Tag: Bankruptcy

THE STRUGGLE IS REAL, CANADIAN COST OF LIVING ON THE RISE: NAVIGATING DEBT IN CANADA’S NEW REALITY

Post author By Brandon Smith
Post date August 25, 2025

cost of living

Introduction: Understanding Canada’s Cost of Living Landscape

Life in Canada used to mean certain dreams were within reach: a comfortable home, food on the table, and savings for a secure future. But for many Canadians, due to the cost of living over recent years always rising, those dreams feel further away than ever. The Canadian cost of living has skyrocketed, placing immense pressure on families, individuals, and businesses alike. It’s a reality that’s leaving millions of Canadians feeling squeezed, stressed, and struggling with debt.

At Ira Smith Trustee & Receiver Inc., we see firsthand how the rising cost of living affects everyday people and companies. It’s not just a feeling; the numbers prove it. More than four out of ten Canadians (45%) say the cost of living is their number one concern. This isn’t just about small worries; it’s about basic survival. When the price of food, housing, and everything else goes up, and wages don’t keep pace, something has to give. Often, that “something” is financial security, leading to a reliance on credit and, eventually, a heavy debt burden.

This Brandon’s Blog explores the deep impact of Canada’s rising cost of living on consumers, entrepreneurs, and businesses. We’ll look at the unsettling statistics that show just how close many are to financial breaking point, their inability to save for the future, and the struggle to afford even the most basic necessities. More importantly, we’ll discuss practical steps and real solutions for managing debt and finding a path to financial stability, no matter how tough things seem.

The Everyday Battle: Cost of Living and Financial Survival

Imagine trying to keep your head above water when the tide keeps rising faster than you can swim. That’s how many Canadians feel about the cost of living. In 2025, a family of four in Canada needs between $4,000 and $6,000 each month just to cover basic expenses, and in big cities like Toronto or Vancouver, that can jump to $6,500 to $7,500. For someone living alone, monthly costs are often $2,000 to $3,500, possibly reaching $3,900. These aren’t luxury budgets; this is the cost of living for normal people’s housing, food, and transportation.

The main reason for this financial strain is inflation – meaning prices for goods and services keep going up; this causes the rising cost of living. This has led to something called “consumer debt,” which hit a whopping $2.5 trillion in late 2024 and kept climbing to $2.58 trillion by mid-2025. This isn’t just people buying new cars or big screen TVs; many are using credit cards to pay for groceries or their utility bills. The average non-mortgage debt per person reached $22,147 in mid-2025.

Younger Canadians, those under 36, are feeling this cost of living pain even more. They’re racking up higher credit card debt and are more likely to miss payments on their loans. Nearly 1.4 million Canadians missed a credit payment in the second quarter of 2025, a noticeable jump from the year before. This isn’t just about money; it’s also taking a huge toll on mental health. In 2024, nearly 4 out of 10 Canadians (38%) felt mental health struggles because of financial stress, and almost half (49%) were losing sleep worrying about money. When you’re constantly worried about how to pay for basic life necessities, it’s hard to feel secure or healthy.

This constant rising cost of living financial worry also affects how people feel about their future. Many Canadians are losing hope that they’ll ever get ahead. They might feel embarrassed or alone, but it’s important to remember that this is a widespread problem. Three out of five Canadians say their stress and anxiety come from debt. This makes it clear that the high cost of living isn’t just an economic issue; it’s a social and personal crisis affecting the well-being of millions.

cost of living

Living Paycheque to Paycheque: A Widespread Reality

The idea of living “paycheque to paycheque” means that all the money you earn goes directly to your bills and expenses, with little to nothing left over. For many Canadians, this isn’t just a saying; it’s their daily reality. A recent survey from H&R Block Canada in spring 2025 painted a stark picture: 85% of Canadians are living paycheque to paycheque. This is a huge leap from just a year before, when 60% reported the same. This dramatic increase shows how quickly things are changing and how deeply the rising costs are affecting people’s ability to save and feel financially safe.

Other studies back this up. A Leger poll in late 2023 found that 47% of Canadians were in this situation, and the Canadian Payroll Association previously reported it was around 48%. Regardless of the exact number, the message is clear: almost half, and possibly much more, of working Canadians are spending everything they earn, with no wiggle room.

Why is this cost of living problem happening? It’s a mix of things:

Inflation: As mentioned, prices for everything are going up.
Rising Interest Rates: If you have loans or a mortgage, the cost of borrowing money has increased, meaning more of your paycheque goes towards interest payments due to the increase in loan and mortgage costs.
High Rent and Home Prices: Housing costs are a massive expense for most, taking a huge bite out of income.
High Taxes: Taxes also reduce the amount of money people have left to spend or save.

Many Canadians, 82% in fact, are worried that their income simply isn’t growing fast enough to keep up with these rising costs. Some even say their paycheque isn’t enough to cover their basic expenses. This isn’t just a problem for people with lower incomes; it’s affecting middle-class families, young professionals just starting out, and even retirees who thought they were prepared.

When you’re living paycheque to paycheque, there’s no room for unexpected cost of living problems. A sudden car repair, a dental emergency, or a lost job can quickly send someone into a deep financial hole. It’s a cycle that’s hard to break, and it fuels stress and anxiety, making it even harder to make clear financial decisions.

No Emergency Savings: A Dangerously Thin Safety Net

When you’re living paycheque to paycheque, building an emergency fund feels impossible. And the statistics show that for many Canadians, it truly is. Around 41% to 50% of Canadians do not have an emergency fund at all. This means they have no savings to fall back on if something unexpected happens. To put it another way, about 46% of Canadians don’t have enough emergency savings to cover three months of essential expenses. This number has worsened over time, dropping from 64% in 2019, who had a three-month buffer, to 55% in 2024.

This lack of savings makes Canadians incredibly vulnerable. What happens if your car breaks down and needs a $500 repair? What if you have a sudden medical bill?

In late 2022, about one-quarter of Canadians (26%) said they couldn’t cover an unexpected $500 expense. This was more common for women (29%) than men (24%).
Around half of all Canadians (50% to 51%) would struggle to cover a surprise $1,000 expense. Some even admit their budget is so tight they couldn’t handle any unexpected bills.
Canadians are worried they couldn’t handle unexpected costs of $1,000 or more.

This is a terrifying situation. It means that a small bump in the road can become a financial disaster. Instead of savings, many Canadians are forced to rely on high-interest credit cards or loans when an emergency hits, digging themselves deeper into debt. More than one-third (35%) of Canadians would use a small loan or credit card for an emergency, and 27% are taking on debt just to cover their basic monthly needs.

The reasons for this are clear:

High Cost of Living: With so much money going to rent, food, and other necessities, there’s simply nothing left to save.
High Debt Levels: Many Canadians are already carrying record levels of personal debt, leaving little room for saving.
Lack of Financial Know-How: Some people struggle with budgeting and planning, even if they have some money left over.
Job Insecurity: The fear of losing a job also makes people hesitant to save, as they might need that money sooner rather than later.

It’s a vicious cycle where a lack of savings leads to more debt, making it even harder to build up savings in the future.

cost of living

The Retirement Dream Fades: Unable to Save for the Future

Beyond immediate emergencies, the long-term future is also a major concern for Canadians due to the high cost of living in Canada. The idea of a comfortable retirement, free from financial worry, is becoming a distant dream for many. Recent surveys show just how deep this anxiety runs:

Fear of Running Out of Money: A survey in August 2024 found that 61% of Canadians are worried they’ll run out of money in retirement. This worry is even higher for younger adults (ages 28 to 44, at 67%) and women (66%). Another survey in early 2025 reported that over three-quarters of Canadians (76%) share this fear because of rising prices.
Belief in Never Retiring: A truly concerning statistic from April 2025 showed that among Canadians who aren’t retired yet, 59% believe they will never be in a financial position to retire. And 66% think they’ll have to keep working even after they retire to make ends meet. For single Canadians, nearly half (45%) feel that saving for retirement is almost impossible.
Lack of Preparedness: Almost 40% of Canadians over 50 feel they aren’t financially ready for retirement. Many haven’t even started saving: 49% hadn’t put any money aside for retirement in the past year, and 39% said they had never saved for retirement.

The main reasons for this grim outlook are, again, the high cost of living and existing debt. When most of your income goes towards daily necessities and paying off bills, there’s little left to put into long-term savings like Registered Retirement Savings Plans (RRSPs). In fact, polling data from February 2025 showed that only 39% of Canadians planned to put money into their RRSP in 2025, a 10% drop from the year before. One in ten Canadians simply can’t afford to invest in their RRSP at all.

Canadians also feel they need more money to retire comfortably than ever before. Their retirement savings goal has jumped from $700,000 to $900,000 in just one year. Some even think they need $1.54 million. But the average Canadian’s retirement savings, not including pensions or home equity, is only around $272,000. This is a huge gap between what people have and what they feel they need.

This struggle to save for retirement isn’t just about numbers; it’s about peace of mind and the promise of a dignified older age. When people feel like they can never stop working, it affects their health, their relationships, and their overall happiness.

Feeding the Nation: Food Costs and Grocery Bills

When financial pressures mount, the first things to feel the squeeze are often the most basic. For a growing number of Canadians, affording these essentials has become a daily struggle.

Food Insecurity: The Empty Plate Problem

Food insecurity means you don’t have enough money to buy enough healthy food. It’s a problem that’s getting worse in Canada.

Millions Affected: In 2024, a staggering 10 million people in Canada’s ten provinces, including 2.5 million children, were living in households that didn’t have enough food. This means over a quarter of the population (25.5%) is food-insecure. This is the third year in a row this number has gone up, reaching a record high.
Rising Food Bank Use: The demand for food banks is at an all-time high. In March 2024, there were over 2 million visits to food banks across Canada. That’s a huge 90% increase compared to March 2019. Think about it: one-third of all food bank clients are children, and for the first time, nearly one in five (18.1%) food bank users are people whose main source of income is employment. This shows that even people with jobs are struggling to put food on the table.
Why It’s Happening: The main reason is simple: lack of money. Food prices have soared due to an increased cost of living. From 2021 to 2022, food bought from stores went up by an average of 9.8% across the country. Experts predict another 3% to 5% increase in food prices for 2025, meaning the average family of four could spend an extra $801.56 on food. When housing costs eat up so much of a budget, there’s simply less left for groceries.
Who Is Most Affected: Certain groups face this cost of living problem more than others. People in lone-parent families, especially those led by women, racialized groups (like Black Canadians), and Indigenous people often experience much higher rates of food insecurity. If you’re living in poverty, your chances of being food insecure are significantly higher.

Food insecurity isn’t just about hunger; it has serious impacts on health, leading to more illnesses, anxiety, depression, and even a shorter lifespan. It also affects children’s ability to learn and thrive.

cost of living

Decoding Housing Costs: The Biggest Budget Factor

For many Canadians, affording housing prices, like food, has become a daily struggle.

Housing Affordability: No Place to Call Home Comfortably

Housing costs are arguably the biggest driver of the cost of living and, therefore, financial stress for Canadians. Whether you own or rent, real estate prices are making it incredibly difficult to live comfortably.

Unaffordable Housing: In 2022, Statistics Canada reported that more than one in five Canadian households (22%) were spending 30% or more of their income on shelter. This is the widely accepted line for “unaffordable” housing. For renters, it was even worse, with 33% spending too much on rent, compared to 16.1% of homeowners. By March 2024, the average mortgage payment for a home was eating up almost half (47.9%) of the typical household’s income. In Toronto and Vancouver, it was a shocking 73.1% and 72.0% respectively!
Homeownership Out of Reach: The dream of owning a home is fading fast. In 2019, nearly 60% of Canadian households could afford a regular condo. By 2023, that number dropped to 45%. For a single-family home, only 26% of households could afford one. Young Canadians are particularly affected, with 72% wanting to buy a home, but nearly half (45%) feel it’s hopeless. A Habitat for Humanity Canada survey in November 2024 revealed that 70% of Canadians believe owning a home has become impossible.
Sacrificing Necessities for Housing: The most heartbreaking part of the housing crisis is that people are cutting back on other essentials to keep a roof over their heads. The Habitat for Humanity Canada survey indicated that 59% of Canadians, and 75% of renters, are sacrificing basic needs like food, clothing, and even education just to pay for housing.
Mental Health Toll: The housing crisis is also hurting people’s minds. Two-thirds of renters and one-third of homeowners say their the is negatively affected by housing costs. Young people are even considering leaving Canada or delaying starting a family because of how expensive housing is.
Rental Market Squeeze: If buying is impossible, renting isn’t much easier. There’s a severe shortage of affordable rental units. Since 2018, the average rent for a two-bedroom place has gone up 70% faster than wages. Renters with children are deeply worried about rent increases and even losing their homes.
Fear of Losing Your Home: A shocking 57% of Canadians, whether they own or rent, are afraid they might lose their home if their financial situation changes. This fear is highest among younger Canadians and low-income households.

The combination of rising food and housing cost of living creates a daily struggle for survival, pushing more and more Canadians into debt and despair.

The Ripple Effect: How Rising Costs Hurt Canadian Businesses and Entrepreneurs

It’s not just individuals who are struggling with Canada’s high cost of living and rising debt; businesses and entrepreneurs are feeling the pressure too. When consumers have less money to spend because their wages aren’t keeping up with high prices, it impacts businesses, especially small and medium-sized enterprises (SMEs).

Challenges for Businesses:

Rising Operational Costs: Just like families, businesses face higher costs for almost everything. This includes raw materials needed to make products, the wages they pay their employees, and energy bills. A Statistics Canada study reported that approximately 65.4% of businesses are expected to face cost-related challenges in mid-2025. The inflation rate is expected to be a major hurdle for almost half of all businesses.
Increased Borrowing Costs: When interest rates go up, it costs businesses more to borrow money. This makes it harder for them to repay existing loans or get new funding to grow. Many small businesses rely on lines of credit, which are directly tied to the Bank of Canada’s interest rates.
Rising Delinquency Rates: More businesses are falling behind on their payments. Over 56,000 businesses missed at least one financial payment in the second quarter of 2024, a 10.2% increase from the year before. The rate of businesses missing payments by 60 days or more also increased. A big reason for this is that businesses are struggling to pay back government loans they took out during the pandemic (like CEBA loans).
Reduced Investment and Productivity: When money is tight and borrowing is expensive, businesses often cut back on plans to buy new machinery or equipment. This affects overall business investment and can lead to lower productivity for the country as a whole.
Pandemic Debt Burden: Many businesses are still weighed down by debt from the COVID-19 pandemic. The average small business debt related to the pandemic was estimated at $139 billion in August 2021. With higher debt servicing costs, many are finding it hard to catch up. Business insolvencies (when a business can no longer pay its debts) jumped by over 41% in 2023, the biggest increase in 36 years. Many of these insolvencies were linked to struggles with CEBA loan repayments.
Sector-Specific Stress: Certain industries are feeling the pinch more than others. Transportation, construction, and retail businesses are facing major financial stress. For example, nearly 4.3% of transportation businesses missed payments for over 60 days in Q2 2024.

When individuals struggle, businesses also suffer. Less consumer spending means less income for businesses, which can lead to layoffs, reduced growth, and even business closures. It’s an interconnected web where the financial health of one group affects the other.

cost of living

Finding a Way Forward: Strategies for Managing Financial Hardship

Facing overwhelming debt and the rising cost of living can feel impossible, but there are always options. The key is to take action and seek professional help. You don’t have to face this alone.

For Individuals:

Understand Your Money: Create a Budget: This is the first and most important step. You need to know exactly how much money is coming in and where every dollar is going. Write down all your income and all your expenses, from rent and groceries to your morning coffee. The Financial Consumer Agency of Canada (FCAC) has useful tools like a Budget Planner that can help. This step helps you see where you can cut back.
Cut Down Expenses: Once you have your budget, look for areas where you can spend less. Even small changes add up. Can you cook more at home instead of eating out? Can you cancel subscriptions you don’t use? Every dollar saved is a dollar that can go towards debt or an emergency fund to meet unexpected expenses.
Make a Debt Repayment Plan: Don’t just pay the minimum on your credit cards. High-interest debts are like a hole in your pocket. Focus on paying off the debts with the highest interest rates first (called the “debt avalanche” method) or tackle the smallest debts first to gain momentum (the “debt snowball” method). Having a plan makes it less overwhelming.
Avoid New Debt: This might seem obvious, but it’s crucial. Before borrowing more money, think about all your other options. If you’re struggling to pay current bills, taking on more debt will only make things worse.
Build an Emergency Fund (Even a Small One): Even if you can only save a small amount each week or month, start building a safety net. This fund can prevent you from using credit cards when unexpected costs arise. Aim for at least $500 to start, then work towards three months of living expenses.
Talk to Your Creditors: If you’re having trouble making payments, don’t ignore your creditors. Call them. Many lenders have hardship programs or might be willing to work with you on new payment terms. It’s always better to be proactive than to let things spiral out of control.
Seek Professional Advice: This is where a Licensed Insolvency Trustee (LIT) comes in. An LIT like Brandon Smith from Ira Smith Trustee & Receiver Inc. is a financial professional regulated by the Canadian government. They are the only professionals who can provide advice on all debt solutions, including the formal options under the Bankruptcy and Insolvency Act. They can help you understand your situation, explore all your options, and guide you to the best solution for you.

For Businesses:

Assess Your Financial Health: Get a clear picture of all your business debts, including interest rates, payment schedules, and what you owe.
Prioritize and Consolidate Debts: Focus on paying off high-interest business debts first. You might also consider consolidating multiple debts into a single, easier-to-manage loan if the terms are better.
Optimize Cash Flow: Ensure you’re invoicing clients on time and following up quickly on unpaid bills. Negotiate payment terms with your suppliers if possible. Maintaining a healthy cash reserve is crucial for unexpected costs.
Increase Revenue and Reduce Spending: Look for ways to boost sales, maybe by exploring new markets or introducing new products/services. At the same time, cut unnecessary costs without harming the quality of your products or services.
Look for Government Programs and Grants: The Canadian government offers various programs, grants, and alternative financing options for businesses. Research what’s available that might fit your situation.
Seek Professional Business Financial Advice: Just like individuals, businesses can benefit greatly from professional financial advisors. They can help create a budget, identify areas for improvement, and explore debt solutions tailored for businesses. A Licensed Insolvency Trustee also deals with corporate insolvencies and can guide formal business debt relief options.

Government Resources and Debt Relief Options

The Canadian government understands that people and businesses face financial challenges due to the cost of living. You could be excused from thinking that the government doesn’t care because you aren’t seeing any federal government programs that either reduce the cost of living or provide Canadians with more disposable income to meet the rising cost of living. The federal government does offer various resources and regulated programs to help.

Formal Debt Relief Options (Overseen by a Licensed Insolvency Trustee):

The federal government regulates two main legal solutions for debt forgiveness under the BIA. These are serious options that can offer a fresh start, but they must be managed by a Licensed Insolvency Trustee (LIT).

Consumer Proposal: This is a legal agreement between you and your creditors to pay back a portion of your debt over a period of up to five years. It can reduce your overall debt by up to 80%, and once accepted, your creditors cannot charge interest or penalties. It also stops collection calls and wage garnishments. A consumer proposal is a powerful tool that allows you to avoid bankruptcy while still dealing with your debts. Many Canadians find this a good way to get out of overwhelming debt while keeping their assets.
Bankruptcy: If a consumer proposal isn’t the right fit, bankruptcy is another legal process that provides debt relief. It’s typically a last resort, involving the surrender of non-exempt assets (some assets, like certain pension funds or tools for your job, are “exempt” and protected). Bankruptcy also stops collection actions and can provide a fresh financial start. Both consumer proposals and bankruptcy are overseen by an LIT to ensure fairness and adherence to the law.

Financial Consumer Agency of Canada (FCAC): This government agency offers excellent online tools and calculators, including a Budget Planner and a Financial Goal Calculator. They also have a free 12-module course called “Your Financial Toolkit” that covers a wide range of personal finance topics.
Government Aid Programs: For individuals facing income loss, programs like Employment Insurance (EI), the Canada Recovery Benefit (CRB), and the Canada Emergency Response Benefit (CERB) have provided crucial support during tough times.
Student Loan Forgiveness Programs: Some provinces offer programs to help with student loan debt, such as the BC Loan Forgiveness Program or the Quebec Loan Remission Program. It’s worth checking if your province has such initiatives.
CPA Canada’s Financial Literacy Program: Chartered Professional Accountants of Canada (CPA Canada) offers unbiased financial literacy education through various resources like publications, podcasts, and free in-person sessions delivered by financial professionals.
Bank of Canada’s Financial Education Resources: The Bank of Canada provides a list of trustworthy Canadian and international websites with financial information on topics like inflation, banking, and personal finance.
cost of living

Beyond the Numbers: Taking Control and Moving Forward

The statistics paint a challenging picture for Canadians struggling with the cost of living and debt. From living paycheque to paycheque with no emergency savings to the inability to plan for retirement or afford basic necessities like food and housing, the pressure is immense. Entrepreneurs and businesses are also caught in this financial squeeze, facing rising costs and increasing rates of delinquency.

