Ira Smith Trustee & Receiver Inc.

BANKRUPTCY AND INSOLVENCY ACT OF CANADA TR1ES TO GIVE EVERYONE UNDENIABLE EQUITABLE TREATMENT

Post author By Brandon Smith
Post date October 18, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

bankruptcy and insolvency act of canada

What is the purpose of the Bankruptcy & Insolvency Act of Canada?

With all the talk of the economy, supply chain problems and the uncertainty of the future these days, it’s no wonder that many people aren’t sure how they will end up when things become “normal” again.

For Canadian people and businesses with too much debt, an insolvency proceeding under the Bankruptcy and Insolvency Act of Canada might just be the answer to getting back to a healthy stress-free life. Notwithstanding that using this federal statute can be a very effective strategy for managing financial difficulties, it is a very scary one that people do not like to talk about.

The Bankruptcy and Insolvency Act of Canada is based on the principle of balancing fairness, equity and a fresh start. A recent court decision in Saskatchewan exemplifies these principles. In this Brandon Blog, I describe a little bit about the Bankruptcy and Insolvency Act of Canada, explain the court decision and how the court used these principles in reaching its decision.

What is in the Bankruptcy and Insolvency Act of Canada?

Canadian citizens, businesses, and companies who run into financial difficulties can turn to the Bankruptcy and Insolvency Act of Canada for assistance. This federal legislation contains the laws, rules, and guidelines that all involved parties must abide by. It details how different financial options work legally, and defines the roles of the various stakeholders – the Office of the Superintendent of Bankruptcy, the Licensed Insolvency Trustees, the debtor, and the secured creditors and unsecured creditors (both preferred and ordinary).

Despite the fact that provincial legislation in Canada may overlap or affect stakeholder rights, federal bankruptcy legislation has priority over provincial legislation in insolvency matters. Therefore, provincial governments cannot do indirectly what is prohibited directly. However, there are cases where provincial laws will still apply. The laws surrounding property exemptions and enforcement of court orders differ from province to province and territory to territory. These provincial and territorial regulations continue to apply even under bankruptcy laws.

It is the Bankruptcy and Insolvency Act of Canada that governs all bankruptcies and proposals (either Division I or consumer proposals) in Canada. Receiverships are also governed by the Bankruptcy and Insolvency Act of Canada. The Laws of Canada – Bankruptcy and Insolvency, are meant to give the honest but unfortunate debtor, be it a person, business or company, a fresh start in life.

bankruptcy and insolvency act of canada

Growth in consumer proposals and business proposals

A person who files for the personal bankruptcy process submits an assignment in bankruptcy and related documents to a Licensed Insolvency Trustee. These documents outline the person’s assets, liabilities, income, and expenses. An insolvent person’s reason for insolvency must also be included in the documents. Individuals typically give the reason for not being able to pay their bills in a timely manner. Consumer proposals require very similar documentation as bankruptcy, except for the assignment in bankruptcy document.

In order to file a Division I Proposal under the Bankruptcy and Insolvency Act of Canada, insolvent companies must describe their assets and liabilities and provide a realistic cash flow statement documenting how they intend to operate under the proposed insolvency process. They must also explain how they became insolvent. Personal insolvency is less complex than corporate insolvency.

Despite a long-term decline in individual bankruptcy filings, consumer proposals have gained in popularity among individuals. The decrease in bankruptcy filings and the increase in proposals can be attributed to several different reasons. Under a proposal, a financial reorganization or restructuring is what is done. Bankruptcy is simply a liquidation.

Regardless of whether it is a consumer proposal, a Division I proposal, or bankruptcy, the Bankruptcy and Insolvency Act of Canada governs these proceedings. The Companies’ Creditors Arrangement Act, another federal government statute, governs reorganizations of very large corporations. This is especially true if there are separate insolvent corporations under the corporate umbrella in different countries, requiring foreign proceedings.

Why does one choose a consumer proposal instead of filing for bankruptcy?

A consumer proposal has many advantages over bankruptcy proceedings. By filing a consumer proposal, you’re able to retain the property you own such as your home, car, boat, etc. and extinguish all of your debts while only paying back a portion. A consumer proposal doesn’t require any of those items to be sold, as long as you can afford them with the monthly payment made under the proposal and your other living expenses.

Changing your lifestyle can help you get out of debt more quickly with a consumer proposal. Bankruptcy means losing everything, except for some assets that are exempt under provincial laws. You have equity if you do not fully encumber your assets by way of secured loans from financial institutions, your house, car, boat, furniture, clothing, jewelry, or anything else of value. You can keep this equity in a consumer proposal, but you will lose it in bankruptcy.

The main reason why people should attempt to perform a successful consumer proposal instead of going straight into bankruptcy under the Bankruptcy and Insolvency Act of Canada is because of this. As you will see in the recent court case I am about to describe, if you don’t pay close attention to how you conduct your affairs once you declare bankruptcy, you might be exposed to another minefield even after receiving your discharge.

bankruptcy and insolvency act of canada

**The Bankruptcy and Insolvency Act of Canada case**

This judgment of the Registrar in Bankruptcy of the Queen’s Bench for Saskatchewan was released on October 6, 2021. It is a relatively simple case, but it described so well the equitable nature of the Bankruptcy and Insolvency Act of Canada.

In this legal process case, there are two unsecured creditors who are the Applicants. They jointly loaned money to an individual debtor, who is now an insolvent debtor and a bankrupt individual on an unsecured basis. They also filed their proof of claim for this debt with the insolvency trustee. They then applied for an order pursuant to s. 69.4 of the Bankruptcy and Insolvency Act of Canada lifting the bankruptcy stay that is in effect with regard to the bankrupt.

The purpose of section 69.3 is to prevent bankruptcy creditors from initiating or continuing enforcement proceedings against a bankrupt debtor. In bankruptcy, a creditor has no recourse against the debtor or the debtor’s property, and may not commence, continue, or seek any action for the recovery of money for a claim that is provable in the bankruptcy.

Nevertheless, Section 69.4 allows a court to lift the stay if it decides that the applicant has established that the continued operation of the stay is likely to cause material harm to him or her, or if there are other equitable grounds for lifting the stay.

**The case: How the Bankruptcy and Insolvency Act of Canada works for fairness and equity**

The bankruptcy process generally compromises the debt obligation of the bankrupt, resulting in creditor claims run through the bankruptcy claims process. Generally, unsecured creditors lose their right to enforce their types of debts and, as a result, realize less than 100% of their debt. Some creditors do not receive anything from an estate in bankruptcy.

There are two major objectives of bankruptcy (and consumer proposal or commercial proposal) proceedings under the Bankruptcy and Insolvency Act of Canada. For one thing, it provides an equitable system for distributing the proceeds from the estate in bankruptcy among the bankrupt’s unsecured creditors. According to the laws Of Canada – bankruptcy and insolvency, unsecured creditors are expected to be treated predictably and fairly. However, it does not guarantee that creditors will receive a dividend in all cases.

Secondly, it is intended to give an honest but unfortunate bankrupt an opportunity to be freed from the crushing burden of debt and receive financial rehabilitation to become a contributing member of society. That is one reason why every person who does an insolvency filing must attend two financial counselling sessions.

In bankruptcy, an automatic stay allows the bankrupt to re-establish himself or herself financially and restart his or her financial affairs so that he or she can meet his or her credit obligations moving forward without being hampered by debt enforcement proceedings.

bankruptcy and insolvency act of canada

**The case: Role of unsecured creditors trying to lift the stay of proceedings**

The Registrar, in this case, followed the reasoning of a 2001 decision from the Court of Appeal for Ontario. It is far from routine to lift the stay, and therefore the court has to make sure that the reasons for lifting the stay are sound and consistent with the objectives of the Bankruptcy and Insolvency Act of Canada.

In the case of Mcculloch (Re), 2021 SKQB 259 (CanLII), the two creditors were alleging that Ms. Mcculloch induced them to loan her the money on a fraudulent basis. It was their argument that they should be allowed to continue legal action against the bankrupt so that they could prove in a separate court action that the debt was a result of fraud and that, therefore, their claim would survive the bankruptcy and her discharge. In addition, they stated that they would be more severely affected than the commercial creditors if the bankruptcy stay bars them from taking action against McCulloch.

According to the Registrar:

Bankruptcy often disproportionately affects individual creditors over commercial creditors. Generally, creditor relationships are based more on trust than on cost-benefit analysis. When advancing a loan, the commercial creditor such as a credit card company, unpaid suppliers, or a sophisticated secured creditor, generally assesses the risk and determines whether it can absorb the loss in the event of default. Individual lenders do not usually do this.
If this form of prejudice is sufficient to support lifting the stay, other individual creditors may be able to apply to lift the stay merely on the basis of relative disadvantage to individual creditors. Lifting the stay on this basis is inappropriate.
The Trustee objects to this application on the grounds that it will significantly increase the costs of bankruptcy administration at the expense of other creditors. In this case, the Registrar sided with the Trustee.
According to the lawyer representing the bankrupt, the creditors have not established any material prejudice or other equitable grounds for lifting the stay. The Registrar agreed.
Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
However, these 2 creditors still have rights in the bankruptcy. The court still has the right to hear their submissions at the discharge hearing. Additionally, they continue to have the right to pursue Ms. McCulloch once the bankruptcy proceedings are over.
At this time, lifting the stay would not benefit the applicants or their creditor claims since during the bankruptcy, Ms. McCulloch’s either the bankruptcy vests her assets in the Trustee for the benefit of the creditors or remain exempt from execution under Saskatchewan law. This disposition of property makes it simply impossible for these creditors to realize much from this stage, prior to the bankrupt’s discharge.
In this case, the equity does not support the court’s exercise of its authority to declare that the bankruptcy stay, established under section 69.3 of the Bankruptcy and Insolvency Act of Canada, does not apply to this litigation.

As a result, the Registrar denied the applicant’s request for what they thought was their legal rights in lifting the stay. Clearly, the Registrar was guided by the Bankruptcy and Insolvency Act of Canada‘s aims of fairness and equity to all stakeholders.

Bankruptcy and Insolvency Act of Canada summary

I hope you enjoyed this Bankruptcy and Insolvency Act of Canada Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges 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 while avoiding bankruptcy. We can get you the relief you need and so deserve.

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. We help many people and companies stay clear of 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, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Brandon Blog Post

NOVEMBER IS FINANCIAL LITERACY MONTH: 5 MINIMALIST STEPS TO BECOME FINANCIALLY SUCCESSFUL

Post author By Brandon Smith
Post date October 14, 2021

financial literacy month

The History of Financial Literacy Month

A national month dedicated to promoting financial literacy and financial education is celebrated every year, with the aim of teaching citizens effective financial habits. Canadian Financial Literacy Month is held every November.

Some of the country’s financial institutions and nonprofit financial educational organizations are promoting the month and supporting financial literacy efforts by creating educational materials, making financial literacy resources available and hosting financial literacy programs and events centred around personal finances.

