debt settlement option with CRA, absent formal insolvency proceedings, you will be disappointed. Without an insolvency proceeding, the CRA representative has no authority to accept anything other than 100 cents on the dollar – payment in full of the assessed tax, penalty and interest.

You can apply for a fairness hearing to see if you can get all or a portion of the penalty and interest eliminated, but the CRA person you speak to can only talk about the full amount that shows up on their computer screen.

*Debt Re**payment Plan*s

CRA will enter into a debt repayment plan, but depending on your situation, again, you may be disappointed. Normally, CRA will only agree to have you pay the full tax debt balance, plus penalty and interest, in 12 monthly instalments over the 1 year. That means that you need to repay the full amount in one year.

If you default on even one payment, then the whole deal is off and CRA will pursue you for the full amount to be immediately repaid. For some, this may be just the breathing room they need and they will be able to repay the full amount of the CRA debt over 12 equal monthly payments. But what if you cannot afford to do that?

Bankruptcy as a Debt Relief Option

Bankruptcy presents a potential solution for individuals or businesses grappling with substantial financial difficulties, especially those brought on by owing a substantial amount to CRA. By discharging most unsecured debts and providing a shield against creditors, it offers a pathway to financial renewal.

Nonetheless, it is crucial to approach bankruptcy as a final option due to its enduring impacts on credit rating, employment in areas that require bonding, and today to a much lesser extent, personal standing. Before making a decision, it is advisable to seek guidance from a qualified licensed insolvency trustee to gain a comprehensive understanding of the ramifications and to evaluate alternative strategies such as debt consolidation, a consumer proposal or corporate financial restructuring.

bankruptcy and cra debt

Bankruptcy and CRA Debt: The Bankruptcy Process in Canada

The bankruptcy process involves a diverse array of stakeholders, each playing a crucial role. Among the key participants are:

The insolvent individual or company, referred to as the debtor, has undergone financial failure and is now also known as the bankrupt.
The licensed insolvency trustee, formerly known as a trustee in bankruptcy, is responsible for managing the bankruptcy proceedings.
The creditors are owed financial obligations by the debtor.
The Office of the Superintendent of Bankruptcy (OSB), holds the mandate to regulate and oversee all administrations governed by the BIA within Canada.

Preparing for Bankruptcy

To prepare for bankruptcy, the debtor, being either the individual or the Director of the company, must make full disclosure to the licensed insolvency trustee about all assets and liabilities and all other information requested by the Trustee. This allows the Trustee to provide the debtor with advice on the realistic available options for the debtor to overcome their debt challenges and hopefully find a solution other than bankruptcy.

The Trustee will want to ensure that the debtor has filed all overdue income tax returns. That way, the debtor, the Trustee and CRA will have a good estimate of all the tax the person owes, subject to review and assessment by CRA of course. At least there will not be any outstanding filings as this can slow down an insolvency process. CRA will want a pause in the insolvency proceedings until they are certain they understand the full amount owed.

If it is decided that an insolvency process is required, such as bankruptcy, then the information also allows the Trustee to prepare all the necessary filing documents.

Filing for Bankruptcy

Filing for bankruptcy is a legal process that allows individuals or businesses to seek relief from overwhelming financial obligations, including CRA debt. It involves filing an assignment in bankruptcy document which is prepared by the Trustee, and reviewed and signed by the debtor. The bankruptcy filing discloses all assets, liabilities, and income and expenses.

Personal bankruptcy can be a complex and emotional decision, but it can provide both a shield against CRA debt collection activities and seizures and simultaneously a fresh start for those individuals struggling with overwhelming debt.

It is crucial to seek the guidance of a licensed insolvency trustee to get the advice necessary to ensure a smooth and successful filing. Bankruptcy is not a decision to be taken lightly, but it can offer a solution to individuals and companies facing insurmountable financial challenges.

Duties and Responsibilities during Bankruptcy

The focus of the BIA in personal bankruptcy is for the honest but unfortunate debtor to a society free of his or her debts. The premise is that the bankrupt, or the officer of the bankrupt corporation, will fulfill their duties with integrity and honesty. The duties are outlined in the OSB’s Directive No. 26. If you are interested, you can read them HERE.

But what if they don’t? What if the individual bankrupt does not fulfill all of their duties and essentially absences themself from the process once they have filed their assignment in bankruptcy? In that case, the Trustee must oppose the bankrupt’s application for discharge and bring the matter to court. With CRA debt, there are times when CRA will automatically oppose a person’s discharge from bankruptcy.

Bankruptcy and CRA Debt Discharge Considerations

Corporations do not receive a bankruptcy discharge; individuals do. When it comes to CRA debt, there are times when CRA automatically opposes a person’s discharge or when a Trustee must.

If an individual filing for bankruptcy has personal income tax debt exceeding $200,000 and if the personal income tax debt accounts for 75% or more of the total unsecured proven claims, they are not eligible for automatic discharge under section 172.1 of the BIA. GST/HST payable is not factored into the determination for high-tax debtors, but taxes on additional income resulting from shareholder loans, draws, or dividends are included in their assessment.

For high-tax debtors seeking discharge, the licensed insolvency trustee will present the bankrupt’s discharge application to the court for a hearing, which the individual must attend. The court’s considerations and the type of discharge order granted for high-tax debtors differ from those in cases of bankruptcy filed by non-high-tax debtors. To avoid this scenario, a high-tax debtor should consider filing an alternative to bankruptcy, such as a restructuring proposal.

Dealing with Bankruptcy and CRA Debt

Outstanding Tax Returns

Unremitted Canadian tax filings mean tax returns that are either outstanding or incomplete within the specified filing deadlines for Canadian taxpayers. Such delinquent filings will incur penalties and interest charges, requiring individuals and companies to prioritize their tax responsibilities with utmost care. It becomes the duty of each taxpayer to ensure the prompt and accurate submission of their tax returns, to avoid negative repercussions.

Tax accountants and lawyers help their clients in fulfilling their tax obligations. Timely resolution of outstanding Canadian tax returns is essential to sustain compliance and avert any future complexities.

As stated above, any person or company contemplating either trying to reach an accommodation from CRA or invoking an insolvency process to deal with their CRA debt must bring all their filings up to date.

