Ira Smith Trustee & Receiver Inc.

DEBT COLLECTIONS NEWS: EXPECT MENACING DEBT COLLECTIONS ACTIVITY TO PICK UP AS THE ECONOMY REOPENS

Post author By Brandon Smith
Post date March 8, 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 debt collections Brandon Blog, please scroll to the very bottom and click play on the podcast.

Expect debt collections activity to pick up as economy reopens: experts

On March 2, 2021, The Canadian Press published an article by Salmaan Farooqui titled Expect debt collections activity to pick up as economy reopens: experts. The crux of the article is that credit specialists state Canadian consumers who owe money must prepare for debt collection agencies to increase their activities as the Canadian economy reopens.

During 2020, lenders and by extension, their collections agencies, had eased up on debt collections from Canadian households and companies. The reason for this drop in demands being made on outstanding debt was the COVID-19 pandemic. Lenders knew that all Canadians were hurting and there were even some loan deferral programs put into place.

But these credit experts are now seeing signs of debt collections picking up. Statistics Canada reported that the Canadian economy started to bounce back in January 2021. No doubt this pickup in the economic activity is making creditors consider if now is a good time to start taking action to try to collect on credit card and other delinquent debt.

As the article indicates, there is a fair bit of pent-up demand now for collection agency services. So if you are one of those expecting calls from debt collection agencies, here are some tips that they do not want you to know.

Debt collections: What is a debt collection agency?

The best answer is found in the question itself: A debt collection agency is an organization that collects debts. Now, ask yourself the follow-up question: What is a debt? It’s money that you owe to another person, company or organization.

In essence, debt collection agencies are hired by businesses and individuals to collect money that is owed to them. The agencies work for the creditors and not for consumers.

In Ontario, collections agencies or debt collectors are people or companies who:

obtains or arranges for settlement of debts owing to a person or company;
sells forms or letters claiming to be a debt collections system;
offers debt settlement services; or
buys up from lenders different types of debt that are in arrears and tries to collect on the debts.

Ontario debt collectors need to pass the eligibility requirements to register and operate a collection agency.

Debt collections: What debt collectors do

When a person or company is unable to pay what is owed, they are said to be in debt. When a creditor cannot collect the debt, the creditor may contact a debt collection agency for assistance.

A debt collector contacts the individual or business that owes the money and attempts to collect debts owed to the debt collector’s client. Debt collectors earn a commission of around 25% of the money collected. They are not allowed to harass or threaten people to get money.

In Canada, the law on debt collections and debt collectors is set by the individual provincial governments. In Ontario, the Collection and Debt Settlement Services Act, R.S.O. 1990, c. C.14 sets out all the requirements that collections agencies and each collection agent must abide by.

How Reputable Collectors Operate

We have all heard horror stories about collectors. Reputable collectors use their reputations to help recover funds. For example, if you are a lawyer specializing in debt collections, you use your reputation to persuade clients that you will recover the funds owed to them. If you are a supplier, you can use your reputation to persuade a debtor to pay. If you can prove your reputation, you have a better chance of collecting the monies owed to you.

Let’s say you’re a collector, and you’ve been retained to collect on a debt. The debtor has previously agreed to repay the debt but has not yet done so. What do you do next? Reputable debt collectors will first send a demand letter that also acts as a debt validation letter.

In the letter, they confirm the debt and give a certain period of time for the debtor to pay. If the debtor does not then contact the collector to try to enter into a debt settlement plan, then the collector starts calling the debtor to collect on the debt. But there’s a chance that these activities will not be enough to get the debtor to pay. In fact, the debtor might even become hostile. In that case, a lawsuit may be their next step.

What to Expect When You Have Debt in Collections

Canadian debt collectors are regulated by the province they operate in. They keep creditors from giving up on their credit delinquencies. In most cases, debt that gets to the debt collections stage is in the hands of a debt collector within a few months of the date the debt went into default. Debt collectors have the power to negotiate settlements for delinquent debt. Their success rate in collecting on debt is better than that of a creditor. The debt collector will make one or more attempts to collect on the debt, usually first by mail and then by phone.

If you have received a letter from a debt collector, or you are being sued for any outstanding debts, you are at a turning point in your financial life. You may have already begun to feel overwhelmed and don’t know where to turn. If you have been sued, the court may have already ordered you to pay. This can feel overwhelming, but there are options for you to consider.

With a debt in default, credit scores suffer. Debt collectors will report any unpaid debt to the credit bureaus, regardless of whether or not the debt is legitimate. It will negatively affect your credit score.

This is because the credit bureaus consider unpaid debt collections to be a negative financial obligation or credit risk. If you have a debt in default, you are probably worried about your credit score.

Debt collections: What Can a Collection Agency Do To Me in Canada?

A collection agency can demand payment for an outstanding debt. When the debt is handed over to a collection agency to try to recover the debt, that places a bad mark on your credit report. With you being in debt collections, you will have to pay some money if you want to settle the debt. The payment will depend on the situation, and there is a lot to consider when making a decision.

For example, you will need to consider how much money you owe and how much the collection agency will require you to pay. When you have outstanding debt, it is important that you make sure you either pay it in full if you can afford to, work out a payment plan to pay the full amount over time or, see if you can settle with the collection agency for a reduced amount you can afford to pay immediately. This will avoid the potential for the collection agency to turn the account over to a lawyer and take legal action against you.

Debt Collections: Can a Collection Agency Charge Interest in Canada?

The rate of interest that some debt collection agencies charge their customers is quite high. The reason is that the type of debt they are collecting, such as credit card debt, originally charged a high rate of interest on late or defaulted payments, or on the outstanding balance if you only made minimum payments.

A lot of Canadians do not know that a debt collection agency in Canada can charge interest on the outstanding financial obligation. A collection agency may be able to charge interest on the debts they are collecting. Nevertheless, this can be no greater than what was originally described in the agreement between the lender and customer.

So, while they can bill you interest just like a lender can, they cannot control how much the interest is and cannot tack on any extra charges, such as for their collection service.

Debt Collections: What Should You Do If You Are Being Pestered By a Collection Agency?

So, what should you do if they won’t leave you alone? Well, the most effective answer is to, certainly, answer them and agree to pay your financial obligations. This can be done by paying completely, setting up a payment plan, or reaching an agreement to pay a lesser amount immediately.

Each option will have its pros and cons, and its success relies upon your financial scenario as well as preferences. Typically speaking, it is best to pay the financial debt completely. However, I recognize that can be challenging, specifically if the amount of debt you owe is quite considerable. Any way that you are able to get this debt off of your credit report as well as off of your back is a good thing. Any one of the techniques I mentioned is much better than just allowing the financial debt to age and worsen.

The debt collection agencies will be calling

Information from Equifax Canada reveals that just 24 percent of debt-ridden Canadians who accessed deferral programs beginning in 2020 were able to utilize the breathing space to improve their credit situation.

So what we discussed so far is:

The Canadian economy seems to be starting its recovery and should show economic growth in 2021. For sure there are still people feeling pain in different sectors of the economy and we are not finished with the shutdown conditions in Toronto and elsewhere in Ontario.
How the debt collections business works in Ontario.
There are many Canadians who are debt-ridden.
If everyone in Canada pulled their credit report only 24% of the reports would show an improvement since the COVID-19 pandemic began.
The news according to the experts is that there will be growth in the debt collections industry. These businesses are going to return to make their phone calls to consumers trying to collect on old unpaid debts. They may even start legal action against some borrowers.

So what is next as the economy and consumer confidence pick up is that debt collections activities will pick up again too. What can the remaining 76% of Canadians who could not improve their situation since the COVID-19 virus hit do when the bill collectors call? There are various options for them, and the 24% that wish to still make improvements to their credit reports and credit scores. Here are some suggestions.

6 fantastic reasons to create and follow a household budget to track your household spending

As you know, I have written many blogs on the benefits of preparing, monitoring and following a budget for your household spending. The advantages of doing so include:

Here are 6 fantastic reasons you should have a household budget plan:

A spending plan offers you control over your cash: A budget plan is a list of all sources of your monthly income and all your expenses that you need to make those monthly payments on. It enables you to plan how you will use your cash. As opposed to money just flying out of your wallet, you make willful decisions on where you desire your cash to go. You’ll never have to wonder at the end of the month where your cash went.
A family budget keeps you concentrated on your financial objectives: Budgeting will permit you to fulfill your economic objectives – paying down debt should be the primary objective so that you don’t get nasty calls from the debt collectors. Then you can allocate savings for other purposes such as an emergency fund, a vacation, money for a retirement savings plan and purchasing a home. With a budget, you’ll recognize specifically what you can afford and you can choose where your cash is spent. For example, if your immediate objective is to save for that down payment on a condo or house, then you might need to abandon that vacation you intended to take. Your budget plan will inform you precisely what you can or can’t afford.
A household budget will make certain that you don’t spend what you don’t have: Credit cards provide such ease of use but that is also what makes them really easy to up your spending since it does not feel like there is any real money traded in the deal. Canadians can rack up serious charge card bills and land up deep in the red before they realize what’s happened. When you create and adhere to your budget plan you have to count every little amount you spend, even if it’s a credit card purchase. You will not wake up deep in the red, wondering just how you arrived at that place.
A spending plan will prepare you for the unanticipated: Every budget plan should have a rainy day fund for those unforeseen expenses. It’s suggested that you must budget for 3 months worth of costs for when there may be an unexpected layoff or various other unplanned major expenditures. Do not be alarmed; you don’t have to create that 3-month cash fund immediately. Grow your fund up gradually. If you haven’t started one yet, then even a small amount each month set aside is an improvement.
A family budget minimizes stress: Many Canadians panic on a monthly basis about where the money will come from to pay their expenses. A budget will offer you peace of mind. It shows you just how much you earn and also what your expenses are. If need be you can decrease unneeded expenses or try to get added work to live within a balanced budget plan. Say goodbye to panic at the end of the month.
A budget plan can help you get the retired life you’ve been dreaming of: Saving for your retirement is very crucial and your spending plan can help you save for your future. Set aside part of your revenue on a monthly basis for retirement savings. Begin early and also constantly stay with it. The money you save now will certainly determine the kind of retired life you can anticipate.

When budgeting alone is not enough and you need some debt settlement

In many previous Brandon Blogs, I have described the important role of the community-based non-profit credit counselling organization. I am not talking about for-profit debt counselling services that have inviting advertising and jingles. Those kinds of organizations you must stay away from. In fact, one is defending a class-action lawsuit in British Columbia. If the class-action lawsuit is successful, it and companies just like it will be put out of business.

These companies suck fees out of the debtor until they cannot pay anymore. Then they walk you down to their favourite licensed insolvency trustee to file a consumer proposal. Consumer proposals are the only federal government-approved debt settlement plan. Only a licensed insolvency trustee can administer consumer proposals.

You could have saved the fees that you really couldn’t afford to pay in the first place, just by going for a no-cost consultation first with the licensed insolvency trustee.

What I am talking about is the true non-profit debt counselling agency. They do not charge you fees. They can review your budget to make sure that it is realistic and give you additional help. They can also try to strike a deal with your creditors for you to either pay the full balance out over time without additional interest or penalties or, a reduced payout now.

Can you raise money on a payment plan that you can afford the monthly payments?

Should you consolidate your unsecured debts? Consolidation is the combining of unsecured debts into one low monthly payment with one creditor. These loans typically carry a lower interest rate than the original credit cards or other unsecured debts. You have to make sure that the terms of the consolidation loan are as good as or better than their current credit card terms.

When it comes to getting a consolidation loan, there are a few things you should know. First, a consolidation loan is a loan that you take out to pay off multiple other loans. Second, you may already have a consolidation loan if you have a home equity loan or a home equity line of credit. If you have an unsecured loan, you can consolidate it into a secured loan, where the creditor can take your home if you don’t pay back the loan.

Turning an unsecured loan into a secured loan is not something you should do if you are already contemplating filing a consumer proposal or an assignment in bankruptcy. However, working with your financial advisor, accountant or non-profit credit counselling services agency, you may find that the risk is worth it. That would be because your budget shows that you can afford the lower monthly payment repayment plan if you get the debt consolidation loan. It is also good if it actually helps you avoid an insolvency filing.

Aggressive debt collections techniques may force some into an insolvency filing

This would be the last step if any of the above options do not work for some of the 76% of Canadians with high debt levels who have not been able to improve their debt situation since the onset of COVID-19 cases. The purpose of this Brandon Blog is not to go into detail on the consumer proposal or bankruptcy processes. I have written many detailed blogs before on each of these insolvency processes. You can find them by using the search function at the top of this blog.

These two would be a great place for you to start:

Debt collections summary

Everyone is hoping that the negative effects of the coronavirus pandemic will soon be in our rearview mirror and Canada will experience continued growth. The article referred to at the beginning of this blog says that the experts feel that soon credit collectors will be increasingly active. You will start receiving those harassing phone calls again. They will be taking action from debt against you, which could even include legal action against you.

If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with theIra 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.

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

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

Tags can a collection agency charge interest in Canada, Canadian households, collection agency, Collection and Debt Settlement Services Act, Consumer Proposal, covid-19 pandemic, debt collection, debt collection agencies, debt collections, debt consolidation loan, debt settlement, expect debt collections activity to pick up as economy reopens, Ira Smith Trustee, Statistics Canada, what can a collection agency do to me in Canada, what debt collectors do, what is a debt collection agency, what to expect when you have debt in collections

Brandon Blog Post

BANKRUPTCY FILINGS CANADA: THE SENSELESS TOP 12 MISTAKES TO AVOID WHEN CONSIDERING FILING FOR BANKRUPTCY

Post author By Brandon Smith
Post date March 3, 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.

