Tag: bankruptcy process

ESSENTIAL DUTIES OF BANKRUPTS AND TRUSTEES IN LIQUIDATING ASSETS: THE ULTIMATE COMPREHENSIVE GUIDE

Post author By Brandon Smith
Post date July 29, 2024

Liquidating Assets: Introduction

Today I am writing about an exciting recent court decision from the Court of King’s Bench of Alberta released on July 23, 2024. This case is an appeal to the Court decided by The Honourable Justice Douglas R. Mah from the decision of the Registrar in Bankruptcy in the bankruptcy discharge hearing of Dr. Omar Ahmad Nsair. The case citation is Nsair (Re), 2024 ABKB 450.

Regular readers of my Brandon’s Blog will recall that last week I wrote about the bankruptcy discharge hearing of Ontario’s self-proclaimed Crypto King in LESSONS FROM THE AIDEN PLETERSKI BANKRUPTCY: OUR COMPREHENSIVE GUIDE ON A “CRYPTO KING” BANKRUPTCY DISCHARGE.

That blog dealt with Aiden Pleterski’s failed application for discharge from bankruptcy. One of the various reasons his discharge application failed was, amongst other things, his total lack of cooperation with their licensed insolvency trustee for the identification and liquidation of his non-exempt assets.

Dr. Omar Ahmad Nsair’s case answers the following question: How much assistance does the bankrupt need to give the licensed insolvency trustee? Dr. Nsair filed a voluntary assignment in bankruptcy. His case underscores the challenges of balancing statutory duties with practical limitations in asset realization, offering valuable insights into the intricacies of bankruptcy proceedings.

First I will provide an overview of the role and responsibilities of a receiver or bankruptcy trustee in liquidating assets. Then I will delve into the details of Dr. Nsair’s personal bankruptcy, where a compelling narrative unfolds, shedding light on the complexities of asset realization and statutory duties in the face of economic uncertainties. Join me on this legal journey as we dissect the nuances of bankruptcy proceedings and the implications for all parties involved.

Liquidating Assets: The Bankruptcy and Insolvency Act of Canada

Overview of the Bankruptcy and Insolvency Act Relating To Liquidating Assets

The Canadian Bankruptcy and Insolvency Act (BIA) is a federal statute that plays a crucial role in liquidating assets in both receivership and bankruptcy scenarios. Here are some key aspects of the BIA’s importance in this context:

Priorities: The BIA sets out the order of priority for the distribution of assets in receivership or bankruptcy. This ensures that certain creditors, such as secured creditors, are paid first, followed by unsecured creditors.
Stay of Proceedings: The BIA provides for a stay of proceedings, which prevents creditors from taking legal action against the debtor or its assets during the receivership or bankruptcy process. This stay allows for a more orderly way of liquidating assets.
Powers of the Receiver or Trustee: The BIA grants the receiver or trustee extensive powers to manage and liquidate the insolvent debtor’s assets. This includes the power to sell assets, collect debts, and manage the debtor’s business.
Asset Protection: The BIA provides for the protection of certain assets, such as exempt property, which are not available to creditors. This ensures that debtors have some protection for essential assets, such as their primary residence.
Notice and Disclosure: The BIA requires the receiver or trustee to provide notice to creditors and other interested parties of the liquidation process. This ensures that all parties are aware of the process and have an opportunity to participate.
Liquidating Assets Process: The BIA sets out the procedures for liquidating assets, including the requirement for a public auction or sale of assets. This ensures that assets are sold fairly and transparently.
Distribution of Proceeds: The BIA sets out the rules for distributing the proceeds of liquidating assets, including the priority of payments to creditors. This ensures that creditors are paid in the correct order.
Avoidance Powers: The BIA grants the licensed insolvency trustee acting as receiver or bankruptcy trustee avoidance powers, which allow them to recover assets that were transferred or sold by the insolvent debtor for less than their fair value. This ensures that creditors receive a fair return on their investment.
Reporting Requirements: The BIA requires the receiver or trustee to provide regular reports to the court and creditors, which ensures transparency and accountability in liquidating assets.
Court Supervision: The BIA provides for court supervision of the liquidation process, which ensures that the receiver or trustee is following the law and that the process is fair and orderly.

In summary, the Canadian Bankruptcy and Insolvency Act plays a critical role in liquidating assets in both receivership and bankruptcy scenarios by providing a framework for the process, protecting creditors’ interests, and ensuring transparency and accountability.

Purpose of liquidating assets in bankruptcy

The primary purpose of liquidating assets in bankruptcy is to:

Distribute the proceeds to creditors: The goal is to collect as much money as possible from the sale of assets and distribute it among creditors, including secured and unsecured creditors, under the priority of claims.
Pay off debts: Liquidating assets helps to pay off the debts of the bankrupt individual or business, allowing them to discharge their obligations and start fresh.
Provide a fresh start: By liquidating assets and paying off debts, the bankrupt individual or business can obtain a fresh start, free from the burden of debt and the stigma of bankruptcy.
Prevent asset stripping: Liquidating assets helps to prevent asset stripping, where creditors or other parties attempt to remove or sell assets for personal gain, leaving the bankrupt individual or business with little or no assets.
Ensure Equity: Liquidating assets guarantees that all creditors receive fair and equitable treatment, as the proceeds are allocated following the established priority of claims.
Provide a mechanism for debt forgiveness: In some cases, liquidating assets can provide a mechanism for debt forgiveness, where debts are written off or reduced due to the lack of assets or the inability to recover them.
Facilitate business restructuring: In the case of a business bankruptcy, liquidating assets can facilitate restructuring and reorganization, allowing the business to continue operating and creating jobs.
Protect the public interest: Liquidating assets helps to protect the public interest by ensuring that the assets of the bankrupt individual or business are not used to perpetuate fraud or other illegal activities.
Provide a mechanism for asset recovery: Liquidating assets provides a mechanism for asset recovery, where assets that were transferred or hidden by the bankrupt individual or business can be recovered and distributed among creditors.
Ensure compliance with bankruptcy laws: Liquidating assets ensures compliance with bankruptcy laws and regulations, which helps to maintain public confidence in the bankruptcy system.

Overall, the purpose of liquidating assets in bankruptcy is to achieve a fair and orderly distribution of assets among creditors, while providing a fresh start for the bankrupt individual or business.

Liquidating Assets: Role of a Trustee in Liquidation

Duties and Responsibilities of a Trustee

As a licensed insolvency trustee, my duties and responsibilities include:

To act as a fiduciary: The licensed trustee must act in the best interests of the bankrupt individual or business, and not in their interests.
To take possession of assets: The trustee must take possession of the assets of the bankrupt individual or business, including real estate, inventory, equipment, and other assets.
To inventory and value assets: The trustee must conduct an inventory of the assets and determine their value.
To determine the priority of claims: The trustee must determine the priority of claims against the assets, including secured and unsecured creditors.
To sell or dispose of assets: The trustee must sell or dispose of assets in a fair and orderly manner, often through public auction or private sale.
To distribute proceeds: The trustee must distribute the proceeds from the sale of assets among creditors, following the priority of claims.
To manage the liquidation process: The trustee must manage the liquidation process, including hiring professionals, such as appraisers and auctioneers, and negotiating with creditors.
Regular reporting: The licensed trustee is required to furnish regular reports and updates to the court, creditors, and other stakeholders regarding the progress of the liquidation process.
To ensure compliance with laws and regulations: The trustee must ensure compliance with bankruptcy laws and regulations, as well as any applicable provincial or territorial laws.
To represent the bankrupt: The trustee represents the bankrupt individual or business when liquidating assets, including negotiating with creditors and making decisions about the sale of assets. The Trustee must do so as a prudent person, but at the same time, is representing and looking out for the rights of the unsecured creditors.
To provide a fresh start: The trustee’s role is to help the bankrupt individual or business obtain a fresh start, by liquidating assets and distributing the proceeds fairly and equitably among creditors.
To maintain confidentiality: The trustee must maintain confidentiality regarding the affairs of the bankrupt individual or business.
To act impartially: The licensed trustee must act impartially and without bias in the process of liquidating assets.
To provide a fair and orderly liquidation: The trustee must provide a fair and orderly process when liquidating assets, taking into account the interests of all stakeholders.
To ensure transparency: The trustee must ensure transparency in the liquidation process, providing regular updates and reports to stakeholders.

These duties and responsibilities are outlined in the BIA and the Bankruptcy Rules and are subject to the supervision of the court.

Trustee’s role in asset valuation and sale

The LIT plays a crucial role in the valuation and sale of assets in receivership or bankruptcy. Here are some key responsibilities:

Asset Identification: The licensed trustee is responsible for identifying all assets of the bankrupt or receiver, including real estate, inventory, equipment, vehicles, and other tangible and intangible assets.
Asset Valuation: The LIT must determine the fair market value of each asset, which may involve hiring appraisers, conducting auctions, or negotiating sales with potential buyers. The goal is to ensure that the assets are valued accurately and fairly.
Asset Classification: The licensed trustee must categorize assets into different classes, such as:
- Preserved assets: Those that are essential to the business or have significant value and should be preserved for the benefit of creditors.
- Realizable assets: Those that can be sold or liquidated to generate cash for creditors.
- Non-realizable assets: Those that have little or no value and may be abandoned or written off.
Asset Sale and Liquidation of assets: The Trustee is tasked with the responsibility of conducting asset sales for liquidating assets in a timely and efficient manner, to maximize returns for creditors. This process may include:
- Auctions: The LIT may conduct public or private auctions to sell assets to the highest bidder.
- Negotiated sales: The LIT may negotiate sales with potential buyers, taking into account the asset’s value, market conditions, and the needs of creditors.
- Private sales: The LIT may sell assets privately, often to a specific buyer or group of buyers.
Asset Disposition: The LIT must ensure that assets are disposed of under the BIA and for large debtor companies, the Companies’ Creditors Arrangement Act (CCAA), as well as any applicable provincial or territorial laws.
Reporting and Disclosure: The LIT must provide regular reports to the court, creditors, and other stakeholders on the valuation, sale, and disposition of assets, as well as any issues or challenges that arise during the process.
Compliance with Court Orders: The LIT must comply with any court orders or directions regarding the valuation and sale of assets, including any restrictions or limitations imposed by the court.

Throughout the process, the licensed trusteeNsair’s must maintain transparency, accountability, and fairness, ensuring that the valuation and sale of assets are conducted in a manner that is in the best interests of all stakeholders, including creditors, the bankrupt or receiver, and other parties involved.

Now that we have gone over the basics of the liquidation of assets in a receivership or bankruptcy context, it is time to focus on the specifics of Dr. Nsair’s personal bankruptcy case.

Significance of ATB Financial as a Major Secured Creditor *Turned Un**secured Creditor*

ATB Financial’s role as a major creditor in Dr. Nsair’s bankruptcy proceedings cannot be understated. With substantial sums at stake and implications for the overall outcome of the proceedings, the actions and decisions of ATB Financial carry significant weight in determining the resolution of the case.

In reading the Judge’s Decision, it is obvious that ATB was fuming at their loss and that the Registrar decided that Dr. Nsair fully cooperated with the Trustee and deserved an absolute discharge. It is ATB Financial that appealed the Registrar’s ruling.

Liquidating Assets: Key Details and Contention Points

The valuation disagreements surrounding these condominium units added a layer of complexity to the situation, with various parties presenting differing estimates of their worth. Marketability challenges further compounded the issue, as the aftermath of the 2020 Beirut explosion cast a shadow of uncertainty over the realizable value of these properties.

Exploring the stalemate in asset realization, it became evident that the conflicting perspectives on the condos’ marketability hindered progress in the bankruptcy process. Despite efforts to assess their sale feasibility, the uncertainty surrounding their actual value created a deadlock, impeding any meaningful progress toward creditor benefit.

As a result, the Trustee decided that it could not take the risk of attempting to sell the condominium units. The Trustee wrote to all the creditors advising them of the situation and that it was not going to take any action concerning the condominium assets. The Trustee further advised the creditors that if they wished to, they could seek the Court’s permission under section 38(1) of the BIA to take on the action of selling the condos in their name. No creditors, including ATB Financial, moved on this option.

Liquidating Assets: Introduction to Dr. Nsair’s Bankruptcy Case

As I delve into the intricate details of Dr. Nsair’s bankruptcy case, it’s essential to provide a comprehensive overview of the background and the key players involved. The case of Dr. Nsair, a dentist facing challenging financial circumstances, unfolds with significant legal implications and complexities.

Dr. Nsair’s bankruptcy situation is a focal point of this case, highlighting the struggles and obligations under the BIA of an insolvent person. The involvement of ATB Financial as a major secured creditor suffering a shortfall, adds a layer of significance to the proceedings. Approximately $1.9 million was still owed after a receivership related to dental clinics operated by Dr. Nsair and his brother. Dr. Nsair’s financial difficulties continued as he guaranteed the ATB Financial debt.

However, the argument that ATB Financial put forward for their opposition to Dr. Nsair’s bankruptcy discharge leading to the appeal of the Registrar’s ruling was they felt the bankrupt did not cooperate with the Trustee enough. ATB Financial could not articulate what else the bankrupt should have done. Just that he should have done not only more, but more than what the Trustee or ATB Financial had done.

The result of all this would be that if Dr. Nsair’s discharge from bankruptcy was upheld, then the Trustee would finish the file and obtain its discharge. The BIA states that if there is unrealized property when the Trustee gets its discharge, then subject to any further directive from the Court, the unrealized property goes back to the discharged bankrupt. That got ATB Financial’s juices flowing!

Liquidating Assets: The Registrar’s Decision and Legal Interpretations

Upon assessing Dr. Nsair’s obligations and actions in the context of his bankruptcy case, it became evident that he faced many challenges. From the looming shadow of ATB Financial, a significant now unsecured creditor seeking approximately $1.9 million, to the uncertainties surrounding the commercial condominium units in Beirut, Lebanon, owned by Dr. Nsair, the stakes were undeniably high.

The Court of King’s Bench of Alberta, in its scrutiny of Dr. Nsair’s case, highlighted the delicate balance between statutory duties and the financial condition of the parties involved. It underscored the need for a nuanced approach that considers the economic uncertainties and practical limitations inherent in such proceedings.

Section 158(k) of the BIA reads as follows:

(k) aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors;

Despite the challenges faced by the Trustee and creditors, the Registrar’s decision shed light on the complexities of the situation. By delving into the legal interpretations surrounding section 158(k) of the BIA and Dr. Nsair’s obligations, the decision provided clarity on the expectations placed on individuals in bankruptcy scenarios. It emphasized the importance of aligning actions with the objectives of the Bankruptcy and Insolvency Act while acknowledging the constraints faced by all parties.

Through this lens, the Registrar’s decision not only addressed the immediate concerns raised by ATB Financial but also set a precedent for future cases involving asset realization and creditors’ benefits. It highlighted the need for a pragmatic approach that considers the practicalities of the situation while upholding the principles of fairness and justice.

Liquidating Assets: Court Ruling and Implications

One of the pivotal aspects under scrutiny was Dr. Nsair’s obligation, as outlined in section 158(k) of the BIA, to facilitate the realization of his assets for the benefit of creditors. The focal point emerged around three commercial condominium units in Beirut, Lebanon, owned by Dr. Nsair. These properties, impacted by the 2020 Beirut explosion, sparked valuation disputes, with estimates varying widely. Dr. Nsair declared the asset on his sworn Statement of Affairs and provided the Trustee with complete information about them and their legal status.

The Registrar’s ruling centred on interpreting section 158(k) and assessing Dr. Nsair’s compliance with aiding in asset realization. While ATB Financial advocated for stringent measures due to perceived inaction on Dr. Nsair’s part, they could not state what else Dr. Nsair should have done. The Registrar’s decision favoured a nuanced approach. It emphasized the practical limitations and reasonable expectations aligned with the BIA’s objectives, highlighting the complexities of balancing statutory duties with economic uncertainties.

Ultimately, the Court upheld the Registrar’s decision, emphasizing that Dr. Nsair did not breach section 158(k) by refraining from actions beyond his or the Trustee’s capacity. The directive the Court can give when the Trustee seeks its discharge, if any before condos were to revert to Dr. Nsair underscores the importance of a fair evaluation of asset realization potential for the benefit of creditors.

This case underscores the intricate dynamics of bankruptcy proceedings, showcasing the delicate balance between legal obligations, practical constraints, and economic realities. It serves as a testament to the challenges inherent in navigating asset realization in bankruptcy cases, emphasizing the need for a judicious approach that considers all stakeholders’ interests.

Liquidating Assets: Lessons Learned

As I reflect on the intricate details of the bankruptcy legal process, one key aspect that stands out is the delicate balance between statutory duties and practical limitations. The case of Dr. Nsair’s bankruptcy journey shed light on the complexities involved in asset realization and the legal interpretations surrounding it.

Throughout Dr. Nsair’s legal battle, it became evident that navigating the intricacies of the BIA requires a deep understanding of one’s statutory duties while also acknowledging the practical constraints that may hinder swift resolutions. The case exemplified the challenges faced by individuals like Dr. Nsair in fulfilling their obligations to aid in asset realization for creditors’ benefits.

One of the key takeaways from Dr. Nsair’s legal ordeal is the importance of maintaining a clear line of communication and collaboration between all parties involved, including creditors, trustees, and the Court. By aligning expectations and working towards a common goal, the process of asset realization can be streamlined, ensuring a fair and equitable outcome for all stakeholders.

Liquidating Assets: FAQ

What is the role of a receiver in a receivership case?

A receiver is appointed either privately or by the court to take possession of and liquidate the assets under receivership to satisfy the obligations owed to secured creditors.

How does financial restructuring differ from bankruptcy in Canada?

Financial restructuring involves negotiating more sustainable debt terms with creditors and taking steps towards financial sustainability under court supervision, to preserve the business as a going concern. Bankruptcy, on the other hand, involves liquidating assets of the insolvent business and distributing the proceeds to unsecured creditors.

What are the key functions of insolvency laws like the BIA in Canada?

Insolvency laws like the BIA provide frameworks and processes to help minimize the impact of business insolvency on stakeholders, make the best of a bad situation, and ensure that assets of failed businesses are returned to the economy for productive purposes.

What options does an insolvent firm have under the BIA in Canada?

An insolvent firm in Canada can opt for bankruptcy to liquidate its assets and distribute proceeds to creditors, or work with creditors to restructure their debt and continue as a going concern through commercial proposal proceedings. If the firm requires an immediate stay of proceedings, it can first file a Notice of Intention To Make a Proposal. The firm may also require interim financing otherwise called DIP financing to work through the proposal process.

How does bankruptcy liquidation contribute to marketplace dynamics in Canada?

Bankruptcy liquidation helps ensure that assets of failed businesses are returned to the economy for productive purposes, contributing to marketplace dynamics and minimizing the impact of business insolvency on stakeholders.

Liquidating Assets: Conclusion

Dr. Nsair’s bankruptcy case underscores the challenges of balancing statutory duties with practical limitations in asset realization, offering valuable insights into the intricacies of bankruptcy proceedings.

I hope you enjoyed this liquidating assets 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 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 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.

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 resulting from reliance on the information provided herein.

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IF YOU DECLARE BANKRUPTCY WHAT HAPPENS? A COMPREHENSIVE OVERVIEW

Post author By Brandon Smith
Post date July 8, 2024

if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Introduction to Financial Hardships

In life, we often face unexpected challenges that test our resilience and determination. Such is the experience of people we help who have encountered financial hardships due to an unforeseen event outside of their control such as job loss. The burden of mounting debts and looming financial uncertainty weighs heavily on people, pushing them to explore solutions that would lead them toward a path of financial recovery.

That is who we help – the honest but unfortunate debtor. Dealing with financial hardships is a journey that tests our resilience and determination. It’s a path filled with unexpected twists and turns, challenging us to find the strength within ourselves to overcome the obstacles that come our way.

