Ira Smith Trustee & Receiver Inc.

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

Post author By Brandon Smith
Post date October 24, 2022

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.

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: 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 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 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.

Brandon Blog Post

CONSOLIDATION LOANS IN CANADA: IS IT POSSIBLE TO CONSOLIDATE DEBT BY USING THIS 1 SIMPLE GOING POSTAL HACK?

Post author By Brandon Smith
Post date October 17, 2022

Debt consolidation loans in Canada

Debt consolidation loans in Canada can be an excellent means to conserve money and get your funds in order. By combining several financial obligations into an affordable single loan, you can frequently get a lower rate of interest and also reduced month-to-month payments. This can assist you to get out of debt quicker as well as save cash over time.

Prior to getting debt consolidation loans in Canada, it is very important to understand the terms of the financing and also to make sure you can afford the monthly payments. It’s also a good idea to look around and compare rates of interest and also loan terms from various financial institutions.

In this Brandon’s Blog, I discuss the concept of debt consolidation loans in Canada and a sort of new potential lender offering personal loans in Canada. I will also share another debt settlement and debt consolidation option that may be beneficial for people and companies who want to repair their financial situation.

Advantages as well as downsides of consolidation loans in Canada

Upsides

Debt consolidation loans in Canada can offer many benefits over making regular monthly payments on many different loans and debts with different interest rates. Interest rates on some debts, like credit card debt, can be categorized as high-interest debts, making it difficult to make a dent in the balance owing. if all you ever do is make the monthly minimum payment.

Consolidation loans supply a number of advantages, such as:

Reduced interest rates – Lenders normally give consumers reduced rates of interest on individual personal loans allowing them to repay their high-interest-rate credit card debt. Consolidation loans in Canada can be an excellent method to obtain a lower rate of interest and come to be debt-free quicker.

Reduce your monthly payments – Banks and credit unions usually offer debt consolidation loans in Canada with terms of up to 5 years. This, along with the lower interest rate, can help you save a lot of money in the long run and give you a lower monthly payment than the sum of the monthly payments required under your many debts.

A single payment instead of multiple payments – One of the best things about debt consolidation loans in Canada is that you only have to make one monthly payment. This makes it much easier to budget and stick to your plan. Instead of having to remember to pay six different bills each month, you only have to worry about one.

Potentially improved credit scores – Your credit report is a number that banks make use of to determine your creditworthiness. A high credit rating suggests you are a low-risk borrower, which is excellent. A bad credit rating indicates you are high-risk, which is bad.

By obtaining a debt consolidation loan, making on-time payments and paying it off on time without a payment schedule default or late payments, you are restoring your bad credit score in 2 ways. First, you have revealed that you had the ability to fully settle all of your other financial debts. Second, you are repairing your credit score by making the consolidation loan payments on time. It is not instant, yet in time, paying off debt consolidation loans in Canada will certainly improve your credit rating. Over time, you will see your credit score and credit report improve.

Downsides

There are a few downsides to debt consolidation loans in Canada, including:

Debt consolidation loans in Canada are often referred to as “easy money.” But they aren’t always easy. Even though many consumers think they qualify for a loan based solely on their disposable income, there are certain circumstances where Canadian banks will not see your monthly income in as good a light as you do. You will need collateral such as real estate, cars, boats, etc.

If you do not have these things, you may be at a disadvantage. Most banks will not lend money to someone with a low credit score unless they have some form of security, such as a car or house with enough equity. This makes sense because the lender knows that it is a debt consolidation loan you are applying for and by definition, you cannot pay off your credit card balances without their loan. They will want to protect themselves against the chance you may default on the loan.

When choosing a bank, you’ll want to compare fees, interest rates and prepayment penalties to ensure you’re getting the best deal. Keep in mind that the lowest fees don’t always mean the best overall value, so be sure to compare all aspects of the loan before making a decision. You might even consider getting one of the types of secured loans by raising money against your home through a home equity line of credit or a second mortgage. So compare your offers of secured loans and unsecured debt consolidation loans in Canada very carefully to consider all factors in deciding which is best for you.

WARNING: Stay away from private lenders, payday lenders and most alternative lenders who may provide loans just as expensive as payday loans. Their fees and high-interest loans will never be in your favour.

Consolidation loans in Canada: Can you consolidate student loan debt?

Students and recent graduates who find themselves buried under student loan debt often look for help. They want to consolidate their debts into one manageable monthly payment, but this can be difficult to obtain because there are few debt consolidation loans specifically designed for them.

Many recent graduates lack the credit history or income to qualify for a consolidation loan. They also generally do not have any free assets to qualify for a single secured debt consolidation loan to pay out over a longer period of time at a lower interest rate.

Unsecured loans to young people with a little credit history will be more expensive than one to an individual with a long-established credit history. That assumes that they can even qualify for this type of loan.

For these reasons, other than perhaps for a recent graduate from either medicine or dentistry who perhaps can roll their student debt into a professional loan, it will be very difficult to get consolidation loans in Canada to consolidate student debt.

Consolidation loans in Canada: Can going postal help you reach your financial goals?

Here is a potential new source for debt consolidation loans in Canada. Although it was not set up specifically for consolidation loans, there is no reason why you cannot use the money for that purpose if you are approved.

There is a new loan program offered by Canada Post which is designed to help people who are struggling financially, especially in rural areas where access to banking institutions is limited. It is called the Canada Post MyMoney™ Loan product. The idea is that you get a loan that’s based on how much you can afford to pay back, what you need the money for, and how likely you are to repay it.

The initiative is part of Canada Post’s commitment to helping Canadians manage their finances better. Their goal is to provide easy access to financial services and products that can help people save time and money.

To have your loan application considered, you have to be either a Canadian citizen or a Permanent Resident. You must be no younger than 18 years of age and you need to have annual earnings of a minimum of $1,000. Additionally, you need to not have been bankrupt within the 2 years before applying for the loan or had any of your financial debts handed off to a collection agency within the year before applying. They will of course also do a credit check on you.

In order to receive your loan proceeds, you must have a chequing or interest-bearing account with a Canadian financial institution in your own name. Borrowers of MyMoney™ loans are not required to offer any security against assets, in contrast to secured loans from banks and credit unions. Instead, applicants need only provide proof of identity, employment history and income. Both variable and fixed-rate installment loans are offered. The actual lender is TD Bank.

Consolidation loans in Canada: Other financial debt loan consolidation choices

You may not want to take on more debt to pay off your current debt. I don’t blame you and I get it. Or you may have been denied a debt consolidation loan. Here are some other options for consolidating your debt:

Balance Transfer Credit Cards

A balance transfer is simply when you move the balance of one credit card over to another credit card. For example, if you have a balance of $5,000 on your Mastercard, you can transfer that balance to a new Visa account that offers you 0% interest for 1 year on all balance transfers.

When you switch, you won’t have to pay interest charges for 12 months. After that, you’ll need to pay off the balance in full or start making payments on the balance transferred. Of course, you’ll still accrue interest after the interest-free period on the remaining balance.

Consolidation loans in Canada: Credit counselling

Credit counselling is a service that helps individuals to manage their finances and improve their financial situation. It can be done with a range of techniques, including budgeting, negotiating with creditors, setting up a plan to repay debt and monitoring actual behaviour vs. the plan.

Credit counselling can be an excellent way for individuals to take control of their financial obligations. It can help them create a plan to settle their debt, and provide them with the tools and knowledge they need to maintain financial literacy in the future.

There are many different credit counselling services available to choose from. You should select a community-based service to avoid being charged any fees. Be sure to stay away from any counselling service that charges fees, as this will only add to your expenses when trying to reduce debt.

Consolidation loans in Canada: Debt help is available with a financial restructuring program

Financial restructuring is a complicated and difficult procedure, however, it likewise provides individuals as well as businesses with a new beginning and a brand-new lease on life. Selecting to reorganize your finances with the help of a licensed insolvency trustee will certainly have temporary challenges, but can ultimately provide you with financial relief and a fresh start.

If you are considering financial restructuring, we urge you to consult with a licensed insolvency trustee to discuss your options. We can help you understand all of your options and work with you to develop a plan that is in your best interests.

Trustees are experienced in all aspects of financial restructuring and can supply you with the information and assistance you require to make the very best decision for your situation.

The most well-known financial restructuring tool for individuals is the consumer proposal. For mid-size companies and individuals with larger debt, it is a Division I proposal. For companies with debts greater than $5 million, restructuring is accomplished through the use of the Companies’ Creditors Arrangement Act.

Here is the best part. You should consider financial restructuring as getting an interest-free loan to pay off all your debts for a fraction of what you owe. I am qualified and experienced in all forms of financial restructuring, can explain this concept to you and am always available to answer any of your questions.

Consolidation loans in Canada: Before making a decision on your financial life needs – Call me

I hope that you found this consolidation loans in Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We are aware of your financial difficulties and understand your concerns. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to give you the best management advice to get you out of your outstanding debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We are sympathetic to the financial difficulties you are experiencing and would like to help alleviate your concerns. We want to lighten your load by coming up with a debt settlement plan crafted just for you.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

Brandon Blog Post

DISCHARGE FROM BANKRUPTCY CANADA: OUR DETAILED STEP-BY-STEP GUIDE

Post author By Brandon Smith
Post date October 10, 2022

discharge from bankruptcy canada

What are the implications of discharge from bankruptcy Canada?

If you are experiencing financial troubles and can’t pay your debts, you can file for bankruptcy in Canada. This legal process lets you off the hook for your debts and start fresh. Once you’re discharged from bankruptcy, you’re no longer responsible for those debts (other than for a few exceptions noted below). Filing for bankruptcy is stressful. We understand how difficult and stressful the bankruptcy process can be, so we hope that this will be a helpful resource for you.

Once the Trustee has completed their duties under the Bankruptcy and Insolvency Act (Canada) with respect to the administration of your property and the bankruptcy estate, the next step in the bankruptcy process is they must apply for a discharge. This will occur after the Trustee has applied for your discharge from bankruptcy Canada, even if you did not get an absolute discharge.

