Tag: automatic discharge

Categories
Brandon Blog Post

WHEN TO FILE BANKRUPTCY: OUR COMPREHENSIVE GUIDE ON WHEN IS THE RIGHT TIME TO FILE FOR BANKRUPTCY

when to file bankruptcy
when to file bankruptcy

When to file bankruptcy to get a fresh start

Definition of Bankruptcy

Are you feeling overwhelmed by unmanageable debt? Then bankruptcy might be the perfect solution
for you. Bankruptcy can be defined as a legal process that can help people and businesses get out of their financial binds.

Though the thought of filing for bankruptcy may be daunting, it can be the best option when you’re facing unexpected expenses or other emergency situations.

To make sure you’re making the right decision, it’s important to understand when to file bankruptcy and what you can expect. Bankruptcy allows a person to get back on top of their finances and start fresh. Weighing the pros and cons of filing for bankruptcy can be an alarming task, but it can ultimately be the best when your back is against the wall with debt. This Brandon’s Blog lets you find out when to file bankruptcy, what you should expect and what the bankruptcy alternatives are.

What is Bankruptcy and How Does it Work?

Bankruptcy in Canada is a liberating process for those who have found themselves under a burden of debt. The Bankruptcy and Insolvency Act (Canada) (BIA) provides debtors with a discharge from most debts, allowing them to have a fresh start in their financial lives. The process is designed to help those who cannot pay their bills as they come due, and have no way of paying back their debt load. By taking advantage of the bankruptcy discharge, individuals can find themselves free from the chains of debt and start anew. On the other hand, unlike a person, a company that files for bankruptcy will not survive in the long run, and thus, there is no discharge process for a company.

when to file bankruptcy
when to file bankruptcy

When to File Bankruptcy?

Don’t let debt take the life out of you! Bankruptcy law can give you the fresh start you need. Although not to be taken lightly, a bankruptcy filing can be an absolute lifesaver when the debt becomes too much to bear.

Filing for bankruptcy is no small decision and has the potential to drastically alter your financial future. It’s essential to be informed on when to file bankruptcy and the process involved to ensure that your credit and ability to access money in the future are not adversely affected.

Start the legal process off right by filing for bankruptcy with the help of a licensed insolvency trustee (formerly called a bankruptcy trustee) (LIT or Trustee). The LIT will submit all the documents at once and get the ball rolling.

When an individual has too much consumer debt and files for bankruptcy, the LIT takes possession of their property and assets (subject to provincial government exemptions). The Trustee is the appointed authority in charge of liquidating the assets and depositing the proceeds into a trust account that will eventually be distributed among the creditors in the priority laid out in the BIA.

It is crucial to understand when to file bankruptcy and the process involved to make informed decisions about one’s financial future.

When to file bankruptcy: Identifying signs of financial distress

Here are 5 common signs of financial distress:

  1. Consistent inability to pay bills – Consistent inability to pay bills can be a difficult and stressful situation for individuals and companies. There are various options for managing late bill payments, however, missing bill payments can have negative financial impacts. It is important to be proactive in finding a solution, as missing bill payments may result in consequences such as eviction, cutting off of necessary supplies and financial penalties. Options for managing late bill payments vary, depending on the type of bill, such as rent or mortgages as opposed to suppliers of goods or services.
  2. Increased collection activity and legal threats – Balances in collections are the result of outstanding debts that have not been paid. The collection process and the behaviour of debt collection agencies and debt collectors are stressful. Provincial law dictates the rights of consumers when it comes to debt collection and debt collectors.The statute of limitations to collect a debt is also a matter of provincial jurisdiction. Debts are statute-barred after the period prescribed by the law for bringing legal action against the consumer to collect a debt. A debt is considered time-barred if the applicable statute of limitations has expired.
  3. Are you buried in debt and feeling overwhelmed? A hefty burden of financial obligations without a plan of attack can lead to a seemingly never-ending cycle of debt, with high-interest payments and a lack of hope. Alternatively, an overly ambitious plan can leave you feeling like freedom from debt is unattainable. The stress of debt can have a major toll on your mental health. It’s time to take control and devise a sensible debt repayment strategy to ultimately become debt-free and reduce the interest you pay.
  4. Tempted to use a credit card for all your needs? Be careful; it can be easy to go overboard and put yourself into financial hardship. When you use credit cards, you risk overspending, inflating your credit utilization ratio, and even opening yourself up to identity theft and credit card fraud. Don’t take the chance – think twice before swiping!
  5. Increasingly relying on personal loans from friends and family – The dangers of relying on loans from friends and family include broken promises or agreements. There may be confused assumptions about the loan, which can lead to misunderstandings.Additionally, not setting up clear and defined terms for repayment could lead to problematic personal relationships. A loan from friends and family could also provide tax problems depending on how it is set up and how interest payments, principal repayments and/or loan forgiveness are treated on tax returns, or not, as the case may be.

    when to file bankruptcy
    when to file bankruptcy

When to file bankruptcy: The process of filing for bankruptcy

The process of filing for bankruptcy in Canada is handled by a Trustee under the supervision of the Office of the Superintendent of Bankruptcy Canada (OSB) under the BIA. The time to complete the bankruptcy process for a 1st time bankrupt with no surplus income, where neither the Trustee nor any creditor opposes the individual bankrupt’s discharge is 9 months. If a first-time bankrupt gets a discharge at the 9-month point, then they have received an automatic discharge from the LIT. During bankruptcy, the creditors can no longer harass the bankrupt person or carry out legal proceedings or wage garnishments.

The LIT provides an information form for the person to complete, and uses that information to prepare and then file the bankruptcy paperwork. The LIT needs personal information (name, address, birth date), a list of creditors and a list of assets. The LIT then files the bankruptcy documents electronically with the OSB and then they will issue a Certificate confirming the acceptance of the bankruptcy filing. It is the day and time of the issuance of the OSB’s certificate that marks the beginning of the bankruptcy process.

When to file bankruptcy: What is the impact of filing for bankruptcy?

Once your bankruptcy is filed, there is an immediate stay of proceedings. This means that unsecured creditors cannot begin or continue lawsuits, wage garnishees, or even contact you to request payment. Within five days of the bankruptcy starting, the LIT will send a copy of the bankruptcy paperwork to creditors so they can file a claim.

Overview of the bankruptcy process

Can I keep my assets when I file for bankruptcy? In most cases, yes. However, the trustee may sell some assets to pay off your creditors. The assets you can keep will depend on your province’s exemptions. The Trustee’s job is to manage the sale of the bankrupt’s assets and place the proceeds into a trust, safeguarding them for the creditors. In other words, the Trustee is a guardian of funds, making sure everything is handled properly.

Are you worried that filing for bankruptcy will destroy your credit? Don’t fret – while bankruptcy will certainly leave its mark on your credit report, it’s far from a death sentence. Once your bankruptcy is approved, you can start taking steps toward restoring your financial health. A fresh start is waiting – be smart and make decisions that will get you back on the right track!

Wondering just how long you’ll be in bankruptcy? That all depends! If it’s your first-time bankruptcy filing with no surplus income, it should only last nine months. But if you’ve filed for bankruptcy more than once and don’t have surplus income, it will take 21 months. For those who have surplus income, this process will take longer.

2 financial counselling sessions. In a consumer restructuring or bankruptcy administration under the BIA, the debtor is required to go through two financial counselling sessions with the LIT. The reason is that one of the objectives of the BIA is financial rehabilitation. Financial education and teaching financial literacy tips are important parts of that rehabilitation.

Requirements for filing bankruptcy

To be eligible to file for bankruptcy in Canada, you must meet certain requirements. You must owe at least $1,000 in unsecured debt and be unable to pay your debts as they come due. You must also be insolvent, meaning you owe more than the value of the assets you own. Additionally, you must either reside, do business or have property in Canada. There are other acts of bankruptcy contained in the BIA, but the normal requirement is as I just described.

Role of Trustees in the bankruptcy process

The role of a LIT in Canada is to assist individuals or companies in the bankruptcy process as laid out by the BIA. They help to explain to the debtor the various options in dealing with their debt and provide advice on the best course of action. The Trustee also prepares the necessary paperwork, including reviewing the debt and completes the process from start to finish. One of the key responsibilities of the Trustee is to take possession of the property not exempt under provincial law, or subject to a trust or secured claim. The LIT then does this by selling the available assets and depositing the funds in trust for the creditors in the bankruptcy administration.

when to file bankruptcy
when to file bankruptcy

When to file bankruptcy: Alternatives to Bankruptcy

There are several alternative solutions that a LIT can recommend to a debtor in solving their debt problems. Bankruptcy is always the last resort and is to be avoided if at all possible. The main alternative solutions are:

Debt consolidation and debt management plans

In Canada, consolidation loans are available to assist individuals in reducing their high-cost debt payments. If you qualify for such a loan, it is an advantageous solution. These debts may include credit cards, payday loans, and unpaid tax obligations. By consolidating higher-interest-rate debts into one lower-interest-rate loan, it is possible to make affordable monthly payments and work toward eliminating debt.

If you’re in need of financial help, a Debt Management Plan (DMP) may be the answer. A DMP is an effective way to repay credit card debt, and with the help of a non-profit, no-cost credit counselling agency, you can get the support to make it work. The agency will assess your situation to ensure that a DMP is the best option for you. Put your debt worries to rest and take the first step towards a sound financial future with a DMP.

Both debt consolidation and debt management plans aim to help individuals in Canada manage their debt effectively.

Credit counselling and financial planning

Credit counselling and financial planning can help someone who has many debts. The services are provided by accredited credit counsellors working for non-profit credit counselling organizations. A credit counsellor will assess the financial situation of an individual and provide tips on dealing with debt. Financial planning and budgeting will be an important part of the process.

If the individual decides to sign up for a DMP, the counsellor will contact creditors on their behalf to request reducing or eliminating the interest rate or fees on their debts. In some cases, the creditors may agree to these requests.

Debt settlement, restructuring and negotiation with creditors

Debt restructuring, also known as debt negotiation, is the process of negotiating the terms and conditions of debt repayment with creditors. This process can be carried out by the consumer or company themselves seeking alternative repayment options. The goal is to reach a mutually agreed-upon arrangement that is more manageable for the consumer or company to repay their debt. It can involve the forgiveness of interest, stopping the interest clock and even the forgiveness of principal. If the company or consumer handles the discussions themselves, or with the help of their accountant, it is called an informal restructuring.

