Tag: assignment in bankruptcy

SEVERANCE PAY ONTARIO & BANKRUPTCY-BARRYMORE FURNITURE UNPAID WORKERS ANGRY

Post author By Brandon Smith
Post date February 10, 2020

If you would prefer the audio version of this Brandon’s Blog or reading subtitles, please scroll to the bottom of this page and watch the picture at the bottom.

Introduction

On February 5, 2020, the Toronto Star wrote about the bankruptcy of Barrymore Furniture Co. Ltd. (Barrymore) titled “Barrymore Furniture has filed for bankruptcy — leaving a throng of angry, unpaid workers in its wake”. It talks about the sad story of this family-owned business going into bankruptcy. It also states that the workers will not receive termination pay, severance pay or benefits. For the record, my Firm is not involved in this bankruptcy file.

The purpose of this Brandon’s Blog is to describe the sad story of the Barrymore bankruptcy and what happens to severance pay Ontario (as well as other employee remuneration) when a company goes bankrupt. But first, a little primer.

Who is entitled to severance pay Ontario?

“Severance pay” is a settlement that is paid to a qualified employee who has their employment “severed.” When a long-term employee loses their job, it makes up an employee for losses (such as loss of standing) that happen.

Severance pay is not the same as termination pay. Termination pay is given instead of the called for notification of termination of work. Not everyone is entitled to severance pay.

A worker gets approved for severance pay if his/her employment is terminated and she or he:

has worked for the company for 5 or more years (whether continuous or not or active or otherwise) and

his/her employer:
- has a payroll in Ontario of a minimum of $2.5 million; or
- severed the employment of 50 or more workers in a six-month period because all or part of the company completely closed.

To determine the amount of severance pay Ontario a worker is entitled to receive, you multiply the employee’s normal wages for a normal week by the sum of:

the # of actual full years of employment; as well as
the # of completed months of employment divided by 12 for a year that is not finished.

The maximum amount of severance pay Ontario to be paid under the Employment Standards Act is 26 weeks.

The Barrymore bankruptcy

Barrymore was a Canadian producer, wholesaler and had a retail store of high-end furniture. It started in business in Toronto going back to 1919. On November 29, 2019, Barrymore tried a business restructuring by filing a Notice of Intention To Make A Proposal (NOI). On December 9, 2019, Barrymore sought and received, a Court Order enabling for an extension of time to submit a restructuring Proposal. Barrymore had until February 12, 2020, to submit its debt settlement plan and other necessary documents.

Barrymore failed to submit on time its cash flow statement, as called for by the Bankruptcy and Insolvency Act (Canada) (BIA). On January 17, 2020, Barrymore filed an Assignment in Bankruptcy.

Barrymore filed its NOI to try to accomplish a few things:

Give it some breathing room from its creditors by invoking a stay of proceedings.
Allow it to operate during the crucial holiday shopping season.
Try to find a buyer for its business.

The post-NOI period

Once the NOI was filed, Barrymore began a sales process to try to find a buyer for the entire Barrymore business. Seventeen parties were identified as being potential purchasers. Only seven were interested in performing due diligence.

At the same time, the Proposal Trustee got proposals from two professional liquidators. They did that so in case no buyer closed a purchase of Barrymore, they could hit the ground running in liquidating the assets.

Unfortunately, nobody submitted an offer for Barrymore’s business. Hence, Barrymore’s bankruptcy.

Barrymore’s statement of affairs

The Barrymore sworn statement of affairs shows assets of $240,000. The assets are inventory ($200,000) and machinery and equipment ($40,000). Barrymore has 5 secured creditors for $4.3 million. The single largest secured creditor is its chartered bank with a claim of $3.7 million. Assuming the Bank’s security is good and in the first position, the estimated asset value of $240,000 won’t go very far!

The sworn statement of affairs also shows 118 unsecured creditors with claims of $3.2 million. So with total claims recorded in Barrymore’s books and records of $7.5 million and the books showing only $240,000 of assets, there is a huge imbalance. The family that owns the business is shown to be owed $1.7 million as an unsecured creditor. The former employees are also unsecured creditors.

With that financial imbalance, it is no wonder the licensed insolvency trustee (formerly called a bankruptcy trustee) in the Barrymore bankruptcy could not run the business. Instead, it received Court approval to enter into a liquidation agreement with one of the liquidators. The liquidation sale to the public has begun. Either the amount shown in the books for inventory value is too low, or, the liquidator has the authority to bring in new goods to put into the bankruptcy sale, or both. It is too much effort to go through for inventory worth so little compared to the Bank’s secured debt!

The employer went bankrupt did not pay employees

I don’t know what the real individual claims of each former employee might be, but it can include:

Wages or salary
Vacation pay
Termination pay
Severance pay
Benefits

The Barrymore employees are members of the United Steelworkers Union. The Steelworkers Toronto Area Council represents the former Barrymore employees. Both the Union and the former employees are naturally quite upset over the bankruptcy.

“Once again, working people are victims of a rigged system that disregards their interests while giving priority to wealthy investors,” said Carolyn Egan, President of the Steelworkers Toronto Area Council. Her comment is understandable. However, based on the sworn statement of affairs, it does not look like any “wealthy investors” are getting paid.

Protecting employees from the bankrupt employer

The United Steelworkers and the Canadian labour movement as a whole have been lobbying for reforms to Canada’s bankruptcy and insolvency legislation for numerous years to give greater top priority to workers and pensioners.

I have written many blogs on the topic of how various federal politicians have put forward Bills to give workers and retirees more rights. Several bills proposing such reforms were provided previously in Parliament, but none made it into legislation by the Liberal federal government.

Rather, only some warm words and minor amendments relating to Director responsibilities were included in the last federal budget and passed. To put it bluntly, the Liberal federal government has rejected enacting legislation to protect workers and retirees when an employer enters insolvency proceedings.

The Liberal majority government showed no interest in any meaningful reform in the area of employee rights in bankruptcy or insolvency. Perhaps for their next budget, the minority government will be forced to look seriously at it.

What happens if my employer owes me money & goes bankrupt?

The BIA created a device for workers of a company that entered either bankruptcy or receivership and are owed money. It does not cover employees of a company trying to right-size itself through a restructuring proposal. The Wage Earner Protection Program Act (WEPPA) provides for wages or benefits, including termination and severance pay, accumulated in the 6 months prior to the business becoming bankrupt or placed right into receivership.

The WEPPA ended up being law due to the federal government’s previous concern that when employees experienced “the company went bankrupt and didn’t pay me wages” there was seldom an opportunity for employees to obtain any of their income owed. As discussed, shortly, there are limits to or caps on what employees may receive.

WEPPA calculation: Who cannot submit?

However, you do not qualify for WEPPA if, throughout the time for which amounts owed to you are past due, if you:

were a Director or Officer of the business;
had a management placement in the company; or
were management whose tasks included making financial decisions on the negotiation or non-payment of amounts owing.

WEPPA calculation Canada

You could qualify if:

your previous employer has really gone into bankruptcy or receivership; as well as
you have overdue wages, salary, vacation pay or unreimbursed costs from the firm throughout the 6 months prior to the date of bankruptcy or receivership.

The WEPPA gives funds to Canadian employees owed money when their employer enters into either bankruptcy or receivership. The WEPPA provides a punctual settlement of qualifying employee earnings. The quantity of the qualifying employee earnings is an amount equivalent to 7 times maximum regular insurable profits under the Employment Insurance Act. As of January 1, 2020, the maximum yearly insurable earnings amount is $54,200. This means that the max amount a former employee can claim under WEPPA is $7,296.17 in 2020.

Receivers and bankruptcy trustees are required to tell employees of the WEPPA program and provide workers information regarding amounts owing. From the day of bankruptcy or receivership, trustees, as well as receivers, have 45 days to send out Trustee Information Forms revealing the amounts owing to each of the workers.

So payment under WEPPA is something, but may not fully compensate each former employee. Of the amount paid by Service Canada, who administers the employment insurance system, the amount of $2,000 per employee paid out is a super-priority against the current assets of the company. The balance of amounts paid to each employee, up to the maximum, are unsecured claims.

So, in Barrymore’s case, the total of all the individual first $2,000 amounts paid to each former employee will rank in first place against the inventory at the date of bankruptcy. This claim ranks ahead of all listed creditors, even the secured creditors.

Wrapup

Have you lost your job due to the fact that your employer entered into bankruptcy or receivership? Were you a Director of a company that went bankrupt or into receivership and now you are being chased for statutory personal liabilities? Is your company in financial trouble and you just don’t know how to save it? Is the pain, stress and anxiety of excessive debt currently negatively affecting your health?

We understand your pain. We will certainly ensure that no bill collectors call you. We will take all the migraines, stress and anxiety you are experiencing off of your shoulders and place it onto ours. We will repair things so that you can march forward in a healthy and balanced way, pain-free, debt-free and guilt-free.

