Parents helping children buy a house: Introduction
Your kids are ready to buy their first house, but the financial realities of buying in cities like Toronto and Vancouver have all but dashed their hopes. Like the kind and caring parents you are, your first reaction is to jump in and save the day. You want to be one of those parents helping children buy a house.
This is not the same as sponsoring a child in need. You have provided for your kids throughout and you want to help your kids become home owners; but, is that really a good idea? I know that buying a house for a child to live in is an emotionally charged issue, but there is a practicality to financial matters that should not be ignored.
Parents helping children buy a house: New mortgage rules stress test
The Office of the Superintendent of Financial Institutions’ (OSFI) new mortgage rules include a tougher need for buyers to be stress tested to see whether they can handle higher interest rates. Some may not qualify for the mortgage amount they want and may not be able to buy a house without parental help. In addition, parents are often asked to help with a down-payment. According to a 2017 national survey conducted by Leger on behalf of the Financial Planning Standards Council, 37% of Canadian parents intend to help their children with the purchase of their first home. Whether or not they can or should help financially is another issue.
Parents helping children buy a house: The secret to knowing what to do
Some parents gift the money and others look at it as a loan. Either way, there are some important issues you should consider before helping your kids buy their first home. It really isn’t a secret – just 4 simple questions to answer:
Can you really afford to help your kids buy their first home? Some parents put themselves in financial jeopardy or risk their retirement savings. This is never a good idea. Will helping your kids buy a home impact your style of living? It shouldn’t. It doesn’t mean you love your kids less if you can’t help financially with the purchase of a home.
Establish limits. If you can afford to help, sit down with your financial advisor/planner and establish the amount of money that you can comfortably help out with and stick to that amount. Don’t allow yourselves to be pressured into giving more than you can afford.
Can your kids realistically afford to own a home? Home ownership is so much more than making a mortgage payment. There are property taxes, insurance, maintenance, utilities, unexpected repairs, etc. And what would happen if there was a health crisis or job loss? Can they afford to be home owners?
Are your kids responsible with money? Or are they living above their means with maxed out credit cards? Have you had to bail them out of a financial jam before?
Parents helping children buy a house: Don’t put yourself in financial jeopardy!
Whatever you do, don’t put yourself in financial jeopardy! If you’re now experiencing financial problems as a result of helping your kids buy their first house, or for any reason, contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.
Over the last two weeks, we have provided you with real case studies from our files. This week’s case study is about our involvement with acompany restructuring process so its business could continue to serve its clients and maintain most of the jobs.
Two weeks ago we described a personal insolvency case study,CLAIM BANKRUPTCY IN ONTARIO CASE STUDY: SHE REALLY WANTED TO BUT WE STOPPED HER AND SOLVED HER PROBLEMS, was about the surgeon who became insolvent because of a failed business venture and a divorce. The events leading up to the doctor’s insolvency convinced her that she had to go bankrupt. We then described the steps we took to restructure her affairs so she could avoid bankruptcy. She completed a successful Proposal under theBankruptcy and Insolvency Act (Canada). More importantly, she regained her confidence, we eliminated her pain points and she is once again thriving emotionally, physically and financially.
Last week, we described a situation where we used our skill set in a different way. In our case study,COURT APPOINTED ESTATE TRUSTEE CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, we described how we ended a war between the two beneficiaries under a Will and monetized the assets for their benefit. In that situation, the Court appointed us as the court appointed estate trustee.
Company restructuring process: The social media agency
The company was a social media agency. Their clients were some of the largest household names in North America. The company made sure that their clients’ websites were eye-catching, technologically advanced using leading search engine optimization (SEO) and search engine marketing (SEM) techniques. In short, their clients had to show up on page 1 of an online search and that their websites were eye-popping and functional. The company was a Canadian and North American leader.
Company restructuring process: Life got in the way
The sole shareholder and Director experienced some health issues with a family member; that required her attention. She was tending to that emergency and it took her away from the business for lengthy periods of time. Experienced senior staff ran the business in her absence. The entrepreneur felt she could deal with business matters by telephone. They established a process where she signed documents and cheques prepared by staff members using couriers.
Company restructuring process: Senior staff were not trustworthy
WRONG!! Although she trusted the senior staff, they turned out not to be trustworthy. They made mistakes and assured the owner that the documents and cheques they prepared were correct.
They also provided her status reports assuring her that all client activities and projects were all on schedule. The reality was that certain senior staff were plotting to establish their own agency, to steal clients. The sole Director felt something was not right, but she could not pinpoint from afar what the issues were. She returned to the office and discovered that her worst fears were her new reality.
Company restructuring process: How bad was it?
Things were very bad. Billings were way behind. Cash flow had dried up. As a result of the lack of cash flow, the company was now behind in rent and had collected but did not remit source deductions totalling over $300,000. Theunremitted source deductions formed a trust claim over all the company’s assets, ahead of the company’s bank. Learning all this information made the bank very uneasy and unwilling to lend any more money.
