Tag: bankruptcy filing

IF PARENTS DECLARE BANKRUPTCY WHAT HAPPENS TO THE CHILDREN? NAVIGATING YOUR FAMILY’S FINANCIAL RESET SUCCESSFULLY

Post author By Brandon Smith
Post date March 10, 2025

if parents declare bankruptcy what happens to the children

If Parents Declare Bankruptcy What Happens To The Children? How Bankruptcy Affects Family Dynamics

If parents declare bankruptcy what happens to the children? Imagine your world turning upside down when your parents tell you they’re facing serious money trouble. Bankruptcy isn’t just a grown-up problem—it can shake up an entire family, leaving teenagers worried about their home, their future, and what comes next.

How Bankruptcy Impacts Teens and Families

When parents declare bankruptcy, it’s more than just a financial setback. This challenging situation can touch nearly every aspect of a teenager’s life, from family relationships to future opportunities. Many young people find themselves navigating unexpected emotional and practical challenges during this time.

What Happens?

Bankruptcy doesn’t mean families are doomed. Instead, it’s a legal process that helps parents get a fresh start with their finances. For teens, this can mean:

Potential changes in living arrangements
Shifts in family financial planning
Emotional stress and uncertainty about the future
Possible impacts on university or career plans

Understanding the Bigger Picture

While bankruptcy sounds scary, it’s not the end of the world. Many families successfully rebuild after financial challenges. The key is understanding the process, supporting each other, and staying focused on long-term goals.

Key Takeaways for Teens

Your parents’ bankruptcy doesn’t define your future. Open communication with family is crucial. There are resources and support available. Financial challenges can be overcome with the right approach.

In this Brandon’s Blog post, we’ll unpack the multifaceted impacts of a parent’s bankruptcy on their children—financially, emotionally, and beyond. We’ll draw from recent data and expert opinions to help you understand and navigate this difficult family situation.

If Parents Declare Bankruptcy What Happens To The Children? Psychological Effects on Children: Inheritance and Legacy Loss

Bankruptcy is a challenging journey that can reshape a family’s financial landscape. For children, this process brings complex emotional and financial implications that extend far beyond simple monetary concerns. Let’s explore how a parent’s bankruptcy can impact a family’s future and what children need to understand.

Understanding Inheritance and Family Assets

When parents face financial difficulties, the potential inheritance children might have expected can change dramatically. This unexpected shift can create uncertainty and stress for the entire family.

Key Inheritance Considerations

Bankruptcy prioritizes debt repayment over asset preservation
Family assets like homes or savings could be eliminated
Financial planning will require immediate reevaluation
if parents declare bankruptcy what happens to the children

If Parents Declare Bankruptcy What Happens To The Children? The Emotional Toll of Losing a Family Home

A family home represents more than just a physical space—it’s a symbol of stability, security, and cherished memories. Losing this anchor can profoundly impact children’s emotional well-being and sense of security.

Potential Impacts of Home Loss

Disruption of established social networks
Potential school changes
Emotional stress from relocation
Challenges in maintaining family continuity

Navigating Equity Rules in Bankruptcy

Bankruptcy proceedings involve complex equity rules that can determine the fate of family properties. Understanding these regulations is crucial for families experiencing financial challenges.

Critical Equity Considerations

Properties with significant equity will be sold to repay debts
Legal frameworks prioritize creditor repayment
Potential complete loss of family real estate assets is a possibility

Financial Stress: A Broader Perspective

Research indicates that financial stress affects a significant number of families. According to recent studies, approximately 36% of parents experience substantial financial pressures that could potentially lead to bankruptcy.

Potential Silver Linings

Bankruptcy can provide a financial reset
Reduced parental financial stress
Opportunity for improved financial management
Potential for future financial stability

Emotional and Financial Recovery

While bankruptcy presents immediate challenges, it can also create opportunities for financial renewal and family growth. The process, though difficult, can lead to:

Improved financial literacy
Reduced debt burden
A fresh start for family finances
Enhanced long-term financial planning

“Bankruptcy isn’t the end of a financial journey—it’s a challenging but potentially transformative beginning.”

Empowering Families Through Understanding

Knowledge is the most powerful tool during financial traoe.

Remember, every financial challenge is an opportunity for growth, learning, and a more secure future.

If Parents Declare Bankruptcy What Happens To The Children? Child Support and Spousal Support Obligations: What Happens During Bankruptcy?

Navigating the complex financial obligations during bankruptcy can be challenging, especially when child support obligations and spousal support are involved. It is not that far-fetched to consider that the toll financial ruin takes on a family could lead to divorce. Understanding how these critical financial responsibilities intersect with bankruptcy is crucial for families facing financial difficulties.

The Unique Status of Family Support Obligations

Bankruptcy law treats child support payments and spousal support differently from other types of debt. These obligations are considered priority debts, which means they cannot be discharged or eliminated through bankruptcy proceedings.

Key Protections for Dependents

Child support payments and spousal support are typically non-dischargeable
Bankruptcy cannot stop existing support payment requirements
Court-ordered support continues regardless of financial status

How Bankruptcy Impacts Support Payments

In short, the impact of bankruptcy on support payments is simple – in one word – NONE! When a parent files for bankruptcy, the impact on child support amounts and spousal support doesn’t vary.

Bankruptcy Liquidation

Does not eliminate existing support obligations
Child support arrears cannot be discharged
Ongoing support payments must continue

Proposal Restructuring

Provides a restructuring plan for debt repayment
Allows parents to catch up on child support arrears
Offers a structured approach to managing financial responsibilities

Protecting the Financial Interests of Children

The legal system prioritizes the financial well-being of children, ensuring that support obligations remain intact during bankruptcy proceedings.

Critical Considerations

Support payments take precedence and must be made
Failure to pay can result in severe legal consequences
Courts have mechanisms to enforce support obligations

Navigating Support Obligations During Financial Stress

Bankruptcy doesn’t provide an escape from family support responsibilities. Parents must continue to meet their financial obligations to their children and former spouse.

Communicate openly with support recipients
Seek legal advice to understand your specific obligations
Explore payment modification options if financial circumstances change
Maintain transparency with family court systems

“Bankruptcy is a financial tool, not an excuse to abandon family responsibilities. Child support and alimony remain critical obligations that must be honored.”

Proactive Steps for Parents

If you’re facing bankruptcy and have support obligations:

Communicate with both your Licensed Insolvency Trustee and family law lawyer to make sure that you understand your responsibilities
Develop a comprehensive financial plan
Maintain open communication with all parties involved

While bankruptcy presents significant financial challenges, it does not absolve parents of their support responsibilities. By understanding the legal framework and maintaining a commitment to family obligations, parents can navigate this difficult process while protecting their children’s financial interests.

Remember, your children’s well-being should always be the top priority, even during challenging financial times.

If Parents Declare Bankruptcy, What Happens to the Children? Emotional Repercussions -Understanding a Child’s Perspective During Family Bankruptcy

Bankruptcy isn’t just about numbers on a page—it’s a deeply personal journey that can shake a family to its core. As a licensed insolvency trustee, I’ve seen firsthand how financial challenges impact not just bank accounts, but the emotional world of children.

Understanding the Emotional Rollercoaster

When a family faces bankruptcy, children experience a whirlwind of feelings that go far beyond financial spreadsheets. Imagine your entire world feeling uncertain—that’s what kids go through during this challenging time.

What Children Feel

Kids don’t just see bankruptcy as a money problem. They experience:

A deep sense of vulnerability
Worry about their family’s future
Fear of losing their home
Anxiety about changing relationships

The Invisible Challenges Children Face

Your family home is more than just walls and a roof. It’s a sanctuary of memories, safety, and belonging. When financial stress threatens this sanctuary, children feel like their entire world is shifting.

The Real Impact on Kids

Bankruptcy can trigger some serious emotional responses in children:

Increased anxiety and mood swings
Potential feelings of shame
Disruption to their sense of identity
Concerns about social connections

Supporting Your Children Through Financial Stress

As a parent, you have the power to help your children navigate this challenging time. Here are practical strategies to support your family:

Communication is Key

Have open, honest conversations using age-appropriate language
Reassure your children about family love and unity
Maintain consistent daily routines
Create new family traditions that build stability

Moving or financial changes can disrupt your child’s school and social world. Potential challenges include:

Academic performance gaps
Feeling isolated from friends
Increased anxiety about changes

Long-Term Emotional Considerations

The psychological impact of bankruptcy can affect children during critical developmental stages. Parents should watch for:

Behavioural changes
Emotional withdrawal
Potential long-term stress management challenges

Professional Support Matters

Don’t hesitate to seek professional counselling if you notice significant emotional changes in your child. Therapists can provide valuable coping strategies.

The Silver Lining: Positive Transformation

While bankruptcy feels overwhelming, it can also be a pathway to financial healing. Reducing financial strain can create a more stable emotional environment at home.

Remember: Your family’s strength isn’t measured by your bank account, but by how you support each other through life’s challenges.

Final Thoughts for Parents

Bankruptcy is a process, not a permanent state. With compassion, communication, and strategic planning, your family can emerge stronger and more resilient.

If Parents Declare Bankruptcy, What Happens to the Children? Financial Impact on Children

When parents declare bankruptcy in Canada, children naturally worry about how this will affect their daily lives. Understanding these impacts can help families navigate this challenging time together.

Seizure of Children’s Personal Belongings

Many children and teens worry that their items might be taken when their parents declare bankruptcy. The good news is that in most cases, children’s belongings are protected.

In Canada, bankruptcy trustees (now officially called Licensed Insolvency Trustees) generally do not seize items that belong to a child. This includes:

Clothing, toys, and personal electronics
Sports equipment and musical instruments
Educational materials and school supplies
Items purchased with a child’s own money

However, certain situations can create complications. If parents purchased expensive items for their children shortly before filing for bankruptcy, these may be scrutinized. For example, an expensive jewelry item bought just before filing could potentially be viewed as an attempt to hide assets.

To protect children’s belongings, it helps to have documentation showing when and how these items were acquired, especially for valuable possessions.

Child Income and Its Role in Bankruptcy

Children’s earnings and income are generally separate from their parents’ bankruptcy proceedings, but there are important considerations:

For teenagers with part-time jobs, their income remains their own and is not considered part of the parent’s bankruptcy estate surplus income calculation. This means:

Wages from after-school or summer jobs belong to the teen
Money in bank accounts in the child’s name remains protected (subject to understanding the source of any recent deposits)
Scholarships and educational grants directed to the child stay secure

However, parents should be aware of certain situations that could affect children’s finances:

If parents have been depositing large sums into children’s accounts before filing, these transfers will be reviewed as potential preferences that a Trustee could successfully attack
Joint accounts between parents and children might be temporarily frozen during the bankruptcy assessment until the source of funds is fully understood
Regular large gifts of money from parents to children shortly before bankruptcy will be questioned

The key factor is timing and intent. Regular deposits to a child’s education fund over many years are viewed differently than sudden transfers made just before filing for bankruptcy.

For families facing financial difficulties, being transparent with the Licensed Insolvency Trustee about children’s assets and income helps ensure appropriate protections remain in place.

If Parents Declare Bankruptcy, What Happens to the Children? Transforming Financial Futures and Finding Hope After Bankruptcy

Breaking Free from the Debt Cycle

Picture the moment when a tremendous weight lifts from your shoulders—that’s the profound relief many families experience after filing for bankruptcy. This isn’t a story of failure, but a strategic reset for your financial life. As a licensed insolvency trustee, I always get excited when I see this happening to families that I am able to help.

The True Meaning of Financial Liberation

Bankruptcy isn’t the end of your financial journey. It’s a new beginning that offers:

A fresh start away from overwhelming debt
An opportunity to rebuild financial foundations
A chance to develop healthier money habits
Renewed hope for economic stability

Understanding the Financial and Emotional Landscape

Before bankruptcy, many families felt trapped in a relentless cycle of financial stress. Imagine endless bill payments, sleepless nights, and the constant anxiety of making ends meet. These challenges drain both emotional and financial resources, creating a seemingly impossible situation.

The Transformative Power of a Financial Reset

Bankruptcy provides a powerful opportunity to:

Break free from cyclical debt
Gain mental and emotional clarity
Refocus on meaningful financial goals
Create a strategic path forward

Rebuilding Your Financial Future

After bankruptcy, families discover an unexpected freedom. The elimination of crushing debt opens doors to:

Building emergency savings
Exploring strategic investment opportunities
Setting long-term financial goals
Improving overall financial literacy

More Than Just Numbers: The Emotional Impact

Financial stress doesn’t just affect bank accounts—it impacts entire family dynamics. Bankruptcy can be the first step toward creating a more stable, nurturing home environment.

Unexpected Benefits

Reduced household tension
Improved family communication
Enhanced emotional well-being
Opportunity for collective financial education

Before vs. After: A Comparative Snapshot

Before Bankruptcy

Constant financial anxiety
Limited financial flexibility
Overwhelming debt burden
Restricted economic opportunities

After Bankruptcy

Reduced financial stress
Increased budgeting capabilities
Clear financial planning
Potential for economic recovery

“Bankruptcy isn’t an end—it’s a strategic financial reset that offers families a second chance at economic stability,” Dr. Emma Reynolds.

Developing Financial Resilience

The journey after bankruptcy is about more than just numbers. It’s an opportunity to:

Learn from past financial challenges
Develop robust budgeting skills
Create sustainable financial habits
Build a more secure future

As financial expert Ashley Morgan wisely states, “Bankruptcy can be a legitimate strategy to regain control of your finances and future.”

If Parents Declare Bankruptcy, What Happens to the Children? Frequently Asked Questions: Children and Parental Bankruptcy

Will We Lose Our Home and Have to Move?

Bankruptcy doesn’t automatically mean losing your family home. The outcome depends on:

How much equity (value minus mortgage) exists in the home
Your province’s exemption rules
The specific type of bankruptcy filing

Many families can keep their homes during bankruptcy, especially if there isn’t significant equity or if they can make arrangements with the trustee. If moving becomes necessary, we help families plan this transition carefully to minimize disruption to children’s schooling and social connections.

How Will This Affect Our Family Finances and My Future?

When parents declare bankruptcy, the family budget typically changes. This might mean:

Less spending on non-essential items
More careful planning for expenses
Possible changes to vacation or entertainment plans

However, a parent’s bankruptcy doesn’t define a child’s future opportunities. Many financial aid programs, scholarships, and grants for education look at the student’s situation, not the parents’ bankruptcy history. Open family discussions about these changes help everyone adapt and plan together.

