Tag: Bankruptcy and Insolvency Act

BANKRUPTCY TRUSTEE IN ONTARIO: REMARKABLE CARE NEEDED TO TAKE OVER A CLAIM

Post author By Brandon Smith
Post date August 12, 2019

If you would prefer to listen to an audio version of this bankruptcy trustee in Ontario Brandon’s Blog, please scroll to the bottom and click on the podcast.

***Bankruptcy trustee in Ontario*: Introduction**

As a bankruptcy trustee in Ontario (now called a licensed insolvency trustee ), there are many times where our investigation indicates that the bankrupt (usually a bankrupt corporation) has a claim against another party. The claim may very well be a good one worthy of pursuing. However, like with any potential litigation, there could be not enough funds to pay for pursuing that claim in the Court, or it may be unwise for a bankruptcy trustee in Ontario (Trustee) to assume the litigation risk.

In cases like this, the licensed insolvency trustee can offer up the opportunity to the creditors to take on the action in their own name. One or more creditors can get an order under s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA) from the Registrar in Bankruptcy, authorizing the assignment to them by the licensed insolvency trustee of the bankrupt company‘s right to advance that claim and if necessary, sue.

Without going into all the finer details and circumstances, any creditor or group of creditors who obtain that right can keep any amount collected under that claim up to the total of their claim against the bankrupt company plus the costs they spent in obtaining that award. Any surplus must be paid over to the bankruptcy trustee in Ontario.

A recent decision of the Court of Appeal for Ontario highlights an interesting issue regarding the interplay between advancing such a claim by a creditor and the limitation period in Ontario.

Bankruptcy trustee in Ontario case background information

The Ridel family used an investment and stock brokerage company called e3m Investments Inc. (e3m). In December 2006, the Ridels issued a Statement of Claim versus their account representative, as well as his employer, e3m. The action was for negligence, breach of contract and violation of fiduciary obligation in the monitoring of their financial investment accounts.

After a ten-day court hearing, judgment was issued against e3m as well as the account representative in Ridel v. Cassin, 2013 ONSC 2279. The judgment was especially scathing of both the account rep and e3m. The judgement, in the amount of $1,036,245.85, was upheld on appeal. As a result, the account representative needed to make an insolvency filing. My Firm administered the successfully completed Division I restructuring Proposal of the account representative. Given the judgement, he needed to do an insolvency filing and it was in his best interests to attempt to restructure to avoid bankruptcy. The Ridel family controlled the voting in his successful Proposal. e3m filed for bankruptcy on January 20, 2015.

The bankruptcy trustee in Ontario case before the Court of Appeal

On July 31, 2019, the Court of Appeal for Ontario released its decision in Ridel v. Goldberg, 2019 ONCA 636. The underlying claim was one the bankrupt company may have had against its Director and majority shareholder.

On October 25, 2016, the Ridels, as an unsecured creditor of e3m, got an order under s. 38 of the BIA. They obtained an assignment of the claim of e3m against its sole Director, a Mr. Goldberg. Since e3m was found liable under the Ridel judgement, e3m could have a claim and institute proceedings against its Director, Mr. Goldberg.

The s. 38 order supplied the Ridels with the legal authority to assert e3m’s claim against Mr. Goldberg “to recover the damages for which e3m became liable pursuant to [the 2013 Judgment, as amended] in their own name and at their own expense and risk, based on Mr. Goldberg’s failure to fulfil his obligations as a director and officer of e3m by abdicating his responsibility to supervise the Ridels’ accounts at e3m”.

The Ridels launched their lawsuit proceedings in the lower Court against Mr. Goldberg the day they obtained the s. 38 order, October 25, 2016. The Ridels were trying to get a summary judgement. Mr. Goldberg raised several defences, including, the Ridels’ claim was statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (Limitations Act).

The lower court judge dismissed the Ridels’ action on two fronts. First, the judge found that there were concerns about needing a trial. Second, the lower court judge agreed that the claim should be dismissed because of the expiration of a two-year limitation period The Ridels appealed the lower court’s decision to the Court of Appeal for Ontario.

The fascinating part (for me anyway) of the Court of Appeal’s decision

The unanimous Court of Appeal ruling agreed with the lower court judge’s decision that the action the Ridels took by way of an assignment document from e3m’s licensed insolvency trustee was statute-barred under the Limitations Act. However, the appeal court review of the lower court decision disagreed with the reasons given by the lower court. Upon agreeing that the Ridel’s action should be dismissed based on it being barred by the Limitations Act, the appeal court did not wade into whether or not the lower court judge’s decision was correct that summary judgement should not be granted as there was a triable issue.

The arguments given for the limitation period are somewhat complex. I will attempt to summarize them here so as not to be confusing. The lower court judge held that the Ridels as applicants knew of the existence of the potential claim of e3m against its Director as early as in July 2006. Since they did not launch the e3m claim in a court action until October 2016. Hence, the limitation period of 2 years made that claim statute-barred.

The Ridels state that the limitation period cannot have actually begun up until after e3m was bankrupt. Before then, they could not take an assignment of any claim from e3m’s licensed insolvency trustee, especially a potential claim by the company against its Director (and Officer).

They also stated it is impossible to get an s. 38 order before the company actually is bankrupt.

The lawyer for the Ridels did not argue the testing of the timing of their very own understanding of the Director’s misdeed in regard to e3m. Rather, he focussed on the fact that the Ridels were not in a place to do anything concerning it, at a minimum, until the bankruptcy of e3m.

The appeal court went through a detailed analysis of the relevant statutes and case law. The Court of Appeal confirmed that the action launched was not a claim by the Ridels personally, but rather the company’s claim of which they took a court-approved assignment. So the appeal court agreed substantially with the Ridels that they could not have started their action until they took the assignment from the e3m licensed insolvency trustee.

When was e3m’s knowledge of its claim?

So the appeal court said what is important, since it is e3m’s claim and not the claim of the Ridels, when did e3m first become aware of the potential claim against its Director? The appeal court stated it fully understood why the Director would not have had e3m sue him or otherwise enjoin him in the original claim against the account rep and e3m. However, when did e3m first become aware of the potential of its claim?

On the proof in this matter, regardless of the Ridels’ or Goldbergs’ understanding of the case or his aversion to act against himself in support of e3m, at the very least, by April 2013, every one of the other e3m investors/shareholders had received a copy of the Reasons for Decision and Judgment against the account rep and e3m. It included different referrals to the Director’s misbehaviour. Those investors had the capacity to make e3m file a claim against the Director.

The Court of Appeal for Ontario judges determined that e3m recognized that: 1. an injury had actually happened; 2. its loss was brought on by an act or omission; 3. the act or omission was purportedly that of the Director, and 4. an action against the Director was a proper way to treat it. Regardless of the Director’s control to protect against such a lawsuit, the investors might have taken control of e3m’s board of directors and cause e3m to make such a case versus Goldberg.

So the appeal court decided that e3m first recognized that it may have a claim against the Director in April 2013, but the action was not commenced until October 2016. Accordingly, it was outside of the 2 year limitation period and the action was statute-barred.

So what does this mean for a bankruptcy trustee in Ontario?