This Brandon’s Blog is for people who have made a bankruptcy filing but have not yet been discharged. If your Licensed Insolvency Trustee has been discharged or is otherwise unable to help you with a second discharge application, this blog will provide you with the information you need to get through the process on your own.

Discharge from bankruptcy Canada: What are the implications if you are not discharged from bankruptcy?

If your previous application for discharge was unsuccessful, you remain an undischarged bankrupt and your Trustee is not obliged to make another application on your behalf. However, you should check with your Trustee first as they may or may not be prepared to do so.

We often receive calls from individuals who claim that their Trustee has been discharged, but they have not been. They express confusion as to why their Licensed Insolvency Trustee will not make an application for their discharge from bankruptcy. A quick search reveals that in these cases, the individual received a conditional discharge, but has not yet fulfilled all of their conditions to get a bankruptcy discharge. That is why their conditional discharge has not yet been converted into an absolute discharge.

If you filed an assignment in bankruptcy and are still an undischarged bankrupt, you may be able to apply for discharge from bankruptcy. An insolvency Trustee only needs to make one application on your behalf. Once the Trustee obtains their discharge, they do not need to make your application for discharge on your behalf again.

The Licensed Trustee cannot be discharged until all bankruptcy administration requirements have been met, including making the first discharge application on behalf of the bankrupt person.

discharge from bankruptcy canada

Discharge from bankruptcy Canada: How do you obtain a bankruptcy discharge in Canada?

Automatic discharge from bankruptcy is typically granted unless there are exceptional circumstances. If there is opposition to the automatic discharge, the discharge application must be brought before the court for a hearing.

If you did not complete all of your bankruptcy duties as the bankrupt person, such as providing income and expense statements, attending required financial counselling sessions, and/or paying surplus income, your Trustee had reasons to oppose your automatic discharge and scheduled a hearing with the court.

The Report of Trustee on Bankrupt’s Application for Discharge sets out the reasons for the insolvency Trustee’s opposition to a bankrupt’s application for discharge. This document is on file with the court.

If a bankrupt does not receive a discharge at the time of the court application, it is usually because they have not yet done what is required. The associate justice/registrar who heard the application at court may have therefore adjourned the application (i.e. stated it was to be heard at a later date, which may or may not have been set).

The court may have adjourned your discharge application or imposed conditions that must be met before you are entitled to a discharge. The disposition sheet from the hearing will state what the court decided in this regard.

Discharge from bankruptcy Canada: What are the steps to clear my bankruptcy?

It’s not unusual for people who didn’t do what they were supposed to at first to try and get back on track and do what’s required to get their discharge. You must comply with your duties during bankruptcy to the best of your ability and be prepared to explain to the court any deficiency in doing so.

For example, to get your discharge, you must be able to provide details and evidence of your income and expenses during bankruptcy. You probably recall that you were required to provide the Trustee with your monthly income and expense reports. If you’re unable to provide the court with those details, the court may want to review your income tax returns for that period. If you want the court to rescind or vary the conditions imposed, you must show that you complied with the conditions to the best of your ability.

There are many examples of trying your best to meet the conditions but maybe not perfectly. If the court orders you to pay a certain sum of money to the Trustee by a certain date, you can make the court-ordered additional payment but not by the specified date. If you were required to make surplus income monthly payments but didn’t make them all, that’s one reason there were conditions attached to your discharge. You can apply to the court to change the date and get your discharge.

Another one is that you didn’t finish all your required credit counselling sessions. You could finish them and then provide proof of completion to the court.

discharge from bankruptcy canada

Completing your own application for discharge from bankruptcy Canada

Making your own application to be discharged from bankruptcy can be a bit daunting, but don’t worry—just follow a few simple steps and you’ll be all set. Here are some tips to help you get your application ready and submitted without the help of a bankruptcy trustee or a bankruptcy lawyer.

To begin, you’ll want to locate your bankruptcy file at the court office. Once you have your file, be sure to look through it thoroughly to find:

your bankruptcy court file number;
the Report of Trustee on the Bankrupt’s Application for Discharge under section 170 of the BIA;
any order issued by the bankruptcy court at the original discharge hearing; and
the court’s disposition sheet from any previous discharge hearing identifies what the court previously ordered or decided.

You will need copies of these documents. You can ask the court office to make copies for you. They will charge you a fee for photocopying. You should check the Report of the Trustee, the court’s disposition sheet, and any court order to see what you failed to do and what conditions the court has imposed. Also, it is not a bad idea to find out who attended your last application for discharge.

You should check the Report of the Trustee, the court’s disposition sheet, and any court order(s) in the file to see what you didn’t do and what conditions (if any) the court has imposed. Lastly, you need to schedule a date for your discharge hearing with the bankruptcy court.

You will be required to prepare the following documents and file them with the court:

a notice of hearing for a bankrupt person’s application for discharge;
your affidavit explaining why you believe you are entitled to the discharge order sought;
an affidavit of service; and
a draft of the order sought.

The Associate Justice/Registrar in Bankruptcy hearing your application for discharge may make any order he or she sees fit. If the order you are seeking is made, he or she may accept and sign it in court on the day you appear, which may save you a period of time later on.

Requisition – Notice of hearing for bankrupt’s discharge from bankruptcy Canada hearing for discharge

The first step in obtaining a discharge in bankruptcy is to file a Notice of Hearing for Bankrupt’s Application for Discharge with the court. That document would have first been filed by the Trustee when the Application for discharge is first scheduled. If you have a copy of it, it will be a good precedent for you to follow.

A requisition must be filed again by you in order to have the matter brought back before the court.

discharge from bankruptcy canada

Discharge from bankruptcy Canada:The Affidavit

An affidavit is a formal, written statement that provides key information in your legal case. Any evidence you want the court to consider in your application must be submitted in an affidavit. Your affidavit should describe the events leading up to your bankruptcy, and your current financial situation.

You must swear or affirm your affidavit before a notary public or commissioner of oaths. Make sure that your affidavit only includes evidence that is relevant to your application for discharge.

The court is familiar with a standard form of affidavit for discharge applications. You should familiarize yourself with that normal format. You should also include:

additional information about why you did not seek a bankruptcy discharge earlier;
is this a 1st-time bankruptcy, 2nd-time bankruptcy or more;
why you have not been able to comply with the bankrupt’s duties or the requirements of an earlier court order; and
state the reasons you are wanting to be discharged now.

You will need to attach any relevant documents to your affidavit in support of your application, including a statement of your current income, expenses, assets, liabilities and any previous bankruptcy information.

Discharge from bankruptcy Canada:Affidavit of Service

To serve documents, you must provide a written copy to the party to be served. You need to obtain a signature or other confirmation, such as an email, to confirm that the document was properly served. You will need to serve the filed Requisition and all filed Affidavits and documents on:

any creditor filed an opposition to your discharge;
creditors who attended an earlier discharge hearing;
your Licensed Insolvency Trustee; and
Office of the Superintendent in Bankruptcy.

These parties may attend your hearing and make submissions.

In order to provide proper service within the required time period before your discharge hearing, you must familiarize yourself with the rules. You must also provide proof of service at the hearing, especially if no one else attends. This proof of service can be the signature of everyone served to show the date they were served.

An Affidavit of Service can also be filed with the court. This Affidavit of Service is separate from the Affidavit filed with the court regarding your reasons for entitlement to anabsolute bankruptcy discharge certificate.

discharge from bankruptcy canada

At the discharge from bankruptcy Canada hearing

When you appear in court for your discharge hearing, you will be able to present your case to either an Associate Justice or Registrar in Bankruptcy. If your application is being opposed, the creditors opposing your discharge need to file a notice of opposition. In this case, the hearing will be in front of a bankruptcy Judge. This is the normal process followed:

You explain why you believe you are entitled to the order you are seeking, for example, an absolute discharge from bankruptcy.
Anyone opposing your application explains his or her position.
The Judge or Registrar may ask questions relating to the affidavits and documents you have filed and make suggestions or give directions.

When presenting your position at the hearing, remember to:

Clearly state what order you are seeking from the Registrar in Bankruptcy or Judge.
Outline the facts supporting your application in a concise manner.
Explain the law on the subject and how it applies to the facts of your case.

Your conduct before and during bankruptcy will be taken into consideration when making a decision on your application for discharge. The Trustee’s report will provide information on your conduct before and during bankruptcy, which will be taken into account. if you did not attend the required financial counselling
sessions, did not file required statements of income and expense, and/or did not make the required surplus income payments to the Trustee for the benefit of your creditors.

The court will consider the relevant factors and make the appropriate order, or it may adjourn the hearing for further information or conditions to be met. Some of the types of orders the court may make are:

An order of discharge that is absolute and therefore you are immediately discharged from bankruptcy.
A conditional discharge may be granted. Examples of conditions are:
- if the debtor pays any unpaid surplus income,
- the debtor pays the outstanding balance for any asset that was agreed to be paid for; or
- if the debtor pays a sum of money to the Trustee toward their debt obligations, as decided by the court.
A discharge that has been suspended.
The court may refuse to issue a discharge order if it is not satisfied that you have made full and adequate disclosure, or if there are issues with your conduct.

Discharge from bankruptcy Canada: Order for discharge

The Judge or Registrar in Bankruptcy will grant a discharge order at the end of the hearing. The type of discharge will be one of the kinds indicated above. If you prepared a draft order and the Registrar in Bankruptcy or Judge finds it acceptable, they will sign it and you can then have it filed with the court. However, if your application was opposed, keep in mind that one of the opposing parties may choose to appeal the discharge order.

If you have not prepared your order before the hearing, you should do so after the hearing and submit the order in duplicate to the court. The court office will then send the order to the Registrar in Bankruptcy or Judge who heard your application for signing. Once you receive your copy of the signed order, your discharge will be official.

When you receive a copy of the signed order, you must provide a copy to the Office of the Superintendent of Bankruptcy. They will in turn notify the credit bureaus and Canada Revenue Agency of your discharge.