Bankruptcy and *CRA Debt**: Discharge in Bankruptcy*

I discussed the issues for an individual high-tax debtor trying to get their discharge from bankruptcy. The Trustee must bring the application to court. At the discharge hearing, subject to any other problematic issues with the debtor’s conduct before or during the bankruptcy administration, CRA will send a lawyer from the Department of Justice to the discharge hearing to request a condition be placed on the bankrupt before they can obtain their discharge.

The condition that the CRA will request is that the debtor pay 25% of the total proven CRA debt to obtain their bankruptcy discharge. Even if the person is not a high-tax debtor, there may be other reasons why CRA will oppose the person’s discharge from bankruptcy. If the CRA file is replete with instances of failed promises, ignoring the CRA representative requests over some time and general “trouble-making” by the taxpayer, the CRA will oppose the discharge.

These are all considerations that a person must discuss with the licensed insolvency trustee up front to end up using a process that is most advantageous to the taxpayer in eliminating their CRA debt.

Rebuilding Your Finances After a Canadian Bankruptcy Discharge

Reestablishing your financial standing following a Canadian bankruptcy discharge may seem like a challenging endeavour. However, with strategic planning and commitment, it is feasible to recover from financial setbacks. The initial step involves developing a budget and adhering to it meticulously, guaranteeing that essential expenses are met while unnecessary spending is curtailed.

Next, it is important to start rebuilding credit in a few different ways:

Obtain a secured credit card. Not the drug store variety, but the kind where you put down a cash security deposit and then you are given a credit card limit equal to your cash deposit. When you make your credit card payments, it gets reported to the credit bureaus. If you make your payments when due, over time, this will increase your credit score.
Take out a small 1 year RRSP loan and pay it off on time. This will also improve your credit score on your credit report.
The two Canadian credit bureaus, Equifax and TransUnion, are now beginning to track residential rent payments. If you are a renter and you make your rent payments on time, this too will increase your credit score.

It is also recommended to seek guidance from a financial advisor or credit counsellor to develop a solid financial plan. With patience and discipline, it is possible to rebuild your finances and secure a brighter financial future.

bankruptcy and cra debt

Bankruptcy and CRA Debt FAQs

Here are the most frequently asked questions and the answers regarding bankruptcy and CRA debt:

Is it possible to file for bankruptcy solely for CRA debt?

When initiating bankruptcy proceedings, it is imperative to include all debts owed. Notably, CRA debt related to income taxes and Director liabilities is treated comparably to other unsecured debts within the scope of bankruptcy proceedings.

What happens to my CRA debt in bankruptcy?

In bankruptcy, CRA debt is included as part of your unsecured debts (the exception being a proprietorship or partnership debt for unremitted HST or employee source deductions). Keep in mind that the CRA may oppose your discharge and the court may make a condition of you paying a portion of the CRA debt to obtain your discharge from bankruptcy.

How does bankruptcy affect my tax refunds?

Tax refunds may be affected in bankruptcy. It’s important to consult with a professional to understand the specific impact on your tax refunds.

Can I include tax debt in a consumer proposal?

Yes, tax debt can be included in a consumer proposal. A consumer proposal offers a structured repayment plan to creditors, including the CRA. It can be a more favourable option than bankruptcy for negotiating repayment terms with the CRA.

What if my tax debt exceeds $200,000 and makes up over 75% of my unsecured debt?

Individuals with personal tax debt exceeding $200,000, constituting over 75% of their total unsecured debts, may not qualify for automatic discharge in bankruptcy proceedings. In such instances, a bankruptcy court hearing will be convened, and potential conditions for discharge may be mandated, such as contributing a specified amount to the bankruptcy estate.

Bankruptcy and CRA Debt Conclusion

I hope you have enjoyed this bankruptcy and CRA debt Brandon’s Blog. Hopefully, you have better insight now into the ways of dealing with CRA debt and what some viable options are.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

An image of a woman holding her head in her hands with an image of a building with a Canadian flag behind her to represent a woman worrying about her bankruptcy and CRA debt. — *bankruptcy and cra debt*

Brandon Blog Post

PROVEN DEBT COLLECTION TIPS AND STRATEGIES TO MAXIMIZE RECOVERY: A LAWYER AND ACCOUNTANT’S COMPREHENSIVE GUIDE

Post author By Brandon Smith
Post date April 29, 2024

Importance of Effective Debt Collection

Welcome to our comprehensive guide on debt collection strategies! In this Brandon’s Blog, you will discover many proven tips to maximize recovery and enhance your success rates in debt collection. Whether you are an experienced collector, just starting, or are an accountant or lawyer trying to help educate your clients, this resource is designed to equip you with effective methods for recovering unpaid debts.

From industry best practices to innovative tools and techniques, we provide valuable insights to help you streamline your collection processes and boost debt recovery. Stay tuned to learn how to optimize your approach and achieve better results in debt collection. Let’s elevate your success in debt recovery together!

Overview of the Debt Collection Process

The debt collection process is a crucial aspect of financial management that requires a strategic and systematic approach. It involves a series of steps to recover outstanding debts while maintaining positive relationships with debtors. From initial contact to negotiation and resolution, each stage demands precision and professionalism to ensure a successful recovery.

Understanding the legal framework, utilizing effective communication techniques, and leveraging technology are key components of a well-rounded debt collection process. Organizations can maximize recovery rates and optimize their financial performance by following best practices and implementing proven strategies. A comprehensive debt collection process overview is essential for success in debt recovery endeavours.

The Impact of *Outstanding Debt**s on Businesses*

Outstanding debts can have a significant impact on businesses of all sizes. When customers fail to pay for the products or services they have received, it can lead to a domino effect of financial challenges for the business. Here are some of the key ways in which outstanding debts can affect a business:

Cash Flow Strain: One of the most immediate impacts of outstanding debts is the strain it puts on the business’s cash flow. When invoices go unpaid, it can disrupt the regular flow of income into the business, making it difficult to cover operational expenses, pay employees, or invest in growth opportunities.

Hindered Growth Opportunities: Businesses rely on a healthy cash flow to invest in new projects, expand their operations, or launch new products and services. When a significant portion of the revenue is tied up in outstanding debts, it can hinder the business’s ability to seize growth opportunities and stay competitive in the market.