Children are welcome to participate in Financial Literacy Month. It can be said that it is also a financial literacy for youth month. In this Brandon Blog, I describe how Financial Literacy Month can be used by anyone for personal finance education. It will equip Canadians with practical tips and financial tools to make informed financial decisions relevant to their financial situation and gain confidence around money.

financial literacy month

The Goals of Financial Literacy Month

This year Financial Literacy Month in Canada is 11 years old. It is the goal of this month to educate Canadians so that they will be able to:

Invest in their future and the future of their children by providing for themselves and their families.
Understand their rights and responsibilities when it comes to their finances.
Give back to the community in a positive way.
Increase financial literacy among students and adults alike.

All these efforts translate into promoting, advocating for, and supporting financial literacy efforts across the country.

During COVID, Canadians Need Financial Literacy Month More Than Ever

Why is financial literacy important? In order to protect consumers, the Financial Consumer Agency of Canada aims to improve their financial literacy. Canadians need to have the knowledge, skills, and confidence they need to select the right financial products and services in light of the increasingly complex financial market. Personal and economic benefits accrue from financial literacy. Learning the basics of money today is as vital as it was 2,000 years ago!

By acquiring financial literacy, people are able to know what they need to know before they take on debt or invest in assets. This is especially true when it comes to major life purchases like real estate. You should be knowledgeable about issues such as credit cards, mortgages, insurance policies, investments, retirement planning, taxes and more. Knowing your options better will help you make an informed decision. Being financially literate involves managing one’s own finances effectively.

This year is probably especially more true than ever. As Canada is trying to get its economic situation ramped up again and things back to normal, the government funding for the various coronavirus income supports is ending. People will have to get back to the basics of understanding what their after-tax income is and sticking to a balanced budget so that they do not incur budget breaker expenses.

financial literacy month

***Financial Literacy Month: 5 Steps to Financial Wellness***

Do not procrastinate. We have Financial Literacy Month for a reason. Having a good understanding of and prioritizing your finances is important. By not putting off your complete understanding of your finances you will build a healthy relationship with money.
Don’t overthink things. People think that their finances are confusing and complicated. When you are starting out on your financial journey, it’s important to not get caught up in the complexities. Just deal with the basics and build from there. Start with writing down what your financial plan is, track your after-tax income and your expenses. List your assets and your debts. This is the complete list of what you need to do to start. Those are the basics that will give you a proper foundation. It is not more difficult than that. You can then show that information to your accountant, financial planner or a relative or friend who is more knowledgeable than you. From those 4 basic items, they can then help you build a budget that works. They will help you build an even more extensive list of things to think about. It will also show you whether or not you need to think about earning extra income with a side gig.
Check your credit report. Using the search function above, you can find many of my blogs on the topics of your credit score, credit report, and Canada’s two credit bureaus: Equifax and TransUnion.Every year, you can obtain a free credit report from each bureau. However, neither of these credit reports includes your credit score. Your credit score is a number that comes from a complex math equation representing all the information contained in your credit report. There will be instructions on each company’s website on how to obtain your free credit report. Annually, you should order your credit report and check it for errors. If there is an error, write Equifax or TransUnion and request that the mistake be corrected immediately by providing your proof.
Retrace your steps. It is vital that you have an accurate picture of the amount of money you will have in the future to spend and how you will spend it. Your household budget serves this purpose. In order to do this, you need to review your historical income, expenses, and taxes. Make a decision about the source and amount of income you expect in the future and decide whether it will come from the same or different sources. Take a look also at the expenses that you will incur. Whether it was paid for with cash or first charged to a credit card, all of them. Starting with a realistic and accurate picture is the only way to plan for a successful future.
Use Financial Literacy Month to establish financial goals. Each person’s financial goals will take a different amount of time to accomplish. Short-term goals are those that can be completed within a year. Every goal should have a specific purpose, a dollar amount, and a realistic deadline. Then there are your mid – term goals. These will take more than 1 year to accomplish, but no more than say 3 years. You should make sure they are flexible and realistic. Having too high a goal will cause frustration and prevent you from achieving it. Debt reduction should be both short- and mid-term goals. A debt management plan should be part of your overall budget. An emergency savings fund should also be established. It will take even longer to achieve long-term financial goals. Regular savings is critical to achieving them. A larger savings plan should be implemented as your budget allows for it. Your success and happiness will increase the more goals you achieve. This is why you should set attainable financial goals which include long-term savings. Goals can also change over time. Occasionally, life’s fluctuations force us to reevaluate our goals or even toss some altogether. This is all part of your financial education. It’s important to remain committed to your successful financial future.
financial literacy month

As indicated above, shortly the Canadian Financial Consumer Agency, financial institutions and other financial education centres will be advertising many resources, including financial literacy books, to help you further your financial education. Whether you are looking for basic literacy basics about money or more advanced money management education, there will be something for you.

I hope you enjoyed this Financial Literacy Month Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges 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 while avoiding bankruptcy. We can get you the relief you need and so deserve.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Brandon Blog Post

CONSTRUCTION LIEN ACT OF ONTARIO: THE GRIPPING FIGHT BETWEEN LIEN FILING, A PRIOR MORTGAGE & RECEIVER FEES

Post author By Brandon Smith
Post date October 11, 2021

construction lien act of ontario

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Construction Lien Act of Ontario: What is a Construction Lien?

The Construction Lien Act of Ontario regulates how payments are made to parties who provide services or materials to a construction project. Construction liens may be filed when a project owner does not make prompt payment to the contractors or suppliers. You can register a construction lien on the title if you have provided materials or services to improve the property.

Having enacted amendments to the Construction Lien Act of Ontario (now the Ontario Construction Act, R.S.O. 1990, c. C.30), Ontario is achieving its plans to modernize provincial construction laws in order to improve efficiency and competitiveness for construction firms.

In this Brandon Blog, I examine the recent Ontario court decision regarding the treatment of court-appointed receiver fees when mortgagees and construction lien claimants disagree over the priority of their claims.

construction lien act of ontario

Construction Lien Act of Ontario: Construction lien and holdback rules

Disclaimer: I am by no means an expert in this area. Nevertheless, as a licensed insolvency trustee, I have acted as a court-appointed receiver over incomplete construction projects. Therefore, I have encountered various construction lien issues in receiverships.

General changes made to the Construction Lien Act of Ontario are related to prompt payment rules and the establishment of new dispute resolution mechanisms (adjudication). According to provincial construction law, prompt payment refers to the payment of an invoice after a “proper invoice” is issued.

A general contractor’s invoice must be paid within 28 days of receipt by the owner. The owner has 14 days to notify the contractor if he disapproves of the amount, quality, or invoice of the work as outlined in the invoice. In place of the old requirement of 45 days, liens must be filed/preserved within 60 days now.

This policy change aims to improve cash flow within the construction pyramid by resolving conflicts more quickly. The dispute resolution procedure is now an adjudication process for the adjudication of construction disputes are handled by qualified adjudicators. The is also a code of conduct for adjudicators.

In the absence of an agreement to extend the timeline, the adjudication procedures state that the adjudication decision will be made within 46 days after it is initiated. If an adjudicator’s decision is not followed, the party expecting payment is also entitled to suspend the work under the contract or terminate it.

Holdbacks are what they sound like. The holdback process requires that for any project owner, contractor, or subcontractor to hold back 10% of the price of materials or services they provide is known as a holdback. With the amendments to the Construction Lien Act for Ontario, holdbacks remain at 10% of the value of improvements, but security can be offered in lieu of cash. Now a letter of credit or repayment bond can be used to maintain holdback.

In light of modern-day construction projects’ long-term nature, the Act expands the options for the make-up of holdback payments. They may now be made annually or in phases or portions, depending on the terms of the agreement.

construction lien act of ontario

Lien Filing under the Construction Lien Act of Ontario

Now for the case. The decision of the 3 Judge panel in the Ontario Superior Court of Justice Divisional Court was released on October 5, 2021. This case essentially deals with the ranking between the fee and costs of a Court-appointed receiver, the interest and costs owing to a mortgagee whose mortgage was registered prior to the registration of construction lien actions and the construction lien claims which then arose.

It was an appeal from a Judge’s decision on appeal from a Master’s (now called Associate Judge) decision who regularly dealt with construction lien cases. This appeal is primarily about the interpretation of section 78(3) of the then Construction Lien Act of Ontario. Prior mortgages have priority over lien claimants when there are arrears in interest charges, fees, or expenses related to the mortgage. The case also discusses how priority is determined when a previous mortgage is in default.

The report by the Associate Judge was issued on May 24, 2018. At trial, the issue was a priority contest between lien claimants, who were now bankrupt and represented by their licensed insolvency trustee, and the mortgagees. There was a court-supervised receivership over the property. During the receivership, my Firm was managing the court-supervised receivership on behalf of the husband and wife who owned the company which owned the property.

According to the Associate Judge, the mortgagee had priority over the lien claimants. As a result, the court-approved receiver fee and costs, mortgage interest, mortgage principal, and other charges ranked ahead of the construction lien claims.

The Trustee appealed that decision. The appeal was successful insofar as it was determined that the Associate Judge’s report was in error and that she failed to determine whether the mortgagee had priority over lien claimants with respect to a deduction for the court-approved receiver‘s fee and costs, mortgage interest, mortgage principal, and other charges. Consequently, the Judge ruled that the mortgagee did not have such priority for interest arrears, enforcement costs, and charges and that any funds paid into court should be given to the Trustee on behalf of the claimants of construction contracts.

Now, the mortgagee has appealed the Judge’s decision. Prior mortgages and building mortgages are covered in section 78(3) of the then Construction Lien Act of Ontario. Mortgages used for property acquisition are known as prior mortgages, and building loans are used for construction funds. For the mortgage advances to be entitled to priority, they must have been made before the registration of claims under the construction lien regime.

construction lien act of ontario

**The court decision of this Construction Lien Act of Ontario case**

According to the Judges hearing this appeal, the arrears of interest and the reasonable expenses, and fees that relate to enforcing security (i.e., the mortgage) cannot be adjudicated in a priority proceeding. Arrears in interest and reasonable expenses incurred on a defaulted mortgage should be determined through proceedings such as the power of sale proceedings, bankruptcy proceedings or the appointment of a Trustee.

The court overseeing the receivership administration approved the sale of the property during the court-supervised receivership proceedings. That same court also affirmed the receiver’s fee and costs, as well as reviewing the evidence and rendering an opinion regarding what the mortgagee was entitled to under the mortgage registered and advanced before a construction lien claim arose. All stakeholders were served with the original court application to appoint the receiver. Lienholders were included in this process as well. The Appointment Order specifies the priority of the receiver’s fee and costs. Nobody questioned the priority and even the lien claimants did not object to it.