It is not your fault that you remain in this scenario. You cannot fix it on your own since you have actually only been shown the old methods. The old ways do not work anymore. The Ira Smith Team makes use of brand-new ways which will return you promptly to a hassle-free life while getting rid of your debt.

Get in touch with the Ira Smith Team today. We have decades as well as generations of experience helping people and businesses seeking financial restructuring and debt relief. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to provide debt settlement and financial restructuring services.

We provide a totally no cost appointment to help you solve your issues. We understand your discomfort that your debt creates. We can also end that painful feeling right away from your life. This will certainly allow you to start afresh again. Call the Ira Smith Team today to ensure that we can begin assisting you as well as get you back into a healthy and balanced, stress-free life Starting Over Starting Now.

Tags assignment in bankruptcy, Bankruptcy, bankruptcy and insolvency act canada, bankruptcy trustee, barrymore bankruptcy, barrymore furniture, employer went bankrupt did not pay employees, Ira Smith Trustee, licensed insolvency trustee, notice of intention to make a proposal, proposal trustee, receivership, severance pay, severance pay ontario, statement of affairs, unpaid wages, Wage Earner Protection Program Act, who is entitled to severance pay ontario

Brandon Blog Post

BANKRUPTCY SMALL BUSINESSES: COMPLETE BANKRUPTCY OPTIONS FOR SMALL BUSINESSES

Post author By Brandon Smith
Post date September 2, 2019

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

Bankruptcy small businesses introduction

The press has reported that certain Big Pharma have considered bankruptcy as part of negotiations to reach a settlement over their liability in the opioid crisis. Bankruptcy, or bankruptcy restructuring is not just for big companies. There are bankruptcy small businesses too.

Earlier this year, Insys Therapeutics Inc. in the United States ended up being the first opioid drugmaker to use the bankruptcy statute. It followed its US$225 million settlement with the Federal government. In recent months, there’s been a supposition that drugmakers might utilize insolvency laws as a means to run away from accountability.

Bankruptcy small businesses: That is not how bankruptcy protection works

Thankfully, that’s not how bankruptcy works. Instead, as I’ve learned in my experience in the Canadian bankruptcy space, insolvency procedures are developed to not only help debtors. It likewise assists creditors too.

Bankruptcy and restructuring proceedings are not best for every stakeholder every time. The end result always appears unreasonable to creditors because they are not being paid in full. However, it’s most definitely not the free ride for the company filing under the bankruptcy laws that many people think it will be. This is especially true in the area of bankruptcy small businesses.

Bankruptcy small businesses: What happens when a small business files for bankruptcy?

To many people, the thought of bankruptcy creates an adverse reaction. The reason is simple: a bankruptcy filing means there is not enough money to pay everyone 100 cents on the dollar.

But the system makes the best of a grim situation by imposing an organized and open process that preserves value and urges negotiation. Bankruptcy reorganizations by well-known brand names such as General Motors revealed that it can bring parties to the table to reach agreements that could not be made absent the structured reorganization laws. It also resurrects sick businesses.

At the most basic level, the Bankruptcy and Insolvency Act (Canada) (BIA) and the Companies’ Creditors Arrangement Act (CCAA) develops for the estate to:

value and account for every one of the debtor’s assets into one proceeding;
recognize and classify creditor claims against the debtor;
in bankruptcy liquidation, sell the assets and distribute the money in priority of the claims of the creditors; and
for a bankruptcy restructuring, to take a hard look at productive assets and those no longer needed, value them, allow for selling off redundant assets to allow the company to continue in its healthy business side and offer the creditors a better deal than they would get in a liquidation.

Specifically how those essential parts of the bankruptcy and insolvency legislation play out in a specific bankruptcy small businesses situation will differ depending upon what kind of insolvency filing the borrower makes and the specific truths regarding the conduct of the debtor.

Bankruptcy small businesses: What types of bankruptcy can small businesses file?

When we hear about bankruptcy small businesses we normally think of a liquidation. However, debtors have two choices under the BIA: liquidation or reorganization.

Pure bankruptcy liquidation is designed to sell off the assets either as a whole to one buyer to allow for someone else to carry on the company’s business, or just sell pieces to many individual buyers. In the latter case, it means that business will not exist anymore.

The value obtained from the asset sale(s) will be distributed to the creditors in priority. First to statutory trust claimants, then to secured creditors, if any. If anything is left after that, it will then be distributed to unsecured creditors: first preferred unsecured and then ordinary unsecured.

On the other hand, a filing under the proposal provisions of Part III of the BIA allows for the company to attempt to reorganize. All aspects of the business will be looked at. The debtor can sell some of its assets that are underperforming or no longer fit into the restructured business plan. The cash raised can be used in the reorganization strategy that aims to resolve the current business problems and allow the company to come out of bankruptcy protection as a new and profitable viable business.

The BIA restructuring provisions are what would be used for bankruptcy small businesses. Large businesses (defined in this case as companies that owe more than $5 million) could use the same BIA proposal provisions. Alternatively, those large companies could also use the CCAA statute to reorganize. The specific situation will dictate what legislation is used for a reorganization.

bankruptcy small businesses

Bankruptcy small businesses: A restructuring attempt could go wrong

It is possible that companies that originally file under the BIA restructuring provisions ultimately become bankrupt. The reasons can vary.

The company may find that the financing it thought it had was no longer available, so they could not put forth a successful restructuring plan. So it will have no choice but to liquidate.

The company’s creditors may not believe that the restructuring plan pays them enough, is not a viable plan or there is too long to wait for too little money. In this case, the creditors when voting on the restructuring plan will vote in sufficient numbers to tank the restructuring. Any company that tries to restructure under the BIA and receives a sufficiently negative vote, is deemed to have filed an assignment in bankruptcy. In such a case, the only remaining option will be a liquidation, probably through a bankruptcy small businessses.

For a business wanting to make it through a restructuring, a successful plan needs lender assistance or a sufficiently strong cash flow so that the restructuring will be funded properly. If there is insufficient cash to fund the restructuring, the Trustee will have to report that to the creditors. The Trustee will also have to recommend against the restructuring plan if the Trustee believes the company does not have enough cash to provide the staying power to carry out the plan.

In that case, there will certainly be a negative vote and the company will go into bankruptcy liquidation. On the other hand, in a successful bankruptcy small businesses restructuring, as soon as a BIA proposal plan of arrangement is fully performed, a company emerges from bankruptcy protection and continues operating, generally in a more powerful position than previously.

Bankruptcy small businesses: Advantages of an insolvency process for debtors

Bankruptcy provides at the very least two valuable advantages to all debtors: time and room to maneuver.

The minute a debtor files, an automatic stay is in play for the debtor. It operates as a time out button on any litigation, collection or enforcement activities. Creditors can ask the Court to lift the stay under specific conditions, however, the standard for doing so is typically tough to satisfy.

The Bankruptcy Court has broad authority to regulate all issues involving the debtor’s estate, including adjudicating any disputed claims. By uniting all those with a stake in the business’s assets in one place, a debtor can effectively handle all claims against it.

While the stay is in place, debtors use the insolvency process to review their troubles and make the essential adjustments to prosper after reorganizing. Decisions are made about which contracts they want to carry forward and which to abandon.

To stay clear of a disputed process, smart debtors use the insolvency restructuring process to reach a total overall negotiation and agreement with all stakeholders. If necessary, smart debtors will also offer a benefit to top up its restructuring plan to make sure that it gets the number of creditors necessary for the plan to succeed.

Bankruptcy small businesses: Benefits of the insolvency process for creditors

Clearly, bankruptcy supplies debtors with substantial power to reposition their business affairs.

What lots of people misunderstand, nonetheless, is that this power is balanced by solid creditor benefits too. The BIA calls for debtors to disclose considerable information about their operations and imposes stringent checks on their actions.

As an example, the company wishing to reorganize must openly disclose financial and other information concerning every one of its assets. Much fo the disclosure is under oath in the sworn statement of affairs. There is also if necessary, the ability to examine company officials under oath. In many cases, the debtor must seek the court’s approval before taking action beyond running the business operations in the normal course.

Under the bankruptcy small businesses BIA provisions, the company is allowed to stay in possession of its property. Management also remains in control to continue running the business. The Trustee must report any material adverse change. The Trustee will also report to the creditors as part of the restructuring process.

Creditors that are worried concerning the debtor’s capacity to maintain the estate’s worth might ask the Court to expand the Trustee’s powers. It is possible to have the Trustee also appointed as an interim receiver to control the receipts and disbursements of the company. Creditors can also ask the Court to end the restructuring and place the company into bankruptcy. Creditors would need to show that either a key secured creditor or a large enough group of unsecured creditors, will under no circumstances vote in favour of any restructuring.

The insolvency laws allow for the creation of a board of unsecured creditors to oversee the restructuring. The Court might also form a unique board standing for a major group of litigants in situations where the debtor faces lawsuits or claimants whose damages are not yet quantified.

These and various other attributes include a degree of justness to an inherently unfair situation. The debtor might think that it is driving the bus, however, countless other stakeholders have the power to make sure that the business complies with the rules of the road.