When you have received your absolute discharge, you are no longer legally responsible for repaying debts that you incurred before your assignment in bankruptcy. You will get rid of debt with some exceptions set out in Section 178 of the Bankruptcy and Insolvency Act. They are:

payment of child support or alimony;
student loans, if you have not been a full-time or part-time student for less than 7 years;
a fine or penalty imposed by the court; or
debt resulting from fraud.
discharge from bankruptcy canada

Discharge from bankruptcy Canada: Are you tired of being in debt?

Bankruptcy law and the bankruptcy process can be complex, so it may be worth retaining a bankruptcy lawyer to help you apply for your discharge. Ultimately, it is up to you, but hopefully, this guide to discharge from bankruptcy Canada will lay out the steps you need to take if you wish to apply for a discharge yourself.

I hope that you found this discharge from bankruptcy Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

Call us now for a no-cost initial consultation. We are licensed professionals.

Brandon Blog Post

SUSPENSION OF DISCHARGE FROM BANKRUPTCY: OUR COMPLETE GUIDE ON BANKRUPTCY DISCHARGES

Post author By Brandon Smith
Post date October 3, 2022

suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Bankruptcy discharge and what it means for the bankrupt

The implications of an absolute bankruptcy discharge on the debtor are significant. Once an absolute discharge is granted, the debtor is no longer liable for any unsecured debts that existed at the date of bankruptcy. The debtor is released from having to repay any debts that they incurred before filing for bankruptcy.

This means that the debtor no longer has to worry about repaying those debts and can move on with their life. This provides a fresh start for the debtor and helps them get back on their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy) (Trustee), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

In this Brandon’s Blog post, I’m discussing what it means when a bankrupt person is discharged, as well as the process and different types of discharges. One type of discharge that a bankrupt person can be given is a suspension of discharge from bankruptcy taking place. I’m also highlighting this recent court decision that demonstrates the balance and fairness that the courts strive for.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged?

If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9 month bankruptcy period. To qualify for this automatic discharge, you must have:

attended the two mandatory financial counselling sessions with the Trustee;
no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate according to guidelines set by the Office of the Superintendent of Bankruptcy (OSB or Official Receiver); and
no opposition to his or her discharge.

The only party that can authorize an automatic discharge in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: When is a discharge challenged?

The Trustee may oppose a bankrupt’s discharge by issuing a notice of opposition. This means that the bankrupt did not fulfill all of their duties when the time came for the Trustee to make a determination if the bankrupt is entitled to a discharge.

If one or more creditors oppose the debtor’s bankruptcy discharge, they may believe that additional information is needed to be evaluated by the court in order to determine what kind of discharge, if any, the debtor should receive.

The court will then decide what kind of bankruptcy discharge the bankrupt should receive.

Suspension of discharge from bankruptcy: What are the different types of discharge that can be granted in bankruptcy proceedings?

There are different kinds of discharge from bankruptcy process. They are:

Absolute discharge: you are entitled to an immediate discharge;
Conditional discharge: you can obtain a discharge after fulfilling one or more conditions;
Suspension of discharge from bankruptcy – a suspended discharge from bankruptcy means that the discharge will occur at a later date set by the court, and will be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
Refused discharge – the court can refuse the bankrupt’s discharge due to unsatisfactory fulfillment of duties and lack of response to the Trustee’s inquiries; or
“no order” – the Trustee has advised the court that, despite the passage of time, the bankrupt has not fulfilled all of his or her duties, has failed to respond to the Trustee’s requests, and the Trustee wishes to seek its discharge.

The bankrupt’s discharge in bankruptcy occurs when the bankrupt person has fulfilled the conditions set by the court and/or the suspension of discharge from bankruptcy period has ended.

The duration of bankruptcy depends on all of the above factors.

suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: There are five types of debt that are not dischargeable in bankruptcy

What debts cannot be discharged through bankruptcy? There are 5 types of debts that cannot be discharged. They are:

alimony or child support payments;
penalties or fines set by the court;
claims from fraud or fraudulent breach of trust;
student loan debt if it is less than 7 years since you stopped being a full-time or part-time student; and
Any debts that are properly secured by an asset are not released as a result of a bankruptcy discharge.

There are five types of debt that are not discharged in bankruptcy. The debtor will need to continue paying these financial obligations according to their terms. For all other unsecured debts, the discharge from bankruptcy will discharge all those debts.

Suspension of discharge from bankruptcy: The opposed bankruptcy discharge process case

The decision was released on September 29, 2022, in Wasylynuk (Re), 2022 ABKB 650 (CanLII), For me, this Court of King’s Bench of Alberta (it is still going to take me time to get used to the switch from “Queen” to “King”!) by the Registrar in Bankruptcy, epitomizes the balance the court strives to find in bankruptcy discharge situations.

This is an application for a bankrupt’s discharge which is opposed. The bankrupt, Ms. Wasylynuk, has completed all required duties. She is a first-time bankrupt with a surplus income requirement. The bankruptcy was driven by litigation costs when Ms. Wasylynuk unsuccessfully sued her surviving brothers and sisters for a share of her father’s estate.

The bankrupt filed a challenge to her father’s will and the disposition of his property in 2008. This led to 10 years of litigation for a share of the estate. All of the estate had been given to one of her brothers, who was tasked with caring for the father and, after his passing, dividing it as he saw fit. Ms. Wasylynuk rejected her brother’s offer of a share, wanting more.

Prior to her bankruptcy, Ms. Wasylynuk brought an application, presumably based on legal advice she received, to set aside her father’s will and an inter vivos gift made by her father that gave everything to one of her siblings. The will and the gift were both drawn up by lawyers with doctors’ certificates of competence and capacity. The will and the gift were upheld by the lower court. The lower court’s ruling was upheld on appeal. The Supreme Court of Canada refused to hear the case.

suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: The opposition to bankruptcy discharge and the evidence

The bankrupt’s siblings are the opposing creditors. The opposing creditors dispute Ms. Wasylynuk’s characterization as an honest but unfortunate debtor. Their grounds for opposition are:

The value of the bankrupt’s assets does not equal fifty cents on the dollar of the bankrupt’s unsecured liabilities, and the bankrupt is responsible for the circumstances that caused this.
Ms. Wasylynuk has not been able to provide an explanation for the disappearance of assets, or for why there are not enough assets to cover debts.
She was eligible to make a proposal under the Bankruptcy and Insolvency Act (Canada) (BIA) rather than bringing on this bankruptcy process but did not.

The evidence included the fact that, during the litigation, the bankrupt employed several different law firms and did not pay most of the legal fees she incurred. At the time of her bankruptcy, she owed in excess of $200,000 for unpaid legal fees. In her bankruptcy filing, she claimed $5,500 in assets, consisting of a motor vehicle, furniture, and personal effects, all of which were exempt.

Another bit of evidence was that Ms. Wasylynuk had likewise allowed a charge to be registered against the home in favour of her spouse to support his alleged loans to her of $277,000.00. Mr. Wasylynuk additionally declared an unsecured amount of $152,365.00 for loans to her. There were no documents to validate the amount. The Registrar noted that he was skeptical of these alleged loans as most of the bankrupt’s legal fees were unpaid.

On top of this, 13 months prior to her making her bankruptcy assignment, she transferred her half share of the matrimonial home to her husband. The bankruptcy Trustee did not have the funds to attack the transfer in the current bankruptcy administration.

Ms. Wasylynuk’s siblings’ litigation costs totalled approximately $750,000.00. The costs awarded from the first instance through the appeal will cover less than a third of those costs.

The Registrar calculated that, under Alberta law, the bankrupt’s non-exempt equity in the matrimonial home at the time of transfer to the spouse was approximately $118,000.00.

Suspension of discharge from bankruptcy: The balancing act of the Registrar’s decision

The Registrar took note of the above and made several findings. First was that Ms. Wasylynuk, 59, is a specialized nurse in a teaching position. She makes nearly $60 per hour. She continues to live in her fully encumbered matrimonial home with her husband, which is now out of reach of her creditors.

The Trustee explained that a proposal was ruled out because the litigation between Ms. Wasylynuk and her siblings that led to this bankruptcy was highly acrimonious. The Registrar found that it is unclear whether a proposal would have been doomed to failure because of ill will between the siblings, particularly since a proposal would have resulted in a better result for the creditors than her bankruptcy.

Ms. Wasylynuk has paid $51,000 into the estate over her 21-month bankruptcy. Her monthly surplus is $2,000. At that surplus rate, a 60-month proposal would have achieved $120,000 for her creditors or about the value of her non-exempt portion of the matrimonial home.

So to balance the scales, the Registrar gave Ms. Wasylynuk a conditional discharge. Ms. Wasylynuk’s discharge is conditioned upon her paying an additional $60,000.00 into the bankruptcy estate at the rate of a monthly payment of $2,000.00. By ordering these additional payments, once they are all made, the amount paid into the bankruptcy estate will be roughly equal to the minimum amount she would have paid if she chose to make a proposal over bankruptcy.

suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Ready to be debt-free?

I hope that you found this suspension of discharge from bankruptcy Brandon’s Blog informative. If you’re sick and tired of being in debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We know that you are worried because you are facing significant financial challenges. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

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

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

Call us now for a no-cost initial consultation. We are licensed professionals.

*suspension of discharge from bankruptcy*

Brandon Blog Post

CAN A LICENSED INSOLVENCY TRUSTEE NEAR ME OR ELSEWHERE POOCH OUT OF ESSENTIAL DUTIES?

Post author By Brandon Smith
Post date September 25, 2022

licensed insovlency trustee near me

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You can easily find a licensed insolvency trustee near me or you

There are Licensed Insolvency Trustees (LITs) (formerly called a bankruptcy trustee or trustees in bankruptcy) all over Canada who can help you with your debt problems. They’re the only debt professionals and debt advisors regulated by the federal government and are experienced in helping individuals and businesses figure out the best way to deal with their financial difficulties. There are about 1,066 individual Trustees and 218 different Insolvency Trustee Firms/bankruptcy companies in Canada, making it easy to find a licensed insolvency trustee near me or you.

The primary concern is finding a Trustee that you feel comfortable working with to discuss your debt issues and that is an ideal match for you or your business. You also need to find one that is willing to carry out its required functions. This is the same whether it is businesses with debt problems or it is people in debt.