All things considered, the judicial panel had to agree with the Associate Judge that all the amounts approved by the Judge ruling on the receivership and all the advances made before any construction lien claims arose ranked in priority for all legitimate costs and arrears of interest. In deferring to the assessment of the receivership Judge, this panel showed deference. As a result, the lower court Judge’s decision was reversed and the Associate Judge’s decision was upheld. The Trustee was ordered to pay costs.

construction lien act of ontario

Construction Lien Act of Ontario summary

I hope you found this Construction Lien Act of Ontario Brandon Blog informative. This case was really one big construction dispute resolution process. The provincial court deals with receivership matters to adjudicate under the applicable insolvency law.

With too high debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the only option, call me.

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

It’s good that you’ve come to this site, where you’ll find answers to your questions, sort through your options, and discover that you can get help. You’re not alone, and the professionals at Ira Smith Trustee & Receiver Inc. are committed to helping you find a debt solution that’s best for you.

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 an alternative 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.

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out 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.

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. 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.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Brandon Blog Post

CEBA LOAN UPDATE: 3 INTRIGUING CREATIVE WAYS FOR ENTREPRENEURS TO CONQUER CEBA LOAN DEFAULT

Post author By Brandon Smith
Post date October 7, 2021

ceba loan update

CEBA loan update introduction

Canada Emergency Business Account (CEBA) loan application deadline was on June 30, 2021. As of right now, COVID-19 support for businesses and individuals soon will be ended by the federal government. The assistance from government programs has been both necessary and very helpful. CEBA was merely one product from an array of government support for Canadians and Canadian businesses.

Many entrepreneurial businesses have lost confidence in their financial prospects due to uncertainty over the fate of ongoing federal pandemic support, according to the Canadian Federation of Independent Business (CFIB). It is pushing the Liberals for more life support to avoid a flood of insolvencies.

This Brandon Blog provides a CEBA loan update and answers a question that many entrepreneurs have asked us: What counts as a CEBA loan default? The blog also tells you about three intriguing creative ways for entrepreneurs to conquer CEBA loan default.

CEBA loan update: Original CEBA eligibility requirements

The CEBA online application process began on April 9, 2020. It was part of the general program to supply Canadian companies with access to credit and support for business operations under the COVID-19 support introduced by PM Trudeau. Under the original program, federally guaranteed financing was provided to each qualifying company for $40,000 by financial institutions.

Canadian chartered banks processed and financed the loans based on the applications from businesses. The Canada Emergency Business Account is not a business account, despite its name. Instead, it serves as a non-revolving loan. It is a government-guaranteed loan of $40,000. The CEBA are interest-free loans that do not need to be repaid until December 31, 2022. Interest will accrue after that date.

The Canadian government created the CEBA to assist small and medium companies and non-profit organizations with their most pressing cash needs during the COVID-19 crisis. The entire process was conducted online. A pre-screening tool was implemented as part of the process. Applicants completed the questionnaire and provided the necessary information. After that, the online application process system:

issued a CEBA pre-screen tool reference number;
advised that your bank had submitted the application;
explained that your bank has no involvement in the application process; and
that you will hear back within 7 to 10 business days.

The approval requirements for the $40K CEBA were not difficult to meet. On or before March 1, 2020, any incorporated company or non-profit relying on their respective CRA Business Numbers and having a Canada Revenue Agency Business Number (BN) could apply for the CEBA. A company or non-profit also needed to be a business with payroll and have a total 2019 payroll of $50,000 to $1 million with the Canada Revenue Agency Business Payroll Number (BN).

There was also an online attestation to sign confirming all the information was correct. Each financial institution had its own form. So, for example, if you applied through The Toronto-Dominion Bank (TD), there was a TD website application attestation.

ceba loan update

CEBA loan update: Expanded CEBA eligibility requirements

Then there was a CEBA loan update since it was first announced as additional government assistance for businesses’ additional funding. There were changes to the maximum loan balance, eligibility criteria, and other details. As part of the CEBA program extension, businesses that were in operation in Canada on March 1, 2020, were now eligible for a $60,000 grant. Businesses must be all-Canadian corporations, partnerships or proprietorships.

The $60,000 CEBA and $20,000 CEBA expansion financing is not available to other types of business. The $40K CEBA amount already funded automatically qualifies you for the $20,000 CEBA expansion, if you were approved for the $40K CEBA amount in the first place. Now, sole proprietors and partners in business partnerships are also eligible. Corporations owned by family members continue to qualify. Not-for-profit organizations apparently still did not qualify.

To be eligible, applicants for this CEBA loan update had to have a payroll amount between $20,000 and $1,500,000 in the 2019 fiscal year. If not, the expansion allowed them to apply for the non-deferrable expense stream (applicants whose total payroll was $20,000 or less in the 2019 calendar year).

The actual program requirements were written in a funny way. Rather than payroll expenses, it talks about having paid employment income. Apparently, Parliament wanted to emphasize that the money should be used to employ Canadians, so they can earn the employment income being paid by the business payroll!

Eligible businesses are ones that:

CRA Business Numbers – has an active business account with a CRA-issued BN registered before March 1, 2020.
Has a business chequing/operating account with the proposed lending institution they are applying through when the application process begins. An example would be an account at BMO B M O business banking relationship or a similar account at any other Canadian chartered bank. You should not have any problem meeting this requirement of having an active business chequing account if you have a Canadian operating business.
In order to qualify for the entire $60,000 CEBA, applicants must not have previously used the Canada Emergency Business Account Program; they also cannot request support under the CEBA Program at any other financial institution. The $20K loan could be added to the $40K loan that you already received.
The plan was to remain open or to reopen as soon as the restrictions were lifted.

CEBA loan update: Repayment terms, rate of interest, other fees and charges

The main provisions of the CEBA term loan are:

Business owners have access to a single tranche $60,000 loan through CEBA.
Interest is 0% until December 31, 2022.
Interest-only until then;
Loans are fully open, so the non-forgiven portion of principal repayment can be done in full or in part before January 1, 2023.
ceba loan update

CEBA Forgiveness: Pay it back on time and get free money

To fully repay the loan by December 31, 2022, a borrower needs to repay only a portion of the amounts outstanding. They only need to pay $40,000 of the $60,000 principal, or $30,000 if you only took a $40,000 CEBA loan. If the loan is repaid by 2022, there will be $20,000 forgiven. According to the federal government, this is actually called a loan forgiveness program. This portion represents forgivable loans for early repayment.

After December 31, 2022, any outstanding balance will bear interest at the 5% rate per year for ‘Extended Term.’ Extended Term ends on December 31, 2025. Essentially, the Extended Term converts it to a 3-year term loan after the interest-free period, which is December 31, 2022. Interest will be payable every month on the outstanding principal during this period. No later than December 31, 2025, the full principal balance of $60,000 is due.

CEBA loan update: Default, Notice of Default and Demand for Repayment

There are some CEBA loan update default events. Each default event is fairly straightforward. You may be required to repay a loan if any of the following defaults occur:

non-payment under CEBA funding;
the repayment of any other business loans not covered by CEBA to the same financial institution is not made under their terms.
violation of any term of the CEBA agreement, including making false or deceptive statements in the CEBA application;
the business becomes insolvent or commits one or more acts of bankruptcy;
a receiver is appointed.

If the borrower defaults, the only recourse for the bank would seem to be to advise the borrower that full repayment is due immediately. A CEBA loan agreement contains no other specifics that grant additional powers to a lender.

Personal guarantees are not included in CEBA loans. The CEBA agreement does state that any successors or personal representatives, including executors and administrators, are bound by the CEBA agreement. When only corporations could apply in the beginning, this language did not make sense. The language now makes sense since the CEBA update expanded CEBA to include sole proprietors and partners, who are people, not companies.

Keep in mind that if you are a sole proprietor or partner in an unincorporated business, the loan was made to you personally. So although there is no personal guarantee, if you run an unincorporated business, you are personally liable.

ceba loan update

CEBA Loan Update: Now For The 3 Ways For Entrepreneurs To Conquer CEBA Loan Default

In the same way that I mentioned the findings of the CFIB in the introduction to this CEBA loan update Brandon Blog, I’ve been contacted by entrepreneurs who applied for and received the $60K CEBA loan funds only to lose confidence in the financial prospects of their business. The company is still in financial trouble and its operating costs are still greater than the revenue being earned. It is just the case that the business managed to hang on longer. Business owners want to understand the risks associated with CEBA repayment if:

their business fails;
it closes; or
If their financial institution appoints a receiver over the assets due to other loans that are in default or, the business goes bankrupt.

So far, I have informed them of my understanding of CEBA loan terms and CEBA loan default events. Entrepreneurs should also make sure the company’s books and records can demonstrate receipt of the CEBA interest-free loan and that used funds were appropriate for the company’s needs.

So here are the CEBA loan update 3 ways for entrepreneurs to conquer a CEBA loan default:

The first CEBA loan update loan default tip is to relax because right now, nothing is due. Not interest or principal. Interest-only begins on January 1, 2023, and then it is a 3-year term loan with monthly payments of interest calculated at 5% per annum. So if your business is still running, for $250 a month, you can buy yourself another 3 years to see if things get better. Maybe things will look brighter as you get closer to the end of 2022 or 2026, as the case may be.
If the CEBA loan borrower is an incorporated company, relax. You are not personally liable. This is my second CEBA loan update loan default tip.
My third CEBA loan update loan default tip is we need to talk if you are a sole proprietor or partner. Don’t relax. Will you continue your business? Is it possible for the partners to pay off the CEBA loan and obtain a 25% loan forgiveness? I can develop strategies for you to reduce the damage of your personal obligations to the Bank if this isn’t possible.

CEBA loan update summary

I hope you enjoyed this CEBA loan update Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges 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 while avoiding bankruptcy. We can get you the relief you need and so deserve.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Tags access to credit, active business, additional funding, application process, applications from businesses, array of government support, BMO B M O business banking relationship, business chequing account, canada emergency business account, ceba, ceba application deadline, CEBA expansion, CEBA Forgiveness: Pay it back on time and get free money, ceba loan default, ceba loan update, Corporations owned by family members continue to qualify, covid-19 pandemic, CRA Business Numbers, Default, eligibility criteria, eligibility requirements, eligible businesses, Expanded CEBA eligibility requirements, Federal government, financial institution, Ira Smith Trustee, loan forgiveness, Notice of Default and Demand for Repayment, online application process, other fees and charges, payroll expenses, principal repayment, program requirements, rate of interest, Repayment terms, sole proprietors, TD website application attestation

Brandon Blog Post

EXECUTOR DUTIES ONTARIO: OUR COMPLETE GUIDE TO MAKE A 1ST TIME EXECUTOR LOOK LIKE A PRO

Post author By Brandon Smith
Post date October 4, 2021

executor duties ontario

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Executor duties Ontario: What is an executor or estate trustee?

Executors, or Estate Trustees as they are now called in Ontario, are people named in a Will to become the personal representatives of the deceased. Executor duties Ontario is a complicated process.

