Prepare yourself for divorce financially: Introduction
There is nothing good about divorce yet Canadians continue to engage in the practice in record numbers. The divorce statistics are staggering. According to Statistics Canada:
In Canada, 48% of marriages end in divorce (Ontario’s rate of divorce is 42.1%)
The average length of a marriage nationally is 14 years
According to the Vanier Institute of the Family, the divorce rate for second marriages is even higher at over 50%.
Prepare yourself for divorce financially: Not just emotionally
We all know how emotionally gut-wrenching divorce can be on couples and their children. But, how many couples are financially ready for divorce? Unless you’re like Gwyneth Paltrow and Chris Martin (each mega-millionaires in their own right) who “consciously uncoupled” or like the rich and famous with iron-clad prenuptial agreements, do you have any idea of what a divorce can cost?
Prepare yourself for divorce financially: Cost of divorce in Canada
According to the results of Canadian Lawyer’s 2015 Legal Fees Survey:
$1,353 – the national average cost for an uncontested divorce
$31,330 – national average cost of a two-day trial
$56,439 – national average cost of a five-day trial
$81,958 – the national average cost of a seven-day trial
Prepare yourself for divorce financially: It costs more for two to live separately than together
Now the shock is about to set in… How are you going to manage your finances separately? Do you know what your monthly expenses are? Do you have a budget? If not, you’re going to need one now.
In all likelihood, you aren’t going to be able to maintain your former lifestyle. If you do, you may land up in a situation where you are bleeding money and accumulating mountains of debt. Are you carrying over debt from your marriage and trying to maintain your old lifestyle?
Prepare yourself for divorce financially: What should you do if you have too much debt?
This is a difficult time but burying your head in the sand isn’t the answer. The best option is to deal with debt with the help of a professional trustee. This is especially true in a separation or divorce situation as one of the very few situations that are NOT stopped by an insolvency filing stay of proceedings are family law proceedings.
Many divorce lawyers do not understand the relationship between provincial family law and the federal Bankruptcy and Insolvency Act (Canada). You are best to consult with a licensed insolvency trustee before taking any action. You need to financially prepare for divorce.
Although your particular situation may seem catastrophic, we offer peace of mind that you will get through this and you will be able to start over. ContactIra Smith Trustee & Receiver Inc. today. Starting Over, Starting Now you can take back control of your life and be debt-free.
The bankruptcy trustee in Vaughan: Why did we transform into a licensed insolvency trustee?
Similar to caterpillars turning into butterflies, this bankruptcy trustee in Vaughan went through a metamorphosis. The Office of the Superintendent of Bankruptcy officially changed the name “bankruptcy trustee” to “licensed insolvency trustee” (LIT). As of April 1, 2017, all licensed trustees must have fully transitioned to the use of the LIT designation.
The purpose of this blog is to offer an overview of the Canadian insolvency process. Think of it as a bankruptcy and insolvency lesson 101.
What is the purpose of the Bankruptcy and Insolvency Act
Among the primary functions of this insolvency process, it is to release the individual from specific financial debts. It is to give a straightforward honest but unfortunate debtor a “new beginning.”. The debtor has no responsibility for discharged financial obligations.
A discharge is available to personal bankrupts, not to corporations. Although a personal case typically causes a discharge of financial debts, the right to a discharge is not absolute. Some sorts of debts may not be released. Section 178(1) of the Bankruptcy and Insolvency Act (Canada) (“BIA”) sets out the types of debts that are not released by the discharge of the bankrupt. The kinds of debts that are not released are:
1. child support and alimony;
2. fraud or near fraud;
3. debts arising from Court orders.
Where can I do some of my research?
You must initially do some of your own research to get an idea of exactly what your choices are. One place to start is our website to learn about:
through bankruptcy by turning over their property to a licensed insolvency trustee to realize upon it for the general benefit of creditors.
Either way, the funds available for distribution to the creditors are paid out by the licensed insolvency trustee. It is according to the scheme of priority laid out in the BIA.