Profitability Challenges: Unpaid invoices directly impact the profitability of the business. As debts accumulate, it can lead to a decrease in profit margins, making it harder for the business to generate revenue and sustain its operations in the long run.

Damage to Reputation: Failing to collect outstanding debts can also damage the business’s reputation. Customers may view the business as unreliable or unprofessional if they repeatedly encounter issues with payments or outstanding debts. This can lead to a loss of trust and loyalty among customers, ultimately affecting the business’s bottom line.

Legal Risks: In some cases, businesses may face legal risks if they are unable to collect outstanding debts. Legal actions or disputes with customers can be time-consuming, costly, and damaging to the business’s reputation. Businesses need to have a solid debt collection strategy in place to minimize these risks and protect their interests.

Overall, outstanding debts can have a ripple effect on the financial health, growth opportunities, and reputation of a business. By implementing effective debt collection strategies and working with professional debt collection agencies, businesses can mitigate these risks and ensure a healthier financial future.

Understanding the Impact of Credit History and Credit Reports on Debt Collection

Debt collectors need to have a comprehensive understanding of how credit history and credit reports impact consumer behaviour. By gaining insight into these complexities, debt collectors can improve their communication and collaboration with debtors to reach mutually beneficial resolutions effectively.

This knowledge not only facilitates smoother interactions but also enables debt collectors to operate with professionalism and ethics. It enhances the likelihood of successful collections by customizing discussions to address debtors’ concerns about maintaining a positive credit score and credit report.

Understanding Debt Collection Tools and Systems

The Role of Artificial Intelligence in Debt Collection

Artificial Intelligence (AI) is revolutionizing the debt collection industry by providing businesses with innovative tools and technologies to improve their debt recovery processes. AI-powered solutions offer a wide range of benefits, including increased efficiency, accuracy, and scalability. Here are some key ways AI is transforming debt collection:

Automated Data Analysis: AI algorithms can analyze vast amounts of customer data to identify patterns and trends that can help businesses better understand customer behaviour and payment patterns. This insight allows businesses to develop more targeted and personalized debt collection strategies.

Predictive Analytics: AI-powered predictive analytics can forecast which customers are most likely to default on their payments, allowing businesses to prioritize high-risk accounts and allocate resources more effectively. This proactive approach can significantly improve debt recovery rates.

Chatbots and Virtual Assistants: AI-powered chatbots and virtual assistants can interact with customers in real time, providing personalized assistance and support throughout the debt collection process. These virtual agents can answer customer inquiries, negotiate payment terms, and even process payments, all while maintaining a high level of customer satisfaction.

Machine Learning: AI algorithms can continuously learn and adapt to new data, enabling businesses to optimize their debt collection strategies based on real-time insights. By leveraging machine learning capabilities, businesses can improve their collection efforts and maximize recovery rates.

Compliance and Risk Management: AI-powered solutions can help businesses ensure compliance with regulations and reduce the risk of non-compliance penalties. These tools can flag potential compliance issues, monitor regulatory changes, and provide guidance on best practices for debt collection.

AI is crucial in revolutionizing debt collection practices, helping businesses streamline their processes, improve efficiency, and maximize debt recovery rates. By leveraging AI-powered solutions, businesses can stay ahead of the curve and achieve award-winning collections success.

Benefits of Using Debt Collection Agencies

The benefits of using debt collection agencies include:

Efficient Recovery: Debt collection agencies specialize in recovering outstanding debts promptly and efficiently, ensuring a higher recovery rate.

Expertise and Industry Knowledge: Debt collection agencies have specialized knowledge of debt recovery laws, regulations, and best practices, enabling them to navigate the complexities of debt collection with precision.

Professional Expertise and Experience: Debt collection agencies bring a wealth of expertise and experience to the table, using successful tactics customized to each debtor’s situation to maximize recovery rates.

Streamlined Operations: By outsourcing debt collection to experts, businesses can focus on their core operations while the debt collection agency handles the details of debt recovery.

Improved Cash Flow: Recovering unpaid debts can improve cash flow and financial stability for businesses, enabling them to invest in growth opportunities and future success.

The Power of *Online Payment**s in Debt Recovery*

In today’s digital age, online payments have revolutionized the way organizations approach debt recovery. With the rise of self-service portals and digital payment platforms, customers have more control over their repayment options, leading to a more positive and efficient debt recovery experience.

One of the key advantages of online payments in debt recovery is the convenience it offers to past-due customers. By allowing customers to set up payment schedules, review their payment history, and make secure payments online, organizations are empowering customers to take charge of their debt repayment journey. This self-service approach not only gives customers a sense of control but also reduces the likelihood of resistance when it comes time to pay back.

Moreover, online payments streamline the debt recovery process for organizations as well. Debt collection software enables organizations to accept online payments without involving third-party merchants, ensuring added security and lower costs. Additionally, automated reminders and notifications can be sent to past-due customers, prompting them to make timely payments and reducing the manual workload for recovery teams.

By implementing a digital-first contact strategy and leveraging debt collection software, organizations can bridge the gap between customer expectations and the reality of debt recovery. Automating debt-collection tasks, such as implementing chatbots and virtual assistants, allows companies to scale up their debt-collecting operations without the need to hire more agents or allocate additional resources.

Segmentation based on the likelihood of self-cure and prioritization is also crucial in managing multiple past-due accounts effectively. By categorizing accounts based on their risk of non-recovery and legal implications, organizations can focus on addressing older debts with higher risks first and prevent further complications.

The power of online payments in debt recovery lies in its ability to provide customers with a convenient and secure way to repay their debts while streamlining the debt recovery process for organizations. By embracing digital payment solutions and automation, organizations can enhance the customer experience, improve collection rates, and ultimately achieve their debt recovery goals more efficiently.

Debt Collection: Establishing Effective Communication with Debtors

Communication Techniques are crucial in debt collection to maintain professionalism and foster positive relationships with debtors. By practicing active listening and empathy, collectors can better understand the debtor’s situation and work towards mutually beneficial solutions. Clear and transparent communication is key to conveying expectations, deadlines, and consequences effectively. Maintaining a professional demeanour in all interactions helps build trust and credibility, increasing the likelihood of successful debt recovery.

The Importance of Communication in Debt Collection

Clear and transparent communication is essential in debt collection to build trust and maintain positive relationships with debtors. By clearly explaining the debt situation, including outstanding amounts, due dates, and consequences of non-payment, collectors can ensure debtors understand their obligations.

