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GAMBLING HELP ONTARIO: BEATING THE ODDS AND CONQUERING GAMBLING ADDICTION AND DEBT

gambling help ontario
gambling help ontario

gambling help ontario

Gambling help Ontario: What is gambling?

Gambling is the act of betting or wagering on the outcome of an event or a game with the intention of winning money or other material goods. It can take many forms, including playing games of chance like slot machines or cards, betting on sports events or horse races, or participating in games of skill like poker or blackjack.

Gambling can be done in person, such as in a casino or at a horse racing racetrack, or online. It is important to note that gambling can be addictive and can have negative consequences if it is not done responsibly. With the proliferation of online gambling opportunities in Canada, in this Brandon’s Blog, I discuss the issue of gambling, gambling addiction, gambling debt, and gambling help Ontario. I am talking about impulsive behaviour leading to addiction, not about the social gambler.

Gambling help Ontario: What is gambling addiction?

Gambling disorder is a type of impulse control disorder, commonly referred to as pathological or compulsive gambling behaviour, which is characterized by a persistent and recurrent inability to resist the urge to gamble, despite the potential for serious negative consequences. Individuals suffering from gambling addiction may continue to gamble despite the consequences.

Gambling can be a real problem, resulting in financial issues, relationship stress, and lower work performance. It can also lead to mental health concerns like anxiety and depression. If you think you, or someone you know, might be dealing with a gambling addiction, it’s important to get gambling help Ontario.

gambling help ontario
gambling help ontario

Gambling help Ontario: What are some of the usual factors behind a gambling problem?

Pathological gambling, commonly referred to as gambling addiction, is a form of impulse control disorder. Those affected by this disorder experience gambling habits which are an intense compulsion to gamble, even when they are aware of the potential adverse effects it can have on their lives.

Potential contributors to the emergence of a gambling dependency may include, but are not limited to:

  1. Biological factors: Some research suggests that gambling addiction may have a genetic component and that certain brain chemicals may be involved in the development of the disorder.
  2. Psychological factors: People with certain personality traits, such as impulsivity and a need for novelty and excitement, may be more prone to developing a gambling addiction.
  3. Environmental factors: People who are exposed to gambling at an early age or who have access to gambling opportunities may be more likely to develop a gambling addiction.
  4. Social factors: Gambling addiction may be more common in people who have a social network that supports or encourages gambling, or in people who are isolated and may use gambling as a way to cope with stress or negative emotions.
  5. Cultural factors: Gambling is more accepted in some cultures than in others, and people who live in cultures where gambling is more prevalent may be more likely to develop a gambling addiction.

It’s important to note that gambling addiction can affect anyone, regardless of age, gender, or background. If you or someone you know is struggling with gambling addiction, it’s important to seek help as soon as possible.

Gambling help Ontario: What is the prevalence of gambling addiction among individuals?

Accurately estimating the prevalence of gambling addiction in Canada is challenging due to underreporting of the disorder. Nevertheless, studies suggest that gambling addiction is a major public health issue in this country.

The Canadian Centre on Substance Use and Addiction (CCSA) estimates that approximately 2% of Canadian adults are affected by problem gambling, characterized by adverse financial, relational, and mental health outcomes.

With respect to alcohol addiction, the CCSA estimates that approximately 5% of the adult population in Canada meets the criteria for alcohol addiction. This includes approximately 10% of men and 3% of women.

The CCSA also estimates that approximately 5% of the adult population in Canada meets the criteria for drug addiction. This includes approximately 10% of men and 3% of women.

It’s important to note that all addictions, including gambling addiction, can have serious consequences for individuals and their families. If you or someone you know is struggling with addiction, it’s important to seek help as soon as possible. There are many resources available in Canada to help people who are struggling with addiction, including support groups, credit counselling, and rehabilitation programs.

gambling help ontario
gambling help ontario

Gambling help Ontario: How do I stop gambling?

Gambling addiction can be a difficult disorder to overcome, but it is possible for gambling addicts to overcome their gambling concerns and addictive behaviour, stop gambling and regain control of their life. Here are some steps you can take to stop gambling:

  1. Seek help: One of the most important things you can do to stop gambling is to seek help from a healthcare professional or a support group, particularly a gambling help services group. A therapist or counselor who specializes in treating gambling addiction can help you identify the underlying causes of your gambling and develop strategies to overcome it.
  2. Set goals: Identify specific goals that you want to achieve, such as paying off debt or rebuilding relationships with loved ones. Setting goals can help you stay focused and motivated as you work to overcome your gambling addiction.
  3. Avoid triggers: Identify the situations and circumstances that trigger your desire to gamble, and try to avoid these triggers as much as possible. This may include avoiding places where gambling is available, such as casinos, or avoiding activities that you associate with gambling, such as watching sports or playing card games.
  4. Find healthy coping mechanisms: Gambling may have been a way for you to cope with stress or negative emotions, so it’s important to find healthier ways to manage these feelings. This may include exercising, spending time with friends and family, or practicing relaxation techniques such as deep breathing or meditation.
  5. Get support: Surround yourself with a support network of friends, family, and loved ones who can offer encouragement and support as you work to overcome your gambling addiction. Joining a support group, such as Gamblers Anonymous, can also be a helpful way to connect with others who are facing similar challenges.

Remember, overcoming gambling addiction takes time and effort, and it’s important to be patient with yourself. It may take several attempts before you are able to successfully stop gambling. Don’t get discouraged, and keep seeking help if you need it.

Gambling help Ontario: Strategies for managing debt from gambling

People with gambling problems ultimately will have significant debt, which can be overwhelming and stressful. If you are struggling with gambling addiction and debt, it’s important to take steps to address both issues as soon as possible. Here are some steps you can take to deal with gambling addiction debt:

  1. Acknowledge the problem: The first step in recovering from gambling debt is to admit that you have a problem and take responsibility for it. This can be difficult, but it is an essential step in the recovery process.
  2. Create a budget: To manage your debt payments, you need to have a clear understanding of your financial situation. Create a budget that takes into account your income, expenses, and debts.
  3. Make a plan to pay off your debts: Once you have started to address your gambling addiction, it’s important to make a plan to pay off your debts. This may include negotiating with creditors, consolidating your debts, or seeking assistance from a debt management organization.
  4. Cut expenses: Look for ways to cut your expenses so that you can free up more money to put towards your gambling debt. This might involve cutting back on non-essential expenses, such as dining out or entertainment.
  5. Look for additional income: If you are unable to cover your debts with your current income, consider looking for additional sources of income, such as taking on a part-time job or selling assets.
  6. Negotiate with creditors: If you are unable to make your minimum payments, consider negotiating with your creditors to see if they will accept a lower payment or extend the repayment period.Retain a lawyer: If negotiations with creditors fail or if you are facing legal action, it may be beneficial to consult a legal professional for assistance.
  7. Speak to a licensed insolvency trustee (formerly called a licensed bankruptcy trustee): If you feel that you are in over your head in debt and there is no way out of it, get a no-cost consultation with a licensed insolvency trustee who can review your situation and make recommendations.
  8. Avoid temptation: To avoid falling into gambling debt again, it is important to avoid situations that may trigger your gambling addiction. This might mean avoiding casinos or online gambling sites or finding alternative ways to cope with stress or boredom.
  9. Seek support: Recovery from gambling debt is a long and difficult process. It is important to seek support from friends, family, and professional resources to help you stay on track and achieve your financial goals.
  10. Using a financial professional such as a non-profit credit counselor or a debt coach: They can determine if they can make a plan for you that will see you pay off your debts in a reasonable period of time. If not, they will recommend you seek advice from a licensed insolvency trustee.
  11. Deny access to financial resources and credit: In order to impede any additional gambling activities and debt accumulation, it may be wise to restrict your access to money and credit. This could involve canceling credit cards and lines of credit, closing bank accounts, or entrusting a reliable relative or friend to manage your funds.

    gambling help ontario
    gambling help ontario

Gambling help Ontario: Is it possible to have gambling debts eliminated in bankruptcy proceedings?

In Canada, it is possible to have gambling debts eliminated in bankruptcy proceedings under certain circumstances.

Under the Bankruptcy and Insolvency Act (Canada), gambling debts may be discharged (eliminated) in bankruptcy if they meet certain criteria. For example, you must not have obtained the money to gamble with through fraud, embezzlement, or larceny.

It is advisable to seek the counsel of a licensed insolvency trustee if you are thinking of filing for bankruptcy with regard to financial obligations resulting from gambling. Doing so will allow you to gain an understanding of the available options and specific regulations applicable to your circumstance so that you can make an informed decision on whether bankruptcy is the best course to take.

Bankruptcy should not be the first option for dealing with a gambling addiction; it should be the last resort. Therefore, it is necessary to explore other options first. However, if any insolvency process is pursued, one must also be committed to tackling the addiction head-on in order to achieve a full recovery. Ignoring the root of the problem and simply filing for bankruptcy will not benefit anyone in the long run.

Gambling help Ontario: If bankruptcy is the last resort, what is first?

The answer is a consumer proposal. A licensed insolvency trustee can offer both a consumer proposal and bankruptcy as two options that are available to individuals who are struggling with debt and are unable to pay their bills. Both options can help you manage your debts and get a fresh start financially, but they work in different ways and have different consequences.

A consumer proposal is a formally proposed payment plan to creditors. Administered by an insolvency trustee, the proposal is intended to have the person make an affordable monthly payment for no more than 60 months to settle all of the debt. It must be approved by creditors.

There are some key differences between a consumer proposal and bankruptcy in Canada. To be eligible for a consumer proposal or bankruptcy, an individual must be insolvent. To qualify for a consumer proposal, you cannot owe more than $250,000 (excluding mortgage debt) and need to have a reliable regular income source.

Feel free to reach out to me to find out more about a consumer proposal for debt relief.

gambling help ontario
gambling help ontario

I hope that you found this gambling help Ontario Brandon Blog helpful. Other types of addiction can also result in debts.

If you or your business are facing serious debt issues, and you are unsure if bankruptcy is the best solution, call me for advice on ways to tackle your debt, whether it stems from gambling or other sources.

It is not your fault that you remain in this way. It has been demonstrated that traditional methods of addressing financial difficulties are inadequate. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will thoroughly evaluate your circumstances and devise a tailor-made solution to address both your financial and emotional concerns. Let us lighten your load and dispel any lingering concerns. We will design a debt settlement strategy for you. We know that we can help you now.

We recognize that individuals and companies facing monetary difficulties require an optimistic opportunity for hope. The Ira Smith Team offers a wide array of solutions to fit any situation – never settle for a one-size-fits-all approach!. Not everyone has to file for bankruptcy in Canada. Most of our clients never give up and explore the alternatives to bankruptcy, thus taking control of their financial future! Our mission is to empower people and businesses to steer clear of bankruptcy and achieve financial success.

You can create a unique payment plan to conquer debt and achieve financial success! It will be as unique and extraordinary as the challenges and struggles you are facing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

gambling help ontario
gambling help ontario
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Brandon Blog Post

TORONTO PAYDAY LOANS: UNLOCKING FINANCIAL FREEDOM OR PAINFUL FINANCIAL SLAVERY?

Toronto payday loans
Toronto payday loans

Toronto payday loans popularity

The city of Toronto is Ontario’s largest city and is home to a growing number of individuals and families who are financially strapped and in need of quick financial assistance. Payday loans, which are short-term personal loans typically used to cover unexpected expenses, are becoming increasingly popular amongst Toronto residents due to the ease and convenience of applying for this quick loan product.

Payday loans offer borrowers immediate access to capital (either the same or within 1 business day) and these cash loans can be used to cover emergency costs, such as medical bills or car repair costs, when you don’t have the money to do so otherwise. There are many payday loan lenders in Toronto, each offering different terms and conditions regarding loan amounts, repayment terms, and fees.  The one thing all of these providers with their alternative payday loans have in common is that the financial solutions they offer are very pricey.

