Ira Smith Trustee & Receiver Inc.

Debt problems: 8 Mistakes To Avoid When You Are Having Money Problems

Post author By Brandon Smith
Post date January 7, 2020

Introduction

I have advised many entrepreneurs and non-business people who have debt problems. Many times, there are things they have done before coming to see me for a no-cost consultation that I wished they had not done. So, I thought I would discuss the 8 mistakes to avoid when you are having money problems.

1. Using money from your RRSP to pay debts

This can be a costly error. Using retirement funds to pay oﬀ debts can hurt you in numerous ways. The vast majority of retirement accounts are exempt. This means your creditors cannot get at them and you won’t lose them if you file for a consumer proposal or for bankruptcy (“an insolvency filing”).

Using retirement money to pay debts that can be discharged in an insolvency filing, like credit card and income tax debt, rarely makes sense. If you make an insolvency filing, you can eliminate the debt without spending any of your retirement funds. Using retirement funds to pay debt jeopardizes your future when you will be in more need of the funds due to lack of other income.

The withdrawal from the RRSP counts as income on which you will owe taxes and possibly even an early withdrawal penalty. Depending on how large the amount is, the added income and related income tax debt could aﬀect the nature of your insolvency filing, the total amount you will still have to pay and provide problems with your discharge from bankruptcy.

2. Paying unsecured debts like credit cards, income tax and personal instead of secured debts like mortgages and car loans

Some creditors are so aggressive and sometimes predatory that they make you think that you must pay oﬀ their debts immediately or suﬀer severe consequences. Frightened by these tactics you may be tempted to pay their unsecured loans first and leave a secured loan unpaid. This creates multiple problems.

The two most common types of property subject to a security interest are probably the two most important things you own: your home and your car. A car loan creditor can repossess a car after one missed payment. If that occurs, you will lose your car and you will be responsible for any deficiency amount you still owe on your car loan after the car is auctioned oﬀ usually for significantly less than it is worth.

While a mortgage lender may not be able to kick you out of your home as quickly, arrears, a higher arrears rate of interest that kicks in upon default and late fees can significantly increase what you owe and make it very diﬃcult to catch up. As a general rule, you should prefer to pay your secured creditors so you can keep your car and home, as opposed to paying unsecured creditors who don’t have near the recourse that a secured creditor has. This assumes that you will be able to aﬀord the car and mortgage payments after we help you eliminate your debts and balance your budget.

In addition, if you decide to make an insolvency filing, the money paid to your unsecured creditors might as well have been thrown in the trash. Meanwhile, you will still have to catch up on your secured debts if you want to keep the property.

Finally, you might have to explain to the licensed insolvency trustee why you were able to pay certain creditors, but not others, so close to the filing. Such payments may be considered preferences that the trustee can force the creditor to return in a bankruptcy. It is always better to avoid such a problem and keep your secured debts current, even if you have to neglect the unsecured ones.

3. Maintaining accounts at a bank or other financial institution where you owe money

Almost every bank and financial institution will require you to sign an agreement authorizing the bank to automatically garnish your account if you miss a payment owed to it. In other words, if you have your mortgage and a savings account at the same bank and you miss a mortgage payment, the bank can take it from your savings account. This is called a setoﬀ.

You should transfer your accounts, other than for the one account need to pay your monthly loan payment, to another institution where you don’t owe money to avoid this situation. You can keep a minimum amount in that one account and replenish it monthly so you can’t lose much in case of a setoﬀ.

4. Using a second mortgage or home equity line of credit to pay off credit cards or other unsecured debt

As mentioned previously, credit card and other unsecured debt can be discharged in an insolvency filing. If you don’t make your mortgage payments, you could lose your home.

If the amount you borrow against your home doesn’t get you out of debt, you may have no choice but to end up not being able to aﬀord the higher payments, in bankruptcy, having wasted money that could have been used elsewhere. To make matters worse, you have allowed a second lien against your home, which increases your monthly expenses and the length of time before you are able to pay your home oﬀ. In addition, the second mortgage, is a secured debt, will not be dischargeable in an insolvency filing and you may end up losing your home.

Don’t fall for the advertisements that suggest you consolidate your debts with a home equity loan. This strategy only makes sense after you have seen a licensed credit counsellor and have created and understood your balanced budget. The licensed insolvency trustees at Ira Smith Trustee & Receiver Inc. are also licensed, credit counsellors.

5. Not filing your tax returns

If you do not file your tax returns on time, you will have an issue if you make an insolvency filing. Your case will not be closed and your debts will not be discharged until you file your missing income tax returns with the Canada Revenue Agency (“CRA”) and they have a chance to review it. The CRA will not allow you to get through the insolvency filing without ensuring your returns have been filed.

It will also be impossible for us to properly advise you on whether you can avoid bankruptcy through a consumer proposal because will not know the total amount you owe to CRA. You always need to bring your income tax filings current BEFORE making an insolvency filing. Better not to have this problem delay a filing when you really need to protect yourself immediately at that time.

6. Telling a creditor that you intend to pay

When you have debt problems, it is always best not to say anything to a creditor than to promise the creditor that you will pay. Once you tell creditors to expect money, their harassment will grow every day they don’t receive the promised money.

7. Making a written promise to pay or making a partial payment on an old debt

Creditors are barred from collecting a debt once the limitation period has run. The limitation period on a particular unsecured debt incurred in Ontario is 2 years. Making a written promise to pay or making a partial payment on the debt (no matter how small) may reset the clock on the creditor’s ability to take legal action.

8. Ignoring pending lawsuits

Pending lawsuits on debts is an obvious sign that you have debt problems. Ignoring pending lawsuits is a huge mistake as these lawsuits lead to judgments. Upon receiving a judgment, the creditor will be able to garnish your wages and freeze your bank accounts.

If you are sued on a debt, it’s wise to at least consult a lawyer. You may have legal defenses. It is normally best to make an insolvency filing either before or immediately upon a judgment being made against you. That way, the creditor who received the judgment cannot enforce against your wages or bank accounts. You are protected in an insolvency filing by an automatic stay of proceedings.

Debt problems summary

I hope you found this Brandon’s Blog, What is a Consumer Proposal, helpful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

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

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

We know that people facing financial problems need realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Bankruptcy, Canada Revenue Agency, Consumer Proposal, CRA, credit card debt, debt problems, income tax, income tax debt, insolvency, insolvency filing, Ira Smith Trustee, licensed insolvency trustee, money problems, RRSP, secured debt, tax returns, trustee, unsecured debt

Brandon Blog Post

BANKRUPTCY BLOG 2019: OUR MOST FAVOURITE INSOLVENCY TOPICS

Post author By Brandon Smith
Post date December 30, 2019

Introduction

I first want to wish all of you and your families a healthy, happy and prosperous New Year. As 2019 draws to a close, I thought it would be interesting to do some research in my 2019 Brandon’s bankruptcy blog to see which ones were the most top 10 popular this year.

So, in order counting down from number 10 to number 1, here are my top 10 bankruptcy blog counts for 2019.

#10 – 407 ETR DEBT SETTLEMENT: OUR NEWEST GUILT FREE WAY TO DO IT

This was a blog I wrote in 2015 as a follow up from one in 2014. It was updated for a 2018 Court decision.

In January 2014 in our blog titled 407ETR FAIRNESS-ONTARIO COURT OF APPEAL ENSURES FRESH START I described to you the decision of the Court of Appeal for Ontario in 407 ETR Concession Company Limited v. Superintendent of Bankruptcy (In the Matter of the Bankruptcy of Matthew David Moore) (the Moore Decision).

The highway’s owners appealed that decision to the Supreme Court of Canada (SCC). On Friday, November 13, 2015, the SCC released three decisions all dealing with the same basic issue: does the federal Bankruptcy and Insolvency Act (BIA) take paramountcy over provincial laws purporting to deal with the issue of debt and bankruptcy in Canada. The SCC answer was a resounding YES!

This blog talks about how 407etr deals with the debt owing by an insolvent person filing either a consumer proposal or for bankruptcy.

#9 – SOMETIMES EVEN A SHARK NEEDS BANKRUPTCY AND INSOLVENCY HELP

Not every innovation that is seen on The Shark Tank is bound to be one of the very best. Among the winners, one just entered into bankruptcy and insolvency proceedings. In this blog, I described one such company that got a deal on Shark Tank, but ultimately, went into bankruptcy.

Fizzics is a machine that makes use of sound waves that improves the taste and quality of a beer. Not even a Shark can stop its company from being driven to Chapter 11 bankruptcy protection. This proves that often an ingenious and fantastic invention being marketed with the assistance of a Shark might not truly interest people.

#8 – COURTS OF JUSTICE ACT: COURT OF APPEAL FOR ONTARIO CREATES NEW RULE?

This was a June 2019 blog about a then-recent decision of the Court of Appeal for Ontario that raises certain issues for a Receiver appointed under the Ontario Courts of Justice Act. The question answered in this blog which I focussed on was does the appeal period in the BIA or the Courts of Justice Act, regulates the appeal period from the order of the motion judge in this situation?

#7 – GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?

I am often asked if you can have a gambling debt bankruptcy; can gambling debts be discharged in bankruptcy? In that January 2018 blog, I discussed the issues and provided my views on how best to get a discharge from not only gambling debts but debts related to any addiction.

#6 – CANADIAN REVERSE MORTGAGE: SENIORS MOVING FORWARD WITH INCREASED DEBT

In this August 2019 blog, I discussed the issue of how seniors are flocking to the Canadian reverse mortgage product in record numbers. I described what seniors must know to avoid reverse mortgage problems.

#5 – PRENUPTIAL AGREEMENTS MAKE FAMILIES STRONGER: THEY AREN’T JUST FOR THE RICH & FAMOUS – PRENUPS IN ONTARIO ARE FOR YOU TOO

In this July 2017 blog, I wrote about how prenuptial agreements make families stronger and why anyone can benefit from prenups in Ontario.

#4 – FORM 31 PROOF OF CLAIM: HOW TO COMPLETE THE PROOF OF CLAIM

This blog is from October 2018. I discussed how a form 31 proof of claim form should be completed and discussed why it is important for it, and the related proxy, to be completed properly.