Transparency in communication also involves providing accurate information about payment options, negotiation terms, and any legal implications.

This approach fosters cooperation and reduces misunderstandings, leading to more successful debt recovery outcomes. Maintaining a professional tone throughout all interactions and being open and honest in communication can help collectors establish credibility and increase the likelihood of recovering unpaid debts.

Effective Communication Techniques for Successful Debt Collection

Effective communication is essential in debt collection to build trust, foster transparency, and ultimately achieve successful debt recovery. By implementing the following communication techniques, creditors can enhance their interactions with debtors and improve their chances of recovering outstanding debts.

Personalization: When communicating with debtors, it is crucial to treat them as individuals rather than just an account number. Addressing them by their name and showing empathy towards their situation can help establish a more positive relationship and increase the likelihood of cooperation.

Clarity and Transparency: Communicate the terms of the debt, including the amount owed, due dates, and consequences of non-payment. Avoid using jargon or complex language that may confuse debtors, and be transparent about any fees or charges associated with the debt.

Active Listening: Listen attentively to debtors’ concerns, questions, and reasons for non-payment. By demonstrating active listening skills and showing an understanding of their perspective, creditors can build rapport and potentially find mutually beneficial solutions to resolve the debt.

Maintain a professional demeanour: While it is important to be empathetic and understanding towards debtors, it is equally important to maintain a professional demeanour in all interactions. Avoid using aggressive or threatening language, and always remain courteous and respectful, even in challenging situations.

By implementing these effective communication techniques in debt collection efforts, creditors can build stronger relationships with debtors, increase the likelihood of debt recovery, and ultimately improve their overall financial health. Remember, successful debt collection is about collecting money maintaining positive relationships and fostering trust with debtors.

Leveraging Communication Channels for Maximum Results

Effective communication is key in debt collection efforts, as it plays a significant role in building trust, resolving conflicts, and ultimately recovering debts. By leveraging various communication channels strategically, creditors can enhance their chances of successful debt recovery. Here are some tips on how to maximize the use of communication channels in debt collection:

Utilize Multiple Platforms: In today’s digital age, creditors have a plethora of communication channels at their disposal. Utilize emails, phone calls, text messages, and even social media platforms to reach out to debtors. By diversifying your communication channels, you increase the chances of getting a response from debtors and prompt them to take action on their outstanding debts.

Tailor Your Message: When communicating with debtors, it’s essential to tailor your message to suit their preferences and circumstances. Personalize your communication by addressing debtors by their name, acknowledging their specific debt, and outlining clear steps for resolution. By showing empathy and understanding, you can build a rapport with debtors and encourage them to cooperate in repaying their debts.

Define Expectations Clearly: Clearly outline the terms of the debt, including deadlines, consequences of non-payment, and available options for repayment. By setting clear expectations from the outset, you reduce the likelihood of misunderstandings and disputes down the line. Be transparent about the consequences of non-compliance while also offering assistance and flexibility where possible.

Provide Regular Updates: Maintain consistent communication with debtors by providing regular updates on the status of their debt. Keep them informed of any progress made in resolving the debt, any payments received, and any changes in the repayment plan. By keeping debtors in the loop, you demonstrate your commitment to resolving the issue and fostering transparency in the debt collection process.

By effectively leveraging communication channels in debt collection, creditors can improve their chances of recovering outstanding debts while maintaining positive relationships with debtors. Clear, personalized, and consistent communication can go a long way in facilitating successful debt recovery follow-ups and enhancing cash flow for businesses.

Debt Collection: Maintaining a Healthy Cash Flow and Financial Health

The Importance of *Timely Payment**s for* Cash Flow Management

Effective debt collection procedures are essential for maintaining a stable cash flow and financial health. Timely receipt of customer payments is crucial for ensuring that a company has the necessary funds to cover expenses and sustain operations. Prompt payment settlements also help reduce the risk of bad debt and enhance the overall financial well-being of the organization.

Delays or missed payments can significantly impact cash flow, leading to disruptions in the debt collection process. Therefore, businesses must prioritize timely payments to ensure efficient cash flow management and successful debt collection.

Strategies for Overcoming Financial Difficulties and Collecting Outstanding Balances

Many businesses face financial difficulties due to various reasons such as unexpected expenses or economic downturns. As a result, collecting outstanding balances has become a challenging task for debt collectors. To overcome these difficulties, it is important to implement effective debt collection strategies that not only help in recovering the outstanding balances but also maintain a positive relationship with the debtors.

Strategies include proactive communication, offering flexible payment plans, and utilizing the services of professional debt collection agencies. By using these strategies, debt collectors can navigate through financial difficulties and successfully collect outstanding balances while maintaining professionalism and empathy towards the debtors.

Legal Considerations and Risk Management in Debt Collection

Legal considerations and risk management are pivotal components in the realm of debt collection practices. The provinces establish the laws that debt collectors must abide by. In Ontario, debt collectors are obliged to abide by the Collection and Debt Settlement Services Act, R.S.O. 1990, c. C.14. Lenders regulated at the federal level, must adhere to appropriate federal laws, to avoid negative legal repercussions. This entails upholding accurate and timely communication with debtors, respecting their privacy, and refraining from engaging in any form of harassment or deceitful methods.

Furthermore, debt collectors must possess a comprehensive understanding of the potential risks entailed in debt collection, such as potential lawsuits or detrimental effects on their own or their clients’ reputations. By implementing effective risk management strategies, such as meticulous documentation and compliance procedures, these risks can be mitigated, ultimately ensuring that debt collection practices are conducted ethically and lawfully.

Through the prioritization of legal considerations and risk management, debt collectors can uphold a professional and esteemed image, while effectively recovering debts.

Debt Collection Conclusion

I hope you enjoyed this debt collection from Brandon’s Blog. This is the final blog in our “Lawyers and Accountants” series. Individuals and business owners must take proactive measures to address financial difficulties, consumer debt and company debt and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns and more associated with your company debt are obviously on your mind.

The Ira Smith Team understands these overwhelming debt financial health concerns. More significantly, we know the requirements of the business owner or the individual who has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious. It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore.

The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now! We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt.

On the contrary. We helped turn their companies around through financial restructuring. We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel. Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, to begin your debt-free life, Starting Over, Starting Now.