This Brandon’s Blog provides a beginner’s primer to the Toronto payday loans industry. We will analyze the associated regulations, and different loan options, and provide some practical advice.

Toronto payday loans regulations

Payday lenders are usually the first and also the last stop for those who would be unable to secure a loan through more traditional banking institutions. They are the most vulnerable so the province implemented additional regulations to further regulate this industry.  The Government of Ontario has enacted regulations for payday loan services in Toronto and the rest of Ontario. It is an essential part of trying to protect consumers residing in one of Canada’s most populous provinces. These regulations are aimed at ensuring that individuals accessing this kind of short-term loan services are provided with effective consumer protection.

The city of Toronto defines Toronto payday loans lenders as any establishment providing payday loans from physical locations, or any portion thereof, operating as a payday lender as outlined in the Ontario Payday Loans Act.  In 2018, the City of Toronto limited the number of permits issued to businesses that offer payday loan services, setting the cap at the number of licenses already issued by that time.

Toronto payday loans
Toronto payday loans

Ontario Payday Loans Act

The Ontario Payday Loans Act, 2008, S.O. 2008, c. 9 has been established to enforce regulations on the payday loan industry in Ontario. Since its implementation, numerous amendments have been made in an effort to safeguard consumers in Ontario who utilizes payday loan services. This piece of legislation lays out the requirements for eligibility, the maximum allowable rate of interest, and various repayment plan choices.

Four key provisions of this Act are:

  1. The borrower retains the right to settle any or all of the payday loan prior to the expiration of the loan agreement. The lender is not authorized to receive or request any part of the borrowing cost from the borrower prior to the end of the payday loan contract.
  2. The cost of borrowing related to a payday loan agreement may be limited if the amount of the advance is $1,500 or less (or, if a different amount is prescribed, that amount or less) and, if the agreement has a duration of 62 days or less (or, if a different number of days is prescribed, that number).
  3. A lender is permitted to levy a charge of up to 2.5 percent per month on the unsettled principal balance in the event of delinquency, not compounded unless an alternative rate has been explicitly prescribed.
  4. A payday loan agreement should not impose any default charges upon the borrower beyond reasonable legal costs incurred by the lender in attempting to collect the required payment. A dishonoured cheque, pre-authorized debit, or other instruments of payment may incur a fee of up to $25.

The Canadian Criminal Code sets the maximum interest rate that can be charged in Canada at 60% per annum. However, payday lenders are exempt. So in spite of the federal and provincial guidelines, payday lenders in Ontario are typically authorized to collect interest of $15-$20 for every $100 borrowed. When expressed as an annual percentage rate (APR) – the same metric applied to credit cards, mortgages, auto loans, etc. – this translates to the cost of borrowing permitted being an APR ranging from 391% to more than 521%!

What other paperwork is required for making an application for Toronto payday loans?

When applying for Toronto payday loans, it is important to ensure you have all the necessary documents to submit alongside your application. These documents include:

  • government-issued photo identification, such as a driver’s license or passport;
  • a void cheque or a debit payment authorization form;
  • an active bank account statement with 30-60 days of account activity;
  • proof of where you live, such as a utility bill; and
  • a recent pay stub to prove your source of income and your regular income or monthly salary.

It is important to note that these documents are used to verify your identity and demonstrate your financial status.

Toronto payday loans
Toronto payday loans

Toronto payday loans interest rates and fees

Payday loan interest rates and fees in Toronto can vary greatly depending on the lending institution. Credit scores play an important factor in determining the applicable rate, as each lender has their own set of policies and regulations. Alongside the interest rate, fees also are charged.

When considering Toronto payday loans, it is essential to investigate and compare the various lenders available to ensure you secure the most competitive interest rate and fees. Prior to signing any loan agreement, be sure to read it thoroughly and check that all applicable fees and interest rates are correctly stated.

The Toronto payday loans application process

If you can’t make it to one of the brick-and-mortar payday loan locations for a time of day during regular business hours, don’t fret about it.  Toronto payday loans have an application process that can be easily completed through one of the many online payday lenders with payday loan online applications which can be completed with minimal effort. Simply provide one of these online lenders with your personal and financial information and they will assess your eligibility. Upon passing the approval process, access to funds can be accessed by way of transferring to your account in a timely manner.

Before beginning the application process for Toronto payday loans, it is essential to thoroughly familiarize yourself with all the applicable terms and conditions. Furthermore, it is highly recommended to plan and budget for the loan repayment in order to avoid any extra fees and charges.

Toronto payday loans
Toronto payday loans

Toronto payday loans:  What if I am on ODSP?

A certain group of Canadians use the convenience of quick access to short-term funds. But for those receiving Ontario Disability Support Program (ODSP) payments in Toronto, the question becomes: is it possible to apply for and receive an online payday loan?

The answer is not so simple, as many lenders have restrictions against lending to individuals receiving ODSP.

Toronto payday loans:  The Canadian government survey

The Financial Consumer Agency of Canada (FCAC) performed a study on payday advance loans, producing insightful and sometimes surprising results. The survey exposed that, while cash advances are a practical method for customers to gain access to credit, they are a pricey form of loan, with a common interest rate of 546%. Moreover, fewer than 43% of respondents recognized the loan terms for this kind of financing.

The findings also indicate that a large proportion of individuals lack the financial literacy needed to make sound borrowing decisions that are beneficial to their financial situation. It has been observed that the percentage of Canadian households using these forms of debt has risen significantly in recent years, reaching 4%. Furthermore, 45% of the respondents indicated that they commonly resort to such loans to cover unexpected expenses.

Survey results showed that 41% of respondents utilized temporary payday advance loans for necessary and also predicted costs. Consider that statement. Another way of phrasing it is that 41% of the people who participated in the study said that they use payday advances to get cash for budgeted costs (although I am certain none of those individuals actually put together a budget plan). That indicates that their anticipated regular monthly expenditures are greater than the money they earn each month.

According to the survey, the majority of users of these types of loans tend to have lower to moderate incomes, with over half reporting annual incomes of under $55,000. However, it should be noted that approximately 20% of users who answered the survey stated that their household incomes were above $80,000 and 7% of respondents said they had a household income in excess of $120K.

The survey results, not surprisingly, showed that most of the users rarely looked for financial advice even when it was needed.

Toronto payday loans
Toronto payday loans

Toronto payday loans:  Are there alternatives?

For those with a bad credit history, a bad credit score or for whatever reason no access to traditional banking and financial institutions, payday loans are an expensive option but are normally the only option. Toronto residents have access to several alternatives which may provide a more cost-effective solution. Some of these alternatives include credit unions, installment loans and peer-to-peer lending.

Many times when people have to resort to Toronto payday loans it really means that they are experiencing serious financial difficulties.  The best option, rather than taking on payday loan debt is to seek help from either a non-profit credit counselling agency or even seek a no-cost consultation from a licensed insolvency trustee.

The unfortunate truth is that Toronto is an incredibly costly city to live in. If a single person or a family is making only $55,000 a year, they are barely scraping by. No matter how much financial knowledge and understanding one has, the reality remains the same. Therefore, it is essential that we start educating children in school so they will gain an understanding of what I believe are the 3 main foundations of financial literacy:

  • the cost of credit;
  • the need for emergency savings; and
  • seeking professional advice for both financial opportunities or financial problems.

Tips for repaying Toronto payday loans

Payday loans can be a great way to manage your finances in a pinch, but it’s important to remember to pay them back on time. Here are five tips to help you successfully repay payday loans in Toronto:

  1. Set a repayment date and mark it in your calendar. Knowing when your payday loan payment is due will help you plan and budget accordingly.
  2. Make more than the minimum payment. Paying more than the minimum will help reduce the total amount of interest you pay over the life of the loan.
  3. Pay by direct deposit whenever possible. Setting up direct deposit for your loan payments can help ensure that you never miss a payment.
  4. Call your lender if you can’t make your payment. Most lenders will be willing to work with you to reschedule your loan payment if necessary.
  5. Create a budget and stick to it. Developing a budget and sticking to it will help you avoid taking out more payday loans in the future.

Toronto payday loans:  Instant approval of instant problems?

I hope you enjoyed this Toronto payday loans Brandon’s Blog.

Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. 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.

We understand 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, Starting Over, Starting Now.

Toronto payday loans
Toronto payday loans
Categories
Brandon Blog Post

DAMAGES FOR MENTAL DISTRESS CANADA:  DAYLAN HEIDEL ORDERED TO PAY $160K TO REVENGE PORN VICTIM

damages for mental distress
damages for mental distress canada

Damages for mental distress in Canada: What are psychological injuries?

In Canada, there are a number of different options available to those who have suffered from psychological injuries. These include a civil lawsuit for damages for mental distress, which can help to cover the costs of treatment and other related expenses.

There are a variety of factors that will be considered when determining the available damages. These include the severity of the injuries, the impact on the victim’s life, and if this type of bodily harm was inflicted on purpose.

Earlier this year, a Saskatchewan court ordered a man to pay $160,000 in damages to a victim of revenge pornography abusive conduct. This is a significant decision that could have far-reaching implications for other victims of this heinous crime. The man’s lawyer said that his client will never be able to afford to pay off this claim and may have to file for personal bankruptcy in order to get released from this debt. This really piqued my interest.

In this Brandon’s Blog, I describe the decision of damages for mental distress in Canada awarded against the man, Daylan Heidel.

Damages for mental distress in Canada: Can you sue for emotional damage or mental suffering in Canada?

Mental impairments or mental distress describes the suffering caused by an accident, injury, or any kind of distressing experience. People who have experienced a traumatic event, including those who may have witnessed the event and also family members of the sufferers, can file a civil legal action claiming mental distress or psychological suffering.  It affects all of these people’s quality of life and produces catastrophic injuries to a person’s psyche.

Usually, in our society, psychological distress, mental health issues or mental suffering are typically minimized or even considered inconsequential health conditions contrasted to physical harm. The truth is that medical evidence has shown that psychological injuries like emotional distress are just as real an injury as physical ones. Unlike a physical injury, it can last for a long period of time and could lead to long-term emotional damage. This is often ignored. The victim could have various symptoms from the traumatic experience.  These include post-traumatic stress disorder or other symptoms, including sleep disorders, huge mood swings and loss of dignity long after the stressful event.

Nevertheless, you may be able to start a lawsuit against the party that is the source of your emotional distress. You might also be qualified for payment according to your legal rights. If you have the ability to collect on the award, that cash can go for spending on the treatment that you need.

Canadian courts are showing that they are willing to give awards for damages for mental distress in Canada.

damages for mental distress
damages for mental distress canada

Damages for mental distress in Canada: Mental distress damages awarded in the Saskatchewan court case

Daylan Heidel was scorned by his ex-lover. He thought that he would get even by uploading nude pics and videos of her to various internet sites. He didn’t just post her intimate images without her consent, but also published her name and personal details. The Judge awarded her $160,000 in general and aggravated damages for mental distress in Canada.

Heidel had already served some jail time a while back. He was convicted of distributing images of six women without their consent. One of them got a lawyer and sued Heidel for violating her privacy. A video of her has 1.5 million views. So every time somebody accesses that material, it’s another violation of her. She was able to sue for those continuing violations.

Since the federal government criminalized the non-consensual distribution of nude pics and videos in 2015, several provinces, including Saskatchewan, have amended privacy laws to make it easier for victims to take civil action and sue perpetrators for compensation. This is a form of sexual abuse.  Although there have been only a few cases so far, this shows that the law is working and that victims now have a way to stand up for their rights, which can have a huge psychological benefit for the aggrieved party.

A Court of King’s Bench for Saskatchewan Judge has found that Heidel’s actions were malicious, flagrant, and intentionally inflicted mental distress. This is a significant ruling, as civil suits for an award for damages for mental distress in Canada are still not common.

