Tag: bankruptcy discharge

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

CANADIAN BANKRUPTCIES LAWS: OPPOSITION TO TRUSTEE DISCHARGE

Post author By Brandon Smith
Post date June 24, 2019

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

Introduction

Believe it or not, people search online for “Canadian bankruptcies laws” almost 500 times every month. Although the spelling looks a bit off, the point is that people are interested in Canadian insolvency laws. People also search for “Canadian personal bankruptcies laws”.

I recently reviewed an interesting bankruptcy case from British Columbia. The issue is one that does not normally find its way into the courts. The issue deals with the Trustee’s discharge from a bankruptcy administration.

So combining these disassociated events, it gave me the idea for this Brandon’s Blog.

Two kinds of discharges in a personal bankruptcy

In every personal bankruptcy, there are two kinds of discharges. In the normal course, first the bankrupt gets his or her discharge from bankruptcy. Then, when all parts of the bankruptcy administration is finished, the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee), gets its discharge.

I have previously written several blogs on the discharge of a bankrupt, but for information purposes, I will briefly summarize the issues surrounding a bankrupt’s application for discharge. Then I will describe the issues in the BC case about the discharge of a Trustee.

The bankrupt’s application for discharge

A bankruptcy discharge is when the bankrupt person is released under Canadian bankruptcy legislation from his or her financial debts. Some people think that it is filing for bankruptcy that releases the bankrupt from responsibility. This is not the situation. It is the discharge process that “discharges” the debts.

The personal bankruptcy discharge is among the key advantages of the Canadian insolvency system. The discharge is crucial to the insolvency process. Debtors, after bankruptcy, can wipe the slate clean and begin again. This is a central concept under the “Canadian bankruptcies laws”.

A personal bankruptcy discharge provides the discharge of many unsecured financial debts. Certain debts will not be discharged. They are:

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

Notice of opposition to discharge

A bankrupt’s bankruptcy discharge application might be opposed by one or more unsecured creditors or the Trustee. This occurs if the bankrupt has not met all of his/her obligations. It can likewise happen if the insolvent has committed a bankruptcy offense. Those are acts provided in Section 173 (1) of the Bankruptcy and Insolvency Act (Canada) (BIA). The Court will assess the overall conduct of the bankrupt and provide its decision.

How bankruptcies work

There are 4 kinds of discharges:

Absolute discharge – The bankrupt is released from the commitment to repay the financial liabilities that existed on the day of filing for personal bankruptcy, except for the types of financial obligations indicated above.
Conditional discharge – A bankrupt has to fulfill specific conditions to obtain an absolute discharge. As soon as all conditions have been met, an absolute discharge is given.
Suspended discharge – An absolute discharge that will be given at a future date identified by the Court.
Refused discharge – The Court has the right to decline a discharge.

What does trustee discharge mean?

A recent case decided by The Supreme Court of British Columbia in Kelowna, BC, dealt with the issue of the discharge of a Trustee. After concluding a bankruptcy administration, the Trustee applies for its discharge. The case is McKibbon (Re), 2019 BCSC 848 (CanLII).

William Edward McKibbon is a person who went through the bankruptcy discharge process. His bankrupt’s application for discharge ultimately ended with his getting an absolute order of discharge after fulfilling his discharge conditions on February 24, 2016. His Trustee then received its discharge. The Trustee discharge date was on November 5, 2016.

Mr. McKibbon made an application to the Court for the withdrawal of the Trustee’s discharge. Section 41 of the BIA deals with the discharge of the Trustee. The case was heard on April 25, 2019, in The Supreme Court of British Columbia in Kelowna, BC. The Court’s decision was released on May 30, 2019.

Section 41(1) of the BIA states:

“Application to court

41 (1) When a trustee has completed the duties required of him with respect to the administration of the property of a bankrupt, he shall apply to the court for a discharge.”

The Trustee went through all the steps required and obtained its discharge.

Section 41(5) of the BIA says:

“Objections to be filed with court and trustee

(5) Any interested person desiring to object to the discharge of a trustee shall, at least five days prior to the date of the hearing, file notice of objection with the registrar of the court setting out the reasons for the objection and serve a copy of the notice on the trustee.”

No person objected to the Trustee’s discharge, including Mr. McKibbon. Now in 2019, he was asking the Court to revoke the Trustee’s discharge as he had certain complaints about the Trustee’s conduct.

The allegations against the Trustee

Mr. McKibbon now alleges that the Trustee’s discharge was gotten because the Trustee did not disclose all pertinent facts.

Mr. McKibbon’s allegations were that: (i) the Trustee had experienced issues in the calculation of the surplus income payable by the bankrupt in that the Trustee had miscalculated the surplus income numbers; (ii) the method by which the Trustee calculated the surplus income; and (iii) the Trustee had not finalized the bankrupt’s pre- and post-bankruptcy income tax returns because it had made errors when submitting those tax returns to the Canada Revenue Agency (CRA).

These allegations were disputed by the Trustee. The Trustee claims that the surplus income calculations were appropriate. Concerning the income tax returns, the Trustee stated that the issues relating to the income tax returns were the result of the CRA, incorrectly, re-allocating income and expenses between the pre- and post-bankruptcy periods.

Can the discharge of the Trustee be revoked?

Section 41(8) of the BIA deals with the revocation of a Trustee discharge. It states:

“Effect of discharge of trustee

(8) The discharge of a trustee discharges him from all liability

(a) in respect of any act done or default made by him in the administration of the property of the bankrupt, and

(b) in relation to his conduct as trustee,

but any discharge may be revoked by the court on proof that it was obtained by fraud or by suppression or concealment of any material fact.”.

Mr. McKibbon, in his complaint, said that the Trustee suppressed and concealed material facts.

The Judge’s decision

The Judge in his decision stated that the analysis of BIA section 41(8) goes back to 1899. The case law requires that to revoke the discharge of the Trustee, there needs to be an aspect of fraud in the suppression or concealment.

The Judge also referred to a 2011 decision in the Superior Court of Québec which reached a similar conclusion. That case is Re Delorme, 2011 QCCS 236 (CanLII).

Mr. McGibbon’s position was that these authorities are mistaken and made the wrong decision. He did so with no authorities have actually been pointed out to bring into question those verdicts!