Bankruptcy filings Canada introduction

It’s not easy to admit that you’re in over your head with debt. One way Canadians can fix their debt problems is through bankruptcy filings Canada. Availing yourself of an insolvency process can feel like an enormous weight off your shoulders. Unfortunately, that relief is often short-lived if did one or more of the things you should not do before taking the plunge into the bankruptcy process.

In this Brandon’s Blog, I discuss the common bankruptcy mistakes people make before they seek the advice of a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee). Stay away from these common mistakes and you should have a much easier time returning to a solvent and stress-free life.

What should you not do before filing bankruptcy?

If you’re considering filing for bankruptcy, be aware that there are some things you should not do, and others you should do, to protect yourself and your assets. The bankruptcy filings Canada mistakes I am going to explain in this Brandon’s Blog are:

Trying to hide assets from your creditors:
- Transferring assets to a third party (such as a family member or friend).
- Disposing of assets, for example, by giving them away or selling them for far below their fair market value.
- Failing to declare all of your assets or all of your liabilities on your sworn Statement of Affairs under penalty of perjury.
Staying clear of loading up on credit card debt or other unsecured debts.
Paying off family debts a short period of time before declaring bankruptcy.
Waiting too long to consult with a Trustee.
Taking extra taxes out of your paycheque.
Cashing in or making early withdrawals from retirement accounts.
Refinancing your mortgage or increasing lines of credit against your real estate to settle unsecured financial obligations.
Keeping debt that you cannot afford to.
Making the wrong type of filing.

By avoiding the things you should not do, you will be the honest but unfortunate debtor. That is the type of person that the Canadian bankruptcy law is meant to help.

***Common mistakes*: Trying to hide assets**

If you’re thinking about declaring bankruptcy because you’re overwhelmed by your debt, it’s important to know that you cannot hide assets from creditors during the bankruptcy process. There are a number of ways people try to do this.

The most common ones in bankruptcy filings Canada are:

Transferring assets to a third party (such as a family member or friend) on the eve of bankruptcy.
Disposing of assets, for example, by giving them away or selling them for far below their fair market value.
Failing to declare all of your assets or all of your liabilities on your sworn Statement of Affairs.

It’s also important to understand that if you choose to hide assets from the court and your creditors, it’s likely that they’ll find out—and they will not be happy when they do!

Transfers of assets or disposing of them for less than fair value is caught under the category of transfers at undervalue. The Trustee can attack any transfers at undervalue and will be successful in getting a judgement against the party you made the transfer to.

A transfer at undervalue is defined in section 2 of the Bankruptcy and Insolvency Act (Canada) (BIA) as disposing of property or providing services for which either no value is obtained by the debtor/bankrupt or for which the value gotten by the debtor/bankrupt is obviously less than the fair market value of the consideration handed over by the debtor. You certainly won’t be doing your friend or family member any favours by having done this.

***Bankruptcy filings Canada*: Debtor trying to hide assets usually doesn’t work and could be counterproductive due to exemption categories**

Failing to declare assets may or may not work. If you are caught, again, this spells trouble. The Trustee is required to perform an investigation and many times there are tell-tale signs that not all assets have been declared. I have many times found when reviewing a bankrupt’s bank statements, regular automatic withdrawals for life insurance, yet no life insurance policy or CSV in a life insurance policy was declared. The same goes for vehicle insurance premiums.

Contrary to popular belief, many times when a person tries to scam the bankruptcy filings Canada system, it is not a very sophisticated one. In fact, most times they are just plain dumb and the person is exposed.

The irony is that if they listed all of their assets, the ones they tried to hide may very well have fit under one of their bankruptcy exemptions. Perhaps the insurance policy was a term life policy, so it had no CSV. Or, when the policy was first taken out, the person designated a spouse or child as their designated beneficiary.

In that case, the entire CSV or the proceeds from the life insurance policy if the bankrupt died, would be exempt from seizure by the Trustee. The same is true with a vehicle. Perhaps their equity in the vehicle would fit under their bankruptcy exemption; either in its own right or after taking into account any loan secured against the vehicle.

So with the possibility of no loss of the asset due to a bankruptcy exemption, the person has committed a bankruptcy offence. Or, the asset involved in the transfer under value could have been saved in some way if the debtor had only made full disclosure to the Trustee before filing. Many times we can help a person perform a successful restructuring consumer proposal and keep their assets, rather than losing them in bankruptcy. It is possible to avoid bankruptcy and not commit a bankruptcy offence just by being open and honest and getting good advice ahead of time.

bankruptcy filings canada

Common mistakes: Do Not Incur Any Additional Debts like maxing out credit cards before filing bankruptcy

You’re probably already knee-deep in debt and have been for quite some time. Maybe you’ve tried to get out from under it by yourself but it just hasn’t worked. It doesn’t mean you’re a bad person, it just means you need a fresh start, and that’s what a Trustee can do for you. If you’re thinking about filing any type of bankruptcy under the BIA, the first thing you need to do is stop incurring new debt.

The last thing you need is more debt and more debt collectors calling you. As well, you may very well be committing a bankruptcy offence, especially if you take on the new debt within 3 months of the date of bankruptcy. You were probably insolvent at that time, and taking on more debt, under those circumstances, is a bankruptcy offence.

What are the ramifications? Your Trustee will have to oppose your discharge and the creditor(s) who realize that their debt was further run up when you knew, or ought to have known, that you were going bankrupt will also oppose.

So especially as a first-time bankrupt, instead of possibly going through the bankruptcy process unscathed and discharged in as early as 9 months, you will be undischarged bankrupt perhaps for years and then face the potential of harsh repayment conditions in order to get a bankruptcy discharge. It really isn’t worth it.

Common Bankruptcy mistakes: Do Not Repay Relatives or Insiders

The BIA is a federal law that governs bankruptcy and insolvency in Canada. This Act is a comprehensive piece of legislation that is meant to protect both creditors and debtors while providing the tools needed for a debtor to start over with a clean slate.

Bankruptcy filings Canada are administered under the Canadian bankruptcy law has rules and regulations regarding how you can file and proceed with a bankruptcy application. One of them is that you are not allowed on the eve of bankruptcy to prefer any of your creditors by repaying some, but not others. No one, and especially, your relatives and insiders, should be repaid right before you are declaring bankruptcy.

The Trustee is required to review your financial history including looking at your bank statements and will no doubt find the preference payments. Making preference payments is a bankruptcy offence and will negatively affect your ability to get a discharge from bankruptcy.

Bankruptcy filings Canada: Waiting too long for consultations with Trustees

The question of whether or not you should file for bankruptcy is a difficult one and should be taken seriously. If you’ve just received a notice of civil action from a creditor, or if you’re worried about your upcoming income tax bill, it is time to speak with an experienced Canadian Trustee to discuss your options.

Before you jump into filing bankruptcy, however, it’s important to take a step back and consider the consequences. It may be that filing for bankruptcy is the wrong move for you. If you meet with a Trustee at the first sign of trouble, rather than waiting until you are up against the time crunch of an impending deadline, the Trustee may be able to recommend other options for you.

One of those options is filing a consumer proposal to successfully perform a government-approved debt settlement plan and avoid bankruptcy. The earlier you consult with a Trustee, the more options and flexibility you have.

bankruptcy filings canada

Huge bankruptcy mistake: Taking extra taxes out of your paycheque

When people do bankruptcy filings Canada, they have more financial obligations than your typical income can manage. Among the reductions from your gross pay is the income tax. It’s unpreventable. When you apply for bankruptcy, one of your financial obligations is probably income tax debt owed to Canada Revenue Agency (CRA).

Just how much in added income tax deductions can you stand not to get in your take-home pay when you are currently insolvent? Most likely none. It is more important to have the cash to pay for rent and food.

So should you take extra taxes out of your paycheque before filing bankruptcy? I say no.

A mistake in bankruptcy: Cashing in or making early withdrawals from retirement accounts

The last thing you want to do in advance of bankruptcy is to cash in a retirement account such as your RRSP. In fact, doing so could cost you dearly. Here’s what you need to know. In a word, “no.” That’s the answer to the question of whether debtors should take money out of their retirement account to pay bills. And it’s the best advice for anyone, but particularly for people who are in the throes of bankruptcy filings Canada.

There are three main reasons for this. First, if you have set up your RRSP with your spouse or child as the beneficiary, then in Ontario, your RRSP is exempt from seizure. There is an RRSP issue when it comes to bankruptcy. Any contributions you made within 12 months of filing for bankruptcy must be paid into your bankruptcy estate. You don’t need to withdraw those funds from your RRSP to do so. You just need to make the payments into your bankruptcy estate. The source of those funds do not have to be from the RRSP.

Second, when you cash in all or a portion of your RRSP, income tax must be deducted at source. So you lose a significant amount off the top. What you are left with may not be enough to fully repay all your debts and help you avoid falling back into unmanageable debt in the future.

Third, you probably will never have enough working years left to make enough contributions back into a retirement plan to make up for what you have lost. You will be sacrificing further retirement payment plan payments when you did not need to cash in your plan in the first place.

Fortunately, your retirement funds are generally protected from loss in bankruptcy. So, why ask for this kind of trouble?

Bankruptcy filings Canada: What debts are not wiped out through bankruptcy?

Unsecured debt is a financial term that describes any loan, credit card or other debt that is not secured against collateral. In other words, it is debt that is not backed by an underlying asset that can be seized in the event of a default.

That means that if you don’t repay the debt – or if you decide to use the money for something else – there is no asset for the creditor to come after. Bankruptcy is a remedy available to the debtor to discharge unsecured debt.

A common misconception is that bankruptcy will result in a loss of the home you’ve worked so hard for; this is not necessarily so. The Trustee is entitled to the debtor’s equity in the home. Not the home itself. There is a difference.

It should be noted that the courts do not allow you to intentionally strip yourself of your assets. However, it is possible to strip yourself of these assets by making a bad decision in the midst of your financial crisis. If you refinanced your mortgages or increased lines of credit against your real estate to settle unsecured financial obligations, this is a mistake of bankruptcy.

First, the Trustee and your creditors will want to know what you did with any spare cash that you received coming out of the refinancing. As I described above, trying to hide assets is not a smart strategy.

Second, you have now turned unsecured debt into secured debt. The unsecured debt could have been settled for less than 100 cents on the dollar through a consumer proposal or discharged in bankruptcy. Now it is debt that cannot be compromised; it can only be repaid in full.

Third, what if your income in the future is not enough to make the necessary payments on this secured debt? Now you are at risk of having your home seized, notwithstanding you received your discharge from bankruptcy filings Canada.

Fourth, perhaps the refinancing should have been done in conjunction with advice from the Trustee, so, it could be used in part to fund a consumer proposal. By having done the refinancing and spending the money before filing, you have now lost that opportunity.

So having that secured debt in bankruptcy was not a smart move. It was a big mistake.

bankruptcy filings canada

Bankruptcy filings Canada: Not sufficiently exploring self-help options

It’s all too easy to get into debt, but if you catch things early, it’s also easy to get out from under it. All it takes is a realistic plan for paying off your debts, and a commitment to sticking to it. If you can do that, you’ll be surprised how quickly your debt can disappear.

The first step is to figure out what you owe – and to whom. If you owe money to several creditors, you’ll need to prioritize them. The most likely to accept a deal are those that are smaller and charge a reasonable interest rate. You may be surprised at how many deals you can cut.

Speak to your accountant, your lawyer, your financial adviser and even a Trustee. You may find that your situation is not as bad as you thought and through some careful analysis, planning, budgeting and behaviour changes, you can eliminate your debt using a self-help remedy.

There are many unscrupulous debt-settlement or debt-relief companies who try to scare you and then after they do, they make all sorts of great-sounding promises that they will not be able to keep. the reality is that they just want to snag you so you can pay them high fees to do what you can do on your own. Do not fall for their tricks.

If everyone made sure that they fully explored all their self-help options first, many could avoid bankruptcy filings Canada altogether.

Bankruptcy filings Canada: Making the wrong type of filing

If you have reached a point where you feel you can no longer control your finances, one of the first things you should do is consult a Trustee. Making the wrong type of bankruptcy filing is a big mistake and will only make the situation worse, but with the right advice, it is easy to find the right solution.

The most common type of personal insolvency filing is a consumer proposal. A consumer proposal allows you to work out a payment plan with your creditors that you can actually afford. This allows you to eliminate all your debt without filing bankruptcy. In a no-cost initial consultation with a Trustee, you will discuss what is the right type of filing for your situation.

Bankruptcy filings Canada summary

I hope that you found the question posed in this bankruptcy filings Canada Brandon Blog. If you are concerned 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.

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

SMALL BUSINESSES IN CANADA ACCUMULATE MASSIVE DEBT DUE TO COVID-19

Post author By Brandon Smith
Post date March 1, 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 small businesses in Canada Brandon Blog, please scroll to the bottom and click play on the podcast.

Small businesses in Canada introduction

Did you know that since the start of the COVID-19 outbreak 1 year ago that 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 Canadian Federation of Independent Business (CFIB). In total, small businesses in Canada currently owe a cumulative $135 billion.

Out of these businesses that have increased their debt, 76% say it will take them over a year to pay it off. Eleven percent of respondents worry that they might not have the ability to repay their COVID-19 associated financial obligations ever! As far as returning to normal profitability (before the additional COVID-19 debt repayment), 40% are hoping to see it in 1 year’s time, but they really worry that it will take longer.

The purpose of this small businesses in Canada Brandon Blog is to discuss how important small business really is to the Canadian economy and what options exist for businesses and companies facing insurmountable debt challenges. Sometimes I will refer to small businesses in Canada as SMEs.

Contribution of SMEs to Canadian business

The best way to describe the contribution of SMEs to the Canadian economy is by looking at the most recent facts about small businesses in Canada reported by Statistics Canada.

How many businesses in Canada are small businesses?