#3 – 40 PARK LANE CIRCLE, 44 PARK LANE CIRCLE TORONTO FOR SALE: ARE FINANCIAL PROBLEMS CONTAGIOUS?

This March 2015 blog asked somewhat tongue in cheek if financial problems could be a result of where you lived. I reviewed some high profile insolvency cases by residents of 40 Park Lane Circle and 44 Park Lane Circle in the toney Bridle Path area of Toronto. I also provided some solutions people could use to solve their own debt issues.

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

This was a June 2018 blog. In it, I explored what happens to debt when you die in Canada. Does debt survive death or not?

#1 – AVERAGE CANADIAN NET WORTH 2018: MIDLIFE WEALTH SHOCK MAY LEAD TO DEATH

This September 2018 blog looked at household debt at an all-time high, making the average Canadian net worth 2018 is a hot topic. My blog explored a then-recent study showing what could happen if we experience wealth shock.

Bankruptcy blog conclusion

You may have already noticed over the last 10 days or so I have slowed down a bit in the writing of my Brandon’s bankruptcy Blog. The holiday period will do that to me! I will continue in January at a slower pace of blog posting. Come February, I will pick up the pace again.

In the meantime, again, I wish all of my loyal readers and their families a healthy, happy and prosperous 2020.

Tags 40 Park Lane Circle, 407 ETR debt settlement, 44 Park Lane Circle, 44 Park Lane Circle Toronto for sale, average canadian net worth, averge canadian net worth 2018, bankruptcy and insolvency, bankruptcy blog, canadian reverse mortgage, courts of justice act, form 31 proof of claim, gambling debt bankruptcy, how to complete form 31 proof of claim, prenups in ontario, prenuptual agreements, what happens to debt when you die, what happens to debt when you die canada

Brandon Blog Post

WHAT IS A CONSUMER PROPOSAL? OUR AMAZING EXCELLENT INSOLVENCY FAQ PRIMER

Post author By Brandon Smith
Post date December 23, 2019

what is a consumer proposal

What is a consumer proposal introduction

Let us start with a what is a consumer proposal definition: A consumer proposal is a formal binding offer made to your creditors to settle your debt for less than the full amount owing.

To help you decide if a consumer proposal is the right option for you, I will provide answers to the most frequently asked questions I receive about what is a consumer proposal in Canada.

What is a consumer proposal?

A consumer proposal is a government-regulated debt settlement program filed with a Licensed Insolvency Trustee (Trustee). The purpose of filing one is to get rid of problem debt so that you can start the process of rebuilding your credit debt-free.

It can only be filed with the Trustee. When you sign your documents, they are then filed with the federal government. It is a legal process under the Bankruptcy and Insolvency Act (Canada) (BIA).

This process is a legal agreement between you and your creditors to repay part of the debt that you owe. If a simple majority, in dollars, of creditors agree to the terms you have offered, then your proposal is binding on all your unsecured debts.

What is a consumer proposal? It is a court-sanctioned process that allows you to negotiate a settlement with your unsecured creditors. This kind of arrangement does not deal with secured creditors.

What is a consumer proposal: Is it worth it?

I would say definitely yes. A successful restructuring is binding on all unsecured creditors. It is a legally binding deal between you and your creditors if the offer is accepted. A consumer proposal is the ideal debt repayment plan for individuals who are able to repay a portion of their debts, but not the full amount.

What is a consumer proposal? This consumer proposal process is a way to avoid filing bankruptcy by making a deal with your creditors to repay a portion of what you owe. If you have high or even just regular monthly income, it is a more sensible option to eliminate your debt obligation than to file for bankruptcy. This process results in a legally binding agreement between you and your creditors that allows you to settle your unsecured debts at a much lower rate, interest-free, over an extended period of time.

The Trustee’s motivation in a consumer proposal is to find a common sweet spot. A number is high enough that it is a better alternative for your creditors than your bankruptcy. A number that the creditors will likely accept yet still a number low enough that it is affordable for you to pay each month.

A consumer proposal is often the way of achieving that objective. In fact, the number one advantage is that you get to keep all assets. Such a proposal can last up to a maximum of 5 years. It is a debt relief solution that allows you to significantly reduce your debt and repay a portion without interest while keeping your assets. That is what is a consumer proposal.

What is a consumer proposal? How do you qualify for one?

A consumer proposal is for individuals who are able to make payments to creditors (either monthly or as a lump sum), but need to change the current arrangement of their payments.

You can file one if you are a person who owes $250,000 or less in unsecured debt.

The big difference between bankruptcy and this kind of restructuring plan is the monthly payment. Once the negotiation is complete and the arrangement agreed to, you make a single payment each month while the proposal is running.

The consumer proposal is one of the most frequently used options for getting out of debt in Canada. If you and your Trustee determine that a proposal is better for your financial situation than bankruptcy or any other debt relief option, you and your Trustee will begin to craft a settlement offer. Your offer will be reviewed by your creditors.

A consumer proposal is typically the preferred alternative to bankruptcy, both in terms of financial affordability and credit ratings. Part of deciding whether bankruptcy or a debt settlement is right for you is knowing what kinds of debts can be included and will be discharged when the process is successfully completed.

A consumer proposal does not deal with secured creditors. Filing one can make keeping up with your mortgage or car loan more affordable. This assumes that in your monthly budget, you can afford to keep them. If not, you will have to give them up to be able to get ones that you can afford. This process does NOT affect the mortgage on your principal residence or a secured car loan. That is what is a consumer proposal is not.

A proposal is an agreement made between the Trustee and your creditors. Through a legally-binding document, it requires you to pay off a percentage of your debts and/or extend the time you need to pay off your debts in full. For those who cannot afford to repay their debts, it is the best debt consolidation program available. If you are looking for debt relief, this is a better option.

For most people, a consumer proposal is a more attractive alternative to bankruptcy; however, it is still considered a form of the insolvency process. For Canadians seeking debt relief, it is an option for insolvent debtors that isn’t as severe as filing for bankruptcy. During your initial no-cost consultation, your Trustee will explain all your debt relief options to determine which one is the right solution for you.

The Trustee acting in your consumer proposal acts as the Administrator. Within ten days after filing with the official receiver, the Administrator will prepare a report containing the results of its investigation, the Administrator’s opinion as to whether the consumer proposal is fair and reasonable to the creditors and the debtor, and whether the consumer debtor will be able to perform it.

If the documents have been successfully filed, accepted by your creditors, court-approved, and then paid through completion, a certificate is given indicating the full performance of the proposal to you and the Official Receiver.

What is a consumer proposal? What does it do to your credit?

Getting out of debt with a consumer proposal is often the first step to rebuilding credit. As with any repayment program, including a debt management plan, this process will for a short while lower your credit score. However, most clients see an improvement in their credit scores shortly after completing the program.

For those who don’t want to go through the bankruptcy process, or want to keep more of their assets, the proposal is less invasive. A proposal is combined with mandatory credit counselling. Trustee fees come out of any monies paid to creditors. If you are unable to repay all of the unsecured debt that you owe but have a steady job and income you could find that a proposal is a viable alternative to bankruptcy.

Once your consumer proposal is completed, you are in the next phase of taking control of your finances.

A proposal is a viable alternative if you have significant surplus income or assets you want to keep. A proposal is a legal proceeding under the BIA that provides a stay of proceedings that immediately stops all creditor actions. This includes most wage garnishments and calls from creditors and collection agencies. If you are dealing with creditor calls or being threatened with legal action, this debt settlement process can help you eliminate your debts and stop dealing with those creditors again.

Payments in a consumer proposal are negotiated upfront. The duties required in a proposal are less than those in bankruptcy. A proposal has fewer required duties than bankruptcy. As you can see, it is a viable way to eliminate all your overwhelming unsecured debt and get your life back on track.

A consumer proposal is also something to consider if your debts are higher than $10,000 and your monthly payment under a debt management plan may be too high for you to afford. Your monthly payment on your consumer proposal is remitted to your creditors once all applicable fees have been paid.

A consumer proposal will eliminate income tax owing

For spouses, if your debts are generally common, you can make a joint consumer proposal. If such a joint filing is made, the unsecured debt threshold increases to $500,000.

A consumer proposal is the only method that can be used to negotiate a reduced balance owing to taxes to the Canada Revenue Agency. A consumer proposal is a safe and reliable way to get out of debt but it can also be the cheapest in terms of monthly payments. The consumer proposal will only include taxes owed from tax returns that were filed prior to the proposal date.

Because each personal situation is unique, the benefit of what is a consumer proposal is that it can be tailored specifically to meet your needs. This is the only government-approved debt settlement option for resolving your debts in Canada, besides filing an assignment in bankruptcy. A consumer proposal is an option to negotiate repayment terms with your creditors through the Trustee, for much less than what you owe today.

No matter what stage in this process you may be at (even if you are still considering one), you probably have questions about what to expect after your consumer proposal is finished. A consumer proposal is a little better than a bankruptcy with regard to your credit score. A consumer proposal is an R7 rating and a bit of an improvement in exchange for the effort of repaying a portion of what you owe. A successful consumer proposal will actually help you avoid bankruptcy.

Another advantage of an arrangement like this is that your Trustee is often able to negotiate greater principal and interest reductions than you could on your own. What sets this plan apart from paying the minimum payments to your creditors on your own is the fact that a consumer proposal includes freezing your interest payments and an agreement that your creditors will consider your debts paid in full for less than what you actually owe.

A consumer proposal is a very commonly used way to settle your debts, without declaring bankruptcy, (or filing for full bankruptcy, as it is referred to by many of our clients). The consumer proposal is a very powerful legally binding way to settle your debts, which normally puts an end to garnishments and other legal actions against you, stops collection calls, and allows you to maintain control of your assets.

Is a Consumer Proposal Right for You?

This is an exceptional program for individuals, families, and sole proprietors who are facing financial hardship and need a practical solution to their debt problems. This process has no hidden fees. While a consumer proposal often lasts longer than bankruptcy proceedings, the total cost to you may be less because you retain your assets and there are no surplus payments.

A consumer proposal is a viable option to deal with small business debts in a proprietorship if the total debts do not exceed $250,000. This program does not deal with debts owed by an incorporated business. It is one of the best, and safest, debt consolidation options available.