The Estate Trustee accepts the role, authorizes the liquidation of the estate assets and the payment of money. The Executor directs and administers the deceased estate both in accordance with provincial and federal laws while abiding by the declared wishes of the deceased.

Executors are people who are legally responsible for the estate of someone who has died. They are required to manage the estate according to the wishes of the deceased person. To be an executor, you must meet certain minimum legal requirements. You should:

have already turned 18;
be financially stable;
reside in Ontario;
have good organizational skills;
be able to keep complete records of all the estate’s transactions;
have a good knowledge of financial matters; and
be able to make effective decisions about the estate.

Suppose there were no Will? What happens? Without a Will, a court can appoint an Estate Trustee Without A Will.

Through our other business, Smith Estate Trustee Ontario, my Firm acts as a Court-appointed Executor/Estate Trustee. Far too often, the person who ends up with the responsibility of settling the estate of a deceased family member or friend is unprepared to do so. This commonly leads to emotional stress, confusion, and financial hardship.

From this Brandon Blog, you’ll learn everything you need to know about effectively fulfilling your duties as an Estate Trustee in Ontario. You will learn how to handle the estate settlement process in Ontario and properly fulfill the duties using our Executor duties Ontario checklist.

Executor duties Ontario: What does an Executor/Estate Trustee Do Right Away?

Executors are people who are appointed to carry out the Will or trust of a person who has died. They are given the authority to make decisions on behalf of the deceased, as long as those decisions are consistent with the wishes expressed in the deceased’s Will or trust. There can be as many Estate Trustees as are indicated in the Will or trust document. When there is a Will, in Ontario, the role is one of Estate Trustee Under A Will.

Once you are notified that you are named as the Executor or one of the Estate Trustees, the first thing you need to do is to decide if you wish to act. Are you capable of doing the job and are you free from any conflict of interest? It is possible to recuse yourself before taking any steps to act as the Executor. However, once you start acting as the Executor, it is very difficult to resign.

An Executor will obtain a copy of the Will as one of the first things they do. As a result, the person’s most recent Will automatically becomes the last Will of the deceased. Some people are unaware that a Will is only as good as its Executors and how they perform their Executor duties Ontario.

Executor duties Ontario: Follow this guide to look like a professional Estate Trustee

Action #1 – Funeral Arrangements and other Day 1 action

If the family is not taking care of this themselves, then you must arrange for the funeral immediately after death. Religious observance of the family and the wishes of the deceased should be your guide. Other things Executor duties Ontario include are:

Arrange for organ donation if applicable.
Find the Will.
Coordinate with family members to notify friends and family of the passing.
Request multiple copies of the Proof of Death Certificate from the funeral director.
Apply for a provincial Death Certificate.
Make necessary arrangements for the ongoing care for dependents/minor children and pets.
Contact the deceased’s bank to ensure that all amounts on deposit are safeguarded, access to any safety deposit box is secured and change signing authorities to Executor(s) so that necessary payments can be made.
Confirm payment to the funeral home.

Action #2 – Submit official paperwork on behalf of the Estate

There are many other notifications that should be made within say, 1 to 2 weeks after the funeral. These Executor duties Ontario consist of:

File the CPP death benefit claim.
Transfer the pension to the spouse by applying for CPP Survivor’s Benefits.
Canada Revenue Agency Notification to Update Record.
Submit OAS/CPP/GIS notifications.
Send the Notice of Death to Equifax and TransUnion, the two Canadian credit bureaus.
executor duties ontario

Action #3 – Protect the hard assets

Concerning any hard assets, as soon as possible after the funeral, Executor duties Ontario include:

Identify and secure all assets: the home, the contents of the home, and other real estate assets.
Direct the post office to forward the mail care of the Estate Trustee.
Inform utilities, landlords, and other service providers.
Review all documents associated with asset ownership, business, investment, including insurance, mortgages, and leases.
Analyze all financial documents, including contracts, divorce papers, or separation agreements, court orders.
Secure personal property, business, vehicles, perishable goods, and safety deposit boxes.
To keep the insurance coverage active, find out what action you need to take if there is a vacant property.
Have all the hard assets appraised.

Action #4 – Protecting financial assets

I already mentioned that I would contact any known financial institution. Other Executor duties Ontario to protect financial assets as soon as possible after the funeral, include:

Gather information about debts and expenses.
Cut off all unnecessary expenses. People rarely think about memberships or subscriptions until the bill or publication arrives in the mail.
The other banks or credit unions, investment advisors, and life insurance companies should be notified.
All credit cards and debit cards should be cancelled.
executor duties ontario

Action #5 – Contacting beneficiaries

Other Executor duties Ontario include:

Completing the inventory of assets and their values on the date of death.
Contacting each of the beneficiaries of Estate individually.
Explaining the Estate administration process to them.
Estate beneficiaries need to know they only receive distributions upon the probate of the Will, completion and filing of all final tax returns, and full payment of the estate’s debts and debts of the deceased. How the estate is handled will also depend on its size and nature.
Depending on the circumstances, the Executor of the estate can make interim distributions.

It is important to keep in mind that Estate Trustees are personally liable. This means if you pay out too much on an interim basis and don’t have enough to cover all the debts, you will be in trouble if you can’t claw back any money.

Action #6 – The probate process

Generally, probate involves completing the necessary Ontario government forms for the confirmation and appointment of the Executor(s), who will manage the estate distribution. The Executor duties Ontario for probate include, say within 30 days after death:

Speak to the estate administration lawyer for assistance.
Calculate the estate administration tax for the Ontario estate.
With the help of the estate administration lawyer, prepare the probate application.
The probate application, along with all relevant documents, should be filed with the deceased’s local probate court. The required documents, including the original Will and payment of the estate administration tax.
executor duties ontario

Action #7 – While you are waiting for the Certificate of Appointment of Estate Trustee With A Will

The court can take many months to respond to your probate application, especially in Toronto. In the meantime, there are things that Executor duties Ontario allow you to do without the need to show the Certificate of Appointment. You can use a copy of the Will. These include:

The deceased’s passport, driver’s license, and Ontario health card can be cancelled.
Meeting with the investment advisor, banker, and insurance agent to gain a better understanding of the estate’s assets.
Finalize the list of assets.
Developing a strategy to liquidate the assets of the estate.
Choose a real estate broker, negotiate the rate and prepare the listing for posting after the grant of probate is received. Be sure you obtain a professional appraisal first to determine the current market value. You don’t want to rely on just the broker’s estimate of market value.
Organize an estate sale to dispose of personal belongings that have not been claimed by the family. When appropriate, arrange donations.
Prepare the property for sale. In almost all cases, minor repairs, painting, cleaning, and staging are necessary.
Prepare life insurance forms (to be submitted once you have your Certificate evidencing the appointment of the Estate Trustee(s)).
Stay in constant contact with the beneficiaries to inform them that you are still waiting for the grant of probate and that things are proceeding normally.

Action #8 – Selling the assets in Estate

Some of the following Executor duties Ontario could be done only with a certified copy of the Will. Some will require a Certificate from the court appointing the Estate Trustee:

Open an estate bank account with your preferred financial institution if you have not already done so.
Merge all bank accounts into the estate account.
List any real property for sale.
Request that all mutual funds, stocks, bonds be liquidated and the funds transferred to the estate
account.
Incorporate all estate sale proceeds and any other cash assets into the estate trust account.
executor duties ontario

Action #9 – Pay all debts and calculate and pay all taxes

To make the final distribution, the creditors and amounts owing to Canada Revenue Agency must be settled in full. In this phase, Executor duties Ontario include:

Clear debts.
Make sure that tax documents are in order.
Prepare all necessary income tax returns, including the estate tax return, with the help of an accountant or other tax specialist.
If your Notice of Assessment has been received and the CRA has been paid all amounts owed, you can request a Tax Clearance Certificate from them.

Action #10 – Final distribution to estate beneficiaries and completion of Estate records

Now it is time to make the distribution to beneficiaries and close your file. These Executor duties Ontario are:

If you are charging a fee, including a care and management fee for having administered the estate, calculate it and pay yourself.
Prepare and issue the distribution to beneficiaries of the remainder of the estate.
Prepare a final accounting and issue it to all beneficiaries.
Get releases from beneficiaries.
Closing the estate bank account.
Terminate the deceased’s social insurance number.
executor duties ontario

Executor duties Ontario: Compensation for estate trustees

The Ontario estate laws and associated regulations provide a framework for the management of a deceased person’s estate and for the distribution of the property. The laws and regulations also deal with the duties and responsibilities of the Executor and compensation for the Estate Trustee.

All Estate Trustees are legally permitted to charge fees. A fee that isn’t in the Will must be an amount that is considered fair and reasonable. The amount depends on the value of your estate and the amount of work your Estate Trustee has to do.

Even though the fee calculation is more complicated than this, for our purposes, you should use as a benchmark 5% of the estate’s value. Additionally, an additional care and management fee of 2/5 of 1% of the average annual value of the assets is sometimes charged.

Executor duties Ontario summary

I hope you found Executor duties Ontario Brandon Blog helpful. If you are concerned because there is an Estate that needs a professional Estate Trustee, Smith Estate Trustee Ontario can help you. Since we are also a licensed insolvency trustee firm, we can also help if the deceased Estate is insolvent. We can also help if you or your business have debt problems.

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 while avoiding bankruptcy. We can get you the relief you need and so deserve.

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, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags beneficiaries, beneficiaries of Estate, Canada Revenue Agency, certificate of appointment, credit cards, death certificate, deceased estate, distribution to beneficiaries, estate administration, estate administration lawyer, estate administration tax, estate bank account, estate beneficiaries, estate sale, estate trust account, estate trustee, estate trustee in Ontario, estate trustee with a will, estate trustee without a will, estate trustees, executor, executor duties ontario, executor duties ontario checklist, executors, financial assets, financial institution, grant of probate, inventory of assets, Ira Smith Trustee, list of assets, probate application, probate court, proof of death, release from beneficiaries, smith estate trustee ontario, state settlement process, tax clearance certificate, what does an executor/estate trustee do

Brandon Blog Post

THE CANADIAN RECEIVERSHIP EASY BEGINNERS GUIDE

Post author By Brandon Smith
Post date September 27, 2021

receivership

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you wish to listen to an audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

**What is Receivership?**

Last week I wrote an easy beginner’s guide on bankruptcy. This Brandon Blog is for anybody interested in finding out what type of insolvency process receivership is and how it differs from some other insolvency processes. I will explain the receivership process, provide an overview of what happens in a receivership, explaining what is sought to achieve, and the consequences of receivership.

Receiverships occur when a secured lender enforces its security to recover loans that have been defaulted on by a borrower. Secured creditors appoint an insolvency trustee to serve as receiver or receiver-manager depending on the terms of their security documents when the corporate debtor defaults.