Company restructuring process: The short-term steps in financial restructuring
The sole Director and shareholder of the company contacted us. She was operating in panic mode. We assessed the situation. Our preliminary assessment was that catching up on the billings and the clients paying them in the normal course, good cash flow would return. There was also a good book of projects to start on; just not as many as normal. Thankfully, no clients had left yet.
The short-term plan we developed had 7 steps:
Fire the staff involved in the attempt to start-up their own firm and steal clients. Pay their normal wages and vacation pay, but not pay in lieu of notice.
File immediately a Notice of Intention To Make a Proposal (NOI) to invoke the stay of proceedings (Stay Period) so that no creditor could take action against the company.
Immediately bill all unbilled projects and begin collection efforts on any outstanding invoices.
Reach out to all major clients to reassure them that the entrepreneur was in control after returning from the family emergency and that she would personally be supervising all work performed.
Prepare a crisis cash flow model that thankfully showed that the company could cash flow itself since the amounts owing to the unsecured creditors was not caught in the restructuring.
The company required fresh capital. Luckily, the entrepreneur had enough funds to inject.
Meet with the company’s banker to explain the situation and share the emergency cash flow to show that the company did not need any new funds from the bank and that the principal was going to inject the temporary funds necessary. This gave the banker the assurance that the bank line would not be pressed any further, and that the entrepreneur was willing to put her money where her mouth was.
company restructuring process
Company restructuring process: The long-term plan
Now that the situation was stabilized, we worked with the company to look at longer term restructuring needs. It needed a business debt restructuring process. We determined that the company had too much space. As it did not need to immediately replace the terminated staff, it now did not need as much space. Certain space could be given up without affecting the main space and the business.
The landlord of course was not happy about this, but was willing to work with the company. If the landlord was not cooperative, the backup plan was to repudiate the unnecessary space through the formal restructuring plan.
The terminated employees retained legal counsel, who made himself known. Various issues arose from this. Were they going to seek leave of the bankruptcy court to launch litigation for damages against the company? What counterclaim could the company prove? Should we agree to attempt to value what claims they may have without litigation and include them in the restructuring plan?
Company restructuring process: The need for more time
Upon the filing of the NOI, the company obtained a first 30 day stay where its creditors could not pursue it and to file the real restructuring proposal. The company had to run for at least a few weeks to assess if the real performance was similar to the cash flow forecast developed on day 1.
Therefore, the company’s lawyers went to bankruptcy court to seek a 45 day extension for the company to file its bankruptcy protection restructuring plan. As Trustee, we had to prepare and file our report with the court to attest to the fact that:
an extension of the Stay Period is required to enable the company to continue to run in the ordinary course and complete its restructuring proposal;
the company continues to act in good faith and with due diligence; and
no creditor would be materially prejudiced by the extension of the Stay Period.
The Court granted the extension for this company restructuring process.
Company restructuring process: The corporate debt restructuring process
We could now finish the real corporate restructuring proposal through thisbankruptcy protection process. Given the unknown of the final valuation of the terminated employees’ claims, if any, we had to build in further protection for the company. We decided that the company’s bankruptcy protection plan would be what is known as a “basket proposal”. The amount of funds available for the unsecured creditors would be a fixed amount. So, whatever the claims ended up being, the size of the pot never changed.
Under thebankruptcy laws in Canada for a corporation undergoing a corporate restructuring, we had to ensure that there were sufficient funds for the unsecured creditors to share in “the pot”. The amount had to be realistic, to get the required majority of unsecured creditors voting in favour of the corporate restructuring plan. We also had to ensure that the bank was not being compromised in the proposal and that we communicated that clearly to the bank.
Company restructuring process: The government trust claim
As stated above, theunremitted source deductions were a trust claim. The restructuring bankruptcy laws in Canada state that such a claim has to be repaid in full within 6 months of Court approval of the restructuring proposal. We revisited the company’s cash flow. Although the company was on track, over the next year, money was needed to reinvest in the business.
The entrepreneur had no more money from her own resources. Therefore, after allowing for operations and the payment of the past unremitted source deduction amount of about $300,000, we could only offer the unsecured creditors roughly 5 cents on the dollar of the proven claims from future operations. The company promised to pay that amount within 6 months of retiring the government trust claim amount. So, within 1 year of Court approval, the unsecured creditors would get their money from the corporate restructuring plan.
Company restructuring process: Solving the terminated employee claims
Seeing this, theterminated employee group did not wish to spend funds on litigation, only to receive 5% of whatever claim they may have from the restructuring plan. We ended up agreeing to a very modest amount to represent their claims in the proposal.
The meeting of creditors was held and we obtained the required majority of creditors voting in favour of the business restructuring proposal. The creditors realized it was a better outcome than if they voted the company into bankruptcy. They voted in favour of the company restructuring process. We then obtained the necessary Court approval.
Company restructuring process: The result
The company turned its operations around. It survived the coup by the terminated employees. The company produced enough cash profits to retire the government trust claim debt within 6 months of court approval. It also paid the proposal fund amount to us as Trustee on time, to be distributed to the unsecured creditors.
