Tag: bankruptcy ontario exemptions

FILING FOR BANKRUPTCY IN ONTARIO: 3RD TIME SHOULD NOT BE A CHARM

Post author By Brandon Smith
Post date December 11, 2019

Filing for bankruptcy in Ontario introduction

We have all heard the expression “third time’s a charm” or “third time lucky”. You say this when someone is successful the third time they try something after they failed the first two times. This expression is not meant to apply to the world of Canadian insolvency or a desperate financial situation. Certainly not for filing for bankruptcy in Ontario.

On December 9, 2019, the Toronto Star published an article by investigative reporters Jesse McLean and David Bruser titled “Rack up debt. Declare bankruptcy. Repeat. And repeat again. How thousands of Canadians are doing it and costing the rest of us”. The article talks about four specific people who file for bankruptcy multiple times.

In this Brandon’s Blog, I want to describe how filing for bankruptcy in Ontario works. Thankfully, the article does state that in the Toronto Bankruptcy CourtFreme, it is much tougher to get away with multiple bankruptcies, as it should be.

Filing for bankruptcy in Ontario: How do I declare bankruptcy in Canada?

Filing for bankruptcy in Ontario begins with a no-cost consultation with a licensed insolvency trustee (formerly called a bankruptcy trustee ) (Trustee). In that consultation, the Trustee will want to get a good understanding of your assets, liabilities, income and expenses. That way, the Trustee will be able to discuss with you all the available options and help you narrow them down to the most viable options to solve your debt problems.

At the end of the meeting, the Trustee will give you the standard intake form. By completing the form fully, you will provide the Trustee with the proper information needed for your filing for bankruptcy in Ontario. My Firm calls our standard intake form the Debt Relief Worksheet The information is then used in order for the Trustee to finalize his or her recommendations to you for dealing with your debt. The options available in general for dealing with personal debt are:

A consumer proposal is an insolvency process which is one of the best of all the alternatives to bankruptcy. It is much preferable than filing for bankruptcy in Ontario. In a consumer proposal, you are able to compromise your debt. You make an offer to pay less than the total you owe. You then make the monthly payment to the Trustee until you have paid the total you agreed to.

If you end up deciding on either a consumer proposal or bankruptcy, the Trustee will prepare the required documentation. This is the case for consumer proposal documents or those necessary for filing for bankruptcy in Ontario.

The Licensed Insolvency Trustee then takes the fully completed worksheet and all additional documents in support of your information. The information is then used in order to prepare the documentation necessary for filing for bankruptcy in Ontario. The documents include your Statement of Affairs and your Statement of Income and Expenses.

The Statement of Affairs used for filing is attested to by the debtor as to its accuracy. This statement includes a listing of all of the person’s assets and indicates which are exempt from seizure and which are not. The asset exemptions are guided by provincial law. As there are some variations between provinces, in this blog I will only be referring to bankruptcy process Ontario exemptions.

The assets not exempt from a seizure will be surrendered to the Trustee to be sold. The statement also lists all the names of the creditors, their respective addresses and the amount owed to each.

The Statement of Income and Expenses, as the name suggests, shows the monthly income and expenses of the household. It also shows whether or not the person will be subject to surplus income payments to the Trustee or not.

When all the documents are ready, the Trustee electronically files them with the Office of the Superintendent of Bankruptcy (OSB). The local OSB representative reviews the filing. If everything is in order, the OSB issues a Bankruptcy Certificate. The issuance of that certificate is the moment the person is now bankrupt.

Filing for bankruptcy in Ontario: How long does bankruptcy last in Ontario?

The Canadian bankruptcy system is administered under the Bankruptcy and Insolvency Act (Canada). This is a federal statute and bankruptcy is a complex legal process. Bankruptcy allows you to compromise the debts to your unsecured creditors. It does not deal with the debt owing to a secured creditor if you are able and wish to keep the asset.

So the question is not how long does bankruptcy last in Ontario? Rather, it really is how long does bankruptcy last in Canada?

The Toronto Star investigative article talks about the length of a bankruptcy. It correctly states that a first-time bankrupt, that does not need to pay surplus income, is entitled to an automatic discharge after 9 months. This assumes that they have lived up to all of their commitments as an undischarged bankrupt as well as completely cooperated with the Trustee.

If a first-time bankrupt surplus income, they must pay it for 21 months prior to qualifying for a discharge. This again assumes that they have fully cooperated with the Trustee. In both cases, if neither the Trustee nor a creditor opposes the discharge of the bankrupt, the Trustee can issue the discharge certificate.