The Judge concluded that in order for there to be a “suppression or concealment of any material fact”, there has to be an element of fraud. He also concluded that Mr. McGibbon had the onus to provide evidence that the Trustee purposely did so with the intent to defraud the court, the creditors or the bankrupt. He found that as Mr. McGibbon failed to do so, he did not have to dig into the details of the allegations.

The Judge also noted that Mr. McGibbon had a bankruptcy discharge hearing, and the Court set the amount of surplus income he needed to pay as part of his conditional discharge from bankruptcy. Therefore, any issue surrounding the surplus income calculation by the Trustee was eliminated with this condition that Mr. McGibbon fulfilled.

Accordingly, the Judge found that there is no basis whereupon any kind of deceptive behaviour can be presumed for the Trustee in failing to reveal any material facts in its discharge application. Therefore, the application to revoke the Trustee’s discharge was rejected. Finally, the Judge allowed for the Trustee to make any submissions it wished to concerning costs to be paid by Mr. McGibbon.

Are you thinking about using “Canadian bankruptcies laws”?

Is your business in financial distress because you cannot collect your billings? Do you not have adequate funds to pay your creditors as their bills to you 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.

A restructuring proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a restructuring 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.

Tags bankrupt's application for discharge, bankruptcy discharge, canadian bankruptcies laws, canadian bankruptcy law, canadian bankruptcy laws, canadian insolvency laws, canadian personal bankruptcies laws, discharge process, how bankruptcies work, Ira Smith Trustee, McKibbon (Re), notice of opposition to discharge, surplus income, trustee discharge, trustee discharge date, what does trustee discharge mean

Brandon Blog Post

WILL JULIAN ASSANGE FACE CANADIAN BANKRUPTCY LAWS?

Post author By Brandon Smith
Post date April 22, 2019

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

Canadian bankruptcy laws Introduction

I got your attention with this silly Brandon’s Blog title, didn’t I? The answer to the question “will Julian Assange face Canadian bankruptcy laws?” is of course, no. He may face the justice systems of Britain, Sweden or the United States, or all three. But as far as I know, he isn’t wanted by the Canadian authorities.

However, there are many Canadians having problems paying all of their debts. Many have actually quit satisfying their financial commitments. If this is where you find yourself, then you are in financial difficulty and may even be insolvent.

I tell everyone that bankruptcy should be your last option. There are many ways to avoid bankruptcy. It really depends on how early on in your situation you consult a professional for advice and guidance.

The purpose of this Brandon’s Blog is to answer what seems to be the 10 essential problems bothering people thus far in 2019 for people facing financial challenges and considering filing for bankruptcy.

What happens if I declare bankruptcy in Canada?

When you declare bankruptcy, you must assign or hand over your assets to the licensed insolvency trustee (previously called a bankruptcy trustee) (Trustee). Each province regulates what assets are exempt from seizure.

So in bankruptcy, you will not lose all your assets. There is a listing of things that are excluded from seizure in Ontario:

Necessary clothing for you and your dependents.
Home furnishings and appliances that are of a worth not more than $13,150.
Tools and various other personal effects not worth more than $11,300, made use to earn revenue from your business. If you are an Ontario farmer, this amount increases to $29,100 for everything, including your livestock.
One car or truck that is worth not more than $6,600.
The cash surrender value of life insurance if your beneficiary is what is called a “Designated Beneficiary”.
Your Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Deferred Profit Sharing Plan (DPSP) other than for any amounts contributed in the 12 months immediately preceding your date of bankruptcy.
$10,000 of equity in your home but only if your share of the equity is less than $10,000 in total.

Earnings are not impacted by bankruptcy yet you will need to submit a monthly Income and Expense Form providing your household revenue and expenditures; this becomes part of your budgeting procedure. If your earnings go beyond specific criteria developed by the Office of the Superintendent of Bankruptcy (OSB), you will certainly have to pay part of the excess into the bankruptcy estate via the Trustee. This is called surplus income.

When you declare bankruptcy, the assets that are not exempt from seizure must be turned over to your Trustee. Those assets will be offered for sale and the cash gained from the sale of your possessions will be available for the Trustee to pay a dividend to your creditors.

Also, see below the discussion of will you lose your house and car in bankruptcy, as these assets may be handled differently.

How much does it cost to file bankruptcy in Canada?

The irony is that it does cost money for an insolvent person to file bankruptcy in Canada. The cost of a no asset, no surplus income administration is in the $1,800 to $2,000 range. If you have neither assets nor income, then you or someone on your behalf will have to make satisfactory arrangements with the Trustee for payment of this cost.

If there are assets and/or surplus income, this will most likely change the calculation of the amount the Trustee is entitled to charge for administering your insolvency file. However, the Trustee is entitled to take the Court approved fee from the funds obtained through the sale of assets and/or the surplus income payments received. In this case, the cost of your proceeding to you may very well be no extra charge!

Will I lose my house and car if I file bankruptcy in Canada?

A complete discussion of the issues involved can be found in my April 2019 blogs:

The Trustee is entitled to your equity in your home and car when you file for bankruptcy. As these other blogs of mine discuss, if someone can purchase the value of your equity, subject to the Ontario exemptions, then the Trustee will not have to take possession of your house and car.

Can you file bankruptcy and keep your credit cards?

The issue of a bankrupt keeping his or her credit cards is governed by Section 158(a. 1) of the Bankruptcy and Insolvency Act (Canada) (BIA) and Directive No. 3 issued by the Superintendent of Bankruptcy (OSB). The title of Directive No. 3 is, “Duties of the Bankrupt to Deliver Credit Cards to the Trustee”. It is provided to define under what conditions a bankrupt shall supply to the Trustee, for cancellation, all charge cards issued to and in the ownership or control of the bankrupt.

In all conditions, the Trustee shall require that the bankrupt supply to the Trustee, for termination, all credit cards issued to and in the ownership or control of the insolvent person with one exception. Except for those bank cards discussed in the next paragraph, in a bankruptcy, all credit cards must be given to the Trustee. This is regardless that there may be a zero balance on that charge card.

There is only one exception to this requirement. The insolvent person need not supply to the Trustee a credit card in the possession and control of the bankrupt where the primary cardholder is a third party (e.g., employer, spouse, friend, parent) and the primary cardholder has obtained a supplementary card in the name of the insolvent and about to be bankrupt person.

