Ira Smith Trustee & Receiver Inc.

LAURENTIAN UNIVERSITY IN SUDBURY: THE LAURENTIAN FEDERATED UNIVERSITIES SUFFERED A CRUSHING DEFEAT

Post author By Brandon Smith
Post date May 17, 2021

laurentian university in sudbury

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

Laurentian University in Sudbury introduction

As widely reported, Laurentian University in Sudbury had federation agreements with the University of Sudbury, Thorneloe University and Huntington University (also known as the Federated Schools or federated universities). These three northern Ontario institutions are each an independent university offering university credits through certain courses that Laurentian University students took.

The reason for the federation agreements, which also had a companion Grant Distribution and Services agreement, is because these three colleges did not have full provincial status to register students, handle the admission to programs, confer degrees or receive provincial funding. Everyone benefitted from the arrangement.

The colleges were able to offer courses (in addition to a few specific courses unique to each respective college) and Laurentian, in turn, shared $7.7 million in funding. Canada Laurentian University made the calculation that it may not need all of the courses they administer on behalf of the 3 colleges. Rather, they can gain a full $7.7 million in funding, rather than just their administrative charge for doing the processing of the academic courses and degrees.

As readers of Brandon Blog know, I have been following the northern Ontario Laurentian University in Sudbury, Ontario financial difficulty insolvency restructuring saga. To date I have written 2 blogs on it:

In my 2 previous Brandon Blogs, I told you about Laurentian University’s academic program cuts comprising 38 English-language undergraduate and 27 French-language undergraduate program closures, in addition to 11 graduate program cuts (4 in French; 7 in English). These undergraduate program and graduate program cuts, dozens of program cuts, have caused job losses amongst the 116 full-time professors and 1 counsellor placement ending up being redundant. It has also obviously affected both undergraduate students and graduate students alike.

In this Brandon Blog, I talk about the Ontario Superior Court of Justice ruling in favour of Laurentian University in Sudbury in its effort to terminate all of its federated agreements.

Laurentian University in Sudbury: Losing academic programs will ‘hurt,’ prof says

The Laurentian University in Sudbury Board of Governors approved the issuance of issued Notices of Disclaimer of Laurentian University in Sudbury to terminate the university’s current agreement with the other Laurentian affiliates, Huntington University and Thorneloe University College, as well as the University of Sudbury (the Federated Universities). The decision was made amidst growing concern from students at all three universities. The Notices of Disclaimer were issued on April 1, 2021 (no joke!).

This news made waves in the Canadian higher education community. Laurentian University in Sudbury decided to terminate its agreement with the Federated Universities effective at the expiry of the notices. Laurentian University cited, in a press release, “concerns relating to low retention and graduation rates.” One grad student described it as “An ugly stain for years to come“.

Huntington University ended up settling with Laurentian University. Perhaps capitulating is a better word. On the other hand, Thorneloe University and the University of Sudbury each brought a motion before the court under section 32(2) of the Companies’ Creditors Arrangement Act (CCAA) for an order that their Federated Universities agreements not be terminated. They did so within the 15 day period they had to oppose the Disclaimers under the CCAA. Their motions were heard on the last two days of April. These motions were heard separately by two different Judges.

Sudbury’s Laurentian, Huntington universities reach a separation agreement, but Thorneloe and the University of Sudbury fought on

The Thorneloe University College and the University of Sudbury did not want to just capitulate. Huntington reached an agreement with Laurentian University regarding just how to terminate its collaboration. Both Thornloe and the University of Sudbury proceeded with their motions to set aside the Disclaimers. Thornloe’s motion was heard on April 29, 2021, by Chief Justice Morawetz.

Justice Gilmore listened to the University of Sudbury‘s motion on April 30, 2021. The Laurentian University stay of proceedings was expanded briefly up until May 2, 2021. On that date, the Justices released short endorsements dismissing both motions and the CCAA proceedings were extended until August 31, 2021. On May 7, both Justices released their detailed reasons.

The factors that the court needed to consider were:

In choosing whether to make the order opposing the Disclaimers, the court needs to consider whether the:

monitor approved the proposed Disclaimers;
Disclaimers would boost the prospects of a viable Plan of Arrangement being made for Laurentian; and also
Disclaimers would likely cause considerable financial difficulty to a party to the agreement.

The arguments against the Disclaimers in each of the northern Ontario Thorneloe and the University of Sudbury motions were essentially the same. They were:

Thorneloe and Huntington did not create Laurentian’s economic problems.
The Disclaimer will result in a significant financial challenge for Thorneloe and as a result, Thorneloe will need to make an insolvency filing either under the CCAA or the Bankruptcy and Insolvency Act (Canada).
Thorneloe and Huntington are immaterial to Laurentian’s financial scenario. Therefore the Disclaimer would not cause a material improvement for the chances of a successful Plan of Arrangement and a restructuring of Laurentian’s finances.
The partnership between Laurentian and the two northern Ontario colleges is not a business relationship to which the provisions of the CCAA were meant to apply.
Laurentian is acting in bad faith against the provisions of s. 18.6 of the CCAA.
The debtor-in-possession lender (DIP lender) has no reason to make it a condition of increased financing that the Federation Agreements must be terminated.
laurentian university in sudbury

The court decision about the Laurentian University in Sudbury Disclaimers for Thorneloe University and University of Sudbury

In both cases, everyone had their legal counsel and Thorneloe retained a financial advisor also. Thorneloe‘s financial advisor prepared a report for the court to attempt to counter the submissions of both Laurentian University and the CCAA Monitor.

The Judges each weighed all the evidence very carefully and both concluded that the:

Monitor authorized the Disclaimer Notices.
Disclaimers will improve the prospects of a successful Plan of Arrangement for Laurentian.
Notices of Disclaimer will have negative economic consequences to Thorneloe and the University of Sudbury, yet this is not enough of a factor to prohibit the Notices of Disclaimer.
University of Sudbury and Thorneloe was provided a choice, similar to Huntington, which was not accepted.
Court has a choice to make and neither choice is a good one. It is required to consider
the more comprehensive implication of refusing the Notices of Disclaimer which would result in the demise of Laurentian.

The choice is if the motions succeed so the Disclaimers are not effective, it might cause an unravelling of Laurentian’s restructuring strategy and also the collapse of Laurentian. This in turn would certainly have a substantial impact on all professors, students and parts of the northern Ontario region and the entire Sudbury community. It would likewise create financial harm to Thorneloe and the University of Sudbury. Certainly, this is not a desirable outcome.

If the Notices of Disclaimer are supported, the court acknowledged that this very well may threaten the survival of the colleges. The court was sympathetic to this but stated that the impact on the colleges will be considerably less than if Laurentian and the colleges both stop operating. Given these two undesirable choices, the much better choice or the least unwanted selection is to support the Notices of Disclaimer.

Therefore, the motions brought by Thorneloe and the University of Sudbury to revoke the Notices of Disclaimer were dismissed. The Judges reject appeals from federated universities. Thorneloe stated it would appeal the decision of the court. As previously stated, Huntington has already struck a brand-new plan with Laurentian. The University of Sudbury is considering what it ought to do next.

Laurentian University in Sudbury summary

I hope you enjoyed the Laurentian University in Sudbury Brandon Blog post. According to the Monitor’s reporting to the court, on April 30, 2021, Laurentian owes millions of dollars; $321.8 million to be precise.

Are you worried because you just lost your job through no fault of your own? Is your business dealing with substantial debt challenges and financial problems due to your largest customer failing to perform and pay your company? Do 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.

laurentian university in sudbury

Tags admission to programs, An ugly stain for years to come, Canada Laurentian University, CCAA, Companies’ Creditors Arrangement Act, federated schools, Federated Universities, Huntington University, Judges reject appeals from federated universities, Laurentian University, laurentian university in sudbury, losing academic programs will 'hurt, millions of dollars, northern Ontario, Notices of Disclaimer, Thorneloe University, University of Sudbury

Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE FOR BANKRUPTCY SIMPLE STEPS ON HOW TO AVOID BANKRUPTCY AND SAVE YOUR BUSINESS

Post author By Brandon Smith
Post date May 12, 2021

licensed insolvency trustee for bankruptcy

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.

Licensed Insolvency Trustee for bankruptcy on why businesses go bankrupt

In my last Brandon Blog, Business Bankruptcy In Canada: Discover The Causes Of Business Insolvency And Bankruptcy, I described the causes of business insolvency, the types of business entities normally found in Canada and tips on how to pull your business around back from insolvency.

Numerous businesses are battling to survive today, not to mention stay lucrative. They are scaling down or just closing their doors. They are accessing the available government support money for a business. Most entrepreneurs hesitate to seek the advice of a licensed insolvency trustee due to the fact that they are afraid all the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) wants to do is be a trustee for bankruptcy.

In this Brandon blog post, I want to continue from the suggestions from my last blog, to show you exactly how that the last point I push for is to be a trustee for bankruptcy. I first look to reorganize your business. If your business or company remains in danger because of the effect of the COVID-19 pandemic, it will certainly be advantageous for you and also your organization to do so.

I will also show how sometimes, a trustee for bankruptcy or receivership, can actually help save parts of your business. The only other alternative could be to let all the business parts fail, which is the worst possible outcome.

The role of a debtor in bankruptcy or insolvency

Remember, I previously defined insolvency as a financial condition, where bankruptcy is a legal condition and a legal process. You will also recall that in my last Brandon Blog, I described the three common types of business structures in Canada; proprietorship, partnership and corporation. Just as these three business structures are different in form, they are also treated differently in insolvency vs bankruptcy. Here is how I differentiate the role of each debtor.

Proprietorship – Sole proprietorships are a type of business structure in which one individual is the sole owner of the business, which gives that person control over everything related to the business. This includes the business’ name, structure, accounting, legal obligations and tax responsibilities.

As I described last week, in Canada, the person, the sole proprietor, is carrying on business in their personal name, operating as the business name. You can register a sole proprietorship with the provincial government by completing an application form.

A sole proprietorship is the simplest kind of business structure. It permits an individual to sell goods or run a service with complete control of it on their own. Nonetheless, a sole proprietorship is not considered a separate legal entity from the owner. This means that any liabilities incurred by the business are also personal financial obligations of the owner.

So in an insolvency situation, all of the sole proprietor’s assets come into play as do all of his or her debts. It is not just the business assets and business liabilities. It is everything. This is the worst-case scenario for an entrepreneur.

So if the business is viable, and the personal assets and liabilities lead to the sole proprietor being in the situation where they can do a debt settlement plan, they can choose one of two options to restructure their entire personal financial situation. This assumes they cannot resolve their financial issues informally to bring their financial situation back to being solvent.

Partnership – A terrific way to begin a new business is teaming up with one or more people. All of you should enhance the group’s abilities as well as energy. Nonetheless, you also wish to be with people that are trustworthy, industrious and have a certain expertise that will help the business grow. Just like the way a proprietorship is one person, a partnership is made up of two or more people.

A partnership agreement is crucial. This is an agreement between the partners, describing the rights as well as obligations of each partner in the business. The same way a sole proprietor is personally responsible for the debts of the business and is putting all of their personal and business assets at risk, the same is true for partners in a business partnership. The partners are each liable for 100% of the business debts in case of insolvency. The partners cannot limit their liability to only their partnership share of the business.

Corporation – When you incorporate a business, it is a corporation. The company is a different legal entity from its owner shareholders. Shareholders are not responsible for the unpaid debts owed to financial institutions (normally a secured creditor), suppliers to the firm (normally an unsecured creditor) or the government. There are only two exceptions: (i) certain government liabilities that are a personal liability of a Director; and (ii) if the entrepreneur directly guarantees a financial debt of the company, such as a company loan, then that individual will have a liability with respect to such debt.

If the company’s financial future becomes bleak because it is insolvent, there are options. In my last blog, I talked about self-help remedies senior management of a company whose business is viable can try to informally bring the company back to a healthy financial state. You can re-read that blog to see the options available. If the self-help remedies do not work yet then we must look at more formal proceedings.