Today’s Brandon’s Blog is about a recent decision from the Court of Appeal for Ontario which confirms that there are certain tasks in the administration of bankruptcy, be it a personal bankruptcy or corporate bankruptcy, or one of the alternatives to bankruptcy under the BIA, a Division I proposal or consumer proposal, that the licensed insolvency trustee cannot opt-out of.

The court’s decision confirms that a Trustee has certain duties under the Bankruptcy and Insolvency Act (Canada) (BIA) which are not optional, regardless of any difficulty that may be involved or the wishes of the party funding the Trustee. The case is Conforti Holdings Limited (Re), 2022 ONCA 651 (CanLII) which is the appeal by the licensed insolvency trustee of the lower court finding. I will describe it in a minute.

Licensed insolvency trustee near me: LITs are federally regulated to ensure consistent standards and supervision throughout Canada

If you’re struggling with debt, a Licensed Insolvency Trustee can help. These federally regulated professionals provide advice and services to individuals and businesses and can help you make informed choices about dealing with your financial difficulties. With their help, you can get back on track and start moving forward.

The only individuals who are authorized to administer Canadian government-regulated insolvency services that would allow you to be discharged from your debt are Licensed Insolvency Trustees. If you are in significant financial difficulty, speaking to a Licensed Insolvency Trustee near me or you to get debt management advice is the right thing to do to learn of the debt restructuring options available to come up with the right debt solution for your specific situation.

If you are not happy with the actions or decisions of a Licensed Trustee that you are unable to resolve, you can file a complaint with the federal regulator. LITs are mandated to follow all federal statutes, rules and guidelines, and your allegations will be given the appropriate consideration.

licensed insolvency trustee near me

Licensed Insolvency Trustee near me: We’ll speak with your creditors for you

After you file for a consumer proposal, Division I proposal, corporate bankruptcy, or personal bankruptcy, the Trustee will manage your affairs with your creditors. This includes sending out a notice with additional documents required by the BIA to all creditors listed on your sworn statement of affairs.

If creditors have questions, they should be speaking with the Trustee, not you. Also, unsecured creditors cannot continue or initiate any collection action or legal proceeding against the debtor who has filed either for financial restructuring or bankruptcy. The collection calls stop in either the consumer proposal process or the bankruptcy process.

Remember, only Licensed Insolvency Trustees are authorized to conduct government-regulated insolvency proceedings – qualified professionals who understand the complexities and nuances of this process. This ensures that your insolvency proceeding is handled correctly, efficiently and with the utmost care.

Locate a Licensed Insolvency Trustee near me who is currently active

So how would I choose a Licensed Insolvency Trustee near me for my problem financial situation and find debt relief solutions? There are 3 main ways that I recommend to anyone who asks me:

Ask a professional that you trust and feel that you can confide in for a referral. Your lawyer, insurance agent, banker or a non-profit credit counselling agency are but a few examples.
If you’re thinking about personal bankruptcy or bankruptcy for your business, it is very important to pick a Trustee you really feel comfortable with. A fast Google or Bing search for “Licensed Insolvency Trustee near me” to check out various internet sites can help you get a feel for various Trustees’ tones. If one resonates with you, make a no-cost confidential consultation to discuss your circumstance.
The Office of the Superintendent of Bankruptcy (OSB) has a database that is complimentary to search to find every Trustee in Canada. Do that search and choose a few. I still suggest looking at their internet site and getting a free appointment before making any kind of decision on the various debt relief options.
licensed insolvency trustee near me

How does a Licensed Insolvency Trustee near me get paid?

The Trustee’s fee and disbursements in a financial restructuring are normally paid out of the funds that the person or company makes available when compromising the debt of the unsecured creditors. In other words, it is the creditors who are actually paying the Trustee.

In a receivership or bankruptcy, the Trustee is paid from the proceeds of the sale of assets. If there are insufficient assets to cover the Trustee’s fees, the Trustee may seek a guarantee from a third party who is willing and able to pay, either by putting up a cash retainer, through monthly payments or both.

The guiding philosophy is that the Trustee has done its job and done so properly. This leads us to today’s discussion of the case.

Licensed insolvency trustee near me: What does a Trustee do?

A Trustee is responsible for administering the insolvency estate. This includes tasks such as collecting and selling assets, vetting and adjudicating creditor claims and distributing funds to the creditors. This is a perfect introduction to the recent Court of Appeal for Ontario decision in Conforti Holdings Limited (Re), 2022 ONCA 651 (CanLII).

Conforti Holdings Limited (CHL) as well as the Trustee in the Division I Proposal (Proposal Trustee) appealed the dismissal of the Proposal Trustee’s application for an order advising as well as directing the Proposal Trustee to not carry out the adjudication of the Moroccanoil, Inc. (Moroccanoil) proof of claim or the cross-claim by CHL versus Moroccanoil, as called for by s. 135 of the BIA. They also seek the lifting of the stay of proceedings to allow the parties to continue litigating in New Jersey.

CHL had been operating a chain of 52 hair salons for many years and had been embroiled in litigation with Moroccanoil in New Jersey for over seven years, over differences related to the supply of hair products. When told that CHL had filed a notice of intention to make a proposal pursuant to the BIA on September 28, 2020, the New Jersey court stayed proceedings there, at Moroccanoil’s request, and over CHL’s objections. The New Jersey proceedings have been case managed and the presiding judge said that the case could proceed to trial if the stay were lifted by the Canadian bankruptcy court.

Moroccanoil filed a proof of claim for $2,807,478.12 in CHL’s proposal proceedings. The Proposal Trustee filed a motion to be relieved of its obligations to determine whether the claim was provable or to value it.

This is a very basic cornerstone duty of all Licensed Insolvency Trustees. I am surprised that the Trustee and the company would prefer to continue with costly litigation in the United States, rather than reach an agreement on what value the claim should be allowed for.

By the very nature of the financial restructuring proceedings, CHL would not be paying the claim in full. Perhaps they were worried that Moroccanoil would vote against the Proposal and could carry the vote. In that case, CHL would become automatically bankrupt. However, as part of CHL agreeing to an amount of claim to allow, they could extract from Moroccanoil the quid pro quo that Moroccanoil would vote in favour of the Proposal.

licensed insolvency trustee near me

Licensed insolvency trustee near me: What the lower court said

The motion was denied for two reasons:

It was a requirement under s. 135(1.1) of the BIA for the Trustee to determine the claim, and there was no jurisdiction to exempt the Trustee from carrying out this basic duty.
The judge ruled that even if the court had the authority to make the requested order, the order was not warranted as it was not one of the clear cases that justifies the court departing from the usual process for valuation of claims under the BIA. He was not convinced that permitting the New Jersey proceedings to continue would be more efficient than adjudicating the Moroccanoil claim in the proceedings under the BIA.

Licensed insolvency trustee near me: Leave to appeal to the Court of Appeal for Ontario

The Trustee and CHL asked to appeal the lower court decision, but the Court of Appeal for Ontario said no. The appellate court said that there wasn’t obvious merit to the appeal.

The motion judge decided that it wouldn’t be right to have proceedings involving CHL and Moroccanoil go ahead in two different jurisdictions. The Court of Appeal for Ontario said that this decision could not be appealed. The proposed appeal is from the order made, not the reasons.

This doesn’t surprise me. There are two basic truths for any court-appointed officer:

The court officer will not be excused from performing the most basic duties.
Don’t ask the court to retrospectively approve a mistake you may have made. You just need to work through it.
licensed insolvency trustee near me

Licensed insolvency trustee near me: Are you sick of being in debt?

If you’re seeking to leave financial debt behind and live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We know that you are worried because you are facing significant financial challenges. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

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

Call us now for a no-cost initial consultation. We are licensed professionals.

licensed insovlency trustee near me — *licensed insolvency trustee near me*

Brandon Blog Post

ECONOMIC RECESSION IN CANADA: IS CANADA’S ECONOMY HEADED FOR AN INTENSE RECESSION?

Post author By Brandon Smith
Post date September 19, 2022

economic recession in canada

economic recession in canada

Economic recession in Canada: In Canada, the economy is under pressure

The economy in Canada is under pressure as the country deals with the fallout of the coronavirus pandemic. The pandemic has hit Canada hard. On one hand, certain Canadian businesses have shut down and people losing their jobs. On the other, there are job openings for other Canadian businesses. In August 2022, the unemployment rate in Canada increased from its record low in June and July, to 5.4%. The Canadian government has been working on trying to mitigate the damage and create supportable economic growth, but the economy is still struggling. The economic news is not good.

Coming out of the COVID economy there are many forces around the world causing global inflation. Supply chain shortages and the war in Ukraine are but two such global forces. Canada is experiencing inflationary pressures like every other country. Chief economists have mixed views on whether there will be an economic recession in Canada.

In response to the new global inflationary pressures, the Bank of Canada, like many other central banks, is raising its key interest rate regularly and significantly. The Bank of Canada is using its old domestic inflation policy rate fighting tools to fight these new pressures. It has promised more aggressive interest rate hikes. The federal government supports these rate hikes. Prime Minister Trudeau and his deputy chief, our Finance Minister and Deputy Prime Minister, Chrystia Freeland have said so.

As a result, the pressure on the economy is evident in the housing market. Home sales have dropped sharply, and house prices are also starting to fall. Notwithstanding the Bank of Canada’s key interest policy rate was designed to calm down a frothy real estate market, it is also a worry for the Canadian economy, as the housing market has been one of the bright spots in recent years.

The Bank of Canada’s inflation-fighting key interest rate policy tool has the potential not only to reduce inflation but if not closely managed, could throw us into a Canadian recession. We see financial markets, especially the stock markets, reacting negatively to this possibility.

Craig Wright, Senior Vice President & Chief Economist of Royal Bank of Canada believes Canada is headed for a recession, but that it will be a moderate one. So the ultimate question Canadians are asking is there a potential recession on the horizon or, how likely is an economic recession in Canada?