When a consumer or company restructures their debt with the help of a LIT under the BIA, they would file either a consumer proposal or a Division I proposal restructuring. A large company could also restructure under the Companies’ Creditors Arrangement Act.

When to file bankruptcy: Conclusion

Personal bankruptcy or corporate bankruptcy, and when to file bankruptcy, is a big decision, but it can be the right one when you’re overwhelmed with debt. You can make an informed decision by understanding the basics of bankruptcy, including when to file and what to expect. If you’re struggling with debt and considering bankruptcy, it’s important to speak with a professional who can help you assess your options. Bankruptcy can be a fresh start for your financial future, but it’s important to understand the consequences and work with a professional to determine if it’s the right choice for you.

I hope you enjoyed this when to file bankruptcy Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

when to file bankruptcy
when to file bankruptcy
Categories
Brandon Blog Post

DISCHARGE FROM BANKRUPTCY CANADA: OUR DETAILED STEP-BY-STEP GUIDE

discharge from bankruptcy canada
discharge from bankruptcy canada

What are the implications of discharge from bankruptcy Canada?

If you are experiencing financial troubles and can’t pay your debts, you can file for bankruptcy in Canada. This legal process lets you off the hook for your debts and start fresh. Once you’re discharged from bankruptcy, you’re no longer responsible for those debts (other than for a few exceptions noted below). Filing for bankruptcy is stressful. We understand how difficult and stressful the bankruptcy process can be, so we hope that this will be a helpful resource for you.

Once the Trustee has completed their duties under the Bankruptcy and Insolvency Act (Canada) with respect to the administration of your property and the bankruptcy estate, the next step in the bankruptcy process is they must apply for a discharge. This will occur after the Trustee has applied for your discharge from bankruptcy Canada, even if you did not get an absolute discharge.

This Brandon’s Blog is for people who have made a bankruptcy filing but have not yet been discharged. If your Licensed Insolvency Trustee has been discharged or is otherwise unable to help you with a second discharge application, this blog will provide you with the information you need to get through the process on your own.

Discharge from bankruptcy Canada: What are the implications if you are not discharged from bankruptcy?

If your previous application for discharge was unsuccessful, you remain an undischarged bankrupt and your Trustee is not obliged to make another application on your behalf. However, you should check with your Trustee first as they may or may not be prepared to do so.

We often receive calls from individuals who claim that their Trustee has been discharged, but they have not been. They express confusion as to why their Licensed Insolvency Trustee will not make an application for their discharge from bankruptcy. A quick search reveals that in these cases, the individual received a conditional discharge, but has not yet fulfilled all of their conditions to get a bankruptcy discharge. That is why their conditional discharge has not yet been converted into an absolute discharge.

If you filed an assignment in bankruptcy and are still an undischarged bankrupt, you may be able to apply for discharge from bankruptcy. An insolvency Trustee only needs to make one application on your behalf. Once the Trustee obtains their discharge, they do not need to make your application for discharge on your behalf again.

The Licensed Trustee cannot be discharged until all bankruptcy administration requirements have been met, including making the first discharge application on behalf of the bankrupt person.

discharge from bankruptcy canada
discharge from bankruptcy canada

Discharge from bankruptcy Canada: How do you obtain a bankruptcy discharge in Canada?

Automatic discharge from bankruptcy is typically granted unless there are exceptional circumstances. If there is opposition to the automatic discharge, the discharge application must be brought before the court for a hearing.

If you did not complete all of your bankruptcy duties as the bankrupt person, such as providing income and expense statements, attending required financial counselling sessions, and/or paying surplus income, your Trustee had reasons to oppose your automatic discharge and scheduled a hearing with the court.

The Report of Trustee on Bankrupt’s Application for Discharge sets out the reasons for the insolvency Trustee’s opposition to a bankrupt’s application for discharge. This document is on file with the court.

If a bankrupt does not receive a discharge at the time of the court application, it is usually because they have not yet done what is required. The associate justice/registrar who heard the application at court may have therefore adjourned the application (i.e. stated it was to be heard at a later date, which may or may not have been set).

The court may have adjourned your discharge application or imposed conditions that must be met before you are entitled to a discharge. The disposition sheet from the hearing will state what the court decided in this regard.

Discharge from bankruptcy Canada: What are the steps to clear my bankruptcy?

It’s not unusual for people who didn’t do what they were supposed to at first to try and get back on track and do what’s required to get their discharge. You must comply with your duties during bankruptcy to the best of your ability and be prepared to explain to the court any deficiency in doing so.

For example, to get your discharge, you must be able to provide details and evidence of your income and expenses during bankruptcy. You probably recall that you were required to provide the Trustee with your monthly income and expense reports. If you’re unable to provide the court with those details, the court may want to review your income tax returns for that period. If you want the court to rescind or vary the conditions imposed, you must show that you complied with the conditions to the best of your ability.

There are many examples of trying your best to meet the conditions but maybe not perfectly. If the court orders you to pay a certain sum of money to the Trustee by a certain date, you can make the court-ordered additional payment but not by the specified date. If you were required to make surplus income monthly payments but didn’t make them all, that’s one reason there were conditions attached to your discharge. You can apply to the court to change the date and get your discharge.

Another one is that you didn’t finish all your required credit counselling sessions. You could finish them and then provide proof of completion to the court.

discharge from bankruptcy canada
discharge from bankruptcy canada

Completing your own application for discharge from bankruptcy Canada

Making your own application to be discharged from bankruptcy can be a bit daunting, but don’t worry—just follow a few simple steps and you’ll be all set. Here are some tips to help you get your application ready and submitted without the help of a bankruptcy trustee or a bankruptcy lawyer.

To begin, you’ll want to locate your bankruptcy file at the court office. Once you have your file, be sure to look through it thoroughly to find:

  • your bankruptcy court file number;
  • the Report of Trustee on the Bankrupt’s Application for Discharge under section 170 of the BIA;
  • any order issued by the bankruptcy court at the original discharge hearing; and
  • the court’s disposition sheet from any previous discharge hearing identifies what the court previously ordered or decided.

You will need copies of these documents. You can ask the court office to make copies for you. They will charge you a fee for photocopying. You should check the Report of the Trustee, the court’s disposition sheet, and any court order to see what you failed to do and what conditions the court has imposed. Also, it is not a bad idea to find out who attended your last application for discharge.

You should check the Report of the Trustee, the court’s disposition sheet, and any court order(s) in the file to see what you didn’t do and what conditions (if any) the court has imposed. Lastly, you need to schedule a date for your discharge hearing with the bankruptcy court.

You will be required to prepare the following documents and file them with the court:

  • a notice of hearing for a bankrupt person’s application for discharge;
  • your affidavit explaining why you believe you are entitled to the discharge order sought;
  • an affidavit of service; and
  • a draft of the order sought.

The Associate Justice/Registrar in Bankruptcy hearing your application for discharge may make any order he or she sees fit. If the order you are seeking is made, he or she may accept and sign it in court on the day you appear, which may save you a period of time later on.

Requisition – Notice of hearing for bankrupt’s discharge from bankruptcy Canada hearing for discharge

The first step in obtaining a discharge in bankruptcy is to file a Notice of Hearing for Bankrupt’s Application for Discharge with the court. That document would have first been filed by the Trustee when the Application for discharge is first scheduled. If you have a copy of it, it will be a good precedent for you to follow.

A requisition must be filed again by you in order to have the matter brought back before the court.

discharge from bankruptcy canada
discharge from bankruptcy canada

Discharge from bankruptcy Canada:The Affidavit

An affidavit is a formal, written statement that provides key information in your legal case. Any evidence you want the court to consider in your application must be submitted in an affidavit. Your affidavit should describe the events leading up to your bankruptcy, and your current financial situation.

You must swear or affirm your affidavit before a notary public or commissioner of oaths. Make sure that your affidavit only includes evidence that is relevant to your application for discharge.

The court is familiar with a standard form of affidavit for discharge applications. You should familiarize yourself with that normal format. You should also include:

  • additional information about why you did not seek a bankruptcy discharge earlier;
  • is this a 1st-time bankruptcy, 2nd-time bankruptcy or more;
  • why you have not been able to comply with the bankrupt’s duties or the requirements of an earlier court order; and
  • state the reasons you are wanting to be discharged now.

You will need to attach any relevant documents to your affidavit in support of your application, including a statement of your current income, expenses, assets, liabilities and any previous bankruptcy information.

Discharge from bankruptcy Canada:Affidavit of Service

To serve documents, you must provide a written copy to the party to be served. You need to obtain a signature or other confirmation, such as an email, to confirm that the document was properly served. You will need to serve the filed Requisition and all filed Affidavits and documents on:

These parties may attend your hearing and make submissions.

In order to provide proper service within the required time period before your discharge hearing, you must familiarize yourself with the rules. You must also provide proof of service at the hearing, especially if no one else attends. This proof of service can be the signature of everyone served to show the date they were served.

An Affidavit of Service can also be filed with the court. This Affidavit of Service is separate from the Affidavit filed with the court regarding your reasons for entitlement to anabsolute bankruptcy discharge certificate.

discharge from bankruptcy canada
discharge from bankruptcy canada

At the discharge from bankruptcy Canada hearing

When you appear in court for your discharge hearing, you will be able to present your case to either an Associate Justice or Registrar in Bankruptcy. If your application is being opposed, the creditors opposing your discharge need to file a notice of opposition. In this case, the hearing will be in front of a bankruptcy Judge. This is the normal process followed:

  1. You explain why you believe you are entitled to the order you are seeking, for example, an absolute discharge from bankruptcy.
  2. Anyone opposing your application explains his or her position.
  3. The Judge or Registrar may ask questions relating to the affidavits and documents you have filed and make suggestions or give directions.

When presenting your position at the hearing, remember to:

  1. Clearly state what order you are seeking from the Registrar in Bankruptcy or Judge.
  2. Outline the facts supporting your application in a concise manner.
  3. Explain the law on the subject and how it applies to the facts of your case.