But knowing the problem is the first step towards a solution. The most important takeaway is that you are not alone, and help is available. Ignoring debt won’t make it disappear; it will only grow and cause more stress.

Key Takeaways and Actionable Advice:

Acknowledge the Problem: The high cost of living is real, and it’s impacting almost everyone. Don’t feel ashamed or embarrassed by financial difficulties.
Take Proactive Steps: Start with a budget. Know where your money goes. Look for ways to reduce expenses, even small ones.
Prioritize Debt Repayment: Focus on high-interest debts first. If you have multiple debts, a strategy like debt avalanche or snowball can help.
Build Your Safety Net: Even if it’s slow, start putting money into an emergency fund. Every dollar helps create a buffer against unexpected costs.
Communicate, Don’t Hide: If you can’t pay your bills, talk to your creditors. They might be able to help you adjust your payments.
Seek Professional Help Immediately: This is perhaps the most crucial advice. A Licensed Insolvency Trustee (LIT) like Brandon Smith at Ira Smith Trustee & Receiver Inc. can provide expert, unbiased advice on all your debt options. They can explain consumer proposals, bankruptcy, and other strategies in a way that makes sense, helping you choose the best path to get rid of your debt and regain control of your financial life. This advice is completely confidential and can be the first step towards truly rebuilding your financial future.
Prioritize Your Well-being: Financial stress takes a heavy toll. Remember to take care of your mental and physical health. Lean on your support network and consider professional help if needed.

Cost of Living Conclusion

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost of living and debt challenges and move towards a more secure and hopeful financial future.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

As a licensed insolvency trustee serving the Greater Toronto Area, I encourage consumers and business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of insolvency and seeking professional advice early, many people and businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

cost of living

Tags Bankruptcy, Canada Pension Plan, canadian cost of living, consumer proposals, cost of living, food prices, housing costs, housing prices, inflation rate, interest rates, Ira Smith Trustee, mortgage costs, mortgage payments, real estate prices, unexpected expenses, utility bill

Brandon Blog Post

CREDIT CARDS DEBT SOLUTIONS TORONTO: THE LICENSED INSOLVENCY TRUSTEE COMPLETE GUIDE

Post author By Brandon Smith
Post date June 9, 2025

credit cards debt

Understanding Credit Cards Debt

It has recently been reported in the Canadian media that Canadians living in the GTA, including Vaughan, Markham, Toronto, Mississauga and York Region are now falling behind in both mortgage payments and other debt payments, including credit cards. If you’re losing sleep over credit cards debt and wondering if another cup of coffee can fix insolvency, you’re in good company. Let me tell you about one potential client who decided to pay down her debt by selling everything but the kitchen sink (that story ends with a suspiciously clean living room and a little more dignity than she expected).

Credit cards debt isn’t just numbers—it’s late-night stress, broken sleep, and more apologizing to your barista than you’d like. But if you’re buried in statements, you need more than the usual advice you’ve heard a dozen times. In this Brandon’s Blog, I’m being real to give you some breathing room.

Before we dive into solutions, let’s be clear on what we’re dealing with. Credit cards debt isn’t just those numbers on your monthly statement—it’s a financial reality that affects millions of Canadians every day.

Definition and Basics

Credit cards debt occurs when you carry a balance from month to month instead of paying off your entire statement balance. Here’s how it works: when you make purchases with your credit card and don’t pay the entire balance by the due date, the remaining amount becomes debt. The credit card company then charges interest on this balance, and if you only make minimum payments, that interest compounds monthly.

In Canada, the average credit card interest rate sits around 19-29% annually. That means if you owe $5,000 and only make minimum payments, you could end up paying thousands more in interest over time. The math is brutal, but understanding it is your first step toward taking control.

Impact on Credit Score

Your credit cards debt directly affects your credit score in several ways. Payment history makes up 35% of your credit score—the biggest factor. Missing payments or making late payments can drop your score significantly. But there’s another sneaky factor: credit utilization.

Credit utilization is how much of your available credit you’re using. If you have a $10,000 limit and owe $7,000, you’re using 70% of your available credit. Experts recommend keeping this below 30%, ideally under 10%. High utilization signals to lenders that you might be financially stretched, which can hurt your score even if you’re making payments on time.

A damaged credit score doesn’t just affect future credit cards—it can impact your ability to get a mortgage, car loan, or even rent an apartment. Some employers and insurance companies also check credit scores.

Legal Consequences: Wage Garnishment and Account Levies

Here’s where things get serious. If you stop making payments entirely, credit card companies won’t just send stern letters forever. In Canada, they can take legal action to collect what you owe.

After several months of non-payment, your account typically gets sent to collections. If collection efforts fail, the creditor can sue you for the debt. If they win (which they usually do), they can obtain a court judgment. With this judgment, they can:

Garnish your wages: In Ontario, creditors can take up to 20% of your gross wages directly from your paycheck
Freeze your bank accounts: They can obtain a court order to freeze funds in your bank accounts
Place liens on property: In some cases, they can put a lien on your home or other assets

The good news? There are legal protections and exemptions. Certain types of income, like social assistance, employment insurance, and pensions, have some protection from garnishment. But don’t wait for it to get this far—there are always better options.

Causes of Credit Cards Debt

Understanding how you got here is crucial for making sure it doesn’t happen again. Let’s break down the main culprits behind credit card debt in Canada.

High Annual Percentage Rates (APR)

Canadian credit card interest rates are among the highest forms of consumer debt. While mortgage rates might be around 5-7%, credit cards typically charge 19-29% annually. Some store cards and cash advance rates can be even higher.

Here’s the kicker: credit card companies make most of their money from interest, not annual fees. They’re betting that you’ll carry a balance, and those high rates ensure they profit handsomely when you do. Even if you think you’ll pay it off quickly, life has a way of getting in the way.

Only Paying the Minimum

This is the credit card company’s favourite scenario. Minimum payments are typically calculated as a small percentage of your balance, often just 2-3%. On a $5,000 balance with a 20% interest rate, your minimum payment might be only $100.

But here’s the trap: most of that payment goes toward interest, not principal. You might pay $80 in interest and only $20 toward your actual debt. At this rate, it would take over 30 years to pay off that $5,000, and you’d pay more than $11,000 in total. The credit card companies designed it this way.

Poor Money Management

Let’s be honest,, without being judgmental, many Canadians never learned proper money management skills. Schools, until very recently, didn’t teach budgeting, and many families don’t discuss finances openly. You’re not alone if you’re figuring this out as you go.

Poor money management often looks like:

Not tracking spending or having a budget
Using credit cards for regular expenses without a payoff plan
Not understanding how interest compounds
Making financial decisions based on emotions rather than facts
Treating available credit as available money

The good news? These are all learnable skills, and it’s never too late to start.

Unexpected Expenses

Sometimes credit card debt isn’t about poor planning—it’s about life throwing you curveballs. Car repairs, medical expenses, job loss, or family emergencies can force you to rely on credit cards for survival.

In Canada, many people don’t have adequate emergency savings. Statistics show that nearly half of Canadians are within $200 of not being able to pay their bills each month. When unexpected expenses hit, credit cards become the only option. While this might be necessary in the moment, it can quickly spiral into long-term debt problems.

credit cards debt

Consequences of Credit Cards Debt

The impact of credit cards debt goes far beyond just owing money. It affects your entire financial life and, frankly, your overall well-being.

Financial Implications

The most obvious consequence is the financial cost. High interest rates mean you’re paying much more than the original purchase price. But the financial implications go deeper:

Opportunity Cost: Every dollar you pay in credit card interest is a dollar you can’t save, invest, or spend on things you need. If you’re paying $200 monthly in credit card interest, that’s $2,400 per year that could have gone toward building an emergency fund or saving for a down payment.

Reduced Borrowing Power: High credit card balances hurt your debt-to-income ratio, making it harder to qualify for mortgages, car loans, or other credit. Even if you do qualify, you might face higher interest rates because you’re seen as a higher risk.

Limited Financial Flexibility: When a large portion of your income goes to debt payments, you have less room to handle life’s ups and downs. A minor emergency can become a major crisis when you’re already stretched thin.

Compound Effect: Credit card debt can create a vicious cycle. High balances lead to high minimum payments, leaving less money for other expenses, which can lead to more credit card use, which increases balances and minimum payments.

Psychological and Physiological Impacts

Here’s what the financial industry doesn’t always talk about: debt stress is real, and it affects your health in measurable ways.

Mental Health Effects: Persistent worry about money can lead to anxiety and depression. Many Canadians report losing sleep over their finances. The constant stress of juggling payments, avoiding calls from creditors, and feeling trapped can take a serious toll on mental health.

Physical Health Impacts: Chronic financial stress doesn’t just stay in your head. It can cause:

Headaches and muscle tension
Digestive problems
High blood pressure
Weakened immune system
Sleep disorders

Relationship Strain: Money problems are one of the leading causes of relationship conflicts and divorce in Canada. The stress of debt can affect how you interact with family and friends. Some people become withdrawn, while others become irritable or defensive about spending.

Self-Worth Issues: Many people tie their financial situation to their worth. Debt can lead to feelings of shame, failure, or inadequacy. This emotional burden can make it even harder to take the practical steps needed to address the debt.

Decision Fatigue: Constantly worrying about money and making difficult financial choices can exhaust your mental energy. This can lead to poor decision-making in other areas of life, creating a cycle where stress leads to more problems.

The important thing to remember is that these impacts are real and valid, but they’re also temporary. As you work toward solving your debt problems, you’ll likely notice improvements in these areas too. Your mental and physical health matter just as much as your financial health—they’re all connected.

Credit Cards Debt Confessions from Rock Bottom: Facing the Debt Monster

If you’re staring at your credit card statements, feeling like you’re drowning in debt with no cash in sight, you’re not alone. Canadians everywhere are feeling the squeeze—rising living costs, job uncertainty, and hefty mortgages and car loans have pushed many to the edge. The stress is real, and sleepless nights are a common occurrence. But here’s the truth: the first step out of this mess is financial honesty—with a healthy dose of tough love.

“Being honest with yourself is the bravest first step out of a debt spiral.” — Lesley-Anne Scorgie

Step One: Brutal Honesty About Your Debt

Before you can build any debt management strategy, you need a clear picture of where you stand. Grab whatever works—a spreadsheet, a napkin, your phone—and list every credit card balance, interest rate, and minimum payment. No skipping, no sugarcoating. This is your financial reality check. Research shows that self-assessment and goal-setting are the cornerstones of effective financial planning.

List all debts (credit cards, loans, lines of credit)
Record each interest rate, especially the high ones
Note when the minimum payments are due

High-interest credit card debt can quietly drain your finances the fastest. Identifying which card is costing you the most is key—this is where your focus should go first.

Step Two: Ditch the Self-Blame, Start Planning

It’s easy to spiral into guilt or shame, but that won’t help you pay off a single dollar. Instead, channel that energy into actionable planning. Canadians’ confidence in repaying credit cards debt is slowly rising—45% now expect it will take six months or more to get out from under, down from 51% last year. That’s progress, and it starts with a plan.

Step Three: Pause All Non-Essential Spending

This is the tough part. Cutting out non-essential spending feels scary, but it’s a game-changer. Cancel subscriptions, skip takeout, and avoid impulse buys. Every dollar you save can go toward your minimum payments. Even small changes add up fast. If you’re worried about missing out, remember: this is temporary, and it pays off in the long run.

Step Four: Use Every Tool—Even Your Tax Refund

Over 70% of Canadians receive a tax refund. If you’re one of them, put that money straight toward your highest-interest debt. It’s a quick way to make a dent and boost your momentum. Research indicates that even a small windfall can help you break the cycle of minimum payments and mounting interest rates.

Real Talk: Stress Is Normal, But Action Is Powerful

Stress and sleeplessness are natural side effects of financial strain. Don’t beat yourself up. Instead, focus on what you can control: honest self-assessment, a clear debt management strategy, and a commitment to trimming expenses. Facing your debt monster head-on is tough, but it’s the only way forward. And remember, if you need help, there are professionals and programs ready to support you.

credit cards debt

The Great Cash Hunt: Squeezing Pennies From Stone (and Facebook)

If you’re a Canadian consumer worried about your credit cards debt and wondering where on earth you’ll find extra income, you’re not alone. The good news? There are more ways to squeeze cash from your current situation than you might think—even if it feels like you’re wringing water from a stone.

Unconventional Ways to Boost Cash Flow

Let’s get creative. Research shows that Canadian debt advice often starts with side hustles and decluttering. Have you considered picking up extra shifts at work or dusting off an old side hustle? Babysitting, dog walking, house cleaning, or even personal training can add up quickly. And don’t forget about that tax refund—over 70% of Canadians are owed money by the CRA. Even if you’re late, file those taxes! That refund could be the cash lifeline you need.

Extra shifts: Ask your employer for overtime or additional hours
Side hustles: Babysitting, dog walking, or cleaning for neighbours
Late tax filing: Don’t skip it—your tax refund might surprise you
Collect owed money: Follow up on bonuses or debts friends still owe you

Declutter With Abandon

Here’s where things get interesting. If it’s collecting dust, it’s potential debt relief. Look around: that old bike, the bread maker you never use, or the stack of video games from 2012. Platforms like Kijiji and Facebook Marketplace are full of buyers. This potential client sold a rare ’90s bike for double what she paid—sometimes nostalgia pays off in real cash.

“Every forgotten gadget or outgrown coat is a tiny step out of debt.” — Lesley-Anne Scorgie

Don’t underestimate the power of decluttering. Not only does it free up space, but it can also give you a quick cash injection. Research indicates that selling possessions is one of the most common ways Canadians improve cash flow in a pinch.

Strategic Cuts: Kill Non-Essential Spending

Now’s the time to go full-on military with your budget. Cancel unused subscriptions and memberships. Grocery shop with a plan—no more wandering the aisles and tossing random snacks into your cart. Buy only what you need, and aim for zero food waste. If you’re renting or leasing, avoid renewing unless it’s necessary. Every dollar saved is a dollar that can go toward your debt.

Subscriptions: Cut anything you don’t use weekly
Groceries: Shop with a list, buy in bulk, and cook at home
No new leases: Hold off on new car or apartment leases if you can

Remember, cutting recurring costs is more powerful than chasing random coupons. The goal is to redirect every spare dollar toward lowering your credit cards debt. As you chip away at your balances, you’ll start to see progress—and that’s the best motivation of all.

Avalanche, Not Snowball: Smarter Ways to Attack Credit Cards Debt

If you’re staring at a stack of credit card bills and feeling like you’re drowning, you’re not alone. Canadians everywhere are facing the same uphill battle, especially as interest rates stay higher and the cost of living squeezes every last dollar. But there’s a smarter way to dig out—one that doesn’t just chip away at your debt, but helps you save on interest and get ahead faster: the Avalanche Method.

Here’s the real talk: you must always make your minimum payments on every card. That’s non-negotiable. But if you can scrape together even a little extra, whether from a side gig, selling unused stuff, or cutting back on spending, throw every spare dollar at the card with the highest interest rate. That’s your financial enemy number one. This is the heart of the Avalanche Method, and it’s proven to save you more money than the popular “snowball” approach, which focuses on the smallest balance first.

Why does this work? Because interest rates on credit cards debt are brutal. By targeting the highest-rate balance, you slow the snowballing effect of compounding interest. Research shows that Canadians who stick to the Avalanche Method and stay ruthless about not adding new debt can see real progress in as little as 90 days. As Lesley-Anne Scorgie puts it:

“The avalanche method only works if you avoid new debt while attacking existing balances.”

That’s the catch. You have to be relentless. No new purchases, no “just this once” exceptions. If you’re serious about getting out of credit card chaos, every dollar counts—and every new charge sets you back.

But what if you’re still falling behind, even after cutting expenses and boosting your income? Don’t panic. This is when you pick up the phone and call your credit card companies. It might feel intimidating, but remember: they want to get paid. Explain your situation honestly and ask about options like:

Lowering your interest rates
Waiving late or over-limit fees
Setting up a hardship plan

Sometimes, just asking is enough to get a break. And if you hear about debt consolidation or balance transfer offers, listen up. These strategies let you combine your debts—possibly even other loans—into a single payment with a lower interest rate. That means more of your money goes toward the principal, not just the interest. But be careful: applying for too many new credit products can ding your score, and missed payments might make it tough to qualify for the best rates.

If you’re stuck, consider a Debt Management Plan (DMP) through a non-profit credit counselling agency. Research indicates that DMPs can slash your interest rates—sometimes down to zero—and help you pay off debt faster. It’s not a magic fix, but it’s a lifeline for many Canadians feeling overwhelmed by credit card chaos.

Bottom line? The Avalanche Method, paired with honest communication and smart debt management strategies, gives you the best shot at breaking free from high-interest debt. Stay focused, stay ruthless, and remember: you’re not alone in this fight.

credit cards debt

Last Stop: When DIY Doesn’t Cut It, Call the Credit Cards Debt Pros

Let’s be real—sometimes, no matter how hard you hustle, cut back, or negotiate, your debt just won’t budge. If you’ve spent 90 days throwing everything you’ve got at your credit cards debt and you’re still underwater, it’s time to consider a different approach. Don’t wait for disaster to strike. This is the moment to reach out for professional debt relief—and there’s no shame in that.

Here’s the truth: Licensed insolvency trustees are the debt pros. We’re not here to judge you or scold you for past mistakes. Instead, we offer expert, practical help tailored for Canadians facing tough financial realities. Research shows that specialized support from credit counselling agencies and insolvency trustees can make a world of difference when self-guided strategies just aren’t enough. They’ll walk you through your options, including the possibility of an Ontario consumer proposal—a formal arrangement that lets you pay back a portion of what you owe, and stopping those relentless collection calls in their tracks.

What’s a consumer proposal, exactly? Think of it as a structured alternative to bankruptcy, designed specifically for Canadians who need a lifeline. With a consumer proposal, you work with a licensed insolvency trustee to negotiate a manageable repayment plan with your creditors. This can mean lower monthly payments, frozen interest, and—best of all—peace of mind. It’s not a magic wand, but it’s a real, legal solution that can help you rebuild without the crushing stigma of bankruptcy.

Maybe you’re considering borrowing from family or friends to get by. If you go down this road, treat it like a real loan. Write out an agreement, set a clear repayment schedule, and stick to it. This isn’t just about protecting your relationships—it’s about building trust and accountability as you work toward debt relief.

One thing to keep in mind: if you’ve tried for a consolidation loan and been turned down, don’t keep reapplying in a panic. Each application can ding your credit score, making things even harder. Instead, focus on making progress for a few months, then try again if your situation improves.

Most importantly, know this: asking for expert help isn’t failure—it’s financial self-defence. As Lesley-Anne Scorgie puts it:

“Asking for expert help isn’t failure—it’s financial self-defence.”

So, if you’ve given it your all for 90 days and you’re still stuck, don’t let shame or fear hold you back. Connect with a licensed insolvency trustee or a reputable credit counselling agency. They’ll help you explore every option, from consumer proposals to debt management plans, and guide you toward a future where your money—and your life—are back under your control.

Credit Cards Debt: Conclusion

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

credit cards debt

Brandon Blog Post

PAYING CREDITORS BEFORE BANKRUPTCY? ONTARIO COURT’S $400,000 DECISION CHANGES EVERYTHING

Post author By Brandon Smith
Post date May 26, 2025

A Recent Ontario Court Decision Every Business Owner Should Know About

As a Licensed Insolvency Trustee practicing in the Greater Toronto Area, I’ve guided many businesses through difficult financial times. Today, I want to share an important recent court decision showing the legal development of how companies handle creditor payments when facing money troubles.

What Happened: The $400,000 Payment That Backfired

The Court of Appeal for Ontario recently made a big decision in a legal action called RPG Receivables Purchase Group Inc. v. American Pacific Corporation (released May 15, 2025).