As the bankruptcy trustee in Ontario in either a corporate bankruptcy or personal bankruptcy, many times we find as a result of our investigation that the bankrupt may have a claim against another party. More often than not, we either do not have sufficient funds or are not prepared to risk the funds in the Estate to the litigation risk. So, what we do is communicate with all known creditors to advise of the potential claim and that the licensed insolvency trustee is either unwilling or unable to act upon it. Accordingly, we are giving the creditors a chance to apply to the Court to take an assignment of such action under s.38 of the BIA.

Creditors seriously considering taking over the bankrupt’s claim must seriously consider the issue of whether or not launching a court action will be met with a defence that the claim is statute-barred, amongst other defences that may be available to the defendant(s). The Court of Appeal for Ontario has clearly communicated that the creditor taking an assignment of the bankrupt’s claim, cannot be in a better position than the bankrupt itself. The first knowledge that a claim exists will be when the bankrupt first had the knowledge, not the date that the creditor obtained the right to sue or any other date.

Bankruptcy trustee in Ontario Canada conclusion

The business world contains normal daily risks. This case clearly shows that. Are your company’s viability and solvency being threatened by claims against it, or for any other reason?

Is your company experiencing financial problems and requires debt relief? Are you on the brink of filing for bankruptcy just like e3m was because of your debts? Or are you an individual that has too much debt and you are looking at personal bankruptcy as your solution? Don’t wait until it is too late to properly restructure your company’s financial affairs. You don’t have to be another one filing bankruptcy in Canada. We can show you the various alternatives to bankruptcy.

As a licensed insolvency trustee, we are the only professionals who have met the requirements of the Office of the Superintendent of Bankruptcy Canada to obtain a trustee licence. One of those requirements to be trustees in bankruptcy is to pass an oral board of examination.

Insolvency trustee’s operations are licensed, authorized and their duties supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy and Insolvency Act (Canada). We are a licensed insolvency trustee operating in Ontario Canada and we will help you to select what is best for you to free you from your debt issues.

Contact the Ira Smith Team today so we can use our qualifications to get you or your company the debt relief that you deserve. We will eliminate the anxiousness, tension, discomfort and pain from your life that your bills and your cash problems have caused. With the unique roadmap, we develop just for you, you can eliminate your debts and we will promptly return you right into a healthy and balanced problem-free life.

Tags Appeal Court, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy and insolvency act canada, bankruptcy trustee, bankruptcy trustee in ontario, Corporate Bankruptcy, Court of Appeal for Ontario, division 1 proposal, Ira Smith Trustee, licensed insolvency trustee, limitation period, limitations act, personal bankruptcy, restructuring, section 38, trustee

Brandon Blog Post

LICENSED INSOLVENCY TRUSTEES: CAN MY BASIC BANKRUPTCY DISCHARGE BE REVERSED?

Post author By Brandon Smith
Post date July 22, 2019

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

Licensed insolvency trustees introduction

From time to time I am asked an interesting question about licensed insolvency trustees and the bankruptcy process. The question is, can a bankruptcy discharge be reversed? The simple answer is, yes.

Most people then wonder how this could be possible. In order to understand how we should have a discussion of the bankruptcy discharge process. The best way is through a recent Court case I recently read.

Licensed insolvency trustees: The discharge process

It is the discharge when the person’s debts are erased. The debts are not “discharged” until that time. In order to get a discharge, the bankrupt has to live up to all of his or her duties.

The duties of a bankrupt include:

make disclosure of and deliver possession of all his or her assets (other than for certain provincial exemptions) that is under his or her possession or control to the licensed insolvency trustee (Trustee) or to anyone the Trustee so directs;
in such scenarios as are defined by the Office of the Superintendent of Bankruptcy, provide to the Trustee, for termination, all credit cards;
supply to the Trustee all documents or files relating to the property of the person who has filed for bankruptcy;
make full disclosure of all assets and liabilities to the Trustee by completing the sworn statement of affairs within 5 days of the date of bankruptcy;
assist the Trustee in making an inventory of all property; make full disclosure to the Trustee concerning all property sold or otherwise transferred within 1 year prior to the date of bankruptcy;
disclose any property sold or transferred at undervalue within 5 years prior to the date of filing;
attend the first meeting of creditors if held;
disclose current income and expense and continue monthly disclosure until discharged in order for the Trustee to calculate any surplus income requirement;
if there is surplus income, to make all such payments to the Trustee in full; and
to perform any other acts required by the Trustee or the Court, including, fulfilling any conditions of discharge issued by the Court.

Failure to perform any of the duties laid out in the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA), will result in the Trustee, and perhaps one or more creditors, opposing the bankrupt’s discharge. When there is an opposition, the Trustee will schedule a Court hearing date.

At the Court hearing, the Court can issue an absolute order of discharge, provide a discharge but with conditions to be fulfilled or even suspend the bankrupt’s discharge. Sometimes, there may be both a condition and a suspension, depending on the circumstances. In rare and bad circumstances, the Court could even refuse to hear the bankrupt’s application for discharge. Licensed insolvency trustees are expected to assist the Court by making a recommendation. llicensed insolvency trustees

Mark Daniel MacFarlane bankruptcy

Section 180 (1) and (2) of the BIA states:

“Court may annul discharge

180 (1) Where a bankrupt after his discharge fails to perform the duties imposed on him by this Act, the court may, on the application, annul his discharge.

Annulment of discharge obtained by fraud

(2) Where it appears to the court that the discharge of a bankrupt was obtained by fraud, the court may, on the application, annul his discharge.”

On June 24, 2019, the Supreme Court of Nova Scotia In Bankruptcy and Insolvency released its decision in the bankruptcy case of Mark Daniel MacFarlane (Citation: MacFarlane (Re), 2019 NSSC 201).

This case is not complex. However, it does clearly shows that the answer to the question, “can a bankruptcy discharge be reversed?” is clearly yes.

Mr. MacFarlane had a surplus income obligation to pay to the Trustee for the benefit of his creditors the amount of $3,823.05. At the time he was entitled to a discharge, he still owed the Trustee the amount of $2,879.05. In every personal bankruptcy, licensed insolvency trustees must do the surplus income calculation. If it turns out that the bankruptcy is required to contribute to his or her bankruptcy estate through surplus income payments, licensed insolvency trustees must report to the Court if the bankrupt made all the required payments.

The bankrupt also owned at the date of bankruptcy, an automobile that the Trustee estimated had a forced liquidation value of $17,500. The Trustee had disallowed the claim of a creditor claiming security over the vehicle. That creditor did not appeal the Trustee’s decision.

So, equity in the vehicle was available. In such cases, licensed insolvency trustees must obtain that value. For some reason that the Trustee could not fully explain, he agreed to sell the vehicle to Mr. MacFarlane for $15,702.50 plus HST. The Trustee did not sell it for all cash, but rather, entered into a conditional sale agreement with the bankrupt. In other words, the Trustee gave him financing.

Mr. MacFarlane paid made various payments totalling $7,040.00, both before and after his discharge, leaving a balance of $8,662.50.

Mark Daniel MacFarlane discharge

Although now stated explicitly in the Court decision, it appears that when it came time for Mr. MacFarlane’s application for discharge, the Trustee opposed it. On June 1, 2018, the Trustee applied for his discharge.

For some unexplained reason, the Trustee decided to not collect the balance of the surplus income requirement. The Trustee asked the Court for his outright discharge. The Court gave Mr. MacFarlane his absolute discharge.