The Court will consider approving a repayment plan that will repay the approved part of the financial obligations in no more than 5 years. When you use the restructuring provisions of the BIA (Consumer Proposal or Division I Proposal), you need to have a payback strategy to show your creditors just how you are going to pay back your debts. A successful restructuring plan is an alternative to bankruptcy and will allow a person or company to avoid bankruptcy.
There are various rules and ways that must be followed. Your licensed insolvency trustee can go over all the issues with you and is there to aid you through the process.
How does it all work?
Canada’s insolvency legislation is designed for debtors experiencing financial problems who cannot pay their present financial obligations and don’t have enough cash flow to offer a restructuring plan to avoid bankruptcy. The aim is to get a release from their existing debts.
The premise of the BIA is that the individual must deliver all of his or her non-exempt assets to the licensed insolvency trustee. The trustee will sell them for distribution to the creditors. In return, other than for either secured debts or the class of debts not released by a discharge from bankruptcy discussed above, the person’s debts will be erased. The person will be able to maintain any type of property that is categorized as exempt under provincial regulations. In this way, a discharge allows the individual to return to society as discharged bankrupt. This allows the person to start all over again.
Your credit score
Filing in an insolvency process could impact your financial resources and credit score for years. You should very carefully weigh all your options before choosing the bankruptcy option. That is a discussion a licensed insolvency trustee will be happy to have with you and will help you in first trying to find one of the possible bankruptcy alternatives. Hopefully, together you can see which one is best for you. Only if there is not an available alternative, will the trustee recommend bankruptcy?
A current bankruptcy filing may prevent you from acquiring a mortgage or other financing for years. Credit card businesses will instantly end your charge cards when you file for bankruptcy. Likewise, if you are trying to find a job or rent a place to live, some employers or property owners might look unfavourably on a current bankruptcy filing. If other applicants are as qualified as you and don’t have a bankruptcy on their record, you probably won’t be chosen.
Fresh start
Bankruptcy permits people or companies that are unable to pay their debts to settle their monetary difficulties and start restoring their credit. Declaring bankruptcy will trigger the “stay of proceedings”, preventing creditors from starting or continuing any legal action to collect their debts.
A bankruptcy filing will stay on your credit report for about 7 years. Since many financial debts can be discharged in bankruptcy with certain exceptions, people can take certain steps to begin boosting their credit rating after filing for bankruptcy and for sure after obtaining their discharge.
What to do if you are experiencing financial hardship
I hope this bankruptcy trustee in Vaughan Brandon’s Blog was helpful to you. People experience financial hardship for many reasons. If you’re experiencing financial hardship and are looking for a way out, contact Ira Smith Trustee & Receiver Inc. With immediate action and the right plan for moving forward, we can set you on a path to debt-free living Starting Over, Starting Now. All it takes is one phone call.
The holiday shopping season is upon us and the first sign that you are in financial trouble is if you truly need to learn about consumer proposal vs bankruptcy BEFORE you begin your holiday shopping! If you have already recognized that you need to know your options in dealing with your debt before you start putting holiday gift purchases on your credit card, I suspect that the New Year will become the time when you begin taking positive action to reduce your debt and gain back control over your life.
A consumer proposal is an alternative to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to people only whose total debts do not exceed $250,000, not including debts secured by their principal residence. Division 1 proposals are available to both businesses and people whose debts exceed $250,000 (excluding the mortgage on their principal residence). The focus of this vlog is on the differences between a consumer proposal vs bankruptcy.
Consumer proposal vs. bankruptcy: What are consumer proposals?
Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee (Trustee) acting as the consumer proposal administrator, you make a proposal to:
Pay your creditors a percentage of what you owe them over a specific period not exceeding 60 months
Extend the time you have to pay off the debt
Or a mix of both
Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.
Below I will highlight more differences between a consumer proposal vs. bankruptcy.
Consumer proposal vs bankruptcy: What are the advantages of a consumer proposal?
The advantages of a consumer proposal vs. bankruptcy are:
You keep all of your assets
Actions against you by unsecured creditors, such as wage garnishments will stop.
Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
You don’t have to declare the “B” word
What are the differences in credit history score?