Your conduct before and during bankruptcy will be taken into consideration when making a decision on your application for discharge. The Trustee’s report will provide information on your conduct before and during bankruptcy, which will be taken into account. if you did not attend the required financial counselling
sessions, did not file required statements of income and expense, and/or did not make the required surplus income payments to the Trustee for the benefit of your creditors.

The court will consider the relevant factors and make the appropriate order, or it may adjourn the hearing for further information or conditions to be met. Some of the types of orders the court may make are:

  • An order of discharge that is absolute and therefore you are immediately discharged from bankruptcy.
  • A conditional discharge may be granted. Examples of conditions are:
    • if the debtor pays any unpaid surplus income,
    • the debtor pays the outstanding balance for any asset that was agreed to be paid for; or
    • if the debtor pays a sum of money to the Trustee toward their debt obligations, as decided by the court.
  • A discharge that has been suspended.
  • The court may refuse to issue a discharge order if it is not satisfied that you have made full and adequate disclosure, or if there are issues with your conduct.

Discharge from bankruptcy Canada: Order for discharge

The Judge or Registrar in Bankruptcy will grant a discharge order at the end of the hearing. The type of discharge will be one of the kinds indicated above. If you prepared a draft order and the Registrar in Bankruptcy or Judge finds it acceptable, they will sign it and you can then have it filed with the court. However, if your application was opposed, keep in mind that one of the opposing parties may choose to appeal the discharge order.

If you have not prepared your order before the hearing, you should do so after the hearing and submit the order in duplicate to the court. The court office will then send the order to the Registrar in Bankruptcy or Judge who heard your application for signing. Once you receive your copy of the signed order, your discharge will be official.

When you receive a copy of the signed order, you must provide a copy to the Office of the Superintendent of Bankruptcy. They will in turn notify the credit bureaus and Canada Revenue Agency of your discharge.

When you have received your absolute discharge, you are no longer legally responsible for repaying debts that you incurred before your assignment in bankruptcy. You will get rid of debt with some exceptions set out in Section 178 of the Bankruptcy and Insolvency Act. They are:

  • payment of child support or alimony;
  • student loans, if you have not been a full-time or part-time student for less than 7 years;
  • a fine or penalty imposed by the court; or
  • debt resulting from fraud.

    discharge from bankruptcy canada
    discharge from bankruptcy canada

Discharge from bankruptcy Canada: Are you tired of being in debt?

Bankruptcy law and the bankruptcy process can be complex, so it may be worth retaining a bankruptcy lawyer to help you apply for your discharge. Ultimately, it is up to you, but hopefully, this guide to discharge from bankruptcy Canada will lay out the steps you need to take if you wish to apply for a discharge yourself.

I hope that you found this discharge from bankruptcy Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We are aware of your financial difficulties and understand your concerns. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

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

The stress placed upon you is huge. We understand your pain points. We are sympathetic to the financial difficulties you are experiencing and would like to help alleviate your concerns. We want to lighten your load by coming up with a debt settlement plan crafted just for you.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

discharge from bankruptcy canada
discharge from bankruptcy canada
Categories
Brandon Blog Post

SUSPENSION OF DISCHARGE FROM BANKRUPTCY: OUR COMPLETE GUIDE ON BANKRUPTCY DISCHARGES

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Bankruptcy discharge and what it means for the bankrupt

The implications of an absolute bankruptcy discharge on the debtor are significant. Once an absolute discharge is granted, the debtor is no longer liable for any unsecured debts that existed at the date of bankruptcy. The debtor is released from having to repay any debts that they incurred before filing for bankruptcy.

This means that the debtor no longer has to worry about repaying those debts and can move on with their life. This provides a fresh start for the debtor and helps them get back on their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy) (Trustee), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

In this Brandon’s Blog post, I’m discussing what it means when a bankrupt person is discharged, as well as the process and different types of discharges. One type of discharge that a bankrupt person can be given is a suspension of discharge from bankruptcy taking place. I’m also highlighting this recent court decision that demonstrates the balance and fairness that the courts strive for.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged?

If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9 month bankruptcy period. To qualify for this automatic discharge, you must have:

  • attended the two mandatory financial counselling sessions with the Trustee;
  • no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate according to guidelines set by the Office of the Superintendent of Bankruptcy (OSB or Official Receiver); and
  • no opposition to his or her discharge.

The only party that can authorize an automatic discharge in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: When is a discharge challenged?

The Trustee may oppose a bankrupt’s discharge by issuing a notice of opposition. This means that the bankrupt did not fulfill all of their duties when the time came for the Trustee to make a determination if the bankrupt is entitled to a discharge.

If one or more creditors oppose the debtor’s bankruptcy discharge, they may believe that additional information is needed to be evaluated by the court in order to determine what kind of discharge, if any, the debtor should receive.

The court will then decide what kind of bankruptcy discharge the bankrupt should receive.

Suspension of discharge from bankruptcy: What are the different types of discharge that can be granted in bankruptcy proceedings?

There are different kinds of discharge from bankruptcy process. They are:

  • Absolute discharge: you are entitled to an immediate discharge;
  • Conditional discharge: you can obtain a discharge after fulfilling one or more conditions;
  • Suspension of discharge from bankruptcy – a suspended discharge from bankruptcy means that the discharge will occur at a later date set by the court, and will be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
  • Refused discharge – the court can refuse the bankrupt’s discharge due to unsatisfactory fulfillment of duties and lack of response to the Trustee’s inquiries; or
  • “no order” – the Trustee has advised the court that, despite the passage of time, the bankrupt has not fulfilled all of his or her duties, has failed to respond to the Trustee’s requests, and the Trustee wishes to seek its discharge.

The bankrupt’s discharge in bankruptcy occurs when the bankrupt person has fulfilled the conditions set by the court and/or the suspension of discharge from bankruptcy period has ended.

The duration of bankruptcy depends on all of the above factors.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: There are five types of debt that are not dischargeable in bankruptcy

What debts cannot be discharged through bankruptcy? There are 5 types of debts that cannot be discharged. They are:

  1. alimony or child support payments;
  2. penalties or fines set by the court;
  3. claims from fraud or fraudulent breach of trust;
  4. student loan debt if it is less than 7 years since you stopped being a full-time or part-time student; and
  5. Any debts that are properly secured by an asset are not released as a result of a bankruptcy discharge.

There are five types of debt that are not discharged in bankruptcy. The debtor will need to continue paying these financial obligations according to their terms. For all other unsecured debts, the discharge from bankruptcy will discharge all those debts.

Suspension of discharge from bankruptcy: The opposed bankruptcy discharge process case

The decision was released on September 29, 2022, in Wasylynuk (Re), 2022 ABKB 650 (CanLII), For me, this Court of King’s Bench of Alberta (it is still going to take me time to get used to the switch from “Queen” to “King”!) by the Registrar in Bankruptcy, epitomizes the balance the court strives to find in bankruptcy discharge situations.

This is an application for a bankrupt’s discharge which is opposed. The bankrupt, Ms. Wasylynuk, has completed all required duties. She is a first-time bankrupt with a surplus income requirement. The bankruptcy was driven by litigation costs when Ms. Wasylynuk unsuccessfully sued her surviving brothers and sisters for a share of her father’s estate.

The bankrupt filed a challenge to her father’s will and the disposition of his property in 2008. This led to 10 years of litigation for a share of the estate. All of the estate had been given to one of her brothers, who was tasked with caring for the father and, after his passing, dividing it as he saw fit. Ms. Wasylynuk rejected her brother’s offer of a share, wanting more.

Prior to her bankruptcy, Ms. Wasylynuk brought an application, presumably based on legal advice she received, to set aside her father’s will and an inter vivos gift made by her father that gave everything to one of her siblings. The will and the gift were both drawn up by lawyers with doctors’ certificates of competence and capacity. The will and the gift were upheld by the lower court. The lower court’s ruling was upheld on appeal. The Supreme Court of Canada refused to hear the case.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: The opposition to bankruptcy discharge and the evidence

The bankrupt’s siblings are the opposing creditors. The opposing creditors dispute Ms. Wasylynuk’s characterization as an honest but unfortunate debtor. Their grounds for opposition are:

  • The value of the bankrupt’s assets does not equal fifty cents on the dollar of the bankrupt’s unsecured liabilities, and the bankrupt is responsible for the circumstances that caused this.
  • Ms. Wasylynuk has not been able to provide an explanation for the disappearance of assets, or for why there are not enough assets to cover debts.
  • She was eligible to make a proposal under the Bankruptcy and Insolvency Act (Canada) (BIA) rather than bringing on this bankruptcy process but did not.

The evidence included the fact that, during the litigation, the bankrupt employed several different law firms and did not pay most of the legal fees she incurred. At the time of her bankruptcy, she owed in excess of $200,000 for unpaid legal fees. In her bankruptcy filing, she claimed $5,500 in assets, consisting of a motor vehicle, furniture, and personal effects, all of which were exempt.

Another bit of evidence was that Ms. Wasylynuk had likewise allowed a charge to be registered against the home in favour of her spouse to support his alleged loans to her of $277,000.00. Mr. Wasylynuk additionally declared an unsecured amount of $152,365.00 for loans to her. There were no documents to validate the amount. The Registrar noted that he was skeptical of these alleged loans as most of the bankrupt’s legal fees were unpaid.

On top of this, 13 months prior to her making her bankruptcy assignment, she transferred her half share of the matrimonial home to her husband. The bankruptcy Trustee did not have the funds to attack the transfer in the current bankruptcy administration.

Ms. Wasylynuk’s siblings’ litigation costs totalled approximately $750,000.00. The costs awarded from the first instance through the appeal will cover less than a third of those costs.

The Registrar calculated that, under Alberta law, the bankrupt’s non-exempt equity in the matrimonial home at the time of transfer to the spouse was approximately $118,000.00.

Suspension of discharge from bankruptcy: The balancing act of the Registrar’s decision

The Registrar took note of the above and made several findings. First was that Ms. Wasylynuk, 59, is a specialized nurse in a teaching position. She makes nearly $60 per hour. She continues to live in her fully encumbered matrimonial home with her husband, which is now out of reach of her creditors.