Licensed InsolvencyTrustee for bankruptcy: Settle with creditors and debt collectors without bankruptcy

In a proprietorship or partnership, if the underlying business is viable, then there are a variety of options to try to turn the business around yourself. You would use the self-help methods I described in my last blog. If the self-help options do not work, there are debt settlement options available to the individual(s) under the Bankruptcy and Insolvency Act (Canada) (BIA). They would be the only government-sanctioned debt settlement plan available in Canada. Either a consumer proposal or a Division I Proposal. You can read about how each one works by clicking on the following links:

In a successfully completed debt settlement program, the bankruptcy trustee would not be a trustee for bankruptcy. Rather, the trustee in bankruptcy would be an Administrator under a consumer proposal or a Proposal Trustee in the Division I Proposal.

If the business is not viable or the circumstances are such that a debt settlement plan is not feasible, then personal bankruptcy would be the only other option. You can read about how personal bankruptcy works by looking at our top 20 bankruptcy FAQs section. Upon the bankruptcy of the person, the sole proprietorship is automatically terminated.

Since a partnership is a way of carrying on business personally, then the same insolvency options available to the partners to the business debtor are also available. A restructuring is always preferred over a bankruptcy when the partnership is in financial difficulty.

For a debt settlement insolvency filing, the licensed trustee is not a trustee for bankruptcy. That is the case only if there is an actual bankruptcy assignment. Under provincial law, if a partner goes bankrupt, the partnership is automatically dissolved.

Licensed Insolvency Trustee for bankruptcy: Ask creditors to help you avoid bankruptcy of the corporation

Without wanting to sound like a broken record, you can review my prior blog to go over the self-help remedies for turning a business around, even if it is a corporation. A self-help remedy is always a great alternative to bankruptcy. If that isn’t appropriate, or just plain does not work, then you must get in touch with an insolvency trustee.

Again, if the company’s business is viable, then there are financial restructuring alternatives. these alternatives will be within a government-regulated insolvency proceeding. There are two formal restructuring statutes in Canada:

Division I Proposal under the BIA.
A restructuring Plan of Arrangement under the Companies’ Creditors Arrangement Act (CCAA).

In both cases, a company should retain the services of both a licensed trustee for bankrutpcy and a bankruptcy lawyer. The lawyer acts as legal counsel to the company. The licensed trustee will be both a financial advisor and steer the company through the restructuring process. The CCAA option is for companies with $5 million or more of debt. A BIA Proposal is for a company with any amount of debt. The main difference between the two processes are:

In a failed BIA Proposal, the debtor is immediately deemed to have filed an assignment in bankruptcy. This is not the case in a failed CCAA Plan of Arrangement.
A CCAA proceeding is more costly as there are many more court appearances in that forum than in a BIA restructuring.

Using one of these two statutes to gain what is called in the media “bankruptcy protection” in order to work out a successful restructuring with your unsecured creditors is always preferable. The company will pay less than it owes while keeping its viable but insolvent business alive. Don’t underestimate the power of preserving jobs in the eyes of a court. A bankruptcy trustee can be very helpful in obtaining great results.

Licensed Insolvency Trustee for bankruptcy: When to consider an Assignment for the Benefit of Creditors

If the business is not viable and is insolvent, then the only thing left to consider is an assignment in bankruptcy filing. It is definitely a last resort if everything I have already spoken about in this Brandon Blog just won’t work and you have run out of options. Trustees in bankruptcy always consider the alternatives to bankruptcy, but sometimes filing bankruptcy is the only option available.

In the case of a proprietorship or partnership, it is the individual sole proprietor and one or more of the partners who will be meeting with a trustee in bankruptcy and filing for a personal type of bankruptcy. the personal bankruptcy trustee will administer the personal bankruptcy estate. Again, you can read up on personal bankruptcy by looking at our top 20 personal bankruptcy FAQs section.

In personal bankruptcies, it will be either a streamlined system called a Summary Administration and if not, it is then an ordinary administration bankruptcy. Unlike a company, a person is ultimately entitled to a bankruptcy discharge.

When it comes to the administration of bankruptcy for a corporation, it is always an ordinary administration bankruptcy. The purpose of this Brandon Blog is not to run through all the steps in a personal or corporate bankruptcy process. Above I have provided some links to read up on debt settlement restructuring and personal bankruptcy. For corporate bankruptcy, I recommend that you read our corporate website page on corporate bankruptcy.

Alternatively, you can also read my previous Brandon Blog Bankrupting a Limited Company: Canadian Corporate Bankruptcy Process.

A trustee for bankruptcy administers the bankruptcy process for the benefit of unsecured creditors. Sometimes, it is a secured creditor who needs to enforce their security. They do not necessarily need the company to meet with a trustee for bankruptcy. Rather, the secured creditor needs the appointment of trustee to act not in a bankruptcy administration, but rather, to act as a receiver or receiver-manager to enforce the secured creditor’s position by taking control of the assets subject to the security and ultimately selling them. To read the receivership process, you can read the receivership section of our corporate website.

You can also read my Brandon Blog titled What Is A Receivership? Our Complete Guide To Receivership Solutions.

Licensed Insolvency Trustee for bankruptcy: How to avoid bankruptcy and save your business from closing

I hope you enjoyed the licensed insolvency trustee for bankruptcy 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. As you can see from this blog, we are not just a trustee for bankruptcy. We believe every person and business should first explore debt settlement to avoid bankruptcy.

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

BUSINESS BANKRUPTCY IN CANADA: DISCOVER THE CAUSES OF BUSINESS INSOLVENCY AND BANKRUPTCY

Post author By Brandon Smith
Post date May 10, 2021

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.

Business bankruptcy in Canada introduction

A business bankruptcy in Canada creates a very difficult time for its owners, employees, suppliers, and families. Bankruptcy can be the result of many things, including poor business decisions, bad economic health conditions, changes in government regulations, increased competition or a combination of all of these. Yet no matter what brought it about, this will be difficult for those involved with the business. Entrepreneurs will need to find the right party to lean on to help them analyze everything and first see if there is a way to save the business.

If you are in this situation, it is important to know that you do not have to, and should not, go through this alone. In today’s Brandon Blog, I will talk about, from the perspective of a licensed insolvency trustee, what the main causes of business bankruptcy in Canada are and how to avoid business bankruptcy in Canada. These steps will help you look at your business’s financial problems in a different way. It may very well be such that you can do the financial restructuring of all or a part of your company’s business properly and avoid a long-term debt to your creditors.

In my next Brandon Blog, I will write about the formal insolvency proceedings available to an insolvent business in Canada.

What’s in it for you, the entrepreneur? This will help you become a healthier business owner and get you out from under the panic and stress the current environment causes.

Bankruptcy vs insolvency

Regular readers of my Brandon Blog will know that I briefly describe the difference between in many blogs. Before going any further, it will be helpful if I just give you a refresher as to the distinction between the two.

Bankruptcy vs insolvency is two extremely different things, although people often say them thinking they mean the same thing. Insolvency refers to a circumstance where an individual or company has more debts than assets. Once the property has been entirely liquidated, there is not enough cash to settle all the debts. This is the economic problem where the company or individual experiencing financial difficulties is said to be insolvent. It is a financial condition.

Bankruptcy is a legal process. A person or company who is insolvent can file for bankruptcy. Or, one or more creditors can make a Bankruptcy Application to the court for a Bankruptcy Order to be made against the financially troubled insolvent person or company. Bankruptcy is a legal state.

The main causes of business bankruptcy in Canada

In my opinion, no one cause is responsible for causing business insolvency or business bankruptcy in Canada. It is usually a combination of things. From my experience in dealing with troubled businesses, I have found there are a variety of factors.

Some are internal to the business and some are external. The internal causes are ones that the entrepreneur has full control over. Similarly, the entrepreneur has either very little or no control over external factors. The following, in no particular order, is my laundry list of the main causes of business failure in Canada.

External causes of business failure in Canada

an economic slowdown or recession
increases in competition
loss of a major customer as the outcome of relocation or market modification or business sector
government regulations
technological change
being a victim of a fraud
labour issues including the loss of key employees
war
a global pandemic

Internal causes of business failure in Canada

While variables beyond a businesses’ control absolutely play a significant role in the failure, numerous businesses that declare bankruptcy additionally struggle with internal issues. While external deficiencies are important to some degree, many failures happen as a result of internal issues mostly rooted in the deficiencies of senior management – the entrepreneur.

Internal root causes of bankruptcy can be categorized as consisting of troubles associated with:

lack of sufficient business monitoring abilities
firm strategies that don’t work
growth and acquisitions that did not work either because of overpaying or lack of funding to support the new business growth and activity
lack of proper financial planning
business administration and record-keeping deficiencies
human resource errors
lack of proper advertising and marketing
undercapitalization – lack of proper cash on hand and financing

Insolvency for business: There are 3 types of business arrangements

Before getting into the strategies that insolvent businesses can use to avoid business bankruptcy in Canada, and to discuss how business bankruptcy works, keep in mind that there are essentially 3 kinds of business setups. They are:

Proprietorship

A proprietorship, also known as a sole proprietorship, is a business entity owned by one individual. There are few formalities to create a sole proprietorship, and many businesses start as sole proprietorships, particularly small businesses. As a sole proprietorship generates profits, the owner is taxed personally on the income.

The main disadvantage to this form of business is that you are personally responsible for all of the business debts and obligations, which means that if you don’t pay the business bills, your creditors can sue you personally and if they get a judgment, seize your personal property, whether it is used in the business or not.

Partnership

A partnership is like a proprietorship, with one main difference. The difference is that it involves two or more people. They share the business profits or losses under an agreed formula. The method used to share profits and losses tends to be based upon each person’s value to the business.

Just like in a proprietorship, the partners are personally responsible for the business financial obligations.

Corporation

When you incorporate a business, you create a corporation. The company is a different legal entity from its owners, the shareholders. That means shareholders are not responsible for the unpaid debts owed to the creditors of the company or its business. The only exemption is that if an entrepreneur shareholder directly guarantees a debt of the company, such as a business loan, then that person is also liable.

In the event of default, the lender can require repayment from both the company and the guarantor. Generally, shareholders just risk the cash they used to purchase the shares of the company and any funds they may have loaned the company.

Business bankruptcy in Canada: How to avoid bankruptcy and save your business

Now that we understand what can go wrong in a proprietorship, partnership or corporation carrying on business, we need to look at what some fixes may be. Not every business needs to go into bankruptcy due to financial difficulties. The first decision point is if your business is still viable. Is there still a vibrant market for the goods or services your business provides? If yes, then you have something worth trying to save.

Here are the steps I recommend taking in analyzing your business to save it:

1. Assess your business cash flow – When looking at the overview of business cash flow needs, it is important to have a clear understanding of your business structure, the services or products you offer and the number of clients you have. Knowing this information will give you a clearer picture of your cash flow requirements.

You must understand your business’s cash flow needs. The very best method is to develop a reasonable monthly cash flow forecast. This is a record that details your business’s monthly forecasted income and expenses on a cash basis for the next 12 months. This will be an important part of establishing an organization strategy, which will be a guideline for how to improve your business’s financial position.

2. Assess your assets for funding or liquidation opportunities – One of the most important things a business owner should do when looking for ways to raise cash is to seriously assess their current financial position. A company’s assets continue to change over time, and a good business owner will regularly review these figures to make sure the company is in the best possible financial shape to raise cash. This process is called “asset analysis,” and it can help a company identify where and how to obtain the best possible funding.

Perhaps you need to focus on shortening the period of time it takes to collect accounts receivable from your business debtors. Maybe there is either redundant or slow-moving inventory that can be liquidated. Perhaps there are some fixed assets not in use that can be sold to raise cash.

When your business is in trouble, you can’t think about the fact that you may be taking a loss on the sale of inventory or other assets. The name of the game is that you need to raise cash today. If you no longer can use certain assets to produce revenue for your business, it may just be time to sell them to raise the much-needed cash.

3. Take a critical look at all your business expenses – “Take a critical look at all your business expenses” is a sentence that is quite hard to start your day with. It’s a sentence that will lead you to an endless stream of thinking of all the ways you can do to save money. It’s a sentence that will make you question yourself if you are using your cash flow most efficiently. It’s a sentence that will make you think that you might be doing more harm than good to your business.