In a second time bankruptcy, with no surplus income, the bankrupt has to wait for 24 months before being eligible for a discharge. Again, if the bankrupt has completed all duties and has cooperated fully, and no creditor opposes the discharge, the Trustee can issue the discharge certificate. If there is a surplus income requirement, then the minimum period before being eligible for a discharge is 36 months. Under the same conditions, the Trustee can issue the discharge certificate if there is no opposition.

The article highlights, correctly, that if it is the person’s third or more bankruptcy, the Trustee cannot issue a discharge certificate. The discharge hearing must be held in Court, even if the Trustee is not opposing. The reason for this is because the Canadian bankruptcy system is supposed to financially rehabilitate the honest but unfortunate debtor.

So in a third or more bankruptcy, the Court wants to review the circumstances of the person’s bankruptcy and why rehabilitation has not been accomplished yet. If there is a Trustee or creditor opposition to discharge, the hearing becomes more complicated.

I have written several blogs previously on the bankruptcy discharge process. You can search for them up above in the search function. If you wish to find out more about the bankruptcy process, you can CLICK HERE and read our filing for bankruptcy in Ontario faq.

**What about my credit cards when filing for bankruptcy in Ontario?**

When filing for bankruptcy in Ontario, you have to do the following:

disclose to the Trustee information regarding every one of your assets and financial debts;
disclose to the Trustee any transactions where you sold or transferred any of your property in the last 5 years;
surrender your credit cards to the Licensed Insolvency Trustee;
attend the initial meeting of creditors (if required);
attend 1 credit counselling session near the beginning of the insolvency process and another 1 credit counselling session later on in the administration;
keep the bankruptcy Trustee informed of any address change; and
assist the Trustee whenever asked for information, documents or property

**What about my credit report when filing for bankruptcy in Ontario?**

The information in your credit report that affects your credit score is usually eliminated after a specific period of time. Generally, it will be removed after six or 7 years for initial bankruptcy. The time frame is a bit less in a consumer proposal.

Sometimes you may hear people say that you remain in bankruptcy for seven years. That is not true. What that time frame really is all about when filing for bankruptcy in Ontario is the amount of time it takes for the notation of your bankruptcy to affect your credit rating and to be eliminated from your credit record. However, even before you are discharged from bankruptcy, or finish your consumer proposal, there are steps you can take to begin rebuilding your credit score and credit report.

filing for bankruptcy in ontario

**How bankruptcies work in Canada – Filing for bankruptcy in Ontario multiple times**

The investigative reporting in the Toronto Star details the multiple bankruptcies of four different people. These people range from being in their third to fifth bankruptcy. The article states that the Province of Quebec has the most people who have gone bankrupt multiple times. The article, of course, and rightly so, takes a very dim view of people who “game the system” with multiple bankruptcies.

As I mentioned earlier, the article clearly states that from their research in Ontario and Quebec, the writers found that the Toronto bankruptcy court takes the dimmest view of people with multiple bankruptcies when they come up for their discharge hearing.

Being a serial bankrupt is not a good thing. The reporting is fair and balanced. It does admit that some people just get a curveball thrown at them in life and have no choice but for filing for bankruptcy in Ontario. However, there are two themes stressed in the article which I don’t think are accurate. They are:

“Unpaid taxes owed by repeat bankrupts make up a portion of the nearly $4 billion the Canada Revenue Agency (CRA) has written off since 2009 because of consumer and commercial insolvencies. In Quebec, the provincial tax agency has lost nearly $2 billion to insolvencies in the last five years alone.” While this is true, it assumes that the taxes would have been paid if the people did not file for bankruptcy multiple times.

My belief is that people who go bankrupt multiple times have their affairs arranged in such a way that they do not have much to lose in bankruptcy. If they don’t have much to lose in a bankruptcy, then there isn’t much for CRA to seize if the person is not bankrupt. So the reality is that there is a class of Canadians that will not pay their fair share no matter what. This is clearly unfair to society as a whole, but it isn’t bankruptcy that causes it.

“Meanwhile, credit card lenders absorb the cost of bankrupts who do not pay their bills by charging high-interest rates to their customers who do pay their debts.”

The fact that credit card companies charge high-interest rates is true. However, in my experience, customers who do pay their credit card debt are not incurring interest charges. They pay their credit card balance off monthly.