What is a consumer proposal good for? It is a great way to take advantage of many of the advantages of bankruptcy without the severe drawbacks such as the loss of assets you must endure during the bankruptcy process. All of your assets are protected from a seizure when your consumer proposal is accepted, and the more you can offer your creditors, the greater the likelihood that they will accept your proposal, thereby allowing you to keep all your assets.

Both bankruptcy and consumer proposals are debt relief options allowing those who are in a significant amount of debt to get out from under what they owe. However, the consumer proposal is far less disruptive to their lives.

Deciding to file a consumer proposal is about dealing with your debt, but I understand that you may be concerned about the impact a consumer proposal has on your credit report.

If your financial situation is such that budgeting or refinancing cannot resolve your ongoing financial crisis, a consumer proposal is one of the options under the BIA to resolve your debts. A consumer proposal may be the best way to help you avoid bankruptcy and achieve real relief from your outstanding debts.

Each situation is different. Each program is tailored to fit the budget and circumstances of each person. The payments you make are then divided among your unsecured creditors. As with bankruptcy, one of the immediate pros of entering such a debt settlement program is that it stops wage garnishments.

Even during the time that this debt settlement process is noted on your credit history, it may still be possible to obtain new credit, including renewal of ongoing commitments such as your mortgage, financing the purchase of a new vehicle, or even a credit card. For consumers who worked seasonally or have fluctuating income, a consumer proposal can be structured so that higher payments are made during peak earning times and lower payments are made during low earning times. Individuals who file a consumer proposal must complete two mandatory financial counselling sessions with a qualified insolvency counsellor.

What is a consumer proposal summary

I hope you found this Brandon’s Blog about what is a consumer proposal helpful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

what is a consumer proposal

Tags Bankruptcy, Bankruptcy and Insolvency Act, BIA, Consumer Proposal, consumer proposal canada, Debt, how do you qualify for consumer proposal, insolvency, Ira Smith Trustee, is a consumer proposal right for you, is consumer proposal worth it, licensed insolvency trustee, offical receiver, Office of the Superintendent of Bankruptcy, trustee, what is a consumer proposal

Brandon Blog Post

TRUSTEES IN BANKRUPTCY TORONTO ONTARIO USUALLY FORBIDDEN TO DIG THIS

Post author By Brandon Smith
Post date December 18, 2019

Trustees in bankruptcy Toronto Ontario introduction

On April 15, 2019, a group of companies operating as QuadrigaCX (Quadriga) became bankrupt. This followed their initial application under the Companies’ Creditors Arrangement Act (CCAA) to get bankruptcy protection.

The purpose of this Brandon’s Blog is to describe the latest events in this ongoing saga. Especially something trustees in bankruptcy Toronto Ontario usually don’t dig this.

What was Quadriga

Quadriga operated a crypto money exchange permitting customers to save, get, and offer various cryptocurrencies (including Bitcoin, Bitcoin Cash Money, Bitcoin Cash SV, Litecoin and Ethereum) on the Quadriga platform.

The cryptocurrency industry is not regulated in Canada and there is no governing body giving oversight.

Canadian chartered banks generally do not supply financial services such as bank accounts to companies operating in the cryptocurrency sector. This held true at Quadriga who needed the solutions offered by Third-Party Payment Processors (TPPP) to provide Quadriga’s treasury functions.

TPPP’s utilize various banking facilities in many countries around the globe. It can be very difficult to trace the flow of funds. Especially if the TPPP purposely sets up an international flow of funds through various intermediaries. We found this when we administered the bankruptcy of Conquest Vacations Inc. (Conquest).

No Canadian or US TPPP would clear Conquest’s credit card transactions. So, Conquest entered into an arrangement with a UK TPPP who utilized, amongst other banks, a financial institution in Mauritius. Our ability to trace the flow of funds with a high level of accuracy was thwarted in that case.

Quadriga was started by Mr. Gerald Cotten. It is reported that he died at. the age of 30 from complications from Crohn’s disease. At the time of his reported death, he was travelling in India.

Apparently, Mr. Cotten was the only person who knew the passwords associated with all the wallet addresses holding cryptocurrency.

Various issues faced by Trustees in bankruptcy Toronto Ontario

The Trustee was unable to find any documentation or other information regarding passwords. The Trustee also was unable to locate conventional books and records. The Trustee was not able to locate basic company records or accounting records.

There were also no records found documenting the location of Quadriga’s cryptocurrency and money reserves between third party settlement processors, savings account, wallet addresses and other third-party exchanges.

There also appeared to be no segregation of assets between funds of Quadriga and its customers. This would make it extremely difficult in any bankruptcy administration for trustees in bankruptcy Toronto Ontario or anywhere else in Canada.

The Trustee found that a substantial volume of cryptocurrency from Quadriga’s platform was transferred to competitor exchanges, some of which were transferred into personal accounts controlled by Mr. Cotten.

Additionally, significant amounts of cryptocurrency were moved to wallet holders whose identification was impossible to identify.

trustees in bankruptcy Toronto Ontario

Gerald Cotten enrichment found by Trustees in bankruptcy Toronto Ontario

It turns out that the cryptocurrency of Quadriga’s customers was taken off the Quadriga system to other third party exchanges and traded on those exchanges.

In other situations, cryptocurrency and its resultant cash were utilized for a margin trading account established by Mr. Cotten. Trading losses sustained and also incremental fees charged by exchanges negatively affected Quadriga’s cryptocurrency books.

Mr. Cotten created particular accounts on the Quadriga system under pen names where it appears that make-believe cryptocurrency and cash funds were deposited and used to trade within the Quadriga platform.

This resulted in inflated revenue numbers and ultimately the withdrawal of customers’ cryptocurrency. Substantial funds were moved to Mr. Cotten directly and various other associated accounts. This resulted in a substantial amount of cash and cryptocurrency reserves that could not be located.

The Trustee’s examination revealed that Mr. Cotten occasionally moved substantial cryptocurrency as well as various other funds outside of Quadriga. In certain instances, these transfers were for considerable amounts of currency routed to Mr. Cotten directly. Funds were used to fund personal costs and also the purchase of various personal assets.

In various other cases, transfers were made straight to his wife, Jennnifer Robertson. Funds were also used to pay personal expenses and to purchase personal assets both in her name or the name of companies which she controlled.

**The trustees in bankruptcy Toronto Ontario settlement with Jennifer Robertson**

Ms. Robertson has offered the Trustee a settlement offer that involves returning the majority of her possessions, the assets of Mr. Cotten’s Estate and also the assets of entities owned by Ms. Robertson or the Estate to the Trustee.

Negotiations have led to a settlement agreement acceptable to the Trustee. The Trustee was of the view that a negotiated settlement was more effective than ongoing litigation.

The settlement arrangements were substantial and conducted at arm’s length. The Trustee sought and obtained the agreement of the Inspectors in the Quadriga bankruptcy administration.

The settlement to transfer almost all of the assets owned by Ms. Robertson, the various companies and the Estate was also approved by the Court. So everything seems to be going smoothly, right?

Trustees in bankruptcy Toronto Ontario usually don’t dig this!

Not quite. On Friday, December 13, 2019, the legal team representing individuals who were users of the platform in these bankruptcy proceedings and who have lost collectively millions of dollars, sent a letter.

The letter went to the Royal Canadian Mounted Police seeking an exhumation and also post-mortem autopsy be performed on the body. The reason is to confirm both its identity as well as the cause of death.

They say information revealed during the proceedings, even more, highlights the requirement for assurance around the concern of whether Mr. Cotten is in fact deceased.

I don’t know why these lawyers feel that proving Mr. Cotten is in fact dead is so important. Maybe they feel that anyone who would give up substantially all of her assets, the Estate’s assets and related companies’ assets, must have more money somewhere else hidden.

Maybe they think that Mr. Cotten faked his own death, has millions of dollars that still have not been found and the two will reunite once the heat is off. I don’t know why, but this certainly is an unusual turn of events in a bankruptcy administration.

It is certainly something that trustees in bankruptcy Toronto Ontario or anywhere else in Canada don’t dig!

We will have to see how this saga unfolds and if there will be any more surprises.

Summary

I hope you found this Brandon’s Blog, Trustees in bankruptcy Toronto Ontario usually don’t dig this interesting. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring.

However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

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

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing.

If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Bankruptcy, bankruptcy toronto, CCAA, Companies’ Creditors Arrangement Act, crypto currency, cryptocurrency, gerald cotten, Ira Smith Trustee, jennifer robertson, quadriga, trustee in bankruptcy, trustee in bankruptcy toronto, trustees in bankruptcy toronto ontario

Brandon Blog Post

WILLS AND ESTATES: SELLING DECEASED ESTATE PROPERTY

Post author By Brandon Smith
Post date December 16, 2019

If you would like to hear the audio version of this wills and estates Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

Earlier this year, I wrote several blogs dealing with the administration of wills and estates. As I previously wrote, Ira Smith and I got very interested in this area. The reason was that we saw that the skill set required and the activities undertaken by an executor of a deceased estate, were quite similar. In Ontario, the executor of a deceased estate is called an estate trustee.

My series of blogs on the administration of a deceased estate in Ontario, in no particular order, were:

The purpose of this Brandon’s Blog is to review a very interesting recent Court of Appeal for Ontario decision appealing a lower Court’s ruling in an estate matter. The appeal was launched by the Estate Trustee who felt the lower court judge erred in approving a sale of an estate asset for a lower price than the Estate Trustee thought was proper. The Court of Appeal for Ontario upheld the lower court’s decision.

This could very well happen to a receiver or trustee in an insolvency file. Again, another similarity between the role we take on in an insolvency file administration and the role Smith Estate Trustee Ontario takes on as Estate Trustee in the administration of a deceased estate.

Wills and estates definition

First some basics. An estate is the property that an individual owns or has a lawful controlling interest in. The term is usually made use of to define the assets and liabilities left by a person after death. A will is a document that states your final wishes. It is a document that becomes operative after your death. It will appoint one or more people to act as an estate trustee. It will also provide for how you want your assets to be divided up amongst your beneficiary or beneficiaries.