What Happens to My Potential Inheritance?

Bankruptcy may reduce or eliminate assets that parents might have passed down. Family savings and investments might be used to pay creditors. However, rebuilding financial stability after bankruptcy is possible, and many parents create new financial plans that include future provisions for their children.

Will My Personal Belongings Be Taken?

In Canada, belongings that belong to children are generally not affected by a parent’s bankruptcy. These protected items typically include:

Clothing and personal items
Toys and games
Electronics for school or personal use
Sports equipment
Musical instruments
Items purchased with a child’s own money

Trustees are concerned with adult assets, not children’s possessions.

Is My Part-Time Job Money Protected?

The money you earn from your part-time job and keep in your bank account is generally separate from your parents’ financial situation. This includes:

Your wages and savings
Scholarships and grants in your name
Money given specifically to you as gifts

Just be careful about large deposits from parents right before they file for bankruptcy, as these might be questioned.

How Might This Affect Me Emotionally?

Financial stress affects the whole family. Children might experience:

Worry about the future
Anxiety about potential changes
Concern about social standing with friends
Confusion about what bankruptcy means

It’s important to maintain open communication, stick to familiar routines, and sometimes seek additional support from school counsellors or family therapists if needed.

What About Child Support and Alimony?

Bankruptcy does not eliminate a parent’s responsibility to pay child support or alimony (spousal support). These are considered priority debts that continue regardless of bankruptcy status. Courts still expect these payments to be made on time.

Can Bankruptcy Help Our Family?

Despite the initial challenges, bankruptcy often provides families with:

Relief from overwhelming debt stress
A fresh financial start
The improved household atmosphere once financial pressure decreases
Opportunities to develop better money management skills
Protection from collection calls and creditor actions

Many families emerge from bankruptcy with improved financial habits and a more secure future.

If Parents Declare Bankruptcy, What Happens to the Children? Getting Professional Support

If your family is considering bankruptcy, speaking with a Licensed Insolvency Trustee can help clarify how it might affect everyone involved. We provide confidential consultations to explain the process and answer questions from all family members.

Remember that bankruptcy is a financial tool for recovery—not a reflection of personal worth or parenting ability. Many successful families have used bankruptcy to overcome temporary financial setbacks and build stronger futures.

If Parents Declare Bankruptcy, What Happens to the Children? Conclusion

While bankruptcy may initially seem like a setback, it can catalyze positive change. The relief from debt opens doors to better financial management. Parents can redirect their focus toward savings and investments, creating a more stable home environment. Understanding the potential benefits of bankruptcy can help you navigate this challenging situation. It’s essential to recognize that this process can lead to improved budgeting and planning, ultimately transforming your financial future. Embrace this opportunity for growth and renewal.

I hope you’ve found this if parents declare bankruptcy what happens to the children helpful. If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance.

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

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

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

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

Tags bankruptcy estate, bankruptcy filing, bankruptcy laws, bankruptcy proceedings, child support obligations, Child support payments, debt relief, file for bankruptcy, financial future, financial obligations, financial situation, If parents declare bankruptcy what happens to the children, insolvency trustee, Ira Smith Trustee, legal advice, licensed insolvency trustee, part-time job, priority debts

Brandon Blog Post

COMPANIES ARE DECLARING BANKRUPTCIES EVEN THOUGH THEY RECEIVED THE CANADA EMERGENCY BUSINESS ACCOUNT: LOANS, REPAYMENTS, AND BANKRUPTCIES

Post author By Brandon Smith
Post date February 24, 2025

declaring bankruptcies

Declaring Bankruptcies Introduction

Picture this: April 2020, and your small Canadian business survive on thin margins. Suddenly, a global pandemic hits, lockdowns ensue, and your revenue disappears overnight. Then, a lifeline appears in a twist of fate: the Canada Emergency Business Account (CEBA).

On February 18, 2025, Statistics Canada released an economic paper written by Sean Clarke, Jasper Hui, and Dave Krochmalnek, “Borrowing, repayments and bankruptcies by industry: Results from the Canada Emergency Business Account program”. This post explores how this initiative influenced many businesses’ trajectories – some soared, while others crumbled under new pressures as the pandemic’s aftermath unfolded forcing many declaring bankruptcies.

Declaring Bankruptcies: Understanding CEBA – Lifesaver or Temporary Relief?

The CEBA was introduced to help small and medium enterprises (SMEs) during the COVID-19 pandemic. But what exactly does this mean for you? CEBA aimed to provide interest-free loans to businesses struggling to survive the economic fallout. With a staggering $49 billion allocated to various sectors, it was a significant lifeline for many. But was it enough?

Overview of CEBA and Its Objectives

CEBA was designed to assist businesses in covering essential operational costs. The loans, which could reach up to $60,000 per Canadian business, were intended to keep the doors open during the toughest times. Think of it as a safety net. But how effective was this net in catching those who fell?

Total funding: $49 billion
Maximum loan per business: $60,000

Total Funding	Maximum Loan per Canadian Business
$49 billion	$60,000

The Definition of Client-Facing Industries

Client-facing industries are sectors that directly interact with customers. This includes accommodations, food services, and transportation. These industries were hit hard during the pandemic. Imagine a restaurant forced to close its doors. The impact was immediate and severe. Output in these sectors dropped between 30% and 60% during the initial lockdowns. How could they survive without support?

In contrast, industries like construction and retail rebounded more quickly. Construction even saw a boom due to increased demand for single-family homes. This disparity raises questions about the fairness of the support provided. Why did some sectors receive more funding than others?

How CEBA Disbursement Shaped Business Survival

CEBA’s disbursement was crucial for many businesses. As one expert noted,

“CEBA was a crucial bridge for many businesses caught in the pandemic’s storm.”

This statement encapsulates the essence of the program. It was a bridge, but was it strong enough to support all who relied on it?

While many businesses managed to repay their loans, a significant portion—about 18.8%—remained outstanding by the forgiveness deadline. This translates to approximately $9.2 billion still owed. Instead of being forgiven, these loans transitioned into three-year term loans at a 5% interest rate. For businesses already struggling, this new burden was daunting.

Some sectors faced even higher rates of outstanding loans. For instance, the transportation and warehousing industry had 30.7% of loans outstanding. Accommodation and food services were not far behind at 21.9%. Even construction, which seemed to recover quickly, had 20.1% of loans still outstanding. This paints a picture of a complex recovery landscape.

It’s essential to evaluate the overall effectiveness of CEBA. Did it truly save businesses, or just delay the inevitable? The number of companies declaring bankruptcies decreased initially, likely due to government interventions like CEBA. However, as time passed and economic conditions changed, bankruptcy filings surged. By early 2024, over 1,200 businesses declared bankruptcy, many of which had received CEBA loans.

This situation raises critical questions. Did CEBA merely mask deeper vulnerabilities in the economy? The interconnected nature of these economic factors is evident. While CEBA provided immediate relief, the long-term implications remain uncertain.

CEBA was a significant initiative at supporting SMEs during an unprecedented crisis. However, the varying impacts across industries and the subsequent challenges faced by many businesses highlight the complexities of economic support measures. As we continue to navigate these waters, understanding the full scope of CEBA’s impact is essential for future economic resilience.

Declaring Bankruptcies: Diving into the Discrepancies – Who Benefited Most?

When we look at the impact of the CEBA program, it’s clear that not all industries were created equal. Some sectors thrived while others struggled. Why is that? Let’s dive into the numbers and uncover the surprising disparities in funding allocations and the reasons behind them.

Comparison of Industry Sectors

First, let’s consider the sectors that fared differently during the pandemic. The client services industry, which includes accommodations, food services, and transportation, saw a staggering drop of 30% to 60% in output during the initial lockdowns. That’s a significant hit! On the other hand, industries like manufacturing bounced back much quicker. In fact, construction even experienced a boom due to increased demand for single-family homes.

It’s fascinating to see how these differences played out in funding. Construction received a whopping $6.4 billion from CEBA, which is about 13% of the total funding. This is surprising, especially considering that construction was recovering faster than many other sectors. Why did they get such a large slice of the pie?

Surprising Funding Allocations

To put things into perspective, let’s look at the funding allocations:

Construction: $6.4 billion
Professional Services: $5.5 billion
Retail Trade: $4.6 billion
Transportation and Warehousing: $4.1 billion

These numbers reveal a clear trend. The sheer number of businesses in the construction sector likely allowed more companies to qualify for CEBA loans. But what about the service industries? They faced deeper impacts and yet received less funding overall.

Reasons Behind the Disparities

So, what explains these disparities in loan distribution? One reason is the nature of the businesses themselves. The hardest-hit sectors also had a higher rate of outstanding loans. For instance, the transportation and warehousing industry had 30.7% of loans still outstanding, while accommodation and food services faced a rate of 21.9%. Even construction had 20.1% of its loans outstanding, indicating that not all businesses in recovering sectors were out of the woods.

As you can see, the funding landscape is complex. While some sectors received substantial support, others were left to fend for themselves. This raises important questions about the effectiveness of such programs. Are they truly helping those in need, or are they simply delaying the inevitable for some businesses?

As we explore the outcomes of the CEBA program, it’s crucial to consider the broader implications. The differences in funding allocations and the varying impacts on different sectors highlight the need for tailored economic support strategies. Understanding these nuances can help us navigate future economic challenges more effectively.

Declaring Bankruptcies Trends: The Consequences of CEBA

The CEBA was a lifeline for many businesses during the pandemic. It provided essential financial support when the world was in turmoil. But what happened after the loan forgiveness deadline? This question is crucial as we analyze the trends in corporate bankruptcies that emerged in the wake of CEBA.

Initial Effects of the Loan Forgiveness Deadline

When the loan forgiveness deadline approached, many businesses faced a harsh reality. A staggering 18.8% of CEBA loans remained outstanding. This meant that instead of being forgiven, these loans transformed into three-year term loans with a 5% interest rate. For businesses already struggling, this was like adding fuel to a fire.

Imagine running a small restaurant. You relied on that loan to keep your doors open during lockdowns. Now, you have to pay it back with interest. How do you manage that when customers are still hesitant to return? This scenario played out in many sectors, particularly those that were client-facing.

Rising Bankruptcy Rates in Various Sectors

As we moved into early 2024, bankruptcy rates surged. In the first quarter alone, there were 12,000 bankruptcies. Alarmingly, 39% of these corporate bankruptcies involved businesses that had taken CEBA loans. The ticking time bomb of conversion to debt ultimately revealed serious vulnerabilities in many businesses once they started incurring CEBA debt service costs.

Accommodation and food services were hit hardest, accounting for 20.3% of bankruptcies among CEBA participants.
Retail trade and construction followed, with 13.7% and 11.8% respectively.

These numbers paint a grim picture. The pandemic had already decimated many businesses. Now, the added burden of repaying loans pushed some over the edge. It’s like trying to swim with weights tied to your ankles. You can only struggle for so long before you sink.

Impact of Economic Conditions Post-Pandemic

The economic landscape post-pandemic was anything but stable. Rising interest rates and escalating input costs created a perfect storm. Businesses that had managed to survive the initial lockdowns now faced new challenges. The combination of these factors led to a significant increase in declaring bankruptcies.

In fact, the report indicates that while bankruptcy rates initially decreased during the pandemic, they reversed course in mid-2022. This shift coincided with the looming deadline for loan forgiveness. As businesses scrambled to adapt, many found themselves unable to cope with the financial strain.

Consider the transportation and warehousing industry. They had a staggering 30.7% of loans outstanding. Even sectors that seemed to recover quickly, like construction, faced challenges. About 20.1% of construction businesses still had loans outstanding. This suggests that the recovery was not uniform across industries.

As you reflect on these trends, it’s clear that the CEBA program had both positive and negative effects. While it provided immediate relief, the long-term consequences are now unfolding. Businesses are left grappling with financial obligations, and the economic recovery remains fragile.

In summary, the consequences of CEBA are complex. The initial relief provided by the loans has transitioned into a burden for many. As bankruptcy rates rise, it’s essential to understand the interconnected nature of these economic factors. The pandemic has left its mark, and the path to recovery is fraught with challenges.

The Ripple Effect: Beyond Declaring Bankruptcies

The economic landscape has changed dramatically in recent years. The COVID-19 pandemic shook businesses to their core. Many faced unprecedented challenges. But what happens when the dust settles? What are the long-term implications of the support provided, like the Canada Emergency Business Account (CEBA)? Let’s dive into the ripple effects of these financial lifelines.

1. Long-Term Economic Implications

When we think about the CEBA program, we often focus on immediate relief. However, the long-term effects are just as crucial. Businesses received interest-free loans, but at what cost? The loans were meant to provide a safety net, yet they may have created a larger debt burden. This can stifle growth in the long run.

Debt Burden: Many businesses now face significant repayments. This can limit their ability to invest in growth.
Market Dynamics: With rising debt, companies may become more risk-averse, avoiding new ventures.
Sector Disparities: Some industries, like construction, received more funding but recovered faster. Others, like food services, are still struggling.

It’s essential to ask: Are we setting businesses up for success or failure? The answer may lie in how these loans are managed in the future.

2. The Impact of Rising Inflation and Interest Rates

Inflation and interest rates are like the weather—unpredictable and often harsh. As inflation rises, so do costs for businesses. This can squeeze profit margins. Additionally, interest rates have been climbing, making it harder for companies to manage their debt.

Cost of Goods: Rising prices can lead to increased operational costs.
Loan Repayments: Higher interest rates mean higher repayments. This can be a heavy burden putting pressuer on being able to repay both secured creditors and unsecured creditors.
Consumer Behaviour: As costs rise, consumers may cut back on spending, affecting sales.

As one expert put it,

“It’s a complex interplay of factors—like juggling flaming swords while riding a unicycle through a storm.”

This analogy perfectly captures the precarious balance businesses must maintain.

3. Vulnerability in Businesses Pre- and Post-Pandemic

The pandemic revealed vulnerabilities in many businesses. Some were already struggling before COVID-19 hit. The support from CEBA helped, but it also masked deeper issues. Now, as the economy shifts, these vulnerabilities are resurfacing.

