Tag: bankruptcy trustee

LICENSED INSOLVENCY TRUSTEE FOR BANKRUPTCY SIMPLE STEPS ON HOW TO AVOID BANKRUPTCY AND SAVE YOUR BUSINESS

Post author By Brandon Smith
Post date May 12, 2021

licensed insolvency trustee for bankruptcy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Licensed Insolvency Trustee for bankruptcy on why businesses go bankrupt

In my last Brandon Blog, Business Bankruptcy In Canada: Discover The Causes Of Business Insolvency And Bankruptcy, I described the causes of business insolvency, the types of business entities normally found in Canada and tips on how to pull your business around back from insolvency.

Numerous businesses are battling to survive today, not to mention stay lucrative. They are scaling down or just closing their doors. They are accessing the available government support money for a business. Most entrepreneurs hesitate to seek the advice of a licensed insolvency trustee due to the fact that they are afraid all the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) wants to do is be a trustee for bankruptcy.

In this Brandon blog post, I want to continue from the suggestions from my last blog, to show you exactly how that the last point I push for is to be a trustee for bankruptcy. I first look to reorganize your business. If your business or company remains in danger because of the effect of the COVID-19 pandemic, it will certainly be advantageous for you and also your organization to do so.

I will also show how sometimes, a trustee for bankruptcy or receivership, can actually help save parts of your business. The only other alternative could be to let all the business parts fail, which is the worst possible outcome.

The role of a debtor in bankruptcy or insolvency

Remember, I previously defined insolvency as a financial condition, where bankruptcy is a legal condition and a legal process. You will also recall that in my last Brandon Blog, I described the three common types of business structures in Canada; proprietorship, partnership and corporation. Just as these three business structures are different in form, they are also treated differently in insolvency vs bankruptcy. Here is how I differentiate the role of each debtor.

Proprietorship – Sole proprietorships are a type of business structure in which one individual is the sole owner of the business, which gives that person control over everything related to the business. This includes the business’ name, structure, accounting, legal obligations and tax responsibilities.

As I described last week, in Canada, the person, the sole proprietor, is carrying on business in their personal name, operating as the business name. You can register a sole proprietorship with the provincial government by completing an application form.

A sole proprietorship is the simplest kind of business structure. It permits an individual to sell goods or run a service with complete control of it on their own. Nonetheless, a sole proprietorship is not considered a separate legal entity from the owner. This means that any liabilities incurred by the business are also personal financial obligations of the owner.

So in an insolvency situation, all of the sole proprietor’s assets come into play as do all of his or her debts. It is not just the business assets and business liabilities. It is everything. This is the worst-case scenario for an entrepreneur.

So if the business is viable, and the personal assets and liabilities lead to the sole proprietor being in the situation where they can do a debt settlement plan, they can choose one of two options to restructure their entire personal financial situation. This assumes they cannot resolve their financial issues informally to bring their financial situation back to being solvent.

Partnership – A terrific way to begin a new business is teaming up with one or more people. All of you should enhance the group’s abilities as well as energy. Nonetheless, you also wish to be with people that are trustworthy, industrious and have a certain expertise that will help the business grow. Just like the way a proprietorship is one person, a partnership is made up of two or more people.

A partnership agreement is crucial. This is an agreement between the partners, describing the rights as well as obligations of each partner in the business. The same way a sole proprietor is personally responsible for the debts of the business and is putting all of their personal and business assets at risk, the same is true for partners in a business partnership. The partners are each liable for 100% of the business debts in case of insolvency. The partners cannot limit their liability to only their partnership share of the business.

Corporation – When you incorporate a business, it is a corporation. The company is a different legal entity from its owner shareholders. Shareholders are not responsible for the unpaid debts owed to financial institutions (normally a secured creditor), suppliers to the firm (normally an unsecured creditor) or the government. There are only two exceptions: (i) certain government liabilities that are a personal liability of a Director; and (ii) if the entrepreneur directly guarantees a financial debt of the company, such as a company loan, then that individual will have a liability with respect to such debt.

If the company’s financial future becomes bleak because it is insolvent, there are options. In my last blog, I talked about self-help remedies senior management of a company whose business is viable can try to informally bring the company back to a healthy financial state. You can re-read that blog to see the options available. If the self-help remedies do not work yet then we must look at more formal proceedings.

Licensed InsolvencyTrustee for bankruptcy: Settle with creditors and debt collectors without bankruptcy

In a proprietorship or partnership, if the underlying business is viable, then there are a variety of options to try to turn the business around yourself. You would use the self-help methods I described in my last blog. If the self-help options do not work, there are debt settlement options available to the individual(s) under the Bankruptcy and Insolvency Act (Canada) (BIA). They would be the only government-sanctioned debt settlement plan available in Canada. Either a consumer proposal or a Division I Proposal. You can read about how each one works by clicking on the following links:

In a successfully completed debt settlement program, the bankruptcy trustee would not be a trustee for bankruptcy. Rather, the trustee in bankruptcy would be an Administrator under a consumer proposal or a Proposal Trustee in the Division I Proposal.

If the business is not viable or the circumstances are such that a debt settlement plan is not feasible, then personal bankruptcy would be the only other option. You can read about how personal bankruptcy works by looking at our top 20 bankruptcy FAQs section. Upon the bankruptcy of the person, the sole proprietorship is automatically terminated.

Since a partnership is a way of carrying on business personally, then the same insolvency options available to the partners to the business debtor are also available. A restructuring is always preferred over a bankruptcy when the partnership is in financial difficulty.

For a debt settlement insolvency filing, the licensed trustee is not a trustee for bankruptcy. That is the case only if there is an actual bankruptcy assignment. Under provincial law, if a partner goes bankrupt, the partnership is automatically dissolved.

Licensed Insolvency Trustee for bankruptcy: Ask creditors to help you avoid bankruptcy of the corporation

Without wanting to sound like a broken record, you can review my prior blog to go over the self-help remedies for turning a business around, even if it is a corporation. A self-help remedy is always a great alternative to bankruptcy. If that isn’t appropriate, or just plain does not work, then you must get in touch with an insolvency trustee.

Again, if the company’s business is viable, then there are financial restructuring alternatives. these alternatives will be within a government-regulated insolvency proceeding. There are two formal restructuring statutes in Canada:

Division I Proposal under the BIA.
A restructuring Plan of Arrangement under the Companies’ Creditors Arrangement Act (CCAA).

In both cases, a company should retain the services of both a licensed trustee for bankrutpcy and a bankruptcy lawyer. The lawyer acts as legal counsel to the company. The licensed trustee will be both a financial advisor and steer the company through the restructuring process. The CCAA option is for companies with $5 million or more of debt. A BIA Proposal is for a company with any amount of debt. The main difference between the two processes are:

In a failed BIA Proposal, the debtor is immediately deemed to have filed an assignment in bankruptcy. This is not the case in a failed CCAA Plan of Arrangement.
A CCAA proceeding is more costly as there are many more court appearances in that forum than in a BIA restructuring.

Using one of these two statutes to gain what is called in the media “bankruptcy protection” in order to work out a successful restructuring with your unsecured creditors is always preferable. The company will pay less than it owes while keeping its viable but insolvent business alive. Don’t underestimate the power of preserving jobs in the eyes of a court. A bankruptcy trustee can be very helpful in obtaining great results.

Licensed Insolvency Trustee for bankruptcy: When to consider an Assignment for the Benefit of Creditors

If the business is not viable and is insolvent, then the only thing left to consider is an assignment in bankruptcy filing. It is definitely a last resort if everything I have already spoken about in this Brandon Blog just won’t work and you have run out of options. Trustees in bankruptcy always consider the alternatives to bankruptcy, but sometimes filing bankruptcy is the only option available.

In the case of a proprietorship or partnership, it is the individual sole proprietor and one or more of the partners who will be meeting with a trustee in bankruptcy and filing for a personal type of bankruptcy. the personal bankruptcy trustee will administer the personal bankruptcy estate. Again, you can read up on personal bankruptcy by looking at our top 20 personal bankruptcy FAQs section.

In personal bankruptcies, it will be either a streamlined system called a Summary Administration and if not, it is then an ordinary administration bankruptcy. Unlike a company, a person is ultimately entitled to a bankruptcy discharge.

When it comes to the administration of bankruptcy for a corporation, it is always an ordinary administration bankruptcy. The purpose of this Brandon Blog is not to run through all the steps in a personal or corporate bankruptcy process. Above I have provided some links to read up on debt settlement restructuring and personal bankruptcy. For corporate bankruptcy, I recommend that you read our corporate website page on corporate bankruptcy.

Alternatively, you can also read my previous Brandon Blog Bankrupting a Limited Company: Canadian Corporate Bankruptcy Process.

A trustee for bankruptcy administers the bankruptcy process for the benefit of unsecured creditors. Sometimes, it is a secured creditor who needs to enforce their security. They do not necessarily need the company to meet with a trustee for bankruptcy. Rather, the secured creditor needs the appointment of trustee to act not in a bankruptcy administration, but rather, to act as a receiver or receiver-manager to enforce the secured creditor’s position by taking control of the assets subject to the security and ultimately selling them. To read the receivership process, you can read the receivership section of our corporate website.

You can also read my Brandon Blog titled What Is A Receivership? Our Complete Guide To Receivership Solutions.

Licensed Insolvency Trustee for bankruptcy: How to avoid bankruptcy and save your business from closing

I hope you enjoyed the licensed insolvency trustee for bankruptcy Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve. As you can see from this blog, we are not just a trustee for bankruptcy. We believe every person and business should first explore debt settlement to avoid bankruptcy.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Brandon Blog Post

RACHEL UCHITEL: Her Astonishing Story on Seduction, Addiction, Celebrity Rehab & Bankruptcy

Post author By Brandon Smith
Post date February 15, 2021

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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

The Rachel Uchitel story

Rachel Uchitel was an American night club manager. She gained popularity for her involvement in the Tiger Woods sex scandal. Currently, she is making news for a different reason – bankruptcy. Her father died when she was only 15 years old. She lost her fiance in the 9/11 tragedy.