How long does bankruptcy last Canada?

The length of time you will be an undischarged bankrupt will rely on mainly three factors:

Is this is your first time or is it your 2nd or more time in bankruptcy?
Do you have a surplus income amount?
Have you given one or more of your creditors, or your Trustee, reason to oppose your discharge?

If this is your 1st filing with no surplus income and nobody opposes your discharge application, your bankruptcy will last for 9 months. If this is your 1st time and you do have surplus income and no one opposes your discharge, it will last 21 months.

If this is your 2nd time and you do not have any surplus income, you are not eligible for a bankruptcy discharge for 24 months. However, you should consider if there is something in your pre-filing affairs that will give rise to someone opposing your discharge. For example, if the reason for your 2nd time is the same as your 1st time, your Trustee will be bound to oppose your discharge.

If you are a 2nd timer and you do have surplus income, then you will not be eligible for a discharge for at least 36 months. Again, consider your pre-filing conduct to estimate the likelihood of opposition.

In the case of an opposition, either by one or more of your creditors or by your Trustee, then it becomes a Court process. A discharge hearing will be scheduled in Court. The timing is then driven by the Court process. If your discharge is being opposed, you would be wise to consult with a bankruptcy lawyer.

Does bankruptcy ruin your credit forever?

A person that declares bankruptcy is given the lowest possible credit score. For a first time bankrupt, the information that negatively impacts your credit rating is inevitably gotten rid of approximately 6 years after your discharge from bankruptcy.

One of the purposes of the Canadian bankruptcy system is financial rehabilitation. Once you are discharged from bankruptcy, you can begin to repair and rebuild your credit.

Two easy ways are:

Get a secured credit card. This is one where you put funds on deposit to equal your credit limit. The secured credit card issuer reports your activity to the two Canadian credit agencies monthly. By paying the balance off every month, you start to rebuild and repair your credit.
Take out an RRSP loan and invest the money in your RRSP. Pay the loan off over the next 12 months and then rinse and repeat. By borrowing money in a manner the Bank will lend to you through the RRSP loan and paying the loan off in a year, you are rebuilding and repairing your credit. By the way, you also enjoy the tax benefit of the RRSP deduction and you are starting to build your retirement savings.

Do you have to declare your bankruptcy after 7 years?

This question was recently asked of me. At first, I didn’t quite understand what the person meant. After some further discussion, it became clear that what the person was really asking was two questions as follows:

Will my bankruptcy filing show up on my credit report after 7 years?
After 7 years, do I have to report the fact that I was bankrupt?

The first question is answered both above and below. As far as reporting the fact that you filed for bankruptcy, there are several issues. First, you don’t need to tell anyone unless you are specifically asked. Second, you will only be asked on an application for a loan or credit card, a job where handling cash and/or bonding is required, on an insurance application or in connection with a professional license that you hold. Sometimes the question may be limited, such as, “in the last 5 years”. You have to read the question carefully and answer truthfully.

Does a bankruptcy automatically come off?

When you file bankruptcy, Canadian bankruptcy laws require your Trustee to inform your creditors, the Canada Revenue Agency (CRA), credit rating coverage firms and the OSB. The OSB maintains a database of insolvency filings that anyone can search. So the fact you filed for bankruptcy is public. That information exists forever.

Your filing will also show up in your credit report. For personal bankruptcy, as indicated above, it will remain on your credit report for about 6 years after you get your bankruptcy discharge.

Additionally, specific insolvencies, both for personal and corporate bankruptcy call for a legal notice to be placed in a local newspaper.

What are the disadvantages of filing for bankruptcy?

There are certain disadvantages of filing for bankruptcy. In no particular order:

Your non-exempt assets will be handed over to the Trustee to be sold in order to obtain the value in cash so that a distribution can be paid to your creditors.
As indicated above, your bankruptcy will certainly show up on your credit report for about 6 years after you get your discharge from bankruptcy. This could be for as much as 7-10 years from your date of bankruptcy.
A bankruptcy drops you to the lowest possible credit score rating.
You have to turn over all of the credit cards in your control or possession where you are the primary cardholder. The credit card companies will also cancel any card you may have forgotten to give to your Trustee.
A bankruptcy might impede your capacity to get a home mortgage or a loan for several years.
If you did not have adequate life insurance before you filed for bankruptcy, your ability to obtain life insurance without being rated will be difficult.
If your employment requires you to be bonded, a bankruptcy could affect your job.
Although your discharge from bankruptcy operates to discharge you from your debts, there is a list of debts that are not discharged.

They are:

- secured loans – home mortgage or vehicle loan;
- certain student loans (remember the 7-year rule I just mentioned?);
- penalties or fines enforced by the court;
- spousal support and alimony you have to make in your separation agreement or divorce proceedings; and
- any debts from fraud.

It is for these reasons that I always advise people that filing for bankruptcy should be a last resort. There are many options to avoid bankruptcy. Which ones might work, depends on how long you have waited to see me and how severe your situation has become. Various options to avoid bankruptcy are:

Do I need to retain a bankruptcy lawyer near me?

In simple situations, I would say it is not necessary. When you have an initial free consultation with a Trustee, he or she can tell you whether or not they believe it would be in your best interest to consult with a bankruptcy lawyer.

Remember that there is no such thing as Trustee-bankrupt confidentiality. In fact, as part of the documentation for an insolvency filing, you will have to acknowledge your understanding that under the Personal Information Protection and Electronic Documents Act (S.C. 2000, c. 5), certain information will be disclosed and will be public.

So, if your situation is complicated, or if you require advice on a matter you need to be kept confidential, you should retain a bankruptcy lawyer. That way you can discuss those issues and obtain the advice you need and be assured of confidentiality.

BONUS ISSUE: Can I get a credit card during bankruptcy?

I thank you for getting this far along in my blog. So here is an 11th bonus question that I am asked from time to time – can I get a credit card during bankruptcy?

Applying for a credit card is just like applying for a loan. You are asking a lender to advance you money that you promise to repay. Under Section 199 of the BIA, it is a bankruptcy offense to obtain a credit of $1,000 or more from any person without telling the lender that you are an undischarged bankrupt.