This is the largest sum awarded thus far for damages for mental distress in Canada arising from the distribution of intimate photos without the person’s consent. This decision is good news for supporters of victims of sexual violence. In our culture, we tend to put a price on things, and so this decision values the lives of sexual assault victims.

The defence lawyer for Heidel stated that his client may appeal the decision or file for bankruptcy, even though he accepts responsibility for his actions and regrets them deeply. The lawyers went on to say that this case should serve as a warning that sharing intimate images without consent can have severe consequences.

Heidel’s defence lawyer’s lack of appreciation for the nuances of Canadian bankruptcy law is evident.  It is obvious that he is not an experienced lawyer for bankruptcy and insolvency matters.

Damages for mental distress in Canada and bankruptcy

The defence lawyer for Heidel believes that his client can file for bankruptcy and avoid liability for the court award. However, given the wording the Judge used, this is incorrect. As stated in numerous previous blogs on personal bankruptcy, it is the discharge from bankruptcy that eliminates the person’s debts.

However, according to section 178(1) of the Bankruptcy and Insolvency Act (Canada) (BIA), there is a class of debts that are not discharged when the bankrupt receives their absolute discharge from bankruptcy.

Specifically, part of section 178 (1) states:

“178 (1) An order of discharge does not release the bankrupt from

(a) any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail;

(a.1) any award of damages by a court in civil proceedings in respect of

(i) bodily harm intentionally inflicted, or sexual assault, …”

The court found that the defendant’s actions constituted intentional infliction of mental distress. The plaintiff was able to demonstrate that the defendant’s conduct was extreme and outrageous, intentionally or recklessly causing the plaintiff emotional distress. The plaintiff also established that she incurred a visible and demonstrable injury as a result of the defendant’s actions.  Courts in Canada have held that mental distress intentionally inflicted is bodily harm, a personal injury claim.

Further, the Judge having chosen the words “malicious, flagrant, and intentionally inflicted mental distress” in awarding the damages for mental distress in Canada in this sexual assault case, has recognized the defendant’s outrageous conduct and puts the award squarely within the scope of BIA section 178(1)(a.1)(i).

That means that Heidel will never be able to eliminate this debt with a discharge from bankruptcy if he ever chooses to file.  This debt will follow him forever.

damages for mental distress
damages for mental distress canada

Damages for mental distress in Canada:  Is there a need to review your situation?

I hope you enjoyed the damages for mental distress in Canada Brandon’s Blog.

Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. 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.

We understand 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, Starting Over, Starting Now.

damages for mental distress
damages for mental distress canada
Categories
Brandon Blog Post

BILL C-228: WILL HUGE PENSION PRIORITY IN CANADIAN INSOLVENCY BE REAL FINALLY?

Bill C-228
Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

Bill C-228: Are pensions protected in Canadian insolvency proceedings?

The long-awaited Bill C-228, an Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985 proposes to give priority and therefore some financial security to pensions of workers in the event of a Canadian insolvency of their employer, may finally soon become law. This is a significant victory for pensioners and unions across the country who have been advocating for this change for many years.

This new law will provide much-needed protection for pensioners in case of the insolvency of pension plan sponsors. It is a major step forward in ensuring that pensioners are able to retire with dignity, security and frankly, what they bargained for.

Bill C-228:  Right now pensions in bankruptcy can be taken away

The Canadian insolvency system has come under heavy analysis and criticism for years for its treatment of pensioners when the employer goes bankrupt or files for bankruptcy creditor protection. Bill C-228 comes from a long line of private members’ bills presented in the House of Commons of Canada that never went anywhere – until now.  It makes every effort to make previous employees getting a pension, and those who someday expect to get payments from their pension plan, a priority in the insolvency process.

In this Brandon’s Blog, I discuss the current status of Bill C-228 and its implications in making pensioners a priority in bankruptcy if it becomes law as presently composed.

Bill C-228
Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

Bill C-228: What can cause you to lose your pension?

Underfunding is a major concern for traditional, defined-benefit pension plans (DB Pension Plans). In other words, do they have enough pension assets and therefore enough money to meet their projected future pension obligations of insolvent pension funds? Inadequate actuarial assumptions, poor investment returns, and mismanagement can lead to pension plan underfunding. In the case of corporate insolvency of a large employer with a DB Pension Plan, this issue always arises. Underfunded pensions in bankruptcy wind up hurting retirees.

The Sears Canada court-supervised liquidation forced us to again focus on the treatment of pensioners in corporate bankruptcies under the Bankruptcy and Insolvency Act (Canada) (BIA) or restructurings and liquidations under the Companies’ Creditors Arrangement Act (CCAA). It was widely reported that representative for 17,000 Sears Canada retirees says insolvency laws are unjust when it comes to underfunded pensions.

When a company is insolvent and its DB Pension Plan is underfunded, pensioners suffer pension losses and ultimately income losses. In practice, pensioners’ rights are weak and highly inadequate, especially when pension plans are underfunded.

Although pension legislation at the provincial and federal level purports to offer some protection for amounts owing to an underfunded pension plan, insolvency legislation does not preserve that protection for the majority of those amounts. The insolvency protection of pensioners and pensions in bankruptcy proceedings is therefore limited.

Dr. Janis Sarra is the founder and director of the National Centre for Business Law and a professor at the Peter A. Allard School of Law. In her opinion, Canadian pensioners and employees are among the worst-protected pensions in bankruptcy and/or insolvency among 60 countries.

The history leading to Bill C-228

Let’s look at some history of attempts to protect pensions in bankruptcy. The Canadian Association for Retired Persons (CARP), a nationwide advocacy organization for Canadian seniors and retirees, lobbied politicians on Parliament Hill about legislation changes. According to CARP, the unfunded pension liability should be given priority so that it is handled first.

There is no priority for retirees when it comes to dividing up assets in bankruptcy, and CARP wanted to protect underfunded DB Pension Plans when the employer company goes through restructuring or bankruptcy.

CARP estimated that roughly 1.3 million Canadians, aside from the retired Sears employees, may be at risk due to underfunded DB Pension Plans. The closure of Sears Canada stores made the plight of retirees a top priority for CARP.

Marilène Gill, Bloc Québécois MP, introduced a member’s BILL C-372, on Oct. 17, 2017. It was intended to change the BIA and the CCAA. The change sought to correct the injustice faced by retired workers whose pension and health insurance policy benefits are not secured when their company declares bankruptcy or undergoes restructuring.

On October 17, 2017, Bill C-372 passed its first reading. The House rarely passes private member’s bills like this one. The Liberal Party did not support taking it further and allowed it to die.

Hamilton Mountain NDP MP Scott Duvall asked for leave to introduce Bill C-384 in the House of Commons on November 6, 2017. He proposed amending Canada’s insolvency laws so that companies must bring any pension fund to 100% before paying any other secured creditors. Additionally, it required companies to pay termination or severance pay owing before paying secured creditors. Similarly, this bill passed the first reading and then died.

Then, Senator Art Eggleton, P.C., proposed BILL S-253 shortly before his retirement to amend the insolvency legislation to deal with a pension deficit in Canada. After the first reading passed on September 18, 2018, the second reading followed on September 25. By introducing this bill, the BIA and CCAA would be amended. The plan proposed to give priority to claims for unfunded obligations or solvency deficiencies of pensions. This was applicable to both solvent companies as well as companies that might become insolvent if certain shareholder payments were made.  That bill never went any further.

Bill C-228
Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

The current Bill C-228:  Pension Protection Act

Then, Conservative MP Marilyn Gladu put forward her pension reform private member Bill C-228: An Act to amend the BIA, the CCAA and the Pension Benefits Standards Act, 1985.  It passed 2nd reading on June 22, 2022.

According to the Hansard transcripts, she noted that the proposed legislation would ensure that pension funds would be paid before secured and unsecured claims. Unremitted source deductions for the Canada Pension Plan, Quebec Pension Plan, Employment insurance, and taxes would be taken first. Suppliers who take back goods delivered within a month of bankruptcy or receivership and unpaid wages or salaries would be paid next. Then payment for insolvent pensions would come next before the claims of secured and unsecured creditors.

It then got a referral to committee, the Standing Committee on Finance.  Once the referral to the Finance Committee happened, it did not take long to get through the committee.  The committee held three meetings between October 17 and 31.  It passed through the committee and on November 23, 2022, it passed 3rd reading and Bill C-228 was adopted.

A cross-party collaboration of New Democrat, Bloc and Conservative MPs was now finally achieved in order to move forward with key legislation to protect workers’ pensions in commercial bankruptcy or insolvency proceedings.  The Liberal government which previously did not have this on its radar also voted in favour.  In fact, PM Trudeau has tried to take some credit for this private member’s bill in the House of Commons.

The bill has now moved on to the Senate of Canada for review and amendment before returning to the House for final approval. It passed its first reading in the Senate on November 24. It now seems to have sufficient support and momentum to ultimately become law.

The current Bill C-228: What will the Pension Protection Act do?

The purpose of the private member’s Bill C-228, which will be known as the Pension Protection Act. is to deal with the insolvency of an employer where there is an unfunded liability or solvency deficiency in an employee pension plan or the employer ceases to fund a group insurance plan. It will prioritize the pension payments for such pensioners and employee claims for pension entitlements.

The proposed legislation would also amend the Pension Benefits Standards Act, 1985 to require the annual tabling of a report on the solvency of pension plans.

The current wording of the proposed legislation proposes to accomplish pension security for retirees by amending existing legislation to deal with deficiencies of pension plans as follows:

  • BIA section 60(1.‍5)‍(a)‍, is the section that deals with employers trying to restructure through a BIA restructuring proposal.  It already states that any pension amounts deducted from employees that were not paid into the pension fund must be in order for the court to consider approving the proposal.
  • It will be amended such that the court cannot approve any employer restructuring proposal unless it stipulates that any amount required to make all special payments, as determined by section 9 of the Pension Benefits Standards Regulations, 1985, that should have been paid to correct any unfunded liability or solvency deficiency will be funded by the employer.
  • It will also be amended so that any amount required to liquidate any other unfunded liability or solvency deficiency of the fund as determined at the time of the filing of the notice of intention or of the proposal if no notice of intention was filed, will be included.
  • BIA sections 81.5 and 81.6, are the sections that deal with the event of bankruptcy proceedings and receivership proceedings.  They will similarly be amended.
  • CCAA section 5, which deals with the employer company with a pension plan, will be amended the same as the proposed amendments to the BIA. This will state that if the company participates in a prescribed pension plan for the benefit of its employees, the court may not sanction a compromise or arrangement unless there are the same provisions stated above to protect the interests of the employees.
  • The Pension Benefits Standards Act, 1985 will be amended to require greater annual report requirements on the solvency of pension funds and their success in meeting funding requirements, and the corrective measures taken or directed to be taken by the Superintendent of Financial Institutions to deal with any pension plan not meeting the funding requirements.

As indicated above, there appears to be enough momentum for Bill C-228 to get through the Senate and ultimately receive Royal Assent to become an Act of Parliament.  This will no doubt be a major change to bankruptcy protection insolvency proceedings in Canada relating to benefit plans if it becomes the new law dealing with pension plan deficits.

We will have to see if this Bill becomes law, once implemented and if there will be any unintended consequences.  Time will tell if these changes will not have negative consequences on corporate restructuring and advisory, preventing what previously would have been successful restructurings of Canadian businesses, albeit on the backs of hard-working Canadians being the employees and retirees.

No doubt the insolvency community and the lending community will have to adjust to the new business environment.  I will provide you with updates as they occur.

Bill C-228
Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

Bill C-228 transition period

The Bill, if passed, would introduce a four-year transition period between its implementation and the implementation of the proposed amendments. My guess is that such a long transition period has been established for two main reasons:

  1. to allow companies who currently are behind in their defined pension benefit payments to catch up; and
  2. to allow the lending community to try to figure out how they are going to adjust their commercial lending practices in this new reality.