The widely held definition of a small business corporation is a company that employs no more than 500 people and that has a total asset value of less than $15 million. Most of us have heard that a “small business” is one that employs fewer than 50 people — and that a “big business” has more than 500 employees. But what about businesses that fall in the middle? They are not quite small, but they’re not quite big either; they all fall into the category of SMEs.

In Canada, 91 percent of businesses fall into this in-between category, and there are roughly 3.5 million businesses in total. That’s a lot of businesses to keep up with.

What is the contribution of SMEs to exports in Canada?

Small businesses in Canada are not just small versions of large companies. They are different beasts altogether, and their individual contributions to the Canadian economy are just as important as those of their larger counterparts. In fact, SMEs contribute almost 50% of the country’s exports, and if they were taken out of the picture, exports would fall by almost 40%.

In 2018, exports of items were valued at $522.8 billion, of which 41.1 percent was attributable to SMEs. More than 50,000 Canadian companies exported goods, the huge majority of which were SMEs (97.4 percent).

How many people were employed in Canada in 2019?

In 2019, roughly 16.1 million people were employed in Canada. Private sector businesses employed 76.2% of the total number. The public sector employed the balance of 23.8%.

The definition of small businesses in Canada ranked by firm size using the number of employees are:

Small companies (1 – 99 workers)
Medium-sized businesses (100 − 499 workers)
SMEs (1 − 499 employees)
Large companies (500+ workers).

What is the distribution of employment across the private sector?

The variety of people employed defined by the business size of the employer varies significantly between the private and public sectors. In 2019, 88.5% of employed individuals in the economic sector worked for small businesses in Canada, compared with 76.2 percent of those used by public companies of the same dimension.

For the five-year period 2014-2019, Canadian employment ranks had a net gain of 1,076,100. Just over 70% of this increase is attributed to the private sector employment and less than 30% to the public sector.

How many businesses appear and disappear each year?

From these statistics, we see that the contribution of SMEs to economic growth is huge. These small and medium-sized businesses make up the majority of businesses in Canada. These key small business statistics show just how important these Canadian businesses are to the survival of the Canadian economy.

An increase or decrease in the number of businesses is the net result of the appearance or disappearance of businesses over a given period. This is often referred to as “creative destruction.” Between 2001 and 2016, the business birth rate was greater than those that died, except for two: in 2013 and in 2016, when more businesses disappeared (97,151 and 95,889) than were created (95,326 and 95,176),

There are more business births each year than those that disappear, other than for 2 years; 2013 and 2016. According to a Business Development Canada report from the Business Development Bank of Canada, there are more than a quarter of a million businesses in the country at any one time each year. More than 40,000 disappear.

The report was based on data from Statistics Canada’s Business Demography Statistics, which tracks businesses based on the number of active and inactive corporations, and Entrepreneurship in Canada, which tracks self-employed and “indeterminate” businesses. The Statistics Canada information is that business formation is on the rise, and the rate of business deaths has decreased.

This variation between the average birth rate for these two sectors can be explained by the entry cost and different levels of competition. If this is, indeed, the case, higher birth rates would be observed in sectors with a lower entry cost or with a higher level of competition than other sectors.

So more small businesses in Canada appear than disappear every year according to these findings. These statistics of course were from time periods all before the coronavirus pandemic.

What proportion of new businesses survive the first 15 years?

Every year, an average of 128,000 new businesses are started in Canada. According to the CFIB, about 10% of these new businesses close their doors within the first year. By year 10, that number has risen to 25%. Those are pretty alarming statistics, no matter how you look at them.

What this means is that most new businesses are doomed to fail in their first year, and many of the rest will only survive a few years beyond that. Here are some more alarming statistics on the percent of SMEs enterprise survival rate:

there is a 45.8% chance that a business will survive for one year;
a 32.3% chance that it will survive for two years;
an 18.3% chance that it will survive for three years; and
a 9.5% chance that it will survive for five years.

How many small businesses in Canada could close permanently amid a pandemic

The number of small businesses in Canada that survive for ten years (and beyond) is quite low, so it is important to recognize those that are able to make it. So two essential business owner characteristics have to be eternal optimism and being a solid business planner when starting a new business because of the high failure rate.

Now take those long odds for a business survival rate and layer a global pandemic on top of that. The COVID-19 pandemic is nerve-wracking enough to the general public, but for many small business owners, it is downright terrifying. According to the CFIB, close to half of the country’s small businesses could close permanently. The CFIB‘s findings were based on responses from 1,800 small business owners. The CFIB called for the government to provide small business owners with the tools they need to protect themselves and keep their businesses afloat.

The Public Health Agency of Canada reported an even scarier estimate. It felt that up to 70% of small businesses in Canada could close permanently amid a pandemic. The reason? Employees and customers won’t show up. The industry sectors that will be affected the most are the ones whose employees and customers are the most mobile and those whose employees have to work in crowds, like cabs, the hospitality industry, food and beverage, and theatres.

From what we have seen so far, they are correct.

The need for government assistance for Canadian business

Given this result, the Canadian federal government is investing heavily in maintaining and creating jobs to help the struggling Canadian economy. One of its investment vehicles is Canada’s COVID-19 Economic Response Plan which I have previously written about. This program is aimed at supporting business sectors that create jobs here.

This financial help program is designed to assist businesses that are having difficulties because of the pandemic-caused state of the economy. It is intended to support businesses that create jobs. Although many of the support programs have now ended, the Economic Response Plan still has the following programs:

Canada Emergency Wage Subsidy (CEWS); and the
Canada Emergency Business Account (CEBA) interest-free loan
small businesses in canada

Saving small businesses in Canada

So before COVID-19 arrived here, the odds were always against Canadian start-up businesses having a healthy long-term survival rate. With the pandemic, credible Canadian organizations estimate that we could lose 50% (CFIB) to 70% (Public Health Agency of Canada) of small businesses in Canada.

The life support program federal and provincial governments have instituted help. Multiple lockdowns obviously do not. What is really needed is some sort of return to normal operations so that business revenue can return. Then hopefully over time, profitability will follow. But that is really outside of all of our control.

However, as a licensed insolvency trustee (Trustee), there are things we are currently doing for businesses that cannot see any short-term prospects for being able to overcome their debt problems on their own. The kinds of businesses that we are seeing fall into two categories; viable and non-viable.

The first thing I do as a Trustee is to get a good understanding from the business owner as to the history of the business and the reasons why the business owner believes the company has gotten itself into financial trouble. I also want to get a snapshot of what the assets and liabilities of the business are and I try to form an assessment as to whether the business is viable or not. Even if viable, does the entrepreneur have the energy, mindset and desire to manage a business turnaround. Finally, I need to understand the cash flow requirements of the business and is there a source of funding.

I then analyze all this information and form an opinion as to what the realistic options are for the company and its business. Depending on each situation, the range of options are:

The business operations and debt levels are such that they are not serious enough and the company, over time, should be able to work itself out of a short-term cash crunch through some imaginative management of the company. Perhaps even an informal restructuring of sorts.
The business is viable but needs to do a formal restructuring in order to keep the good parts of the business so that it can become profitable again and continue to provide jobs to Canadians. The process would be either a Division I Proposal under the Bankruptcy and Insolvency Act (Canada) (BIA) or a Plan of Arrangement under the Companies’ Creditors Arrangement Act (Canada) (CCAA).
If a formal restructuring is not possible, perhaps a sale of the business assets is required and the buyer will operate the assets as an operating business. In this case, a secured creditor will enforce its security in a receivership, through either a private appointment or a court appointment.
Finally, maybe corporate bankruptcy is required either in concert with the secured creditor enforcement or by itself if there are no secured creditors. This would allow for the necessary protection to give the time to liquidate the assets, either as a going concern sale or a pure liquidation. The funds obtained from the sale would then be paid to the creditors, in priority of their claims.

Entrepreneurs are obviously scared of any formal insolvency proceeding

The idea of a formal insolvency proceeding makes an entrepreneur feel like a failure. I know they can feel discouraged, but the business isn’t in trouble because senior management did something wrong. You didn’t fail. Business conditions changed. Especially under today’s pandemic circumstances.

Now you’re ready to move forward with your business, but you need some help. That’s what the BIA and CCAA are designed to do; to help your business make a new start. Insolvency proceedings are there to provide a safety net for people and companies. It’s a tool that responsible people use to save a good business after a setback.

Don’t worry what your customers might think about you if your business goes through a formal insolvency proceeding. You won’t be the first and you won’t be the last.

Small businesses in Canada summary

I hope that you found the question posed in this small businesses in Canada Brandon Blog. If you are concerned 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.

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

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

Tags Business Development Canada, canada emergency business account (ceba), canada emergency wage subsidy cews, Canada's COVID-19 Economic Response Plan, Canadian Federation of Independent Business, cfib, How many businesses appear and disappear each year?, How many businesses in Canada are small businesses?, How many people were employed in Canada in 2019?, How many small businesses in Canada could close permanently amid a pandemic, Ira Smith Trustee, licensed insolvency trustee, small businesses in canada, small businesses in Canada racked up $135 billion worth of debt, Statistics Canada, Statistics Canada's Business Demography Statistics, What is the contribution of SMEs to exports in Canada?, What is the distribution of employment across the private sector?, What proportion of new businesses survive the first 15 years?

Brandon Blog Post

SHARIA LAW IN CANADA: HEARTBREAKING DIVORCE, RELIGIOUS MARRIAGE CONTRACTS, COURTS AND BANKRUPTCY

Post author By Brandon Smith
Post date February 24, 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.

Sharia law in Canada introduction

I am no religious expert, but this past week I was consulted by a professional going through a divorce. When we got to talking about his creditors, he spoke to me about a debt he will have under Islamic Sharia law in Canada. The question I asked him is, will that debt be recognized as a debt under Ontario law? His response was yes.

Canada has always prided itself on being a cultural mosaic. We are a welcoming country to those from around the world. So I started wondering why the issue of religious divorce and claims that may arise specifically from it, is not encountered in a bankruptcy context more often.

So I did the research on the Sharia law in Canada debt from a religious divorce. Lo and behold, he was right. So now I know a bit about two religion’s divorce requirements: Jewish and Islamic.

Today in this Brandon’s Blog, I am going to be talking about Sharia law in Canada, religious divorce claims in Ontario, bankruptcy law, and divorce in Ontario. Now, a lot of people don’t know too much about these topics, but they’re very important to understand. I will explore the Canadian and Ontario laws, and hopefully shed some light on is Sharia law in Canada and other religious divorce claims enforceable in Ontario and what happens in a bankruptcy?

Judaism: The Wedding Ceremony, Religious Divorces and Getting a Get

In Judaism, like many other religions, partners are married according to religious marriage regulations in addition to provincial regulation. Jewish marriage ceremonies officiated by a Rabbi are also recognized as a lawful civil ceremony for getting married in Ontario.

The Jewish marriage contract is called the Ketubah. When they want to end their marriage, they need more than just an order from the provincial family law court. They also need to approach a religious authority to grant a formal religious Jewish divorce that would allow them to end the marriage.

Religious divorces and civil divorces are two different things and involve different steps. A religious divorce, or Get, is a document that releases a Jewish woman from the obligation of a marriage to a man, as well as releasing a man from the obligation of providing support for his wife. A Get is required for the dissolution of a Jewish marriage.

When a man gives his wife a Get, he is freeing her to ultimately enter into another marriage. Without a Get, a Jewish woman is not allowed to remarry. A Get can only be given through the act of a religious court. The parties involved in the divorce cannot grant it. Thus, the Get must be granted by the husband, and a rabbinical court must be involved.

The act of getting a Get does not in itself produce a claim by one spouse against another. That is because there is not a religious marriage contract promising property from one partner to another as part of either the religious marriage or divorce.

***Sharia Law in Canada*: The Mahr**

It is important to realize that even though some of the rules and procedures of Islamic marriage contracts and Islamic divorce are similar to those of a civil divorce, the two are separate processes and are governed by two different institutions. The Islamic divorce is conducted by an Islamic judge or qadi. The qadi is part of an Islamic court.

As I recently learned, in the Islamic religion, the Mahr agreement is a prenuptial agreement that establishes an amount of money or the property to be given by the husband to the wife as “Mahr” (dowry) at the time of marriage. The Mahr can also be waived by the wife if she so wishes.

In order to limit the amount of money that can be requested in the event of a divorce, a number of Islamic jurists have proposed that the mahr agreement should be made in the form of a promissory note, payable upon demand, rather than a lump-sum payment.

Mahr agreements are Islamic marriage contracts that are based on the Islamic religion. It explains what the bridegroom will provide to the bride as part of the marriage. The purpose of a Mahr agreement is to ensure that the bride will be provided for in the case of divorce or the death of the husband.

In an Islamic marriage, the Mahr is a gift from the bridegroom to his bride. It is typically paid in cash, but it can also be paid in other forms, including real estate, gold, or jewelry. In today’s economy, a Mahr agreement may also require the groom to provide a life insurance policy to the bride. The Mahr agreement can be written as a separate pre-marital contract.

When talking to this Muslim professional about his financial situation, there was a fascinating question that I ultimately researched the answer for. The question is, does Sharia law in Canada apply to the Mahr agreement so that the amount promised by the husband to the wife, payable upon divorce, is also a claim provable in bankruptcy?

***Sharia Law in Canada: A Religious Ceremony Marriage Agreement* Payment Can Be A Claim Under Ontario Law**

In the example I encountered, the Mahr agreement was a signed agreement. It called for a payment of six figures in Canadian dollars from the husband to the wife upon the divorce of the couple. This is a very significant debt for this man. In Ontario, the civil side of the divorce proceedings is adjudicated under the Family Law Act, R.S.O. 1990, c. F.3.

In the year 2000, the Ontario government made laws about Mahr. These laws include 1. The amount of Mahr should be a minimum of $20,000 2. The payment should be done in a way that is acceptable according to Sharia law in Canada. 3. The contract has to be made at the time of the marriage.