The company successfully restructured and operated profitably afterwards. The entrepreneur was able to sell her company several years later and retire.
Company restructuring process: The financial restructuring process
Thefinancial restructuring process is complex. TheIra Smith Team understands how to do a complexcorporate restructuring. However, more importantly, we understand the needs of the entrepreneur. You are worried because your company is facing significant financial challenges. Your business provides income not only for your family. Many other families rely on you and your company for their well-being.
The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your company’s problems; financial and emotional. The way we dealt with this problem and devised a corporate restructuring plan, we know that we can help you and your company too.
We know that companies facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with theIra Smith Team. That is why we can develop a company restructuring process as unique as the financial problems and pain it is facing. If any of this sounds familiar to you and you are serious in finding a solution, contact theIra Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation. We will get yourcompany back on the road to healthy stress free operations and recover from the pain points in your life, Starting Over, Starting Now.
Banks keep raising their fees and blaming it on inflation andrising costs. The reality is that bank charges are too high because bank fees are an easy cash grab. In fact, according to Statistics Canada, Canadians paid an average of $216 in bank service fees in 2015.
The Big Banks currently charge monthly chequing fees ranging anywhere from $3.95 to $30 per month. Shocking, isn’t it? This is great news for the banks who strive to make the highest possible profit for their shareholders, and some of those profits are coming at your expense.
Bank charges are too high: Want to save money?
Want tosave money? Start reading your bank statement carefully! What fees are you currently paying?
Paper billing
Cheque book fees
Chequing account fees
Debit fees
ATM fees
Overdraft fees
Foreign transaction fees
Non-Sufficient Funds (NSF) fees
Cheque certification fees
Bank charges are too high: It wasn’t always this way
Outrageous bank fees weren’t always the case. “It used to be that people did not pay a monthly fee for banking because funding came from the spread between what banks made on loans and what they paid out in interest on deposits,” writes Kate Payne, spokesperson for the Canadian Bankers Association. This of course makes perfect sense but then the banks realized how much greater their profits could be by charging additional fees for every type of transaction. Fees have now become an important part of a bank’s revenue model.
Bank charges are too high: Canadians are loyal to a fault
Although there are lower cost alternatives like online banks and credit unions, Canadians are loyal to a fault to the Big Banks. According to the Financial Consumer Agency of Canada (FCAC), regardless of what we’re being charged in fees:
68% of Canadians and 96% of Ontarians still bank with one of the Big Five Banks
8% bank with a branchless bank
3.5% solely bank with a branchless bank
Bank charges are too high: Some ideas to fight back
What can you do if you’re paying too much in bank fees?
Review your current account package and see if it’s still right for you
Use theAccount Comparison Tool from the FCAC website to shop around – see what’s available and how your account compares
Ask for youth or student accounts if applicable
Ask for senior’s discounts if applicable
Use your own bank’s ATM and avoid convenience fees
Take advantage of cash back to avoid additional transaction fees
Bank charges are too high: What if you have too many expenses?
There are many ways to save money and paying attention to how much you’re paying in bank fees can be an excellent cost saving measure. If you’re having serious financial problems cutting back on any unnecessary expenses is vital to your recovery. But, you can’t do it alone.
It seems straightforward so what do you need us for?
An estates lawyer we know contacted us to help him solve a problem for his client. His client was a single man. His mother, whose husband predeceased her, passed away. Her only assets were two pieces of real estate; one a commercial property and the other the family home. The fully leased commercial property was producing income.
On the surface, it appeared to be a very simple situation. Two pieces of real estate and the only beneficiaries were the single man and his single sister. There were no spouses or grandchildren involved. So I asked our lawyer friend the obvious question: “It seems straightforward so what do you need us for?”.
The facts
The lawyer told me that:
his client and his sister cannot agree on anything;
the sister’s lawyer is making unreasonable requests;
the sister is a hoarder, which is a mental health issue;
nobody lives in the home and the utilities turned off services a long time ago; and
the sister has hoarded so much personal property in the home you cannot get past the front door!
The lawyer went on to say that the situation cries out for an expert to intervene to get things done so that the properties can be sold and the funds distributed. Neither sibling is capable of agreeing with the other and then doing what needs to be done. The receivership fees to solve their problems would be less than the legal fees spent fighting and not solving anything.
Please don’t call me the receiver
After a thorough discussion with the lawyer, I said it sounds like what you need is a for the Court to appoint a receiver. The lawyer responded that he felt he could get the other side to agree to the appointment of a custodian, but not to any proceedings called anything remotely close to a receiver or licensed insolvency trustee.
I said to my lawyer friend, that problem is easy to solve. How about we call ourselves either an estate trustee or asset manager? He loved the asset manager title.
The agreement
We took part in a conference call with our lawyer friend and the lawyer for the sister. Everyone discussed all the issues and we pointed out our firm’s wealth of experience in acting as a receiver in complex real estate matters.