Bill C-228: Pension reform to insolvency

I hope you enjoyed this Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985, Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns of businesses and people facing a mountain of unsecured claims and financial liabilities. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. 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.

We understand 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, Starting Over, Starting Now.

Bill C-228
Bill C-228 An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

 

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Brandon Blog Post

CONSUMER PROPOSAL CALCULATOR: CONSUMER PROPOSAL GREAT SECRETS REVEALED!

consumer proposal calculator
consumer proposal calculator

Consumer proposal calculator: When should you think about a consumer proposal?

Debt can be a heavy burden, and it seems like there’s no end in sight. If you’re having a hard time making ends meet and debt is taking over your life, you may be asking yourself if a consumer proposal is right for you.

If you’re finding it impossible to pay off your financial debt, a consumer proposal could be a perfect choice for you. As soon as approved by your creditors and also authorized by the court, a consumer proposal is an enforceable deal between you and your creditors. You only need to pay off a part of your financial debt and in return, they write off the balance. This is an excellent method to pay off your debt as well as get your life back on course.

There are 2 main points to keep in mind when thinking of a consumer proposal. First, just an insolvency trustee (Trustee) can carry out a consumer proposal. They will first evaluate your situation and determine if this is the very best choice for you.

Secondly, you need to be able to make the promised payments to the Trustee. If you cannot, then a consumer proposal may not be right for you.  There are also several non-insolvency debt relief options for people when looking at their unsecured debt and I describe them below.

Knowing how much you may need to pay in a consumer proposal in order to extinguish all of your unsecured debt is an important part of the decision-making.  That is why I created this consumer proposal calculator located down below in this Brandon’s Blog.

Consumer proposal calculator:  Option 1 – Pay off your debt on your own

If you have adequate savings and are in a financial situation to pay your financial obligations in a timely manner, excellent. Yet that is not every person’s circumstance. It’s not unusual for individuals to find themselves in a state where they have financial obligations coming due for payment, but, they do not have the cash. If you’re in this situation, you might be unsure about exactly how you can repay the money you owe but do not have.

There are a couple of things you ought to remember if you’re seeking to pay off the financial debt by yourself. First, you need to ensure you have a clear plan for exactly how you’re likely to pay off the money. This means establishing a budget plan and staying with it.

Second, you ought to keep communication open with the individual or company you owe the money. By doing this, they’ll understand what you’re doing to pay back the debt and can provide support if needed.

Finally, it is very important to be patient. Settling a financial debt can take time, however as long as you’re sticking to your strategy and seeing progress, you’ll ultimately get there to financial freedom.

consumer proposal calculator
consumer proposal calculator

Consumer proposal calculator:  Option 2 – Debt consolidation

Combining your financial obligations, such as the total debt on all your credit cards, into one new debt consolidation loan can aid you to become debt-free faster and get your funds back on the right track. It can help you to repay your financial debts a lot faster and also right-size your finances. Before consolidating your financial debts and making debt consolidation payments, there are a couple of things you need to understand:

  1. Prior to you trying to settle your financial debts through debt consolidation, it’s important to recognize just how debt consolidation loan payments work as well as what type of impact it can have on your credit rating.
  2. See to it that you recognize what you’re getting into. Consolidating your financial debts through new loan funding to settle your existing financial obligations, ensure you recognize the terms of the new financing, including the rate of interest and how much the regular monthly payment will be.
  3. Search for the very best deal available. There are a variety of companies that provide financial debt consolidation funding. Shop around to find the best rates of interest as well as terms.
  4. Combining your debts will lead to a lower single monthly payment. Make sure it fits into your budget.
  5. Making your new loan monthly payments on time will work to improve your credit rating.

Consumer proposal calculator: Option 3 – Credit counselling

If you’re struggling with credit card debt, you’re not alone. It’s one of the most common types of debt in Canada. But there’s help available. Credit counselling can help you get your debts under control and develop a plan for you.

Credit counselling can be a very therapeutic process that assists people to address their debt obstacles as well as enhance their total financial health and wellness. Your best choice is to go for credit counselling offered by a nonprofit credit counselling agency.

Credit counselling commonly involves working with a credit counsellor to develop a spending plan, understand your economic alternatives, and produce a plan to settle your financial debts. More often than not the credit counsellor can get your creditors to agree to allow you to pay off the principal amount of your debt without adding any more interest charges.

Credit counselling can aid you to get out of debt, improve your credit score, and also teach you how to make better financial decisions in the future. If you’re seriously thinking about credit counselling as an option for you, it is very important to pick a reputable firm to deal with in order to produce a personalized plan to address your unique financial situation.

consumer proposal calculator
consumer proposal calculator

Consumer proposal calculator: Option 4 – Debt Settlement

If you’re struggling to make your financial debt settlements and are dealing with economic difficulty, financial debt settlement may be a great choice for you. This is where you work out with your creditors to resolve your debt for less than the amount of the individual debt amounts you owe.

  1. There are a couple of points to remember if you’re thinking about financial debt settlement:
    Your credit score will take a hit.
  2. Your creditors might send your debt to their lawyer to take legal action against you or they might send your debt to a collection agency to plague you with collection calls as soon as you divulge that you cannot settle them in full.

If you’re looking at this kind of financial debt negotiation, it is very important to evaluate the pros and cons and speak with a professional advisor to see if it’s the right option for you.

WARNING:

A for-profit debt settlement company charges fees, just like any other business. Before any of your money is used to settle your personal debts, you must pay their fees upfront. No fees are charged by the non-profit credit counsellor.

When you cannot pay anymore, the for-profit debt settlement company walks you over to their friendly Trustee for you to file either a consumer proposal or an assignment in bankruptcy.

Please stay away from for-profit debt settlement companies.  I do not recommend for-profit debt settlement arrangements or debt settlement programs.  These types of debt counsellors are not the debt-help professionals you should go to see.

Consumer proposal calculator: Option 5 – About consumer proposals

If you’re battling with a mountain of debt, do not worry, there is help and it avoids bankruptcy. A consumer proposal is a legal process that is the only federally-approved debt settlement process. A consumer proposal can only be carried out by a Trustee.

If you’re thinking about a consumer proposal, it is very important to understand just how the process works and also what it will indicate for your financial future. I have actually written several of Brandon’s Blogs giving a comprehensive on what consumer proposals are and how they work.

If you’re insolvent and owe $250,000 or less to your creditors (excluding any secured creditor debt like mortgages or lines of credit that are secured by registration against your personal residence), you can qualify for this government-sanctioned debt settlement plan.

This could be a good option for people who are employed and can budget their money to make the required monthly payments under this plan to the Trustee. It helps to avoid personal bankruptcy, and not have to deal with collection calls from agencies anymore.  This is the best alternative to bankruptcy.

For more information, check out either one of the following Brandon’s Blogs:

consumer proposal calculator
consumer proposal calculator

Consumer Proposal Calculator:  What will my monthly payments be in a consumer proposal?

Here is how a debt calculator calculates your total debt and estimates what your monthly payments will be in a consumer proposal debt management plan.  Below you will be asked for all your unsecured debts, including any government debt or income tax debts.

Consumer proposal calculator$
What is the total of your credit card debt?
What is your income tax debt?
What is the total of any online loan?
How much is your other government debt?
Total of other unsecured debt?
What is your payday loan debt?
Total unsecured personal loan debt?
Your total unsecured debt
# of months you wish to take to pay (max 60 months)60
Monthly payment = (Your total unsecured debt
divided by # of months) X20%

Use this consumer proposal calculator method to compare what a monthly payment would be for you under a consumer proposal as compared to what your monthly debt payments are now.  Keep in mind that in a consumer proposal, you are getting rid of all your debt if successfully completed.  Right now, you may only be paying the interest charges and not making any dent in the principal reduction.

To figure out your exact monthly payment, give us a call.

Consumer Proposal Calculator:  We can help you with a consumer proposal

I hope you enjoyed this consumer proposal calculator on Brandon’s Blog.

Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. 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.

We understand 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, Starting Over, Starting Now.

consumer proposal calculator
consumer proposal calculator
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Brandon Blog Post

RECEIVERSHIP IN CANADA: THE COMPLETE STORY OF WHOSE HAPPY RECEIVER IS IT ANYWAY?

receivership in canada
receivership in canada

Receivership in Canada: What does receivership mean?

I have just read a decision of the Ontario Superior Court of Justice Commerical List dealing with an important aspect of receivership in Canada. The case is concerned with what happens when two equally applicable provincial laws appear to be working at cross purposes in the context of the receivership in Canada process.

I will explain the case and the process of company receivership in Canada. By understanding the process, the case will make more sense.

Secured lenders may enforce their security to recover loans from borrowers who have defaulted. This remedy available to secured creditors when a borrower, usually a company defaults, is known as receivership.

What does going into receivership in Canada mean?

A receivership is a legal process available to secured creditors, whereby a company’s affairs, business and property are entrusted to a receiver to manage and eventually sell the assets. Secured lenders may enforce their security to recover loans from borrowers who have defaulted. This remedy available to secured creditors is known as receivership.

If a business debtor does not make payments or otherwise defaults on a secured loan, the secured creditor would have the right to appoint a receiver to collect the money owed. Before appointing a receiver, a secured creditor must first issue a “Section 244” notice of intention to enforce security.  This is a notification that secured creditors must send to defaulting debtors before appointing a receiver. Section 244 refers to that section number in the Bankruptcy and Insolvency Act (Canada) (BIA).

The notice states that the security covers certain assets, that the company in default owes a specified amount to the secured creditor, and that the creditor may enforce the security after 10 days. The company in default may waive the notice period and consent to the appointment of the receiver.

Under the BIA, only a licensed insolvency trustee (formerly called a trustee in bankruptcy) can be a receiver. No other party is licensed to administer a receivership in Canada.

receivership in canada
receivership in canada

Receivership in Canada: What is the difference between a court-appointed receiver and a privately appointed receiver?

A privately-appointed receiver is a licensed trustee who is appointed by a contract between the insolvency trustee and the secured creditor. A private receiver is typically used when there is no dispute to ranking among secured creditors or various claims to ownership of the company’s assets. The powers of a receiver listed in the security document give the privately appointed receiver more limited powers than a court-appointed receiver gets under a court order.

A receiver is court-appointed when the secured creditor makes an application to the court for the appointment of a receiver with more expanded powers. Like a privately-appointed receiver, a court-appointed receiver takes control of a company’s property because of financial distress and when there is a dispute among secured creditors and others as to the ranking of secured claims and ownership of property.

Both kinds of receivers are tasked with protecting and preserving the value of the company or property and are certainly given broader powers by the court to do so.

How is receivership in Canada different from bankruptcy proceedings?

Many people mistakenly use the terms “receivership” and “bankruptcy” interchangeably. However, bankruptcy and receivership are two distinct legal proceedings with different implications.

Bankruptcy vs. receivership can be confusing, but once you understand the key differences between the two, it is fairly straightforward. Whether it is a private appointment or a court-appointed receiver, the differences between bankruptcy and receivership in Canada are the same.

A receivership is a legal remedy available to secured creditors to enforce their security rights against a defaulting debtor. A receiver is appointed to manage the debtor’s property and assets and sell them under a properly run and fair sales process.

The Canadian bankruptcy process is a distinct legal process. An insolvency trustee does not represent secured creditors in bankruptcy proceedings. Instead, under the bankruptcy regime, they represent the unsecured creditors of the bankrupt estate. A corporate debtor may be subject to both bankruptcy and receivership proceedings simultaneously.

One of the major differences has to do with the creditors.  In a bankruptcy administration, the bankruptcy trustee must call a meeting of creditors.  This is where the insolvency trustee provides its report on the affairs and conduct of the bankrupt debtor and unsecured creditors get to vote on any matters of importance.  In receivership, there is no such requirement to hold a meeting of creditors.

receivership in canada
receivership in canada

What are the key distinctions between receivership in Canada and liquidation?