Tags bad debt, cash flow, collection efforts, collection process, credit history, credit reports, debt collection agency, debt collection efforts, debt collection process, debt collectors, debt recovery rate, effective communication, online payments, outstanding debts, payment history, payment options, payment plans, successful debt collection, timely payments

Brandon Blog Post

NAVIGATING BUSINESS INSOLVENCY IN CANADA: A LAWYER AND ACCOUNTANT’S COMPREHENSIVE GUIDE TO MASTERING INSOLVENCY LAW

Post author By Brandon Smith
Post date April 22, 2024

Introduction to Business Insolvency

Welcome to our Brandon’s Blog where we will explore the intricate world of insolvency and its profound impact on businesses in Canada from my perspective as a professional in the field. In this exploration of business insolvency, we will uncover the implications that insolvency brings for creditors, shareholders, their lawyers and accountants, and employees alike.

Understanding the complexities of financial distress is crucial for businesses to navigate through turbulent times successfully. Join me as we discuss effective strategies and best practices to mitigate the challenges of insolvency, ensuring a smoother transition toward financial stability.

Definition of Business Insolvency

Business insolvency in the Canadian context refers to the financial state of a business where it is unable to pay its debts as they become due. It is a financial condition, not a legal one. Do not confuse the business or company with the financial condition of being an insolvent person with the legal condition of being involved in bankruptcy proceedings. Corporate insolvency is not corporate bankruptcy.

Corporate insolvency results in the business being unable to pay its debts when due which may make it impossible for the business to continue its operations. Insolvent companies may very well end up in the legal state of bankruptcy or as an alternative to bankruptcy, in insolvency restructuring proceedings.

Business insolvency can force the business to choose one of the insolvency options for businesses, including bankruptcy filings or proposals for restructuring and repayment plans under the Bankruptcy and Insolvency Act (Canada) (BIA).

In Canada, the number of business insolvencies has been on the decline for many years, but the impact of the COVID-19 pandemic has seen a reversal of this trend. Business insolvency filings are on the rise again. However, there are many small businesses where a business bankruptcy process does not make any sense as there are either no or few assets to offset the large company debts. We get calls daily from entrepreneurs of such companies where we tell them it is in their best interests to merely close the business doors rather than spend money to put their company into bankruptcy.

Causes and Warning Signs of Business Insolvency

Economic Downturn and Market Volatility

One of the primary contributors to business insolvency in Canada is the unpredictable nature of economic fluctuations and market volatility. As businesses strive to adapt to shifting market trends and consumer demands, they are often met with unforeseen challenges that can strain financial resources. Economic downturns, changes in consumer behaviour, and global market dynamics all play a pivotal role in determining the financial health of businesses across various sectors.

Cash Flow Problems: Overleveraging and Excessive Debt Burden

Another significant factor that can precipitate business insolvency is overleveraging and an excessive debt burden. While leveraging can be a strategic tool for growth and expansion, it becomes problematic when businesses accumulate debt beyond their capacity to repay. High levels of debt, coupled with declining revenues or profitability, can create a precarious financial situation, ultimately leading to insolvency if left unaddressed.

Poor Financial Planning and Management

Effective financial management and planning are essential components of sustainable business operations. However, inadequate financial oversight and poor planning can leave businesses vulnerable to insolvency. From misaligned budgeting strategies to ineffective cash flow management, deficiencies in financial management practices can exacerbate existing challenges and hasten the onset of insolvency.

Regulatory Compliance and Legal Challenges

Navigating the complex regulatory landscape in Canada can pose significant challenges for businesses, especially concerning compliance and legal matters. Failure to adhere to regulatory requirements, such as tax obligations or industry-specific regulations, can result in legal disputes, penalties, and fines, placing additional strain on financial resources. Moreover, litigation and legal challenges can further impede business operations and contribute to business insolvency.

Technological Disruption and Industry Shifts

The rapid pace of technological innovation and industry shifts can disrupt traditional business models and market dynamics, presenting both opportunities and challenges for businesses in Canada. Failure to embrace technological advancements or adapt to changing industry trends can render businesses obsolete or inefficient, leading to a decline in competitiveness and financial viability. As such, businesses must remain agile and proactive in leveraging technology to stay ahead of the curve and mitigate the risk of insolvency.

External Shocks and Unforeseen Events

External shocks and unforeseen events, such as natural disasters, geopolitical instability, or pandemics, can have profound implications for business continuity and financial stability. The unprecedented disruptions caused by such events can severely impact supply chains, disrupt operations, and erode consumer confidence, thereby jeopardizing the financial health of businesses. While certain external shocks may be beyond the control of businesses, proactive risk management and contingency planning are essential to mitigate their adverse effects.

Remember, proactive planning, decisive action, and collaboration with knowledgeable professionals are the cornerstones of navigating business insolvency effectively.

Business Insolvency: Overview of Insolvency Law in Canada

In Canada, insolvency law plays a vital role in guiding businesses through financially distressed situations. As a professional knowledgeable in this field, I will delve into the types of insolvency proceedings and the key legislation and regulations that govern insolvency processes.

Types of Insolvency Proceedings: In Canada, businesses can navigate various types of insolvency proceedings:

- bankruptcy;
- proposal;
- corporate restructuring;
- receivership.

Bankruptcy involves the liquidation of assets to repay creditors, while a proposal allows for negotiating repayment plans to avoid bankruptcy. For larger corporations, corporate restructuring under different legislation than a proposal (discussed next) is available. Finally, when a secured creditor enforces its security to liquidate the business assets, that is receivership.

Understanding the nuances between these proceedings is essential for businesses facing financial challenges. All of these proceedings are described in detail in my previous blogs in the Lawyer and Accountant Series over the last few weeks.

Key Legislation and Regulations: The BIA applies to all business bankruptcy, proposal and receivership proceedings in Canada. The Companies’ Creditors Arrangement Act (CCAA) applies to corporations that owe more than $5 million to creditors who wish to avail themselves of Canadian bankruptcy protection to restructure their operations and finances.

These are the pivotal legislation for an insolvent person, be they a consumer, individual, proprietorship, partnership or corporation. They govern personal insolvency and business insolvency in Canada. The BIA will govern any personal bankruptcy or corporate bankruptcy.

