Ira Smith Trustee & Receiver Inc.

UNDISCHARGED BANKRUPTS: WHAT ALARMING RESTRICTIONS ARE PLACED ON CANADIAN UNDISCHARGED BANKRUPTS?

Post author By Brandon Smith
Post date August 1, 2022

undischarged bankrupts

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

What? I thought the point of filing bankruptcy was to make all of a person’s debts go away.

For many years, people have used debt repayment strategies such as the debt snowball, debt avalanche and debt stacking to pay off their credit card debts and other unsecured liabilities. Each strategy has its own set of pros and cons in attempting to straighten out your financial affairs.

If you’re struggling with too much debt and you feel your financial affairs are in a mess, you can always try financial restructuring. This involves working with a licensed insolvency trustee to reorganize your finances. It is a sensible next step people take when they’re trying to get their debt under control.

Deciding to file for bankruptcy is never very easy, however, it may be the most effective choice for getting a fresh start to straighten out your financial affairs. If a do-it-yourself or restructuring method is not an option for someone after that bankruptcy will certainly be the required action.

Nobody likes to think of the possibility of personal bankruptcy, yet it is essential to understand the procedure. In this Brandon’s Blog post, I’ll discuss the insolvency process, what limitations are placed on individuals that have actually filed for bankruptcy and are still undischarged bankrupts, and also when in bankruptcy is the time financial obligations are gotten rid of.

Undischarged bankrupts: How bankruptcies work in Canada

The Canadian bankruptcy legislation is designed to help insolvent and not viable companies, or insolvent, honest but unfortunate people, obtain relief. Subject to trust claimants’ rights and the rights of secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee.

After going through bankruptcy and being discharged, most of your debts will be gone. There are a few exceptions, but for the most part, you will be relieved of a great financial burden.

undischarged bankrupts

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

It’s crucial to remember that once undischarged bankrupts are released from bankruptcy, they are no longer responsible for the financial obligations they had at the time of bankruptcy. The discharge is a key part of this process, and it helps to give individual bankrupts a fresh start.

A bankruptcy discharge provides relief from most debts, except for:

support payments for a former spouse or your children;
penalties and fines assessed by the court;
any financial debts resulting from fraud or fraudulent breach of trust; and
student loans within the last seven years before your date of bankruptcy while you were a part-time or full-time student.

Additionally, the debts owing to secured creditors holding valid security fall outside of the bankruptcy process. Those secured loans must stay current or else the secured creditor can look to the default provisions of its loan in order to preserve their rights to collect.

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

The implications of not being discharged from bankruptcy are significant for undischarged bankrupts.

Being unable to obtain credit

If you are bankrupt (i.e., not discharged from bankruptcy), you may only borrow $1,000 or less without informing the lender (e.g., credit card company) that you are an undischarged bankrupt. If you fail to do this, it is an offence under the Bankruptcy and Insolvency Act Canada (BIA) and you could be fined and/or imprisoned.

Being unable to work in certain jobs or professions

Undischarged bankrupts in Canada, will not be able to work in certain jobs or professions. Examples are:

If possible employment requires you to pass a security clearance, you may not be able to pass it. If you cannot pass, then you will not be hired.
As someone who is not yet discharged from bankruptcy, you are not able to serve as a Director of a company.
You cannot operate a trust account so that is a problem for certain professions such as real estate brokerage or lawyer.
If you’re bankrupt and haven’t been discharged, you won’t be able to get bonded. So any jobs that require that are out of the question.

How long the information lasts on your credit report

The six to seven years AFTER your bankruptcy discharge that your bankruptcy information stays on your credit file is like a stain that just won’t come out. For undischarged bankrupts, the clock hasn’t even started ticking yet. Your credit score is negatively affected for anyone who goes bankrupt, especially for undischarged bankrupts.

Being subject to certain restrictions in relation to their property and finances

While you are an undischarged bankrupt, your property and finances are in play.

While you are an undischarged bankrupt, your property and finances are up for grabs! You cannot have any assets other than those allowed for by the exemptions allowed in the province where you live. So if you acquire any before your discharge from bankruptcy, they belong to your licensed insolvency trustee!

The most often cited examples are things that are out of your control, such as a windfall, like winning the lottery or getting an inheritance.

An undischarged bankrupt may be subject to having to make surplus income payments to their licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada sets a minimum threshold in bankruptcy proceedings based on the person’s family income and the number of people in the household. That minimum threshold is essentially the Canadian poverty line. Any monthly income earned by an undischarged bankrupt above that minimum threshold set is subject to surplus income payments.

Essentially, one-half of the person’s monthly income, net of income tax, above the minimum, must be paid over. A licensed insolvency trustee administering the personal bankruptcy must recalculate the person’s obligation to pay, up or down, as the person’s income changes. The longer you remain an undischarged bankrupt, the longer your ability to keep all that you earn is restricted.

undischarged bankrupts

What is the meaning of undischarged bankrupts?

As soon as you declare personal bankruptcy, the individual bankrupt’s status is that of an undischarged bankrupt. People that have actually not yet gotten their discharge from personal bankruptcy are called undischarged bankrupts.

How does an individual bankrupt person get their discharge? By completing all of the required duties, including making full disclosure of all assets and liabilities to the licensed insolvency trustee and delivering non-exempt assets to the Trustee. You are expected to attend the two mandatory counselling sessions and any other meetings that may be called.

You are entitled to an automatic discharge after 9 months if you are a first-time bankrupt and do not need to pay surplus income. This assumes that you have met all of your obligations as an undischarged bankrupt, fully cooperated with the licensed insolvency trustee and that no creditor is opposing your discharge.

If you are a first-time bankrupt and subject to surplus income, you must pay it for 21 months before you are entitled to a discharge. Longer timelines apply if you are a second or more time bankrupt.

Suppose the Trustee has evidence that the bankrupt has not been forthcoming and cooperative, or has committed one or more bankruptcy offences. In that case, the Trustee needs to oppose the bankrupt’s application for discharge. Such undischarged bankrupts are not entitled to an automatic discharge. Unsecured creditors who have filed a proof of claim in the person’s bankruptcy on account of their unsecured liabilities may also object.

If your income tax debt is equal to or more than $200,000 and 75% or more of your total debt, you are not entitled to an automatic discharge either. If you have been bankrupt before, the Office of the Superintendent of Bankruptcy Canada may object. This would happen if they believe the person is abusing the Canadian bankruptcy system.

If you’re a secured creditor, you’re usually not affected by bankruptcy. That’s because bankruptcy is designed to help unsecured creditors with unsecured liabilities, not creditors who have a security interest in some or all of the bankrupt debtor’s assets. Secured creditors have the right to enforce their security, take possession of the asset(s) covered under the security, sell the asset(s) and get paid back all or a portion of their secured debt. Secured creditors who are not repaid in full after the sale of the secured asset(s), can file a claim in the person’s bankruptcy as an unsecured creditor for the unpaid unsecured liabilities.

Undischarged Bankrupts in Canada – Your Options

The Trustee is only responsible for filing an undischarged bankrupt’s application for discharge once in the bankruptcy proceedings. The system requires that the Trustee make the first application on their behalf. It is ultimately the responsibility of the bankrupt person to ensure that their application is filed.

If either the Trustee or one or more unsecured creditors oppose your application for discharge, the matter will need to go to a hearing in bankruptcy court. This will essentially put a hold on the bankruptcy proceedings until the court hearing.

Undischarged bankrupts are never sure what to do next. This is understandable, so, here are a few options to consider:

1. Contact your Trustee – They’ll be able to help you understand your options and what’s best for your situation. You’ll need to speak to your licensed insolvency trustee to find out why they’re opposing your discharge. It might be something as simple as not having had your second counselling session yet, or forgetting to give the Trustee some information or a document.

If the Trustee or creditor opposes your discharge for any reason, it may be more difficult to remedy the situation, but the best place to start is by talking to the Trustee and getting a copy of any notice of opposition filed.

This way, undischarged bankrupts can understand the issues preventing them from getting an automatic discharge from bankruptcy.

2. Get in touch with a bankruptcy lawyer – They can give you more specific advice about your options and what might be the best course of action for you. Undischarged bankruptcy may need to retain a bankruptcy lawyer for advice and representation in court.

3. File a consumer proposal – this is another option that might be available to you, depending on your circumstances. A consumer proposal filed by a bankrupt person that makes a sufficient offer to the unsecured creditors that is accepted and fully performed acts to annul the person’s bankruptcy. By doing this, the need for a bankruptcy discharge hearing is eliminated.

undischarged bankrupts

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

After you file for bankruptcy, you will be automatically discharged nine months later from your bankruptcy proceedings if:

this is the first time you were ever bankrupt;
unless your trustee, creditors, or the Office of the Superintendent of Bankruptcy oppose it;
you have gone to your 2 mandatory counselling sessions;
your income tax debt is less than $200,000 and less than 75% of your total debt; and
you have not been told to pay surplus income to the bankruptcy estate.

If you do have to make payments, and you qualify for an automatic discharge, you will get it after 21 months of payments.

If this is your 2nd bankruptcy, after 24 months of bankruptcy, you may be eligible for an automatic discharge if you don’t have to make payments of surplus income.

If you need to pay surplus income and are bankrupt for the second time, you must pay this money to your Trustee for 36 months. After that, you qualify to be automatically discharged.

If you do not get an automatic discharge, then you are required to attend a bankruptcy court hearing to consider all the evidence to decide what type of discharge you are entitled to. The court has various options available.

Absolute order of discharge –

As part of the bankruptcy proceedings, there are many factors the bankruptcy court will consider when you apply for discharge. Some of these may include:

What was your conduct before and during bankruptcy, as set out in the Trustee’s Section 170 Report?
Did you attend the financial counselling sessions and pay any required surplus income to the Trustee for your creditors as agreed?
How much do you earn annually?
Do you have any assets that are exempt from seizure (such as RRSPs)?
Do you have just one creditor, such as the Canada Revenue Agency or a litigation creditor?

The court will issue an absolute order of discharge if it is satisfied that there are no factors that would disqualify you from receiving your bankruptcy discharge immediately.

Conditional order of discharge –

If the court feels that your discharge should be conditional on you meeting certain conditions to obtain an absolute discharge, the court will order a conditional discharge.

This usually involves paying a certain amount of money over a set period of time. The court may also impose other conditions. Once you’ve met all the conditions, you’ll be given an absolute discharge.

Suspended order of discharge –

A suspended discharge is one that delays the absolute discharge to a later date. It can also be combined with a conditional order of discharge.

Refused discharge –

If the evidence demonstrates that the bankrupt individual is taking advantage of the bankruptcy process, has not worked cooperatively with the licensed insolvency trustee, or their conduct is deemed unacceptable, the court can refuse to grant a discharge.

In this instance, undischarged bankrupts must take measures to improve the situation before being able to apply again to court to hear the bankrupt’s application for discharge.

Undischarged bankrupts summary

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

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

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

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 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.

Call us now for a no-cost initial consultation.

Tags absolute discharge, application for discharge, automatic discharge, bankrupt person, bankruptcy proceedings, breach of trust, Consumer Proposal, discharge from bankruptcy, financial affairs, income tax, individual bankrupt, Ira Smith Trustee, secured creditors, surplus income, surplus income payments, undischarged bankrupt, undischarged bankrupts, unsecured creditors, unsecured liabilities

Brandon Blog Post

LIQUIDATION OF COMPANY ASSETS: WHEN SHAREHOLDERS ARE INTENT ON CRUSHING EACH OTHER WHAT CAN A VOLUNTARY LIQUIDATOR DO?

Post author By Brandon Smith
Post date July 25, 2022

liquidation of company

Liquidation of company assets: What is the liquidation of a company?

In business and the law, liquidation is the process of bringing a company to an end and distributing its assets to creditors. This usually happens when a company is financially solvent and can pay all of its debts after all its assets are sold or collected.

When a product is not selling well, retailers may choose to liquidate it by selling it at a discounted price. This process called a liquidation sale can help them clear out slow-moving inventory. This is not the process I am talking about today.

If you want to learn more about the types of liquidation in Canada, then you’ve come to the right place. In this Brandon’s Blog, I will explain everything about the liquidation of company assets and give you a real-life example that my Firm is currently involved in. This real case is an example of what can be done when shareholders who originally agreed to a voluntary liquidation (defined below) can no longer agree on the liquidation of company assets or anything else, even how to pay them the cash the shareholders are entitled to receive!

Why would a company want to have liquidation of company assets?

There are a few reasons why companies pick a liquidation process, including:

The business is solvent yet no longer practical to operate

Possibly time has actually passed the business by. Technological adjustments have made the products or services the limited company offers unneeded as well as no longer relevant. The shareholders want to call it quits now, sell off the corporate assets and properties, repay creditors and also distribute the leftover funds to the shareholders.

The shareholders do not intend to or think it is possible to convert the business to make it viable again. They do not feel it deserves the investment of time and resources, as well as to endure ongoing losses in turning the business around so that it ends up being pertinent again.

Shareholder disputes

The shareholders in a private entrepreneurial company no longer get along. The dissident shareholder(s) cannot or refuse to buy out the remaining shareholders or vice versa. Alternatively, certain shareholders are willing to do a buy-out but either cannot agree on the price or balk at paying the amount calculated under the formula prescribed in the shareholder agreement.

The company is not saleable

The limited company’s business is not viable anymore. Nobody wants the company’s products or services and the company never moved forward with new product offerings that are in demand. Therefore, nobody wants to buy the company or its assets. So while it is still solvent, the shareholders decided to realize all the assets, distribute the cash first to pay off all of the company’s debts in full, make a distribution to shareholders for what is left over and formally dissolve the corporation.