With such safeguards in place, creditors and the general public need not be afraid of the most awful possible outcome if bankruptcy provisions are used to try to restructure companies involved in bitter disputes. The playing field will never be even, but the Canadian insolvency statutes try to bring as much fairness into the bankruptcy small businesses system as possible.

Bankruptcy small businesses conclusion

I hope that you found this bankruptcy small businesses Brandon’s Blog informative. The financial restructuring process is complex. The Ira Smith Team understands how to do a complex corporate 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 realistic lifeline. There is no “one solution fits all” approach with the Ira 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 the Ira Smith Trustee & Receiver Inc. team today.

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.

bankruptcy small businesses

Tags assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy and restructuring, bankruptcy filing, bankruptcy small businesses, BIA, CCAA, Companies’ Creditors Arrangement Act, corporate restructuring, creditors, Ira Smith Trustee, liquidation, proposal, reorganization, small business

Brandon Blog Post

COLLECTION AGENCY ONTARIO: HOW DO COLLECTION AGENCIES WORK IN ONTARIO?

Post author By Brandon Smith
Post date August 19, 2019

If you would prefer to listen to the audio version of this collection agency Ontario Brandon’s Blog, please scroll to the bottom of this page and click on the podcast

Introduction

In many of the free consultations I provide, the issue of collection agency Ontario arises. More often than not, people and companies that are insolvent, experience harassing phone calls from debt collectors.

In fact, in certain corporate bankruptcy or receivership matters that I handle, there are certain situations where I hire a collection agency. They can be very effective in collecting amounts owing to the insolvent company.

The purpose of this collection agency Ontario Brandon’s Blog is to answer the top 4 questions that I am asked about collection agencies.

1 – How do collection agencies work in Ontario

In Ontario, debt collectors need to be signed up and should adhere to the guidelines outlined in the Collection and Debt Settlement Services Act, R.S.O. 1990, c. C.14 and its regulations.

The Ontario Ministry of Government and Consumer Services registers and controls these firms.

Ontario registered collection agencies must first send you a personal letter by mail or email. Their letter should include:

details on just how much you owe as well as the kind of product and services that put you in debt
the name of the business/individual you owe money to
the amount of the debt on the day it was initially due and payable and, if different, the level of debt presently owing
advice that a breakdown of the present amount owing will be offered upon demand
the name of the collection agency and also the individual collector that is requiring payment of the financial debt
that the debt collector is registered in and as a collection agency Ontario
the contact details of the debt collection agency, including the complete mailing address, phone number and, if applicable for communication, their email address
a disclosure statement, which discusses your legal rights and the steps you can take if you believe the debt collection company has broken the law

After the agency sends out the letter they need to wait six days prior to their next effort to get the payment of the financial debt.

Collection agencies work on a commission basis. They get to keep a percentage of the debts collected on behalf of their respective clients.

2 – Can a collection agency sue you in Ontario?

The short answer is yes.

A collection agency, once it gets approval from its client, the party that feels you owe them money, can sue you. If it is a large amount of money, they will definitely hire a lawyer to do it. If it is a smaller amount that can be handled by Small Claims Court, they might hire a lawyer, a paralegal, or just have one of the collectors do it him or herself in Court.

The rules of the Court will apply. The collection agency will issue a Statement of Claim against you. You will then have the time the Court allows to file your defence. The Court will look at all the evidence before it and render its judgment. If you are found liable for the debt, then the collection agency can attempt to enforce the judgment against you. They will try to garnishee your bank account and/or a portion of your wages.

Keep in mind that in Ontario, the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B has a fundamental restriction of 2 years. Anyone has specifically two years, starting from the day you first recognized or should have known, that a loss occurred, to file a claim and sue. The two year period would start running the day the person trying to collect a debt from you first contacted you about your being in default.

For example, a credit card company writes to you telling you that you are in default and asks that you pay up in full or else they will take further action against you. You don’t reply or pay, and they write to you again threatening legal action. Again you don’t respond or pay, and then you get a letter from a collection agency. The collection agency then sues you.

The collection agency is only the agent of the credit card company. The debt they are collecting is not their own, it is the debt of the credit card company. So, the first date the credit card company knew of a loss is not the first time you are contacted by the collection agency. It is the first time you are contacted by the credit card company. That is the day you start counting the two years from.

If the collection agency begins its lawsuit against you more than 2 years after the date the credit card company first advised you that you are in default, it is too late.

3 – How long can a collection agency collect on a debt in Ontario?

This is always a fascinating question for me. Even if the 2-year statute of limitations kicks in, all that means is that you cannot be sued any longer. It does not mean that you no longer owe the money. Most normal people, if they know they can’t be sued, will not pay. However, since the collection agency works on commission, it does not mean that they will necessarily stop calling you to ask for the money, even though they can no longer sue you.

You will always owe that debt. The Ontario Court of Appeal confirmed this in the case of Grant v. Equifax Canada Co., 2016 ONCA 500 (CanLII). In that case, the Court ruled that if you owe money, even if it is too late for you to be sued, it can still show up on your credit report in Ontario. The Court of Appeal went on to say just because a creditor misses the deadline or chooses not to sue within the two-year period it doesn’t mean that the debt still isn’t owed.

The only way in Ontario short of paying off the debt, or a lesser settlement amount, is to file either a consumer proposal or assignment in bankruptcy. Once you successfully complete your consumer proposal or get your discharge from bankruptcy, that debt and all other unsecured debts are wiped out. They are discharged. However, if the only debt you are not paying is the one the collection agency is trying to collect, an insolvency filing may be a very drastic and unnecessary step.

To find out for sure, you would have to consult with either a lawyer or a licensed insolvency trustee (formerly called a bankruptcy trustee).

4 – How do I stop a collection agency?

The only real way to stop a collection agency in Ontario is to either pay off the debt in full or arrange for a debt settlement and pay it. The settlement can be an immediate payment for less than the total amount owed, or paying off some amount over time.

If you cannot make a settlement with them that you can afford to pay and live up to, then you the only other way is to do an insolvency filing. As I mentioned above, in the case of an individual person, that would be either a consumer proposal or filing for bankruptcy. In the case of a company, it would be either a restructuring proposal or bankruptcy.

Are you on the edge of insolvency? Are bill collectors hounding you? Are you ducking all your phone calls to the point where your voicemail box is always full?

If so, you need to call me today. As a licensed insolvency trustee we are the only professionals licensed, recognized as well as supervised by the federal government to give insolvency assistance. We are also the only authorized party in Canada to apply remedies under the Bankruptcy and Insolvency Act (Canada). I can definitely help you to choose what is best for you to free you from your financial debt issues.

Call the Ira Smith Team today so we can get free you from the stress, anxiety, and discomfort that your cash issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Starting Now.

Call the Ira Smith Group today.

Tags assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, can a collection agency sue you in ontario, collection agencies, collection agency, collection agency ontario, Consumer Proposal, credit report, credit report ontario, debt collector, how do collection agencies work in ontario, how do i stop a collection agency, how long can a collection agency collect on a debt in ontario, Ira Smith Trustee, licensed insolvency trustee

Brandon Blog Post

CONSUMER PROPOSALS: HOW MANY ARE REJECTED?

Post author By Brandon Smith
Post date July 3, 2019

Introduction

When people with high debt come to see me for their free consultation, many times I shock them. They are shocked when I tell them that bankruptcy might not be required. I then tell them about consumer proposals. I also explain why I think they would be able to successfully complete a consumer proposal (CP) and therefore avoid bankruptcy.

What are consumer proposals?

I have written on the topic many times. In summary, a consumer proposal is a streamlined process under the Bankruptcy and Insolvency Act (Canada) (BIA). This process allows insolvent people to make a formal deal with their creditors. This government approved debt settlement plan is to repay only a portion of what you owe and you can take as long as 5 years of regular monthly payments to do so.

To qualify, the person must be insolvent and owe $250,000 or less to all creditors, other than for any debts secured by way of registration against your principal residence, such as a mortgage.

The person will then ask me how many we have done were rejected. They are trying to determine what the odds are for their deal to be accepted by their creditors. What I tell them is that I first do an assessment and tell them what amount of offer I think they need to make to gain the approval of their creditors. I also tell them that so far, anyone who has followed my advice has had their consumer proposal accepted by their creditors. Therefore, the number of those rejected by people who follow my advice is ZERO.

The benefits

There are benefits to submitting a successful debt settlement payment plan sanctioned under the BIA. The benefits include:

Unlike an informal debt arrangement, the CP develops a forum where each of your unsecured creditors has to participate in for your debt restructuring.
You maintain your assets and don’t have to give them up.
Lawsuits against you or your property and financial debts, or enforcement actions such as wage garnishments, cannot proceed.
You do not need to submit an assignment in bankruptcy

The process

Once prepared, the CP is submitted to the Office of the Superintendent of Bankruptcy Canada (OSB), the government department that controls Licensed Insolvency Trustees (formerly called bankruptcy trustees) (Trustee). The Trustee acts as the Administrator of the CP.