The individual that declares bankruptcy will certainly get R9 status. This is the lowest credit score as well as it will continue to be on their report for 7 to 14 years. A person that submits a consumer proposal will have an R7 ranking which is less extreme. It will certainly continue to be on their record for approximately 8 years in total, from the moment of declaring.
For the most part, you will certainly pay less than you owe with a consumer proposal. Often as much as 70% less. Your several financial obligations will also be consolidated right into a simple regular monthly settlement. This number will be based upon what you can pay for.
Your ability to improve your credit score later is much different in a consumer proposal vs bankruptcy
What are the costs and fees of a consumer proposal versus filing for bankruptcy?
When doing a consumer proposal, the Trustee’s charges are included in the payment you bargain with your creditors. For instance, if your consumer proposal has you paying $400 monthly for 60 months, the Trustee’s fee and disbursements are taken from those funds.
Nevertheless, if you were to file for bankruptcy, the cost is established by any kind of excess earnings you could have (based on the criterion that includes earnings as well as family size), any assets that you may intend to try to keep, and also the monthly contribution for surplus income if any.
If there is no excess earnings or assets, the insolvency cost will be around $2,000. This is another difference between a consumer proposal vs bankruptcy.
Are assets treated differently between a consumer proposal vs bankruptcy?
If you do a consumer proposal, you can retain your assets whereas in bankruptcy your properties might be impacted. This consists of the equity in your home if higher than $10,000, a car or truck worth more than $6,000 (with no liens against it), financial investments, tax refunds, and also RRSP payments made in the last 1 year. In bankruptcy, you transfer your possessions (except those that are exempt by regulation) to the Trustee, and they are then sold or transferred to repay your creditors.
This difference between a consumer proposal vs bankruptcy is huge.
What if I default on my consumer proposal vs bankruptcy payments?
If you do not maintain your payments on a consumer proposal, it defaults and is void. You also are unable to submit an additional one. Collection action by your credits will begin again. If you do not complete all your duties in bankruptcy, you will certainly not be discharged and eventually, your creditors will resume collection activities as well.
This is another consumer proposal vs bankruptcy difference.
When is a meeting of creditors held in a consumer proposal?
A meeting of creditors in a consumer proposal is held if one is requested by one or more creditors who are owed at least 25% of the total value of the proven claims.
A request for a meeting has to be made by the creditors within 45 days of the filing of the consumer proposal. The OSB can also request the Trustee to call a meeting of creditors any time within that exact same duration.
The meeting of creditors should be held within 21 days after being called. At the meeting of creditors, they vote to either approve or decline the proposal.
If no meeting of creditors is asked for within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors no matter any objections received later.
A consumer proposal is finished once the individual has actually made the required payments for the needed period of time. In a bankruptcy, the discharge depends on a variety of different aspects, consisting of whether it was the first time the debtor filed for bankruptcy and if they need to make surplus income payments.
If the debtor has actually never ever declared bankruptcy before and they do not have to make surplus income payments, most bankrupts are discharged 9 months after declaring bankruptcy. However, if the bankrupt has surplus income, they will need to make payments for 21 months prior to when they can be released.
This is another difference between a consumer proposal vs bankruptcy.
What do consumer proposals and bankruptcy have in common?
Both a consumer proposal and filing for bankruptcy are lawfully binding procedures that are provided by a Trustee. If you are thinking about bankruptcy, it is essential that you consult with a Trustee so that you can totally understand the procedure, what’s involved, and also any charges. You can speak with friends or family that may have filed for one or the other before, yet it is necessary that you get professional recommendations concerning your unique situation.
Filing for bankruptcy or doing a consumer proposal are both matters of public record. That means there will certainly be an irreversible public document regarding your insolvency that can be accessed by anyone. If the debts are joint or co-signed, the other individual is accountable for the financial debt in both a consumer proposal and personal bankruptcy as well, unless it is a joint filing.
Even these similarities still point out differences between a consumer proposal vs bankruptcy.
Consumer proposal vs bankruptcy: How to Figure Out Which Option is Best for You?
As you can see, when you look at a consumer proposal vs bankruptcy, there are definitely differences between the two, but they also have a lot in common too. What’s most important, though, is that you find the best way to get your finances back on track in a way that will help you achieve your long-term goals.