Those who only make the minimum payment are the ones who are incurring high-interest charges. Ultimately, those people cannot afford to make all their debt payments and they ultimately invoke an insolvency process, being either a consumer proposal or bankruptcy.

So even a one-time-only bankrupt pushes a loss onto a credit card company. Hence the high-interest rates charged. By the way, who is it that makes the credit decision to extend new credit to a multiple time bankrupt? It isn’t the bankruptcy system, it is the credit card issuer. Perhaps they should not give a credit card to someone who has demonstrated many times that they cannot handle the credit responsibly.

Filing for bankruptcy in Ontario – Rack up debt

The statistics quoted in the article shows that although there has been an increase over the years in multiple time bankrupts, this is somewhat of a self-fulfilling prophecy. By definition, if a certain segment of the Canadian population goes bankrupt multiple times, then the statistics have to show an increase.

The statistics used in the article shows the following regarding the percentage between 1st and 2nd + out of total personal bankruptcies between 2011 through 2018:

Year	Total # bankruptcies	1st time %	2nd + time %
2011	77,993	84.41	15.59
2012	71,495	83.83	16.17
2013	69,224	82.74	17.26
2014	64,839	81.31	18.69
2015	63,406	80.52	19.48
2016	63,372	80.10	19.90
2017	57,969	79.23	20.77
2018	55,091	78.99	21.01

My takeaways from these statistics are:

Personal bankruptcies in Canada dropped by 29.4% between 2011 and 2018. I believe there are two main reasons. First, fewer Canadians are opting for an insolvency process in an era of unprecedented low-interest rates. Second, those requiring an insolvency process, have sufficient income to perform a successful consumer proposal thereby being able to avoid bankruptcy.
The increase in second and more time bankrupts is just under 5%. I believe most of the increase is as mentioned above, somewhat self-fulfilling. Every time the same person goes bankrupt, the statistic has to increase! So, what percentage increase is because of the actual mathematical formula, and what percentage increase is because there are actually more people in raw numbers are filing for bankruptcy more than one time?

Filing for bankruptcy in Ontario – The bankruptcy discharge

A discharge from bankruptcy releases you from the legal commitment to pay off your debts you had as of the day you applied for bankruptcy, with certain exceptions. Examples of certain exceptions are alimony, child support, certain student loans (if you stopped being a student less than seven years before filing), court-ordered penalties or fines and financial debts as a result of a fraud finding against you.

Of course, the ultimate objective for those filing for bankruptcy in Ontario is to receive the most sought after discharge from bankruptcy after you have performed all of your duties. The bankruptcy discharge releases a person from the majority of his or her debts as indicated above.

While many people thinking about bankruptcy currently have a poor credit score, it’s usually not irreparable. Declaring personal bankruptcy, nevertheless, will drop it to an R9 rating. This is the worst possible score there is. Unfortunately, this rating will last for about 6 years post-discharge. As I have already mentioned, there are steps you can take to start rebuilding your credit score.

Filing for bankruptcy in Ontario summary

I hope you found this Brandon’s Blog on filing for bankruptcy in Ontario useful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. We can help with your personal debt situation. We can also help with insolvency for business.

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. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team . That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

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

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Brandon Blog Post

IF I FILE FOR BANKRUPTCY ONTARIO WILL I LOSE MY ADORABLE HOME?

Post author By Brandon Smith
Post date April 15, 2019

file for bankruptcy ontario

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

File for bankruptcy Ontario: Introduction

Many individuals experience financial difficulty eventually in their lives. There are times you require to rely upon credit lines and credit cards to make ends meet. Frequently these bank cards and credit lines can come to be a prop. It helps you to avoid preparing a family budget plan and taking a difficult look at your expenses and lifestyle. Eventually, you realize that you are beneath a heap of debt you can not climb up out of. In this Brandon’s Blog, we respond to a concern we are often asked – file for bankruptcy Ontario will I lose my house?

An additional usual concern is can I keep my car if I file for bankruptcy Ontario. Today I will concentrate on the far more valuable possession, the house. However, I will give a hint below the answer to the vehicle question.

File for bankruptcy Ontario: Bankruptcy and your home

I will first give the answer to this specific question about bankruptcy and your home. After that, I will discuss all the things that you should be thinking of before considering bankruptcy. Whether you know it or not, you do have various options that are alternatives to bankruptcy in Ontario. The short answer is that if you go bankrupt, there are various ways and conditions in bankruptcy that you will NOT lose your home. Let me explain why.