So now the bankrupt is discharged, but he still owed the outstanding money for the vehicle that was sold to him by the Trustee under a conditional sale agreement. Rather than paying off the amount owing, Mr. MacFarlane sold the vehicle out of province and pocketed the cash. llicensed insolvency trustees

Licensed insolvency trustees can apply to Court to have a discharge reversed

So now the Trustee makes an application to Court to have Mr. MacFarlane’s discharge reversed. Officially, it is called having the discharge annulled. An annulment makes it as if the discharge never happened. So, if the Trustee is successful, Mr. MacFarlane will be back in bankruptcy. The Trustee also asked that the Court order the payment of the balance of what is owing on the vehicle, for a suspension of the discharge and an amount for costs and disbursements. Mr. MacFarlane represented himself in Court.

The Court was not overly impressed with either Mr. MacFarlane or the Trustee. The Court felt that not did he fail to carry out his responsibilities under the BIA, he actually acted in such a way to deny himself the advantage of any type of latitude the Court might have given him relative to those obligations.

The Court went on to say that his responsibilities under the BIA are not pointers or activities to be carried out when convenient or if life does not get in the way. It was obviously not his place to choose what he would and would not do. Concerning the automobile, it was not his to just sell it, pocket the cash, and tell the Trustee (and by extension his creditors) to go take a hike.

The Court was not too happy with the Trustee

The Court was at a loss to some of the Trustee’s behaviour also. There was no explanation given as to why the Trustee merely gave up on collecting all of the surplus income requirement. Likewise, there was no explanation why the Trustee would have given the bankrupt a discount off of the liquidation value of the vehicle. Such a look is not good for licensed insolvency trustees.

Quite rightly, the Court pointed out that in such situation, licensed insolvency trustees, and specifically this Trustee, should not have recommended to the Court that Mr. MacFarlane receive an absolute order of discharge. Rather, the Trustee should have insisted on a conditional order of discharge. The conditions would have been that the bankrupt pay off both the surplus income balance and the amount owing on the vehicle before being entitled to an absolute order of discharge. llicensed insolvency trustees

The Court’s decision

The Court ordered that:

Mr. MacFarlane’s discharge from bankruptcy be annulled, so now he is once again an undischarged bankrupt.
He must pay the Trustee the $8,662.50 owing on the vehicle.
The Trustee will collect $500 for disbursements in tracing what happened to the vehicle from Mr. MacFarlane also.
There will not be an automatic discharge once he pays the $9,162.50 to the Trustee. Rather, the bankrupt will have to apply to the Court for his discharge and there will be another discharge hearing.
Since the Court was not asked to revisit the balance owing on surplus income, the Court didn’t review that again.
The request of the Trustee for $5,000 as a censure of the bankrupt’s behaviour was denied. The Court said that this situation was caused in part by the Trustee allowing the surplus income requirement to be waived and agreeing to an absolute discharge.

Although not part of the Order, the Court strongly stated that any costs in the additional work done by the Trustee now, and the disposition of the amount to be received once finally paid, will be reviewed by the Court.

The Court emphatically intimated that since the Trustee’s actions were in part to blame for this situation, the Court was going to make sure that part of the $9,162.50 will go to the creditors when the Trustee comes back to Court to have its accounts taxed.

Licensed insolvency trustees conclusion

So there you have it on licensed insolvency trustees. Can a bankruptcy discharge be reversed or revoked? As we see in this case if the discharge was improperly obtained because the bankrupt did not fulfill all of his or her duties, YES. Similarly, if it can be shown that a discharge was obtained through fraud or fraudulent conduct, the discharge can be annulled in that case also.

Whenever I sit down with a person to talk about his or her insolvency, or with an owner of a company to discuss business financial problems, I make sure that we have an entire discussion. I not only talk to them about what process I recommend for their unique situation, but I also walk them through the entire process and what all the rights and responsibilities are. For personal insolvency, this includes the discharge process.

Are you or your business experiencing money troubles? Are you on the verge of bankruptcy? Do not wait till it is far too late to understand how you can restructure your financial affairs and avoid bankruptcy. You do not need to be one more person or company declaring bankruptcy in Canada.

As licensed insolvency trustees, we are the only specialists certified, accredited and overseen by the federal government to provide insolvency guidance and to apply remedies under the BIA. We will certainly help you to choose what is best for you to release you from your debt problems.

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

Tags absolute discharge, annul, Bankruptcy and Insolvency Act, bankruptcy discharge, bankruptcy process, BIA, conditional discharge, court, date of bankruptcy, Ira Smith Trustee, licensed insolvency trustee, licensed insolvency trustees, Office of the Superintendent of Bankruptcy, surplus income, suspended discharge, trustee

Brandon Blog Post

FILING BANKRUPTCY IN CANADA: RETAILER BANKRUPTCIES AND CO-TENANCY

Post author By Brandon Smith
Post date July 15, 2019

If you would prefer to listen to an audio version of this filing bankruptcy in Canada Brandon’s Blog, please scroll to the bottom and click on the podcast.

Introduction

I read one article and one legal case over this past weekend that gave me the idea for this Brandon’s Blog about filing bankruptcy in Canada. The article was about the large US jewelry and accessories retailer Charming Charlie’s filing Chapter 11 bankruptcy for the second time in just over a year. In its 2018 filing, the retailer shed almost half of its 400 stores in a restructuring. Unfortunately, that was not good enough to save them. They have now filed again and announced they are closing their remaining stores.

The case I read is Old Navy (Canada) Inc. v. The Eglinton Town Centre Inc., 2019 ONSC 3740 (CanLII). This decision of the Ontario Superior Court of Justice was released on June 21, 2019. This case involves a retail tenant’s right to put into play rights it has as a result of a co-tenancy requirement under its commercial lease.

What Is Co-Tenancy Provision?

Simply put, a co-tenancy clause in retail lease agreements permits retail tenants to reduce their lease payments if key renters or a specific variety of lessees leave the retail premises. The idea being that certain tenants are major draws to a shopping centre and produce traffic for themselves and the other tenants. Those types of tenants are called anchor tenants.

A retail tenant agrees with the landlord to specific lease terms, especially the amount of rent to be paid. The commercial tenant agrees to those terms expecting a certain level of traffic in the mall or shopping centre. If anchor tenants leave, a co-tenancy provision allows a tenant to decide if it wishes to remain or not. If it decides to stay, then the lower amount of rent to be paid when a co-tenancy provision comes into play is meant to compensate the tenant for the lower traffic volume.

The Players

Old Navy is a famous retailer of clothes. It runs stores throughout Canada, the United States, and worldwide. Old Navy is a subsidiary of Gap Inc. (GAP), which is headquartered in San Francisco, California. Old Navy’s operations and stores are owned and operated by GAP.

GAP is the biggest specialty retailer in the USA. It has roughly 3,700 locations globally, consisting of 240 shops in malls and strip/power centres throughout Canada. GAP also owns the Banana Republic brand. Of the three, Banana Republic is taken to be on the top end of the GAP household of brand names, while Old Navy is the reduced level, affordable or budget brand name.

The landlord, The Eglinton Town Centre Inc., is owned and run by Lebovic Enterprises, a major Canadian property developer with its head office in Toronto, Ontario. Among others, it owns and runs the “Power Centre”, situated at Eglinton Opportunity East (the Centre).