Pre-Pandemic Weakness: Many businesses were operating on thin margins. The pandemic exposed these weaknesses.
Post-Pandemic Recovery: As the economy reopens, businesses must adapt. Those that don’t may face business bankruptcy.
CEBA Recipients vs. Non-Recipients: Interestingly, CEBA participants had a bankruptcy rate of 0.7% compared to 1.3% for non-participants. This shows that support can make a difference, but it’s not a cure-all.

As we analyze the data, it’s clear that while CEBA provided immediate relief, it also created a new set of challenges. Businesses are now navigating a complex landscape of debt, rising costs, and changing consumer behavior.

The ripple effects of the CEBA program are profound. The long-term economic implications, the impact of rising inflation and interest rates, and the vulnerabilities exposed during the pandemic all intertwine. As businesses continue to adapt, they must find ways to manage their debts while also investing in future growth. The journey ahead is uncertain, but understanding these factors will be crucial for navigating the new economic reality.

A Cautious Path Forward: Lessons Learned

The COVID-19 pandemic has left many businesses grappling with vulnerabilities. As we reflect on the lessons learned from the CEBA program, it’s essential to consider how we can move forward. What can we take away from this experience? How can we ensure that future financial programs are more effective and sustainable?

Takeaways for Future Financial Programs

First and foremost, we need to recognize that not all businesses are created equal. Different industries have different needs. The CEBA program provided crucial support, but it also highlighted the disparities in recovery among sectors. For instance, while construction thrived, accommodations and food services struggled. This brings us to a vital takeaway: future financial programs must be tailored to the specific needs of industries.

Understand industry-specific needs: Programs should be designed with a clear understanding of the unique challenges faced by different sectors.
Flexibility is key: Financial support should be adaptable, allowing businesses to pivot as conditions change.
Monitor outcomes: Regular assessments can help identify which programs are working and which are not.

The Importance of Targeted Support

Targeted support is crucial for effective recovery. The CEBA program showed us that blanket solutions often miss the mark. For example, many businesses in the transportation and warehousing sector faced significant challenges, with 30.7% of loans remaining outstanding. This indicates that a one-size-fits-all approach can lead to unintended consequences.

As we move forward, we must ask ourselves: How can we provide support that truly meets the needs of businesses? The answer lies in targeted interventions. By focusing on specific sectors, we can ensure that resources are allocated where they are needed most.

Looking Ahead to Sustainable Recovery Strategies

Looking ahead, sustainability in economic recovery is paramount. As the quote goes,

“Sustainability in economic recovery depends on a nuanced understanding of industry needs and vulnerabilities.”

This means that recovery strategies must be holistic and context-sensitive. We need to consider not just immediate relief but also long-term resilience.

Some strategies to consider include:

Investing in training and development: Equip businesses with the skills they need to adapt to changing markets.
Encouraging innovation: Support businesses in developing new products or services that meet emerging demands.
Building partnerships: Foster collaboration between businesses, government, and community organizations to create a supportive ecosystem.

The lessons learned from the CEBA experience are invaluable. We must embrace a more nuanced approach to financial support, one that recognizes the unique challenges faced by different industries. By focusing on targeted support and sustainable recovery strategies, we can help businesses navigate the complexities of the post-pandemic landscape. The road ahead may be cautious, but with the right strategies in place, we can foster resilience and ensure a brighter future for all. Remember, the key to successful recovery lies in understanding the diverse needs of our economy and responding accordingly.

Declaring Bankruptcies: CEBA FAQ

What was the purpose of the Canada Emergency Business Account (CEBA) program?

The CEBA program was introduced by the Government of Canada on March 27, 2020, to provide interest-free loans to eligible small and medium-sized businesses to help cover their operating costs during the COVID-19 pandemic. The loans were up to $60,000, with a portion (up to one-third) forgivable if repaid by a set deadline. The aim was to help businesses maintain solvency and operations during a period of significant economic disruption.

Which industries received the most CEBA funding and why?

The construction industry received the most CEBA funding, totaling over $6.4 billion (13.1% of total loan disbursements), largely distributed among residential building construction businesses, building equipment, and building finishing contractors. This was partly due to the high number of legal entities within the construction sector. Client-facing service industries such as professional, scientific, and technical services; retail trade; transportation and warehousing; and accommodation and food services also received significant funding because they were among the most severely impacted by public health restrictions and disruptions to traditional business operations.

What were the repayment terms and deadlines for CEBA loans?

The original repayment deadline to qualify for partial loan forgiveness was December 31, 2022. This was extended to December 31, 2023, and then again to January 18, 2024. If the loan was not repaid by this final deadline, the outstanding balance was converted into a three-year term loan, subject to an interest rate of 5% per annum, with the loan forgiveness option no longer available. The final repayment date for these term loans is December 31, 2026.

Which industries had the highest rates of outstanding CEBA loans after the repayment deadline?

Industries that were hardest hit by pandemic-related lockdowns and experienced slower recoveries tended to have the highest rates of outstanding CEBA loans. These included transportation and warehousing (30.7% outstanding), administrative and support, waste management and remediation services (22.7% outstanding), accommodation and food services (21.9% outstanding), and construction (20.1% outstanding). These sectors often faced prolonged disruptions and financial pressures, making it difficult to repay loans by the deadline.

How did bankruptcies among CEBA borrowers change during and after the pandemic?

Business bankruptcies initially declined in the first half of the pandemic but began to accelerate in mid-2022, reaching a high in the first quarter of 2024, coinciding with rising interest rates, elevated input costs, and the end of the CEBA program forgiveness period. The proportion of bankrupt businesses that had taken out CEBA loans increased from 39% in the first quarter of 2021 to 70% in the first quarter of 2024. After this acute period, bankruptcies dropped sharply over the remainder of 2024.

Which industries saw the most bankruptcies among businesses that had received CEBA loans?

The accommodation and food services industry accounted for the largest share of bankruptcies among CEBA borrowers (20.3%), with full-service restaurants and limited-service eating places being particularly affected. Retail trade (13.7%) and construction (11.8%) also had significant proportions of CEBA borrowers declaring bankruptcy.

What were the overall bankruptcy rates for CEBA borrowers compared to non-borrowers?

Of the 898,271 CEBA borrowers, 6,343 (0.7%) eventually declared bankruptcy by the end of September 2024. In contrast, the overall bankruptcy rate for all businesses between the second quarter of 2020 and the third quarter of 2024 was 0.9%, and for businesses that did not take CEBA loans, the bankruptcy rate was 1.3%. This suggests that while many CEBA borrowers did face bankruptcy, their overall rate was lower than that of businesses that did not receive CEBA support.

What were the expectations of businesses regarding their ability to repay outstanding CEBA loans?

According to Statistics Canada’s Survey on Business Conditions, nearly two-thirds (65.6%) of businesses with outstanding CEBA loans anticipated having the liquidity or access to credit to repay the loan by December 31, 2026. However, approximately one-fifth (19.9%) were uncertain about their ability to repay, and 14.5% did not expect to have the necessary liquidity or credit access, indicating that repayment challenges persisted for a significant minority of businesses.

Declaring Bankruptcies Conclusion

The CEBA provided crucial financial lifelines to many businesses during the COVID-19 pandemic. However, disparities in funding distribution and subsequent declaring bankruptcies highlight a complex economic landscape that continues to evolve. Don’t let the storm of bankruptcy catch you off guard. Take proactive measures now, and you may find yourself on the path to recovery.

I hope you enjoyed this declaring bankruptcies Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

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

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

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

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

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

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

Brandon Blog Post

INSOLVENCY LAWYER: OUR COMPLETE GUIDE WHY YOU NEED ONE BOTH BEFORE AND AFTER FILING BANKRUPTCY IF YOU WANT TO START A BUSINESS

Post author By Brandon Smith
Post date February 10, 2025

Insolvency lawyer introduction

So you’ve been through a tough time with debt, and you’re thinking about starting a business? Well, the goal of the Canadian insolvency system is to allow people in financial distress to bounce back, even after dealing with bankruptcy or a consumer proposal.

In this Brandon’s Blog, I discuss why you need to hire an insolvency lawyer:

if you are in business and need to file for bankruptcy; or
if you need to file bankruptcy and then wish to start a business.

The time to hire the insolvency lawyer is before you do a bankruptcy filing. First, let us go over a few basic definitions.

Insolvency Lawyer: Bankruptcy and Insolvency in Canada

Here are a few basic definitions you need to know about the Canadian insolvency process.

Bankruptcy: This is like a fresh start where you get rid of most if not all of your unsecured debts. It’s sometimes called “straight bankruptcy,” or a “bankruptcy liquidation” where a licensed insolvency trustee (formerly called a bankruptcy trustee) is appointed to sell most of your assets to pay back the people you owe money to.

But, if the only assets you own are those that are exempt from seizure, called exempt assets, then there aren’t any assets to sell. In that event, the case is closed without taking any assets. You can usually keep basic stuff like your clothes and a reasonably priced car. You can also keep most of your RRSP – you only lose the contributions made within the 12 months before filing bankruptcy.

Consumer Proposal: This is a way to reorganize your debt and make a deal with your creditors. Instead of getting rid of everything, you agree to a payment plan, usually lasting three to five years, to pay back some of what you owe. This way you get to keep your assets and once you make all the payments you promised to make to the licensed insolvency trustee, the rest is written off by your unsecured creditors.

In Canada, many people who own businesses operate as sole proprietors, meaning that legally, your personal finances and your business finances are connected. This means that if you file for bankruptcy or a consumer proposal, it will affect both your personal and business finances. If your business is set up as a separate legal entity as a corporation, this might not be the case, and you might have more flexibility.

Understanding the Role of Insolvency Lawyers

Insolvency lawyers help people and companies navigate the tricky world of debt and bankruptcy. Here’s a breakdown of what they do:

Advising on Bankruptcy Alternatives

Insolvency lawyers explore all the options before jumping into bankruptcy. They might suggest things like debt restructuring or repayment plans. For example, they could help a business negotiate with its creditors to lower payments or give them more time to pay.•

Debt Restructuring Guidance◦

Sometimes, instead of declaring bankruptcy, you can reorganise your debts. This means making a plan to pay back what you owe in a way that’s more manageable. Insolvency lawyers help create these plans, making sure they’re fair for everyone involved. They’ll work to find solutions so that businesses can continue operating while repaying debts.•

Advocacy in Insolvency Proceedings◦

If bankruptcy is the only option, insolvency lawyers act as your advocates in court. They help you understand the bankruptcy process and represent you in court. They make sure your rights are protected.

For individuals, it means helping them keep essential property while dealing with debt.

Why is this important? Bankruptcy and insolvency can be super stressful. Insolvency lawyers can guide you through the process and help you make the best decisions for your future. They can explain complex stuff like bankruptcy and consumer proposals. They can also provide guidance that can help a business owner keep their business operating.

Bottom line: Insolvency lawyers provide essential support to individuals and businesses facing financial difficulties. They offer expert advice, help navigate complex legal processes and situations, and advocate for their clients’ best interests. All of this is done with lawyer-client privilege intact.

Difference Between Insolvency Lawyers and Licensed Insolvency Trustees

Let’s break down the roles of two key players when dealing with debt: Insolvency Lawyers and Licensed Insolvency Trustees. They both help when you’re facing financial difficulties, but they do it in different ways. Think of it like this: one is like a legal guide, and the other is like a financial manager.

What’s the difference? It’s all about their roles and responsibilities in the insolvency process.

Licensed Insolvency Trustees

LITs are licensed and regulated by the Canadian government. They are the only insolvency professionals in Canada legally authorised to administer bankruptcies and proposals to creditors.

Financial Managers: Think of them as financial managers who oversee the insolvency process. They assess your financial situation, explain your options by giving you practical advice (like bankruptcy or a consumer proposal), and administer the process that you decide to file.

Key Responsibilities: This includes managing your assets, dealing with creditors, and making sure everything follows the rules of the Bankruptcy and Insolvency Act.

Insolvency Lawyers

Insolvency lawyers are legal professionals who understand insolvency laws and specialise in providing insolvency legal services.

Legal Guides/Advocates: They provide legal advice and represent you in court if needed. They ensure your rights are protected throughout the insolvency process.

Key Responsibilities: This includes advising you on your legal options, helping you choose the best course of action, negotiating with creditors, and representing you in legal proceedings.

Here’s a table to simplify it:

Feature	Licensed Insolvency Trustee	Insolvency Lawyer
Role	Administrator/Financial Manager	Legal Advisor/Advocate
Licensing	Licensed and regulated by the Canadian government through the Office of the Superintendent of Bankruptcy.	Licensed lawyer
Key Functions	Administers bankruptcy and proposal processes, manages assets, deals with creditors.	Provides legal advice, negotiates with creditors, represents you in court.
Focus	Managing the financial process of insolvency.	Providing legal guidance and protecting your rights.
When to engage	When considering bankruptcy or a consumer proposal.	When you need legal advice, are facing legal action from creditors, or want to explore all your options before filing.
Can they offer advice?	Trustees can explain the implications of the available debt relief options, including bankruptcy, but they must remain impartial.	Insolvency lawyers can provide legal counsel and advocate on your behalf.

Why is this important? Knowing the difference helps you get the right kind of help when you need it. If you’re just starting to explore your options, a Trustee can give you an overview. If you need someone to fight for your rights or provide legal advice, a lawyer is the way to go. Sometimes, you might even need both!

Real-World Example: Imagine a small business owner in Toronto is drowning in debt. They might start by talking to a Licensed Insolvency Trustee to understand their options for filing a proposal or bankruptcy. If they are facing lawsuits that if successful, the type of debt would not be discharged by a bankruptcy, they need an insolvency lawyer to fight it. The person may also need advice on how their business could continue if they need to file for bankruptcy. Finally, they might need to hire an insolvency lawyer to represent them in bankruptcy court.

Bottom line: Trustees manage the process of insolvency, while insolvency lawyers provide legal guidance and advocacy. Both play crucial roles in helping individuals and businesses navigate financial difficulties in Canada.

Insolvency Lawyer: Can You Really Start a Business After Bankruptcy?

Absolutely! According to an insolvency lawyer, it doesn’t prevent you from starting a business. However, it might be more challenging to get funding and handle the money side of things when starting up, and that’s true for anyone starting a business. Financial institutions are not going to fund a business run by an undischarged bankrupt!

In addition to how you are going to fund a new business while being an undischarged bankrupt, you also have to think of things like how will your business be formed, i.e. a sole proprietorship or a corporation. If a corporation, who is going to be the director and who is going to be the shareholder. As an undischarged bankrupt, you cannot be a director and you do not want to be the shareholder.