She has been quoted as saying that her dad’s fatality had a big impact on her life. Maybe that can describe her as “looking for love in all the wrong places“. But a lot more on that particular later.

In reading about her background, you could reach the conclusion that she was just a pillow-lipped party girl. It may feel like she has actually committed her adult life to arrive on the social scene and in show business. Nonetheless, she does have a college degree in communications. In 2002, Rachel Uchitel was a Bloomberg television producer. But it is clear that she turned away from Bloomberg news to seek her fame and fortune as a star celebrity.

I think you will find this Brandon Blog is very different from most of the others. I tell a bit of the Rachel Uchitel story. I tell her story not to be salacious, but to highlight how real addictions can lead to a person’s downfall. Even a famous celebrity type and how their troubles can lead to bankruptcy.

Rachel Uchitel and the Bottle Girls

Starting in 2008 in Las Vegas, a team of young women called the “Bottle Girls” began to appear on the scene. It wasn’t long before these ladies were creating a great deal of enthusiasm from the public as well as the financial investment community. Before the coronavirus pandemic, Bottle Girls were a typical sight at some of the most preferred clubs and bars in Las Vegas. They are young, gorgeous women that stand outside of the bar or casino and try to people to go into the establishment to partake in all that it has to offer.

While they may be scantily clad to stand out, they are the friendly girl next door type. Rachel Uchitel was a bottle girl.

Nightclub hostess and NHL Rangers good luck charm

Rachel Uchitel was one of the most famous people hosting in New York, and her links with nightclub managers had been invaluable to the New York Rangers. Soon after she started dating then-Ranger Sean Avery, the team started winning. So it’s reasonable that the Ranger players and then-coach Tom Renney held her in high regard.

Her grandparents owned the Manhattan El Morocco supper club in the 1960s. Famous people like President John F. Kennedy and Cary Grant frequented the place on a regular basis. She held on to her family’s memorabilia, and her dream has always been to one day re-create a contemporary version to be a nightclub owner.

What Rachel Uchitel is most famous for

As the story has it, Rachel Uchitel and Tiger Woods first met at the Griffin, a former club in New York’s Meatpacking District. The American nightclub manager was the director of VIP services. In interviews, she would often stress that it was her duty to greet important patrons such as Tiger and also ensure that they were having fun. After that, she met Tiger a number of times more before they hooked up with each other.

When the news came out concerning Tiger’s extramarital relations, Rachel Uchitel was caught up in the media storm and the face of one of the greatest celebrity cheating scandals. She was called an “alleged mistress” and dealt with public scrutiny over this.

When Tiger Woods drove his vehicle into a fire hydrant in November 2009, the headlines weren’t regarding the accident itself. They were about Rachel Uchitel, the American model and one of the most notorious women connected to the pro golfer. She came to be the face of his affairs regardless of dozens of allegations from women of sexual affairs with Tiger that appeared shortly thereafter.

As you may remember, the fling notoriously finished when Woods’ angered his better half Elin Nordegren who chased him from their Florida home brandishing a golf club after discovering saucy messages from Rachel Uchitel on his phone. Horrified Woods then banged up his car backing up into a fire hydrant and his neighbour’s tree. Nordegren later got an estimated $100 million in their divorce. It was not a pretty picture.

Rachel Uchitel was paid $10 million in 2010 after signing a non-disclosure contract meant to acquire her silence over the affair. Yet a year later, she was forced to hand most of the money back by her then-lawyer Gloria Allred after discussing her fling with Tiger when she appeared on Celebrity Rehab.

The Rachel Uchitel Addiction

Nowadays, it feels like lots of people are addicted to something. The one-way ticket to dependency seems to be love. The love of money, love of sex, love of liquor, even the love of food. Addiction has actually brought about a lot of issues in our society. The concern is, what’s the dividing line between addiction and a healthy and balanced relationship?

Rachel Uchitel says she had a love addiction. Looking back on her affair with Tiger Woods, she says that she didn’t think she was a love addict. Rather, she said the affair with such a famous person wanting to have sex with her was her way of validating her own self-worth. She did not lump herself in with drug and alcohol addicts. Yet her striving to prove her own self-worth was through a love addiction.

She may not be alone. According to an American survey, one in 10 Americans claims to be head over heels in love with someone who does not love them back. This is a statistic that appears to support the claim that love dependency is an actual, diagnosable condition. The study, conducted by the American Psychiatric Association, also discovered that 7% of Americans made love with a person they understood had not been helpful for them, just because they felt they could not quit the relationship.

Rachel Uchitel really did not include herself in with drug addicts, alcoholics and those with gambling issues. However ultimately, she did come to the realization that she did need to go to rehab. She got assistance to understand and overcome her sex addiction.

Rachel Uchitel is now bankrupt

Rachel Uchitel has recently been making more headlines not in a good way. The 45-year-old-woman at the time filed for Chapter 7 bankruptcy protection last July. She has since turned 46. She listed her main creditors like American Express and Deutsche Bank, both of whom are owed more than $595,000.

She additionally owed more than $10,000 in an unsettled lease on her Manhattan home and racked up a bill of $164,770 on a 2nd Manhattan residence. Rachel Uchitel says she has not worked since her children’s clothing shop closed in 2019.

She described herself as jobless in her Chapter 7 bankruptcy filing. She is likewise on the hook for another $17,339 in tax debt in addition to $23,694 due to a New York law firm. rachel uchitel

Rachel Uchitel on the HBO documentary talks about Tiger, boyfriends and marriage

Rachel Uchitel is currently showing up in the HBO documentary Tiger, where she discusses her affair with him in detail for the very first time. It is unknown whether she was paid to be on the program.

Ms. Uchitel asserts that the huge majority of her financial obligations to be discharged were directly related to her kids’ clothes shop business which proved to be not financially viable. She stated she had directly guaranteed debts of the business, leaving her no choice but to go into bankruptcy.

When asked if her connection with Woods was to blame for her financial troubles, Rachel Uchitel reacted saying, “No, I don’t think so. There’s no correlation between golf and bankruptcy.“

Is Chapter 7 one of the types of bankruptcies in Canada?

No. Chapter 7 bankruptcy is one of the bankruptcy Chapters under the US Bankruptcy Code. It is the most common type of bankruptcy in the United States. This chapter of the Bankruptcy Code is for the liquidation of the debtor’s non-exempt property and then distributing the funds realized to the creditors in priority. It is not meant as a restructuring tool or to implement a debt settlement plan.

In Canada, there is no such thing as Chapter 7. Here in Canada, it is just called either personal bankruptcy or consumer bankruptcy. As in the US, this is not one of the types of bankruptcies in Canada that would be used to do a restructuring to implement a debt settlement plan. Rather, personal bankruptcy in Canada is also for the liquidation of the debtor’s non-exempt property so that funds can be distributed to the creditors. In Canada, the bankruptcy system is operated under the provisions of the Bankruptcy and Insolvency Act (Canada) (BIA).

Bankruptcy and addictions

The Canadian insolvency process is geared to deal with debts resulting from any kind of addiction. It does not only deal with the debts caused by borrowing money to feed an addiction. The insolvency process is uniquely positioned to deal with the person’s total rehabilitation. When the person hits rock bottom with debts they cannot repay and no more credit to keep borrowing to feed the addiction, a licensed insolvency trustee (formerly called a bankruptcy trustee) is positioned to help not only with the debt issues but also the rehabilitation issues.

My firm has been involved in helping many people out of their debt problems arising from addiction issues. The most common are gambling, alcohol and drug addictions. But a love addiction can be just as troublesome. Professionals have referred their family members suffering because of an addiction to me.

In my January 31, 2018 blog, GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?, I discussed from a procedural view the issue of gambling debts and bankruptcy. In my January 30, 2019 GAMBLING DEBTS HELP blog, I focussed on how the insolvency process, especially bankruptcy, can deal with overall rehabilitation.

The addict is not an awful person but they do have an awful problem. They need the support of their family, family friends and medical professionals. If addiction has led to unmanageable debt, that is where a licensed insolvency trustee fits in to be part of the team helping the honest but unfortunate person. If Rachel Uchitel was living in Canada, a proceeding under the BIA would help her get rid of her debts.

The Rachel Uchitel story summary

I hope you enjoyed the Rachel Uchitel Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags addiction, American night club manager, bankruptcy trustee, Bottle Girls, celebrity cheating scandals, Celebrity Rehab, Chapter 7, Chapter 7 bankruptcy, consumer bankruptcy, El Morocco, Elin Nordegren, HBO documentary Tiger, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy, pillow-lipped party girl, rachel uchitel, Tiger Woods, Tiger Woods sex scandal

Brandon Blog Post

CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS

Post author By Brandon Smith
Post date January 27, 2021

consumer proposal faq

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

consumer proposal faq

Consumer proposal faq introduction

If you’re struggling with financial obligations, you’ve probably thought about declaring bankruptcy. You may have listened to advertisements or people saying that a consumer proposal or bankruptcy is basically the exact same, however, there are some essential distinctions. That confusion has actually led me to create this consumer proposal faq.

Under a consumer proposal, you bargain a repayment strategy with your creditors (individuals you owe money to), yet you don’t lose your assets. Depending on exactly how rapidly you can pay it off, you can be discharged a whole lot quicker from a consumer proposal than from a bankruptcy. While bankruptcy will certainly remain on your credit record for 7 years after discharge, a consumer proposal can be gotten rid of in about half that time.

In this Brandon Blog, I answer the most usual questions concerning consumer proposals which is why I call this blog the consumer proposal faq blog.

Consumer proposal faq: What are the common benefits of filing a consumer proposal?

Filing a consumer proposal in Canada is a great way to help manage your overloaded financial situation. A consumer proposal is a legal alternative to bankruptcy that helps you work out a payment plan for your creditors. It allows you to pay back a portion of your debt, eliminate the rest of your debts while keeping the remainder of your possessions and giving you a fresh start.

consumer proposal faq

Consumer proposal faq: What does a consumer proposal cost?