Everyone who owns a home and experiences financial problems is concerned about losing their home. Losing your home is probably one of the more traumatic fears people facing a large debt load that is crushing them is losing the home. This is how it works if you file for bankruptcy Ontario.

Just to make sure that we are all starting off with the same basic knowledge, I will quickly go over what bankruptcy is. Bankruptcy is the legal state of assigning all of your assets, with certain exceptions discussed below, to a licensed insolvency trustee (formerly called a bankruptcy trustee). Insolvency is the financial state of not being able to pay your debts as they come due. Bankruptcy is one available legal process to deal with your insolvency.

In Ontario, the provincial legislation that outlines what is exempt from seizure is called the Execution Act, R.S.O. 1990, c. E.24. For a complete list of all bankruptcy Ontario exemptions, please read my Brandon’s Blog, BANKRUPTCY IN ONTARIO CANADA SECRETS REVEALED. For the purpose of this blog, the exemption in Ontario for your home is $10,000 of equity. The current thinking is that if your equity is $10,000 or less, if you go bankrupt, then your entire equity is exempt from seizure by a licensed insolvency trustee. However, if your equity is $10,001 or higher, then your entire equity in your home is NOT exempt and is available to your licensed insolvency trustee for your creditors.

HERE IS THE HINT I PROMISED: The exemption in Ontario for one car or truck is one that is worth not more than $6,600.

File for bankruptcy Ontario: Bankruptcy factors and your home

So the first important detail for you to remember is that in bankruptcy, the Trustee is only interested in your equity in the home. To calculate the equity in your home, you would:

Find your home’s current market value. The price you paid for your home may not be the current value of your home.
Subtract your mortgage balance. Once you have the current market value of your home, subtract the amount you still owe on your home mortgage and any other loans registered against the title of your home from the estimate.
Apply the proper percentage representing your share of the ownership of the home against the number you came up with from point 2 above. So if you are the sole owner of the home, the right percentage to apply is 100%. If you own the home jointly with your spouse or partner, then the correct percentage to apply is 50%.

Now the question becomes, can you afford to keep your home? Can you afford to keep up all the mortgage payments, any other loan payments where security registered against your home has been granted (just like a mortgage) and the other costs of homeownership? There are various factors to consider to answer this question. Some of the factors are:

You need to have a good handle on what all the real costs of owning the home are. It is more than just mortgage payments. Insurance, repairs and maintenance and property tax come to mind as obvious additional costs of homeownership.
Now that you know all the annual costs of owning your home, could you rent suitable accommodations for less or more money? If less, then it may not be worth hanging onto the home, especially if you cannot afford all the required costs of owning that home. If more, then you are not saving any money by selling the home. In fact, you would be worse off, because you would also incur moving costs.
If renting is roughly equal to the cost of owning, or only slightly less, will there be disruption to the family that is not worth it? For example, if the children can walk to a very good school in your neighbourhood, but to move, you would have to drive them to and from school every day because of the distance, or the local school in the new area is not as good, that could tip the scales.

If you decide as a family that you cannot keep the home, then the only options are to either sell it yourself or abandon it to the first mortgagee. A lived-in home will always sell for more than a vacant one. Perhaps your mortgagee(s) would allow you to stay in the home without making any further mortgage payments while it is listed for sale because it helps them. This is especially true if there are more loans registered after the first mortgage.

By “playing ball” with you in this way, the first mortgagee is showing the lenders behind the first that it is doing everything possible to maximize the sale price. The later lenders will be pleased because you are cooperating. So, in return for this win-win situation, your offer is to save the cash by not paying those loans in return. Keep in mind that if any mortgagee/lender registered against the home suffers a shortfall on the sale, they have the right to sue the borrower(s) and any guarantor(s) of the loan for the shortfall.

file for bankruptcy ontario

File for bankruptcy Ontario: How to keep your home in bankruptcy

If you decide that your family can afford the cost of owning this home, then in bankruptcy, the Trustee will need to recover the bankrupt person’s equity in the home. There are various ways this can be accomplished. The most common ones are:

Refinancing the home when one or more of the owners are bankrupt will prove impossible. However, if only one of the owners is bankrupt, perhaps the other owner can purchase the Trustee’s interest in the equity of the bankrupt owner. If the non-bankrupt owner has good enough credit to borrow enough money to pay the bankrupt’s equity to the Trustee. If this can be accomplished, and the non-bankrupt person can afford the new loan payments, then the Trustee has realized the value of the bankrupt’s equity in the home and your family can keep the home.
If this cannot be done, then maybe there is a relative or very good friend who is willing to purchase the bankrupt owner’s equity in the home. Again, once the value of the equity has been paid to the Trustee, the Trustee no longer has any interest and the family can keep the home.
If neither of the first two options is realistic for your situation, there is a third way. As long as you could afford the payments, the non-bankrupt owner could offer to purchase the bankrupt owner’s equity from the Trustee by giving the Trustee a mortgage against the home for the full value of the equity. This is all a matter of negotiation.