The Trustee explained that a proposal was ruled out because the litigation between Ms. Wasylynuk and her siblings that led to this bankruptcy was highly acrimonious. The Registrar found that it is unclear whether a proposal would have been doomed to failure because of ill will between the siblings, particularly since a proposal would have resulted in a better result for the creditors than her bankruptcy.

Ms. Wasylynuk has paid $51,000 into the estate over her 21-month bankruptcy. Her monthly surplus is $2,000. At that surplus rate, a 60-month proposal would have achieved $120,000 for her creditors or about the value of her non-exempt portion of the matrimonial home.

So to balance the scales, the Registrar gave Ms. Wasylynuk a conditional discharge. Ms. Wasylynuk’s discharge is conditioned upon her paying an additional $60,000.00 into the bankruptcy estate at the rate of a monthly payment of $2,000.00. By ordering these additional payments, once they are all made, the amount paid into the bankruptcy estate will be roughly equal to the minimum amount she would have paid if she chose to make a proposal over bankruptcy.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Ready to be debt-free?

I hope that you found this suspension of discharge from bankruptcy Brandon’s Blog informative. If you’re sick and tired of being in debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We know that you are worried because you are facing significant financial challenges. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

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

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

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy
Categories
Brandon Blog Post

UNDISCHARGED BANKRUPTS: WHAT ALARMING RESTRICTIONS ARE PLACED ON CANADIAN UNDISCHARGED BANKRUPTS?

undischarged bankrupts
undischarged bankrupts

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

What? I thought the point of filing bankruptcy was to make all of a person’s debts go away.

For many years, people have used debt repayment strategies such as the debt snowball, debt avalanche and debt stacking to pay off their credit card debts and other unsecured liabilities. Each strategy has its own set of pros and cons in attempting to straighten out your financial affairs.

If you’re struggling with too much debt and you feel your financial affairs are in a mess, you can always try financial restructuring. This involves working with a licensed insolvency trustee to reorganize your finances. It is a sensible next step people take when they’re trying to get their debt under control.

Deciding to file for bankruptcy is never very easy, however, it may be the most effective choice for getting a fresh start to straighten out your financial affairs. If a do-it-yourself or restructuring method is not an option for someone after that bankruptcy will certainly be the required action.

Nobody likes to think of the possibility of personal bankruptcy, yet it is essential to understand the procedure. In this Brandon’s Blog post, I’ll discuss the insolvency process, what limitations are placed on individuals that have actually filed for bankruptcy and are still undischarged bankrupts, and also when in bankruptcy is the time financial obligations are gotten rid of.

Undischarged bankrupts: How bankruptcies work in Canada

The Canadian bankruptcy legislation is designed to help insolvent and not viable companies, or insolvent, honest but unfortunate people, obtain relief. Subject to trust claimants’ rights and the rights of secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee.

After going through bankruptcy and being discharged, most of your debts will be gone. There are a few exceptions, but for the most part, you will be relieved of a great financial burden.

undischarged bankrupts
undischarged bankrupts

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

It’s crucial to remember that once undischarged bankrupts are released from bankruptcy, they are no longer responsible for the financial obligations they had at the time of bankruptcy. The discharge is a key part of this process, and it helps to give individual bankrupts a fresh start.

A bankruptcy discharge provides relief from most debts, except for:

  • support payments for a former spouse or your children;
  • penalties and fines assessed by the court;
  • any financial debts resulting from fraud or fraudulent breach of trust; and
  • student loans within the last seven years before your date of bankruptcy while you were a part-time or full-time student.

Additionally, the debts owing to secured creditors holding valid security fall outside of the bankruptcy process. Those secured loans must stay current or else the secured creditor can look to the default provisions of its loan in order to preserve their rights to collect.

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

The implications of not being discharged from bankruptcy are significant for undischarged bankrupts.

Being unable to obtain credit

If you are bankrupt (i.e., not discharged from bankruptcy), you may only borrow $1,000 or less without informing the lender (e.g., credit card company) that you are an undischarged bankrupt. If you fail to do this, it is an offence under the Bankruptcy and Insolvency Act Canada (BIA) and you could be fined and/or imprisoned.

Being unable to work in certain jobs or professions

Undischarged bankrupts in Canada, will not be able to work in certain jobs or professions. Examples are:

  • If possible employment requires you to pass a security clearance, you may not be able to pass it. If you cannot pass, then you will not be hired.
  • As someone who is not yet discharged from bankruptcy, you are not able to serve as a Director of a company.
  • You cannot operate a trust account so that is a problem for certain professions such as real estate brokerage or lawyer.
  • If you’re bankrupt and haven’t been discharged, you won’t be able to get bonded. So any jobs that require that are out of the question.

How long the information lasts on your credit report

The six to seven years AFTER your bankruptcy discharge that your bankruptcy information stays on your credit file is like a stain that just won’t come out. For undischarged bankrupts, the clock hasn’t even started ticking yet. Your credit score is negatively affected for anyone who goes bankrupt, especially for undischarged bankrupts.

Being subject to certain restrictions in relation to their property and finances

While you are an undischarged bankrupt, your property and finances are in play.

While you are an undischarged bankrupt, your property and finances are up for grabs! You cannot have any assets other than those allowed for by the exemptions allowed in the province where you live. So if you acquire any before your discharge from bankruptcy, they belong to your licensed insolvency trustee!

The most often cited examples are things that are out of your control, such as a windfall, like winning the lottery or getting an inheritance.

An undischarged bankrupt may be subject to having to make surplus income payments to their licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada sets a minimum threshold in bankruptcy proceedings based on the person’s family income and the number of people in the household. That minimum threshold is essentially the Canadian poverty line. Any monthly income earned by an undischarged bankrupt above that minimum threshold set is subject to surplus income payments.

Essentially, one-half of the person’s monthly income, net of income tax, above the minimum, must be paid over. A licensed insolvency trustee administering the personal bankruptcy must recalculate the person’s obligation to pay, up or down, as the person’s income changes. The longer you remain an undischarged bankrupt, the longer your ability to keep all that you earn is restricted.

undischarged bankrupts
undischarged bankrupts

What is the meaning of undischarged bankrupts?

As soon as you declare personal bankruptcy, the individual bankrupt’s status is that of an undischarged bankrupt. People that have actually not yet gotten their discharge from personal bankruptcy are called undischarged bankrupts.

How does an individual bankrupt person get their discharge? By completing all of the required duties, including making full disclosure of all assets and liabilities to the licensed insolvency trustee and delivering non-exempt assets to the Trustee. You are expected to attend the two mandatory counselling sessions and any other meetings that may be called.

You are entitled to an automatic discharge after 9 months if you are a first-time bankrupt and do not need to pay surplus income. This assumes that you have met all of your obligations as an undischarged bankrupt, fully cooperated with the licensed insolvency trustee and that no creditor is opposing your discharge.

If you are a first-time bankrupt and subject to surplus income, you must pay it for 21 months before you are entitled to a discharge. Longer timelines apply if you are a second or more time bankrupt.

Suppose the Trustee has evidence that the bankrupt has not been forthcoming and cooperative, or has committed one or more bankruptcy offences. In that case, the Trustee needs to oppose the bankrupt’s application for discharge. Such undischarged bankrupts are not entitled to an automatic discharge. Unsecured creditors who have filed a proof of claim in the person’s bankruptcy on account of their unsecured liabilities may also object.

If your income tax debt is equal to or more than $200,000 and 75% or more of your total debt, you are not entitled to an automatic discharge either. If you have been bankrupt before, the Office of the Superintendent of Bankruptcy Canada may object. This would happen if they believe the person is abusing the Canadian bankruptcy system.

If you’re a secured creditor, you’re usually not affected by bankruptcy. That’s because bankruptcy is designed to help unsecured creditors with unsecured liabilities, not creditors who have a security interest in some or all of the bankrupt debtor’s assets. Secured creditors have the right to enforce their security, take possession of the asset(s) covered under the security, sell the asset(s) and get paid back all or a portion of their secured debt. Secured creditors who are not repaid in full after the sale of the secured asset(s), can file a claim in the person’s bankruptcy as an unsecured creditor for the unpaid unsecured liabilities.

Undischarged Bankrupts in Canada – Your Options

The Trustee is only responsible for filing an undischarged bankrupt’s application for discharge once in the bankruptcy proceedings. The system requires that the Trustee make the first application on their behalf. It is ultimately the responsibility of the bankrupt person to ensure that their application is filed.

If either the Trustee or one or more unsecured creditors oppose your application for discharge, the matter will need to go to a hearing in bankruptcy court. This will essentially put a hold on the bankruptcy proceedings until the court hearing.

Undischarged bankrupts are never sure what to do next. This is understandable, so, here are a few options to consider:

1. Contact your Trustee – They’ll be able to help you understand your options and what’s best for your situation. You’ll need to speak to your licensed insolvency trustee to find out why they’re opposing your discharge. It might be something as simple as not having had your second counselling session yet, or forgetting to give the Trustee some information or a document.

If the Trustee or creditor opposes your discharge for any reason, it may be more difficult to remedy the situation, but the best place to start is by talking to the Trustee and getting a copy of any notice of opposition filed.

This way, undischarged bankrupts can understand the issues preventing them from getting an automatic discharge from bankruptcy.

2. Get in touch with a bankruptcy lawyer – They can give you more specific advice about your options and what might be the best course of action for you. Undischarged bankruptcy may need to retain a bankruptcy lawyer for advice and representation in court.

3. File a consumer proposal – this is another option that might be available to you, depending on your circumstances. A consumer proposal filed by a bankrupt person that makes a sufficient offer to the unsecured creditors that is accepted and fully performed acts to annul the person’s bankruptcy. By doing this, the need for a bankruptcy discharge hearing is eliminated.

undischarged bankrupts
undischarged bankrupts

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

After you file for bankruptcy, you will be automatically discharged nine months later from your bankruptcy proceedings if:

  • this is the first time you were ever bankrupt;
  • unless your trustee, creditors, or the Office of the Superintendent of Bankruptcy oppose it;
  • you have gone to your 2 mandatory counselling sessions;
  • your income tax debt is less than $200,000 and less than 75% of your total debt; and
  • you have not been told to pay surplus income to the bankruptcy estate.