Here’s what happened in simple terms:

A company called Specialty Chemical Industries was struggling financially
They owed over $11 million to various parties in respect of various secured loans and unsecured creditor suppliers’ unpaid debts
One supplier, American Pacific Corporation (AmPac), was their main supplier
Specialty paid AmPac $400,000 to get $100,000 worth of chemicals
They hoped this would help them fill an order for their main customer
Less than two months later, Specialty went bankrupt

The court ruled that this $400,000 unsecured debt payment was a “preference” – meaning Specialty unfairly favoured one creditor (AmPac) over all their other creditors. AmPac was ordered to return the money.

Creditor vs. Debtor: What Is a Creditor Preference?

When a business is going under, the law says all creditors should be treated fairly. Section 95 of the Bankruptcy and Insolvency Act (BIA) calls this “creditor equality.”

A preference happens when:

A debtor pays one creditor shortly before bankruptcy (within 3 months)
This payment gives the payee better treatment than others
The debtor knew it couldn’t pay all its debts

The law assumes any payment made within 3 months of bankruptcy was intended to prefer that payee. It’s up to the business to prove otherwise.

Why Did Specialty’s “Business Survival” Argument Fail?

The argument was that Specialty paid AmPac under unsecured credit terms because they needed to keep their business going. It was argued this wasn’t preferring one over others – it was trying to save the company for everyone’s benefit.

The court didn’t buy this argument. Here’s why:

No solid plan: Specialty had no clear plan showing how this payment would help the company and all stakeholders
Poor financial position: After the payment, they had only $35,000 left but owed $11 million
Low profit margins: Their profit margins were only 2-10%, not enough to dig out of debt
No testimony: No company director testified to explain their plan
Failed strategy: Their main customer left anyway

FULL DISCLOSURE: My Firm was the licensed insolvency trustee administering the company director’s bankruptcy. The personal bankruptcy occurred by the court issuing a Bankruptcy Order in January 2019, through a legal proceeding initiated by RPG. Both the director and my Firm have since been discharged. My Firm was not involved in this court case I am writing about.

What This Means for Your Business

If your business is facing financial problems, this case offers important lessons:

Do:

Treat all creditors fairly if you’re approaching insolvency
Document your business plans that show how payments benefit all stakeholders
Seek professional advice early from a Licensed Insolvency Trustee

Don’t:

Pay one unsecured party a large sum when you can’t pay others
Make last-minute payments, hoping to save your business without a solid plan
Assume “business necessity” justifies preferring one over another

I often see business owners make decisions based on hope rather than reality when facing financial trouble. They think, “If I just pay this one supplier, I can keep going.”

The court’s message is clear: hope isn’t enough. If you can’t prove your plan truly benefits all stakeholders,, not just one, the payment could be considered a preference and later clawed back.

Key Takeaways

All unsecureds rank equally under bankruptcy law
Payments made shortly before bankruptcy are carefully scrutinized
Commercial pressure doesn’t justify preferring one over another
Only evidence-based rescue plans can justify paying one over others

Protecting Your Business from Preference Issues

As a business owner, you need to understand these rules before financial troubles hit. If you’re struggling to manage all your payments, it’s time to speak with a Licensed Insolvency Trustee about your options.

We can help you develop strategies that comply with the law while giving your business the best chance for recovery, or at least ensure you will not be giving yourself bigger headaches and legal liability if bankruptcy becomes necessary.

Final Thoughts on Fairness

The law may seem harsh, but it serves an important purpose: ensuring everyone is treated fairly when a business fails. Without these rules, stronger or favoured suppliers would get paid while others get nothing.

Remember: when it comes to creditor treatment during financial distress, good intentions aren’t enough. The law demands fairness – even when that’s difficult.

Preference FAQ: Your Questions Answered

What exactly does “anti-preference” mean in bankruptcy law?

The anti-preference rules in the BIA stop businesses from playing favourites when they’re about to go bankrupt. These rules make sure all regular unsecureds are treated fairly and share equally in whatever assets are left. This is the cornerstone of Canadian bankruptcy law – fairness for all stakeholders.

When might a payment to a creditor be considered unfair?

A payment might be considered unfair (or “void”) when:

It’s made within 3 months before bankruptcy
It’s made while the business can’t pay all its debts
It gives that party better treatment than others

If these conditions are met, the court assumes the payment was meant to give special treatment.

What is a “rebuttable presumption” regarding creditor payments?

This legal term simply means the court starts by assuming any payment made to a creditor within 3 months of bankruptcy was intended to favour them. It’s then up to the business to prove this wasn’t their intention. Even if a creditor was putting pressure on the business, that pressure alone isn’t enough to justify the payment.

Can a business explain that they were under pressure from a creditor?

Yes, but with limits. A business can tell the court about pressure put on them to help explain their situation, but pressure alone won’t justify the payment. The court will consider this information as part of the whole picture, not as a valid reason for favouring one over others.

How can a business prove they weren’t trying to favour one creditor?

A business must show that its main goal wasn’t to give one stakeholder special treatment. They need to prove, with clear evidence, that they had a different reason for making the payment, like trying to keep the business going with a solid plan that would benefit all stakeholders in the long run.

When is “trying to save the business” a valid reason for paying just one creditor?

This reason only works if the business had a realistic plan that would help everyone, not just one. Having a vague hope or wish isn’t enough. The business needs to show:

A sensible business plan
Evidence that the plan could realistically work
Proof that the plan would benefit all stakeholders, not just one
That the financial situation wasn’t already hopeless

Why does a business continuity plan need to be “reasonable”?

The “reasonable plan” requirement ensures businesses don’t drain their remaining assets, helping one or two parties while leaving nothing for everyone else. A reasonable plan aligns with bankruptcy law’s core purpose – fair treatment for all. If a payment is part of a genuine strategy that could improve the situation for everyone, then it isn’t considered unfair to others.

What factors do courts look at when deciding if a business plan was reasonable?

Courts consider several practical factors:

Was there a clear, sensible business plan?
Was the business already too far gone financially?
Did the potential benefits outweigh the payment amount?
Would a bankruptcy trustee have made the same decision to maximize recovery for all creditors?

Six Key Lessons from the Preference Case

This case teaches us important lessons about how creditors are treated when a business is heading toward bankruptcy. Let’s break down what the Court of Appeal for Ontario said in simple terms:

1. All Creditors Must Be Treated Equally

The court firmly reminded us that the foundation of bankruptcy law is treating all creditors fairly. Section 141 of the BIA states that “all unsecured creditors rank equally and share equally in the bankrupt’s assets.” This isn’t just a nice idea – it’s the law.

2. Payments Shortly Before Bankruptcy Can Be Reversed

When a business pays one creditor right before bankruptcy (within 3 months), that payment can be “voided,” – meaning the creditor has to give the money back. This happens when:

The business was already unable to pay all its debts
The payment gave that creditor better treatment than others

In this case, AmPac had to return the entire $400,000 payment.

3. Courts Assume Preferential Intent

If arrangements with creditors, including a payment, check the boxes above, the court starts with the assumption that the business intended to give that creditor special treatment. This is called a “rebuttable presumption,” which means it’s up to the business to prove otherwise.

4. Pressure from a Supplier Isn’t an Excuse

The court clarified an important point: just because a creditor was demanding payment doesn’t justify giving them special treatment. While the court will consider creditor pressure as part of the whole story, it can’t be the main excuse for the payment.

5. Business Continuation Plans Need to Be Realistic

The court established a clear standard: if a business claims they made a payment to stay afloat (not to prefer one creditor), they must show they had a reasonable plan. This plan must:

Be more than just wishful thinking
Shows real potential to benefit all creditors, not just one
Be something a bankruptcy trustee might reasonably do to help all creditors

6. Courts Look at Hard Facts, Not Just Good Intentions

When deciding if a business plan was reasonable, courts look at practical factors:

Was there a sensible, detailed business plan?
Was the business already beyond saving?
Did the potential benefits outweigh the payment amount?
Would the plan help satisfy all creditor claims?

The Hard Truth About Equality

The outcome of this case might seem harsh. AmPac provided goods, Specialty made a payment, and now AmPac has to give the money back. But bankruptcy law has a greater purpose – making sure one creditor doesn’t get special treatment while others get nothing.

In the end, the court ordered AmPac to return the entire $400,000. This reinforces an important principle: when a business is heading toward bankruptcy, fairness to all creditors matters more than the survival of one relationship.

For business owners, the message is clear: when you’re facing financial trouble, you can’t play favourites with creditors – even if it feels like the only way to keep your business alive. The law demands fairness, even when fairness is difficult.

As a licensed insolvency trustee serving the Greater Toronto Area, I encourage business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of company insolvency and seeking professional advice early, many businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

Brandon Blog Post

INSOLVENCY ADVISORY SERVICES: STANDOUT HELP DOES NOT NEED HORRIFYING HIGH COSTS

Post author By Brandon Smith
Post date December 23, 2024

This is our last blog post for 2024. We will be back with more in January. Happy Holidays and a Happy and Healthy New Year to all of our readers.

Insolvency Advisory Services: Introduction

Insolvency is a complex financial situation with significant legal and practical implications. This Brandon’s Blog post explores the key aspects of insolvency law in Canada, drawing on authoritative sources to provide a clear and informative overview.

As the pandemic-induced economic rollercoaster continues, I recently read an article in The Globe & Mail Report on Business about the world of insolvency advisory services. On the one hand, professionals like me help to fix corporate car crashes during crises, seemingly thriving off others’ misfortunes. On the other hand, our services can lead struggling businesses to a new beginning, saving jobs and families. Not just the workers or the owners, but all the businesses that rely upon that one business. Let’s dive into this fascinating landscape where financial insolvency wizardry collides with corporate despair.

What is Insolvency?

Insolvency refers to a situation in which an individual or a company is unable to fulfill their financial obligations as they become due. In Canada, the legal framework offers several mechanisms to manage insolvency, with the goal of balancing the interests of both debtors and creditors.

The Insolvency Legal Framework

Key Legislation in Canadian Insolvency Law

The Bankruptcy and Insolvency Act (BIA) serves as the fundamental legislation governing insolvency in Canada. This federal law establishes the protocols for addressing bankruptcies and proposals, ensuring a fair and systematic approach for all parties involved.

In conjunction with the BIA, the Companies’ Creditors Arrangement Act (CCAA) offers a framework specifically designed for the restructuring of insolvent corporations, particularly those with debts exceeding $5 million. Both the BIA and CCAA are administered by the Office of the Superintendent of Bankruptcy (OSB), which operates under the Department of Innovation, Science and Economic Development Canada. The OSB is essential in overseeing the insolvency process, licensing insolvency professionals, and maintaining public records related to insolvency matters.

Provincial Laws and Their Impact on Insolvency

Federal legislation primarily regulates the fundamental aspects of insolvency in Canada; however, provincial laws significantly influence this area, particularly concerning property and civil rights. Specific issues addressed by provincial legislation include:

The establishment of security interests The handling of absconding debtors Regulations surrounding bulk sales Provisions related to fraudulent conveyances

This interaction between federal and provincial laws results in a comprehensive legal framework for managing insolvency in Canada.

Roles and Responsibilities

Licensed Insolvency Trustees are licensed professionals authorized by the OSB to administer bankruptcies, handle proposals, and act as monitors or receivers. Insolvency Trustees play a pivotal role in guiding debtors and creditors through the insolvency process, ensuring compliance with legal requirements.

Access to Insolvency Information

The OSB provides a searchable database of bankruptcy and insolvency records that is available to the public for a fee. This database includes detailed information on various insolvency proceedings, such as bankruptcies, proposals, receiverships, and proceedings under the CCAA. Furthermore, the publication “Insolvency Insider Canada” offers current news and legal updates on trends related to insolvency in Canada.

Insolvency Advisory Services: The Profit Motive

Have you ever thought about how much insolvency advisers bill out per hour? The article stated that downtown Bay Street bankruptcy legal counsel and licensed insolvency trustees charge up to $1,300 per hour for their services. Are these fees justified? Or are they merely a symptom of a broken system?

Understanding Senior Claims

In insolvency cases, fees charged by advisers are classified as senior claims. This means they get paid before other creditors. When a company admits insolvency and makes a filing under either the BIA or the CCAA, these advisers work hard to navigate the complex legal landscape.

But who benefits the most? According to The Globe & Mail article:

Adviser fees have been climbing steadily over the years. While companies going through insolvency struggle with debt, they may very well be paying unnecessarily high fees.

The Financial Implications

What does this mean for businesses? When firms find themselves in the dire straits of insolvency, they owe a mountain of money. The debt piles up, and the cost of hiring pricey advisers only adds to their woes. In many cases, legal and financial advisers are feasting on the carcass of struggling companies.

The Cold Reality

This narrative reveals the harsh truth: while companies drown in debt, they may very well be paying too much for their advisers. Insolvency advisers are essential for navigating bankruptcies and restructurings, but many companies may be paying too much for the help they need. No doubt there are certain regulated industries or overly complex businesses that need the minds and skills of the downtown Bay Street advisers. But that is not the majority of Canadian businesses.

Insolvency Case Study: Do Our Fees Hold Up In Court?

We are involved in the liquidation case of two companies. Certain stakeholders, including the Estate Trustees of the Estate of a deceased shareholder, disagreed with the fees we and our legal counsel charged. A court hearing concerning our fees as a court-appointed liquidator and those of our legal counsel was held in the winding-up case.

As liquidator we sought approval for substantial fees which were challenged by the respondents, shareholders of the companies, as disproportionate to the assets involved. The judge considered various factors including the complexity of the case, the time spent, and the results achieved, ultimately approving the fees, citing prior court approvals of the liquidator’s actions and rejecting the respondents’ arguments as a collateral attack. The decision highlights the principles of fairness and reasonableness in determining court officer fees.

What factors influenced the assessment of the fairness of our liquidation fees?

The court evaluated several factors to assess the fairness of the liquidation fees charged by the Liquidator and their counsel. Ultimately, the judge ruled in our favour based on the following considerations:

Nature, Extent, and Value of Assets: The Liquidator was responsible for liquidating two companies that presented moderately complex tax and accounting challenges.
Complications and Challenges Encountered: The Liquidator faced numerous obstacles, including concurrent family and estate proceedings, conflicts between the Estate Trustees and another shareholder, and multiple adjournments. Additionally, delays in court proceedings instigated by the Estate Trustees contributed to increased costs.

These delays included:

The conversion of the liquidation proceedings from voluntary to court-supervised, happened almost a year after the liquidation proceedings began.
The proposed sale of was delayed because the Estate Trustees continued accepting new orders despite the initial agreement to not accept new orders during the voluntary liquidation. They requested time to procure an offer to sell the company.
Further delays were caused when the Estate Trustees proposed to remove one of the companies from the liquidation but failed to do so. The Liquidator was then required to notify customers that business operations would cease once current orders were completed.
The Estate Trustees switched counsel, which caused adjournments and increased time spent on the case.

The degree of assistance provided by the company. The Estate Trustees were confrontational and slow to provide information, which made the Liquidator’s job more difficult.
The time spent. The liquidation proceedings were protracted due to issues between the stakeholders.
The Liquidator’s knowledge, experience, and skill. Both the Liquidator and its counsel were found to have significant knowledge and experience in corporate and insolvency matters.
Diligence and thoroughness. The Liquidator produced three comprehensive reports and affidavits for the motion. Their invoices provided a clear understanding of the thoroughness of their work.
The responsibilities assumed. The Liquidator was responsible for extensive activities, which were outlined in its reports and approved by the court. These activities included monitoring business operations, selling one of the companies’ primary assets, engaging various professionals, establishing and monitoring a claims process, and taking steps to wind down an active business.
The results of the efforts. The Liquidator successfully converted the voluntary liquidation into a court-supervised process. They managed the companies’ finances, initiated a claims process, and made interim distributions.
The cost of comparable services when performed prudently and economically. The rates charged by the Liquidator and its counsel were comparable to those charged by other providers in the Toronto market. Although the respondents argued that the fees were disproportionate to the value of the businesses, the court ultimately ruled that the fees were fair and reasonable given the factors outlined above.

The Mechanics of Corporate Insolvency

Understanding corporate insolvency and bankruptcy law can feel like navigating a maze. Why is there a need for specialized expertise in this field? Let’s dive into this complex world.

1. The Ins and Outs of Bankruptcy Law

Bankruptcy law is not just a set of rules; it’s a detailed framework designed to address financial distress. At the core is the legal process that aims to protect debtors while ensuring creditors get as much back as possible. This is where specialized knowledge comes in. It is critical to understand the nuances, strategies and strategizing, litigation processes, and the potential financial ramifications of each decision.

Think about it: would you trust someone who has only dabbled in the subject to handle a significant financial crisis? I wouldn’t. Expertise in this area enhances efficiency. A knowledgeable insolvency adviser can streamline the process and avoid costly missteps.

Also, this specialized knowledge often leads to reduced competition. But there are alternatives; there are experienced insolvency professionals who operate in lower-cost boutique firms like mine. Their offices may not be as fancy as the Bay Street crowd, but, what do you want to pay for. Their knowledge and expertise or their office furnishings and high rent?

2. A Day in the Life of a Licensed Insolvency Trustee Adviser

What does a licensed insolvency trustee adviser actually do day-to-day? Most of our time on corporate restructuring files involves analyzing company financials and negotiating with creditors. Navigating through heaps of paperwork is part of the gig, too. Advisors must also attend court hearings and meetings with various stakeholders, always looking to find the best possible outcome.

Typical Tasks Include:

Drafting essential documents and filings.
Conducting asset evaluations.
Coordinating with legal teams and financial analysts.

On any given day, a licensed insolvency trustee adviser may switch gears between solving legal puzzles and crunching numbers. It’s a mixture of law, finance, and a bit of psychology when negotiating to save distressed businesses.

3. Key Players in Corporate Insolvency

Corporate insolvency involves several key roles, each contributing to the process in distinct ways:

Legal Counsel: Legal professionals represent the interests of their clients and assist in navigating the complex legal landscape associated with insolvency proceedings. Court-
Court-Appointed Receivers/Insolvency Trustees: These individuals are tasked with managing the assets of the company during the insolvency process, ensuring proper handling and distribution according to legal guidelines.
Monitors: Monitors oversee the restructuring process to prevent the company from entering receivership or bankruptcy. They ensure that the company adheres to all legal requirements throughout the process.

Each of these roles is essential in facilitating a fair and orderly insolvency process. Together, they work towards achieving the best possible financial recovery while upholding the integrity of the legal framework.

4. Why Experience Really Matters

Experience can make or break an insolvency case. A seasoned insolvency professional will have seen various crises unfold, equipping them with the knowledge of what strategies work. They can anticipate challenges and react swiftly to changes in circumstances.

Also noteworthy is that judges usually have a high regard for seasoned practitioners. The more experienced the insolvency adviser, the more likely they will get favourable outcomes – and that’s crucial. After all, when dealing with millions on the line, would you want a novice watching your back?

Ultimately, the world of corporate insolvency is a ripe field for those with the right set of skills and experience. But remember, it’s about guiding businesses through some of the most turbulent waters they face.

The Ripple Effect of Rising Insolvency Advisories

In today’s economic climate, the rise in insolvency advisory fees is an issue that’s hard to ignore. It touches everyone – from entreprenurial businesses trying to stay afloat to investors scratching their heads over diminished returns.

Entrepreneurial Businesses and Higher Fees

As advisory fees rise, entrepreneurs are generally shut out of being able to restructure. That is one of the reasons why Ira Smith Trustee & Receiver Inc. was established. We offer the highest quality of service that rivals any Bay Street licensed insolvency trustee firm. However, due to our unique boutique formula, our hourly rates are slightly less than half of those charged by downtown Toronto Bay Street insolvency professionals.

We know that many entrepreneurs find themselves squeezed by Bay Street hourly rates, unable to afford the very advice meant to save their companies. That is why we can earn a fair return for our services in running our insolvency advisory business, without killing off the company we are trying to save because of higher fees. Downtown firms don’t think we can, but with the combined experience of Ira and Brandon Smith totalling over 60 years, we know how to and have done complex corporate restructuring. We are also one of those experienced seasoned firms that judges recognize as such. Our clients also give us 5-star reviews!

The Role of Insolvency Advisers

Despite the high costs, insolvency advisers play a crucial role in reviving struggling companies. When firms like Groupe Dynamite sought protection during tough times, savvy advisers helped them navigate those murky waters. Their expertise can mean the difference between a successful turnaround and a grim closure.

Lending and Creditworthiness

But there’s a catch. Rising advisory fees may also undermine a company’s creditworthiness. Imagine a lender reviewing a firm burdened by steep fees. They might hesitate, fearing that funds directed to advisers are funds that won’t go toward debt repayment. Essentially, high fees could close the door on future lending.