A consumer proposal is an official arrangement to pay off your financial debts over a specific time period. While there are different kinds of consumer proposals, the basic idea remains the same. Consult with a licensed insolvency trustee (previously called a bankruptcy trustee) (Trustee) who will certainly analyze your scenario and figure out whether a consumer proposal is a good fit for your situation.

The Trustee will also prepare a consumer proposal that takes into account the settlement plan for the creditors that you can afford to make the monthly payments on. The estimation of the minimum amount to offer your creditors is determined by the Canadian bankruptcy law laid out in the Bankruptcy and Insolvency Act (Canada) (BIA). The BIA states that your creditors must be offered something better than they would get in your bankruptcy.

To do that computation, the Trustee will identify if, in a bankruptcy, you would have to make any kind of surplus income payments. The Trustee would additionally find out the value of any of your assets that would be non-exempt and would have to be turned over in bankruptcy to the Trustee.

Once the Trustee has actually made those determinations, the Trustee can then tell you the minimum dollar value you need to offer your creditors. When you and the Trustee agree on the regular monthly payments and the length of time you require to make them (no greater than 60 months), the Trustee can prepare your consumer proposal and related filing documents.

The Trustee’s fee is regulated by the BIA. That guideline of the statute entitles the Trustee to what is called the tariff. That tariff is paid from the amount you pay to the Trustee as Proposal Administrator. The Trustee is able to deduct the tariff fee from the total payments you made. Because the amount you pay is calculated without any connection to the Trustee fee, that implies the services of the Trustee are free!

Consumer proposal faq: What debts can be included in a consumer proposal?

If you need to submit a consumer proposal, you can include the majority of your debt, however, there are exceptions. For example, secured debt, such as mortgages and auto loans, cannot be included. Financial debts that are the outcome of fraud and unpaid court fines or traffic fines, can additionally be excluded. The reason for this is since such debts are not discharged by a discharge from bankruptcy.

So it is most likely that the creditors that are owed cash from such types of financial debt would possibly vote against your consumer proposal. My assumption is that a judgement against someone for fraud will be huge enough that their vote will swamp the various other votes. However, that does not suggest you should not try.

Overdue income tax owing to Canada Revenue Agency (CRA) is a debt that can likewise be included in your consumer proposal. For that reason, tax debt forgiveness can be completed via a successful consumer proposal.

consumer proposal faq

Consumer proposal faq: What happens when you file a consumer proposal?

As already mentioned, the Trustee prepares a consumer proposal that lays out the terms of the repayment plan showing the creditors what will be paid. The calculation of the minimum to offer your creditors is determined by the Canadian bankruptcy law laid out in the BIA. The BIA states that your creditors should be supplied something better than they would if you entered bankruptcy.

To do that calculation, the Trustee will identify if, in a bankruptcy, you would have to make any kind of surplus income payments. The Trustee would likewise figure out the liquidation value of any of your non-exempt assets. The Trustee will take the total amount of the called for bankruptcy payments and add it to the approximated liquidation value of your non-exempt assets, to come up with that minimum amount you must offer.

As soon as the Trustee has actually made that assessment, the Trustee can then tell you the minimum amount you are required to offer your creditors. Once you and the Trustee settle on the monthly payments and the time you need to make them (no more than 60 months), the Trustee can prepare your consumer proposal and associated filing documents.

Consumer proposal faq: What happens if creditors reject consumer proposal?

This is where the Trustee truly earns his or her money. If it appears that your creditors are going to vote down your consumer proposal, the Trustee will advise that you amend your consumer proposal. The reason for modifying it is to look for an amount that both satisfies your creditors and that your budget permits you to be able to manage.

So, there are 2 most likely outcomes: either you’ll come up with a brand-new debt settlement plan that pleases them, or the proposal will entirely go down. The latter result suggests you’ll probably be filing bankruptcy.

Consumer proposal faq: What percentage do you pay in a consumer proposal?

The amount you pay in a consumer proposal depends on your financial obligation level, income as well as expenses, and which province you reside in. The plan can be either one where you make one lump sum payment (if there is someone ready to set up that cash for you) or a regular stream of monthly payments that will be made to the Trustee as the Proposal Administrator.

The overall amount is your proposal fund where all your creditors will be paid their pro-rata share. The most essential point to bear in mind is that once your consumer proposal is approved by your creditors, and you have made all the payments, you will receive your Certificate of Full Performance.

This means you’ll not have to pay anything more to your unsecured creditors.

Bear in mind, you are paying a fraction of your total financial debts in order to remove all of your unsecured debt. I find that in general, an individual who ends up offering around 25% of their total unsecured financial debts can have an approved and effective consumer proposal.

Consumer proposal faq: Can you keep a credit card with a consumer proposal?

You are allowed to maintain a credit card with a consumer proposal. The actual question is, will it work? Let me discuss.

A consumer proposal is actually a debt settlement plan: the financial institution, lending institution and your other creditors agree to forgive a specific amount of your debt and you consent to pay back a specific percentage of the debt. If you owe money to a credit card issuer that is caught in your consumer proposal, it is very unlikely that they will continue extending credit to you and allow you to continue using their card.

On the other hand, if you have a bank card that you owe nothing on at the time of filing your consumer proposal, AND you have actually not made any type of unusual payments to them in the 90 days immediately before your consumer proposal filing, you can probably maintain using that credit card under the existing credit agreement.

Worst situation, if all your credit cards are cut off as a result of your filing, you can always get a secured charge card to make use of. In this consumer proposal faq, I don’t explain how to get one. It is easy to find online.

Consumer proposal faq: Does a consumer proposal ruin your credit?

Of all the consumer proposal faq, this is probably the one that bothers people the most. The alternative is bankruptcy. The proposal is a plan with your creditors. The proposal is binding as quickly as it is accepted, but it does not eliminate your financial debt. It reorganizes it. You pay your Trustee as I discussed above. But you pay at a reduced amount than the total you owe.

The record of your consumer proposal will show up on your credit report. It will certainly be there for possibly 3 years after you have actually fully finished making all the payments. It does also adversely affect your credit rating. However, the notation on your credit history and the adverse impact on your credit score is not as damaging as in a bankruptcy.

Having a poor credit score might sound like a negative. But you can’t make your current payments on your debt any longer. If you cannot stay up to date with your debts, a consumer proposal will at first stop repossession or foreclosure and also will completely stop wage garnishment. It will give you a fresh start.

With all those advantages contrasted to a lower credit score, I believe it is well worth it, especially over bankruptcy. When people ask me “What are the pros and cons of a consumer proposal“, this is what I describe to them. After that, the option is theirs, consumer proposal vs bankruptcy.

Is a consumer proposal worth it? I certainly think so.

consumer proposal faq

Consumer proposal faq: Can consumer proposal affect employment?

If you have stable earnings and can make payments under a consumer proposal, bankruptcy will not be required. You cannot lose your job just because you file a consumer proposal. If you do not carry out a full and complete consumer proposal debt management programme, a creditor can try to garnish your wages. How will you feel when your employer gets the wage garnishment notification?

Consumer proposal faq: What are the main differences between a consumer proposal and bankruptcy?

A consumer proposal is a legal option for people that owe no more than $250,000 (other than for any debts registered against your primary residence) in consumer debt. If you owe more than $250,000, you can file a debt settlement plan called a Division I Proposal.

Unlike a consumer proposal, bankruptcy is a choice for individuals that owe any amount. It is necessary to note that bankruptcy is much more difficult and can impact your credit score ranking for virtually 10 years. In a consumer proposal, you do not need to turn over your non-exempt assets to the Trustee. You also do not have to report your monthly income and expenses in a consumer proposal like you do in a bankruptcy.

These are the main differences between a consumer proposal and bankruptcy.

Consumer proposal faq summary

I hope you enjoyed this consumer proposal faq Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, Contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We would be pleased to answer any other questions you may have about this Consumer Proposal FAQ Brandon’s Blog or any other matter of interest to you.

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Brandon Blog Post

SMALL BUSINESS IN CANADA: MUST A STAGGERING 200,000 CANADIAN SMALL BUSINESSES DECLARE BANKRUPTCY DUE TO THE PANDEMIC?

Post author By Brandon Smith
Post date January 25, 2021

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of the small business in Canada Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Small business in Canada introduction

The Canadian Federation of Independent Business (CFIB) is the country’s champ of small business in Canada. CFIB is Canada’s biggest non-profit organization devoted to producing and sustaining an atmosphere where your small business in Canada can succeed.

CFIB promotes small business in Canada issues with political leaders as well as decision-makers. As a non-partisan company, it influences public policy based upon its members’ views. It tries to ensure that small business owners have an opportunity to impact the regulations and policies that impact Canadian business.

A member survey was performed by CFIB and the results were announced on Thursday, January 21, 2021. The results suggest that greater than 200,000 organizations could shut permanently because of and during the pandemic.

The federation states that it could throw greater than 2.4 million people out of work. The study suggests 1 in 6, or about 181,000 small companies, are currently seriously considering closing down. That’s up from 1 in seven or around 158,000 last summer.

The CFIB is contacting provincial and federal governments to try to help small businesses by presenting secure pathways to re-open and end lockdowns that may kill off these businesses.

The question I wish to explore with you today is if a small business in Canada needs to shut down, does it have to become one of the statistics of Canadian business bankruptcies? Must it file for corporate bankruptcy? For this small business in Canada Brandon Blog, I will assume that the small business is a corporation.

Small business in Canada: When is a corporation bankrupt, or insolvent?

As I have discussed with you in previous blogs, a company is insolvent under the BIA if:

it is not able to satisfy its debts as they generally come to be due; or
it has ceased paying current debts in the normal course of business as they end up being due; or
the company’s property is not enough, at a fair valuation, to permit settlement of all debts (significance that even if all the property was to be sold, the proceeds would not provide sufficient cash to pay all financial obligations which are owed, or will certainly soon end up being due).

A company is bankrupt under the Bankruptcy and Insolvency Act (Canada) (BIA) if it has made an assignment in bankruptcy, or if a bankruptcy order has actually been made against it. Bankruptcy is a legal process to eliminate debts if the small business in Canada is unable to pay them.