If you do have to make payments, and you qualify for an automatic discharge, you will get it after 21 months of payments.

If this is your 2nd bankruptcy, after 24 months of bankruptcy, you may be eligible for an automatic discharge if you don’t have to make payments of surplus income.

If you need to pay surplus income and are bankrupt for the second time, you must pay this money to your Trustee for 36 months. After that, you qualify to be automatically discharged.

If you do not get an automatic discharge, then you are required to attend a bankruptcy court hearing to consider all the evidence to decide what type of discharge you are entitled to. The court has various options available.

Absolute order of discharge –

As part of the bankruptcy proceedings, there are many factors the bankruptcy court will consider when you apply for discharge. Some of these may include:

  • What was your conduct before and during bankruptcy, as set out in the Trustee’s Section 170 Report?
  • Did you attend the financial counselling sessions and pay any required surplus income to the Trustee for your creditors as agreed?
  • How much do you earn annually?
  • Do you have any assets that are exempt from seizure (such as RRSPs)?
  • Do you have just one creditor, such as the Canada Revenue Agency or a litigation creditor?

The court will issue an absolute order of discharge if it is satisfied that there are no factors that would disqualify you from receiving your bankruptcy discharge immediately.

Conditional order of discharge –

If the court feels that your discharge should be conditional on you meeting certain conditions to obtain an absolute discharge, the court will order a conditional discharge.

This usually involves paying a certain amount of money over a set period of time. The court may also impose other conditions. Once you’ve met all the conditions, you’ll be given an absolute discharge.

Suspended order of discharge –

A suspended discharge is one that delays the absolute discharge to a later date. It can also be combined with a conditional order of discharge.

Refused discharge –

If the evidence demonstrates that the bankrupt individual is taking advantage of the bankruptcy process, has not worked cooperatively with the licensed insolvency trustee, or their conduct is deemed unacceptable, the court can refuse to grant a discharge.

In this instance, undischarged bankrupts must take measures to improve the situation before being able to apply again to court to hear the bankrupt’s application for discharge.

Undischarged bankrupts summary

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

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

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

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost initial consultation.

undischarged bankrupts
undischarged bankrupts
Categories
Brandon Blog Post

A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON

bankruptcy discharged
bankruptcy discharged

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

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

If you would like to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Your Bankruptcy Discharged – But Wait

Well, that took no time at all. Last week I told you about a bankruptcy discharge hearing I attended where the bankrupt person had his bankruptcy discharged by the Master in the Ontario Superior Court of Justice In Bankruptcy and Insolvency.

The Master’s decision was released on August 13, 2021. On August 20, 2021, we received the Notice of Motion of the opposing creditor appealing the Master’s decision to give this person his discharge from bankruptcy. That is their right.

In this Brandon Blog, I want to discuss the reasons for the opposition to the fact that this bankrupt had his bankruptcy discharged and my thoughts on one scenario of how this may play out. First, I just want to refresh your memory about the bankruptcy process and specifically how the discharge under bankruptcy law in Canada process works. Then I will get into this real-life story.

Canada’s Bankruptcy and Insolvency Act (BIA) gives people the option of filing a debt management plan restructuring consumer proposal if they are unable to pay back all unsecured debt owing to their unsecured creditors. This option offers the consumer a way to maybe keep their home and car that is heavily financed, as long as they can maintain the payments to the secured creditors such as the financial institution who financed the purchase of the home by way of the mortgage, or the auto loan, and it makes sense in their budget.

A successful consumer proposal is also the way to avoid bankruptcy. Like bankruptcy, the process starts with a no-cost consultation for financial advice with a licensed insolvency trustee. A licensed trustee is the only party able to administer a consumer proposal in Canada (or a bankruptcy). The Trustee can help you lose your debt load.

A first-time bankrupt who fulfills all of their obligations, including attending 2 mandatory credit counselling sessions, is entitled to a discharge after 9 months from the date of bankruptcy.

bankruptcy discharged
bankruptcy discharged

A bankruptcy discharged: First and second bankruptcy (or more)

When an insolvent debtor files for bankruptcy for a second time, you cannot be discharged after a nine months bankruptcy period. When you don’t need to pay the Trustee any surplus income payments, a second bankruptcy lasts for a minimum of 24 months. A second-time bankruptcy filer with surplus income must make those payments for 36 months to qualify to get their bankruptcy discharged.

A third or subsequent bankruptcy follows the same timeline as a second bankruptcy. There is, however, a high probability that the Trustee or creditors will oppose the discharge. Where there is opposition, there must be a court bankruptcy discharge hearing and the court can impose any conditions it deems appropriate.

What does bankruptcy discharged mean in Canada?

It is a Canadian legal term used to describe the release of a consumer debtor or business proprietorship from their obligations, responsibilities, debts, and legal claims. “Bankruptcy” is a legal proceeding to protect the estate of a person or company. “Discharge” fulfills the requirement that a person is released from their obligations, responsibilities, debts, and legal claims through the bankruptcy process. There is no equivalent requirement for a company.

The insolvent debtor filing for bankruptcy merely invokes the legal protection to the person and puts a bankruptcy trustee in place to realize upon any available assets in the bankruptcy estate for the benefit of the creditors. Bankruptcy filings do not relieve the person of their debts. It is when the person is bankruptcy discharged, that they are released from their debts (other than for a select list of exceptions).

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged: Types of bankruptcy discharge

The licensed insolvency trustee can usually issue an automatic discharge when there is no trustee in bankruptcy opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties during bankruptcy.

In case of opposition or if the bankrupt meets one of the criteria that prevents automatic discharge (for example, the bankruptcy process finds the bankrupt to have a high tax debt situation), a discharge hearing in court is held, which is conducted by the Master of the Bankruptcy Court. There are four types of the bankruptcy discharge and a fifth outcome is also possible. Here they are:

  1. Absolute discharge – An absolute discharge means that the bankrupt may obtain a discharge immediately. If the bankrupt has fulfilled all of their duties and there is no insolvency trustee or creditor opposition, this can be provided by the licensed insolvency trustee of the bankruptcy estate handling the bankruptcy administration;
  2. Conditional discharge – can get discharged if certain conditions are met. Typically, to get bankruptcy discharged this way, conditions include payment to the licensed insolvency trustee;
  3. Suspended – the bankruptcy discharge will be granted at a later date and may very well be combined with an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. Refused– because the debtor has not made full disclosure or done other bankruptcy duties; or
  5. “No order” – the insolvency trustee informs the court that the bankrupt has not fulfilled all of his or her obligations and has failed to respond to the Trustee’s demands for information despite the passing of time. The licensed insolvency trustee is at liberty to seek its discharge when the “no order” order is provided. When the bankrupt has actually complied with the court’s requirements, he or she may apply for a hearing for discharge. When the Trustee gets its discharge, the stay of proceedings preventing collection actions against the bankrupt disappears.

A bankruptcy discharged: The appeal just served upon us – a true story

To refresh your memory about the discharge hearing itself you can CLICK HERE. The appeal just served upon us seeks an Order setting aside the decision of the Master made on August 13, 2021. The grounds for the appeal can be described as throwing everything including the kitchen sink! The stated grounds are that the Learned Registrar erred:

  • by granting the bankrupt an absolute discharge from bankruptcy;
  • in holding that the Receiver’s interest in the discharge application is not firmly established and by not recognizing that should the Receiver be paid an amount in excess of the debt owed to the secured creditor, any surplus funds would be available for the other creditors of the
    corporate bankruptcy estate;
  • in holding that the discharge hearing is not the proper forum in which to make determinations as to the propriety of the various transactions that the Receiver has raised;
  • in finding that the bankrupt has generally cooperated with me as his Trustee;
  • in declining to consider the bankrupt’s conduct in the corporate bankruptcy because that the trustee in the corporate bankruptcy had remedies available to it;
  • in finding that the failure of the company’s business was due to the loss of its 1 customer and pricing related to that arrangement;
  • in relying on her finding that the corporate trustee may be the only truly interested party on the discharge or would benefit most from the conditional order sought if the secured debt is otherwise repaid;
  • in exercising her discretion in finding that an order of discharge requiring payment of the significant amount proposed by the Receiver is not reasonable;
  • in finding that the bankrupt has no ability to pay and that his future prospects to pay are unknown;
  • in finding that an order for a conditional discharge of the magnitude sought would be tantamount to a refusal;
  • by omitting to consider relevant evidence or the absence thereof, in relying on irrelevant considerations, and/or giving improper weight to the evidence before the Court; and
  • anything else the lawyers may want to say.

    bankruptcy discharged
    bankruptcy discharged

Standard of review to getting a personal bankruptcy discharged

Such an appeal from a bankruptcy discharge hearing has a standard of review. According to BIA S. 192(1), the bankruptcy registrar can, among other things, grant orders of discharge. S. 192(4) of the BIA permits a party dissatisfied with a registrar’s order or decision to appeal it to a judge.

Registrars are exercising judicial discretion when granting discharges in bankruptcy cases. As long as the registrar acted reasonably, the judge should not set it aside or ignore it. Furthermore, if an appeal from a bankruptcy discharge order is based on alleged errors in factual findings, the court will not intervene if the findings of fact can be justified based on credible evidence. If the registrar has materially misinterpreted the law or made an error in respect of the facts underpinning his or her discretion, discretionary decisions can, of course, be overturned.

If the registrar decides that in order for the person to get their bankruptcy discharged, the court imposes conditions, those conditions must be realistic to allow the bankrupt to meet the requirements in a reasonable amount of time. If an amount ordered in order for the person to get their bankruptcy discharged is unrealistic and the discharge is conditional on making additional payments, the appellate court in such cases previously held that results in an error of law. The appellate judge can either substitute other conditions or refer the matter back to the registrar for reconsideration.

A bankruptcy discharged: What my gut is telling me

I normally am not in the prediction business. However, having been the insolvency trustee responsible for administering the consumer bankruptcy, having written the reports to the court on the bankrupt’s application for discharge, having attended the discharge hearing and having heard all the evidence, having read the Registrar’s decision and the Appeal documentation, I believe that the appeal should be dismissed.