Myths Surrounding Formal Insolvency Proceedings

It is essential to clarify some misconceptions regarding the beneficiaries of formal insolvency proceedings. A common belief is that companies undergoing restructuring are guaranteed to be saved; however, this is not always the reality. Once advisers get to work, there are situations where we realize that most of the company isn’t salvageable. This emphasizes the importance of critically assessing the situation as quickly as possible so that unnecessary steps are not taken using up scarce resources.

In certain cases, such as that of Groupe Dynamite case, advisers have successfully revitalized struggling brands. Conversely, there are situations where advisers do earn fees from a business that ultimately cannot be sustained. Therefore, an effective insolvency assessment must identify these challenges from the outset in every case. It is crucial to ensure that a successful restructuring does not come at the expense of overwhelming financial burdens.

A candid and transparent dialogue between the insolvency advisor and company management is necessary before initiating any restructuring efforts. This collaboration is vital for determining the viability of the company and the best course of action moving forward.

The Ethical Dilemma In Insolvency Advisory

Navigating the complexities of insolvency involves not only strategic calculations but also significant ethical considerations. A critical question arises: at what point does one profit from another’s misfortune? The high fees charged by downtown Toronto Bay Street insolvency advisers, which can exceed $1,300 per hour, certainly prompts the question. This raises an important discussion about whether these professionals are genuinely aiding in recovery or merely capitalizing on the difficulties faced by their clients.

Insolvency advisory fees are typically structured to be front-loaded, meaning that the initial phases of an insolvency case require significantly more effort from advisers. This is necessary as they work to thoroughly understand the various issues at hand. Consequently, the execution of the devised strategy tends to be less intensive than its formulation.

This structure can exacerbate the financial strain on already struggling businesses, leading to concerns about the fairness of such practices. Therefore, transparency regarding fees is not merely a preferable quality but an essential component of ethical practice in insolvency advisory. Business owners deserve clarity to make informed decisions during challenging times.

Finding Balance

Achieving a balance between risk and reward is essential for long-term success in business. While it can be tempting to chase higher gains, it’s important to carefully consider the potential consequences. Understanding the balance between your business’s viability and the associated advisory fees is key to making informed decisions.

As we navigate the challenges ahead, let’s stay vigilant and compassionate, ensuring we take care of our businesses and those who support us in maintaining them.

I encourage you to take a moment to reflect on these points and prepare not just for success, but for stability in the ever-changing marketplace. Together, we can build a resilient foundation for the future.

Insolvency in Canada: FAQs

1. What is insolvency and how does it impact businesses in Canada?

Insolvency happens when an individual or a company is unable to fulfill their financial obligations when they are due. This situation can have important legal and practical implications, and it is guided by a detailed set of federal and provincial laws in Canada. For businesses facing insolvency, there are several potential outcomes, such as increasing debt, legal actions from creditors, and the possibility of closure. However, it’s important to remember that there are options available to help navigate this challenging situation, and seeking advice from financial professionals can be a valuable step forward.

2. What key legislation governs insolvency in Canada?

The BIA serves as the primary federal legislation governing bankruptcies and proposals in Canada. It establishes a structured process to protect the interests of all parties involved in insolvency proceedings. In contrast, the CCAA is specifically designed for the restructuring of insolvent corporations, with debts that exceed $5 million. Additionally, provincial laws contribute to the framework surrounding bankruptcy, particularly in matters related to property rights and fraudulent conveyances.

3. What role do Licensed Insolvency Trustees play in insolvency proceedings?

Licensed Insolvency Trustees are professionals authorized by the OSB to oversee bankruptcy proceedings, manage proposals, and act as receivers or monitors. Their responsibilities include offering guidance to both debtors and creditors throughout the legal processes, ensuring compliance with applicable regulations, and working to balance the interests of all parties involved.

4. Why are insolvency advisory fees considered a concern, especially for entrepreneurial smaller businesses?

Insolvency advisory services, though crucial in navigating complex legal and financial landscapes, often come with high hourly rates. This can be a significant burden for struggling businesses, particularly smaller enterprises, as these fees are prioritized as senior claims, meaning they are paid before other creditors. Some argue that these fees add to the financial strain and may not always guarantee a successful recovery.

5. What are some alternatives to high-priced Bay Street insolvency firms?

While large Bay Street firms dominate the insolvency landscape, boutique firms like ours offer comparable expertise and experience at lower hourly rates. Smaller Firms like ours prioritize practical solutions and cost-effectiveness, all delivered with a large dose of empathy. This makes us a viable alternative for businesses seeking quality advice without exorbitant fees.

6. How can businesses prepare for potential insolvency and mitigate risks?

Organizations can effectively mitigate the risks associated with insolvency by prioritizing strong financial management practices. This entails diligent monitoring of cash flow, diversifying revenue sources, maintaining adequate reserves, and establishing a contingency plan to address potential financial challenges. Timely identification of warning signs, along with seeking guidance from qualified professionals, can greatly enhance the likelihood of recovery.

7. What ethical considerations arise in the field of insolvency advisory services?

The power dynamics and the potential for substantial fees in insolvency advisory raise significant ethical considerations regarding the profit derived from a company’s financial difficulties. It is crucial to ensure transparency in fee structures and demonstrate a sincere commitment to prioritizing the client’s best interests over the pursuit of maximum profit. Such practices are essential for upholding ethical standards within the industry.

Insolvency Conclusion: Navigating the Stormy Waters Ahead

As I reflect on the unpredictability of the business world, it strikes me how everything can change in an instant. What appears stable today can be rocky tomorrow. We’ve seen thriving companies face insolvency as consumer habits shift overnight. There are many such examples. They soared high, only to crash due to rising interest rates impacting consumer spending. It’s a stark reminder that no one is immune to the tides of economic downturn.

For business owners, the key is preparation. Have you considered what your plans are if faced with potential insolvency? It’s essential to develop mitigation strategies. Keeping an eye on cash flow, diversifying income streams, and maintaining a strong financial buffer can save a business from downfall. By creating a robust financial foundation, we can cushion ourselves against unforeseen storms.

I hope you enjoyed this insolvency Brandon’s Blog. Do you or your company have too much debt? Are you or your company 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 someone with 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 the bankruptcy process. We can get you debt relief freedom using processes that are a bankruptcy alternative.

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 plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

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

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Tags advisory services, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy proceeding, BIA, business insolvency, CCAA, Companies’ Creditors Arrangement Act, court appointed receiver, financial restructuring, formal insolvency proceedings, insolvency process, Ira Smith Trustee, legal advice, legal counsel, legal fees, Office of the Superintendent of Bankruptcy, OSB, public record

Brandon Blog Post

FRAUD AND MISREPRESENTATION AND BANKRUPTCY: SUPREME COURT OF CANADA’S REVOLUTIONARY RULING ON ADMINISTRATIVE FINES AND BANKRUPTCY

Post author By Brandon Smith
Post date August 5, 2024

fraud and misrepresentation

Fraud and Misrepresentation: Introduction

On July 31, 2024, the Supreme Court of Canada released its decision in the case of Poonian v. British Columbia (Securities Commission), 2024 SCC 28. This appeal to the Supreme Court was heard on December 6, 2023. The Canadian insolvency community has been anxiously awaiting this decision to drop.

Thalbinder Singh Poonian and Shailu Poonian engaged in market manipulation that caused vulnerable investors to lose millions of dollars. The British Columbia Securities Commission (BCSC) found that they had contravened the province’s Securities Act. It ordered them to pay $13.5 million in administrative penalties; it also ordered them to disgorge approximately $5.6 million, which represented the amounts they obtained as a result of the market manipulation fraud and misrepresentation scheme.

These sanctions were registered with the Supreme Court of British Columbia under the Securities Act, which provides that, on being filed in a registry of that court, a decision of the BCSC has the same force and effect, and all proceedings may be taken on it as if it were a judgment of that court.

On April 20, 2018, the Poonians initiated a voluntary assignment in bankruptcy. Subsequently, on February 13, 2020, they sought a discharge from bankruptcy; however, this request was opposed by both the BCSC and the Canada Revenue Agency. On April 8, 2020, the Supreme Court of British Columbia denied the Poonians’ application, and as a result, they continue to remain undischarged bankrupts to this day.

In this Brandon’s Blog, I discuss the decision of the Supreme Court of Canada in this case. The Poonian case stems from stock market manipulation, fraud and misrepresentation. It highlights the intersection of fraud, bankruptcy law, and investor protection. Its impact stresses the need for reform to ensure accountability for dishonest practices while fostering trust in financial markets. The ruling may serve as a crucial step towards a more ethical financial landscape.

Fraud and Misrepresentation: The Core Issues of the Case

Delving into the intricacies of the case provides a rich tapestry of legal nuances that underscore the importance of regulatory frameworks in financial markets. The case was centred around the role of the BCSC, a critical entity in safeguarding investor interests and maintaining the integrity of the marketplace.

An important question arose: could the

administrative penalties and disgorgement orders imposed by the BCSC withstand the complexities introduced by bankruptcy discharges as delineated in the Bankruptcy and Insolvency Act (Canada) (BIA)? This question reflects legal intricacies and highlights ethical implications in financial governance.

First, let’s examine the significant penalties. The case’s details reveal staggering financial penalties: Thalbinder Poonian was hit with a hefty $13.5 million administrative penalty, while his partner, Shailu Poonian, faced $3.5 million. Additionally, a $5.6 million disgorgement order was made by the BCSC representing the Poonians’ illicit gains from their fraud and misrepresentation activities between 2007 and 2009.

The BCSC applied to the Supreme Court of British Columbia for a declaration that the debts represented by the administrative penalties and disgorgement orders not be released by any order of discharge, under s.178(1)(a), (d) and (e) of the BIA. The chambers judge allowed the BCSC’s application, finding that the debts were exempt and would survive any discharge. While only one exception had to apply for the debts not to be released, the chambers judge found the exceptions in s. 178(1)(a) and (e) both applied.

The Poonians filed an appeal with the British Columbia Court of Appeal, contesting, among other points, the chambers judge’s interpretation of the Bankruptcy and Insolvency Act (BIA). Justice Willcock, representing the British Columbia Court of Appeal, determined that the chambers judge had made an error in concluding that the debts were exempt from discharge under section 178(1)(a) of the BIA. However, the court upheld the chambers judge’s finding that the debts were exempt under section 178(1)(e). As the debts were deemed exempt, albeit only under section 178(1)(e), the appeal was ultimately dismissed.

Not satisfied with this result, the Poonians appealed to the Supreme Court of Canada. Before delving into the findings of the Supreme Court of Canada, we should review some basics about the BIA.

fraud and misrepresentation

The Legal Background of Bankruptcy and Fraud and Misrepresentation

The Bankruptcy and Insolvency Act

The Supreme Court’s analysis of the BIA centred on interpreting and applying the exceptions listed under section 178(1) in the context of the Poonian v. British Columbia Securities Commission case. Here are the key aspects of the court’s analysis:

Financial Rehabilitation and Fresh Start Principle:

The court acknowledged the primary objective of the BIA, which is to facilitate the financial rehabilitation of debtors by enabling them to achieve a fresh start and relief from burdensome debt.
Subsection 178(2) of the BIA delineates the fresh start principle, permitting an honest yet unfortunate debtor to be discharged from outstanding debts upon completing the bankruptcy process.

Limits of Financial Rehabilitation:

The court acknowledged that while financial rehabilitation is a key goal of the BIA, it is not unlimited. There must be a proper balance of interests. Sections 172 and 178(1) of the BIA set out specific debts and considerations that balance financial rehabilitation with other policy objectives.

Section 178(1) Exceptions:

The court highlighted that Section 178(1) enumerates particular debts that are not extinguished by discharge and consequently persist beyond bankruptcy. This provision reflects Parliament’s intention to reconcile financial rehabilitation with other policy objectives, including the maintenance of confidence in the credit system.

Specific Debt Exemptions:

The court addressed exemptions under sections 178(1)(a) and 178(1)(e) of the BIA, which were central to the case.
Section 178(1)(a) relates to fines, penalties, restitution orders, recognizances, bail, and orders imposed by a court (emphasis added). The court interpreted this subsection to clarify its scope and application to the BCSC’s orders.
Section 178(1)(e) pertains to debts or liabilities resulting from obtaining property or services by false pretenses or fraudulent misrepresentation. The court provided a detailed analysis of the elements and requirements of this subsection concerning the case at hand.

Interpretation of Court Orders:

There was an analysis of the effect of administrative tribunal decisions being registered as judgments of a court and whether they fall under the exemptions listed in section 178(1)(a) of the BIA.

Decision on Exemptions:

Ultimately, the court determined whether the administrative penalties and disgorgement orders in the Poonian case were exempt from discharge under section 178(1)(a) and (e).

Overall, the court’s analysis primarily focused on the relevant exceptions under section 178(1) of the BIA, their interpretation, and their application to the specific circumstances of the case.

Section 178(1) Explained

The legal background of bankruptcy concerning fraud and misrepresentation involves specific elements that need to be established for a debt or liability to survive bankruptcy under section 178(1)(e) of the BIA. Here are the key points in the Supreme Court analysis related to this legislative history:

False Pretences or Fraudulent Misrepresentation:

- The first requirement is for the creditor to prove that the debts or liabilities were obtained as a result of the debtor’s false pretences or fraudulent misrepresentation.
- A court cannot infer fraud easily and must independently review the evidence presented.
- Judicial notice of fraud is not admissible, and fraud cannot be inferred in a cursory manner.
- The creditor must establish that a deceitful statement was made, which was false, made knowingly without belief in its truth, and that the creditor relied on it and suffered a loss as a result.

Passing of Property or Provision of Services:

- The second requirement involves a loss in the form of a transfer of property or delivery of services, resulting in a corresponding debt or liability.
- The bankrupt need not be the direct recipient of the property. It can pass indirectly from the person to a third party at the bankrupt’s direction.
- The property need not be obtained or retained by the bankrupt, but the fraudulent misrepresentation must induce a person to give the property to the bankrupt or someone associated with the bankrupt.

Link between Debt or Liability and Fraud:

The debt or liability must have been created as a direct result of false pretences or fraudulent misrepresentation.
The court must ensure a clear and cogent link between the deceitful conduct and the resulting debt or liability.
Even if findings of fraud have been made by an administrative decision-maker, the court must make its determination based on a review of the evidence.

In summary, the legal background of bankruptcy and fraud/misrepresentation involves stringent requirements to establish that debts or liabilities were obtained through deceitful actions, resulting in a loss of property or services, and directly linked to the fraudulent conduct. These elements are essential for determining whether a debt or liability can survive bankruptcy under the BIA.

Fraud and Misrepresentation: The Appeal To The Supreme Court

The Supreme Court’s Decision

The Supreme Court’s majority opinion dismissing this appeal by the Poonians written by Justice Côté now provides clarity on the matter. The SCC affirmed that the disgorgement orders are monetary sanctions imposed because of, and thus resulting from, deceitful conduct or dishonest conduct that Parliament specifically sought to address. They are debts that originate from the Poonians having obtained property by false pretences or fraudulent misrepresentations. Accordingly, the disgorgement order falls within the narrow scope of s. 178(1)(e) and should not be released by any order of discharge from bankruptcy. The Supreme Court majority decision decided that the administrative penalties do not fall under any of the section 178(1) exemptions, be it section 178(1)(a) or (e).

This decision illuminates the understanding that the BCSC’s disgorgement order was closely tied to the fraudulent actions of the Poonians, which had directly inflicted financial harm on investors, but the administrative penalties were not. In essence, the court recognized that allowing the disgorgement order to be discharged would go against the spirit of the law designed to root out fraudulent behaviour.

The dissenting opinion from Justices Karakatsanis and Martin also adds an intriguing layer to this narrative. They concurred with the majority opinion for the survival of the disgorgement order under BIA sections 178(1)(e), but they would have given the administrative penalties the same treatment. The dissenting Justices advocated for the idea that all the underlying actions constituted fraud. However, their dissenting opinion did not alienate them from the majority opinion on the disgorgement order.

The Poonian case highlights the critical tension between providing pathways for honest debtors and preventing those engaged in deceit from reaping financial rewards for their actions. It is a reminder that while bankruptcy law aims to provide relief, it should not create loopholes that enable fraudsters to escape accountability. The dissonance between the aims of the BIA and the realities of financial misconduct presents a significant challenge but also an opportunity to fortify legal structures that prioritize the trustworthiness of our financial systems.

The Supreme Court’s Detailed Analysis of Section 178(1) of the BIA

To fully grasp the nuances of bankruptcy discharges, understanding Section 178(1) is crucial. This section explicitly lists categories of debts that a bankruptcy discharge does not cover. Specifically, it sets out parameters that determine if a debt may survive the bankruptcy process.

Subsection (a) targets amounts that are deemed penalties specifically imposed by a court for offences.
Subsection (e), on the other hand, relates to non-dischargeable debts that arise from unlawful acquisition of property through fraudulent misrepresentation.

Through the context of Poonian’s case, we begin to see the implications of these distinctions. The Supreme Court directly confronted whether the administrative penalties levied against the Poonians did not fall under the non-dischargeable categories, notwithstanding these penalties had been registered with the BC court.

Differences Between Court-Imposed Penalties and Administrative Fines

One of the critical distinctions I’ve noticed is how court-imposed penalties differ fundamentally from administrative fines. Administrative penalties are typically issued by regulatory agencies for violations of regulation rather than for conduct termed by law. In the case at hand, the penalties were administered by the BCSC, which is an administrative body. It was not a decision of the Court.

The Supreme Court highlighted that for the context of subsection (a), penalties need to originate from a court ruling to classify as “court-imposed.” The Justices affirmed neither the administrative penalties nor the disgorgement orders stemming from the BCSC fell under subsection 178(1)(a). Conversely, it recognized that only the disgorgement order debt could indeed be assessed under subsection 178(1)(e) because they arose from the fraudulent actions committed by the Poonians, aligning such misconduct directly with fraudulent misrepresentation.

fraud and misrepresentation

Fraud and Misrepresentation: Real-Life Implications for Those Facing Bankruptcy

While exploring this judicial decision, let’s not overlook the real-world implications for individuals grappling with the aftermath of bankruptcy. Bankruptcy proceedings are not simply academic exercises; they represent often hard-fought battles for individuals and families seeking finality and relief from oppressive debt. However, as this case illustrates, an individual’s past actions in the realm of fraud can significantly affect their future financial recovery.

The situation faced by Thalbinder and Shailu Poonian serves as a cautionary tale. After executing a fraudulent market manipulation scheme that inflicted massive financial losses on investors, they found themselves facing not only civil penalties but also the complexities of bankruptcy law that would determine if certain of their debts could not be discharged through the bankruptcy process. Their case spotlighted how, even while seeking refuge under the BIA, the weight of their actions continued to haunt them—shaping their financial reality moving forward.

In the context of fraud and misrepresentation, the legal system takes a firm stance. The Supreme Court underscored that despite bankruptcy serving as a fresh start for many, there remains a clear societal interest in holding those who engage in fraudulent conduct accountable. As one legal expert succinctly articulated,

“It’s essential to maintain the balance between allowing recovery and punishing fraudulent behaviour.”

Upon reviewing the rulings, it becomes evident that the relationship between administrative penalties and bankruptcy discharges presents significant complexities. The evolving nature of jurisprudence underscores the importance of seeking experienced legal counsel for individuals navigating these circumstances. Cases such as that of the Poonians highlight the enduring repercussions of dishonesty in business transactions and the stringent scrutiny that follows in the legal arena.

Moreover, Section 178(1) serves as an essential protective measure against unscrupulous debtors, holding accountable those who exploit the bankruptcy system for personal gain. It is imperative to emphasize that not all debts are treated equitably in bankruptcy proceedings, particularly for individuals who have acquired property through fraud and misrepresentation.

Fraud and Misrepresentation: The Broader Legal Implications of the Ruling

In reflecting on the Supreme Court ruling in this case, I am struck by the potential ramifications for future cases involving a fraudulent scheme and bankruptcy. The ruling not only clarifies certain provisions under the BIA but also highlights that the majority opinion shapes the legal discourse for years to come.