To avoid bankruptcy

If the company is not wound up, it will eventually become an insolvent corporation. The shareholders realize that it is much better to now agree to a voluntary liquidation while there still can be a distribution to the shareholders after all the business assets are sold or collected and all creditors are paid in full. The shareholders wish to get this value and avoid a corporate bankruptcy filing.

liquidation of company

How a liquidation of company assets begins

If shareholders wish to have a dissolution process for a corporation, they may do so by passing a special resolution to begin the liquidation process. In such cases, the company would call a meeting of shareholders in accordance with the corporate bylaws. Shareholders must be given notice of the meeting in advance. Alternatively, a court may make an order for the liquidation of company assets and the winding-up of the corporation. More on this below. This is how the liquidation of company assets and the winding-up of the company begins.

Shareholders will be given notice of the meeting where the special resolution authorizing the dissolution process will be considered. At the meeting, shareholders can vote to approve or disapprove of the special resolution for the dissolution of the company by special resolution.

Liquidation of company assets: What are the 2 types of liquidation in Canada?

When a company is struggling, it’s common to see a sale take place. When this happens, all of the assets of the company may be sold to pay off creditors. This process of selling off the company’s assets is known as “liquidation.” In Canada, there are two main types of liquidation: “compulsory liquidation” and “voluntary liquidation”.

Voluntary liquidation or voluntary dissolution begins with the shareholders agreeing to a special resolution for the liquidation of company assets, the distribution of the cash first to all creditors and then to the shareholders. When the liquidation is completed, the company is then would up.

Compulsory liquidation is when a court order is made directing the liquidation of company assets and the winding-up of the company.

In Canada, the laws under which a solvent company is liquidated depend on the laws under which the company was incorporated. If federally incorporated, then the Canada Business Corporations Act (CBCA) is the relevant statute. If provincially incorporated, then it would be the law of that particular province. In Ontario, it is the Ontario Business Corporations Act (OBCA). This is the statute that I will focus on in this Brandon’s Blog.

liquidation of company

Liquidation of company assets: What is the OBCA process for liquidation?

The Ontario Business Corporations Act is a piece of provincial legislation that is designed to govern the formation, administration, and dissolution of corporations in Ontario. In reality, most liquidations filed in Ontario are voluntary. This means that the company shareholders decide to seek liquidation.

Part XVI of the OBCA sets out the process for the liquidation of company assets in Ontario. The OBCA provides a comprehensive framework for the voluntary winding up of corporations. Sections 193 to 205 of the OBCA set out the procedures and requirements for the voluntary winding up of corporations.

As I have previously stated, the OBCA requires shareholders of a corporation to vote for a voluntary winding up of the company as the first step in liquidation of company assets and ceasing business. The shareholders’ requirement is evidenced by a special resolution made at a properly convened meeting of shareholders.

At the meeting, shareholders will appoint one or more people as liquidators of the company. These people may be directors, officers, or employees of the company. Their job will be to wind up the company’s affairs and distribute its property. Shareholders may also provide other instructions at that meeting or at any subsequent meeting.

It’s also common for shareholders to appoint a third party experienced in winding up corporations, like a licensed insolvency trustee. Even though the company isn’t insolvent, shareholders see the advantages of keeping a professional experienced in liquidating assets on board.

A corporation voluntarily winding down will cease carrying out business operations, except where doing so would be beneficial for the winding down process. All transfers of shares, except those made with the approval of the liquidator, taking place after the commencement of the winding down are void.

The OBCA provides for a stay of proceedings when an Ontario company is being liquidated and wound up. After a voluntary winding up has begun,:

no legal action can be taken against the corporation; and
no seizure, sequestration, distress or execution can be carried out against the corporation’s assets or property.

You will need the court’s permission before taking any action. The court will then decide what terms to set.

Liquidation of company assets: Special considerations in a compulsory or court-supervised liquidation

The court may dissolve the corporation if:

If the court finds that the actions or inaction of a corporation or any of its affiliates has resulted in or will result in an outcome that does not consider the interests of any security holder, creditor, director, or officer fairly, it may order the dissolution of the corporation.
All shareholders agree that dissolution should occur after a specific event, and that event has occurred.
Proceedings have begun to wind up the corporation voluntarily.
The court finds that if the actions or inaction of a corporation or any of its affiliates has resulted in or will result in an outcome that does not consider the interests of any security holder, creditor, director, or officer fairly, it may order the dissolution of the corporation.
It is best for those who would have to contribute to a company’s assets in the event of its dissolution, and for those who are owed by the corporation, that the court supervises the dissolution process.
The corporation cannot continue its business because of its debts and it is advisable to end its operations other than by bankruptcy.
The shareholders vote by special resolution to wind up the corporation through a court-supervised process.

Who can apply to the court for a court-supervised liquidation of company assets and the winding-up of the corporation? If you want to dissolve a corporation through a court-supervised process, you can do so by filing an application with the court. Shareholders, a contributory or creditor having a claim of $2,500 or more, or a voluntary liquidator can all apply to have the corporation wound up.

In the section below titled “Liquidation of company assets: Real-life example when voluntary had to become court-supervised” I describe a file that my Firm is involved in the liquidation of two companies, and we were forced to use the right of a voluntary liquidator to apply to the court to turn the voluntary liquidation into compulsory liquidation.

liquidation of company

Liquidation of company assets: How does the distribution of assets during liquidation work?

When a company is liquidated, its assets are sold off and the proceeds are distributed to creditors. The distribution of assets is first used to pay off secured creditors, then unsecured creditors, and finally shareholders.

The liquidator first needs to gain an understanding of all of the company’s assets and liabilities. The financial statements and the books and records of the company are a good place to start. The liquidator will put together a plan to collect and sell the assets of the company.

The liquidator then needs to put together a list of all creditors, and identify if they are secured creditors or unsecured creditors. This is necessary because the creditors need to be paid in order of priority. Any remaining funds will then be distributed to the shareholders.

The liquidator will keep company management and shareholders informed every step of the way. The liquidator would be very wise to get management and shareholder approval for all of the liquidator’s decisions. The liquidator will also need to make sure that the preparation of the company’s financial statements and income tax returns are kept current and that all government filings and payments are made on time.

The fee of the liquidator must be agreed to by the shareholders. The OBCA also provides for the court to be able to assess the fee charged by the liquidator. In doing so, the court will no doubt look at the steps and acts of the liquidator that were taken.

These are the main steps that every liquidator must carry out. Even in a compulsory liquidation done by court order, the practical steps involved in the liquidation of company assets are the same.

Liquidation of company assets: Real-life example when voluntary had to become court-supervised

The shareholders of two affiliated companies, each one a private company, passed special resolutions in August 2021 for both companies to begin liquidating their assets, winding up the corporations, and appointing Ira Smith Trustee & Receiver Inc. as the liquidator of both corporations. The desire to wind up both companies came from the very acrimonious litigation between family members.

We were very successful in helping the warring factions, through their respective legal representatives, make adequate provisions so that agreements could be reached in each crucial step of the liquidation process from August 2021 through April 2022. Unfortunately, we hit a snag in May 2022. The shareholders were unable to resolve their impasse due to the pertinent issues regarding the liquidation of both companies. Without court intervention, the stalemate would never end.

We knew that we could still provide value in helping these shareholders, but given their bitter disagreements, it could only be done under a court-supervised compulsory dissolution. Therefore, we prepared a report for the court and first circulated a draft to the stakeholders and their lawyers. We did so for two reasons:

we wanted to make sure that we did not make any factual errors; and
by circulating a draft in advance, we gave everyone the chance to consider consenting to our application to turn the voluntary liquidation into a compulsory dissolution.

We then had our legal counsel set up a court date, which they were thankfully able to get for mid-July. All stakeholders consented to the court-supervised liquidation of one of the two companies. One side also consented for the other company to enter a court-supervised process, but the other side opposed it.

The court made an order to convert the voluntary liquidation into a compulsory liquidation for the one private company that all shareholders consented to. It also set a hearing for mid-September, which will allow the opposing party to present their case, and for the consenting party and the liquidator to do the same. This provision in the OBCA allowing a voluntary liquidator to make the court application definitely prevented a less favourable outcome.

liquidation of company

Liquidation of company assets: Difference between insolvency and liquidation

There is a big difference between insolvency and liquidation, just as there is a difference between insolvency and bankruptcy. Being insolvent is a very difficult financial condition to be in. When a company or individual cannot pay their bills, debts, or liabilities, it is insolvency. This often leads to either restructuring or bankruptcy.

The liquidation of a corporation under the CBCA, OBCA or respective provincial legislation is a legal process that can be undertaken when the company is not insolvent but the shareholders wish to end the life of the company for other reasons.

In a liquidation, the company’s assets are sold and the proceeds are used to pay off creditors. The remaining funds are distributed to shareholders. This is not the case for an insolvent company, which may be forced to close its doors through an insolvency process such as bankruptcy.

The first step in determining the solvency of a company is to look at its most recent set of financial statements.

Key point takeaways on the liquidation of company assets

I hope you found this liquidation of company assets Brandon’s Blog interesting. The key takeaways from this blog, in my view, are:

Liquidation and winding-up of a company must be considered when a company is still solvent but is facing insurmountable problems such as its business is no longer viable or internal fighting makes its survival doomed.
While value still remains in the company, it is in the best interests of all stakeholders to get that value for everyone.
A liquidator can be very helpful to shareholders in a private company who no longer can effectively manage the companies on their own and there is value to be obtained for them.
A voluntary liquidator can apply on its own to court to turn a voluntary liquidation into a court-supervised compulsory liquidation.

Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt help.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective.

We’re passionate about permanently solving your financial problems with you and getting you or your company out of debt. We offer innovative services and alternatives, and we’ll work with you to develop a personalized preparation for becoming debt-free which does not include bankruptcy. We are committed to helping everyone obtain the relief they need and are worthy of.

You are under a lot of pressure. We understand how uncomfortable you are. We will assess your entire situation and develop a new, custom approach that is tailored to you and your specific financial and emotional problems. We will take the burden off of your shoulders and clear away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We realize that people and businesses in financial difficulty need a workable solution. 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 us now for a no-cost consultation.

Brandon Blog Post

INSOLVENCY TRUSTEE: TURNS OUT CERTAIN ACTIONS AGAINST THE TRUSTEE CANNOT BE UNLEASHED WITHOUT COURT PERMISSION

Post author By Brandon Smith
Post date July 18, 2022

What does an insolvency trustee do?

In simple terms, the only professional who can help you with a government-regulated insolvency proceeding that may allow you to be discharged from your debt is an insolvency trustee. This may be the best solution for individuals with significant financial difficulties.

An insolvency trustee is responsible for carrying out the administration of an insolvency file in accordance with the requirements of the Bankruptcy and Insolvency Act (Canada) (BIA). The insolvency trustee is responsible for ensuring that both creditors and the public interest are protected during the debt relief options of bankruptcy, consumer proposal, or Division I proposal process. This includes ensuring that assets are properly managed, sold and the cash distributed and that the bankruptcy or insolvency process is carried out in a fair and orderly manner.

A licensed insolvency trustee is federally regulated

The Office of the Superintendent of Bankruptcy (OSB) licenses and provides ongoing oversight for insolvency trustees, who must adhere to federal standards of practice, including the Code of Ethics for Trustees.

If you have a problem with a licensed insolvency trustee (formerly called a bankruptcy trustee) that you can’t solve, you can file a complaint with the OSB. Your complaint will be reviewed and assessed. You may even want to consider taking legal action against the insolvency trustee if your situation is extreme.

Section 215 of the BIA states:

“Except by leave of the court, no action lies against the Superintendent, an official receiver, an interim receiver or a trustee with respect to any report made under, or any action taken pursuant to, this Act.”

The BIA recognizes that a party may have a legitimate grievance against an insolvency trustee for something that was done or not done during a bankruptcy administration. The BIA tries to balance the need to protect legitimate claims against the Trustee with the need to prevent parties from using the threat of litigation to gain leverage.

insolvency trustee

Who is a person of insolvency?

The above is an introduction to today’s insolvency trustee Brandon’s Blog. In June of last year, I wrote about this bankrupt person in the blog TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION. That Brandon Blog dealt with a decision of the Ontario Superior Court of Justice.

The person of this insolvency was a serial bankrupt, filing bankruptcy four times in 12 years: 2004, 2006, 2011, and 2016. Each time he used the same insolvency trustee. He operated a sole proprietorship painting business. So technically, each time he went bankrupt, a new sole proprietorship began.

The plaintiff alleges that the licensed insolvency trustee (LIT) was negligent, committed fraud, breached their fiduciary duty, and was unjustly enriched, starting with the confidential consultation and throughout each personal bankruptcy administration. The bankrupt discovered during his 4th bankruptcy that his former spouse had misappropriated substantial sums from his business between 2003 and 2018. Ultimately, he determined that the amount of the misappropriations was approximately $206,000.

The bankrupt’s fourth bankruptcy was annulled by filing a consumer proposal with a different insolvency trustee that was accepted by his creditors. He and his current spouse then commenced an action not against the corporate licensed insolvency trustee of record who handled all four bankruptcies, but rather against the person, who is a licensed insolvency trustee, who carried out the individual bankruptcy processes.

The bankrupt person and his new spouse are seeking relief against the individual as though he were the Trustee of record. The central allegation is that he, as the “Licensed Insolvency Trustee” providing bankruptcy services for each of the bankruptcies, ought to have detected the misappropriations and, once told about them, he should have sued the former spouse. So they are blaming the Trustee for the bankrupt businesses with debt problems!

The plaintiff went to court to determine whether they needed the court’s permission to proceed with their case under section 215 of the BIA against the bankrupt person’s insolvency trustee. The plaintiff believed they did not need permission, but if they did, they should be granted it. The defendant Trustee argued that permission was needed and should not be granted. The judge ruled that the plaintiff does not need to get permission from the court to start this legal process.