So you know what receivership is by now. The federal BIA doesn’t govern liquidation, that’s done under the provincial Business Corporations Act or Wind-Up Act.

A liquidation is for a solvent company where the shareholders, Officers and directors decide to cease business operations.  The company puts up its assets for sale and uses the proceeds to pay off its creditors with cash. Any funds left over are then distributed to the shareholders.

A liquidator can be appointed either privately by the company’s directors or by a court order. Liquidation is therefore different from both bankruptcy and receivership in Canada.

Can individuals be placed into receivership in Canada?

The answer is yes. When a secured creditor wishes to take enforcement action upon the security agreement they have against a debtor’s property, as indicated above, they have the remedy of receivership in Canada.  This remedy allows them to collect as much of their secured debt as possible.

There are no restrictions as to who can go into receivership in Canada.  One of our more famous (infamous?) receivership cases over the years has been the receivership of the assets, property and undertaking of Norma and Ronauld Walton.

receivership in canada
receivership in canada

Receivership in Canada:  Whose receiver is it anyway?

Now for the court case where two different provincial laws caused a fight amongst secured creditors over the appointment of a receiver.  The case is Canadian Equipment Finance and Leasing Inc. v. The Hypoint Company Limited, 2618905 Ontario Limited, 2618909 Ontario Limited, Beverley Rockliffe and Chantal Bock, 2022 ONSC 6186.  The two competing provincial statutes are the Mortgages Act and the Personal Property Security Act.

The business is conducted through two affiliated entities. One owns the property and the other operates the business. This is quite a typical arrangement.

One creditor funded the purchase of equipment and took PPSA security over it. Another creditor funded the acquisition of the real property and has a traditional mortgage security. The security agreements extend over different assets, and the outcome is usually uncomplicated.

However, when equipment that has been purchased is attached to real property, there is disagreement about whether and how it can be removed, and whether such removal will negatively affect the value of both the equipment and the real property. The question is now more complicated: which creditor’s rights should take priority over this matter?

Both the equipment lender and the mortgagee are seeking to enforce their security. The equipment lender has filed a motion with the court to appoint a receiver over both the operating company (Opco) that owns the pledged equipment and the holding company (Holdco) that owns the real estate. This would allow the receiver to manage and sell the assets of both companies in order to repay the outstanding debt.

In this case, Opco was a commercial marijuana operation that was unable to get off the ground due to its heavy debt load and startup problems.

Although the mortgagee began power of sale enforcement proceedings, they do not object to a receiver being appointed over the equipment only. The mortgagee wishes to continue its power of sale proceedings and opposes the receiver being appointed over the building. The mortgagee in possession is of the opinion that the equipment is attached to the building and cannot be removed.

The mortgagee concurred that the court has the power to assign a receiver over the property of both Opco and Holdco according to section 101 of the Ontario Courts of Justice Act. They stated that, if a receiver is appointed, the receiver needs to be a firm chosen by them.

Both the licensed insolvency trustee firm preferred by the mortgagee and the firm nominated by the equipment lender filed a consent to act with the court.

What are the conditions under which a receiver may be appointed?

The court looked at numerous factors in order to make a decision on whether or not to appoint a receiver, and if so, which one, including those that have historically in receivership in Canada cases been taken into account in such determinations:

  1. Although it is not essential for a creditor to establish irreparable harm if a receiver is not appointed where the appointment is authorized by the security documentation, the court considered if no order is made, will irreparable harm be caused?
  2. The size of the debtor company’s equity in the assets and the need for protection or safeguarding of assets during litigation are important factors to consider when assessing the risk to the security holder.
  3. The kind of property it is.
  4. The potential for the assets to be wasted or dissipated.
  5. The need to safeguard the property until a legal ruling is made.
  6. The parties’ respective balance of convenience needs to be considered when making the decision.
  7. Pursuant to the loan documentation, the creditor has the right to an appointment.
  8. Enforcing the security instrument when the security holder experiences or anticipates difficulties with the debtor.
  9. The principle of appointing a receiver should be approached with caution.
  10. The court will determine whether appointing a receiver is necessary to enable the receiver to carry out its duties efficiently.
  11. The effect a receivership order will have on the parties.
  12. The parties’ conduct.
  13. How long a receivership may last.
  14. The financial impact on the parties.
  15. The likelihood of maximizing return to the parties is increased.
  16. The goal of ensuring the smooth running of the receiver’s duties.

As everyone agreed that all assets of both Opco and Holdco should be sold to maximize recovery for all creditors, but cannot agree on the process by which that should be undertaken, resulting in the entire process being stalled, the judge was satisfied that it is just and convenient to appoint a receiver.

The court found that either proposed receiver was acceptable and decided that the receiver nominated by the mortgagee would be appointed by the court to administer all assets. The receiver would eventually come back to court with a sales plan to maximize the value of all the assets subject to the security of all stakeholders.

receivership in canada
receivership in canada

How the entrepreneur can avoid receivership in Canada

As a business owner, the way to avoid the receivership process is long before financial difficulties ever become serious financial problems. Here are a few tips on how to do just that:

  • Keep a close eye on your finances. This means regularly reviewing your income and expenses, and making sure you have a good handle on your cash flow.
  • Stay current on your bills. This includes not only making timely payments but also staying on top of any changes in your billing terms or amounts.
  • Keep good records. This means having up-to-date financial statements and documentation for all of your income and expenses.
  • Make a plan. If you do find yourself in a financial bind, have a plan in place for how you’ll get out of it. This may include negotiating with creditors, seeking new financing, or making cuts to your expenses.
  • Seek professional help from a licensed insolvency trustee with commercial insolvency experience. If your business is viable and you seek help early enough, there may be many options.  The most common ones are refinancing with or without financial restructuring.  Reviewing your business allows us to make restructuring recommendations allowing your viable company to become healthy and profitable once again.

Receivership in Canada summary & speak with a licensed insolvency trustee

I hope you enjoyed this receivership in Canada Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. 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.

We understand 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, Starting Over, Starting Now.

receivership in canada
receivership in canada

 

 

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CANADA RECOVERY BENEFIT ACT: EVERYTHING YOU NEED TO KNOW IF CRA IS IN BATTLE WITH YOU FOR REPAYMENT

canada recovery benefit act

A new phase for the Canada Recovery Benefit

The Canada Recovery Benefit (CRB) was part of the Canadian government’s overall economic recovery programs to help Canadian individuals and businesses during the COVID-19 period.  It was a taxable benefit of $500 per week that lasted for up to 26 weeks. It was given to employed and self-employed workers directly affected by COVID-19. The Canada Recovery Benefit gave financial support to eligible workers who could not work and tried to provide some measure of recovery in response to the COVID-19 pandemic. This includes self-employed workers, contract workers, and part-time workers.

The benefit was paid out for a maximum of 26 weeks in respect of any application under this program and was available to workers who lost their job, were sick or quarantined, were taking care of someone who was sick with COVID-19, or was caring for children who are not in school because of COVID-19.

We’re in a new phase with the Canada Recovery Benefit now. It was phased out some time ago. Since the money was given out so quickly, there wasn’t any checking to see whether the person applying for this benefit actually qualified. Now the Canada Revenue Agency (CRA), which is in charge of the program, is checking all of the applications.

The CRA is currently investigating all applications for the program to ensure that everyone who received funding met the eligibility criteria. They’re sending out letters asking for proof of eligibility, and if people can’t provide that, they’re asking for the money back. We have done the bankruptcy of several individuals who did not have the money to repay, as they spent it on things like food and shelter.

In this Brandon’s Blog, I explain in more detail what the Canada Recovery Benefit was and describe a recent court decision about someone who CRA demanded the money back from and the kind of proof that CRA is demanding to see if a person met the eligibility criteria.

Canada Recovery Benefit – Closed: How the Canada Recovery Benefit used to work

The Canada Recovery Benefit plan stopped accepting retroactive applications as of December 23, 2021.

The Canada Recovery Benefit was created to help those who have been directly affected by COVID-19 and are not eligible for Employment Insurance. The Canada Revenue Agency is responsible for administering this benefit.

Depending on when you applied for the Canada Recovery Benefit, you may have received either $1,000 ($900 after taxes withheld) or $600 ($540 after taxes withheld) for 2 week periods, for no more than 13 two-week periods. The Canada Recovery Benefit was available between September 27, 2020, and October 23, 2021.canada recovery benefit act

Who was eligible for and what were the requirements for Canada recovery benefit?

The Canada Recovery Benefit was established under federal legislation, the Canada Recovery Benefits Act (S.C. 2020, c. 12, s. 2) To be eligible for the CRB for a 2-week period, you must have met the following conditions:

  • A resident of Canada and present in the country during the two-week period being applied for.
  • Be at least 15 years old on the first day of the two-week period.
  • Have a valid Social Insurance Number.
  • Due to the pandemic, either your work has stopped and you are available for work, or you continue to work but have had a 50 percent reduction in your employment/self-employment income in the two-week period as compared to an average two-week period in the previous year.
  • Must have had employment and/or self-employment annual income of at least $5,000 in either 2019 or 2020 or in the 12 months preceding a CRB application.  Keep in mind if you are self-employed that income losses from self-employment will make you ineligible.  Although it was never properly defined, CRA looks at net income, not gross income.
  • You have not received EI, the Canada Recovery Sickness Benefit (CRSB) or the Canada Recovery Caregiving Benefit (CRCB).
  • During the two-week period being the periods in respect of what was being applied for, the applicant must have looked for work and not placed any undue restrictions on their ability to work.
  • Not having quit their job on or after September 27, 2020, or if they did, it must have been for a reasonable reason.
  • You must have returned to work when recalled, or not have declined a reasonable offer to work, during the two-week period or the four two-week periods immediately prior (back to September 27, 2020).
  • You filed a tax return for the 2019 or 2020 tax year (with certain limited exceptions).
  • If your annual net income exceeds $38,000, you will be required to repay a portion of the Canada Recovery Benefit at a rate of 50 cents for every $1 over the limit.

Do you know if the Canadian government is giving out any extra money in 2022?

The federal government announced some changes to the Employment Insurance (EI) program to supplement regular benefits under that program and introduced three new benefits to help people who are transitioning from CRB and other ending benefits.

The federal government realized that Canadians would still need support while they looked for work. The government attempted to transition people who had been receiving the Canada Recovery Benefit to a more flexible EI program for those who qualify, which will provide them with additional features.

The federal government also disclosed 3 new programs for Canadians who don’t qualify for EI. These are all taxable and will be run by the CRA.

All COVID-19 benefits are now finished. The new emergency programs were:

  1. Canada Worker Lockdown Benefit (CWLB). If you’re a Canadian and could not work because of a lockdown in designated regions, you could have applied for the CWLB starting December 30, 2021. The CWLB was only obtainable when a coronavirus lockdown was announced for your area. If you were eligible, you could have gotten a weekly income of $300 ($270 after tax was deducted at source) for each and every one-week period. The CWLB eligibility period ran from October 24, 2021, to May 7, 2022. The final day to submit the application was May 18, 2022.
  2. The CRCB was a program that gave workers a weekly income of $500  (taxable, tax deducted at source) for up to 42 weeks in respect of a situation where people couldn’t work for at least 50% of the week because they had to care for a child under 12 or a family member.The need for this benefit arose from the closure of schools, daycares, or care facilities due to COVID-19, or from the child or family member being sick and/or self-isolating or at high risk of serious health complications due to a health condition that made you more susceptible to a significant reaction to COVID-19. This benefit was paid in one-week periods and was available for the period from September 27, 2020, until May 7, 2022. The deadline to file CRCB applications was July 6, 2022.
  3. The Canada Recovery Sickness Benefit (CRSB). It was a government-funded program that supplied monetary support to workers who were not able to work at least fifty percent of the week due to being ill with the coronavirus, self-isolation, or underlying conditions that placed them in danger of contracting the virus. The benefit paid a maximum weekly income of $500 for a max of 6 weeks. The benefit was paid out in 1-week periods of weekly income and was available from September 27th, 2020 until May 7th, 2022. However, the ability to file for the benefit closed off on July 6th, 2022.canada recovery benefit act

The Canada Recovery Benefit is now closed and we have entered a new phase

Now that the Canada Recovery Benefit program is closed, we are entering a new phase. CRA is reviewing all benefit payments made by each individual and assessing those that CRA feels were not entitled to it, either because of error or outright fraudulent claims. They are demanding that such people provide proof of eligibility and if they can’t, they need to repay the money.