People with financial difficulties, particularly in the face of job loss, credit card debts, income tax debts and the contemplation of bankruptcy, learn valuable lessons about financial recovery, overcoming challenges, and the empowerment that comes from taking control of your financial future. That and if you declare bankruptcy what happens, is what this Brandon’s Blog is about.

Impact of That Unforeseen Event Outside Of Your Control On Your Financial Situation

The impact of that uncontrollable event such as losing your job goes beyond just the loss of income. It disrupts the stability we have worked so hard to build, leaving us feeling vulnerable and uncertain about the future. When someone becomes unemployed, they struggle to make ends meet, juggling bills and expenses with a limited budget. The stress and anxiety that come with financial insecurity can be overwhelming, but it’s during these challenging times that we discover our inner strength and resilience.

Struggles with Credit Card Payments and Bills

One of the most daunting aspects of financial hardships is the burden of credit card payments and bills that seem to pile up with each passing day. People find themselves caught in a cycle of debt, where the minimum payments barely make a dent in the overall balance. The constant worry about falling behind on payments and the fear of accumulating more debt can weigh heavily on our minds, affecting our peace of mind and overall well-being.

Considering Bankruptcy as a Viable Option

When individuals are confronted with substantial debt and limited solutions, the prospect of bankruptcy may arise as a challenging but potentially necessary step toward financial recovery. In my capacity as a licensed insolvency trustee (formerly known as a bankruptcy trustee), I assist individuals through a process of thorough research and consultation. My role involves guiding and comprehending the bankruptcy process, and its ramifications and exploring viable alternatives to bankruptcy. Opting for bankruptcy is a significant decision that individuals are supported in making through a careful evaluation of their financial circumstances, prospects, and personal aspirations.

Throughout the bankruptcy process, the individuals I work with gain invaluable insights into financial empowerment and the importance of seeking assistance when encountering financial challenges. While bankruptcy may lead to temporary implications on one’s credit rating, it also presents an opportunity for a fresh start and the possibility to rebuild a secure financial foundation. Engaging in the bankruptcy process fosters financial resilience and enhances individuals’ ability to navigate future financial decisions effectively.

If You Declare Bankruptcy What Happens? Exploring Options: The Role of Licensed Insolvency Trustees

A journey towards financial recovery will lead you to a consultation with a licensed insolvency trustee. This no-cost initial consultation will become a guiding light offering insights and solutions to your financial challenges.

Engaging in consultations with a licensed insolvency trustee marks a crucial juncture in your financial path. Our proficiency and empathy equip debtors to comprehend the various solutions at their disposal and make well-informed choices regarding their financial destiny. By engaging in transparent and candid dialogues, you acquire the requisite insight to navigate the intricate bankruptcy process with strength and resolve.

In your journey towards your financial empowerment, the Trustee serves as a pivotal figure in facilitating the bankruptcy application process with the Office of the Superintendent of Bankruptcy Canada (OSB) and guiding you every step of the way. By taking this initial step, you are relieved of the responsibility of making direct payments to unsecured creditors and are granted a stay of proceedings, preventing creditors from initiating or pursuing collection or legal actions against you. This offers a sense of comfort and security, shielding you from additional financial pressures.

Despite the challenges you may be facing, you will find solace in knowing that certain assets may be safeguarded by provincial and federal laws, ensuring a measure of stability during this turbulent time. The Trustee’s guidance on surplus income payments, credit counselling sessions and debt repayment strategies instills a sense of discipline, confidence and commitment toward overcoming financial obstacles.

While the journey toward financial recovery may have its hurdles, the Trustee reassures you that every step taken will lead you closer to a brighter future. Though some people may have a narrow category of debts that may not be discharged, the prospect of rebuilding your financial foundation fills you with hope and optimism.

Through this experience, will learn that resilience in finance is not just about overcoming challenges but also about embracing the opportunity for growth and renewal. As you navigate through the bankruptcy process support provided by the Trustee paves the way for a new beginning filled with hope and possibilities.

If You Declare Bankruptcy What Happens? What is bankruptcy?

Definition of bankruptcy

Canadian bankruptcy is a legal process where an individual, a business or a company declares they are insolvent and are unable to meet their financial obligations. They work with a licensed insolvency trustee to legally file an assignment in bankruptcy. They do so to assign their unencumbered assets to the Trustee and get relief from their overwhelming debt load.

Laws governing bankruptcy in Canada

Navigating the intricate realm of bankruptcy in Canada is a dance choreographed by the Bankruptcy and Insolvency Act (Canada) (BIA). This piece of legislation orchestrates the delicate balance between debtors, creditors, and Trustees, each playing a unique role in the bankruptcy waltz.

When a debtor takes the courageous step of filing for bankruptcy, they are required to bear their financial soul to the Trustee, laying out their assets, liabilities, and monetary intricacies. The Trustee, like a wise conductor, then ensures a harmonious distribution of the debtor’s assets among their creditors, aiming to untangle the financial web that binds them.

For individuals, bankruptcy offers a chance at rebirth, a fresh canvas on which to paint a new financial future. However, for a company or business, it may signify the final curtain call for that legal entity. Yet, there exists a glimmer of hope in the form of selling core assets to a willing successor, potentially salvaging jobs and keeping the business flame alive.

In this intricate ballet of financial redemption, the Bankruptcy and Insolvency Act stands as the maestro, guiding the players toward a resolution that seeks to balance the scales of financial responsibility.

If You Declare Bankruptcy What Happens? Who qualifies for bankruptcy?

Criteria for qualifying for bankruptcy

In Canada, debtors facing significant debt challenges and unable to meet their financial obligations to creditors may be eligible for bankruptcy relief. To qualify for bankruptcy, debtors must have a minimum of $1,000 in unsecured debt and have been residing in Canada for at least the previous six months before filing, or have a substantial connection to the country.

Alternatives to bankruptcy – Individuals

Depending on how pressing the person’s debts are, there are several alternatives to personal bankruptcy that a licensed insolvency trustee can walk you through. The most common alternatives are:

Credit counselling and budgeting assistance: Sometimes people just need help understanding where their family income comes from and how it is spent. In cases like this, going to a non-profit credit counselling service to get some tips and help in developing a monthly household budget and sticking to it is all that is necessary for the household to get back on track.
Debt consolidation: If you still can borrow money at a rate lower than the amounts you are currently being charged on high-interest-rate credit cards and payday loans, you need to look at debt consolidation. Rather than having several to many high-rate debts, if you can borrow the total amount of your debt from a bank or credit union at a much lower rate than you are currently paying and use that new loan to pay off your high-interest rate debts, that will help immensely. Now you have one lower interest rate loan to repay.
Consumer proposal: A consumer proposal is a formal filing under the BIA, however, it is not bankruptcy. It is where you make a contract with your creditors to pay less than you owe in total. It is based on your monthly income, to offer making monthly payments to the Trustee towards your debt. Normally you pay around 25% of your total debt to the Trustee. If your creditors agree, you can take up to 60 months to complete a consumer proposal. When you have finished making your payments, you get a Certificate of Full Performance and the balance of your debt is wiped away.

Alternatives to bankruptcy – Companies

Asset sales: Are there underused or redundant assets in the company that could be sold to raise needed cash to significantly reduce or eliminate corporate debt? This should first be explored.
Refinancing: Can the company refinance to take advantage of a loan opportunity that will help with its cash flow through lower interest, monthly payments or both? Retiring expensive debt and replacing it with more manageable debt is another avenue to explore.
Formal restructuring – BIA Proposal: Companies that have a viable but insolvent business can look at a formal restructuring. Although it is an alternative to avoid bankruptcy, it is commonly referred to as bankruptcy protection. A proposal under the BIA is where the company can negotiate with creditors to come up with a plan to repay its debts over some timeperiod of time. Just like in a consumer proposal, the company pays less than 100% of its debt load, but upon completion, eliminates all of its unsecured debt.
Formal restructuring – Companies’ Creditors Arrangement Act (CCAA): Companies that owe $5 million or more can also restructure as long as they have a viable business. The CCAA allows a company to restructure its debts and business operations under the supervision of a court-appointed monitor. It is essentially the same as a BIA Proposal, but just under a different Canadian statute.
A BIA Proposal and a CCAA restructuring a similar processes you always hear under the US bankruptcy law of bankruptcy chapter 11.

If You Declare Bankruptcy What happens to your assets, debts, and income during bankruptcy?

Going through a financial crisis can be incredibly challenging, but it’s important to remember that there is always a way forward. The people we help who go through the bankruptcy process are a testament to the resilience in finance and the power of financial empowerment as they use bankruptcy to turn their lives around.

Treatment of assets in bankruptcy

One of the concerns people have when considering bankruptcy is what happens to their assets. When someone goes bankrupt, they may not have to give up all of their assets. Let me explain as follows:

Secured debts: When you have assets where there are secured loans against those assets, such as a house or a motor vehicle, the Trustee’s interest is only the bankrupt’s equity in that asset. If there is little or no equity, and your monthly budget shows that you can afford to make the monthly loan payments and you wish to keep the asset, then you can do so. The Trustee will discuss with you ways in which the Trustee can realize the bankrupt’s equity without that asset being taken away.

Exempt assets: Certain provincial and federal laws safeguard some of your possessions when you file for bankruptcy. As provincial laws vary, you need to get the complete list from a licensed insolvency trustee in the area where you live.

Non-exempt assets: Non-exempt assets refer to assets owned by a bankrupt individual that are not protected by a secured creditor’s security interest or are exempt under provincial or federal laws. These assets fall within a category that the Trustee must liquidate to benefit the creditors involved in the bankruptcy proceedings.

Treatment of debts in bankruptcy

Once the bankruptcy application is filed with the OSB, a significant burden is lifted off the bankrupt’s shoulders. Direct payments to creditors cease, and the Trustee notifies all the creditors and there is an immediate stay of proceedings.

This means that any legal actions cannot be commenced or continued against the bankrupt and all collection activities, such as wage garnishment are put on hold. This offers the person much-needed relief from the constant financial pressure.

Some debts cannot be discharged, such as alimony, child support, valid secured loans and certain types of student loans. A Trustee in your no-cost initial consultation will look at the details of your debts and advise you if any would not be discharged from your bankruptcy estate.

While the decision to make the bankruptcy filing may seem daunting, it is a necessary step toward regaining control of your finances and eliminating the stress in your life. Knowing that your wages are protected from garnishment provides a sense of security during this challenging time.

Treatment of income during bankruptcy

While in bankruptcy, the Trustee monitors the person’s monthly income and expenses. The Trustee is required by the OSB and under the BIA, to do a calculation to determine if the bankrupt person has sufficient income to contribute towards his or her total debts by making surplus income payments to the Trustee.

The Trustee is required to do this calculation both at the time of the bankruptcy filing and throughout the time the person is an undischarged bankrupt. If the person’s income changes, either up or down, this will affect the calculation.

Although judgment creditors cannot garnish wages, it is possible that until the person gets their bankruptcy discharge, they may have to contribute something from their monthly income under the surplus income calculation. A licensed insolvency trustee can explain the calculation to you.

If You Declare Bankruptcy What Happens? How long does personal bankruptcy last?

Personal bankruptcy typically lasts for 9 months for a first-time bankrupt in Canada. Your first-time bankruptcy will extend to 21 months if you have to pay surplus income. If this isn’t your first bankruptcy, it will last longer.

At the end of this time, if you have fulfilled all of your bankruptcy duties and neither the Trustee nor any creditor who has proven their bankruptcy claim opposes your discharge, then you are entitled to your bankruptcy discharge. It is at the time you receive your discharge from bankruptcy, that your debts can be discharged.

If You Declare Bankruptcy What Happens? What Are Your Duties During Bankruptcy?

Responsibilities and obligations during bankruptcy

The primary responsibilities entail the disclosure of all assets, liabilities, income, and expenses. It is required to provide bank statements and other relevant records to support the information provided. In the event of a creditors’ meeting, attendance is mandatory.

Attendance at credit counseling sessions

Participating in the two mandatory counselling sessions is an essential component of a bankrupt’s journey toward financial recovery. Each counselling session is held with a person from the Trustee’s office who the OSB has licensed as a credit counsellor.

If You Declare Bankruptcy What Happens? What Is The Impact On Your Credit Score?

Impact on credit score during and after bankruptcy

Filing for bankruptcy in Canada can have a significant impact on your credit score, both during and after the bankruptcy process. Here’s a breakdown of what you can expect:

During Bankruptcy:

Initial Credit Score Decline: Upon filing for bankruptcy, it is common for individuals to experience a substantial decrease in their credit score, typically by 100-200 points or more. This decline is largely attributed to the fact that bankruptcy is a matter of public record, leading lenders to perceive it as a high-risk event.
Credit Reporting: Your credit report will reflect the bankruptcy filing and remain on your report for at least 6 years from the date of discharge (more on discharge below).
Credit Inquiries: Lenders may conduct credit inquiries to assess your creditworthiness, which can further lower your credit score.

After Bankruptcy:

Credit Score Recovery: After bankruptcy, your credit score will gradually recover over time. The rate of recovery depends on your credit habits and the steps you take to rebuild your credit (see next discussion).
Credit Reporting: The bankruptcy notation on your credit report will remain for roughly 6 years from the date of discharge. After that, it will be removed from your report.
Credit Score Objectives: Strive to attain a credit score ranging between 600 and 650 within 2-3 years post-bankruptcy. This will enhance your eligibility for improved loan conditions and interest rates.

Discharge:

In Canada, bankruptcy typically lasts for 9-21 months, depending on your financial situation and the type of bankruptcy you file for (e.g., consumer proposal or personal bankruptcy). Once you’ve completed the bankruptcy process and received a discharge, the bankruptcy notation will be removed from your credit report.

Rebuilding credit after bankruptcy

Tips for Rebuilding Credit After Bankruptcy:

Monitor your credit report: Conduct a thorough review of your credit report to verify its accuracy and pinpoint any potential areas for improvement.
Make on-time payments: It is imperative to make payments on time for all financial obligations to showcase a commendable track record of credit responsibility.
Keep credit utilization low: Maintain a disciplined approach to managing credit by ensuring your credit utilization remains low and refraining from excessive spending. Additionally, exercise caution when seeking new credit opportunities by minimizing credit inquiries and refraining from submitting multiple applications within a condensed timeframe.
Avoid new credit inquiries: Limit the number of credit applications you make and try to avoid applying for multiple credit products within a short timeframe. This will help you maintain a stable credit profile and minimize the impact of new credit inquiries on your credit score.
Credit Score Rebuilding: If you’re looking to improve your credit after facing financial challenges, some practical steps you can take include applying for a secured credit card, becoming an authorized user on a family member’s credit account, or taking out a small loan. One relatively accessible option post-bankruptcy is getting an RRSP loan, where the RRSP is held at the same financial institution you’re borrowing from.

These kinds of loans must normally be repaid within 1 year. Making all loan payments on time and doing the same thing again the following year not only will rebuild your credit, but also build your savings.

If You Declare Bankruptcy What Happens? What are the consequences for your spouse’s credit and assets?

Spouse’s liability for joint debts

In Canada, when one spouse files for bankruptcy, sometimes it can have consequences for the other spouse’s credit and assets, depending on the type of bankruptcy and the couple’s financial situation. Here’s a breakdown of the most common issues.

Credit Score Impact: The non-bankrupt spouse’s credit score could be affected if they are jointly liable for certain debts with the bankrupt spouse. This is because it may view the non-bankrupt spouse as being the next to default.
Joint Debts: If the couple has joint debts, such as a mortgage, car loan, or credit card, the non-bankrupt spouse will still be responsible for paying those debts. This is because joint debts are considered a shared responsibility.
Assets at Risk: Any of the non-bankrupt spouse’s assets that are jointly owned with the bankrupt spouse, will be at some level of risk. For example, if the couple owns a jointly held property, the Trustee must recover the non-exempt equity of the bankrupt spouse’s assets. In jointly held property, this will on a practical level impact and involve the non-bankrupt spouse, who is the natural purchaser of the bankrupt spouse’s equity.
Credit Reporting: The non-debtor spouse’s credit report may reflect the bankruptcy filing depending on the type of bankruptcy, the credit reporting agency and any joint debts or debts guaranteed by the non-bankrupt spouse.

Types of Bankruptcy and Their Impact on the Non-Debtor Spouse

Consumer Proposal: A consumer proposal is a debt settlement agreement between the insolvent spouse and their creditors. In this case, the non-insolvent spouse is not directly affected by the consumer proposal filing, but they may still be responsible for paying joint debts.

Personal Bankruptcy: Personal bankruptcy is a more severe type of bankruptcy that involves the liquidation of assets to pay off debts. In this case, the non-insolvent spouse’s assets may be at risk if they are jointly owned by the bankrupt spouse.

Protection of spouse’s assets during bankruptcy

The time to put plans in place to protect the assets of each spouse is upon the acquisition of each asset when neither spouse is insolvent. Any transfers of assets aiming to shield them from creditors, will not be successful. Here are some tips:

Separate Property: If the non-insolvent spouse has separate property, such as a separate bank account or a separate property, it is generally protected from the bankrupt spouse’s creditors.

Exemptions: In Ontario, individuals going through bankruptcy can keep certain assets as exempt property. These include household furnishings and appliances valued up to $14,180, livestock, tools, and other items used in farming up to $31,379 for farmers, tools of trade up to $14,405 for self-employed individuals, one motor vehicle worth up to $7,117, equity in a primary residence not exceeding $10,783, and funds in registered plans like RRSPs, RRIFs (other than contributions in the 12 months preceding the bankruptcy), and life insurance policies with designated beneficiaries such as a parent, spouse or child.

Credit Counseling: Additionally, credit counselling might be a good idea for the non-bankrupt spouse.

If You Declare Bankruptcy What Happens After You Are Discharged From Bankruptcy?

Discharge from bankruptcy

The effects of an absolute discharge from personal bankruptcy for the person are substantial. As soon as an outright discharge is granted, the debtor is no longer accountable for any type of unsecured debts that existed at the date of bankruptcy (with a few specific exceptions). The debtor is launched from needing to pay back debts that they took on before applying for bankruptcy.

This indicates that the debtor no longer has to stress over paying back those financial debts and can move on with their life. This supplies a clean slate for the borrower and helps them return to their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged? If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9-month bankruptcy period. To qualify for this automatic discharge, you must have:

attended the two mandatory financial counselling sessions with the Trustee;
no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate
according to guidelines set by the OSB or Official Receiver); and no opposition to his or her discharge. The only party that can authorize an
automatic discharge
in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

Rehabilitation and rebuilding finances after bankruptcy – A Path to Financial Freedom

Rehab after personal bankruptcy entails a combination of finance management, debt administration, and as indicated above, credit rebuilding. The goal is to produce a sustainable economic strategy that permits you to manage your debt, reconstruct your credit, and achieve lasting financial security.

The key steps to rehabilitation are:

Get your bankruptcy discharge: Attend the two mandatory financial counselling sessions with your licensed insolvency trustee firm, fulfill all your other duties in the bankruptcy administration and obtain your discharge from bankruptcy
Create a Budget: Continue tracking your income and expenses to identify areas where you can cut back and allocate funds more effectively. A budget will help you prioritize your spending and make informed financial decisions.
Prioritize Debt Repayment: Focus on starting within your budget spending so that you can pay your bills every month on time in full.
Rebuild Credit: Use the tips I listed above to rebuild your credit.
Screen Credit Reports: Obtain a duplicate of your credit report and correct any type of mistakes or errors to guarantee your credit score is accurate.
Seek Professional Guidance: If you feel you need an element of accountability to help you in your rehabilitation, seek out a non-profit credit counsellor or financial coach to give you personalized guidance and support to help you navigate the rehabilitation process and achieve your financial goals.