Once it is submitted, you will quit paying your unsecured creditors for past debts. The Trustee will send a notice of the filing along with a copy of the CP to all creditors affected by the CP. This includes anyone suing you or garnishing your earnings. Those activities against you will stop also.

Your creditors will have 45 days to accept or decline the debt settlement CP deal. If your unsecured creditors are disappointed with the proposal, they can vote against. In that case, the Trustee will discuss modifications with you that the Trustee believes the creditors might accept. That discussion will take place prior to the against vote counting. Usually, this means offering more money to them over the maximum 5 year period. The key is that you have to be able to afford to make those higher monthly payments. It will still be only a portion of the total you owe.

In order for consumer proposals to be accepted, a simple majority of your creditors by dollar value who has filed a proof of claim must approve it. If creditors who have filed a proof of claim choose not to vote, that is considered a vote in favour. You also may not even need to have a meeting of creditors. Unless creditors holding 25% in dollar value of the claims filed to request a meeting, or the OSB requests a meeting, there is no need to hold one. If a meeting is not requested, the proposal is deemed to be accepted by the creditors. This is all part of the streamlining.

Acceptance and performance

If your CP is accepted, the OSB (or any type of other interested parties) has 15 days to ask the Trustee to go to court to have the deal court approved. If no such demand is made, the debt plan is deemed to have actually been accepted by the court. More streamlining.

After acceptance and approval, the person is then accountable for making the regular monthly payments to the Trustee that was promised in the debt management plan. There will also be 2 counselling sessions for the person to attend with the Trustee to help them with their financial issues and behaviour.

If you miss 3 monthly payments, or you are greater than 3 months overdue since your last payment, the proposal will be considered annulled. This indicates to your creditors that they are now able to either resume or begin collection actions against you. Not a good thing.

Full performance

As I previously mentioned, the person must successfully complete the debt management settlement plan by making all the required payments and attending the 2 counselling sessions. When completed, the person is entitled to receive a Certificate of Full Performance. This means that you have successfully completed the CP and that all debts caught by it are discharged.

The Trustee will then finalize the administration of your debt settlement plan, get the necessary OSB approval and distribute the money to all the creditors who have filed a proof of claim. The Administrator also is entitled to the government approved fee.

Summary

Consumer proposals must provide your creditors with a better outcome than what they would get in your bankruptcy. I have never had a consumer proposal rejected for someone who took my advice and made all the payments required.

Are you in financial distress? Do you not have enough funds to pay your bills as they come due?

As a Trustee, we are the only professionals acknowledged, accredited and also managed by the federal government to provide insolvency advice and services. A consumer proposal is a federal government licensed debt settlement approach to eliminate your debt. We will certainly help you to pick what is best for you to clear your own debt issues.

Call the Ira Smith Team today so we can eliminate the stress, anxiety, discomfort and pain from your life that your cash problems have produced. With the distinct roadmap, we develop just for you, we will swiftly return you right into a healthy and balanced problem-free life.

We have years and generations of experience assisting people and companies looking for debt restructuring to PREVENT bankruptcy. You can have a no-cost analysis so we can help you to fix your financial troubles. Call the Ira Smith Team today. This will certainly allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, Consumer Proposal, consumer proposals, Debt, debt management, debt management plan, debt settlement, debt settlement plan, informal debt, insolvent, Ira Smith Trustee, licensed insolvency trustee, OSB, Superintendent of Bankruptcy

Brandon Blog Post

CONSUMER PROPOSAL CALCULATOR REVIEW FOR YOU

Post author By Brandon Smith
Post date July 1, 2019

If you would prefer to listen to the audio version of this consumer proposal calculator Brandon’s Blog, please scroll down to the bottom of the page and click on the podcast

Introduction

A consumer proposal calculator is important to figure out what sort of debt settlement plan should be offered to your creditors. But to have a truly successful one, you really need clear language. In Brandon’s Blog, I review a recent court case that explains why.

Shelly Gail Corriveau bankruptcy

I recently read the Reasons for Decision dated June 13, 2019 by Registrar in Bankruptcy L.A. Smart of Court of Queen’s Bench of Alberta. This case is in the matter of the bankruptcy of Shelly Gail Corriveau. The case reference is Corriveau (Re), 2019 ABQB 438 (CanLII).

Ms. Corriveau filed an assignment in bankruptcy in April 2012. She had unsecured creditors of roughly $73,000. The reason for her insolvency was stated as offering monetary help to her child’s business. She was by all accounts a perfect example of an honest but unfortunate debtor. At the time of the bankruptcy, her only asset was her house.

In June 2012, Ms. Corriveau got a gift from her mom of $46,000. It featured instructions that $6,000 of those funds be utilized for children and certain other matters. She spent the $6,000 as instructed, with the balance of the $40,000 being paid to her licensed insolvency trustee (formerly called a trustee in bankruptcy) (the Trustee) for the benefit of her creditors.

The home was sold in October 2012. From the sale, she received her provincial exemption of $40,000 with the balance of $3,916.21 being paid to her bankruptcy estate.

Ms. Corriveau files a consumer proposal

On May 12, 2013, Ms. Corriveau advised her Trustee she had received an inheritance of $15,000 from her Mother’s estate. On May 26, 2013, Ms. Corriveau submitted a consumer proposal. The Trustee served as the Administrator of the consumer proposal.

The proposal in paragraph 4 states:

“4. That the following payments be made to [Name omitted to not embarrass the guilty] Trustee in Bankruptcy, the administrator of the consumer proposal, for the benefit of the unsecured creditors:

Proposal payments to total $10,000.00. The of (sic) funds will be provided to the Administrator as follows – $300.00 filing fee to be paid at time of filing and then a lump sum payment of $9,700.00 due 60 days after the proposal is court approved (all payments to be made within the 60 months proposal period)

The debtor reserves the right to accelerate payments should funds become available.

*** NOTE *** – There will be a significant dividend paid from the bankruptcy administration.”

In accordance with the requirements of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA), the consumer proposal Canada read that the payments must be completed within 60 months.

The Trustee recommended acceptance of the proposal. In his report to creditors he stated:

“This proposal will provide the debtor with relief and allow the debtor’s affairs to be restructured in an orderly fashion. It will allow the debtor to annul her bankruptcy and provide for a greater return to the creditors when compared to the bankruptcy option.”

The consumer proposal was deemed accepted by the creditors and approved by the Court. Ms. Corriveau made all the required payments and received her Certificate of Full Performance on August 2, 2013.

Have you “Noted” the problem yet?

Under the BIA, a bankrupt is allowed to lodge a proposal with the Trustee; either a consumer proposal or a Division I Proposal. In either format, it is a debt settlement plan that the bankrupt is proposing for acceptance by the debtor’s creditors. By definition, if the proposal is fully carried out, then the person or company’s bankruptcy is annulled.

When bankruptcy is annulled, it is declared to have had no legal existence. It is as if it never happened. The annulment of the bankruptcy takes place upon the approval or deemed approved by the court of the consumer proposal. There will never be a distribution to the creditors from the bankruptcy administration. The Trustee, in this case, did not issue any funds from the bankruptcy, yet.

So the Note that the Trustee added, “There will be a significant dividend paid from the bankruptcy administration.” is problematic. Actually, it is more than problematic. It is just plain wrong.

Now the Trustee wishes to complete the bankruptcy administration. The Trustee submits its Statement of Receipts and Disbursements as required to the Superintendent of Bankruptcy (OSB) for approval. This issue came before the Court because of the OSB’s unfavourable comment letter dated June 15, 2018.

The Court’s analysis

Section 66.4(2) of the BIA states:

“Where consumer debtor is bankrupt

(2) Where a consumer proposal is made by a consumer debtor who is a bankrupt,

(a) the consumer proposal must be approved by the inspectors, if any, before any further action is taken thereon;

(b) the consumer debtor must have obtained the assistance of a trustee who shall act as administrator of the proposal in the preparation and execution thereof;

(c) the time with respect to which the claims of creditors shall be determined is the time at which the consumer debtor became bankrupt; and

(d) the approval or deemed approval by the court of the consumer proposal operates to annul the bankruptcy and to revest in the consumer debtor, or in such other person as the court may approve, all the right, title and interest of the trustee in the property of the consumer debtor, unless the terms of the consumer proposal otherwise provide.”

There is a similar provision for Division I Proposals.

The Court looked at the:

Statute
wording of the consumer proposal
Trustee’s report to the creditors on the consumer proposal; and the
Trustee’s actions in administering the proposal.

The Court had to decide if the Note was a term of the proposal or not. The Registrar took all factors into consideration, including that the Trustee issued to Ms. Corriveau the certificate evidencing full completion of the proposal upon her payment of $10,000.

The Registrar decided that the Note was an unfortunate error and that the only intention was for the creditors to share in the distribution from the consumer proposal with a gross value of $10,000.