Nevertheless, it is a must. Businesses in most industries regardless of firm size have been hurt badly due to the COVID-19 pandemic. The credit crunch is in full swing and it’s easy to see how your business has been hit hard. You may not be able to do anything right away about your debt payments, but there may be other opportunities for cutbacks.

If your business has seen its financing alternatives run out, it’s important to take a hard look at your costs. Are you spending too much on advertising, marketing, staff wages and salaries, management salaries or supplies? You need to take a critical line-by-line look and eliminate enough costs given current revenue and market conditions. The cuts will not be easy, but many family’s lives depend on your business continuity.

You need to take the time to sit down and look at your expenses to see where you must cut back given the current business environment.

4. Is renegotiating or at least getting a moratorium on some business loans or leases a possibility? – You’re a business owner and you’re asking yourself whether you ought to try to renegotiate loans or leases. The answer relies on a variety of aspects. You may be bumping up against your business credit limits and know you must try to reorganize your financial debt and cash flow.

It is certainly something that must be thought about since it for sure will certainly be if your business enters into an insolvency proceedings restructuring program with your creditors. So look critically at this option voluntarily. It may not be possible to achieve, but at least you will know that you have thoroughly canvassed the possibilities.

5. Is it possible to create a new cash flow stream using the existing skill sets and staff until the economy turns around? – It’s not uncommon for struggling businesses to experience cash flow problems. For example, a business owner who takes on too much debt may suddenly find themself paying far more interest than they can afford, and the business is now burning through money every month just to keep their creditors at bay.

Sometimes the business owner may simply have too many creative ideas and not enough time to take them to fruition; this can cause them to take on new projects before they can finish the ones they’ve already started.

Rather than focussing on many new projects, look at what new twist on what you already do can be implemented to meet current market demand just to bring in some additional cash from a new source. This may very well save your business until more permanent changes can be implemented and/or the marketplace and the economy turns around.

6. Take advantage of Canada’s COVID-19 Economic Response Plan for business – Canada’s COVID-19 Economic Response Plan is designed to help businesses by providing relief to companies that owe funds to Canada Revenue Agency, the banks or landlords. It is also intended to try to keep Canadians working. The Plan was introduced in 2020 in response to the pandemic and has been revised several times since then to help struggling businesses in Canada.

The Canadian government’s COVID-19 Economic Response Plan is designed to help the small and medium-sized businesses struggling to survive the impact of the economic downturn. The program offers business owners a chance to hit the refresh button on their business’s finances with a package of tax credits, interest relief and plain old money to help them with their outstanding debts. The program is designed to help all Canadian businesses in general.

I have written many blogs already on various Canadian government programs for business, such as the:

There’s been no spike in personal and business bankruptcies, but surge is expected

There are many businesses across Ontario considering bankruptcy as they sit on the sidelines from the COVID-19 financial impact, according to the Canadian Federation of Independent Business (CFIB).

“Businesses need to start making revenue again, otherwise they’re just not going to survive” said Ryan Mallough, CFIB’s Director of Provincial Affairs for Ontario.

As I previously reported in my Brandon Blog, Small Businesses In Canada Accumulate Massive Debt Due To COVID-19, since the start of the COVID-19 outbreak in March 2020, small businesses in Canada racked up $135 billion worth of debt to stay afloat.

Seven in 10 small businesses in Canada have actually borrowed money because of COVID-19. The average is almost $170,000 per business, according to a new survey released by the CFIB. In total, small businesses in Canada currently owe a cumulative $135 billion.

This is the perfect segue into my next Brandon Blog. I will be talking about what the insolvency proceedings and bankruptcy proceedings options are for businesses, be they a proprietorship, partnership or corporation. Based on the various business types, it will include business insolvency options for personal insolvency, personal bankruptcy, corporate insolvency and corporate bankruptcy.

That Brandon Blog will be of a more practical nature in how the various personal and debtor company business bankruptcy in Canada and insolvency options work.

I feel this is a good time to talk about this in my next Brandon Blog because right now the insolvency statistics show that notwithstanding the tough economic slowdown, insolvency filings are low. I don’t believe the insolvency rate is low, but right now federal government support is masking the true economic health of Canadian businesses.

Business bankruptcy in Canada summary

I hope you enjoyed the business bankruptcy in Canada Brandon Blog post. You may be very upset and frustrated over this. You may have been directly affected by the course and employee downsizing. Perhaps your pension has just been cut drastically from what you thought it would eventually be. You may even be downright depressed. No doubt the Sudbury entrepreneurs may be very frustrated whether their businesses will be able to continue to pay all their debts as they come due.

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.

business bankruptcy in canada

Brandon Blog Post

LAURENTIAN UNIVERSITY INSOLVENCY RESTRUCTURING – OUR UPDATED GUIDE ON ITS MASSIVE CUTS TO GAIN FINANCIAL HEALTH

Post author By Brandon Smith
Post date May 5, 2021

laurentian university insolvency

Laurentian University insolvency: Laurentian students, faculty ‘shocked’ at university’s declaration of insolvency

On February 8, 2021, I wrote my blog about the Laurentian University insolvency filing for creditor protection under the Companies’ Creditors Arrangement Act (Canada) (CCAA) on February 1, 2021. It was the very first time in Canada that a public university took such creditor protection action. That blog is titled: Laurentian University Facing Insolvency Makes Startling CCAA News By Filing For Creditor Protection.

Post-secondary education can be a hard path for lots of young Canadians. The road can be filled with challenging experiences. Nevertheless, students never thought that having their college or university teeter on the edge of bankruptcy while they’re still going there would be a reality they would need to face! “It was a surprise,” declares one third-year Laurentian University student, resembling the views of her peers.

The students found out about the Laurentian University insolvency when they logged into their student portal. That is when they found out that the school has declared itself insolvent. The University President and Vice-Chancellor stated in the CCAA proceedings that the university’s dire financial situation financial issues were first determined as early as 2008-09 when a prior administration.

The students who were accepted to the school on the understanding that the school would continue operating and that their field of study would not be in danger surely feel betrayed by this. What a stressful time for them.

Everyone was pretty shocked when we found out that the Laurentian University insolvency CCAA filing happened. Nobody had really focussed before on the fact that public institutions like Laurentian would become insolvent and then be eligible for a CCAA process.

What went wrong in this Sudbury, Ontario-based university? In this Brandon Blog, I’m going to give you an update to my February 8, 2021, Brandon Blog and what has gone on since then in this Laurentian University insolvency process.

Laurentian University insolvency: Is Laurentian University closing?

No. The purpose of the CCAA filing is to allow Laurentian University to restructure so that hopefully it will remain open for a long time to come. Laurentian has continued operating. Courses are continuing (virtually because of the COVID-19 pandemic).

Laurentian opened up discussions with its different stakeholders, including its students, faculty, other staff, trade suppliers, research-granting agencies and donors immediately after the issuance of the court order approving the Laurentian University insolvency filing.

Laurentian has to negotiate functional modifications in order to drive go-forward financial savings. Consequently, these conversations have included settlement negotiations between Laurentian and the:

Committee of representatives chosen by the Senate, to deal with the course offering to restructure.
Federated Universities;
Laurentian University Faculty Association, the bargaining unit representing the professors; and
Laurentian University Staff Union, the bargaining unit for non-faculty personnel.
laurentian university insolvency

Upon the initial CCAA filing, the Laurentian University insolvency application included a request for a sealing order to keep away from public viewing two Exhibits. Laurentian’s position was that stakeholders should not be able to see those documents as it would weaken and perhaps totally frustrate Laurentian’s ability to restructure. The court granted the sealing order.

On March 4, 2021, the Ontario Confederation of University Associations, the faculty union and the Canadian Union of Public Employees served notices looking for leave to appeal the sealing order from the Court of Appeal for Ontario. On March 31, 2021, the Court of Appeal for Ontario issued its decision dismissing the motion for leave to appeal.

Laurentian University cuts 100 professors, dozens of programs

Laurentian University told the court that it had many programs relative to its number of pupils. Since the day of the CCAA declaration, Laurentian had roughly 209 different programs – 166 undergraduate programs as well as 43 programs for graduate students. Laurentian additionally advised that a lot of programs have continually reducing enrolment and are not financially sustainable.

The university undertook an evaluation of low-enrollment programs and a review of the variety of courses to be provided moving forward. This procedure led to a full review of programs as well as potential program closures. The results of this analysis led to recommendations for academic program restructuring. The recommendations were accepted by the Senate Sub-Committee charged with completing this review and also the complete Senate.

The program closures consist of 38 English-language undergraduate programs and 27 French-language undergraduate programs. This represents 39% of the undergraduate programs offered as of February 1, 2021. This will affect about 772 undergraduate students (557 in English language programs and 215 in French-language programs). In addition, Laurentian proposes to close 11 graduate programs (4 in French; 7 in English).

If programs are being cut, then it stands to reason that teaching costs and other staff costs also need to be reduced. At the commencement of the CCAA proceedings, approximately 612 employees were represented by LUFA including 355 full-time faculty, many of whom had tenure pursuant to the collective agreement, 252 sessional faculty or health care professionals and 5 full-time counsellors.

The faculty and the Laurentian Board are parties to a collective agreement with a three-year term which expired on June 30, 2020. Pursuant to the provisions of the agreement, it automatically continues year-to-year unless notice is provided that either the union or university intends to terminate or amend it. In February 2020, the union provided the Laurentian Board with a notice to bargain. The agreement automatically remains in force during any period of negotiation.

On April 7, 2021, after participating in insolvency negotiations and mediation, the parties entered into a new labour agreement term sheet. Since academic programs were cut, faculty cuts had to follow. The term sheet calls for a new collective agreement with a five-year term expiring on June 30, 2025. It declares 116 full-time faculty positions and 1 counsellor position redundant.

The faculty downsizing will be achieved through voluntary resignations and termination of employment. Faculty to be terminated, who is currently teaching, will be terminated effective May 15, 2021. Those faculty who were not teaching in the current term were terminated effective April 30, 2021. There are also some other salary decreases across the board and benefits reductions for continuing faculty.

As far as other unionized staff (non-faculty), there will be 42 job losses. For the remaining non-teaching staff, there will be certain salary and benefits adjustments. For non-union staff, there is some salary rollback and loss of certain benefits.

Laurentian University insolvency: Court ruling allows Laurentian University to reduce value of pension plan payouts

The institution oversees three pension and benefit plans: (a) a registered defined benefit pension plan (DBP); (b) a supplementary unfunded retirement plan (SURP) and (c) a retirement health benefits plan (RHBP). The SURP, as well as RHBP, are currently unfunded. Repayments pursuant to the SURP and RHBP have remained stayed, in conformity with the terms of the CCAA Order.

The DBP is a plan registered with the Financial Services Regulatory Authority of Ontario under the Ontario Pension Benefits Act as well as the Income Tax Act (Canada). The DBP has a going-concern pension deficit of roughly $4.5 million. The University needs to deal with the going-concern shortage. Under provincial government regulations, it needs to do so within a 10-year duration.

Terminated personnel that are DBP members, need to think about whether they want to move their pension plan entitlement to a different trustee due to the fact that they are not qualified to receive their pension payments yet. Alternatively, they could maintain their pension with Laurentian University as trustees. For retiring or terminated staff, depending on their situation, they must elect either an immediate pension plan payment or a deferred pension.

On March 17, 2021, the court made an order specifying, amongst other things, that for any kind of DBP participant that wanted to transfer their pension plan, a transfer proportion of 65.8% will be used for any commuted value transfer request for anyone that received a retirement or termination statement and an election form, for whom such transfers had not yet been made.

Therefore, anyone making such an election lost 34.2% of what they believed their pension entitlement was going to be. Various other amendments to the DBP are also proposed to take place in the Laurentian University insolvency matter. As you can imagine, the further amendments are aimed at creating long-term solvency for the DBP. Therefore, it involves certain reductions to what the remaining members thought they bargained and signed up for!