Economic recession in Canada: Bank of Canada believes that higher rates are essential to controlling inflation expectations

Higher interest rates ultimately force a contraction of the Canadian economy and an overall economic decline. The Bank of Canada really only has this one tool if it is going to act. Inflation is strong and is affecting longer-run business and consumer expectations. If inflation expectations rise, they can become self-fulfilling.

If inflation rates stay high, it can have very troubling economic impacts. Businesses will start charging more for their products. For things we need, we would have to pay more and would probably start asking for higher salaries and wages. If Canadians think inflation will go way past the Bank of Canada’s target, it could cause big problems with greater interest-rate hikes.

Both the US Fed and the Bank of Canada are increasing interest rates in an effort to control inflation. And neither bank is finished yet. The U.S. Fed and the Bank of Canada are expected to raise rates through to the end of 2022. That’s high enough to significantly restrict growth.

economic recession in canada

Economic recession in Canada: Although rates will eventually go down, they will not do so until inflation has cooled off

Although oil prices have been settling down and therefore prices at the pumps are falling, food and other consumer goods continue to have steady price increases. Continued increases eventually get to the point where they are unsustainable. Inflation won’t slow down until demand falls. Central banks will not ease interest rates until demand falls off sufficiently to reverse the current inflationary trends. If global economies cool off, it will help temper inflation.

Although labour shortages are preventing some expansion, many markets are still growing. However, disruptions from the pandemic continue to make it difficult for China to expand. Slowing growth abroad may have some negative effects on the US and Canadian economies as well.

The Bank of Canada will have to work very hard to find the right balance of interest rate hikes to cool inflation without causing an economic crisis or a recession.

Are we heading towards an economic recession in Canada and what can you do to help yourself?

I don’t know if the Bank of Canada’s current inflation-fighting efforts will force an economic recession in Canada, but Canadians have good reason to be concerned.

If you’re concerned about a recession in the near future, it’s important to be more mindful of your finances and think carefully about whether you can afford major purchases. What would happen if you were to lose your job or have an unexpected expense arise? It’s best to be prepared by carefully evaluating your savings and emergency fund now.

Your employment situation, savings, as well as spending practices can all contribute to how well you weather an economic downturn. Consequently, it is prudent to be prepared for bumpy rides by having a savings cushion and being mindful of living within your means. Additionally, those who are dissatisfied with their current employment or earnings may currently want to check out other opportunities prior to the Canadian economic situation worsening.

Douglas Porter, the Bank of Montreal chief economist, explains that how much Canadians feel the slowdown in the Canadian economy will depend on their individual circumstances. This includes what sector they’re employed in and whether they’re a borrower or saver.

One of the risks of a recession is the possibility of inflation eroding purchasing power and cementing in lower real wages. This is why it’s important to think carefully about asking for a raise now before a recession hits. Anyone considering a large purchase, like buying a home, must look at affordability.

Not only can you get the necessary financing to make the purchase, but can you afford the monthly payments? If you believe a recession is inevitable, then you should hold off making that real estate purchase because home prices inevitably will fall further in a recession.

economic recession in canada

What are 8 things you can do to prepare for an economic recession in Canada?

There are certain things Canadians can do to protect against an oncoming recession. It is not easy. It takes planning, belt-tightening and behaviour modification. Some possible steps include:

Begin creating a household budget as soon as possible. This will help you to keep track of your income and expenses and help you make responsible financial decisions to not spend more than your household earns. Do not forget to use your family net income after accounting for income tax as your top income line.
Now that you have your budget prepared, make sure you’re mindful of your spending and cut back where you can. Your budget needs to not only be break-even but there also needs to be a line for monthly savings.
Credit cards can be useful when used properly. However, if you are using credit cards as a means to provide you with income that you do not earn, and increasing your credit card debt each month, this must stop. Lock your credit cards away, reduce your spending and eliminate your credit card debt.
If you want to save money, you’ll have to cut back on eating out. Try to be mindful of how often you’re doing it, and you may be surprised at how much money you can save.
Cutting back on your entertainment expenses is another way to reduce your spending. That means fewer nights out at the movies or out to eat, and maybe even skipping or cutting back on your various cable and streaming subscription services. It’s not going to be easy, but if you’re serious about saving money, it’s a necessary step.
Take a critical look at your cell phone plan. Maybe there is a good deal on a more economical cell phone plan available. It is tough in Canada to do so because of the concentration of power by having so few Canadian providers, but that does not mean that you should not try.
Do not incur new debt.
Keep saving.

What if the economy in Canada is expected to experience a recession in the near future and you cannot hang on anymore?

We’re getting increasingly more telephone calls from people who state they or their companies have been hit hard by the pandemic, and they don’t see an escape. They applied for and received CERB payments. They really believed they qualified, and now the Canada Revenue Agency is reassessing their eligibility and demanding the money back.

We are getting calls from entrepreneurs. Their companies received CEBA loans but were unable to survive — their businesses had to close their doors even before an economic recession in Canada hit.

People are worried about what to do. These calls are coming daily. They are looking for answers to how they can bail themselves out of COVID-induced financial troubles, especially if there will be an economic recession in Canada.

Are you or your company in need of financial restructuring? Are you or your company insolvent due to a contract you may have entered into? Can you or your business not able to afford to make all your necessary debt payments, including mortgage payments?

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

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation.

Brandon Blog Post

THE SAVVY FIRST MORTGAGEE: SOMETIMES YOU CAN’T ALWAYS GET WHAT YOU WANT

Post author By Brandon Smith
Post date September 12, 2022

first mortgagee

First mortgagee: What is the definition of a mortgagee?

A mortgagee is a person or company who gives a loan and uses the property as security for the debt. The mortgagee is the lender. The property owner who borrows the money is called the mortgagor.

I have acted in many real estate receivership matters. Real estate receiverships in Ontario normally involve a court-appointed receiver. The reason is usually that there are many competing parties and perhaps competing claims. The best way to resolve these disputes and for the party that purchases the real estate from the receiver is through court supervision.

In this Brandon’s Blog, I describe a recent decision of the Court of Appeal for Ontario involving a real estate receivership and the claim of the first mortgagee. I and my Firm are not involved in this matter.

What is the definition of a first mortgagee?

A first mortgage is a loan that is secured by real estate property in priority to any other loans registered against the real property. In the event of default, the first mortgage loan has priority over any other loans that are secured by the property. The first mortgagee is the mortgagee that holds that first mortgage for that mortgage loan.

Institutional First Mortgagee Definition

The term “institutional first mortgagee” refers to a lending institution that provides financing for a first mortgage loan. Such mortgage lenders are typically a banking institution, credit union, or company that specializes in mortgage lending.

The institutional first mortgagee typically offers the lowest interest rate and best terms for the mortgage loan, especially if they are going to hold an institutional first mortgage. However, this is not the case if the institutional lender is one that deals with harder-to-finance properties or sub-prime mortgage loans.

Is it possible to have more than one mortgage at the same time?

There are instances where multiple mortgages may be an option. However, it is no secret that mortgages can be difficult to obtain. Financial institutions are often hesitant to approve multiple mortgages for fear of the borrower’s ability to repay. It is quite possible that to get more than one mortgage a borrower may have to look at the secondary mortgage market to accomplish that second or third mortgage transaction on the same property.

Every lender is different. One lender may see an opportunity where another would deem it too risky. The terms and pricing being offered will match the lender’s risk assessment. Remember, there can only be one first mortgage. Each subsequent mortgage will be more expensive and may have more onerous terms as each subsequent mortgagee is taking on more risk than the first mortgagee lending against the same real property.

Adding another mortgage may only exacerbate your financial difficulties if you are already struggling to make payments on one. Before making a decision, it is important to carefully weigh all of your options.

first mortgagee

The case I am about to describe highlights the dangers of having an institutional first mortgage and then having a subsequent mortgagee holding the second mortgage when the owner’s business plan for the commercial real estate does not work out.

First National Financial v. Golden Dragon: You can’t always get what you want

The case before the Court of Appeal for Ontario is an excellent instance of not always obtaining what you want. The Rolling Stones stated it best in their 1969 tune, “You Can’t Always Get What You Want.”

The Court of Appeal decision that I describe below may seem fairly obvious. First National Financial GP Corporation v. Golden Dragon Ho 10 Inc., 2022 ONCA 621, stands for the proposition that in order for a first mortgagee (or any mortgagee) to make a claim for accelerated interest on the entire debt, or any other claim a mortgagee may make when a mortgage goes into default, you first must look at the mortgage terms to see what exactly they are entitled to.

The first issue to be addressed is a priority dispute between the first mortgagee, First National Financial GP Corporation (First National), the second mortgagee, Liahona Mortgage Investment Corporation (Liahona); and the mortgagors, Golden Dragon Ho 10 Inc. (GDH 10) and Golden Dragon Ho 11 Inc. (GDH 11) (collectively referred to as the mortgagor). The primary concern of this appeal is whether the trial judge erred in deciding that First National, as the first mortgagee, is entitled to payment of a future, unearned, interest to the end of the term of its closed mortgages.

Additionally, Golden Dragon appealed the receiver’s fee and costs approved by the lower court. The Court of Appeal for Ontario quickly dismissed their appeal.

First mortgagee: Should You Take Out a Second Mortgage?

When it comes to your finances, taking on more debt is generally not considered a good idea. However, there are some situations where taking out a second mortgage charge on title can make sense.

Opting for a second mortgage entails some risks. If you’re unable to keep up with all the mortgage payments, you could lose your property through the power of sale proceedings.

Golden Dragon used to own two residential apartment buildings that were next to each other in Ottawa. When they bought these properties, they assumed three closed registered mortgages: the first mortgage on one building, a first mortgage for the second building, and a second mortgage for the second building. All three mortgages were held by First National. Its second mortgage ranked pari passu with its first mortgage.

Despite being required to give notice to First National under its mortgages, Golden Dragon subsequently placed a second mortgage on the first building without giving any notice. This new subsequent mortgage was held by Liahona.

Golden Dragon took out a second mortgage to get access to funds to use to renovate the apartments. However, Golden Dragon was unsuccessful in renovating the properties and became insolvent. As of December 2016, the Liahona second mortgage was in default and no further payments were made.