Rehabilitation after bankruptcy can have numerous benefits, including:

Improved credit scores
Reduced debt burden
Increased financial stability
Greater financial flexibility
A fresh start
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Looking Towards a Brighter Future Conclusion

The people we help through personal bankruptcy for their journey of financial recovery are filled with a sense of gratitude and hope. The impact of understanding their credit rating, navigating the bankruptcy process, and embracing the steps toward recovery are profound. It not only tests their resilience in finance but also empowers them to envision a brighter future filled with possibilities through a fresh start.

I hope you enjoyed this if you declare bankruptcy what happens 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.

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 resulting from reliance on the information provided herein.

Tags alternatives to bankruptcy, Bankruptcy, bankruptcy discharge, bankruptcy duties, bankruptcy process, bankruptcy protection, Canada, credit counsellor, debt relief, exempt assets, financial recovery, If you declare bankruptcy what happens, Ira Smith Trustee, licensed insolvency trustee, non-exempt assets, personal bankruptcy, surplus income, what happens when you declare bankruptcy

Brandon Blog Post

COMPANY IS BANKRUPT: A COMPLETE GUIDE TO BANKRUPTCY SALES FOR BUYERS

Post author By Brandon Smith
Post date May 27, 2024

company is bankrupt

An Introduction to Company Is Bankrupt Asset Sales

On May 13 of this year, I published Brandon’s Blog titled: NAVIGATING THE STALKING HORSE OFFER LEGAL MAZE: THE TOOL SHED BREWING BANKRUPTCY PROTECTION EXPERIENCE. This week I am expanding on that specific Brandon’s Blog to comment on bankruptcy asset sales in general.

For anyone interested in strategic acquisitions and investment opportunities, exploring bankruptcy sales can offer a unique avenue to acquire assets at distressed pricing. In this Brandon’s Blog, I delve into the intricacies of bankruptcy sales, particularly focusing on buying assets when a company is bankrupt in Ontario, to provide you with a comprehensive understanding of the process and considerations involved.

Types of Bankruptcy

Let’s embark on this journey together to unlock the potential of acquiring assets through bankruptcy sales. When I use the term “bankruptcy sale”, I mean all the various types of bankruptcy or insolvency processes. It could be in the context of a sale of assets by a court-appointed receiver or even the company that has filed for restructuring under bankruptcy protection and is looking to sell assets out of the ordinary course of business.

For this Brandon’s Blog, you can consider it to mean any court-supervised insolvency process, be it out of a sale of assets when the company is bankrupt or in receivership under the Bankruptcy and Insolvency Act (Canada) (BIA). The issues are the same be it a bankruptcy or receivership.

When delving into the realm of bankruptcy sales, one encounters a landscape that offers both challenges and opportunities. The allure of acquiring distressed assets at potentially discounted prices is undeniable. Picture this: a sales process setting where bidders, including yourself, have the chance to engage in a fair competition, armed with the ability to conduct due diligence and submit bids for coveted assets. Such is the essence of a bankruptcy sale.

A bankruptcy sale isn’t just a run-of-the-mill transaction; it is a meticulously structured process governed by legal frameworks and case law. The principles applied from the leading case law act as a guiding light, laying down the procedures for sales that occur outside the typical course of business. It sets the stage for a structured process where the highest or best bid, subject to stakeholder approval, court approval, or both, emerges victorious.

The pivotal role of court approval in sale transactions cannot be overstated. It serves as the ultimate checkpoint, ensuring that the sale is conducted by the law and safeguarding the interests of all parties involved. Court approval is not merely a stamp of approval. The Court will only add its layer of legitimacy and finality to the transaction after it is satisfied that all legal standards have been met, assuring buyers of the validity of their acquisitions and unsuccessful buyers that the process was fair and transparent.

In the realm of bankruptcy sales, one must navigate the terrain with caution. While the prospect of purchasing assets free and clear of all creditor claims and liens is enticing, there are caveats to consider. Assets are typically sold in an “as-is, where-is” condition, with limited assurances from the licensed insolvency trustee who is the seller. The pace of proceedings is expedited, leaving little room for post-closing recourse or exhaustive due diligence.

Balancing these nuances is crucial for bidders eyeing strategic acquisitions in the bankruptcy sales arena. It requires a blend of foresight, adaptability, and a keen understanding of the intricacies of the process. Join me as we unravel the layers of bankruptcy sales and explore the dynamic landscape governing these kinds of transactions in Canada.

Benefits and Downsides of Court-Supervised Sales When a Company is Bankrupt

As someone deeply involved in the field, I often find myself exploring the nuances of court-supervised sales, delving into their advantages and potential pitfalls. Let’s take a closer look at the intricacies of this unique opportunity.

Advantages of Purchasing Assets through Court-Supervised Sales

When I consider the benefits of acquiring assets from court-supervised insolvency process sales, one key advantage stands out – the opportunity to acquire assets at potentially distressed pricing. This presents a unique chance to make strategic acquisitions at potentially lower costs, providing a competitive edge in the market.

Moreover, the level playing field offered by court-supervised sales allows bidders to engage in fair competition, conduct thorough due diligence albeit in an environment where as much information as you would like may not be available, and submit bids directly to the licensed insolvency trustee. The ability to purchase assets free and clear of the company’s financial obligations and the secured debts and unsecured debts, with the transaction receiving court approval, provides a sense of finality and security that is highly valuable in such transactions.

Limitations and Challenges in Court-Supervised Sales

However, in the realm of Court-supervised sales, you need to be acutely aware of the limitations that come with this process. Assets in bankruptcy sales are always sold “as-is, where-is,” with such limited representations and warranties from the licensed insolvency trustee seller, there are essentially none. This, coupled with the fact that the licensed insolvency trustee was not the operator of the business utilizing those assets where the company was bankrupt. This makes due diligence both critical and yet challenging. The expedited timeline and lack of post-closing recourse further adds complexity to the transaction.

Additionally, since the company is bankrupt the buyer needs to bid without the safety net of due diligence and financing contingencies, which can be a daunting prospect. Balancing these limitations against the potential benefits requires a keen eye for detail and a strategic mindset.

Balancing Pros and Cons for Strategic Bidders

For strategic bidders, finding the equilibrium between the pros and cons of court-supervised sales is crucial. Evaluating the cost-benefit ratio, understanding the bidding process, and complying with the court-approved terms and conditions of sale are all essential steps in the process.

Navigating this complex landscape requires a strategic approach. By weighing these factors thoughtfully, the buyer must aim to make informed decisions that lead to successful and accretive acquisitions through the court-supervised sales process.

Company is Bankrupt: Tactical Considerations for Potential Bidders

If you are someone considering participating in a bankruptcy sale, understand the unique opportunity it presents to potentially acquire assets at favourable pricing. This process allows you to compete on a level playing field with other bidders, conducting due diligence and submitting bids directly to the licensed insolvency trustee.

One significant advantage of a bankruptcy sale is the ability to purchase assets free and clear of all creditor claims and liens, as finalized through court approval. The money you pay as the winning bidder stands in place of the assets. However, there are essential aspects to consider before diving into this opportunity.

Cost-Benefit Analysis of Participating in the Sale Process: Before getting involved, you need to evaluate the cost versus benefit of participating in the sale process. Understanding the potential risks and rewards is crucial for making informed decisions.

Key Elements of the Bidding Procedures: To make a successful bid, you must ensure that it meets all the necessary criteria and complies with the bidding procedures governing the bankruptcy sale. This requires attention to detail and a clear understanding of the requirements.

Strategies for Successful Participation in Bankruptcy Sales: To navigate the bankruptcy sale process effectively, you need to develop strategies that can help you stand out among other bidders. This involves setting clear goals, assessing the competition, and being prepared to act decisively.

By considering these tactical aspects carefully, you can position yourself for a successful experience in a bankruptcy sale. It’s about weighing the pros and cons, understanding the process, and strategizing effectively to make the most out of this unique opportunity.

Company is Bankrupt: What the Court Requires

Being involved as a bidder in bankruptcy sales can be both exciting and daunting, laden with unique challenges and opportunities. Let’s delve into the intricacies of what the Court requires for the legal process to approve a particular sales process and sale of assets when the company is bankrupt or in receivership.

The Soundair principles

The Soundair principles are a collection of lawful standards developed by the Court of Appeal for Ontario in 1991 in the case of Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). These principles are followed by all Canadian courts.

The Soundair principles are aimed at creating fairness and transparency in the sale of assets throughout bankruptcy or receivership cases. Thirty-one years later, it is still the leading case in Canadian insolvency asset sales rules and regulations. These concepts guide courts in evaluating whether the sale procedure carried out by a receiver (or a trustee in bankruptcy) has been fair and suitable.

Here are the Soundair principles in detail:

Diligent Efforts to Secure the Best Price: The receiver/trustee is obliged to exert sensible efforts to secure the highest possible price for the assets for the general benefit of creditors. This entails thoroughly advertising the assets for sale, soliciting competing bids, and ensuring that prospective purchasers are provided with sufficient information to submit proper offers to purchase. The goal is to get the highest sales price possible under the circumstances, to maximize the return for the benefit of creditors.

Fairness and Integrity in the Sale Process: It is essential to give all interested parties an equivalent opportunity to join the sales process and to avoid any potential purchaser from obtaining an unreasonable edge. Transparency and impartiality are vital, and conflicts of interest cannot be tolerated.

All Stakeholders’ Interests: The receiver/trustee must look out for the interests of all parties, secured creditors and unsecured creditors, shareholders, and any other appropriate stakeholders. It is very important for the licensed insolvency trustee to avoid preference for any party and to strive for a fair equilibrium of the interests among everybody affected because the company is bankrupt.

Input from significant creditors: This is a crucial consideration for the licensed insolvency trustee. While the trustee retains the ultimate decision-making authority, it is essential to carefully weigh and consider the recommendations and preferences of major creditors. Given that these creditors will bear financial implications based on the sale outcomes, their input carries substantial significance in the decision-making process.

Application of the Soundair principles

In practice, when a sale of assets is held because the company is bankrupt or in receivership, there are two stages of court review. First, the licensed insolvency trustee needs to get approval for the actual sales process itself. Then, the Court will review the process as implemented by the licensed insolvency trustee.

The Court’s reviews are to ensure conformity with these Soundair principles. This is the case if this is not a sale at arm’s length purchaser. The court will take into consideration the following elements:

Marketing Efforts: How the assets were advertised and marketed, including the period and reach of the advertising and marketing initiatives.

Number and Quality of Offers: The variety of offers obtained and whether they reflect reasonable market price. To assist the Court in determining the reasonableness of the offers received, the Trustee must provide evidence to the Court. An independent appraisal of the assets and other market data is the normal kind of evidence usedwhat a fair valuation of the assets is.

Transparency: Whether the sale process was conducted fairly and transparently, with appropriate details provided to all possible purchasers.

Stakeholder Consultation: Whether the licensed insolvency trustee has spoken with and taken into consideration the views of significant creditors and other stakeholders.

Authorization of Sale: Whether the proposed sale is supported by the significant creditors or as a minimum, is not being opposed.

The Soundair principles assist when a company is bankrupt or in receivership, in guaranteeing that the sale of assets in an insolvency context is carried out in a fashion that maximizes value, keeps fairness, and appreciates the interests of all the major stakeholders. By adhering to these concepts, the court aims to supply confidence in the integrity and fairness of the process and protect the rights of all stakeholders.

Company is Bankrupt: Navigating Contracts and Leases

When it comes to Court-approved sales in bankruptcy proceedings, sometimes some contractual commitments or leases are in place. Even though the company is bankrupt or in receivership, a purchaser of the assets may need some or all of those contracts or leases to make the purchasing of those assets make sense. Expressed another way, having the assets may not be enough.

Having the rights and responsibilities that come with those contracts and leases may be required. Navigating contracts and leases is a crucial aspect that requires careful consideration and strategic decision-making. Let’s delve into some key points related to this intricate process.

Options Regarding Contracts and Leases

There are 2 primary options regarding contractual commitments and leases: rejection or assignment and assumption. Each option comes with its own set of implications and considerations that need to be weighed meticulously. Making the right choice can significantly impact the outcome of the sale process and the overall success of the bankruptcy proceedings.

Practical Challenges Regarding Contracts and Leases

There are some practical challenges regarding contracts and leases as follows:

Rejection: If there are contracts or leases that a purchaser does not require, this is the simplest. The purchaser will not purchase the licensed insolvency trustee’s right, title and interest, if any, in those obligations. By not purchasing those rights, the purchaser will simply not deal with them. The licensed insolvency trustee, acting as the receiver or bankruptcy trustee, will either ignore them or will formally reject them. Any rejection or repudiation will occur as part of the sales process.

Any claims by the party that contracted with the debtor company will be an unsecured claim caught in the court-supervised insolvency process as against the company and therefore, as against the pool of money obtained through the sales process. The Court will ultimately approve the distribution of funds by the Trustee, so the lessor/contracting party will be out of the money if the secured creditors suffer a shortfall.

Assumption and Assignment: One major challenge is determining whether contracts and leases can be assigned to the purchaser. In many cases, contracts contain anti-assignment clauses that prohibit transfer without consent from the other party.

Termination Rights: Contracts and leases might have termination clauses that can be triggered by the insolvency or the sale itself, complicating the continuity of these agreements.

Negotiating Consents: Obtaining necessary consents from counterparties to contracts and leases can be time-consuming and uncertain. Counterparties may demand changes to terms or additional payments as a condition for their consent. These negotiations normally are in addition to the process of purchasing the assets and do not involve the licensed insolvency trustee administering the sales process because the company is bankrupt or in receivership.

Legal Challenges: Even if a Trustee can theoretically assign a contract or lease, the counterparties might contest this in court, leading to potential delays and additional legal costs.

Successfully navigating contracts and leases in Canadian insolvency court-supervised sales requires a comprehensive understanding of the legal framework, meticulous attention to detail, and strategic decision-making. By carefully evaluating the options available, addressing challenges proactively, and adhering to legal requirements, potential purchasers can enhance the efficiency and efficacy of the sale process, ultimately maximizing the value of assets and securing a successful outcome in the proceedings.

Company is Bankrupt: Considerations for Governmental Approvals and Regulatory Reviews

Certain industries are regulated under provincial or federal government licenses or approvals. Purchasing the assets when a company is bankrupt or receivership is not enough to operate the business itself. The business operations require government approval. It is of paramount importance to navigate governmental approvals and regulatory reviews. These considerations are not mere formalities but critical steps that can significantly impact the success of the sale process.

Importance of Regulatory Approvals in Bankruptcy Sales: In the realm of bankruptcy sales, regulatory approvals play a pivotal role in ensuring that the transaction complies with all necessary laws and regulations. These approvals act as safeguards to protect the public. A prudent purchaser will make such regulatory approvals a buyer’s condition to purchase the assets.

Sometimes, such as my receivership file I referenced in my stalking horse Brandon’s Blog, we purposely made it a condition that the buyer is solely responsible for obtaining the necessary regulatory approval and not obtaining it is not a reason the purchaser can rely upon to not complete the transaction. The reason we did this is because we did not want the sale of assets to be conditional on obtaining regulatory approval. In such a circumstance, the purchaser must understand this and have a high expectation that they will be approved.

Transition Services Agreements for Regulated Industries: Operating in regulated industries adds another layer of complexity to bankruptcy sales. A sophisticated purchaser will recognize that they may need a transition services agreement as a crucial mechanism to facilitate the seamless transfer of assets while adhering to industry-specific regulations and requirements. These agreements outline the terms under which services will be provided post-sale, ensuring continuity and compliance.

Navigating Foreign Purchasers and Regulatory Requirements: Dealing with foreign purchasers introduces a host of additional challenges, particularly in terms of regulatory compliance. Understanding and adhering to the specific requirements imposed by different jurisdictions is vital to the sale’s success. Navigating these regulatory landscapes demands meticulous attention to detail and a comprehensive understanding of international laws. As the licensed insolvency trustee seller, it would be my preference to not sell to a foreign purchaser and have the sale hung up for a lengthy time pending the outcome of the regulator’s review of the suitability of the foreign purchaser.

Being mindful of these aspects is not just a matter of legal obligation but a strategic imperative. Failing to secure necessary approvals or overlooking regulatory nuances can derail the entire sale process, leading to potential legal repercussions and financial setbacks.

As someone immersed in the complex world of bankruptcy sales, I recognize the delicate balancing act required to maneuver through governmental approvals and regulatory reviews successfully. A purchaser needs to be informed, proactive, and meticulous in its approach, aiming to navigate these intricate processes with precision and expertise. If I must recommend a foreign purchaser in the sale of assets used in a regulated industry, I must have confidence in the purchaser’s ability to navigate the governmental approval process.

Company is Bankrupt: Addressing Liabilities Affecting Bankruptcy Sales

It’s important to recognize the significance of addressing potential liabilities throughout the process. One key aspect that stands out is the need for thorough identification and mitigation of these liabilities, ensuring a smooth and successful acquisition. As stated above, most liabilities of the company are caught in the bankruptcy estate or receivership process.

The sales of assets vests them out of the company to the purchaser and the money obtained from the sale stands in its place. The licensed insolvency trustee must then make its recommendation to the Court for the distribution of the money as the priorities require.

However, sometimes some liabilities may on a practical level make it difficult to use the assets as an operating business, without addressing certain liabilities. Here are some essential talking points to consider:

Identification and Mitigation of Potential Liabilities: Before diving headfirst into a bankruptcy sale, it’s crucial to conduct a comprehensive review of potential liabilities associated with the assets up for acquisition. Identifying any existing or potential risks early on allows for strategic planning to mitigate these liabilities effectively.

Thorough Due Diligence and Legal Counsel Consultation: Engaging in thorough due diligence, possibly with the support of legal counsel, can provide valuable insights into the liabilities that may not be immediately apparent. Legal experts can offer guidance on navigating complex legal frameworks and ensuring compliance with regulatory requirements.

Understanding Exceptions to ‘Free and Clear’ Asset Sales: While the concept of purchasing assets ‘free and clear’ in a bankruptcy sale may seem straightforward, it’s essential to be aware of exceptions that could impact the transaction. Certain liabilities, such as environmental issues, may not be absolved despite the ‘free and clear’ nature of the sale. Also, the business may be reliant on one or two essential suppliers and without their cooperation, it will be impossible to operate a business utilizing those assets.

The concerns and interests of such creditors who cannot be replaced going forward in the business operations and their respective unsecured creditors’ claims must be addressed before completing the purchase of the assets.

By paying close attention to these critical aspects, potential buyers can approach bankruptcy sales with a well-rounded strategy, safeguarding their interests and minimizing potential risks. Collaborating with legal experts and conducting in-depth due diligence are pillars of success in navigating the complexities of bankruptcy sales.

Company is Bankrupt: The Insolvency Process and Sale Order Approval

When diving into the world of bankruptcy sales, there is a mix of thrill and caution that comes with the territory. It’s a realm where opportunities to acquire assets at distressed pricing collide with the need for strategic decision-making and quick actions. You see, a bankruptcy sale isn’t your run-of-the-mill transaction – it’s a structured process overseen by the Bankruptcy Court, designed to ensure fairness and transparency for all parties involved.

As I take you through the stages where the company is bankrupt, the bankruptcy process, the role of the Bankruptcy Court in sale order approval, and the key milestones in bankruptcy asset sales, you’ll start to see the intricate dance that occurs in the world of distressed asset acquisitions.

Stages of the Bankruptcy Process

Filing for Bankruptcy: It all begins with the company filing for bankruptcy (or being placed into a court-supervised receivership) overseen by the Bankruptcy Court.

Approval for the Sales Process Including the Bidding Procedures: Once the company is bankrupt or in a court-supervised receivership, the licensed insolvency trustee will seek approval for the sales process including the bidding procedures from the court, setting the stage for the asset sale process.