Bankruptcy will show up on your personal credit report for up to 7 years from the date of filing. If your business files for bankruptcy it could stay on your business credit report for much longer.

But, keep in mind that many people who file for bankruptcy have probably already seen their credit scores drop due to debt, missed payments, and so on. So, bankruptcy can actually be a way to reset your finances and start rebuilding your credit and, potentially, launch a new business.

As you can see, going bankrupt and then starting a business can be a very tricky endeavour. There are many legal issues to consider and get advice on given your financial situation. That is why if you are contemplating filing bankruptcy and then wish to start a business, you need to speak to an insolvency lawyer before doing anything.

What Happens If You Have a Business When You File for Bankruptcy?

If you’re a sole proprietor and file for bankruptcy, the licensed insolvency trustee is entitled to take control of your business assets. The Trustee will value the assets and sell them. It is unlikely that the Trustee will operate your sole proprietorship.

If you have a company, the business isn’t automatically dragged into your personal bankruptcy. The Trustee gets ownership of the shares you hold in the corporation, which may have no value for creditors. However, as stated above, an undischarged bankrupt person cannot continue to act as a director of a corporation.

Things to Consider When Star ing a Business After Bankruptcy or a Consumer Proposal

Separate Legal Entities: Consider forming a corporation to legally separate your personal and business finances. This means that your business’s problems won’t automatically drag down your personal finances and vice versa. If the business is separate from you, your bankruptcy does not automatically mean that the business has to close.

Money Matters: Create a detailed financial plan with a realistic budget. Be careful with taking on expensive debt. It’s important to focus on the cost of credit, not just the minimum payment.

Business Partners: Choose your business partners very carefully, as their actions could impact your finances. Make sure you have a written agreement in place for your business relationships and consider that your partner’s credit can impact your ability to get loans.

Types of Business Bankruptcy in Canada

Bankruptcy (Liquidation): If you have a business and have to file for bankruptcy, it usually means the business will shut down. For a proprietorship, a Trustee will sell the business assets as well as any non-exempt personal assets not used in the business. If the business is in a corporation, then the shares owned by the bankrupt person will need to be valued and sold by the Trustee.

Reorganization: If a business wants to keep operating, it can work out a deal with its creditors to repay debts while it continues operating. This would be done through a commercial proposal.

Important point: If you’re a sole proprietor, the business and you are legally seen as one and the same. This makes a reorganization type of bankruptcy easier since you are treated as a person, not a business.

How to Start Rebuilding Credit

Get accounts that report to credit bureaus: You want to have accounts that will show up on your credit reports.

Pay on time: Make sure you pay all of your bills on time.

Keep debt low: Try to keep your borrowing low.

Credit-Building Tools

Secured Credit Cards: These require a deposit, and it’s returned to you when you close the account. They are easier to get with bad credit.

Net-30 Accounts: Some suppliers allow you to pay in 30 days, and they report the payments to credit bureaus.

Keep an eye on your credit reports: This will allow you to track your credit building progress.

Insolvency Lawyer Conclusion

I hope you enjoyed this insolvency lawyer Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

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

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

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

Tags bankruptcy filing, bankruptcy trustees, Canadian insolvencies, consumer proposals, credit report, debt relief options, debt restructurings, financial difficulty, financial distress, insolvency laws, insolvency lawyer, insolvency process, insolvency professional, legal actions, legal advice, legal issues, legal options, legal services, licensed insolvency trustee

Brandon Blog Post

THE BANK RUPTCY RECOVERY PLAN: A COMPREHENSIVE ROADMAP TO FINANCIAL STABILITY

Post author By Brandon Smith
Post date August 19, 2024

bank ruptcy

Bank ruptcy: Introduction

I know it looks weird, but I have noticed through our software that people wanting to find out more about the Canadian bankruptcy process are searching for the two-syllable phrase “bank ruptcy“. I started to investigate this phenomenon. It turns out that individuals may often search for the term “bankruptcy” by entering “bank ruptcy” due to a phenomenon known as “typo-based search behaviour.” This behaviour occurs when users inadvertently type a word incorrectly while still approaching the correct spelling closely enough that their search engine or browser can suggest the accurate term.

In this instance, individuals may intend to find information about “bankruptcy” but mistakenly type “bank ruptcy.” The search engine or browser, recognizing the intent, may then offer “bankruptcy” as a suggested correction, which users can select to access the desired information.

Moreover, some users may be utilizing mobile devices or keyboards with non-standard layouts, which can contribute to typographical errors or misspellings. In such instances, search engines or browsers often retain the capability to discern the user’s intent behind the query and provide relevant search results.

It is also important to acknowledge that search engines, such as Google, are designed to improve user experience by interpreting and correcting common typing errors, thereby facilitating more effective information retrieval without necessarily teaching the person the correct spelling.

Bank ruptcy: What is Bankruptcy and Where Did the Word Originate?

The term “bankruptcy” has its origins in ancient civilizations, notably in Greece and Rome, where debtors had avenues for seeking relief from their creditors through various forms of debt forgiveness or restructuring. However, the modern legal framework and procedures associated with bankruptcy are a more recent development, emerging in Europe during the 16th century.

The word bank ruptcy is likely derived from the Italian two-word phrase “banca rupta,” which translates to “broken bench” or “broken table.” In this context, “banca” refers to a “bench” or “table,” while “rupta” means “broken.” This term was historically employed in medieval Italy to describe a merchant or trader who was unable to meet their financial obligations. Business was conducted at the benches or tables of the various merchants. Consequently, their “bench” or “table,” representing their business, was broken and rendered inoperative if they ran out of money.

In the 14th century, the Old French term “banqueroute” evolved from the phrase “banquer ost,” which followed the Italian meaning and further contributed to the development of the modern word and concept of bankruptcy as we understand it today.

The term evolved to include the concept of a legal process by which a person or business could be declared insolvent and their assets liquidated to pay off creditors. Being insolvent is the financial condition that can lead to the legal bankruptcy process to allow the honest but unfortunate debtor to have financial recovery.

Bank ruptcy: Are you ready to take control of your financial life and gain peace of mind?

Are you facing overwhelming debt and experiencing persistent financial stress and uncertainty? Do you aspire to liberate yourself from the burdens of debt and emerge more resilient and financially savvy? If so, you are not alone.

Millions of individuals worldwide are navigating similar challenges, and it is common to feel isolated in your struggle with debt issues. However, there is a solution. By identifying the underlying causes of debt and formulating a tailored recovery plan, you can take significant steps toward financial stability.

If you are prepared to regain control of your finances, overcome debt, and lay the groundwork for a more secure future, you have come to the right place. Let us embark on this journey to financial freedom from debt together.

Bank ruptcy: Reasons for Filing for Bankruptcy

Common financial difficulties

Consumers

Many Canadians who are considering a consumer proposal or personal bank ruptcy filing face similar financial challenges, including:

High-interest debt.
Job loss or reduced income.
Unexpected expenses.
Divorce or separation.
High credit card debt.
Student loan debt.
Mortgage debt.
Tax debt.
Overextension of credit.
Lack of budgeting and financial planning.
Financial stress and anxiety.

It’s essential for individuals experiencing financial difficulties to seek professional help, such as credit counselling or speaking to a licensed insolvency trustee (formerly called a bankruptcy trustee), to address their debt and develop a plan for financial recovery.

Businesses

Common financial difficulties Canadian businesses who need to file either a financial restructuring proposal or bank ruptcy often exhibit common danger signals such as:

Cash flow problems.
High debt levels.
Declining sales or revenue.
Increased competition.
Regulatory changes.
Supply chain disruptions.
Economic downturns.
Over-expansion.
Poor financial planning.
High operating costs.
Lack of diversification.
Insufficient working capital.
Seasonal fluctuations.
Lack of access to capital.
Poor management decisions.
Industry-specific challenges.
Cybersecurity breaches.
Environmental liabilities.
Lack of succession planning.

If a business faces financial struggles, it’s important to, it’s important to consult a licensed insolvency trustee. They can advise on turnaround strategies and help create a recovery plan to tackle these challenges effectively.

Impact of debt on individuals and businesses

Debt can significantly influence both individuals and businesses in various ways. For individuals, the burden of overwhelming debts may result in considerable financial stress, which can manifest as anxiety and, in severe cases, depression. When debt becomes unmanageable, it can hinder one’s ability to meet daily expenses, potentially leading to missed monthly payments, impaired credit scores, and a pervasive sense of despair.

Additionally, consumer debts can restrict an individual’s financial flexibility, making it challenging to make substantial purchases, assume new financial responsibilities, or pursue long-term financial aspirations. Moreover, the strain of financial difficulties can impact personal relationships, as stress related to finances often leads to conflicts and tension among family and friends.

Similarly, for businesses, the implications of debt issues can be equally challenging. Elevated outstanding debt levels can create cash flow issues, complicating a company’s ability to fulfill its financial commitments, including employee salaries, supplier payments, and tax obligations.

Furthermore, substantial debt can curtail a business’s capacity to invest in new opportunities, foster innovation, or expand operations, ultimately hindering growth and sustainability. Understanding debt’s effects is crucial for individuals and businesses to navigate financial challenges effectively and maintain long-term stability.

Bank ruptcy: The Bankruptcy Process in Canada

Obtaining a Free Debt Assessment

If you’re having difficulty keeping up with your debt payments and feeling stressed about your financial situation, you might want to seek help from a licensed insolvency trustee. These professionals are qualified to guide you through the often complicated process of managing debt. One of the key services they provide is a free debt assessment.

This assessment involves a thorough look at your finances, including your income, expenses, assets, and debts. The trustee will work with you to pinpoint the main issues contributing to your debt and help create a personalized plan to get you back on your feet.

The best part is that a free debt assessment from a licensed insolvency trustee is completely free, with no obligation to proceed with any debt relief options. This means that you can get a clear understanding of your financial situation and explore your options without incurring any costs or risks.

During the assessment, the trustee will also be able to advise you on the best course of action to take, whether that’s a debt consolidation loan, a debt management plan, or even bank ruptcy. By taking advantage of a free debt assessment from a licensed insolvency trustee, you can gain the clarity and confidence you need to take control of your finances and start building a brighter financial future.

Necessary Forms to Declare Bankruptcy

The bankruptcy procedure in Canada is a complex and intimidating process, but it’s essential to understand the necessary forms and procedures to navigate it successfully. In Canada, the necessary bankruptcy paperwork is to declare bank ruptcy is prepared by a licensed insolvency trustee, who will guide you through the process and ensure that all required documents are completed accurately and on time.

More than that, the insolvency trustee must be able to explain your options to you and help you feel comfortable that the option you choose, is the best one for your circumstances. The information that the insolvency trustee uses to prepare the forms comes from the initial intake form the licensed trustee provides to you. From that form, the Trustee can then prepare the required documents.

The main documents required to file either a consumer proposal or for bank ruptcy are:

Either the consumer proposal or the assignment in bankruptcy.
The statement of affairs outlines the assets and liabilities of the debtor and includes other important information for both unsecured creditors and the Office of the Superintendent of Bankruptcy Canada to consider.
The debtor’s statement of monthly income and expenses.
The notice to the debtor outlining their responsibilities in the insolvency process chosen, be it a consumer proposal or bankruptcy.

Your licensed insolvency trustee will provide you with these forms and guide you through the process of completing them accurately and submitting them to the Office of the Superintendent of Bankruptcy Canada. By completing these forms and following the necessary procedures, you can ensure that your bankruptcy is processed efficiently and effectively and that you can start rebuilding your financial future.

Role of Licensed Insolvency Trustees

Licensed Insolvency Trustees are essential participants in the Canadian debt relief landscape. These professionals possess specialized expertise in the field of insolvency, and their work is regulated by the Canadian government, which oversees the entire insolvency process and bankruptcy laws in the country. As the only individuals authorized by the federal government, insolvency trustees play a critical role in assisting both individuals and businesses as they navigate the often complex procedures associated with debt relief, including bankruptcy, consumer proposals, and financial restructuring.

Insolvency trustees serve as neutral third parties, allowing them to offer objective advice and support to those experiencing financial challenges. They collaborate closely with creditors to negotiate settlements and develop payment plans, and they can facilitate debt restructuring efforts that lead to a more sustainable financial future.

Engaging the services of a licensed insolvency trustee can provide individuals and businesses with valuable reassurance, as they can trust in the expertise and guidance of these qualified professionals during their journey toward financial recovery.

Advantages of Filing for Bank ruptcy in Canada

Filing for a consumer proposal, corporate restructuring or bank ruptcy for individuals or corporate bankruptcy in Canada can provide several advantages, including:

Debt Relief: It provides a fresh start by discharging most of your debts, allowing you to start over financially.
Protection from Creditors: An insolvency process provides automatic protection from creditors, which means they cannot pursue you for payment or take legal action against you.
Stop Wage Garnishments: A consumer proposal or bankruptcy can stop wage garnishments, which is a legal process when judgment creditors take a portion of your paycheque to pay off debts.
Stop Collection Calls and legal proceedings: Upon filing, you can stop collection calls and letters from creditors by referring them to your insolvency trustee. This gives you peace of mind and reduces stress.
Impact on Credit Score: It is true that an insolvency process initially worsens a person’s credit score. However, it allows you to use certain techniques that we teach you to rebuild credit and over time improve your credit rating.
Protection of Assets: A consumer proposal can protect all of your assets. Bankruptcy protects your exempt property. In many cases, it stops your home or car from being seized by creditors.
Simplified Financial Life: The insolvency process simplifies your financial life by eliminating debt and providing a clear plan for moving forward.
Professional Guidance: Insolvency trustees provide guidance and support throughout the process.
Discharge of Debts: Over time, the insolvency process allows you to discharge most debts, including credit card debt, loans, and other unsecured debts.
Fresh Start Perspective: Bankruptcy, a consumer proposal and financial restructuring all provide a fresh start, allowing you to start over and make a new beginning.
Reduced Stress: A successful insolvency process reduces stress and anxiety caused by debt, allowing you to focus on rebuilding your life.
Protection from Tax Debt: It protects you from tax debt which can be a significant burden for many individuals.

It’s important to note that bankruptcy is a serious legal process and should only be considered as a last resort. There are various debt relief options as alternatives to bankruptcy for you to consider before resorting to bankruptcy. It’s essential to consult with a Licensed Insolvency Trustee to determine which of the many options is best for your specific situation.