Now for the treatment of the funds collected by the Trustee under the bankruptcy that is now annulled. The Registrar further concluded that consumer proposals that purport to also include a distribution from the funds held in the bankruptcy administration, must include clear and precise language in the proposal. The Registrar said that the Trustee failed to do so.

Therefore, the Registrar concluded that subject to any entitlement to fees by the Trustee from the bankruptcy administration, the funds held in the annulled bankruptcy are Ms. Corriveau’s property and should be returned to her. Costs of the application will be dealt with at the taxation of the Trustee’s account. The Trustee was directed to arrange a suitable date for that taxation to proceed before that Registrar.

Consumer proposal calculator summary

A proposal must offer the creditors a better result than what they would get in a person or company’s bankruptcy. So although a consumer proposal calculator is important, I think clear language is more important.

Are you in financial distress? Do you not have sufficient funds to pay your commitments as they come due?

Call the Ira Smith Team today so we can remove the anxiety, stress, pain and discomfort from your life that your money troubles have created. With the distinctive roadmap, we establish simply for you, we will quickly return you right into a healthy and balanced problem-free life.

As a Trustee, we are the only experts recognized, licensed and supervised by the federal government to give insolvency recommendations and to carry out insolvency procedures. A consumer proposal is a federal government authorized debt negotiation strategy to do that. We will assist you to choose what is best for you to rid yourself of your debt problems.

Call the Ira Smith Team today. We have years as well as generations of experience helping people and companies searching for debt restructuring, a debt negotiation strategy, or a consumer proposal Ontario to AVOID bankruptcy. You can have a no-cost evaluation so we can aid you to repair your financial problems. Call the Ira Smith Team today. This will let you return to a brand-new healthy and balanced life, Starting Over Starting Now.

Tags annul, assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, BIA, canlii, Consumer Proposal, consumer proposal calculator, consumer proposal canada, consumer proposal ontario, debt settlement, debt settlement plan, Ira Smith Trustee, licensed insolvency trustee, Superintendent of Bankruptcy, trustee in bankruptcy

Brandon Blog Post

INSOLVENT MEANING RESTORED IN COURT OF APPEAL FOR ONTARIO

Post author By Brandon Smith
Post date June 17, 2019

If you would prefer to listen to the audio version of this Insolvent Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

On November 28, 2018, I published my Brandon’s Blog titled “INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE”. I wrote about a then recent decision of the Ontario Superior Court of Justice in Bankruptcy and Insolvency in Kormos v. Fast, 2018 ONSC 6044 (CanLII). In that decision, the Judge gave a new twist on deciding whether or not Mr. and Mrs. Fast was insolvent.

If they were found to not be insolvent, their respective consumer proposal and bankruptcy filings would be annulled. In that event, Mr. and Mrs. Kormos would be able to continue enforcing their judgement against Mr. and Mrs. Fast. If unsuccessful in annulling the filings, then their only remedy would be to file a proof of claim in each insolvency proceeding. That would result in a payment far less than what might otherwise be available.

The lower court ruling

Mr. and Mrs. Kormos submitted evidence that the Fast’s assets had a value greater than their total liabilities. They submitted that therefore, Mr. and Mrs. Fast was not insolvent and should not have been able to file under the Bankruptcy and Insolvency Act (Canada) (BIA).

The evidence submitted by Mr. and Mrs. Kormos was not challenged. However, the Judge seized upon the fact that the income and expense statement of each of Mr. and Mrs. Fast indicated that on a monthly basis, their income was much less than their expenses. The Judge, therefore, concluded that Mr. and Mrs. Fast was insolvent and their separate insolvency filings should not be annulled. Accordingly, he dismissed the application by Mr. and Mrs. Kormos.

The appeal

Mr. and Mrs. Kormos did not believe that this ruling was either fair or appropriate. Therefore, they appealed the Judge’s decision with respect to Mrs. Fast only to the Court of Appeal for Ontario. On May 23, 2019, the Court of Appeal for Ontario released its unanimous decision in Kormos v. Fast, 2019 ONCA 430.

The position of Mr. and Mrs. Kormos was that the Judge erred in dismissing their application by not annulling Mrs. Fast’s assignment in bankruptcy and not deciding that her filing was a misuse of the bankruptcy procedure. They further submitted that therefore, the Judge legitimized an unjustified technique to protect the equity in Mrs. Fast’s home.

The Court of Appeal agreed with Mr. and Mrs. Kormos. They stated that the lower court erred in failing to decide that Mrs. Fast was not an insolvent person. It is for that reason, it was not necessary for the Court of Appeal to decide if her filing was a misuse of the bankruptcy scheme and procedure.

The Court of Appeal Judges determined that on the day of her bankruptcy, Mrs. Fast was not an “insolvent person” as that term is specified under s. 2 of the BIA. Her assets substantially went beyond and were readily available to pay off all of her liabilities.

Apart from the unexplained regular monthly cash deficiency, there was no proof that she could not satisfy or had actually stopped paying her liabilities as they normally came due. Instead, the undisputed proof was that she could. The only single item submitted as proof of any kind of financial hardship was that Mrs. Fast had not paid the debt owed to Mr. and Mrs. Kormos under their judgement.

The Court’s power for bankruptcy annullment

Under s. 181(1) of the BIA, a court might annul a bankruptcy order if it feels that it ought not to have actually been made. An annulment will be approved where it is revealed either:

the bankrupt was not an insolvent individual when he or she made the assignment in bankruptcy, or
the bankrupt abused the procedure of the court or performed a fraud on his or her creditors.

What is an insolvent person?

Section 2 of the BIA specifies an “insolvent person” as:

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

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

Mrs. Fast plainly did not meet any of the requirements to be considered insolvent. The lower court erred by ignoring Mrs. Fast’s capacity to satisfy her liabilities and her accessibility to considerable assets.

On the day of her bankruptcy, Mrs. Fast’s real value of her assets over her liabilities, including her share in the value of the real estate, was $417,581.24. The debt owing to Mr. and Mrs. Kormos under their judgement was $25,565.64 plus interest. Therefore, she definitely was not insolvent.

Out and out lies

Mrs. Fast was motivated to take the actions she did because Mr. and Mrs. Kormos was beginning to execute on their judgement and there was real value in the real estate to eventually get paid from. So, Mrs. Fast lied on her sworn statement of affairs she completed with her licensed insolvency trustee (formerly called a bankruptcy trustee) (LIT). She also manufactured an income and expense statement to show that on a cash basis, she suffered a monthly loss.

It is obvious that first, her LIT did insufficient work to establish the bona fides of the values Mrs. Fast used in her bankruptcy filing. Second, the lower court Judge ignored what should have been obvious. Mrs. Fast should not have been allowed to file an assignment in bankruptcy. At least now we are back to the tried and true definition of an insolvent person with clarity from the Ontario appellate court.

The Court of Appeal ordered the annulment of Mrs. Fast’s bankruptcy. They also awarded costs to Mr. and Mrs. Kormos on a partial indemnity basis in the amount of $2,000, including disbursements and HST.

Are you insolvent?

Are you unable to pay your debts as they come due? Are your bills past due and you don’t know how you are going to pay them? Is the true value of your assets less than what you owe to your creditors? If so, then you are insolvent, and we can help end your pain and anxiety.

A LIT is the only insolvency expert accredited, licensed and supervised by the federal government to handle debt restructuring. As a LIT, our personalized strategy will assist you to know all your alternatives. The alternative you choose based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

Nobody wants to visit a bankruptcy trustee. However, the Ira Smith Team has decades and generations of experience people and companies in financial trouble. We will treat you with the respect and dignity that you deserve. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create a result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life.

Call us today for your free consultation, Starting Over, Starting Now.

Tags annul, assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy order, bankruptcy trustee, BIA, Consumer Proposal, income and expense statement, insolvency definition, insolvency proceeding, insolvent, insolvent definition, insolvent meaning, insolvent person, Ira Smith Trustee, licensed insolvency trustee

Brandon Blog Post

THE HONEST TO GOODNESS TRUTH ON BANKRUPTING A CORPORATION

Post author By Brandon Smith
Post date April 29, 2019

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

Bankrupting a corporation: Introduction

I have blogged on personal and corporate insolvency matters for just over 6 years now. I have covered many topics. During a recent corporate bankruptcy consultation, I realized that I have never written about what the steps are for bankrupting a corporation. An important issue arising from this topic would be what the Directors of a corporation going into bankruptcy should know.

There are 3 ways for a company to be bankrupt

Like in all bankruptcy matters, there are three methods that result in bankrupting a corporation in Canada. The first way is being pushed, and the second way is jumping in with both feet voluntarily (I know, corporations don’t have feet!). The third way is to have the company’s creditors vote down a corporation’s attempt to restructure under a Proposal under the Bankruptcy and Insolvency Act (Canada) (BIA). In this Brandon’s Blog, I will focus on describing the first two methods.