You might recall that opposing the bankrupt getting bankruptcy discharged was the Receiver of the company previously operated by the bankrupt. As a result of complaints regarding the bankrupt and his family in relation to the company’s operations, the Receiver has filed lawsuits against several parties. The proceedings are still pending. According to previous court rulings, the court should not consider the issues raised in other proceedings when deciding whether to discharge the bankrupt. A discharge hearing is a summary proceeding. It is important to see how the debtor behaved during HIS bankruptcy.

As for the judge’s decision, only time will tell. I’ll keep you up to date as always.

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged summary

I hope that you found this bankruptcy discharged Brandon Blog helpful in telling this real-life story of an appeal to a person getting their bankruptcy discharged. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

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

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

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

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

 

Categories
Brandon Blog Post

BANKRUPTCY DISCHARGE ORDER: OBSESSED CREDITOR LOSES APPEAL OF THE DISCHARGE ORDER

bankruptcy dischargeWe hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

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

What does bankruptcy discharge mean in Canada?

A bankruptcy filing is a form of insolvency process under Canadian bankruptcy law available to individuals and businesses. Bankruptcy deals with a person’s or company’s debt load and assets. After performing a detailed initial assessment, the licensed insolvency trustee will be in a position to advise the debtor if they will be better serviced through a restructuring process as an alternative to bankruptcy (consumer proposal or Division I Proposal for individuals, Division I Proposal or Companies’ Creditors Arrangement Act bankruptcy protection for companies) with creditors, or whether the debtor will be better served filing for bankruptcy.

The final piece of any bankruptcy process for an individual is the bankruptcy discharge. Individuals who go bankrupt are entitled to a discharge from bankruptcy. Companies are only entitled to one if every bankruptcy claim filed is paid in full, with interest. Because this never happens, companies do not receive a bankruptcy discharge. It is not impossible, but for this reason, it really does not happen.

If you are thinking about filing an assignment in bankruptcy, then you may be wondering about the bankruptcy discharge process and how it will affect you. Many people think their debts are eliminated at the moment of their bankruptcy filing.

This is incorrect. It is the bankruptcy discharge that will remove all (with certain limited exceptions) of your unsecured debts from your life and will result in letting you move forward with a clean slate. In this Brandon Blog, I discuss the bankruptcy discharge process and a recent decision of the Supreme Court of British Columbia hearing an appeal to the decision of the Master sitting as bankruptcy registrar on a bankrupt’s application for discharge.bankruptcy discharge

Bankruptcy discharge and its consequences for the bankrupt

When you are granted a bankruptcy discharge, this means that those debts caught by your bankruptcy are no longer your responsibility. This means that every action from creditors or the collection agencies they have retained stops trying to collect the debt obligations.

As I previously mentioned, most almost all debts are wiped off your slate when you receive your discharge from bankruptcy. The kinds of debts that remain even after a bankruptcy discharge are:

  • spousal or child support payments;
  • fines or penalties mandated by the court;
  • claims arising from fraud or fraudulent breach of trust;
  • student loan debt if less than 7 years have passed since the bankrupt stopped being a part-time or full-time student.
  • any kind of financial debts that are secured against your assets, such as a home mortgage or automobile financing, are not discharged as a result of your bankruptcy discharge.

These sorts of financial debts endure after bankruptcy as they are not released. The individual will be required to continue paying those financial obligations according to their terms. All various other financial obligations are discharged and do not have to be paid.

What are the types of bankruptcy discharge?

If there is no Trustee opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties of a bankrupt, in most situations, the licensed insolvency trustee can issue an automatic discharge which provides the bankrupt with an absolute discharge from bankruptcy.

If there is an opposition or the bankrupt meets one of the criteria that does not allow for an automatic discharge (such as the bankruptcy process finding the bankrupt a high income tax debt situation), there must be a discharge hearing in court which is heard by a Master of the court sitting as the registrar in bankruptcy. There are 4 types of bankruptcy discharge and a 5th bankruptcy outcome is also possible. They are:

  1. absolute – an absolute discharge means the bankrupt is entitled to an immediate discharge. This can be given by the licensed insolvency trustee in the bankruptcy estate handling the bankruptcy administration if the bankrupt has fulfilled all of their duties and there is no trustee or creditor opposition;
  2. conditional discharge – can get a discharge after meeting one or more conditions. The most common type of condition of discharge involves paying a sum of money to the licensed insolvency trustee;
  3. suspended – the bankrupt’s discharge will take place at a later date and may very well be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. refused– the court refused to grant a bankruptcy discharge probably because the bankrupt has failed to provide full disclosure or perform other bankruptcy duties; or
  5. “no order”– the Trustee advises the court that regardless of the time period that has passed, the bankrupt has actually not satisfied every one of his or her obligations and the bankrupt has actually failed to reply to the Trustee’s demands for information. In this situation, when the “no order” order is provided, the licensed insolvency trustee is at liberty to seek its discharge. Once the bankrupt person has actually fulfilled the requirements set by the court, the bankrupt can re-apply for a discharge hearing by the court.bankruptcy discharge

For a first-time bankrupt with no surplus income who fulfills of their duties, including attending the 2 mandatory credit counselling sessions, they are entitled to their bankruptcy discharge after a bankruptcy period of 9 months from the date of bankruptcy.

If this is your second bankruptcy a discharge will not be available after 9 months. A 2nd bankruptcy lasts for a minimum of 24 months if you do not have any surplus income payments to make to the Trustee. If you have surplus income, a second-time bankrupt must make those monthly payments for 36 months before they are entitled to a bankruptcy discharge.

For a 3rd or subsequent bankruptcy, the timeline is the same as the 2nd time bankrupt. However, it is much more possible that there will certainly be resistance to the discharge by the Trustee or the creditors. The court can also impose whatever conditions it sees fit.

Creditor objects to the decision of the Master on bankrupt’s application for discharge

On July 9, 2021, the decision in Hanlon (Re), 2021 BCSC 1348 in the Supreme Court of British Columbia was released. This was an appeal from an order by the bankruptcy registrar of the Supreme Court of British Columbia dated April 28, 2021 in Hanlon (Re), 2021 BCSC 800, VA B190492. This is an appeal under s. 192(4) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA), from an order of a master of that Court, sitting as a registrar in bankruptcy, granting the bankrupt, Mr. Hanlon, a bankruptcy discharge that was made conditional on his paying $7,500 to the Trustee.

The appellant, Ms. Johnson, is one of Mr. Hanlon’s creditors. She states that the registrar erred in approving the discharge on those terms. If the appeal is allowed, she looks for an order refusing Mr. Hanlon’s application for a discharge, with leave to apply again in two years, or alternatively, giving a discharge conditional on his paying $50,000. The appeal is opposed by both Mr. Hanlon the bankrupt, and the Trustee. The appeal was heard by Judge Milman, Canada’s bankruptcy legislation, the BIA states that a person dissatisfied with an order or decision of a registrar can appeal that decision to a judge of that court who in that capacity is sitting as a bankruptcy judge.

The alleged errors made by the registrar in the making of the order of conditional discharge

Ms. Johnson argued that the registrar made certain errors in granting the conditional bankruptcy discharge order. Ms. Johnson says that in granting the bankruptcy discharge on those terms, the registrar erred as follows:

  • in concluding that Mr. Hanlon had complied with the injunction resulting from Ms. Johnson’s original successful litigation against Mr. Hanlon when he had not;
  • in falling short to take into account Mr. Hanlon’s refusal to agree with the accuracy of the trial judge; and
  • in failing to consider Mr. Hanlon’s real income earning potential.bankruptcy discharge

The standard of review on such an appeal

There is a standard of review on such an appeal from an order of a bankruptcy discharge hearing. S. 192(1) of the BIA gives the bankruptcy registrar the authority to, amongst other things, grant orders of discharge. S. 192(4) of the BIA allows a party dissatisfied with an order or decision of a
registrar may appeal it to a judge.

In granting an order of discharge in the bankruptcy process, the registrar is exercising judicial discretion. If the registrar has acted reasonably, the judge should not set it aside or ignore it. Further, if an appeal from a bankruptcy discharge order is based on alleged errors in findings of fact, the court will not interfere if there is no overriding error in the findings of fact and there is evidence from which the findings of fact could be made. Discretionary decisions may, naturally, be overturned if the registrar has materially misinterpreted the law or made an error in respect of the facts underlying the use of that discretion.

When a registrar’s decision in a bankruptcy discharge hearing imposes conditions, those conditions must be realistic for the bankrupt to perform in a reasonable period of time. Where the amount ordered was unrealistic and the bankrupt’s discharge is conditional on making additional payments, the appeal court did hold that results in an error of law and the appellate judge can either substitute the conditions or refer the matter back to the registrar for reconsideration.

The judge’s decision on the appeal from the registrar’s bankruptcy discharge order

The judge dismissed the appeal finding there were no overriding errors made by the registrar. With respect to the amount of $7,500 ordered as a condition of discharge from bankruptcy, the judge found as follows:

Ms. Johnson says that the registrar did not consider Mr. Hanlon’s untapped earning capacity and instead concentrated practically completely on her arguments of his potential inheritance. She suggests that Mr. Hanlon could be earning more than he is. In her opinion, he could earn more to enable him to make a settlement of $50,000 rather than the $7,500 that was ordered.

Mr. Hanlon’s real historic earnings offered adequate assistance for the registrar’s verdict that he was incapable of paying any more than the $7,500 that she ordered for him, did not have the financial prospects himself to do so and without getting personal loans from family members to help him with that. That was properly decided by the registrar based on the evidence before her.

The judge found that there is no merit in this or any other of the grounds of appeal. He found no error in the registrar’s decision, and having found the discharge condition that she imposed to have been reasonable in the circumstances, he dismissed the appeal.

Bankruptcy discharge summary

I hope that you found this bankruptcy discharge Brandon Blog interesting and that you now have a good appreciation for the process at the end of the administration for a person who files for bankruptcy and the considerations of the court if someone appeals a bankruptcy discharge order. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

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

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.bankruptcy discharge

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

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

Categories
Brandon Blog Post

BANKRUPTCY SURPLUS INCOME: OUR ESSENTIAL GUIDE 4 YOU

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Bankruptcy surplus income introduction

I have written many blogs about personal bankruptcy and consumer proposal insolvency matters over the recent past. I notice though that it has been many years since I have written about bankruptcy surplus income. I refer to it in many of my Brandon’s Blogs but have not described it in detail in quite a while.