On December 6, 2019, the Court of Appeal for Ontario released its decision in the legal case Loran v. Weissmann, 2019 ONCA 962 (CanLII). As I mentioned, the Estate Trustee appealed the lower court’s decision released in January 2019. The issue was one that could easily come up in other wills and estates. Since the issue being appealed was the lower court’s decision on a sales price for an asset, this issue also can arise in insolvency files. Just a different context.

Wills and estates Ontario: What was the issue?

This appeal by the estate trustee occurred out of a disagreement regarding a provision in the will concerning the sale of the business owned by the deceased. Unfortunately, this happens all too frequently. The provision in dispute was regarding the sales price of the business.

The will stated that the respondent, a long-time employee of the business, could purchase the business. The purchase price stated in the will was “…the lesser of $1.75 million or “the price determined by multiplying the earnings of…(averaged over the last three fiscal periods) by a factor of 5.5”.

The will also stated that the price paid by the respondent will be provided by way of a promissory note, with interest payable at 5% per year. There will be an annual repayment to the estate of not less than $180,000, to be made in month-to-month payments. The promissory note was to be secured by a general security agreement against the assets of the business and by the registration of a mortgage against the respondent’s house.

So far it sounds pretty simple, or so you would think.

They couldn’t reach a deal

The long-time employee tried to purchase the business, but the estate trustee and the employee could not agree on the purchase price. That is how they ended up in court.

The lower court judge hearing the evidence ruled that the sales price will be $529,611. He calculated this as $716,921, using the formula in the will, minus $187,310. This latter amount was an amount the Judge ruled was improperly paid by the company to the estate. The Judge also ruled that the employee was not required to provide the collateral mortgage. The estate trustee felt that this went against the will.

The appeal by the estate trustee

The appellant submitted that the application judge made the following mistakes:

he treated the respondent as a beneficiary as opposed to a favoured buyer;
he ignored the need of a collateral mortgage;
he approved the respondent’s evidence about the amount to be attributed to the deceased owner’s wages for the purposes of computing the earnings of the company; as well as
he incorrectly subtracted from the sales price the $187,310 paid out of the company to the estate.

The Court of Appeal for Ontario did not agree with any of these grounds for appeal.

The reasons were given by the Court of Appeal for Ontario

Beneficiary vs favoured buyer – The appellate court did not find any error in the lower court ruling on this. The Court of Appeal for Ontario noted that the will did not try to maximize the value of the business. It did not state that the estate trustee had to run a marketing effort to obtain the best price under the circumstances.

You would expect this to be the case in any sale by either an estate trustee or a receiver or licensed insolvency trustee. The appeal court noted this absence of intention. Rather, they agreed with the lower court that the intention was for the long-time employee to buy the business under the formula in the will.

Collateral mortgage – The evidence before the lower court was that at the time the will was written, the long-time employee did not own a home. The will also did not have any language about what minimum amount of equity the long term employee’s home had to have to provide for the collateral mortgage security. There was no argument that the lower court judge had the right to apply commercially reasonable terms. So, since the will was so unclear on what wording and real value the collateral mortgage security had to have, the lower court judge ruled that it would be meaningless and was unnecessary in the circumstances. The Court of Appeal for Ontario agreed again with the lower court judge.

The owner’s salary adds back to normalize earnings – The evidence was that at trial, both the appellant and respondent provided expert witness reports on this issue. The lower court judge preferred the respondent’s expert evidence. The appellant took issue with this. The Court of Appeal found that the lower court judge had the right to rely on one or the other of the expert’s reports and made a judgment call. There was nothing in that decision to be overturned.

Payment of $187,310 – The appellant’s position was that this payment would one day be rectified by the company recording this payment as a dividend. The appellant stated that the company had the right to pay dividends, which it had in the past. The lower court judge agreed that, as long as the payment of dividends did not render the company insolvent, it could do so.

The lower court judge also found that in the past the company had paid a dividend. However, it did not characterize this payment as a dividend, but rather, just payment to the estate. The lower court judge ruled that the purchaser should get the benefit of those funds having been stripped out of the company by a reduction in the purchase price of that same amount.

It turned out that the estate trustee caused the company to make that payment to the estate so that the estate could then pay out those funds to support the deceased’s widow. The company did not record that payment as a dividend or as salary to the widow. The lower court drew a distinction between dividends and gratuitous payments from the company’s bank account. The appeal court found that decision was within his discretion and there is no basis to interfere with the lower court judge’s finding.

So, the appeal court dismissed the appeal entirely and ordered that the appellant pay the respondent’s costs fixed in the amount of $10,000.

Summary

As I stated at the beginning, there are a lot of similarities between acting as an estate trustee and administering an insolvency file. Disputes normally arise in insolvency files. As this case shows, disputes also arise regularly in the administration of a deceased estate.

As a result of the similarities, we started this year Smith Estate Trustee Ontario. We currently have several estate trustee administrations underway. Our mix of empathy, experience and impartiality provides us with a distinct viewpoint. We have the capability to appropriately administer a deceased estate. Through our efforts, we minimize problems and accomplish outcomes for all stakeholders in an economical way.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation. Get our no cost full-scale analysis of your issues and our recommended options to solve your problems allowing you to move forward confidently. Check out our website by clicking HERE.

Tags beneficiary, Court of Appeal for Ontario, deceased estate, estate trustee, executor, insolvency, Ira Smith Trustee, licensed insolvency trustee, receiver, selling deceased estate property, smith estate trustee ontario, will, wills and estates, wills and estates definition, wills and estates ontario

Brandon Blog Post

FILING FOR BANKRUPTCY IN ONTARIO: 3RD TIME SHOULD NOT BE A CHARM

Post author By Brandon Smith
Post date December 11, 2019

Filing for bankruptcy in Ontario introduction

We have all heard the expression “third time’s a charm” or “third time lucky”. You say this when someone is successful the third time they try something after they failed the first two times. This expression is not meant to apply to the world of Canadian insolvency or a desperate financial situation. Certainly not for filing for bankruptcy in Ontario.

On December 9, 2019, the Toronto Star published an article by investigative reporters Jesse McLean and David Bruser titled “Rack up debt. Declare bankruptcy. Repeat. And repeat again. How thousands of Canadians are doing it and costing the rest of us”. The article talks about four specific people who file for bankruptcy multiple times.

In this Brandon’s Blog, I want to describe how filing for bankruptcy in Ontario works. Thankfully, the article does state that in the Toronto Bankruptcy CourtFreme, it is much tougher to get away with multiple bankruptcies, as it should be.

Filing for bankruptcy in Ontario: How do I declare bankruptcy in Canada?

Filing for bankruptcy in Ontario begins with a no-cost consultation with a licensed insolvency trustee (formerly called a bankruptcy trustee ) (Trustee). In that consultation, the Trustee will want to get a good understanding of your assets, liabilities, income and expenses. That way, the Trustee will be able to discuss with you all the available options and help you narrow them down to the most viable options to solve your debt problems.

At the end of the meeting, the Trustee will give you the standard intake form. By completing the form fully, you will provide the Trustee with the proper information needed for your filing for bankruptcy in Ontario. My Firm calls our standard intake form the Debt Relief Worksheet The information is then used in order for the Trustee to finalize his or her recommendations to you for dealing with your debt. The options available in general for dealing with personal debt are:

A consumer proposal is an insolvency process which is one of the best of all the alternatives to bankruptcy. It is much preferable than filing for bankruptcy in Ontario. In a consumer proposal, you are able to compromise your debt. You make an offer to pay less than the total you owe. You then make the monthly payment to the Trustee until you have paid the total you agreed to.

If you end up deciding on either a consumer proposal or bankruptcy, the Trustee will prepare the required documentation. This is the case for consumer proposal documents or those necessary for filing for bankruptcy in Ontario.

The Licensed Insolvency Trustee then takes the fully completed worksheet and all additional documents in support of your information. The information is then used in order to prepare the documentation necessary for filing for bankruptcy in Ontario. The documents include your Statement of Affairs and your Statement of Income and Expenses.

The Statement of Affairs used for filing is attested to by the debtor as to its accuracy. This statement includes a listing of all of the person’s assets and indicates which are exempt from seizure and which are not. The asset exemptions are guided by provincial law. As there are some variations between provinces, in this blog I will only be referring to bankruptcy process Ontario exemptions.

The assets not exempt from a seizure will be surrendered to the Trustee to be sold. The statement also lists all the names of the creditors, their respective addresses and the amount owed to each.

The Statement of Income and Expenses, as the name suggests, shows the monthly income and expenses of the household. It also shows whether or not the person will be subject to surplus income payments to the Trustee or not.

When all the documents are ready, the Trustee electronically files them with the Office of the Superintendent of Bankruptcy (OSB). The local OSB representative reviews the filing. If everything is in order, the OSB issues a Bankruptcy Certificate. The issuance of that certificate is the moment the person is now bankrupt.

Filing for bankruptcy in Ontario: How long does bankruptcy last in Ontario?

The Canadian bankruptcy system is administered under the Bankruptcy and Insolvency Act (Canada). This is a federal statute and bankruptcy is a complex legal process. Bankruptcy allows you to compromise the debts to your unsecured creditors. It does not deal with the debt owing to a secured creditor if you are able and wish to keep the asset.

So the question is not how long does bankruptcy last in Ontario? Rather, it really is how long does bankruptcy last in Canada?

The Toronto Star investigative article talks about the length of a bankruptcy. It correctly states that a first-time bankrupt, that does not need to pay surplus income, is entitled to an automatic discharge after 9 months. This assumes that they have lived up to all of their commitments as an undischarged bankrupt as well as completely cooperated with the Trustee.

If a first-time bankrupt surplus income, they must pay it for 21 months prior to qualifying for a discharge. This again assumes that they have fully cooperated with the Trustee. In both cases, if neither the Trustee nor a creditor opposes the discharge of the bankrupt, the Trustee can issue the discharge certificate.

In a second time bankruptcy, with no surplus income, the bankrupt has to wait for 24 months before being eligible for a discharge. Again, if the bankrupt has completed all duties and has cooperated fully, and no creditor opposes the discharge, the Trustee can issue the discharge certificate. If there is a surplus income requirement, then the minimum period before being eligible for a discharge is 36 months. Under the same conditions, the Trustee can issue the discharge certificate if there is no opposition.