Insolvency trustee appeals lower court decision

On July 13, 2022, the Court of Appeal for Ontario released its decision of the three appellate judge panel on the insolvency trustee‘s appeal of the lower court decision. The OSB obtained intervener status and was represented by legal counsel on the appeal. The OSB supported the insolvency trustee‘s position.

The motion judge, sitting in the bankruptcy court, determined that permission was not required under s. 215 to commence the legal action. However, she expressly did not determine whether, if permission were required, it should be granted. Therefore, she did not address whether the person’s status as an undischarged bankrupt would impact the decision.

The motion judge found that the litigation did not require permission under section 215 for two reasons:

she believed that actions against trustees in their personal capacity do not require permission; and
she found that actions that allege omissions do not require such permission.

Is the appeal as of right, and if not, should leave to appeal be granted?

The Court of Appeal for Ontario first had to decide if the licensed insolvency trustee has an automatic right to appeal the lower court decision and if not, should leave to appeal be granted?

The appellate court stated that it would be willing to grant leave to appeal because the proposed appeal, falls within the proper scope of section 215 of the BIA for 3 reasons:

This case raises an important issue – the circumstances in which an insolvency trustee can be sued without leave of the court – that is of general importance to the practice in bankruptcy/insolvency matters.
The case is prima facie meritorious.
The appeal would not unduly hinder the progress of the person’s bankruptcy proceedings.

The Court of Appeal for Ontario, therefore, gave the Trustee the opportunity to appeal the lower court’s decision.

Insolvency trustees and bankrupts are obliged to work with the court

The lower court found that the action did not require leave under section 215 of the BIA. This is because the judge decided it was against the Trustee in a personal capacity. The Trustee was now appealing this decision. The Trustee argued that section 215 of the BIA applies when a director, officer, or employee of the corporate trustee is sued for the Trustee’s conduct, just as it would if the corporate trustee were sued. The appellate court agreed, relying on a decision from the Supreme Court of British Columbia.

The purpose of BIA section 215 is to ensure that the bankruptcy process is not obstructed by the Trustee being hindered by actual or threatened vexatious lawsuits in connection with the administration of the bankruptcy.

In Canada, most licensed insolvency trustees are corporations. The BIA imposes numerous duties on them. A corporate entity can only discharge its duties through its directors, officers and employees. If the scope of section 215 were limited to protecting only the corporate trustee, then Trustees would be unable to properly carry out their duties.

The Court of Appeal for Ontario in this cased determined that this type of distinction between the corporate trustee and its staff would contravene the clearly expressed will of Parliament as evidenced by the statutory language. To allow such would be to subvert the fundamental purpose of section 215.

The key question in determining whether s. 215 applies is whether the connection contemplated by the section is present. This question is answered by examining the relationship between the alleged wrongdoing complained of in the Action and the role of a trustee. The appellate court looked at the proposed action by the bankrupt person and his current spouse and saw that there was the required connection. Therefore the Court of Appeal for Ontario agreed with the position of the Trustee and the intervener in finding that section 215 does apply in this case.

The other reason the motion judge came to her conclusion was that the action also alleged omissions. The lower court judge determined that a claim for omissions is not covered by section 215. The appellants and the intervener argued that action may fall outside of section 215 only when the crux of the action is the failure to do something expressly and specifically required by the BIA.

The common law claims here arise from alleged failures to act, rather than from failures to do something specifically and expressly required by the BIA. The Court of Appeal believes that section 215 applies to this action, and the motion judge was incorrect in concluding otherwise.

The Court of Appeal for Ontario sent this case back down to the bankruptcy court to decide whether the former bankrupt and his current wife should be allowed to sue the Trustee. insolvency trustee

What you need to know about LITs

Neither myself nor my firm has any kind of involvement in this issue. I have not read any of the pleadings in this action. I wish to be clear with you and let you know, based only on the information available to the public from the court decisions, what I would certainly have done in carrying out the personal bankruptcies if I was the Trustee.

If you’re experiencing financial difficulties and are considering insolvency, the first step is to consult with an insolvency trustee. During this consultation, the Trustee will collect information about your financial affairs and make recommendations about the best course of action for you.

The individual conducting the assessment must inquire about the debtor’s property and financial affairs. They shall prepare a statement of the debtor’s financial affairs, including their assets and liabilities, based on the information obtained from the debtor.

It is also necessary to get a clear and up-to-date monthly income and expenditure statement, which details all income (gross and net), all expenditures (including special needs, alimony, support or maintenance payments, and medical and prescription expenses). The debtor must also be prompted to provide information on all transfers under value they may have made concerning their assets.

There are a few options available to debtors who are struggling financially and looking to improve their financial situation. These debt relief programs include:

non-legislative debt solutions such as debt consolidation or financial counselling sessions performed by credit counselling agencies (insolvency trustees must provide two mandatory credit counselling sessions with the debtor as part of either a proposal or bankruptcy);
consumer proposals under Division II of the BIA;
a proposal under Division I of the BIA for those that do not qualify for a consumer proposal; and
as a last resort, bankruptcy.

What are the duties of an insolvency trustee?

Each debt management plan option has different rights and responsibilities for both the debtor and the creditors. It’s important for the debtor to understand all of the available debt management solutions. I would discuss each one with the debtor and help them choose the one that would be the best for their individual situation. In this particular case, I would want to drill down with the debtor to have him identify the causes of their insolvency. This inevitably would lead to a discussion with this debtor as to why his business seems to be losing so much money every year.

In order to fulfill my duties, I would want to drill down with the debtor to have him identify the causes of their insolvency. This inevitably would lead to a discussion with this debtor as to why his business seems to be losing so much money every year. If the debtor had been able to afford the monthly payments for a consumer proposal to annul his fourth bankruptcy using a different Trustee, could he have avoided filing for bankruptcy a fourth time altogether? I don’t have enough information to know the answer to that question.

I am required to review the bankrupt’s banking transactions for the 12 months prior to the date of bankruptcy as a Trustee. I am looking for any large or unusual transactions, especially large amounts of cash being paid to relatives or friends. This is important in bankruptcy proceedings because the Trustee has a duty to keep creditors updated on any legal proceedings, reviewable transactions, and preference payments. The Trustee needs to consider taking action against anyone to recover funds or, at the very least, opposing the bankrupt’s absolute discharge.

This review is only possible if the bankrupt has accurate records. In this case, if the bankrupt had the records and I reviewed them, I would have either found or not found any unusual transactions. If I did the review, it may have uncovered the alleged fraud.

The former bankrupt claims that the insolvency trustee should have sued the former wife for taking cash out of his business fraudulently. As a Trustee, I must first determine whether there are sufficient funds available to do so. If there are funds available, I must then carefully consider whether pursuing legal action is in the best interests of the estate.

This also assumes that the Trustee’s lawyer has given the opinion that this is a strong case to pursue. The Trustee must be very cautious because if the case is lost, the Trustee will be responsible for the other party’s legal costs awarded by the court. If the bankruptcy estate has insufficient funds, the Trustee will be held personally responsible. This is not a desirable outcome.

If I had found evidence of the alleged fraud and I either did not have sufficient funds to launch a legal action or I did not think it was a wise use of estate funds, there is one more thing I could do and would have done.

I would write to all known creditors and the bankrupt to advise that there is a potential asset in the form of litigation against the bankrupt’s former wife. However, the Trustee does not have sufficient assets to begin the litigation and as a result, I must refuse to pursue this asset. I would also explain section 38 of the BIA. This section allows creditors to obtain court approval to pursue legal action in their own name. If successful, they are able to keep their costs and the full amount of their claim from the recovery. This could be a great option for creditors who wish to fund the legal action.

If the facts that come out align with my explanation of the steps I would have taken, then my prediction is that the former bankrupt and his current wife will not be successful in persuading the court to allow them to continue their action against the Trustee. I will keep watch. insolvency trustee

The insolvency trustee is here to help you with your problem debt

I understand that you’re struggling with debt and I’m here to help. I am an insolvency trustee and I want to help you find a way to shed your debt, eliminate your challenging debt issues, improve your financial future and get all that stress and worry out of your life, Starting Over Starting Now.

I hope you found this insolvency trustee Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt help.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective.

Call us now for a no-cost initial consultation.

Tags bankruptcy canada, bankruptcy proceedings, bankruptcy trustee, Consumer Proposal, credit counselling, debt consolidation, debt management, debt settlement, initial consultation, insolvency trustee, insolvency trustee canada, Ira Smith Trustee, licensed insolvency trustee, monthly payments, Office of the Superintendent of Bankruptcy, personal bankruptcy

Brandon Blog Post

CANADA RECESSION: 8 ESSENTIAL SMART STEPS TO KEEP YOUR BUSINESS GOING IN A DOWN ECONOMY

Post author By Brandon Smith
Post date July 11, 2022

canada recession

Canada recession: Can you operate a business if there is a recession in Canada?

During slow economic growth and economic downturns in the Canadian economy, companies cut costs and especially labour costs. I wrote about Canadians’ fears of the Canada recession two weeks ago. Job losses go hand in hand with tough times. For many people, gaining new meaningful employment is very tough and sometimes impossible. For those people with dim economic prospects in the Canadian labour market, starting a small business in tough economic times is really their only option.

Despite the challenges a weak economy and the current recession fears may pose, starting a small business can be a rewarding experience with the proper amount of planning. In this Brandon’s Blog, I provide my 8 best tips for either changing parts of your business or starting a small business during tough economic times and maybe even a Canada recession.

How must business owners respond to a Canada recession?

Right now, no economist is prepared to forecast the Canada recession risk. Will it be a mild recession, a severe recession or will we even have one at all? The current and forecasted monetary policy of the Bank of Canada with its overnight rate hikes to its benchmark rate has financial markets, Canadian businesses and Canadian households all on edge. It is not just Canada as the heads of the central banks of all advanced economies reacted to the pandemic the same way and are now all acting in concert with rate hikes in an attempt to curb the now persistent inflation.

We are in somewhat of new territory as this period of time is very different than previous recessions and financial crises. We are experiencing economic shocks due to the COVID-19 pandemic and the shutdown and restarting of the Canadian economy. There is not a lot of either business confidence or consumer confidence in the marketplace right now. The consumer price index is increasing due to rising inflationary pressures and the inflation rate in Canada.

Small business owners need to have a well-crafted business plan, especially during an economic downturn. This is because it can be more difficult to get financing from lenders when money is tight. Therefore, starting a small business during a recession can be challenging. If you want to have success in your business, new or established, you need to put some serious effort into cash forecasting and knowing your bottom line. This means understanding how much money you need to bring in, what your operating costs are, and ideally how to make a profit.

canada recession

How to financially prepare my business for a Canada recession

Here are some methods that can help ensure your business does well during challenging financial times. Whether you’re just starting or need to make some adjustments to your existing company, these pointers can help you survive as well as also grow.

You can even find success at some level during turbulent economic activity. The reasons are as follows:

You may find that there is less competition during this time. This is because most people tend to start businesses when the economy is doing well.
You may find certain things are cheaper, the overhead costs of things that you need for your business to run. Think about working from home or renting a location that has been vacant for a while. Think of used furniture and materials, which you can buy at a discount or maybe even from a bankruptcy sale.
If you service your customers you gain during this time well, your good relationship will be a good reason why they will be more likely to stay in touch with you when the economy improves. This is especially important if you can offer them a more affordable option than the competition.
More mature businesses tend to stifle or prevent innovation during downturns. You can use this time to come up with new ideas that might be missed and give you a better position when you open doors, real or virtual.

The success of your company is based on how well you study the actual domestic demand for your product or service in the marketplace. It is just as important to comprehend what target price you need to reach in order to make sales. Furthermore, you need to understand what sales level you need to hit to both break even and also to be profitable.

Canada recession financing

It’s always an excellent idea to have someone you trust assess your business plan and cash flow forecast before trying to obtain financing. This will help you catch any essential issues you might have missed or inaccurate assumptions you have actually made as it relates to your business and its capital requirements. Some resources you might wish to turn to for help before looking to financial institutions for a loan include:

friends who have their own business;
someone at the bank where you do business with who you have a good relationship; or
your accountant

The Canadian economy could be pushed into a recession by the federal government’s reaction to the COVID-19 pandemic. If you’re considering starting a new business during these challenging times, you need to be very cautious. Your ability to develop a financial backup plan for your business and personal finances if you don’t meet your initial revenue target is more important than your ability to borrow money. It is normal for any new business that you will not be able to draw a salary during the 1st year of your new business.

You should also have a personal cash reserve so you have enough to live on for ideally the first 12 months of a new business. Make sure you budget carefully so you can keep making your most critical payments: rent/mortgage, insurance, utilities, and food. Finally, check your gut and your bank balance to make sure you’re ready to embark on your new adventure.

canada recession

Canada recession: Sell shrewdly

Starting a new business at a time of sharp economic downturn and turbulent economic activity requires creativity and resourcefulness. Marketing is critical to staying ahead of the competition. Make sure your business plan really fleshes out the marketing process: What exactly are you trying to sell? Who is your target customer? How will you price your product or service? What is your business promotion plan?

Dividing your original customer base into smaller pieces or niches is another strategy to allow any business to market more strategically. For example, if you are offering professional services for women, are you able to narrow it down to women in a specific age group, occupation type, or geographic location? Or, can you tier your product offering so that there is a relatively low-cost entry point product to allow new customers to try out your business and to allow you to then move them up to higher-priced and more profitable product offerings?

Can you think of ways to expand your customer base? For example, if you have a business shipping recipes and ingredients on a subscription basis for people to cook their own dinners without having to go do the shopping, could you also offer packaged dinners to customers who just want the convenience of heating and eating?

Canada recession: Ongoing competitive analysis

Be informed of your competitors’ movements in terms of marketing and product design. Are they enhancing the product? Devaluing the price? Utilizing original promotional methods? Knowing your competitors’ standings will help you formulate a unique selling proposition and grow your market.