Fortunately, the preliminary issue of whether any religious marriage contract, including a Mahr agreement, can ever be enforced by a Canadian court was decided in Marcovitz v. Bruker, 2007 SCC 54 (CanLII). The Supreme Court of Canada held that the fact that a legal contract has a religious aspect or basis does not prevent its judicial consideration and enforceability, as long as the agreement has the necessary components to make it valid and lawfully binding.

Therefore, a Canadian court is not prevented from considering the issue of a religious nature, provided that the claim is based upon the infraction of a policy recognized by legislation. There have actually already been cases in which Canadian courts have been asked to implement the results for responsibilities stemming from a religious marriage contract.

Nonetheless, if a spouse can demonstrate that the religious marriage contract fulfills all the demands for a civil contract under provincial law, then the courts can order the fulfilment of undertakings to pay the amounts called for in the contract.

***Sharia Law in Canada: Is a Mahr An Enforceable Obligation* In An Ontario Divorce Situation?**

To answer this question, we now need to look at the Ontario Family Law Act. Section 52 of the Act deals with marriage contracts. Section 52(1) states that two people who are married to each other or intend to marry may enter into an agreement in which they agree on their respective rights and obligations under the marriage or on separation, on the annulment or dissolution of the marriage or on death.

Such a marriage contract can deal with:

ownership in or division of property;
support obligations;
the right to direct the education and moral training of their children, but not the right to decision-making responsibility or parenting time with respect to their children; and
any other matter in the settlement of their affairs.

This section goes on to state that a provision in a marriage contract purporting to limit a spouse’s rights regarding the matrimonial home is unenforceable. Section 56 identifies other areas where the court can disregard certain terms of a marriage contract. Those unenforceable aspects deal with clauses that may not be in the best interests of the children, provide inadequate support provisions or attempt to enforce chastity.

The Ontario court decision in Akkawi v. Habli, 2017 ONSC 6124 (CanLII) settles the specific issue of the Mahr. In that case, the court found that the Mahr is a valid contract and that it is enforceable as such agreements have been found to be valid and enforceable in the province of Ontario.

Therefore, under both Sharia law in Canada and Ontario law, the Mahr is an enforceable obligation in an Ontario divorce situation. Therefore, it is a valid claim by the wife against the husband. Since it is a valid claim, it is also a claim provable in bankruptcy. However, unlike alimony or support payments, but like an equalization claim, in bankruptcy, the Mahr claim is a provable claim that IS discharged upon the bankrupt obtaining his discharge from bankruptcy.

Religion-Based Mahr Agreements: Validity and Status Under Canadian Law

So based on the combination of the Supreme Court of Canada decision and the Ontario Superior Court of Justice decision referred to above, the Mahr agreement in Ontario, based upon Sharia law in Canada, results in an enforceable claim for money by the wife against the husband in divorce proceedings.

As it is a valid claim, it is also a provable claim in bankruptcy. So in the bankruptcy of a husband getting divorced from his wife who has a financial obligation under a Mahr agreement, the wife has a claim in his bankruptcy for the amount of the Mahr.

So while we are on the topic of divorce, I will answer other questions I am normally asked when it comes to divorce and bankruptcy.

Answers to the Top 5 Divorce and Bankruptcy Questions – Secular stuff

This section has nothing to do with Sharia law in Canada. Rather, it is the answers to the top 5 bankruptcy and divorce questions we are asked. It is purely secular.

What happens to spousal and child support payments during bankruptcy?

It is important to note that bankruptcy is not a “get out of debt free” card; a person is still responsible for the money they owe for spousal and child support payments. The amount set by the family court will still be required to be paid before, during and after bankruptcy. Spousal and child support payments are not discharged when a person receives their discharge from bankruptcy.

Who is responsible for joint debt when separating or divorcing?

The question of who is responsible for joint debt is not a new one and is often asked by married couples with a substantial amount of shared debt. The response depends, in part, on the type of debt incurred as well as the level of contribution of each individual to the debt. If both spouses signed a loan agreement or credit agreement, both will be liable for the debt. However, the creditor may choose to pursue one spouse and not the other.

In the case of a joint credit card, with the credit card account in the names of both spouses, both are liable for the debt. Whether one spouse used the credit card either more than the other or one spouse did not use that card at all, each is liable for the entire debt.

What happens to joint debt if you file for bankruptcy?

If one person declares bankruptcy, the other person in the relationship will have to continue making full payments on any joint debt remaining. If you file for bankruptcy to eliminate your unsecured debt, your creditors can go after your ex-spouse for the full amount of any joint debts you had while together.

Concerning secured debt, such as the home mortgage or a vehicle loan, the debt follows the asset. So depending on who ends up wanting to keep the asset, that person will want to keep making the payments so that the secured lender won’t enforce its security against the asset in question. No doubt the retention of the asset and taking over full responsibility for the debt payments will be taken into account in the overall divorce proceedings.

What Happens To Joint Debts After Bankruptcy?

After the bankruptcy process, you’ve finally received your discharge, wiping the slate clean of all of your unsecured debt. Once the bankruptcy is over, the last thing you want to do is start accumulating debts again, but what about any joint debts you have with ex-spouses? Can they come back and haunt you?

In short, no. The creditors do retain their rights to make the unsecured claims for the joint debts against the ex-spouse who did not go bankrupt.

Do Support or Alimony Payments Affect Surplus Income?

Yes, they do. If the bankrupt person is making support or alimony payments, the surplus income calculation allows the bankrupt to deduct those monthly payments from their monthly income. Therefore, the support or alimony payments end up reducing a person’s required surplus income payment.

Sharia law in Canada summary

I hope that you found the question posed in this Sharia law in Canada Brandon Blog about the Mahr claim, and specifically, can religious marriage contracts be upheld in Ontario divorce proceedings, as interesting as I did.

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.

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.

Call us now for a no-cost consultation.

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

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

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

Tags Akkawi v. Habli, claim provable in bankruptcy, divorce and bankruptcy, Do Support or Alimony Payments Affect Surplus Income, equalization claim, get, Islamic marriage contracts, Jewish marriage ceremonies, Jewish marriage contract, ketubah, mahr agreement, Marcovitz v. Bruker, Ontario Family Law Act, religious divorce claims, sharia law in canada, What happens to joint debt if you file for bankruptcy?, What Happens To Joint Debts After Bankruptcy, What happens to spousal and child support payments during bankruptcy, Who is responsible for joint debt when separating or divorcing

Brandon Blog Post

FILE FOR BANKRUPTCY: CAN YOU FILE FOR BANKRUPTCY CANADA FROM THE LUXURIOUS CARIBBEAN?

Post author By Brandon Smith
Post date February 22, 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 bottom and click play on the podcast.

File for bankruptcy introduction

You have all probably read about or heard about the Ontario judge who presided over Toronto-area court cases from the Caribbean. With today’s technology, it is electronically possible to attend Zoom court from anywhere in the world. That got me thinking. Can a Canadian file for bankruptcy from the Caribbean or anywhere else in the world?

So I did the research. In my opinion, using what is right now permissible technology, I think it is possible for a licensed insolvency trustee to either accept a Canadian filing bankruptcy or make it happen from the luxurious Caribbean or anywhere else outside of Canada. In this Brandon Blog, I will explain the bankruptcy process and why I think a person or company can file for bankruptcy from outside Canada.

You owe money: Considering bankruptcy?

To file for bankruptcy is a difficult decision to make, especially considering the financial and personal consequences it has on you and your family. But sometimes, there is no other option. If you find yourself unable to pay your debts, filing for bankruptcy may be your best bet for a fresh financial start. But before you decide to file for bankruptcy, you must assess your situation and understand the consequences.

It’s easy to be overwhelmed when you’re facing the prospect of filing for bankruptcy. Bankruptcy is a complicated legal proceeding, and the law has established procedures that must be followed in a specific order. If you’re considering bankruptcy, it’s important that you understand how the process works and the critical role a licensed insolvency trustee (formerly called either a trustee in bankruptcy or a bankruptcy trustee (Trustee) plays in that process.

As a Trustee, I can tell you that bankruptcy is a serious undertaking. It can have a big impact on you financially and emotionally, and there are many important decisions you must make before, during, and after the process. The decisions you make now will have a big impact on your future. As a Trustee, I always first try to help people and companies look at the alternatives to bankruptcy in order to avoid bankruptcy, rather than file for bankruptcy. Personal bankruptcy or business bankruptcies are truly a last resort when there is no other choice.

How to file for bankruptcy Canada: Let the licensed insolvency trustee no-cost consultation happen first

You may be considering filing for bankruptcy in Canada because you have debts that you can no longer pay. If you are drowning in debt, you might feel like there is no way out. But bankruptcy isn’t the end of the world. In fact, it can help many people get a fresh start by eliminating debts they can no longer pay. But as I always say, an individual or company may not need to file for bankruptcy. You have to consider all of your options. But in this section, we will focus on the bankruptcy filing process.

It all starts with you going to see a Trustee for a free, no-obligation initial consultation. The Trustee will listen to the facts you describe and ask you some questions to gain a better and deeper understanding of your specific situation. The Trustee will then tell you about the various debt relief options he or she believes are available to you. The Trustee will then provide you with his or her recommendation as to what is best for your situation and why.

Many factors will play into the Trustee’s recommendations, especially around your debt issues, including:

The types of debts.
Your unsecured debt vs. secured debts.
Do you have any student debt and if so, when did you graduate from the program that you acquired the student loan debt for?
The total amount of your Canadian debts and any foreign debt you may have.
Is Canada Revenue Agency hounding you for tax debt?
How appropriate are all the various debt options for your situation?
What percentage of debts are related to your assets that you cannot afford to lose.
What is the nature and extent of all of your assets?
Which assets are exempt from seizure and which are non-exempt?
Do you have any joint (co-signed) debt and how will your insolvency filing affect the other person?
Is the pressure from debt you are feeling right now require an immediate filing or could you wait a bit to see how some things play out over the short-term future?
Do you need immediate protection from debt and the related creditors or debt collectors taking collection actions right now such as trying to enforce against your assets, sue you or garnish your wages under a judgement?
How is your burden of debt currently affecting you and your family?
Comparing your current debt situation pre-filing to what your debt after filing and after your discharge will look like under each of the available alternatives.
How does the Trustee’s debt assessment factor into the realistic alternatives available to you to avoid bankruptcy?
Does your debt level at this stage that of overwhelming debts or are you right now only feeling mild indigestion? Perhaps you could work out of your debt problems on your own with just one or two strategies the Trustee will share with you at the no-cost consultation stage.

The Trustee considers all of this to see if you have an unmanageable debt to determine the best options available to you, including having you file for bankruptcy. You don’t want to do a consumer bankruptcy filing for yourself or have your company filing bankruptcy if it is not necessary to fix the debt problems.

How to file for bankruptcy – How the bankruptcy process starts

Alright, now for getting to answering the question I posed in the title and at the beginning of this Brandon Blog. Can a Canadian file for bankruptcy from the luxurious Caribbean? Can Canadian bankruptcy filings start from outside of Canada? To answer this question, we must look at what are the requirements of both the debtor, be it a person or company, and the Trustee, for a bankruptcy file to begin? All of my comments below, with appropriate amendments for context, will apply to:

an individual filing a debt settlement consumer proposal;
a person filing for personal bankruptcy;
either a person or a company filing a debt settlement financial restructuring proposal under Part III Division I of the Bankruptcy and Insolvency Act (Canada) (BIA); or
a company filing an assignment in bankruptcy.

Before the COVID-19 pandemic, the debtor and Trustee met in-person at the Trustee’s office in order for the Trustee to assess the debtor’s financial situation. If an insolvency process was required to help fix the debtor’s financial problems, then there was also an in-person meeting at the Trustee’s office to sign up the filing documents. Since the pandemic began, the Office of the Superintendent of Bankruptcy Canada (OSB) Messages to LITs concerning COVID-19 gave Trustees the authority to hold meetings by video conference. This is how the whole world has been operating for almost 1 year now. So this is how the insolvency process begins.

In addition to the initial consultation and signup. other meetings are also held via video meetings. Examples are a Meeting of Creditors and the two credit counselling sessions. Although the OSB’s guidance does say that Trustees can use methods other than in-person…..” for those areas where they have an approved resident or non-resident office…” keep in mind that a Trustee is licensed to act within an entire province! I won’t get into the semantics of the apparent conflict between the OSB’s guidance and its licensing approval process in this Brandon Blog.

Who can file for bankruptcy?

Any insolvent person can file for bankruptcy. Section 2 of the BIA defines an insolvent person as:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,
(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”
So to file for bankruptcy, amongst other requirements, the person or company must reside, carry on business or have property in Canada.

The locality of the debtor

Once all the documents are signed up to file for bankruptcy, the Trustee has to file them with the OSB in the “locality of the debtor“. Section 2 of the BIA defines “locality of the debtor” as:

“locality of a debtor means the principal place

(a) where the debtor has carried on business during the year immediately preceding the date of the initial bankruptcy event,

(b) where the debtor has resided during the year immediately preceding the date of the initial bankruptcy event, or

(c) in cases not coming within paragraph (a) or (b), where the greater portion of the property of the debtor is situated;”

If the debtor has been living in the Caribbean for 4 months immediately preceding the date of the filing of the assignment in bankruptcy, do they qualify? The answer is yes. Court decisions have determined that the word “during” means “at some time” during the year preceding the date of bankruptcy. It does not mean continuously. So during these pandemic days where we meet with everyone online, it is possible for the Canadian person to be in the Caribbean, meet with the Trustee for the initial consultation, decide on an insolvency process, in this case, bankruptcy and then initiate the bankruptcy proceedings, all from the luxury of a Caribbean vacation spot.