Marketing Assets: With the court’s approval, the licensed insolvency trustee starts marketing the assets to potential buyers, generating interest and gathering bids for the distressed assets.

Receiving Bids: Prospective buyers submit their bids, each vying for the opportunity to acquire the assets through the bankruptcy sale process.

Application to Court: The licensed insolvency trustee administering the bankruptcy or receivership process, will make its application to the Court, filing its evidence, which includes a Report to the Court explaining how the Court-approved sales process was conducted, the results of the process and the bids received, showing how the Soundair principles were adhered to and recommending a specific offer to be approved,.

Finalizing Sale with Court Approval: The sale approval order, once issued by the Bankruptcy Court, finalizes the transaction, paving the way for the transfer of assets to the successful bidder.

Each stage in the insolvency process plays a crucial role in the successful sale of distressed assets, ensuring that the interests of all stakeholders are protected and that the process remains transparent and fair.

Role of Court Resulting in the Sale Approval Order

The Court acts as the guardian of the bankruptcy or receivership process, overseeing the sale approval order and ensuring that all legal requirements and considerations are met. Its role is pivotal in maintaining the integrity of the asset sale process, providing a level playing field for prospective buyers and all stakeholders.

When a sale order is presented to the Court for approval, the court scrutinizes the terms of the transaction, ensuring that it aligns with the laws and the best interests of the parties involved. By granting the sale approval order, the court adds a layer of legitimacy and finality to the asset sale, safeguarding the rights of the buyer and seller.

Key Milestones and Deadlines in Bankruptcy Asset Sales

Deadlines are a crucial aspect of any bankruptcy or receivership asset sale, dictating the pace and efficiency of the process. Key milestones and deadlines serve as guideposts throughout the sale process, ensuring that each step is taken within the specified timeframe to maintain the momentum and integrity of the transaction.

From the initial filing for bankruptcy or receivership to the finalization of the sale order, adhering to these milestones and deadlines is essential for a smooth and successful asset sale. These markers not only provide clarity and structure to the process but also instill confidence in all parties involved, signalling a well-managed and efficient transaction.

Company is Bankrupt Conclusion: Key Takeaways for Successful Asset Acquisitions

As we wrap up our discussion on successful asset acquisitions in bankruptcy sales, let’s reflect on the pivotal points that can guide us toward making informed and strategic decisions in this unique process:

Firstly, navigating bankruptcy proceeding sales requires a nuanced understanding of the key considerations that come into play. Assets are sold “as-is, where-is,” with limited warranties and protections for buyers. This necessitates a careful evaluation of the risks and rewards before participating.
Secondly, being well-informed is crucial when participating. The competitive nature of these sales demands swift decision-making and strategic bidding strategies. Having a clear grasp of the process and a thorough assessment of the assets can give bidders a competitive edge.
Lastly, the guiding principles for acquiring distressed assets successfully revolve around finding the balance between opportunity and risk. Whether you are a strategic investor or a financial bidder, understanding the intricacies of bankruptcy sales and aligning your acquisition strategy with your overall goals is key to driving value from these transactions.

I hope you have enjoyed this company is bankrupt 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 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.

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 asset sale, bankruptcy estate, bankruptcy proceeding. types of bankruptcy, bankruptcy process, bankruptcy trustee, benefit of creditors, company is bankrupt, contractual commitments, fair valuation, financial obligations, insolvency trustee, legal process, sale at arm, secured creditors, secured debts, unsecured claim, unsecured creditors

Brandon Blog Post

NAVIGATING THE STALKING HORSE OFFER LEGAL MAZE: THE TOOL SHED BREWING BANKRUPTCY PROTECTION EXPERIENCE

Post author By Brandon Smith
Post date May 13, 2024

stalking horse offer

Stalking Horse Offer Introduction

In Brandon’s Blog post, I provide an in-depth analysis of the stalking horse offer in the context of bankruptcy protection, drawing insights from a recent ruling by the Alberta Court in the case of Tool Shed Brewing. By examining the various elements that influence court decisions regarding such offers and the intricacies of managing a stalking horse sales process, I aim to shed light on this complex legal subject.

Through an examination of Tool Shed Brewing’s situation and an ongoing stalking horse case of mine, this article offers readers a comprehensive understanding of the challenges, nuances, and legal aspects involved in navigating the complexities of bankruptcy protection.

What is a Stalking Horse Offer?

Definition and Purpose of a Stalking Horse Offer

In an insolvency or bankruptcy proceeding, a stalking horse offer serves as an initial bid on the assets of a distressed company.

This offer sets a floor price for the assets, exposed to a public marketing process, and encourages other potential buyers to submit higher bids. The company typically chooses the stalking horse bidder in financial distress and plays a crucial role in the solicitation and investment solicitation process (SISP).

Benefits of a Stalking Horse Offer

By providing a baseline offer, the stalking horse offer aims to maximize the value of the company’s assets and streamline the sale process. Understanding the nuances of stalking horse offers is essential for companies navigating bankruptcy protection cases to secure the best possible outcome.

stalking horse offer

Stalking Horse Offer: Understanding the Stalking Horse Bid Process

How a Stalking Horse Bidder is Selected

In the business world, a stalking horse bidder is often used in the context of mergers and acquisitions or an insolvency or bankruptcy process to help facilitate the sale of a company (M&A) or the company’s assets (insolvency/bankruptcy process). The party selected to make the stalking horse offer is selected by the target company’s management team to submit an initial offer for the company or its assets, to start the bidding process.

The selection of a stalking horse bidder is a strategic decision, often based on their financial stability and expertise in the industry. Many times in an insolvency process, the stalking horse bidder may already be a stakeholder of the insolvent company. It is not unusual for a secured creditor, a major investor or a group affiliated with current management to make the stalking horse offer.

The stalking horse bidder serves as a starting point for other interested parties to make their bids, hopefully driving up the value of the company or its assets and maximizing the potential sale price. Careful consideration and due diligence are taken in selecting a stalking horse bidder to ensure the best outcome for all parties involved.

Factors Considered in Choosing a Stalking Horse Bidder

When considering a stalking horse bidder, several factors must be carefully evaluated to make an informed decision. The first and most crucial factor is the bidder’s financial stability and ability to fulfill their obligations. This includes their credit rating, cash flow, and previous track record in similar transactions. Additionally, the bidder’s strategic fit with the company and their long-term goals must be taken into account.

Other important factors include their experience in the industry, their proposed purchase price, and any proposed contingencies or conditions. It is also important to thoroughly review the bidder’s proposed plans for the company or the assets post-acquisition. By carefully considering all of these factors, it ensures that the right party has been chosen to make the stalking horse offer which is not only financially capable but also aligned with achieving the goals of the stalking horse sales process.

Importance of a Stalking Horse Bid in Attracting Other Bidders

A stalking horse bid plays a crucial role in attracting other bidders in a competitive bidding process. It is a preliminary bid made by a buyer to set a minimum price for the assets being sold. This bid serves as a starting point for other potential buyers to make their offers, creating a competitive environment.

A stalking horse bid also demonstrates the seriousness and commitment of the buyer, making it more likely for other bidders to take the opportunity seriously. Moreover, it provides a benchmark for fair market value, ensuring that the insolvency process results in the estate receiving the best possible price for the assets under the circumstances. In summary, a stalking horse bid catalyzes a successful and competitive bidding process.

In setting the floor price, the licensed insolvency trustee needs to be able to justify that price, amongst all the other details of the stalking horse offer. The use of appraisals will help the Trustee in justifying the stalking horse offer price as well as the ultimate sales price when seeking the approval of the court for both the SISP and the ultimate sale.

Stalking Horse Offer: Stalking Horse Bid Agreement

Contents and Terms of a Stalking Horse Bid Agreement

A stalking horse bid agreement is a legal document that outlines the terms and conditions of a potential acquisition or sale of a company’s assets. The contents of a stalking horse bid agreement include a detailed description of the assets being sold, the purchase price, and any conditions or contingencies that must be met for the sale to be completed. It also outlines the responsibilities and obligations of both the buyer and the seller. Additionally, the agreement may include confidentiality and non-disclosure terms to protect sensitive information. This agreement serves as a framework for the bidding and negotiation process, providing structure and protection for all parties involved.

In a court-appointed receivership I am involved in right now, we are using the stalking horse offer process in the court-approved SISP. The agreement we obtained court approval for is in a typical format used in insolvency or bankruptcy proceedings to facilitate the sale of a distressed company’s assets.

To give you a better idea of the content and terms in a stalking horse bid agreement, the main headings in the stalking horse offer asset purchase agreement we developed with our legal counsel are:

ASSETS TO BE SOLD AND PURCHASED

Assumed Liabilities
Assignments Requiring Consent
Purchase Price
Allocation of
Purchase Price
Bid and Auction Procedures

REPRESENTATIONS AND WARRANTIES

Receiver’s Representations and Warranties
Purchaser’s Representations and Warranties
“As Is, Where Is”

COVENANTS

Covenants of the Receiver
Covenants of the Purchaser

CONDITIONS AND TERMINATION

Conditions for the Benefit of the Purchaser
Conditions for the Benefit of the Receiver
Waiver of Condition
Termination
Effect of Termination

CLOSING ARRANGEMENTS

Closing
Receiver’s Closing Deliveries
Purchaser’s Closing Deliveries
Confidentiality
Delivery of Receiver’s Certificate

COMPETING BIDS AND SALES PROCESS

The Sale Process
Break Fee

stalking horse offer

Stalking Horse Offer: Agreement for Expense Reimbursement and Breakup Fee

In a stalking horse offer, the seller may agree to cover certain expenses incurred by the stalking horse purchaser during the negotiation process. The seller always offers a breakup fee if the party making the stalking horse offer turns out not to be the buyer because the SISP produces a better offer.

This agreement for expense reimbursements and breakup fees, which are also called topping fees, is a common practice in the world of mergers and acquisitions and insolvency/bankruptcy process stalking horse sales, as it protects both parties involved. The potential buyer can gain a competitive advantage by being the first to make an offer while being compensated for incurring the time and expense of doing its due diligence and exposing its offer to the marketplace if the deal does not go through.

This type of agreement is typically negotiated carefully and is an important aspect of the overall SISP.

Stalking Horse Offer: The Importance of a Court-Approved Stalking Horse Agreement

A Court-Approved Stalking Horse Agreement and a Court-Approved SISP, are crucial tools in the process of a bankruptcy sale. The agreement allows a potential buyer, known as the “stalking horse,” to set a floor purchase price for the assets being sold. This not only ensures a fair and transparent bidding process but also provides a level of protection for the debtor’s estate. By setting a minimum bid, the stalking horse agreement prevents lowball offers and encourages competitive bidding, ultimately maximizing the value of the assets for the benefit of creditors. Furthermore, obtaining bankruptcy court approval for this agreement enhances the validity and credibility of the SISP.

Therefore, a Court-Approved Stalking Horse Agreement and SISP are of utmost importance in facilitating a successful bankruptcy sale.

Stalking Horse Offer: The Auction Process and Other Bidders

In the court-appointed receivership SISP I am running, using this sales process resulted in competition among bidders. We ended up having two Qualified Bidders (as defined in the SISP documents); the stalking horse bidder and one of the other parties who made an offer. Following the terms of the SISP bidding procedures, both Qualified Bidders were given the limited time allowed for in the sales process to advise if they wished to participate in an auction process. Both Qualified Bidders advised they would participate.

I held the auction on the day and time stated in the SISP documents. The result was that the price got bid up to a point where the stalking horse bidder dropped out of the auction.

As I am in court tomorrow seeking approval of a sale to the other bidder and not the stalking horse transaction, I can’t provide any specific details in this blog. What I can say is:

This buyer originally made a low-ball offer before we were in a position to offer the assets for sale
. For many reasons, the offer was rejected.
The stalking horse offer price is 2.75 times the offer we rejected. The price achieved through the auction process is 1.5 times the stalking horse bid price.

The details contained herein and in our court material prove that the stalking horse sales process worked well in this case.

Stalking Horse Offer: Introduction to Tool Shed Brewing Company Inc.

Now let me take you on a journey through another real-life case through the fascinating world of Tool Shed Brewing Company Inc. (Tool Shed). This company ran a craft beer brewery and a restaurant.

Tool Shed had financial struggles that ultimately led to its bankruptcy protection filing. Despite their creative endeavours in the craft beer industry, Tool Shed found themselves grappling with substantial debts and financial obligations.

Tool Shed’s operations revolve around the production and distribution of both alcoholic and non-alcoholic beverages to various retailers and restaurants. The valuable assets were non-assignable licenses and permits issued by the Alberta Gaming, Liquor and Cannabis Commission. Tool Shed considered these assets as the pillars of their business.

stalking horse offer

Stalking Horse Offer: The Bankruptcy Protection Filing Through A Notice of Intention To Make A Proposal

In January 2024 the CRA took legal action against Tool Shed, highlighting the pressing financial crisis. Faced with the stark reality of its financial obligations, Tool Shed took a decisive step by filing a Notice of Intention To Make A Proposal under the Bankruptcy and Insolvency Act (Canada) (BIA), appointing a licensed insolvency trustee as their proposal trustee.

With the weight of financial distress looming over them, Tool Shed sought avenues for recovery, leading to the approval of a stalking horse bid by 2582568 Alberta Inc., a company owned by Tool Shed’s CEO, James Costello. However, this move faced opposition from individual investors and secured creditors, John Donovan and Juliana Bourne, who presented a competing bid through 2594617 Alberta Ltd.

February 12, 2024, played a crucial role in setting the stage for the ensuing developments. Tool Shed went to the Alberta court seeking an order not only to extend the timeline for filing a proposal but also for the approval of the interim financing by the Costello Company, and initiating the sales process, including the approval of the 2582568 Alberta Inc. offer. Despite the objections of the Donovan group, the court approved the relief requested by Tool Shed, including the SISP and the Costello offer approval.

The Stalking Horse Bid and Approval Application

The proposal trustee ran the SISP and then applied to court As the narrative unfolded, intense deliberations ensued, as Tool Shed faced the impending threat of bankruptcy. The contentious discussions revolving around the SISP transaction application brought to the fore the divergent viewpoints of stakeholders, including the Donovan Group and the Costello Company.

The Donovan Group raised many issues in opposing the approval of the sale to the Costello Company. There were also many issues affecting the court process, some of which were outside of the control of the stakeholders.

The road to approval is rarely smooth, and Tool Shed’s case is no exception. With opposing voices from the Donovan Group, who also were investors in Tool Shed, the Approval Application process became a battleground of conflicting interests.

As the clock ticked towards the crucial hearing date, scheduling issues and the need for more time loomed large. The delicate dance of legal procedures and the strategic moves of involved parties heightened the drama surrounding the fate of Tool Shed and the Stalking Horse Bid.

The twists and turns in the Approval Application process serve as a testament to the intricate nature of financial dealings and the resilience required to navigate through turbulent waters. With each challenge faced head-on, Tool Shed’s fate teeters on a knife-edge, awaiting the final verdict on the Stalking Horse Bid.

stalking horse offer

Stalking Horse Process: The Challenges Faced During the Approval Application Process

Standing of the Parties

The issue of standing was raised, where the Costello investors and the Donovan Group asserted their standing as secured creditors. The application continued on the basis that they had standing, as there was no objection from Tool Shed.

Issues of Fairness and Integrity

In a previous case, the court considered the situation where the losing bidder had no standing to raise concerns about fairness and integrity in the bidding process.

It was suggested that objections should be given to the court-appointed monitor, but in that specific case, the monitor had already submitted its report and did not address the objections.

In this case, the Proposal Trustee in their correspondence and reports addressed the issues raised by the Donovan Group and the Costello Investors. The Costello Investors and Donovan Group asserted that while the SISP Order was final, the implementation of the SISP Process was unfair and lacked integrity.

The SISP Process established specific requirements for a bid to be considered qualified, including timing, sale proposal, unconditional bid, and being a superior offer. The process also incorporated a definition of assumed liabilities and outlined the assessment and determination of qualified bids.

There appeared to be inconsistencies in the drafting of the SISP Process, specifically in requirements for a qualified bid to be a superior offer and the authority to waive non-compliance. The court interpreted the requirements and determined the reasonable assessment of qualified bids based on the process.

Determination of Superior Offer

The determination of a superior offer was defined based on the credibility, financial viability, and terms of the offer in comparison to the Stalking Horse Agreement. If no qualified bid was a superior offer, the Stalking Horse Bid would be declared the successful bid.

Principles for Disposition Approval

Tool Shed submitted that the factors for approval of the disposition had been met, ensuring the successful assessment of the principles outlined in the leading case for any insolvency or bankruptcy sale process, Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA) (Soundair). The Donovan Group contested that the Soundair principles had not been met and argued against approval of the Stalking Horse Bid.

Stalking Horse Offer: Final Rulings and Approval of the Stalking Horse Bid

Understanding the context leading to these final rulings and approvals is crucial. Tool Shed sought approval for a reverse vesting order for the Stalking Horse Bid. The reverse vesting order process was part of the SISP. This method had to be used to preserve the non-transferable licenses that were so valuable.

Throughout the process, Tool Shed’s financial situation and attempts to restructure debt were under scrutiny. The involvement of various parties, including creditors and investors, added complexity to the proceedings. The court considered crucial factors such as assets, debts, and the impact on all stakeholders.

The court is required to ensure the integrity of the process without delving into the minutiae of operational decisions. Review in receiverships focuses on procedural fairness rather than questioning business decisions.

Consideration of SISP Order The court carefully considered the implementation and compliance with the Sale and Investment Solicitation Process (SISP) order in evaluating the Stalking Horse Bid. The SISP order is a crucial component of the bankruptcy proceedings as it ensures a fair and transparent process for all parties involved.

The court always needs to ensure the integrity of the process without delving into the minutiae of operational decisions. A court review in receivership or bankruptcy cases focuses on procedural fairness rather than questioning business decisions. Here is what the court must consider when asked to approve a sale.

Challenging the SISP Order in the Approval Application

The court ruled that during the Approval Application, the Donovan Group cannot challenge the SISP Order granted on February 12, 2024. Secured creditors were notified per s.65.13(3) of the BIA and the SISP Order granted was not appealed. As a valid and subsisting court order, the Donovan Group cannot now attack the SISP Order.

Reasonableness of Sale Process

The implementation by the Proposal Trustee rather than the structure of the SISP Process was under scrutiny. The court’s role was to ensure fair negotiations and the bidding process. Notwithstanding some glitches in the way the Proposal Trustee carried out the SISP, the court interpreted the results as consistent with the aims of the SISP and found the SISP to have been run reasonably.

Consultation with Creditors

No consultation with creditors was required in the SISP implementation. The court found that the integrity of the process was maintained without creditor involvement.

Effects of Proposed Sale

Parties had prior knowledge of the SISP Process and Stalking Horse Agreement. Consideration of the sale process fairness was previously determined as was the proposed sale under the stalking horse offer. Therefore, it was not a primary concern in the Approval Application.

Soundair Principles

Soundair principles involve specific inquiries by the court. The court performed the applicable analysis for the NOI Proceedings and Approval Application context. The court found that the Soundair principles were met.

Efforts for Best Price

The court found that proper steps were taken to encourage interest in Tool Shed for the best price. No issues were raised regarding the advertising process for the sale.

Access to Information

Concerns were raised by Donovan Group about timely and full access to Tool Shed information. Issues were highlighted regarding asymmetrical access to information due to dual roles. The court did not find that there were any impediments to access to information.

Inadequate Due Diligence Information

Due to resource constraints, certain inquiries from the Donovan Group were unfulfilled. However, the Donovan Group was satisfied with the information passed on by the Proposal Trustee. The court did not feel this impacted the Donovan Group’s ability to make a meaningful bid.

Evaluation of Bid Information

Donovan Group failed to demonstrate they were denied access to different or better information for the Stalking Horse Bid. Considerations by the Alberta Court of Appeal were highlighted for bid evaluation.