As part of the restructuring, the Laurentian University insolvency process also proposes that the RHBP will be terminated. Any claims against the SERP will be dealt with in the CCAA proceedings.

The SURP was implemented on July 1, 2002, to supply additional retirement benefits to Laurentian staff members who were in the DBP, to get additional benefits for those earning income over a certain limit. Retiring employees that qualified for the SURP were automatically enrolled. They received either a yearly or monthly payment from the SURP. All of the SURP commitments are unfunded. Historically, the university made annual payments in respect of the SURP from existing operating funds every July.

The insolvency negotiations and mediation have led to the Laurentian University insolvency process recommending that the SURPs be terminated. Accumulated obligations will be managed in the Laurentian University insolvency CCAA Plan of Arrangement. All SURP payments stopped on February 1, 2021, as a result of the CCAA stay of proceedings.

By March 17, 2021, all the changes I have talked about so far were approved by the court.

Judges reject appeals from federated universities, Laurentian insolvency plan can proceed

Laurentian has a federated school structure whereby it has formal affiliations with the Federated Universities: the University of Sudbury, Huntington University and Thorneloe University. Laurentian has a federated institution framework whereby it has official affiliations with the Federated Universities: the University of Sudbury, Huntington University as well as Thorneloe University.

The University of Sudbury is a Roman Catholic multilingual university offering programs in Culture and Communication Studies, Indigenous Studies, Philosophy as well as Religious Studies consisting of courses in both English and French. It was founded in 1913 as Collège du Sacré-Coeur before changing its name to the University of Sudbury in 1957.

Huntington is an independent university founded in 1960 with its own charter and offers programs in Communication Studies, Gerontology, Religious Studies as well as Theology.

Thorneloe is a university with historic origins and association with the Anglican Church of Canada. It offers programs in the departments of Ancient Studies, Religious Studies and also Women’s, Gender as well as Sexuality Studies.

Laurentian and the Federated Universities are connected via a selection of historical connections as well as contractual arrangements. Each of the Federated Universities is a separate legal entity and each is controlled by their own respective board of governors, independent of Laurentian providing oversight of university affairs, respectively.

The Federated Universities do not admit or register their own students and they do not confer their own degrees (with the exception of Theology at Huntington as well as Thorneloe). All Federated University programs and courses are offered by Laurentian University, and all students go to the Laurentian campus. Although the Federated Universities each manage their own respective financial affairs, they cannot receive provincial funding directly. The majority of the public funding for Federated Universities is processed through Laurentian.

As part of the Laurentian University insolvency CCAA restructuring, Laurentian served Notices of Disclaimer on the Federated Universities as it felt it was financially more advantageous for Laurentian to be free from those contractual responsibilities. As a result of the negotiation and mediation process, on April 16, 2021, Laurentian and Huntington entered into an agreement whereby Huntington essentially agreed to cease offering its courses and turn over certain course rights to Laurentian. The only exception allowed in this Laurentian University insolvency process negotiation was that if the court held that the University of Sudbury and Thorneloe University were permitted to continue to receive funding from Laurentian to teach courses or programs, Huntington could also, should it choose to do so.

The University of Sudbury and Thorneloe took a different approach. They each filed motion records in court objecting to the Notices of Disclaimer. The court heard the motions on May 2, 2021, along with Laurentian’s motion to extend the restructuring period and the resulting stay of proceedings to August 31, 2021, and to approve an increase of $10 million to its debtor-in-possession financing.

Laurentian argued that a condition of the increased financing was that the Federated Universities agreements be terminated and that terminating them will improve the University finances. The University of Sudbury and Thorneloe argued that it has not been shown necessary to Laurentian’s future viability and solvency that the Federated Universities relationship had to end and all it really is was an attempt to put them out of business.

Two different judges heard the University of Sudbury and the Thorneloe University motions. Each released their decisions last Sunday night. Each judge dismissed their respective motions. Laurentian’s increased financing and the extension of its restructuring period were also approved. The judges indicated that Reasons would follow. At the time of writing this Brandon Blog, the Reasons have not been released. When they are, I will certainly let you know what the Judges’ thought processes were.

Unprecedented Laurentian University insolvency summary

Seeking to escape a mounting debt problem, the administration of Laurentian University insolvency process has led to its filing for bankruptcy protection under the CCAA statute. This will have unfortunate consequences for some students whose courses of study are no longer offered. It will also have a terrible effect on the roughly 164,000 people who live in Sudbury, many of whom are directly involved in the school.

I hope you enjoyed the Laurentian University insolvency Brandon Blog post. You may be very upset and frustrated over this. You may have been directly affected by the course and employee downsizing. Perhaps your pension has just been cut drastically from what you thought it would eventually be. You may even be downright depressed. No doubt the Sudbury entrepreneurs may be very frustrated whether their businesses will be able to continue to pay all its debts as they come due.

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

SOFT CREDIT CHECK: TWEAKS YOU CAN DO TO MAKE IT HARD AND HAPPY

Post author By Brandon Smith
Post date May 3, 2021

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.

Soft credit check introduction: What is a credit score?

When you apply for a loan, or to rent someone’s house, condo or apartment, the bank or landlord will very likely do a credit check on you. What will be of importance to them, amongst other things, is your credit score.

A Canadian credit score is a three-digit number used to indicate the creditworthiness of a debtor, based upon the info in their credit report. It is determined by looking at several factors, including if you usually pay your bills on time, just how much of your readily available credit you use, the number of charge cards you have, as well as your basic level of financial debt. The score ranges from 300 to 900 and also represents the chance that you will pay every one of your expenses on time.

There are two methods that either you or a potential lender can do a credit check on you: soft or hard. Keep in mind that even a potential landlord can fall into the category of prospective lenders. They will be advancing your credit in the form of their property. They are entrusting the tenant to take possession of their property, in return for paying for that privilege every month. In that way, a landlord is also extending credit to a tenant.

Have you ever wondered what the difference is between a soft credit check and a hard credit check? Well, in this Brandon Blog I am going to explain the difference between them for you.

Overview: Hard vs. Soft inquiries on your credit report (And Why They Matter)

The hard inquiry is a credit check that will show up on your credit report. These types of inquiries are typically the result of applying for a new loan, credit card or insurance quotes. A hard inquiry will typically stay on your credit report for up to 3 years.

A soft inquiry, on the other hand, is a credit check that does not show up on your credit report but is visible to creditors. A soft inquiry could be the result of checking your own credit score or shopping around for a new cell phone or cable plan.

More details: What is the difference between hard and soft credit inquiries?

What is a soft credit check you ask? A soft credit check request is something you can do at the beginning of your search for a loan. It will help you to know what your credit score is to help you get better loan rates, special promotions or offers a bank may be running or even help you secure that loan for which you might not qualify if your credit score was outside of an acceptable range. Knowing that information upfront can help you negotiate better for that loan deal you want.

A soft credit check is a surface-level credit inquiry that is used to get a preliminary assessment of your creditworthiness. These take place when you check your credit report or when a lending institution checks your score to pre-approve you for special deals. Soft checks do not influence your credit rating.

A hard credit check is basically a check performed by a company to find out your credit history and score. A hard credit check is different than a soft credit check. Hard checks are performed by companies that decide whether or not to lend you money. Sometimes, a hard check is also referred to as a hard credit inquiry. While a hard check is more informative than soft pulls, it can also adversely affect your score if too many checks are performed.

Sometimes you will enter into a contract for a product or service that requires you to provide authorization on the credit applications to access your credit report and credit score. Whether you are applying for a cell phone contract, to a credit card company, or applying to mortgage lenders or for auto loans, the company is going to check your credit report and score. Knowing what is a “hard credit check” can help you decide if it is worth it to use the service or not.

How could a hard credit check affect your credit score when a soft credit check will not?

Many consumers have a good credit score, but when you are one of the millions of consumers who do not, it can be difficult to get that coveted loan or credit card. To make sure that you do not have to deal with a hard credit check, you should make sure that you have no missed payments on your credit reports and that you have a diverse mix of credit (credit cards, store cards and installment loans, for example).

A hard inquiry can harm your credit score, but usually by just a few points. But how much your score is affected can depend on your specific financial situation.

Having too many inquiries on your credit report especially within a short period of time may also have an impact. And if your credit report shows multiple credit applications within a short period of time, it might appear to lenders that your finances have changed negatively.

When you apply for credit, as I mentioned, a hard credit score check is the way a potential lender can take a deep dive into your credit history. A putative lender would do so to determine if they should approve you for the credit you are applying for. This is different from a cursory soft credit check so a lender can tell you if you might qualify for a special deal or are doing your own self-assessment.

If you’ve ever before been denied for financing, denied an apartment, or had your car loan application rejected, you probably went through a hard credit check and the financial institution or landlord you approached was not happy with your results.

Soft credit check: How your initial credit limit is determined

The normal question individuals typically ask is why their credit line is not higher. In fact, the question is so usual, some credit card companies have their own applications that you can use to forecast your credit line. Nonetheless, as you may anticipate, the response is not quite as straightforward as the credit card issuers would like you to believe.

Your credit rating is an important metric in establishing what your credit line will be set at. If you have an inadequate credit rating, expect a lower credit limit and various other unfavourable terms. On the other hand, a high credit score offers you the opportunity to shop around to find the best credit card agreement and credit card issuer for you.

Soft credit check: Who creates your credit report and credit score?

Each time you make an application for a credit card, a car loan or home mortgage, your credit report is evaluated by the loan provider you are applying to. Your credit report is a document of the financial commitments you have actually currently incurred (credit cards, personal loans, lines of credit and mortgages) and your payment history. It is obtained from one of the two credit bureaus in Canada.

By now you should understand that the higher your credit score, the better your chances are to be approved for the loan or credit card you are applying for. This is because your credit rating will be seen as a lower threat to default, and therefore the bank will feel more positive that you will pay off any credit extended to you.

TransUnion and Equifax Canada are the two credit bureaus in Canada that contain your credit information. Lenders will use one of these two businesses to do the soft credit check or the hard credit check on a potential borrower or existing customer requesting additional or new credit.

These are private businesses that collect, store and share details concerning just how you use debt. Equifax Canada and TransUnion just collect information from creditors concerning your financial experiences in Canada.

Can a lender do a soft credit check or any type of inquiry without my permission?

If you are applying for credit from a financial institution or another type of lender, you will be asked to provide the authorization for them to do search one of the two major credit bureaus in Canada on you as part of their normal credit process. A lender cannot perform a hard credit pull without your OK.

No pre-authorization is required to do soft pulls. Perhaps you wish to just discover if you meet the requirements for a unique promo they may are promoting on one or more of their credit products. Or, possibly the loan provider wants to get a quick picture of your credit file to see if it is worth investing the time running you through their credit application process. The lender can get a response to both issues by carrying out a soft inquiry on you. That they can do soft credit pulls on their own.

Soft credit check: How long inquiries stay on your credit report

Your credit rating is a snapshot of your financial life, and it is important for obtaining credit, renting an apartment, even getting a job. But what happens if you want to buy a house, apply for a job, or apply for a loan and you have a negative or positive inquiry on your credit report? It is important to know how long an inquiry will remain on your report.

The rules surrounding credit inquiries and how long they stay on your Canadian credit report are a little different than in the US. In the US, hard inquiries generally stay on your record for 2 years. In Canada, there is no specific set amount of time that they stay on your report. The length of time a new inquiry is reported is determined by the business that requested the inquiry. According to Equifax Canada, a hard inquiry may not drop off your report for up to 36 months.

Home & Car Insurance Savings From Good Credit Scores

If you’ve ever shopped for auto insurance or homeowners insurance, you’ve no doubt been pressured to buy coverage you don’t need or a policy that seems like the insurance costs are just too high? If that sounds like you, don’t be ashamed! To avoid this, you should first know your credit score, since that will be the key to getting the best insurance rates.

A good credit score does more than simply affect the interest rates you pay on loans – it also affects the rates you pay on your insurance. This is because insurance companies consider your credit score when setting the rates you pay because it correlates to your likelihood of filing a claim and the likelihood of that claim being paid.

In addition, your mortgage company, your landlord and your car dealership will check your credit score when renting property, leasing a car or deciding how much of a down payment you can afford.