The Old Navy Canada Lease

The Old Navy Canada lease, of course, had many terms in it. It included a co-tenancy provision. The clause named the key retailers (Key Shops) and their square footage. The Key Shops are the following retailers with the flooring area indicated:

Key Shops	Square footage
Cineplex	68,000 sf
Roots	6,545 sf
Globo Shoes	12,084 sf
Danier Leather	6,548 sf

Although the co-tenancy clause had various alternative remedies in it, all of them are not essential for you to know for the purpose of this Brandon’s Blog.

It is important for us to know that the co-tenancy section consisted of three main parts: (i) the number of Key Shops; (ii) a gross leasable area test; and (iii) a requirement for the landlord to advise the tenant in writing when a co-tenancy failure has actually happened.

Simply put, if the co-tenancy provision kicked in Old Navy Canada had the option to either:

Shut down its store and leave on proper notice to the landlord; or
Remain and pay a lesser “Alternate Rent” for the period that the co-tenancy issue remained unresolved.

The Danier Leather bankruptcy

Danier Leather (Danier) was a prominent Canadian seller of leather clothing and related leather items. The landlord entered into a lease with Danier for a preliminary 10-year term from June 10, 1999, to June 9, 2009. Danier’s lease was renewed in 2009 and Danier continued to be a renter of the Centre up until 2016. Danier’s premises of 6,548 square feet of space was out of a total of 285,425.37 square feet of gross leasable area in the Centre. Danier’s retail outlet represented just 2.3% of the gross leasable area.

Danier was a public company. Its shares were traded on the Toronto Stock Exchange. Nonetheless, public filings showed that Danier had been battling financial issues since 2014. Decreased earnings and yearly losses were unfortunately now its norm.

The negative operating results were thought to have been attributable to a change in the preferences of the buying public. There was a sentiment among some people to stop wearing leather items and apparel. On February 4, 2016, Danier submitted a Notice of Intention to File a Proposal (NOI) under the Bankruptcy and Insolvency Act, R.S.C., 1985 c. B-3.

Certainly, Danier’s insolvency was major news in the retail market. It was publicly reported in the nationwide media. At the time of the NOI filing, Danier operated 84 stores throughout Canada. Every one of the shops was leased. Ultimately, nonetheless, Danier determined not to submit a proposal and instead made an assignment in bankruptcy. A receiver was also appointed over Danier to liquidate the shops. Danier continued running until July 2016.

Definitely, every one of the occupants at the Centre, including the local staff of the Old Navy shop, would have recognized that Danier was conducting a going out of business inventory sale. It was unclear if anyone from Old Navy Canada told this to its senior management at the GAP.

Throughout the duration of the closing of the Danier outlet, the various other retailers at the Centre were growing. The Centre’s construction had long been completed and was well over 90% rented at the time of Danier’s insolvency. Cineplex was drawing audiences daily. The remaining stores in the portion of the Centre in which the Old Navy shop was located, across the parking area from the Danier outlet, were all operating. There was no proof they were not operating well and profitably.

The Dispute

The landlord believed that the closure of Danier had no material impact whatsoever on traffic at the Centre or on Old Navy’s sales. Given its interpretation of the co-tenancy requirements, the landlord ruled out that a co-tenancy failing had actually occurred. Therefore it did not provide any notice to the Old Navy care of GAP.

By September 15, 2016, GAP asserted they had ultimately found out about Danier’s filing bankruptcy in Canada. Thus, Old Navy issued a Notice of Co-Tenancy Failure to the Landlord and took the view that:

Danier’s bankruptcy constituted a “co-tenancy failure” under the lease;
that the landlord had breached the lease by not advising Old Navy of Danier’s bankruptcy; and
that Old Navy was, as a result, exercising its “right” under the lease to pay the lesser rent to the landlord, retroactive to May 1, 2016.

The landlord argued that the Centre was in co-tenancy failure as a result of the closure of Danier and stated that if the current lease was not paid, the landlord would declare Old Navy Canada to be in default under the terms of the lease.

Various communications took place between lawyers for the landlord and Old Navy Canada. The landlord also kept them up to date on discussions it was having with various potential retailers that would be interested in either the Danier space or larger premises. One such retailer was a global party supply store chain. Another, that ultimately entered into a lease and began operating in the Centre, was a retailer of pets and pet products.

Old Navy Canada, through its parent the GAP, took the position that only a retailer of upscale clothing like Danier was, would be a suitable replacement. It also stated that it had a corporate policy not to be located in shopping centres that had a pet retailer as a tenant.

It turns out that assertion was untrue. The landlord produced evidence that there is a power centre in the west end of Toronto where the opposite is true. That centre was the Stock Yards Village, where the anchor was Target Canada until it failed several years ago. There is an Old Navy store operating in that shopping centre along with a PetSmart retail outlet. This contradicted Old Navy Canada’s and the GAP’s position on suitable co-tenants.

The landlord and Old Navy Canada continued to agree to disagree. Old Navy Canada continued to pay the normal rent but under protest. Ultimately, Old Navy Canada launched the litigation against the landlord looking for reimbursement of rent that it asserts to have actually overpaid to the Landlord.

The Court’s decision

The Court went through a complex analysis of legal precedents that are beyond the scope of this Brandon’s Blog. After careful consideration of the lease, the issues involved and precedent case law, the Judge decided:

Old Navy’s interpretation of the provisions of the lease for the co-tenancy requirements is rejected.
He accepted the landlord’s interpretation of the relevant terms as being the most objective.
GAP/Old Navy’s evidence which was speculative.
It was not sensible for GAP/Old Navy to anticipate to be able to occupy the facilities for the rest of its lease term without paying proper rent, merely because of a technical issue that had no noticeable effect on its operations.
The landlord acted throughout in a commercially reasonable way.

Summary

What this case shows is that the bankruptcy of a retailer may very well invoke co-tenancy rights. However, it is not the bankruptcy that is the determining factor. Rather, it is the terms of the co-tenancy clause and its formulas contained in the clause that we have to look to. As seen in this example, the breach was not just because one of the Key Shops no longer operated. The terms of the Old Navy Canada Lease also forced a gross leasable area calculation to be performed. If the gross leasable area test was not met, then there was no breach.

Is your company experiencing financial problems? Are you on the brink of insolvency just like Danier was? Don’t wait until it is too late to properly restructure your company’s financial affairs. You don’t have to be another one filing bankruptcy in Canada.

As a Trustee, we are the only professionals licensed, authorized and supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy Act Canada. We will help you to select what is best for you to free you from your debt issues.

Call the Ira Smith Team today so we can eliminate the anxiousness, tension, discomfort and pain from your life that your cash problems have caused. With the unique roadmap, we develop just for you, we will promptly return you right into a healthy and balanced problem-free life.

Tags anchor tenant, Bankruptcy, Bankruptcy and Insolvency Act, chapter 11, charming charlie's, co-tenancy provision, danier leather, filing bankruptcy in canada, insolvency, insolvent, Ira Smith Trustee, Office of the Superintendent of Bankruptcy, retail, Target Canada, trustee

Brandon Blog Post

BANKRUPTCY ACT CANADA: ARE YOU REALLY PREPARED FOR IT?