Liahona issued a notice of sale for the property of Golden Dragon and obtained a default judgment, and a judgment to take possession of the property.

As of June 2017, the First National mortgage charges on title were in default. Their mortgages included cross-default provisions, meaning that a default under one was deemed to be a default under all three First National mortgages. On August 17, 2017, First National made a formal demand that Golden Dragon pays the arrears and cure the non-monetary defaults and delivered notices of intention to enforce security pursuant to s. 244 of the Bankruptcy and Insolvency Act. Golden Dragon was unable to cure the borrower defaults and the court appointed the interim receiver after considering the circumstances of default.

first mortgagee

The interim receiver ensured the properties were stable and increased the rental income. Rather than the first mortgagee or second mortgagee selling the properties by way of a power of sale, the court then expanded the interim receiver’s role to marketing and selling the apartment buildings. The interim receiver requested the court’s approval for the sale of the properties. The court found that the approval conditions were met, the sale was approved, and the properties were sold.

What can the first mortgagee claim if the mortgaged properties are sold?

The trial judge’s ruling found that the First National registered mortgages did not give it the right to claim the disputed “yield maintenance penalties,” which included an acceleration of all amounts due until the end of the mortgage terms.

Although the mortgages contained a provision allowing Golden Dragon to redeem the mortgages by paying a “yield maintenance” penalty calculated according to a formula set out in the provision, this privilege only applied if Golden Dragon was not in default under the terms of the mortgages. Since Golden Dragon was in default, it no longer enjoyed the privilege of prepayment of the mortgages. As a result, First National was not entitled to charge a yield maintenance penalty.

Despite this, the trial judge decided that First National was entitled to the amounts it claimed as a condition of payout:

under a common law rule that a mortgagee is entitled to all accelerated interest owing to the date of maturity when a closed mortgage is vested off the title before the end of the term; or
in accordance with an implied contractual entitlement to interest on the unpaid balance, the trial judge read into the First National mortgages.

Liahona submitted to the trial judge that the first mortgagee was not entitled to accelerated interest under their mortgages unless there was a specific clause in the mortgage authorizing such a claim. The trial judge rejected that argument and concluded that the accelerated interest under the mortgage became due when the registered mortgages were terminated prematurely upon being vested off title pursuant to the court-supervised sale.

What the Court of Appeal for Ontario decided

Liahona and Golden Dragon appealed the trial judge’s decision in interpreting the basics of mortgagee clauses for the following issues:

Whether the trial judge was correct in finding that the first mortgagee claim for priority for the accelerated interest under its mortgages under common law.
If the trial judge erred by implying a contractual term in the First National mortgages that didn’t exist.

The Court of Appeal for Ontario differed from the lower court’s ruling concerning the mortgagee clause relating to accelerated interest. The appellate court noted that the lower court misapplied the law as well not taking into consideration the full scope of the contracts. It further stated that a loan agreement is interpreted according to standard principles of contract interpretation.

The Court of Appeal for Ontario vacated the trial judge’s ruling. Even though First National objected, the appellate court decided that the first mortgagee was only entitled to the principal and interest, plus costs up to the day of the sale of the properties that the court authorized.

First mortgagee: The main point

The main point of this court case is that if you negotiate and bargain for a certain set of contractual terms set out in writing, the court will look at the rights and responsibilities of the parties to the contract. This includes any mortgagee clause it bargained for.

I hope you enjoyed this Brandon’s Blog on what this first mortgagee rights and what it was entitled to from the court-supervised sale of the properties. Are you or your company in need of financial restructuring? Are you or your company insolvent due to a contract you may have entered into? Can you or your business not able to afford to make all your necessary debt payments, including mortgage payments?

Call us now for a no-cost initial consultation.

Brandon Blog Post

STALKING HORSE BIDDER: OUR SIMPLE YET GREAT STEP-BY-STEP GUIDE FOR SELLING DISTRESSED COMPANY ASSETS

Post author By Brandon Smith
Post date September 5, 2022

What is a stalking-horse bidder?

A stalking horse bidder is basically a potential buyer who’s interested in making a public bid for an insolvent company’s assets. The stalking horse bidder gets to be the first one to check out the assets and enter into an agreement to purchase them. The agreement negotiated with the licensed insolvency trustee acting as the court-appointed officer sets the lowest price the company’s creditors would get if sold in the receivership or bankruptcy.

If the stalking horse bidder enters into an agreement, and no better offers come in, they’ll be able to purchase the company’s assets. If someone offers more than the stalking horse bidder during the auction and that higher offer is the one that gets court-approved and completed, then the stalking horse bidder is entitled to receive compensation for allowing their bid to be public.

In this Brandon’s Blog post, I describe a case we are currently working on that describes what the stalking horse process is all about, and how the stalking horse bidder either ends up with the assets it bid on or gets paid for not being the successful bidder.

What are the benefits of being a stalking horse bidder?

There are several key benefits and potential advantages to being a stalking horse bidder. For one, you get to negotiate the sale terms (both legal and financial) with the seller, compared to other potential bidders who are presented with a court-approved form of agreement that has already been negotiated for the assets for sale. As the stalking horse bidder, you also have the advantage of being the first bidder in line, which could give you a better chance of winning the auction.

The stalking-horse bidder is allowed to complete due diligence before any other competing bidders, giving them the advantage. This is a privileged position that allows them to make a bid they believe gives them the best chance of success. This includes taking the time to review the company’s financial records and talk to the management and employees, in order to gain a better understanding of the business.

The stalking horse bidder also has the opportunity to engage critical suppliers and large customers to gauge their willingness to work with the stalking horse bidder if its bid is successful.

The stalking-horse bidder is protected from incurring costs as the first bidder. It can negotiate the terms of its break-up fee and expense reimbursements for costs incurred to hire legal and financial advisors, conduct due diligence, and other expenses incurred in formulating its offer.

The costs of the stalking horse bidder are reimbursed from the sale of the assets of the company, but this is subject to the approval of the court. If the stalking horse bidder is not a successful purchaser, the reimbursement will take place.

When is it appropriate to use the stalking horse bidder as an option?

My firm has been appointed by the court as the receiver of a green technology financially distressed company. We are currently in the process of developing a stalking horse sales process in order to sell the assets of the company. Once we have received court approval, we will be able to implement the plan.

We are still developing the entire sales process, including the bidding procedures. As we don’t have court approval yet, I can only describe how we’ll recommend it to the court, and I can’t mention any real names.

As the court-appointed receiver, we took possession of the assets and found that a fair amount of deferred maintenance limited the revenue-generating capability of the assets. However, we were able to borrow certain funds from the secured creditor Applicant in the court process. The cash flow generated from running the business, combined with the borrowing, allowed us to take the time to have a fair amount of the deferred maintenance completed.

Now that we had done as many revenue-improving activities as funding allowed, it was time to develop a sales process to take to the court for approval. The main value of the assets is a function of their revenue-generating capability over their useful life and what the maintenance costs in the future will be. At the same time, we had a party who operates in the same industry approach us advising us they wish to be a purchaser.

We have improved the assets to a fair degree, we are aware of other potential purchasers, and we have the luxury of time to run the business. We thought that a stalking horse bid process would work well to set a floor purchase price for the assets. We did our own calculations for what we thought the purchase price could be, but we wanted to see what an experienced industry player would say. They of course usually build in their own discount, so we were curious.

After some discussion, we decided that proceeding with a stalking horse bid process would be best if an industry player was willing to act as a stalking horse bidder. So we asked them if they would be willing to take on that role, and after giving it some thought, they agreed.

This stalking horse bidder has now completed their due diligence and we have received their letter of intent. We are now negotiating all the terms to come up with an asset purchase agreement. The agreement will set out the sales price and other terms and conditions, including the break-up fee and reasonable expenses reimbursement for its due diligence costs if they are not the successful bidder. Before being able to sign the asset purchase agreement we will need bankruptcy court approval.

We will also have to prepare the terms and conditions of the sale. A stalking horse bidding process is a competitive bidding process where the stalking horse bidder‘s sale price is the auction sale process reserve price. The stalking horse is the winner of this auction-type process if its bid remains the best one.

We will select the bid that provides the greatest value for the assets if there are higher bids. In such a scenario, the stalking horse bidder has the choice to participate in a competitive auction process round to see if it will end up being the purchaser at a higher price than its initial bid. If the stalking horse bidder chooses not to get into a further auction additional bidding and therefore its offer is not accepted, they are entitled to a break-up fee to compensate them for its time and costs.

The court must first approve all of these terms and conditions, including the break-up fee as well as the sales process itself.

The stalking horse bidder: Why would the court approve a stalking horse receivership sale process?

When applying to the Court for authorization of this sort of sales process, the stalking horse agreement is just one part the Court must look at. There are numerous variables the Court thinks about when being asked to approve a specific sales process.

The main considerations are:

Is a sale warranted at this point in the court-supervised insolvency administration?
Will the entire “economic community” benefit from such a proposed sale?
Do any of the debtor’s creditors or major stakeholders have a valid reason to object to a sale procedure for the business?
Does a better sensible alternative exist?

A stalking horse sales process may be recommended by a receiver in situations where the receiver believes it would be advantageous. The benefits generally are:

It cuts down on delays and expenses, which helps out the main stakeholders.
The court-appointed receiver will be able to oversee the sales process and make sure that any superior bids are known, thus protecting the fairness of the process.
A well-advertised sales process will determine the pool of prospective bidders who will ask to see the initial sales package and perhaps may even choose to invest time and money in performing due diligence within the bidding process timeline.
There are bidding protections because If higher bids come in, the conditions for closing the deal proposed by the stalking horse bidder won’t be met, and the receiver will have to tell the court. So, approving the deal wouldn’t prejudice any stakeholders.
If there aren’t any better offers, then there won’t be a need for the time delay and extra cost associated with another sale approval hearing.

Although our specific situation is a receivership administration, a stalking-horse bid process and its terms and conditions, including a breakup fee, could also work for a bankruptcy estate in a bankruptcy proceeding. In a bankruptcy, bankruptcy court approval is required for this kind of bankruptcy sale.