Consumer proposals and bankruptcy aren’t the only ways of obtaining debt relief and consolidating debt. There are also other ways of resolving debt problems that don’t involve an official program or paying anyone. If you honestly want to carefully and objectively look at all your options, contact a local Trustee, and speak to him or her. They’ll listen to your situation and issues and advise you on what will work best for you even if you do not need to file for either a consumer proposal or bankruptcy.
Their help is usually free and non-judgmental.
At our Firm, declaring bankruptcy is only encouraged until all other settlement solutions have been exhausted. A consumer proposal in Ontario is shaping up to be one of the better bankruptcy alternatives, primarily because of the reasons I describe in this Brandon’s Blog.
Consumer proposal vs bankruptcy: Who qualifies for a consumer proposal?
A consumer proposal is available to people whose total debts do not exceed $250,000, not including debts secured by their principal residence.
Before you decide what to declare, contact a professional to discuss all of your options. A trustee is a highly-skilled, professionally licensed by the federal government that can evaluate your situation and presents all the options available to you. Whatever process ends up being the best and the most helpful for your particular circumstance, we can administer the insolvency process.
Consumer proposal vs bankruptcy: How to file for bankruptcy?
In order to file, you must engage a Trustee. This is an individual or company licensed by Industry Canada to administer the insolvency process. The 10 steps below are a guide to the bankruptcy process.
Contact a licensed insolvency trustee and attend a meeting with him or her to talk about your personal situation and your options including if it is possible for you to avoid bankruptcy.
Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
The trustee notifies your creditors of the bankruptcy.
You attend a meeting of creditors if one is called.
You attend two counselling sessions.
Subject to your provincial exemptions, the trustee sells your assets; you may also have to make surplus income payments to the trustee.
In certain circumstances, you may have to attend an examination by an officer at the OSB.
The Trustee prepares a report to the OSB describing your actions during the bankruptcy.
You attend the discharge hearing if required.
You get your discharge from your bankruptcy and then the trustee completes the administration, including paying a dividend to your creditors, if available.
Consumer proposal vs bankruptcy: Move on with your life
The ability to live better than just hanging on one payday to the next;
Improved credit ratings; and
Improved health and well-being.
Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.
Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations. ContactIra Smith Trustee & Receiver Inc. today. All you have to lose is your debt!
Divorce during bankruptcy Canada is the same as the old conundrum, “which arrived first; the chicken or maybe the egg”, how would one answer, marital breakdown and insolvency: which comes first? Nobody has a definitive answer because excellent arguments can be produced for both. The same is true for “divorce and personal bankruptcy which comes first”?
Every case is decided based on its unique facts. Marital breakdown and insolvency, and bankruptcy and divorce, often go hand in hand. However, a marital breakdown will not always lead to divorce if the marriage can be salvaged. However, personal bankruptcy and divorce are two separate legal processes that can be at odds with each other.
A few indisputable facts
In this divorce during bankruptcy Canada Brandon’s Blog you will find 5 indisputable facts:
The number one reason for marital breakdown and divorce is financial issues. Divorce.com
In a recently available study one out of every seven people who made an insolvency filing in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
One-third of all people facing insolvency problems are also going through relationship breakdown and divorce in Ontario or {a splitting up. Gail Vaz-Oxlade
Declaring personal bankruptcy on joint debts, even debts in a divorce will impact the other debtor.
Are you looking to reduce grief?
If creating minimal interruption on the children of the family during a marital breakdown and personal bankruptcy features prime importance to the spouse with the debts (and presumably that will be just like the spouse making the support payments), it makes sense to have at least the support terms of the divorce decided, including the making of the support order and then do an insolvency filing. The marital breakdown and bankruptcy process will not disturb any in good faith arrangements for support, but keep in mind it will affect property not already dealt with by the family law court.
What about joint debts?