As mentioned before, to be eligible for the Canada Recovery Benefit, you must have had an income level through employment and/or self-employment income of at least $5,000 in either 2019 or 2020 or in the 12 months preceding a CRB application. The case from British Columbia showed what the right evidence is.

Other than confirming what evidence CRA can request, the case was not remarkable. The taxpayer did not help himself by refusing to give CRA additional information other than his T4 slips.

CRA stated that T4 slips are insufficient proof of income for Canada Recovery Benefit eligibility: The judge agreed with this assessment

You would think that if a taxpayer filed their 2019 and 2020 income tax returns showing all employment and self-employment income earned, that is good enough.  Unfortunately, it is not.  The Canadian income tax act is not the governing legislation;  the Canada Recovery Benefits Act (S.C. 2020, c. 12, s. 2) (Act) is.

The legislation in question imposes a duty to disclose information. The extent of this duty is significant; the Act requires that applicants provide the Minister with any information that may be requested in relation to their application.  The only arbiter of what is sufficient proof is CRA!

Proof of employment income includes verification through pay slips, employment verification letters, records of employment, bank statements with the employee’s name, address and payroll deposit, and other documentation.

Evidence of self-employment income includes invoices that include the date of service, client name, cost of service, and type of payment received.canada recovery benefit act

Will I have to repay the Canada Recovery Benefit?

I hope you found this Canada Recovery Benefit Brandon’s Blog informative. Is CRA taking collection action against you, including seizing bank accounts?

If you were in receipt of benefits under the Canada Recovery Benefit program and either did not meet the eligibility requirements or cannot prove that you did, then the short answer is YES. We are currently handling the insolvency filings of several individuals who were unable to prove their eligibility to the CRA’s satisfaction.

I know it’s not your fault. You were trying to make ends meet during this COVID-19 period, but you couldn’t do it all on your own. I get why you don’t have the money now.

If you’re an entrepreneur, it’s not uncommon to use unremitted employee source deductions and unremitted HST to finance Canadian businesses of corporate taxpayers during tough economic times. However, falling behind on your CRA payments can create large tax debt that can be difficult to recover from. Although unpaid income tax is not a Director’s liability, unremitted source deductions and GST/HST become a personal liability for tax of the Directors of the company. It is generally too late to protect yourself or try to restructure your financial affairs, once CRA is hounding you with the collection remedies available to them.

As people’s take-home pay fails to keep pace with inflation and mounting financial debt, many people are having a hard time keeping their heads above water. Are you now worried about just how you or your business are going to survive? Are your creditors taking collection efforts and you cannot afford to pay your or your company’s debts? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now while explaining our recommendations.

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. Whatever process we recommend for you, we will do so in order to minimize any cons you may experience.

We understand 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 financial life, Starting Over, Starting Now.canada recovery benefit act

 

 

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CANADIAN INCOME TAX ACT S. 160: BAD MOVES LEAD TO HUGE TAX DEBT

canadian income tax act
canadian income tax act

Canadian Income Tax Act: Section 160 transfer of property

The Canadian Income Tax Act allows Canada Revenue Agency (CRA) to have a variety of methods for collecting debts from businesses. One option is to assess anyone who received money from the tax debtor business without proper consideration. This applies both if the business was a tax debtor when the money was paid out and if the business becomes a tax debtor after the payment is made.

Section 160 of the Canadian Income Tax Act is designed to let the CRA pursue people or companies who receive transfers of property when the person or company transferring the property owed, or could owe, amounts payable to the CRA and hasn’t paid them. The rule creates an income-tax debt for the person who got the transfer of property, without them having given adequate consideration for it.

For example, if an entrepreneur who is the major or sole shareholder of a company conducting business gave themselves a generous bonus in 2022, they may see that bonus clawed away by the CRA if the business is assessed as owing taxes for the 2022 taxation year or for a prior tax year. The potential tax liability could be sizable, so it’s important to be aware of this possibility.

This is what this Brandon’s Blog is about. We explain how section 160 of the Canadian Income Tax Act works and then describe a recent decision from the Federal Court in Murphy v. The King, 2022 TCC 111 (CanLII).

What’s section 160 of the income tax act?

The goal of the current legislation of Section 160 of the Canadian Income Tax Act is to stop taxpayers from avoiding paying taxes by transferring property to someone who is a non-arm’s length transferee. CRA is of the view that rather than transferring the asset, the taxpayer should sell the asset to pay off their income tax debt. A transfer deprives the CRA of the ability to collect taxes by seizing the asset.

Section 160 becomes effective when:

  • a person (or company) has transferred property, directly or indirectly, through a trust or any other means, to their spouse or common-law partner, or to a party they are not dealing with at arm’s length; and
  • the party making the transfer owes income tax or is assessed at a later date to owe income tax for the taxation year or prior to the transfer taking place.

Section 160 of the Canadian Income Tax Actis designed to cover a wide range of transactions involving a party related to the tax debtor. This includes many types of transactions, such as:

  • A direct transfer to a related party, such as an outright gift to a spouse or child, or a dividend from a corporation to a shareholder.
  • An indirect transfer of property to a related party may occur when the property is first transferred to an arm’s-length party and then the same property is transferred to a non-arm’s length party.
  • A transfer of property to a trust where the beneficiaries of the trust are non-arm’s length parties.
  • A transfer to a related party by any other means whatever, just in case the above wording missed a specific transfer.

    canadian income tax act
    canadian income tax act

What is the third-party tax liability under Section 160 for the transferee?

If section 160 of the Canadian Income Tax Act applies, both the person making the transfer and the person receiving the property become jointly and severally liable for the original tax debtor transferor’s income tax debt. So, the original tax debtor remains liable for the tax debt, but the recipient now becomes independently liable as well. The CRA can now go after both the original tax debtor and the recipient for the same income-tax debt. The claim by CRA against transferees are known as derivative assessments.

The recipient’s tax liability under section 160 cannot be greater than the fair market value of the transferred property. If any amount was paid or another consideration given in return for the property reduces the amount the recipient owes CRA on account of the original tax debtor transferor’s tax liability.

As stated in section 160 of the Canadian Income Tax Act, when the original taxpayer who transferred the property makes a payment to CRA, it will discharge the liability to the extent of the payment.

It also states that when the taxpayer who received the property makes a payment, their liability is reduced by that amount. This also lowers the amount the taxpayer owes. To get rid of the recipient’s liability completely, the taxpayer receiving the property needs to pay an amount that equals or is greater than the fair market value of the property they received.

Is it possible to dispute a Canadian Income Tax Act Section 160 CRA Assessment?

You could fight CRA’s notice of assessment and collection action first by filing a notice of objection. If that proves unsuccessful, you could take it to court, but you’re not likely to win. In the next section, I describe a recent Tax Court decision where the taxpayer fought it in court – and lost. The taxpayer then appealed the lower court decision and the appellate court refused to hear the appeal. So I’m a licensed insolvency trustee, not a tax accountant or tax legal professional, but here’s my understanding of section 160.

Section 160 of the Canadian Income Tax Act is pretty harsh. There’s no due-diligence defence, it applies even if the transfer wasn’t motivated by tax avoidance transactions, and it catches transferees who don’t even realize that they’re receiving property from a tax debtor with an outstanding tax debt.

Section 160 of the Canadian Income Tax Act doesn’t have a time limit or limitation period, so the CRA could come after you years after the supposed transfer. And even if the original tax debtor is later discharged from bankruptcy and doesn’t owe the tax debt anymore, the person who got the property would still be on the hook.

As an aside, I wonder if the transferee could get out of their liability if the taxpayer fully completed a successful proposal – like a consumer proposal or Division I. But this is just a thought, not related to this Brandon’s Blog post.

Further, the unpaid tax debt liability under section 160 can be passed on – just like the common cold or COVID! After being assessed for a tax obligation under s.160, you can spread out the suffering if you then transfer property to yet one more taxpayers who are non-arm’s length persons to you. The CRA may come after you for the tax bill, and now someone else!

The only defences I am aware of available to the transferee against this are to prove that:

  • the transferor didn’t owe anything to CRA at the time of transfer;
  • that the recipient gave fair market value for the property in return; or
  • the property’s fair market value is zero (this will presumably be impossible because if it was really worthless, the transfer was unnecessary).

    canadian income tax act
    canadian income tax act

Murphy v. The King, 2022: The court upheld the third-party income tax liability under section 160 of the Canadian Income Tax Act

This case is all about an appeal to the Federal Court of Appeal of a 2018 decision of the lower court, upholding the notice of assessment issued by the Minister of National Revenue (the “Minister”) dated June 7, 2017, pursuant to section 160 of the Canadian Income Tax Act in respect of dividends paid by 591985 British Columbia Ltd. (the “Corporation”), in December 2015 to Mr. Murphy, the Appellant. Coincidentally, Mr. Murphy is a licensed insolvency trustee.

At that time, the Appellant was the only director and the controlling shareholder of the Corporation. The Corporation had a tax liability which, on June 7, 2017, was $109,460.96. This amount represented the total federal and provincial taxes owing, plus penalties and interest.

The question that needed to be answered is whether the Appellant is jointly and severally liable for the $109,460.96 the Corporation owes under section 160 of the Canadian Income Tax Act.

Although the lower court went through a purposive analysis and is detailed, the lower court’s decision was ultimately based on one key issue. This issue is important not only for cases involving the transfer of property or for taxpayers experiencing financial difficulty and having an unpaid tax debt, but also for all entrepreneurs.

It’s not uncommon for entrepreneurs to bonus themselves through dividends instead of salaries. In this case, Mr. Murphy argued that the fair market value of the services he provided to the Corporation was equal to or greater than the amount transferred. He argued that, since he gave market value consideration for the property in question, he should not have any liability under subsection 160(3) of the Canadian Income Tax Act.

The Tax Court and the Federal Court of Appeal was not buying this argument. The Judge referred to the fact that Canadian courts follow a Supreme Court of Canada decision in support of the fact that market value consideration has nothing to do with it when considering this liability provision in the context of the transferred property being dividends.

The Supreme Court of Canada’s decision held that a dividend is related to shareholding and not to any other consideration the shareholder might have provided. The fact that the Appellant declared the dividends on his personal income tax return and paid taxes on them does not impact the fact that dividends are not paying for services.  Therefore, the lower court decision finding joint liability was upheld.

This is an important point for all entrepreneurs, whether facing a liability assessment under section 160 or not. Dividends are related to shareholding and not to any other consideration the shareholder might have provided, according to the Supreme Court of Canada’s decision. This means that shareholders are only entitled to the dividend if they continue to hold their shares. If they sell their shares, they are not entitled to the dividend.

Perhaps if Mr. Murphy had received a salary from the Corporation in return for the services provided, then all he would have to prove is that the services provided had a value equal to or greater than the underlying tax debt of the Corporation. Perhaps the lower court or the Federal Court of Appeal would have ruled differently.  But that is not what he did, so, no sense speculating further on such legal questions.