To be bankrupt, in the case of an assignment, the company, and in the case of a court order, the applicant creditor would have engaged the services of a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy). Licensed insolvency trustees are the only professionals allowed to administer bankruptcies in Canada and are licensed and supervised by the Office of the Superintendent of Bankruptcy (OSB).

Every corporate bankruptcy is what is called an “ordinary administration“. Unlike in personal bankruptcy, there is no streamlined method for corporate bankruptcy. Remember this point as it serves as the basis for answering the question “Must a small business in Canada declare bankruptcy in order to close down due to the pandemic“?

***Small business in Canada*: Is small business bankruptcy the right choice?**

One of the most difficult decisions that an entrepreneur owner of a small business in Canada ever needs to make is whether or not to put his/her business into bankruptcy. Obviously, every entrepreneur goes into business hoping for success, so thinking about bankruptcy isn’t just an economic decision; it is a psychological emotional one too. It’s very crucial to understand the truths regarding local business bankruptcy and also the various other options that may be available to you before you make that decision. This will aid you to avoid making a rash choice that could be the wrong one.

The reality is that, for many companies, there are choices besides small business in Canada bankruptcy. One possible choice is a proposal to creditors. In a proposal, you make a deal to your unsecured creditors to pay off a percentage of what is owed to them and/or stretch out (commonly lower) monthly payments over a longer amount of time. This ensures that creditors receive either some or all of what is owed to them in a way the company can afford. This enables small business in Canada to avoid bankruptcy and remain in operation.

The whole concept of a proposal is that you have a corporate entity that is insolvent, but, the underlying business is viable. If you can cut away the layers of debt, the business could continue to operate and employ people. You may even need to transition the business assets to a new corporation. All of this is possible under a Division I Proposal under the BIA. A proposal under the BIA is the same as the term you hear in the news all the time – bankruptcy protection. The company ultimately comes up with a plan of reorganization to tell its unsecured creditors what the company can do for them because it does not have the necessary money to pay them 100%.

If the business is not that complex and there are only a few creditors, possibly an informal proposal would work. The entrepreneur would discuss his company’s problems with each creditor and make an offer to them that is both appropriate and something the company can pay. If successful, the company can avoid formal restructuring proceedings. If there are too many creditors to do it on an informal basis, or if the restructuring is too complex, the small business can restructure under the BIA.

A proposal can be an excellent option for a small business that has actually encountered recent economic issues while having had success in the past. It can also be useful for a small company that was profitable but is now having a hard time due to the fact that past issues are weighing it down. A proposal is one of the alternatives to bankruptcy that I implement to save a company by allowing it to develop its plan of reorganization to emerge healthy to stay in business and to save jobs.

However, for some organizations, filing for small company bankruptcy is the choice that makes the most sense. A Trustee can help you recognize the alternatives available to ensure that you can decide if a bankruptcy filing is a proper alternative for your small business.

***Small business in Canada*: Is just closing the door an alternative?**

Over the years we have consulted with many entrepreneurs about their small businesses in Toronto or other small business Ontario locations. Many times we end up advising them that it does not make sense to spend the money on any of the various types of bankruptcy proceedings. The size of the company and the nature of its assets makes either a proposal in bankruptcy or any bankruptcy process unnecessary. None of the forms of bankruptcy make sense. Let me explain.

Most small business opportunities in Canada started by entrepreneurs are funded using a variety of methods including:

investment by the owners;
small business start up grants Canada; and
small business loans.

More recently, the small business loan covid 19 Canada ($40000 Canada Emergency Business Account (CEBA) loan which has now been increased to $60,000) has also been used. The combination of owners taking stock in exchange for cash, loaning money to the small business and having a small business bank loan, perhaps even the official government-guaranteed Canada small business loan is pretty standard.

The bank will take security over all of the assets of the small business in Canada. By the time the business needs to shut down, there are not many assets left. Whatever assets there are, they are all fully secured by the bank. If the business is no longer viable, then although it is insolvent, it cannot be restructured as the business itself does not work anymore. If the assets are all fully encumbered, then there is no restructuring that can take place.

So a Division I Proposal under the BIA is not possible. Bankruptcy is a remedy for the unsecured creditors. If there are not many assets left, and what is left is fully secured by the bank, then the bank will suffer a shortfall and there are no assets available for the Trustee to use to make a distribution to the unsecured creditors. So why have any type of bankruptcy or any bankruptcy proceeding? It does not make sense to spend that money.

In this situation, it just makes sense to tell the bank that the business is shutting down, turn the key in the lock to the front door and give the key to the bank.

***Small business in Canada*: So what happens if I just close the door and lock it?**

I call this the self-help remedy. There are too many problems with the business that it is not viable anymore. Perhaps the COVID-19 lockdown is just too tough to recover from and the small business cannot survive. Perhaps the assets are not worth much – think restaurant equipment where the cost of the leasehold improvements may be as much as the cost of the equipment. Because of this, the only choice is to walk away.

As a director of the company, you have a responsibility to make sure that all final government returns are completed and filed. If the company’s books and records are stored on-site. Perhaps the accounting information is stored on a computer hard drive. The directors should make sure that the books and records, be they electronic or physical, are safeguarded by taking them off the business premises.

You may need them not only to prepare final returns but also in case Canada Revenue Agency or any other regulatory authority has any questions or wishes to perform an audit. The directors will also want to make sure that all final employee records are completed and distributed to the former employees.

Next comes the bank. In Canada, the bank loan would have been either fully or partially guaranteed by the entrepreneur. The entrepreneur may have also personally guaranteed the premises lease of the business. The entrepreneur may also have personal liability for director obligations such as unremitted source deductions, unpaid HST and outstanding employee wages and vacation pay.

If the individual does not have sufficient personal assets or other resources to make good on their personal guarantee, then rather than focussing on bankruptcy for the business notwithstanding all the business debts, we need to focus on the person’s situation. Perhaps they will need to look at the various bankruptcy options, be it a consumer proposal, Division I Proposal or as a last resort, bankruptcy.

It will be much more productive for the entrepreneur to retain me to help them with their personal financial problems arising out of the closure of the small business in Canada rather than on the business itself that has little in the way of assets and no viable business left to salvage.

Must 200,000 Canadian small businesses declare bankruptcy due to the pandemic?

So given the above, the answer to the question is no. If the small business in Canada is viable, then perhaps it can be restructured to avoid bankruptcy, maintain operations and save jobs. If it is not viable, then, bankruptcy may be necessary depending on the complexity of the business and the issues facing it.

If it is not complex and there are no free assets, then just closing the doors of that small business in Canada is all that needs to happen. The individual will then have to deal with their personal liabilities arising from that.

Small business in Canada summary

I hope you enjoyed this small business in Canada Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of this seems familiar to you and you are serious about getting the solution you need, Contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags Bankruptcy, bankruptcy trustee, business debts, canada emergency business account (ceba), canadian federation of indepdent business, cfib, Corporate Bankruptcy, Division I Proposal, Ira Smith Trustee, licensed insolvency trustee, small business, small business canada, small business in canada, small business loan covid 19 Canada 40000, small business Ontario, small business start up grants, small businesses in Toronto, when is a corporation bankrupt

Brandon Blog Post

FILE BANKRUPTCY IN CANADA ONLINE: OUR COMPLETE GUIDE ON HOW TO FILE BANKRUPTCY ONLINE

Post author By Brandon Smith
Post date December 16, 2020

We hope that you and your family are safe and healthy.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

File bankruptcy in Canada online introduction

People have been asking us recently, “Can I file bankruptcy in Canada online?”. The most honest answer is yes, just not all alone with your computer and internet connection. Doesn’t sound very definitive, does it? That is because you cannot file bankruptcy yourself.

The only one the federal government authorizes in Canada to do bankruptcy filings is a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) (Trustee). The process itself requires anyone experiencing financial problems either themselves or with their company, needs to meet with a Trustee for an initial consultation.

However, since the onset of the COVID-19 pandemic and the lockdowns that have accompanied it since March 2020, the way a Trustee meets with people considering bankruptcy has changed. It has essentially gone online given the current operating environment. I will explain what I mean and how it might help you with your individual situation.

Can I file bankruptcy in Canada online?

Virtually anything and everything can be done online. The lockdown has increased our use of online purchasing. Whether it is clothes, office supplies, or toilet paper, it can all be ordered online and shipped to our homes. The taxi industry has been under assault for some time now from both Uber and Lyft.

The internet also includes a wealth of knowledge on thousands of different subjects. Financial topics are no exception. I find that anyone contacting me who is struggling with their, or their company’s financial problems, debts and paying their bills, including credit card bills, have already looked online for information and help to try to recover for their financial future.

Although people may not understand everything about insolvency and bankruptcy with all its nuances, which is to be expected, callers are definitely more educated in options for help in dealing with their secured creditors, unsecured creditors and different types of debts – both secured debt and unsecured debt.

So nowadays, everyone expects that you can do everything online, including the ability to file bankruptcy in Canada. This is true for people who think bankruptcy might be a solution for them. They are curious to understand if they can declare bankruptcy online. It is no longer just a bankruptcy in-person system.

file bankruptcy in canada

How the coronavirus pandemic pushed bankruptcy online

The bankruptcy law in Canada is a federal statute. So the Canadian government supervises the administration of the insolvency process in Canada through the Office of the Superintendent of Bankruptcy Canada (OSB). On March 13, 2020, as a result of COVID-19, the OSB provided guidance to Trustees about how elements of the process for filing bankruptcy in Canada have changed. The document issued by the OSB is called Temporary Guidance for LITS During the COVID-19 Pandemic.

In that guidance, the OSB pushed the Canadian insolvency system as close to how can you file bankruptcy online. The only thing you still cannot do is file bankruptcy online yourself.

There was great growing concern in Canada about COVID-19. Insolvency practitioners had to take action to reduce in-person meetings. The OSB supported the Trustee community in these initiatives while keeping the stability of Canada’s insolvency system.

The OSB encouraged Trustees to make use of the considerable flexibilities that exist in the OSB’s Directives when determining which measures may be appropriate, in light of the pandemic.