Receivers and secured lenders can enter into a private contract appointing a receiver. Alternatively, the secured lender may seek an order from the court appointing a receiver. I’ll talk more about that shortly.

**What Does Going into Receivership Mean?**

If the corporate debtor defaults on a secured loan, the creditor may be entitled to appoint a receiver to collect their money. In Canada, “Section 244” notices are specific forms of notification that secured creditors must send to defaulting companies.

The notice specifies the assets covered by the security, the amount owed by the company in default, and that the secured creditor has the right to enforce the security after 10 days. The debtor company in default can consent to the appointment of the receiver before the expiration of the 10 day notice period.

A Section 244 notice is prescribed under the Bankruptcy and Insolvency Act (Canada) (BIA), and it is usually the last notice a creditor receives before the receiver takes possession of the debtor’s assets, properties, and undertakings.

Receivers then liquidate the assets of a business in order to pay secured creditors.

**How Receivership Works**

Parliament amended the BIA insolvency legislation in 1992 by enacting Part XI. BIA sections 243 through 252 to deal with secured creditors and receivers. Prior to that time, there was no federal statute insolvency legislation dealing with receivership matters. These provisions provide information about the court that hears bankruptcy and insolvency cases control over receivership matters that involve all or substantially all of the inventory, the accounts receivable, or the other property of a debtor. There are also restrictions imposed on the duties of secured creditors and receivers. It also stipulates that only a licensed insolvency trustee can act as a receiver. Part XI applies to both privately-appointed and court-appointed receivers.

These sections do not confer any powers available to a trustee of a bankrupt estate on secured creditors or receivers. Only those powers conferred upon the receiver in the appointment letter are granted to private receivers, and those are the powers specified in the security instrument. However, the receiver may also exercise certain statutory powers. If certain powers are required to administer the estate but are omitted under the security instrument, a receiver cannot act. Receivers are generally appointed by the secured creditor pursuant to security that at least states:

the collateral secured under the security; and
the receiver has the right to dispose of the collateral, including operating the insolvent debtor‘s business.

In a court-appointed receivership, the powers of the receiver come from the receivership appointment court order appointing the court-appointed receiver.

Receivership: Notice and Statement of the Receiver

From the 1992 amendments to the BIA, a receiver is required to provide notice to all known creditors of an insolvent debtor in receivership. Previously, creditors were not required to be notified.

When the receiver has become the receiver of an insolvent debtor‘s property, the receiver must provide notice of receivership as soon as reasonably possible but within 10 days of its appointment. Notice of the receivership must be sent to all creditors, the Office of the Superintendent of Bankruptcy and the insolvent debtor.

If the debtor is also bankrupt, rather than sending the notice to all creditors, the receiver sends the notice to the bankruptcy trustee. Since the creditors are already represented in corporate bankruptcy by the Trustee, the bankruptcy process will deal with them.

A receivership notice states, among other things, that the receiver has been appointed, whether it is a private appointment or a court appointment, and what the receiver’s plan of action is. Additionally, it contains a list of all known creditors.

As part of the receivership process, the receiver must provide interim reports every six months as well as a final report when the receivership is concluded. A copy of the receiver’s final receipts and disbursements statement must also be included in the final notice.

**What’s The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver?**

A court-appointed receiver vs. a privately appointed receiver is something people always want to know the answer to. I will explain the difference to you. It is pretty simple. Based on what I have already written, you have probably guessed it by now.

In a Court-appointed receivership, when the Court appoints a receiver, it does so through an Order on the application of the secured creditor. As between a secured creditor and a debtor, a privately appointed receiver is a receiver who is appointed by the secured creditor as provided in the Security Agreement. The Court-appointed receiver’s administration is supervised by the Court.

How is Receivership Different from Bankruptcy? Bankruptcy / receivership

Bankruptcy vs. receivership is also something people want to know. Many times, people confuse the two and use the terms receivership and bankruptcy, mistakenly, interchangeably. Often, receiverships and bankruptcy are confused, but the differences between the two are fairly straightforward. Whether it is a private appointment or a Court-appointed receivership, it is still different.

There are several main differences between bankruptcy and receivership. A receivership is a remedy available to secured creditors, as stated above. In order to enforce the secured creditor’s security rights against a defaulting debtor, a receiver is appointed.

Bankruptcy is a separate legal process. Trustees do not represent secured creditors in bankruptcy. Instead, they represent unsecured creditors. Corporate bankruptcy can occur simultaneously with a receivership of the same corporate debtor. The process of a corporate bankruptcy would be the subject of another Brandon Blog. To find other Brandon Blogs about corporate bankruptcy, use the search function at the top of this page.

What’s the Difference Between Receivership and Liquidation?

By now you know what the definition of receivership is. So I won’t repeat it because I do not want to sound like a broken record (younger people may not catch that reference!)!

Liquidation is not governed by the federal BIA. Rather, it is done under the provincial Business Corporations Act or Wind-Up Act. A liquidation is for a solvent company where the shareholders, Officers and Directors decide to cease business operations by running off any existing contracts and selling off the assets. The cash obtained is then used first to pay off the creditors. Any funds leftover is then distributed to the shareholders.

Just like a receiver, a liquidator can be appointed either privately by resolution of the Directors or by Court order. Liquidation is not a receivership or bankruptcy.

Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership

A device was created by the BIA for employees of a company that went bankrupt or into receivership. It does not apply to employees of a company trying to rightsize itself through reorganization; either a BIA Proposal or a Plan of Arrangement under the CCAA. The Wage Earner Protection Program Act (WEPPA) protects wages or benefits, including termination and severance pay, accumulated in the 6 months prior to a business going bankrupt or going into receivership.

The WEPPA ended up being enacted due to the federal government’s concern that when a company went bankrupt and employees were not paid their wages, there was rarely an opportunity for them to recoup any of their income. There are limits or caps on what employees can receive.

In the period in which amounts are past due to you, you will not qualify for WEPPA if:

you are a Director or Officer of the business;
or you have worked as a manager for the company
you are part of the management responsible for negotiating or refusing to pay amounts owed.

You may qualify if:

the previous employer has gone bankrupt or into receivership.
The firm owes you wages, salaries, vacation pay, or unreimbursed costs throughout the six months prior to the date of bankruptcy or receivership.

When an employer enters bankruptcy or receivership, the WEPPA provides funds to employees owed money. Those employees who qualify are paid as soon as possible. An employee’s qualifying earnings are equal to seven times their maximum regular insurance earnings under the Employment Insurance Act. According to Service Canada, the maximum amount of $56,300 a year is the limit for insurable earnings as of January 1, 2021. Thus, in 2021 the maximum amount a former employee can claim under WEPPA is $7,578.83.

Trustees and receivers are required to inform employees about the WEPPA program and provide information about amounts due. In the event of bankruptcy or receivership, trustees, as well as receivers, have 45 days to submit to Service Canada the Trustee Information Forms showing the amounts owed to each employee.

In other words, WEPPA‘s payment for former employees is something, but it may not be enough to fully compensate each. As a result of the amount paid by Service Canada, which administers the employment insurance system, $2,000 per employee is a super-priority against the company’s current assets. All remaining amounts paid to each employee, up to the maximum, are unsecured claims.

Receivership summary

I hope you found this receivership Brandon Blog informative and that the differences between receivership, bankruptcy, restructuring and liquidation legal proceedings are now clearer. Because it all has to do with corporate insolvency, the provincial Bankruptcy Courts also deal with receivership matters to adjudicate under the applicable insolvency law.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the only option, call me.

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

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.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags bankrupt estate, Bankruptcy, Bankruptcy / receivership, bankruptcy and insolvency, bankruptcy and insolvency act canada, bankruptcy process, Bankruptcy vs. receivership, BIA, corporate debtor, corporate debtor defaults, court appointed receiver, court-appointed receiver vs. a privately appointed receiver, Court-appointed receivership, creditor pursuant, creditors, debtor company, debtor defaults, Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership, How is Receivership Different from Bankruptcy, How Receivership Works, insolvency legislation, insolvency trustee, insolvent debtor, licensed insolvency trustee, Notice and Statement of the Receiver, Office of the Superintendent of Bankruptcy, private receiver, Privately-appointed receivers, receiver, receiver manager, receivers, receivership, receivership process, section 244 notice, secured creditors, secured lender, secured lenders, secured loan, trustee, unsecured creditors, Wage Earner Protection Program Act, WEPPA, What Does Going into Receivership Mean, what is receivership, What's The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver, What's the Difference Between Receivership and Liquidation

Brandon Blog Post

THE CANADIAN BANKRUPTCY AND INSOLVENCY ACT EASY BEGINNER’S GUIDE

Post author By Brandon Smith
Post date September 23, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What is in the Canadian Bankruptcy and Insolvency Act?

Canada’s bankruptcy and insolvency laws are governed by two major pieces of federal legislation: the Canadian Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. Additionally, provincial legislation intersects with the Canadian Bankruptcy and Insolvency Act. During bankruptcy, a debtor can keep certain types of property based on provincial legislation. Details may differ amongst each Canadian province. Provincial governments and territories have their own laws regarding property exemptions, court orders, and debt collection.

The Canadian Bankruptcy and Insolvency Act (often referred to as the “BIA” or the “Bankruptcy Act“) is a federal government statute that sets out the rules and procedures governing insolvency proceedings in Canada. These rules and procedures will apply to all corporations, individuals and partnerships that are parties to an insolvency filing. The whole point of bankruptcy legislation is to allow the honest but unfortunate debtor to shed themselves of their debts and to allow for the sale of assets or reorganization and refinancing of insolvent persons so that there is also fairness for the different claims of creditors.

Under the Companies’ Creditors Arrangement Act (CCAA), financially troubled corporations are given the opportunity to restructure their affairs in order to avoid bankruptcy. A corporation must have debts of at least $5 million to qualify for the CCAA.

The Canadian insolvency landscape is a complex one, with many different insolvency proceedings being used to deal with many different types of debtors. In this Brandon Blog, I provide an easy beginner’s guide of the Canadian Bankruptcy and Insolvency Act, as a primer into Canadian insolvency legislation and the administration of estates.

This Brandon Blog is not about the nuts and bolts of filing for bankruptcy. Other blogs I have written cover that topic and more. You can use the search function above to search for those Brandon Blog topics.

What is the purpose of the Canadian Bankruptcy & Insolvency Act?

Everyone knows you should do your best to stay out of too much debt, but for many people, it’s an impossible feat. When you’re over your head in debt, you’re having to keep up just to pay the interest on your debt. When you are spending more than you are making, you can’t pay your bills on time, or your assets when liquidated are worth less than your total liabilities, you are insolvent. Insolvency is the main test to see if you, or insolvent companies, qualify to start a bankruptcy process or a formal restructuring process, either under the Canadian Bankruptcy and Insolvency Act or the CCAA.