Let’s not delve into how a debtor who needs to file for bankruptcy can afford to live in the Caribbean or whose villa it is. That is beyond the scope of this Brandon Blog.

What about the Trustee?

The same way the debtor, or a judge, can transact business by video meeting from outside Canada, the same is true for the Trustee. As long as the Trustee can access all his or her office documents and systems online from outside of the office, there is no reason why the Trustee could not operate from the Caribbean as well to handle the person or company that wants to file for bankruptcy.

I am not advocating for this position, especially when you consider both the danger of and the appropriateness of travelling during these times of hardship and sacrifice. But since the question was “Can a Canadian file for bankruptcy from the Caribbean or anywhere else in the world?”, the answer is YES.

So whether you are a judge in the Ontario court, an insolvent debtor or a Trustee, I do not see any legal reason why someone could not file for bankruptcy from the Caribbean or anywhere else in the world.

File for bankruptcy summary

I hope you enjoyed the file for bankruptcy Brandon Blog post. If you are concerned 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.

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.

Call us now for a no-cost consultation.

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

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

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

Tags avoid bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, Consumer Proposal, debt assessment, debt collectors, debts, file for bankruptcy, filing bankruptcy, insolvency, insolvent person, Ira Smith Trustee, licensed insolvency trustee, locality of the debtor, Office of the Superintendent of Bankruptcy Canada, student debt, Toronto-area court cases, unsecured debt

Brandon Blog Post

RACHEL UCHITEL: Her Astonishing Story on Seduction, Addiction, Celebrity Rehab & Bankruptcy

Post author By Brandon Smith
Post date February 15, 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’s Blog, please scroll to the bottom and click on the podcast.

The Rachel Uchitel story

Rachel Uchitel was an American night club manager. She gained popularity for her involvement in the Tiger Woods sex scandal. Currently, she is making news for a different reason – bankruptcy. Her father died when she was only 15 years old. She lost her fiance in the 9/11 tragedy.

She has been quoted as saying that her dad’s fatality had a big impact on her life. Maybe that can describe her as “looking for love in all the wrong places“. But a lot more on that particular later.

In reading about her background, you could reach the conclusion that she was just a pillow-lipped party girl. It may feel like she has actually committed her adult life to arrive on the social scene and in show business. Nonetheless, she does have a college degree in communications. In 2002, Rachel Uchitel was a Bloomberg television producer. But it is clear that she turned away from Bloomberg news to seek her fame and fortune as a star celebrity.

I think you will find this Brandon Blog is very different from most of the others. I tell a bit of the Rachel Uchitel story. I tell her story not to be salacious, but to highlight how real addictions can lead to a person’s downfall. Even a famous celebrity type and how their troubles can lead to bankruptcy.

Rachel Uchitel and the Bottle Girls

Starting in 2008 in Las Vegas, a team of young women called the “Bottle Girls” began to appear on the scene. It wasn’t long before these ladies were creating a great deal of enthusiasm from the public as well as the financial investment community. Before the coronavirus pandemic, Bottle Girls were a typical sight at some of the most preferred clubs and bars in Las Vegas. They are young, gorgeous women that stand outside of the bar or casino and try to people to go into the establishment to partake in all that it has to offer.

While they may be scantily clad to stand out, they are the friendly girl next door type. Rachel Uchitel was a bottle girl.

Nightclub hostess and NHL Rangers good luck charm

Rachel Uchitel was one of the most famous people hosting in New York, and her links with nightclub managers had been invaluable to the New York Rangers. Soon after she started dating then-Ranger Sean Avery, the team started winning. So it’s reasonable that the Ranger players and then-coach Tom Renney held her in high regard.

Her grandparents owned the Manhattan El Morocco supper club in the 1960s. Famous people like President John F. Kennedy and Cary Grant frequented the place on a regular basis. She held on to her family’s memorabilia, and her dream has always been to one day re-create a contemporary version to be a nightclub owner.

What Rachel Uchitel is most famous for

As the story has it, Rachel Uchitel and Tiger Woods first met at the Griffin, a former club in New York’s Meatpacking District. The American nightclub manager was the director of VIP services. In interviews, she would often stress that it was her duty to greet important patrons such as Tiger and also ensure that they were having fun. After that, she met Tiger a number of times more before they hooked up with each other.

When the news came out concerning Tiger’s extramarital relations, Rachel Uchitel was caught up in the media storm and the face of one of the greatest celebrity cheating scandals. She was called an “alleged mistress” and dealt with public scrutiny over this.

When Tiger Woods drove his vehicle into a fire hydrant in November 2009, the headlines weren’t regarding the accident itself. They were about Rachel Uchitel, the American model and one of the most notorious women connected to the pro golfer. She came to be the face of his affairs regardless of dozens of allegations from women of sexual affairs with Tiger that appeared shortly thereafter.

As you may remember, the fling notoriously finished when Woods’ angered his better half Elin Nordegren who chased him from their Florida home brandishing a golf club after discovering saucy messages from Rachel Uchitel on his phone. Horrified Woods then banged up his car backing up into a fire hydrant and his neighbour’s tree. Nordegren later got an estimated $100 million in their divorce. It was not a pretty picture.

Rachel Uchitel was paid $10 million in 2010 after signing a non-disclosure contract meant to acquire her silence over the affair. Yet a year later, she was forced to hand most of the money back by her then-lawyer Gloria Allred after discussing her fling with Tiger when she appeared on Celebrity Rehab.

The Rachel Uchitel Addiction

Nowadays, it feels like lots of people are addicted to something. The one-way ticket to dependency seems to be love. The love of money, love of sex, love of liquor, even the love of food. Addiction has actually brought about a lot of issues in our society. The concern is, what’s the dividing line between addiction and a healthy and balanced relationship?

Rachel Uchitel says she had a love addiction. Looking back on her affair with Tiger Woods, she says that she didn’t think she was a love addict. Rather, she said the affair with such a famous person wanting to have sex with her was her way of validating her own self-worth. She did not lump herself in with drug and alcohol addicts. Yet her striving to prove her own self-worth was through a love addiction.

She may not be alone. According to an American survey, one in 10 Americans claims to be head over heels in love with someone who does not love them back. This is a statistic that appears to support the claim that love dependency is an actual, diagnosable condition. The study, conducted by the American Psychiatric Association, also discovered that 7% of Americans made love with a person they understood had not been helpful for them, just because they felt they could not quit the relationship.

Rachel Uchitel really did not include herself in with drug addicts, alcoholics and those with gambling issues. However ultimately, she did come to the realization that she did need to go to rehab. She got assistance to understand and overcome her sex addiction.

Rachel Uchitel is now bankrupt

Rachel Uchitel has recently been making more headlines not in a good way. The 45-year-old-woman at the time filed for Chapter 7 bankruptcy protection last July. She has since turned 46. She listed her main creditors like American Express and Deutsche Bank, both of whom are owed more than $595,000.

She additionally owed more than $10,000 in an unsettled lease on her Manhattan home and racked up a bill of $164,770 on a 2nd Manhattan residence. Rachel Uchitel says she has not worked since her children’s clothing shop closed in 2019.

She described herself as jobless in her Chapter 7 bankruptcy filing. She is likewise on the hook for another $17,339 in tax debt in addition to $23,694 due to a New York law firm. rachel uchitel

Rachel Uchitel on the HBO documentary talks about Tiger, boyfriends and marriage

Rachel Uchitel is currently showing up in the HBO documentary Tiger, where she discusses her affair with him in detail for the very first time. It is unknown whether she was paid to be on the program.

Ms. Uchitel asserts that the huge majority of her financial obligations to be discharged were directly related to her kids’ clothes shop business which proved to be not financially viable. She stated she had directly guaranteed debts of the business, leaving her no choice but to go into bankruptcy.

When asked if her connection with Woods was to blame for her financial troubles, Rachel Uchitel reacted saying, “No, I don’t think so. There’s no correlation between golf and bankruptcy.“

Is Chapter 7 one of the types of bankruptcies in Canada?

No. Chapter 7 bankruptcy is one of the bankruptcy Chapters under the US Bankruptcy Code. It is the most common type of bankruptcy in the United States. This chapter of the Bankruptcy Code is for the liquidation of the debtor’s non-exempt property and then distributing the funds realized to the creditors in priority. It is not meant as a restructuring tool or to implement a debt settlement plan.

In Canada, there is no such thing as Chapter 7. Here in Canada, it is just called either personal bankruptcy or consumer bankruptcy. As in the US, this is not one of the types of bankruptcies in Canada that would be used to do a restructuring to implement a debt settlement plan. Rather, personal bankruptcy in Canada is also for the liquidation of the debtor’s non-exempt property so that funds can be distributed to the creditors. In Canada, the bankruptcy system is operated under the provisions of the Bankruptcy and Insolvency Act (Canada) (BIA).

Bankruptcy and addictions

The Canadian insolvency process is geared to deal with debts resulting from any kind of addiction. It does not only deal with the debts caused by borrowing money to feed an addiction. The insolvency process is uniquely positioned to deal with the person’s total rehabilitation. When the person hits rock bottom with debts they cannot repay and no more credit to keep borrowing to feed the addiction, a licensed insolvency trustee (formerly called a bankruptcy trustee) is positioned to help not only with the debt issues but also the rehabilitation issues.

My firm has been involved in helping many people out of their debt problems arising from addiction issues. The most common are gambling, alcohol and drug addictions. But a love addiction can be just as troublesome. Professionals have referred their family members suffering because of an addiction to me.

In my January 31, 2018 blog, GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?, I discussed from a procedural view the issue of gambling debts and bankruptcy. In my January 30, 2019 GAMBLING DEBTS HELP blog, I focussed on how the insolvency process, especially bankruptcy, can deal with overall rehabilitation.

The addict is not an awful person but they do have an awful problem. They need the support of their family, family friends and medical professionals. If addiction has led to unmanageable debt, that is where a licensed insolvency trustee fits in to be part of the team helping the honest but unfortunate person. If Rachel Uchitel was living in Canada, a proceeding under the BIA would help her get rid of her debts.

The Rachel Uchitel story summary

I hope you enjoyed the Rachel Uchitel Brandon Blog post. If you are concerned 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.

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.

Call us now for a no-cost consultation.

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

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

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

Tags addiction, American night club manager, bankruptcy trustee, Bottle Girls, celebrity cheating scandals, Celebrity Rehab, Chapter 7, Chapter 7 bankruptcy, consumer bankruptcy, El Morocco, Elin Nordegren, HBO documentary Tiger, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy, pillow-lipped party girl, rachel uchitel, Tiger Woods, Tiger Woods sex scandal

Brandon Blog Post

PROBATE ONTARIO: Properties, Debts, Estate Trustee Rules and more

Post author By Brandon Smith
Post date February 10, 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.

probate ontario

Afer reading this blog, also check out our Brandon Blog

HOW LONG DOES PROBATE TAKE IN ONTARIO? 7 QUESTIONS NEWBIE ONTARIO ESTATE TRUSTEES ARE EMBARRASSED TO ASK

What is Probate Ontario?

Yes, you just found a blog site on the topic of wills and probate Ontario. It is a complex legal treatment that is typically not totally comprehended by lots of people. It is usually a requirement of the passing away of an individual. It is the start of certain actions to ensure the deceased’s wishes are performed.

In July 2019, we set up a companion business to our insolvency Firm. This new business is acting as an Estate Trustee. It is called Smith Estate Trustee Ontario. As we are asked many times about the intersection of death and debts and have acted as the licensed insolvency trustee in the bankruptcy of an insolvent deceased estate, I thought it would be a chance to write about deceased estate matters, including probate Ontario.

It is important to understand that the choice of and the actions of the Estate Trustee (previously known as the executor or executrix) will certainly make all the difference in exactly how the probate process will go. An excellent Estate Trustee will be able to help you comprehend the entire process. The Estate Trustee is the person in charge of seeing to it that whatever needs to be done pertaining to the estate, its property, and the distribution to the estate beneficiaries are all done properly.

Probate is a legal process that comes after the death of an individual that has left a legitimate will. It is used to accomplish the directions laid out in the will. It starts with the death of the testator and finishes when the Estate Trustee of the will certainly disperse the estate to the beneficiaries as stipulated in the will. If there is no will, various rules apply. If a person dies without a will, it is said that they have died “intestate“.

In this Brandon Blog, I go over many of the matters involved in taking the estate to probate Ontario.

What assets are subject to probate Ontario?

Property that is bequeathed to people in a will may have to go through the application for probate Ontario. It normally includes cash, land, as well as other physical possessions. The probate process involves the Estate Trustee named in the will, seeking the court to:

give that person (or group of individuals) the authority to act as the Estate Trustee of an estate; or
validate the authority of an individual named as the Estate Trustee in the deceased’s will;
officially authorize that the deceased’s will is their legitimate last will.

This individual, or group of people if greater than one is named in the will, is accountable for administering the estate as well as ensuring that the wishes and directions that are written in the will are accomplished as the dead person meant them to be.

***Probate Ontario: What is a Certificate of Appointment of Estate Trustee?***

If you’ve ever read the official documents of a deceased’s estate, you’ve probably heard the phrase “Certificate of Appointment of Estate Trustee“. As well if you’re like most people, the term may have appeared a little mystical and confusing. However, for those of us who are managing an estate as an executor or administrator, a Certificate of Appointment of Estate Trustee is a necessary part of the probate process.

A Certificate of Appointment of Estate Trustee is a paper that is issued by the Government of Ontario and provided to the assigned Estate Trustee to prove that the individual has actually been selected to the function of the Estate Trustee. It shows that he or she has the legal authority to deal on behalf of the estate.

The certificate is not a legal necessity in the province; it’s simply a document provided by the government that verifies that the individual called the Estate Trustee has actually been assigned. It makes things a great deal easier when verifying to financial institutions and also other third parties that you have the authority to act concerning the estate property. To acquire the certificate, you need to provide the provincial government with a certified copy of the death certificate as well as a duplicate copy of the will.