The article highlights, correctly, that if it is the person’s third or more bankruptcy, the Trustee cannot issue a discharge certificate. The discharge hearing must be held in Court, even if the Trustee is not opposing. The reason for this is because the Canadian bankruptcy system is supposed to financially rehabilitate the honest but unfortunate debtor.

So in a third or more bankruptcy, the Court wants to review the circumstances of the person’s bankruptcy and why rehabilitation has not been accomplished yet. If there is a Trustee or creditor opposition to discharge, the hearing becomes more complicated.

I have written several blogs previously on the bankruptcy discharge process. You can search for them up above in the search function. If you wish to find out more about the bankruptcy process, you can CLICK HERE and read our filing for bankruptcy in Ontario faq.

**What about my credit cards when filing for bankruptcy in Ontario?**

When filing for bankruptcy in Ontario, you have to do the following:

disclose to the Trustee information regarding every one of your assets and financial debts;
disclose to the Trustee any transactions where you sold or transferred any of your property in the last 5 years;
surrender your credit cards to the Licensed Insolvency Trustee;
attend the initial meeting of creditors (if required);
attend 1 credit counselling session near the beginning of the insolvency process and another 1 credit counselling session later on in the administration;
keep the bankruptcy Trustee informed of any address change; and
assist the Trustee whenever asked for information, documents or property

**What about my credit report when filing for bankruptcy in Ontario?**

The information in your credit report that affects your credit score is usually eliminated after a specific period of time. Generally, it will be removed after six or 7 years for initial bankruptcy. The time frame is a bit less in a consumer proposal.

Sometimes you may hear people say that you remain in bankruptcy for seven years. That is not true. What that time frame really is all about when filing for bankruptcy in Ontario is the amount of time it takes for the notation of your bankruptcy to affect your credit rating and to be eliminated from your credit record. However, even before you are discharged from bankruptcy, or finish your consumer proposal, there are steps you can take to begin rebuilding your credit score and credit report.

filing for bankruptcy in ontario

**How bankruptcies work in Canada – Filing for bankruptcy in Ontario multiple times**

The investigative reporting in the Toronto Star details the multiple bankruptcies of four different people. These people range from being in their third to fifth bankruptcy. The article states that the Province of Quebec has the most people who have gone bankrupt multiple times. The article, of course, and rightly so, takes a very dim view of people who “game the system” with multiple bankruptcies.

As I mentioned earlier, the article clearly states that from their research in Ontario and Quebec, the writers found that the Toronto bankruptcy court takes the dimmest view of people with multiple bankruptcies when they come up for their discharge hearing.

Being a serial bankrupt is not a good thing. The reporting is fair and balanced. It does admit that some people just get a curveball thrown at them in life and have no choice but for filing for bankruptcy in Ontario. However, there are two themes stressed in the article which I don’t think are accurate. They are:

“Unpaid taxes owed by repeat bankrupts make up a portion of the nearly $4 billion the Canada Revenue Agency (CRA) has written off since 2009 because of consumer and commercial insolvencies. In Quebec, the provincial tax agency has lost nearly $2 billion to insolvencies in the last five years alone.” While this is true, it assumes that the taxes would have been paid if the people did not file for bankruptcy multiple times.

My belief is that people who go bankrupt multiple times have their affairs arranged in such a way that they do not have much to lose in bankruptcy. If they don’t have much to lose in a bankruptcy, then there isn’t much for CRA to seize if the person is not bankrupt. So the reality is that there is a class of Canadians that will not pay their fair share no matter what. This is clearly unfair to society as a whole, but it isn’t bankruptcy that causes it.

“Meanwhile, credit card lenders absorb the cost of bankrupts who do not pay their bills by charging high-interest rates to their customers who do pay their debts.”

The fact that credit card companies charge high-interest rates is true. However, in my experience, customers who do pay their credit card debt are not incurring interest charges. They pay their credit card balance off monthly.

Those who only make the minimum payment are the ones who are incurring high-interest charges. Ultimately, those people cannot afford to make all their debt payments and they ultimately invoke an insolvency process, being either a consumer proposal or bankruptcy.

So even a one-time-only bankrupt pushes a loss onto a credit card company. Hence the high-interest rates charged. By the way, who is it that makes the credit decision to extend new credit to a multiple time bankrupt? It isn’t the bankruptcy system, it is the credit card issuer. Perhaps they should not give a credit card to someone who has demonstrated many times that they cannot handle the credit responsibly.

Filing for bankruptcy in Ontario – Rack up debt

The statistics quoted in the article shows that although there has been an increase over the years in multiple time bankrupts, this is somewhat of a self-fulfilling prophecy. By definition, if a certain segment of the Canadian population goes bankrupt multiple times, then the statistics have to show an increase.

The statistics used in the article shows the following regarding the percentage between 1st and 2nd + out of total personal bankruptcies between 2011 through 2018:

Year	Total # bankruptcies	1st time %	2nd + time %
2011	77,993	84.41	15.59
2012	71,495	83.83	16.17
2013	69,224	82.74	17.26
2014	64,839	81.31	18.69
2015	63,406	80.52	19.48
2016	63,372	80.10	19.90
2017	57,969	79.23	20.77
2018	55,091	78.99	21.01

My takeaways from these statistics are:

Personal bankruptcies in Canada dropped by 29.4% between 2011 and 2018. I believe there are two main reasons. First, fewer Canadians are opting for an insolvency process in an era of unprecedented low-interest rates. Second, those requiring an insolvency process, have sufficient income to perform a successful consumer proposal thereby being able to avoid bankruptcy.
The increase in second and more time bankrupts is just under 5%. I believe most of the increase is as mentioned above, somewhat self-fulfilling. Every time the same person goes bankrupt, the statistic has to increase! So, what percentage increase is because of the actual mathematical formula, and what percentage increase is because there are actually more people in raw numbers are filing for bankruptcy more than one time?

Filing for bankruptcy in Ontario – The bankruptcy discharge

A discharge from bankruptcy releases you from the legal commitment to pay off your debts you had as of the day you applied for bankruptcy, with certain exceptions. Examples of certain exceptions are alimony, child support, certain student loans (if you stopped being a student less than seven years before filing), court-ordered penalties or fines and financial debts as a result of a fraud finding against you.

Of course, the ultimate objective for those filing for bankruptcy in Ontario is to receive the most sought after discharge from bankruptcy after you have performed all of your duties. The bankruptcy discharge releases a person from the majority of his or her debts as indicated above.

While many people thinking about bankruptcy currently have a poor credit score, it’s usually not irreparable. Declaring personal bankruptcy, nevertheless, will drop it to an R9 rating. This is the worst possible score there is. Unfortunately, this rating will last for about 6 years post-discharge. As I have already mentioned, there are steps you can take to start rebuilding your credit score.

Filing for bankruptcy in Ontario summary

I hope you found this Brandon’s Blog on filing for bankruptcy in Ontario useful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. We can help with your personal debt situation. We can also help with insolvency for business.

However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team . That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy in ontario, bankruptcy ontario exemptions, Consumer Proposal, debt relief worksheet, filing bankruptcy, filing bankruptcy in ontario, filing bankruptcy in ontario faq, filing for bankruptcy, filing for bankruptcy in ontario, how do I declare bankruptcy in canada, how long does bankruptcy last in ontario, office of the superintendent of bankrkuptcy, rack up debt, statement of affairs, statement of income and expenses

Brandon Blog Post

HOW TO GET OUT OF DEBT FAST: 7 TIPS YOU CAN START USING IMMEDIATELY

Post author By Brandon Smith
Post date December 9, 2019

If you would prefer to listen to the audio version of this how to get out of debt fast Brandon’s Blog, please scroll to the bottom of the page and click on the podcast.

Introduction

I meet with people every day who have too much debt. There are some common themes. So this Brandon’s Blog is taking those common themes to give you seven quick ways to find extra money so you can know how to get out of debt fast. By fast, I don’t mean immediately. I mean a lot faster than you can do on your own.

It is not your fault that you have not been able to get out of debt yet. The reason is that you have never been shown these tips before. Or, if you do know some or all of them, you have not been properly motivated yet to start using them.

So I am writing this Brandon’s Blog as much to motivate as to provide information.

How do I get myself out of debt?

The concepts I am going to discuss have taught many people how to get out of debt fast. These suggestions will certainly equip you to discover cash in your budget plan and also get yourself out of debt.

I’ll then offer you three more steps to entirely repay your debt. It will aid you with benefit approaches to facing those greatest difficulties in being debt-free. Utilizing these methods to repay your debt will put you on the path to building your credit rating score back up.

Warning on how to be debt-free fast

I’ve got to put a little warning here. If you are trying to get debt-free in a fairly brief time, whether you’ve got five thousand or fifty thousand of debt, it’s going to involve some difficult decisions.

You need to dedicate yourself fully to taking these steps I’m sharing with you and to stick with it for your debt-free future. You’re probably better off just clicking out to enjoy some pet cat videos if you’re not ready to make that commitment!

How can I reduce my debt quickly?

Step 1 – Here is my first step to becoming debt free. This one is crucial before anything else. You need to get some quiet time and make you’re becoming debt-free objectives real. Making those goals real does not suggest simply thinking them out for 5 seconds.

What will you do daily when you’re debt-free? What will it feel like? How will your life be different? Write out this story on a piece of paper. Then start making you how to get out of debt fast plan.

Step 2 – Just how much do you intend to pay off in three months? In six months? You’ll make use of the actions explained below to create these objectives. The suggestion is that you have some shorter-term goals of how much to save and also just how much debt to repay.

These shorter-term goals need to feed into your longer-term 1-year goal. They’re easier to get to than that big goal. They also will inspire you to keep going when you reach them. With your goals done, it’s time to prepare your month-to-month budget. It is a plan of where your cash comes in from and where your money is going.

You require to take the time to write down every source of revenue you have and also how much from each one. You also require to recognize and write down where the money is going. As soon as you have done that, your very first big money-saver is going to be to plan spending challenges.

Now I know I just lost half of you. This isn’t a budgeting blog per se. You need to develop your budget on your own. I have written other blogs on the topic of budgeting which you can read here.

Step 3 – I like these fast little bursts of saving cash. As well, they’re going to disclose a lot concerning your spending. The way a spending challenge functions is you take one item from your budget plan, something you have control over like purchasing clothing, eating in restaurants or other shopping.