Understanding these aspects of insolvency law is imperative for businesses as they navigate through financial difficulties. By recognizing the procedures and regulations outlined in the key legislation, businesses can protect their interests and work towards a successful resolution of insolvency issues.

As we continue to unravel the intricate landscape of insolvency law in Canada, I will now explore the specific roles of lawyers and accountants in business insolvency, shedding light on their invaluable contributions to navigating insolvency proceedings effectively.

Role of a Lawyer in Business Insolvency

Lawyers play a critical role in guiding businesses through the challenging landscape of insolvency. There are many complexities and responsibilities involved in representing clients during financial distress. Let’s explore the legal responsibilities and duties, as well as effective strategies for representing clients in insolvency proceedings.

Legal Responsibilities and Duties

A lawyer’s primary responsibility is to ensure that their clients navigate the legal proceedings smoothly, legally and ethically. Upholding the highest standards of professionalism and compliance with relevant laws is paramount in protecting the interests of all involved parties. From providing sound legal advice to negotiating on behalf of clients, every action must align with the legal framework outlined in insolvency law.

In insolvency proceedings, it’s essential to draft and review legal documents meticulously, such as restructuring plans and agreements, to safeguard the rights of creditors, shareholders, and employees. Transparency and adherence to the law are non-negotiable aspects that guide a lawyer’s responsibilities in representing clients effectively.

Strategies for Representing Clients

When representing clients in business insolvency cases, adopting a strategic approach is key to achieving successful outcomes. Clear communication with clients to understand their objectives and concerns forms the foundation of developing a tailored strategy. By conducting in-depth research, analyzing financial documents, and collaborating with other professionals like accountants and insolvency practitioners, lawyers can offer comprehensive legal services.

Each client’s situation is unique, requiring a personalized strategy that addresses their specific needs and goals. Through a combination of legal expertise, practical considerations, and proactive communication, lawyers strive to navigate the complexities of insolvency proceedings effectively. By working collaboratively with clients and other professionals, especially the insolvency professionals, they can secure the best possible resolutions for their clients’ insolvency challenges.

Role of an Accountant in Business Insolvency

Accountants also play a critical role in the realm of business insolvency. The CPA understands the importance of financial analysis and compliance with accounting standards in navigating through the complexities of insolvency. Let’s explore how accountants play a pivotal role in helping businesses facing financial distress.

Financial Analysis and Reporting

Financial analysis and reporting are fundamental aspects of dealing with business insolvency. The accountant’s role involves carefully assessing the financial health of a company experiencing insolvency issues. By analyzing crucial financial statements, cash flow projections, and other relevant data, CPAs can provide insights that help the business understand its current financial situation.

Through their expertise in financial analysis, CPAs identify key areas of concern and create accurate reports that are essential for stakeholders, including creditors, shareholders, and employees, to make informed decisions. Effective financial analysis enables businesses to develop strategies for managing financial distress, paving the way for a smoother resolution of insolvency issues.

Compliance with Accounting Standards

Compliance with accounting standards is a cornerstone for businesses navigating insolvency in Canada. The CPA will ensure that the financial statements are prepared in adherence to the relevant accounting principles and regulations. This commitment to compliance promotes transparency and upholds the integrity of financial reporting.

By maintaining strict compliance with accounting standards, businesses demonstrate their dedication to ethical practices and financial accuracy. This, in turn, fosters trust among creditors, shareholders, and other stakeholders during times of financial distress. Upholding accounting standards is crucial for businesses to mitigate legal and financial risks, emphasizing the need for meticulous attention to regulatory requirements.

CPAs recognize the significance of financial analysis and compliance with accounting standards in guiding businesses through the insolvency process. By providing invaluable financial expertise ensuring adherence to regulatory guidelines, and working with other professionals, especially the insolvency professionals, the external CPA supports businesses in making well-informed decisions and navigating the complexities of business insolvency successfully.

This is how both non-insolvency lawyers and accountants can still play a meaningful role in business insolvency, especially in a business restructuring process. A successful outcome of the business restructuring is the best way for the existing lawyer and accountant to maintain both the client but also a close meaningful business relationship for the long term.

Impact of Business Insolvency

Job Losses and Unemployment

The impact of Canadian business insolvency on job losses and unemployment can be significant. When a business becomes insolvent, it may be forced to lay off employees or shut down entirely, leading to job losses. This can result in a higher unemployment rate as workers find themselves without a job and struggle to secure new employment.

The COVID-19 pandemic has exacerbated these challenges, with many entrepreneurial businesses in Canada continuing to face financial difficulties and the continued risk of closure. Such businesses are still struggling to return to normal revenues, carry unpaid debt taken on during the pandemic, and face rising costs and a shortage of labour.

Targeted measures and support for small businesses are crucial to prevent closures and job losses. By assisting, such as financial aid, access to resources, and support for restructuring, the impact of business insolvency on job losses and unemployment can be mitigated. Additionally, policies like the recent amendments to prioritize creditor claims related to defined-benefit pension plans can help protect employees’ financial security in the event of insolvency.

Effects on Suppliers and Creditors

The effects of Canadian business insolvency on suppliers and creditors can be significant. When a business becomes insolvent, suppliers may face challenges in receiving payment for goods or services provided to the business. This can result in financial difficulties for the suppliers themselves, especially if they rely heavily on the insolvent business as a major customer.

Creditors, including financial institutions and other lenders, may also experience losses when a business files for bankruptcy or proposes a restructuring plan. In most cases, creditors will not receive the full amount owed to them, or they may have to wait a significant amount of time to receive any repayment.

Overall, Canadian business insolvency can have a ripple effect on suppliers and creditors, leading to financial challenges and losses for those involved in the business’s operations. Suppliers and creditors need to assess their credit risks before extending credit and take appropriate measures to protect their interests in the event of a business insolvency.

Potential Closure or Sale of the Business

In Canadian business insolvency, the potential closure or sale of the business can have significant implications for the business owner, employees, creditors, and the economy as a whole. If an entrepreneurial business is unable to meet its financial obligations and is forced to close its doors, it can result in job losses, financial losses for creditors, and a decrease in economic activity in the local community.

For the business owner, the closure or sale of the business can mean the end of their entrepreneurial venture, financial loss, and potential personal liability for both Director liabilities as well as any corporate debt personally guaranteed by the entrepreneur. Such liabilities can have a significant impact on their financial well-being and prospects.