Each lawyer agreed that assuming the finer points could be worked out, the brother’s lawyer would go ahead with a motion, on consent, to have our Firm act as the court appointed asset manager.
We provided our lawyer friend with a copy of the Ontario Superior Court of Justice Commercial List model receivership order. He then amended it to fit the particulars of this situation and to do a global change from receiver to the titleasset manager.
The appointment
Of course, the finer points could not be agreed to. Rather than the matter proceeding on a consent basis, the motion was argued. After hearing all arguments and considering all the evidence, the Court appointed our firm as the asset manager. The commercial property did not have any problems associated with it, so other than to tell you that the property sold, the rest of this story will concentrate on the residence.
Selling the house was the easiest part
The house was not just a house. It was the entire reason for the sister’s existence. Given the mental health issues, we quickly realized that from her perspective, we were about to take away her only joy in life; being able to enter the home and see her loot. It did not matter to her that nobody could enjoy the home and that it was mold infested. This was her baby and we were about to take her baby away from her.
Given these issues, our role was as much like that of a guardian for adults as much as it was about the property in Ontario.
We first obtained quotes for the removal of all of her personal property from the home. I realized that removing the property from the house would only give us another problem as hoarders are not willing to let go of anything. We had to devise a method where the sister would choose what was garbage and what would go to storage. However, even the storage could not go on forever.
The removal plan
We presented our plan to both lawyers. All the items would be removed in front of the sister. If the brother wished to attend he could, but it was not a need. We would also prepay from the proceeds of the sale of the home for six months of storage. That way we capped the brother’s liability for expenses. As items left the house, the sister had to say “garbage” or “storage”. Both sides agreed.
The removal began. What should have taken two weeks took six! The reason was due to mental health issues getting in the way of progress. We understood this and just had to work with it. Eventually, we completed the removal of personal property. We could finally see the entire inside of the house.
We entered with a firm we use to investigate and if necessary do environmental damage remediation work; Hazmat suits and all! Surprisingly, although there was mold, we obtained a verbal report that for our purposes, the home was safe for our purposes to enter for brief periods of time for a realtor and potential purchaser to view. Therefore, we did not need to do any remediation work.
Appraise and sell
The rest of the case could now go ahead. We obtained two appraisals of the house. The house was on a great lot in Toronto in a hot housing market. We listed the house for sale. Due to the house’s condition, it would attract a developer/renovator type of buyer.
After one week on the market, we received four offers to purchase. We rejected all of them and asked for everyone’s best and final offer. The final offer we accepted, subject to Court approval, was above market value. Working with our independent legal counsel, we put our motion material together, obtained the consent of both sides and then obtained Court approval for the sale.
We completed the sale, developed our distribution plan, obtained Court approval for that, distributed the funds and got our discharge.
Court appointed estate trustee: Do you have a financial problem that needs someone else to help you solve?
I present this case study to show how, as alicensed insolvency trustee in the GTA, we can use our skills set in a way that may not seem obvious at first. We look at the entire story of each person or company that comes to us for help.
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 dealt with this problem and devised an alternate plan for the siblings, allowed them to monetize the assets they were incapable of doing on their own and letting them get on with their lives.
We all read the headlines. The annual cost of living is rising, interest rates are rising, house prices are rising, food prices are rising, everything is rising; everything except for our paycheques. How can Canadians expect to keep up with their financial obligations when their paycheques are the only things that seem to be frozen in time?
Annual cost of living: The Canadian consumer price index
“…an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.”
Statistics Canada measures the consumer price index against the year 2002. So as the base year, the 2002 consumer price index is the 100% level. The consumer price index has risen steadily every year since then. The annual average Canadian consumer price index for 2017 was 130.4%. The January 2018 Canadian consumer price index was up 1.7% as compared to January 2017. So, as you can see, up is the only direction our expenses go.
Annual cost of living: Frozen salaries breed discontent
This situation has created a great deal of dissatisfaction among employees. According to a poll conducted by Indeed (a major world-wide job hunting site):
83% of Canadians are dissatisfied with the pay they’re receiving
More than 50% of employed Canadians are definitely going to ask for a raise this year
“There’s no money in the budget” is the top reason for why requests for a raise are rejected, accounting for 63% of rejections (women hear this excuse far more often than men — 77% of the time, compared to 54% for men
The average employee plans to ask for a raise of nearly $12,000, though 23% said they wanted a raise of $16,000 or more (Indeed cautions that when asking for a raise to do your research into the current pay scales for your job)
Annual cost of living: Unemployment is down and salaries are stagnant
Even though Canada has added 423,000 jobs over the past year and the unemployment rate has fallen to 5.7% (the lowest since 1976), salaries haven’t kept up. It seems that employers have gotten away with it by hiring temporary and/or contract workers. So, while your cost of living increases, your salary doesn’t.
Annual cost of living: What happens when the rising costs force you to go deeper into debt?
We wish you luck in getting your pay raise! But, if you’re one of the many Canadians who can’t keep up with your bills now and are feeling that pain, the Ira Smith Team can help.