You’re going to challenge yourself to reduce that spending in half or eliminate it out entirely over the next 2 months. I am not talking about going cold turkey and not spending anything. I am speaking about a short-term challenge of a couple of months and also on 1 or 2 spending items at a time.

These spending challenges work on so many levels and I guarantee you’ll love them as much as I do. By only taking one or two items from your budget, you’re not trying to skimp and save every penny.

You can still have fun. You’re just experimenting cutting back on a few things at a time. Besides saving a lot of money, this is going to show you what you don’t care about in your budget. Even after the spending challenge, you’ll find that some of these things don’t matter that much and you’ll keep saving money.

I know somebody that used this spending challenge concept for just 6 months and saved a great deal of cash. They used that cash to pay down debt! These spending challenges are super-easy to maintain since they are only for 2 months. You’re not trying to go a year without spending. It is eight short weeks so you’ll always see the finish line.

What’s great is that eight weeks is right around the time it takes to build new habits and break old ones. Even if you go back to spending a little more after the challenge, those new habits are going to drive you and help you save easier. Maintaining this new behaviour is one of the keys for how to get out of debt fast.

How to get out of debt on a low income

Step 4 – Next is to do a complete decluttering. Don’t stress, I guarantee it’s much easier than it seems. A clutter clean means going room-to-room in your apartment, condo or house and taking out every little thing you don’t need. Particularly those things you don’t use.

This means the treadmill you never used, those movies you never see, also the furniture you never rest on. Anything that isn’t being used or making your life better, offer it for sale online or where ever you can market it.

Old clothes can go to a consignment shop, videos, as well as books to a half-price book store, to sell. Not only are you making a little money here to help pay off your financial debts, however, but you’re also ridding yourself of what you do not make use of.

It could be a challenging reality to face the fact that you may have squandered your cash getting some of these things. But it is that wakeup call we all need to keep us from wasting more of our money on even more stuff.

Step 5 – This is going to be another tough decision but its one that a lot of people need to make. That is taking a cold, hard look at how you’re getting around every day.

I like watching or listening to shows and reading about people talking about how much debt they have. What always amazes me about these, and I see this probably 90% of the time, is how many people have new car payments they can’t afford. Seriously, people just don’t seem to see how a monthly $800 new car payment is wrecking their budget!

Besides the payment itself, insurance and registration are going to be more on a new car. Now I’m not saying you can’t have nice things or that you should never buy a new car. Perhaps a demo or a car in good condition that just came off a 3-year lease would be more economical and save you money.

Enjoy your money! We don’t have a lot of time on this earth and you have to enjoy it. But you can’t enjoy life if you’re constantly stressed out from the burden of that debt. So you need to take a look at what’s parked in the driveway.

If it’s a new car and you have more than $20,000 in debt, sell that sucker or trade it in. Get a used car that’s going to save you a few hundred a month and use it to pay down your debt!

Step 6 – This one is going to be to fight lifestyle creep. Lifestyle creep is how your spending seems to rise along with your income so you’re always stuck in that paycheque-to-paycheque money trap.

How is it that we get tax refunds or a raise but never have enough to save? You work overtime but the money just seems to evaporate into thin air. It’s that problem of lifestyle creep. Our budget always seems to grow to eat up whatever income there is.

Fighting lifestyle creep just means writing out that budget, knowing how much you’re spending and then making that effort to not spend more just because you’ve got a little extra. The best way I’ve found to do this is to assign all your extra money to that debt payoff plan or a retirement investing account.

By having a place for that extra money, it stops being extra and that temptation to fill the gap with extra spending goes away. It might not seem like it will save much but you would be surprised how quickly regular smaller amounts will add up.

Step 7 – My last money-saving trick before we get to those 3 debt repayment methods is going to be to freeze your credit cards. As I have stated lots of times in the past, you simply do not get that same mental and emotional feeling when you use a credit card that you get when you pay with cash.

I’m not saying to cut up your cards. I have a credit card I use for business spending and personal spending. It is also helpful to have one for emergencies if you don’t have a cash emergency fund. Freezing your credit cards is going to still keep that option open yet it makes you reconsider your spending on almost every item.

Simply put, those 7 money-saving hacks are going to provide you with thousands to plan with to pay off debt quickly. None of them are awfully hard and I assure you they will help put you back on the right track.

How can I pay off 5000 in debt fast?

Now I want to share three more debt strategies. These are ways to pay off your debt and restructuring your debt to get it paid off as fast as possible. You need to know how to prioritize your debt payoff. It is amazing how just a little tweak in how you pay your bills can mean a huge difference in getting debt-free.

There are two debt payoff strategies that I’ve talked about in Brandon’s Blog quite a bit: (i) the avalanche method; and (ii) the debt snowball method. Picking one of these two strategies is going to help you save money on interest and motivate you when budgeting gets tough. I’ve detailed these two strategies in other blogs like the one you can read by clicking here. I’ll give you the general outline here. These two methods are very common as to how to get out of debt fast.

In the debt avalanche method, you list out your debts in order of interest rate from the highest rate to the lowest. You still have to make minimum payments each month but you use any extra money, the money we found from those seven savings strategies before, to make extra payments on those with the highest rate of interest.

This method makes the most sense financially because by paying off those high-rate debts first, you’re saving money. A lot of times, these high-rate debts are going to be the highest payments as well so paying them off faster is going to free up a lot of room in your budget.

That other method, the debt snowball method, means listing your debts by order of amount owed from smallest to largest. Here instead of making those extra payments to the highest-rate debt, you’re paying more on the debts with the lowest amount owed. That means you’re going to see these small debts fall off your list faster.

And while that avalanche method might save the most money, that snowball method is hugely motivating. You’re going to see those debts fall off your list fast and that’s going to help you keep going with your budget and saving money.

So think carefully about the debt snowball vs debt avalanche methods and pick the one you think will make you feel the best. But even if you’re not following a specific debt payoff strategy, I want you to try just putting an extra $15 a month towards paying off your debt. Do more if you can but even this small amount is going to go a long way and save you a lot of money.

How to pay off credit card debt

The third strategy comes after picking one of the two debt payoff strategies I just mentioned. This third strategy is to get your interest rates lowered on the debt you have. TransUnion Canada has said that in 2018, the average Canadian’s non-mortgage debt stood at $29,312 per person, including an average credit card balance of $4,154. With interest rates at a minimum of 19% per annum, that means you’re paying $166.16 a month just for the minimum monthly payment.

Using the average credit card balance, at $166.16, it would take you over 10 years to pay off $4,154. If the entire average non-mortgage debt of $29,312 is credit card debt, then the minimum monthly payment would be $1,172.48. It would take 17.4 years to pay off the balance. That’s going to make it impossible to get out ahead so we’re going to focus first on these cards to lower our rates.

The first thing you can do is just call the credit card company and ask for a six-month introductory rate. Tell them you’re thinking about a balance transfer to a zero percent rate you are being offered by another credit card issuer, but you’d like to stick with them if they’ll match the offer. A lot of times, this is all it takes.

Getting a six-month introductory rate on that average balance means you’ll save almost $1,000 on a call that takes all of five minutes to make. If your credit card company won’t lower your rate, then start looking for those introductory rate cards and make a balance transfer. Either way, you’re going to be saving money that you can put into faster debt payoff.

Another option is going to be to just consolidate your debt into a personal loan. This means taking out a signature loan from a bank to pay off those high-rate cards. IF you still have a decent credit score and a job, then hopefully you can qualify for a personal loan. With a personal loan which probably has an interest rate 10% lower than the credit card rate, you’ll save hundreds of dollars, and you’ll get a fixed payment and a payoff date instead of that hamster wheel of credit cards.

How to get out of debt on a low income

Now you’ve got 7 financial concepts and 2 debt payoff techniques to help you pay down your debt. But I want to talk to you about one more action that most people miss out on. It is essential to creating your financial future. The problem is that so many people living paycheque to paycheque are only looking at their finances from one side of the equation. They get into debt or are trying to get out ahead and they immediately go to budgeting and saving money. But how realistic is that when your budget is already cut to the bone?

They claim you cannot squeeze blood from a rock and you cannot save money from a budget that is barely sufficient to make ends meet as it is. Instead, what I want you to do is to look at this from the other side of the formula. Do not check out it simply from the side of saving money but making even more cash also.

This doesn’t mean getting a 2nd job. It can be as easy as investing simply five or 10 hours a week in a side hustle, making that additional $200 a week to help pay for your debt much faster. You’re not only going to be paying down debt. You likewise are going to be happier because every little thing isn’t depending upon skimping and cutting your spending plan to live like a miser.

Doing all this, you’re going to be impressed at exactly how quick you repay your debt. When you get out from under that constant burden of debt I want you to feel it. It is a great sensation.

Summary

I hope you found this Brandon’s Blog on how to get out of debt fast and my tips to pay off your debt helpful. Sometimes though things are too far gone and more drastic and immediate triage action is required.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags budget, budget plan, credit card debt, debt free, debt snowball vs debt avalanche, get out of debt plan, How can I pay off 5000 in debt fast, How can I reduce my debt quickly, How do I get myself out of debt, how to be debt-free fast, how to get out of debt, how to get out of debt fast, how to get out of debt on a low income, how to pay off credit card debt, Ira Smith Trustee, living paycheque to paycheque, paycheque to paycheque

Brandon Blog Post

BUY NOTHING DAY CANADA: WILL IT HAVE ANY EFFECT ON HOLIDAY SHOPPING

Post author By Brandon Smith
Post date December 4, 2019

Introduction

Buy Nothing Day Canada is part of an international day of protest against consumerism. In North America, it takes place on the Friday after U.S. Thanksgiving. That is the same day as Black Friday. Elsewhere, it is held on the last Saturday in November.

It is a Canadian invention. Founded in Vancouver by creator Ted Dave in 1992 it was subsequently advertised by Adbusters magazine, based in Canada.

In this Brandon’s Blog, I discuss what effect, if any, Buy Nothing Day Canada has on Black Friday, Cyber Monday and holiday shopping in general. I also provide some tips on how not to go deep into debt from holiday spending.

What is the purpose of Buy Nothing Day Canada?