If there is no will, the court will issue an order upon the probate application of an interested party approving the choice of Estate Trustee. This would certainly be in addition to any other death court forms the province needs the Estate Trustee to submit for probate Ontario.

Probate Ontario: What does an estate trustee have to disclose to beneficiaries?

A well-written will is the cornerstone of proper estate administration. The Estate Trustee is the one who oversees the distribution of the estate. In his/her function, the person in charge of the estate must manage a number of legal and financial issues. The Estate Trustee should be neutral and act in an impartial way to all stakeholders, especially the beneficiaries.

The Estate Trustee is well advised to report on a regular basis, preferably in writing, to the beneficiaries to ensure that they will be up to date on all issues of significance. For instance, beneficiaries need to understand the extent of the estate’s debts. They also must be told of any kind of litigation the estate is or might about to be associated with. This is specifically so if that implies a loss of value of the assets to reduce the estate’s worth. Nothing good will come from surprising the beneficiaries. Especially if it is bad news about a reduction of value in what they expected from the estate.

Probate Ontario: What is this Estate Information Return?

Typically, any individual who gets a Certificate of Appointment of Estate Trustee (likewise referred to as an Estate Certificate or Probate) after January 1, 2015, is required to file an estate information return.

This return is to be completed in addition to an application for a Certificate of Appointment of Estate Trustee submitted to the Courthouse (Ministry of the Attorney General). It will be used by the Ministry of Finance to impose compliance with the Ontario Estate Administration Tax Act, 1998. This return should be filed with the Ministry of Finance within 180 calendar days after the appointment certificate is issued to deal with the provincial estate tax owing.

If not all the estate tax issues are solved within the 180 day period, an amended return can always be filed later. The estate trustee would either pay any additional tax owing or request a refund of any overpayment. The estate administration tax estate administration matters must be taken care of in the administration of any estate.

What are the ways to avoid probate Ontario for an estate?

To avoid probate Ontario, you need to ensure for your assets that can avoid probate, are either owned jointly with the person or individuals you wish to inherit them, or are named as a designated beneficiary.

The most reliable preparation strategy to employ prior to death to minimize probate tax is making use of “twin wills“. This is where assets that require probate pass under one will, and other property that regularly do not call for probate (such as the shares of a family-owned private company) pass under a separate will.

Properties that can be omitted from probate Ontario are:

Jointly held assets with a right of survivorship.
RRSPs, RRIFs, TFSAs with a named beneficiary apart from ‘Estate’.
The life insurance policy proceeds paid to a named recipient besides ‘Estate’.
Real property owned outside of Ontario.
Gifts to people made throughout your life.

How long does probate take in Ontario?

How long probate will take for probate Ontario varies depending on where in the province the departed person lived and exactly how complex the will and the estate is. In Ontario, and specifically in the Toronto area as a result of how backed up the courts are, it can take numerous months just to obtain the Certificate of Appointment. The procedure starts after the Estate Trustee files the request for probate with the court in Ontario.

Probate Ontario: How does my estate (assets) get transferred after I die?

As you age it’s essential to prepare for what will certainly take place in your estate after you die. When you have children and grandchildren, it is specifically important to set up a will or living trust. Without one, your assets (residence, automobile, and also financial savings) will require to pass through the court system, which might be costly and also take a long time. The court system is likewise raging with possible issues, such as opposed wills, family arguments, and unintentional disinheritance.

If you have a will, your assets will get distributed to your beneficiaries by the Estate Trustee according to your wishes, barring any type of court challenge.

What happens if someone dies without a will in Ontario

When an individual dies without a legitimate will, it is called intestate. Ontario’s Succession Law Reform Act (the Act) lays out exactly how the estate assets are distributed.

According to the Act, unless a person that is financially dependent on the dead individual makes a claim, the first $200,000 of value is given to the departed individual’s spouse if she or he has chosen to claim his/her entitlement. This is called the preferential share. The other possibility is to claim half of the net family assets under the Family Law Act (Ontario). Lawyers will be really handy in helping the spouse choose which is the better selection.

Anything over $200,000 is shared between the spouse and the offspring (e.g. children, grandchildren) according to particular policies. If there is no partner, the departed individual’s children will certainly acquire the estate. If any among them has actually died, that youngster’s offspring (e.g. the dead individual’s grandchildren) will inherit their share.

Assuming there are no lawful challenges to rights to the property, this is what occurs if you pass away without a will in Ontario. Where there are a spouse, children, and grandchildren, this is not a good place to leave them in.

Probate Ontario: Do I have to file taxes for the deceased?

We are often asked the question, “Do I have to file taxes for the deceased?” Your loved one has passed away and now you are trying to settle their estate, and you wonder about the taxes. Let’s start with the basics of what taxes you may owe for the estate of your loved one.

When a person dies, the estate has to pay several types of taxes. The first is the amount of estate administration taxes calculated on the Estate Information Return. The Estate Administration Tax is billed on the value of the estate of a departed person if an estate certificate is requested and is provided. The estate tax obligation is paid as a deposit when looking for an estate certificate from the Ontario Superior Court of Justice. Once the estate certificate is released, that deposit comes to be the estate administration tax.

The estate administration tax is paid on the value of the assets in the estate. The return provides for an estate administration tax calculator on the form. So, it is a pretty easy thing to calculate. If an estate certificate is neither gotten nor issued, no Estate Administration Tax applies.

The second is income taxes. If the deceased has any years for which an income tax return was not filed, the Estate Trustee must gather up the pertinent information and file those returns from prior years. Then, there is the income tax return for the year of death. That is called the terminal return. Finally, the Estate Trustee has to make sure that any tax arising out of the sale of assets of the estate are also accounted for and any income tax paid.

The Estate Trustee must make sure that all outstanding amounts, be it to the Province of Ontario or to Canada Revenue Agency are fully paid. Ideally, the Estate Trustee should also request and receive from Canada Revenue Agency a clearance certificate. This certificate shows that all amounts owing have been paid. It is important for both the personal liability of the Estate Trustee and for the estate to have this clearance.

In Ontario, there is no such thing as a death tax.

Probate Ontario: If your parents die with debt who pays it in Canada?

Generally, nobody can inherit debt. But there are exceptions.

In general, what happens to debt when you die in Canada is that the Estate Trustee needs to understand all of the deceased’s assets and liabilities. The Estate Trustee needs to make sure that all debts are paid off before making any distribution to the beneficiaries. Unless you have co-signed for or guaranteed someone else’s loan, you are not responsible for your spouse’s or parent’s debts upon their death. There are generally three exceptions.

The first is credit card debt where usually a spouse has a supplementary credit card on the same account. In that case, you need to look at the credit card agreement because the supplementary cardholder might be responsible for the debt. So if there are insufficient assets in the estate to pay off the credit card debt, the supplementary cardholder is liable.

The second way is through being entitled to inherit an asset, such as real property or a vehicle. That asset may have financing registered against it; a mortgage or a vehicle financing loan. If you accept the asset, then you must also be responsible to make the payments for interest and principal. If the secured loan is not kept current, the lender has the ability to seize the asset and sell it as part of their enforcement rights.

The third example is Canada Revenue Agency for unpaid income tax. Section 160(1) of the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (Income Tax Act), and its equivalent, S. 325 of the Excise Tax Act (Canada), can be utilized by Canada Revenue Agency to assess a tax obligation liability to those who received a transfer of property from persons with tax obligations at the time of the transfer.

This deals with if a person offers you something of value (virtually anything), while they have a tax debt, Canada Revenue Agency can and will certainly pursue you. Their view is that the original tax obligation debtor ought to have sold whatever was transferred, and the funds used to pay off the tax debt.

This section of the Income Tax Act (or Excise Tax Act) especially comes into play during the administration of a deceased Estate or in an insolvency filing. As a matter of fact, if a deceased estate is insolvent, the Estate Trustee has the ability to get an order from the court allowing the Estate Trustee to place the deceased estate into bankruptcy. Then the licensed insolvency trustee will deal with selling assets and distributing the funds in priority of ranking, as established under the Bankruptcy and Insolvency Act (Canada).

My other probate Ontario blogs you might find interesting

I have written on a variety of matters regarding a deceased estate, debt and probate that you may find interesting. They are:

WILLS AND ESTATES: SELLING DECEASED ESTATE PROPERTY

FREE E-BOOK – TRUSTEE OF DECEASED ESTATE – WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS

TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS

WHAT HAPPENS IF YOU DIE WITHOUT A WILL IN ONTARIO? READ OUR INTENSE ANALYSIS

WHAT HAPPENS TO MORTGAGE WHEN YOU DIE CANADA: DEBT PHILOSOPHY EXPLAINED

WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

DO YOU INHERIT DEBT IN CANADA: CRA SAYS YES TO PROPERTY TRANSFERS

TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?

Probate Ontario summary

I hope you enjoyed the probate Ontario Brandon Blog post. If you are concerned 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.

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.

Call us now for a no-cost consultation.

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

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

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

Tags do i have to file taxes for the deceased, estate trustee, how does my estate get transferred after i die, how long does probate take in ontario, if your parents die with debt who pays it in canada, insolvent, intestate, Ira Smith Trustee, probate, probate in ontario, probate ontario, smith estate trustee ontario, what are the ways to avoid probate ontario for an estate, what assets are subject to probate ontario, what does an estate trustee have to disclose to beneficiaries, what happens if someone dies without a will in ontario, what is a certificate of appointment of estate trustee, what is probate ontario, what is this estate information return

Brandon Blog Post

LAURENTIAN UNIVERSITY FACING INSOLVENCY MAKES STARTLING CCAA NEWS FILING FOR CREDITOR PROTECTION

Post author By Brandon Smith
Post date February 8, 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 bottom and click play on the podcast.

UPDATE MAY 5, 2021: SEE OUR UPDATED BLOG PUBLISHED TODAY ON THE LAURENTIAN UNIVERSITY INSOLVENCY CREDITOR PROTECTION PROCEEDINGS STATUS – CLICK HERE FOR THE UPDATE

Laurentian University introduction

Laurentian University is facing a cash crisis and has filed for creditor protection. The Ontario university states that the application under the federal Companies’ Creditors Arrangement Act (CCAA) is intended to permit the university to continue running day-to-day operations during restructuring.

The Sudbury, Ontario school is not shutting down and will continue to provide services for students. It states it will keep normal operations and keep classes running. In this Brandon Blog, I talk about what creditor protection in the Canadian context is and why Laurentian University did so.

***Laurentian University: What is creditor protection***?

In its simplest terms, creditor protection is the protection you get when you start a proceeding with a filing under either the Bankruptcy and Insolvency Act (Canada) (BIA) or the CCAA. Under the BIA, an individual or company gets that protection in either a consumer or corporate bankruptcy. This safeguard is also obtained by filing under the restructuring proposal provisions of the BIA. A company safeguards itself when it files for restructuring under the CCAA.

Once a filing is done, without getting special permission from the court, none of your creditors can start or continue legal action against the person or the company for the repayment of a debt or for any enforcement action against its assets.

Laurentian University, therefore, received its sheltering once it made its filing under the CCAA. When using this statute, it can also be called CCAA protection.

Below is the section titled “How the Laurentian University restructuring story begins”. I discuss its particular issues leading up to the need to file.

Laurentian University: What is a stay period?

The “time out” that a person or business gets from its creditors is called a stay period (Stay of Proceedings). Upon the agreement of the court to the initial filing, the result is that the court will issue an Order giving the company an initial 30 days of protection from creditors to allow for the preparation of the restructuring proposal called a Plan of Arrangement.

This initial stay can be extended by the court, as long as the judge is convinced that the company is acting in good faith and working expeditiously in sorting through the myriad of issues stopping it from putting together its Plan of Arrangement.

Laurentian University: What does CCAA mean

The CCAA is a Canadian federal law that helps companies in financial difficulties emerge from its difficulties. The company begins its reorganization proceeding with its application to the court and files for creditor protection to avail itself of the process for a company and its creditors to come to an agreement on how to reorganize the company’s debt, while the company continues to operate normally and pay amongst other things, wages to its employees.

One of the biggest advantages of the CCAA is that it allows a business to “hold the fort” while the creditors and the company work out an agreement that will hopefully get the company back on its feet. While operating in this fashion, company management remains in control of running the business. The company does not hand over its assets to a licensed insolvency trustee (Trustee). Rather, the Trustee is appointed by the court to act as Monitor.

As the title sounds, the role of the Monitor is that of the neutral court officer working with the company. The duties of the Monitor include:

overseeing and providing supervision of the company’s affairs;
assisting in the negotiations with creditors;
helping with the drafting of the Plan of Arrangement for describing what the restructuring process will be;
report regularly to the court on the progress and details of the restructuring administration, and ultimately,
conducting the meetings of the various classes of creditors where voting on the Plan of Arrangement takes place.

Although the CCAA is unique to the country of Canada, other countries have similar restructuring legislation. The most famous is probably Chapter 11 of the US Bankruptcy Code. This is when you normally hear the term “bankruptcy protection“.

Laurentian University files to reorganize university finances

Last Fall, Laurentian University recognized it was in financial trouble. On October 1, 2020, it issued a press release advising that it has financial challenges brought on by the global COVID-19 pandemic and its pre-existing structural deficit. It also announced at that time that it hired Ernst & Young as financial advisors to assist in a further review of its detailed financial results, budgets, and our various initiatives to help identify and analyze any additional opportunities for cost savings or improvement.

On February 1, 2021, facing insolvency, Laurentian University took the step to begin its insolvency proceeding under the CCAA in order to come up with a formal restructuring plan. Since it is in the early stages of the insolvency administration, the actual plan has not yet been developed as Laurentian University needs time to come up with the proper plan. It will be one of many future events I will keep my eye on for you.