One particular area that comes up in divorce during bankruptcy Canada is this common question: “If my ex files how will it affect joint liabilities? “. Family law rules are the one area of a provincial law that is left relatively unblemished by the Bankruptcy and Insolvency Act, which is a federal statute. Nevertheless, the Supreme Court of Canada has confirmed that in Provinces that are an equalization jurisdiction (as opposed to a split of property jurisdiction, in a unanimous decision, the court upheld defining equalization payments as debts that are a claim provable in an insolvency process, meaning they are wiped off a person’s slate by the bankruptcy process.
Divorce during bankruptcy Canada: What should you do if you have both marital breakdown and too much debt?
Marital breakdown and bankruptcy is an extremely complicated process, made even more complicated when put together with divorce and requires a qualified licensed Trustee to work with your family law legal professional to work with your individual situation and give practical alternatives and an action plan. If you have serious debt problems, are considering bankruptcy and divorce, or perhaps wish to know more about marital breakdown and bankruptcy, then contactIra Smith Trustee & Receiver Inc. as soon as possible. Starting Over, Starting Now, we can help you get your life back again on track, even with marital breakdown and personal bankruptcy looming.
I want to talk to you today about the required division one proposal Ontario documents and division 1 proposal restructuring proceedings under the Bankruptcy and Insolvency Act (Canada) (BIA). You may have heard about this section of the BIA also called Chapter 11 bankruptcy proceedings. The reason is that the corporate restructuring provisions under the BIA are in Canada under Division I of Part III of the BIA, while the corporate restructuring provisions in the United States is under Chapter 11 of the US Bankruptcy Code. We are going to focus today on the restructuring provisions under Division 1 Proposal proceedings of the BIA.
First steps
The first thing the insolvent debtor must do is hire the services of a licensed insolvency trustee (formerly known as a trustee in bankruptcy). The division 1 proposal proceedings apply to corporate restructuring or the restructuring of debt of an individual with a complex debt situation and a debt level of $250,000 or more. We are going to talk today about corporate restructuring and the Division One Proposal Ontario documents required for this process.
The first step in any corporate restructuring is for the board of directors to understand and resolve that the corporation is insolvent, that it needs to restructure under the Division 1 Proposal section of the BIA and that it needs to retain a licensed insolvency trustee to do that. The corporation working with the trustee then has a choice. It can first file what is called a Notice of Intention To Make A Proposal, which is a notice to its creditors that it will be shortly making a restructuring proposal. Or it can just file the real division one proposal itself with the licensed insolvency trustee.
Documents and process
The licensed insolvency trustee has to be satisfied that: (i) all the relevant information has been obtained; (ii) the company has a good chance of actually implementing this proposal; and (iii) the company’s cash flow is enough that it can run the business successfully and pay its ongoing debts in full through the ongoing restructuring proceedings, then the licensed insolvency trustee continues the restructuring process.
The licensed insolvency trustee will mail to all the known creditors a copy of:
the proposal
a statement of the company’s assets and liabilities
The meeting of creditors is then held and if the proposal is accepted by the required majority then the proposal trustee takes the proposal documentation to Court for approval. Once the proposal is accepted by the creditors and approved by the court there is now a contract between the company and its creditors about how the company is going to restructure and what amount of money is ultimately going to be paid to the creditors through the licensed insolvency trustee.
Implementation
The company then carries its proposal as it continues its operations. It carries out its restructuring business plan and hopefully is successful in turning the corner and generating profits. The company would then be saving a certain amount of its profits in cash and pays the amounts required under the corporate restructuring plan over to the licensed insolvency trustee to create the restructuring fund. The licensed insolvency trustee then makes the distribution to the creditors as called for in the proposal itself. Once all the payments have been made, the company has successfully restructured and carried on its business free from the proposal proceedings.
What if your company has too much debt – division one proposal?
When it comes to insolvent estates Canada, among the various questions asked of us, these three questions are always asked:
What are the duties of an executor/personal representative when the estate has more liabilities than assets?
Can the executor(s) pay bills before the creditors actually file a claim?
Do executors or beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?
We prepared the above video to answer these 3 questions. Below is a more detailed discussion of the last 2 questions.
Insolvent estates Canada: The loss of life of a debtor occurs; who’s responsible for the money owed?
Although some creditors may try to collect from the spouse or other relatives, money owed doesn’t transfer because of marriage or death. If the debt is “joint”, the survivor has taken on the obligation directly and is liable on the account.