Think about which segments your competitors are not serving, or which leads they are missing, and then fill that gap.

canada recession

Canada recession: Start small…with a plan to expand

As you start your business, be mindful of both your expectations and expenses. Try to be conservative in your estimates and plans, then adjust as your business grows. Review your business plan periodically and reconsider what is truly necessary to get started. For example, could you open in a smaller or cheaper location? Or, could you avoid the need for physical space by staying virtual?

When you have found the most cost-effective space for your business, think about your staffing needs. Before hiring permanent staff, you could use independent contractors as temporary or part-time workers.

If you are aware of a similar business that is failing, you may be able to find some great people who are willing to be paid less than in a more active market. Offer fewer employee benefits initially and then increase them as your profits grow. You don’t want to offer all sorts of great benefits at first and then find out you can’t afford them later. Taking away benefits is much worse than not having given them in the first place.

Immediate business growth in a challenging economy is unrealistic. An aggressive approach in a Canada recession or a down economy is unwise. You should be looking for sustained business growth over time.

Canada recession: Leverage technology to your advantage

The right tools are essential for business success. Utilizing modern technology can help you to stay organized, connected with customers and effectively market your company. CRM systems help you track your customers’ interests, so you can focus on products and services that best meet their needs.

The latest technology gives entrepreneurs more options for selling online and through multiple channels. You can save on advertising costs by doing email marketing, blogs, podcasts and of course optimizing your website for SEO instead of opting for more expensive electronic or print ads. And when you need inspiration, you can turn to social media and online publications and groups focused on helping entrepreneurs.

canada recession

Canada recession: Your network

Building a strong network is essential for anyone looking to advance their career or grow their business. Getting involved in local business groups and networking events is a great way to meet other like-minded individuals and make valuable connections. Joining professional associations or local clubs and organizations related to your industry is also a great way to expand your network and get your name out there.

Canada recession cost reduction ideas

With inflation pressures causing rising prices, cost reduction needs to be a key element of running your business. A gloomy economy can actually mask some great ways to save money. Creative ideas to reduce your start-up costs include:

Be very careful when making capital investments due to their mid and long-term nature. Leverage the economic situation and negotiate everything. You may be able to get a sharp drop in prices if you can demonstrate that you can afford to pay the lower price in full and on time.
Buying supplies from businesses that are about to go out of business or need to reduce inventory, especially bulky items like electronics and office furniture.
Barter with other business owners to find business alliance possibilities and suggest trading in products or services to offset costs.
Initially, do your own legal, financial and business homework through free online resources.
Compare business credit cards for the best deals.
Find a bank account that meets your small business needs including access to brick-and-mortar and online services as well as attractive rates and incentives.
canada recession

Canada recession key takeaways

Before seeking financing, consult with another business owner or friend to review your business plan. Develop a marketing strategy tailored to your business goals. Start small and expand when you see improvements. Secure your network and find ways to keep costs down by utilizing available technology.

You should begin with small steps and then increase your efforts when you start seeing improvements. Make sure your network is secure and look for ways to reduce costs. Make use of appropriate existing technology.

Although it may be challenging, there are benefits to starting or running a business during an economic downturn. By being thoughtful and strategic about cost-cutting measures while still providing value to customers, you can set your business up for success.

Canada recession conclusion

I hope you found this Canada recession Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt help.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective.

Call us now for a no-cost consultation.

Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE FEES: WHAT UNDENIABLE EVIDENCE IS NEEDED FOR COURT APPROVAL OF INSOLVENCY TRUSTEE FEES?

Post author By Brandon Smith
Post date July 4, 2022

Licensed insolvency trustee fees: How is a licensed insolvency trustee paid?

Are your debts or your company’s debts and financial situation causing you so much stress that you are considering speaking to a licensed insolvency trustee (formerly called a bankruptcy trustee or trustees in bankruptcy), but you are worried about the licensed insolvency trustee fees? Are you concerned about the professional fees to be paid because you think that businesses with debt problems already cannot afford to hire professionals? Your concerns are valid and relevant but you should not let that stop you from your initial inquiry. An insolvency trustee will always provide you with a no-cost initial consultation, discuss realistic options and explain the cost of each option to you.

Licensed insolvency trustee fees are set by bankruptcy laws and rules contained in the Bankruptcy and Insolvency Act (Canada) (BIA). They are reviewed by the Office of the Superintendent of Bankruptcy and must be approved by the bankruptcy court. Fees are either drawn from the funds accumulated in the insolvency file from the sale of assets in the receivership or bankruptcy administration or the monthly payment funding of the restructuring proposal. If there are insufficient assets in the insolvency file, then the insolvency trustee gets its fee from a third-party retainer.

In this Brandon’s Blog, I describe how licensed insolvency trustee fees are calculated. Then, I review a recent Ontario court decision to show what kind of evidence the Trustee needs to provide the court in order for its fees to be approved.

Licensed insolvency trustee fees: Disbursements included in a streamlined personal insolvency process

Licensed insolvency trustees offer a range of services for both individuals and businesses. For individuals, there are two streamlined insolvency processes:

summary administration personal bankruptcy; and
consumer proposals.
licensed insolvency trustee fees

Licensed insolvency trustee fees in a summary administration personal bankruptcy

The summary administration personal bankruptcy process applies when the assets of the bankrupt person to be sold are expected to sell for $15,000 or less. Licensed insolvency trustee fees for a summary administration personal bankruptcy are set by a formula called a tariff.

In a summary administration bankruptcy, the fees that insolvency trustees are entitled to are calculated as follows:

100 percent on the first $975 or less of receipts;
35 percent on the portion of the receipts exceeding $975 but not exceeding $2,000;
50% of receipts exceeding $2,000;
for counselling fees of $75 per session, totalling $150; and
an allowance for administrative disbursements of $100.

The reason the formula refers to receipts (of cash) rather than net proceeds from asset sales is that, in any personal bankruptcy, there are two types of cash receipts: 1. from the sale of assets; and 2. surplus income payments made by the bankrupt person, if any.

Licensed insolvency trustee fees: How much will it cost me to file a consumer proposal?

The calculation of the amount you need to offer your creditors in your consumer proposal has no relation to what the licensed insolvency trustee fees will be. Licensed insolvency trustee fees for a licensed trustee acting as the Administrator in the consumer proposal process is also governed by a tariff. It is calculated as follows:

$750 on the filing of the proposal with the official receiver;
$750 on the approval or deemed approval by the court;
20% of moneys distributed payable on distribution; and

counselling fee of $75 for each counselling session for a total of $150.

In a consumer proposal, administrative disbursements are paid out of the above fee calculation.

In both summary administrations and consumer proposals where the licensed insolvency trustee fees are only the tariff, there is no need for court approval.

licensed insolvency trustee fees

What factors influence licensed insolvency trustee fees in other administrations?

There are no streamlined provisions for any corporate insolvency administration. In addition to administering summary administration bankruptcies and consumer proposals, licensed insolvency trustees also can provide the following services:

business review of a company to identify its solvency and future prospects so that financial advice can be given
ordinary administration personal bankruptcy
commercial bankruptcy
personal Division I restructuring proposal to creditors (for consumers who cannot qualify for a consumer proposal)
corporate Division I restructuring proposal
private corporate receivership
court-appointed corporate receivership
winding-up corporate liquidation, either voluntary or court-supervised
corporate restructuring under the Companies’ Creditors Arrangement Act

In all of the above government-regulated insolvency proceedings/insolvency procedures, there are only two factors that influence the licensed insolvency trustee fees. They are:

Hours spent by the level of staff working.
The professional hourly rate of the staff.

Licensed insolvency trustee fees: How does an insolvency practitioner receive compensation?

In all of the non-streamlined insolvency processes, I just described, how the licensed trustee gets the fees it is charging requires approval. In private appointments, the licensed trustee needs the approval of the client. In a court appointment or administration for bankruptcy services or any other mandate under the BIA, the licensed trustee needs court approval.

What evidence do licensed insolvency trustees need to provide to prove the time that was spent doing the work? The documentation expected of a licensed trustee is the same that is expected from an insolvency lawyer or any other kind of lawyer. What is expected are detailed time dockets, so that everyone can see who spent what time, on what day on what activity.

But what if proper dockets are not kept? Well, that is exactly what the court case I want to describe to you is all about.

licensed insolvency trustee fees

Licensed insolvency trustee fees: How do practitioners of insolvency get compensated – it takes a Final Statement of Receipts and Disbursements

I am writing this Brandon’s Blog to be informative, not to embarrass anyone. So I will not be providing the case reference of the case I am now going to describe. This is actually the second such case in Ontario that I am aware of in the last 12 months.

The case deals with a bankruptcy trustee who submitted its final statement of receipts and disbursements (SRD) to the court for approval. Contained in this final statement is amongst other things, the line item for the fee and disbursements the Trustee is seeking court approval for. The court expects to see a sworn affidavit from someone on the insolvency trustee’s staff who has knowledge of the time spent and the fee charged outlining what was done and why it was necessary. The court also expects to see detailed time dockets.

In this case, and the very similar one that came before it, the insolvency trustee’s material did not include detailed time dockets. Both Trustees applied for taxation of their SRD in an individual debtor’s Division I Proposal. In both cases, the Office of the Superintendent of Bankruptcy issued clean letters of comment. The primary issue raised on this taxation is whether the insolvency trustee’s fees are to be approved. In the ordinary course, the debtor and the creditors have not been given notice of the taxation but it would appear that there is unlikely to be any objection.

The taxation raises the question of how the Trustee is supposed to establish its entitlement to fees when there is no time dockets kept or otherwise available to support the trustee’s claim. In this case (and the one before it), the Trustee is relying solely on the terms of the proposal. The proposal contains the methodology for calculating the fees to be taken by the Trustee in administering the proposal. The Trustee is relying on the fact that a Proposal is a contract between the debtor and its creditors, the court has already approved the Proposal and the Proposal includes the Trustee’s remuneration.

Licensed insolvency trustee fees: Bankruptcy trustees – why not keep accurate time records?

The Trustee requested fees (plus HST) based on the formula set out in the debtor’s proposal. While the Trustee provided an affidavit in support of its taxation, the Trustee did not provide any evidence of actual time spent at each staff level. The taxation came before the Associate Justice on September 1, 2021. She adjourned the taxation and requested time dockets.

The Trustee filed a report in response to the September 1, 2021 endorsement and request for time dockets, supporting the taxation and approval of the fees claimed, but no time dockets were included. In its report, the Trustee noted that it did not keep formal, detailed time records, as the terms of the Trustee’s fees and expenses are set forth in the Proposal as a “fixed fee” formula. This fee formula was accepted by creditors and approved by the Court. Therefore, the Trustee is relying upon that in not keeping time dockets.

The Trustee advised that its rationale for the development of a fixed fee formula to be charged by the Trustee, and for its decision to eliminate time docketing in such Division I proposals containing a formula for fixing a fee, were as follows:

The fixed fee formula was designed by the Trustee to provide more certainty about the costs of administration for the Division I proposal. This formula also takes into account contingencies such as the time needed to negotiate the terms of the proposal and to verify the debtor’s financial information.
The fixed fee formula was designed to make billing and accounting more efficient by eliminating the need to track chargeable time.
The fixed fee formula was based on the consumer proposal tariff, to a certain extent.
The fixed fee formula’s structure helped the Trustee keep initial costs low, so creditors could start getting dividends from the debtor’s monthly payments sooner.
The fixed fee formula was designed to minimize unexpected increases in costs of administration and a resulting decrease in dividends.
Not once has a creditor balked at the Trustee’s fixed fee.
The court approved the proposal with the fixed fee formula, so the Trustee did not keep time dockets.
There are many proposals whose administration is underway or completed that the Trustee has relied upon the fixed fee formula, and therefore has not maintained time dockets.
The trustee’s fees, as claimed under the fixed fee formula, have not been objected to by the Office of the Superintendent of Bankruptcy Canada.
licensed insolvency trustee fees

Licensed insolvency trustee fees: The court’s analysis and decision

The BIA provides for the determination of a Trustee’s remuneration in section 39. The Associate Justice said that s. 39(5) of the BIA provides the jurisdiction to increase or reduce the remuneration claimed by a Trustee. Further, the court was not a “rubber stamp” obliged to approve the fees claimed by the Trustee merely because they were in the Proposal. The court noted that it is common for Trustees to request remuneration based on the time spent and hourly rates charged. The burden is on the Trustee to convince the court that the amount claimed for remuneration is warranted.

The Associate Justice listed the following principles that must be considered when it comes to taxation:

Trustees should be given proper compensation for their services.
Prevent unjustifiable payments for Trustee fees that harm the insolvent estate and its unsecured creditors.
The efficient and conscientious administration of an estate for the benefit of creditors and, to the extent that the public is concerned, in the interests of the proper carrying-out of the objectives of the BIA, should be encouraged.

This Associate Justice also dealt with the previous case I mentioned above, which involved the taxation of a statement of receipts and disbursements in a Division I proposal where no time dockets were kept. In that case, she held that the lack of time dockets was not fatal to the approval of fees. She said the court is in a difficult position when there is no corroborative evidence as to the time and effort spent in the administration of the proposal.

So due to the lack of evidence justifying the time spent by the various staff members of the Trustee firm at their normal hourly rates, the Associate Justice was forced to look at the entirety of the Trustee’s administration. She found issues with it and therefore concluded that the Trustee was not entitled to the full fee being requested, based on the formula contained in the Division I Proposal. The Associate Justice determined, with the benefit of hindsight as to how the Division I Proposal turned out, that the debtor could have filed a consumer proposal and the creditors would have then been better off with a higher dividend distribution.

The Associate Justice ruled that, in this case, fees and disbursements will be set on a consumer proposal tariff basis. The proposal fund totalled $31,500. Using the formula for a consumer proposal, the Trustee was therefore entitled to fee and disbursements of $7,620 (plus HST) and not the $9,973.46 fee and $14,252.01 of disbursements (plus HST) formula amount.