Bankruptcy application – an involuntary bankruptcy

Being pushed means that one or more unsecured creditors, owed in total at least $1,000, has made a motion before the Court asking that a Bankruptcy Order be made against the company. The motion is called a Bankruptcy Application.

In order to do so, the unsecured creditor(s) have to:

retain a bankruptcy lawyer.
gotten the consent of a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) to administer the corporate bankruptcy.
In addition to proving the debt owing, the applicant(s) also have to prove that at least one act of bankruptcy was committed by the company within the 6 months before the filing of the bankruptcy application.

There are various acts of bankruptcy listed in Section 42(1) of the BIA. Commonly seen acts of bankruptcy are fraudulent transfers of property, allowing a lawful seizure of some or all of their property by a creditor under a lawful process, and the catch-all ceasing to meet many liabilities as they come due.

Jumping in with both feet – a voluntary bankruptcy

By this term, I mean filing an Assignment in Bankruptcy. In this case, rather than someone going to Court, the Directors call a Directors’ meeting. At the meeting, the Directors resolve that the company is experiencing financial difficulty and cannot continue to run. The Directors also reserve that the company should file an assignment in bankruptcy and it gives authority to one Director to sign all the necessary documents.

The Director who has the authority to sign the bankruptcy documents is called the Designated Officer. Before the documents are ready for signing, the Trustee who is selected must get enough information to prepare the documentation.

Whether bankrupting a corporation in Ontario or elsewhere in Canada and regardless if it is a result of a Bankruptcy Order or an Assignment in Bankruptcy, the information the Trustee requires is the same.

Information and documents a Trustee needs

The Trustee requires a great deal of information before being able to properly administer a voluntary or involuntary corporate bankruptcy. Sometimes company officials can provide it and in other cases, the Trustee has to dig through the books and records of the company.

Here is the lengthy list of what is needed:

Exact corporate name and address of head office, details of any other locations, copy of any premises leases.
Minute book and corporate seal.
Bankruptcy Order or the resolution of the Directors.
Full description of the nature of the business.
Names of Officers and Directors and their addresses.
Date of incorporation of the company.
The date the company ceased operations, if prior to the date of bankruptcy.
The greatest number of employees employed in the last 12 months.
All employees – listing of names, addresses, social insurance number, amounts owing for each of severance, termination, wages, vacation pay, commissions and expenses.
Employee T4’s & ROE’s for current year employees (employer should issue to all employees for the year of bankruptcy and earlier if unissued).
Creditors’ listing (accounts payable) – details consisting of name, address, account number(s), and respective amounts owing classified as follows:
- Secured – banks, leasing company, source deductions, etc.
- Preferred – wages owing, rent to landlords, government remittances outstanding:
- Workers Compensation Board, if applicable.
- Municipal authorities: e.g. business taxes and realty taxes.
- Employer’s health tax.
- Unsecured – trade suppliers; Hydro; Bell Canada (quote telephone number(s); gas, etc.
- Details of any unsecured private party loans, shareholder loans or advances due to the company.
Details of any unions, if applicable, including name, address, account number.
Details of contingent liabilities and pending legal action, if any.
Accounts receivable – aged trial balance and detailed backup documentation (invoices, delivery slips, purchase orders, etc.) to support collection efforts. From the aged trial balance, classify the accounts as good, doubtful, bad to equal the total balance.
Inventory – detailed information on inventory cost and the company’s assessment of estimated realizable values.
Machinery, equipment and plant – detailed listing providing original cost, if possible and estimated realizable value.
Office furniture & fixtures – detailed listing providing original cost, if possible and estimated realizable value.
Real estate – all details of real estate owned, including deeds, legal descriptions, original costs, appraisals (if any), an estimated fair market value.
Vehicles – provide descriptions including year, model, VIN, kilometres, original costs and estimated realizable value. Note if any vehicles are leased/financed and provide copies of the lease/finance documentation.
Other assets – details of other assets such as prepaid expenses, deposits, goodwill, intangibles, shares or any investments, patents, trademarks.
Bank accounts – details of all bank accounts, including name, address, account number and approximate balance in the accounts.
Last 12 months of accounting records, bank statements and cancelled cheques (for all accounts maintained).
Financial statements – most recent.
Corporate solicitor – name and address.
Listing of leased equipment (copy of leases) – vehicles, office and any other equipment.
Insurance policy(ies).
A brief narrative of management’s opinion as to cause(s) of insolvency.
Disclosure of any sale or disposition of assets, outside of the ordinary course of business, in the last year.

The Trustee’s job

In a corporate bankruptcy, the Trustee, with certain exceptions, takes possession of the assets of the company. If the Trustee is aware that there are deemed trust claims against the assets, or there is a secured creditor, like a Chartered Bank, the Trustee must be careful. If there are, the Trustee should have already had a conversation with those parties prior to the bankruptcy, to decide what rights, if any, the Trustee may have against such property.

Assuming there are assets not subject to the valid claim of third parties, the Trustee must at least:

Establish whether the value of the assets will be enhanced if the Trustee operates the company’s business.
Take into account what obstacles exist in running the business and how to reduce risk if it is beneficial or necessary to run the business.
Decide what are the very best means to sell the properties? En bloc as one parcel or individually or at least several parcels?
Determine if there are any 3rd party owned assets on the company’s premises?
Identify if there are any company assets on the property of 3rd parties?
Prepare the required reporting to Service Canada so that the former employees will be able to make their Wage Earner Protection Plan Act claims.
See if there are proper insurance coverage and proper physical security over the assets?
Identify any inventory been delivered in the 30 days prior to the date of bankruptcy? What rights of revindication might exist?
Circularize the creditors requesting claims to be filed to understand what the depth and breadth of claims against the company are. This way, the Trustee can formulate a distribution to creditors, in priority, with the net funds available from the sale of assets.

What the Directors should be concerned about

Directors should have two concerns when contemplating bankrupting a corporation. First, they should be concerned about any decisions they have made or senior management actions they have ratified.

For example, Sears in the United States recently lodged a claim versus its previous CEO Eddie Lampert and a string of its top-level previous Directors. This includes Eddie Lampert’s previous Yale roomie Treasury Secretary Steven Mnuchin. The allegation is that the Directors condoned and approved Eddie Lampert’s actions for presumably swiping billions of dollars from the once-storied merchant.

Second, there are various types of claims against the corporation that are also personal claims against Directors. The list includes Director liability for unpaid:

Wages
HST
Source deductions
Certain environmental offences
Cybersecurity risks

In general, there is a relatively short list of things Directors can be personally liable for. In many cases, there will be Director and Officer Insurance to be relied upon. Directors may also have a due diligence defence.

A Director resigning their position will not protect them against any liability that would be a personal Director liability prior to their resignation.

Are you a Corporate Director?

Are you a Director of a corporation that has too much debt? Is your company’s capital insufficient to fulfill every one of its economic responsibilities and may be insolvent? Are you worried that your firm’s major secured lender will soon pull its financing completely and demand repayment in full which the company will not be able to do?

If you responded yes to any of these questions, call the Ira Smith Team today so we can kill off the stress and anxiety that these financial troubles have activated. We will create a strategy for the Directors unique for your company’s problems so that it can avoid bankruptcy and become profitable and continue to employ many people.

Call the Ira Smith Team today. We have decades and generations of experience restructuring and turning around companies seeking financial restructuring or a debt negotiation strategy. As a licensed insolvency trustee, we are the only specialists recognized, certified and monitored by the federal government to offer insolvency guidance to save businesses.

You can have a no-cost assessment so we can fix your company’s debt problems. Call the Ira Smith Team today. This will absolutely allow you to return to being efficient, healthy and balanced, Starting Over Starting Now.

Tags act of bankruptcy, assignment in bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy application, bankruptcy lawyer, bankruptcy matters, bankruptcy order, bankruptcy trustee, bankrupting a corporation, bankrupting a corporation in canada, bankrupting a corporation in ontario, BIA, Corporate Bankruptcy, director, involuntary bankruptcy, licensed insolvency trustee, voluntary bankruptcy

Brandon Blog Post

CONSUMER PROPOSAL CANADA PART OF BANKRUPTCIES LAWS IN ONTARIO?

Post author By Brandon Smith
Post date December 12, 2018

Introduction

I prepared this vlog to explain the differences between a consumer proposal (CP), one of the bankruptcies laws in Ontario and bankruptcy. This discussion is based on the inquiries that we are asked often. Hopefully, this information will help you understand better specifically what a CP debt settlement strategy is and how it will certainly assist you to remove all your financial obligations. All this while AVOIDING personal bankruptcy.

Main benefits of a CP

Take into consideration several of the benefits of the CP vs. bankruptcy:

- Unlike informal debt negotiation, the CP creates a forum where every one of your unsecured creditors must take part in for your debt restructuring.
- You keep your property.
- Legal actions against you on your property and debts, such as wage garnishments, cannot continue.
- You do not require to file an assignment in bankruptcy

CP vs. bankruptcy

How do I recognize if I have a financial problem?