For employees, the closure of a business can result in job loss, uncertainty, and financial hardship. They may struggle to find new employment, especially if the closure is due to broader economic challenges in the industry or region.

For creditors, the closure of a business can mean they probably will not recover the full amount owed to them. They may have to write off the debt as a loss, which can impact their financial stability and ability to extend credit to other businesses.

In terms of the economy, the closure or sale of a business can contribute to a decrease in economic activity, reduced consumer confidence, and a negative impact on the overall business environment. It can also lead to a loss of tax revenue for the government, further impacting public services and infrastructure.

Overall, the potential closure or sale of a business in a Canadian business insolvency is a complex and challenging situation that requires careful consideration of the implications for all stakeholders involved. It underscores the importance of effective financial management, planning, and risk mitigation strategies for entrepreneurial businesses to avoid insolvency and closure in the first place.

Reputation Damage

Reputation damage arising from a Canadian business insolvency can have long-lasting effects on a company. When a business becomes insolvent, it is unable to fulfill its financial obligations, leading to creditors and suppliers losing trust in the company. This can result in difficulty in securing credit, partnerships, and contracts in the future.

Moreover, news of a business insolvency can spread quickly, damaging the company’s reputation among customers and stakeholders. Customers may lose faith in the company’s ability to deliver products or services, leading to a loss of business and revenue. Employees may also become concerned about job security and employee wages. Morale suffers and the most qualified employees can find new jobs quickly. All of this leads to morale suffering which makes the business insolvency closer to a self-fulfilling prophecy.

Reputation damage from a business insolvency can be difficult to overcome. Rebuilding trust with creditors, suppliers, customers, and employees may take time and effort. Companies trying to implement a restructuring insolvency plan need to implement strong communication strategies to address concerns and demonstrate a commitment to financial stability and responsibility.

Overall, reputation damage arising from Canadian business insolvency can have significant consequences for a company’s long-term success and viability. Businesses need to address insolvency issues promptly and transparently to mitigate potential reputational harm.

Navigating Business Insolvency Proceedings

Initiating the Insolvency Process

In Canada, the process of initiating insolvency proceedings is a critical step for businesses facing financial distress. There are two kinds of processes; 1. voluntary and 2. involuntary.

The voluntary process normally begins with the insolvent business formally declaring insolvency by filing for bankruptcy protection under either the BIA or CCAA to begin the restructuring process. Alternatively, the insolvent business can file corporate bankruptcy if liquidation is the only answer for a business that is no longer viable.

The involuntary process would normally begin with either a secured creditor privately appointing or making an application to the Court for the appointment of a receiver. Alternatively, one or more unsecured creditors owed in total at least $1,000 can launch a Bankruptcy Application against the insolvent company.

Seeking professional guidance from experts like insolvency lawyers and licensed insolvency trustees is essential to navigate this complex process effectively. Businesses can begin addressing their financial challenges by initiating insolvency proceedings and working toward a resolution.

Managing Stakeholder Relationships

Managing stakeholder relationships is paramount during times of business insolvency in Canada. Creditors, shareholders, and employees all have vested interests in the outcome of insolvency proceedings. Effective communication and transparency are essential to build trust and mitigate potential conflicts. By keeping stakeholders informed, addressing their concerns, and involving them in decision-making processes, businesses can navigate insolvency proceedings with clarity and confidence.

Business insolvency is a complex issue that requires careful navigation. By understanding the implications for all stakeholders and seeking professional advice, businesses can better prepare for financial challenges.

Resolving Legal issues Within a Business Insolvency

There are two main avenues for addressing legal issues within insolvency cases: 1. Negotiation and Mediation Techniques, as well as 2. Litigation and Court Proceedings. I will now delve into the strategies and approaches essential for navigating through challenging financial times successfully.

Negotiation and Mediation Techniques

When faced with legal issues within insolvency cases, negotiation and mediation techniques can be powerful tools for finding amicable solutions. Insolvency trustees find that engaging in constructive dialogue with stakeholders can often lead to mutually beneficial outcomes. By exploring innovative and collaborative approaches, businesses can avoid unnecessary conflicts and costly legal battles.

Effective negotiation involves understanding the concerns and needs of all parties involved.
Mediation offers a platform for open communication, ensuring that diverse perspectives are heard and respected.
Skilled mediators facilitate the process, guiding toward agreements that protect the interests of creditors, shareholders, and employees.

By adopting a strategic and empathetic approach to negotiation and mediation, businesses can navigate the complexities of insolvency issues with resilience and integrity. The ability to find common ground and explore creative solutions is essential in any business restructuring.

Litigation and Court Proceedings

While negotiation and mediation are preferred methods for resolving legal issues within the insolvency case, there are instances where litigation and court proceedings become inevitable. This is more so within a liquidating bankruptcy proceedings rather than in a business reorganization. Licensed insolvency trustees understand the importance of legal recourse in protecting the rights and interests of all stakeholders involved.

Litigation provides a formal platform for resolving disputes and making legally binding decisions.
Court proceedings ensure that insolvency matters are adjudicated fairly and by the law.
Legal experts specializing in insolvency law offer invaluable guidance throughout the litigation process.

By preparing meticulously and engaging competent legal representation, businesses can navigate the complexities of court proceedings with confidence. While litigation may signify a more adversarial approach, it can also lead to definitive resolutions that provide clarity and direction in times of financial turmoil.

4 Common Business Insolvency FAQs

What is the difference between company insolvency and personal bankruptcy?

Company insolvency refers to a company that is unable to pay its bills and debts owed, while personal bankruptcy is a legal process for individuals who cannot pay their bills to eliminate debt.

When should a company consider filing for bankruptcy?

A company should consider filing for bankruptcy or bankruptcy protection to restructure when they are facing overwhelming financial difficulties, such as a loss of income, high levels of debt, inadequate cash flow, and reliance on personal credit to meet obligations. This only makes sense if action is taken relatively early in the insolvency when there are still assets that can be used in perhaps a different corporate form to continue to run the viable part of the insolvent business.

How much debt does a business need to owe to file for bankruptcy in Canada?

In Canada, an insolvent person or insolvent business needs to owe $1,000 or more to unsecured creditors to be eligible to file for bankruptcy.