The Associate Justice was also very critical of the Trustee’s administration and she had strong words overall for Trustees coming to court without proper evidence of the time spent when requesting approval for fees and disbursements at taxation. Her warning was that she did not accept the Trustee’s submissions that:

The court’s jurisdiction over approving the SRD and the fees to be claimed by the Trustee is replaced by the approval of the creditors and the OSB. Creditor and OSB approval are not determinative when it comes to taxation, but their approval is still relevant.
The appropriateness of the Trustee’s fees is not considered in an application for court approval of a Division I proposal. The court is not prevented from taxing the Trustee’s fee and disbursements upon the taxation of the SRD.
Any benefits to having a set fee remove the court’s jurisdiction to approve the Trustee’s fees. If the Trustee decides to save time by not documenting their hours worked, they do so at their own risk. The responsibility is always on the Trustee to justify their fees.
Creditors who want to know how much the Trustee’s fee will be cannot override the Trustee’s responsibility to explain to the court why the fee is fair and reasonable.

The court directed the Trustee to redo its SRD on the basis decided by the court, resubmit it to the Office of the Superintendent of Bankruptcy for its comment letter and then resubmit the entire package to the court for the taxation order.

A tough day in court to be sure.

Licensed insolvency trustee fees: Call us for debt-free solutions

I hope you found this licensed insolvency trustee fees Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you or your business are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt relief advice in setting up one of various possible debt management plans using debt relief options for you or your company.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective. We are debt professionals who know how to use the new innovative tools to solving debt problems while avoiding a bankruptcy filing.

Call us now for a no-cost consultation to find out what your debt relief options are.

Brandon Blog Post

IS CANADA IN RECESSION? MOST CANADIANS SAY YES TO AN INTENSE RECESSION

Post author By Brandon Smith
Post date June 27, 2022

Is Canada in recession?

Statistics Canada recently released data showing that inflation rose to 7.7% year-on-year in May, up from 6.8% in April. This was the highest reading since January 1983 and well above the 7.3% expected by economists. The inflation index rose 1.4% from the previous month, with gasoline prices, hotel prices and car prices being the main reasons for the rise in May.

Many economists believe core measures are a better indicator of underlying price pressures, as it excludes food and energy costs. The recent average of this measurement, according to Statistics Canada, increased to 4.73% which is the highest level in the last 32 years! The worst news, their inflation expectations are not stopping.

In this Brandon’s Blog, I discuss is Canada in recession and look at what effect it might have on Canadians.

Is Canada in recession? What is a recession?

In the most basic terms, a recession is not only when economic growth is curtailed but is a period of economic decline marked by a contraction in economic activity. Most governments define a recession as two straight quarters in which the economy contracts by at least 1.5 percent. Economists define it as negative gross domestic product (GDP) growth. This definition doesn’t take into account consumer sentiment, but that’s an important metric to pay attention to since it affects consumer spending.

Fears of a recession have been rising in recent weeks as central banks around the world try to bring inflation down from the highest in decades by raising interest rates quickly. A new poll finds that nearly 8 in 10 Canadians believe the Canadian economy is in or near a recession. More than half of those Canadians are starting to cut back on spending to cope with the recession.

According to a recent survey of 1,517 Canadians by Yahoo and pollster Maru Public Opinion, a whopping 78 percent of respondents believe Canada is now in a recession or approaching a recession. Of those, 23% believe Canada will enter a recession within the next three months, while as many as 55% believe the Canadian economy is now in a recession.

is canada in recession

Is Canada in recession right now? What the economists say

Canadian economists were surveyed by Finder on their inflation and economic recession expectations. Most said Canada has recession risk and is heading for a recession. They say we can expect it to happen anytime between 2023 and the first half of 2024. Most thought it would happen in the first six months of 2023, another quarter thought it would take a year to manifest. Economists have pointed to the pandemic, inflation and interest rate hikes as the reasons for the recession in Canada (isn’t the hot money only flowing into the housing market the reason for the recession?).

Finder explains how economists try to time recessions. Canada is headed for a normal summer as pandemic restrictions are lifted, but a new variant of the COVID-19 pandemic could emerge in the fall that could tip us into a Canadian recession by this time next year. What they cannot tell us is whether it will be a mild recession or a deep recession.

Why Is Canada likely to experience a recession?

In a single word – inflation. Inflation is rising and our federal government is doing nothing to quell the inflation expectations. This is causing the Bank of Canada to try to tame inflation by raising interest rates. This increases the risk of a recession. In fact, many economists told Finder they expect “aggressive” rate hikes in the coming year. Most of those polled believe there will be at least four more rate hikes this year.

Fears of a recession have been rising in recent weeks as central banks around the world try to bring inflation down from the highest in decades by raising interest rates quickly. The Bank of Canada is one of the central banks trying to restore soaring inflation to its target range of 1% to 3%. On June 1, the Bank of Canada announced a rate hike of 0.5%.

The timing of the recession is not easy to grasp, and much depends on what happens with Russia’s invading Ukraine. Murshed Chowdhury, an associate professor at the University of New Brunswick, expects the recession to continue into the first half of 2024. How long the supply-side problems will last and the escalation of the Russian-Ukrainian war will play a big role in deciding how things turn out.

The rise in prices causing inflation can be attributed to a number of factors, including poor fiscal management by the federal government. Other factors include record highs in commodity prices such as oil and wheat. Unfortunately, wage growth for most Canadians has not kept pace with inflation. Wages have risen 2.7% over the past two years, compared with inflation of 3.4% over the same period.

is canada in recession

Is Canada in recession? What will happen to the economy of Canada?

Consumer prices in Canada accelerated to their highest level in 40 years, Bloomberg reported, adding pressure on the Bank of Canada to continue aggressively raising interest rates in the coming weeks.

Markets are almost entirely confident that the Bank of Canada will raise interest rates by 75 basis points next month, which will lift its policy rate to 2.25%. The rate is expected to be as high as 3.50% by the end of the year. The preferential loan interest rate offered by commercial banks is usually more than 2 percentage points higher than the policy interest rate.

Prime Minister Justin Trudeau’s government has also come under pressure from opposition parties and economists to do more to contain inflationary pressures and help households offset the cost of living, though the Trudeau government has been wary of any new measures.

Like other countries, Canadian households have been hit by record gasoline prices and soaring food prices. After a slight pullback in April, gasoline prices surged again in May, rising 12% for the month and 48% from a year earlier. Food prices rose by a smaller 0.8% in May but were up 8.8% from a year earlier.

Given that gasoline prices rose further in June, the 7.7% annual figure may not even be representative of the peak annual price increase. There were more signs that imported inflation was affecting domestic prices, with the cost of services rising 5.2 percent from a year earlier, the fastest pace of growth since 1991.

The cost of living is rising twice as fast as the average Canadian wage, creating significant headwinds for the economy. Unfortunately, the Canadian government and the Bank of Canada are treating this as if inflation is all caused by domestic factors when it is really global. Raising interest rates aggressively, an old tool, cannot solve a globally induced imported inflation spike.

The inflation we are experiencing now is a result of all the shocks to the Canadian economy: COVID-19, monetary policy-induced recession factors when the Bank of Canada kept interest rates at their lowest ever levels during the COVID-19 pandemic, the supply side problems because every major world economy effectively shut down for the better part of 2 years, the war in Ukraine causing shortages and therefore price spikes. None of it is a Made In Canada problem, yet the Bank of Canada and the federal government are treating it as if it was homegrown.

Is Canada in recession? What happens if we experience a recession?

Canadians’ purchasing behaviour is already beginning to change. A poll conducted by Nanos Research for Bloomberg News indicates:

52% of Canadians surveyed say they have adjusted their spending habits, set stricter priorities and started consciously spending less in the past month.
The majority of Canadians expressed concern about the state of the economy, with 62 percent of Canadians believing that the Canadian economy was on the wrong track.
Rising prices have led 32 percent of Canadians to believe they are in a worse financial position than they were the previous month. Only 8 percent of Canadians said their situation had improved.
Regionally, the poll showed that residents of Atlantic Canada and Western Canada are particularly concerned about the economy.
In the Atlantic region, 75% of respondents believe the Canadian economy is heading in the wrong direction; in Manitoba and Saskatchewan, 77%; in Alberta, 66% of people hold this view.
41 percent of Canadians said they were in a worse financial position today than they were last year. This is the second-highest reading since 2008.

This consumer sentiment, runaway inflation and the Bank of Canada and the federal government using old tools to fix a new problem will have negative consequences for Canadian businesses. Consumer spending which previously fueled the Canadian economy, now reduced consumer spending, this will most likely place is Canada in recession.

Lower company sales will lead to job losses and our record low unemployment rate will increase possibly to a new high when the current job market changes for the worst during a recession. Business investment will be reduced and what investment is made, will be more in systems and technology than people. There will be a resultant drop in GDP. Certain asset categories will drop dramatically in price as capital flees places like the Canadian stock market for investments seen to be safer.

is canada in recession

Is Canada in recession? How to protect yourself from a recession

Our spending and investing habits directly impact the economy. This year so far, it’s been a rough ride. However, the majority of how a recession affects us is within each of our own control. The rest of it, the minority is because of forces beyond our control.

The economy will vary from year to year. Our spending, saving and investing habits directly impact the economy. It is important for all of us to make smart financial decisions now so we can weather the storm when the economy dips. Is Canada in recession? Based on the above, not right now, but, it could be soon. Here are my tips on how to protect yourself from a recession.

It’s important to have an emergency fund

When a recession hits, you can get fired and the value of your investments can plummet. One of the best ways to protect yourself from financial distress or additional debt is to increase your emergency savings.

That way, even if there are unexpected expenses, or your income is affected, you’ll have a cushion to protect yourself and your family. I always recommend having an emergency fund that allows you to survive for a 6-month period.

Boost your employment prospects

When a recession hits, job security can be at risk. To safeguard your income, you should consider finding a side hustle in addition to your regular job. This can serve two key purposes—helping you grow your emergency fund and providing you with extra income.

You should focus on developing job skills that will help improve your chances of not being laid off. Time management, communication, and attention to detail are all important skills to focus on.

Budgeting

Look at your family household expenses. Cut back on anything that is not necessary spending. If necessary, use cash to pay for purchases and not a credit card. We tend to spend less when we have to count it out in cash rather than tapping or swiping a card.

That way your money will go much further. Remember, during a recession, cash is king!

Pay down debt

Do everything you can to pay down your debt before a recession hits. The more debt you have, the more of your money goes to interest payments. If you have variable rate loan debt, as the Bank of Canada continues to crank up interest rates, the cost of that debt increases.

If you have fixed-rate debt and it comes up for renewal time, say like your house mortgage, you will be forced to renew at a higher interest rate. So, by paying down debt, you are insulating yourself as best as possible against the negative effects of the recession on your outstanding debt.

The economy may or may not slip into a recession but based on what the economists believe, more likely than not, eventually, it will. Recessions can last for a long time, or they can end quickly. However, the more prepared you are, the lower your chances of suffering a prolonged financial shock in the aftermath.

You may also want to read 2 other Brandon’s Blogs:

IS CANADA IN A RECESSION: OUR 9 EASY STEPS TO SOLVE COVID-19 INDUCED FINANCIAL PROBLEMS

CANADA IN RECESSION: WILL THE ECONOMY FALL INTO A GREAT DEPRESSION?

Is Canada in recession? What if your debt is too much for you?

I hope you found this is Canada in recession Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt help.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective.

Call us now for a no-cost consultation.

Brandon Blog Post

ONLINE SPORTS BETTING: DISCUSSION IN ONTARIO IS ABOUT WHETHER IT COULD LEAD TO ALARMING ADDICTION

Post author By Brandon Smith
Post date June 20, 2022

Is online sports betting legal in Ontario?

Private gaming websites that have gone through the province of Ontario licensing process are allowed to start taking wagers as of April 4, 2022. This new online platform marketplace is being run by iGaming Ontario, a subsidiary of the Alcohol and Gaming Commission of Ontario. Right now, online sports betting sites are the heaviest in advertising spending.

The Canadian government made single-game betting legal in Canada last summer, but Ontario didn’t fully open until 12:01 a.m. April 4, 2022. The province of Ontario is expected to generate about $800 million in total revenue this year from the online gambling market. Ontario with a population of approximately 15 million, is equal in size to the state of Pennsylvania, the fifth-largest state in the United States by population.

Who is responsible for monitoring online casinos in Ontario?

The Alcohol and Gaming Commission of Ontario is responsible for monitoring the new online casino market run by online casino operators. They were already monitoring the land-based casinos such as Casino Windsor run by Caesars Windsor, Fallsview Casino Resort in Niagara Falls and Casino Rama. Now they are in the online casino game too. They have a mandate to ensure that Ontario’s alcohol, gaming, horse racing and cannabis retail sectors operate with honesty and integrity, in the public interest. The federal government allowed for single-game betting and now the Ontario provincial government has implemented its licensing system for online sports betting.

The question now is whether online sports betting and other wagering sites will lead to an increase in gambling addiction. In this Brandon’s Blog, I explore the issue and describe why people who become insolvent because of addiction must be treated differently than others who have run-up debt.

online sports betting

Welcome to the exciting world of iGaming in Ontario!

Welcome to the exciting world of Internet gambling in Ontario! Here you’ll find all the hottest games and biggest jackpots, the most popular casino games, all just a click away! So come on in and start winning today!

The government of Ontario has officially launched its new online gaming market, which includes online casinos and esports betting sites. This marks the first time a Canadian province has run a private market for online betting, and predictions are that it could be worth billions of dollars.

The new regime in the province has raised many eyebrows and people are anxious to see how it will play out. The province has stated that it would like to bring some of the illegal, grey-market players into the fold by promising lower taxes (for the operators) and enforcing responsible gambling standards and anti-money laundering practices. This would, of course, generate new revenue from taxes.