If you are having difficulty satisfying your debts or have actually quit paying them, you are probably insolvent. Another sign of insolvency is that if your assets if liquidated, will not bring in enough money to pay off your debts. When you are all stressed out over the money you owe, for sure you will know that you have financial problems.

How do I know if I qualify for either a CP or bankruptcy?

Any person that is insolvent and owes greater than $1,000 is qualified to file either a CP or an assignment in bankruptcy in Canada.

Will I have to give up my assets?

As soon as you file for bankruptcy you will certainly have to give up your non-exempt property to the Trustee. These possessions will be marketed and sold. The cash from the sale of your property will be used to pay for the cost of the bankruptcy administration. The balance will be dispersed among your creditors.

In CP, you will not be giving up your assets. You are making an offer to your creditors less than the total amount you owe. According to the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA), your CP has to be a better result for your unsecured creditors than they would receive in your bankruptcy.

What occurs to my wages or salary?

Nothing. You receive it as normal.

In a CP that has been (deemed) accepted by your creditors and approved by the Court, you begin to make your payments. There are no other requirements for your income in CP.

In bankruptcy, nothing happens to your income either. However, in a bankruptcy, unlike a CP, your Trustee at the outset has to decide if you are required to make voluntary contributions to your bankruptcy case based off of your income. If so, this is called a surplus income requirement. Also, you will have to file monthly statements of income and expense with the Trustee. Your surplus income requirement can change, depending on if your income goes up or down. There is no such requirement in CP.

Canada Revenue Agency (CRA) has frozen my bank account and has garnished my earnings. Exactly how can I deal with that?

As stated above, once you file a CP, there is a stay of proceedings. Upon receiving notice from the Trustee, CRA stops the garnishee process and lifts the freeze on your account(s). The same is true in bankruptcy.

Will I still owe money after I declare bankruptcy or file a CP?

Perhaps, because of neither a CP nor bankruptcy covers:

secured creditors – mortgages, car loans;
student loans (if it is less than seven years since you ceased to be a full or part-time student)
alimony and support payments you must make in your divorce proceedings; and
debts arising from fraud.fines or penalties imposed by the court;

How much time will I be under the insolvency proceeding?

The duration of time in bankruptcy will depend on whether this is an initial or 2nd (or more) bankruptcy, whether you have to pay surplus income and if your discharge is opposed or not. Depending on your circumstances, it can be anywhere from 9 months to many years.

In a CP, you can take up to 60 months to pay the total amount you promised to pay. Payments in a CP are required monthly.

Will anyone find out that I have filed either a CP or for bankruptcy?

As soon as you file for bankruptcy or a CP, your Trustee must file a notification with the Office of the Superintendent of Bankruptcy Canada (OSB) to start either process. The OSB does run a public database showing the status of all files.

In either a CP or bankruptcy, your Trustee must send a notice to all of your creditors. So they will know.

In a CP or a shortened summary administration bankruptcy, the Trustee does not place a legal notice in the local newspaper advertising that you filed. In an ordinary administration bankruptcy, the Trustee must publish a notice.

Generally, it is only the OSB, your Trustee and your creditors who are aware of your filing.

Is my partner or spouse impacted by my CP or bankruptcy?

Your partner/spouse will not be impacted by your CP or bankruptcy unless he/she co-signed as a borrower or has guaranteed payment for any of your debts. If they have guaranteed some or all of your debts, then those specific creditors can ask your spouse for payment in full.

NOTE: There is a body of case-law to suggest that if your CP is fully performed, then there is no debt left for your guarantor to make good on. That type of discussion is too technical for this general blog. If you are in this situation, your spouse should get legal advice before agreeing to pay anything. No such argument could even be considered in a bankruptcy situation.

Just how will my CP or bankruptcy impact my existing divorce case?

In Canada, CP and bankruptcy filings do not conflict with the majority of the divorce procedures. In a bankruptcy, the Trustee will stand in the shoes of the bankrupt spouse. Ontario is an equalization Province; not a division of assets Province. If the bankrupt spouse is entitled to an equalization payment, that will come to the Trustee.

In a CP, the Trustee does not get involved at all in any way. The BIA does not interfere at all with non-financial divorce issues such as custody. It also does not have any effect on support or alimony.

Consumer Proposal Canada or bankruptcy: Conclusion

I hope this consumer proposal discussion about the differences between a Consumer Proposal Canada and bankruptcy has been helpful to you.

Do you have severe debt and don’t know where to begin to fix it? Are your debt issues causing you to lose sleep? Is too much debt triggering stress and anxiety, discomfort and pain? We know that discomfort better than anyone and we can get it out of your life.

If so, call the Ira Smith Team today. We have years and generations of experience helping people and companies seeking financial restructuring or a debt settlement strategy. As a licensed insolvency trustee, we are the only specialists recognized, accredited and supervised by the Federal government to give insolvency advice and remedies to assist you and to prevent bankruptcy.

Call the Ira Smith Team today so you can end the stress and anxiety financial problems create. With the special roadmap, we will develop with and special to you, we will promptly return you right into a healthy, balanced hassle-free life.

You can have a no-cost appointment to assist you so we can fix your debt troubles. Call the Ira Smith Team today. This will certainly allow you to make a fresh start, Starting Over Starting Now.

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Brandon Blog Post

TORONTO REAL ESTATE: REAL ESTATE NEWS ON BUYER’S REMORSE

Post author By Brandon Smith
Post date July 25, 2018

ToToronto real estate: Introduction

This Brandon’s Blog is about Toronto real estate and what happens when the purchaser experiences buyer’s remorse. “When the residential real estate market is a rising market, most people – perhaps with the exception of first-time buyers, are happy homeowners and investors. When the market turns and drops, it is not for the faint of heart.” This is how Justice M.L. Edwards begins his Reasons for Decision in Gamoff v. Hu, 2018 ONSC 2172 (CanLII).

The realities of this situation show how one family came to be involved in a bidding process. Determined to get their dream house, they exhausted their ability to fund the acquisition of that residence. We will describe this case which is similar to several people my Firm has helped overcome their financial problems after being found liable for similar amounts the defendants, in this case, were found responsible for.

Toronto real estate: The Toronto real estate market news facts

Douglas and Sheila Gamoff (the “Gamoffs” or the “plaintiffs”) were the owners of a residential property. The home was in Stouffville, Ontario (the “Home”), part of the GTA. The plaintiffs listed the Home for sale on the multiple listing service on March 29, 2017. Within a fairly short amount of time (March 29, 2017, to April 2, 2017), there were 18 offers.

The defendants, Yixing Hu and David Lea, saw the Home with their real estate agent on April 1, 2017. They state that they told their real estate agent that they had an interest in acquiring the Home. They also didn’t want to be involved in a bidding price battle.

The defendants originally submitted their written offer on April 1, 2017, with an offer of $2,050,000. On April 2, 2017, the defendants were told by their real estate agent that there were several deals for the residential property. Their realtor also told them that their offer of $2,050,000 was not accepted. In spite of having informed their real estate agent that they did not intend to end up being in a bidding war, they inevitably submitted a new offer for $2,250,000. The vendors accepted the revised offer.

The deal had no conditions. The agreement of purchase and sale read that the purchasers provided a deposit in the amount of $30,000 upon acceptance of the offer. It further read that a second down payment tranche of $90,000 would be made on April 6, 2017. The date for the second deposit payment was then amended to April 10, 2017. The closing day for the acquisition of the Home was August 30, 2017.

Toronto real estate: It did not take long for buyer’s remorse to arise

On the same day, the defendants called their real estate agent. They suggested to him that they thought that they had actually paid way too much for the Home. Their issue here was no doubt created by the fact that they had just found out that, a mix of their mortgage loan funding and the value of their house yet to be sold, would not be enough for them to get the essential funding to close on their purchase.

David Lea emailed his real estate agent stating to him that he and Ms. Hu had actually slipped up aiming to acquire the Home. Mr. Lea went on to say in this email that he is begging, please contact the vendor’s agent with a new firm offer.

As I previously stated, the agreement of purchase and sale did not have any conditions in it to allow them to end the agreement and get back their first tranche deposit. The agreement certainly was not conditional either on their obtaining satisfactory mortgage financing or the sale of their existing home. That is enough stress to cause anyone to panic which no doubt led to their buyer’s remorse.

Toronto real estate: The purchaser’s default

On April 10, 2017, the purchaser failed to pay the 2nd payment needed by the change to the agreement of purchase and sale. On the following day, the defendants visited the property. They informed the plaintiffs face to face that they did not actually have the funding needed to complete the purchase.

Toronto real estate: The vendors’ mitigation

The Gamoffs first consulted with their lawyer. Then on May 1, 2017, they listed the Home for sale again on the multiple listing service for $2,250,000. From May 1 to May 16, 2017, the plaintiffs got no offers on the Home.

The Gamoffs lowered the listing price of the Home to $1,998,000 on May 17, 2017. This was because of a recommendation from their real estate agent. In between May 17, 2017, and June 6, 2017, they obtained no deals on the Home.