Bank ruptcy: Resources for Bank ruptcy Information

There are several resources available for bankruptcy information in Canada, including:

Office of the Superintendent of Bankruptcy Canada: The Office of the Superintendent of Bankruptcy Canada is the federal agency responsible for overseeing the bankruptcy and insolvency system in Canada. Their website provides information on bankruptcy, consumer proposals, and other debt-relief options.
Licensed insolvency trustees: They and their websites can They and their websites can provide guidance and advice on bankruptcy and other debt-relief options.
Credit Counselling Services: Legitimate non-profit c services, such as the Credit Counselling Society, provide free or low-cost advice and guidance on managing debt and avoiding bankruptcy. Financial institutions: Many banks and credit unions provide resources and information about bankruptcy and debt relief options.
Government Websites: The Government of Canada’s website provides information on bankruptcy, including a guide to bankruptcy and a list of licensed insolvency trustees.
bank ruptcy

Bank ruptcy Conclusion: Moving Forward After Bank ruptcy

Here is what I tell everyone about moving forward after bank ruptcy to have a successful and stress-free life:

Take responsibility: Acknowledge that you made mistakes and take responsibility for your financial decisions. This will help you to learn from your mistakes and positively move forward.
Continue budgeting: Part of the personal insolvency process involves financial counselling and proper budgeting. A budget shows you what you earn each month and therefore how much you have, after tax, to spend. Allocating your earnings over your essential needs first and sticking to that plan will keep you out of debt trouble in the future.
Establish an emergency fund: It is important to try to save part of your monthly income to create an emergency fund that can pay for unforeseen expenses. This will help you reduce the need for debt when unexpected financial demands arise.
Focus on rebuilding credit: Rebuilding credit takes time, but it’s essential to start building a positive credit history. Make on-time payments, keep credit utilization low, and monitor your credit report regularly.
Support: Finally, It’s important to reach out for support from friends, family, or even a financial advisor. Having a solid support system can keep you motivated and focused on your goals.

I hope you enjoyed this bank ruptcy Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

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

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

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

Brandon Blog Post

BANKRUPTCY AND CRA DEBT STRATEGIES: A COMPREHENSIVE GUIDE ON NAVIGATING DEBT MANAGEMENT AND TAX RELIEF

Post author By Brandon Smith
Post date May 6, 2024

bankruptcy and cra debt

bankruptcy and cra debt

Bankruptcy and CRA Debt Introduction

Finance Minister and Deputy Prime Minister Chrystia Freeland introduced the 2024 Federal Budget on April 16. During her presentation in Parliament, she advised that Budget 2024 will include that any capital gain will be taxed from the current 50% to two-thirds. April 30 was the last day for most Canadians to file their 2022 personal income tax return.

At the end of April, Ms. Freeland announced that Budget 2024 would not include the capital gains tax change. Rather, she will ask Parliament to approve a stand-alone Bill which will include the capital gains tax change, no doubt combined with other initiatives such as more Federal money for access to housing, in a crass move to try to score voter points when the Conservatives vote against the Bill because of the tax increase. So income tax owed to the Canada Revenue Agency (“CRA”) is on everyone’s mind.

Canadian entrepreneurs are up in arms over the Budget 2024 capital gains taxation change. People are concerned over the level of taxation disclosed in their personal income tax returns. Some Canadians do not have the money to pay their calculated income tax payable.

This Brandon’s Blog discusses the complex world of Canadian bankruptcy and CRA debt, along with other potential options, to achieve financial stability. I aim to equip people with the necessary knowledge and strategies to make informed choices.

Definition of Bankruptcy and CRA Debt

Bankruptcy is a legal condition where consumers or companies admit they are unable to pay their outstanding debts. The bankruptcy process is a supervision and administration process overseen by a licensed insolvency trustee and the court. Under the bankruptcy legislation, people and businesses can either: (i) restructure to eliminate their debt by only paying a percentage of the amount owing; or (ii) liquidate most of their assets for the proceeds to be paid to the creditors in priority as outlined in the legislation.

CRA debt is one kind of debt that individuals or companies may owe for unpaid taxes, penalties and interest. Understanding the workings of bankruptcy and CRA debt will help people owing taxes they cannot repay make informed decisions on how to deal with their debts to get back to a financially healthy and stress-free life.

bankruptcy and cra debt

Bankruptcy and CRA Debt: Importance of Debt Management and Tax Relief

Effective debt management and tax relief are crucial aspects of financial stability for individuals facing Canadian bankruptcy and CRA debt. By implementing sound strategies for managing debt and seeking relief from tax obligations, individuals can regain control of their finances and work towards a brighter financial future.

Debt management techniques such as budgeting, debt consolidation, and credit counselling can help individuals navigate the complexities of bankruptcy and CRA debt. Additionally, exploring tax relief solutions such as deductions, payment plans, and professional assistance can alleviate the burden of tax liabilities. Prioritizing debt management and tax relief is key to overcoming financial challenges and achieving long-term financial well-being.

Bankruptcy and *CRA Debt**: Understanding Bankruptcy in Canada*

What is bankruptcy?

Having a solid grasp of how bankruptcy can affect a person is vital for those experiencing financial difficulties. Things such as the different types of bankruptcy, the procedure for initiating bankruptcy proceedings, and the real-life impact it has on a person’s daily life are crucial for anyone considering personal bankruptcy to understand. By examining the intricacies of bankruptcy, I hope you will gain valuable insights into how to effectively navigate this intricate legal process.

Whether contemplating personal or corporate bankruptcy, understanding critical aspects such as which assets can be liquidated by a Trustee, how your debt gets discharged, and creditor negotiations is essential. With the appropriate knowledge and assistance, people can make well-informed choices to manage their debts to head towards a new financial beginning.

*Bankruptcy law**s in Canada*

Bankruptcy laws in Canada are a set of legislation and regulations that govern obtaining bankruptcy protection and the subsequent handling of a person or business’ financial affairs. These laws are designed to provide individuals and companies with a second chance to manage their debts and start afresh.

In Canada, the main governing legislation for bankruptcy is the Bankruptcy and Insolvency Act (BIA), which outlines the procedures and requirements for obtaining relief to restructure debts under either a consumer proposal or a Division I proposal.

If restructuring is not a possibility, the BIA also covers the procedures for what is always the last choice, a liquidating bankruptcy. The BIA also covers the rights and responsibilities of debtors, creditors and insolvency trustees. Additionally, each province has its legislation that may impact the result of bankruptcy under federal laws.

In the case of larger and more intricate corporations, the Companies’ Creditors Arrangement Act (CCAA) presents an additional federal statute to be considered. This legislative provision enables such substantial entities to effectively reorganize their operations and financial matters, thereby ensuring their sustained business activities and provision of employment opportunities for Canadians.

Individuals and businesses alike must gain comprehensive knowledge of these legal frameworks and diligently seek expert counsel before undertaking any bankruptcy-related determinations.

bankruptcy and cra debt

Bankruptcy and CRA Debt

Overview of the CRA

The CRA is entrusted with the pivotal responsibility of overseeing the execution of tax laws and programs on behalf of the Canadian government at the federal level. From 1867 until 1999, the Department of National Revenue, commonly referred to as Revenue Canada bore the responsibility of overseeing tax services and programs. However, in 1999, a comprehensive reorganization took place, resulting in the establishment of the Canada Customs and Revenue Agency (CCRA).

Subsequently, in 2003, the CCRA underwent further transformation, giving rise to the inception of the Canada Border Services Agency (CBSA), thereby altering the agency’s core focus and subsequently prompting its name change to CRA.

The CRA’s mandate revolves around the proficient and equitable collection of taxes, diligent administration of benefits, and rigorous enforcement of tax laws. Additionally, they extend their services to taxpayers by disseminating pertinent information and offering assistance to ensure that Canadians have accurate comprehension and adherence to tax obligations.

Upholding the utmost integrity of Canada’s tax system while fostering voluntary compliance through educational outreach and enforcement measures remains at the forefront of the agency’s priorities. Backed by a devoted team of professionals and leveraging cutting-edge technology, the CRA is steadfastly committed to delivering superlative and exemplary services to the Canadian populace.

Types of debt owed to the CRA

Unpaid taxes result in individuals or businesses facing substantial CRA debt financial obligations. It is important to understand the ramifications associated with such indebtedness, given that it can give rise to severe repercussions including wage garnishment, bank account freezing, or legal repercussions. To mitigate the weight of this debt and avert penalties, it is always highly recommended to stay current in your obligations to CRA.

The Canada Revenue Agency (CRA) collects a range of debts from both individuals and businesses. Among these debts, the most prevalent is income tax owed, which represents the unpaid tax on an individual’s or business’s income. Another significant debt includes the Harmonized Sales Tax (HST) or, in provinces without sales tax, the Goods and Services Tax (GST) owed. These taxes apply to most goods and services supplied within Canada. CRA may also assess the individual Directors for GST/HST and employee source deductions not remitted by the corporation.

Furthermore, individuals and businesses may also encounter debts such as payroll remittance, excise tax, and penalties or interest charges resulting from late or erroneous filings. To ensure compliance and avoid further penalties or potential legal consequences, individuals and businesses must promptly and accurately address these debts on time.

Consequences of CRA debt

Noncompliance with the CRA and the resulting indebtedness can lead to serious problems for both individuals and businesses. Failing to pay your tax obligations to the CRA results in penalties, interest charges, and legal repercussions. These ramifications extend beyond mere financial burdens, encompassing wage garnishments, bank account seizures, seizure of amounts owing to the taxpayer from third parties, and property liens.

The CRA can freeze your assets and conduct audits to recover outstanding debts. The detrimental consequences of indebtedness to the CRA can have far-reaching implications, impairing credit ratings and impeding access to loans or mortgages. It is of utmost importance for individuals and businesses to expeditiously address and resolve any outstanding debt owed to the CRA to avert these severe consequences. Retaining a tax professional to assist in dealing with CRA is always advisable.

Bankruptcy and CRA Debt: Exploring CRA Debt Solutions in Canada

Informal Debt Settlements

When you seek an informal debt settlement option with CRA, absent formal insolvency proceedings, you will be disappointed. Without an insolvency proceeding, the CRA representative has no authority to accept anything other than 100 cents on the dollar – payment in full of the assessed tax, penalty and interest.

You can apply for a fairness hearing to see if you can get all or a portion of the penalty and interest eliminated, but the CRA person you speak to can only talk about the full amount that shows up on their computer screen.

*Debt Re**payment Plan*s

CRA will enter into a debt repayment plan, but depending on your situation, again, you may be disappointed. Normally, CRA will only agree to have you pay the full tax debt balance, plus penalty and interest, in 12 monthly instalments over the 1 year. That means that you need to repay the full amount in one year.

If you default on even one payment, then the whole deal is off and CRA will pursue you for the full amount to be immediately repaid. For some, this may be just the breathing room they need and they will be able to repay the full amount of the CRA debt over 12 equal monthly payments. But what if you cannot afford to do that?

Bankruptcy as a Debt Relief Option

Bankruptcy presents a potential solution for individuals or businesses grappling with substantial financial difficulties, especially those brought on by owing a substantial amount to CRA. By discharging most unsecured debts and providing a shield against creditors, it offers a pathway to financial renewal.

Nonetheless, it is crucial to approach bankruptcy as a final option due to its enduring impacts on credit rating, employment in areas that require bonding, and today to a much lesser extent, personal standing. Before making a decision, it is advisable to seek guidance from a qualified licensed insolvency trustee to gain a comprehensive understanding of the ramifications and to evaluate alternative strategies such as debt consolidation, a consumer proposal or corporate financial restructuring.

bankruptcy and cra debt

Bankruptcy and CRA Debt: The Bankruptcy Process in Canada

The bankruptcy process involves a diverse array of stakeholders, each playing a crucial role. Among the key participants are:

The insolvent individual or company, referred to as the debtor, has undergone financial failure and is now also known as the bankrupt.
The licensed insolvency trustee, formerly known as a trustee in bankruptcy, is responsible for managing the bankruptcy proceedings.
The creditors are owed financial obligations by the debtor.
The Office of the Superintendent of Bankruptcy (OSB), holds the mandate to regulate and oversee all administrations governed by the BIA within Canada.

Preparing for Bankruptcy

To prepare for bankruptcy, the debtor, being either the individual or the Director of the company, must make full disclosure to the licensed insolvency trustee about all assets and liabilities and all other information requested by the Trustee. This allows the Trustee to provide the debtor with advice on the realistic available options for the debtor to overcome their debt challenges and hopefully find a solution other than bankruptcy.

The Trustee will want to ensure that the debtor has filed all overdue income tax returns. That way, the debtor, the Trustee and CRA will have a good estimate of all the tax the person owes, subject to review and assessment by CRA of course. At least there will not be any outstanding filings as this can slow down an insolvency process. CRA will want a pause in the insolvency proceedings until they are certain they understand the full amount owed.

If it is decided that an insolvency process is required, such as bankruptcy, then the information also allows the Trustee to prepare all the necessary filing documents.

Filing for Bankruptcy

Filing for bankruptcy is a legal process that allows individuals or businesses to seek relief from overwhelming financial obligations, including CRA debt. It involves filing an assignment in bankruptcy document which is prepared by the Trustee, and reviewed and signed by the debtor. The bankruptcy filing discloses all assets, liabilities, and income and expenses.

Personal bankruptcy can be a complex and emotional decision, but it can provide both a shield against CRA debt collection activities and seizures and simultaneously a fresh start for those individuals struggling with overwhelming debt.

It is crucial to seek the guidance of a licensed insolvency trustee to get the advice necessary to ensure a smooth and successful filing. Bankruptcy is not a decision to be taken lightly, but it can offer a solution to individuals and companies facing insurmountable financial challenges.

Duties and Responsibilities during Bankruptcy

The focus of the BIA in personal bankruptcy is for the honest but unfortunate debtor to a society free of his or her debts. The premise is that the bankrupt, or the officer of the bankrupt corporation, will fulfill their duties with integrity and honesty. The duties are outlined in the OSB’s Directive No. 26. If you are interested, you can read them HERE.

But what if they don’t? What if the individual bankrupt does not fulfill all of their duties and essentially absences themself from the process once they have filed their assignment in bankruptcy? In that case, the Trustee must oppose the bankrupt’s application for discharge and bring the matter to court. With CRA debt, there are times when CRA will automatically oppose a person’s discharge from bankruptcy.