The Bankruptcy Act was designed to help Canadians who find themselves in financial difficulty. It is the main piece of Canadian insolvency legislation that governs bankruptcy proceedings, receivership and personal and corporate restructuring proceedings through consumer proposals and commercial proposals. Commercial proposals are also available for those people with consumer debt levels greater than the amount allowed to qualify for a consumer proposal. All Canadian bankruptcies, proposals and receiverships are governed by the Act. It contains bankruptcy laws, rules and guidelines for all stakeholders: the Superintendent of Bankruptcy (which is part of Industry Canada) the Licensed Insolvency Trustee, the debtor, and the creditors.

What options are available under the Canadian Bankruptcy and Insolvency Act?

The Canadian Bankruptcy and Insolvency Act provides a number of ways to deal with a financially troubled company or person. Most involve a court-supervised process. The options for a person or business in financial trouble and not able to right themself or itself are:

Consumer proposal

It is an offer to your creditors to repay a portion of your unsecured debt obligations in exchange for their elimination (with certain limited exceptions as laid out in the Bankruptcy Act). You can qualify if you owe $250,000 or less, excluding any debts registered against your home, such as mortgage debt or secured home equity line of credit debt.

A person proposes a plan to make monthly payments to the Licensed Trustee acting as the consumer proposal Administrator. The total amount offered to your unsecured creditors must be agreed upon by them. Within 60 months, you must pay off the entire amount accepted. Creditors typically accept a total payment of 25% or less of your total unsecured debt. Individual situations vary, however.

A successfully completed consumer proposal allows the insolvent person to eliminate their debts and avoid an assignment into bankruptcy.

Commercial proposal

Commercial proposals are also known as Division I proposals. The reason for this is because it is provided under Canadian Bankruptcy and Insolvency Act, Part III, Division 1 (consumer proposals are found under Part III Division II). An insolvent corporation or person can use it for restructuring proceedings. When a consumer’s debt exceeds the limits of a consumer proposal, a “commercial proposal” would be filed. If a definitive commercial proposal cannot be immediately prepared but the debtor needs to file in order to invoke the stay of proceedings (discussed in the next section), they can get the immediate protection they need by first filing a Notice of Intention To Make A Proposal.

A commercial proposal works in a very similar way to a consumer proposal, except for some differences as follows:

- A commercial proposal may have various classes of creditors. A consumer proposal normally does not.
- Unlike for a person, there is no streamlined reorganization process for companies. Therefore, even if its debt is $250,000 or less, a company cannot file a consumer proposal.
- A meeting of creditors must be held as part of a commercial proposal. If the Official Receiver (being a representative of the Superintendent of Bankruptcy), doesn’t wish to chair the meeting, it can be delegated to the Trustee. A creditor who has filed a valid proof of claim has voting rights. They have the right to vote ahead of the creditors’ meeting by using a voting letter or in person. An official meeting of creditors is only held in a consumer proposal if 25% of the proven creditors’ claims request one.
- In a consumer proposal, if a meeting is not requested, the consumer proposal is deemed approved and there are no voting rights to be concerned about. If a meeting is requested, then the creditors who attend the meeting can vote by ordinary resolution for the acceptance of the consumer proposal. In a commercial proposal, it is a two-pronged test: 3/4 of the $ value voting AND a majority in the number of those voting.
- If the commercial proposal is voted down, the person or company is immediately deemed to have filed an assignment in bankruptcy. There is no such automatic bankruptcy if a consumer proposal is not accepted.

As soon as the commercial proposal is accepted by the creditors and approved by the court, the debtor starts making the payments promised in the proposal to the Insolvency Trustee. Once full payment has been made, the trustee in bankruptcy will issue to the person or company their Certificate of Full Performance. At this point, all provable claims, regardless of whether they filed a proof of claim or not.

As part of a successful restructuring process, the Trustee will run a claims process, vet every proof of claim to ensure that they are valid and that only an allowable claim is considered for distribution purposes. The Trustee will then comprise a scheme of distribution in order to distribute the funds promised to the creditors in the commercial proposal.

Restructuring under either the Canadian Bankruptcy and Insolvency Act or CCAA becomes possible for companies with debts greater than $5 million.

Receivers and Secured Creditors

Receiverships are remedies for lenders who have loaned money out and taken security over the debtor’s assets. It is most common in Canada for financial institutions to be lenders to Canadian businesses. As long as their loan documents, including the security agreement, allow for it in writing, a secured creditor may appoint a receiver when a debtor defaults on secured debt. Secured creditors and receivers are subject to certain requirements under the Canadian Bankruptcy and Insolvency Act.

Receivership relies both on provincial laws and federal legislation. The Bankruptcy Act specifies several main requirements for receivership, including:

- It is not permissible to enforce a security interest on the business assets of an insolvent person unless the secured creditor has given 10 days prior notice in the prescribed form and manner.
- Only a Licensed Insolvency Trustees (formerly called Trustees in Bankruptcy) can act as a receiver.

The secured creditor can appoint the receiver privately or with court approval.

A private receiver’s primary responsibility is to the secured creditor who appointed it. A court-appointed receiver is an officer of the court who protects the interests of all creditors of the debtor company.

Private receivers usually have from the security documents the power to run the debtor’s business and sell the debtor’s assets through auctions, tenders or private sales.

A court appointment is also preferred over a private appointment when there are significant claims against the debtor or its property as well as litigation or a threat of litigation. It is according to the provincial rules of court and s. 243 of the BIA (National Receiver) that a court may appoint a receiver.

The receivership order normally stays proceedings (discussed below in the next section) against the receiver, the debtor, and its property. In terms of its purpose, it gives the receiver authority to manage the assets of the debtor, to borrow money against the assets to repay a loan, to sell the assets of the debtor with the approval of the court, and to commence and defend litigation on behalf of the debtor. A privately-appointed receiver does not enjoy a stay of proceedings.

Bankruptcy

If a personal or commercial restructuring is not possible, then the insolvent person or company has no choice but to file for bankruptcy. The first step in dealing with insolvency is to consult an insolvency trustee. You can learn about the bankruptcy administration process and your legal rights from Trustees in Bankruptcy so you can make an informed decision. A candid discussion about how much you earn, what assets you own, and what types of debts you have can help you decide if bankruptcy is the best choice for you.

Here is what the Canadian bankruptcy procedure is all about. After the bankruptcy assignment has been completed, the Trustee submits it to the Office of the Superintendent of Bankruptcy Canada. All legal obligations will be handled by the Trustee once the assignment has been filed. Your creditors will no longer receive payments directly from you.

The Trustee administers your bankruptcy. No more lawsuits or wage garnishments for you. Depending on your province’s law, some of your assets will certainly be exempt. The bankruptcy vests your non-exempt assets in the Trustee. The Trustee will sell them. According to the Canadian Bankruptcy and Insolvency Act, the proceeds will be for the benefit of the bankrupt estate and there could be a scheme of distribution among your preferred creditors and ordinary unsecured creditors.

In the administration of bankruptcy, the Trustee will send your creditors a notice of bankruptcy. You must attend a creditors’ meeting if one is called. Additionally, you will need to attend two counselling sessions. Canadian insolvency legislation in Canada includes rehabilitation programs to help individuals regain financial stability.

Finally, you may need to make payments toward your debt. “Surplus income payments” ensure that people who declare bankruptcy and have sufficient income contribute to paying back a portion of their debt. Your debts will eventually be discharged, relieving you from the obligation of repaying most of the debt you had on the day you filed for bankruptcy.

Despite the fact that most debts can be discharged, some cannot, namely:

alimony and child support;
court fines and penalties;
debts related to fraud; and some
student loans.

You will suffer credit damage for several years after filing for bankruptcy. After your debt is discharged, you can start rebuilding your credit. Although it’s not ideal, it will lift the burden from your shoulders and solve the debt problems you couldn’t resolve on your own.

Canadian Bankruptcy and Insolvency Act: Can bankruptcy protect you from creditors?

In addition to bankruptcy, any filing listed above under the Canadian Bankruptcy and Insolvency Act will protect you from creditors. In fairness to all stakeholders, the filing calls for a “time out” after which no claims for money, lawsuits, or collection efforts are permitted. In legal jargon, we call this a stay of proceedings.

By virtue of the individual’s bankruptcy or insolvency, you may not terminate, amend, or accelerated pay, or claim the term of any agreement. When an insolvent person files a notice of intention or a proposal, a similar provision is made.

Just like in bankruptcy, if you file a notice of intention or a Division I proposal or Division II proposal, all proceedings automatically stay and no creditor is entitled to take any action against the debtor or to pursue any execution or other proceeding for the recovery of a claim provable.

Commercial proposals are normally worded so that Directors of insolvent companies who have filed notices of intention or proposals enjoy similar protection.

A word on cross-border insolvencies

Many of the large CCAA reorganization filings in recent times have been cross-border insolvencies. Canadian courts prefer that cross-border insolvencies proceed as a single process with one jurisdiction acting as the primary entity. The Canadian court examines whether the Canadian case should be considered the main proceeding in order to determine whether it is significant and connected to Canada.

The other jurisdiction (most often the U.S.) usually recognizes the Canadian court’s authority when the court believes the insolvency action should be handled, for the most part, in Canada. Likewise, the opposite is also true.

Canadian Bankruptcy and Insolvency Act: Personal bankruptcy

Canadian Bankruptcy and Insolvency Act summary

I hope you found this Canadian Bankruptcy and Insolvency Act Brandon Blog informative. With too high household debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the only option, call me.

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

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.

Call us now for a no-cost consultation.

canadian bankruptcy and insolvency act

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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Brandon Blog Post

CANADA’S DEBT BURDEN: CANADIAN WEALTH SOARS RELATIVE TO DEBT

Post author By Brandon Smith
Post date September 20, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would like to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Canada’s debt burden growing for Canadians: 2021 Edition

Canada’s fiscal policy faces many challenges, according to the Fraser Institute. The federal and many provincial governments face serious financial challenges due to budget deficits and increasing accumulation of debt. As interest payments increase, there will be less money left for tax cuts, education, and social services. In the aftermath of COVID, the federal and provincial governments must develop long-term plans to address Canada’s growing debt problem.

Canada’s debt burden continues to be the talk of the town in this age of global statism. It’s always cited by statists that Canada’s federal debt is 100+ percent of GDP compared with 80 percent in the early 1980s. It’s even considered a threat to Canada’s sovereignty, a moral hazard, and a burden on future generations by some. However, individuals’ personal share of Canada’s debt burden may not be growing. I will explain some interesting Statistics Canada reporting in this Brandon Blog post.

Canada’s debt burden: The coronavirus is why provinces need financial assistance now

In 2020, the Premier of Newfoundland and Labrador wrote to Justin Trudeau, saying that his province faced an “immediate and urgent financial crisis” and was unable to raise short- and long-term funds.

During the critical period, the letter explained, the government has no alternative methods of funding provincial government operations, including its health care system. The Bank of Canada offered to buy 40 percent of all new provincial bonds four days after the letter was sent.