The Canadian Income Tax Act and your income-tax debt to CRA

I hope you found this Canadian Income Tax Act Brandon’s Blog informative.  Is CRA taking collection action against your or your company, including seizing bank accounts?

If you’re an entrepreneur, it’s not uncommon to use unremitted employee source deductions and unremitted HST to finance the businesses of corporate taxpayers during tough economic times. However, falling behind on your CRA payments can create large tax debt that can be difficult to recover from. Although unpaid income tax is not a Director’s liability, unremitted source deductions and GST/HST become a personal liability for tax of the Directors of the company. It is generally too late to protect yourself or try to restructure your financial affairs, once CRA is hounding you with the collection remedies available to them.

As people’s take-home pay fails to keep pace with inflation and mounting financial debt, many people are having a hard time keeping their heads above water. This is also a crucial concern dealing with entrepreneurs and their businesses, as profits, as well as cash flow, are challenged and perhaps even evaporating. In these troubled economic times, it is necessary to be knowledgeable about these concerns as well as take action to shield yourself and your company.

Are you now worried about just how you or your business are going to survive? Are your creditors taking collection efforts and you cannot afford to pay your or your company’s debts?  Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now while explaining our recommendations.

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. Whatever process we recommend for you, we will do so in order to minimize any cons you may experience.

We understand 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 financial life, Starting Over, Starting Now.

canadian income tax act
canadian income tax act
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PROS AND CONS OF BANKRUPTCIES CANADA: A HEALTHY FRESH START OR THE LAST RESORT?

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Evaluating the pros and cons of bankruptcies Canada: Introduction

When you are in debt, it can feel like you are stuck in quicksand – the more you struggle, the deeper you sink. If you are considering bankruptcy, you are not alone. According to the Office of the Superintendent of Bankruptcy (OSB), almost 100,000 Canadians filed either a consumer proposal or for bankruptcy in 2021. The numbers for 2022 are rising above the 2021 level.

Before you make a decision, it is crucial to weigh the pros and cons of filing for bankruptcy in Canada. On the positive side, bankruptcy can give you a fresh start. It can discharge your debts and give you a chance to rebuild your finances. On the negative side, bankruptcy can damage your credit score more than one of the bankruptcy alternatives.

If you are struggling with debt, there are other options to consider before bankruptcy. You may be able to negotiate with your creditors and set up a payment plan. You can also improve your financial situation by cutting expenses and increasing your income. If you decide that you do need an insolvency process, a consumer proposal or a Division I Proposal may be better for you.

In this Brandon’s Blog post, I wish to aid you in gaining a better understanding of the pros and cons of bankruptcies Canada. Then you can make a much more educated choice about your financial debt issues.

What are the pros and cons of bankruptcies Canada?

When it comes to making the decision to file for bankruptcy, it is important to understand all of the implications that this will have on your life. In Canada, bankruptcy is a legal process that allows individuals to discharge all of their debts if they are unable to repay them. This process is overseen by the OSB, and there are certain requirements that must be met in order to be eligible for bankruptcy.

While bankruptcy can provide relief from debt, it is not without its drawbacks. Once you have been declared bankrupt, your credit rating will be significantly damaged, which can make it difficult to obtain new lines of credit in the future. Additionally, your assets may be seized in order to repay your creditors.

Before making the decision to file for bankruptcy, it is important to weigh the pros and cons carefully. Speak with a financial professional to get advice that is specific to your situation. Now for a more detailed discussion on the pros and cons of bankruptcies Canada.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The pros of bankruptcies Canada

A fresh start

If you’re sick of being in debt, bankruptcy might be a good option for you. It can be a fresh start, and it’ll get creditors off your back. You can move on with your life without all that stress.

Rebuild your credit

As stated above, bankruptcy will cause some damage to your credit. However, it can stop the continuous damage you may be facing now. You can begin rebuilding your credit rating, rather than having to face extra charges from missed payments as well as receiving those pesky telephone calls from bill collectors.

Get rid of most if not all of your debts

In most cases, all of your obligations will be cleared by your bankruptcy discharge. Normally cleared debts are your unsecured debts like credit card debt, lines of credit, personal loans, payday loans, and income tax debts. A bankruptcy filing will let you not worry about a ton of bills but will force you to focus on balancing your budget.

There are some obligations that bankruptcy cannot clear, like child or spousal support payments, or payments for fines or penalties awarded by a court. You can get your student loans discharged too as long as you’ve been out of school for 7 years or even more.

Stop debt collectors cold

Creditors and their debt collectors making their collection calls can be pretty aggressive when they’re trying to get paid. Bill collectors demand and try to scare you as to what will happen if you do not pay up. Answering your phone or checking your VM becomes terrifying. You might also have a ton of mail from them stacking up in your mailbox, inbox, and so on.

If you’re losing the battle of staying up to date with your bill payments, personal bankruptcy might be a good option for you. Declaring bankruptcy stops all collection efforts, including calls as well as letters from your creditors. This is called the “automatic stay of proceedings”. When you’ve filed an assignment in bankruptcy, the automatic stay goes on and offers you some breathing space.

Get rid of any wage garnishment

If you file for bankruptcy, you don’t need to worry about wage garnishment or legal action anymore. The stay of proceedings also prevents any further attempts at collection, including wage garnishment. Creditors and collectors also won’t be able to take you to court.

Bankruptcy is not forever

So, if you’re thinking about filing for the bankruptcy process, know that it usually takes about nine months to go through the process for a first-time bankrupt who does not have any surplus income payments to make to your Trustee. And, if the Licensed Insolvency Trustee handling your case finds that you have surplus income, you won’t be able to get a discharge for 21 months.

If this is your second bankruptcy, it will take longer. If you don’t have surplus income payments to make, it will take 24 months. If you do need to make surplus income payments, it will take 36 months.

These are the pros when considering the pros and cons of bankruptcies Canada. Now for the cons!

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The cons of bankruptcy

There are many cons of filing bankruptcy, including:

Your credit rating

If you file for bankruptcy, it’ll rank you as an R9 on your credit report, which is pretty bad news for your credit score. The damages to your credit rating will not last forever. Your very first personal bankruptcy will be noted on your credit record for 6 years after the day of your bankruptcy discharge. A second bankruptcy will certainly harm your credit score for a lot longer.

At the outset of your bankruptcy journey, you cannot see the light at the end of the tunnel. At least you now have a roadmap to restoring your credit and have a date when your credit will be cleared of any damage. You can start to rebuild your credit even before you are discharged from bankruptcy.

Your assets may be liquidated

This doesn’t mean that you’ll lose everything. Your personal belongings – like clothes, household items, work tools, and even a car under a certain value – usually can’t be taken away from you in bankruptcy. This means that the proceeds from the sale of your other non-exempt assets will be used to repay your creditors.

RRSP contributions in the past 12 months are not exempt

Your retirement savings are protected, but any contributions you made in the past 12 months to your RRSP are not exempt.

Surplus income and the cost of bankruptcy

If you’re making more money than the surplus income threshold, you’ll also have to make surplus income payments to your Licensed Insolvency Trustee. If you don’t have any assets and don’t have to pay the surplus income requirement, you or a relative will have to pay your Trustee’s fee.

Complete financial disclosure

You will need to make full financial disclosure to your Trustee. Your Licensed Insolvency Trustee will use that information to help you complete a Statement of Affairs. This disclosure details your financial position and will even potentially highlight certain financial transactions. Essentially your Trustee and the court will know everything about your finances and your creditors will get a peek too.

When you’re going through bankruptcy, you’ll need to hand over your tax docs and pay stubs to show how much you’re earning. This is how the Trustee decides if you’ve gone over the surplus income threshold.

A lasting record

Once you file for bankruptcy, the paperwork will become part of the public record in Canada. To start your bankruptcy, your Licensed Insolvency Trustee files your bankruptcy documents with the OSB. It then becomes part of the public record.

Most people who file for bankruptcy will only have their Trustee, the OSB, the court, their creditors and the two Canadian credit bureaus know about it.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Bankruptcy alternatives from pros and cons of bankruptcies Canada

Now that you understand the pros and cons of Canadian bankruptcies, you must just consider this option as a last choice. If you can solve your financial problems without experiencing the unfavourable elements of personal bankruptcy, that is the most effective way to go.

During your initial no-cost consultation, the Licensed Insolvency Trustee will help you should explore all the bankruptcy alternatives. I have written before in more detail about each of the bankruptcy alternatives listed below. I have included a link to each of those more detailed blogs. The main alternatives to bankruptcy are:

Debt consolidation

If you’re aiming to leave financial debt behind, debt consolidation could be a good alternative for you. By rolling all your financial obligations into one financing with a lower rate of interest, you will save money from the lower rate of interest on the new consolidation loan and leave your debt behind much faster.

Just make sure that you understand the current interest rates you are being charged, the total of your monthly payments that you currently may or may not be able to afford, the interest rate being offered to you on a debt consolidation loan, what your new monthly payment will be and make sure that you have a realistic budget of your monthly income and monthly expenses that shows that you can afford the new payments on a monthly basis.

Credit counselling

Credit counselling is a process whereby a person in debt meets with a credit counsellor to discuss their options for dealing with their debt. The credit counsellor will assess the person’s financial situation and provide advice on how to best deal with the debt. This may include negotiating with creditors to reduce interest rates or monthly payments and setting up a debt management plan.

As I have written many times before, you should only go to a community-based non-profit credit counselling agency that does not charge any fees. If the credit counsellor you choose wants to charge you fees, get out of there. It is not the best choice for you.

Debt settlement

Debt settlement is a process in which you can negotiate with your creditors to pay less than the full amount you owe. This can be a good option if you are not able to pay your debts in full and you are willing to negotiate with your creditors.

Debt settlement works well if you only have 1 or a few creditors. If you have many creditors, debt settlement is much more difficult in making sure that everyone remains on board with the negotiated settlement and that you will have enough money to pay the lower settled amounts you promised.

Many times with a multitude of creditors, either a consumer proposal or a Division I Proposal is the most effective way to bind everyone in a debt settlement process.

Like in credit counselling, I urge you to stay away from debt settlement companies that charge fees.  What they do is charge you unnecessary fees, try to sell you products you don’t need and then when they cannot sell you any more products and their debt settlement techniques do not work, they then walk you to their favourite Licensed Insolvency Trustee for an insolvency process, which might just be a bankruptcy.

I would rather see you use your accountant or lawyer if you do not feel comfortable negotiating yourself.  Those professionals will have your best interests at heart in return for their fee.  They also won’t try to sell you more products.

Consumer proposals

When it comes to debt of $250,000 or less (other than for secured debts registered against your home), there are a number of options available to help you get back on track. One option is a consumer proposal.

A consumer proposal is a formal debt relief and debt-settlement option available in Canada. It is a legally binding agreement between you and your creditors. Under a consumer proposal, you agree to repay a portion of your debts, and your creditors agree to forgive the rest.

A consumer proposal can be an attractive option for many reasons. First, it can help you get out of debt without having to declare bankruptcy. Second, it can help you keep your assets, such as your home or car. Third, it can give you a fresh start by wiping away most, if not all, of your unsecured debts.

If you’re considering a consumer proposal, it is necessary to obtain assistance from a qualified expert. A Licensed Insolvency Trustee, who is also a consumer proposal administrator in Canada, can walk you through the process and answer your questions. This will allow you to see if it’s the right choice for you.

Division I Proposal

If you owe more than $250,000, a Division I Proposal is a great option to settle your debts. It’s not as streamlined as a consumer proposal, but it’s still a great way to get out of debt.

Other than these technical differences, it has the same aim as a consumer proposal: to provide a debt settlement option that will bind all unsecured creditors and get the person back onto their feet free of the stress and burden of their unmanageable debts.

Either a consumer proposal or a Division I Proposal are excellent debt relief options approved by the Canadian government.  One of the other benefits of either of these two debt settlement options is that the person will also receive two mandatory financial counselling sessions.  Getting this education will help put the person on the right track for the rest of their life.