The core issue at stake was whether administrative penalties and disgorgement orders could withstand bankruptcy discharges. The Poonians, who engaged in a significant market manipulation scheme causing notable losses to investors, faced substantial sanctions totalling over $17 million. What caught my attention was the legal reasoning applied by the judges concerning subsections of the BIA — particularly around the distinction of what constitutes a “penalty imposed by a court.” The majority decision concluded that the disgorgement orders could indeed be non-dischargeable, while they dismissed the administrative penalties under section 178(1).

fraud and misrepresentation

Fraud and Misrepresentation: Impact on Future Cases

The implications of this ruling extend far beyond the immediate case. The way future fraud cases are adjudicated may fundamentally change as a consequence of this decision. From my perspective, the judicial reasoning employed could pave the way for stricter enforcement of certain penalties against those engaging in fraudulent activity. At the same time, the reasoning, in this case, can be extended to all administrative tribunals charged with maintaining the trust the public can place in the industry they regulate.

I can envision that future court rulings will be influenced by the emphasis placed on the fraudulent behaviour of the individuals involved. If future courts lean towards the rationale demonstrated here, it might deter would-be fraudsters from riskier financial behaviour due to the heightened likelihood of facing non-dischargeable debts post-bankruptcy.

Furthermore, this case might serve as a benchmark for evaluating the legitimacy and scope of financial penalties imposed not only by commissions like the BCSC but also by regulatory bodies across Canada. When I think about the potential for greater clarity in judicial interpretation, I am both hopeful and curious about its influence on how we perceive financial accountability in society at large.

Fraud and Misrepresentation: Conclusion

As I sift through the implications of this Supreme Court decision, I can’t help but reflect on how the outcomes resonate far beyond the courtroom. The repercussions of this case reach every corner of the investment community, sending ripples into regulatory frameworks that must adapt to this reality.

The Poonians were found guilty of orchestrating fraud and misrepresentation through their stock manipulation activities that significantly harmed countless investors. The Supreme Court’s ruling, emphasizes a crucial principle: while bankruptcy laws may offer a fresh start, they should not protect those who engage in unethical conduct.

I hope you enjoyed this fraud and misrepresentation Brandon’s Blog. Do you or your company have too much debt? Are you or your company 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 someone with 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.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

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.

Brandon Blog Post

IF YOU DECLARE BANKRUPTCY WHAT HAPPENS? A COMPREHENSIVE OVERVIEW

Post author By Brandon Smith
Post date July 8, 2024

if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Introduction to Financial Hardships

In life, we often face unexpected challenges that test our resilience and determination. Such is the experience of people we help who have encountered financial hardships due to an unforeseen event outside of their control such as job loss. The burden of mounting debts and looming financial uncertainty weighs heavily on people, pushing them to explore solutions that would lead them toward a path of financial recovery.

That is who we help – the honest but unfortunate debtor. Dealing with financial hardships is a journey that tests our resilience and determination. It’s a path filled with unexpected twists and turns, challenging us to find the strength within ourselves to overcome the obstacles that come our way.

People with financial difficulties, particularly in the face of job loss, credit card debts, income tax debts and the contemplation of bankruptcy, learn valuable lessons about financial recovery, overcoming challenges, and the empowerment that comes from taking control of your financial future. That and if you declare bankruptcy what happens, is what this Brandon’s Blog is about.

Impact of That Unforeseen Event Outside Of Your Control On Your Financial Situation

The impact of that uncontrollable event such as losing your job goes beyond just the loss of income. It disrupts the stability we have worked so hard to build, leaving us feeling vulnerable and uncertain about the future. When someone becomes unemployed, they struggle to make ends meet, juggling bills and expenses with a limited budget. The stress and anxiety that come with financial insecurity can be overwhelming, but it’s during these challenging times that we discover our inner strength and resilience.

Struggles with Credit Card Payments and Bills

One of the most daunting aspects of financial hardships is the burden of credit card payments and bills that seem to pile up with each passing day. People find themselves caught in a cycle of debt, where the minimum payments barely make a dent in the overall balance. The constant worry about falling behind on payments and the fear of accumulating more debt can weigh heavily on our minds, affecting our peace of mind and overall well-being.

Considering Bankruptcy as a Viable Option

When individuals are confronted with substantial debt and limited solutions, the prospect of bankruptcy may arise as a challenging but potentially necessary step toward financial recovery. In my capacity as a licensed insolvency trustee (formerly known as a bankruptcy trustee), I assist individuals through a process of thorough research and consultation. My role involves guiding and comprehending the bankruptcy process, and its ramifications and exploring viable alternatives to bankruptcy. Opting for bankruptcy is a significant decision that individuals are supported in making through a careful evaluation of their financial circumstances, prospects, and personal aspirations.

Throughout the bankruptcy process, the individuals I work with gain invaluable insights into financial empowerment and the importance of seeking assistance when encountering financial challenges. While bankruptcy may lead to temporary implications on one’s credit rating, it also presents an opportunity for a fresh start and the possibility to rebuild a secure financial foundation. Engaging in the bankruptcy process fosters financial resilience and enhances individuals’ ability to navigate future financial decisions effectively.

If You Declare Bankruptcy What Happens? Exploring Options: The Role of Licensed Insolvency Trustees

A journey towards financial recovery will lead you to a consultation with a licensed insolvency trustee. This no-cost initial consultation will become a guiding light offering insights and solutions to your financial challenges.

Engaging in consultations with a licensed insolvency trustee marks a crucial juncture in your financial path. Our proficiency and empathy equip debtors to comprehend the various solutions at their disposal and make well-informed choices regarding their financial destiny. By engaging in transparent and candid dialogues, you acquire the requisite insight to navigate the intricate bankruptcy process with strength and resolve.

In your journey towards your financial empowerment, the Trustee serves as a pivotal figure in facilitating the bankruptcy application process with the Office of the Superintendent of Bankruptcy Canada (OSB) and guiding you every step of the way. By taking this initial step, you are relieved of the responsibility of making direct payments to unsecured creditors and are granted a stay of proceedings, preventing creditors from initiating or pursuing collection or legal actions against you. This offers a sense of comfort and security, shielding you from additional financial pressures.

Despite the challenges you may be facing, you will find solace in knowing that certain assets may be safeguarded by provincial and federal laws, ensuring a measure of stability during this turbulent time. The Trustee’s guidance on surplus income payments, credit counselling sessions and debt repayment strategies instills a sense of discipline, confidence and commitment toward overcoming financial obstacles.

While the journey toward financial recovery may have its hurdles, the Trustee reassures you that every step taken will lead you closer to a brighter future. Though some people may have a narrow category of debts that may not be discharged, the prospect of rebuilding your financial foundation fills you with hope and optimism.

Through this experience, will learn that resilience in finance is not just about overcoming challenges but also about embracing the opportunity for growth and renewal. As you navigate through the bankruptcy process support provided by the Trustee paves the way for a new beginning filled with hope and possibilities.

If You Declare Bankruptcy What Happens? What is bankruptcy?

Definition of bankruptcy

Canadian bankruptcy is a legal process where an individual, a business or a company declares they are insolvent and are unable to meet their financial obligations. They work with a licensed insolvency trustee to legally file an assignment in bankruptcy. They do so to assign their unencumbered assets to the Trustee and get relief from their overwhelming debt load.

Laws governing bankruptcy in Canada

Navigating the intricate realm of bankruptcy in Canada is a dance choreographed by the Bankruptcy and Insolvency Act (Canada) (BIA). This piece of legislation orchestrates the delicate balance between debtors, creditors, and Trustees, each playing a unique role in the bankruptcy waltz.

When a debtor takes the courageous step of filing for bankruptcy, they are required to bear their financial soul to the Trustee, laying out their assets, liabilities, and monetary intricacies. The Trustee, like a wise conductor, then ensures a harmonious distribution of the debtor’s assets among their creditors, aiming to untangle the financial web that binds them.

For individuals, bankruptcy offers a chance at rebirth, a fresh canvas on which to paint a new financial future. However, for a company or business, it may signify the final curtain call for that legal entity. Yet, there exists a glimmer of hope in the form of selling core assets to a willing successor, potentially salvaging jobs and keeping the business flame alive.

In this intricate ballet of financial redemption, the Bankruptcy and Insolvency Act stands as the maestro, guiding the players toward a resolution that seeks to balance the scales of financial responsibility.

If You Declare Bankruptcy What Happens? Who qualifies for bankruptcy?

Criteria for qualifying for bankruptcy

In Canada, debtors facing significant debt challenges and unable to meet their financial obligations to creditors may be eligible for bankruptcy relief. To qualify for bankruptcy, debtors must have a minimum of $1,000 in unsecured debt and have been residing in Canada for at least the previous six months before filing, or have a substantial connection to the country.

Alternatives to bankruptcy – Individuals

Depending on how pressing the person’s debts are, there are several alternatives to personal bankruptcy that a licensed insolvency trustee can walk you through. The most common alternatives are:

Credit counselling and budgeting assistance: Sometimes people just need help understanding where their family income comes from and how it is spent. In cases like this, going to a non-profit credit counselling service to get some tips and help in developing a monthly household budget and sticking to it is all that is necessary for the household to get back on track.
Debt consolidation: If you still can borrow money at a rate lower than the amounts you are currently being charged on high-interest-rate credit cards and payday loans, you need to look at debt consolidation. Rather than having several to many high-rate debts, if you can borrow the total amount of your debt from a bank or credit union at a much lower rate than you are currently paying and use that new loan to pay off your high-interest rate debts, that will help immensely. Now you have one lower interest rate loan to repay.
Consumer proposal: A consumer proposal is a formal filing under the BIA, however, it is not bankruptcy. It is where you make a contract with your creditors to pay less than you owe in total. It is based on your monthly income, to offer making monthly payments to the Trustee towards your debt. Normally you pay around 25% of your total debt to the Trustee. If your creditors agree, you can take up to 60 months to complete a consumer proposal. When you have finished making your payments, you get a Certificate of Full Performance and the balance of your debt is wiped away.

Alternatives to bankruptcy – Companies

Asset sales: Are there underused or redundant assets in the company that could be sold to raise needed cash to significantly reduce or eliminate corporate debt? This should first be explored.
Refinancing: Can the company refinance to take advantage of a loan opportunity that will help with its cash flow through lower interest, monthly payments or both? Retiring expensive debt and replacing it with more manageable debt is another avenue to explore.
Formal restructuring – BIA Proposal: Companies that have a viable but insolvent business can look at a formal restructuring. Although it is an alternative to avoid bankruptcy, it is commonly referred to as bankruptcy protection. A proposal under the BIA is where the company can negotiate with creditors to come up with a plan to repay its debts over some timeperiod of time. Just like in a consumer proposal, the company pays less than 100% of its debt load, but upon completion, eliminates all of its unsecured debt.
Formal restructuring – Companies’ Creditors Arrangement Act (CCAA): Companies that owe $5 million or more can also restructure as long as they have a viable business. The CCAA allows a company to restructure its debts and business operations under the supervision of a court-appointed monitor. It is essentially the same as a BIA Proposal, but just under a different Canadian statute.
A BIA Proposal and a CCAA restructuring a similar processes you always hear under the US bankruptcy law of bankruptcy chapter 11.

If You Declare Bankruptcy What happens to your assets, debts, and income during bankruptcy?

Going through a financial crisis can be incredibly challenging, but it’s important to remember that there is always a way forward. The people we help who go through the bankruptcy process are a testament to the resilience in finance and the power of financial empowerment as they use bankruptcy to turn their lives around.

Treatment of assets in bankruptcy

One of the concerns people have when considering bankruptcy is what happens to their assets. When someone goes bankrupt, they may not have to give up all of their assets. Let me explain as follows:

Secured debts: When you have assets where there are secured loans against those assets, such as a house or a motor vehicle, the Trustee’s interest is only the bankrupt’s equity in that asset. If there is little or no equity, and your monthly budget shows that you can afford to make the monthly loan payments and you wish to keep the asset, then you can do so. The Trustee will discuss with you ways in which the Trustee can realize the bankrupt’s equity without that asset being taken away.

Exempt assets: Certain provincial and federal laws safeguard some of your possessions when you file for bankruptcy. As provincial laws vary, you need to get the complete list from a licensed insolvency trustee in the area where you live.

Non-exempt assets: Non-exempt assets refer to assets owned by a bankrupt individual that are not protected by a secured creditor’s security interest or are exempt under provincial or federal laws. These assets fall within a category that the Trustee must liquidate to benefit the creditors involved in the bankruptcy proceedings.

Treatment of debts in bankruptcy

Once the bankruptcy application is filed with the OSB, a significant burden is lifted off the bankrupt’s shoulders. Direct payments to creditors cease, and the Trustee notifies all the creditors and there is an immediate stay of proceedings.

This means that any legal actions cannot be commenced or continued against the bankrupt and all collection activities, such as wage garnishment are put on hold. This offers the person much-needed relief from the constant financial pressure.

Some debts cannot be discharged, such as alimony, child support, valid secured loans and certain types of student loans. A Trustee in your no-cost initial consultation will look at the details of your debts and advise you if any would not be discharged from your bankruptcy estate.

While the decision to make the bankruptcy filing may seem daunting, it is a necessary step toward regaining control of your finances and eliminating the stress in your life. Knowing that your wages are protected from garnishment provides a sense of security during this challenging time.

Treatment of income during bankruptcy

While in bankruptcy, the Trustee monitors the person’s monthly income and expenses. The Trustee is required by the OSB and under the BIA, to do a calculation to determine if the bankrupt person has sufficient income to contribute towards his or her total debts by making surplus income payments to the Trustee.

The Trustee is required to do this calculation both at the time of the bankruptcy filing and throughout the time the person is an undischarged bankrupt. If the person’s income changes, either up or down, this will affect the calculation.

Although judgment creditors cannot garnish wages, it is possible that until the person gets their bankruptcy discharge, they may have to contribute something from their monthly income under the surplus income calculation. A licensed insolvency trustee can explain the calculation to you.

If You Declare Bankruptcy What Happens? How long does personal bankruptcy last?

Personal bankruptcy typically lasts for 9 months for a first-time bankrupt in Canada. Your first-time bankruptcy will extend to 21 months if you have to pay surplus income. If this isn’t your first bankruptcy, it will last longer.

At the end of this time, if you have fulfilled all of your bankruptcy duties and neither the Trustee nor any creditor who has proven their bankruptcy claim opposes your discharge, then you are entitled to your bankruptcy discharge. It is at the time you receive your discharge from bankruptcy, that your debts can be discharged.

If You Declare Bankruptcy What Happens? What Are Your Duties During Bankruptcy?

Responsibilities and obligations during bankruptcy

The primary responsibilities entail the disclosure of all assets, liabilities, income, and expenses. It is required to provide bank statements and other relevant records to support the information provided. In the event of a creditors’ meeting, attendance is mandatory.

Attendance at credit counseling sessions

Participating in the two mandatory counselling sessions is an essential component of a bankrupt’s journey toward financial recovery. Each counselling session is held with a person from the Trustee’s office who the OSB has licensed as a credit counsellor.

If You Declare Bankruptcy What Happens? What Is The Impact On Your Credit Score?

Impact on credit score during and after bankruptcy

Filing for bankruptcy in Canada can have a significant impact on your credit score, both during and after the bankruptcy process. Here’s a breakdown of what you can expect:

During Bankruptcy:

Initial Credit Score Decline: Upon filing for bankruptcy, it is common for individuals to experience a substantial decrease in their credit score, typically by 100-200 points or more. This decline is largely attributed to the fact that bankruptcy is a matter of public record, leading lenders to perceive it as a high-risk event.
Credit Reporting: Your credit report will reflect the bankruptcy filing and remain on your report for at least 6 years from the date of discharge (more on discharge below).
Credit Inquiries: Lenders may conduct credit inquiries to assess your creditworthiness, which can further lower your credit score.

After Bankruptcy:

Credit Score Recovery: After bankruptcy, your credit score will gradually recover over time. The rate of recovery depends on your credit habits and the steps you take to rebuild your credit (see next discussion).
Credit Reporting: The bankruptcy notation on your credit report will remain for roughly 6 years from the date of discharge. After that, it will be removed from your report.
Credit Score Objectives: Strive to attain a credit score ranging between 600 and 650 within 2-3 years post-bankruptcy. This will enhance your eligibility for improved loan conditions and interest rates.

Discharge:

In Canada, bankruptcy typically lasts for 9-21 months, depending on your financial situation and the type of bankruptcy you file for (e.g., consumer proposal or personal bankruptcy). Once you’ve completed the bankruptcy process and received a discharge, the bankruptcy notation will be removed from your credit report.

Rebuilding credit after bankruptcy

Tips for Rebuilding Credit After Bankruptcy:

Monitor your credit report: Conduct a thorough review of your credit report to verify its accuracy and pinpoint any potential areas for improvement.
Make on-time payments: It is imperative to make payments on time for all financial obligations to showcase a commendable track record of credit responsibility.
Keep credit utilization low: Maintain a disciplined approach to managing credit by ensuring your credit utilization remains low and refraining from excessive spending. Additionally, exercise caution when seeking new credit opportunities by minimizing credit inquiries and refraining from submitting multiple applications within a condensed timeframe.
Avoid new credit inquiries: Limit the number of credit applications you make and try to avoid applying for multiple credit products within a short timeframe. This will help you maintain a stable credit profile and minimize the impact of new credit inquiries on your credit score.
Credit Score Rebuilding: If you’re looking to improve your credit after facing financial challenges, some practical steps you can take include applying for a secured credit card, becoming an authorized user on a family member’s credit account, or taking out a small loan. One relatively accessible option post-bankruptcy is getting an RRSP loan, where the RRSP is held at the same financial institution you’re borrowing from.

These kinds of loans must normally be repaid within 1 year. Making all loan payments on time and doing the same thing again the following year not only will rebuild your credit, but also build your savings.

If You Declare Bankruptcy What Happens? What are the consequences for your spouse’s credit and assets?

Spouse’s liability for joint debts

In Canada, when one spouse files for bankruptcy, sometimes it can have consequences for the other spouse’s credit and assets, depending on the type of bankruptcy and the couple’s financial situation. Here’s a breakdown of the most common issues.

Credit Score Impact: The non-bankrupt spouse’s credit score could be affected if they are jointly liable for certain debts with the bankrupt spouse. This is because it may view the non-bankrupt spouse as being the next to default.
Joint Debts: If the couple has joint debts, such as a mortgage, car loan, or credit card, the non-bankrupt spouse will still be responsible for paying those debts. This is because joint debts are considered a shared responsibility.
Assets at Risk: Any of the non-bankrupt spouse’s assets that are jointly owned with the bankrupt spouse, will be at some level of risk. For example, if the couple owns a jointly held property, the Trustee must recover the non-exempt equity of the bankrupt spouse’s assets. In jointly held property, this will on a practical level impact and involve the non-bankrupt spouse, who is the natural purchaser of the bankrupt spouse’s equity.
Credit Reporting: The non-debtor spouse’s credit report may reflect the bankruptcy filing depending on the type of bankruptcy, the credit reporting agency and any joint debts or debts guaranteed by the non-bankrupt spouse.

Types of Bankruptcy and Their Impact on the Non-Debtor Spouse

Consumer Proposal: A consumer proposal is a debt settlement agreement between the insolvent spouse and their creditors. In this case, the non-insolvent spouse is not directly affected by the consumer proposal filing, but they may still be responsible for paying joint debts.

Personal Bankruptcy: Personal bankruptcy is a more severe type of bankruptcy that involves the liquidation of assets to pay off debts. In this case, the non-insolvent spouse’s assets may be at risk if they are jointly owned by the bankrupt spouse.

Protection of spouse’s assets during bankruptcy

The time to put plans in place to protect the assets of each spouse is upon the acquisition of each asset when neither spouse is insolvent. Any transfers of assets aiming to shield them from creditors, will not be successful. Here are some tips:

Separate Property: If the non-insolvent spouse has separate property, such as a separate bank account or a separate property, it is generally protected from the bankrupt spouse’s creditors.

Exemptions: In Ontario, individuals going through bankruptcy can keep certain assets as exempt property. These include household furnishings and appliances valued up to $14,180, livestock, tools, and other items used in farming up to $31,379 for farmers, tools of trade up to $14,405 for self-employed individuals, one motor vehicle worth up to $7,117, equity in a primary residence not exceeding $10,783, and funds in registered plans like RRSPs, RRIFs (other than contributions in the 12 months preceding the bankruptcy), and life insurance policies with designated beneficiaries such as a parent, spouse or child.

Credit Counseling: Additionally, credit counselling might be a good idea for the non-bankrupt spouse.

If You Declare Bankruptcy What Happens After You Are Discharged From Bankruptcy?