The province has been hit with a public health crisis of unprecedented proportions, and their provincial peers, who have similar debt-to-GDP ratios, are not far behind. It is likely that the government can do the same for provinces and municipalities that have to shoulder heavy coronavirus-related costs if it can provide zero percent loans to small businesses.

By law, it can.

canada’s debt burden

Is Canada’s debt burden a cause for concern?

Following a federal budget deficit of $354.2 billion last year, the Trudeau government budget documents show that the Feds anticipate a deficit of $154.7 billion in 2021/22, and deficits of at least $30 billion for another four years thereafter. There has been a significant increase in debt accumulation. During the next two years, the country’s net debt-to-GDP ratio is expected to rise to 55.3 percent. In spite of low-interest rates, government program spending in 2021/22 is expected to increase by more than 40 percent over 2019/20. Despite the prime minister’s vague promise that a balanced budget will be achieved at some point, there is no timeline for that.

Can Canadians expect a bout of inflation to continue rising? Can we expect an increase in interest rates? Do you expect a depreciation of the exchange rate? Is it possible that the government will default at some point? Are there any limits on the size of the debt?

Over the years, various economists have noted that federal government debt is not the same as “debt” in the way that the term is commonly understood. Even if it means working harder or cutting back on our spending, we expect to have to pay back debt at some point.

Unlike a government, a household has a finite lifespan. The government, however, can, in principle, refinance (rollover) its debt indefinitely while a household must eventually pay off its debt. Governments do not have to worry about involuntary defaults when they finance themselves with convertible debt.

As a burst of inflation has already begun, we should prepare for possible temporary spikes. Governments borrow money because they don’t spend all of their income right away. Some of it is saved until later. Therefore, future tax revenues can be increased without increasing current taxes. Thus, as real incomes increase, consumer spending increases, which in turn generates additional tax revenue. Therefore, the economy grows more rapidly than it would ordinarily.

How does the government handle overspending? Governments need to reduce spending sooner than later when they run up a level of borrowing that is unsustainable. If it does not, then raising taxes is the only option left. Those who are old enough to recall the 1970s know that high taxes tend to slow down economic growth.

Although prices haven’t risen too much so far for Canadians, their rise is inevitable and the end does not seem too close right now. Inflation concerns seem to be making daily headline news. Nonetheless, many people fear that living costs will continue to rise forever.

So that is the government. What has happened to individuals and their contribution to Canada’s debt burden over the last 18 months?

Canada’s debt burden: Canadian Debt To Assets Falls To Nearly Two-Decade Low

According to Statistics Canada, family financial debt is at its lowest level in the last two decades as a percentage of the overall household assets. Throughout the last twenty years, the debt-to-assets proportion has actually never ever been below its long-term average as it is now.

Therefore, Canadians are less likely to file for bankruptcy than in the past. This is supported by statistics on bankruptcies over the past 18 months. David Madani, senior director at Capital Economics, called it rather remarkable.

According to CNBC, Canadian consumer credit rose 0.5%, but non-financial corporate borrowing of business loans declined 1%. Lending to consumers is up. Consumer lending annual growth is primarily fueled by a substantial increase in mortgages and home equity loans, as I mentioned in previous Brandon Blogs. Debt on credit cards has steadily reduced during the pandemic. Three billion dollars more than expected was borrowed by non-financial companies.

canada’s debt burden

Canadian Household Wealth Soars, Canadian’s Debt Burden Drops Amid Pandemic: Statistics Canada

I will now turn my attention to the household wealth side of the ratio now that I have discussed the debt side. What’s behind the rise of wealth? The rise in wealth can be attributed to a number of factors:

prices for stocks and houses soaring;
a generous income support program from the government for jobless individuals;
during lockdowns, there are fewer things to spend money on.

Households have saved an estimated $90 billion as a result.

Amid the worst economic downturn in decades, Canadian households are seeing wealth hit a record high while debt burdens shrink relative to income. That is really the entire rise in household wealth story.

Compared to debt, Canadian wealth soared, but the bank executive warned that this might only be a mirage

Debt-to-assets fell to their lowest level since the early 2000s. In response to this, a Bank Exec at the National Bank of Canada believes it produces a “wealth effect” whereby consumers feel wealthy and then spend more. Why not get a new expensive truck for your driveway if you live in a million-dollar house?

Although Canadian banks are warning about the inevitability of rising interest rates and slowing economic growth, some economists say Canadians may be feeling wealthier than ever before. This could mean consumers will start spending again after years of saving for retirement or paying off debt. Capital Economics senior economist David Madani stated, “We’re seeing an increase in wealth.” Consumption is likely to pick up.” He says higher-priced items like cars and houses have also taken over.

Statistics Canada data shows household assets have soared this year. The housing boom created significant equity with little actual financial contribution from owners. When it comes to Canada’s debt burden or a family’s household debt, it’s important to look at the right statistics. It’s also important to remember the most important point about debt is not the debt itself. It’s the ability to pay it back.

canada’s debt burden

Canada’s debt burden: Where the heck does my money go?

This is a common question we always hear from people who come to us with financial problems.

I hope this Canada’s debt burden Brandon Blog was informative. With too much household debt and not enough wealth, you are insolvent. You can choose from several insolvency processes. It may not be necessary for you to file for bankruptcy.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the 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.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

canada’s debt burden

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Brandon Blog Post

CREDIT SCORE IN CANADA: ARE CAR INSURANCE COMPANIES REQUIRED TO PULL A CREDIT REPORT ON NEW BRUNSWICK RESIDENTS?

Post author By Brandon Smith
Post date September 16, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

A credit score in Canada: Can car insurance companies use your credit score?

According to the CBC News show “Marketplace” in 2010, home insurance rates can be influenced by a person’s credit score in Canada. A number of people experienced doubled insurance premiums after their insurance company included credit scores in calculating risk.

Consumer credit scores are portrayed positively by those who make use of it. Insurers only check your credit score to determine the best premium for you, according to Desjardins. The Cooperators offer a different perspective. The credit score reflects a person’s financial responsibility and behaviour. The issue is undoubtedly contentious.

In Ontario, as elsewhere in the country, credit scoring has been controversial. In this Brandon Blog, I discuss the recent request by certain auto insurance companies in obtaining consent to check a New Brunswick resident’s credit score in Canada when determining auto insurance rates.

New Brunswick has Canada’s highest rates of personal insolvency and some of its lowest credit scores

There are two Canadian credit bureaus that perform credit scoring in Canada, Equifax and TransUnion. Credit reporting agencies track your credit history by tracking consumer borrowing and payment histories. Credit scores in Canada are derived from these activities.

In Canada, two major credit bureaus report credit scores between 300 and 900. It is through this report that lenders determine whether you have good credit. You are more likely to get credit and have low interest rates if your credit score is high. A credit score in Canada at a high level is therefore beneficial.

What is a good credit score in Canada? You can get a pretty good idea of what they are by looking at the following list:

740 plus Excellent
The 700 to 740 range is a very good score
A score of 680 to 700 is considered good
600 to 679 Fair
Below 600 Poor

Missing payments or maxing out your credit card can result in a bad credit score. As a fintech company, Borrowell Canada represents multiple lenders in Canada that issue credit cards and make loans to individuals based on their respective credit score in Canada. They became the first business in Canada to offer free credit scores and credit reports. Borrowell’s New Brunswick users have an average credit score of 634.

New Brunswick has the lowest average credit score in Canada. Adults in New Brunswick deal with financial problems at a higher rate than anywhere else in Canada. New Brunswick is currently the province with the highest bankruptcy rates for consumers.

credit score in canada

Are bills up to date? New Brunswick auto insurance companies are interested in your credit score

According to insurance companies, studies show bad credit drivers are more likely to have an accident than those with similar driving records, and they want premiums in New Brunswick to reflect that. Several insurance companies in New Brunswick recently gained approval to ask for the introduction of credit scores when setting auto premiums for insurance.

The insurance companies claim studies show that motorists with bad credit are more likely to get into accidents than those with similar driving records, and they want New Brunswick premiums to reflect that.

In Canada, insurance companies believe your credit score in Canada is an accurate predictor of risk and therefore future claims. As a result, policyholders are said to be given rates based on the justest risk segmentation. The application they submitted for approval argued this.

A policyholder will be charged more if they are likely to generate the highest costs than a policyholder who is likely to generate lower costs, according to the New Brunswick Insurance Board. According to the board, it was satisfied there is a relationship between bad credit and bad driving and, as a result, granted the right to set rates using a person’s credit score in Canada.

As part of the risk assessment, a credit score raises a number of concerns:

What will the insurance companies do if New Brunswick residents refuse to have their credit score used?
For insureds with low credit scores and limited resources, insurance may be harder to obtain and more expensive.
Is an individual’s driving record more indicative of risk when it comes to car insurance than their credit score in Canada?
Suppose you are a young adult, new to Canada, unemployed, or barely getting by? A low credit score may make it harder for you to get to school, work, or a doctor’s appointment.

A credit score in Canada: Are insurance companies allowed to check credit scores?

Are the rules the same in all the Canadian Provinces? No, they are not. If you live in a certain province, your credit score may also affect your monthly premium. Those who live in Ontario or Newfoundland and Labrador can breathe easier. In these two provinces, auto insurance companies are not allowed to use your credit score in Canada as there is a ban on insurance companies doing so.

As of spring 2019, the Progressive Conservative Party announced plans to allow companies to ask you for your credit score in exchange for a better rate. It hasn’t happened yet. Premier Ford’s plans may have been thwarted by the COVID-19 pandemic!

It is already the case in Nova Scotia, though you cannot be denied coverage if you refuse. In March 2021, the province’s insurance regulator approved RSA Canada’s request to offer discounts to auto policy applicants based on their credit scores.

In Alberta, insurers are required to ask for your consent before looking at your credit score, and they can’t use it if you only want the most basic plan.

Business is regulated by the provincial government in Manitoba and British Columbia. Manitoba Public Insurance and Insurance Corporation of British Columbia do not list credit scores among their criteria.

As for Saskatchewan, it’s the same story with Saskatchewan Government Insurance (SGI). Despite the fact that drivers are required to get basic coverage through SGI, you might face a credit check if you choose private company coverage.

Quebec, New Brunswick, and Prince Edward Island don’t have any laws forbidding the practice, but it was not common in the two Maritime provinces until the recent change in New Brunswick.

In addition to your driving history, insurance companies also consider your location, driving experience, and the type of car you drive when assessing your accident risks.

We also have a consumer watchdog called the Insurance Bureau of Canada (IBC). The code has been published and 85% of Canada’s car and home insurance companies have signed on.