Once you make that disclosure, or they find out otherwise, I highly doubt they will approve of you. There may be some companies that will give a car loan to an undischarged bankrupt, but, the amount you can borrow will result in your not getting a very good car. Also, the fees and interest rate that they will charge you will be extremely high.

The only exception is that you could apply for a secured credit card. As I noted above, a secured credit card is a good way to start rebuilding your credit.

Canadian bankruptcy laws summary

If you have too much debt and are facing financial challenges, I hope this Brandon’s Blog has provided some insight for you. The above questions are what I have found to be the 10 essential problems bothering people thus far in 2019 when facing financial challenges and considering Canadian bankruptcies laws.

If you are one of the many Canadians facing debt problems and not knowing what to do about them, call the Ira Smith Team today. We have decades and generations of experience aiding people and companies trying to find and work through a successful financial restructuring or debt settlement approach. As a licensed insolvency trustee, we are the only experts recognized, approved and supervised by the Federal government to provide insolvency help and solutions to help you to avoid bankruptcy.

Call the Ira Smith Team today so you can do away with the stress and nervousness debt concerns produce. With the distinct roadmap we develop special to you, we will rapidly return you right into a balanced, healthy and carefree life.

You can have a no-cost evaluation to aid you so we can repair your debt issues. Call the Ira Smith Team today. This will definitely enable you to go back to being productive, healthy and balanced, Starting Over Starting Now.

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Brandon Blog Post

WHAT IS THE DIFFERENCE BETWEEN BANKRUPTCY AND INSOLVENCY CANADA

Post author By Brandon Smith
Post date December 5, 2018

What is the difference between bankruptcy and insolvency Canada: Introduction

Encountering major money troubles is life-shattering, especially if you automatically think that bankruptcy is your only alternative. As a matter of fact, lots of people erroneously think that serious financial difficulties immediately suggest the only answer is bankruptcy. The most common question I am asked is, “what is the difference between bankruptcy and insolvency Canada”.

What is the difference between bankruptcy and insolvency Canada: Insolvency

If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are insolvent, not bankrupt. Insolvent is a cash flow problem; bankruptcy is a legal state. You can read a detailed discussion on the definition of being insolvent in my last week’s vlog INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE.

What is the difference between bankruptcy and insolvency Canada: Bankruptcy is a legal рrосеѕѕ

Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.

If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened, and the cost of the bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.

In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) (formerly known as a bankruptcy trustee) all уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and the proceeds will be used to рау for the bankruptcy administration and then make a distribution to уоur сrеdіtоrѕ.

What is the difference between bankruptcy and insolvency Canada: Assets exempt in a bankruptcy in Ontario

In Ontario, where my practice is, the following assets are exempt from seizure in a personal bankruptcy:

Your necessary clothing without any dollar restriction.
Family furnishings and appliances up to a value of $13,150.
Your tools and other personal property used to earn income from your occupation up to a value of $11,300.
One vehicle with equity of no more than $6,600.
Registered Retirement Savings Plan and Registered Retirement Income Fund savings, other than payments made within the 12 months immediately before the bankruptcy filing.
The equity in your house if up to the amount of $10,000. Note that the current thinking is that if your equity is more than $10,000, then your exemption is zero.

If you have very little property, all of it may be рrоtесtеd so that you will not lose it.

What is the difference between bankruptcy and insolvency Canada: Surplus income

How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be ѕоld fоr and whether you will be required to pay “surplus income” to your LIT. For a detailed discussion on surplus income, read my May 28, 2013 blog CAN YOU REALLY HAVE SURPLUS INCOME IF YOU’RE BANKRUPT?

Among all the things that seem to perplex many people when it involves the bankruptcy procedure is surplus income. It’s tough to get your head around the concept of surplus income when you are heading towards bankruptcy. Can that really be true if you are insolvent?

What is the difference between bankruptcy and insolvency Canada: What is surplus income

Surplus income in a bankruptcy describes the amount the bankrupt must pay to the Trustee monthly. The Canadian bankruptcy system attempts to balance your right to end your debt and start over with the rights of creditors to be paid.

To permit Canadians to keep a sensible right to make a living throughout the bankruptcy administration, the federal government has established limits or standards on revenue a person can keep (after tax obligations and certain limited deductions) throughout their bankruptcy. The Office of the Superintendent of Bankruptcy establishes the limit restriction every year tied into the cost of living.

How do you figure surplus income?

The Federal Government establishes the formula used to calculate surplus income payments. The same formula is used for all of Canada.

The limits for surplus income are based off across the country “poverty line”. Surplus income has absolutely nothing to do with what you have left over monthly. It is a federal government formula that considers your revenue, specific non-discretionary costs as well as your household size.

The calculation is to find if you will need to contribute from your earnings monthly to your Trustee, for the benefit of your creditors.

Bankruptcy discharge

The final step of your bankruptcy process will be to get your discharge. Your discharge from bankruptcy acts as the trigger to discharge you from all of your debts. This means that you will not have to рау them (with possibly certain exceptions depending on your circumstances).

Whether you get an absolute discharge from your bankruptcy will depend essentially on your conduct. Before your bankruptcy, did you treat all your creditors the same? Does anyone feel aggrieved by your actions? That will decide if any of your creditors will oppose your discharge.

For an in-depth discussion of the personal bankruptcy discharge process, check out our vlog BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION.

Is your debt keeping you up at night?

Do you have extreme debt and have no concept of how to handle it? Are your debt woes keeping you up at night and causing you stress, pain and maybe even depression? We understand that pain and can cut it from your life.

Ira Smith Trustee & Receiver Inc. has helped many companies and people throughout the Greater Toronto Area (GTA) juggling too much debt in their lives that requires a blueprint for Starting Over, Starting Now. Do not delay. Help is 1 phone call away. You can fix your financial troubles while avoiding bankruptcy as long as you take swift action. Call the Ira Smith Team today for your free consultation.