Post author By Brandon Smith
Post date July 10, 2019

Introduction

No person wishes to go make a filing under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (Bankruptcy Act Canada), however occasionally it is inevitable. You might think that people who file are just those that are careless with their finances. However, with most of the people I see, it is usually an event outside of their control that pushes them over the edge.

In personal bankruptcy, things such as illness, divorce, job loss, unanticipated catastrophes, identity theft and fraud are many times the causes of insolvency. Of course, lack of proper budgeting, overspending and inappropriate uses of credit are also involved. In corporate insolvency, the #1 cause always seems to track back to management.

Insolvency filings happen every year. In 2018, a total amount of 128,846 insolvency filings were made with the Office of the Superintendent of Bankruptcy (OSB). This is 2.4% more from 2017. Consumer insolvency filings increased 2.5% (125,266 filings), while company filings dropped 0.8% to 3,580.

At the very same time, people choosing to avoid bankruptcy by filing a proposal continued increasing in 2018, bringing this number to a brand-new level. Proposals represented 52.6% of consumer filings in 2017. In 2018, they expanded by 6.6% to 56% of all personal filings.

Are you considering a Bankruptcy Act Canada filing, or at least speaking to a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) (Trustee)? In order to help you start your fact-finding, I want to tell you what will happen to your bank accounts, retirement accounts and your other important financial funds. Understanding what to anticipate can assist you to stay clear of some pricey blunders.

Bankruptcy or (consumer) proposal

Being insolvent is that you are not able to settle your financial debts. People with severe financial problems can make Bankruptcy Act Canada filing by filing either for bankruptcy, a consumer proposal or Division I proposal.

Proposals are official methods controlled by the Bankruptcy Act Canada for personal filings. Dealing with a Trustee you make a proposal to:

Pay your creditors a portion of what you owe them over a particular time period not going beyond 60 months
Extend the time you need to settle the debt
Or a mix of both

The Proposal is made via the Trustee, who uses the money in your proposal fund to pay the cost of administration and distribution to each of your creditors their pro-rata share. A consumer proposal needs to be finished within 5 years from the day of filing.

Proposal

People with severe financial problems can apply for bankruptcy. They can also try to avoid bankruptcy by using the Proposal provisions of the Bankruptcy Act Canada.

There are numerous advantages to avoiding bankruptcy. The main differences between proposals and bankruptcy are:

Unlike informal debt settlement, a Proposal produces a binding discussion forum where each of your unsecured creditors has to participate in for your debt restructuring.
You can keep your property, including your home, if you can afford to in your budget.
Lawsuits against you and enforcement proceedings, such as wage garnishments, cannot begin or continue.
In a successfully completed Proposal, you do not need to file for bankruptcy.

Keep in mind that financial institutions have “set-off” legal rights, implying that if you declare bankruptcy or file for bankruptcy when you’re behind in payments to them, they will take the funds in your accounts to try to cover all or some of what you owe them. This is notwithstanding that there is a stay of proceedings once a Bankruptcy Act Canada filing takes place and such an offset really should not take place.

So if you are thinking of filing either for bankruptcy or a proposal, I want you to be prepared for what might happen to your financial assets.

Your bank account

In a bankruptcy, the cash in your bank account is a property which must be paid over to the Trustee. Upon your filing, the Trustee will put all your banks on notice to provide the funds in any accounts maintained with them to the Trustee. As noted above, the bank may very well offset cash in your savings or chequing account against the money you may owe them, including credit card debt.

In a Proposal, you do not lose control of the money in your bank accounts. Rather, they are considered by the Trustee in formulating the type of Proposal you should offer your creditors. Remember, your Proposal must offer your creditors a better alternative than your bankruptcy would. However, even though there is a stay of proceedings invoked once you file your Proposal, it is not uncommon for a bank where you maintain an account and to whom you owe money, to take the money in your account and offset it against what you owe them.

So the moral of this story is that you are best to have bank accounts at financial institutions to whom you do not owe any money.

In a bankruptcy, your RRSP, RRIF or DPSP are excluded from seizure. However, the Trustee is entitled under the Bankruptcy Act Canada to receive the equivalent to any amounts contributed to these accounts in the 12 months preceding your filing date. In a Proposal, this 12-month amount must be included by the Trustee in the calculation of what amount your Proposal should offer your creditors.

Canada Pension Plan (CPP) and Old Age Security income (OAS)

Canada Revenue Agency (CRA) is the only one permitted to garnish your CPP earnings if you have an unpaid personal income tax. By filing either for bankruptcy or a Proposal, the stay of proceedings will be invoked and CRA will have to stop the garnishment of your CPP and you will get the CPP payments you are qualified for.

However, the earnings obtained from CPP and OAS will certainly be taken into account by the Trustee in determining if you have any surplus income payment obligation in bankruptcy. In a Proposal, that amount also has to be considered in developing your Proposal.

Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and other non-registered account investments

In a bankruptcy, just like any other non-exempt property, the amount held in your TFSA and any other non-registered investment account must be paid to the Trustee. In a Proposal, these amounts need to be taken into account in determining what type of Proposal to make. It may very well be that these accounts are collapsed in order to help fund a Proposal.

Similarly, RESPs are not excluded in personal bankruptcy. In a Proposal, the amount must be considered as an asset in calculating how much must be offered in your Proposal to stand a chance for success.

The reason that an RESP is not excluded from seizure in bankruptcy is relatively straightforward. Your child does not acquire ownership or other entitlement to the RESP funds as parents can take possession of the funds prior to the child becoming a post-secondary school student. For that reason, it is the parents who have ownership of the funds.

Consequently, the Trustee of an insolvent mother or father that has an RESP can collapse it. If the parent in bankruptcy wants the RESP to not collapse, adequate arrangements need to be made with the Trustee for the equal amount of funds in the RESP at the filing date be paid to the Trustee for the bankruptcy estate and the bankrupt’s creditors.

Annuity revenue in bankruptcy

Annuities are agreements where you pay a company (normally an insurance company) a specific amount, in order to get regular monthly payments for a specific period of time or for the remainder of your life.

If an annuity contract is properly set up with an insurance company, it will be exempt from seizure in bankruptcy. However, the income stream it produces will be considered by the Trustee in determining whether the bankrupt person has a surplus income obligation.

Your RRIF can also be considered as an annuity as it provides a legislated stream of payments. The RRIF is exempt from seizure in a bankruptcy, other than for any contributions in the 12 months immediately prior to filing. Like an annuity, the entitlement to payments will be considered by the Trustee in doing the surplus income calculation.

In a Proposal, you don’t give up ownership of an annuity contract or RRIF, but the income must be considered in preparing a suitable Proposal.

Bankruptcy Act Canada summary

Do you have financial problems? Do you not have enough money to pay your bills in full when due?

As a Trustee, we are the only professionals licensed, authorized and supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy Act Canada. A consumer proposal is a federal government licensed debt settlement plan to eliminate your debt. We will help you to select what is best for you to free you from your debt issues.

Call the Ira Smith Team today. We have generations and decades of experience helping people and companies looking for debt restructuring and a debt settlement plan to AVOID bankruptcy.