Extension of Bid Deadline

The initial bid deadline was set for March 11, 2024, with a requested two-week extension by Donovan Group. The Proposal Trustee granted a three-day extension till March 14, 2024. The court did not find that Donovan Group was prejudiced in any way.

Submission of Preliminary Bid

Donovan Group submitted a conditional bid on March 14, 2024. The bid was rejected for various reasons including conditional nature and incomplete payment obligations.

Rejection of Revised Donovan Bid

Donovan Group submitted an unconditional bid on March 22, 2024. The Proposal Trustee originally rejected the bid citing contraventions of the process and insufficient benefit to stakeholders.

The Donovan Group further revised the bid to satisfy the Proposal Trustee’s concerns. The Proposal Trustee later reviewed and accepted the Revised Donovan Bid.

The court decided that it did not need to deal with the Donovan Group’s complaints regarding the Trustee’s prior rejection reasons as they were not applicable or relevant post-acceptance.

Efforts to Get the Best Price

The Proposal Trustee extended the deadline twice for the Donovan Group, showing fairness. The court found that the Proposal Trustee made efforts to secure the best price without acting improvidently.

Consideration of All Parties’ Interests

The court held that the interests of the losing bidder (Donovan Group), the proponent of the Stalking Horse Bid (Costello Company), and the creditors were all taken into account.

Tool Shed’s interests were also considered by the SISP and the SISP Order.

Assessment of Qualified Bid and Superior Offer

The Revised Donovan Bid diverged from the SISP in the required Assumed Liabilities. The Revised Donovan Bid was therefore not considered either a Qualified Bid or a Superior Offer by the Proposal Trustee.

The court concurred with the Proposal Trustee’s assessment and confirmed that the Donovan Group had no stake in the Sale Approval Process due to its bid not meeting all of the required qualifications.

An image of a stormy dark sky with a ray of light shining through with professional advisors in the foreground to represent corporate financial problems but the hope for a successful restructuring using a stalking horse offer. — *stalking horse offer*

Stalking Horse Offer: The Court’s decision

After the parties finished navigating the legal maze and after the Court’s careful consideration of all arguments and submissions, the Court rendered its decision. The court found that:

The SISP Process was approved and implemented with integrity.

Overall, there was no identified unfairness in the working of the SISP Process.

No unfair actions were attributed to the Proposal Trustee.

The test of the Soundair principles was met.

The Court approved the Stalking Horse Bid as it met the necessary criteria outlined in the SISP. Concerns raised were thoroughly assessed, leading to a decision in favour of the approved bid.

Stalking Horse Offer FAQs

What is a stalking horse bid?

A stalking horse bid refers to an initial overture intended to acquire assets from a financially distressed company, typically one undergoing bankruptcy or seeking bankruptcy protection. The primary objective behind employing a stalking horse bid is to establish a baseline price for the said asset, unveiling the first bid publicly and instigating a competitive bidding procedure.

Where does the term “stalking horse” come from?

The term “stalking horse” originally referred to a horse or an object that hunters would hide behind to approach their prey without being noticed. In the context of business, it now means an initial bidder who sets the groundwork for subsequent bidders in a sale process.

What is a stalking horse candidate in a bankruptcy proceeding?

In a bankruptcy proceeding, a stalking horse candidate is an interested buyer of a bankrupt company that is chosen by the company and presented to the bankruptcy court for approval. The stalking horse candidate sets the initial bid, which other interested bidders cannot go below, essentially dividing the opposition in the bidding process.

What are the benefits of being a stalking horse bidder?

Being a stalking horse bidder allows for control over many aspects of the bidding process and includes fail-safe fees if the bid doesn’t win. However, there are higher initial costs associated with being a stalking horse bidder, such as negotiations and conducting due diligence, which other bidders can then leverage in their bids.

How does a stalking horse sale process work?

In a stalking horse sale process, an initial bidder negotiates a purchase agreement with a distressed or bankrupt company to purchase its assets. The initial bidder sets the terms of the transaction, conducts due diligence on the assets, and establishes a minimum purchase price for other interested parties to bid on. This process aims to maximize the value of the company’s assets in a fair, efficient, and transparent manner.

Stalking Horse Offer Conclusion

In conclusion, navigating the legal maze of stalking horse offers in bankruptcy cases is crucial for companies seeking protection and restructuring. Understanding the intricacies of the process, including the factors considered by the court for approval and the running of a stalking horse sales process, is essential for a successful outcome.

The Tool Shed bankruptcy protection experience serves as a valuable case study, shedding light on the challenges and opportunities presented by stalking horse offers. By seeking expert legal and licensed insolvency trustee counsel and following strategic approaches, companies can effectively navigate the complexities of stalking horse offers and emerge stronger from the bankruptcy protection process.

I hope you have enjoyed this stalking horse offer 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 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.

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 resulting from reliance on the information provided herein.

Tags auction process, bankruptcy court approval, bankruptcy process, bankruptcy sale, bankruptcy sale process, bidding procedures, breakup fee, competitive bidding process, distressed company, initial bidder, investment solicitation process, Ira Smith Trustee, stalking horse, stalking horse bid, stalking horse bidder, stalking horse offer, subsequent bidders, Tool Shed Brewing

Brandon Blog Post

BANKRUPTCY OR CONSUMER PROPOSAL?: A LAWYER AND ACCOUNTANT’S COMPREHENSIVE GUIDE TO MASTERING INSOLVENCY LAW

Post author By Brandon Smith
Post date April 15, 2024

bankruptcy or consumer proposal

Bankruptcy or Consumer Proposal: Introduction

When your client has an amount of debt they cannot repay, they often consider measures such as bankruptcy or consumer proposal. To choose the most appropriate option for their unique situation, it’s important to have a good understanding of the details of each option. Let’s compare and contrast these options to help you help your client make the right choice that best fits their situation.

Bankruptcy or Consumer Proposal: Importance of understanding the differences between the two options

When faced with financial challenges, understanding the difference between a consumer proposal and bankruptcy can be crucial in determining the best path forward for your financial well-being. Let’s delve into the key disparities. Learn about the differences between a consumer proposal and bankruptcy so that you can further help your clients start to make an informed decision on the best debt relief solution for them before they see a licensed insolvency trustee.

bankruptcy or consumer proposal

Overview Explanation of Bankruptcy or Consumer Proposal

Bankruptcy: A Solution for Unmanageable Debt

If your client is experiencing economic challenges, bankruptcy might be a sensible option to deal with their debt problems. It is a legal treatment focused on offering help to people, corporations, or entities facing economic hardship.

Bankruptcy allows debtors to get rid of certain unsecured financial obligations, such as credit card balances and unsecured lines of credit or loans. It offers debt relief and a fresh start, but undischarged bankrupts must comply with particular rules and procedures. These include potentially a meeting with creditors and for certain taking part in two credit counselling sessions.

Consulting a licensed insolvency trustee can aid in exploring options and making an informed decision when dealing with money problems, leading to a better financial future. Bankruptcy may be a sensible option, however, it’s vital to carefully consider all other restructuring options before filing bankruptcy. A licensed insolvency trustee can offer advice on the most appropriate strategy for your client’s particular scenario.

Consumer Proposal: A Negotiated Settlement

A consumer proposal is a much more flexible approach to debt repayment than bankruptcy is. In a consumer proposal, the licensed insolvency trustee acting as the Administrator, assists the debtor in their financial restructuring by negotiating with creditors to repay a portion of their debts over an extended period.

Although only a portion of the total debt is being repaid (as a rule of thumb, say 25%), once all payments are successfully made and the debtor attends the two mandatory financial counselling sessions, they receive their Certificate of Full Completion. Once that certificate is issued, their entire debt is discharged.

In a consumer proposal, unlike bankruptcy, the debtor does not hand over their non-exempt assets. Like in bankruptcy, the debts eligible for inclusion in a consumer proposal include credit card debt, unsecured personal loans, and tax debt. Proposals must be filed through a licensed insolvency trustee and are legally binding once accepted by the creditors.

Consumer Proposal Allows You to Keep More Assets

The important difference between a consumer proposal and bankruptcy is that although you need to account for the value of the equity in your assets, in a consumer proposal, you don’t lose them. This is a form of asset protection. A consumer proposal is a debt settlement financial restructuring where you negotiate with your creditors to repay a portion of your debt over some time not greater than 60 months. Upon successfully paying that portion in the promised time frame, all of your debts are erased. If you can do so without having to sell any of your assets, you get to keep them.

Bankruptcy or Consumer Proposal: How Does a Consumer Proposal Work?

Finding a way out of debt feels overwhelming. A licensed insolvency trustee can help your client understand the options available. This education empowers your client to make the right choice. A consumer proposal is a legally binding structured legal agreement between your client and their creditors. The benefit to your client is to ultimately remove the burden of their debt and let them get back to a stress-free life and a bright financial future. The main points of a consumer proposal are:

Binding Agreement with Creditors

A consumer proposal is a formal agreement that lays out how you’ll pay back a portion of your unsecured debt through a formal agreement under the Bankruptcy and Insolvency Act (Canada). Once you complete the proposal, your client will be free from all of their unsecured debts.

This agreement is a solution that works for both your client and their unsecured creditors. A licensed insolvency trustee, guides your client through the negotiation process, helping them come up with a plan to gradually pay off their unsecured debts over time. You qualify for a consumer proposal as long as your unsecured debt is $250,000 or less (not including any mortgage against your principal residence).

Administered by Licensed Insolvency Trustee

Only a licensed insolvency trustee can oversee the entire process. These professionals are the only ones with the professional accreditation to perform insolvency assignments in Canada. They are licenced, authorized and supervised by the federal government Office of the Superintendent of Bankruptcy (OSB) to handle insolvency matters. I guide your client through the process, ensuring compliance with all legal requirements. I also provide expert advice to you and your client.

Protection from Debt Collectors and Wage Garnishments

Like bankruptcy, a consumer proposal gives your client a stay of proceedings against constant harassment by debt collectors including wage garnishments. This is real legal protection against creditors. Once the proposal is filed, debt collectors must by law stop their collection calls and legal actions. This provides your client with a break from the unending pressure associated with collection efforts. This gives your client the breathing room to regain control of their income and expenses.

A consumer proposal allows for a path toward financial recovery giving your client a sense of security and relief from the stress of their debt. This empowers your clients to confront their financial challenges using a real plan of action to eliminate their unsecured debt over time.

bankruptcy or consumer proposal

Bankruptcy or Consumer Proposal: How Does Bankruptcy Work?

Bankruptcy is perceived by people to be the darkest of all dark clouds. People associate bankruptcy not only with financial difficulties and loss but also as a symbol of being a total failure in life. The reality is that bankruptcy is a legal process designed to help honest but unfortunate people relieve themselves of the crushing debt load that is suffocating them. It offers them the chance to get a fresh start.

Structured legal process to relieve debts: When drowning in debt, bankruptcy acts as a lifeline. It allows people to go through a process approved by the Canadian government to eliminate their debt and provide a path for a fresh start.
Licensed insolvency trustee controls the assets: During bankruptcy, the licensed insolvency trustee is appointed to administer the bankruptcy process. The Trustee manages and sells the non-exempt assets, investigates the financial affairs of the bankrupt, conducts the two mandatory financial counselling sessions with the undischarged bankrupt and makes sure that all necessary administrative steps are taken. This includes the undischarged bankrupt fulfilling all of their bankruptcy duties.
Discharged from debt in 9-21 months: The main outcome of bankruptcy is the bankrupt’s discharge from his or her debts. Depending on the specific circumstances as to whether or not the undischarged bankrupt is liable to make regular payments for surplus income to the Trustee, bankrupts typically expect to obtain their discharge within a period between 9 and 21 months.

Embracing bankruptcy as a tool for financial freedom, rather than a symbol of failure, helps the person get on with their life. It is a chance to redefine one’s life and learn valuable financial lessons.

By referring your client to a licensed insolvency trustee people can decide on a proposal vs bankruptcy much easier navigate the bankruptcy process and emerge better and stronger on the other side.

Bankruptcy: Different Payments, Bigger Credit Impact

On the flip side, bankruptcy payments are often based on your income and can vary accordingly. This means that your monthly bankruptcy payments may fluctuate depending on your financial situation, making it more unpredictable compared to the fixed payments of a consumer proposal.

While bankruptcy can offer you a fresh start by clearing your debts, it typically has a more significant impact on your credit score and can remain on your record for a longer period, affecting your financial status for an extended time.

Choosing the Right Path

Deciding between a consumer proposal and bankruptcy is a personal decision that should be made based on your circumstances. Seeking professional advice from a licensed insolvency trustee can assist you in navigating the complexities of each option and making an informed choice that aligns with your financial goals.

Remember, the aim is to select a debt relief solution from the various options available that best fits your needs and helps you on your journey to financial stability.

bankruptcy or consumer proposal

Bankruptcy: Different Payments, Impact on Credit

In bankruptcy, any monthly surplus income payments the undischarged bankrupt must make are calculated by a formula prescribed by the OSB based on the person’s income. The undischarged bankrupt must provide a monthly report of monthly income and expenses to the Trustee. As the monthly income varies, the surplus income monthly payments can change, either up or down.

While bankruptcy gives the person a fresh start, it has a worse impact on the person’s credit score and credit report since it remains on your record for a longer period.

Choosing the Best Path for You

Choosing between a bankruptcy or consumer proposal is a personal decision that should consider your circumstances and needs. Seeking advice from a licensed insolvency trustee helps the person choose between and navigate either option.

Remember, the aim is to select a debt relief solution that best fits your client’s needs among the various options available.

Bankruptcy or Consumer Proposal: Debts Discharged and Not Discharged

When it comes to managing debts, it is important to know which debts can be cleared through an insolvency process and which ones cannot be discharged. Here is a listing of the different types of debts and whether they can be discharged:

Debts that cannot be discharged:

Fraud or Malfeasance: It is important to know that debts from fraudulent activities or court fines from being found guilty of wrongdoing cannot be cleared through either a bankruptcy or consumer proposal. This ensures accountability for any unlawful financial actions.
Child Support and Spousal Support: Another category of debts that can’t be discharged includes obligations for child support and spousal support. The Canadian insolvency system believes from a societal perspective, these kinds of responsibilities are legally binding and must be met, no matter what other debts the person may have.

Debts that may be discharged after a certain time:

Student loan debt has specific regulations for discharge: After completing your education, there may be possibilities for discharging this debt. Student loan debt can only be discharged if you go bankrupt 7 years after the last time you were either a full-time or part-time student.
Debts that are discharged upon the discharge of the bankrupt person: Most unsecured debts.
bankruptcy or consumer proposal

Impact on Your Credit Score: Bankruptcy or Consumer Proposal

When it comes to your credit score, it’s important to understand how a bankruptcy or consumer proposal can affect it. Bankruptcy has a more negative impact on your credit score compared to a consumer proposal. A consumer proposal is generally less harmful to your credit rating.

Duration of Impact

Another key difference between the two options is how long they stay on your financial record. A consumer proposal is typically noted on your credit report for three years after completing it. A first-time bankruptcy remains on your credit history for six years after receiving your bankruptcy discharge. This difference is important to know. It does affect many choices people make among the various debt relief options.

Ultimately, the choice between a bankruptcy or consumer proposal depends on your client’s unique financial circumstances. It’s always a good idea to seek professional guidance from a licensed insolvency trustee when making this decision.

When it comes to making financial decisions, especially ones as impactful as considering bankruptcy, there are various factors to take into account. One significant aspect that often plays a role in decision-making is the social stigma associated with personal bankruptcy.

Bankruptcy is commonly viewed in a negative light in our society. People may perceive it as a sign of personal failure or irresponsibility. This stigma can make individuals hesitant to consider bankruptcy as a viable option, even when they are struggling with overwhelming debt.

However, it is essential to look beyond the social perceptions and focus on the practical aspects of the situation. Before choosing the path of bankruptcy, it is crucial to assess one’s ability to repay the debt. Understanding your financial capabilities and limitations is key to making an informed decision.

Mathematical analysis can be a helpful tool in this decision-making process. By conducting a thorough financial evaluation, including income, expenses, and debt obligations, individuals can gain a clear understanding of their financial standing. This analysis provides valuable insights into whether filing for bankruptcy is the most viable solution or if there are alternative options available.

Ultimately, the decision to pursue bankruptcy should not be solely influenced by social stigma. Instead, it should be based on a realistic assessment of one’s financial circumstances and the potential benefits and consequences of bankruptcy. By approaching the decision-making process with a rational and informed mindset, individuals can make choices that align with their financial well-being.

bankruptcy or consumer proposal

Bankruptcy or Consumer Proposal: Getting Professional Help for Making the Right Decision

Exploring debt settlement or insolvency options creates tough choices that a person would rather not make. However, hiding their head in the sand and avoiding the reality of their financial situation ultimately is not a realistic option. One thing that bothers every person we speak to is who will find out about personal bankruptcy and how it will affect how others view the person.

As stated above, bankruptcy often carries a negative reputation in our society. May see it as a sign of personal failure. This stigma makes it tough for people to choose bankruptcy as a solution for dealing with overwhelming debt.

It is important to remember that your financial well-being, that of your family and your ability to get a fresh start is what matters most. Before you make any debt settlement decision, take a step backward and honestly consider your true financial situation. Understanding what you can realistically manage on your own without legal intervention is crucial in making the right choice.

Doing the math and looking at the realistic and true side of things will guide you in making an informed decision and doing the right thing that will be best for your financial future. A consumer proposal is the best bankruptcy alternative when a formal insolvency process is required.

Bankruptcy or Consumer Proposal: Conclusion

In summary, a licensed insolvency trustee plays a crucial role in assisting individuals and businesses facing insolvency. From conducting financial assessments to facilitating legal proceedings and providing ongoing support, LITs serve as trusted advisors and advocates, in conjunction with a person’s or corporation’s lawyer and accountant, for those navigating challenging financial terrain. By understanding the role and significance of an LIT, debtors can make informed decisions and embark on the path toward financial stability and recovery.

By assisting clients in navigating insolvency matters proficiently, lawyers and accountants can empower them to take proactive steps towards a brighter financial future. This includes providing insights on debt restructuring, bankruptcy options, and other relevant strategies that can improve financial sustainability and stability. Ultimately, the goal of leveraging a foundational understanding of Canadian insolvency laws is to facilitate positive outcomes for clients, equipping them with the knowledge and resources needed to overcome financial obstacles and achieve long-term success. This also allows them to remain your client!

I hope you enjoyed this bankruptcy or consumer proposal Brandon’s Blog. 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 overwhelming debt 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.

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.

an image of a man and woman with a maze behind them and a question mark between them to signify their difficult decision of whether to file for a liquidation bankruptcy or to try to restructure their debts with a consumer proposal. — *bankruptcy or consumer proposal*

Brandon Blog Post

PARTNERING WITH A LICENSED INSOLVENCY TRUSTEE: A LAWYER AND ACCOUNTANT’S COMPREHENSIVE GUIDE TO MASTERING INSOLVENCY LAW

Post author By Brandon Smith
Post date April 8, 2024

Definition of a Licensed Insolvency Trustee in Canada

A Licensed Insolvency Trustee (previously called Trustees in Bankruptcy) in Canada plays a crucial role in helping individuals and businesses with debt problems. Navigating financial difficulties can be overwhelming, but understanding the role of a Licensed Insolvency Trustee can provide clarity and guidance. In this comprehensive guide, we’ll delve into the responsibilities and significance of an LIT, shedding light on how they can assist individuals and businesses facing insolvency.

This is the second in a series of Brandon’s Blogs to encourage legal and accounting professionals not familiar with insolvency techniques to help clients navigate the Canadian bankruptcy system. Understanding essential principles and vocabulary about bankruptcy is essential before working together with experts in this area. We will discover the complexities of the insolvency meaning, and take a look at the varied forms of insolvency identified in Canada.