Debt won’t eliminate itself. You need a professional trustee who understands your pain and can explain all of your options and come up with a solid financial plan for moving forward Starting Over, Starting Now. Give us a call today and book an appointment for a free, no obligation consultation. You’ll be happy you did!
Claim bankruptcy in Ontario: Case study introduction
For today, and the next few weeks, I want to give you some interesting case studies direct from our files. I will not mention any real names of course. Hopefully from these case studies, you will see that we do a lot more than just allow people or companies to claim bankruptcy in Ontario.
Claim bankruptcy in Ontario: A variety of problems
Today’s case study deals with our client who is a specialist medical doctor and surgeon. We will call her Dr. X. She had an ongoing successful career and then opened up a specialty high-end clinic to offer services not paid for by OHIP, the provincial medical plan. Unfortunately, Dr. X did not get the best advice from her professional advisers when she established the new business venture.
She set up her clinic in a separate building that she purchased. Dr. X then had it renovated extensively to meet the business’ needs, leased or purchased equipment and hired staff.
This new venture was financed entirely by debt:
personal debt such as mortgage financing against the matrimonial home;
equipment loans or leases in her personal name; and
Equipment and mortgage debt in the new business venture corporation for which Dr. X personally guaranteed it.
Therefore one way or the other, her personal responsibility was for 100% of the debt to get the business started. Her husband was responsible jointly with her for the mortgage raised against the matrimonial home.
The cash flow of the business was insufficient to pay the operating costs and debt financing. She had to keep borrowing money personally to keep the new business alive. The stress this caused affected her previously stellar activities as a surgeon and hurt her marriage. By the time Dr. X was came to us, she and her husband were separated and divorce proceedings were underway.
Claim bankruptcy in Ontario: And then it got even worse
To make matters worse, she could not attempt to liquidate assets to pay down debt and ease the burden. Like most equipment, the clinic’s equipment was not worth more than its original cost. There was no excess equipment either.
The building could not be sold and leased back for a very bad reason. There was a large environmental problem associated with the building which was not discovered through due diligence prior to purchasing it. The issue arose when she tried to refinance.
The potential lender performed a Phase 1 Environmental Study, which indicated that a earlier use in the building produced contaminants which were buried in the ground. The contaminants were leaching into the neighbours’ respective properties. So now there was further personal liability exposure as the sole Director of the company that owned the real estate!
Claim bankruptcy in Ontario: Filing bankruptcy in Canada would give Dr. X more headaches
Dr. X came to us convinced that she had to go bankrupt. The stress of her failing business was taking a huge toll on her normal duties as a surgeon and her marriage was over. She had previously seen a different licensed insolvency trustee and was convinced from that meeting that bankruptcy was her only answer.
Dr. X considered herself a total failure, in spite of she was still a sought after as a brilliant medical doctor and surgeon. We considered her assets and liabilities, income and expenses and her overall situation.
Claim bankruptcy in Ontario: More complications
To further complicate matters:
The matrimonial home was listed at the amount required to clear all mortgages which was well above market value.
Once Dr. X inevitably stopped making the first mortgage payments on the matrimonial home, the Bank holding the mortgage would begin power of sale proceedings. The first mortgagee would probably suffer a shortfall on the sale and Dr. X and her estranged spouse would be responsible for the shortfall on the first mortgage and the entire balance of the second mortgage.
Dr. X had a life insurance policy with a cash surrender value (“CSV”). The CSV was not exempt from seizure by a bankruptcy trustee because the beneficiary was her Estate. In a bankruptcy, the CSV would go to the Trustee for the benefit of her creditors.
Dr. X did not know if she could get replacement insurance coverage at all and if so, at a reasonable cost.
There were many creditors who currently had a contingent claim against Dr. X with a very high dollar volume. These claims would ultimately be crystallized. In a bankruptcy, we anticipated that a lot of angry ordinary unsecured creditors, many of whom were sophisticated, such as banks and equipment lenders/lessors, would oppose her discharge from bankruptcy.
In a bankruptcy, Dr. X would have to pay about $82,000 in surplus income payments to us as her bankruptcy trustee over a 21 month period for a monthly payment of $3,905. Dr. X could not afford to pay that much each month and keep her normal medical practice afloat.
Bankruptcy was not a good answer for Dr. X. Notwithstanding she earned a high income, the irony was that she could not afford to claim bankruptcy in Ontario!
Claim bankruptcy in Ontario: Our assessment
We had to deal with two problems; one financial and one emotional. Dr. X was an emotional wreck as a result of the failed business venture with all of its problems. We actually had to deal with that first. It is normal for a licensed insolvency trustee to take a holistic approach. The debtor facing financial problems always needs two outcomes: (i) a solution that will allow them to shed their debts and get piece of mind; and (ii) become rehabilitated.
We advised Dr. X that a personal bankruptcy was not the answer for her. We told her that she first had to shut down her clinic. She had to deal with the employees to make sure that they were paid up to the last date work their normal wages and vacation pay. They also needed to get their Record of Employment and T4 Statements as quickly as possible. Unfortunately there was no money for pay in lieu of notice.