Tags absolute discharge, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy discharge, bankruptcy trustee, BIA, Debt, insolvency, Ira Smith Trustee & Receiver Inc., personal bankruptcy, Registered Retirement Income Fund, registered retirement savings plan, RRIF, RRSP, Summary Administration, trustee, what is the difference between bankruptcy and insolvency canada

Brandon Blog Post

DEBT RELIEF IN CANADA: BANKRUPTCY COURT SALUTES CANADIAN MILITARY VETERAN

Post author By Brandon Smith
Post date September 12, 2018

Debt relief in Canada: Introduction

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

Debt relief in Canada: The case

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

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

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

Debt relief in Canada: The facts

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

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

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

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

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

Debt relief in Canada: The Court’s thinking

The Registrar made a point of saying:

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

Debt relief in Canada: The Registrar’s analysis

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

Wage loss replacement plan – Wrongful termination awards would normally be included in total income, as would pay in lieu of notice. The Registrar, however, went on to comment that in this case, the wage loss replacement plan was not termination pay or pay in lieu of notice but rather, pay because Master Corporal Durdle’s PTSD prevented him to continue serving. The Registrar concluded that this amount should not be considered as income in accordance with Section 68 of the Bankruptcy and Insolvency Act (BIA). Therefore, the Registrar also concluded that this amount should not be included in the calculation of surplus income.

Rehiring allowance – The Registrar applied the same logic for this payment. He decided that it should not be included in the calculation of surplus income. He decided that this payment was a result of Master Corporal Durdle’s PTSD preventing him from continuing to serve in the military.

Pension income – The Registrar could not determine whether this income was solely a benefit due to Master Corporal Durdle’s PTSD or not. However, it did factor into the Registrar’s ruling.

Disability income – The Registrar considered this income in light of previous Court decisions involving lump sum awards. This included under a Workers’ Compensation Plan. The Registrar went on to review the actual Federal statute under which the payment was made to him, the Veterans Well-being Act (S.C. 2005, c. 21). The Registrar concluded that this amount would not be included in the calculation of surplus income.

Employment income – The Registrar concluded that this amount is included in the surplus income calculation.

Debt relief in Canada: The Court’s decision

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

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

Debt relief in Canada: Sometimes understanding and kindness is required

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

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

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

Tags automatic discharge, Bankruptcy and Insolvency Act, Bankruptcy and Insolvency Act (BIA), bankruptcy discharge, BIA, debt relief, debt relief canada, debt relief in canada, Durdle, Ira Smith Trustee, PTSD, Raffi A. Balmanoukian, registrar, second bankruptcy, Supreme Court, surplus income, suspended discharge, undischarged bankrupt

Brandon Blog Post

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

Post author By Brandon Smith
Post date June 20, 2018

Filing for bankruptcy in Canada: Introduction

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

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

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

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

Filing for bankruptcy in Canada: Defaulting on the consumer proposal

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

filing for bankruptcy in canada

Filing for bankruptcy in Canada: The bankruptcy discharge hearing

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

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

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

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

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

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

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

filing for bankruptcy in canada

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

So the Court of Appeal found that:

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

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

Filing for bankruptcy in Canada: Mental health issues

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

Filing for bankruptcy in Canada: Debt after your bankruptcy discharge

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

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

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

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

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

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

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

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

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

Brandon Blog Post

AFTER BANKRUPTCY DISCHARGE CANADA: LIVE WELL AFTER A BANKRUPTCY DISCHARGE

Post author By Brandon Smith
Post date May 23, 2018

after bankruptcy discharge canada

After bankruptcy discharge Canada: Introduction

The purpose of my blog is to provide ideas and suggestions on how a person can fulfill one of the aims of the Canadian insolvency system. That is to carry out successful financial rehabilitation and live profitably and happily after bankruptcy discharge Canada.

After bankruptcy discharge Canada: You are not alone

In 2017, 122,198 Canadians went for either bankruptcy or a restructuring proposal. The split was roughly even. These people and their families underwent significant financial and emotional pain. In January and February 2018 together, 19,082 Canadians went for either bankruptcy or a restructuring proposal. The split favoured restructuring proposals slightly.

After bankruptcy discharge Canada: Your financial slate is now clean

Your financial slate is wiped clean. However, your credit score has taken a beating. Now is the time to not squander the opportunity you have for financial rehabilitation. Notation of your bankruptcy stays on your credit report for 7 years after your bankruptcy discharge. In the case of a restructuring proposal, the notation remains on your credit report for 3 years after successful completion of your financial restructuring.

After bankruptcy discharge Canada: My 10 step program to live profitably after a bankruptcy discharge

So how can a discharged bankrupt hop on a rapid course to a bankruptcy rebound? Here are my suggestions:

Use your bankruptcy experience to improve your financial education. Take a course on practical money management.
You won’t have any credit cards so you have to rely more on cash. Use an envelope system so that every payday you segregate your cash into envelopes, each marked with an essential family expense. Make sure the cash is used only for those essential purposes and no cheating. No borrowing from the envelopes!
Points 1 and 2 above lead naturally into the next point. Sit down with the entire family and work out a monthly budget. Your total expenses cannot be more than your total income, after income tax, for the month. If everyone is involved in setting it up, then they will all understand if you just can’t afford something in a certain month. Also, they will all be helping you stay on budget.
You do need to find a way to start rebuilding credit. Obtain a secured credit card. Not the drug store variety, but the kind issued by a real credit card company. You have to deposit funds with the credit card issuer and then you get a credit limit equal to the funds deposited. Use that credit card each month, but pay off the FULL balance each month. The credit card company then reports to the credit reporting agencies that you are using credit wisely. Over time, this will improve your credit score.
Always remember the behaviours that got you into financial trouble in the first place and don’t repeat them. If it was an event outside of your control like job loss or a medical emergency, it was not your behaviour that was the cause of your financial problems.
Establish SMART goals. Specific, Measurable, Achievable, Realistic and Timely goals. Setting and reaching your goals will certainly make you an economic success.
Begin building up savings. You need to be financially prepared for a life emergency. As a bare minimum, begin setting up a reserve so that you can withstand a 6 to 9 month emergency that increases your expenses or reduces your income.
Start investing in an RRSP using an RRSP loan. Take out a small RRSP loan. Use your tax savings to pay it down, and work into your budget repaying the rest of the loan, with interest, during the year. Do the same thing the following years. Not only will you build up RRSP savings, the reported loan repayments will improve your credit rating because you are using credit wisely again.
Purchase based only on your needs that are in your budget; never on your “wants”.
Do not purchase anything on impulse. Research, research and research to make sure that you are getting the best deal possible.