Discharge from bankruptcy

The effects of an absolute discharge from personal bankruptcy for the person are substantial. As soon as an outright discharge is granted, the debtor is no longer accountable for any type of unsecured debts that existed at the date of bankruptcy (with a few specific exceptions). The debtor is launched from needing to pay back debts that they took on before applying for bankruptcy.

This indicates that the debtor no longer has to stress over paying back those financial debts and can move on with their life. This supplies a clean slate for the borrower and helps them return to 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), 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.

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 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.

Rehabilitation and rebuilding finances after bankruptcy – A Path to Financial Freedom

Rehab after personal bankruptcy entails a combination of finance management, debt administration, and as indicated above, credit rebuilding. The goal is to produce a sustainable economic strategy that permits you to manage your debt, reconstruct your credit, and achieve lasting financial security.

The key steps to rehabilitation are:

Get your bankruptcy discharge: Attend the two mandatory financial counselling sessions with your licensed insolvency trustee firm, fulfill all your other duties in the bankruptcy administration and obtain your discharge from bankruptcy
Create a Budget: Continue tracking your income and expenses to identify areas where you can cut back and allocate funds more effectively. A budget will help you prioritize your spending and make informed financial decisions.
Prioritize Debt Repayment: Focus on starting within your budget spending so that you can pay your bills every month on time in full.
Rebuild Credit: Use the tips I listed above to rebuild your credit.
Screen Credit Reports: Obtain a duplicate of your credit report and correct any type of mistakes or errors to guarantee your credit score is accurate.
Seek Professional Guidance: If you feel you need an element of accountability to help you in your rehabilitation, seek out a non-profit credit counsellor or financial coach to give you personalized guidance and support to help you navigate the rehabilitation process and achieve your financial goals.

Rehabilitation after bankruptcy can have numerous benefits, including:

Improved credit scores
Reduced debt burden
Increased financial stability
Greater financial flexibility
A fresh start
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Looking Towards a Brighter Future Conclusion

The people we help through personal bankruptcy for their journey of financial recovery are filled with a sense of gratitude and hope. The impact of understanding their credit rating, navigating the bankruptcy process, and embracing the steps toward recovery are profound. It not only tests their resilience in finance but also empowers them to envision a brighter future filled with possibilities through a fresh start.

I hope you enjoyed this if you declare bankruptcy what happens Brandon’s Blog. Do you or your company have too much debt? Are you or your company 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 someone with too much personal debt.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

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 information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Tags alternatives to bankruptcy, Bankruptcy, bankruptcy discharge, bankruptcy duties, bankruptcy process, bankruptcy protection, Canada, credit counsellor, debt relief, exempt assets, financial recovery, If you declare bankruptcy what happens, Ira Smith Trustee, licensed insolvency trustee, non-exempt assets, personal bankruptcy, surplus income, what happens when you declare bankruptcy

Brandon Blog Post

HUGE IMPACT OF A SOCIAL MEDIA DEFAMATION CASE RULING ON CANADIAN BANKRUPTCY AND INSOLVENCY: A BREAKDOWN

Post author By Brandon Smith
Post date July 1, 2024

defamation case

Introduction to Chelsea Hillier’s Defamation Case

As I delve into the intriguing case of Chelsea Hillier, it becomes apparent that her background and the subsequent defamation allegations have sparked a legal battle with profound implications. Let’s explore the intricacies of this complex situation.

In this blog, I delve into the intriguing defamation case of Chelsea Hillier, a bankrupt individual who found herself amid a legal battle due to online defamation. Join me as we uncover the details of the case, the court rulings, and the aftermath that followed.

Defining A Defamation Case and Forms of Defamation

What is defamation?

In Canada, defamation is any intentional or negligent false communication, whether written or spoken, that harms a person’s reputation or exposes them to ridicule, belittling, or contempt.

Types of defamation: libel and slander

The concept of defamation can have two possible parts; libel and slander. There is a distinction between libel and slander.

Written defamation (libel)

Libel is defamation either in writing or some other permanent form. Section 298(1) of the Canadian Criminal Code (R.S.C., 1985, c. C-46) defines a defamatory libel as any published material that is likely to injure someone’s reputation or make them the object of hatred, contempt, or ridicule, without lawful justification or excuse.

Spoken defamation (slander)

Slander is defamation that is not left permanently. Slander is more commonly associated with an oral statement. With slander, there generally will always be a fight waged between slander and freedom of speech.

The impact of defamation on individuals and organizations

Defamation is an act of harming the reputation of another person through a false statement or many of them. In the real world, defamation can lead to severe consequences, including damages to one’s reputation and livelihood. The criminal code and being found guilty of the criminal offence of criminal defamation is one thing.

But in the real world, the possibility of imprisonment is not going to provide any real satisfaction to the wronged party. The way to get compensated for the suffered damages because of the defamation of character is to start a civil suit action for a defamation claim.

In today’s digital world, the occurrence of online vilification and social media problems positions an expanding worry for people and businesses alike. The simplicity and rate at which misinformation can be distributed on the web have made it extra challenging to secure your reputation from baseless attacks.

Social network platforms, once hailed as tools for connection and interaction, have now ended up being places for disparagement and where a defamation case is born through the fast spread of disparaging and harmful stories. Consequently, people have to bear in mind the web content they share on the internet and the potential consequences of their activities in the digital age.

Understanding the legal ramifications of online defamation is crucial. While freedom of expression is a fundamental right, it is essential to remember that this right comes with obligations. Uploading or sharing false information concerning others can have seriously damaging consequences, both legally and personally.

People must exercise care and promote ethical and honest behaviour in their online interactions to prevent injury to others and find themselves on the wrong side of the law. In a world where reputations can be tainted with a single click, it is crucial to focus on respect and integrity in all online communications.

The Elements of a Defamation Claim

Probably the most publicized recent defamation case was the case study of defamation to character was the Amber Heard vs. Johnny Depp in the United States. Although I am not a lawyer and this blog is not meant as legal advice, I do wish to discuss my understanding of the elements required in a defamation case in Canada.

Making a defamatory statement

In legal terms, a defamatory statement is false and harmful to a person’s reputation. To be considered defamatory, the statement must harm the plaintiff’s character or standing in the community. This can include accusations of criminal behaviour, dishonesty, or incompetence.

It is important to note that the statement must be proven false for it to be considered defamatory. If a statement meets these criteria, the plaintiff may have grounds for a defamation lawsuit. It is crucial to exercise caution when making statements that could potentially harm someone’s reputation, as the consequences can be severe.

Identifying the statement’s recipients

In a defamation case making a defamation claim, it is imperative that the plaintiff accurately identifies the defendant as the individual or entity responsible for the defamatory statement. This process is essential in establishing the grounds for the lawsuit and ensuring that the appropriate party is held accountable for their actions.

A thorough and detailed identification of the defendant is crucial in providing clarity and direction to the legal proceedings. Failure to correctly identify the defendant can result in delays, confusion, and potential dismissal of the case. Therefore, it is paramount that the plaintiff diligently and accurately identifies the defendant to pursue a successful resolution to the claim.

Statement’s falseness and its effect on reputation

The statement must have a defamatory meaning, which is a false and harmful statement that tends to harm the plaintiff’s reputation. For a statement to be considered defamatory, one of the key elements that must be proven is publication. The defendant must have shared the defamatory statement with a third party, someone other than the plaintiff. This includes written words in a letter or publication, or even online posts on social media platforms.

The act of publication is crucial in defamation cases as it demonstrates that the harmful information was disseminated to a wider audience, potentially causing damage to the plaintiff’s reputation. Individuals need to exercise caution and responsibility when sharing information to avoid potential legal consequences.

Damage to reputation and *emotional distres**s caused*

In defamation cases, the plaintiff must establish that they have suffered harm directly caused by the defamatory statement. This harm can materialize in various forms, such as damage to the plaintiff’s needs to compile reputation, financial losses, or other detrimental effects. Without concrete proof of harm, a defamation lawsuit may not stand in a legal setting.

Therefore, the plaintiff needs to compile relevant documentation and evidence to substantiate their claim of harm, whether through witness accounts, financial records, or other verifiable means. Demonstrating damage is a fundamental aspect of proving the legitimacy of a defamation case and necessitates thorough documentation and validation to pursue legal redress.

Defenses against defamation claims

There are several possible defenses against defamation claims. Some of the most common defences include:

Truth: The defendant can argue that the statement is true, and therefore, not defamatory. The burden of proof is on the defendant to prove the truth of the statement. Fair comment: The defendant can argue that the statement is a fair comment on a matter of public interest. This defense is often used by journalists, politicians, and others who make comments about public figures or issues.
Privilege: The defendant can argue that the statement is protected by privilege, which means that it is made in a context where the speaker has a qualified privilege to make the statement. Examples of privileged statements include statements made in Parliament, in court, or a confidential communication.
Honest opinion: The defendant may assert that the statement constitutes an honest opinion, and hence, is not defamatory. This defense is commonly invoked by individuals when making subjective remarks about a person or entity. Context: The defendant can argue that the statement is not defamatory because it is made in a context that makes it clear that it is not meant to be taken literally. For example, a statement made in a joke or a metaphor may not be defamatory if it is clear that it is not meant to be taken seriously.
Absolute privilege: The defendant can argue that the statement is protected by absolute privilege, which means that it is made in a context where the speaker has absolute immunity from liability. Examples of absolute privilege include statements made in court or a confidential communication.
Qualified privilege: The defendant can argue that the statement is protected by qualified privilege , which means that it is made in a context where the speaker has a qualified privilege to make the statement. Examples of qualified privilege . Therefore include statements made in a confidential communication or a communication made in good faith. Innocent dissemination: The defendant can argue that they did not know or have reason to know that the statement was defamatory, and therefore, should not be held liable.
Innocent dissemination: The defendant can argue that they did not know or have reason to know that the statement was defamatory, and therefore, should not be held liable.
Spoliation: The defendant can argue that the plaintiff has destroyed or tampered with evidence that would have helped to prove the truth or falsity of the statement. Therefore, the plaintiff should not be able to recover damages.
Statute-barred: The defendant can argue that the plaintiff has delayed in bringing the claim, and therefore, the claim is statute-barred or should be dismissed due to the passage of time. It’s worth noting that the availability of these defences may depend on the specific circumstances of the case, and the court may consider other factors when determining whether a defense is available.

The burden of proof in a defamation case

In a defamation case within the Canadian legal system, the burden of proof typically follows these guidelines:

The plaintiff, who initiates the claim, is responsible for demonstrating that the defendant made a defamatory statement about them.
The plaintiff must also provide evidence that the statement was disseminated to a third party rather than solely being known to the plaintiff.
It is incumbent upon the plaintiff to establish that the statement carried a defamatory meaning, characterized by being both false and damaging to the plaintiff’s reputation.
The plaintiff must further substantiate that the defendant acted recklessly or negligently in making the defamatory statement.

Overview of Chelsea Hillier’s Background and the Defamation Case Allegations

Chelsea Hillier, the daughter of former MPP Randy Hillier, found herself embroiled in a legal quagmire due to her online behaviour. The saga began with a series of defamatory tweets posted on her ‘weaponized’ Twitter account, targeting her former friend, Esther Post. These tweets falsely accused Post, a sessional lecturer at Carleton University, of unethical behaviour, leading to a contentious legal battle.

In June 2022, the Honourable Madam Justice Gomery found Hillier guilty of defamation, highlighting the significant harm caused by her reckless online conduct. The court ordered Hillier to pay $85,000 in damages and additional legal fees to Post, underscoring the severe repercussions of her actions.

Relationship Between Chelsea Hillier and Esther Post Leading to the Legal Battle

The relationship between Chelsea Hillier and Esther Post dates back to 2008 when Post was Hillier’s instructor at Carleton University. What began as a close friendship deteriorated due to Hillier’s extremist views on the COVID-19 pandemic, mirroring those of her father.

The fallout culminated in a series of defamatory tweets by Hillier, including false accusations and the dissemination of private photos from Post’s wedding. Post, rightfully aggrieved by these actions, pursued legal recourse, resulting in a protracted legal battle that exposed the dark underbelly of online behaviour.

The legal ramifications of this case extend beyond mere monetary compensation, shedding light on the broader implications of social media conduct and the legal responsibilities that accompany online interactions.

Defamation Case: The Defamation Allegations

As I delve into the details of the defamation case involving Chelsea Hillier, it’s evident that the repercussions of her actions have been significant. The defamatory tweets she posted not only tarnished her reputation but also led to legal battles with severe consequences.

Details of the Defamatory Tweets

Chelsea Hillier’s tweets, posted on her Twitter account, targeted Esther Post with false accusations of drugging and inappropriate behaviour. These tweets, intended to harm Post, resulted in a ruling against Hillier for causing psychological harm through online harassment.

The tweets, weaponized to spread misinformation and malice, showcased a blatant disregard for the truth and ethical online conduct. Despite Hillier and Post’s friendship, the defamatory posts’ fallout was irreparable.

Legal Implications and Subsequent Bankruptcy Consequences

The legal ramifications of Hillier’s actions were severe. Post was successful in obtaining judgment against Hillier in the total amount of about $100,000. Facing this debt that she could not pay, Hillier filed an assignment in bankruptcy, thinking she would outsmart Post. As discussed below, it did not quite work out that way.

Esther Post’s pursuit of justice in her defamation action exemplifies the impact of social media’s legal implications and the need for accountability in online interactions. The ongoing battle for restitution underscores the long-lasting effects of defamatory actions and the importance of upholding integrity in digital communication.

Defamation Case Court Rulings and Legal Consequences

As we delve into the intricate web of court rulings and legal consequences surrounding the case of Chelsea Hillier, it becomes evident that the ramifications of her actions extend far beyond a mere declaration of bankruptcy. The analysis of the court rulings against Chelsea Hillier sheds light on the complexities of defamation cases and the enduring financial obligations that follow.

Chelsea Hillier’s journey through the legal system serves as a stark reminder of the repercussions of online behaviour and the profound impact it can have on individuals’ lives. Despite her attempts to absolve herself through bankruptcy, the courts have held her accountable for the damages inflicted on Esther Post due to defamatory statements made on social media.

Analysis of the Defamation Case Court Rulings

The court’s decision to uphold the $85,000 in damages plus additional legal fees underscores the gravity of Chelsea Hillier’s actions. The ruling of the Honourable Mr. Justice Stanley J. Kershman of the Ontario Superior Court emphasizes that bankruptcy does not serve as a shield against the consequences of intentional harm caused to others.

Post’s lawyer, David Shiller, aptly argued that bankruptcy laws are designed to protect honest debtors facing financial distress, not as an escape route for individuals evading their responsibilities. The legal system’s unwavering stance against misuse of bankruptcy in cases of deliberate harm sets a precedent for accountability and justice.

Section 178(1)(a.1)(i) of the BIA states that any award of damages by a court in civil proceedings in respect of bodily harm intentionally inflicted is not released by the bankrupt obtaining a discharge from bankruptcy. In other words, this kind of debt follows the person until the judgment is fully paid, even after bankruptcy.

This is not a novel situation. Courts across Canada have dealt with this type of issue before. Certain cases are extremely relevant to the Hillier bankruptcy case that lay out how defamation to character judgment claims are handled in the Canadian bankruptcy context and whether such a claim survives a person’s bankruptcy. The roadmap of prior cases I found are:

In short, these cases uphold the concept that civil liability for defamation from intentionally causing bodily harm is not a debt that can be discharged through bankruptcy. It also confirms that “bodily harm” includes negatively affecting the person’s mental health.

Financial Obligations Despite Declaring Bankruptcy

The saga of Chelsea Hillier brings to the forefront the stark reality that there is a limited class of debts that are not erased by declaring bankruptcy, especially in cases where harm has been inflicted intentionally. Hillier’s failure to comply with court orders and remove defamatory content led to further legal repercussions, including contempt of court charges and additional financial penalties.

Despite her bankruptcy filing, Hillier remains liable for the damages and legal costs incurred by Post, highlighting the enduring nature of this kind of legal obligation. The court’s decision to allow Post to pursue the owed amount through wage garnishment underscores the long-term consequences of failing to meet legal responsibilities.

The Bankruptcy Had No Impact On The Defamation Case

The complexities of Chelsea Hillier’s legal battle show the ramifications of declaring bankruptcy in the context of the defamation case come to light. Bankruptcy does not absolve one of financial obligations arising from the actual malice of untrue statements resulting in intentional harm caused by online behaviour.

The legal repercussions of bankruptcy in the defamation case involving Chelsea Hillier are profound. Despite her declaration of bankruptcy, the court ruled that she remains liable for the actual damages and legal fees amounting to over $100,000. This ruling underscores the principle that bankruptcy laws are designed to protect honest debtors, not to enable individuals to evade certain obligations without any penalty.

Moreover, the ongoing financial obligations for Chelsea Hillier extend beyond mere monetary payments. The impact of her online behaviour, characterized by defamatory tweets, has far-reaching consequences. These actions not only led to legal repercussions but also inflicted psychological harm on the victim, Esther Post. The court’s decision to hold Hillier accountable emphasizes the importance of upholding ethical standards in online interactions.

It is crucial to recognize that declaring bankruptcy may not erase the consequences of one’s actions. In Chelsea Hillier’s case, the legal system has made it clear that accountability transcends financial matters. The defamation case serves as a stark reminder of the social media legal implications and the need for responsible online behaviour.

Defamation Case Conclusion

Reflecting on the case of Chelsea Hillier and its aftermath, it becomes evident that social media has the power to shape not just our virtual interactions but also our real-world relationships and legal standing. As we navigate the digital landscape, it is crucial to tread carefully, mindful of the impact our online actions can have on others and ourselves.

I hope you enjoyed this defamation case Brandon’s Blog. Do you or your company have too much debt? Are you or your company 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.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

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 information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

DEBT MANAGEMENT PROGRAM VS. BANKRUPTCY: OUR CHEAT SHEET HELPS YOU TO CHOOSE THE RIGHT OPTION FOR YOUR FINANCIAL SITUATION

Post author By Brandon Smith
Post date March 25, 2024

Debt Management Program: Introduction

Are you drowning in credit card debt, tax debt or any other debt and feeling overwhelmed by mounting interest charges? Are you behind in some or all of your debt payments? Is there a collection agency hounding you? It’s a common struggle, especially with the recent increases in interest rates. But fear not, there are debt relief options available to help you regain control of your finances. Two popular choices are a debt management program and bankruptcy, but there are key differences to consider.

In this Brandon’s Blog post, we will explore the differences between these two options and guide you on how to choose the right one for your unique financial situation. Read on to discover the path to financial freedom.

Understanding a Debt Management Program

A debt management program offers a way to pay off high-interest credit card balances without resorting to bankruptcy. However, it’s important to note that a debt management program may not be the best solution for everyone. It is most effective when your debt amount is manageable and you have assets you want to protect.

If you find yourself in this situation, a debt management plan can help you lower your overall payment to a more affordable amount, without the need for legal filings or interventions. This means you can keep your valuable possessions, such as homes, cars, and other assets. Additionally, debt relief allows for a more gradual approach, giving you the flexibility to regain your financial footing over time.

Is a debt management program right for you?

When you find yourself overwhelmed by debt, exploring debt management program options may provide a much-needed solution. However, determining whether a debt management plan is ideal for your situation requires careful consideration.

Debt Amount Consideration

A debt management program tends to be most effective when your debt amount is manageable. While the specific threshold varies depending on individual circumstances, having a debt level that you can realistically work to pay off over time is typically more conducive to successful debt management program outcomes.

You also need to separate secured debt from unsecured debt. Secured debt is what its name sounds like. The debt is secured against one or more of your assets, such as an auto loan. If you need the asset and its value is greater than the amount of debt against it, the secured lender will not be motivated to amend the amount you owe.

No Legal Filings Required

One of the key advantages of a debt management program is that it generally does not necessitate any legal filings or interventions. This streamlines the process and makes it more accessible to individuals seeking relief from their financial burdens. By avoiding legal procedures, a debt management program can offer a more straightforward and efficient path to debt resolution.

Use of Credit and Affordability

A debt management program allows you to continue using credit while you work towards repaying your debts. This can be particularly beneficial for maintaining essential expenses and managing unexpected costs during the debt management program process. Additionally, a debt repayment program often offers an affordable and gradual approach to debt repayment, making it suitable for individuals looking to regain financial stability without experiencing overwhelming financial strain or having the negative impact on your credit score that happens with bankruptcy.

Overall, the decision to pursue a debt management program should be based on a comprehensive evaluation of your financial situation and goals. By considering factors such as the amount of debt you owe, the convenience of the process, and the affordability of the options available, you can determine whether a debt management program aligns with your needs and priorities.