You can have a no-cost consultation so we can work with you to fix your money troubles. Call the Ira Smith Team today. This will certainly allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags avoid bankruptcy, avoiding bankruptcy, Bankruptcy, bankruptcy act canada, Bankruptcy and Insolvency Act, Consumer Proposal, Debt, debt settlement, Division I Proposal, informal debt settlement, insolvent, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy, proposal, stay of proceedings, trustee in bankruptcy, wage garnishment

Brandon Blog Post

CONSUMER PROPOSALS: HOW MANY ARE REJECTED?

Post author By Brandon Smith
Post date July 3, 2019

Introduction

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

What are consumer proposals?

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

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

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

The benefits

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

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

The process

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

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

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

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

Acceptance and performance

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

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

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

Full performance

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

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

Summary

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

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

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

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

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

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

Brandon Blog Post

CONSUMER PROPOSAL CALCULATOR REVIEW FOR YOU

Post author By Brandon Smith
Post date July 1, 2019

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

Introduction

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

Shelly Gail Corriveau bankruptcy

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

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

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

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

Ms. Corriveau files a consumer proposal

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

The proposal in paragraph 4 states:

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

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

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

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

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

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

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

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

Have you “Noted” the problem yet?

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

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

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

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

The Court’s analysis

Section 66.4(2) of the BIA states:

“Where consumer debtor is bankrupt

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

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

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

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

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

There is a similar provision for Division I Proposals.

The Court looked at the:

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

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

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

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

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

Consumer proposal calculator summary

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

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

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

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

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

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

Brandon Blog Post

INSOLVENT MEANING RESTORED IN COURT OF APPEAL FOR ONTARIO

Post author By Brandon Smith
Post date June 17, 2019

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

Introduction

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

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

The lower court ruling

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

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

The appeal

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

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

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

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

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

The Court’s power for bankruptcy annullment

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

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

What is an insolvent person?

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

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

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

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

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

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

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

Out and out lies

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

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

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

Are you insolvent?

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

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

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

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

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

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

Brandon Blog Post

RESP CONTRIBUTION NOT PROTECTED IN BANKRUPTCY

Post author By Brandon Smith
Post date June 10, 2019

If you would prefer to listen to the audio version of this RESP contribution not protected in bankruptcy Brandon’s Blog, please scroll down to the bottom and click on the podcast

Introduction

Many parents contribute to a Registered Education Savings Plan (RESP) to save for their children’s post-secondary education. Unlike a Registered Retirement Savings Plan (RRSP), an RESP contribution, or the total of all contributions made by the parent(s), is subject to seizure in the bankruptcy of the owner of the RESP.

In Brandon’s Blog, I discuss the history of why an RRSP is largely exempt from seizure in a bankruptcy, while a Registered Disability Savings Plan (RDSP) and an RESP are not. The rules governing whether an RRSP or Registered Retirement Income Fund (RRIF), RDSP or RESP are exempt from seizure or not is an interplay between both federal and provincial laws. As I practise in the province of Ontario, I will speak only about the Ontario situation.

resp contribution

RRSP or RRIF exemption

Before 2008, whether an RRSP was exempt from seizure or not relied solely upon provincial law. There was no federal law which outlined the treatment for an RRSP in bankruptcy. Effective July 2008, the assets contained in either an RRSP or a RRIF were codified in the Bankruptcy and Insolvency Act (Canada) (BIA) to be exempt from seizure, except for contributions made to an RRSP in the 12 months prior to the date of bankruptcy.

The only exception would be based on whether or not RRSPs and RRIFs were exempt from seizure under provincial law. So, in the case of Ontario, the 12-month clawback exists. The bankrupt has to pay the equivalent of the contributions made in the 12 months before the date of bankruptcy.

The reason for making this change to the BIA was because there was an inequality amongst RRSPs. If you held your RRSP at a financial institution, then it was not exempt from seizure in a bankruptcy. However, if you held your RRSP:

with an insurance company; AND
you had made an irrevocable designation that in the event of your death, the beneficiary of your plan was a spouse, child, parent or grandchild

then under the Ontario Insurance Act the entire RRSP or RRIF was exempt from seizure.

The amendment to the BIA was done for two main reasons:

to put all RRSPs and RRIFs on the same footing, regardless of what institution it was held with; and
in order to not be destitute in their fresh start that the bankruptcy system allows them to have, retired Canadians who had to go bankrupt should not lose what was probably their single largest source of retirement income as a result of their financial problems.

So before the July 2008 amendment, people who were going to file for bankruptcy and who had a sizeable RRSP held with a chartered bank, would transfer the RRSP to an insurance company and make the required beneficiary designation. Many cases were heard in bankruptcy Courts across Canada.

If the beneficiary in an insurance policy, including the RRSP or RRIF investments, was revocable, it was held that the licensed insolvency trustee (then called a bankruptcy trustee) could revoke the named beneficiary, replace it with designating the Estate as the beneficiary, and then collapsing the plan to obtain the funds.

If the beneficiary was irrevocable, then the Trustee could not collapse the investment. Rather, it would have to be 1 of the reasons why a Trustee would oppose the bankrupt’s discharge. The reason being is that the person, knowing themselves to be insolvent, transferred an asset out of the creditors’ reach for no value obtained. This was called a settlement.

The leading case which was subsequently followed by other Courts, including Ontario, was The Court of Appeal for Saskatchewan case Royal Bank of Canada v. North American Life Assurance Co., 1994 CanLII 4696 (SK CA) which became known as the Ramgotra case.

The reason is that Dr. Ramgotra was bankrupt. Royal Bank was a creditor and obtained Court approval to appeal, in lieu of the Trustee, a lower Court decision on what should happen to the RRSP, turned into an RRIF, funds. The Court of Appeal determined that since Mrs. Ramgotra obtained an irrevocable interest in the property, notwithstanding the RRSP transfer was a settlement, the Trustee could not obtain the money.

resp contribution

RDSP and Budget 2019

An RDSP is a financial savings strategy that is planned to assist moms and dads and others build up funds for the long-term financial safety of an individual who qualifies for the disability tax credit.

Unlike RRSPs, the balance kept in RDSPs are not excluded from seizure in a bankruptcy. The reason for this is because the settlor of the RDSP may do an RDSP withdrawal of funds at any time. The theory is that funds will be withdrawn for the welfare of the disabled person. However, it is the ability to withdraw funds at any time, that renders this vehicle to not be a true legal trust.

In Budget 2019, it is proposed that RDSPs be given the identical treatment to RRSPs. The societal aim is to make sure that the needs of a disabled person are not negatively affected due to the financial problems of the person who is looking out for and financially contributing to the welfare of the disabled person. More than likely the contributor is a parent.

Budget 2019 intends to exclude RDSPs from seizure in bankruptcy, except for payments made in the 12 months prior to the date of bankruptcy. This will put in on the same footing as RRSPs.

resp contribution

RESPs are not exempt

The reason that RESP contribution funds are not exempt from seizure in bankruptcy is fairly simple. The child does not obtain property interest in the RESP funds as the parent can collapse the plan any time before maturity. Therefore it is not a trust or any form of transfer of property to the child. Therefore, the Trustee of a bankrupt parent who owns an RESP can collapse it.

If the parent wishes the RESP to continue and not be collapsed, satisfactory arrangements have to be made with the Trustee for the equivalent amount of funds in the RESP as at the date of bankruptcy be paid to the Trustee for the benefit of the bankruptcy Estate and the bankrupt’s creditors.