After bankruptcy discharge Canada: The takeaway

The takeaway? It is not easy to recover after bankruptcy discharge Canada. It is a series of small steps using modified behaviour and healthy money management skills. But it is possible. I have seen many of my past clients do it. There is not a magic pill you can take. It is a matter of concentrating and working on moving on and learning from your past mistakes. Working at it one day at a time, you will regain your self-respect and feeling of self-worth by restoring your financial and credit report health and wellness.

After bankruptcy discharge Canada: What if you have too much debt?

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

Tags after a bankruptcy discharge, after bankruptcy, after bankruptcy discharge, after bankruptcy discharge canada, Bankruptcy, bankruptcy discharge, Canadian insolvency system, credit report, credit score, debt settlement, financial rehabilitation, insolvency, Ira Smith Trustee, monthly budget, proposal, rebuilding credit, restructuring, restructuring proposal, trustee

Brandon Blog Post

PONZI SCHEME CRIMINALS: CANADIAN PONZI SCHEME GUY WHO RUINED LIVES SENTENCED TO 7 YEARS FOR MASSIVE PONZI SCHEME

Post author By Brandon Smith
Post date May 2, 2018

Ponzi scheme criminals: Introduction

We now have a Canadian to add to the long list of Ponzi scheme criminals. A Ponzi scheme is a fraud perpetrated on unsuspecting parties in which belief in the success of a non-existent enterprise through the payment of quick returns to the first investors from money invested by later investors.

Ponzi scheme criminals: What is a Ponzi scheme?

The name comes from the swindling ways of an Italian born con man in the late 1890’s and early 1900’s – Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi – known in North America as Charles Ponzi. The most famous of the modern-day Ponzi scheme criminals is Bernard (Bernie) Madoff, who is serving 150 years in prison for his multi-billion dollar Ponzi scheme.

Ponzi scheme criminals: Canadian Wade Robert Closson, Ponzi scheme criminal

Canadian Wade Robert Closson, a 48-year-old Sturgeon County, Alberta resident was recently sentenced to seven years in jail for executing a Ponzi scheme. He was originally charged in over 80 counts of fraud. Mr. Closson plead guilty to 53 counts. Most of the fraudulent activities encompassed more than one victim, typically a husband and wife pair. Several of them were present in Court and read their victim impact statements. Others were read on behalf of the victims.

Ponzi scheme criminals: His swindle has caused financial devastation

Many of the victims were discussing feelings of shame. They have experienced overall financial devastation. Some are now still working at the ages of 83, not being able to retire. As a result of the fraud perpetrated upon them by Mr. Closson, they cannot afford to take a vacation or go out for a dinner.

Ponzi scheme criminals: With friends like Mr. Closson……….

Mr. Closson was actually friends and even related to many of the victims. Most of them are talking about the loss of trust in their friend, in humanity and their ability now to relate to other human beings.

He preyed on his friends and relatives, who recruited from their social circles to invest with Closson. A number who lost money in the scam lost more than $100,000 with one suffering a loss of over $600,000. This included cash from a credit line and their RRSP. Closson took $80,000 of that amount out of the couple’s accounts without their authorization.

Ponzi scheme criminals: Essentially, it was a mortgage scam

The overall size of the fraud itself was $11 million dollars that ran through the Ponzi scheme. The Crown was able to prove losses of about $6 million dollars. That is what was in the agreed statement of facts.

The Court heard how Mr. Closson ran the Ponzi between 2006 and 2013. He operated two firms, Optam Holdings Inc. (Optam) and Infinivest Mortgage Investment Corporation (Infinivest), which both entered into bankruptcy in 2013. Closson would take the cash invested in Infinivest to pay off the investors in Optam.

When Optam applied for bankruptcy it detailed about $10 million in liabilities spread out among 69 creditors. The biggest one was Infinivest, which Optam owed $4 million.

ponzi scheme criminals

Ponzi scheme criminals: He recruited friends and family to be on his sales team

Closson made use of the cash to pay himself around $1.185 million throughout the period of the fraud. He used an unspecified amount of money for at least one vehicle, credit cards and golf club. Mortgage payments for his mother-in-law and father-in-law too.

He incentivized people to bring in others into his scheme by paying a commission to his buddies and family members. He invested in various other companies, including a financial investment in a firm that operated a lumber mill in Nicaragua. This investment did not work out well either.

Ponzi scheme criminals: The sentencing

In Court, Closson apologized for his activities and requested the forgiveness of the 20 victims who attended Court for the sentencing!

Justice Belzil ordered Closson to pay restitution of $5.8 million he lost in the Ponzi plan together with a fine of $10,600. He is banned for life from trading in securities.

The Ponzi plan spurred an examination by the Alberta Securities Commission which fined Closson $1 million and banned him from trading in the Province of Alberta in 2015. Up until now Closson has made no payments.

“It is one thing to be taken advantage of by a stranger but this was a trusted friend,” Justice Paul Belzil said when sentencing Mr. Closson.

Ponzi scheme criminals: Wade Closson, the undischarged bankrupt

Closson and his spouse have both filed for bankruptcy on March 27, 2013. He remains an undischarged bankrupt with a hearing set for his discharge from bankruptcy. No doubt that hearing was adjourned until the outcome of the criminal trial was known. Even if Mr. Closson does one day receive a discharge from bankruptcy, the Court fine and the restitution Order, because the restitution is a liability arising out of fraud, will follow him for the rest of his life.

How the bankruptcy discharge process works has been a topic of several of my blogs in the past, including, BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION.

Ponzi scheme criminals: Do you have too much debt?

Have you taken on debt that you cannot repay as a result of being swindled from a Ponzi scheme? Have you been swindled and now don’t have enough cash to meet all your debts? Are you facing financial problems for any other reason? The Ira Smith Team can develop a restructuring plan for you.

Debt problems are stressful and confusing. The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.