What is the Ontario gambling age?

Both online sports betting and online casino gaming are available online in Ontario to anyone of legal betting age which is19 years or older. It didn’t take long for someone to bet on Ontario’s online sports betting industry.

PointsBet announced 50 seconds after the start that its “first big bet” in the province was Monday night’s NCAA men’s basketball finals in which North Carolina beat Kansas and the Toronto Maple Leafs beat the Tampa Bay Lightning.

Initially, 16 gaming operators, including sports betting operators, for each to become a provincially licensed operator to open operations in the province. More companies have registered with the Alcohol and Gaming Commission of Ontario, but have yet to reach an agreement with iGaming Ontario.

One is online game operator FanDuel, which signed a multi-year deal with TV station TSN. FanDuel will integrate with TSN across platforms, including in-game broadcasting, digital marketing, mobile apps and co-branding opportunities.

The service means that people in Ontario can now place bets on a wide variety of casino games, and sporting events, including single-event sports, betting, betting, and other gambling through online websites, smartphone apps and online casino apps that operate in the province’s regulated markets. The many gamblers in the province who have been active in the so-called “grey market” for years will find this appealing.

online sports betting

Is the Woodbine Casino available online?

But not everyone is excited about its launch. Jim Lawson, chief executive of Woodbine Entertainment, worries that the growing online sports betting market could have a detrimental effect on the horse racing industry and Woodbine Casino.

Woodbine, Canada’s largest bookmaker, has been unable to integrate its homogeneous horse racing business into legal online sports betting. “We don’t seek exclusivity, we don’t seek protection,” Lawson said. “We just want to be a part of it…all we’re asking for is having the operator host our product.”

“We knew almost from the beginning that they (sports betting platforms) were all very interested in horse racing, and if they wanted it, they had to buy it from Woodbine. That’s the premise that we’ve been pushing. And putting our content on their platform is a good thing for racing because that’s going to give it a huge exposure.”

Lawson hopes horse racing will soon be included in this newly competitive market of gambling sites with its wide range of betting options to allow the horse racing gambler to bet online, but he admits that being forced to do so after the game’s release isn’t ideal.

“I think it hurts us because we’re not on the starting line with everyone else,” he said.

Do online sports betting lead to gambling addiction?

The Ontario government of course hopes that everyone will only be involved in responsible gaming, but we all know that not everyone will. The early stages of the COVID-19 pandemic saw a shift from offline gambling to online gambling, including online sports betting, for many people. Offline gamblers became online gamblers. While most people see gambling as nothing more than a form of entertainment and will not be a seriously impacted gambler, the epidemic has led to an increase in gambling addiction.

Gambling addiction is a problem that is on the rise for women in the United Kingdom since the onset of the coronavirus pandemic. This addiction can lead to mental health problems, cognitive problems, relationship problems, and in some cases, bankruptcy and crime.

Unlike alcohol and drug addiction, gambling addiction does not have obvious physical symptoms or physiological manifestations. However, gambling problems have a huge impact. According to the latest estimates from the World Health Organization, players worldwide lost a total of $400 billion per year since 2016.

The current diagnosis of gambling disorder is based on the Diagnostic and Statistical Manual of Mental Disorders published by the American Psychiatric Association. Treatment and management guidelines for gambling disorders are being developed by the National Institute for Health and Care Excellence. Cognitive behavioural therapy and self-help groups are currently the most effective treatments for gambling disorders. These methods can help change thinking patterns and behaviours associated with gambling.

The key to addressing gambling disorders is early detection and treatment. This is essential in order to keep everyday activities enjoyable and prevent the brain’s reward system from being distorted.

If an addiction has taken over someone’s life, causing them to borrow money they can never repay, or divert money from family needs to feed their online sports gambling addiction, bankruptcy may be an option for them to get out of debt. However, a licensed insolvency trustee must deal with the bankrupt person whose causes of insolvency include addiction in a specific manner different than bankruptcies not caused by addiction.

online sports betting

Can you file bankruptcy for online sports betting debts?

People in debt because of addiction are usually dealing with personal loans, lines of credit, credit card debt, and maybe even income tax debt. They don’t have the money to repay and don’t have to repay your debts in full.

Filing an assignment in bankruptcy for gambling debts is possible, but it is not going to be easy. Different concerns must first be taken into consideration by people with gambling dependencies and financial obligations resulting from gambling.

The key issues are:

Your assets.
What is your annual income?
Have you ever been bankrupt before?
Full disclosure of all your debts, not just money owed as a result of gambling.
Have you been avoiding paying taxes because of gambling money?
Do you qualify for financial restructuring to avoid bankruptcy by filing a consumer proposal or a Division I proposal?
If you’re struggling with a gambling addiction, there are many resources and programs available to help you get the treatment you need. Gamblers Anonymous is one of the most well-known programs, but there are also many therapists and counsellors who specialize in gambling addiction who can help you in the long term.
To get a bankruptcy discharge, it is crucial for the person to show both financial rehabilitation as well as showing that their treatment is successfully stopping them from continuing to gamble. This involves the bankrupt revealing they have regularly attended therapy sessions and have ceased their addictive behaviour. They must also prove they are now capable of managing their finances responsibly.

Online sports betting: There are many other issues that need to be addressed besides just getting gambling addiction debt help

If you are insolvent and decide to file for bankruptcy, you will face several challenges.

Your non-exempt assets or equity in non-exempt possessions will be transferred to your Trustee. For example, if you own your marital residence with your partner, your share of the asset will be given to the Trustee and your partner will have to buy your interest back.

In a bankruptcy, if your regular income exceeds the poverty line, you will have surplus income to pay to the Trustee. If you have never been bankrupt before and have surplus income, you will have to make a regular monthly payment for 21 months before you can seek bankruptcy discharge. If you have been previously bankrupt, the 21 months becomes 36 months.

When the Trustee reports that your financial problems are due to a gambling addiction, they may try to block your discharge in bankruptcy. You will need to show not only that you have fixed your finances, but also that you have gotten help for your addiction. The Trustee has an obligation to make sure you have it as part of your overall rehabilitation.

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Online sports betting, gambling addiction and getting a bankruptcy discharge

If you have a large unpaid income tax balance with the Canada Revenue Agency, they will likely oppose your discharge from bankruptcy. Your Trustee needs to oppose your discharge from bankruptcy if your bankruptcy is due to gambling. The facts that make it impossible to get an absolute discharge from bankruptcy are under the Bankruptcy and Insolvency Act (Canada) (BIA).

Section 172 of the BIA permits the Court to make an order of discharge which is either absolute, conditional, suspended, or even refused. The purpose of section 172.1 of the BIA is to prevent bankrupts who owe (1) $200,000 or more in personal income tax debt, and (2) at least 75 percent of all unsecured proven claims in the form of personal income tax debt, from receiving an automatic discharge from bankruptcy.

If a fact under s. 173 of the BIA is proven, the absolute discharge is not possible. The acknowledged fact that gambling addiction can bring on or contribute to bankruptcy is an s. 173 fact (BIA, s. 173(e)) that precludes an absolute discharge. This is why your Trustee would oppose your discharge from bankruptcy. The Court and Trustee require that any decision on your discharge maintain the integrity of the Canadian insolvency system. Your discharge will be contingent upon you paying a certain amount of money to your Trustee. A bankruptcy discharge suspension for a period of time after you pay the condition is also possible. If your behaviour was especially egregious, your discharge could be refused.

At the discharge hearing, you will need to demonstrate that you are taking active measures to end your addiction and are receiving counselling and therapy for gambling addiction. You will also need to show that your financial situation is improving.

Fantasy sports is one thing but an online sports betting addiction is real

I hope that you found this online sports betting Brandon’s Blog interesting. Among the countless problems that can arise if you have too much debt, you may also find yourself in a situation where you are seriously considering bankruptcy as a realistic option.

If you are concerned because you or your business are dealing with substantial debt challenges, whether you need online sports betting debt help or just plain old debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

online sports betting

Brandon Blog Post

CERB CANADA: THE ENORMOUS DEBT PROBLEM NOW FACING CANADIANS

Post author By Brandon Smith
Post date June 13, 2022

The Canada Emergency Response Benefit (CERB Canada) has been closed but is not over

The government is ramping up its efforts to verify CERB Canada eligibility for payments made under the Canada pandemic support program. Many Canadians have been told to return some or all of the funds received in the past. The Canada Revenue Agency (CRA) and Employment and Social Development Canada are working together to ensure that those who received COVID-19 pandemic individual benefits were eligible for them. CRA also announced that they are sending out Notices of Redetermination to Canadians who were ineligible for some or all of the CERB Canada benefits they received.

The CERB Canada benefit was rolled out quickly and there was a lot of confusion about who was eligible for it. It was created to help those in Canada who the COVID-19 pandemic directly impacted. The program provided financial assistance to employees and self-employed workers. The benefit was worth a maximum of $2,000 every 4-week period for up to four months.

The issue that troubles me is that the benefit was mostly paid to people who otherwise would not have been able to afford rent or food. The CERB Canada benefit money was spent immediately and a long time ago. So if CRA and Service Canada have now determined that some people should not have gotten that benefit, what are those people supposed to do if CRA demands the money back?

In this Brandon’s Blog, I discuss what the options may be for people who receive a demand for repayment of the CERB Canada benefit.

Who was eligible for CERB Canada?

To qualify for the CERB payment from the government support program, you must have met certain conditions during the period you applied. The Government of Canada stipulated the following eligibility criteria:

You did not look for or receive, CERB Canada or Employment Insurance benefits from Service Canada for the same qualification period.
You did not stop your work willingly on your own. You were forced to stop your work by someone else.
You are a Canadian resident who is at least 15 years old.
You must have earned at least $5,000 (before taxes) in the preceding 12 months, or in 2019, from one or more of the following:
- job income
- self-employment income earnings
- benefits relating to pregnancy or parental leave from the province

The program was designed to help Canadian employees and self-employed Canadians who lost their jobs or saw a significant decrease in income due to the COVID-19 pandemic and the COVID-19 lockdown order resulting in business shutdowns. The program came to an end on December 2, 2020. cerb canada

Sending your CERB Canada payment back

If you have received a letter from Service Canada asking you to repay an overpayment, the CRA says you need to follow the instructions on the letter to return the payment.

You will have the opportunity to provide more evidence to support your claim that you were entitled to the CRA’s full CERB benefit payment. Based on your responses, you may need to repay the full amount you received.

If you received any CERB Canada payments and they now say you didn’t fit into the group of eligible workers, you have the option to pay back what you owe in full right now or over time. They expect you to repay it in full either way.

Now consider this. The federal government paid nearly $12 million in CERB Canada payments to more than 1,600 people with foreign addresses during the first seven months of the pandemic! How did that happen if one of the criteria of this program was you had to be a resident of Canada?

The way the CERB Canada benefit is taxed is by taking it out of your paycheque – wasn’t that enough?

The CERB Canada benefit was not a grant or any other kind of freebie. Anyone who received it had to include it in their taxable income. That is fair because the benefit was meant to replace lost income.

In April 2020, Prime Minister Trudeau announced that the Government of Canada would be taking extensive and decisive action to support Canadians and businesses who were struggling due to the COVID-19 global pandemic through an expansion of this program.

The Prime Minister went on to say that no Canadian should have to choose between protecting their health, putting food on the table, paying for their medication or caring for a family member. He said this is why the government introduced the CERB Canada Benefit, a taxable benefit.

There have even been CRA, Employment and Social Development Canada and court decisions confirming that the CERB Canada payments are taxable and that it was definitely not a free ride. The demand for repayment of benefits from Canadians who CRA and Service Canada now feel were not eligible workers seems totally anti-social. The program was rolled out hastily and under unclear, confusing circumstances, and Canadians have been paying income tax on the benefits they received. Surely our federal government has better places to spend its time clawing back wasteful spending. cerb canada

Mom was shocked when her maternity leave benefits were cut in half due to the CERB Canada benefit

A mother was shocked to see that her most recent parental benefits instalment had been cut in half. She said that maternity and parental benefits are paid to parents so they can take time off from paid work to do another kind of work: care work.

She was receiving half of her parental leave benefits for three weeks, which were already about half of her regular earnings. The reason for the reduction was because it was determined that the CERB Canada benefit she received for every four-week period, increased her income to the point where the reduction was warranted.

Then she received a demand for repayment. She hadn’t expected to have to repay the benefit. Shortly after the COVID-19 outbreak hit in March 2020, she was let go from her work because there wasn’t enough work to go around. She thought she qualified under the eligibility requirements for the CERB Canada benefit.

She couldn’t repay the full amount in one shot so she tried to arrange a repayment plan with CRA. She said that she had to fax about a dozen documents and field several questions from federal government employees to prove she is experiencing “financial hardship” in order to qualify for a payment plan. I don’t understand why payment plans have to be approved rather than just being automatically set up. These are not rich people that they are demanding repayment from, so why make them jump through hoops?

The British Columbia court has ruled that the CERB Canada payment must be deducted from the damage award for wrongful dismissal

Here is another example that the CERB Canada benefit is not a tax-free payment or a non-taxable grant. In Reotech Construction Ltd. v Snider, 2022 BCSC 317 the trial judge awarded the employee damages for a 4.5-month reasonable notice period and declined to deduct his CERB Canada payments.

After reviewing the case, the Supreme Court of British Columbia decided that the original trial judge was incorrect in choosing not to reduce the damage award by the $9,000 in benefits received. The court decided that these payments should be deducted from the award.

There was no indication that the employee would have to repay the CERB Canada benefit to the government. If the CERB payments are not deducted, then the employee would be in a better position than if there had been no breach of the employment contract. The employee would not have received the benefit if he had not been dismissed, making the benefit an indemnity for the wage loss caused by the dismissal. cerb canada

How to repay the CERB Canada benefit

If you received the CERB Canada and now find out that you did not meet the eligibility requirements, as shown above, you must repay the money. There are a few different ways that you can repay the amount demanded.