Debts are normally paid out of the assets of the property of the deceased before distributions to heirs (before paying heirs, the deceased’s debts must be paid). If the estate is insolvent (the assets of the estate are not enough to pay the amounts owed), then the order of charge is commonly prescribed by way of provincial rules.
If warranted, the executors could apply to Court for an order letting them assign the deceased’s estate into bankruptcy. In that situation, then the Bankruptcy and Insolvency Act (Canada) (“BIA”), the federal legislation, will prescribe the order of payment.
If insurance was bought to pay off a specific debt such as a bank issued mortgage or loan, then upon the death of the individual the insurance company will repay the bank and the debt will not exist in the deceased’s estate.
What are your alternatives and your responsibilities, as an executor upon the death of a debtor?
If the estate is insolvent, before or after paying the testamentary costs, you have alternatives:
Pay the money owed out of your personal resources.
Emotionally you may wish to pay the money owed because you believe in your heart that it is the proper thing to do and you don’t wish to dishonour the memory of your loved one with a string of bad debts and bankruptcy. But before you decide, you need to know that there is no liability for an executor or heir to take on the debts of the deceased.
Even though there may be a stigma connected to bankruptcy, the reality is that you are not responsible for the money owed, so why should you assume this burden and in all likelihood put your family in financial jeopardy?
Bankrupting the estate makes economic sense. An executor can sidestep the minefield of issues involved in administering the deceased’s insolvent estate by bankrupting it.
What should executors and heirs be aware of?
If you and/or another family member is the executor, be aware:
The executors have a legal responsibility for all acts completed, and for all acts not accomplished that they should have.
Notwithstanding everyone’s best efforts, they may unknowingly be inviting proceedings from lenders or heirs for difficult issues. This happens when family members, who are well-intentioned but not skilled at monetary, insolvency or legal issues, are executors because she or he is named, however actually has no know-how in this region.
By putting the property into bankruptcy, which requires the previous approval of the bankruptcy court, the executors are relieving themselves of personal legal responsibility because the estate will now be administered under the BIA and all creditors by the Licensed Insolvency Trustee.
The executor will relieve him or herself of coping with collection calls.
As long as there are sufficient funds in the estate to pay the funeral costs, that can be paid out first in the case of a bankruptcy of the deceased’s estate because of S.136. (1)(a) of the BIA states:
Priority of claims
“136 (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:
(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;”
It is the first debt with a preferred status that can be paid.
What should I do if I am an executor and I find that the liabilities are greater than the assets?
If you are an executor of a will and you find out that the estate is insolvent, after speaking with the estate lawyer, contactIra Smith Trustee & Receiver Inc. as soon as possible. We will evaluate the situation and give you sound financial advice on how best protect yourself as executor and the heirs, so that you will be able to go ahead Starting Over, Starting Now.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.
History of bankruptcy: Helping the debtor
The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.
History of bankruptcy: Helping the creditors
The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:
Trust claimants who are outside of the bankruptcy scheme
Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.
History of bankruptcy: The BIA
The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:
In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.
History of bankruptcy: Rehabilitation
It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.
The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.
History of bankruptcy: The Courts
The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.
History of bankruptcy: What to do if you have too much debt
I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
We have noticed a surge of renewed interest in this topic based on recent activity from readers of our Brandon’s Blog, so, we thought it would be a good idea to put together a short video on this topic.
People ask us what if the company didn’t pay me wages?
We answer if wages are owed by your employer because the employer went bankrupt with unpaid employees or is in receivership don’t despair; there is hope for you to recuperate monies owed to you. The Wage Earner Protection Program (“WEPP”) Act – WEPPA – in conjunction with an amendment to the Bankruptcy and Insolvency Act (Canada) – BIA – created a mechanism for employees to be compensated for claims of unpaid wages, commissions and vacation pay accrued in the six months preceding the employer files for bankruptcy or being placed in receivership and wages are owed to you along with claims for unpaid termination and/or severance pay.
Are there any exceptions? What are the rules?