As a result of perceived inequality, on June 3, 2019, Dan Albas, Conservative MP for Central Okanagan—Similkameen—Nicola (B.C.), introduced as a private member’s bill, Bill C-453, An Act to amend the Bankruptcy and Insolvency Act (property of bankrupt — registered education savings plan). This Bill intends to amend s. 67(1)‍(b.‍3) of the BIA, so that RESPs receive the same treatment as RRSPs and the treatment proposed in Budget 2019 for RDSPs.

The thrust is obviously to make sure that other than for contributions made in the 12 months before the date of bankruptcy, a parent should not lose the RESP benefits for their child’s post-secondary school education because of their bankruptcy.

As private member’s bills rarely become law, I am doubtful that this initiative, no matter how well-meaning, will pass. There may also be a societal distinction between a retiree whose income earning days are behind him or her, a disabled person who is reliant upon a trust set up for their care and benefit and an elementary or high school student’s future university or college tuition.

resp contribution

What about you?

Are you in financial distress? Are you worried about any RRSP, RDSP or RESP contribution? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

As a licensed insolvency trustee, we are the only professionals accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

resp contribution

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, disability tax credit, Ira Smith Trustee, licensed insolvency trustee, rdsp, rdsp withdrawal, registered education savings plan, Registered Retirement Income Fund, registered retirement savings plan, resp, resp contribution, RESPs, RRIF, RRSP, RRSPs

Brandon Blog Post

WILL CRA CONTACT ME IF I DO NOT PAY?

Post author By Brandon Smith
Post date June 3, 2019

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

Introduction

It seems that more often than not, the Canada Revenue Agency (CRA) is a creditor in the personal or corporate insolvency matters that I get involved with. Many times the person, be they just an individual, an unincorporated business owner or the President of the company, will ask, “will CRA contact me if I do not pay?”.

In this Brandon’s Blog, I discuss the various ways CRA will contact the responsible individual, be they the taxpayer or the authorized representative of the taxpayer company.

Types of CRA debt

The following types of tax debt are the usual ones that a person in Ontario might owe:

personal income tax
unremitted source deductions or HST of an unincorporated business
Director liability for corporate unremitted source deductions or HST

The following types of tax debt are the usual ones that an Ontario corporation might owe:

corporate income tax
unremitted source deductions or HST

Most likely CRA has already contacted the insolvent person or company before they come to see me for a free consultation. The reality is that when someone owes money to Revenue Canada and gets one of those unique brown envelopes in the mail, they tend to feel sick in the stomach. So, although they may keep the envelope and its contents, they certainly don’t wish to look inside it.

Let’s look at the various ways CRA has to contact a taxpayer and for CRA payment arrangements to be made.

Ways you and the taxman can communicate

Notice of Assessment or Reassessment

The first way CRA will contact you is by sending a notice of assessment or reassessment to the individual or corporate taxpayer. This is a notice that explains the reason for the (re)assessment, the calculation and the amount owing. There is no need to talk about the situation where the taxpayer pays the balance in full on time. I am talking about the situation when the taxpayer cannot afford to pay the amount owing.

Be proactive

If you cannot pay the total you owe, be proactive by getting in touch with the CRA as soon as possible. Overlooking your debt does not make it vanish. As a matter of fact, ignoring it might make things worse. This is the same whether it is a personal debt or a corporate debt.

The CRA tacks on interest at the prescribed rate compounded daily. You can’t avoid this because whether you realize it or not, CRA has become your lender for any unpaid amounts. By taking action first, you can at least ward off a much worse result. So you contacting CRA is the first and best way to make the connection.

I will discuss below what your options are concerning amounts you cannot pay off immediately, but first, I want to discuss other ways that the CRA will contact you if you first don’t contact them.

Telephone or letter

If the taxpayer does not contact CRA to work out a payment arrangement (discussed below), CRA will then communicate with the taxpayer. The amount owing is assigned to a collections officer who will contact the taxpayer by telephone, letter or both.

If the taxpayer responds to that outreach, the collections officer will attempt to obtain payment. The collections officer will also ask many more questions. If the taxpayer is a company, the collections officer may also make an appointment to go visit the company to review its financial records.

The purpose of asking the questions and reviewing corporate financial records is to attempt to determine if any money is owed to the taxpayer by third parties and where does the taxpayer maintain bank accounts.

Garnishment by a Requirement To Pay

Armed with the information obtained from the taxpayer’s tax filings and any additional information collected through discussions or reviews, the next level of CRA contact to get the taxpayer’s attention is not with the taxpayer, but rather with third parties. A Requirement To Pay (RTP) is a lawful notification that the CRA sends out to a 3rd party when:

the CRA thinks that the 3rd party owes or will owe money in the future to the taxpayer that has not paid their tax obligation; and
the CRA has not been able to collect the taxpayer’s debt or make an appropriate settlement plan with the taxpayer.

The RTP advises the 3rd party to send the money the third party owes to the taxpayer to the CRA, rather than the taxpayer. The RTP reveals the taxpayer’s name, address, and the CRA account number.

The RTP is the way the CRA uses to garnishee bank accounts, wages or any other amount owing by a third party to the taxpayer. An RTP can garnishee all sorts of repayments a 3rd party might make to a taxpayer. The more common ones are:

income, earnings, payments, bonus offers, or various other amounts owing by an employer to an employee;
repayment of expenses owed to an employee;
amounts due to a professional or contractor for work performed, products, or services;
lease or rent payments;
loan payments;
interest or dividend payments;
insurance claim settlements
amounts on deposit at a financial institution

Seizing your assets

A garnishee through an RTP is to intercept and seize payments from a third party to the taxpayer. But what if there is no such third party that exists or can be found but the taxpayer has assets?

In that situation, the CRA has the power to seize assets found registered in the name of the taxpayer. This is how CRA goes about doing it. The CRA can lawfully register your debt with the Federal Court of Canada. By doing so they get a certificate validating the amount you owe to the Crown. As soon as it is issued, this certification, called a memorial, has the same or even greater impact as a judgment if someone sued you.

Now that the CRA has the memorial, they can register it against any assets in your name. This includes your home and its possessions owned by the taxpayer. The CRA rarely actually takes physical possession of the assets, but in most cases, they don’t need to. It will be impossible to sell or refinance your assets with the CRA memorial registered against it under provincial law. So when that time comes, the taxpayer will have no choice but to deal with the CRA on the outstanding debt, one way or the other.

Here are different ways that you can deal with the CRA on your tax debt if you cannot pay it now in full.

Payment arrangement

This is the first and most hassle-free way of paying off your tax debt. A payment arrangement is a settlement plan you make with the CRA. It enables you to make smaller regular payments over time until you have paid your whole tax debt plus interest.

Prior to agreeing to the settlement plan, the CRA collections officer will want to know that you are paying the maximum amount you can afford. Hopefully, the amount you can pay is at least the same as the minimum monthly amount the collections officer is willing to accept.

So, the collections officer will ask you all sorts of questions and may even want you to complete a questionnaire, so that they understand your monthly budget as part of any debt settlement plan.

As part of making a payment arrangement, you should also be working with your accountant to see if any of the taxpayer relief provisions are available to you. This blog isn’t meant to be a discussion of the income tax act or taxpayer relief, so, I won’t go into any more detail than that.