The mortgage could either be interest-bearing or have zero interest. That is to be negotiated. The only caution is that the Trustee’s role is to administer the bankruptcy estate as efficiently as possible. This means that the Trustee is not going to want to keep the file open for 5 years. However, there is nothing unreasonable about requesting the Trustee take back a mortgage for a 2 or 3 year period.

Keep in mind that the bankrupt’s discharge is different from the Trustee’s discharge. So, by doing this, it does not mean that the bankrupt’s discharge is held up for this reason. If this can be accomplished, then again, the family can keep the home.

That is the analysis anyone who owns a home and believes they need to go bankrupt must go through. There are other options that affect the decision of whether or not to go bankrupt. I always discuss all the issues with everyone who comes to my office for their free consultation. Some other issues affecting the bankruptcy decision are:

Would this be the person’s second time (or more) file for bankruptcy Ontario?
How long does bankruptcy last in Ontario? This depends on whether this is your first bankruptcy or not. I would also need to assess if your file for bankruptcy Ontario would produce surplus income.

File for bankruptcy Ontario: Keep your home and avoid bankruptcy

There are various options that you should consider before going bankrupt. There may be alternatives to bankruptcy and you need to consider them all carefully.

If there is equity in the home, before jumping straight to the conclusion that you need to go bankrupt, here is the advice I have given many people:

Go through the analysis of calculating the equity and does it make sense to stay in that home that I discussed above.
Once you have those answers, you will know if you are selling the home and downsizing both your home and living costs or if you are trying to stay in the home.
If you are trying to keep the home, can you refinance it to pay off your debts, either in whole or in part?
We have worked with many people and mortgage brokers to get the home refinanced.
If the refinancing provides enough cash to pay off all or enough of the debts to get you back on the road to financial stability, then do so and there is no need to discuss the bankruptcy option.
If that is not possible, it may be that the refinancing produces enough cash for the non-insolvent owner to fund a successful government-approved Debt Consolidation Canada Program (DCP). We have administered many DCP’s.

This is how it works. We review with you all the issues, including, what sort of DCP we believe your creditors would accept. You then enter into the formal DCP and we tell your creditors. Your creditors then vote on the DCP. If accepted, then if required, we get Court approval for it also and it is now binding on all your creditors. The DCP stops all garnishee actions, collection calls, and lawsuits.

If the refinancing provides sufficient cash to pay out the DCP in full, then you will be in and out of it very quickly. If there is not enough cash from the refinancing, then we need to find room in your household budget to make up the difference with regular monthly payments. You would have up to 5 years to complete paying off the balance. The balance under the DCP does not cost you any interest. The balance is fixed and that is it.

Why would your creditors go for this type of DCP? Getting a lot of cash today is a huge incentive for your creditors to agree to receive a reasonable amount of money, but less than what you owe them in total.

With a successful DCP, you get to keep all of your assets. The DCP must offer your creditors a better alternative than what they would get in your bankruptcy. If successful, losing your home is never an issue.

File for bankruptcy Ontario: Conclusion

I hope you enjoyed this file for bankruptcy Ontario Brandon Blog. Do you have excessive debt? Are you having trouble making your month-to-month payments? Is your business not taking care of financial challenges that you simply cannot figure out how to escape from?

If so, call the Ira Smith Team today. We have years and generations of experience assisting people and companies trying to find a financial restructuring or a debt negotiation strategy. As a licensed insolvency trustee, we are the only professionals identified, accredited and monitored by the Federal government to give insolvency help and services to assist you to avoid bankruptcy.

Call the Ira Smith Team today so you can finish with the tension and anxiousness debt issues produce. With the unique roadmap, we establish special to you, we will quickly return you right into a healthy and balanced worry-free life.

You can have a no-cost assessment to help you so we can fix your debt issues. Call the Ira Smith Team today. This will certainly allow you to return to being productive and healthy, Starting Over Starting Now.

file for bankruptcy ontario

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