To allow for the necessary social distancing, while still allowing people to file bankruptcy in Canada, the OSB advised the Trustee community:

Assessment of a person’s or company’s financial situation – Trustees are allowed to make use of techniques besides in-person meetings. The OSB recognized the COVID-19 pandemic as a remarkable circumstance.
- Trustees did not need to get separate approval to conduct assessments making use of techniques aside from in-person. Where a video conference is not feasible, evaluations and discussions about a person’s or company’s debt situation may be carried out through a mix of telephone discussion and email.
- In these assessment meetings, we discuss various debt relief options and alternatives to bankruptcy to avoid bankruptcy. We talk about credit counselling sessions, debt consolidation, debt settlement, various financial management techniques. We even discuss is a debt consolidation loan a realistic prospect?
- Then we move on to the insolvency remedies of a consumer proposal for financial reorganization and debt settlement, corporate financial reorganization, personal bankruptcy or corporate bankruptcy. Whatever is appropriate. Then we give the person our recommendations and help them pick the best solution for them. The aim is always to avoid bankruptcy, wherever possible.
Insolvency financial counselling – Trustees and the accredited credit counsellors in their office are allowed to give financial management counselling via video conferencing. The OSB also allowed for credit counseling over the telephone, when video conferencing is not feasible. That is how I have been doing each credit counselling session and it has been working very well.
Meeting of Creditors – The Chair of the meeting is now allowed to hold creditors’ meetings either by video or conference call. The Chair can count on the representations by those in attendance to confirm their identity. It is mainly the unsecured creditors who are interested in the meeting of creditors.
Oaths and Signatures: Filing for bankruptcy and the bankruptcy process, involves bankruptcy forms. We are now urged to trade bankruptcy paperwork using e-mail. Trustees also explain to anyone filing bankruptcy, be it personal bankruptcy or corporate bankruptcy, using video conferencing.
This also the case for a consumer proposal filing. So even though we are not sitting in the same room as the person, we give the debtor the required support to explain the bankruptcy forms by using Zoom, FaceTime or over the phone.

What I do for taking oaths is that I confirm the person’s name and ask them to hold up their birth certificate or driver’s licence to their webcam or mobile phone. I also watch them sign the official bankruptcy documents. Then, I ask them to scan everything, including the identification they used, email it to me right away and then put the originals in the regular Canada Post mail.

So far, this has worked quite well. It has allowed people to file bankruptcy in Canada even during a pandemic. It has worked so well, we are now helping people and entrepreneurs looking for debt relief options who otherwise could not travel to our office. They would not travel to see us in person because although they are in Ontario, they are not in the Great Toronto Area.

Trustees already use an online bankruptcy filing system

Once the Trustee receives the documents by email from the person, they then turn to the electronic online bankruptcy filing system. It is called the E filing system. The Trustee can upload certain computer files into the E filing system, to tell the OSB all the information it needs to issue the Certificate of Appointment.

It is the same system across the country, regardless of what province you are in when someone wants to file bankruptcy in Canada. When the OSB issues the Certificate, that is the moment when a person or company officially becomes bankrupt and the Trustee is appointed.

This same E filing system is used also for all filings. Things like a consumer proposal, corporate receivership and corporate restructuring filings are also uploaded through the same online portal.

***File bankruptcy in Canada*: The rest of the process is the same as before**

Once the type of online bankruptcy or consumer proposal filing is made to help you with the debt solutions you need, the rest of the process is the same. How bankruptcies work in Canada from this point on is not really different, other than as stated above, the two mandatory counselling sessions are done by either video or telephone meeting. Also, the effect on someone’s credit report is the same.

To find out the information on how the overall process works when you file bankruptcy in Canada, take a look at my Brandon’s Blog – HOW TO FILE FOR BANKRUPTCY IN CANADA: PERSONAL BANKRUPTCY MODUS OPERANDI. That will give you a very good read on the entire process.

File bankruptcy in Canada online: A word of warning

A word of caution for you. Bear in mind at the beginning I told you that only a Trustee is licensed to do any insolvency filing in Canada. You should understand that to file bankruptcy in Canada or file a consumer proposal online in Canada with someone that is not licensed by the federal government as a Trustee isn’t a choice.

You must be aware of fake organizations, firms, or service providers that attempt to trick people right into believing they can do any kind of insolvency filing for you. This includes anyone wanting to file bankruptcy in Canada.

Sadly, there are many debt consultant bankruptcy scam artists that state that they can help you do a debt settlement for you for a fee. DO NOT think of them under any circumstances. All they do is charge you for the first bankruptcy assessment of a person’s financial situation that a Trustee will do for you at no cost.

Then they try to offer you more items that the state will certainly help improve your credit score. This may also include giving you a high-interest rate loan but holding back all the cash to make the monthly payments out of until gone. Then when they cannot sell you any more products, they walk you down the block to file with a Trustee either to do a consumer proposal or to file bankruptcy in Canada.

Do not fall for these scammers that make it seem like they can file bankruptcy in Canada for you.

File bankruptcy in Canada summary

I hope you have enjoyed this file bankruptcy in Canada 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.

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

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. We help many people and companies avoid bankruptcy.

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.

We hope that you and your family are safe and healthy.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Brandon Blog Post

TRUSTEE BANKRUPTCIES FEES IN A SCARY CORONAVIRUS WORLD

Post author By Brandon Smith
Post date November 23, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

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

Trustee bankruptcies introduction

Are trustee bankruptcies filings high right now?

Every day we read or hear in the media about the life-threatening health challenges faced daily by Canadians. We also hear sad stories about people who have lost their job because of businesses having to close down.

The general public thinks that right now there is a lot of personal bankruptcy and corporate bankruptcy filings. In actual fact, the numbers are low. The 2 main reasons are:

Government support programs have helped support people and businesses. Most of the programs ended effective September 30, 2020.
Creditors are not chasing or harassing borrowers right now. Given that we are about 5 weeks away from Christmas, that will not change until some time in 2021.

I am receiving a lot of inquiries from people and entrepreneurs about their personal and business debt situation. I am doing a lot of initial consultations by telephone or video meeting. That tells me that there should be an increase in insolvency filings in 2021.

It may surprise you to hear that even a licensed insolvency trustee (formerly called a bankruptcy trustee or trustee in bankruptcy) business could be having cash-flow problems. A recent court decision out of Ottawa highlights this issue. The purpose of this Brandon’s Blog is to discuss the court case and what it means for a trustee bankruptcies fee collection.

What are the fees of a licensed insolvency trustee?

This question is quite relevant, but the answer depends on what role the licensed insolvency trustee takes on.

A trustee in bankruptcy performs a wide variety of services, such as:

administrator in a consumer proposal;
the monitor under a Companies’ Creditors Arrangement Act (CCAA) corporate restructuring;
licensed insolvency trustee in either a summary administration or ordinary personal bankruptcy;
receiver over a company’s assets, either by private appointment or court appointment;
the licensed insolvency trustee in a corporate restructuring under the proposal provisions of the Bankruptcy and Insolvency Act (Canada) (BIA);
as the licensed insolvency trustee in a corporate bankruptcy; or
act as a consultant in either a corporate or personal insolvency situation, advising either a creditor or the debtor.

The fee will certainly differ depending on what duty is played. Keep in mind that the costs of trustee bankruptcies are established under the BIA itself for all insolvency administrations under the BIA.

Personal bankruptcy administration where the non-exempt assets are estimated to be worth less than $15,000 is called a summary administration bankruptcy. Rule 128 of the BIA General Rules dictates the cost and disbursements in such trustee bankruptcies. This kind of fee is called a tariff. A tariff also exists in a consumer proposal file.

A bankruptcy is called an “ordinary” bankruptcy when the realizable assets are estimated at $15,000 or greater in personal bankruptcy. Every corporate bankruptcy is an ordinary administration. The BIA also regulates the trustee bankruptcies fee and disbursements.

With this information as background, I will now discuss the recent case out of the court in Ottawa.

**A bankruptcy trustee needs cash flow too**

The case involves a court application by an Ottawa bankruptcy trustee on 3 separate ordinary administration personal bankruptcy files. Normally, when a bankruptcy trustee wishes to get an interim draw towards its fees and disbursements in an ordinary administration, they either get the approval of the creditors at a meeting of creditors or, approval of the inspectors appointed in the bankruptcy administration.

The First Meeting of Creditors has to take place within 21 days of the date of bankruptcy. It is rare to have to call another meeting of creditors. So if the Trustee does not get approval for an interim draw at the outset from the creditors present at the First Meeting, that chance is gone quickly. If no inspectors are appointed, or a long time has passed and the Trustee has trouble finding the inspectors, getting inspector approval may also prove difficult.

But there is one more way for a Trustee to get approval to get an interim draw for its cash flow.

Office of the Superintendent of Bankruptcy (OSB) Directive no. 27R

The OSB publishes Directives from time to time. Trustees are bound by and obliged to follow all regulations provided by the OSB. This is so there will be consistency in the insolvency process across Canada. Directive 27R is titled “Advance of Trustee’s Remuneration for Bankruptcies Under Ordinary Administration.”. It was issued on February 10, 2010. The purpose of this Directive is to set out the correct procedure the Trustee should comply with when making an interim withdrawal or taking out an advance on remuneration for ordinary trustee bankruptcies.

To withdraw an advance on its compensation, the Trustee needs to obtain consent in the form of:

a resolution of a duly comprised meeting of creditors;
the resolution of a majority of the inspectors at a properly convened meeting of inspectors; or
make an application to the Court for an order approving such interim advance.

This is what this Ottawa Trustee did for 3 of its trustee bankruptcies.

The OSB did not like the court application

The OSB did not like the fact that the Trustee made this application. The OSB actually opposed the application, notwithstanding the Trustee was properly following all the requirements of Directive 27R. The Trustee brought to the court’s attention that it would still take some time to prepare its Final Statement of Receipts and Disbursements, submit it to the OSB to receive their comment letter and then apply to the court for taxation. The process would take many months.