Our debt settlement plan process can ease this stress. The Ira Smith Team has a great deal of experience in helping people avoid bankruptcy while resolving their debt problems. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put you back on a healthy profitable path, Starting Over, Starting Now.

ponzi scheme criminals 0 — Ponzi scheme criminals

Tags Bankruptcy, bankruptcy discharge, bankruptcy discharge process, bernard madoff, bernie madoff, charles ponzi, closson, Debt, debt problems, fraud, Ira Smith Trustee, ponzi, ponzi scheme, ponzi scheme criminals, RRSP, undischarged bankrupt, wade closson

Brandon Blog Post

PAY BANKRUPTCY FEES ONLINE? BE LIKE NIKKI HALEY AND DON’T GET CONFUSED

Post author By Brandon Smith
Post date April 18, 2018

Introduction

A ruling in a proposed class action against a defunct Orlando Florida attorney firm, claimed a lawyer goes against government law “if he instructs a client to pay his bankruptcy related legal costs making use of a credit card.” That would also include using a credit card, either directly or through a third-party site, to pay bankruptcy fees online with a credit card.

Note to professionals encouraging clients considering bankruptcy: tell them to keep that plastic in their pocketbooks.

United States Court of Appeals for the Eleventh Circuit ruling

In a judgment likely to resonate with bankruptcy and debt settlement legal representatives, the United States Court of Appeals for the Eleventh Circuit ruled a lawyer violates government regulation “if he advises a customer to pay his bankruptcy-related legal charges using a credit card.” This of course would include an instruction to pay bankruptcy fees online.

The opinion released March 30, 2018 reversed a lower court decision and renewed a Florida class action against shut down Kaufman, Englett & Lynd filed by a previous client. The Orlando Sentinel reported the firm dissolved in April 2016 after the suit was filed.

The panel found a lawyer who advised his client to “sustain more debt” by billing his lawful fees on a credit card contravenes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Yes, it is fraud

That individual would certainly be committing fraud, and so would the attorney. This is because they’re making a charge knowing they never ever plan to pay that credit card.

The problem was that Kaufman Englett violated the Bankruptcy Code that does not permit a debt relief firm– consisting of a law practice– to “advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.”

My Canadian view

I would suggest that the outcome in Canada would be as disastrous for both the bankrupt and the licensed insolvency trustee (bankruptcy trustee or trustee). However, that does not mean that a bankruptcy trustee cannot encourage online payments; just not those using a credit card. Before getting into my reasons why, let’s first explore the issue of online payments.

Online payment choices

I think it is important to first understand what the various online payment choices are. The report “Canadian Payment Methods and Trends: 2017” by Michael Tompkins, Research Lead, Research Unit, and Viktoria Galociova, Research Associate, Research Unit, Payments Canada. In their report, they review the various online payments:

credit cards;
Interac® online debits;
online transfers include online e-wallet and electronic P2P transactions initiated through online services and providers, which are either prefunded or linked to deposit accounts at financial institutions (e.g., Interac e-Transfers, PayPal and Tilt); and
prepaid app store cards (or virtual cards)

Credit cards are the most used for online payments. But as you can see, there are ways of making online payments using cash.

You can but not by credit card

I submit that you can use an online payment method to pay for Canadian bankruptcy costs, just not by credit card. What this means is that you can transfer cash to your bankruptcy trustee (or consumer proposal administrator) using an online system.

Why not by credit card?

My view is that it would be unlawful to use a credit card for paying a bankruptcy fee in installments or in one payment. The more likely scenario would be paying it all at once just before filing.

My reasons are as follows:

Using a credit card to charge expenses or take cash advances against knowing that you are about to file for bankruptcy and will not repay it is fraud. Fraud of course is illegal. So the insolvent debtor, about to become a bankrupt, will be in trouble. Just like in the USA as cited by the Court that I mentioned at the start of this blog.
Likewise, any bankruptcy trustee who accepts payment by a credit card in the name of and from the insolvent debtor would be in trouble. The same trouble would befall the professional if he or she encouraged the insolvent debtor to take a cash advance against the credit card to pay bankruptcy fee online.
pay bankruptcy fees online

Here’s why:

It is against the rules of professional conduct of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). The rules need a member to maintain the good reputation of the profession and perform professional services with integrity.
The General Rules of the Bankruptcy and Insolvency Act (Canada) (BIA) requires that a bankruptcy trustee maintain the high standards of ethics that are central to the maintenance of public trust. It also requires that trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process.

What are the risks?

The risk for the trustee, of course, is serious – the loss of his or her license to practice. But what are the risks for the insolvent debtor?

For the undischarged bankrupt, in my view, the risks are twofold: (i) criminal; and (ii) civil. The criminal repercussions are obvious. The laying of one or more fraud charges would happen and the result would be a criminal conviction, jail time and a restitution order.

In the civil sense, I focus on the bankruptcy discharge process.

Forget about getting a discharge from bankruptcy

The credit card issuer would certainly oppose the bankrupt’s discharge. In the meantime, the credit card company would get a lifting of the stay of proceedings which protects an undischarged bankrupt from lawsuits, to start litigation to find that at least the debt incurred by the debtor to pay for the Canadian bankruptcy costs was a claim against the debtor for a debt not released by order of discharge. Sections 178(1) (a) and (e) are the most likely section of the BIA that would be relied upon.

So the credit card issuer and the trustee (probably by now the substituted trustee!) must oppose the bankrupt’s discharge. I am certain that the oppositions would be successful. The most likely result would be that the Court would flat-out refuse to hear the bankrupt’s application. The result of this is complex and should be discussed in a separate blog. Suffice to say that the bankrupt will have a very hard time ever getting out of bankruptcy without making full restitution. Even then, I would expect the Court to only grant a discharge upon certain conditions being met.

In other words, it would be a disaster and a mess for both the trustee and the bankrupt. These are my reasons why I feel that to pay bankruptcy fee online using cash is fine, but not by a credit card.

Pay bankruptcy fees online: What about you?

Are you facing financial problems? The Ira Smith Team can develop a restructuring plan for you. Debt problems are stressful and confusing. But with our help, you can be just like Nikki Haley and say “I don’t get confused”!

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.