Any payment arrangement has to deal with 100% of the principal amount of tax owing plus interest. Unfortunately, the collections officer does not have the authority to make a deal to accept less than full payment, absent an insolvency proceeding (further discussed below).

Insolvency proceeding

If you cannot reach a satisfactory payment arrangement with the CRA, or you have one but can no longer keep up with the payments, then, the taxpayer can consider an insolvency filing. In the case of an individual, it would be either bankruptcy or a consumer proposal. For a corporation, it would be either a Division I Proposal or bankruptcy.

Either bankruptcy or a proposal will stop CRA’s ability to issue a requirement to pay or obtain a memorial. However, if CRA has obtained and registered a memorial before the taxpayer files for either a restructuring proposal or bankruptcy, the memorial cannot be eliminated.

Similarly, for a corporation, unremitted source deductions form a deemed trust claim against the company’s assets. So in either a bankruptcy or financial restructuring proposal, this trust claim cannot be eliminated or reduced. However, for both individuals and companies, the income tax debt can be eliminated. For companies, the HST arrears will not be a trust claim in bankruptcy. Unlike a bankruptcy, HST arrears are not automatically made unsecured by the wording of the Bankruptcy and Insolvency Act (Canada). However, current CRA policy in financial restructuring proposals results in the HST arrears being treated as an unsecured claim.

Personal or corporate income tax is an unsecured debt. As soon as you’ve declared bankruptcy or filed the financial restructuring proposal, the CRA cannot begin or continue any action against you, including wage garnishment or freezing your assets, including your bank account. Your licensed insolvency trustee (formerly called a bankruptcy trustee) will alert CRA as soon as you submit your filing and advise it to quit any type of enforcement activity through any RTP. As I stated above, unfortunately, any memorial already registered will remain against your assets.

Do you have too much debt?

I hope you have found this CRA contact Brandon’s Blog to have useful information for you. Do you have too much debt? Are you in financial distress? Do you not have adequate funds to pay your financial obligations as they come due?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only professionals accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, Canada Revenue Agency, CRA, cra contact, cra payment arrangements, director liability, financial restructuring, Ira Smith Trustee, notice of assessment, onsumer proposal, payment arrangement, requirement to pay, Revenue Canada, tax debt, unremitted hst, unremitted source deductions, wage garnishment

Brandon Blog Post

OSAP BANKRUPTCY IS NOT AS SIMPLE AS YOU MIGHT THINK

Post author By Brandon Smith
Post date May 29, 2019

OSAP bankruptcy Introduction

I have written before on the issue of the difficulty in discharging student loans through bankruptcy. Bankruptcy will certainly not release your student loans debt until you’ve been out of full or part-time studies for 7 years. It is also question and answer #8 in our TOP 20 PERSONAL BANKRUPTCY FAQS found on our main website. In Brandon’s Blog, I want to drill down into the issue of an OSAP bankruptcy.

What is OSAP?

The Ontario Student Assistance Program (OSAP) is a financial assistance program that can assist students in spending for college or university.

OSAP provides money via:

Grant: cash you do not need to repay
Loan: a loan you are required to pay off when you’re done college or university

OSAP can assist your spending for:

tuition
books and supplies/equipment
student fees billed by an institution
living expenditures
childcare

Amongst the various categories of people who are not eligible for OSAP, one is those people who have filed for either personal bankruptcy or a consumer proposal. As you might imagine, the rules surrounding OSAP bankruptcy are not simple. Let’s do some drilling down now!

Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal

If the student has been discharged from bankruptcy or fully completed a consumer proposal, she or he does not require to offer any type of supporting paperwork in order for their OSAP application to be reviewed.

If the student is an undischarged bankrupt or has not completed the consumer proposal, the student must supply a letter from their licensed insolvency trustee (formerly called a bankruptcy trustee) or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

Discharged and the student is not presently enrolled in studies

If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the Bankruptcy and Insolvency Act (Canada) (BIA) no longer applies to the student loans.

In this situation, the student needs to supply:

evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order

Discharged and continuing a program of study

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the BIA no longer applies to the student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program they were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply:

evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Undischarged bankrupt or has not yet fully completed the consumer proposal

If the student is an undischarged bankrupt or has not successfully completed a consumer proposal, the processing of the student’s OSAP application will not be completed until the student gives evidence that they have no amount owing on any student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program the were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply a letter from their licensed insolvency trustee or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

The student will also need to supply a:

letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Summary

I hope you now understand that the whole area of OSAP bankruptcy and student loans in either a bankruptcy or consumer proposal is not as simple as you might have originally thought. This is especially the case if the student is continuing his or her studies.

Do you have too much debt? Are you in financial distress? Do you not have adequate funds to pay your financial obligations as they come due?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags bankrupt, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, Consumer Proposal, consumer proposal administrator, date of bankruptcy, discharged from bankruptcy, filing date, Ira Smith Trustee, licensed insolvency trustee, national student loans service centre, osap, osap bankruptcy, student loan, student loan debt, student loans, student loans debt, undischarged bankrupt

Bankruptcy trustee in Ontario: Introduction

Bankruptcy trustee in Ontario case background information

The bankruptcy trustee in Ontario case before the Court of Appeal

The fascinating part (for me anyway) of the Court of Appeal’s decision

When was e3m’s knowledge of its claim?

So what does this mean for a bankruptcy trustee in Ontario?

Bankruptcy trustee in Ontario Canada conclusion

Licensed insolvency trustees introduction

Licensed insolvency trustees: The discharge process

Mark Daniel MacFarlane bankruptcy

Mark Daniel MacFarlane discharge

Licensed insolvency trustees can apply to Court to have a discharge reversed

The Court was not too happy with the Trustee

The Court’s decision

Licensed insolvency trustees conclusion

If you would prefer to listen to an audio version of this filing bankruptcy in Canada Brandon’s Blog, please scroll to the bottom and click on the podcast.

Introduction

What Is Co-Tenancy Provision?

The Players

The Old Navy Canada Lease

The Danier Leather bankruptcy

The Dispute

The Court’s decision

Summary

Introduction

Bankruptcy or (consumer) proposal

Proposal

Your bank account

Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Deferred Profit Sharing Plan (DPSP)

Canada Pension Plan (CPP) and Old Age Security income (OAS)

Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and other non-registered account investments

Annuity revenue in bankruptcy

Bankruptcy Act Canada summary

Introduction

What are consumer proposals?

The benefits

The process

Acceptance and performance

Full performance

Summary

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

Introduction

Shelly Gail Corriveau bankruptcy

Ms. Corriveau files a consumer proposal

Have you “Noted” the problem yet?

The Court’s analysis

Consumer proposal calculator summary

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

Introduction

The lower court ruling

The appeal

The Court’s power for bankruptcy annullment

What is an insolvent person?

Out and out lies

Are you insolvent?

Introduction

RRSP or RRIF exemption

RDSP and Budget 2019

RESPs are not exempt

What about you?

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

Introduction

Types of CRA debt

Ways you and the taxman can communicate

Payment arrangement

Insolvency proceeding

Do you have too much debt?

OSAP bankruptcy Introduction

What is OSAP?

Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal

Discharged and the student is not presently enrolled in studies

Discharged and continuing a program of study

Undischarged bankrupt or has not yet fully completed the consumer proposal

Summary

***Bankruptcy trustee in Ontario*: Introduction**