The easiest way to repay the CERB Canada amount is through your online service CRA My Account. You can log into your account and select “Repay CERB” under the “My Account” tab. If you do not have a CRA online account, you can repay the amount you owe either by sending a cheque through Canada Post to the CRA mailing address you can find online. You can also pay it at your financial institution using the government-issued remittance form.

But what if you are just one of the many hard-working Canadian workers living paycheque to paycheque? What if you do not have the money to repay what they say you owe, either all at once or by taking an amount out of each of your future paycheques that CRA will agree to?

What if you cannot repay because the government stepped up its efforts to verify CERB Canada payments and made demands on you?

As stated above, if you cannot afford to repay the full amount being demanded of you all at once, you can hopefully convince CRA that you deserve a payment plan over time due to “financial hardship”. This assumes that the government is right that you were not originally entitled to the amount that you received for the CERB Canada benefit. But what if you cannot afford to repay it at all, no matter what sort of payment plan you can enter into?

The outcome will depend on if you are insolvent. Being insolvent doesn’t necessarily mean bankruptcy. Insolvency (aka financial failure) is a financial condition that occurs when a person or company doesn’t have enough assets to pay off all debts if they were to be liquidated. It also means that the person or company has stopped paying their bills on time in the normal course.

If the person is NOT insolvent, they are expected to sell assets or use cash on hand to pay their bills.

If you’re insolvent, you can take advantage of Canadian insolvency legislation, the Bankruptcy and Insolvency Act (Canada) (BIA). The debt to repay the CERB Canada benefit is an ordinary unsecured claim that will be eliminated through a successful financial restructuring under either a consumer proposal or a Division I proposal. As a last resort, you could also file for bankruptcy.

I would rather refer you back to some of my earlier Brandon’s Blogs that go over the requirements for each insolvency option, rather than go through all of them individually here. They are:

Consumer proposal –CONSUMER PROPOSAL TORONTO: THE COMPLETE #1 WAY TO ELIMINATE DEBT IN ONTARIO
Division I Proposal –THE EASIEST WAY TO ACTUALLY LIKE WHAT IS A DIVISION i PROPOSAL ONTARIO
Personal bankruptcy – BEYOND BANKRUPTCY SERVICES: OUR BEST PERSONAL INSOLVENCY FAQ 2 JUMPSTART YOUR FINANCIAL LIFE

CERB Canada: Canadian workers now under fire

In summary, CRA now says it’s “time to pay up” for Canadians who were paid the CERB Canada benefit during the pandemic. Although CRA has a right to claw back the amount if it is correct that the person was not eligible, what CRA’s insistence means for many Canadian workers is they now have to choose between paying back their CERB or paying for food, rent or medicine.

This is so ironic because the benefit payments were designed to help those people in making those payments when their incomes dried up. The amounts were taxed so the government earned income that way. Now they are causing unneeded stress and worry to the people they aimed to help.

I hope this Brandon’s Blog was helpful to you in understanding more about this problem now facing many Canadians. If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life.

Brandon Blog Post

DEFAMATION TO CHARACTER: THE BANKRUPTCY INFORMATION YOU NEED TO AVOID PAYING A JOHNNY DEPP-AMBER HEARD EXPENSIVE JUDGMENT

Post author By Brandon Smith
Post date June 6, 2022

What is defamation to character?

In Canada, defamation is any intentional or negligent false communication, whether written or spoken, that harms a person’s reputation or exposes them to ridicule, belittling, or contempt. The concept of defamation can have two possible parts; libel and slander. There is a distinction between libel and slander.

Libel is defamation either in writing or some other permanent form, while slander is defamation that is not left in a permanent way. Section 298(1) of the Canadian Criminal Code (R.S.C., 1985, c. C-46) defines a defamatory libel as any published material that is likely to injure someone’s reputation or make them the object of hatred, contempt, or ridicule, without lawful justification or excuse. Slander is more commonly associated with an oral statement. With slander, there generally will always be a fight waged between slander and freedom of speech.

Unless you have been living under a rock for the past few months, you have no doubt “heard” about, and maybe even followed, the sensational legal case of John C. Depp, II v. Amber Laura Heard. Amber Laura Heard was sued for defamation to character by Johnny Depp, who claimed US$50 million in damages, in a trial that began on April 11 and ended on June 1, 2022, in Fairfax County, Virginia.

Johnny Depp married Amber Heard in 2015, but their partnership has actually been shrouded in conflict since the beginning. Heard accused Depp of domestic abuse and they broke up in 2016. Their divorce was all settled in 2017. The jury’s ruling in favour of Johnny Depp ordered Amber Heard to pay the actor $15 million in damages for defamation. The seven-person jury also decided that Depp through his lawyer had defamed Heard on one of three counts in her countersuit, ordering him to pay $2 million.

Defamation in the Real World

Defamation is an act of harming the reputation of another person through a false statement or many of them. In the real world, defamation can lead to severe consequences, including damages to one’s reputation and livelihood. The criminal code and being found guilty of the criminal offence of criminal defamation is one thing. But in the real world, the possibility of imprisonment is not going to provide any real satisfaction to the wronged party. The way to get compensated for the suffered damages because of the defamation to character is to start a civil suit action for a defamation claim.

The jury awarded Johnny Depp $15 million in damages against Amber Heard for defamation to character, but she will only have to pay $10.35 million due to a Virginia law capping punitive damages. One little problem. According to her lawyer, Amber Heard does not have the means to pay $10.35 million in damages to her ex-husband Johnny Depp following their trial verdict in the defamation lawsuit.

After hearing of the verdict, it got me thinking. If this kind of award was handed down here from Canadian defamation actions, could the party who was found guilty of such defamation of character and now had a huge judgment against them, could they use the Canadian insolvency system to get out of paying that kind of judgment coming out of an action for defamation?

The answer is maybe! In this Brandon’s Blog, I take a look at defamation as one of the civil torts that someone would have a civil cause of action for. I then look at what would happen to the person who was found guilty in a civil suit for a defamatory allegation if they looked to the Bankruptcy and Insolvency Act (Canada) (BIA) to try to get out of paying that kind of judgment.

defamation to character

Does defamation to character, libel and slander judgment claim survive in a Canadian bankruptcy?

To see if a claim can be discharged through bankruptcy, we need to look at section 178(1) of the BIA. This section enumerates the debts that are not released by an order of discharge from bankruptcy. As you may recall from earlier Brandon’s Blogs, I have explained that it is not the bankruptcy itself that clears a person’s debts, it is the discharge from bankruptcy.

Notwithstanding that a discharge from bankruptcy is what clears out a person’s debts, the BIA lists several specific debts that cannot be released by an order of discharge. I looked at the list contained in section 178(1) and there is only 1 item that relates to judgment debts. That is section 178(1)(a.1) which reads as follows:

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

- (i) bodily harm intentionally inflicted, or sexual assault, or
- (ii) wrongful death resulting therefrom;

A person’s bankruptcy discharge releases them from all claims provable in bankruptcy that are not listed in section 178(1). The question is, does Johnny Depp – Amber Heard type judgment awards for damages in defamation cases survive the bankruptcy of the party against who the judgment is?

In order for that claim to survive the person’s bankruptcy, the judgment creditor offended party would have to show that:

the award of damages is for bodily harm; and
was intentionally inflicted.

Some key bankruptcy decision trends made by Canadian courts when it comes to defamation to character law judgment claims

My research includes 3 court decisions that I believe clearly lay out how defamation to character judgment claims are handled in the Canadian bankruptcy context and whether such a claim survives a person’s bankruptcy. The cases are:

I will explain the main findings and general themes running through each case that seems to answer the question as to is defamation to character judgment claim is eliminated by a person’s discharge from bankruptcy? Put another way, if this was a Canadian case, could Amber Heard get out from under this judgment claim by filing either an assignment in bankruptcy or a restructuring proposal under the BIA?

I will focus on the bankruptcy aspect. The simple answer for a restructuring proposal under the BIA is that a successfully completed restructuring proposal would eliminate such a judgment claim. The real issue is what would happen in a bankruptcy.

defamation to character

Can I file defamation to character lawsuit against someone?

That is exactly what happened in Ross (Re). In the 2014 Saskatchewan Court of Queen’s Bench Ross (Re) decision, the question the Registrar in Bankruptcy needed to answer was “What is the appropriate disposition of the bankruptcy discharge application given the unique circumstances of this bankruptcy?” The Registrar started with the premise that it is more reprehensible to make a bankruptcy assignment with the purpose of avoiding a judgment creditor’s claim than to make a bankruptcy assignment to avoid general commercial debts.

The Registrar said that a bankrupt person’s civil judgment history may be relevant in deciding what conditions to put on that person’s bankruptcy discharge. The court determined that Mr. Ross filed for bankruptcy to avoid paying the creditor’s damage award under defamation laws. There were only two claims admitted in the bankruptcy for dividend purposes: the defamation judgment claim of $92,183 and a claim for $965.83 from a credit card issuer for a total of $93,148.83.

In this case, the Registrar did not look at all as to whether the judgment claim was of a kind that would survive Mr. Ross’ bankruptcy discharge. Rather, it was looked at only from what is an appropriate condition to place on Mr. Ross for his discharge from bankruptcy. The Registrar decided that a condition that Mr. Ross pays the amount of $34,000 or 37% of the proven claims in order to obtain his bankruptcy discharge.

Can you tell me how to file defamation to character lawsuit when the proposed defendant files bankruptcy?

This was not the main issue in this January 2019 British Columbia court decision in Burke v. Red Barn at Mattick’s Ltd. This case does not deal with defamation to character, but rather, is an analysis of section 178(1) of the BIA and particularly subsection (a.1) stating that any award of damages by a court in civil proceedings for bodily harm intentionally inflicted, sexual assault or wrongful death resulting therefrom cannot be discharged through bankruptcy proceedings.

As I previously stated, this is the section that a successful plaintiff who gets a civil judgment in defamation to character lawsuit would rely upon to have their debt survive a defendant’s bankruptcy. So the analysis this British Columbia court Judge goes through is instructive.

This case revolved around a proposed class action which stated that Mr. Schwabe, a former employee invaded the privacy of female employees by recording them without permission while they were changing in and using the restroom. The former employee then filed for bankruptcy, so the plaintiffs requested a declaration from the court to allow the plaintiffs to continue with their proposed class proceeding against him.

The BIA’s section 69.4 automatically halts any legal proceedings related to debts when an insolvency filing is made. No legal action to establish or collect a debt can continue or begin without the court’s permission. If a creditor thinks that a stay of proceedings would unfairly affect them, they can ask the court for a declaration that the stay no longer applies to them. The court can decide to grant this request if it feels that the creditor is likely to be disadvantaged by the stay continuing.

The Judge went through a thoughtful analysis of prior court decisions across Canada. The Judge acknowledged that an applicant under s. 69.4 must demonstrate to the court that at least one of these grounds is present:

Actions for debts that cannot be discharged through bankruptcy.
Actions involving complex, contingent, or unliquidated debts that cannot be valued by the Trustee alone under the BIA.
Actions where the bankrupt party is necessary for complete adjudication of the matter involving others.

The Judge said that going ahead with proceedings after a bankruptcy filing is an unusual situation. He added that simply having a claim listed in the paperwork is not enough to merit an exemption from the stay. To be given an exemption, there must be convincing evidence, a reasonable ground, to show that there is a chance the claim could be successful.

The Court had to take many different factors into account when making its decision in this case. One was if the plaintiff group was successful in obtaining a judgment against the bankrupt individual, would the debt be one that a discharge would not be a defence against? The section we would look to for a judgment for a debt under defamation laws due to defamation to character is the same – “bodily harm intentionally inflicted”.

The damage award to be exempt from discharge under this part of s. 178(1) must be for bodily harm resulting from an act done with the specific intent to injure. The Court’s decision acknowledged that:

The non-consensual distribution of intimate images by the bankrupt carries with it the risk of psychological hardship and embarrassment to the victims of such crimes.
Some people who have had their private images shared online without their consent have committed suicide as a result.
The inferred impact of the distribution of intimate images on victims accordingly is substantial, and the moral responsibility of such offenders generally will be high.
Moreover, our courts recognize that via the internet the images can be forever available.

The plaintiffs stated in their affidavit evidence that they have suffered psychological harm as a result of the violation they have experienced. The Judge was content that s. 2 of the Canadian Criminal Code was a full answer that psychological harm is covered under s. 178(1)(a.1)(i) of the BIA. Section 2 of the Criminal Code explains “bodily harm” as “any hurt or injury to a person that interferes with the health or comfort of the person and that is more than merely transient or trifling in nature.” Therefore the Judge determined that it encompasses the emotional trauma and hurt the plaintiffs detailed in their affidavits.

The Judge found that the psychological harm suffered by the plaintiffs constituted “bodily harm” for the purposes of s.178(1)(a.1)(i), and that this harm was “intentionally inflicted” in the sense that the images were distributed with “specific intent to injure.” The Judge ruled that the plaintiffs’ case against Mr. Schwabe is a debt action, not one that he can be discharged from. If the plaintiffs are successful, they will be awarded damages for the intentional bodily harm inflicted.

Similarly, a successful civil lawsuit judgment for a debt arising from action under defamation laws resulting from intentional bodily harm inflicted would also survive the defendant’s bankruptcy.

defamation to character

Can I bring a claim for emotional distress?

This is a decision out of the Milton, Ontario small claims court. Obviously, the amount of money involved fits under the small claims court jurisdiction, but it resulted in a thoughtful 31-page decision from the Court. This is a cyberbullying case between two people who once lived in a common-law relationship.

This case included cyber libel claims. The wrongness lies in making her private, intimate personal life globally public by way of online video. This case too involves bodily injury intentionally inflicted and more specifically, the plaintiff’s mental health as a direct result of the defendant’s actions.