Licensed Insolvency Trustee: Qualifications and Licensing Requirements

To attain the designation of Licensed Insolvency Trustee candidates have to undergo a difficult journey of extensive training and meet stringent licensing prerequisites developed by the Canadian Government’s Office of the Superintendent of Bankruptcy (OSB). These licensing requirements include going before an Oral Board of Examination.

This rigid procedure assures that a Licensed Insolvency Trustee (LIT) has the indispensable understanding and abilities essential for expertly managing complex financial circumstances. Furthermore, LITs are bound by a stringent code of ethics, which emphasizes the utmost integrity, professionalism and reliability within their specialist practice. We must also continuously update our professional development.

Roles and Responsibilities of a Licensed Insolvency Trustee

As Licensed Trustees in Canada, primary responsibilities revolve around assisting individuals and businesses facing debt challenges. This role is crucial in guiding people and companies towards making informed decisions about their debt management strategies. Let me walk you through the key tasks that make up my day-to-day responsibilities.

Financial Assessment: Helping Individuals Navigate Debt Management Options

As a Licensed Insolvency Trustee in Canada, my main obligations revolve around assisting people and companies dealing with debt obstacles. This function is critical in leading debtors toward making educated choices regarding the wide range of available debt relief options. Let me walk you through the crucial steps that make up my day-to-day obligations.

Among the most fulfilling elements of being a Licensed Insolvency Trustee is the opportunity to assist individuals in recognizing and choosing one of the most appropriate financial debt management options for their one-of-a-kind situations. By supplying individualized advice tailored to their financial conditions, I aim to equip individuals to take control of their financial debt and work in the direction of financial stability.

Among the key duties of Bankruptcy Trustees is to conduct a detailed analysis of a person’s or business’s financial situation. This includes reviewing assets, liabilities, income, and expenses to determine the most ideal course of action.

Exploring Options: Reviewing Debts and Providing Tailored Advice

When it involves handling your debt, there is no one-size-fits-all solution. As a Licensed Insolvency Trustee, I dive deep right into your distinct financial scenario and provide you with individualized advice that is tailored to your requirements. From the moment we take a seat for your initial consultation, my goal is to understand the specific difficulties you are facing to ensure that I can recommend strategies that not only address your immediate concerns but will also establish you on a course toward long-lasting financial success.

After very carefully examining your circumstances, I am here to help you or your company discover the most effective remedies for your money battles. We can explore numerous alternatives, including filing bankruptcy, a consumer proposal, or executing alternate methods to manage your financial obligations.

Whether we concentrate on producing a tailored payment plan, working out a repayment plan with your creditors, or taking into consideration different options, my major objective is to provide you with an uncomplicated course to financial freedom and stability. We work together to minimize your financial problems and pave the way for a brighter future.

Making Sure Legal Process Protection During Bankruptcy or Proposal Process

Personal bankruptcy and consumer proposals are processes that feature certain legal protocols and safeguards. As a Licensed Insolvency Trustee, I play a vital function in making sure that people who file obtain full protection throughout as called for by the Bankruptcy and Insolvency Act (Canada) (BIA). In cases where either a consumer proposal or personal bankruptcy is deemed necessary, LITs administer the insolvency procedures. We communicate with creditors, prepare required documentation, and ensure conformity with pertinent legislation and policies throughout the process.

From launching the required paperwork to taking care of interactions with creditors and supervising the entire procedure, I work as a trusted intermediary to make sure that all stakeholders follow their roles and responsibilities. By upholding this lawful framework, I make sure that people undertaking the bankruptcy or proposal process, are provided the safety and comfort they need during this difficult time.

Being a Licensed Insolvency Trustee is not simply a task; it’s a dedication to guiding individuals and companies toward a brighter economic future. By helping them navigate through the best decision for them that they can make from all of the debt settlement options, and offering customized advice, I make every effort to make a significant difference in their lives and encourage them to get over their financial difficulties with self-confidence.

Official Documents and Filing Documentation

One of the primary obligations is preparing and filing essential documentation with the OSB and the Court. This action is vital as it officially initiates the financial obligation resolution process and establishes lawful protection for the person or organization seeking relief. By carefully finishing and filing the needed records, we make certain that all required details are properly recorded and processed.

Notifying Creditors to Stop Collections

An additional key facet of my duty is to inform creditors about the client’s decision to seek debt relief through an official filing, whether it is personal or corporate bankruptcy or a restructuring proposal. By notifying unsecured creditors concerning the filing declaration, we successfully stop creditors’ collection activities, including pestering collection calls, letters, and any possible lawsuits. This communication not only safeguards the debtor but likewise ensures that creditors adhere to the legal guidelines affecting debt collection.

Managing Creditor Claims and Assets

A Licensed Insolvency Trustee manages the sale of assets that are not exempt from seizure and also manages the creditor claims process. It is an indispensable part of the management tasks of a LIT. By assessing the assets and liabilities of the person or business, we identify just how to ideally address creditor claims within the framework of the bankruptcy or restructuring case. This includes working very closely with creditors to facilitate the proper valuation and classification of claims and make certain everyone is treated equitably and fairly.

Throughout a bankruptcy case, LITs take responsibility for managing and selling the debtor’s properties. We work for the highest return possible under the circumstances for creditors while providing debtors with a fresh start.

In summary, the administrative responsibilities of a Licensed Insolvency Trustee include a large range of jobs focused on helping with the debt resolution process while supporting the legal standards and securing the rights of both debtors and creditors. These responsibilities call for a focus on detail, adherence to laws, and effective communication to guarantee an effective outcome for all involved in the process.

Licensed Insolvency Trustee: Client Support and Education

For consumers who have filed and taken on either a consumer proposal process or personal bankruptcy, I provide you with assistance and education throughout your journey to financial recuperation. As federally regulated debt experts in Canada, LITs’ duties include offering assistance and services to people and businesses dealing with debt challenges.

Providing Credit Counseling Sessions

One of the essential and required tasks when helping an individual through a consumer proposal or bankruptcy is to provide two credit counselling sessions targeted at assisting them in budgeting effectively and setting financial objectives. These sessions are developed to equip the person with the expertise and skills needed to handle their finances sensibly, leading the way for a much more secure economic future.

Past formal insolvency proceedings, LITs use these financial counselling sessions to aid people in gaining back control of their financial resources. This may consist of budgeting recommendations, financial debt monitoring strategies, and sources for enhancing financial literacy.

Assisting in Money Management

Managing cash properly throughout and after the debt resolution process is vital for lasting economic stability. I am right here to offer financial advice to help the person succeed with this process, supplying sensible suggestions and assistance to ensure that they can make educated decisions regarding their finances. Whether it’s producing a spending plan, focusing on expenditures, or exploring methods to enhance their earnings, I will certainly be by their side every step of the way.

Discharge Process for Bankrupt Individuals or Consumer Proposal Completion Certificate

Among the last steps in formally clearing your financial obligations is making an application for a discharge from bankruptcy or getting your certificate of full performance. This certification represents that you have efficiently satisfied your obligations and are currently debt-free. As your Licensed Insolvency Trustee, I will help you finish this process, making certain that you receive the essential documents to formally shut down this chapter of your financial life.

With a combination of credit counselling, strict money management, and the conclusion of needed paperwork, we work together to help you achieve financial liberty and satisfaction.

Unique Role of a Licensed Insolvency Trustee

As a Licensed Insolvency Trustee in the Greater Toronto, Ontario Canada area, my role is vital in aiding people and companies to navigate complicated financial debt issues. A LIT is the only debt professional accredited by the federal government to offer extensive financial debt guidance and to carry out insolvency administration under the BIA. This means that when you are encountering overwhelming debt, I and my fellow Licensed Insolvency Trustees are the go-to people for specialist advice and remedies.

When individuals or companies are battling with financial debt, I act as an intermediary or umpire to ensure a fair and balanced process for both debtors and creditors while solving the debtor’s financial problems. I must help with communication, uphold laws, and supervise the financial obligation resolution procedure, making certain that the entire administration abides by the required regulations.

Partnering With a Licensed Insolvency Trustee Supplies Countless Benefits For People and Companies Facing Financial Obstacles

Professional Advice: LITs bring specialized knowledge and experience to the table, making sure of informed decision-making throughout the entire process.
Legal Protection: By working with a LIT in a formal insolvency process, debtors gain legal defence from creditor harassment and collection actions, providing much-needed relief and peace of mind.
Financial Debt Resolution: LITs aid debtors explore viable alternatives for fixing their financial debts, tailoring remedies to their special financial scenarios.
Financial Recovery: With financial therapy and support, LITs equip debtors to restore their monetary health and wellness and progress with confidence. More often than not, this also goes a long way to restoring mental health.

Licensed Insolvency Trustee: Conclusion

In summary, a Licensed Insolvency Trustee plays a crucial role in assisting individuals and businesses facing insolvency. From conducting financial assessments to facilitating legal proceedings and providing ongoing support, LITs serve as trusted advisors and advocates, in conjunction with a person’s or corporation’s lawyer and accountant, for those navigating challenging financial terrain. By understanding the role and significance of an LIT, debtors can make informed decisions and embark on the path toward financial stability and recovery.

I hope you enjoyed this Licensed Insolvency Trustee Brandon’s Blog. 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.

Tags bankruptcy process, bankruptcy trustees, businesses with debt problems, code of ethics, Consumer Proposal, credit counseling sessions, credit counselling sessions, debt management, debt management option, debt professionals, debt relief options, debt settlement, filing bankruptcy, financial counselling sessions, insolvency laws, licensed insolvency trustees, Office of the Superintendent of Bankruptcy, trustees in bankruptcy

Brandon Blog Post

UNLOCKING THE MYSTERIES OF INSOLVENCY MEANING: A COMPREHENSIVE GUIDE FOR LAWYERS AND ACCOUNTANTS

Post author By Brandon Smith
Post date April 1, 2024

insolvency meaning

Insolvency Meaning: Introduction

In a vibrant economic environment where change is the only constant, legal and accounting experts have to be fluent in insolvency laws to be able to supply their clients with some basic advice they require to navigate tough financial situations. To use reliable guidance, lawyers and accounting professionals require a basic understanding of the complexities of Canadian bankruptcy regulations.

In this first in a series of blog posts, Brandon’s Blog undertakes to encourage legal and accounting professionals not familiar with insolvency techniques to help clients navigate the Canadian bankruptcy system. Understanding essential principles and vocabulary about bankruptcy is essential before working together with experts in this area. We will discover the complexities of the insolvency meaning, and take a look at the varied forms of insolvency identified in Canada.

Insolvency Meaning: Key Concepts and Terminology

Insolvency Meaning: Insolvency Is A Financial Challenge

Financial distress, or insolvency, describes a scenario where a person or company is incapable of satisfying their financial commitments. This can transpire when they have a lot more liabilities than assets or when their cash flow is inadequate to cover their financial obligations. Because of this, people might have a hard time paying their bills, personal loans, or mortgages, while businesses might discover it testing to satisfy payroll, vendor payments, or difficult financial debt obligations.

Insolvency vs. Bankruptcy

While insolvency and bankruptcy are frequently used interchangeably, they have distinct definitions. Insolvency is a financial state where an entity or individual cannot meet their financial obligations as they end up being due. On the other hand, bankruptcy is a legal declaration under federal government bankruptcy law resulting in a bankruptcy filing. It includes the restructuring of financial obligations or the liquidation of assets under the supervision of the court.

Insolvency is an economic condition, whereas bankruptcy is a legal process to deal with that problem. Comprehending this difference is necessary for people and companies and their legal and financial advisors when dealing with financial obstacles.

insolvency meaning

Insolvency Meaning: Forms of Insolvency in Canada

In Canada, there are several forms of insolvency that individuals and businesses may encounter. The most common way of describing the different forms of Canadian insolvency procedure is:

Personal Insolvency: When an individual is unable to repay their debts, but their debts and financial situation are either large, complex or both. These individuals may look to either a bankruptcy restructuring of their debts or in certain cases, a bankruptcy to liquidate assets and discharge their debts to allow them to get a fresh start. This type of insolvency also includes a business in the form of a sole proprietorship or partnership.
Corporate Insolvency: Limited companies facing financial distress may opt for restructuring where the business is viable. This is done through either the Companies’ Creditors Arrangement Act (CCAA) or the Bankruptcy and Insolvency Act (Canada) (BIA). In some cases, where the business is no longer viable, liquidation through bankruptcy is the only option.
Consumer Insolvency: This refers to the financial challenges faced by consumers, often leading to paying a portion of their debts to discharge all their debts through a consumer proposal under the BIA and avoiding bankruptcy. In other situations where a consumer proposal is not feasible, then bankruptcy would be the necessary filing.

Each type of insolvency possesses its distinctive qualities and procedures, underscoring the paramount significance of seeking guidance from seasoned professionals amidst financial problems. In every circumstance, the main goal remains to avoid bankruptcy.

Within the Canadian realm, solely licensed insolvency trustees bear the capacity to oversee affairs falling under the jurisdiction of either the CCAA or BIA. These professionals are bestowed with licenses and subject to the vigilant supervision of the Office of the Superintendent of Bankruptcy Canada.

Insolvency meaning: Canadian Insolvency Laws and Framework

When it comes to insolvency in Canada, two key legislations govern the process: the BIA and the CCAA. These federal bankruptcy laws provide a framework for dealing with financial difficulties faced by individuals and businesses.

The BIA provides provisions for debtors, be they individuals or corporate entities, encountering financial difficulties to seek respite through either a debt restructuring mechanism or the declaration of bankruptcy. These prescribed legal avenues empower debtors to effectuate the eradication or modification of their financial liabilities, subject to the oversight of a duly authorized licensed insolvency trustee. The BIA delineates the specific entitlements and responsibilities bestowed upon debtors, creditors, and insolvency trustees, thereby guiding the intricate course of bankruptcy restructuring or liquidation proceedings.

On the other hand, the CCAA is specifically designed for larger corporate restructurings. It provides a mechanism for insolvent corporations with debts exceeding $5 million to restructure their affairs and debts while continuing to operate under court protection. The CCAA aims to facilitate the rehabilitation of financially distressed companies and maximize returns to creditors.

Debtors under the BIA have the right to seek debt relief through bankruptcy or a restructuring proposal, which is a formal agreement to settle debts with creditors. Creditors have the right to receive payments as per the priority set out in the BIA and participate in the insolvency proceedings. Licensed Insolvency Trustees play a crucial role in administering the insolvency process, ensuring compliance with the legislation, and facilitating communication between debtors and creditors.

Under the CCAA, companies facing financial difficulties can apply for court protection from their creditors to restructure their operations and debts. The court appoints a monitor to oversee the restructuring process and ensure that the interests of all stakeholders are considered. The CCAA process allows companies to negotiate with creditors, develop a restructuring plan, and seek court approval for its implementation. There is a similar process for company restructuring under the BIA. Each process has its advantages and disadvantages.

In conclusion, the Canadian insolvency laws set out in the BIA and CCAA provide a structured approach to dealing with financial distress for individuals and corporations alike. By understanding their rights and obligations under these laws, debtors, creditors, and LITs can navigate the insolvency process effectively and work towards achieving a fair resolution for all parties involved.

insolvency meaning

Insolvency Meaning: Key Indicators Of Insolvency

Key indicators and examples of insolvency typically include:

Trouble in Paying Financial Obligations: Among the key signs of insolvency is when a person or business constantly battles to make debt payments on time, such as paying bills, personal loans, mortgages, or suppliers.
Cash Flow Insolvency: Insolvency commonly materializes through cash flow difficulties, where there is insufficient cash handy to cover expenses as they come to be due. This might cause constant overdraft accounts, NSF cheques, or late payments to financial institutions.
Balance Sheet Insolvency Through Increasing Debt Levels: A significant increase in debt levels compared to income or assets is a warning sign of approaching insolvency. Rising debt amounts integrated with a restricted capacity to pay indicate financial distress.
Declining Earnings: For organizations, decreasing profits or continual losses over time indicates underlying financial problems. Gross margin tightening or vanishing leads to an inability to generate adequate revenue to cover expenditures.
Balance Sheet Insolvency Through Asset Erosion: Balance sheet insolvency can also happen due to a decline in the value of assets while liabilities stay relatively flat or rise. When assets are not able to cover liabilities because of substantial impairment, that is a classical insolvency meaning.
Lawsuits by Creditors (and maybe even customers): Legal action taken by lenders and/or suppliers, such as lawsuits, collection initiatives, or repossession process, can be a clear indication that financial troubles have reached a critical point and the insolvency of the debtor.
Unable to Obtain Credit: Difficulty in getting brand-new credit or protecting favourable lending terms happens when lenders or suppliers see the specific person or business as a higher credit risk, most likely because of underlying financial instability.
Use of Short-Term Funding for Long-Term Obligations: Relying upon short-term financings, such as credit cards or payday advances, to cover longer-term commitments, such as making payroll or normal monthly expenses, shows financial stress and prospective insolvency.
Non-Financial Signs of Distress: Beyond money metrics, non-financial indicators of distress, such as management turnover, decreasing client base, or distributor concerns, can additionally suggest underlying financial issues leading to insolvency.
Credit Rating Downgrades: A downgrade in credit ratings by credit score firms indicates perceived economic weak points and boosts borrowing costs, intensifying financial problems for individuals or businesses.

Spotting these key signs of insolvency is something that anyone should be able to do, whether you practice in the insolvency world full-time or not at all. At the onset lawyers and accountants can assist in proactive actions for people and enterprises to deal with economic obstacles and seek professional help. Lawyers and accountants can do so before getting into an irreversible state of insolvency requiring the retainer of a licensed insolvency trustee.

Insolvency Meaning: Types of Insolvency Proceedings

People and companies dealing with their economic problems have options regarding insolvency proceedings. Each option tackles one or more particular issues and the solution utilized must be able to satisfy the individual’s or business’s special scenarios. Here are the primary Canadian insolvency procedures:

Individual Bankruptcy

Personal bankruptcy is a legal process developed to assist individuals who are incapable of paying off their debts. Through this bankruptcy proceeding, people can get rid of or reorganize their financial obligations under the guidance of a Trustee. The procedure entails selling off assets to pay off creditors as established by the BIA and getting relief from frustrating financial responsibilities to get a fresh start.

Corporate Restructuring

Company restructuring is a financial procedure that allows companies encountering economic distress to restructure their business operations, financial debts, and frameworks. This kind of bankruptcy protection case intends to help companies end up being economically feasible once again by renegotiating financial obligations, selling redundant or no longer needed assets, or carrying out functional adjustments to the business. Business restructuring can help companies prevent bankruptcy and get back to running successfully and profitably. It can occur under either the CCAA or BIA.

Consumer or Division I Proposals

Consumer proposals and Division I proposals are formal arrangements discussed between a debtor and their creditors to work out unsecured debts without filing personal bankruptcy. In either type of proposal, the debtor promises to pay off a part of the debt over a prolonged period, not greater than 60 months, using monthly payments or with a lump-sum payment. In return for doing so, when they are finished paying the portion of the total debt stated in the proposal, the full amount of debt is extinguished. This insolvency remedy enables people to stay clear of the preconception and lasting repercussions of bankruptcy while still resolving their financial problems.

Those who owe $250,000 or less, apart from any financial obligations secured by a registration against the debtor’s home, can use a consumer proposal. For those other people with higher financial obligations, or companies, the Division I Proposal process is readily available. Both kinds of proposals are administered under the BIA.

Key Points to Remember:

Personal bankruptcy means that assets will be liquidated to repay debts.
Corporate restructuring focuses on rearranging company operations to end up being financially and practically viable.
Consumer proposals are a debt solution that allows people to negotiate payment plans with their creditors.