Can prospective employers perform a credit check on me?

If the job application you signed gives a potential employer permission to do a hard inquiry on you, then they can. Bad credit history can have many consequences that far exceed a simple refusal to get a loan. It can prevent you from getting a job, and destroy your self-esteem. How do you know if your bad credit is affecting your life? The first step is to find out what’s on your credit report.

The next step is to realize that your negative financial situation didn’t happen overnight. Your financial problems are a result of both bad luck and poor judgment.

Most of us have been there: you’re ready to start your career, turn over a new leaf and begin a new chapter in your life, but you get rejected for a job because one of the background checks turns up a bad credit report. And you are confused. You didn’t know that your report included bad credit information. And you didn’t know that you could fix a bad credit report.

But you can. As I already mentioned, it starts with you doing a soft inquiry on yourself and finding out what the bad information is. Or, once a year, for free, you can do a hard inquiry on yourself and really drill down to find out what negative information is causing the roadblock to your moving forward in life. I highly recommend that you do so as the start to improving your financial situation.

Soft credit check a summary

I hope you enjoyed the soft credit check Brandon Blog post. You may be very upset and frustrated over the current pandemic situation and your personal financial problems. You may even be downright depressed. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

There may be sufficient value to take care of the secured creditor, but nothing for anyone else, including the unsecured creditors. There may be some business units that should not survive, but if cut out, the business will be viable. A receivership might very well accomplish the goals for the entrepreneur also. I have many times structured a receivership process, in order to meet the goals of the entrepreneur, while satisfying the requirements of the secured creditor.

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

CEBA UPDATE TODAY: OUR SIMPLE HAPPY GUIDE TO CEBA LOAN TERMS

Post author By Brandon Smith
Post date April 28, 2021

ceba update

Canada Emergency Business Account (CEBA)

The CEBA is a unique program established by the federal government to help Canadian businesses adversely impacted by the lockdowns and other business interruptions produced by the COVID-19 pandemic. The program was originally developed to help companies and non-profits that need additional funding and some business relief. Absent this Canada Emergency Business Account program, the funding that might be available from financial institutions would not address the Canadian business realities of then or unfortunately, still now.

In my April 13, 2020, Brandon Blog “COVID-19 BUSINESS SUPPORT: CANADA EMERGENCY BUSINESS ACCOUNT REVIEW“, I described the CEBA program. Since then there has been a CEBA update or two. As most of us understand, the economic situation is still refraining from doing much better. I am currently being contacted by companies who got CEBA funds yet still are insolvent and feel they will either need financial restructuring or bankruptcy. The CEBA funds were valuable yet were insufficient now that we are in the 14th month of this health and wellness pandemic.

In this CEBA update Brandon Blog, I want to go over the most up-to-date upgrade on CEBA and answer several of the more typical inquiries I am now being asked when business owners consider an insolvency filing for their company.

The easiest way to answer what the CEBA update is will be to start fresh and describe what the program was back when first announced and what it is today after the CEBA changes.

CEBA update: Original CEBA eligibility requirements

The original CEBA loan requirements went like this. The CEBA online application process showed up on April 9, 2020. PM Trudeau introduced this brand-new program as part of the federal government’s general program to supply COVID-19 business operations assistance to Canadian companies. At that time, the program saw financial institutions providing $40,000 in financing to each qualifying company, guaranteed by the federal government.

The loans were processed and financed by the Canadian chartered banks. Despite its name, the Canada Emergency Business Account is actually not a business account. It is a non-revolving term loan. It is government-guaranteed lending of $40,000, The CEBA are interest-free loans that are not due for repayment until December 31, 2022. If not repaid by then, interest will then accrue.

The CEBA was developed by the Canadian government to supply COVID-19 business operations assistance to small and medium companies and also non-profit organizations with their most immediate cash requirements during the COVID-19 dilemma. The process was all online. The online application process included a CEBA pre-screen tool. The applicant went through the questions and submitted the required information. The system then:

provided a CEBA pre-screen tool reference number;
told you that the application was submitted through your bank;
said your bank really has nothing to do with the application process; and
confirmed that you will get an answer within 7 to 10 business days.

The requirements for approval for the $40K CEBA were not difficult to meet. The CEBA was readily available to incorporated companies and non-profits who relied upon their respective CRA Business Numbers and had an operational Canada Revenue Agency Business Number (BN) on or before March 1, 2020. The company or non-profit also needed to be businesses with payroll and have a total 2019 payroll filed under the Canada Revenue Agency Business Payroll Number (BN), between $50,000 and $1 million.

CEBA update: Is my business eligible for CEBA and its expansion?

The program requirements have since been amended since the original CEBA came out. The maximum loan balance, other program details and eligibility criteria have changed. To qualify as one of the eligible businesses for a $60,000 CEBA the applicant needs to be an operating company that is a proprietorship, partnership or a Canadian-controlled private corporation that was in operation in Canada on March 1, 2020.

Other types of entities are not qualified for the $60,000 CEBA or $20,000 Canada Emergency Business Account expansion financing. If you previously were approved for the original $40,000 CEBA, you know that you can qualify now for the $20,000 CEBA expansion from the initial $40K amount already funded. So now sole proprietors operating a sole proprietorship and partners in business partnerships also qualify. Family-owned corporations always did and continue to qualify. It seems that the non-profit enterprises do not for the CEBA update program.

The CEBA update application process now adheres to 1 of 2 streams: (i) the Payroll Stream (To be considered as eligible businesses, applicants that are businesses with payroll paid under the Canada Revenue Agency Business Payroll Number (BN), in the 2019 fiscal year between a lower limit of $20,000 to a maximum limit of $1,500,000) or (ii) the Non-Deferrable Expense Stream (Applicants who are businesses with payroll paid under the Canada Revenue Agency Business Payroll Number (BN), of $20,000 or less in the 2019 calendar year).

The actual wording in the program requirements is expressed in a funny way. It talks about having paid employment income, rather than a payroll expense as I have described it above. I guess Parliament wanted to emphasize the fact that the money should be used to including employing Canadians so that they will earn the employment income being paid by the business payroll!

Every applicant needs to meet the following eligibility criteria:

CRA Business Numbers – has an active business account with a CRA Business Number (BN) registered on or before March 1, 2020.
Has an open business chequing/operating account with the proposed lending institution they are applying through at the time the application process is put into play. Examples would be a CIBC Business Operating Account, an RBC Business Deposit Account, or a similar account at any of the other Canadian chartered banks. If you have a Canadian operating business, it should not be too hard to meet this qualification of having an active business chequing account.
Those making an application for the complete $60,000 CEBA, have not previously utilized the Canada Emergency Business Account Program and also will not request support under the CEBA Program at any other financial institution.
Plans to stay open or to go back to opening up as soon as restrictions are lifted.

CEBA update: Non-deferrable expense stream eligibility

If you are applying under the Non-Deferrable expenditures stream, you have to, in addition, comply with some extra eligibility criteria as follows:

Having verifiable non-deferrable expenses between $40,000 and $1,500,000. Eligible non-deferrable expenses can consist of operating costs like property rental fees, real estate tax, insurance policy protection, and utilities. The government says that expenditures for such non-deferrable operating expenses will certainly undergo confirmation and audit, presumably by Canada Revenue Agency.
Submitted an income tax return with the CRA with a tax year ending in 2019 or, if its tax return for fiscal 2019 is not yet due for filing, 2018.

As always, as soon as you have actually finished the online application via your bank, the Government of Canada will examine the application as well as alert you and your bank of the approval or decline of the funding. Your financial institution will put the funds right into your business chequing/ operating account if you are successful.

So this is how the CEBA expansion has changed the eligibility requirements resulting from the CEBA update. It is obvious that the government wants to help businesses have the necessary cash on favourable terms to make necessary expenses for business purposes.

The CEBA update has also extended the CEBA Application Period. The CEBA update also has now extended the to receive applications from businesses to June 30, 2021, (proposed in the recent Budget to be extended to the Fall of 2021) to request a $60,000 CEBA or the $20,000 expansion at their financial institution. Unless the government announces an extension to this date, time is running out.

CEBA update: How many businesses have applied for CEBA?

Here are the statistics of the use of the CEBA program during this difficult time as of this date:

866,750 businesses were approved for CEBA loans;
532,899 businesses were approved for the CEBA update expansion; and
funds were loaned as a result of the above total $46.56 billion.

What are the CEBA loan terms and is there any CEBA event of default?

The most well-known CEBA term loan provisions are:

The CEBA program supplies access to a $60,000 business loan.
0% interest till December 31, 2022.
No principal payments until after December 31, 2022.
The loan is fully open so, all or part of the non-forgiven portion can be repaid prior to January 1, 2023.
Full repayment by December 31, 2022, will only require the borrower to repay $40,000 of the total $60,000 loan for it to be considered fully repaid. Therefore, there is loan forgiveness of $20,000 if repaid by the end of 2022. The federal government is actually calling this loan forgiveness for early repayment.
The interest rate on any outstanding balance after December 31, 2022, is 5% per annum during the “Extended Term”. The Extended Term runs until December 31, 2025. So after the interest-free period, the Extended Term converts it to a 3-year term loan after December 31, 2022, the Initial Term Date. During the Extended Term, monthly interest payments are required. The full principal balance of $60,000 is due no later than December 31, 2025.

There are some CEBA update loan events of default as follows:

The events of default are quite simple. The bank may need you to pay back the loan, upon the incident of any kind of among the following events of default:

you fail in paying any amount due under the CEBA funding;
you don’t pay according to its terms any other non-CEBA financing outstanding to that same financial institution;
you fail to comply with any one of the terms of the CEBA agreement (which really revolves around interest and repayment), you make any false or deceptive statements to the bank, including without restriction, in your CEBA application;
the business commits an act of bankruptcy or becomes insolvent; or
the business is placed in receivership.

It would appear that the only remedy for the bank upon the default of the borrower is to advise that full repayment is due immediately. There are no other specifics in the CEBA loan agreement providing the lender with any other powers.

There is no personal guarantee attached to this CEBA loan. However, there is some language that speaks to the CEBA agreement being binding on “your heirs, your successors and personal representatives – including executors and administrators”. This language did not make any sense when only corporations could apply in the beginning. The language now makes sense because the CEBA update created the CEBA expansion to include sole proprietors and partners, who of course, are people, not companies.

I have received some calls from entrepreneurs who applied for and obtained the CEBA $60K loan expansion funds. Their company is still in financial trouble; it was just able to hang on longer. The business owners want to know if their company has to enter into an insolvency proceeding, what is their risk as it relates to the CEBA repayment?

To date, I have advised them of my understanding of the CEBA loan terms and CEBA loan events of default as outlined above. I also caution entrepreneurs that the company books and records should be able to show both the receipt of the CEBA interest-free loan and that the funds were used for appropriate business purposes.

CEBA update summary

I hope you enjoyed this CEBA update Brandon Blog post on the current rules for the Canada Emergency Business Account. This is one of several government programs to hopefully allow business continuity to survive.

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

EQUALIZATION PAYMENT DIVORCE ONTARIO: THE BASIC RULE FOR MARITAL PROPERTY AND BANKRUPTCY

Post author By Brandon Smith
Post date April 26, 2021

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 on the podcast.

Bankruptcy and divorce: Equalization payment introduction

The pandemic has taken a toll on couples both financially and psychologically, which has actually triggered many to consider going for separation and maybe even filing for bankruptcy. This is not to say that every bankruptcy causes a subsequent divorce, or that every separation will certainly necessitate the declaring of bankruptcy.

In my Brandon Blog dated March 2, 2020, titled “DIVORCE DEBT: NOT ALL EQUALIZATION ISSUES ARE EQUAL IN BANKRUPTCY” I described a decision of the Ontario Superior Court of Justice (Commercial List) where the court decided that the claim for an equalization payment is “personal as between the spouses” and cannot be started by the licensed insolvency trustee. However, if the claim was already started by the spouse prior to his or her bankruptcy assignment, then it is a claim for property that the Trustee can continue to advance.