The Court determined that when it comes to the tort of intentional infliction of nervous shock, the law does not recognize any mental states that fall short of a provable injury. The requirements for this tort are:

The defendant’s conduct must have been extreme and outrageous.
The defendant must have intentionally or recklessly caused the plaintiff emotional distress.
The plaintiff must have suffered a visible and provable injury as a result of the defendant’s conduct.

Although small claims court in the Greater Toronto Area is limited to claims not exceeding $35,000, including the award, in this case, it is the care that the small claims court Deputy Judge took that impresses me. This case was only about actual damages and not punitive damages, hence the relatively The Deputy Judge stated that this court emphasizes that it is making an award of damages for bodily harm intentionally inflicted, in the event that any recourse is sought in future to the BIA and, more particularly, s. 178(1)(a.1)(i)).

This case, and the others, show that if the evidence is such that the damages were caused by intentional behaviour to inflict bodily damage, which includes a mental state that can be shown to be a provable injury based on the intentional conduct of the defendant, then that claim will not be discharged when the bankrupt obtains his or her discharge from bankruptcy.

What are the possible punishments for defamation to character?

As you can see, there could be both criminal and civil consequences for defamation to character. In the Johnny Depp – Amber Heard case, if it was Canadian and Amber Head filed for bankruptcy in order to avoid paying the judgment to Johnny Depp, assuming she had the ability to pay, that debt may very well survive her bankruptcy discharge. As outlined above, in order to survive, Johnny Depp would have to show that he has experienced bodily injury, which could include a real mental health disorder, as a result of the intentional acts of Amber Heard.

If so, like in 2 of the 3 above cases, Johnny Depp’s claim against Amber Heard for that defamatory matter would survive under section 178(1)(a.1)(i)) of the BIA.

defamation to character

What happens to a civil award for defamation to character in bankruptcy?

I hope this Brandon’s Blog on what would happen if the Johnny Depp – Amber Heard case and civil lawsuit judgment award was a Canadian case and then Amber Heard filed for bankruptcy to avoid paying the judgment for defamation to character. I hope it was helpful to you in understanding more about this type of debt arising from a defamatory statement which would survive the bankruptcy of a defendant like Amber Heard.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

Call us today and get back on the path to a healthy stress-free life.

defamation to character

Brandon Blog Post

DEBT AND UNPOPULAR INTEREST RATE HIKES, HOW IS THE ECONOMY FARING?

Post author By Brandon Smith
Post date May 30, 2022

What is the definition of debt?

Debt is the money that a person or company owes to others. That is the simplistic definition. It is really one of life’s most stressful parts. Some people grow up in debt. For them, it’s just part of their lives, and they can make it work. Others live from paycheque to paycheque and save little to nothing. For them, it is crippling and can consume their lives, making their existence a daily struggle. For others, it is a parasite, feeding on their mind and their body. It can destroy their life, pulling them down and limiting their options and choices.

Consumer debt and household debt come from a number of places. Some source of debt is from emergency situations, and some of it is from buying expensive things but useful and worth the cost. That is how people have viewed real estate over the last decade, especially during the unprecedented pandemic. However, I also see some situations where high levels are just from bad decisions.

Business loans and corporate debt come in handy for a number of reasons. Perhaps you need some extra cash to get your business up and running. Or, maybe you’re looking to expand your operations by opening a new branch or purchasing new equipment. In any case, a business loan can provide the funds you need to reach your goals. Or, like in the last 2 years, perhaps the bottom has fallen out of the economy due to the COVID-19 pandemic and in order to survive, the business has had to take on government-support loans to increase the business debt load substantially.

All of these are now coming together in a perfect storm, as the Bank of Canada attempts to battle inflation and high Canadian real estate prices by beginning a pattern of interest rate hikes.

In this Brandon’s Blog, I look at how interest rate hikes, higher Canadian household debt and more Canadian business bankruptcies are the most recent signs of the Canadian consumer debt burden, as well as the major indicator of the current state of business in Canada. debt

Policy Interest Rate – Bank of Canada

The Bank of Canada’s primary business is to conduct monetary policy for the Canadian economy. This means that the Bank uses its tools of monetary policy to try to hit its target for inflation, which it does by adjusting the Bank of Canada’s policy interest rate. The Bank of Canada’s policy interest rate is the rate at which it lends money to financial institutions.

At the beginning of March, the Bank of Canada increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. This Fed interest rate hike was the biggest increase in two decades. The reason? To fight inflation.

The world’s biggest central bankers have long argued that ultra-low interest rates encourage spending and investment, helping to boost growth and employment. So at the outset of the pandemic with the world economies in tatters, all major central bankers, including the Bank of Canada, set borrowing costs at record lows. Those actions, amongst other things, contributed to the current state of inflation in the economy.

Macklem won’t rule out an inflation-driven, super-sized rate hike

The central bank predicts that inflation will remain high, averaging almost six percent in the first half of this year and remaining elevated in the second half of 2022. It is expected to ease in the second half of next year before returning to the two-per-cent target in 2024.

What are the factors causing this inflation? The global financial situation has become more difficult and unpredictable. Prices for oil, natural gas, and other commodities have risen sharply, contributing to inflation in many parts of the world. Supply disruptions resulting from Russia’s invasion of Ukraine have caused the prices of energy and other commodities to increase even further.

Looking to the future, Bank of Canada Governor Tiff Macklem stated that the Bank will be taking another 50-basis-point step which has already been baked into the financial markets. He believes that the economy needs higher rates and can handle them. It is evident that Macklem is dedicated to using Canada’s policy interest rate to bring inflation back to target. As inflation continues to surge to new highs, an even bigger interest rate hike may be on the horizon. Bank of Canada Governor Tiff Macklem indicated that further and faster rate hikes could be necessary to keep inflation in check.

The problem is that Canadian inflation is as much from a global impact as it is local. Raising interest rates may slow down home buying and mortgage growth. While it is true that mortgage debt is Canadians’ single largest obligation, increasing interest rates won’t fix the sky-high pricing at the gas pumps and the supermarkets. debt

As interest rates increase, so is household debt!

The latest figures from Statistics Canada, the agency responsible for collecting and disseminating statistics related to the economy of Canada, indicated that the total amount of household debt in the country increased by 0.5% in March 2022, up $14.4 billion to $2.69 trillion.

The increase of $13.2 billion came largely from debt related to the real estate market, such as mortgage borrowing and home equity lines of credit (HELOCs). This amount totalled $2.16 trillion outstanding. However, Statistics Canada also reported that credit card debt has increased for the second consecutive month, growing at a faster rate than mortgage debt!

Now as the Bank of Canada embarks on a hiking cycle that could go faster and further than before, and sky-high inflation squeezes household budgets, economists and capital markets are once again raising the red flag.

In a recent poll, 31% of Canadians polled say they already don’t make enough to cover their bills and required payments. Economists look at the rise in credit card debt and attribute it to a rise in personal spending. This is true. However, with prices rising much faster than wages, the increase could be a troubling sign that Canadians are spending on basics by using credit to replace the money they do not have and will not have to repay the new rising liabilities.

The rising cost of debt payments is already putting a strain on Canadians

If you’re borrowing money, interest is what you pay to your lender for using their money. It is your debt cost. If interest rates go up, the amount you have to pay each month for a mortgage, line of credit, or other loans with variable interest rates will increase. The minimum payment required each month on variable rate loan products will increase as interest rate hikes continue. At some point, you’ll also need to renew a fixed interest rate mortgage or loan. When interest rates are rising, the renewal rate on the fixed debt cost will be higher.

Raising borrowing costs to quell rising consumer prices may pose some risks, especially since Canada has a high level of household debt. In terms of household debt to income, Canada ranks 4th highest in the world. debt

What are the most effective ways to reduce your debt?

Paying down debt as much as possible will help counter the effects of a rise in interest rates and provide you with much-needed debt relief. Here are some of the best ways to reduce your debt burden thereby improving your credit score and credit rating:

Cut up your credit cards and only use cash for an extended period of time until things are back in control.
Make a budget and stick to it.
You should have an emergency fund to pay for unexpected expenses arising from external events out of your control.
Create a payoff plan. Look at your various categories of debt and make a plan that is most realistic for each type of debt.
Save money on interest by paying down the outstanding amount with the highest interest rate first.
Debt consolidation. Consolidate your liabilities with the highest interest rates into a single loan with a lower interest rate. By keeping your payments the same, and paying more than the monthly minimum payment, you’ll be able to pay it off faster and save money in the long run.
Avoid getting the biggest mortgage or line of credit that you’re offered.
Get a part-time job or begin a side hustle to boost your income.
Think first about how borrowing more money could impede your ability to save for future objectives.
Speak to a financial advisor or one from a wide variety of other financial professionals to find out how to teach you how to create a plan to be debt-free.

What will happen now with external debt and business bankruptcies?

As businesses continue to experience insolvencies, it’s important to note that the Canadian business bankruptcy rate is on the rise, according to a recent report by Statistics Canada and the Office of the Superintendent of Bankruptcy Canada. This increase underscores the importance of taking measures to protect your business from financial hardship.

Business bankruptcies in Canada increased by almost 34 percent year-over-year in the first quarter of 2022, which some experts warn could be the start of a growing wave of failures. This is closer to pre-pandemic levels. The number of business bankruptcies and proposals increased in the first quarter of 2022, with 807 cases compared to 733 in the previous quarter and 603 in the first quarter of 2021.

Business bankruptcies in Canada are increasing as government support comes to an end and businesses face a difficult post-pandemic recovery with high costs, supply chain problems and a shortage of workers. The financial support provided by the government through the COVID-19 pandemic assisted in delaying the surge in bankruptcies. Funding sources are becoming more expensive also.

Small business owners are feeling increased pressure from inflation in comparison to the average Canadian. With each budget line costing more, filing for bankruptcy is often the only option left. The data doesn’t capture the number of insolvent businesses that are forced to close without any formal filing, but the trend is now becoming evident.

Do you think that debt levels and bankruptcy filings will surpass pre-pandemic levels?

The state of the economy and how inflation and supply chain issues are managed will determine if the number of bankruptcy filings will rise in the coming months or not. As you can see, inflation, supply chain issues, interest rate hikes, household debt problems, business owners searching for more solutions and business bankruptcy filings are all now coming together in a perfect storm.

I hope this Brandon’s Blog on the current state of Canadian interest rates, household debt and business bankruptcies was helpful to you in understanding more about the corporate bankruptcy system in Canada.

Call us today and get back on the path to a healthy stress-free life. debt

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

Undischarged bankrupts: How bankruptcies work in Canada

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

Being unable to obtain credit

Being unable to work in certain jobs or professions

How long the information lasts on your credit report

Being subject to certain restrictions in relation to their property and finances

What is the meaning of undischarged bankrupts?

Undischarged Bankrupts in Canada – Your Options

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

Absolute order of discharge –

Conditional order of discharge –

Suspended order of discharge –

Refused discharge –

Undischarged bankrupts summary

Liquidation of company assets: What is the liquidation of a company?

Why would a company want to have liquidation of company assets?

The business is solvent yet no longer practical to operate

Shareholder disputes

The company is not saleable

To avoid bankruptcy

How a liquidation of company assets begins

Liquidation of company assets: What are the 2 types of liquidation in Canada?

Liquidation of company assets: What is the OBCA process for liquidation?

Liquidation of company assets: Special considerations in a compulsory or court-supervised liquidation

Liquidation of company assets: How does the distribution of assets during liquidation work?

Liquidation of company assets: Real-life example when voluntary had to become court-supervised

Liquidation of company assets: Difference between insolvency and liquidation

Key point takeaways on the liquidation of company assets

What does an insolvency trustee do?

A licensed insolvency trustee is federally regulated

Who is a person of insolvency?

Insolvency trustee appeals lower court decision

Is the appeal as of right, and if not, should leave to appeal be granted?

Insolvency trustees and bankrupts are obliged to work with the court

What you need to know about LITs

What are the duties of an insolvency trustee?

The insolvency trustee is here to help you with your problem debt

Canada recession: Can you operate a business if there is a recession in Canada?

How must business owners respond to a Canada recession?

How to financially prepare my business for a Canada recession

Canada recession financing

Canada recession: Sell ​​shrewdly

Canada recession: Ongoing competitive analysis

Canada recession: Start small…with a plan to expand

Canada recession: Leverage technology to your advantage

Canada recession: Your network

Canada recession cost reduction ideas

Canada recession key takeaways

Canada recession conclusion

Licensed insolvency trustee fees: How is a licensed insolvency trustee paid?

Licensed insolvency trustee fees: Disbursements included in a streamlined personal insolvency process

Licensed insolvency trustee fees in a summary administration personal bankruptcy

Licensed insolvency trustee fees: How much will it cost me to file a consumer proposal?

What factors influence licensed insolvency trustee fees in other administrations?

Licensed insolvency trustee fees: How does an insolvency practitioner receive compensation?

Licensed insolvency trustee fees: How do practitioners of insolvency get compensated – it takes a Final Statement of Receipts and Disbursements

Licensed insolvency trustee fees: Bankruptcy trustees – why not keep accurate time records?

Licensed insolvency trustee fees: The court’s analysis and decision

Licensed insolvency trustee fees: Call us for debt-free solutions

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Is Canada in recession? What is a recession?

Is Canada in recession right now? What the economists say

Why Is Canada likely to experience a recession?

Is Canada in recession? What will happen to the economy of Canada?

Is Canada in recession? What happens if we experience a recession?

Is Canada in recession? How to protect yourself from a recession

It’s important to have an emergency fund

Boost your employment prospects

Budgeting

Pay down debt

Is Canada in recession? What if your debt is too much for you?

Is online sports betting legal in Ontario?

Who is responsible for monitoring online casinos in Ontario?

Welcome to the exciting world of iGaming in Ontario!

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Do online sports betting lead to gambling addiction?

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