Understanding the different sorts of bankruptcy proceedings is crucial for people and businesses encountering financial difficulties and their legal and accounting professionals. By discovering these alternatives and seeking suitable specialist suggestions, debtors can navigate their financial difficulties and work in the direction of a fresh financial and stress-free start.

insolvency meaning

Insolvency Meaning: Roles of Lawyers and Accountants

When it comes to navigating the complex world of insolvency matters, the roles of lawyers and accountants are crucial in providing expert guidance and support to individuals and businesses. Let’s delve into the specific responsibilities and contributions of these professionals in handling financial challenges:

Legal Advice and Representation in Insolvency Matters

Lawyers play a vital role in supplying legal advice and representation to clients with insolvency concerns. They are educated to analyze and use the laws related to personal bankruptcy, financial debt restructuring, and various other insolvency procedures. By having a legal expert on their side, people and companies can make informed decisions regarding their financial situation and lawful rights. For those lawyers who do not practice insolvency, knowing the basics at the very least gets the conversation started.

In corporate restructurings, the role of the company lawyer is vital. The company’s legal firm will have extensive expertise in specific special assets, such as patents, trademarks and specialized licenses.

Proficiency in Preparing Financial Statements and Developing Restructuring Strategies

Accountants bring important financial knowledge to the table by helping clients in preparing accurate financial statements and creating reliable restructuring strategies which need to consist of comprehensive budget plans and cash-flow estimates. They possess the required skills to analyze financial information, determine essential areas for improvement, and develop detailed strategies to deal with economic difficulties. By leveraging their knowledge, clients can get clarity on their financial standing and chart a path toward economic stability. Regular tax compliance and filings, along with the income tax result of numerous restructuring plans, is likewise an essential part of the restructuring that can be carried out by the firm’s exterior accountant.

By doing this, accountants can be an indispensable part of the restructuring process assisting the licensed insolvency trustee.

Insolvency Meaning: Helping Clients Facing Financial Difficulties

Both lawyers and accountants play a collective role in helping clients who encounter monetary challenges. Whether it’s bargaining with lenders, representing clients in court proceedings, or offering strategic financial suggestions, these professionals collaborate to sustain their clients facing insolvency. Their combined efforts can assist clients work through the intricacies of insolvency and emerge more powerful.

The roles of lawyers and accountants are crucial when it pertains to dealing with insolvency matters and leading clients through economic chaos. By offering legal advice, financial knowledge, and undeviating support, these professionals play a critical role in aiding people and businesses to overcome economic obstacles and lead the way to a brighter economic future.

Insolvency Meaning: Typical Insolvency Issues Dealt With by Clients

Facing insolvency can be a daunting and frustrating experience for individuals and companies alike. It generally includes a variety of financial difficulties and stress that can significantly affect one’s economic stability and future. Below are some common insolvency concerns dealt with by clients and exactly how to address them:

Increasing Debts, Creditor Pressure, and Cash-Flow Obstacles

One of the key indications of insolvency is the accumulation of increasing debts that become progressively difficult to pay off. This circumstance is usually intensified by creditor pressure, where creditors might start demanding loan repayment or starting lawsuits to recover what they are owed. Additionally, cash-flow obstacles can better exacerbate the economic pressure, making it tough for people or companies to cover their expenses and financial debt responsibilities.

To address these issues, it is necessary to take a positive strategy by analyzing the total financial obligation load, working out with creditors better and realistic credit terms and payment strategies, and applying techniques to improve cash flow. Looking for licensed insolvency trustee recommendations or credit counselling can additionally be advantageous in working through these difficulties and establishing a sustainable financial debt monitoring strategy.

Identifying Warning Signs of Insolvency Early On

Early discovery of insolvency warning signs is crucial in taking prompt rehabilitative actions to prevent more economic deterioration. Some typical indications consist of persistent cash flow issues, missed payments to lenders and suppliers, declining sales or income, enhancing dependence on credit products and short-term loans, and lawsuits such as court judgments or liens against assets.

By acknowledging these warning signs beforehand, people and businesses can look for ideal assistance from their accountants, lawyers, or insolvency professionals to discover practical solutions and prevent much more severe effects such as bankruptcy.

Exploring Alternatives for Debt Relief

When dealing with insolvency, discovering debt alleviation options becomes crucial to attaining financial security and staying clear of overwhelming financial obligation burdens. Some usual financial debt alleviation solutions include debt consolidation using a debt consolidation loan, financial debt settlement, debt restructuring, debt forgiveness with formal financial debt restructuring and even filing bankruptcy (as a last resort).

Each choice has its advantages and negative aspects, depending upon the individual’s or company’s financial situation and goals. It is crucial to assess the readily available alternatives very carefully and look for experienced advice to identify which one will be the most proper insolvency fighting technique that lines up with your client’s demands and conditions.

insolvency meaning

Insolvency Meaning: Ethical Issues To Consider In Insolvency Administration

Maintaining Client Privacy and Preventing Conflicts of Interest

Among the core moral factors to consider in insolvency practice is the obligation to preserve client confidentiality and avoid conflicts of interest. Insolvency experts are handed over a large amount of delicate information regarding their client’s financial affairs, which need to continue to be private. The only exemption is if the court directs the Trustee to disclose the info.

Although there is not the very same expectation of privacy as there remains in the client-lawyer relationship, by vigilantly safeguarding client confidentiality, lawyers play a crucial and distinct role for an insolvent debtor who requires a guarantee of confidentiality when seeking insolvency recommendations.

Performing in the Very Best Interests of Clients

Performing in the very best interests of clients is a basic concept that underpins an ethical insolvency practice. Insolvency practitioners have a fiduciary responsibility to prioritize the well-being of their clients and make decisions that advance the client’s interests rather than serve their own interests.

By approaching each situation with a dedication to advocating for the client’s wellness, insolvency specialists can show their devotion to honest conduct. This involves making choices that align with the client’s needs and functioning towards accomplishing the best end result in challenging economic situations.

Transparency and Integrity Throughout the Insolvency Case

Openness and integrity are crucial components that need to penetrate every stage of the insolvency process. Insolvency professionals must perform with honesty, justness, and transparency to preserve the trust of all stakeholders involved. By promoting transparent interaction and maintaining high moral requirements, insolvency professionals can make certain that the insolvency case is conducted with integrity. This not only improves the reliability of the professional but also instills confidence in the fairness and integrity of the entire process.

Insolvency Meaning Frequently Asked Questions

This Brandon’s Blog has tried to address the most frequently asked questions about insolvency meaning. The FAQ checklist is as follows:

What is insolvency?
What are the essential signs of insolvency?
Is there a difference between insolvency and bankruptcy?
What are the differences between individual and corporate bankruptcy?
What laws govern bankruptcy in Canada?
What are the duties of licensed insolvency trustees in the Canadian insolvency process?
What are the possible ramifications of insolvency for both creditors and debtors?
What options are available for solving financial debt problems in cases of insolvency?
What ethical factors should be thought about in a Canadian insolvency process?
Exactly how can professionals help clients facing insolvency concerns?

You can utilize the above frequently asked question as a type of self-test. You will find all the answers above in this Brandon’s Blog.

Insolvency Meaning: Conclusion

Understanding Canadian insolvency laws is essential for effectively handling financial distress situations. By gaining a solid foundation in these laws, professionals can better serve their client’s needs and guide them through complex insolvency matters with confidence and competence. One of the key benefits of having a comprehensive understanding of insolvency laws is the ability to provide tailored solutions that align with the client’s specific circumstances. This enables professionals to offer personalized guidance and support, ultimately helping clients address their financial challenges strategically and effectively.

I hope you enjoyed this insolvency meaning Brandon’s Blog. 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.

The Ira Smith Team understands these overwhelming debt 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.

An image of a female lawyer and a female accountant superimposed over a complex maze representing the professional advisors helping an insolvent debtor determine if bankruptcy protection in order to restructure their massive debt load or filing for a liquidation bankruptcy is the right option to resolve their debt problems. — *insolvency meaning*

Tags balance sheet insolvency, bankruptcy process, cash flow insolvency, Consumer Proposal, debt consolidation, debt consolidation loan, debt forgiveness, difference between insolvency, Federal bankruptcy law, filing bankruptcy, financial difficulties, financial distress, financial obligations, financial statements, insolvent company, insolvent debtor, licensed insolvency trustee, Office of the Superintendent of Bankruptcy, unsecured debts

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.

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.

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.

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

UNLOCKING THE MYSTERIES OF A REVIVED CANADIAN CONSUMER PROPOSAL: A LOOK BEYOND THE ESSENTIAL 5-YEAR BARRIER

Post author By Brandon Smith
Post date October 2, 2023

Reviving a Canadian consumer proposal: Introduction

If you’re fighting with financial debts and want to stay clear of filing for bankruptcy, a consumer proposal might be a great alternative to take into consideration. A current Court decision in Ontario highlights the significance of making your Canadian consumer proposal payments on time to guarantee its success.

In this Brandon’s Blog, the situation is analyzed, as well as the factors that determine whether a Court can revive a consumer proposal more than five years after it was filed are discovered. This Brandon’s Blog provides useful information for people seeking a fresh financial start.

What a Canadian consumer proposal is all about

A Canadian consumer proposal occurs as an intricately structured contract, between an individual and their unsecured creditors, with the single function of agreeably resolving their burdensome financial debts. Once agreed to, it stands as an irrevocable pact, wielding the power to instantly save the beleaguered debtor from the unrelenting pursuit by his or her creditors, while simultaneously affording the debtor the ability to systematically repay a portion of their debts over an extended period of no more than 5 years. After making the required payments laid out within the Canadian consumer proposal, the outstanding unpaid amount is erased.

To launch a Canadian consumer proposal, one must employ the services of a duly licensed insolvency trustee, also referred to as a LIT or Trustee. The LIT meticulously scrutinizes the person’s financial world and then crafts a detailed debt settlement repayment plan for them.

The benefits of a Canadian consumer proposal

Going with a Canadian consumer proposal presents a person with the bankruptcy alternative that provides a myriad of advantages that can be likened to a world of financial peacefulness:

Immediate Shelter: Upon the submission of a Canadian consumer proposal, a debtor finds themselves wrapped up in a bulletproof shield of creditor protection. It legally protects them against the claims of their creditors. This bars creditors from starting or continuing any legal actions to recover what is owed to them. This includes collection calls and other collection actions on things like credit card debt or income tax debt.

Financial Debt Settlement: The borrower’s obligations go through a metamorphic reduction, changing them right into a workable sum that the borrower can repay over some time. As a result, just a portion of the debts are paid back. After making all the required payments, the unpaid balance is written off.

Structured Settlement Blueprint: The Canadian consumer proposal allows the debtor the opportunity to get into a binding agreement with their creditors to fix their debt problems across an extended period, not surpassing the five-year mark. This gracious break grants the borrower the latitude to pay an amount they can afford, all while finding support in the eyes of their creditors. The debtor also benefits through the two mandatory financial counselling sessions.

Unified Monthly Commitment: Instead of juggling a myriad of creditors paying them inconsistent amounts, a consumer proposal streamlines the borrower’s financial trip. Right here, the debtor need only make the agreed-upon regular payments to their appointed Trustee. The LIT manages to pay the funds out according to the ratified debt settlement plan.

Eligibility requirements for a Canadian consumer proposal

The Office of the Superintendent of Bankruptcy and the Bankruptcy and Insolvency Act (Canada) (BIA) clearly lay out the eligibility requirements for this Canadian consumer proposal legal process. People coming to grips with frustrating debt and satisfying particular financial standards could find themselves suitable prospects for starting a consumer proposal.

These prerequisites include an overall debt level ranging from $1,000 to $250,000 (not including any mortgages or lines of credit secured against the person’s principal residence), while at the same time not being able to pay their debts as they come due. An essential element for restructuring one’s financial debts within the realm of a Canadian consumer proposal is having a consistent source of income.

Additionally, individuals cannot file a second consumer proposal if they are already in one. Also, if a debtor defaults on making all the payments under a consumer proposal, they cannot file another one (more on this soon). It is necessary to understand that each person’s circumstances are unique. So consulting with a Trustee is of the utmost significance in determining one’s eligibility as well as figuring out the personalized plan for debt reduction, including the amount that needs to be paid.

Types of debt covered by a Canadian consumer proposal

A Canadian consumer proposal addresses unsecured debt responsibilities. This includes credit card indebtedness, unsecured personal loans and lines of credit, payday loans, and the worry of income tax obligations. It is incumbent to recognize that secured financial encumbrances owing to secured creditors, such as home mortgages and vehicle loans, do not drop within the ambit of consumer proposals.

Nevertheless, if a debtor’s unsecured debts are significantly affecting their ability to pay off their secured debts, the consumer proposal might yet manifest as a probable option. Student loans do not typically get discharged with consumer proposals, except in cases where the borrower has stopped being a full or part-time student for no less than 7 years.

In summation, the Canadian consumer proposal emerges as a pragmatic solution for people facing monetary problems, earnestly in search of a break from the weight of their insolvency.

Annulment of a Canadian consumer proposal

The annulment of a Canadian consumer proposal is the cancellation of the commitment binding a debtor to their creditors, as laid out in section 66.3 of the BIA. This termination transpires when the borrower either falters in the discharge of their duties or due to a change in their circumstances, making them incapable of sticking to the agreed-upon payments.

The beginning of the annulment procedure can be initiated by the LIT, functioning as the consumer proposal Administrator of a Canadian consumer proposal, or, by any of the creditors. When annulled, the borrower gives up the sanctuary provided by a Canadian consumer proposal, protecting them from legal proceedings.

Debtors need to comprehensively grasp the implications of annulment and get expert advice if they encounter difficulties in meeting their commitments. The annulment of a consumer proposal has significant financial consequences and should be avoided whenever feasible.

The Canadian consumer proposal before the Ontario Court

Background

This case, Re Cumberbatch, 2023 ONSC 5287 is very instructive. It involved a hardworking individual battling financial difficulties, who made a consumer proposal to manage her debts effectively. As she struggled to meet her monthly debt obligations, she realized that a consumer proposal could provide her with much-needed relief and a structured repayment plan.

In the case heard by the Associate Justice, his pronouncement in this circumstance conveys very useful insights. This case featured a person trying to come to grips with the unrelenting stress of financial misfortune, who, in a positive step, filed a Canadian consumer proposal as a strategic method of efficiently navigating her financial obligation problems. As she faced the tough task of meeting her financial responsibilities, the realization dawned upon her that a consumer proposal might function as the cure-all, delivering the much-coveted respite that a skillfully created structure for financial debt negotiation provides.

She approached a LIT who assessed her financial situation, including her income, expenses, and outstanding debts. After careful evaluation, the Trustee determined that she was eligible for a consumer proposal and worked with her to develop a reasonable and manageable debt repayment plan.

Before diving into the Court’s reasoning, let’s first provide some background information about the case. The consumer proposal was initially filed by the debtor to deal with her outstanding debts.

However, due to a collection of unanticipated events, the debtor defaulted under her Canadian consumer proposal by not keeping up with her payments. The debtor defaulted in making payments to the Administrator under the consumer proposal.

As a result of missing 3 months of payments due the consumer proposal was deemed annulled by subsection 66.31(1) of the BIA.

Jurisdiction to revive a Canadian consumer proposal

In the realm of bankruptcy and insolvency law, consumer proposals provide individuals with an alternative to personal bankruptcy. A consumer proposal, as defined under the Bankruptcy and Insolvency Act (BIA), allows debtors to negotiate with their creditors, proposing a plan to repay a portion of their outstanding debts. However, there are instances where a consumer proposal becomes dormant or inactive, leading to questions regarding the Court’s jurisdiction to revive such proposals after the initial five-year period.

The issue of jurisdiction was significantly addressed by the Supreme Court of Canada in the landmark case of A. Marquette & Fils Inc. v. Mercure. In that case, the Supreme Court of Canada stated about the BIA (then called the Bankruptcy Act):

“has its origins in the business world. Interpretation of it must take these origins into account. It concerns relations among businessmen, and to interpret it using an overly narrow, legalistic approach is to misinterpret it.”

In making this commentary, the highest Canadian Court said the purpose of the BIA, is to provide a framework for the effective administration of insolvency matters and to facilitate the rehabilitation of debtors. The Court acknowledged that the successful completion of a consumer proposal is aligned with this purpose, as it allows debtors to repay a portion of their debts in an organized manner.

Bankruptcy courts, applying this philosophy to consumer proposals, have determined that they have the jurisdiction to revive a Canadian consumer proposal that was annulled. The thorny issue before the Court in this case was that more than 5 years had passed since this Canadian consumer proposal was filed. The Court needed to consider if it had the jurisdiction to revive a consumer proposal that on the calendar, would take more than 5 years to complete.

Factors considered by the Court in deciding whether to revive a Canadian consumer proposal

In establishing whether to exercise its jurisdiction to revive a consumer proposal, the Court developed several factors to consider:

The debtor’s persistence in attempting to finish the proposal within the five-year duration.
The reasons for the consumer proposal becoming inactive.
The prejudice or lack thereof to creditors in reviving the proposal.
Any other pertinent factors, such as the debtor’s existing financial circumstance.

The Court emphasized that the decision to revive a dormant Canadian consumer proposal needs to be led by factors to consider fairness to both debtors and creditors. The Court needed to take on a balanced and discretionary approach when exercising its jurisdiction.

Recognizing the Court’s jurisdiction to revive a Canadian consumer proposal supplies higher clarity to debtors and creditors alike, eventually contributing to a much more reliable and equitable insolvency system.

Factors considered for reviving a Canadian consumer proposal

The LIT who acted as the consumer proposal Administrator in this Canadian consumer proposal process, made the application to the Court to revive the proposal. The Court had to take into consideration whether to provide this restoration and also evaluate the effect of reviving the proposal.

In figuring out whether a revival of that consumer proposal was appropriate, the Associate Justice meticulously analyzed different variables. These aspects played a significant role in deciding upon the expediency and justness of revitalizing this consumer proposal. Some of the crucial elements the Court took into consideration included the reason for annulment, the amount already paid under the proposal, and any creditor opposition.

Reason for annulment of the Canadian consumer proposal

The Court paid attention to the reason why the consumer proposal was initially annulled. Reasons that can lead to annulment are usually non-payment by the debtor of at least 3 months’ worth of payments or non-compliance with other provisions of the proposal. If the reason for annulment results from situations beyond the debtor’s control, such as an unexpected further financial setback such as job loss or a substantial life event, the Court may be inclined to revive a Canadian consumer proposal once the debtor shows the ability to continue and complete the outstanding payments.

However, if the reason for annulment is an outcome of the debtor’s deliberate non-payment or unyielding disregard for the proposal, the Court will probably decline a revival application. In such instances, the debtor will need to offer a convincing argument backed by evidence to show why the revival is appropriate.

Amount paid under the Canadian consumer proposal

Another vital aspect is the amount paid by the debtor under the consumer proposal before it was annulled. The Court examines whether the debtor has made a considerable contribution towards their financial obligations as agreed upon in the Canadian consumer proposal. If the debtor has fulfilled their payment responsibilities before the annulment and has shown an authentic initiative to meet their remaining financial commitment under the consumer proposal, the Court is more likely to consider the revival as a practical option.

On the other hand, if the debtor has fallen short of making significant payments or has constantly defaulted on their obligations, a revival probably will not be viewed favourably by the Court. The debtor needs to offer a legitimate reason for their previous repayment shortcomings and show the ability to fulfill the balance of the payments they originally agreed to.

Creditor opposition

The Court thinks about the level of resistance from creditors about the resurgence of the consumer proposal. Creditors play an essential function in the overall decision-making process. If a considerable variety of creditors reveal solid opposition to the revival, it can heavily affect the Court’s decision.