Bankruptcy and CRA Debt Discharge Considerations

Corporations do not receive a bankruptcy discharge; individuals do. When it comes to CRA debt, there are times when CRA automatically opposes a person’s discharge or when a Trustee must.

If an individual filing for bankruptcy has personal income tax debt exceeding $200,000 and if the personal income tax debt accounts for 75% or more of the total unsecured proven claims, they are not eligible for automatic discharge under section 172.1 of the BIA. GST/HST payable is not factored into the determination for high-tax debtors, but taxes on additional income resulting from shareholder loans, draws, or dividends are included in their assessment.

For high-tax debtors seeking discharge, the licensed insolvency trustee will present the bankrupt’s discharge application to the court for a hearing, which the individual must attend. The court’s considerations and the type of discharge order granted for high-tax debtors differ from those in cases of bankruptcy filed by non-high-tax debtors. To avoid this scenario, a high-tax debtor should consider filing an alternative to bankruptcy, such as a restructuring proposal.

Dealing with Bankruptcy and CRA Debt

Outstanding Tax Returns

Unremitted Canadian tax filings mean tax returns that are either outstanding or incomplete within the specified filing deadlines for Canadian taxpayers. Such delinquent filings will incur penalties and interest charges, requiring individuals and companies to prioritize their tax responsibilities with utmost care. It becomes the duty of each taxpayer to ensure the prompt and accurate submission of their tax returns, to avoid negative repercussions.

Tax accountants and lawyers help their clients in fulfilling their tax obligations. Timely resolution of outstanding Canadian tax returns is essential to sustain compliance and avert any future complexities.

As stated above, any person or company contemplating either trying to reach an accommodation from CRA or invoking an insolvency process to deal with their CRA debt must bring all their filings up to date.

Bankruptcy and *CRA Debt**: Discharge in Bankruptcy*

I discussed the issues for an individual high-tax debtor trying to get their discharge from bankruptcy. The Trustee must bring the application to court. At the discharge hearing, subject to any other problematic issues with the debtor’s conduct before or during the bankruptcy administration, CRA will send a lawyer from the Department of Justice to the discharge hearing to request a condition be placed on the bankrupt before they can obtain their discharge.

The condition that the CRA will request is that the debtor pay 25% of the total proven CRA debt to obtain their bankruptcy discharge. Even if the person is not a high-tax debtor, there may be other reasons why CRA will oppose the person’s discharge from bankruptcy. If the CRA file is replete with instances of failed promises, ignoring the CRA representative requests over some time and general “trouble-making” by the taxpayer, the CRA will oppose the discharge.

These are all considerations that a person must discuss with the licensed insolvency trustee up front to end up using a process that is most advantageous to the taxpayer in eliminating their CRA debt.

Rebuilding Your Finances After a Canadian Bankruptcy Discharge

Reestablishing your financial standing following a Canadian bankruptcy discharge may seem like a challenging endeavour. However, with strategic planning and commitment, it is feasible to recover from financial setbacks. The initial step involves developing a budget and adhering to it meticulously, guaranteeing that essential expenses are met while unnecessary spending is curtailed.

Next, it is important to start rebuilding credit in a few different ways:

Obtain a secured credit card. Not the drug store variety, but the kind where you put down a cash security deposit and then you are given a credit card limit equal to your cash deposit. When you make your credit card payments, it gets reported to the credit bureaus. If you make your payments when due, over time, this will increase your credit score.
Take out a small 1 year RRSP loan and pay it off on time. This will also improve your credit score on your credit report.
The two Canadian credit bureaus, Equifax and TransUnion, are now beginning to track residential rent payments. If you are a renter and you make your rent payments on time, this too will increase your credit score.

It is also recommended to seek guidance from a financial advisor or credit counsellor to develop a solid financial plan. With patience and discipline, it is possible to rebuild your finances and secure a brighter financial future.

bankruptcy and cra debt

Bankruptcy and CRA Debt FAQs

Here are the most frequently asked questions and the answers regarding bankruptcy and CRA debt:

Is it possible to file for bankruptcy solely for CRA debt?

When initiating bankruptcy proceedings, it is imperative to include all debts owed. Notably, CRA debt related to income taxes and Director liabilities is treated comparably to other unsecured debts within the scope of bankruptcy proceedings.

What happens to my CRA debt in bankruptcy?

In bankruptcy, CRA debt is included as part of your unsecured debts (the exception being a proprietorship or partnership debt for unremitted HST or employee source deductions). Keep in mind that the CRA may oppose your discharge and the court may make a condition of you paying a portion of the CRA debt to obtain your discharge from bankruptcy.

How does bankruptcy affect my tax refunds?

Tax refunds may be affected in bankruptcy. It’s important to consult with a professional to understand the specific impact on your tax refunds.

Can I include tax debt in a consumer proposal?

Yes, tax debt can be included in a consumer proposal. A consumer proposal offers a structured repayment plan to creditors, including the CRA. It can be a more favourable option than bankruptcy for negotiating repayment terms with the CRA.

What if my tax debt exceeds $200,000 and makes up over 75% of my unsecured debt?

Individuals with personal tax debt exceeding $200,000, constituting over 75% of their total unsecured debts, may not qualify for automatic discharge in bankruptcy proceedings. In such instances, a bankruptcy court hearing will be convened, and potential conditions for discharge may be mandated, such as contributing a specified amount to the bankruptcy estate.

Bankruptcy and CRA Debt Conclusion

I hope you have enjoyed this bankruptcy and CRA debt Brandon’s Blog. Hopefully, you have better insight now into the ways of dealing with CRA debt and what some viable options are.

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

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

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

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

An image of a woman holding her head in her hands with an image of a building with a Canadian flag behind her to represent a woman worrying about her bankruptcy and CRA debt. — *bankruptcy and cra debt*

Brandon Blog Post

UNVEILING THE RUDY GIULIANI LEGAL PUZZLE: A MASSIVE RUDY GIULIANI-STYLE DEBT CHALLENGE IN CANADIAN BANKRUPTCY LAWS!

Post author By Brandon Smith
Post date March 4, 2024

Rudy Giuliani

Rudy Giuliani: Introduction

Rudolph Giuliani, formerly revered as a prominent figure in American governance for his commendable response during the September 11th attacks, has encountered a series of legal predicaments in recent times. Notably, his entanglement in the Ukraine scandal on behalf of Donald Trump to discredit Hunter Biden and his father Joe Biden, which led to the first impeachment of President Trump. From there, Rudy Giuliani, on behalf of Donald Trump, embraced all the conspiracy theories with his active role in disseminating baseless election claims and election-denier allegations of electoral malpractice during the 2020 Presidential election because of Trump’s election loss. These have significantly marred Giuliani’s once esteemed standing.

Rudy Giuliani’s post-election activities following Donald Trump’s loss in the 2020 election have stirred significant controversy. The actions taken by Giuliani against individuals such as Freeman and Moss have led to legal repercussions and personal ramifications. Understanding the sequence of events provides insight into the aftermath of the false allegations and subsequent legal proceedings.

Now, given the multiple lawsuits and legal challenges, Giuliani has filed for bankruptcy to escape accountability for his actions. However, it is important to note that his US Chapter 11 bankruptcy is not a foolproof method to avoid legal consequences.

In this Brandon’s Blog, I will also look at this from the perspective of what would be the case if Rudy Giuliani was Canadian.

Background on Rudy Giuliani’s legal issues

Rudy Giuliani’s False Allegations

After the contentious 2020 election, 79-year-old Giuliani, a prominent figure in Trump’s legal team, made false claims and damaging statements about two Georgia election workers, Ruby Freeman and Shaye Moss. These unfounded allegations attacked their character and integrity, creating controversy and misinformation. The impact of Giuliani’s words reverberated through the media and public consciousness, tarnishing the reputation and physical safety of Freeman and Moss.

Background on Rudy Giuliani’s legal issues

In response to the baseless claims made by Giuliani, Ruby Freeman and Wandrea’ ArShaye (“Shaye”) Moss took legal action by filing a defamation lawsuit. The lawsuit aimed to hold Giuliani accountable for his reckless statements and the resulting harm caused to their reputation.

Rudy Giuliani

After the due legal process in the defamation trial, a default judgment was issued in favour of Freeman and Moss, highlighting the severity of Giuliani’s bad faith actions and the court’s acknowledgment of the harm inflicted. A jury awarded Freeman and Moss over $148M in damages from Rudy Giuliani, including $75M in punitive damages, $33,169,000 in defamation damages, and $40M in total damages for infliction of emotional distress. The defamation lawsuit sought to restore the damaged reputation of Freeman and Moss. The default judgment and jury award underscored the gravity of Giuliani’s false allegations. Legal recourse was instrumental in addressing the defamation and seeking justice for the impacted parties.

Explanation of why Rudy Giuliani filed for bankruptcy

Following the issuance of the default judgment and the jury award in favour of Freeman and Moss, Rudy Giuliani’s legal troubles escalated. Just three days after the final judgment was entered, Giuliani unexpectedly decided to file for Chapter 11 bankruptcy protection.

Giuliani’s bankruptcy filing added another layer of complexity to the already tumultuous legal saga. The decision to file for bankruptcy so soon after the judgment raised eyebrows and sparked speculation about Giuliani’s financial state and made many suspect that he was in a state of financial ruin.

The timing of Giuliani’s bankruptcy filing about the legal ruling underscored the interconnected web of consequences resulting from his false allegations. The filing hinted at potential financial repercussions for Giuliani and opened avenues for further examination of his actions.

Definition of bankruptcy protection and how it can help individuals in financial distress

Rudy Giuliani

Bankruptcy is a legal process that allows individuals or businesses to seek relief from their debts and reorganize their finances. While filing for bankruptcy can provide temporary protection from creditors and halt legal actions, it does not erase all obligations or shield individuals from all types of legal liabilities. Bankruptcy allows honest but unfortunate debtors to discharge themselves of their debts in return for surrendering most of their assets to the Trustee.

The Rudy Giuliani Bankruptcy Protection and its Limitations

In Giuliani’s case, bankruptcy may not protect him from lawsuits related to his alleged involvement in various illegal activities. If he is found guilty of misconduct, bankruptcy will not absolve him of criminal or civil penalties. Additionally, bankruptcy courts have the authority to reject deemed abusive or fraudulent filings.

Moreover, Giuliani’s reputation and standing in the legal community, whatever is left of it, may suffer further by his using his Chapter 11 bankruptcy to evade accountability. Ultimately, using bankruptcy as a strategy to escape legal accountability is not a guaranteed solution. Giuliani must face the consequences of his actions and address the legal challenges against him transparently and responsibly. Only by taking accountability for his actions can he begin to rebuild his reputation and credibility in the eyes of the public and the legal system.

The Allegations Against Rudy Giuliani

Giuliani’s purported defamation campaign has garnered widespread attention and scrutiny, leading to a legal showdown that could reshape the contours of US bankruptcy law. The lawsuit argues that the damage inflicted by Giuliani was not incidental but calculated, seeking to tarnish the reputation and livelihood of the plaintiff.

The allegations against Giuliani paint a compelling narrative of deliberate harm and a blatant disregard for the consequences of his actions. Such intentional and malicious conduct, if proven, could have significant ramifications on the dischargeability of debts incurred as a result. In essence, the lawsuit thrusts the spotlight on the intersection of personal liability and financial obligations in a high-stakes legal arena.

A significant legal battle unfolded in the U.S. Bankruptcy Court, revolving around the dischargeability of debt in a high-profile case involving former New York City mayor, Rudy Giuliani. The lawsuit focuses on the implications of Giuliani’s alleged defamation campaign and raises crucial questions about the nature of the debts incurred. Let’s delve deeper into the details of this complex legal dispute.

Rudy Giuliani

The core of the lawsuit lies in the determination of whether the debts stemming from Giuliani’s actions are dischargeable under U.S. bankruptcy law. The plaintiff has taken the stance that Giuliani’s defamation campaign was not just a casual misstep but a willful and malicious injury, causing severe harm and repercussions. Giuliani has stated that he intends to appeal the defamation verdict, to get the relief granted to Freeman and Moss substantially lowered.

The Unforgiving Nature of U.S. Bankruptcy Law

Under U.S. bankruptcy law, debts arising from willful and malicious injuries are subject to special treatment, reflecting the seriousness with which such actions are viewed. The rationale behind this provision is to prevent wrongdoers from evading accountability through the shelter of bankruptcy, ensuring that victims are not deprived of recourse and justice.

Debts stemming from intentional torts, such as defamation, fall within this category of nondischargeable obligations, highlighting the stringent standards applied in such cases. The law recognizes the inherent harm caused by deliberate misconduct and aims to uphold the principles of fairness and justice in the realm of debt resolution.

The lawsuit represents a crucial juncture in the legal landscape, setting a precedent for similar cases in the future. It underscores the importance of accountability and responsibility in the realm of public statements and actions. The outcome of this case could have far-reaching implications for how defamation and intentional harm are treated in bankruptcy proceedings.

Giuliani’s debt represents more than a financial obligation; it is a tangible symbol of the repercussions he must bear for his intentional and malicious conduct. The pursuit of non-dischargeability underscores the gravity of his actions and the commitment to holding him answerable for the harm caused. It serves as a potent reminder that accountability transcends monetary concerns, encompassing the broader spectrum of ethical and moral responsibilities.

Rudy Giuliani’s Bankruptcy Implications and Beyond

The outcome of this lawsuit has the potential to shape the legal landscape surrounding the dischargeability of debts in cases involving intentional harm. It raises fundamental questions about the boundaries of free speech, the responsibilities of public figures, and the consequences of malign actions.

Rudy Giuliani

As the legal proceedings unfold, the intricacies of the case will be scrutinized, setting a precedent that could reverberate across similar disputes. Ultimately, the lawsuit encapsulates the inherent tension between individual rights and societal interests, underscoring the complexities of balancing personal freedoms with the consequences of one’s actions. Stay tuned as this legal saga unfolds and sheds light on the intricate tapestry of law, ethics, and justice.

Rudy Giuliani Bankruptcy: What If Rudy Giuliani Was a Canadian Living In Toronto, Ontario Canada

What is defamation in Canada?

In Canada, defamation is any intentional or negligent false communication, whether written or spoken, that harms a person’s reputation or exposes them to ridicule, belittling, or contempt. The concept of defamation can have two possible parts; libel and slander. There is a distinction between libel and slander.