Claim bankruptcy in Ontario: How to deal with the failed business venture
We then advised Dr. X that she should not bankrupt the corporation carrying on this new business. Rather, she should call up the first mortgagee and tell that she is abandoning the business premises and is sending the keys over. Then call up the equipment lessors and the lender that did some equipment financing to tell them the business has shut down and they should contact the first mortgagee to gain access to retrieve their property.
Next we advised Dr. X to safeguard the business books and records, so that she could have her accountant file final tax returns. She would also have the records for when Canada Revenue Agency wished to do an audit on the business activities.
The final piece of advice for Dr. X with respect to her new business venture was this. After performing the above steps, walk away. This would end the stress of operating a failing business.
Claim bankruptcy in Ontario: Our assessment and his personal financial fix
All of the contingent debts from the failed business venture had not yet crystallized. They were still contingent. We worked out a cash flow plan with Dr. X that she could keep current with, now that she had abandoned and stopped funding the debt incurred because of the failed business. She also stopped paying the first mortgage on the matrimonial home as the value of the home was now less than the total of the mortgage debt against it.. We worked with Dr. X on a plan to avoid bankruptcy, by filing a formal restructuring proposal under the Bankruptcy and Insolvency Act (Canada) (“BIA”).
Claim bankruptcy in Ontario: The advantages of our strategy
The advantages of this strategy, if the restructuring proposal could be fully performed, are:
Dr. X would not give up her assets to a bankruptcy trustee;
She would not lose her life insurance coverage or CSV;
All of her debts could be eliminated through the restructuring proposal;
Although the total of her restructuring proposal payments had to be more than her creditors would get in her bankruptcy, we could term those payments out to a maximum of 5 years;
Her estimated monthly payment would be less than the monthly surplus income payment in a bankruptcy; and
Dr. X followed our advice. Her restructuring proposal was accepted by her creditors qualified to vote at the meeting of creditors held 21 days after the filing of the restructuring proposal. The contingent claims had not yet crystallized. Although eventually those creditors were allowed to file their proper respective claims and take part in the dividends paid out to the unsecured creditors, we made it successfully through the voting process. The proposal was then approved by the Court.
Dr. X not only maintained her regular monthly proposal payments to us, she was able to pay off the proposal early. The reason for this was that now that she had a clear head and no longer felt she was a failure, she could focus on her medical practice and surgery, which once again flourished. Her income and savings rose. These are some of the benefits that financial rehabilitation brings. Dr. X also avoided going bankrupt.
Claim bankruptcy in Ontario: Does Dr. X’s financial problems sound familiar to you?
I present this case study to show how, as a licensed insolvency trustee in the GTA, we look at the entire story of each person or company that comes to us for help. 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 stopped Dr. X from going bankrupt and devised an alternate plan for her, allowed her to solve her financial problems and get her life back.
We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Team today.
Call us now for a free consultation. We will get you back on the road to a healthy stress free life and your recovery will be as pain-free as possible. We may be able to stop you to claim bankruptcy in Ontario!
Many Canadians are under the mistaken impression that financial planning is a young person’s game. After all, you’re now retired and you have your pension(s) and perhaps some savings. What financial planning is there to do for managing family finances? I’m here to tell you that it’s never too late to have a financial plan. You may not realize it but there are many financial decisions still to make – even after the age of 65.
Managing family finances: CIBC financial planning advice
Lana Robinson, executive director, CIBC financial planning and advice, says it’s never too late to plan. The biggest mistake for those heading into their 70s and 80s would be not to have a plan or mistaking a budget for a plan, she said. They might say ” ‘Well I have a budget and I’m living to my budget‘ but is that really a plan?
Figured out whether your goal is to have in-home care as opposed to living in a retirement home?
Managing family finances: Can you answer these seven questions?
Should you take your Canada Pension Plan (CPP) at 65 or defer it?
Should you take your Old Age Security (OAS) at 65 or defer it?
How much do you know about Registered Retirement Income Funds (RRIFs) and annuities?
Do you need to rebalance the risk in your investment portfolio?
What is the most financially helpful way to use your RRSPs?
What are your financial goals and what are these goals going to cost you?
Are you in debt?
Managing family finances: Don’t retire in debt
If we can give you one piece of extremely valuable advice for managing family finances it’s DON’T RETIRE IN DEBT! If you do, your retirement will be extremely stressful trying to figure out how to make ends meet. Family financial planning is not fun when you need a financial plan to get out of debt. But, don’t despair – we can help.
The Ira Smith Team has many years of experience helping people just like you facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. We approach every file with the attitude that financial problems can be solved given immediate action and the right financial plan. Give us a call today and take the first step towards a debt free retirement.
A recent The Forum Poll™ indicates that for about 61% of the Canadians polled, a balanced budget is more important than spending on government services. The federal budget process overview is that Prime Minister Trudeau and Finance Minister Morneau have signed off on a budget that will have the federal government spend more than it receives in revenue. So, Canada’s debt will continue to grow.