The Trustee also highlighted for the court that these are not normal times. Due to the coronavirus pandemic, government and court staff were not working at their normal pace. The Trustee also pointed out that its own business had to lay off staff and its own cash flow was suffering. Therefore, the Trustee was making an application to the court for approval for an interim draw, as allowed. The Trustee highlighted what has gone on to date in each bankruptcy estate. The Trustee also provided proof of proper service on the OSB of this motion.

The decision does not indicate why the Trustee did not just go for inspector approval. Nevertheless, its position was that it was within its rights to make this application to the court and for the court to approve it.

The OSB’s basis for opposing this motion can be summarized as:

Interim draws approved by a court under Directive 27R are just to be made in special circumstances.
While COVID-19 is an exceptional situation, it is insufficient to call for the orders asked for by the Trustee.
The OSB additionally argues that the motion was not on notice to the creditors in the respective trustee bankruptcies estates concerned, who might actually object to the amount being claimed by the Trustee.
The OSB is worried that, if the motion is granted and the court order made, it could cause more need on the court’s time as more Trustees will seek similar orders in other trustee bankruptcies estates.
Finally, the OSB says that this matter is not urgent and therefore ought to not be dealt with right now. The Trustee should just go for final taxation in the normal course.

The OSB also provided two earlier court decisions where interim draws were not approved in support of its opposition.

The court sees COVID-19 creating urgencies, even for trustee bankruptcies

The court considered the OSB’s submissions and the cases it relied upon. The court distinguished those cases from the current motion for these trustee bankruptcies. Due to COVID-19, the Court found that it is not practical for the Trustee to need to wait on the receipt of the OSB Letter of Comment and then proceed to final taxation.

The court stated these are not normal times. The timelines for any of the steps involved in the final taxation process could be much longer, taking into consideration the stay-at-home orders that have been issued, even including the OSB team.

The judge stated that the court must deal with the situation as it presently exists and as it advances each day, and also make appropriate decisions as necessary. He stated that businesses in all industries have been laying workers off. This includes the insolvency industry. A lot of the businesses that are still operating are doing so with minimized staff. Those businesses are attempting to make the most out of their limited cash flow to sustain operations.

The court stated that it understands that the choice it makes on this motion might bring about an influx of cases for interim draws in trustee bankruptcies. If that becomes the case, the court will deal with it. In addition, the court recognized that, because of coronavirus, interim draws are a practical method of managing the liquidity crunch presently being experienced by Trustees. Even if there had been no coronavirus pandemic, Directive 27R still allows for such an application to the court in the trustee bankruptcies.

The Court was also conscious that accounting firms, and consequently licensed insolvency trustee businesses, have been proclaimed essential services in the Province of Ontario.

**The court’s decision on the trustee bankruptices motion**

As a result of all these findings, the court decided that licensed insolvency trustees must have the tools essential to maintain their operations and to permit people and companies to get access to the Canadian insolvency system. Therefore, the court held that Trustees need to be able to access the funds in their trust accounts that they have actually earned as fees, inclusive of HST.

Taking all this into account, the court exercised its discretion and ordered that the Trustee is approved to withdraw 75% of the fee that has been earned in the three trustee bankruptcies, including HST. The Trustee should then move to final taxation. There are already safeguards built into the final taxation process where creditors in each of the trustee bankruptcies estates can object to the taxation and the total fees if they wish to.

If the total final fees are approved, then the Trustee can withdraw the remaining 25%. If final taxation results in any fees less than the 75% interim draw approved in any of the trustee bankruptcies, then the Trustee will have to repay into the bankruptcy estate the specific amount(s).

The court ordered that any costs incurred on the motion was an overhead cost of the Trustee and was not recoverable from the trustee bankruptcies. Costs were neither sought nor awarded. My understanding is that the OSB is not appealing this decision.

Trustee bankruptcies summary

I hope you have enjoyed this trustee bankruptcies Brandon’s Blog. It is the first decision I am aware of that deals with the reality that like any other entrepreneur, a licensed insolvency trustee is running a business too.

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.

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

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

We know that people facing financial problems need 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.

Tags bankruptcy administration, Bankruptcy and Insolvency Act, bankruptcy trustee, Consumer Proposal, Corporate Bankruptcy, insolvency, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy, trustee, trustee bankruptcies, trustee in bankruptcy

Brandon Blog Post

CLOSING A BUSINESS DOES NOT AUTOMATICALLY MEAN AN ALARMING BANKRUPTCY

Post author By Brandon Smith
Post date November 18, 2020

At the end of this blog, we have a special gift for you!

Closing a business introduction

Many times I am consulted by an entrepreneur about closing a business. This may sound odd coming from a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee), but not all business closures involve a formal bankruptcy. In fact, there are more business closures that do not involve bankruptcy

Now with so many businesses hurting due to a slowdown or complete destination due to the result of the coronavirus pandemic, I expect more entrepreneurs are going to want to know about closing a business.

In this Brandon’s Blog, I provide the reasons why. I also go through the various steps in closing a business that you can use as a checklist.

Closing a business that does not have many (free) assets

Many times I get a call from someone whose business is not doing well. They probably cannot afford to pay the business rent next month and it does not make sense to stay open. They think bankruptcy is the only way they have for closing a business. The business does not have many assets, or all the assets are secured by a bank that loaned the corporation money. Think of a business where the assets were bought through a bank loan. The funding may or may not have been under a government small business loan program.

The entrepreneur gave a personal guarantee to the bank ranging from 25% to 100% of the total loan amount. The entrepreneur may also have provided a personal guarantee to the landlord. The business may or may not be current in its employee source deduction remittances and harmonized sales tax (HST) payments. The entrepreneur does not believe the assets have any value above the amount of the secured loan and wishes to place the company in bankruptcy as the answer to closing a business.

Here is why bankruptcy will not help:

The assets are fully secured by the bank.
Canada Revenue Agency (CRA) may have a trust claim over the assets because of unremitted source deductions.
A corporate bankruptcy will not solve the entrepreneur’s personal debt issues under the personal guarantee to the bank for any shortfall claim and the landlord for any claim due to the failure of the corporate tenant.

In this type of situation, there is not much I can do. I tell the entrepreneur that if they are going to shut the business down before the first of the next month, they should do so. Then, they should go to the bank, advise them and cooperate with the bank to allow them to realize their security. I tell them to make sure that they follow the steps for closing a business that I outline below.

I tell the entrepreneur that when the bank and the landlord each make a demand for their obligations under the respective personal guarantees to call me. We will then work together on their personal situation. Perhaps a consumer proposal will be possible. I also tell them that it is not worth spending the money they don’t have in order to bankrupt the company.

That is why in this case a corporate bankruptcy will not help an entrepreneur in closing a business. I call this the self-help remedy.

The business is still operating – will anyone buy it?

Before making any decisions about closing a business, you should first think in terms of is your business worth anything? You have spent many years building your business. It may be insolvent because it has suffered losses for several years, cash flow is weak and the corporation cannot pay its debts generally as they come due.

Although the current corporate body may be weak, you need to determine if your business is still viable. Does the marketplace still have a need for the service or product you provide? Are there competitors who seem to be doing well? Your business has a customer base and trained staff. One of your competitors may find your customer base and some or all of your staff something they want to amalgamate into their existing business.

If that is the case, you need to understand what your business might be worth. The selling prices of similar organizations in your geographical area or market will be a good barometer of what you can anticipate getting for your company. Innovative buyers might evaluate your business on the basis of projected cash flow for the next few years. They may very well mark down the worth of that cash flow to mirror the perceived threats and risks inherent in your business.

In the case of an insolvent but viable business, it may be that an insolvency process is necessary to allow the purchaser to buy the assets it wishes to purchase and take on all or some of your employees, maybe even including you.

The range of options available includes:

So with the right insolvency process, the assets of the business can be put back to good use and be very productive. It may very well help get a good M&A deal done.

I have written before many blogs on how these insolvency proceedings could help in getting the healthy parts of a business into a purchaser while leaving the sick parts behind and then be used for closing a business. Those details are beyond the scope of this Brandon’s Blog.

**When does corporate bankruptcy make sense in closing a business?**

Corporate bankruptcy is not a simple process. An entrepreneur needs the advice of their lawyer and also needs to retain a Trustee. This costs money. More often than not, there are no free assets in the company. That means the entrepreneur needs to personally fund the cost of the bankruptcy process for closing a business.

A bankruptcy of the company may make sense in several situations. Some of the most common are:

Certain government claim priorities need to be reversed and that only can be done in bankruptcy. The most common one is unremitted HST. Absent a bankruptcy, the HST obligation is a trust claim and will come before the claim of any other creditor, including a secured creditor. As probably the sole director of the corporation, the entrepreneur may be willing to bankrupt the company to put the HST behind the bank. The director may very well choose as part of closing a business, to take their chances on the claim for unpaid HST as a director liability, rather than increase the bank’s shortfall by the amount of that HST claim.
There may be value in the premises lease. If the rent under the lease is below market and can be sold, a bankruptcy will be necessary. That is because the combination of the Commercial Tenancies Act Ontario and the Bankruptcy and Insolvency Act (Canada) Trustee has certain rights to sell the lease that the corporation tenant does not have. So, bankruptcy may be a good idea in that case.
The security of a lender for which no personal guarantee has been given is invalid against a Trustee. The corporation may be able to restructure with that liability moved from secured to unsecured. Alternatively, a bankruptcy will allow for assets to be better protected for the secured creditors first and then provide some value for the unsecured creditors if there is a bankruptcy.