Nonetheless, the Court likewise considers the reasons behind creditor resistance. If creditors are opposed entirely as a result of their positions or an unwillingness to engage, the Court may offer much less weight to their arguments. On the other hand, if the creditors raise valid issues concerning the debtor’s conduct, ability to fulfill their obligations or the fairness of the recommended revival strategy, the Court will thoroughly evaluate these issues.

This Canadian consumer proposal disposition: The Court’s decision in the case of Re Cumberbatch

When it comes to Re Cumberbatch, the Associate Justice made an important choice about the revival of a Canadian consumer proposal.

The Court very carefully assessed the situation surrounding the annulment of the consumer proposal and the reasons presented in support of a revival by the Administrator. It recognized that the unintentional expiry of the proposal was not an intentional act, but instead an oversight. The Court took into consideration the best interests of all stakeholders, consisting of the debtor, the creditors, and the Administrator.

Among the key variables that influenced the Court’s decision was the reality that given that the debtor validated that she would be able to pay the balance of her Canadian consumer proposal, its revival supplied the very best possibility for the debtor to pay off a portion of her debts in an organized and structured fashion. The Court recognized that the debtor had made significant initiatives to satisfy her commitment via the original proposal, and reviving it would allow her to continue on the path toward debt resolution.

Furthermore, the Court additionally took into consideration the interest of the creditors. Reviving the consumer proposal provided a structure where they would certainly receive more of a repayment than if the consumer proposal was not revived and the debtor filed for bankruptcy.

This approach by the Court prioritized fairness as well as guaranteed that the debtor’s financial situation was managed responsibly. The Court likewise followed the Supreme Court of Canada decision as well as others, to use its jurisdiction in a reasonable as well as business-like fashion in deciding that it could revive this Canadian customer proposal, even though doing so means it would take more than 5 years for the consumer proposal to be completed.

So with this set of facts, it is feasible for a Canadian consumer proposal to be revived and finished, in more than 5 years.

Canadian consumer proposal: Conclusion

In the matter of Re Cumberbatch, the Court’s deliberation regarding the approval of the Administrator’s request to reinstate the consumer proposal exemplifies the unwavering dedication of the judicial system to equity and the facilitation of avenues for debtors to remedy their fiscal obligations through the Canadian insolvency legislation. This particular case vividly underscores the paramount importance of procedural precision. Furthermore, it underscores the imperative need to ensure that unforeseeable external factors, which lie beyond the debtor’s sphere of control and yet obstruct the successful completion of a Canadian consumer proposal within the stipulated 5-year timeframe, do not constitute an impediment to the equitable resolution of debt-related affairs.

I hope you enjoyed this Canadian consumer proposal Brandon’s Blog. If you’re struggling with managing your overwhelming debt in a high-interest environment, don’t worry – there are some things you can do to take control of the situation. First, it’s important to create a realistic budget and track your expenses. From there, you can prioritize your debt repayment and make consistent payments to chip away at what you owe. It’s also a good idea to seek professional financial advice to help guide you through the process. Just remember, managing debt is a gradual process that requires commitment and determination, but you can do it! So don’t hesitate to reach out for help from financial professionals.

Individuals and business owners must take proactive measures to address financial difficulties 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.

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 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.

Brandon Blog Post

WHAT HAPPENS WHEN YOU FILE FOR BANKRUPTCY IN CANADA BUT CANNOT SPEAK BASIC ENGLISH?

Post author By Brandon Smith
Post date July 31, 2023

what happens when you file for bankruptcy

What happens when you file for bankruptcy? Introduction

Canada has two official languages: English and French. Canada’s cultural diversity means that our citizens speak a wide range of languages as their native tongue. In Ontario, the majority of the people’s mother tongue is English. That is the language throughout this Brandon’s Blog site, however, if French is your native tongue, you can conveniently substitute the two languages wherever I speak of English, one for the other.

What happens when you file for bankruptcy in Canada when English or French isn’t your native language? In this Brandon’s Blog site, I will certainly discover the unique obstacles faced by non-English speakers in this process and also overview you on exactly how to get rid of language barriers, access necessary sources, as well as seek emotional support throughout this hard time.

Declaring bankruptcy is already a tough as well as stressful trip, and it becomes a lot more intimidating for people that do not speak English. Navigating the Canadian insolvency system needs a comprehensive understanding of the process and paperwork, all as explained by the licensed insolvency trustee, making language effectiveness paramount. Unfortunately, the lack of English can prevent those people from completely understanding their situation.

This Brandon’s Blog about what happens when you file for bankruptcy but cannot speak English reviews a BC court case as well as the resulting policy statement from the Office of the Superintendent of Bankruptcy on this exact subject.

What happens when you file for bankruptcy? Importance of understanding the bankruptcy process in Canada

Trying to understand the Canadian insolvency regime and what happens when you file for bankruptcy is difficult for every layman and particularly for people facing language obstacles due to their limited English. Navigating the ins and outs of insolvency can prove to be an overwhelming job, and language obstacles can worsen the difficulties. Nevertheless, equipped with a thorough understanding of the process, those that talk languages other than English or French can properly tackle their financial dilemma, access necessary resources, and discover the essential emotional support.

What happens when you file for bankruptcy? Declaring bankruptcy is a legal process that grants individuals and even enterprises a fresh start when they can no longer fulfill their financial obligations. In Canada, the insolvency procedure is overseen by the Bankruptcy and Insolvency Act (BIA). This intricate course of action entails various stages and specific regulations for addressing a multitude of concerns. Grasping the ins and outs of the insolvency process is vital for any individual or business seeking to restructure or entirely absolve their debt because they cannot afford to make the debt payments they are obligated to make.

The journey through insolvency can be overwhelming, particularly for an individual who lacks proficiency in English, but there’s no need for it to be so. Armed with the right information and supported emotionally and linguistically, both individuals and companies can make well-informed decisions about their financial future.

what happens when you file for bankruptcy

What happens when you file for bankruptcy? Requirements and eligibility criteria for filing for bankruptcy in Canada

To launch an insolvency filing in Canada, it is necessary to satisfy certain requirements. It is critical to have a comprehensive understanding of these criteria, no matter your mother tongue.

Eligibility for a declaration under the BIA needs the person or company to be insolvent. The BIA uses three main criteria to identify the insolvency condition of a specific person or business:

Does the person or company owe $1,000 or more?
Are they incapable to satisfy their liabilities as they end up being due?
If they were to sell off all their assets, would the cash not be able to fully pay off their liabilities?

If you are able to answer “yes” to the very first inquiry as well as “yes” to either or both of the 2nd and 3rd questions, you or your company meet the standards for insolvency under the BIA and are eligible to proceed with an insolvency declaration.

Language barriers can complicate this procedure, making it important to overcome them in order to access the Canadian insolvency system. Utilizing an interpreter is an effective strategy for resolving the language obstacle and efficiently accessing the Canadian insolvency system. By fixing the linguistic divide, individuals are able to completely be involved with the system, make informed choices, and obtain the necessary assistance throughout the insolvency process.

What happens when you file for bankruptcy? Language barriers and their implications

Challenges faced by individuals who cannot speak basic English

When people who are not skilled in English seek help from Canada’s insolvency system legal process, they come across a wide range of challenges, especially when involving their creditors and the licensed insolvency trustee. Language barriers can greatly impede their ability to properly describe their financial difficulties, understand what happens when they file for bankruptcy, understand the insolvency process, and properly complete the needed documents. This interaction space can trigger misconceptions, delays, and also legal issues that are beyond their control. As we look into the conversation below, it comes to be evident that getting expert support, such as working with interpreters or translators, is crucial for non-English speakers to assist in reliable communication throughout the insolvency process.

Types of insolvency process people and companies can access

In the consumer market, the available insolvency processes are:

Consumer proposal to restructure debts and avoid bankruptcy.
Division I proposal to restructure debts and avoid bankruptcy.
Bankruptcy – summary administration or ordinary administration.

For the corporate market, the insolvency processes under the BIA are:

Division I proposal to restructure debts and avoid bankruptcy.
Receivership.
Bankruptcy – ordinary administration.

If you use the search function in the top right corner of this Brandon’s Blog and type in any of the above terminologies, you will find previous Brandon’s Blogs covering all these insolvency topics.

As you will see from the discussion of the court decision and the OSB’s position paper, the licensed insolvency trustee is responsible for hiring a qualified interpreter for a person who cannot speak English in specific situations. The cost of the interpreter in a Division I proposal, receivership or ordinary bankruptcy is not an issue as the cost is an allowable expense. Where the issue comes into play to pay for the cost of interpreter services is in both a summary administration bankruptcy or a consumer proposal.

what happens when you file for bankruptcy

What happens when you file for bankruptcy? Access to language support services

The OSB, in response to the British Columbia Supreme Court’s ruling in Ali (Re) 2022 BCSC 169, has lately revealed its position paper that emphasizes the critical value of diversity and also language inclusivity in our society. This document presents comprehensive guidelines for interpreter services, aiming to level the playing field and make sure equal accessibility to these important services, all the while adhering to the BIA and relevant case law.

This July 24, 2023 position paper explores the pivotal functions taken on by Licensed Insolvency Trustees in working with interpreter solutions for debtors during OSB examinations or meetings of creditors. Additionally, it clarifies the step-by-step process whereby Trustees can look for repayment of interpreter expenses from the estate. By promoting practical and also fair access to interpreter services, we can foster an all-encompassing and also inclusive culture that celebrates as well as appreciates the uniqueness of every individual’s voice.

The OSB maintains that if a debtor is unable to communicate fluently in the official language used during an OSB examination or the meeting of creditors, the Trustee must engage the services of an approved interpreter. The OSB’s position paper states that the Trustee has the responsibility of arranging and paying for the services of the interpreter.

As stated above, this really is a non-issue in every insolvency administration other than for a summary administration consumer bankruptcy or a consumer proposal. This is where the Ali (Re) case comes in.

What happens when you file for bankruptcy? The Ali (Re) case

This case before a judge in the BC Supreme Court was a result of an appeal from a decision of a Registrar sitting in bankruptcy court. The issue is who is responsible for paying the cost of an interpreter in a summary administration bankruptcy estate. In a summary administration bankruptcy, the Trustee’s fee is calculated by a government-set tariff and the Trustee’s disbursements, as part of the tariff, are fixed as an allowance of $100. As an aside, in a consumer proposal, the Trustee’s fee is a tariff calculation also and other than for the filing fee and court fee, there is no allowance for disbursements.

In this summary administration consumer bankruptcy estate, the Registrar determined that the Trustee was not responsible for paying for the cost of the service of an interpreter for an examination of the bankrupt as required by the OSB The Registrar, however, did not specify whether the bankrupt or the OSB was required to pay this expense.

In this case, The bankrupt is originally from Lebanon and her first language is Arabic. She came to Canada as a refugee in 2000. She is functional in English but did not feel comfortable with technical or business English, so she requested an interpreter. The Trustee found several individuals who spoke Arabic and were willing to translate for the bankrupt during the examination. However, they were not certified interpreters. The OSB insisted that at its examination, only certified interpreters were acceptable. The cost of retaining a certified interpreter for this duration ranges from $190 to $305.

The Trustee applied to the court to determine who is the responsible party for paying for a certified interpreter. The Registrar concluded that the Trustee was not responsible for the cost of the interpreter, as the Trustee had fulfilled their duty of arranging for the services of an OSB-approved translator. However, the issue of expense responsibility remained unresolved. As a result, both the Trustee and the OSB appealed the Registrar’s decision to a judge in the BC Supreme Court.

The OSB wants the Registrar’s order set aside. It seeks declarations that the Trustee is required to pay the cost of an approved interpreter and will be compensated out of the general remuneration from the bankrupt’s estate provided by the tariff.

The Trustee submits that the Registrar erred in failing to find that the government levy it receives pursuant to s. 147 of the BIA whenever a Trustee distributes funds and was set up to pay for the cost of the government administering the Canadian bankruptcy system is to be used to pay for the expense of having a certified interpreter attend the bankrupt’s examination by the OSB.

Our national association, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), sought and obtained intervenor status. CAIRP’s position was that the Trustee of the bankruptcy estate usually paid the cost, with correspondingly lower distribution to creditors. It recognizes that, on rare occasions, the Trustee will have to pay this expense where an estate has no assets. However, it submits that a general “trustee pays” rule skews incentives and access to the bankruptcy system by vulnerable groups.

The judge reviewed the BIA legislation and available case law and determined that the Registrar’s order should be set aside. The judge further ruled that the Trustee is entitled to the expenses it incurs, from the bankrupt’s estate, for the services of an interpreter for an examination requested by and to be conducted by the OSB.

what happens when you file for bankruptcy

What happens when you file for bankruptcy? The OSB position

Abiding by the court’s decision, the OSB now recognizes that the cost of interpreter services used for an examination conducted by the OSB or for a meeting of creditors is a reimbursable expense in a summary administration consumer bankruptcy (or in a consumer proposal). However, rather than just saying that the OSB will now approve it in those circumstances, it forces Trustees to go for taxation just like in ordinary administrations. In an ordinary administration, the Trustee is entitled to recover its time and disbursements in going for taxation or as the court may otherwise determine.

I can only imagine that if a Trustee goes for taxation in a summary administration or consumer proposal because of interpreter services costs, the OSB very well may take the position that the fee and disbursements of the Trustee in going for taxation are non-recoverable. What leads me to that conclusion is that in the position paper, the OSB states that the Trustee may just decide to:

“Consider the expenses incurred for the services of an interpreter as encompassed under their fees chargeable under section 128 of the Rules, not claim to recover the specific expenses, send their final statement of receipts and disbursements, and proceed to deemed taxation and discharge under sections 62 and 65 of the Rules.”

In other words, what happens when you file for bankruptcy and require an interpreter for those special situations, don’t bother trying to claim the cost of the interpreter, file your summary administration final statement of receipts and disbursements without including that cost, and you won’t have to get your fee and disbursements taxed as it will be in accordance with the tariff. If the Trustee decides to go for taxation to claim the interpreter cost, and perhaps the cost of going for taxation, then it is open for the OSB to issue a negative comment letter and oppose the taxation in court.

What happens when you file for bankruptcy? Conclusion

What happens when you file for bankruptcy is a challenge for all debtors, particularly for those who do not speak English or French. Language barriers can complicate the already difficult financial situation faced by non-English speakers.

However, it is crucial to recognize that language should not hinder individuals from seeking help and relief. Various resources are available to assist non-English speakers in navigating the bankruptcy process and overcoming language barriers. As seen from the above case and the OSB position paper, the Trustee must engage an approved interpreter for all OSB examinations or for a meeting of creditors.

I hope you enjoyed this what happens when you file for bankruptcy Brandon’s Blog. Problems with making ends meet are a growing concern in Canada, affecting individuals of all ages and income levels.

Creating a solid financial plan can be the key to unlocking a brighter and more prosperous future. By taking control of your finances, you can prioritize your expenses, set clear financial goals, and build a strong foundation for your dreams to come true. With the right mindset and approach, financial planning can empower you to regain control, eliminate this issue as a source of stress in your life and find peace of mind.

Individuals must take proactive measures to address financial difficulties 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 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 are obviously on your mind.

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.

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.

*what happens when you file for bankruptcy*

Tags bankruptcy estate, bankruptcy process, British Columbia, Canadian Association of Insolvency and Restructuring Professionals, debt payments, financial difficulties, financial distress, interpreters, Ira Smith Trustee, legal process, meeting of creditors, Supreme Court, what happens when you file for bankruptcy

Liquidating Assets: Introduction

Liquidating Assets: The Bankruptcy and Insolvency Act of Canada

Overview of the Bankruptcy and Insolvency Act Relating To Liquidating Assets

Purpose of liquidating assets in bankruptcy

Liquidating Assets: Role of a Trustee in Liquidation

Duties and Responsibilities of a Trustee

Trustee’s role in asset valuation and sale

Significance of ATB Financial as a Major Secured Creditor Turned Unsecured Creditor

Liquidating Assets: Key Details and Contention Points

Liquidating Assets: Introduction to Dr. Nsair’s Bankruptcy Case

Liquidating Assets: The Registrar’s Decision and Legal Interpretations

Liquidating Assets: Court Ruling and Implications

Liquidating Assets: Lessons Learned

Liquidating Assets: FAQ

Liquidating Assets: Conclusion

If You Declare Bankruptcy What Happens? Introduction to Financial Hardships

Impact of That Unforeseen Event Outside Of Your Control On Your Financial Situation

Struggles with Credit Card Payments and Bills

Considering Bankruptcy as a Viable Option

If You Declare Bankruptcy What Happens? Exploring Options: The Role of Licensed Insolvency Trustees

If You Declare Bankruptcy What Happens? What is bankruptcy?

Definition of bankruptcy

Laws governing bankruptcy in Canada

If You Declare Bankruptcy What Happens? Who qualifies for bankruptcy?

Criteria for qualifying for bankruptcy

Alternatives to bankruptcy – Individuals

Alternatives to bankruptcy – Companies

If You Declare Bankruptcy What happens to your assets, debts, and income during bankruptcy?

Treatment of assets in bankruptcy

Treatment of debts in bankruptcy

Treatment of income during bankruptcy

If You Declare Bankruptcy What Happens? How long does personal bankruptcy last?

If You Declare Bankruptcy What Happens? What Are Your Duties During Bankruptcy?

Responsibilities and obligations during bankruptcy

Attendance at credit counseling sessions

If You Declare Bankruptcy What Happens? What Is The Impact On Your Credit Score?

Impact on credit score during and after bankruptcy

Rebuilding credit after bankruptcy

If You Declare Bankruptcy What Happens? What are the consequences for your spouse’s credit and assets?

Spouse’s liability for joint debts

Types of Bankruptcy and Their Impact on the Non-Debtor Spouse

Protection of spouse’s assets during bankruptcy

If You Declare Bankruptcy What Happens After You Are Discharged From Bankruptcy?

Discharge from bankruptcy

Rehabilitation and rebuilding finances after bankruptcy – A Path to Financial Freedom

If You Declare Bankruptcy What Happens? Looking Towards a Brighter Future Conclusion

An Introduction to Company Is Bankrupt Asset Sales

Types of Bankruptcy

Benefits and Downsides of Court-Supervised Sales When a Company is Bankrupt

Advantages of Purchasing Assets through Court-Supervised Sales

Limitations and Challenges in Court-Supervised Sales

Balancing Pros and Cons for Strategic Bidders

Company is Bankrupt: Tactical Considerations for Potential Bidders

Company is Bankrupt: What the Court Requires

The Soundair principles

Application of the Soundair principles

Company is Bankrupt: Navigating Contracts and Leases

Options Regarding Contracts and Leases

Practical Challenges Regarding Contracts and Leases

Consent from Counterparties

Company is Bankrupt: Considerations for Governmental Approvals and Regulatory Reviews

Company is Bankrupt: Addressing Liabilities Affecting Bankruptcy Sales

Company is Bankrupt: The Insolvency Process and Sale Order Approval

Stages of the Bankruptcy Process

Role of Court Resulting in the Sale Approval Order

Key Milestones and Deadlines in Bankruptcy Asset Sales

Company is Bankrupt Conclusion: Key Takeaways for Successful Asset Acquisitions

Stalking Horse Offer Introduction

What is a Stalking Horse Offer?

Definition and Purpose of a Stalking Horse Offer

Benefits of a Stalking Horse Offer

Stalking Horse Offer: Understanding the Stalking Horse Bid Process

How a Stalking Horse Bidder is Selected

Factors Considered in Choosing a Stalking Horse Bidder

Importance of a Stalking Horse Bid in Attracting Other Bidders

Stalking Horse Offer: Stalking Horse Bid Agreement

Contents and Terms of a Stalking Horse Bid Agreement

ASSETS TO BE SOLD AND PURCHASED

REPRESENTATIONS AND WARRANTIES

COVENANTS

Significance of ATB Financial as a Major Secured Creditor *Turned Un**secured Creditor*