The poll results showed that:
40% don’t like the budget;
17% were in favour;
31% were neutral; and
12% did not know.
Federal budget process overview: Budget spending highlights
On February 27, 2018, Finance Minister Bill Morneau tabled the Liberal Government’s budget titled “Equality + Growth: A Strong Middle Class”. The federal budget process 2018 calls for $338.5 billion in overall planned spending. The budget projects an $18.1 billion deficit in 2018-19.
The highlights of the government’s proposed major spending included in the budget are:
Nearly $5 billion invested in Indigenous communities over 5 years;
Canadian science and research spending of almost $3.2 billion over five years;
$2.6 billion over 5 years to promote gender equality in science and business;
$1.2 billion over 5 years for a new parental sharing benefit; and
$2 billion over 5 years for international aid
Federal budget process overview: Deficits and debt
I normally don’t think of Prime Minister Trudeau or Finance Minister Morneau as being like an average Canadian, but the 2018 federal budget canada news shows me that the government is budgeting now like an average Canadian.
What do I mean? Well, I have written many times about the average family household debt rising over the last few years. Some of the blogs I wrote are:
Federal budget process overview: Our government is like the average Canadian
All of these blogs have a common message that the average Canadian is:
amassing too much debt;
using debt to supplement income to meet their spending habits;
although they can afford minimum payments on the debt in this low-interest rate environment, trouble will begin when rates creep up; and
in need of a proper household budget so that borrowing can stop, existing income can be used for expenses and debt repayment.
That is why I say that the government created the 2018 federal budget deficit and the debt just like the average Canadian does. The government has one trick up their sleeve to raise more money than us normal Canadians have; they can just increase the taxes we pay to try to cover off the extra deficit spending.
Federal budget process overview: The practical problem
The practical problem for the government is that although Canadians say that they prefer a balance budget, they also like spending that they believe will help them. When polled on the individual spending plans, the results were favourable. Although it does not seem that the poll asked the question “Would you favour higher taxes to pay for the spending so that there will not be a deficit”, I suspect the answer to that question would be a loud NO!
So the government has to make promises if it wants to get re-elected. The government also knows that Canadians will like spending for things they believe will help them or their quality of life. So what the federal government is hoping is that this will translate in the voting booth for more votes for the Liberal government than votes from people who don’t like deficits.
Federal budget process overview: Difference between budget deficit and federal debt
The 2018 federal budget Canada shows that Ottawa has no plan to stop deficit spending or reduce federal debt in the short or medium term. The annual deficit represents the amount the government spends in any year above what it earns in revenue in that same time period. The federal debt is the amount of money the government has to borrow to pay for cumulative amount of deficits.
Previous Liberal and Conservative governments devoted efforts to balancing the budget and paying down debt. This government isn’t.
federal budget process overview
Federal budget process overview: If you are serious we can help you reach your financial freedom before our government does
What about you? Do you enjoy the stress you feel every month when you do not have enough money to go around? Have you been avoiding the tough discussions with your family about what spending has to be cut out to balance your books? Before your life gets totally out of control, now is the time for you to take positive steps to gain back your financial freedom and your life.
If you are serious we can help you reach your financial freedom before our government does. We are very interested in helping honest but unfortunate people whose spending was perhaps out of control in the past because of an unexpected life event. Even if your spending remains a problem, we can help you get back on course.
Contact the Ira Smith Trustee & Receiver Inc. Team today. We’re not politicians. We are experts in helping good people regain control of their financial and personal lives. If you give us a call today we will work with you to find one of the bankruptcy alternatives so that you can cut your stress and regain control over your finances, Starting Over, Starting Now.
How can a good credit score help you? Introduction
Many of you already know that you need a good credit score to borrow money, get a mortgage, lease a car, get insurance and in some cases, even get a job. But, how many of you know how can a good credit score help you? It can save you thousands of dollars.
How can a good credit score help you? What does your credit score say about you?
Your credit score tells prospective lenders how reliable or unreliable you are at repaying debt. Based upon your credit score you’ll be approved or denied when applying for a loan, credit card, mortgage, car lease…
How can a good credit score help you? How can your credit score save you money?
When applying for any type of loan, your credit score also determines what sort of terms you’re likely to get.
Insurance Rates: Insurers typically create an “insurance score”, which is largely based on your credit score. With a good credit score, you could qualify for a discount on your premiums. Conversely, a bad credit score can cost you a lot of money annually in higher premiums.
Loan Rates: With a good credit score you may get a better mortgage interest rate. Over the life of your mortgage this could save you thousands of dollars. The same applies for any type of loan – car loan, personal loan, etc. The more you’re borrowing and the longer the term of the loan, the more money you can save.
Internet, TV and Cell Phone Rates:Many providers do a credit check before giving you service. With a bad credit score you may be denied service altogether, or you may be required to leave a sizeable deposit as a guarantee of payment.
How can a good credit score help you? What is a good credit score?