Can sole proprietorships and partnerships file for business bankruptcy?

Yes, sole proprietorships and partnerships can file for business bankruptcy, and they would need to work with a Licensed Insolvency Trustee to do so. In these forms of business, it is the sole proprietor or partners who would be filing bankruptcy. As this would be a consumer insolvency, the bankruptcy rules dealing with the insolvency of individuals would guide this kind of bankruptcy process.

Business Insolvency Conclusion

Navigating business insolvency in Canada is a multifaceted challenge that requires careful consideration and strategic planning. As a licensed insolvency trustee, I have explored the intricacies of insolvency law and its impact on businesses, creditors, shareholders, and employees. Understanding the complexities of insolvency is pivotal for businesses to weather financial storms successfully for a brighter financial future.

The role of corporate lawyers and accountants in helping to guide businesses through insolvency proceedings is an important one. By recognizing the significance of legal responsibilities, financial analysis, and compliance with accounting standards, businesses, with the help of a Licensed Insolvency Trustee and insolvency legal counsel can tackle insolvency issues with confidence and resilience.

I hope you enjoyed this business insolvency Brandon’s Blog. Individuals and business owners must take proactive measures to address financial difficulties, consumer debt and company debt and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Tags bankruptcy proceedings, benefit of creditors, business bankruptcy, business insolvency filings, canadian businesses, company debts, consumer insolvency, Corporate Bankruptcy, corporate insolvency, employee wages, financial distress, insolvency of individuals, insolvency options, insolvency process, insolvency professionals, insolvency trustee, insolvency trustees, legal proceedings, secured creditor

Form 31 Proof of Claim Introduction

Background Information on Form 31 Proof of Claim

Purpose of Form 31 Proof of Claim

Importance of Properly Completing Form 31

Section 1: Understanding the Basics of Form 31 Proof of Claim

Definition of Provable Claim

Difference Between Provable and Unliquidated Claims

Identifying False Claims

Section 2: Required Information for Completing Form 31 Proof of Claim

Personal Details of the Creditor

Details of the Claim

Priority of the Claim

Section 3: Additional Considerations for Completing Form 31 Proof of Claim

A Claim of Lessor For Disclaimer of a Lease

Valuing a Secured Claim

Claim by Farmer, Fisherman or Aquaculturist

Claim by Pension Plan for the unpaid amount

Claims Against Directors

Claim of a Customer of a Bankrupt Securities Firm

Complicated or Contingent Claims

Section 4: Procedural Requirements for Submitting Form 31 Proof of Claim

Deadline for Submitting Proof of Claim

Properly Filing the Form 31

Notice of IntentionTo Make A Proposal

Notice of Bankruptcy Process

Section 5: Ensuring Accuracy in Completing Form 31 Proof of Claim – A Step-by-Step Guide to Filing a Proof of Claim

Step 1: Gather Required Information

Step 2: Complete the Header Information

Step 3: Furnish Creditor Details

Step 4: Specify the Debt

Step 5: Provide Supporting Documentation

Step 6: Sign and Date the Form

Step 7: File the Form

Additional Tips and Reminders

Section 6: Common Mistakes to Avoid when Completing Form 31 Proof of Claim

Section 7: Form 31 Proof of Claim FAQs

Conclusion

What Happens to Credit Card Debt When You Die? Introduction

What Happens to Credit Card Debt When You Die? Credit Card Debt and Death

How Credit Card Debt Is Handled After Death

Impact of Credit Card Debt on the Estate

What Happens to Credit Card Debt When You Die? Dealing with Credit Card Debt After Death

Checking for Life Insurance Coverage

Selling Assets to Pay Off Debt

What Happens to Credit Card Debt When You Die? Introduction to the Case

Parties Involved

Debt Dispute and Amount

Purpose of Plaintiff’s Application

What Happens to Credit Card Debt When You Die? Facts and Evidence Presented

What Happens to Credit Card Debt When You Die? Legal Analysis and Arguments

Evaluation of Mrs. Smith’s Liability and Contractual Obligations

Comparison with Similar Cases and Legal Precedents

Interpretation of the Cardholder’s Agreement and Consent to Credit Limit Increases

What Happens to Credit Card Debt When You Die? Comparison with Previous Cases

Reference to the Royal Bank of Canada v. Klassen Case and Its Implications

Analysis of the Similarities and Differences in the Two Cases

What Happens to Credit Card Debt When You Die? The Final Judgment

Summary of the Court’s Decision and Reasoning

Implications of the Judgment on the Parties Involved

What Happens to Credit Card Debt When You Die FAQs

What Happens to Credit Card Debt When You Die Conclusion

Real Estate Receiver Introduction to Real Estate Insolvency

Real Estate Receiver Overview of the Current Market Conditions

Challenges Faced by Developers with In-Progress Projects

Growing Demand for Remedies in Distressed Properties

Real Estate Receivership: Challenges in Residential Condominium Economics

Impact of Construction Delays and Cost Inflation

Strategies for Developers to Mitigate Financial Risks

Real Estate Receiver: Power of Sale vs. Foreclosure Process

Comparison of Power of Sale and Foreclosure Processes

Key Scenarios for Each Approach

Legal Considerations for Lenders and Borrowers

Real Estate Receiver: Workout – The Collaborative Solution

Exploring the Concept of Workouts as a Collaborative Approach

Key Components of a Workout Plan and Forbearance Agreements

Real Estate Receiver: A Detailed Overview of a Real Estate Receivership

What is a receivership and how does it function in Canada’s legal framework?

Who is an approved buyer in the context of a receivership sale?

The role of secured creditors and their rights in receiverships

The timelines and stages of a receivership sale: The role of the approved buyer in Canadian receiverships

*Claim by Farmer**, Fisherman or Aquaculturist*

*Notice of Intention**To Make A Proposal*

Comparison of Power of Sale and *Foreclosure Proces**ses*

*Real Estate Receiver**: A Detailed Overview of a* *Real Estate Receiver**ship*

The role of *secured creditor**s and their rights in receiverships*

Analysis of the percentage of Canadians making minimum *monthly payment**s on* credit cards

How to pay off *credit card**: Importance of* credit, financial literacy and financial planning

Establishing healthy *spending habit**s and avoiding excessive debt*