Some important things to remember

I hope you enjoyed this Brandon’s Blog on what a stalking horse bidder is and this kind of court-supervised auction. Are you or your company in need of financial restructuring? Are you or your company unable to survive the COVID pandemic and its aftermath? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

Call us now for a no-cost initial consultation.

Tags asset purchase agreement, auction process, bankruptcy court approval, bidding procedures, bidding process timeline, break-up fee, breakup fee, competitive bidding process, court-appointed officer, court-supervised auction, distressed company, Ira Smith Trustee, potential bidders, prospective bidders, stalking horse, stalking horse bid, stalking horse bidder, successful bidder

Brandon Blog Post

HOW TO FILE BANKRUPTCY ONLINE: OUR KNOCKOUT STEP-BY-STEP GUIDE

Post author By Brandon Smith
Post date August 29, 2022

file bankruptcy online

File bankruptcy online: You can file bankruptcy online in Canada!

Can I file bankruptcy online in Canada? This is a question we’ve been getting a lot lately. And the answer is yes, you can file bankruptcy online in Canada; just not by yourself.

The only ones the federal government authorizes in Canada to do bankruptcy filings are licensed insolvency trustees. Since March 2020, the process for meeting with a bankruptcy trustee to discuss bankruptcy has changed and can be done online. This may be helpful if you’re considering bankruptcy for your individual situation.

In this Brandon’s Blog, I explain how, with the help of a licensed insolvency trustee, you can meet all the legal requirements and file bankruptcy online for the Canadian bankruptcy process.

Why you can file bankruptcy online in Canada

There’s virtually nothing you can’t do online these days. The lockdowns increased our reliance on online shopping for things like groceries, clothes, office supplies, and even toilet paper.

The internet also includes a wealth of knowledge on any subject you can think of, including financial topics. I find that anyone contacting me who is struggling with their, or their company’s financial problems, has already looked into the various options available to them in dealing with debts like income taxes and credit cards.

Although people may not be familiar from their online research with all the ins and outs of insolvency and bankruptcy, this is to be expected. However, callers are generally well-informed about different options for dealing with secured creditors and unsecured creditors.

Nowadays, people expect to be able to do everything online – including filing for bankruptcy in Canada. Those who think bankruptcy might be a solution for them, are curious to understand if they can declare bankruptcy online. Thanks to the COVID-19 pandemic, online everything is a way of life.

file bankruptcy online

Why you should file bankruptcy online

The Canadian government oversees the administration of the insolvency process in Canada through the Office of the Superintendent of Bankruptcy Canada (OSB). The OSB is part of Innovation, Science and Economic Development Canada (Industry Canada). They ensure that consumer proposals, corporate financial restructuring and bankruptcies are handled in accordance with federal law. This process protects the rights of both debtors and creditors and helps to ensure a fair and orderly resolution to financial difficulties.

The OSB is responsible for administering Canadian bankruptcy law under the Bankruptcy and Insolvency Act (BIA), as well as certain duties under the Companies’ Creditors Arrangement Act (CCAA). They license and regulate the insolvency profession, ensure an efficient and effective regulatory framework, and supervise stakeholders. The OSB is independent of the Government of Canada in carrying out its regulatory, administrative, and supervisory duties.

As a result of the outbreak of COVID-19, the OSB issued guidance to Trustees on how certain aspects of the Canadian bankruptcy and insolvency process have changed. This document, entitled Temporary Guidance for LITS During the COVID-19 Pandemic, provides direction on how to navigate these changes.

As concerns about COVID-19 grew in Canada, licensed insolvency trustees took action to reduce in-person meetings. The OSB supported the Trustee community in these initiatives while maintaining the stability of Canada’s insolvency system.

Many of the same temporary measures remain in place today. Most clients find it more convenient and less stressful to continue filing for bankruptcy online. So how do we file bankruptcy online in Canada?

Assessing your financial situation and considering bankruptcy alternatives

No matter what form of insolvency process we are discussing to deal with a specific debt situation calling for either financial restructuring with a debt settlement payment plan through a consumer proposal or Division I Proposal, or personal bankruptcy, the process always starts in the same way. It’s not important what type of bankruptcy or insolvency process we’re talking about if we are dealing with a limited liability company or with someone considering bankruptcy for individuals.

When it comes to corporate insolvency, it’s important to have a clear understanding of the company’s current financial position and what its chances are for a successful financial restructuring. In consumer insolvency cases, the first step is to assess the debtor’s individual situation.

When a person contacts me to discuss their personal financial situation, we would have our initial chat. If the person wished to explore their available options in more detail, I would need to collect additional information from them to enable a proper assessment. Before we discuss which actual filing may be appropriate, it is important for me to know things like their assets and liabilities, their monthly income, and their household size.

If they would like me to continue our no-cost consultation and provide them with a proper assessment, I email them our standard intake form called the Debt Relief Worksheet. I ask them to please make sure to fully complete it and include any backup documents that are requested.

The backup documents we typically request are quite standard – a copy of their most recent bank statement, their last filed tax return, and the notice of assessment. Once I have a chance to review everything and ask any follow-up questions, I’ll be able to provide tailored advice based on their unique situation.

The counseling before filing bankruptcy that we give is perhaps even more important than any counselling sessions after filing. So far, we’ve been able to do everything over the telephone and online.

file bankruptcy online

Is filing bankruptcy online an option for getting rid of debt?

Now that I have all the necessary information, I can perform the rest of the initial assessment. There could be several options available for those struggling with debt, and filing for bankruptcy may be an option for some. However, it’s important to understand the process and what it entails before making a decision.

Continuing with the online model, I meet with the person and do the rest of the assessment by phone or video meeting. I explain what I see as the realistic debt relief options for the person, explain why and discuss what is involved with each option and answer any questions they may have.

At the end of the meeting, I provide the person with a list of resources that can help them make their decision. I’m always available to answer any questions they may have throughout the process. Filing for online bankruptcy may very well be an option for getting rid of debt, but it should be the last option.

Something else to remember is that an insolvency proceeding will lower your credit score as it appears on your credit report. Declaring bankruptcy will have a worse effect than a debt management plan through a BIA-approved financial debt restructuring program repayment plan.

What documents do you need in order to file bankruptcy online?

To discuss what documents you need for a bankruptcy application in order to file bankruptcy online in Canada, we will assume that the person chose the bankruptcy option. By now, I have enough financial information to prepare all the necessary bankruptcy documents.

Examples of statutory bankruptcy forms which are part of the bankruptcy paperwork include the:

statement of affairs, indicating both the person’s eligible assets and those exempt from seizure under provincial law with related bankruptcy schedules;
list of creditors that is used for the creditor mailing list to send out the notice to creditors;
person’s statement of monthly income and expenses;
bankruptcy assignment
notice to bankrupt of their bankruptcy duties; and
estate information summary.

We schedule a video meeting with the debtor once all the statutory and financial documents are ready for signing. We can either email the documents or upload them to our secure signing portal and provide the debtor with a private, secure link. We’re happy to use online technology to have our meeting and explain all the documents, witness their signing, and get the signed documents from them.

We take the signed documents and file them in the Industry Canada OSB electronic online filing system. The OSB issues the bankruptcy certificate once the electronic filing is accepted. The day and time of the certificate is the exact moment the person is officially bankrupt.

file bankruptcy online

Duties during bankruptcy include credit counselling sessions

The duties of a bankrupt person are set out in section 158 of the BIA. They include:

to identify all of their property and allow the Trustee or anyone authorized by the Trustee to take possession of all the debtor’s property;
to give the Trustee all books, records, documents and papers related to their property or affairs, including, but not limited to, title papers, insurance policies, and tax records and returns;
providing full disclosure of all assets and liabilities;
helping the trustee when required with assistance from time to time;
if one or more creditor meetings are required, you must attend; and
attending the two mandatory bankruptcy credit counseling sessions run by the Trustee.

We can meet with the bankrupt person over video meetings to provide counselling sessions and help them to fulfil their online bankruptcy duties.

Is it always going to be possible to file bankruptcy online in Canada?

The OSB has extended the option to conduct online service delivery of the Canadian insolvency options available under the BIA. Licensed insolvency trustees can continue to use online methods. It has provided some peace of mind for many people.

The OSB has been consulting with the insolvency community on potential amendments to relevant directives, with the goal of implementing an online alternative to meeting in person. While allowing flexibility, the changes they are contemplating would emphasize that while trying to be flexible, the changes being contemplated would emphasize that debtors will have the choice to either meet in person or online.

It looks like the OSB is warming up to the idea that remote filing through online resources, whether we are talking about BIA-approved debt repayment plans or bankruptcy may very well be here to stay. The OSB is trying to balance the benefit to debtors as well as the bankruptcy process continuing to be for the benefit of creditors. Can it all continue to be accomplished by online resources and technology? So far the average person, be they Canadian debtors or Canadian creditors, seem to want to continue with the choice of having insolvency administration online.

file bankruptcy online

Are you deep in debt? We can help!

I hope you enjoyed this Brandon’s Blog on how to file bankruptcy online. Are you or your company in need of financial restructuring? Are you or your company unable to survive the COVID pandemic and its aftermath? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

Call us now for a no-cost initial consultation.

Brandon Blog Post

ENTREPRENEURIAL CANADIAN BUSINESS BANKRUPTCIES: THE TIP OF A HUGE ICEBERG?

Post author By Brandon Smith
Post date August 22, 2022

business bankruptcies

Insolvency for business including business bankruptcies

In the last two Brandon’s Blogs, I wrote about personal bankruptcy. The topic was the class of debts not released by a person’s discharge from personal bankruptcy. In this Brandon’s Blog, I discuss insolvency for business, and specifically, business bankruptcies, as a result of the recent report by the Canadian Federation of Independent Business (CFIB).

If a business is incapable to pay its financial obligations as they come due, it might deal with some negative effects, including legal action. However, this does not have to damage a business’s credibility forever, if management is prepared to take the required corrective activity before it is far too late.

If a business that is unable to pay its debts cannot turn itself around, it may be forced to declare business bankruptcies, which can have a devastating impact on the business and its employees.