Libel is defamation either in writing or some other permanent form, while slander is defamation that is not left permanently. Section 298(1) of the Canadian Criminal Code (R.S.C., 1985, c. C-46) defines a defamatory libel as any published material that is likely to injure someone’s reputation or make them the object of hatred, contempt, or ridicule, without lawful justification or excuse. Slander is more commonly associated with an oral statement. With slander, there generally will always be a fight waged between slander and freedom of speech.

Defamation is an act of harming the reputation of another person through a false statement or many of them. In the real world, defamation can lead to severe consequences, including damages to one’s reputation and livelihood. The criminal code and being found guilty of the criminal offence of criminal defamation is one thing. But in the real world, the possibility of imprisonment is not going to provide any real satisfaction to the wronged party. The way to get compensated for the suffered damages because of the defamation of character is to start a civil suit action for a defamation claim.

Are All Debts Discharged Through A Canadian Bankruptcy

To see if all potential debts can be discharged through bankruptcy, we need to look at section 178(1) of the BIA. This section enumerates the debts that are not released by an order of discharge from bankruptcy. As you may recall from earlier Brandon’s Blogs, I have explained that it is not the bankruptcy itself that clears a person’s debts, it is the discharge from bankruptcy.

Notwithstanding that a discharge from bankruptcy is what clears out a person’s debts, the BIA lists several specific debts that cannot be released by an order of discharge. I looked at the list contained in section 178(1) and there is only 1 item that relates to judgment debts. That is section 178(1)(a.1) which reads as follows:

(a.1) any award of damages by a court in civil proceedings in respect of

- (i) bodily harm intentionally inflicted, or sexual assault, or
- (ii) wrongful death resulting therefrom;

A person’s bankruptcy discharge releases them from all claims provable in bankruptcy that are not listed in section 178(1). The question is, does a Rudy Giuliani-type judgment award for damages in defamation cases survive the bankruptcy of the party against whom the judgment is?

For that claim to survive the person’s bankruptcy, the judgment creditor offended party would have to show that:

the award of damages is for bodily harm; and
was intentionally inflicted.

When it comes to the tort of intentional infliction of bodily harm, the law does not recognize any mental states that fall short of a provable injury. The requirements for this tort are:

The defendant’s conduct must have been extreme and outrageous.
The defendant must have intentionally or recklessly caused the plaintiff emotional distress.
The plaintiff must have suffered a visible and provable injury as a result of the defendant’s conduct.

Therefore, it is not a clear-cut answer if the Freeman and Moss judgment award would survive a Canadian bankruptcy protection filing. They would have to prove having suffered a visible and provable injury. Cleary being scared to step outside your home and being unable to work could very well be the kind of injury that would make the debt for such an award not dischargeable in a Canadian bankruptcy protection filing. An award for infliction of emotional distress and loss of reputation could very well be discharged through a Canadian bankruptcy protection filing.

Rudy Giuliani: Conclusion

I will be watching closely the ongoing case of Rudy Giuliani and his U.S. Bankruptcy filing. As individuals navigating the complex world of personal finances, it is crucial to be aware of the legal framework surrounding Canadian bankruptcy protection. Understanding the Canadian bankruptcy legislation and the authority and discretion of the courts empowers us to make informed financial decisions and ensures the integrity of the bankruptcy system.

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

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

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

It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore.

The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now!

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

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

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

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

A picture of Donald Trump's former lawyer, Rudy Giuliani after he filed for Chapter 11 bankruptcy protection — *Rudy Giuliani*

Brandon Blog Post

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

Post author By Brandon Smith
Post date February 13, 2023

when to file bankruptcy

When to file bankruptcy to get a fresh start

Definition of Bankruptcy

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

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

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

What is Bankruptcy and How Does it Work?

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

when to file bankruptcy

When to File Bankruptcy?

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

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

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

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

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

When to file bankruptcy: Identifying signs of financial distress

Here are 5 common signs of financial distress:

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

When to file bankruptcy: The process of filing for bankruptcy

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

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

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

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

Overview of the bankruptcy process

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

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

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

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

Requirements for filing bankruptcy

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

Role of Trustees in the bankruptcy process

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

when to file bankruptcy

When to file bankruptcy: Alternatives to Bankruptcy

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

Debt consolidation and debt management plans

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

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

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

Credit counselling and financial planning

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

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

Debt settlement, restructuring and negotiation with creditors

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

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

When to file bankruptcy: Conclusion

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

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

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

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

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

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

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

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

Brandon Blog Post

PROS AND CONS OF BANKRUPTCIES CANADA: A HEALTHY FRESH START OR THE LAST RESORT?

Post author By Brandon Smith
Post date October 31, 2022

pros and cons of bankruptcies canada

Evaluating the pros and cons of bankruptcies Canada: Introduction

When you are in debt, it can feel like you are stuck in quicksand – the more you struggle, the deeper you sink. If you are considering bankruptcy, you are not alone. According to the Office of the Superintendent of Bankruptcy (OSB), almost 100,000 Canadians filed either a consumer proposal or for bankruptcy in 2021. The numbers for 2022 are rising above the 2021 level.

Before you make a decision, it is crucial to weigh the pros and cons of filing for bankruptcy in Canada. On the positive side, bankruptcy can give you a fresh start. It can discharge your debts and give you a chance to rebuild your finances. On the negative side, bankruptcy can damage your credit score more than one of the bankruptcy alternatives.

If you are struggling with debt, there are other options to consider before bankruptcy. You may be able to negotiate with your creditors and set up a payment plan. You can also improve your financial situation by cutting expenses and increasing your income. If you decide that you do need an insolvency process, a consumer proposal or a Division I Proposal may be better for you.

In this Brandon’s Blog post, I wish to aid you in gaining a better understanding of the pros and cons of bankruptcies Canada. Then you can make a much more educated choice about your financial debt issues.

What are the pros and cons of bankruptcies Canada?

When it comes to making the decision to file for bankruptcy, it is important to understand all of the implications that this will have on your life. In Canada, bankruptcy is a legal process that allows individuals to discharge all of their debts if they are unable to repay them. This process is overseen by the OSB, and there are certain requirements that must be met in order to be eligible for bankruptcy.

While bankruptcy can provide relief from debt, it is not without its drawbacks. Once you have been declared bankrupt, your credit rating will be significantly damaged, which can make it difficult to obtain new lines of credit in the future. Additionally, your assets may be seized in order to repay your creditors.

Before making the decision to file for bankruptcy, it is important to weigh the pros and cons carefully. Speak with a financial professional to get advice that is specific to your situation. Now for a more detailed discussion on the pros and cons of bankruptcies Canada.

pros and cons of bankruptcies canada

The pros of bankruptcies Canada

A fresh start

If you’re sick of being in debt, bankruptcy might be a good option for you. It can be a fresh start, and it’ll get creditors off your back. You can move on with your life without all that stress.

Rebuild your credit

As stated above, bankruptcy will cause some damage to your credit. However, it can stop the continuous damage you may be facing now. You can begin rebuilding your credit rating, rather than having to face extra charges from missed payments as well as receiving those pesky telephone calls from bill collectors.

Get rid of most if not all of your debts

In most cases, all of your obligations will be cleared by your bankruptcy discharge. Normally cleared debts are your unsecured debts like credit card debt, lines of credit, personal loans, payday loans, and income tax debts. A bankruptcy filing will let you not worry about a ton of bills but will force you to focus on balancing your budget.

There are some obligations that bankruptcy cannot clear, like child or spousal support payments, or payments for fines or penalties awarded by a court. You can get your student loans discharged too as long as you’ve been out of school for 7 years or even more.

Stop debt collectors cold

Creditors and their debt collectors making their collection calls can be pretty aggressive when they’re trying to get paid. Bill collectors demand and try to scare you as to what will happen if you do not pay up. Answering your phone or checking your VM becomes terrifying. You might also have a ton of mail from them stacking up in your mailbox, inbox, and so on.

If you’re losing the battle of staying up to date with your bill payments, personal bankruptcy might be a good option for you. Declaring bankruptcy stops all collection efforts, including calls as well as letters from your creditors. This is called the “automatic stay of proceedings”. When you’ve filed an assignment in bankruptcy, the automatic stay goes on and offers you some breathing space.

Get rid of any wage garnishment

If you file for bankruptcy, you don’t need to worry about wage garnishment or legal action anymore. The stay of proceedings also prevents any further attempts at collection, including wage garnishment. Creditors and collectors also won’t be able to take you to court.

Bankruptcy is not forever

So, if you’re thinking about filing for the bankruptcy process, know that it usually takes about nine months to go through the process for a first-time bankrupt who does not have any surplus income payments to make to your Trustee. And, if the Licensed Insolvency Trustee handling your case finds that you have surplus income, you won’t be able to get a discharge for 21 months.

If this is your second bankruptcy, it will take longer. If you don’t have surplus income payments to make, it will take 24 months. If you do need to make surplus income payments, it will take 36 months.

These are the pros when considering the pros and cons of bankruptcies Canada. Now for the cons!

pros and cons of bankruptcies canada

The cons of bankruptcy

There are many cons of filing bankruptcy, including:

Your credit rating

If you file for bankruptcy, it’ll rank you as an R9 on your credit report, which is pretty bad news for your credit score. The damages to your credit rating will not last forever. Your very first personal bankruptcy will be noted on your credit record for 6 years after the day of your bankruptcy discharge. A second bankruptcy will certainly harm your credit score for a lot longer.

At the outset of your bankruptcy journey, you cannot see the light at the end of the tunnel. At least you now have a roadmap to restoring your credit and have a date when your credit will be cleared of any damage. You can start to rebuild your credit even before you are discharged from bankruptcy.

Your assets may be liquidated

This doesn’t mean that you’ll lose everything. Your personal belongings – like clothes, household items, work tools, and even a car under a certain value – usually can’t be taken away from you in bankruptcy. This means that the proceeds from the sale of your other non-exempt assets will be used to repay your creditors.

RRSP contributions in the past 12 months are not exempt

Your retirement savings are protected, but any contributions you made in the past 12 months to your RRSP are not exempt.

Surplus income and the cost of bankruptcy

If you’re making more money than the surplus income threshold, you’ll also have to make surplus income payments to your Licensed Insolvency Trustee. If you don’t have any assets and don’t have to pay the surplus income requirement, you or a relative will have to pay your Trustee’s fee.

Complete financial disclosure

You will need to make full financial disclosure to your Trustee. Your Licensed Insolvency Trustee will use that information to help you complete a Statement of Affairs. This disclosure details your financial position and will even potentially highlight certain financial transactions. Essentially your Trustee and the court will know everything about your finances and your creditors will get a peek too.

When you’re going through bankruptcy, you’ll need to hand over your tax docs and pay stubs to show how much you’re earning. This is how the Trustee decides if you’ve gone over the surplus income threshold.

A lasting record

Once you file for bankruptcy, the paperwork will become part of the public record in Canada. To start your bankruptcy, your Licensed Insolvency Trustee files your bankruptcy documents with the OSB. It then becomes part of the public record.

Most people who file for bankruptcy will only have their Trustee, the OSB, the court, their creditors and the two Canadian credit bureaus know about it.

pros and cons of bankruptcies canada

Bankruptcy alternatives from pros and cons of bankruptcies Canada

Now that you understand the pros and cons of Canadian bankruptcies, you must just consider this option as a last choice. If you can solve your financial problems without experiencing the unfavourable elements of personal bankruptcy, that is the most effective way to go.

During your initial no-cost consultation, the Licensed Insolvency Trustee will help you should explore all the bankruptcy alternatives. I have written before in more detail about each of the bankruptcy alternatives listed below. I have included a link to each of those more detailed blogs. The main alternatives to bankruptcy are:

Debt consolidation

If you’re aiming to leave financial debt behind, debt consolidation could be a good alternative for you. By rolling all your financial obligations into one financing with a lower rate of interest, you will save money from the lower rate of interest on the new consolidation loan and leave your debt behind much faster.

Just make sure that you understand the current interest rates you are being charged, the total of your monthly payments that you currently may or may not be able to afford, the interest rate being offered to you on a debt consolidation loan, what your new monthly payment will be and make sure that you have a realistic budget of your monthly income and monthly expenses that shows that you can afford the new payments on a monthly basis.

Credit counselling

Credit counselling is a process whereby a person in debt meets with a credit counsellor to discuss their options for dealing with their debt. The credit counsellor will assess the person’s financial situation and provide advice on how to best deal with the debt. This may include negotiating with creditors to reduce interest rates or monthly payments and setting up a debt management plan.

As I have written many times before, you should only go to a community-based non-profit credit counselling agency that does not charge any fees. If the credit counsellor you choose wants to charge you fees, get out of there. It is not the best choice for you.

Debt settlement

Debt settlement is a process in which you can negotiate with your creditors to pay less than the full amount you owe. This can be a good option if you are not able to pay your debts in full and you are willing to negotiate with your creditors.

Debt settlement works well if you only have 1 or a few creditors. If you have many creditors, debt settlement is much more difficult in making sure that everyone remains on board with the negotiated settlement and that you will have enough money to pay the lower settled amounts you promised.

Many times with a multitude of creditors, either a consumer proposal or a Division I Proposal is the most effective way to bind everyone in a debt settlement process.

Like in credit counselling, I urge you to stay away from debt settlement companies that charge fees. What they do is charge you unnecessary fees, try to sell you products you don’t need and then when they cannot sell you any more products and their debt settlement techniques do not work, they then walk you to their favourite Licensed Insolvency Trustee for an insolvency process, which might just be a bankruptcy.

I would rather see you use your accountant or lawyer if you do not feel comfortable negotiating yourself. Those professionals will have your best interests at heart in return for their fee. They also won’t try to sell you more products.

Consumer proposals

When it comes to debt of $250,000 or less (other than for secured debts registered against your home), there are a number of options available to help you get back on track. One option is a consumer proposal.

A consumer proposal is a formal debt relief and debt-settlement option available in Canada. It is a legally binding agreement between you and your creditors. Under a consumer proposal, you agree to repay a portion of your debts, and your creditors agree to forgive the rest.

A consumer proposal can be an attractive option for many reasons. First, it can help you get out of debt without having to declare bankruptcy. Second, it can help you keep your assets, such as your home or car. Third, it can give you a fresh start by wiping away most, if not all, of your unsecured debts.