I thought that was the end of the matter, but apparently not. The bankruptcy trustee, who could have left well enough alone, did not. The trustee in bankruptcy appealed the court’s decision to the Court of Appeal for Ontario. Recently, the three-judge panel released their decision of the appeal that was heard last November.

In this Brandon Blog, I discuss this recent Court of Appeal for Ontario decision dealing with an equalization payment, marital property, divorce and bankruptcy in Ontario.

Bankruptcy and property: Insolvency 101 on what happens to property in a personal bankruptcy

It is a fact that when someone files for personal bankruptcy, the bankruptcy provisions states that all of their property vests in the licensed insolvency trustee administering the file. There is a discrete list of assets set by every province in Canada that is exempt from seizure and therefore cannot be sold by the Trustee. Technically, the licensed insolvency trustee gives back to the bankrupt that property. In practical terms, the Trustee never seizes it. But whenever the topic of bankruptcy under federal bankruptcy laws gets mixed in with the Ontario Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), the discussion on matters about bankruptcy always starts to get murky.

A claim for an equalization payment by one spouse against the other in Ontario family law proceedings meets the definition of property. So if the spouse entitled to the equalization payment files an assignment in bankruptcy, that entitlement is their property which now vests in their licensed insolvency trustee. When collected upon, it is available to the bankruptcy estate and its creditors. However, what if that spouse has yet to make the equalization payment claim and goes bankrupt? Does the Trustee have the right to assert that claim?

What are equalization payments in divorce?

In Canada, each province sets their own family law statutes. When it comes to family property and divorce, there are two different possibilities in Canada. The province can elect for those divorcing spouses to have to split their property equally. This would make them a division of property province under family law.

Alternatively, rather than looking for a division of assets, the province can mandate that each spouse calculate their respective net family property. Then the spouse with the higher net family property value has to either pay money or transfer property to the other spouse so that they end up being equal. Hence the money that would be paid over from one spouse to another is called the equalization payment. This is what happens in Ontario. Ontario is not a property division province but rather is an equalization jurisdiction.

The application for equalization and the equalization payment is totally separate from the claim for and determination of spousal support and child support to the other. The equalization claim falls into the category of non-support-related spousal claims.

Rusinek & Associates v. Arachchilage & Baliah, 2020 ONSC 1090 (CanLII)

In my March 2020 blog referred to above, I described this Ontario family law case combined with the insolvency situation of bankruptcy. You can certainly read it if you want all the details. However, the bottom line of that decision is that under the FLA, the post-separation equalization claim is “personal as between the spouses”.

This means that if a spouse who subsequently becomes bankrupt had not yet made that claim, his or her Trustee cannot start the claim for the determination of equalization on the basis that the claim is a property that vests in the Trustee. However, if the claim had already been made and the equalization process litigation has already begun, and then that spouse becomes bankrupt, the Trustee does take over the right to advance that litigation against the non-bankrupt spouse for the equalization payment which stands in lieu of property rights. Whatever payment comes from it goes to the Trustee for the general benefit of the creditors.

Bankruptcy and equalization payments: Court of Appeal for Ontario says the timing of the bankruptcy matters

From what I have told you so far, you can see that the timing of the person’s voluntary assignment into bankruptcy or the Bankruptcy Order being made (from the filing of a Bankruptcy Application) does matter. For the trustee in bankruptcy to be able to assert that equalization payment claim, the bankrupt spouse had to have already made that claim prior to becoming bankrupt.

The Court of Appeal for Ontario considered the Trustee’s appeal of this lower court decision. It considered the laws around bankruptcy and the FLA and dismissed the appeal. I will now tell you why.

The Court of Appeal stated that a spouse’s claim for equalization becomes property of the bankrupt if that same spouse then declares bankruptcy. The action vests in the trustee in bankruptcy and the Trustee has control over the claim together with the right to get any unpaid equalization payment.

There is no restriction in the Bankruptcy and Insolvency Act (BIA), under the FLA or in the common law, preventing the trustee in bankruptcy from going after it after the now-bankrupt spouse had already started that part of the Family Law litigation.

[NOTE: This bracketed portion is not part of the case heard by the Appeal Court, but this is the appropriate place to share this information with you. I think it is obvious that the bankrupt spouse would not start the equalization claim litigation while being an undischarged bankrupt. Otherwise, the Trustee would be entitled to the proceeds.

Also, presumably, the bankrupt spouse might do better if the non-bankrupt spouse only paid support instead of both support and equalization. I would advise the bankrupt’s family law lawyer to not make an equalization claim, and in return, negotiate for a larger support claim, in lieu of both.

A Trustee cannot directly attach to a support claim. The Trustee would just have to assess that information, along with whatever other income the bankrupt spouse has, to determine if there is any surplus income obligation.]

The Court then went through a thoughtful analysis of whether the entitlement to equalization can be initiated by the licensed insolvency trustee. The Court of Appeal concluded that because the action for equalization is “personal as between the spouses”, only spouses can bring claims for equalization. The Trustee cannot.

It is for these reasons that the Court of Appeal for Ontario confirmed the lower court decision, dismissed the Trustee’s appeal and awarded costs of $10,000 against the Trustee in favour of the non-bankrupt spouse respondent.

I will now go on to provide you with some extra information about divorce proceedings and bankruptcy.

How does an unpaid equalization payment intersect with bankruptcy?

In a bankruptcy, if the non-bankrupt spouse still owes the bankrupt spouse an unpaid equalization payment, the bankruptcy plays no part. That spouse still has to make the payment. Only now, it has to be made to the Trustee.

However, if the spouse who files for bankruptcy owes the non-bankrupt spouse an unpaid equalization payment, that liability is caught in the bankruptcy. The non-bankrupt spouse has a provable ordinary unsecured claim in the bankruptcy of the spouse. As stated above, the bankrupt spouse no longer has to make the equalization payment because it is an unsecured debt and will be discharged from that person’s discharge from bankruptcy.

What happens to spousal and child support payments during bankruptcy? Nothing. Any liability for support, either spousal support or child support, is not eliminated by filing bankruptcy. The bankrupt spouse still has to make those payments. Just like any other spouse, if the bankrupt spouse does not make the support payments, the spouse that is entitled to receive support can obtain collection assistance from the Ontario Family Responsibility Office.

What happens to joint debt if you file for bankruptcy?

Joint debt in a divorce is hard enough to sort out. Layer a bankruptcy on top of that and things may become much clearer, but also potentially unfair. When you file for bankruptcy and have joint debt, it is important to know what happens to the debt. The most common type of joint debt couples share is from joint credit cards. Next would be if one spouse co-signed for or otherwise guaranteed the debts of the other spouse. Other common examples are joint mortgages and joint lines of credit.

A creditor can collect the debt from both you and your co-signer, but in your bankruptcy, the law does not protect your non-bankrupt co-signer from your joint debt. If you file for bankruptcy, your creditors can still come after your co-signer for the debt.

If your estranged spouse is considering bankruptcy as a last-ditch effort to eliminate their overwhelming unsecured debt, it could spell trouble for you if they file for bankruptcy. When they file for bankruptcy, they are trying to erase their unsecured debt. Unfortunately, you will be saddled with the sole responsibility to repay those joint debts. You will have to try as best you can to be protected financially through the divorce process.

You need to decide how you will deal with these debts that your spouse won’t have to pay because of their bankruptcy. If you cannot afford to pay them on your own, in addition to your other living expenses, you may have to consider either bankruptcy or a consumer proposal as an option to save you from this catastrophe.

Are the bankruptcy rules fair, especially given the discussion above about the equalization payment? The BIA is the set of regulations and rules that govern a bankruptcy or insolvency in Canada. The BIA governs both people and companies that have come to be incapable to pay their financial debts. It handles the regulations for the time duration both leading up to insolvency and the declaring of bankruptcy.

The policies established by the BIA have a substantial impact on the lives of debtors and creditors. They are extremely crucial for the survival of the business or person. The rules are fair for everyone. But the effect they have on different stakeholders in an insolvency file may not be very fair.

Equalization payment and Ontario divorce and bankruptcy summary

I hope you enjoyed the equalization payment Brandon Blog post. You may be very frustrated and angry over your marital and financial situations. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

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.

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.

equalization payment

Brandon Blog Post

CERTIFICATE OF APPOINTMENT OF ESTATE TRUSTEE RULES KICK IN RIGHT AFTER YOU LOSE SOMEONE CLOSE TO YOU

Post author By Brandon Smith
Post date April 21, 2021

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.

What is a Certificate of Appointment of Estate Trustee?

For anybody that is a potential Estate Trustee, a Certificate of Appointment of Estate Trustee is a required part of the probate procedure. A Certificate of Appointment of Estate Trustee is a document that is issued by the court and provided to the appointed Estate Trustee.

Regular readers of Brandon Blog know that I have written on estate matters before. You also know that in addition to being a licensed insolvency trustee firm, we also act through our related business, Smith Estate Trustee Ontario, acts as a professional estate trustee for both solvent and insolvent deceased estates.

The purpose of this Brandon Blog is to describe the application for probate process in applying for the Certificate of Appointment of Estate Trustee and the responsibilities of the Estate Trustee and how they must perform their duties according to the various rules.

What does a Certificate of Appointment of Estate Trustee do?

The Certificate of Appointment of Estate Trustee verifies that the individual (or a professional Estate Trustee such as Smith Estate Trustee Ontario or a trust company) has in fact been selected to act as the Estate Trustee. It shows that she or he has the legal authority to deal with the real property (real estate) and personal property of the estate. All of the estate assets.

When is a Certificate of Appointment of Estate Trustee needed?

The Certificate of Appointment of Estate Trustee is not a legal requirement in the province of Ontario. It’s merely a record supplied by the government that verifies that the individual called the Estate Trustee has really been designated. It makes things a great deal much easier when validating to financial institutions as well as various other third parties that you have the authority to act concerning the estate property.

To obtain the probate Certificate, you need to complete the appropriate application form to give to the provincial government with a certified duplicate of the death certificate as proof of death in addition to a duplicate copy of the Will. If there is no Will, the court will certainly issue an order upon the probate application of an interested party for approving a selection of Estate Trustee. The estate lawyers can certainly assist with providing legal advice and completing such an application. This would be in addition to any other forms the province needs the Estate Trustee to submit for probate Ontario.

Avoid Common Errors in Applying for a Certificate of Appointment of Estate Trustee

When applying for a Certificate of Appointment of Estate Trustee, it is always best to get advice from experienced estate lawyers. The Estate Trustee should go to the lawyer for advice on any matters they are unsure about. While most people are concerned about the estate planning process itself, it is equally important to ensure that the application for a Certificate of Appointment of Estate Trustee is completed accurately, completely, and that the appropriate supporting documentation is also provided. If the application is not completed correctly, the executor of the estate is not appointed as the estate trustee, which can delay the estate management and the distribution of the assets.

Applying for a Certificate of Appointment of Estate Trustee is a simple process, but there are many common errors in the application that can result in the application being rejected, delayed, or the application can end up taking more time than it should. Here are some of the most common errors that occur:

Section 7 of the Ontario Estates Act requires that the application for a Certificate of Appointment of Estate Trustee needs to be submitted with the Superior Court of Justice in the locality where the departed lived when they died. If the person did not live in Ontario at the time of death, the application needs to be submitted to the Court in the region in Ontario where the deceased had property when they passed away.
Be consistent in every document to use the exact same names for individuals and also make sure the spelling matches the names set out in any Will. This includes the dearly departed, estate trustee(s) and estate beneficiaries. If they have any “also known as names”, include those too.
All of the following details must be on the court forms, and it must be consistent in all the different forms submitted:
- date of the Will;
- day of death;
- line of work of the dead before they retired;
- chosen work and addresses of the estate trustee(s).

Proper calculation and payment of the estate administration tax payment obligation.
Obtaining and also the filing of an estate administration bond in accordance with Section 35 of the Estates Act, or filing motion material for an application to obtain a court order that does away with the bond requirement.