Understanding the advantages of bankruptcy and also the disadvantages of bankruptcy for companies

When a company faces overwhelming debt, bankruptcy may seem like the only way out. However, there is only one advantage and one disadvantage to bankruptcy for a company.

One advantage of this situation is that the Trustee may be able to sell the assets to a purchaser who will then be able to use those assets to continue the former business of the company in a profitable way. This could potentially save some jobs, at least for the key employees of the old business.

The one disadvantage is that unlike a person, when a company goes bankrupt, the corporate legal entity is now dead.

Before the Directors of a company decide to bankrupt the company, they should determine if certain divisions or parts of the business can be saved and operate profitably if the unprofitable part(s) could be eliminated. If so, a financial restructuring can be done to turn this unprofitable company into a viable and profitable one and save some jobs in the process.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Pros and cons of bankruptcies Canada:  Summary

I hope you enjoyed this Brandon’s Blog on the pros and cons of bankruptcies Canada.

People are falling behind with stagnant wages or tiny wage increases while there is runaway inflation and they are falling deeper and deeper into debt.  Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now, while explaining the pros and cons of bankruptcies Canada or any other of our recommendations.

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.  There are many pros and cons of bankruptcies Canada.  Whatever process we recommend for you will, we will do so in order to minimize any cons you may experience.

We understand 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 financial life, Starting Over, Starting Now.

 

 

pros and cons of bankruptcies canada
pros and cons of bankruptcies Canada                                                                      pros and cons of bankruptcies canada
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Brandon Blog Post

CCAA PROTECTION FAQ: 10 EASY THINGS YOU MUST KNOW TO BE FINANCIAL RESTRUCTURING SAVVY

ccaa protection

What is CCAA protection?

The Companies’ Creditors Arrangement Act (CCAA) allows insolvent companies owing creditors $5 million or more to seek CCAA protection. This can help them restructure their business and settle their debts over time. The CCAA gives such companies the ability to restructure their business affairs and financial obligations. In Canada, the CCAA operates under the authority of the federal government and is administered by the courts of each province.

If a debtor company owes less than $5 million, it can restructure under Part III Division I of the Bankruptcy and Insolvency Act (Canada). This federal insolvency statute has streamlined procedures for handling insolvency restructuring cases. There’s no prohibition against using this statute if the company owes $5 million or more. Those larger companies just have a choice as to which statute to restructure under.  This kind of restructuring is done in order to avoid liquidation through the filing of an Assignment in Bankruptcy.  By successfully restructuring, the company can avoid job losses, claims by employees and the other negative effects of bankruptcy.

In this Brandon’s Blog post, I’ll be discussing CCAA protection for companies needing to go through a financial restructuring by making the Initial Application to the court. I’ll also be talking about a recent court decision that will be of interest to companies needing to restructure when their bank is demanding that all loans be repaid and they are trying to enforce their security.

Is CCAA protection the same thing as chapter 11?

Bankruptcy protection is a term closely associated with a US company filing under Chapter 11 of the US Bankruptcy Code. In Canada, it most likely means that the Canadian company has applied to a Canadian court to make its application for CCAA protection under the CCAA.ccaa protection

What is CCAA protection in Canada and “The Stay”?

Creditor protection under the CCAA is a process that provides companies with some relief from their creditors. This process can help them to reorganize their affairs and continue operations.

CCAA protection can provide some much-needed breathing room for companies that are struggling to stay afloat. It can give them time to restructure their affairs and come up with a plan to repay their creditors. A debtor company files its application for creditor protection in order to obtain an Initial Stay from the court. This will allow the company to begin restructuring its financial affairs.

While the CCAA protection order is in place, creditors are not allowed to take any action to recover money owed to them. They can’t try to seize the company’s property or petition the court for its bankruptcy, without the prior approval of the court. This is called the CCAA protection “stay of proceedings”.

A CCAA Canada filing is typically made when a business is insolvent and seeking to restructure its debts. The goal of the business in CCAA protection is to reach a satisfactory agreement with its creditors, which can include both secured and unsecured creditors. I will talk more about the support of secured creditors when I discuss the court case below.

Comeback hearing: Can CCAA Canada protection be extended?

Yes. Initial Order applications are often submitted on an urgent basis with prior notice only to key stakeholders such as senior lenders. Initial orders usually contain a “comeback” clause allowing stakeholders who did not receive initial notice an opportunity to attempt to change the terms of the CCAA protection order.  Under the CCAA, Section 11.02(1) states that the Initial Order cannot be effective for more than 10 days.

The Canadian court system requires that there must be a “comeback hearing,” where interested parties can challenge aspects of the initial order, or even request additional relief before the order is extended. This means that the comeback hearing must be scheduled for within those 10 days. This ensures that the process moves forward promptly while protecting the interests of those involved. At the comeback hearing, the court will then assess the evidence before making a decision on whether or not to extend CCAA protection. If the court decides to extend protection, it will only do so for a limited amount of time.

The amount of time given will be at the discretion of the court and is definitely not open-ended. The company and its Monitor will be required to provide regular reports to the court detailing this progress.

The court will determine the next reporting period based on the information provided, which will allow the debtor company to continue its restructuring. The court may also be asked to make other orders, such as borrowing authority for financing the debtor company’s operations.ccaa protection

CCAA protection: What is the role of the Monitor?

The Monitor is the Licensed Insolvency Trustee (LIT) appointed by the court to monitor the business and financial affairs of the debtor company in a CCAA proceeding. The LIT’s role is to ensure compliance with the law, court order(s), and terms of the debtor company restructuring plan.

The Court-appointed Monitor is responsible for assisting with the preparation of the restructuring plan, formally known as the Plan of Arrangement and sometimes referred to as a Plan of Compromise. Monitors act as financial advisors to the insolvent company and they also advise creditors on the claims process and oversee voting at each meeting of creditors.

A Monitor must submit regular reports to the court summarizing the debtor company’s activities and the progress of the case. This includes the claims process when they get to that point in the administration.

These reports are published online and are accessible to creditors and interested parties. One of the ongoing responsibilities of the Monitor in its reporting is to advise if, in the Monitor’s opinion, the debtor company under CCAA protection is continuing to act in good faith and carrying out its restructuring on a timely basis.

CCAA protection: The Plan of Arrangement or Compromise

The company usually begins talking with its creditors and investors right away after the initial order is made. To do this, it may end or give away unwanted and especially unprofitable contracts, fire employees, sell property, negotiate new credit terms, change its corporate structure, and take other restructuring steps to ensure the viability and profitability of the company.

The court will ultimately be asked to approve all major actions in order to allow the company to move towards a viable Plan of Arrangement it believes will garner the support of the necessary majority of creditors.

The Plan of Arrangement or Compromise is the proposal presented by a company to its creditors detailing how it intends to resolve the issues it is facing and how the amounts owed to creditors will be compromised, An arrangement is a broader term that encompasses any plan for reorganizing. The distinction between “compromise” and “arrangement” is in practice, immaterial.

Different creditors are often treated differently based on terms of priority. This affects the order and amount they will be paid under the restructuring plan.

The first step in a CCAA restructuring will be to prioritize any government claims that are considered trust claims. Next will be any new charges ordered by the court as part of the restructuring. Examples of such court-ordered charges are amounts owing under a Key Employee Retention Plan and the lender financing the company during the restructuring phase.

The pre-filing secured creditors are typically at the forefront next when it comes to recovering their funds. They may have security in the form of a general security agreement or mortgage.

Unsecured creditors are next in line for payment. These creditors have provided goods or services to the company on credit, without receiving any security in return. In retail insolvencies, the company under creditor protection has to decide as part of its business plan if it is going to treat customers who have paid deposits for items they have not yet picked up as unsecured creditors or if they will complete the sale providing value for the prior deposits.

Such differing priorities will influence how the Plan of Arrangement or Compromise is constructed.ccaa protection

CCAA protection and the financial statements of the debtor

When a company seeks CCAA protection from the court, they are required to submit a projected cash flow statement. This document projects the company’s expected revenue and expenses from ongoing business operations and any required financing over the next 12 months and is used to assess whether or not it can fund day-to-day operations and survive during the CCAA protection proceedings.

Furthermore, the company must provide copies of all financial statements issued during the one-year period prior to the date of the Initial Application. If none were issued during this time period, it should provide a copy of the most recent financial statement.

CCAA protection:  Creditor approval of the Plan of Arrangement or Compromise

A company can establish separate classes of creditors to increase the chances of a favourable vote for the Plan of Compromise or Plan of Arrangement. There must be some form of shared characteristic or similarity amongst the creditors in each class in order to qualify for each such classification.

In addition to the simple majority test, the creditors in each class who are voting must vote in favour of it by at least 2/3 of the total value of the creditors voting in each class.ccaa protection

CCAA protection and court approval of the Plan of Arrangement or Compromise

The court may approve the Plan once they have been approved by each participating class of creditors. The Plan will include all negotiated compromises and arrangements that deal with any matter, including claims against directors and amendments to the articles of incorporation or letters patent incorporating the company,

A Plan cannot be approved by the court if a provision is not made for settling “super-priority” claims relating to:

  • compensation and reimbursement claims by employees other than officers and directors;
  • pension plan contributions (except where an agreement has been reached with the relevant pension regulator); and
  • unremitted employee source deductions from employee paycheques for taxes and other deductions.

Additionally, any equity claims cannot be authorized by the court through a compromise or arrangement until all other claims have been paid in full.

CCAA protection: You can access CCAA filing records and court documents through 2 sources

There are two ways to find CCAA filing records and court documents. The easiest way is to go to the Monitor’s website specifically set up for the CCAA case. All documents filed by the Monitor in court and all court orders will be there. The second source is the court file itself.

This leads us to the actual court case I mentioned at the very beginning of this CCAA protection blog post. It is a decision dated October 14, 2022, by the Honourable Justice MacDonald of the Supreme Court of Newfoundland and Labrador in Bankruptcy and Insolvency. The case is Edward Collins Contracting Limited (Re), 2022 NLSC 149.

It is an application by a group of companies in the construction industry seeking an Initial CCAA protection Order for the debtor company. The case is notable for one factor: the companies’ main secured creditor, the Royal Bank of Canada, is opposing the application.

The companies were operating under a forbearance agreement. However, Royal Bank claims that they were in breach of their forbearance agreement and that the Bank should be allowed to have a Court-appointed Receiver.  Although they did not provide any evidence in their material, in argument, the Bank claimed the companies were not acting in good faith.

The court ruled that if the companies’ application for CCAA protection is approved, then the Royal Bank of Canada’s application for a Court-appointed receiver is moot.

The court’s entire decision and His Honour’s thought process in considering all issues can be located online. Of specific relevance to me is His Honour’s thought process and careful consideration of all the points he must consider in deciding whether or not to grant the requested relief of CCAA protection.

The court considered the following:

  • Do the companies have proper standing under the CCAA?
  • Have the companies satisfied the test to allow the granting of grant an Initial Order?
  • If so, should the company’s conduct during the prior Consent Stay period cause it to refuse the Initial Order?

The court found that the CCAA applies to the debtor company and the affiliated debtor companies as they are all insolvent corporations or have committed an act of bankruptcy and owed their creditors in excess of $5 million.  The court also found that the companies were entitled to CCAA protection from creditors and even the Royal Bank of Canada notwithstanding its opposition to the Initial Application and the granting of the Initial Order.  The Initial Order was made.

You can read His Honour’s lengthy analysis if you wish, as it is very detailed and provides a great deal of insight.

You Owe Money—The CCAA protection

I hope you enjoyed this Brandon’s Blog on CCAA protection.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.   Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that 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. 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 makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

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.

We understand 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, Starting Over, Starting Now.ccaa protection

Call a Trustee Now!