On July 28, 2017, the Gamoffs, based on the further advice of their realtor, lowered the price of the Home again to $1,798,000.

In between June 6 and July 26, 2017, the Gamoffs got no offers on the Home. On July 31, 2017, they got an offer to purchase the Home for $1,700,000. After some back and forth, on August 9, 2017, the Gamoffs accepted a brand new agreement of purchase and sale. It was with an arm’s length buyer for $1,770,000. That deal closed on October 3, 2017.

Toronto real estate: The Court’s decision

The plaintiffs sought a summary judgment for the difference between the defendants’ offer of $2,250,000 and what the Home eventually sold for, $1,770,000. The defendants opposed this on several grounds, including, that there was an issue that required a full trial.

Based on the evidence, the judge disagreed. He awarded the plaintiffs the difference between the defendants’ offer of $2,250,000 and what the Home eventually sold for. The judge also awarded costs to the plaintiffs. The judgment was for $470,000 plus costs. Add that to the $30,000 down payment the defendants lost, this aborted deal cost them half a million bucks!

Toronto real estate: Our own case studies

My Firm has been involved in several matters helping people who have had judgments like the one described above made against them from failed real estate deals. We have been involved as a result of failed real estate deal judgments in:

a bankruptcy caused by the plaintiffs (the vendors) who could not yet collect on their judgment filing a Bankruptcy Application with the Court and obtaining a Bankruptcy Order be made against the defendants;
a consumer proposal for a defendant which was successfully completed;
the successful proposal of the defendant who had a large amount awarded against him by the judgment; and
an assignment in bankruptcy filed by the defendant who did not have the ability to attempt a proposal to get relief from the judgment against them.

In each case, the only way that the defendants could get relief, voluntarily or involuntarily, was through an insolvency process. In the one case caused by the Bankruptcy Order, it was the plaintiff who took action. The plaintiff was able to get a payment for all the unsecured creditors. The insolvency process requires that the distribution is shared among all creditors. That result was better than the plaintiff not being able to collect on its judgment without the insolvency process.

In that specific case, it was a combination of the Trustee’s powers and the plaintiff’s judgment and specific knowledge, that joined to produce the recovery for all creditors. The Trustee’s powers were required to get enough leverage resulting in the recovery.

Toronto real estate: A tough lesson to learn

The effect of this Court’s decision will definitely have a significant result on the defendants. The judge said that he had every compassion for them.

With the adjustments in the realty market in the Greater Toronto Area, I have every reason to believe that there will be extra instances where buyers discover that they have not protected themselves and will not be able to complete their real estate transaction.

Buyers would certainly be well advised to think about making their deals to acquire real estate subject to satisfactory funding, as well as for the sale of their existing residence if they have one. The cost of entering a bidding war and getting the property unconditionally could turn out to be a very expensive one just like in this case.

Toronto real estate: What to do if you have too much debt

If you have too much debt because of a judgment against you, either because you have made the real estate in Toronto news from a failed real estate deal or for any other reason, there is no shame in looking for a professional to help you out of your financial jam. A licensed insolvency trustee (formerly called a trustee in bankruptcy) will look at your circumstances and assist you to get to the very best option for your issues. The Ira Smith Team will give you a free consultation.

Ira Smith Trustee & Receiver Inc. is right here to help. We’re government supervised and adhere to a rigorous code of ethics. Our experienced team provides a high-quality service which will create a unique and an affordable solution made just for you. I feel your pain and know how to end it.

Don’t wait until we read about you in the real estate in Toronto news Canada. Call us today to end your stress and experience our pleasant, non-judgmental technique to solve your financial problems and get you back on the right track to stress-free living, Starting Over, Starting Now.

Brandon Blog Post

FILING FOR BANKRUPTCY IN CANADA: INTENSE MENTAL HEALTH & DISCHARGED BANKRUPTCY

Post author By Brandon Smith
Post date June 20, 2018

Filing for bankruptcy in Canada: Introduction

With filing for bankruptcy in Canada, if a person’s discharge is opposed, there must be a court hearing. At the hearing, the court will decide if the discharge will occur. Once the discharge is granted, the person will be relieved of his or her debts as of the day he or she filed for bankruptcy (with certain exceptions) and will be free to start rebuilding his or her credit rating and financial future.

Filing for bankruptcy in Canada: Court of Appeal for Ontario decision

The purpose of my blog is to describe a March 2018 Court of Appeal for Ontario decision, Kuczera (Re), 2018 ONCA 322 (CanLII). This is an important decision in how mental health issues intersect with the bankruptcy discharge process.

Mr. Kuczera’s financial problems began with a costly and hotly contested divorce proceedings. With his debts mounting and the divorce proceedings continuing, Mr. Kuczera filed a consumer proposal. As a result of the ongoing family law battle, his mental health deteriorated and he became clinically depressed. He was no longer able to cope with life and was unable to work.

Filing for bankruptcy in Canada: Defaulting on the consumer proposal

Up to this point, he was making the consumer proposal payments. His default in the consumer proposal caused it to be annulled. The consumer proposal was his attempt to get out of bankruptcy, as he first used filing for bankruptcy in Canada with an assignment in bankruptcy first. So, Mr. Kuczera now remained an undischarged bankrupt.

filing for bankruptcy in canada

Filing for bankruptcy in Canada: The bankruptcy discharge hearing

Mr. Kuczera represented himself in Bankruptcy Court on his discharge hearing. He tried to show the Registrar in Bankruptcy that he tried his best to live up to all of his bankruptcy obligations to the licensed insolvency trustee, but due to his mental health issues, he could not. Unfortunately, his evidence was only a basic report from his psychiatrist.

The Registrar did not grant an absolute discharge. Rather, based on the evidence in front of her, she ordered that a discharge be granted only after payment of the outstanding balance under the consumer proposal, and one other minor condition. The Registrar went on to state that he was held responsible for his situation.

Filing for bankruptcy in Canada: Appeal of the Registrar’s decision

Mr. Kuczera was able to hire a lawyer to appeal the Registrar’s decision to a Judge sitting in Bankruptcy Court. The Judge refused to consider fresh evidence in the form of more descriptive psychiatric reports supporting the summary findings presented at the original discharge hearing. The Judge dismissed Mr. Kuczera’s appeal.

Filing for bankruptcy in Canada: Appeal of the Judge’s decision

He now had his lawyer appeal the Judge’s decision to the Court of Appeal for Ontario. The Court of Appeal disagreed with the approach of the appeal judge. The Court of Appeal could not understand why the appeal judge would not allow the more detailed reports from Mr. Kuczera’s treating psychiatrist. These new detailed reports were further to the summary report provided to the Registrar.

The Court of Appeal went on to say that neither the Registrar nor the appeal judge gave proper weight to the psychiatric evidence. It also went on to say that a discharge condition requiring Mr. Kuczera to pay the payments due under the consumer proposal would not be “difficult”, as described by the Registrar. Rather, the Court of Appeal said that it would be “crushing”.

filing for bankruptcy in canada

Filing for bankruptcy in Canada: What the Court of Appeal found

So the Court of Appeal found that:

the appeal judge erred by not considering the fresh psychiatric report evidence;
The need for the bankrupt to pay the balance of the consumer proposal payments would be crushing; and
The fresh psychiatric evidence was compelling.

Given the length of time that Mr. Kuczera remained in bankruptcy, and considering the above factors, the three-judge panel in the Court of Appeal for Ontario unanimously agreed that Mr. Kuczera gets his absolute discharge from bankruptcy.

Filing for bankruptcy in Canada: Mental health issues

Mental health issues are at the forefront of the news. Most recently, both Kate Spade and Anthony Bourdain committed suicide because of mental health issues. I believe that as society recognizes mental health issues as a legitimate illness or disability, you will see it influencing Bankruptcy Court decisions. That certainly was the case for Mr. Kuczera.

Filing for bankruptcy in Canada: Debt after your bankruptcy discharge

After receiving your bankruptcy discharge, NOBODY can try to collect this debt again. Discharged debt cannot appear on your credit report as anything other than a zero balance. Sometimes collection agencies report a discharged debt to the credit bureaus, hoping you will pay off the debt and not correct the information with the credit bureaus. The debt will still incorrectly appear on your credit report.

Filing for bankruptcy in Canada: Discharged debt and your credit report

When discharged debt re-appears on your credit reports, it affects your credit score and can result in higher interest rates or credit denials. Sometimes debt collectors buy discharged debt, knowing they can’t collect on it, but hoping you don’t know that.

These debt collectors may tell you that the discharge doesn’t apply to them because they are not the original creditor. Don’t be fooled. Creditors who attempt to collect a discharged debt are violating a court order. The court can stop them, and they may even have to pay damages.

Discharged debt should not show on your credit report except as a zero balance – Monitor your credit report and be proactive. A discharged debt is not valid and is not collectible.

Filing for bankruptcy in Canada: Do you have too much debt?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.

The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.

Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.