Issues specific to Applications for a Certificate of Appointment of Estate Trustee With a Will

Sometimes, the person applying for the Certificate of Appointment of Estate Trustee (or succeeding estate trustee), is someone different than the person named in the Will. The named person must relinquish his/her right by filing the appropriate form indicating renunciation of the right to a Certificate of Appointment of Estate Trustee (or succeeding estate trustee) with a Will.

If the applicant is not the person identified as Estate Trustee in the Will, that person Will need to be provided with written authority from beneficiaries that, together, have a majority share in the value of the properties of the estate. Otherwise, they Will need a court order giving them the necessary authorization.

The estate beneficiaries indicated in the Will must be served with notice of the application for a Certificate of Appointment of Estate Trustee. If one or more cannot be served, for example, they no longer live at the only known address and they so far can’t be found, then it must be disclosed.

Issues specific to Applications for a Certificate of Appointment of Estate Trustee Without a Will

To be considered to administer the entire estate process when someone dies without a Will, the following applies:

You must live in Ontario to make the application.
If the departed was divorced at any time, you must make it clear that a prior marriage ended in divorce and what proof you are relying upon to confirm that the departed individual was ended by divorce.
On the application for Certificate of Appointment of Estate Trustee, where you describe why you are entitled to apply for the Certificate, you must include information relating to the authorization offered by individuals that are qualified to a share in the distribution of the estate who, together, are entitled to the majority in the value of the possessions of the estate. Absent such authorization, a court order Will be required.
The estate beneficiaries indicated in the Will must be served with notice of the application for a Certificate of Appointment of Estate Trustee. If one or more cannot be served, for example, they no longer live at the only known address and they so far can’t be found, then it must be disclosed.
certificate of appointment of estate trustee

I’ve been named an estate trustee in a Will. What do I have to do now that I have the Certificate of Appointment of Estate Trustee?

An Estate Trustee is an individual that has been appointed to carry out the estate administration duties after a person passes away. But what does that entail? The obligations consist of:

seeing to it that funeral arrangements have actually been appropriately made and funeral expenses are paid;
amending and filing the amended estate information return, if applicable;
calculating and paying the proper amount of estate administration tax;
locating and safekeeping crucial files;
getting official copies of the death certificate as proof of death;
settling any type of financial debts of the deceased person;
wrapping up any kind of loose ends like communicating with government departments;
dealing with bank officials to collect the funds from and then closing the deceased’s bank accounts;
figuring out how to deal with any property;
dealing with any estate tax issues and preparing and filing final tax returns;
paying the income tax owing; and
distributing the net funds on hand or specific property to the beneficiaries as stipulated in the Will.

Is an Estate Trustee responsible for the debts of the estate?

The Estate Trustee’s responsibility does not extend in the first instance for the debts of an estate. As a trustee, it’s your job to ensure the debts are paid and all of the estate’s legal obligations are fulfilled. However, as an Estate Trustee, it’s important to know how to handle the debts of the estate to make sure you aren’t personally responsible for the debts. However, if the Estate Trustee distributes funds without taking care of business, then the Estate Trustee IS responsible for the known debts not paid.

Does an Estate Trustee have to advertise for creditors of the estate?

This is a great question. I’m sure anyone with a passing familiarity with the estate law knows that it may not be required for an Estate Trustee in Ontario to publish a notice to call for creditors of the estate. However, it certainly is a best practice to do before distributing the remaining assets to the beneficiaries of the estate. Traditionally, advertising was done by inserting a notice in a newspaper. More recently, the NoticeConnect online system has been held in Ontario to be an approved way to advertise online only.

How does an Estate Trustee make a payment from an estate to a child?

If there is a Will, the child is qualified to get his/her share of the estate the way it is laid out in the Will. The Will may establish a trust where payment is made to the child’s parent(s) in trust for the child, or, to a trustee of a trust established for the child.

If there is no Will, then the Estate Trustee is limited to who the funds earmarked for the minor beneficiary can be paid to. There has to be a deferral of payment as an Estate Trustee cannot distribute funds or other types of property to a minor child. It can only be paid to either the Accountant of the Superior Court of Justice or the court-appointed guardian of the property.

The parents of the minor child can apply to the Accountant or guardian for periodic payments to be made for expenses incurred for the benefit of the child. Once the child turns 18 years old, then, they are entitled to their share of the remaining funds.

Certificate of Appointment of Estate Trustee summary

I hope you enjoyed this Certificate of Appointment of Estate Trustee Brandon Blog post. If you are concerned because it is now time to act under the Will, but the named executor is unwilling or incapable of acting, that is where Smith Estate Trustee Ontario can be of assistance. We act as substitute trustees appointed by the court in such situations.

Have you been administering an estate and now you have determined that it is an insolvent estate? 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.

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.

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Brandon Blog Post

FROZEN BANK ACCOUNT: DISCOVER MY RUNDOWN OF WHAT RIGHTS YOU HAVE AND WHAT YOU NEED TO DO NEXT

Post author By Brandon Smith
Post date April 19, 2021

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 this page and click play on the podcast.

Frozen bank account: Can my bank seize my accounts if I file a consumer proposal or bankruptcy?

A frozen bank account is something people usually worry about when they have unpaid financial debts and need to know. There is plenty of mistaken beliefs worrying Canadians about what legal authority the government or creditors need to seize your chequing or interest-bearing accounts, confiscate various other properties including garnishing your income. This is incredibly troubling for people with too much debt considering filing either a consumer proposal or personal bankruptcy.

I know people freak out about their frozen bank account. Rightly so, but it’s not that bad. In this Brandon Blog, I’m going to give you a basic rundown of what rights you have and what you need to do next.

In this Brandon Blog, I discuss the ins and outs of who and how can your bank accounts can get frozen and how an insolvency filing can help you not only to lift the hold on a frozen bank account. It can also get you complete debt settlement and allow you to move forward debt and stress-free.

Who can freeze your bank account in Canada?

We are always asked the question: “Who can freeze my bank account?” There are essentially three different parties who can create your frozen bank account in Canada. They are:

The bank.
The government.
A creditor with unpaid debt from you sued you and won (the judgment creditor).

The latter two require the cooperation of your bank, which they will give.

What does a frozen bank account mean?

When you have a frozen bank account, it means that the bank has for some reason blocked you from using that account. It can be your personal bank account or something else such as a joint account or a business account. The bank for some reason has either temporarily or permanently made the frozen bank account and seized the cash. You will definitely be wanting to start making phone calls to your banking customer service representative!

You can get your bank accounts frozen due to:

Court action because a judgment creditor has had it seized to get repaid, in whole or in part, for an outstanding debt.
Canada Revenue Agency has seized the funds because you or your business owes them money.
Your bank suspects some sort of and the bank flags suspicious activity running through the account they feel they must investigate. Perhaps they suspect money laundering, other criminal activity or other illegal activities. Something running through your account has piqued their activity to create your frozen bank account.
You owe money to the bank for one or more bank loans that have matured and have not been repaid. The bank agreements and loan agreements that you signed gives the bank the right to offset. So not only can they freeze your accounts, they can without getting a judgment offset any balances held by the bank to your credit against the money you owe them. More on this later.

The exact terms of creating the frozen bank account will vary depending on provincial law. What it does mean is that the account holder cannot take any money out. The funds in the account can still be used by the bank to cover any amount owing to them, but the account holder cannot access the funds.

Unpaid Debts to the Government: Canada Revenue Agency (CRA) caused the frozen bank account

There are some standard reasons why CRA may cause your frozen bank account. They are:

You owe money to CRA for personal income tax debts.
Your proprietorship or partnership owes it money for unremitted HST or employee source deductions.
Your company owes CRA money for the unpaid HST tax debts or employee deductions not turned over to them as they should be.

When the Canada Revenue Agency (CRA) freezes your bank account, it is doing it by one of two mechanisms. It has provided your bank with either a third party demand for any funds payable to you or with a Federal Court Order called a “Memorial“.

Either way, CRA has provided your bank with the official documentation requiring your bank to freeze your bank account and remit all funds payable to the bank account owner over to CRA.

The CRA does this in order to get money owed to them. CRA can freeze any bank account. In Ontario, this includes TFSAs and absent a bankruptcy filing, your RRSP is also subject to seizure.

In this Brandon Blog, I am only talking about a frozen bank account and not property in general. What property is subject to a person’s claim of exemption from seizure is a matter of provincial law. Likewise, wage garnishment is also governed by provincial law and is not the subject of this Brandon Blog.

Unpaid debts through creditors: How can creditors freeze my bank account?

If a creditor is looking to collect from you, once they have run out of patience with you, one of the first steps they will take is to sue you. They begin their litigation against you to get a judgment for the amount you owe. If successful, in Ontario, they then provide that judgment to the Sheriff to freeze your bank account. Once the Sheriff serves the judgment notice on the bank, it suspends your right to use your money or assets held at the bank. If a creditor causes you to have a frozen bank account, you will not be able to access your money until the issue is resolved.

It does not matter what the original debt was for – credit card debts default under your credit card agreements, an unsecured loan, payday loans from one or more payday lenders, damages under a contract or any other type of commercial debt. Once the creditor has obtained a judgment, they can get your bank to have your bank account frozen.

Frozen bank account: How to get my bank account unfrozen when I am not insolvent

If you now have an extremely icy bank account as the outcome of a judgment against you or a CRA garnishee, perhaps following a tax audit, you are probably really feeling scared and powerless. While there are no guarantees, there are actions you can take to help get your frozen bank account thawed out and your financial life back on course.

Since you are not insolvent, you cannot even consider an insolvency proceeding. But there are some things you can do.

The first thing you need to do is find out who the perpetrator is that forced your bank to create this deep freeze. Most creditors will get the bank to freeze your account to get you to concentrate on the reality that you need to take care of them. Various other means they have actually made use of to engage with you have clearly not worked. Ask your bank representative who is it that has triggered the icy account.

Since you now know who it is, connect with them. Attempt to reach a bargained negotiation in return for them lifting the freeze promptly on your account. As an example, entering into a payment plan by providing the CRA financial debt collector with a collection of post-dated cheques that will settle your tax debt in full. Absent an insolvency procedure, the CRA agent must decline anything less than 100 cents on the dollar.

If it is a judgment creditor, you may have an opportunity to negotiate a minimized settlement amount if paid instantly. Clearly, the amount will certainly need to be greater than what the creditor anticipates obtaining from your icy bank account. Alternatively, you can enter into a payment schedule that you can honour.

There is no maximum number of hours or days where you can prepare for having your chequing or savings account unfrozen. Each condition will absolutely differ. The intricacies of your negotiations as well as the length of time they take will normally be the guiding aspect.

Consequently, any bargained settlement needs to include an arrangement that will instantly result in your bank raising the freeze and allow you to maintain your cash. Either you or the creditor or both will need to supply your bank with proof of the satisfactory payment arrangement that includes the unfreezing of the frozen bank account.

The one thing I can guarantee you is that neglecting the problem will only slow down the process and will not help your frozen bank account. Your financial institution will certainly clear out your account one way or the other. If you owe your bank, the tried seizure of your account is a default on your loan. The bank will certainly take the cash in your account and offset it versus your loan. Then they will tell the judgment creditor there is no cash available for them.

If it is CRA, your financial institution will send the cash off to them.

If you do not owe your bank any kind of cash, they will send your money to the judgment creditor.

Regardless of which of the above 3 potential outcomes is, if you do not respond to an icy account, the economic repercussions can end up being far more severe.

Frozen bank account: What bankruptcy protection does the Bankruptcy and Insolvency Act provide to get my bank account unfrozen

If you find yourself with too much financial debt, especially from unsettled tax obligations, you might be thinking of bankruptcy. Though the word “bankruptcy” is frequently made use of to explain any type of situation in which a person is unable to pay their debts, the legal term “bankruptcy” really describes a particular legal process administered by the Bankruptcy and Insolvency Act (Canada) (BIA).