From my review of the filing documents, I can tell you what the story is so far.

How the Laurentian University restructuring story begins

“We are working with all stakeholders to ensure a smooth process for students,” said Peter Baxter, the university’s provost and vice-president, academic.”

Who would’ve thought that universities, which are supposed to be institutions of higher learning, would actually run into financial problems and put their stakeholders at risk? But that’s exactly what happened and is the current situation with the Laurentian University insolvency in Sudbury, Ontario. I guess the place was not run by any of the finance profs! It is obviously a stressful time for all students, staff, faculty, and creditors.

Dr. Robert Haché, the President and Vice-Chancellor of the Laurentian University of Sudbury, swore the necessary affidavit on January 30, 2021, in support of Laurentian’s court application for an Initial Order to commence CCAA proceedings. In his affidavit, Dr. Haché stated:

Laurentian’s financial issues were first determined as early as 2008-09 when a prior administration gave a budget to the Board that would not be balanced for the 2008-2009 academic year and showed little to no improvement for the future financial prospects of the university absent any revised processes. The budget was approved, but the Board expected the financial situation to be fixed as a top priority item.
A Plan for Regaining Sustainability at Laurentian was presented to the school’s Board on December 18, 2008, and again on February 20, 2009. The Board approved the implementation of the plan, expecting to regain financial health over a three-year period.
Starting in 2014, Laurentian undertook a $64 million Campus Modernization Project for the construction of approximately 250,000 sq. ft. of classrooms, research, study as well as a public area.
The Campus Modernization Project involved Laurentian incurring a substantial amount of long-term debt (approximately $40 million) to pay for the construction of buildings and facilities to modernize the campus in order to accommodate its historical growth and fuel the projected enrolment growth. The university elected to defer repayment of the principal amounts borrowed until after construction was completed, leading to the accrual of further interest.
When the Board approved the 2016-17 operating budget, LU forecasted operational deficits continuing through 2021-22 leading to an accumulated operational deficit of greater than $43 million.
With the exception of the modest growth experienced in 2020, enrolment has declined each year from 2015 to 2018 and tuition fees remain low, while labour and debt servicing costs have grown substantially.
The 10% tuition reduction and tuition freeze ordered by the Province of Ontario beginning in 2019.
Laurentian’s academic costs are generally higher as a percentage of total costs than other Ontario universities.
Not re-evaluating over the last decade its programs to make sure it is focusing on those the marketplace of students deem relevant and required.
The COVID-19 pandemic has made all these issues worse.

From reading his sworn affidavit, I would use one simple word to describe what has led to the Laurentian University insolvency – MISMANAGEMENT! Dr. Haché joined Laurentian University in July 2019. So he has only been involved in this mess for the last 19 months.

What Laurentian University reports its immediate plans are by making this CCAA filing

Laurentian University reported that as at April 30, 2020, it had $358.5 million in assets based on generally accepted accounting principles. Of that total, only $33.2 million is either liquid or near-liquid. As at the same date, its liabilities are:

Line of credit $14.4 million
Short-term loan $1.4 million
Accounts payable and accrued liabilities $22.4 million
Accrued vacation pay $1.8 million
Deferred revenue $1.0 million
Current portion of long-term debt $2.7 million
Long-term debt $89 million
Employee future benefits liabilities $20.8 million
Deferred contributions $38.6 million
Deferred capital contributions $129.9 million

This adds up to $322 million. The balance sheet balances because the remainder represents either restricted capital or special purpose endowments.

Laurentian University advised the court that it intends to come back requesting an Amended and Restated Initial Order. Right now, Laurentian has the benefit of the Stay of Proceedings and will not be making any payments on any outstanding amounts owing as of February 1, 2021.

Among other things, the motion in respect of the Amended and Restated Initial Order will seek the following additional relief:

extending the Stay of Proceedings to April 30, 2021;
suspending Laurentian’s requirement to make certain special payments in respect of its defined benefit pension plan, pending further Order of the Court;
suspending Laurentian’s need to reply to requests for information received under the Freedom of Information and Protection of Privacy Act (Ontario) during the Stay of Proceedings, nunc pro tunc to February 1, 2021;
the appointment of a mediator, as an officer of the Court and a neutral third party to undertake a mediation of various issues under the supervision of this Court, on an urgent basis;
approving Laurentian’s request for a debtor-in-possession credit facility (the “DIP Facility”) borrowing authority up to the principal amount of $25 million to finance its working capital requirements and other general corporate purposes, post-filing expenses and costs during the Stay of Proceedings.

The court has now declared that Laurentian University is insolvent. I will be following this CCAA administration and will write more blogs on material points of special interest as this restructuring winds its way through the court.

Laurentian University summary

I hope you enjoyed the Laurentian University Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you in such a time of uncertainty 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.

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

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

Tags bankruptcy and insolvency act canada, bankruptcy protection, CCAA, classes of creditors, Companies’ Creditors Arrangement Act, covid-19 pandemic, Dr. Robert Haché, Ernst & Young, initial order, Laurentian University, licensed insolvency trustee, plan of arrangement, protection from creditors, restructuring proposal, stay of proceedings, what does ccaa mean, what is a stay period, what is creditor protection

Brandon Blog Post

6 DISADVANTAGES OF CONSUMER PROPOSAL ARE NOT ENOUGH TO STOP A HEALTHY RETURN TO ENJOYING LIFE

Post author By Brandon Smith
Post date February 3, 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.

Disadvantages of consumer proposal: What is a consumer proposal?

As regular readers of Brandon Blog know, I have written many blogs about consumer proposals. I normally focus on the advantages of a consumer proposal. As I have never written about the disadvantages of consumer proposal, I thought I would do so now. There are many more advantages than there are disadvantages; however, there are a couple of points you should know. Some people may see them as drawbacks or disappointments. It depends on your unique situation.

Consumer proposals can be called an individual’s insolvency debt settlement agreement in Canada. It is a proposal to your unsecured creditors to pay off a portion of your frustrating unsecured debts over a set period of time. If you successfully complete the consumer proposal by making all the needed payments, the total amount of your unsecured financial obligations are forgiven at the end of the settlement period. Consumer proposals are created to get the debt freedom to consumers who cannot afford to pay off their total debt. It is a legally binding contract between the debtor and the unsecured creditors to eliminate debt carried out under the Bankruptcy and also Insolvency Act (Canada).

So consumer proposals are the best alternative to bankruptcy. To find out about all the advantages of consumer proposals, I recommend my recent blog post, CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS.

Disadvantages of consumer proposal: When is a consumer proposal appropriate?

Consumer proposals are appropriate for individuals that:

Have a secure income flow, such as from full-time employment.
Are insolvent.
Are serious about getting rid of all of their unsecured financial obligations by paying only a portion of the total owed.
Wish to stay clear of bankruptcy.

To discover if a consumer proposal is an appropriate selection for you, set up a no-cost conference with a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) (LIT or Trustee) to discuss your personal scenario. The LIT will examine your monetary situation and see if you have the economic capacity to efficiently complete a consumer proposal. The Trustee will certainly describe the pros and cons of the various options that might assist you to resolve your financial troubles.

If you choose to submit a consumer proposal, the LIT will work with you to develop a proposal that benefits both you as well as your unsecured creditors. If you file a customer proposal, you have to:

give the LIT a complete list of your assets and liabilities;
attend the first meeting of creditors, if one is requested by your creditors;
participate in 2 counselling sessions;
keep the LIT updated of any change of address; and
help the LIT in administering the proposal.

Disadvantages of consumer proposal: When is a meeting of creditors held?

The first disadvantage to talk about is when is a meeting of creditors held? The only time a meeting of creditors is called in consumer proposals is if creditors representing 25% or more of the proven claims filed request it. This would mean that at that point, you do not have a great relationship with creditors. They do not like the original consumer proposal you have submitted for their consideration.

A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The Office of the Superintendent of Bankruptcy Canada (OSB) can also direct the LIT to call a meeting of creditors at any time within that same period.

The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal, or any amended proposal tabled at the meeting.

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors regardless of any objections received.

Disadvantages of consumer proposal: How will a consumer proposal affect my credit rating?

The disadvantages of consumer proposal include the fact that it will have a negative impact on your credit rating. Generally, a person who declares bankruptcy is assigned the lowest possible credit score. Normally, with proposals, you are assigned a rating of R7. With bankruptcies, it is a worse rating of R9, the lowest possible. With proposals, The record of your consumer proposal will show up on your credit report. It will certainly be there for possibly 3 years after you have actually fully finished making all the payments. This is less than how long it will stay on your credit report because of bankruptcy.

Your ability to obtain and make use of credit after a consumer proposal relies on encouraging lenders of your personal financial maturity as well as the capability to repay the credit you are requesting. There are no guarantees and nobody is required to extend credit to you.

Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance.” To make sure your credit record is updated, send a copy of that document to the major credit-reporting agencies, TransUnion Canada and Equifax Canada. Be sure to keep all of your proposal-related documents for reference by future lenders.

Disadvantages of consumer proposal: Why are consumer proposals rejected?

Adding to the disadvantages of consumer proposal is the possibility that the creditors will decline it. Consumer proposals are commonly the last option for creditors, other than for consumer bankruptcy. In most cases, creditors accept a well thought out debt settlement plan since they wish to recuperate some of the funds that would otherwise be lost forever. Consequently, LITs who prepare well-drafted and properly explained consumer proposals get them approved by creditors.

Nevertheless, creditors can reserve their right to reject them. When consumer proposals are rejected, it’s commonly a result of the belief of the creditor that the proposal is in reality, not a better realization than in a bankruptcy process. Conversely, creditors see that they may need to wait as much as 5 years to receive what they deem a paltry reward. They prefer to finish the pain now and get nothing in the individual’s bankruptcy than have to carry holding and administering the account for 5 years to get next to nothing, notwithstanding it is a better outcome than the borrower’s filing for bankruptcy.

Disadvantages of consumer proposal: What happens if you miss a consumer proposal payment?

As long as you are following the agreed terms of your proposal, your creditors cannot take any further action against you. If you fail to meet the agreed terms of your proposal and/or miss three months of payments, the proposal will be deemed annulled. If this happens, you are barred from filing another consumer proposal.

However, there is a temporary COVID-19 special accommodation now allowed for by the OSB. A Trustee can explain what the special rules are.

So, subject to certain temporary COVID-19 accommodation, one of the disadvantages of consumer proposal is that if you default by missing 3 months of payments, your proposal is deemed annulled. The only thing left would be a bankruptcy filing.

How long does it take to rebuild credit after a consumer proposal?

Another one of the disadvantages of consumer proposal is that you will need to rebuild your credit. Although it is difficult and takes time, it is not impossible. To begin rebuilding your credit after a consumer proposal, work with your Trustee to make sure that everything you do is reported to the credit bureaus. The more positive reports that you have on file with TransUnion and Equifax, the better your credit score will be.

I always advise clients that the first thing they should do is get a secured credit card. Not the kind you buy at the drug store. Rather, it is a credit card from one of the banks. You put up a sum of money that the bank will keep as a security deposit, They then issue you a credit card with a limit equal to the deposit you put up. Each month, when you pay the credit card off in full on time, the bank reports this to the credit bureaus. Every month they report favourably is another month that you are working on improving your credit score.

The next thing you can do is take out a small loan to invest the funds in an RRSP. Use your tax refund or the extra tax you did not have to pay, to pay down the loan. Make sure that you pay off the balance of the loan within 1 year. Make your monthly payments on time. Again, your proper use of this credit will be reported to the credit bureaus and will work in your favour.

It will take a few years, and initially you may pay a higher rate of interest than if you didn’t need to file a consumer proposal. After a few years of using credit properly, you will find that your credit is now rebuilt.

***Disadvantages of consumer proposal*: Are consumer proposals bad?**

In my view, the disadvantages of a consumer proposal are not enough to ever stop anyone from entering into the only government-approved debt settlement plan. To summarize, I see the disadvantages as:

The possibility that it may take a lot longer and be more expensive than you hoped for to reach a deal with your creditors if 25% or more of the dollar value of the proven claims vote against your initial offer.
Negative impact on your credit rating.
Rejection by your creditors and no agreement on an amended proposal forcing you into bankruptcy.
You miss 3 payments causing you to default on your consumer proposal. Again, if this happens, your only real option is to file for personal bankruptcy, which is what you tried to avoid.
It will take you time to rebuild your credit.
It only allows you to wipe away your unsecured debt. If you have secured debt that you cannot afford to continue paying, your LIT will counsel you on the best way to deal with that secured debt BEFORE you file.

Disadvantages of consumer proposal summary

I hope you enjoyed the disadvantages of consumer proposal Brandon Blog post. If you are concerned 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.

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.

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

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

Tags are consumer proposals bad, avoiding bankruptcy, Bankruptcy, Consumer Proposal, consumer proposals, disadvantages of consumer proposal, filing for bankruptcy, how long does it take to rebuild credit after a consumer proposal, how will a consumer proposal affect my credit rating, Ira Smith Trustee, licensed insolvency trustee, meeting of creditors, what happens if you miss a consumer proposal payment, what is a consumer proposal, when is a consumer proposal appropriate, when is a meeting of creditors held?, why are consumer proposals rejected

Brandon Blog Post

CANADA INSOLVENCIES EXPECTED TO JUMP SAYS EVERY AUTHORITATIVE PUNDIT AND INSOLVENCY INSIDER

Post author By Brandon Smith
Post date February 1, 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 the Canada insolvencies Brandon blog, please scroll to the bottom and click play on the podcast

Canada insolvencies introduction

Ideally, if the debt was free as well as limitless, most of us would certainly be able to spend for whatever we wanted with a couple of swipes on our credit card. Companies would be able to buy supplies and also pay salaries simply by borrowing a lot more from their lender. There would be no Canada insolvencies and I guess I would be out of work!