Debt Management Program: Considering Bankruptcy

A bankruptcy filing, on the other hand, provides a more immediate solution for those facing crushing debt loads. It can be the right choice when you owe significant amounts of credit card debt, unsecured personal loans, or other unsecured debts that far exceed your means. The bankruptcy process offers unparalleled debt elimination, but it comes with serious trade-offs.

Your credit score may be negatively impacted for a period of seven to ten years, making it a less favourable option if you have good or marginal credit and owe only a few thousand dollars. However, if your credit is already severely impaired, filing bankruptcy may be a quicker and more efficient way to resolve your debt burdens.

Is bankruptcy right for you?

Bankruptcy is a difficult financial decision that many individuals may consider when they find themselves overwhelmed by debt and unable to manage their financial obligations. While bankruptcy is a serious process under the Bankruptcy and Insolvency Act (Canada) with long-term consequences, it can also provide a fresh start for those in dire financial circumstances.

Relief from Crushing Debt Load

One of the primary reasons individuals opt for bankruptcy is the overwhelming burden of debt they carry. When debts become unmanageable, it can lead to constant stress, sleepless nights, and strained relationships. Filing for bankruptcy can provide relief by allowing individuals to eliminate or restructure their debts to a more manageable level.

By working with a Licensed Insolvency Trustee (LIT), individuals can develop a repayment plan or proceed with liquidating assets to pay off debts. This process can help individuals regain control of their finances and start anew with a more sustainable financial future.

Solution for Badly Damaged Credit

For individuals with severely damaged credit, bankruptcy can offer a way to address their financial challenges and start rebuilding their credit history. While bankruptcy harms credit scores initially, it also provides an opportunity for a fresh start.

By discharging debts through bankruptcy, individuals can eliminate the burden of overdue payments and past defaults that have been dragging down their credit rating. With a clean slate, individuals can gradually rebuild their credit by managing new credit responsibly and demonstrating improved financial habits.

Quick Resolution and Legal Protections

Unlike other debt management program options, bankruptcy offers a relatively quick resolution to financial problems. Depending on the type of bankruptcy filed, individuals can receive a discharge of their debts within less than 1 year to a few years, depending on the circumstances. This allows them to move forward without the weight of excessive debts.

Keep in mind that your discharge of debt does not take place until you are discharged from your bankruptcy. A few kinds of debt cannot be discharged through bankruptcy, but most people get their entire debt discharged.

Additionally, bankruptcy provides legal protections against creditors, wage garnishment, and foreclosure. Once an individual files for personal bankruptcy, an automatic stay goes into effect, preventing creditors from taking collection actions such as wage garnishment or repossession of assets.

This legal protection can provide individuals with much-needed relief and breathing room to address their financial situation. The downside of bankruptcy of course is that your non-exempt assets must be turned over to the Trustee to be sold.

The only Debt Management Program Approved By The Canadian Government

There is only one debt management program approved by the Canadian Government and it is an excellent option for those with a steady income. This government-approved form of debt relief is called a consumer proposal. It is the only government-approved debt settlement plan available in Canada and is an alternative to a liquidation bankruptcy. It is not as drastic as personal bankruptcy but has most of the bankruptcy protection elements making it more potent than in a debt management program.

A consumer proposal is a legal process also under the BIA designed to help individuals settle their debts with creditors in a manageable way. It provides a structured framework for debt repayment while offering protection from creditors’ collection actions. Let’s delve deeper into the key aspects of a consumer proposal.

Legal Process to Settle Debts with Creditors

When an individual is struggling with overwhelming debt and is unable to keep up with payments, a consumer proposal can be a viable solution. This process involves working with a LIT to create a formal proposal to creditors outlining a revised payment plan. The proposal typically includes an offer to repay a portion of the total debt over a set period, based on the individual’s financial situation.

Once the consumer proposal is submitted to the creditors, they have the opportunity to review and vote on the proposal. If the majority of creditors accept the terms of the proposal, it becomes a legally binding agreement, and the individual is bound to fulfill the revised payment plan.

Allows Debtor to Make a Formal Proposal to Creditors

One of the key benefits of a consumer proposal is that it allows debtors to take an active role in addressing their financial difficulties. Instead of facing aggressive collection actions from creditors or considering bankruptcy as the only option, individuals can work with a LIT to craft a proposal that is fair and feasible for both parties.

By making a formal proposal to creditors through a consumer proposal, debtors have the opportunity to demonstrate their commitment to repaying their debts in a structured manner. This not only helps in resolving financial issues but also allows individuals to regain a sense of control over their financial future.

Provides Protection from Creditors’ Collection Actions

Like bankruptcy, one of the significant advantages of opting for a consumer proposal is the protection it offers from creditors’ collection actions. Once the proposal is filed, an automatic stay of proceedings is initiated, which prevents creditors from pursuing legal actions, such as wage garnishments or asset seizures, against the debtor.

This protection provides individuals with relief from the constant stress and pressure of dealing with aggressive collection attempts. It allows them to focus on adhering to the terms of the consumer proposal and working towards becoming debt-free without the fear of immediate consequences from creditors.

In conclusion, a consumer proposal is a valuable tool for individuals facing overwhelming debt and seeking a structured way to settle their obligations with creditors. By understanding the legal process, the opportunity it provides to make a formal proposal, and the protection it offers from debt collectors’ collection efforts and legal actions, individuals can make informed decisions to improve their financial situation and work towards a debt-free future.

Meeting with a nonprofit credit counsellor to assess your financial situation

Consider credit counseling sessions with a certified nonprofit credit counsellor for expert recommendations. If you’re unsure about the best course of action to take regarding your debt, seeking advice from a certified nonprofit credit counselor can provide invaluable insights. These professionals working at a nonprofit credit counseling agency can assess your financial situation, provide personalized recommendations, and guide you toward effective debt management strategies.

WARNING: Stay away from for-profit debt settlement companies. A nonprofit credit counselor or a bankruptcy trustee can provide you with the same advice at no charge.

Choose between a debt management program or bankruptcy based on your specific circumstances

When deciding between a debt management program and bankruptcy, several factors should be taken into account. First, carefully assess your full financial situation and long-term goals. Consider the amount of debt you owe, your ability to make payments, and the impact on your credit score.

If you have assets you want to protect and prefer a more affordable and gradual approach, a debt management program might be the better option. On the other hand, if you are facing wage garnishment, or foreclosure, or need a quicker resolution, bankruptcy may be the right debt solution choice for you.

A consumer proposal or bankruptcy can be a viable option for individuals facing insurmountable debt, damaged credit, and the threat of financial instability. While it is a significant decision with long-lasting consequences, bankruptcy offers a path to financial relief, a fresh start, and legal protections against creditor actions.

It is essential for individuals considering bankruptcy to seek the advice of a financial advisor or bankruptcy professional to fully understand their options and make an informed decision about their financial future.

Debt Management Program: The bottom line

When it comes to managing debt, making informed decisions is crucial. Here are some key takeaways to help you navigate this challenging situation:

Carefully assess your financial situation and long-term goals.
Before taking any steps toward resolving your debt problems, it’s essential to have a clear understanding of the current financial position of your assets and all your outstanding debts.
Take stock of your monthly income and living expenses, so that you can create an accurate monthly budget to see where your money is being spent. Don’t forget to deduct from your monthly income your actual income taxes deducted from your monthly pay.

Debt Management Program: Conclusion

Assess your finances and goals, seek advice from a nonprofit credit counselor, and decide between a debt management program, consumer proposal or bankruptcy based on your specific circumstances. You can also have a no-cost consultation with a LIT to get personalized advice and find out how a consumer proposal or bankruptcy would work in your specific situation.

Dealing with overwhelming debt is no easy task, but there is hope. By understanding the differences between a debt management program, consumer proposal and bankruptcy, you can choose the right option for your financial situation. A debt management program offers a manageable and gradual approach, protecting your assets while you work towards becoming debt-free.

Bankruptcy, on the other hand, provides a quicker resolution and is best suited for those with significant debt loads and impaired credit. Remember to carefully evaluate your circumstances and consult with an expert if needed. With the right choice and determination, you can pave the way to a brighter financial future. Don’t let debt hold you back any longer – take control today and improve your financial health and your life.

I hope you enjoyed this debt management program Brandon’s Blog. Individuals and business owners must take proactive measures to address financial difficulties, consumer debt and company debt and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns and more associated with your company debt are obviously on your mind.

The Ira Smith Team understands these financial health concerns. More significantly, we know the requirements of the business owner or the individual who 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 and it does not mean that you are a bad person. 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 uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. 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.

The Ira Smith Trustee & Receiver Inc. team understands 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, to begin your debt-free life, Starting Over, Starting Now.

Tags Bankruptcy, collection agency, credit card, credit card debt, credit score, debt collectors, debt management program, debt relief options, debt settlement, debt settlement plan, debt solution, financial difficulties, monthly budget, nonprofit credit counseling agency, nonprofit credit counselor, protection from creditors, tax debt, unsecured debt, wage garnishments

Brandon Blog Post

DEBTS SOLUTION: STRATEGIES TO DODGE CORRUPT DEBT RELIEF SCAMS

Post author By Brandon Smith
Post date February 12, 2024

debts solution

Debts Solution: Introduction

Facing soaring expenses in housing, groceries, and fuel, Canadians grapple with amplified financial strains. The mounting necessity for a debts solution burgeons as debt problems and insolvencies surge. Seeking expert guidance becomes pivotal, steering clear of pitfalls entwined in deceptive debt relief enticements posing as saviours.

In this Brandon’s Blog, I provide insights on mitigating exposure to these cunning ploys by discussing the common warning signs that are prevalent with a debt help scammer. Unearth methods to shield you from the clutches of debt relief scams. Acquire proficiency in detecting warning signals, discerning credible services, and fortifying yourself against deceitful machinations. Delve into tangible scenarios and preemptive strategies to navigate the labyrinthine terrain of a possible debts solution, safely and securely.

Debts Solution: Recognizing Debt Relief Scams

Navigating through debt’s labyrinth often induces immense stress and a sense of being inundated, prompting many individuals to seek solace in debt alleviation initiatives. Yet, exercising prudence and vigilance within this sphere holds paramount significance. Within this industry, deceptive stratagems loom from for-profit debt settlement companies, preying on the susceptible, and exacerbating their financial woes. Deciphering these deceitful maneuvers becomes pivotal; doing so empowers you to shield yourself and judiciously discern the avenues for debt alleviation at your disposal.

*Debts Solution: Scammers often ask for upfront fees and make unrealistic promises***

Identifying a potential debt relief company scam often hinges on a prominent signal: the insistence on upfront fees by the entity or individual. Authentic debt relief programs typically levy charges solely after achieving a triumphant negotiation or formulation of a repayment strategy. Conversely, imposters brazenly demand payment in advance, vanishing into thin air without rendering any tangible aid.

Moreover, these malevolent actors might peddle unattainable assurances regarding debt eradication or swift resolution of financial problems. It’s imperative to grasp that an overnight miraculous debt dissolution remains an illusory prospect. Legitimate debt mitigation ventures engage in protracted negotiations with creditors, aiming for diminished interest rates or modified payment schemes. This, however, demands time and harmonious collaboration among all involved stakeholders.

When scrutinizing a debt relief initiative, exercise caution toward those espousing immediate or fanciful outcomes. Reputable entities furnish pragmatic prognoses, collaborating with you to sculpt a sustainable blueprint for enduring financial balance and security while providing you with lasting strategies to continually improve your financial situation.

*Debts Solution: Beware of anyone who advises you to stop communicating with and paying your creditors***

A conspicuous red flag signalling potential deceit in a debt relief scheme emerges when the program advocates severing communication and payments with your creditors. While succumbing to the allure of dodging creditor calls and missives may seem appealing, sidestepping dialogue can exacerbate your predicament.

Genuine debt mitigation programs engage in dialogue with your creditors, endeavouring to forge fresh payment terms or negotiate reduced settlements. They champion transparent communication and harmonious collaboration among all stakeholders. Conversely, swindlers might counsel total cessation of contact with creditors, precipitating escalated interest, penalties, and even legal ramifications.

Should a debt relief program advocate complete cessation of creditor payments, it unequivocally betrays your best interests. Upholding your financial commitments to the best of your capacity remains crucial while charting a course toward resolution via a reputable, trustworthy debts solution avenue.

In the digital age, debt relief frauds have actually discovered their way onto various online platforms. Debt settlement firm fraudsters might connect to you with social media sites, text, or email, encouraging quick and very easy services to your financial obligation troubles.

If you obtain unwanted messages from unidentified sources offering debt settlement solutions, use caution. Reputable debt relief programs typically do not participate in hostile or unsolicited advertising and marketing tactics. It is necessary to do your research study and thoroughly vet any type of company before giving them personal information or agreeing to work with them.

When researching debt settlement choices online, be sure to verify the firm’s credentials and try to find reviews and testimonies from other customers. In addition, inspect if the firm is associated with any reliable industry organizations or if they have any accreditations that demonstrate their competence and trustworthiness.

debts solution

*Debts Solution: Seeking Professional Help***

Seeking adept guidance from recognized experts in managing your finances and addressing debt problems is a prudent choice. Licensed insolvency trustees emerge as specialists adept in aiding individuals and companies to restructure their way through financial quagmires. Their realm encompasses proffering no-cost initial consultations, delving into your fiscal panorama, dispensing counsel, and facilitating the exploration of diverse avenues in debt management.

The following are 3 legitimate options to consider in solving debt problems. In fact, the debts solution scammers, after sucking as much money out of you as they can, then introduce you to a licensed insolvency trustee to execute one of the below options. Why not avoid the middleman debts solution scammer? All of the “services” they provide, for which they charge you thousands of dollars, you can get from a licensed insolvency trustee during the initial no-cost consultation.

Here are 3 legitimate debt relief options for anyone looking for a debts solution:

*Debts Solution: Debt Management Plan***

A structured repayment scheme, a debt management plan, proves instrumental in efficaciously steering individuals through their debt labyrinth. Collaborating with a licensed insolvency trustee ensures in tailoring a blueprint attuned to your distinct fiscal landscape. Herein, regular remittances through a payment schedule are made to the trustee to find dispersion among your creditors under their auspices.

The virtues of a debt management plan abound. Primarily, it amalgamates your debts into a singular monthly payment, streamlining financial oversight. Coupled with this, it commonly encompasses a diminished interest rate, harbouring potential savings in the long haul. Furthermore, active participation in such a plan potentially serves as a conduit for the reconstruction of your credit score, contingent upon consistent and punctual payments.

*Debts Solution: Consumer Proposal***

Should your financial circumstances veer toward a more severe terrain, contemplating the avenue of a consumer proposal emerges as a viable debts solution recourse. It constitutes a binding accord, ensconced in legality, forged between you and your creditors, shepherded by a licensed insolvency trustee. It is the only approved debt settlement government program. In a consumer proposal, your trustee takes over all communication with creditors, freeing you of this burden.

Within this framework, you proffer a proposal to reimburse a segment of your unsecured debts over a stipulated timeframe, commonly spanning five years. This offer is grounded in your reasonable capacity and only requires you to pay a portion of the total indebtedness. Upon acceptance by your creditors, monthly disbursements to the trustee ensue, who, in turn, channels these funds to your creditors. After completing your total set of monthly payments, your entire debt is wiped out.

The merits of opting for a consumer proposal are many. Firstly, it furnishes immediate shielding against collection calls, wage garnishments and legal action reprisals instigated by your creditors. Simultaneously, it facilitates a reduction in your cumulative debt burden, given that the repayment amounts to less than the owed sum. Additionally, resorting to a consumer proposal carries less weight than declaring bankruptcy, exerting a comparably milder impact on your credit standing.

*Debts Solution: Bankruptcy as a Last Resort***

As a final debts solution recourse, bankruptcy emerges as a potential remedy for individuals ensnared in insurmountable debt with no viable alternatives. This legal recourse orchestrates a fresh start by absolving a significant portion of debts, facilitating a reboot of one’s financial trajectory and life.

However, navigating the terrain of bankruptcy demands judicious consideration, given its weighty repercussions. The enduring impact on your creditworthiness, spanning multiple years, can pose hurdles in securing future credit. Furthermore, the liquidation of certain assets to reimburse creditors and potential constraints on professional accreditation warrant conscientious contemplation in discussion with a licensed insolvency trustee.

Prudent counsel from a licensed insolvency trustee assumes paramount significance before delving into bankruptcy. Our expertise enables a comprehensive no-cost evaluation of your circumstances, guiding you toward the most fitting pathway forward.

Credit counseling is an important aspect of any service provided by a licensed insolvency trustee.

*Debts Solution: Protecting Yourself from Fake Loan Scams***

Many times debts solution scammers combine a mandatory loan program with their debt relief package. Here are some tips on how to avoid being a victim of these loan program scams.

Be cautious of deals that require payment upfront or appear too good to be real

A substantial indicator of a spurious finance scam materializes when the lender needs payment before finalizing the loan. That is what a bogus debt relief company does or arranges for you. Reputable companies who lend money typically deduct any type of fees or expenditures from the loan itself, avoiding any kind of in-advance payment. Furthermore, lenders that appear excessively beneficial are commonly deceptive. Fraudsters often attract people with implausibly low-interest rates or guarantees of assured loan authorizations, departing from the reasonable standards of the lending world.

Phony lending rip-offs assure loans even with a negative credit history yet never provide the loan

If you have a negative credit rating, scammers may attempt to take advantage of your scenario by encouraging loans without credit history checks or with assured authorizations. Nonetheless, genuine lending institutions always analyze the creditworthiness of a borrower before approving a loan. If a lender is not interested in your credit rating and claims to supply financing to any individual despite their credit rating, it is likely a fake funding fraud. Remember, no lender can ensure funding without appropriate analysis.

Stay clear of offering individual or financial details to unidentified sources

Protecting your personal and financial info is vital in the electronic age. Fraudsters may pose as loan providers and demand sensitive info, such as your social insurance number, bank account details, or driver’s certificate information. Never offer such information to unknown sources or through unknown sites or channels. Genuine lenders will have protected systems in position to secure your data, and they will not ask for unnecessary individual or financial information.

debts solution

*Debts Solution: Conclusion***

Getting specialist support from a licensed insolvency trustee is essential in working through the details of your financial debt and money obstacles. Licensed insolvency trustees stand as important wellsprings, supplying invaluable advice, support, and strength for you to navigate the puzzle of economic problems. Whether designing a debt management plan approach or considering a consumer proposal, embarking on these paths alongside a seasoned specialist will let you recover your authority over your entire life. It minimizes the difficult anxiety you have carried and moulds a course towards a much more positive financial destiny.

I hope you enjoyed this debts solution Brandon’s Blog. If you’re struggling with managing your overwhelming debt, don’t worry – there are some things you can do to take control of the situation. It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person.

First, it’s important to create a realistic budget and track your expenses. From there, you can prioritize your debt repayment and make consistent payments to chip away at what you owe. It’s also a good idea to seek professional financial advice to help guide you through the process. Just remember, managing debt is a gradual process that requires commitment and determination, but you can do it! So don’t hesitate to reach out for help from financial professionals.

Individuals and business owners must take proactive measures to address financial difficulties and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

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 uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. 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.

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.

picture of man deep in debt going over a contract to hire a debts solution settlement company — *debts solution*

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Brandon Blog Post

FINANCIAL STRESS TEST: 10 UNDENIABLE WARNING SIGNS YOUR COMPANY IS HEADING TO BANKRUPTCY

Post author By Brandon Smith
Post date January 29, 2024

financial stress test

Financial stress test: Introduction

Poor financial management is a substantial element that causes a firm to be burdened with excessive financial debt. To avoid financial stress, one of the critical areas for companies is to develop a proper balance between their debt and equity financing, in addition to creating a distinct plan for managing their debt. Overlooking these obligations may lead to a situation where a company ends up being overloaded by debt and interest payments and ends up perilously close to insolvency and maybe even bankruptcy.

Investing in private or public companies always brings dangers, yet it can be particularly devastating when a company you’ve bought declares bankruptcy. In this financial stress test Brandon’s Blog, we discuss the topic of business financial stress and exactly how to identify early signs that a company you own or have invested in is heading in the direction of bankruptcy. By comprehending the 10 essential indications or danger signals, you will certainly be able to make enlightened choices and protect your economic future. We believe that recognizing these signs is critical for any manager, owner or investor and we discuss them below.