There are a few exceptions to the company went bankrupt and didn’t pay me wages. You are generally not eligible if, during the period for which your wages are owed to you by your employer, you:
were an officer or a director of your former employer
had a controlling interest in the business of your former employer
were a manager whose responsibilities included making binding financial decisions impacting the business of your former employer, and/or making binding decisions on the payment or non-payment of wages by your former employer
Who is eligible for the WEPP? You may apply if wages are owed to you by your employer and:
wages are owed to you by your employer, vacation pay, termination or severance pay from your former employer
amounts earned during the eligibility period or, in the case of termination or severance pay, your employment was terminated during the eligibility period ending on the date of bankruptcy or receivership
One more very important exception – it only applies if wages are owed to you by your employer and your employer is in either receivership or bankruptcy and owes you wages. If your employer is attempting a corporate restructuring under a Notice of Intention to Make a Proposal, a Division I Proposal or the Companies’ Creditors Arrangement Act, then WEPPA and its provisions do not come into play.
Claim limits when the company went bankrupt and didn’t pay me wages
Regardless of the total amount owing to you, the maximum any employee can receive under WEPPA is the greater of $3,200 or four times the maximum weekly insurable earnings under the Employment Insurance Act (which is now around $3,900).
Once employees file claims with both the Trustee/Receiver and Service Canada, Service Canada pays their claims for owed wages by the employer and Service Canada becomes the creditor. The amendment to the BIA has recognized WEPPA and created a priority charge that supersedes all secured charges except CRA’s deemed trust claim (and the reclaiming rights of farmers and suppliers) to a max of $2,000 per employee, secured against current assets.
Documentation needed if the company went bankrupt and didn’t pay me wages
While no one wants – or expects – to be part of a receivership or bankruptcy, you should always keep detailed records of hours worked for any pay period. On any occasion when you discover there will be no paycheque, record the loss that you will suffer, such as not being able to pay bills or buy groceries. Ask for a formal explanation from your employer and keep detailed notes on your efforts. It’s important to prove that when owed wages by an employer; you still expect to be paid, even if it’s late.
If your employer is in receivership or bankruptcy proceedings, and you believe you have a claim for owed wages by the employer, find the trustee and get in touch with Service Canada. Have your records ready and make sure you get your Proof of Claim.
What should I do if I have too much debt and the company went bankrupt and didn’t pay me wages?
This is an important issue. If you are experiencing financial problems, contact Ira Smith Trustee & Receiver Inc. We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make.
Contact us today. We are a licensed trustee and will listen to your issues and offer compassionate, professional assistance to aid you to avoid bankruptcy, so that you can regain control of your life, Starting Over, Starting Now.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
Every Monday and Wednesday night Brandon posts to Brandon’s Blog. Monday night is a blog and Wednesday night is a vlog. Just to remind you what this means, here are dictionary definitions:
blog Pronunciation: /blɒɡ/noun
A regularly updated website or web page, typically one run by a person or small group, written in an informal or conversational style: you can add personal bankruptcy blog to the growing list of insolvency-related material popping up on the Web
vlog Pronunciation: /vlɒɡ/ noun
A blog in which the postings are primarily in video form: you can add personal bankruptcy vlog to the growing list of insolvency-related material popping up on the Web
Differences between US and Canadian insolvency statutes
In the United States, people filing for bankruptcy have many “chapters” from which to choose. Similarly, Canada has one chief insolvency law, the Bankruptcy and Insolvency Act, or BIA, and several supporting pieces of legislation. In perusing a personal bankruptcy blog, the potential filer can find the information he or she seeks.
In the United States, Chapter 11 bankruptcy is the most complex because it applies to large businesses and usually involves gigantic sums of money. In Canada, the equivalent is the Division I proposal. In such a proposal, the debtor’s business can keep assets necessary for its role so that it can generate streams of income from other places to repay its debts. Management also stays in control of the company and business operations.
What are the Choices in Canada?