In order to correct that situation, here I discuss the concept and application of bankruptcy surplus income in personal bankruptcy filings.

What is bankruptcy surplus income?

Surplus income is perhaps an inadequately worded expression. Very few individuals would certainly really feel that they have surplus income, especially when dealing with financial debt. Nonetheless, in the bankruptcy context, surplus income describes a calculation that figures out just how much cash monthly an individual must be paying into their bankruptcy estate for the benefit of their creditors.

When you file for personal bankruptcy in Canada you are able to retain most of the income that you make monthly. In order to have a practical level of living during the bankruptcy period, the Office of the Superintendent of Bankruptcy Canada (OSB) establishes a net month-to-month earnings standard.

These earnings criteria take into consideration annual inflation and are derived from information collected by Statistics Canada annually. What you pay to your licensed insolvency trustee (Trustee) into your bankruptcy estate every month is determined by these standards. They are used to decide if a bankrupt has any bankruptcy surplus income.

I have to warn you though. The practical standard of living that the OSB permits is actually the Canadian poverty line. It matters not if you reside in one of Canada’s most pricey cities or in a rural area. There are no regional modifications made. The OSB lays out the meaning and calculation in its Directive No. 11R2. Every year the OSB updates the exemption limitations.

Click on this link for the up to date bankruptcy surplus income 2020 Directive No. 11R2-2020.

What happens to a person’s wages during bankruptcy?

You are still allowed to earn money and collect your wage or salary when you apply for bankruptcy under the Bankruptcy & Insolvency Act (Canada) (BIA). As a matter of fact, lots of people apply for bankruptcy because their wages, salary, or bank account are being garnisheed or frozen either by Canada Revenue Agency (CRA) or a judgment creditor. As I have written in several Brandon’s Blogs, the filing of an assignment in bankruptcy knocks out the garnishee against your wages or salary and/or the freeze on your bank account.

Now that there is no longer a garnishee, your earnings on an after-tax basis are readily available to you. The Canadian bankruptcy process, which strives for fairness, states that your after-tax income is now available for contribution to bankruptcy surplus income. To provide you a feel for the personal exemptions permitted, on an after-tax basis, as established by the OSB, here is the 2020 table the Trustee needs to work off of:

Superintendent’s Standards – 2020

bankruptcy surplus income

How it works is that you look at the table and pick first how many persons are in your household. The next column marked “S” and “N”, is the exemption that the OSB standard that it gives your family. You can then do one of two things: (1) go across the top of the table that resembles the closest your household after-tax income (the household’s, not just yours); or (2) if you know the calculation, do the exact calculation.

bankruptcy surplus income
bankruptcy surplus income

Bankruptcy surplus income limits for 2020 Canada

To have bankruptcy surplus income payable, your after-tax regular monthly earnings need to be $200 or greater than the limit established by the OSB. The exact computation is to add the bankrupt’s after-tax monthly earnings to the bankrupt spouse’s after-tax month-to-month revenue, and the same for anyone else in the family that is contributing their income for household expenditures.

Take that sum and deduct your allowed exemption. Then subtract the reasonably few unique extra exemptions, if appropriate:

  1. medical expenses;
  2. support payments
  3. child care expenses
  4. court-imposed fines or penalties
  5. expenses as a condition of employment.

After that take the bankrupt’s percent of the complete household income bankruptcy surplus income which you just computed. Split that number in half which is the month-to-month surplus income that the bankrupt must pay.

So for example, take a look at the calculation below for an imaginary family of two where both spouses work and there are no extra special deductions:

Family Situation (Family unit of two)
Bankrupt’s available monthly income $2,800
Add: Other family unit member’s available monthly income 1,000
Family unit’s available monthly income$3,800
Minus: Superintendent’s standard for a family unit of two
2,793
Total monthly surplus income$1,007
Family Situation Adjustment
(2800 ÷ 3,800 = 73.68%
$1007 × 73.68% = $741.96)		$741.96
Payment required from bankrupt
($741.95 × 50% = $370.98)
$370.98

Bankruptcy surplus income calculator

To help you better understand everything that goes into the calculation, I want to share with you a tool I use to calculate bankruptcy surplus income. I am providing you with the link to the same spreadsheet that I use to do the calculation.

Here is the link:

Bankruptcy surplus income calculator

Your income is checked by the Trustee on a month-to-month basis and is balanced out over the entire period of your bankruptcy. If you have a short-term boost in earnings, such as from a bonus or commissions, or a short-term reduction, such as a temporary layoff, this will be factored in.

When do bankruptcy surplus income payments end?

For a 1st time bankrupt, without surplus income, you are entitled to get an automatic discharge after 9 months. This requires that neither the Trustee nor a creditor has opposed your bankruptcy discharge. If you are a 1st time bankrupt yet you do have surplus income, then you need to make monthly bankruptcy surplus income payments for 21 months. You are then entitled to an automatic discharge if all your surplus income payments are made and there is no opposition to your discharge.

If you have actually been bankrupt before and this is your 2nd (or more) bankruptcy, you will not have the ability to obtain a discharge in 9 months. Your bankruptcy will certainly be lengthened. A 2nd + bankruptcy lasts for a minimum of 24 months. If you have surplus income, a second-time bankrupt will certainly not have the capacity to obtain a bankruptcy discharge for 36 months. The monthly bankruptcy surplus income payments must be made for the very same 36 months.

Can I file bankruptcy if I make too much money?

The test to file for bankruptcy is not how much money do you make. The test is:

  • are you insolvent; and
  • have you committed one or more acts of bankruptcy within the six months preceding the filing of an assignment in bankruptcy or the launching of an application for a bankruptcy order.

But if you do make a lot of money, and go into bankruptcy, then no doubt you will have a large bankruptcy surplus income obligation to pay to the Trustee every month. That large amount may not fit into your monthly budget. You may not be able to afford that monthly bankruptcy surplus income payment.

So what can you do? You should speak to a Trustee about filing either a consumer proposal or a Division I Part III proposal. Both are filed under the BIA. Why? Depending on your assets, a proposal may work better for you. Although your proposal would have to be a better alternative for your creditors than your bankruptcy, it gives you the advantage of terming out the monthly payments.

It may work out that for a little more, you can get up to 60 months to pay. So rather than having only 24 or 36 months to make your total payment, as the case may be, you could get 60 months to pay only a bit more. Obviously, the proposal is more gentle on your budget than a bankruptcy. It is also easier on your credit score and credit report.

Bankruptcy surplus income summary – Are you in financial trouble?

To declare personal bankruptcy is a major life event. However, it is a necessary thing to rid yourself of crippling debt. Most people who declare bankruptcy have been faced with a major life event. The main examples are illness, pay cuts, job loss, or divorce. It is not your fault. I hope this bankruptcy surplus income Brandon’s Blog has given you helpful information.

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

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

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

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

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

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

bankruptcy surplus income canada

Categories
Brandon Blog Post

DEBT RELIEF IN CANADA: BANKRUPTCY COURT SALUTES CANADIAN MILITARY VETERAN

automatic discharge

Debt relief in Canada: Introduction

I recently read a decision of the Bankruptcy Registrar of the Supreme Court of Nova Scotia in Bankruptcy and Insolvency that really inspired me. It got me thinking about the sacrifices our men and women in the military make for all Canadians. This particular Court decision, also made me think of sometimes they need our help for debt relief in Canada.

Debt relief in Canada: The case

The case I refer to is Durdle (re), 2018 NSSC 206, released August 31, 2018. The first two paragraphs of the Registrar’s decision, I found especially poignant:

“[1] This Court routinely considers situations in which the Bankrupt is indebted to the people of Canada, through tax or other liabilities to the State. As a matter of general policy, these obligations have a higher moral and sometimes legal priority than to private creditors as they are borne by all of us, as citizens and fellows of Society; and because the public generally must bear the share not paid by someone else. The collective public is an involuntary creditor in the result.

[2] What, then, is the situation when that is reversed – when it is the people of Canada who are indebted to the individual? Should compensation paid out as a consequence be considered divisible among creditors in an insolvency?”

Debt relief in Canada: The facts

Master Corporal Durdle was a career soldier. He spent 24 years in the military, retiring at the age of 45 years old. Master Corporal is now 49 years old and suffers from military service induced post-traumatic stress disorder (PTSD). He remains under professional care. He is in need of debt relief.

On November 13, 2013, Master Corporal Durdle filed an assignment in bankruptcy. This was his second bankruptcy and therefore, he was not entitled to an automatic discharge from bankruptcy. The purpose of the Court hearing was for the Court to consider what form of bankruptcy discharge he should be entitled to. In this second bankruptcy, there were minimal non-exempt assets and unsecured creditors totaling $73,476.76.

In 2014 while an undischarged bankrupt, Master Corporal Durdle received taxable income, including:

  1. $16,778 from a wage loss replacement plan;
  2. A rehiring allowance of $28,107.04, including $19,675 in severance pay;
  3. Pension income of $23,594.10;
  4. Disability income of $49,289; and
  5. $3,624 in employment income.

The decision the Court had to make was, as the guidelines existed in 2014, how much if any of this 2014 taxable income should be considered “surplus income”?ira smith bankruptcy trustee vaughan

Debt relief in Canada: The Court’s thinking

The Registrar made a point of saying:

“…I wish to be clear that nothing should be taken as putting military debtors on a different footing than a civilian. The rule of law, including that of civil contract, is one of the core values we hold as Canadians, and which is protected by our men and women in uniform. What is, however, on a different footing is the debt we owe those men And women when they are injured or ill in the discharge of those Duties.”