**My closing a business checklist**

This is what I tell any entrepreneur for a self-help remedy for closing a business that is most appropriate:

Advise the utilities that they should do a final meter reading and shut down the account.
Prepare and issue all records of employment to the former employees.
Remove the books and records (probably computerized) from the business premises so that the information can be secure.
Advise your bank lender that the business is shut down and that you are delivering the keys to the banker so that they can get their security.
If there is no bank lender, and no trust claims over the assets, hold a going out of business sale.
Tell the landlord the business is over and deliver the keys.
Cancel insurance policies. There may be an unearned premium refund coming back to the business.
Redirect the business mail to a different address. Most of the mail will be bills, but there may also be cheques you don’t want to miss so you can deposit them into the bank account.
Cancel any corporate credit cards.
Deal with the termination and return of any business license and permits.
Deal with your business social media accounts, website, and any other digital or intangible assets. You will have to decide when it comes up for renewal if you wish to retain the URL in light of your closing a business decision. The URL may have a value that you can unlock.
Make sure that the final financial statements and tax returns are prepared. File the tax returns with the government. If there is a balance owing, don’t worry about it as the business cannot pay and corporate income tax owed is not a director liability.
Prepare and issue final T4 statements of remuneration paid. Issue them to the former employees. Figure out if there are any employee source deductions owing. If there is and you can pay them as it is a director liability.
Calculate, prepare and file the final HST return. If there is a balance owing and you can pay the amount as it is also a director liability.
Maintain the books and records as CRA may want to perform an audit.
Send a letter to all creditors advising of your closing a business decision was due to financial problems, express your gratitude for the relationships you have built, tell them that there is no money for them and let them know that you have also lost money.
Mail a letter to your customers/clients advising of the closure of the business and thank them for their loyalty and patronage over the years.

Closing a business summary

I hope you have enjoyed this closing a business Brandon’s Blog. A sick insolvent company’s business might be saved by a debt restructuring.

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

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

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.

CLOSING A BUSINESS INFOGRAPHIC. CLICK ON THE INFOGRAPHIC TO DOWNLOAD YOUR OWN COPY

Tags Bankruptcy, bankruptcy trustee, Canada Revenue Agency, closing a business, Corporate Bankruptcy, CRA, hst, Ira Smith Trustee, licensed insolvency trustee, liquidating proposal, proposal, receivership, restructuring, restructuring proposal, small business, trustee

Brandon Blog Post

RECEIVERSHIP MEANING: OUR NURTURING 8 POINT CHEAT-SHEET ANSWERS WHAT IS RECEIVERSHIP

Post author By Brandon Smith
Post date October 21, 2020

Receivership meaning introduction

My last Brandon’s blog was about bankruptcy meaning; the duties, rights and responsibilities of the different stakeholders in a bankruptcy administration. So I thought it would be fitting to follow that up with a blog on the topic of receivership meaning.

In this Brandon’s Blog, I answer the 14 most often asked questions about the meaning of receivership.

Receivership meaning: What’s the meaning of “receivership” in simple words

The receivership meaning in English, according to the Merriam-Webster dictionary is:

“Definition of receivership

1: the office or function of a receiver

2: the state of being in the hands of a receiver”

Those are the simplest words I can think of. Unfortunately, it does not tell you much. I doubt that it aids in your understanding. Simple words don’t help. Let’s get a little more complex.

Receivership meaning: What does it mean when a receiver is appointed?

First, a receivership is a remedy for secured creditors, such as a chartered bank or another lender who lent money to a company and took back valid security. One of the terms of the security agreement will be that upon one or more events of default, the secured creditor has the right to appoint a receiver.

When a secured creditor wishes to realize upon the assets of the borrower company that is subject to its security, they employ the services of a Licensed Insolvency Trustee (Trustee) to be the receiver. A receivership is performed under the authority of the Bankruptcy and Insolvency Act (Canada) (BIA).

In Canada, only a Trustee can be a receiver. The secured creditor appoints the receiver to take possession of the collateral covered by the lender’s security. The receiver then conducts a receivership.

Receivership meaning: How is a receiver appointed?

There are two kinds of receiver appointments: (i) private appointment; or (ii) court appointment. The type of appointment depends upon the circumstances facing the putative receiver. The main question to answer is are there practical or legal reasons why the court is required to make decisions and oversee this proposed receivership. If no, then a private appointment can take place. If yes, then an application to court needs to be made to have a receiver appointed.

Before being able to either make a private appointment or seek the assistance of the court, the secured creditor must give the borrower company adequate notice. It must provide the borrower with written notice of the events of default and demand full repayment of the loan. The lender must give the company at least 10 days’ notice before being able to appoint the receiver. The company that borrowed the money can waive the 10 day notice period, but the lender cannot.

Receivership meaning: What happens when the receiver is called in?

When the receiver is appointed, there are certain steps that the receiver must take. The receiver is charged with the responsibility of taking possession of the assets of the company in receivership. The receiver must get possession and control of the assets to safeguard them, wherever they are located. The receiver must make sure that an inventory of all the assets is quickly taken and that the assets are adequately insured.

Keep in mind that the assets belong to a company that was carrying on an active business. Therefore, one of the first things the appointed receiver must decide is whether or not to carry on the business of the company. The receiver must answer many questions, including:

Was the business already shut down when the receiver was appointed?
Are experienced employees available and willing to work for the receiver?
Will the assets of the company be worth more if sold on an operating business basis than on a shutdown liquidation basis?
Can the receiver operate the business in a cash-flow positive way?
If the receiver is estimating that the business being run in receivership will produce negative cash flow, is the secured creditor willing to fund the losses to take the chance that the assets will sell for a higher price than if the business is shut down right away?
Are there any legal, regulatory, or environmental issues that would preclude the receiver from operating the business?
Can the business be run safely?
Is there property located on the company’s premises that belong to third parties and therefore are not assets of the company covered by the lender’s security? This includes any assets, normally inventory, that might be subject to the right of revindication.

These are just some of the considerations for the receiver. The receiver must be able to make decisions rather quickly. The receiver must also be able to support the decisions with facts and evidence. So as you can see, the receivership meaning, in the beginning, means that there is a lot of hectic activity and decisions.

Receivership meaning: Under receivership meaning

So when the company is placed in receivership, it is under receivership. Once the receiver makes the various decisions I talked about above, with facts backing them up, the receiver then needs to get approval.

In a private appointment, the receiver only needs the approval of the secured creditor that appointed the receiver in an attempt to recover its secured loan. In a court appointment, the receivership meaning is that the receiver needs to take several steps.

First, the appointed receiver should make sure that the secured creditor who applied to the court for the receivership appointment order is onside with the receiver’s recommendations. Once that is the case, the receiver needs to prepare its report to court to advise the court of the receiver’s activities up to that date and the receiver’s recommendations for going forward in the receivership administration. The receiver is asking the court for its approval of the actions and activities of the receiver to date and for its go-forward recommendations.

Receivership meaning: What does a receiver do in business

Once the receiver receives the appropriate approval from the holder of the secured debt in a private appointment, or the court order approving the receiver’s recommendations, it then proceeds with implementing its recommendations in the receivership administration. If the receiver is continuing to run the business while advertising the business assets for sale, that is called a going-concern sale.

If the receiver is not operating the business and is just selling the assets of the closed-down business, that is called a liquidation sale. That is what happens in a liquidation.

Receivership meaning: What is the difference between receivership, liquidation, and insolvency?

When trying to figure out the receivership meaning, I have been asked the following questions many times:

What is the difference between receivership and liquidation?
What’s the difference between liquidation and insolvency?
What happens when a company goes into receivership in Canada?

I hope that based on what you have read so far, you now understand that receivership is an enforcement action started by the holder of secured debt or a secured loan. Liquidation can have two meanings. The first one is when the receiver (or bankruptcy trustee) sells the assets while NOT operating the company’s business. The second meaning of the word is in the phrase “statutory liquidation”. This happens when the shareholders decide to close down the business, but the value of all the assets is enough to provide funds to not only pay off all the debts. It also provides funds for the shareholders. A statutory liquidation happens when the company is solvent.

Insolvency, or insolvent, is a financial state. It means that the company cannot pay its debts as they come due. It also means that if the company’s assets are liquidated, there would not be sufficient funds to pay off all of the liabilities.

Finally, my whole discussion above is meant to explain in a receivership meaning sense, what happens when a company goes into receivership in Canada.

Receivership meaning: How do receivers get paid

The financial institution or other secured creditor who is responsible for the appointment of the receiver is liable to pay for the cost of the receivership. The receiver has a first charge against the assets of the company secured by the lender. That first charge is subject only to any valid trust claim against those same assets.

If the assets are insufficient to pay for the cost of the receivership and fully repay the outstanding debt of the secured creditor, then that creditor will suffer a shortfall.

Receivership meaning summary

I hope you have enjoyed this bankruptcy meaning Brandon’s Blog. Hopefully, you have better insight now into the fact that a sick insolvent company’s business can be saved by doing a sale of its assets to a healthy organization.

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

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

Call us now for a free consultation.

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

Tags bankruptcy trustee, court appointed, How do receivers get paid, How is a receiver appointed, Ira Smith Trustee, licensed insolvency trustee, meaning of receivership, private appointment, receivership, receivership meaning, under receivership meaning, What does a receiver do in business, What does it mean when a receiver is appointed, What happens in a liquidation, what happens when a company goes into receivership in canada, What happens when the receiver are called in, What is the difference between receivership and liquidation, What's the difference between liquidation and insolvency, What's the meaning of receivership in simple words

Brandon Blog Post

BANKRUPTCY TRUSTEE: OUR COMPLETE GUIDE TO WHAT IS A LICENSED INSOLVENCY TRUSTEE

Post author By Brandon Smith
Post date October 14, 2020

Licensed Insolvency Trustees, licensed by the Canadian Government

A bankruptcy trustee (now called a Licensed Insolvency Trustee) is a person or company licensed to administer receiverships, bankruptcies, and proposals in Canada. We are licensed by the Office of the Superintendent of Bankruptcy Canada (OSB).

The role of the bankruptcy trustee is to help people and companies look at their financial situation and explore the various debt relief options. The Trustee can help with many possible debt solutions; much more than just filing bankruptcy. The Trustee looks at various ways the person or business can avoid bankruptcy first. Bankruptcy, which is the legal process for debtors to deal with their unsecured creditors, by discharging away their unsecured debt, including credit card debt and income tax debts, is the last resort.

In this Brandon’s blog, I provide my complete guide on how a bankruptcy trustee helps people and companies who are in a precarious financial situation because they have too much debt by providing insolvency services and helping people and companies through the Canadian insolvency process.