But when the credit crisis struck at the start of this century, it revealed simply how much complimentary and limitless credit there really was, and also the number of people who had been living beyond their means with massive huge debt loads for years.

In 2020, the coronavirus pandemic struck the globe. Every country’s health system has been exhausted to the max. Governments initiated widespread lockdowns and strove to maintain their respective economies afloat. Canadian workers lost their jobs or otherwise having their income considerably decreased because of stringent lockdown measures. This required the federal government to bring in several assistance programs for individuals as well as businesses under the banner of Canada’s COVID-19 Economic Response Plan. Household support measures were imperative.

Every pundit, economist and insolvency insider forecast that Canada insolvencies would jump in 2020. They didn’t. I discuss why and what it means.

What Canada insolvencies mean

As I have written many times in the past, the word insolvency refers to a financial condition in which a person or business is not able to pay its financial obligations. The sensation of being in debt can be an extremely frustrating scenario. The thought of being not able to settle your debts is impending darkness that can seem impossible to get rid of.

As I have promoted many times in my blogs about Canadian households and family budgets, your charge card must continue to be securely in your pocket most of the time. You only should utilize it to acquire things you’ve budgeted for. Nonetheless, if you find yourself not able to pay your credit card bill, you might run the risk of dealing with a scenario known as insolvency. If you have a large amount of debt or restricted earnings, the concern of insolvency needs to be a large motivator for you to do something about it. It causes strains in households.

Limited, lowered or no revenue, whether you are an individual or a company, has actually been the result for lots of Canadians due to the coronavirus pandemic. The provinces, including Ontario, implementing lockdowns of differing degrees has also been a cause. The federal government had no choice but to generate its economic response plan to make aid payments to individuals and companies. Pundits had actually been anticipating a rise in insolvency volumes since the 2nd quarter of 2020.

Global insolvency insider forecasts said there would be a rise in Canada insolvencies and elsewhere in 2020

Insolvencies in the UK were anticipated to leap to record levels by 27% in 2020. That was exposed in a financial study called the Atradius Insolvency Report. Atradius is a leading trade credit insurance firm. It also forecasted that every major economy in all countries, except for China, was anticipated to enter an economic downturn in 2020 with international GDP forecast to contract by 4.5%. This would make it a much more intense recession in magnitude than the Great Recession of 2009. Naturally, COVID-19 was the reason.

Euler Hermes, a trade insurance firm, reported that it predicted that governments around the globe are clambering to save companies battered by coronavirus lockdowns. They said the world is nonetheless encountering a huge rise in insolvencies by one-third in 2020 and also 2021.

In Canada, increased food prices, loss of income and a cost of living have many individuals struggling monetarily. Credit card debt is surging and that is what might push numerous people over the edge. Statistics Canada just released a preliminary estimate that 2020 GDP reduced by 5.1% over year-earlier levels which is the worst year in over 6 decades. The federal government will certainly be presenting a new budget to try to kickstart Canada into an economic recovery. Predictions for later in 2020 also had Canada insolvencies rising.

What really happened in 2020 Canada insolvencies

Nonetheless, as 2020 finished, Canada insolvencies including personal bankruptcies went to a 24-year low. The 2020 trend in insolvencies was a continuing descending pattern. There’s been no spike in personal and business bankruptcies notwithstanding lots of financial difficulty in our country. There was no surge in Canada insolvencies. The opposite was true.

I have previously written on the decrease in Canada insolvencies. In my view, the main factors for the record low Canadian personal insolvencies and corporate insolvencies, including bankruptcy filings in 2020 were:

federal and provincial government support measures including the Canada Emergency Response Benefit (CERB), Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Business Account (CEBA), which had an increase from $40,000 to $60,000
mortgage debt payment deferrals
the courts having been closed for many months so nobody could get sued

So the predictions for 2020 regarding the level of insolvencies did not come true as there was a continuing decline in insolvencies. So now, each economist and all the pundits have just kicked their signs of increases in insolvencies predictions down the road and claim that 2021 will be the year for the big jump in corporate and Canadian consumer insolvencies. The main reason cited for these 2021 insolvency forecasts is that as far as we know now, the COVID-19 relief programs will wind down. Canada, like most other nations, is not expected to return to a pre-pandemic level for some time.

How do you prove insolvency?

Canada’s insolvency laws are fairly straightforward. The two main options for an individual who cannot pay all their debts are also straightforward under the Bankruptcy and Insolvency Act (Canada) (BIA). You either file for an individual consumer proposal or personal bankruptcy.

For insolvent corporations, there are options for them under the BIA too. They can restructure and reduce their debts through a Division I Proposal. Alternatively, a company can file for bankruptcy. For companies with debts greater than $5 million, they could choose to restructure by filing under the Companies’ Creditors Arrangement Act (CCAA).

I have also written before about the tests for Canada insolvencies. They are:

the debtor has stopped paying debts as they generally become due
your liabilities are greater than your assets
if you liquidated all of your assets, there would not be enough money to pay off all your debts in full

***Canada insolvencies*: What happens during insolvency?**

When a person or company finds themselves not able to pay their costs, they are insolvent. Insolvency is an economic problem. This typically indicates that they cannot pay their present expenses in a prompt way. There are a number of choices for dealing with your debt when you go into insolvency. What you need is the insolvency advice of a licensed insolvency trustee (Trustee). The Trustee will certainly examine your scenario, establish your insolvency level and discuss your sensible alternatives with you.

As an individual, you can try to use the proposal provisions of the BIA to keep your assets, while you negotiate with your creditors with the help of the Trustee. The objective is to come up with a plan to pay a portion of what you owe to eliminate all of your financial obligations. This allows you to attempt to reorganize your business or personal situation to avoid bankruptcy. It is important to understand your choices.

Lots of people are afraid of declaring bankruptcy or perhaps even owing money. Not many individuals understand what happens throughout insolvency. People assume bankruptcy is a quick fix to all of their financial problems. They think they will never ever need to fret about cash ever again. They are wrong. When you file for bankruptcy, you have simply taken a massive step in the direction of economic liberty.

Nonetheless, there are duties and responsibilities on the person that declares bankruptcy. The process is developed to work with you using counselling to ensure, as best as feasible, that your financial troubles will no longer rule your life. The ultimate objective is that when you have actually successfully completed your debt settlement proposal or have your bankruptcy discharge, you will not once more be tempted to have additional debt that is going to drag you back into insolvency.

It is very important to remember that just because you owe money does not imply that you ought to give up. Rather it suggests that you require to find among the realistic options that a Trustee can help you with to work you out of financial trouble.

***Canada insolvencies*: What happens when you file insolvency?**

At some point in life, you may find yourself in an economic scenario that you do not recognize exactly how to get yourself out of. You’ll be stuck in a situation where you owe more money than you can ever pay back. Remember that insolvency is a financial situation. You can become insolvent, but you cannot file insolvency.

What you can do is search for an option to settle your financial debts, leave them behind as well as move forward with confidence and no tension in your life. It is not your fault that you cannot do it yourself. You have only been taught the old ways. A Trustee can help you using new ways. That is what we are trained to do.

The options, in order of seriousness and urgency, within the Canadian insolvency framework are:

Devise a realistic family household budget to see where you can divert the money you are currently spending away from certain items to unpaid debt until it is all paid off. Household finances must be studied to make sure that there is a balanced budget.
Reaching an informal arrangement with your few creditors to get deferrals from creditors and/or pay them less than the total amount owing on each in order for them to write off the balance.
Reaching a formal debt settlement plan through a Trustee in order to extend the time you have on an interest-free basis and agreements with creditors that you will pay less than the total owing in order to wipe away all of your unsecured debt. This process is called either a consumer proposal or a Division I Proposal, depending on whether you owe more or less than $250,000. To read more about consumer proposals, please click to read my consumer proposal faq blog.
Filing for bankruptcy in order to eliminate your debt and start again fresh, Starting Over, Starting Now.

This is what the BIA is designed for. For corporations owing less than $5 million, they too can take advantage of either debt settlement or bankruptcy using the BIA. If a corporation owes more than $5 million, they can also consider a debt settlement plan under the Companies’ Creditors Arrangement Act (CCAA).

You can deal with your own form of insolvency through the BIA if you can’t pay your bills and you can’t find a way to get out of your situation. You can do one of the consumer insolvency filings available to avoid being harassed by debt collectors. Consumer filings are available to individuals to get a fresh start. Your car breaks down and you can’t afford to fix it. Your debt through mortgages payments are too high. You can’t pay your rent. Why would you not want a no-cost consultation with a Trustee? You literally have nothing to lose.

Canada insolvencies summary

I hope you enjoyed this Canada insolvencies Brandon Blog post. Will there be an increase in insolvencies around the globe in 2021? What will the insolvency figures end up being? I don’t know. But rather than worrying about the whole world, what about you?

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.

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.

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

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

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Expect debt collections activity to pick up as economy reopens: experts

Debt collections: What is a debt collection agency?

Debt collections: What debt collectors do

How Reputable Collectors Operate

What to Expect When You Have Debt in Collections

Debt collections: What Can a Collection Agency Do To Me in Canada?

Debt Collections: Can a Collection Agency Charge Interest in Canada?

Debt Collections: What Should You Do If You Are Being Pestered By a Collection Agency?

The debt collection agencies will be calling

6 fantastic reasons to create and follow a household budget to track your household spending

When budgeting alone is not enough and you need some debt settlement

Can you raise money on a payment plan that you can afford the monthly payments?

Aggressive debt collections techniques may force some into an insolvency filing

Debt collections summary

Bankruptcy filings Canada introduction

Common mistakes: Trying to hide assets

Bankruptcy filings Canada: Debtor trying to hide assets usually doesn’t work and could be counterproductive due to exemption categories

Common mistakes: Do Not Incur Any Additional Debts like maxing out credit cards before filing bankruptcy

Common Bankruptcy mistakes: Do Not Repay Relatives or Insiders

Bankruptcy filings Canada: Waiting too long for consultations with Trustees

Huge bankruptcy mistake: Taking extra taxes out of your paycheque

A mistake in bankruptcy: Cashing in or making early withdrawals from retirement accounts

Bankruptcy filings Canada: What debts are not wiped out through bankruptcy?

Bankruptcy filings Canada: Not sufficiently exploring self-help options

Bankruptcy filings Canada: Making the wrong type of filing

Bankruptcy filings Canada summary

Small businesses in Canada introduction

Contribution of SMEs to Canadian business

How many businesses in Canada are small businesses?

What is the contribution of SMEs to exports in Canada?

How many people were employed in Canada in 2019?

What is the distribution of employment across the private sector?

How many businesses appear and disappear each year?

What proportion of new businesses survive the first 15 years?

How many small businesses in Canada could close permanently amid a pandemic

The need for government assistance for Canadian business

Saving small businesses in Canada

Entrepreneurs are obviously scared of any formal insolvency proceeding

Small businesses in Canada summary

Sharia law in Canada introduction

Judaism: The Wedding Ceremony, Religious Divorces and Getting a Get

Sharia Law in Canada: The Mahr

Sharia Law in Canada: A Religious Ceremony Marriage Agreement Payment Can Be A Claim Under Ontario Law

Sharia Law in Canada: Is a Mahr An Enforceable Obligation In An Ontario Divorce Situation?

Religion-Based Mahr Agreements: Validity and Status Under Canadian Law

Answers to the Top 5 Divorce and Bankruptcy Questions – Secular stuff

What happens to spousal and child support payments during bankruptcy?

Who is responsible for joint debt when separating or divorcing?

What happens to joint debt if you file for bankruptcy?

What Happens To Joint Debts After Bankruptcy?

Do Support or Alimony Payments Affect Surplus Income?

Sharia law in Canada summary

File for bankruptcy introduction

You owe money: Considering bankruptcy?

How to file for bankruptcy Canada: Let the licensed insolvency trustee no-cost consultation happen first

How to file for bankruptcy – How the bankruptcy process starts

Who can file for bankruptcy?

The locality of the debtor

What about the Trustee?

File for bankruptcy summary

The Rachel Uchitel story

Rachel Uchitel and the Bottle Girls

Nightclub hostess and NHL Rangers good luck charm

What Rachel Uchitel is most famous for

The Rachel Uchitel Addiction

Rachel Uchitel is now bankrupt

Rachel Uchitel on the HBO documentary talks about Tiger, boyfriends and marriage

Is Chapter 7 one of the types of bankruptcies in Canada?

Bankruptcy and addictions

The Rachel Uchitel story summary

What is Probate Ontario?

What assets are subject to probate Ontario?

Probate Ontario: What is a Certificate of Appointment of Estate Trustee?

Probate Ontario: What does an estate trustee have to disclose to beneficiaries?

Probate Ontario: What is this Estate Information Return?

What are the ways to avoid probate Ontario for an estate?

How long does probate take in Ontario?

Probate Ontario: How does my estate (assets) get transferred after I die?

What happens if someone dies without a will in Ontario

Probate Ontario: Do I have to file taxes for the deceased?

***Common mistakes*: Trying to hide assets**

***Bankruptcy filings Canada*: Debtor trying to hide assets usually doesn’t work and could be counterproductive due to exemption categories**

***Sharia Law in Canada*: The Mahr**

***Sharia Law in Canada: A Religious Ceremony Marriage Agreement* Payment Can Be A Claim Under Ontario Law**

***Sharia Law in Canada: Is a Mahr An Enforceable Obligation* In An Ontario Divorce Situation?**

***Probate Ontario: What is a Certificate of Appointment of Estate Trustee?***

***Laurentian University: What is creditor protection***?

***Disadvantages of consumer proposal*: Are consumer proposals bad?**

***Canada insolvencies*: What happens during insolvency?**

***Canada insolvencies*: What happens when you file insolvency?**