There are a number of friendly ground rules:

Asking for your permission prior to checking your credit score in Canada.
Do not cancel or deny your insurance if you do not consent.
In the absence of much credit history, calculating your premiums using other relevant information.
credit score in canada

A credit score in Canada: Auto insurers’ interest in N.B. credit scores is bad news for many

I hope this credit score in Canada Brandon Blog was informative. The auto insurers’ interest in New Brunswick credit scores is bad news for many. But if you have a low credit score and too much debt, wherever you live in Canada, you are considered insolvent. There are several insolvency processes available to you. It may not be necessary for you to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need 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 an alternative 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 with credit cards maxed out 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.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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Brandon Blog Post

WHAT IS THE POWERFUL CRA LIEN ON PROPERTY TOOL?

Post author By Brandon Smith
Post date September 13, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this CRA lien on property Brandon Blog, please scroll to the very bottom of this page and click play on the podcast.

CRA lien on property: Canada Revenue Agency’s collection powers

The CRA (formerly known as Revenue Canada) assigns “collection officers” to taxpayers who fail to make timely payments or who do not pay in full. For the CRA to agree to a payment arrangement (usually monthly payments), the taxpayer must provide financial disclosure on a monthly basis (details of their expenses, their income, and their assets).

Tax debts that cannot be settled through a payment plan may be registered in Federal Court. Once the debt is certified, the certificate is equivalent to a judgment entered in court. This is called a memorial. If you own property, the CRA can create a lien on your property based on your judgment. A CRA lien on property against your interest in your home is the most common CRA lien on property they register.

This Brandon Blog discusses a recent decision from the British Columbia Supreme Court that confirms that the CRA lien on property becomes secured once they are registered.

What is a Super Priority Lien?

A super priority lien is a powerful legal tool that gives the Canada Revenue Agency (CRA) first claim on a debtor’s assets when taxes aren’t paid. This type of lien takes priority over almost all other creditors, including banks and mortgage companies. The super priority lien applies specifically to unpaid source deductions (payroll taxes) and GST/HST taxes.

How Super Priority Liens Work

When a business fails to pay certain taxes, the CRA automatically gets a super priority lien on the company’s assets. This happens because of something called a “deemed trust” in Canadian tax law. Here’s what this means:

The government considers payroll taxes and GST/HST as money held in trust for them. Even if a business owner spends this money on other things, the law still treats it as government property. This creates the super priority lien without any paperwork or registration.

Key Features of Super Priority Liens

Automatic Creation: Unlike other liens, a super priority lien doesn’t need to be registered or filed. It exists automatically when taxes aren’t paid.

Higher Priority: The super priority lien beats almost all other claims on assets, including mortgages and other secured loans.

Specific Tax Types: This special lien only applies to source deductions (like income tax, CPP, and EI taken from employee paychecks) and GST/HST taxes.

Why Super Priority Liens Matter for Lenders

Commercial lenders face real risks from super priority liens. When a business owes these special taxes, the CRA’s claim comes before the lender’s mortgage or loan. This means:

Lenders might not get paid back if the business fails
The super priority lien can exceed the property’s value
Even after a mortgage is paid off, the lender could still be responsible for the borrower’s tax debt

Protecting Against Super Priority Lien Risks

Smart lenders use several strategies to protect themselves:

Thorough Due Diligence: Check if the borrower owes source deductions or GST/HST before lending money.

Legal Review: Have a qualified tax lawyer review the loan documents and borrower’s tax situation.

Title Insurance: Buy title insurance with special endorsements that cover super priority lien risks.

Extended Coverage: Some insurance companies offer protection that continues even after the mortgage is paid off.

Limited Exceptions to Super Priority Liens

While super priority liens are very powerful, some exceptions exist. Certain types of security interests may have priority in specific situations. However, these exceptions are rare and very narrow. Most creditors, including mortgage lenders, will find their claims come after the CRA’s super priority lien.

The Bottom Line on Super Priority Liens

Super priority liens represent one of the strongest collection tools available to the Canadian government. For businesses, this means payroll taxes and GST/HST must be paid on time. For lenders, it means careful planning and proper insurance are essential to avoid significant losses.

Understanding how super priority liens work helps both borrowers and lenders make better financial decisions and avoid costly surprises, as we will see immediately below.

CRA lien on property: CRA Super Priority Liens

I previously wrote a Brandon Blog about the legal case of Canada v. Toronto-Dominion Bank. By mentioning this case, I hope that my comments about the recent British Columbia Court decision below will be clearer.

Federal statutes give CRA a creditor powerful tools to collect debts. They can access avenues of collection significantly quicker than other types of creditors. It was not known to Toronto-Dominion Bank (TD) that, as a sole proprietor operating a landscaping business, the borrower had collected GST in the amount of $67,854.

After selling his home, the borrower fully paid off his first mortgage with TD. TD did not lend to or deal with the proprietor’s business. Since there was no CRA lien on property against the house, TD was not aware of the outstanding GST.

The CRA has enhanced security, known as “super-priority”, over most of a tax debtor‘s real property and personal assets, by virtue of deemed trust provisions in the Income Tax Act and Excise Tax Act (ETA). CRA has priority over substantially all secured creditors under the deemed trust concept, which means that the proceeds of the sale from the property subject to the deemed trust will go to CRA. A deemed trust claim is a CRA lien on property and is obtained without any registration.

A demand letter was subsequently sent to TD demanding that a portion of the proceeds be used to satisfy the GST debt. TD refused to pay since they believed their mortgage security ranked higher than CRA’s claim for unremitted GST. Court action was taken against TD by the CRA. The Crown argued that under section 222 of the ETA, the proceeds received by TD on the repayment of the mortgage and line of credit were subject to a deemed trust in favour of the Crown.

The Federal Court held that TD had an obligation to reimburse the CRA for the debt of $67,544, plus interest, owing by the Borrower to the CRA. Super-priority interests can be enforced by the CRA without notifying the secured creditor. TD was responsible for repaying CRA amounts received from a borrower with an outstanding GST/HST bill.

cra lien on property

FCA confirms CRA super-priority over secured creditors on a GST/HST debtors’ property

TD appealed the decision of the Federal Court to the Federal Court of Appeal (FCA). According to the FCA ruling in Toronto-Dominion Bank v Canada, the FCA agreed with the lower Court that TD must pay the CRA proceeds of $67,854 for unremitted GST that it received from a borrower upon the discharge of its mortgage. CRA is considered to hold in trust amounts paid to a secured creditor from a debtor who owes Goods and Services Tax/Harmonized Sales Tax (GST/HST) liabilities.

FCA affirmed the Federal Court’s finding that no triggering event was required and that the deemed trust operates continuously once GST is collected but not remitted. Further, the FCA noted that case law has distinguished between secured creditors and bona fide purchasers of value, such that the two categories are mutually exclusive.

It is best for secured creditors to review their current risk management practices and revise them both at the time of due diligence when vetting new borrowers as well as throughout the term of any secured credit agreement.

If we were talking about unremitted employee source deductions, the result would be the same.

CRA lien on property: Personal income tax debt collection

CRA is a powerful creditor when it comes to personal income tax debt collection. Above I discussed how they can get a CRA lien on property just by way of the statute for unremitted source deductions or unremitted GST/HST. But what about personal income taxes? CRA does not have an automatic lien for unpaid income taxes.

However, they can go to Federal Court and obtain a memorial and then register that CRA lien on property of the tax debtor who fell behind in their payment of taxes. Once they place that lien, they now turned their unsecured claim for unpaid taxes into a secured claim. As I already mentioned, the most common type of property they register against is real property, like the tax debtor‘s home.

If the CRA lien on property goes on the real property before the person who owes unpaid income taxes files either a consumer proposal or bankruptcy, then the CRA lien on property stays on. CRA will not try to go power of sale or foreclosure to throw the taxpayer out of their home based on this tax lien. Rather, they will just wait until the taxpayer either sells the home or tries to renew or refinance a mortgage.

In the case of a sale, they will get their tax lien paid out of the sale proceeds. In the case of a mortgage renewal or refinancing, mortgage lenders will not do a new mortgage loan or a refinancing with the CRA lien on property. This is how they get their money.

Keep in mind that the lien is only against the taxpayer’s interest in the home. So if the tax debtor is the sole owner, it is against 100% of the home. If the taxpayer owns the home jointly with say, a spouse, then the lien is only against the 50% interest.

cra lien on property

CRA lien on property: Can Canada Revenue Agency put a lien on my house?

You should now know that the answer to this question is yes. Licensed insolvency trustees know this. Nevertheless, in the British Columbia case I will describe now, the Trustee tried a novel, but an unsuccessful, approach to try to knock out CRA’s lien on property secured claim to collect taxes owed by the tax debtor. I am referring to Gidda (Re), 2021 BCSC 1460 (CanLII).

The licensed insolvency trustee appealed the decision of the Master as Bankruptcy Registrar dated February 3, 2020, reversing the Trustee’s rejection of a secured proof of claim filed by the federal Crown on behalf of the CRA in the bankruptcy. As well, the Trustee appealed the Master’s ruling that he is personally liable for the costs of the proceeding.

The CRA has taken out a memorial to attach a lien in favour of CRA to the taxpayer’s home due to unpaid income taxes. Then he filed for bankruptcy. So the lien against property holds as it came before the bankruptcy. A secured proof of claim for unpaid income tax was filed by the CRA in response to the memorial and registered tax lien. A secured claim was granted to CRA, which was not directly contested by the Trustee.

In my opinion, this claim, however, was handled by the Trustee in a novel way that wasn’t sustainable. It was so novel that the Judge took judicial notice of the submissions that such a case was never litigated before in Canada. There were also a number of judgments against the title of the property in addition to the memorial. There was no priority among the other judgments.

According to section 70(1) of the Bankruptcy and Insolvency Act (Canada) (BIA), bankruptcy takes precedence over judgments, garnishments, and any collection action. Furthermore, no judgment takes precedence over another.

A memorial is a judgment of the Federal Court, and since all judgments are treated equally as unsecured creditors, the Trustee disallowed CRA’s secured claim. Because the memorial and its registration against the title are secured claims under other federal statutes, it has powers not given to other simple money judgments. Therefore, I believe it is a losing argument. So did the Master.

In addition, the Master believed that the Trustee ought to have been aware of this when disallowing CRA’s secured claim and causing it to appeal the Trustee’s decision. Therefore, the Master awarded the Crown costs to be paid by the Trustee personally.

On both counts, the Trustee appealed the Master’s decision. The Judge who reviewed this found that the Master was correct in upholding the CRA secured claim and dismissed this portion of the Trustee’s appeal. The Judge did, however, let the Trustee off the hook by allowing the costs portion of the appeal. According to the Judge, the costs awarded by the Master will be paid by the bankruptcy estate and not by the Trustee personally.

CRA lien on property: Say goodbye to debt stress

I hope that you found this CRA lien on property Brandon Blog informative. Unpaid taxes and a heavy debt load do not mix well. If you have too much debt, you are considered insolvent. There are several insolvency processes available to you. It may not be necessary for you to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need 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 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.

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.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

cra lien on property

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