What will happen to the company if it is insolvent?

If your company is financially troubled, it may need to assign itself into bankruptcy. Nonetheless, business bankruptcies are not always the automatic result of being insolvent. If your business is experiencing financial problems, it is essential to speak to a bankruptcy lawyer or a licensed insolvency trustee to review all of your realistic choices. Bankruptcy should be the last choice when nothing else will work.

Case in point, the recent report issued by the CFIB on small business insolvency says that its survey finds that only 10% of business owners would certainly declare bankruptcy if they were to shut down completely.

The CFIB report is meant to give a more comprehensive view of Canadian business insolvencies (bankruptcies + proposals). The data indicates that the number of businesses filing for bankruptcy has been on the rise and is now at the highest level of business insolvencies in two years.

As we recover from the COVID-19 pandemic, Canadian small businesses face a number of challenges in returning to normal operations, including debt from necessary pivots, increased costs of doing business and trouble finding employees to work.

The CFIB study found that half of the businesses (54%) are still seeing below-normal revenues, and over 60% are carrying unpaid debt from the pandemic. Small businesses are under significant financial pressure, with little room to maneuver.

Insolvency fears among Canadian small businesses are alarmingly high, and the true scope of the problem may be even greater than what is reflected in official statistics. Business owners have a range of options available to them when faced with financial difficulties, and bankruptcy is only one of these.

The CFIB recently released report details the different ways the surveyed small businesses in Canada said they would take if they had to shut down as follows:

46% – Just ceasing all operations permanently.
27% – Selling or transferring ownership to another party.
10% – Filing for business bankruptcies or business bankruptcy protection.
10% – Unsure at this time.
7% – Exploring all options.

Interestingly enough, recapitalizing the legal entity or taking on more business debt by way of loans was not one of the answers. That should tell you how tapped-out Canadian small business shareholders are and that the businesses have no borrowing base room left on their assets to increase their bank borrowings.

business bankruptcies

Business bankruptcies: The insolvency of a business – First steps

The first step for the Directors is to consult with a business bankruptcy attorney/lawyer and a licensed insolvency trustee (formerly called a bankruptcy trustee) (sometimes referred to as “Trustee”). The lawyer can confidentially discuss the situation with the Directors and develop a proposed plan to deal with the situation.

The licensed insolvency trustee will review the company’s financial position and proposed game plan, and consider all options available to the company and its Directors. In Canada, the only party licensed to run the administration of bankruptcy, or any formal insolvency process, is a licensed insolvency trustee.

The licensed insolvency trustee will want to understand fully the company’s assets and liabilities. With a clear understanding of the company’s financial status, the Trustee can explain how best to implement the plan to either restructure or liquidate the company. If necessary, the Trustee can tweak the game plan.

The next question is whether the business is viable. Does it produce goods or services that are still in demand in the marketplace? If not, one option to consider is selling the business to another company that has complementary lines of business. Would the business fit in neatly with the buyer’s existing operations?

Could it perhaps be integrated in some way that would make your standalone business, which is not currently viable, become viable? Keep in mind for this to be an option, the company would need to have a solvent business.

If you can’t sell your unprofitable but still solvent company, you could always explore the option of a statutory liquidation. This would involve liquidating all the company assets, paying off any outstanding liabilities, and then distributing the remaining amount to shareholders.

Companies under business bankruptcy protection

If your business is struggling financially but still has potential, you may be able to restructure it through business bankruptcy protection. In Canada, there are two main possible federal statutes to restructure under; (i) the Bankruptcy and Insolvency Act (Canada); and (ii) the Companies’ Creditors Arrangement Act. One of these restructuring legal proceedings is an alternative to business bankruptcies.

A proposal under the Bankruptcy and Insolvency Act (Canada) (“BIA”)

The BIA is the canadian bankruptcy legislation containing all the rules and regulations in Canada’s bankruptcy regime. However, it also includes bankruptcy options such as a Division I Proposal for debtors who owe more than $250,000. This kind of financial restructuring allows the company to remain in business while it restructures. The essence of a BIA Proposal restructuring is that the company is offering a contract to its unsecured creditors to pay less than the total it owes those unsecured creditors in return for eliminating all of its unsecured debt.

To ensure that the company can successfully implement a proposal and pay its post-filing debts, the licensed insolvency trustee will need to be satisfied that all relevant information has been obtained and that the company has a good chance of success. The company’s cash flow will need to be monitored to ensure that it is sufficient to run the business and pay for the goods and services it needs going forward.

The Trustee will send all known creditors a copy of the proposal, a portion of the company’s statement of affairs listing the company’s assets and liabilities, a list of creditors, a proof of claim form, a voting letter and the Trustee’s report providing additional information and the Trustee’s recommendation.

The meeting of creditors is then held and if the proposal is accepted by the required majority of unsecured creditors, the licensed insolvency trustee takes the proposal documentation to Court for approval. If the proposal is accepted by creditors and approved by the court, the company is now bound by the proposal.

If the companies successfully complete their financial restructuring proposal, they will avoid business bankruptcies. However, if the company fails to get creditor or court approval, or fails to successfully complete the proposal, it will automatically go into bankruptcy under the BIA.

Financial restructuring under a Companies’ Creditors Arrangement Act (“CCAA”) plan of arrangement

Restructuring through a CCAA plan of arrangement is a financial restructuring process that provides companies with a way to restructure their debts and other obligations. This process can help companies to avoid the business bankruptcy process and to continue operating while they repay their creditors. It is very similar to a BIA proposal. The main difference is that it is only for companies with debts of $5 million or more, it is much more court-time intensive and there is no automatic business bankruptcy provision. In a CCAA, the licensed insolvency trustee acts as a monitor under the CCAA to administer the restructuring process.

When you hear when a company files for protection, or bankruptcy protection, in Canada it is usually under the CCAA. In the United States, it is under Chapter 11 of the US Bankruptcy Code.

business bankruptcies

Licensed insolvency trustees say if companies are insolvent and not viable the best option may be business bankruptcies

We still want to know if the business is viable when it is insolvent. If it is viable, then we could look at doing a restructuring as outlined above. After the company is restructured, we could either keep running it or look to sell it. If there are impediments to a successful restructuring, the approach we take even through business bankruptcies will be different than if it is not a viable business model any longer.

If the business is not viable and insolvent, then there is not much that can be done. The business is financially unhealthy and the marketplace no longer wants the product or service this business provides. Therefore, we are looking at bankruptcy if there is not a secured creditor who is going to enforce their security through a receivership. Receivership is a whole topic unto itself which is for a different day.

As a licensed insolvency trustee, I am responsible for understanding all the issues in business bankruptcies and preparing the necessary documentation for limited companies to assign themselves to business bankruptcies. A meeting of directors must be called for them to resolve that the company should put its business into bankruptcy and appoint one of the directors to be the designated officer.

The officer designated by the board should be the director with the most intimate knowledge of the company’s affairs. This officer will sign the bankruptcy documentation and be the company’s representative at the first meeting of creditors.

The Trustee attends the director’s meeting and prepares the meeting minutes, or the minutes will be prepared by the directors and provided to the Trustee. Then, the licensed insolvency trustee prepares the bankruptcy documents which include the statement of affairs, which is the listing of assets and liabilities, names addresses and amounts owing to each creditor. The designated officer then attests to the truthfulness of the information and signs it all.

The companies are insolvent and have to go into business bankruptcies

The Trustee files the necessary documentation with the Superintendent of Bankruptcy, who issues a certificate of bankruptcy and appoints the Trustee. That’s when a company is officially entered into the bankruptcy process and the bankruptcy proceedings begin. This is the process of a company filing an assignment into bankruptcy.

So in a commercial bankruptcy administration, the Trustee has several responsibilities. The Trustee has to deal with the assets. The Trustee has to first determine are the assets subject to the security of a lender. Is that lender’s security good and valid?

What happens when the certificate is issued for business bankruptcies?

If every one of the assets is covered by a lender’s valid security which makes the security cover the assets in priority to the rights of a Trustee, then the bankruptcy trustee would not take steps to handle the company’s secured assets unless the secured lender particularly requests the Trustee to do so separately either as Receiver or Agent of the secured lender.

So let’s simply take the case where in bankrupting the company, the Trustee is handling the assets either due to the fact that they’re not secured or because the secured financial institution wants the Trustee to handle the secured assets within the bankruptcy (which is not normal, but not unheard of either).

The Trustee needs to make certain that the corporate assets are safeguarded, that they’re appropriately insured and that the Trustee has carried out an inventory of those assets.

The Trustee then needs to figure out how is it going to offer those business assets for sale. The Trustee must do a risk-reward analysis to see if it makes good sense for the Trustee to run the business. If so, is the Trustee looking for a sale of assets as a going-concern business sale or just shut down the business and liquidate the assets once the reasons for running the business have been met?

If it doesn’t make sense for the Trustee to run the business, the Trustee will close it down and take a look at the alternatives available. The assets can be sold by public auction, private sale or by tender sale separating the assets up into blocs. If the assets are such that they would attract a retail audience where consumers would pay more than if it was sold in lots to wholesalers, then a retail sale would be the way to go. The nature of the assets will identify what sort of sale of assets the Trustee runs.

Business bankruptcies: How will I know what’s going on?

The Trustee alerts all of the company’s creditors listed in the sworn statement of affairs of the bankruptcy in a mailing. The Trustee includes a proof of claim form so that all creditors can file their claim. The Trustee examines the claims and holds the first meeting of creditors.

After the first meeting, a meeting of inspectors is held. Inspectors are creditor representatives who assist the Trustee in providing approval for the Trustee’s recommendations and actions it wishes to take. This includes any approval of asset sales the Trustee recommends after making an informed decision. Inspectors also need to approve the Trustee’s Final Statement of Receipts and Disbursements near the end of the administration of all business bankruptcies.

Finding a Licensed Insolvency Trustee

I hope you enjoyed this Brandon’s Blog on business bankruptcies. Are you or your company in need of financial restructuring? Are you or your company unable to survive the COVID pandemic and its aftermath? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

Call us now for a no-cost initial consultation.