An average credit score is around 600. A very good credit score is 700 and above.
How can a good credit score help you? Do you know your credit score?
If not you can find out by contacting either one of Canada’s two major credit reporting agencies – Equifax or TransUnion. Make a habit of checking your credit score annually. If your credit report has information that’s inaccurate or has items unfamiliar to you, it could be a sign that you’re a victim of identity theft.
If you’ve been turned down for loans due to a bad credit score, you need professional help to get back on track financially. A professional trustee can help you solve your debt problems with immediate action and a solid financial plan. Give Ira Smith Trustee & Receiver Inc. a call today to book a free, no obligation consultation and you’ll be well on your way to debt free living Starting Over, Starting Now.
Many people I help are caught in a credit card debt trap. It’s always good to repay your credit card debt, and now could be a better time compared to ever before to do so. I have previously written about the Canadian household debt crisis as Canadians take on more debt and average canadian household debt levels increase. Rates of interest are beginning to increase so combining the two creates a mix that can place people in a bind.
Credit card debt trap: A storm is brewing
In December, Statistics Canada reported that the Canadian household debt ratio struck a brand-new high. The ratio of household credit-market debt to disposable income (the key gauge for measuring Canadians’ debt loads) rose to 171.1%. “Everyone has this sense that there is a storm brewing,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling in the U.S.
“All indications that we’ve seen are that people are carrying higher balances from month-to-month and more are behind on their monthly payments. That’s not a healthy mix.” Climbing debt levels could suggest people really feel better about the economy. Our concern is that people could be over-extending themselves. Both the US Federal Reserve and the Bank of Canada expect to raise rates later this year, so the cost of lugging credit card debt is most likely to increase. What can you do try becoming credit card debt-free? Our revolutionary 4 step plan can help get you there. Step 1. Credit card debt trap: Take control
It isn’t easy to take a difficult look at your financial position, but it is a necessary one. Analyze your financial obligations, and the rates of interest connected to each debt, as well as minimal repayments. Track your costs to get a feeling of what your credit card charges get you every month. This is the first step in understanding your expenses and cutting back on the ones that are not necessary. To understand where you are going, you should understand where you have actually been. Step 2. Credit card debt trap: Minimize rates The typical interest rate on a bank card is about 19 percent. That’s quite high, so you might wish to think about transferring your credit card debt to a card with a reduced or zero-interest first offer rate to help pay it off much faster.
A word of caution: you’ll most likely need to pay a transfer cost in doing so. Also, you will need to pay off the debt prior to that promo rate finishes. Otherwise, the balance at that time is charged a higher interest rate, probably the same or higher than the card you transferred the debt from.
Although I don’t hold out a lot of hope, you can ask your credit card firms if they will decrease your interest rate.
credit card debt trap
Step 3. Credit card debt trap: Plan choice If you simply cannot earn enough to fund your repayments, think about a non-profit credit counselling service. Do not go to any of the debt settlement companies that advertise regularly on television or social media.
All they do is charge you a fee to take down basic information, and then send you to a licensed insolvency trustee. Going first to a licensed insolvency trustee will do more good for you in a first free consultation than the debt settlement company will. There are 2 typical debt settlement approaches– avalanche as well as a snowball. The avalanche method of getting out of the credit card debt trap works by placing all your money towards your highest possible rate of interest debt. As soon as that’s settled, you begin repaying the following most costly debt till it’s all gone. In some cases, the snowball approach offers much more inspiration. With this technique, you repay the tiniest debt initially, to increase your spirits. You make use of that energy to pay off what is not the smallest outstanding debt and so on. You are picking up steam like a snowball rolling downhill.
It does not matter which method you use. The important thing is that you start now and stick to it. Step 4. Credit card debt trap: Adhere to it Remember your single emphasis ought to be lowering debt, so do not plan any kind of elegant getaways or huge acquisitions in the meantime. You could backslide or strike some roadway bumps yet do not allow that to sap your inspiration. Now for the tough part. When possible, save some money to aid with unforeseen expenditures that you would normally place on your credit card. This will lessen the amount you would have to charge by paying with cash. Credit card debt trap: A lengthy and painful trip to get out of it
It’s an incredibly lengthy and painful trip to get out of the credit card debt trap. It also can be a very lonely one. People don’t get into the credit card debt trap overnight, so you can’t get out of it without some hard work.
The Ira Smith Team has helped many people stay the course and be stimulated by their successes. We have helped many people avoid bankruptcy.
Contact the Ira Smith Team today. Your first consultation is free. We will be there with you every step of the way to help you out of the credit card debt trap so you can begin living credit card debt-free. If it isn’t credit card debt you are worried about, but rather other kinds of debt trap you may be caught in, we can help free you from those too.
To deal with debt you need the help of a debt professional – a trustee. Dealing with debt is not something that you can put off any longer. Start the New Year off right by calling Ira SmithTrustee & ReceiverInc. today and make an appointment for a free, no-obligation consultation.
We can give you back peace of mind and put you on the road to debt free living StartingOver,StartingNow.