If you’re considering a consumer proposal, it is necessary to obtain assistance from a qualified expert. A Licensed Insolvency Trustee, who is also a consumer proposal administrator in Canada, can walk you through the process and answer your questions. This will allow you to see if it’s the right choice for you.

Division I Proposal

If you owe more than $250,000, a Division I Proposal is a great option to settle your debts. It’s not as streamlined as a consumer proposal, but it’s still a great way to get out of debt.

Other than these technical differences, it has the same aim as a consumer proposal: to provide a debt settlement option that will bind all unsecured creditors and get the person back onto their feet free of the stress and burden of their unmanageable debts.

Either a consumer proposal or a Division I Proposal are excellent debt relief options approved by the Canadian government. One of the other benefits of either of these two debt settlement options is that the person will also receive two mandatory financial counselling sessions. Getting this education will help put the person on the right track for the rest of their life.

Understanding the advantages of bankruptcy and also the disadvantages of bankruptcy for companies

When a company faces overwhelming debt, bankruptcy may seem like the only way out. However, there is only one advantage and one disadvantage to bankruptcy for a company.

One advantage of this situation is that the Trustee may be able to sell the assets to a purchaser who will then be able to use those assets to continue the former business of the company in a profitable way. This could potentially save some jobs, at least for the key employees of the old business.

The one disadvantage is that unlike a person, when a company goes bankrupt, the corporate legal entity is now dead.

Before the Directors of a company decide to bankrupt the company, they should determine if certain divisions or parts of the business can be saved and operate profitably if the unprofitable part(s) could be eliminated. If so, a financial restructuring can be done to turn this unprofitable company into a viable and profitable one and save some jobs in the process.

Pros and cons of bankruptcies Canada: Summary

I hope you enjoyed this Brandon’s Blog on the pros and cons of bankruptcies Canada.

People are falling behind with stagnant wages or tiny wage increases while there is runaway inflation and they are falling deeper and deeper into debt. Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you. There are many pros and cons of bankruptcies Canada. Whatever process we recommend for you will, we will do so in order to minimize any cons you may experience.

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

Brandon Blog Post

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

Post author By Brandon Smith
Post date October 10, 2022

discharge from bankruptcy canada

What are the implications of discharge from bankruptcy Canada?

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

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

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

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

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

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

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

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

discharge from bankruptcy canada

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

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

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

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

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

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

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

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

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

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

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

discharge from bankruptcy canada

Completing your own application for discharge from bankruptcy Canada

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

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

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

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

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

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

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

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

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

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

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

discharge from bankruptcy canada

Discharge from bankruptcy Canada:The Affidavit

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

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

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

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

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

Discharge from bankruptcy Canada:Affidavit of Service

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

any creditor filed an opposition to your discharge;
creditors who attended an earlier discharge hearing;
your Licensed Insolvency Trustee; and
Office of the Superintendent in Bankruptcy.

These parties may attend your hearing and make submissions.

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

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

discharge from bankruptcy canada

At the discharge from bankruptcy Canada hearing

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

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

When presenting your position at the hearing, remember to:

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

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

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

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

Discharge from bankruptcy Canada: Order for discharge

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brandon Blog Post

HOW TO FILE BANKRUPTCY ONLINE: OUR KNOCKOUT STEP-BY-STEP GUIDE

Post author By Brandon Smith
Post date August 29, 2022

file bankruptcy online

File bankruptcy online: You can file bankruptcy online in Canada!

Can I file bankruptcy online in Canada? This is a question we’ve been getting a lot lately. And the answer is yes, you can file bankruptcy online in Canada; just not by yourself.

The only ones the federal government authorizes in Canada to do bankruptcy filings are licensed insolvency trustees. Since March 2020, the process for meeting with a bankruptcy trustee to discuss bankruptcy has changed and can be done online. This may be helpful if you’re considering bankruptcy for your individual situation.

In this Brandon’s Blog, I explain how, with the help of a licensed insolvency trustee, you can meet all the legal requirements and file bankruptcy online for the Canadian bankruptcy process.

Why you can file bankruptcy online in Canada

There’s virtually nothing you can’t do online these days. The lockdowns increased our reliance on online shopping for things like groceries, clothes, office supplies, and even toilet paper.

The internet also includes a wealth of knowledge on any subject you can think of, including financial topics. I find that anyone contacting me who is struggling with their, or their company’s financial problems, has already looked into the various options available to them in dealing with debts like income taxes and credit cards.

Although people may not be familiar from their online research with all the ins and outs of insolvency and bankruptcy, this is to be expected. However, callers are generally well-informed about different options for dealing with secured creditors and unsecured creditors.

Nowadays, people expect to be able to do everything online – including filing for bankruptcy in Canada. Those who think bankruptcy might be a solution for them, are curious to understand if they can declare bankruptcy online. Thanks to the COVID-19 pandemic, online everything is a way of life.

file bankruptcy online

Why you should file bankruptcy online

The Canadian government oversees the administration of the insolvency process in Canada through the Office of the Superintendent of Bankruptcy Canada (OSB). The OSB is part of Innovation, Science and Economic Development Canada (Industry Canada). They ensure that consumer proposals, corporate financial restructuring and bankruptcies are handled in accordance with federal law. This process protects the rights of both debtors and creditors and helps to ensure a fair and orderly resolution to financial difficulties.

The OSB is responsible for administering Canadian bankruptcy law under the Bankruptcy and Insolvency Act (BIA), as well as certain duties under the Companies’ Creditors Arrangement Act (CCAA). They license and regulate the insolvency profession, ensure an efficient and effective regulatory framework, and supervise stakeholders. The OSB is independent of the Government of Canada in carrying out its regulatory, administrative, and supervisory duties.

As a result of the outbreak of COVID-19, the OSB issued guidance to Trustees on how certain aspects of the Canadian bankruptcy and insolvency process have changed. This document, entitled Temporary Guidance for LITS During the COVID-19 Pandemic, provides direction on how to navigate these changes.

As concerns about COVID-19 grew in Canada, licensed insolvency trustees took action to reduce in-person meetings. The OSB supported the Trustee community in these initiatives while maintaining the stability of Canada’s insolvency system.

Many of the same temporary measures remain in place today. Most clients find it more convenient and less stressful to continue filing for bankruptcy online. So how do we file bankruptcy online in Canada?

Assessing your financial situation and considering bankruptcy alternatives

No matter what form of insolvency process we are discussing to deal with a specific debt situation calling for either financial restructuring with a debt settlement payment plan through a consumer proposal or Division I Proposal, or personal bankruptcy, the process always starts in the same way. It’s not important what type of bankruptcy or insolvency process we’re talking about if we are dealing with a limited liability company or with someone considering bankruptcy for individuals.

When it comes to corporate insolvency, it’s important to have a clear understanding of the company’s current financial position and what its chances are for a successful financial restructuring. In consumer insolvency cases, the first step is to assess the debtor’s individual situation.

When a person contacts me to discuss their personal financial situation, we would have our initial chat. If the person wished to explore their available options in more detail, I would need to collect additional information from them to enable a proper assessment. Before we discuss which actual filing may be appropriate, it is important for me to know things like their assets and liabilities, their monthly income, and their household size.

If they would like me to continue our no-cost consultation and provide them with a proper assessment, I email them our standard intake form called the Debt Relief Worksheet. I ask them to please make sure to fully complete it and include any backup documents that are requested.

The backup documents we typically request are quite standard – a copy of their most recent bank statement, their last filed tax return, and the notice of assessment. Once I have a chance to review everything and ask any follow-up questions, I’ll be able to provide tailored advice based on their unique situation.

The counseling before filing bankruptcy that we give is perhaps even more important than any counselling sessions after filing. So far, we’ve been able to do everything over the telephone and online.

file bankruptcy online

Is filing bankruptcy online an option for getting rid of debt?

Now that I have all the necessary information, I can perform the rest of the initial assessment. There could be several options available for those struggling with debt, and filing for bankruptcy may be an option for some. However, it’s important to understand the process and what it entails before making a decision.

Continuing with the online model, I meet with the person and do the rest of the assessment by phone or video meeting. I explain what I see as the realistic debt relief options for the person, explain why and discuss what is involved with each option and answer any questions they may have.

At the end of the meeting, I provide the person with a list of resources that can help them make their decision. I’m always available to answer any questions they may have throughout the process. Filing for online bankruptcy may very well be an option for getting rid of debt, but it should be the last option.

Something else to remember is that an insolvency proceeding will lower your credit score as it appears on your credit report. Declaring bankruptcy will have a worse effect than a debt management plan through a BIA-approved financial debt restructuring program repayment plan.

What documents do you need in order to file bankruptcy online?

To discuss what documents you need for a bankruptcy application in order to file bankruptcy online in Canada, we will assume that the person chose the bankruptcy option. By now, I have enough financial information to prepare all the necessary bankruptcy documents.

Examples of statutory bankruptcy forms which are part of the bankruptcy paperwork include the:

statement of affairs, indicating both the person’s eligible assets and those exempt from seizure under provincial law with related bankruptcy schedules;
list of creditors that is used for the creditor mailing list to send out the notice to creditors;
person’s statement of monthly income and expenses;
bankruptcy assignment
notice to bankrupt of their bankruptcy duties; and
estate information summary.

We schedule a video meeting with the debtor once all the statutory and financial documents are ready for signing. We can either email the documents or upload them to our secure signing portal and provide the debtor with a private, secure link. We’re happy to use online technology to have our meeting and explain all the documents, witness their signing, and get the signed documents from them.

We take the signed documents and file them in the Industry Canada OSB electronic online filing system. The OSB issues the bankruptcy certificate once the electronic filing is accepted. The day and time of the certificate is the exact moment the person is officially bankrupt.

file bankruptcy online

Duties during bankruptcy include credit counselling sessions

The duties of a bankrupt person are set out in section 158 of the BIA. They include:

to identify all of their property and allow the Trustee or anyone authorized by the Trustee to take possession of all the debtor’s property;
to give the Trustee all books, records, documents and papers related to their property or affairs, including, but not limited to, title papers, insurance policies, and tax records and returns;
providing full disclosure of all assets and liabilities;
helping the trustee when required with assistance from time to time;
if one or more creditor meetings are required, you must attend; and
attending the two mandatory bankruptcy credit counseling sessions run by the Trustee.

We can meet with the bankrupt person over video meetings to provide counselling sessions and help them to fulfil their online bankruptcy duties.

Is it always going to be possible to file bankruptcy online in Canada?

The OSB has extended the option to conduct online service delivery of the Canadian insolvency options available under the BIA. Licensed insolvency trustees can continue to use online methods. It has provided some peace of mind for many people.

The OSB has been consulting with the insolvency community on potential amendments to relevant directives, with the goal of implementing an online alternative to meeting in person. While allowing flexibility, the changes they are contemplating would emphasize that while trying to be flexible, the changes being contemplated would emphasize that debtors will have the choice to either meet in person or online.

It looks like the OSB is warming up to the idea that remote filing through online resources, whether we are talking about BIA-approved debt repayment plans or bankruptcy may very well be here to stay. The OSB is trying to balance the benefit to debtors as well as the bankruptcy process continuing to be for the benefit of creditors. Can it all continue to be accomplished by online resources and technology? So far the average person, be they Canadian debtors or Canadian creditors, seem to want to continue with the choice of having insolvency administration online.

file bankruptcy online

Are you deep in debt? We can help!

I hope you enjoyed this Brandon’s Blog on how to file bankruptcy online. Are you or your company in need of financial restructuring? Are you or your company unable to survive the COVID pandemic and its aftermath? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

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

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

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

Call us now for a no-cost initial consultation.

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How Bankruptcy Impacts Teens and Families

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Understanding the Bigger Picture

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Understanding Inheritance and Family Assets

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If Parents Declare Bankruptcy What Happens To The Children? The Emotional Toll of Losing a Family Home

Potential Impacts of Home Loss

Navigating Equity Rules in Bankruptcy

Critical Equity Considerations

Financial Stress: A Broader Perspective

Potential Silver Linings

Emotional and Financial Recovery

Empowering Families Through Understanding

If Parents Declare Bankruptcy What Happens To The Children? Child Support and Spousal Support Obligations: What Happens During Bankruptcy?

The Unique Status of Family Support Obligations

Key Protections for Dependents

How Bankruptcy Impacts Support Payments

Bankruptcy Liquidation

Proposal Restructuring

Protecting the Financial Interests of Children

Critical Considerations

Navigating Support Obligations During Financial Stress

Proactive Steps for Parents

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Understanding the Emotional Rollercoaster

What Children Feel

The Invisible Challenges Children Face

The Real Impact on Kids

Supporting Your Children Through Financial Stress

Communication is Key

School and Social Life: What to Expect

Long-Term Emotional Considerations

Professional Support Matters

The Silver Lining: Positive Transformation

Final Thoughts for Parents

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Seizure of Children’s Personal Belongings

Child Income and Its Role in Bankruptcy

If Parents Declare Bankruptcy, What Happens to the Children? Transforming Financial Futures and Finding Hope After Bankruptcy

Breaking Free from the Debt Cycle

The True Meaning of Financial Liberation

Understanding the Financial and Emotional Landscape

The Transformative Power of a Financial Reset

Rebuilding Your Financial Future

More Than Just Numbers: The Emotional Impact

Unexpected Benefits

Before vs. After: A Comparative Snapshot

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After Bankruptcy

Developing Financial Resilience

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Will We Lose Our Home and Have to Move?

How Will This Affect Our Family Finances and My Future?

What Happens to My Potential Inheritance?

Will My Personal Belongings Be Taken?

Is My Part-Time Job Money Protected?

How Might This Affect Me Emotionally?

What About Child Support and Alimony?

Can Bankruptcy Help Our Family?

If Parents Declare Bankruptcy, What Happens to the Children? Getting Professional Support

If Parents Declare Bankruptcy, What Happens to the Children? Conclusion

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The Definition of Client-Facing Industries

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Declaring Bankruptcies: Diving into the Discrepancies – Who Benefited Most?

Comparison of Industry Sectors

Surprising Funding Allocations

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Declaring Bankruptcies Trends: The Consequences of CEBA

Initial Effects of the Loan Forgiveness Deadline

Rising Bankruptcy Rates in Various Sectors

Impact of Economic Conditions Post-Pandemic

The Ripple Effect: Beyond Declaring Bankruptcies

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2. The Impact of Rising Inflation and Interest Rates

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