The BIA sets out the ground rules, and several smaller pieces of legislation fill in the details. Although we Canadians don’t call them various chapters, our legislation is like that of the U.S. Here are the options for filing bankruptcy in Canada:
Personal bankruptcy in Canada is most similar to Chapter 7 in the U.S. By filing bankruptcy, the debtor seeks to deal with his or her entire debt load at once. The debtor does not believe that he or she has the means to attempt a restructuring. There are certain assets that are exempt for any one of a number of reasons, so anyone filing bankruptcy should consult a Trustee to find out more.
If a debtor decides to file a consumer proposal (because his or her debt load is $250,000 or less, not including any mortgages against the principal residence) or a Division I Proposal (for unsecured debts $250,000 or greater) instead, he or she is seeking a restructuring of debt so for repayment over a five years or less. Many times, debtors can negotiate with their creditors for part of the amount owed and work out deals on monthly payments, rates of interest, and other such considerations. A proposal is most similar to Chapter 13 in the U.S. and used by people who wish to AVOID bankruptcy.
Basically, the business operates as usual while making an offer to its creditors of payments over time, totalling an amount greater than the creditors would receive if everything was sold off in liquidation in bankruptcy. The largest businesses might even have several layers of debt that would need restructuring as part of a Division I proposal, and each layer might have different guidelines and restrictions based on the proposal.
For companies with greater than $5 million in debt, they could also make use of a different Federal restructuring statute called the Companies’ Creditors Arrangement Act (CCAA). Both the Proposal under the BIA and restructuring under the CCAA are for large complex corporate reorganizations.
Is a Lawyer Required?
Unlike citizens of the United States, Canadians don’t need a lawyer to file for bankruptcy. A Licensed Insolvency Trustee acts as the “referee” between debtor and creditors. In this way, people file and handle bankruptcy proceedings on their own in Canada. If the debtor has various complex issues or is a defendant in litigation where the plaintiff wishes to continue the litigation perhaps to attempt to prove that their claim is one not released by the person’s discharge from bankruptcy, then they may very well need a lawyer for those issues.
What to do if you have too much debt and want to read a personal bankruptcy blog?
To find out more, check out our Brandon’s Blog entries for the topic of personal bankruptcy blog. If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.
We are always asked, how much do you have to owe to file bankruptcy? The real question is, here are my assets and my debts, what are my options? In Canada, the Bankruptcy and Insolvency Act (Canada) (“BIA”) states that you must owe at least $1,000 of unsecured debt to file for bankruptcy. The same holds true if someone owes you money. They must owe you at least $1,000 on an unsecured basis to apply to the Court to make an Order judging a person or company into bankruptcy. As you can see, the threshold is not very high.
HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –
ARE YOU INSOLVENT?
Facing serious financial difficulties is devastating, especially if you believe that personal bankruptcy is your only option. In fact many people mistakenly believe that dire financial problems automatically mean personal bankruptcy. If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvent is a financial condition; bankruptcy is a legal state.
Bаnkruрtсу is a legal рrосеѕѕ under the BIA that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the shortened Summary Administration part of the BIA. If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administration provisions. Don’t worry about these distinctions now. For now, just know that the streamlined summary administration rules is a simpler process, and the Superintendent of Bankruptcy sets the cost of the bankruptcy administration.
HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –
THE BANKRUPTCY PROCESS
In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) all of уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and the proceeds used to рау for the bankruptcy administration and then to distribute to уоur сrеdіtоrѕ.
If you have very little property, all of it might be рrоtесtеd so that you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property sells fоr and whether you must pay “surplus income” to your LIT.
The last step of your bankruptcy process, will be to get your discharge from your debts, meaning that you will not have to рау them all (with certain exceptions).
HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –
SEE A TRUSTEE EVEN IF YOU DO NOT WANT TO GO BANKRUPT!
People think that they should only see a LIT if they need to file for bankruptcy. Every LIT will give you a free 1 hour consultation, to go over your situation and offer you your available options. The topics the LIT will discuss with you are:
As you can see, bankruptcy is only one of many topics discussed, in determining what your options are, allowing you to choose the one that makes the most sense to you. No other professional can discuss this full range of topics with you, and especially not for free!
WHAT SHOULD YOU DO IF YOU OR YOUR COMPANY HAS TOO MUCH DEBT?
If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.
Prepare yourself for divorce financially: Introduction