Buy Nothing Day Canada and worldwide, it is meant as a day for society to take a look at the problem of over-consumption. In 2000, Adbusters tried to purchase advertising time on television to promote Buy Nothing Day Canada and elsewhere were rejected marketing time by nearly all significant TV networks besides CNN.

Notwithstanding, it has become a grassroots movement. Campaigns started showing up in the USA, the United Kingdom, Israel, Austria, Germany, New Zealand, Japan, the Netherlands, France, Norway and Sweden. Currently, it is held in about 65 countries.

Doubters of the day feel that it merely:

shifts people’s buying habits to the next day; or
appeals really only to those people who rebel against over-consumerism all year through.

Is it effective?

Based on a recent study, I think Buy Nothing Day Canada is meaningful only to those who already practise a lifestyle against over-consumerism. This study says that Canadians will spend approximately$1,593 per person for the 2019 holiday season. This is a little up from $1,563 (or 1.9 percent) in 2018, according to the same report.

For many years now, there have been reports that say Canadians are over their heads in debt. They are living paycheque to paycheque. On average, Canadian adults are $200 away from financial disaster. I have written several blogs on the topic of Canadian households in debt.

So, from what I can tell, this movement has no effect at all on holiday shoppers.

Must I resort to a buy nothing Christmas?

Black Friday and Cyber Monday are over. You may feel you overdid it on your holiday spending last year. Perhaps it put you in a bad place that took a lot of time to get out of. You don’t wish to repeat it going into 2020.

So I have created a holiday spending in Canada tips list to try to assist with your budgeting for the holidays. Ideally, by following my suggestions, you won’t get in the brand-new year with more financial debt that you cannot handle. You will have avoided one of the most typical holiday spending blunders.

By following my tips, you can buy gifts and remain financially healthy without resorting to shopping abstinence.

But first, it all starts with a budget

You don’t need to adhere to a Buy Nothing Day Canada philosophy, but you do have to live within your means. So, the overall key is proper budgeting for holiday spending. It is so vital that you think out your holiday budget before you start spending.

I believe there are 3 major classifications to your Xmas holiday spending plan:

presents;
food and beverage in your home if you are hosting; and
tree and decors.

To begin setting your holiday budget plan, you need to establish 3 separate mini-budgets; one for each item. For gifts, the first thing is to detail out everybody you feel you would like to buy a gift for. After that reduce the list to everyone you really must buy a present for. You may not be able to manage your “desires”, but only your “needs”. The various other classifications will be easier to establish.

Now, check out your regular monthly earnings and expenses as well as any kind of savings you might have designated for holiday costs. This will help you to understand just how much you can afford to spend without going into holiday spending financial debt. Simply figure out the amount you can safely spend.

With that total, you should estimate your spend in the food and drink and tree and decors groups. What you have leftover in total will be your gift spending plan. Nothing is set in stone. If you feel you require to readjust the allowances among the 3 categories, go right ahead. Eventually, you will be left with your present total spending plan.

Now spread out the total gift budget among the people. Your specific amounts need to add up to a number not higher than the total you established as your total gift spending amount. With the budgeting worksheets finalized, it is now time to go shopping!

Holiday spending in Canada tips list

Purchase with objectives – You have determined just how much you can safely spend on each person. Get the best gift possible for each that satisfies your spending budget. Stick to the financial limitations of your gifts. You can now spend more time focussing on the appropriateness of the gift within your budget limitations.

Only spend cash don’t buy on plastic – You will be lured to buy with your charge cards. Using plastic will cause you to overspend due to the fact that you will not feel the purchase. To truly feel it, you must only use cash. When you feel it, you don’t spend beyond your means. You will also stay clear of the nasty shock in January since you won’t get an unmanageable credit card statement. You will feel terrific in both December and January.

Think of a family present to conserve cash – If you feel you will not be able to afford specific gifts, think of people in the very same family and search for a household present. A gift card for the household to go see a movie or a family pass for admission to a tourist site may turn out to be cheaper than the overall cost of separate gifts. Or one thing for their home that you feel all family members will take pleasure in. Look at that option. There are many opportunities for a group gift.

Give an experience, not simply your money – Do not think that the only gift that counts is one that sets you back the money. You have numerous abilities and talents. Probably one or more would certainly make an excellent present. If you cannot think of anything special you can give of yourself to that special someone that would make a wonderful present, how about your time? Think to babysit for nieces or nephews. How about helping out an ageing relative because they can’t go out a lot on their own but have appointments or tasks to get. These can all count as useful presents that won’t cost you anything or much in any way. Your time and enjoying each other’s company are much more valuable than any gift you would buy in the mall or online.

Think outside the gift box – If you do not have a box of ornaments from years past to use, think artistically. The accessories bought at a Dollar Store will look just as good on your tree as ones bought at a more expensive specialty shop. Or, use your own imagination to make your own. If you aren’t sure where to start, look online. There are many video clips to reveal step-by-step how to make terrific looking ornaments that don’t cost too much for materials. Your creativity and labour, of course, is cost-free.

Summary

I hope you found this Brandon’s Blog on Buy Nothing Day Canada and my holiday spending tips useful. Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Black Friday, brandon’s blog, budget, budgeting, buy nothing christmas, buy nothing day, buy nothing day canada, Cyber Monday, financial restructuring, holiday budgeting plan, holiday spending, holiday spending budget, holiday spending in canada, ira smith team, Ira Smith Trustee, What is the purpose of Buy Nothing Day

Brandon Blog Post

UNDISCHARGED BANKRUPT: WHAT YOU NEED TO KNOW ABOUT BANKRUPTCY DISCHARGE

Post author By Brandon Smith
Post date December 2, 2019

If you would prefer to hear an audio version of this undischarged bankrupt Brandon’s Blog, please scroll down to the bottom and click on the podcast

Undischarged bankrupt introduction

I recently read a Manitoba court decision issued in late October about the position taken by a judgment creditor in an undischarged bankrupt’s hearing. The creditor holding the judgment realized that the bankrupt’s discharge would discharge that debt. So, they tried to convince the court that their debt fit into one of the limited classes of debt that is not discharged by the bankrupt discharge.

That court case reminded me that is not so unusual. Many times a creditor who holds a judgment against the undischarged bankrupt tries to bootstrap their position. One of the leading cases cited by the Manitoba court is a 2018 decision from the Court of Appeal for Ontario.

The purpose of this Brandon’s Blog is to describe the bankruptcy discharge process, the position taken by the judgment creditor and what the Court has to say about that.

How bankruptcies work in Canada

The Canadian bankruptcy legislation is open for an insolvent and not viable company, or the insolvent, honest but unfortunate person can obtain relief. Subject to trust claimants’ rights and secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee). In return, the bankrupt person can have all of their debts discharged, subject to certain exceptions.

The bankruptcy discharge is amongst the primary advantages of relief under the Bankruptcy and Insolvency Act (Canada) (BIA). The discharge is vital to the bankruptcy procedure. Debtors, after bankruptcy, can wipe the slate tidy as well as begin over. This is a central concept under the BIA law. That is the essence of the bankruptcy discharge meaning.

A bankruptcy discharge is when the bankrupt is released under Canadian bankruptcy law from his or her financial debts as part of the bankruptcy discharge procedure. Some people think that it is the declaring for bankruptcy that releases the insolvent from obligation. This is not the case, it is the discharge that releases a bankrupt from debt.

A bankruptcy discharge provides the discharge of all unsecured debts, except for:

support payments to a previous partner or children;
penalties or fines enforced by the Court;
financial debts arising from fraud or fraudulent breach of trust;
student loans if less than seven years have actually passed since the bankrupt stopped being a part-time or full-time student.

Can an undischarged bankrupt leave the country?

If you are an undischarged bankrupt, you can travel. There are no restrictions on you leaving or returning to Canada if you are travelling for work or on vacation. Just make sure that your travel plans do not interfere with your legal obligation and your duties in your personal bankruptcy case, including:

attending a meeting of creditors (if one is required);
showing up for your mandatory counselling sessions;
submitting your monthly income reports to the Trustee;
remitting any surplus income payments you are required to make;
providing your financial information to the Trustee so that your pre and post-bankruptcy income tax returns can be filed;
being able to respond to any inquiries from your Trustee; and
attending in Court for your bankruptcy discharge hearing in an opposed discharge application.
undischarged bankrupt

Undischarged bankrupt: What is an undischarged debt?

When a bankrupt is discharged from bankruptcy, the individual is released from the legal obligation to repay their different types of debt that is unsecured and existed on the day that the bankruptcy was filed, except for the following types of original debt:

Alimony or support payments to a previous spouse or for the children;
Fines or monetary penalties imposed by the Court;
Financial obligations arising from fraud, misappropriation or defalcation; or
Student loans if less than seven years have actually passed since the person stopped being a full or part-time student.

So other than for the small category of debts that are not discharged, once the bankrupt is discharged from their bankruptcy, they do not have to make payments on debts that existed at the date of bankruptcy.

Undischarged bankrupt: Trustee opposed the discharge

A first-time bankrupt, who does not need to pay surplus income, is entitled to an automatic discharge after 9 months. This assumes that they have lived up to all of their obligations as an undischarged bankrupt and fully cooperated with the LIT. If this first-time bankrupt is subject to surplus income, then they must pay it for 21 months before they are entitled to a discharge. Longer timelines apply for a second or more time bankrupt.

If the Trustee has evidence that the bankrupt has not been forthright and fully cooperative, or has actually committed one or more bankruptcy offences, then the Trustee has a duty to oppose the bankrupt’s discharge.

Notice of opposition to discharge

Similarly, any unsecured creditor can oppose the bankrupt’s discharge. The grounds of opposition would likewise be evidence of lack of honesty or that one or more offences have been committed. The process for a creditor opposing the discharge of the bankrupt is by filing a notice of opposition to discharge.

In either a Trustee or creditor opposed discharge, the bankrupt’s application for discharge must be heard in Bankruptcy Court. For more on the discharge process, you can read about it in one of my previous Brandon’s Blogs.

The judgement creditor

Often, a judgment creditor thinks they have a higher position in the pecking order than other unsecured creditors because they have a judgment. They may have even registered the judgement against the title to real estate owned wholly or partially by the defendant. Unfortunately, upon the bankruptcy of a person, all enforcement proceedings on a judgment must stop.