Debt relief in Canada: The Registrar’s analysis

The Registrar went through a very thoughtful analysis of the law. He considered it in connection with the various types of 2014 taxable income:

  1. Wage loss replacement plan – Wrongful termination awards would normally be included in total income, as would pay in lieu of notice. The Registrar, however, went on to comment that in this case, the wage loss replacement plan was not termination pay or pay in lieu of notice but rather, pay because Master Corporal Durdle’s PTSD prevented him to continue serving. The Registrar concluded that this amount should not be considered as income in accordance with Section 68 of the Bankruptcy and Insolvency Act (BIA). Therefore, the Registrar also concluded that this amount should not be included in the calculation of surplus income.
  1. Rehiring allowance – The Registrar applied the same logic for this payment. He decided that it should not be included in the calculation of surplus income. He decided that this payment was a result of Master Corporal Durdle’s PTSD preventing him from continuing to serve in the military.
  1. Pension income – The Registrar could not determine whether this income was solely a benefit due to Master Corporal Durdle’s PTSD or not. However, it did factor into the Registrar’s ruling.
  1. Disability income – The Registrar considered this income in light of previous Court decisions involving lump sum awards. This included under a Workers’ Compensation Plan. The Registrar went on to review the actual Federal statute under which the payment was made to him, the Veterans Well-being Act (S.C. 2005, c. 21). The Registrar concluded that this amount would not be included in the calculation of surplus income.
  1. Employment income – The Registrar concluded that this amount is included in the surplus income calculation.

Debt relief in Canada: The Court’s decision

The Registrar concluded that if he includes the pension income ($23,594.10) and of course the employment income ($3,624) (less statutory deductions), Accordingly, Master Corporal Durdle’s income falls under the Superintendent of Bankruptcy threshold for 2014. Accordingly, Master Corporal Durdle had no surplus income to pay when considering Section 68 of the BIA.

Since this was Master Corporal Durdle’s second bankruptcy, he was not entitled to an absolute discharge. Therefore, the Registrar did not impose any conditions on his discharge, but rather, suspended his discharge for one day.

Debt relief in Canada: Sometimes understanding and kindness is required

The Registrar was obviously moved by Master Corporal Durdle’s service to Canada. He also considered his current plight brought on by service-related PTSD. The Registrar followed the law and also showed his understanding and kindness of this sad situation.

If you have financial difficulties, whether brought on by a medical cause or for any other reason, you need to seek professional advice from a Firm that will show you the understanding and kindness you deserve. The Ira Smith Trustee Team has seen many cases of personal and corporate financial distress. We understand your pain and we know how to alleviate it; with understanding and kindness.

Our strategy for every single business and person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get your debt settlement and back on the road to leading a healthy and stress-free life. Contact the Ira Smith Team today.debt relief in canada

Categories
Brandon Blog Post

BANKRUPTCY DISCHARGE: MY CHEAT-SHEET OF THE TOP 8 THINGS THE BANKRUPTCY COURT CONSIDERS

Bankruptcy discharge introduction

A bankruptcy discharge is when the bankrupt is released under Canadian bankruptcy law from his or her debts as part of the bankruptcy process. Some people think that it is the act of filing bankruptcy that releases the bankrupt from liability. This is not the case. It is the discharge from bankruptcy process that “discharges” the bankrupt’s debts.

We explain in this vlog the procedure when a bankrupt’s outright discharge is opposed. We discuss the top 8 things that the Bankruptcy Court will consider in determining just what outcome the bankrupt could expect.

The primary benefit of the bankruptcy process for the insolvent person

The bankruptcy discharge is among the primary benefits of relief under the Bankruptcy and Insolvency Act (Canada) (BIA). The discharge is vital to the bankruptcy process. Debtors, after bankruptcy, can wipe the slate clean and start over, which is a central principle under the BIA statute.

Not all debts may be released

A bankruptcy discharge offers the discharge of many unsecured debts. Credit card debts, personal income tax debt, unsecured personal loans and under certain conditions, some student loan debt are all dischargeable debts. Financial debts, which will not be discharged include:

  • support payments to a previous spouse or to children;
  • fines or financial charges imposed by the Court;
  • debts emerging from fraudulent behaviour;
  • student loans if fewer than seven years have passed considering that the bankrupt quit being a full or part-time student.

    ontario bankruptcy court discharge certificate
    bankruptcy discharge

It can be opposed

An insolvent’s bankruptcy discharge application may be opposed by one or more unsecured creditors or the Licensed Insolvency Trustee (formerly called a bankruptcy trustee) (LIT). A creditor opposition is created when the creditor files the required notice of opposition, setting out the reasons for opposing.

This happens if the insolvent has not met all of his/her responsibilities under the BIA. Making full disclosure, attending the required two financial counselling sessions and making all necessary surplus income payments are all duties of the bankrupt that must be fulfilled if a discharge is to be considered.

It can also happen if the individual bankrupt has actually committed a bankruptcy offence. Those are acts listed in section 173 (1) of the BIA. In this case, there needs to be a bankruptcy discharge hearing in Court and the Court will after that evaluate the LIT or creditor opposition as well as give its decision on the discharge from personal bankruptcy.

There are four types of discharges possible

There are 4 types of discharges:

  1. Absolute discharge— The bankrupt is launched from the legal obligation to pay off financial obligations that existed on the day of bankruptcy, except for certain types of debt identified above.
  1. Conditional discharge— The bankrupt must fulfill certain conditions, additional payments into the bankruptcy estate, to get an absolute discharge. Once all conditions have been fulfilled, an absolute discharge will certainly be granted.
  1. Suspended discharge— An absolute discharge that will be granted at later on a specific date determined by the Court.
  1. Refused discharge— The Court has the right to decline a discharge.

If there is no opposition to the discharge from bankruptcy of the bankrupt by a creditor or the LIT, then the LIT is able to provide an automatic discharge by issuing the appropriate certificate. There is no need for attendance in Court.

after bankruptcy discharge canada
bankruptcy discharge

The opposition process

When a debtor’s bankruptcy discharge application is opposed by either an unsecured creditor or the LIT, the Trustee needs to secure a Court day. This will be for a Court hearing on the insolvent’s application for discharge. The LIT must then tell all creditors who have filed a proof of claim of the opposition. Details are also provided about the date, time as well as place of the Court hearing.

The Trustee needs to also file a report with the Court on the conduct of the bankrupt both prior to as well as after applying for bankruptcy. The report will as well give a summary of the financial results of the bankruptcy administration. If a creditor has opposed the bankrupt’s discharge, then that creditor likewise needed to send a notice of opposition.

Does the bankrupt need a lawyer on an opposed discharge?

When going to Court for his/her discharge application hearing, a bankrupt would be well advised to come with a skilled bankruptcy lawyer to represent his or her interests. Sometimes the discharge hearing is less formal than various other types of Court hearings.

However, the Court follows all the proper regulations of civil procedure. It is sometimes tough for nonprofessionals to put their best foot forward without an attorney’s aid.

There have been many Court cases on applications for discharge. A Court decision released recently from the Queen’s Bench of Saskatchewan supplies an exceptional walk-through of the points the Court will take into consideration. For those interested, the reference is Hertz Bankruptcy (Re), 2017 SKQB 224 (CanLII).

bankruptcy discharge 3
bankruptcy discharge

The top 8 things the Bankruptcy Court will consider

The concerns the Court thought about, in determining what type of bankruptcy discharge certificate to issue, which is the same in all bankruptcy discharge hearings, were:

  1. Do the conditions of the bankruptcy filing and the bankrupt’s conduct sustain an order discharging the Bankrupt’s unsecured debts?
  2. The Court’s problem is to make sure that within a choice the policy purposes of the BIA are fulfilled. The bankruptcy, including the insolvent’s discharge, should act as a deterrence for the person not to duplicate the very same behaviour.
  3. If the circumstances of the bankruptcy support an order discharging the bankrupt, what terms of discharge are proper under the distinct circumstances of the bankruptcy?
  4. What were the conditions of the insolvent when the debts were sustained?
  5. What efforts did the insolvent make to pay the creditors?
  6. Did the bankrupt pay in respect of certain other debts but not all of them and particularly not the debt of the opposing creditor?
  7. Exactly what are the insolvent’s monetary opportunities for the future?
  8. Is there any other conduct or reality that needs to be factored into with the regard to discharge?

The Court will take lots of variables into account. The conduct, previous income, education and age of the bankrupt are all important factors. The Court will certainly likewise trust the Trustee’s report to Court on the bankrupt’s application for discharge. The Trustee’s report assists in determining facts about the conduct of the insolvent and his or her future prospects.

bankruptcy discharge

Is the bankrupt young or old?

Prevention is always a consideration. It is however very important to remember that Courts tend to be extra conventional when dealing with older bankrupts. A more youthful bankrupt with years of income-making opportunities could be needed to make an extra significant repayment. Less respect is given to the instant ability to pay.

An older bankrupt with some surplus income but fewer working years might be needed to pay less surplus income obligations into the bankruptcy estate.

Bankruptcy discharge: Is my bankruptcy case over when I get a discharge?

You should by this point in my Brandon Blog realize that when you receive an absolute discharge from your bankruptcy, at that point, you are discharged from your unsecured debts.

A discharge shows that you have finished with your bankruptcy legal process and your personal liability for unsecured debts has ceased. It’s not a separate thing from bankruptcy; it happens either automatically or by an Order of the Court, as I have described above.

At that point, the LIT still has some duties to fulfill. They include:

  • if there is going to be a dividend paid to the creditors, making sure that all proofs of claim have been reviewed and allowed for dividend purposes;
  • resolve any uncertainties the LIT may have concerning certain filed bankruptcy claims, including the issuance of Notices of Disallowance if any;
  • preparing the bankruptcy administration Final Statement of Receipts and Disbursements;
  • getting approval from the Office of the Superintendent of Bankruptcy to the Final Statement
  • getting the Final Statement, including the LIT’s fee and disbursements, approved by the Court;
  • issuing the dividend bankruptcy payments, if any
  • getting the discharge of the LIT

It is then that your bankruptcy case is closed.

Bankruptcy discharge: Do you have too much debt and want to avoid bankruptcy?

Do you have too many debt obligations and debt payments and have no idea how to deal with them? Act before you find yourself in the throes of an emergency financial situation. Ira Smith Trustee & Receiver Inc. has assisted many Canadian businesses and people throughout the Greater Toronto Area (GTA) in dealing with debts that need a plan for Starting Over, Starting Now. Don’t postpone. Give us a call today. Financial problems can be solved while avoiding bankruptcy with timely activity as well as our excellent strategy tailored just for you.

bankruptcy discharge

Call a Trustee Now!