In reality, there are three possible provisions of the BIA that can be used by a person to not only do a government-authorized debt settlement program. It also has the added benefit of immediately unfreezing your bank account. The three possible choices are:

Consumer proposal debt settlement plan
Division I proposal debt settlement plan
Bankruptcy

Let’s focus on the bankruptcy protection possibilities, being a consumer proposal or a Division I proposal, rather than a pure bankruptcy liquidation. If you have a bank account that is iced, a filing under the BIA invokes an immediate stay of proceedings. This means that once a person has filed with the licensed insolvency trustee, any action to try to enforce collection on debt cannot be started or continued. This includes the frozen bank account as part of a seizure. Therefore the bank account must be unfrozen once the bank receives notice of the filing.

There are only two exceptions to this for your frozen bank account: one lawful and one debatable.

Lawful – If the seizure has been completed before the bank receives notice of the filing, then it is game over. Your account is unfrozen, but there is no cash left in it. This means the bank has made the payment to itself already, already transferred the money to CRA.

In the case of a creditor, the Sheriff has had to have distributed the money and it has to have already been received by the creditor. If the Sheriff still has it, he cannot proceed to send it on to the creditor. In the case of a proposal, he must return it to the insolvent person who has filed. If a bankruptcy, the Sheriff must hand the money over to the Trustee.

Debatable – You owe the bank money. Once they receive notice of your filing, your lender takes the position that they have the right to offset any money on deposit to your credit against any amount you owe them. After you file and they receive notice, they empty out your account and apply for the money to be put against your bank loan or credit card debt. This action of maintaining your frozen bank account and keeping the cash is debatable.

Can you open a new bank account if your account is frozen? Definitely, just not at the same bank!

Most people can open a new bank account when they have a frozen bank account. However, why would you want to open a new one up with the same bank? They probably view accounts frozen for nonpayment as accounts that are high risk. Your creditors also now know where you bank. If you owe your bank money, as I have already discussed, you cannot keep your cash there anymore anyway.

The frozen bank account prevents you from withdrawing your money. If you have had your bank accounts frozen multiple times, the bank simply won’t issue another account and will be very happy to see you leave.

We always advise anyone contemplating filing a proposal or for bankruptcy, to set up a new account. Then, advise anyone who automatically deposits money into your account, that they should start depositing into your new account. Like your employer or the government.

It is also important to tell anyone you have granted a pre-authorized withdrawal to of the new bank account and make arrangements for them to pull the money out of the new account once there is money in it. Like your mortgagee you make your monthly mortgage payment to or your landlord you pay rent to, utilities, the vehicle loan company. Now your bank or their credit card division cannot automatically take your money to offset your liability to them.

We normally steer people towards one of the online banks, as it is unlikely that they owe money to them. We do not earn any commission for steering business to any bank, so we do not have a conflict. Something like a Simplii or EQ Bank savings and chequing accounts seem to work just fine. Then the person files and nobody can take some debatable action against the funds in their bank account.

Frozen bank account: Get a personalized no-cost debt-free plan today

I hope you enjoyed the frozen bank account Brandon Blog post. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

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

WHAT IS A RECEIVERSHIP? OUR COMPLETE GUIDE TO RECEIVERSHIP SOLUTIONS

Post author By Brandon Smith
Post date April 14, 2021

what is a receivership?

What is a receivership?

What is a receivership is a question I am asked often. Receivership is a remedy available to secured lenders to recoup as much of their debt as possible. A secured creditor, normally a financial institution, has lent funds to the company or individual under a secured financing transaction. They did it this way so in the event the company or person defaults on its finance payments, they can enforce against the assets subject to the security.

Receivership is a different process than bankruptcy for the sale of the properties of a corporation. In Canada, the secured creditor is typically the Bank as the lender. Normally, when a borrower misses payments, they tend to be insolvent. However, it is possible to have a receivership in Ontario even if the borrower is not insolvent.

In this Brandon Blog, I am going to tell you all about receivership. What is a receivership? How it works. When it can be used? What types of receivership are there?

What is a receivership? Examples of receivership in a sentence

What is a receivership? Receivership is a legal proceeding. Either a secured creditor privately appoints the receiver by instrument or a court appoints a person or company, called a receiver, to collect and manage the assets of a person or business that is unable to manage those assets effectively.

To understand more about the receivership process, we first need to look at the types of receivership. These are:

Liquidating receivership – This is a type of receivership that is brought about when a company ceases operations because the management of the company is unable to make it a viable business again. If the business is not viable, then the receiver will not operate it and will find buyers for the assets.
Operating receivership – This form of receivership is when parts of the company are viable or must otherwise continue operating under receivership. The business assets have a great deal of value if operating, but if shut down, relatively no value. In this case, the receiver will continue operating the business and the secured creditor will agree to lend funds if the business’s cash flow is insufficient. While operating the business, the receiver will also look for buyers.

The word “receiver” originally meant “a person appointed by a court to manage the affairs of another, especially a bankrupt or insolvent“. The term is now more widely applied and refers to a person placed in temporary charge and control of another person’s assets or a business entity. A receivership is a form of governance used in a wide range of situations. It is particularly common in the fields of law and business.

What is a receivership in a sentence – A receivership is a legal process started by a secured creditor either privately appointing a receiver by instrument or making an application to the court for an order that forces a party to carry out the duties of a receiver over the assets of a company or person.

In Canada, section 243(4) of the Bankruptcy and Insolvency Act (Canada) (BIA) dictates that only a licensed insolvency trustee can act as a receiver. From the above, you should now realize that there are two types of receivers: (i) privately appointed receiver; and (ii) court-appointed receiver.

What is a receivership? 10 – Day Notice of Intention to Enforce Security

Section 244 of the BIA relates to a secured creditor who intends to enforce its security against an insolvent debtor, either through private appointment or by making an application to the court. This section states that any secured creditor who intends to enforce against all, or substantially all, of the inventory, accounts receivable or other property used by the insolvent debtor in its business, must give adequate notice. The notice must be in writing by using the form prescribed by the BIA.

The BIA defines adequate as a minimum of 10 days. A secured creditor must send out the 10-day notice of intention to enforce security and cannot enforce its security until the 10 days have expired unless the debtor consents in writing to earlier enforcement. The purpose of giving the 10-day notice is to allow the insolvent debtor a chance to either negotiate some resolution with the secured creditor or otherwise attempt to reorganize its financial affairs. An example of reorganizing would be speaking with new potential lenders, consideration of assets that could be sold to repay or otherwise reduce the indebtedness to the unhappy secured creditor.

The insolvent debtor may also be considering invoking an insolvency process such as a Division I Proposal under the BIA to reorganize all of its debts to implement a financial reorganization strategy. If a proposal or a notice of intention to make a proposal under the BIA is filed by the insolvent debtor before the expiry of the 10 day period, then the enforcement action of the secured creditor has initially stayed.

That secured creditor would have to make an application to the court to show that it has lost total confidence in the insolvent debtor’s abilities and it will not support any reorganization attempt. The application is to lift the automatic stay of proceedings that happened when the insolvent debtor filed, to allow the secured creditor to enforce its security against the assets to try to recover as much of the secured debt as possible through the appointment of a receiver.

Why did 10 days become the official notice period? This was part of amendments to the BIA made in 2009. It arose as a .esult of court decisions over what is reasonable notice. The most famous case is one that insolvency practitioners refer to as Lister v. Dunlop. The case made its way all the way up to the Supreme Court of Canada. The proper name of the case is R.E. Lister Ltd. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726. The decision was released on May 31, 1982.

The case dealt with a variety of issues, including what is receivership. Another of the issues considered was a reasonable notice to be given when a secured creditor demanded repayment of its demand loan, due to one or more defaults on loan? The most common default is defaulting on making the required loan payments on time. The loan agreement and debenture securing the loan stated that it was a demand loan and that the lender must give reasonable notice when making the demand.

However, in the “old days”, there was never a definition of what reasonable notice was. In fact, in Ontario, the law at the time was that reasonable notice only came into being if the business owner asked for a time to repay the loan. What was reasonable was a matter of discussion and negotiation. In Lister v. Dunlop, it was determined that Dunlop did not provide reasonable notice, based on the specific facts in that case.

Case law evolved and eventually, in 2009, the BIA was amended as part of the new provisions to bring receivership under the BIA and receivers subject to the supervision of the Office of the Superintendent of Bankruptcy Canada. The 10 day notice period was Parliament’s way to try to codify what reasonable notice is.

Court Appointed Receivers vs. Privately Appointed Receivers

As discussed above, receivers are appointed when secured creditors want to recover on their secured loans. Receivership is a remedy for secured creditors. It is not a remedy for unsecured creditors. The intent is for the receiver to take possession of the insolvent company assets subject to the security agreement and conduct a sale of assets. The proceeds of the sale will then be distributed in accordance with the priority of the creditors under the BIA. The secured creditor should want to make sure that it is in the first place to receive the funds from the receiver, for the receivership process they are paying for!

From the above, by now, you have probably realized that a privately appointed receiver is appointed in writing by the secured creditor. The receiver gets properly retained and then is given an appointment letter by the secured creditor after the 10 day notice period has either passed or was waived by the insolvent debtor. The privately appointed receiver gets its powers from the security documents which will outline the approved steps the receiver can take.

Court-appointed receivers, as the term implies, are appointed by the court. The secured creditor properly retains the receiver and makes an application to the court for the appointment of the receiver. The secured creditor is the plaintiff in this litigation. If the court grants the order, then the court-appointed receiver begins the receivership administration. The powers and responsibilities of the court-appointed receiver come from the court order, called the Appointment Order.

The steps the receiver will take in determining what method will realize the most money possible from the sale of assets should be pretty well identical under both a court-appointed receivership and a privately appointed receivership. The analysis of how and the steps to be taken to realize the most money possible from the assets of the company in receivership should be the same, regardless of the form of appointment.

Either way, as stated above, the receiver must be a licensed insolvency trustee who is experienced in acting as a licensed insolvency practitioner.

What is a receivership? Duties of a receiver

Receivers are required to act honestly and in good faith. A privately appointed receiver has a duty to the secured creditor who appointed the receiver. A court-appointed receiver has a duty to act in good faith to all creditors.

The main roles of the receiver, whether private or court-appointed, can be summarized as to:

Secure all the assets of the insolvent debtor pledged under the security agreement or covered by the Appointment Order.
Make sure the receiver has control of property, the assets are conserved and properly insured.
Advance the rights of the debtor with the approval of either the secured creditor or the court. This could include continuing or beginning any necessary litigation.
Formulate the plan to maximize the realization from the sale of assets. This also involves a decision as to whether or not to operate the business of the company.
Offer the assets for sale in a properly advertised public sale.
Complete the sale and distribute the net proceeds in accordance with the provisions of the BIA.
Make regular reporting to the court and/or the appointing creditor
Obtain the approval of the secured creditor, and under a court appointment, approval of the court for all actions to be taken by the receiver.
In a court appointment, to obtain the approval of the court for its fee and disbursements and for those of the receiver’s legal counsel.

The Appointment Order generally will give the court-appointed receiver extensive powers.

I want to summarize the difference between company receivership and bankruptcy

I find that many times people will confuse the terms receivership and bankruptcy. What is a receivership is not the same as what is bankruptcy. I want to summarize the difference between company receivership and bankruptcy. There are important differences between bankruptcy and receivership.

The terms bankruptcy and receivership are often mistakenly used; they are not the very same thing. Bankruptcy is a legal process for unsecured creditors. The bankruptcy of a person and that person’s discharge from bankruptcy acts to discharge that person’s unsecured debt. As a company is never discharged from bankruptcy, the bankruptcy process has the effect of ending the company’s business.

What is a receivership? Receivership on the other hand, is a legal process for the benefit of secured creditors that safeguards their security if an insolvent borrower defaults on its secured debt financial obligations.

What is a receivership? Is receivership the right solution for you?

I hope you enjoyed the what is a receivership Brandon Blog post. I have gone to great lengths to describe what is a receivership, the different types of receivership and that it is a remedy for secured creditors. However, many times, if properly handled, it can also assist the business owner. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due and is looking for a way out, a way to sell the business or a way to get rid of the sick parts of the business and keep the good parts.

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.

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What is a receivership?

What is a receivership? Examples of receivership in a sentence

What is a receivership? 10 – Day Notice of Intention to Enforce Security

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I want to summarize the difference between company receivership and bankruptcy

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