The judgment for a debt, in bankruptcy, is merely a piece of paper that proves you have unsecured debt. Nothing else. Anyone who understands the litigation process knows that there is a big difference between getting a judgment and collecting on it.

Judgement creditors may take a keener interest in the bankruptcy proceedings, including opposing the discharge from bankruptcy. The reasons for this are twofold:

The judgment creditor has already spent time in court, money on legal fees and still has not collected their debt, so they are more invested in this person’s bankruptcy than someone who did not go the court route.
They are hoping that they can somehow fit their money judgment only into a position where they can claim that the debt is one not released by an order of discharge.

It is this second reason that this Manitoba court case, and the Court of Appeal for Ontario decision relied upon by the Manitoba court, revolves around.

Undischarged bankrupt: Can more evidence be introduced by a judgment creditor at the discharge hearing?

Most judgements that I see in a debt settlement program under the BIA or bankruptcy tend to fall into the same category. A service or good was supplied and not paid for. A contract was entered into and was breached. That is just normal business. There is no fraud, embezzlement, misappropriation, defalcation, fraudulent misrepresentation or fraudulent breach of trust.

It is simply someone owes money and didn’t pay. The plaintiff entered all of the evidence they thought was important, the defendant either defended or allowed for default judgment to be obtained because they did not defend. Regardless, the court ordered the defendant to pay the money.

The judgement creditor was unpaid and then one day received the Trustee’s notice of bankruptcy in the mail. The judgment creditor was incensed. The creditor took an active interest in the bankruptcy proceedings and maybe even served as a bankruptcy inspector. The bankrupt person is now entitled to apply for his or her discharge from bankruptcy.

The judgment creditor is unhappy because they now know that they are receiving either nothing or a small dividend from the Trustee compared to the debt to be written off. So they now oppose the bankrupt’s discharge and try to get new evidence submitted to the Bankruptcy Court to somehow prove that their judgment is a claim that is not extinguished by the person’s bankruptcy discharge.

This is what the Court of Appeal decision was all about. Can you introduce new evidence at a bankruptcy discharge hearing?

The case I am referring to, Lawyers’ Professional Indemnity Company v. Rodriguez, 2018 ONCA 171 (CanLII). The appeals court said that the answer is no. You can read the entire decision here if you like. The Court of Appeal essentially said that the Court is allowed to look at:

the judgment
the proof that would certainly have been entered as evidence at the time in the pleadings
as well as that evidence which has been led in the bankruptcy discharge hearing

to analyze whether the judgment debt falls within an exclusion to the general discharge rules. The Court also said that in a bankruptcy discharge hearing, the application judge was limited to looking at the judgment, the pleadings, the statement of claim and any statement of defence, to determine whether the judgment fell into the class of those debts not released by a discharge from bankruptcy. New evidence is not allowed.

This finding has been followed and further clarified. It is now apparent that the only purpose of a bankrupt’s application for discharge is to consider the bankrupt’s application. It is not a forum to attempt to advance new or amended claims.

Undischarged bankrupt summary

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

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

undischarged bankrupt

Brandon Blog Post

CANADA DEBT HELP: ARE YOU MAKING THESE DEBT RELIEF MISTAKES?

Post author By Brandon Smith
Post date November 27, 2019

Introduction

On Friday, November 22, 2019, Manulife Bank published its most recent Manulife Bank Canada debt help survey. Manulife Bank publishes its survey annually. The 2019 survey, compared to previous ones, shows that two in five Canadians have given up all hope of ever being debt-free.

In Brandon’s Blog, I review the main findings of the survey. The results show the debt relief mistakes being made. I will also discuss how you can get yourself out of debt so that you won’t be one of the 40% of Canadians that have given up all hope.

Manulife Bank Canadian customer debt relief reviews

The Manulife Bank Canada poll questioned 2,001 Canadians in all provinces between ages 20 and 69 with household revenue of more than $40,000. The survey was carried out on the internet by Ipsos between September 20 to September 26, 2019. National results were weighted by gender, age, area as well as education.

The 2019 survey results show:

Two in 5 question will they ever be debt-free in their lifetime.
Spending-to-income % is trending negatively in Canada.
Ninety-four percent of Canadians say the ordinary home is in too much financial debt.
The spending-to-income proportion is trending adversely as 45 percent record that their expenses are rising faster than their revenue.
Sixty-seven percent of Canadians with too much debt presume everybody else does too.

“There is a financial wellness crisis, and it’s affecting Canadians of all demographics,” said Rick Lunny, President and CEO, Manulife Bank.

Canadians not really asking “How can I get out of debt in Canada?”

One of the saddest parts of the survey is what I did not read. Apparently, Canadians surveyed are not asking how they can get out of debt. Rather, they are just resigned to that being their normal reality.

The survey also shows differences by generation. Whether you are a Boomer, Generation X or Millennial makes a difference. This makes sense as the different generations are at different stages of life.

The generational differences are:

Boomers – 38% of these survey participants say that their spending is greater than their income and 31% feel they will never be debt-free.
Millennials – 46% of those surveyed say that their costs are greater than their earnings and 42% feel they don’t see themselves ever paying off debt.
Generation X – 54% of these study participants state that their expenses are higher than their earnings and 49% feel they will certainly never ever get out of debt.

How can I get relief from debt?

So with these survey results as a backdrop, the question these Canadians need to ask is how to get debt relief. There are no free Canadian government grants to pay off debt. According to Manulife Bank Canada debt help is required by many Canadians.

People have to take matters into their own hands. It starts with a household budget. All members of the family have to be involved in preparing it and you need complete buy-in for it to be successful. The budgeting process begins with understanding what the family’s after-tax income is every month and what all of the household expenses are. Then, all the expenses have to be looked at critically to determine which are necessary and which represent “wants” not “needs”. You can also look at the income side and see if there are opportunities to also increase income.

The goal of the budgeting process is to end up with a household budget that is realistic, will be tracked and all family members will be accountable for. Monthly expenses cannot be greater than the monthly net after-tax income. The budget must also have room for making regular monthly payments to pay down debt, including credit card debt. The budget must also include regular monthly savings, in order to build up an emergency fund. The emergency fund is essential to meet unexpected expenses or income loss.

The 6 main benefits of a household budget

The 6 main benefits of a household budget are:

A budget offers you the ability to have control over your cash: A budget plan is a list of all revenues and costs. It permits you to plan exactly how you intend to spend your money. Rather than money just flying out of your pocketbook, you make deliberate choices on where you desire your cash to go. You’ll never need to wonder each month where your money went.
A budget keeps you concentrated on your economic goals: Budgeting will enable you to meet your money objectives – paying down debt, putting money away in a retirement savings plan, getting a home – as long as you follow it consistently. With a budget, you’ll know exactly what you can afford and you can separate your money appropriately. E.g. If your instant goal is to save for the deposit of a house, then you might need to pass up that holiday you wanted to take. Your spending plan will inform you specifically what you can or can’t manage.
A budget plan will ensure that you do not spend what you do not have: Charge cards are a great convenience yet they also make it really easy to spend due to the fact that there is no cash exchanged in the transaction. Many Canadians rack up major credit card spending and land up deep in debt before they recognize what’s occurred. When you use and stay with your spending plan you need to record every little thing you spend, even if it’s a bank card purchase. You will not wake up deep in debt, ask yourself how you arrived there.
A spending plan will prepare you for the unanticipated: Every budget plan must have a rainy day fund for those unanticipated costs. It’s recommended that you should budget for three months worth of costs for when there may be an unanticipated layoff or various other unplanned for a significant expense. Don’t be distressed; you do not need to save all the cash at once. Build your fund up slowly.
A budget decreases tension: Lots of Canadians panic every month about where the money will come from to pay their bills. A budget will offer you satisfaction. It reveals to you just how much you earn and what your expenses are. If need be you can reduce unneeded expenditures or take on an extra gig to live within a well-balanced budget. No more panicking at the end of the month.
A budget plan can assist you to pay for the retirement you’ve been desiring: Saving for your retirement is really essential and your spending plan can help you save for your future. Reserve part of your income every month for retirement savings. Beginning early as well as consistently stick to it. The money you conserve now will determine the type of retirement you can anticipate.

Is there a government debt relief program?

There is a government-approved debt relief program. It is governed under the federal Bankruptcy and Insolvency Act (Canada) (BIA). There are 3 personal debt government approved debt relief programs. The only person authorized to administer any of these debt settlement programs is a licensed insolvency trustee (formerly called a trustee in bankruptcy).

I have written about them before, but I will summarize here what they are:

Consumer proposal: A consumer proposal is a streamlined process. This process enables insolvent people to make a formal deal with their creditors. This federal government authorized financial debt settlement program allows you to repay only a portion of what you owe to eliminate all of your debts. You can take as long as 5 years of routine month-to-month payments to do so. To qualify, you have to be insolvent and owe $250,000 or less to all creditors, apart from for any kind of financial obligations secured by way of registration against your house. A successful consumer proposal allows you to keep your assets that you can afford to keep. It also allows you to avoid bankruptcy.
Division I proposal: A Division I proposal offers the same protections as a consumer proposal. If successfully completed, it provides the same benefits as the consumer proposal, including avoiding bankruptcy. This kind of proposal is not as streamlined as a consumer proposal and is for people who owe more than $250,000, not including any mortgage or other loan registration against your home. The other major difference is that an unsuccessful Division I Proposal results in an automatic bankruptcy. A consumer proposal does not have this same automatic provision.
Bankruptcy: Bankruptcy is a process whereby in exchange for giving up your assets to the Trustee (with certain provincial exemptions), the honest but unfortunate debtor will be able to discharge all of their debts (with certain exceptions). When I meet with insolvent people for their no-cost consultation to explore their options, I always try to find the option that allows them to avoid bankruptcy as long as it is feasible and realistic.

Canada debt help summary

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

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags canada debt help, canadian customer debt relief reviews, Consumer Proposal, credit card debt, Debt, debt free, debt help, debt relief, division 1 proposal, free canadian government grants to pay off debt, get out of debt, government debt relief program, How can I get out of debt in Canada, How can I get relief from debt, Ira Smith Trustee, licensed insolvency trustee, paying off debt, trustee in bankruptcy