Financial stress test danger signal 1: Debt can be a killer

Too much debt can be a major business killer. It typically results in their insolvency and failure. When a firm struggles with low sales and revenues, the worry of debt becomes a lot more challenging to overcome. As investors, it is important to carefully keep an eye on the financial obligation level of a business to make sure that it can fulfill its economic obligations.

Among the indications that a company is heading towards bankruptcy is frustrating financial obligations. High degrees of debt, the first financial stress test, can be a significant root cause of financial tension for a company. When a business has gathered a considerable amount of debt that it cannot pay off, it can discover it is challenging to fulfill its economic obligations, which is the leading cause of bankruptcy. This can bring about a downward spiral where the business continues to borrow to pay off other financial debts, intensifying the problem. As an investor, it’s important to keep an eye on a firm’s financial obligation levels and assess its capability to handle and reduce its financial debt burden.

In addition to taking a look at a business’s financial statements, it is very important to remain updated on the latest information and advancements that might impact a firm’s debt circumstance. Modifications in rates of interest, credit report ratings, or industry-specific regulations can have a considerable effect on a firm’s capability to handle its financial obligations and its ability to continue to operate.

Comparisons can be made between different companies and their financial obligations. It truly is a tool with 2 sides. When debt is used practically and responsibly, it has the prospective to drive business growth and expand horizons. Nonetheless, if financial debt reaches unmanageable proportions, it can swiftly turn into a fatal strike. Organizations strained by frustrating financial debt frequently find themselves captured in a damaging pattern, unable to generate sufficient funds to satisfy their financial debt duties.

financial stress test

Financial stress test danger signal 2: Declining revenue

The second financial stress test is a decrease in sales can act as a substantial indicator, shedding light on the multifaceted challenges a corporation grapples with. It may insinuate that the demand for the enterprise’s offerings is experiencing erosion in the marketplace, or that rival contenders are annexing a larger slice of the market pie.

Discerning the underlying rationales behind the slump in sales assumes paramount importance, as it offers insights into the realms necessitating enhancements or recalibrations in corporate strategies. Furthermore, it facilitates the assessment of whether the market has wearied of the company’s product or service offerings.

Various methodologies exist for surveilling sales trends and scrutinizing a corporation’s performance. One prevalent approach involves scrutinizing the company’s financial records, encompassing the income statement and balance sheet. These documents provide a granular breakdown of the corporation’s sales figures, profits, and expenditures. By juxtaposing these numerical facets across temporal dimensions, both management and investors can pinpoint any deviations or recurring themes in the company’s sales acumen.

Sustained drops in revenue can be construed as momentous signifiers of financial adversity and disquiet. A dip in revenue may signify a flagging appetite for the company’s offerings or an encroachment on market territory by competitors. This deterioration exerts a direct influence on the corporation’s earnings and liquidity, thereby engendering mounting impediments in meeting monetary obligations and defraying expenses.

Lenders ought to lend a vigilant ear to this clarion, as it portends the company’s arduous struggle in generating commensurate income, with potential repercussions spanning financial hardship or, in extreme cases, insolvency if left unaddressed.

Financial stress test danger signal 3: Negative cash flow

When conducting a comprehensive evaluation of a firm’s financial well-being, sustainability, and overall fiscal robustness, one pivotal factor that investors should diligently scrutinize pertains to its capital. Cash flow, the third financial stress test, denotes the intricate ebb and flow of financial resources within a company, encapsulating both the inflow and outflow of monetary assets over a specified duration.

Capital stands as the linchpin of any prosperous enterprise, furnishing the wherewithal to discharge financial obligations, sustain day-to-day operations, and seize growth opportunities. A robust cash flow empowers a company to honour its debt commitments, bankroll its routine functions, and allocate resources for the expansion of its business. Conversely, an inadequacy in cash flow can give rise to formidable fiscal predicaments, potentially imperilling the company’s equilibrium and longevity.

If a company consistently experiences a surplus of monetary outflows over inflows, it may serve as an ominous harbinger of financial distress. One of the paramount indicators signalling that a company is grappling with financial strain and edging toward insolvency is an adverse cash flow. When a company persistently witnesses an outflow of cash exceeding its inflow, it undeniably indicates that financial woes are looming.

An unfavourable cash flow signifies that the company is not generating sufficient revenue to offset its expenditures, thereby engendering the perilous inability to meet financial obligations and fulfill fiscal commitments. Prudent investors must exercise vigilance when they discern this forewarning and regard it as a crimson banner, safeguarding their investments and rendering well-informed judgments concerning the financial destiny of the company.

Comprehending the significance of cash flow

Examining a corporation’s capital history and contrasting it with its prevailing levels of financial indebtedness bestows a valuable perspective on its financial well-being. If a company shoulders a substantial debt burden that eclipses its capital reservoir, it may signal heightened risk and potentially foreshadow impending financial tribulations.

Debt servicing: Enterprises endowed with a robust cash flow possess the capacity to expeditiously honour their debt obligations, thus evading the pitfalls of loan defaults. A bountiful cash flow not only equips them to promptly meet interest and principal repayments but also instills faith in lenders and stakeholders alike.

Operational expenditures: Cash flow plays a pivotal role in underwriting a company’s day-to-day operational outlays, encompassing personnel salaries, lease outlays, utility expenses, and inventory procurements. Ineffectual cash flow management can precipitate quandaries in sustaining routine business functions, thereby opening the door to potential disruptions.

Prospects for growth: A buoyant cash flow furnishes a corporation with the requisite financial means to seize burgeoning prospects, be it diversifying its product portfolio, venturing into novel market segments, or acquiring rival entities. Enterprises grappling with meagre cash flow may forfeit these openings and fall short of harnessing their full growth potential.

Analyzing cash flow: Key metrics and ratios

Pro Tip: It’s also crucial to compare a company’s cash flow metrics with those of its industry peers and competitors. This helps provide context and identify potential outliers or areas of concern.

Since we have developed the significance of capital in a business’s monetary wellness, let’s explore the important indicators and proportions that investors typically rely upon to evaluate a business’s financial security and efficiency.

Cash flow to debt ratio: This proportion contrasts a business’s operating capital to its overall debt, providing an understanding of its capacity to service its financial obligation obligations. A greater proportion suggests a favourable circumstance, showing that the company creates enough cash to cover its financial debt settlements.

Running cash flow (RCF): This metric exposes the cash created from a company’s core procedures. A positive RCF indicates that the business’s operations are producing enough cash to cover its costs and purchase future growth. An unfavourable RCF might recommend operational inefficiencies or declining sales.

Free capital (FCF): FCF represents the cash left after subtracting capital investment from running capital. It shows the surplus cash offered for debt settlement, shareholder distributions, or reinvestment in business. A healthy FCF is necessary for long-lasting economic stability.

While these metrics offer a beginning point for capital analysis, it is very important to perform an extensive testimonial of a company’s financial declarations, including its earnings statement and balance sheet. Comparing the trends in cash flow over multiple periods can reveal patterns and provide a more accurate assessment of the company’s financial stability.

financial stress test

Financial stress test danger signal 4: Inadequate liquidity

Inadequate liquidity stands as the pivotal fourth financial stress test, suggesting that a corporation is treading the precarious path towards insolvency. When a company grapples with a paucity of access to liquid resources, such as cash or readily tradable securities, it can substantially fetter its capacity to discharge fiscal obligations and retire outstanding debts. Constricted liquidity begets complexities for a company in navigating unanticipated financial setbacks or leveraging investment opportunities to generate revenue.

In the dearth of a commensurate cash flow, a company might resort to exorbitantly high-priced borrowings or precipitous divestment of valuable assets, thereby exacerbating its fiscal predicaments. Investors ought to meticulously monitor a company’s liquidity standings, for it can serve as a telltale sign of an impending bankruptcy risk.

Financial stress test danger signal 5: Impact of competition on a company’s financial health

When one undertakes the evaluation of an enterprise, it becomes paramount to consider the relative extent of its market dominance in comparison to its competition. If said market portion exhibits a downtrend, it could potentially signal operational hurdles, a struggle to maintain competitiveness, or perhaps even an ongoing struggle for supremacy. Moreover, prudent investors ought to delve into the company’s array of competitive strengths and weaknesses in this fifth financial stress test.

This endeavour necessitates a comprehensive examination of aspects such as the distinctiveness of their products, the standing of their brand, their operational efficiency, and the fidelity of their customer base. A holistic understanding of these facets stands as a fount of invaluable insights concerning the organization’s ability to maintain a lead within the competitive milieu.

Furthermore, seismic shifts in consumer proclivities might also wield a profound influence on the fiscal well-being of an enterprise. As the predilections of consumers undergo metamorphosis, organizations must adroitly recalibrate their stratagems to conform to these evolving exigencies. Failure to do so could culminate in market erosion and revenue diminution.

For example, a company that neglects to embrace the currents of e-commerce and the tenets of digital marketing might find itself outflanked by competitors who adroitly harness the potential of the online sphere. Investors ought to scrutinize the responsiveness of an enterprise to the vicissitudes in consumer comportment and evaluate its preparedness to exploit nascent prospects.

In the process of scrutinizing the financial robustness of an enterprise, it becomes imperative for proprietors, administrators, and financiers alike to factor in the competitive ecosystem. It is a sine qua non to undertake a scrupulous and penetrating inquiry to fathom the challenges posed by rival entities and gauge the organization’s tenacity in the face of such challenges.

One of the cardinal modes through which competition influences the financial stability of an enterprise resides in the transformations that transpire within the marketplace landscape. The advent of formidable competitors possesses the potential to upend the dynamics of the market, casting a substantial shadow over long-established entities.

These competitors may proffer analogous wares or services at more enticing price points or introduce pioneering solutions that captivate the discerning gaze of consumers. In such instances, the organization may experience an erosion of its market pie, thereby impacting its financial performance adversely.

Competition assumes a pivotal role in ascertaining the fiscal vitality of an enterprise. In the contemporaneous warp-speed business milieu, entities confront ceaseless challenges emanating from their adversaries, which can deliver both boons and banes. It is of utmost import for investors to vigilantly track the competitive vista and assess its prospective repercussions on the enterprise they have bestowed their confidence.

Financial stress test danger signal 6: Problem in securing financing

When a company is not able to secure funding, it can be a concerning indication of economic distress. Lenders might watch the firm as not creditworthy, implying they do not believe in its capability to pay off borrowed funds. This can develop a cycle of financial stress, making it even more difficult for the firm to fulfill its monetary commitments and survive. Investors should be cautious when they see a firm battling to get financing, as it can be a very early indication of prospective bankruptcy. It is critical to completely analyze a firm’s credit reliability before making any kind of financial investment decision.

This sixth financial stress test is one of the essential warning signs that a company might be heading towards bankruptcy is trouble in safeguarding financing. When a firm is unable to secure financings or credit history, it shows that lending institutions and financial institutions might have doubts about its capability to repay its debts.

This can be a significant obstacle for a company as it restricts its choices for raising funding and dealing with economic obstacles. Problems with getting financing can likewise affect the company’s operations, making it more difficult to buy development opportunities or meet everyday costs. Investors must focus on this red flag as it might suggest deeper economic stress within the company.

Financial stress test danger signal 7: Workforce downsizing and layoffs

This seventh financial stress test is an indicator of a company grappling with financial anxiety that emerges in the implementation of terminations and downsizing initiatives. When a corporation finds itself ensnared in economic turmoil, it frequently turns to measures aimed at trimming expenses to reinvigorate its financial solvency. This may entail the reduction of personnel or the curtailment of operational procedures.

Workforce reductions within a company can serve as a telltale sign of its struggles in meeting financial obligations and its ardent quest to curtail expenditures. Such measures can exert a deleterious impact on the morale and efficiency of employees, and it behooves investors to take heed, as it may foreshadow more profound fiscal challenges.

In the event that a business grapples with financial adversity, one stratagem to ameliorate the financial impact is staff terminations and a constricting of operational scope. These maneuvers are typically resorted to as a measure of last resort to forestall bankruptcy and enhance liquidity. Nonetheless, the downsizing of the workforce can engender unfavourable repercussions on morale and productivity, concurrently signalling to investors and stakeholders that the company is grappling with economic tumult.

Consequently, if you happen upon a corporation contemplating substantial staff reductions or a contraction in its operational domain, it becomes imperative to monitor the situation as a cautionary signal and conduct a comprehensive assessment of its overarching financial stability.

financial stress test

Financial stress test danger signal 8: Legal issues and lawsuits

Legal issues and lawsuits can be serious warning signs of financial stress within a company. When a company is involved in numerous legal battles, it not only incurs hefty legal fees but also faces the risk of significant financial settlements or judgments against it. These legal issues can drain a company’s resources and impact its profitability, leading to financial instability.

Additionally, the negative publicity associated with legal problems can damage a company’s reputation and erode customer trust. Investors should carefully monitor a company’s legal standing eighth financial stress test to assess the potential financial implications of ongoing legal battles before making any investment decisions.

Legal issues and lawsuits can serve as a warning sign of financial instability for a company. When a company is faced with numerous legal challenges, it can be an indication that its financial position is precarious. Legal battles can be expensive, and the costs associated with defending against lawsuits and paying settlements can take a toll on a company’s financial health.

Additionally, legal issues can divert management’s attention from crucial business operations, further exacerbating the financial stress. Therefore, investors should pay close attention to any company that is involved in a significant number of legal disputes, as it may suggest underlying financial difficulties leading to a negative financial impact.

Financial stress test danger signal 9: Loss of key clients or customers

A potential sign that a company might be veering toward the precipice of financial stress and bankruptcy materializes with the exit of pivotal clients or customers. When these linchpin stakeholders take their leave, the reverberations can be severe and calamitous, exacting a profound toll on the company’s finances. These clients are the linchpin of the company’s revenue streams, rendering their departure a grievous blow.

Multiple reasons may underpin their decision to depart, including the company’s inability to adapt to shifting customer expectations, the surge in competitive forces, or the repercussions of economic downturns. The attrition of these key clients signifies a waning appetite for the company’s offerings or the erosion of its business relationships. It is of paramount significance for investors to maintain unwavering vigilance and meticulously scrutinize any conspicuous losses in this sphere, as they may serve as potent harbingers of impending financial adversity on the horizon. For all these reasons, this is why it is our ninth financial stress test.

Financial stress test danger signal 10: Deteriorating stock performance

Our tenth financial stress test deals with public companies. One conspicuous red flag signalling a public company’s perilous journey of financial stress toward the brink of bankruptcy resides in the withering performance of its stocks. A consistent descent in the company’s stock values signifies a growing lack of investor faith in its fiscal vitality. The dwindling stock worth resonates as a resounding expression of apprehensions regarding the company’s capacity to yield profits and fulfill its financial commitments.

Investors maintain an eagle-eyed watch over stock performance as it crystallizes the company’s overarching steadiness and market sentiment. Hence, the vigilant tracking of a company’s stock performance, particularly for those in which one has invested, serves as a fount of invaluable insights into the financial strains at play and empowers judicious investment decisions.

A persistent depreciation in the company’s stock value embodies a potent indicator that investors harbour reservations about its fiscal well-being. This erosion of trust may emanate from worries concerning the company’s competence in revenue generation, financial obligation fulfillment, or operational perpetuation.

When investors bear witness to a protracted downturn in stock performance, they oftentimes construe it as a herald of impending fiscal turbulence or, in the direst of scenarios, bankruptcy. As potential investors grow increasingly reticent to pour capital into the company, they may grapple with impediments in securing essential financial resources.

Financial stress test: Conclusion

To protect your investments and make informed decisions, it’s extremely important for investors and owners to maintain a vigilant position and remain in harmony with the very early indications of financial stress and possible company insolvency. A detailed understanding and thorough surveillance of essential financial metrics and cautionary signs act as the barrier to safeguarding your investments.

An aggressive orientation and continual watchfulness in worrying about the financial health of your invested enterprises are essential for securing your financial future. Consequently, it’s imperative to maintain a watchful eye on variables such as declining income streams, placing financial obligation problems, feeble cash flows, and monitoring instability. Equipped by these perspicacious understandings, you will expertly browse the elaborate investment terrain and take on requisite procedures to secure your hard-earned wide range.

I hope you enjoyed this financial stress test Brandon’s Blog. If you or your company are struggling with managing overwhelming debt in this high-interest environment, don’t worry – there are some things you can do to take control of the situation.

It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. 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 uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now!

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.

CLICK HERE TO GET A FREE COPY OF OUR EBOOK 10 UNDENIABLE WARNING SIGNS YOUR COMPANY IS HEADING TO BANKRUPTCY

An image showing a traffic light with red and green lights with financial charts and dollar signs in the background to depict a company showing danger signals and nearing financial bankruptcy — *financial stress test*

Tags Bankruptcy, cash flow, competition, danger signals, Debt, deteriorating stock performance, economic distress, financial distress, financial impact, financial stability, financial stress, financial stress test, insolvency, key clients/customers, liquidity, litigation, market share, warning signs, workforce downsizing

Introduction: Understanding Canada’s Cost of Living Landscape

The Everyday Battle: Cost of Living and Financial Survival

Living Paycheque to Paycheque: A Widespread Reality

No Emergency Savings: A Dangerously Thin Safety Net

The Retirement Dream Fades: Unable to Save for the Future

Feeding the Nation: Food Costs and Grocery Bills

Food Insecurity: The Empty Plate Problem

Decoding Housing Costs: The Biggest Budget Factor

Housing Affordability: No Place to Call Home Comfortably

The Ripple Effect: How Rising Costs Hurt Canadian Businesses and Entrepreneurs

Challenges for Businesses:

Finding a Way Forward: Strategies for Managing Financial Hardship

For Individuals:

For Businesses:

Government Resources and Debt Relief Options

Formal Debt Relief Options (Overseen by a Licensed Insolvency Trustee):

Other Government-Related Resources and Programs:

Beyond the Numbers: Taking Control and Moving Forward

Key Takeaways and Actionable Advice:

Cost of Living Conclusion

Understanding Credit Cards Debt

Definition and Basics

Impact on Credit Score

Legal Consequences: Wage Garnishment and Account Levies

Causes of Credit Cards Debt

High Annual Percentage Rates (APR)

Only Paying the Minimum

Poor Money Management

Unexpected Expenses

Consequences of Credit Cards Debt

Financial Implications

Psychological and Physiological Impacts

Credit Cards Debt Confessions from Rock Bottom: Facing the Debt Monster

Step One: Brutal Honesty About Your Debt

Step Two: Ditch the Self-Blame, Start Planning

Step Three: Pause All Non-Essential Spending

Step Four: Use Every Tool—Even Your Tax Refund

Real Talk: Stress Is Normal, But Action Is Powerful

The Great Cash Hunt: Squeezing Pennies From Stone (and Facebook)

Unconventional Ways to Boost Cash Flow

Declutter With Abandon

Strategic Cuts: Kill Non-Essential Spending

Avalanche, Not Snowball: Smarter Ways to Attack Credit Cards Debt

Last Stop: When DIY Doesn’t Cut It, Call the Credit Cards Debt Pros

Credit Cards Debt: Conclusion

A Recent Ontario Court Decision Every Business Owner Should Know About

What Happened: The $400,000 Payment That Backfired

Creditor vs. Debtor: What Is a Creditor Preference?

Why Did Specialty’s “Business Survival” Argument Fail?

What This Means for Your Business

Do:

Don’t:

Key Takeaways

Protecting Your Business from Preference Issues

Final Thoughts on Fairness

Preference FAQ: Your Questions Answered

What exactly does “anti-preference” mean in bankruptcy law?

When might a payment to a creditor be considered unfair?

What is a “rebuttable presumption” regarding creditor payments?

Can a business explain that they were under pressure from a creditor?

How can a business prove they weren’t trying to favour one creditor?

When is “trying to save the business” a valid reason for paying just one creditor?

Why does a business continuity plan need to be “reasonable”?

What factors do courts look at when deciding if a business plan was reasonable?

Six Key Lessons from the Preference Case

1. All Creditors Must Be Treated Equally

2. Payments Shortly Before Bankruptcy Can Be Reversed

3. Courts Assume Preferential Intent

4. Pressure from a Supplier Isn’t an Excuse

5. Business Continuation Plans Need to Be Realistic

6. Courts Look at Hard Facts, Not Just Good Intentions

The Hard Truth About Equality

Insolvency Advisory Services: Introduction

What is Insolvency?

The Insolvency Legal Framework

Key Legislation in Canadian Insolvency Law

Provincial Laws and Their Impact on Insolvency

Roles and Responsibilities

Access to Insolvency Information

Insolvency Advisory Services: The Profit Motive