Tags Bankruptcy and Insolvency Act, bankruptcy discharge, bankruptcy trustee, BIA, Canadian Association of Insolvency and Restructuring Professionals, canadian bankruptcy costs, Consumer Proposal, consumer proposal administrator, credit card, discharge from bankruptcy, Ira Smith Trustee, kaufman englett lynd, licensed insolvency trustee, pay bankruptcy fee online, pay bankruptcy fees online, payments canada, prepaid app store cards

Brandon Blog Post

ONTARIO BANKRUPTCY DISCHARGE CERTIFICATE: CANADIAN BANKRUPTCY LAW

Post author By Brandon Smith
Post date February 7, 2018

Ontario bankruptcy discharge certificate: Introduction

I have written before on the more practical aspects of Ontario bankruptcy discharge certificate issues and process within Canadian bankruptcy and insolvency law. The most recent blogs are:

BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION – September 13, 2017
GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY? – January 31, 2018

I recently reviewed the Ontario Court of Appeal decision in Cole v. RBC Dominion Securities Inc., 2017 ONCA 1009. This case is very interesting as it highlights an issue that we often don’t talk enough about when advising a person on what they might expect at their hearing under Canadian bankruptcy and insolvency law.

The facts

Henry Cole, age 52, had a Bankruptcy Order made against him in 2011 upon motion by Royal Bank of Canada (“RBC”), after he misappropriated $5 million from clients while working as their investment advisor. While in bankruptcy, he had a net monthly income of $14,600, resulting in surplus monthly income of $12,500. He nevertheless failed to make any surplus income payments.

To understand what surplus income in a bankruptcy is, see my June 1, 2016 vlog titled WHY SURPLUS INCOME IS SO POPULAR UNTIL YOU ARE FORCED INTO BANKRUPTCY.

The Ontario Court of Appeal (“ONCA”) upheld the two lower Court decisions

As is the case in bankruptcy matters, Mr. Cole’s bankruptcy discharge hearing came before the Master in Bankruptcy Court who also sits as the registrar in bankruptcy. Mr. Cole appealed the Master’s decision (discussed below) unsuccessfully to a Judge of the Bankruptcy Court. The Judge dismissed Mr. Cole’s appeal, thereby upholding the Master’s decision. As indicated above, the ONCA agreed with the Judge (and the Master) in dismissing Mr. Cole’s appeal.

Now for the interesting stuff!

Now for the interesting stuff. The Master determined that there was enough evidence to show that Mr. Cole, as a bankrupt, committed various bankruptcy offenses. The Master determined facts for which discharge may be refused, suspended or granted conditionally, under Section 173(1) of the Canadian bankruptcy and insolvency law called the Bankruptcy and Insolvency Act (Canada) (“BIA”).

The Master determined that Mr. Cole had failed to provide information to enable the Licensed Insolvency Trustee to calculate surplus income. Mr. Cole also conceded to the following facts:

his assets upon bankruptcy were not of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities. Mr. Cole gave no evidence why he should not be held responsible;
he failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; and
he brought on, or contributed to, his bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of his business affairs

With these findings, the Master, under Section 172(2) of the BIA, had to not grant an absolute discharge and to:

refuse the discharge of a bankrupt;
suspend the discharge for such period as the court thinks proper; or
make the bankrupt, as a condition of his discharge, to do such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.

I must point out that the options available to the Master are not mutually exclusive. So, just like in Mr. Cole’s case, you could have the Court come up with a mixture of a suspension and a condition to pay moneys.

What the Master decided

The Master made several decisions. First, the Master dealt with the surplus income issue. The Master ordered Mr. Cole to pay $284,346 to the Trustee as surplus income, payable at a rate of $5,000 per month.

The Master also considered Mr. Cole’s criminal behaviour and that he had real income while not working any longer as an investment advisor. Given the amount of Mr. Cole’s liabilities, and for the integrity of the Canadian bankruptcy system, the Master ordered as further conditions that:

Mr. Cole pay an extra $5,000 per month to the Trustee for a further six years for a total more payment of $360,000; and that
his discharge from bankruptcy be suspended for two years.

The dismissed appeals

Mr. Cole argued before first the Judge, and then the ONCA, primarily that the Master’s treatment of surplus and other income was in error. He also argued that the Judge’s finding in dismissing his appeal was an error. The ONCA disagreed and dismissed his appeal.

So what is the lesson to be learned?

It is important for the Trustee, when sitting down with the person contemplating an insolvency proceeding, to understand all the facts. By properly understanding all the facts, we can provide proper professional advice and guidance.

Someone who had a facts situation like Mr. Cole, we would have strongly advised him or her to avoid bankruptcy and to contemplate performing a Division I Proposal to compromise his debts. The reasons we would have advised this are:

the debtor has real income to successfully do a Proposal;
Mr. Cole never would have qualified for an absolute discharge from bankruptcy given his facts situation and any discharge conditions would be onerous;
avoiding the ongoing calculation of surplus income up to the time of his bankruptcy discharge hearing; and
with the support of his major creditors, it is possible that the Proposal amount could have been somewhat less than $644,000 (subject to knowing the value of his assets at the date of bankruptcy).

he person needs our advice in plain English before making any decisions

We also would have advised the debtor the type of the rough ride they were in for if they chose to go ahead with the bankruptcy option. We would have explained in detail how we believed the Canadian bankruptcy and insolvency law system would treat him, so at least there would be no surprises during the bankruptcy administration.

Many times people we speak with do not like to hear the truth, and begin “Trustee shopping” until they find a Trustee that does not tell them all the bad news up front. People like this believe that if they aren’t told it, it can’t happen. This is a mistake. We believe everyone deserves to know the truth about their situation, to help them make the best decision possible.

In Mr. Cole’s case, not only did he find out the hard truth from the Court, he then spent money on his lawyers appealing the Master’s and Judge’s decisions. That obviously was extra money spent with no benefit received.

FULL DISCLOSURE: Our firm has never met with Mr. Cole and was not considered to be his Trustee.

What to do if you have too much debt

Declaring personal bаnkruрtсу in Canada is a big deal. So is getting your Ontario bankruptcy discharge certificate. While it can be a way out for the honest but unfortunate debtor who is deep in debt and looking for a new start, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

ISI 4 — ontario bankruptcy discharge certificate

Tags absolute discharge, bankruptcy discharge, bankruptcy discharge process, bankruptcy order, conditional discharge, Consumer Proposal, credit counselling, debt settlement, discharge from bankruptcy, Division I Proposal, Henry Cole, Ira Smith Trustee, licensed insolvency trustee, ontario bankruptcy, ontario bankruptcy discharge certificate, proposal, suspended discharge