About Bankruptcy Trustees: what is a licensed insolvency trustee?

A Licensed Insolvency Trustee (LIT) is federally certified by the OSB. A trustee in bankruptcy is the old name for a LIT. LITs are the only debt professionals who are federally regulated and supervised professional that offers recommendations and solutions to individuals and businesses with financial problems.

LITs help people make informed choices to manage their debt difficulties. A bankruptcy trustee is the only expert licensed to carry out government-regulated insolvency proceedings such as:

privately-appointed or court-appointed receiver or receiver and manager to administer receiverships Bankruptcy and Insolvency Act Canada (BIA).
assisting people to restructure through consumer insolvency using a consumer proposal.
helping people who owe more than $250,000 (not including debts registered against their principal residence) and companies by making a proposal to creditors as alternatives to bankruptcy.
bankruptcy trustee/licensed insolvency trustee in a bankruptcy administration when a person or company is filing for bankruptcy.

As licensed insolvency trustees, we’re here to help: How do I become an insolvency trustee?

A person who wishes to acquire an individual licence may complete and file an application with the OSB. The following are required for the issuance of a personal licence under the BIA:

successfully passed the following, which is administered by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP):
the Canadian Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP) unless otherwise exempted;
the CIRP National Insolvency Exam; and
the insolvency counselling course;
paid the required fee;
the applicant shall be solvent;
the applicant must be of good character and reputation; and
passed the oral board of examination run by the OSB.

You need to pass the educational program run by CAIRP. In order to register, you need to be sponsored by a bankruptcy trustee. That LIT will most certainly be your employer. When you pass the final CQP exam, you are awarded the CIRP designation and then able to apply to sit before the OSB’s oral board of examiners.

bankruptcy trustee

***Trustees in Bankruptcy near you: How to find a bankruptcy trustee* in Canada**

If you are looking for a trustee in bankruptcy near you, there are three good ways to find one.

The best way to find a bankruptcy trustee is a referral from friends or family members. Although they themselves may have never filed for bankruptcy, perhaps they know someone who did. Or, maybe they know a lawyer they trust who can provide them with a name or two that could be passed on to you. A personal reference is the best way to go.

The second way is through the OSB. They maintain a searchable database of all LITs in Canada. You can look for a bankruptcy trustee located near you. The directory includes the office locations of all LITs. You can browse either by name, city or province.

The third way is to look for bankruptcy information online. Type into your favourite search engine a phrase like “ bankruptcy trustee”, “bankruptcy trustee near me”, bankruptcy trustee Vaughan ” or “ trustee in bankruptcy Toronto ” and start searching websites. Then call the one whose website seems to speak to you. You can make an appointment for a no-cost consultation to get all your questions answered. You may even want to try two or three so that you can compare approaches. Then you can select the bankruptcy trustee that you feel you could work best with.

The fee of a bankruptcy trustee in a summary administration bankruptcy – The Bankruptcy & Insolvency Act

A personal bankruptcy administration is called a “summary” bankruptcy administration when the realizable assets are estimated at $15,000 or less. This kind of filing for bankruptcy is many times referred to as “no assets, no income”.

Rule 128 of the BIA General Rules dictates the fee and disbursements of a bankruptcy trustee in a summary administration personal bankruptcy. The fee is fixed and is called a tariff. It is calculated as follows:

“128 (1) The fees of the trustee for services performed in a summary administration are calculated on the total receipts remaining after deducting necessary disbursements relating directly to the realization of the property of the bankrupt, and the payments to secured creditors, according to the following percentages:

(a) 100 percent on the first $975 or less of receipts;

(b) 35 percent on the portion of the receipts exceeding $975 but not exceeding $2,000; and (c) 50 percent on the portion of the receipts exceeding $2,000.

(2) A trustee in a summary administration may claim, in addition to the amount set out in subsection (1), (a) the costs of counselling referred to in subsection 131(2);

(b) the fee for filing an assignment referred to in paragraph 132(a);

(d) the amount of applicable federal and provincial taxes for goods and services; and (e) a lump sum of $100 in respect of administrative disbursements.” If there are no assets or surplus income that will provide cash in the bankruptcy administration, then the debtor, in order to retain the services of the bankruptcy trustee, needs someone to either guarantee the fee and disbursements or post a cash retainer with the LIT in order to file for bankruptcy.

The fees of the bankruptcy trustee in an ordinary bankruptcy

A bankruptcy is called an “ordinary” bankruptcy when the realizable assets are estimated at $15,000 or greater in personal bankruptcy. Every corporate bankruptcy is an ordinary administration.

In an ordinary administration, the trustee is entitled to the remuneration voted by the inspectors in the bankruptcy case. The inspectors are representatives of the creditors who were voted in at the First Meeting of Creditors. The fee must also be approved by the court.

The fee will be affected by the complexity of the bankruptcy case, how much work the LIT had to do to preserve and sell the assets and did the LIT obtain verifiable results that can be described as extraordinary. The time spent and the hourly rates of the bankruptcy trustee staff involved are the basis for calculating the fee in an ordinary administration.

The disbursements incurred are to be added to the fee and must also be taxed. If the bankruptcy trustee is unsure at the outset if there will be any realizable assets, the LIT will ask a third party to provide either a guarantee or cash retainer.

bankruptcy trustee

The consumer proposal fee for a bankruptcy trustee acting as administrator of a consumer proposal – The Bankruptcy & Insolvency Act

Rule 129 sets out how to calculate the tariff fee in a consumer proposal. As I stated above, one of the roles a bankruptcy trustee is licensed for is to act as the administrator of a consumer proposal This rule states:

“129 (1) For the purposes of paragraph 66.12(6)(b) of the Act, the fees and expenses of the administrator of a consumer proposal that must be provided for in a consumer proposal are as follows:

(a) $750, payable on filing a copy of the consumer proposal with the official receiver;

(b) $750, payable on the approval or deemed approval of the consumer proposal by the court;

(c) 20 percent of the moneys distributed to creditors under the consumer proposal, payable on the distribution of the moneys;

(d) the costs of counselling referred to in subsection 131(1);

(e) the fee for filing a consumer proposal referred to in paragraph 132(c);

(f) the fee payable to the registrar under paragraph 3(b) of Part II of the schedule; and (g) the amount of applicable federal and provincial taxes for goods and services.

Our regular readers of Brandon’s Blog will recall that in previous blogs that I wrote, I described what the BIA minimum requirements are for calculating how much a debtor should offer its creditors as a proposal fund in a consumer proposal. That calculation has nothing to do with what fee the licensed trustee acting as the administrator may be entitled to.

That is why any debtor thinking about filing a consumer proposal in order to avoid bankruptcy need not be concerned with how much they have to pay as a fee. The calculation as to what a reasonable proposal fund will be has zero relation to what the administrator’s fee will be. In this way, the fee of the bankruptcy trustee acting as administrator is no-cost!

The fee of the bankruptcy trustee for the administration of a Division I proposal

Readers of the Brandon Blog will remember that a consumer proposal is available for any individual who has $250,000 of debt or less, not including any debts secured against their personal residence. A Part III Divison I of the BIA proposal is available to all companies and to any person whose debts are too large to do a consumer proposal. Both are alternatives to bankruptcy Under either administration, a proposal is a debt relief plan sanctioned by the BIA. It is the only debt settlement plan authorized by the Government of Canada. Above I described how the fee and disbursements of a bankruptcy trustee in an ordinary bankruptcy administration must be approved by the inspectors and the court.

The same is true for the fee of the bankruptcy trustee acting as the licensed trustee in a Divison I proposal. The calculation of the fee will be very similar to an ordinary bankruptcy administration also. The only difference will be as required by the difference between a proposal and bankruptcy.

A proposal is a great alternative to bankruptcy.

Only a bankruptcy trustee can act as a receiver

Section 243(4) of the BIA states that only a bankruptcy trustee can be appointed as a receiver. It does not matter whether the receiver will be privately or court-appointed. The calculation of the receiver’s fee is based on the hours worked and the hourly rate charged by the respected staff working on the file.

In a private appointment, the fee must be approved by the appointing secured creditor. In a court appointment, the fee must be approved by the court.

bankruptcy trustee

Bankruptcy trustee summary

I hope you have enjoyed this bankruptcy trustee Brandon’s Blog. Hopefully, you have better insight now into the many roles played by a LIT. As part of any bankruptcy or proposal administration, there are two mandatory credit counselling sessions also. So, the LIT also acts as a credit counsellor.

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team That is why we can develop a restructuring process as unique as the financial problems and pain you are facing.

If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

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

Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Tags Bankruptcy, Bankruptcy and Insolvency Act (BIA), bankruptcy trustee, bankruptcy trustee near me, bankruptcy trustee toronto, Consumer Proposal, Division I Part III proposal, how do i become an insolvency trustee, Ira Smith Trustee, licensed insolvency trustee, LIT, Office of the Superintendent of Bankruptcy, ordinary administration, ordinary bankruptcy, OSB, receiver, receivership, Summary Administration, what is a licensed insolvency trustee

Brandon Blog Post

INSOLVENCY AND BANKRUPTCY ACT: ANTI-DEPRIVATION RULE COMPLETELY VALID IN INSOLVENCY

Post author By Brandon Smith
Post date October 12, 2020

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

Insolvency and bankruptcy act introduction

On October 2, 2020, the Supreme Court of Canada (SCC) rendered its decision in Chandos Construction Ltd. v. Deloitte Restructuring Inc., 2020 SCC 25 (Chandos decision). This decision upheld the idea that the anti-deprivation rule is completely valid when it pertains to both personal and business insolvency and bankruptcy act cases.

In this Brandon’s Blog, I describe the Chandos case and what it stands for.

**The definition of the word deprive and the insolvency and bankruptcy act context**

The Merriam-Webster dictionary states the definition of the word deprive is:

1: to take something away from; and
: to withhold something from.

In the Chandos Construction Ltd. (Chandos) insolvency and bankruptcy act case, the SCC was asked to rule on contract clauses that if upheld, would deprive the bankruptcy estate and therefore the unsecured creditors of money that would otherwise be available. This deprivation of funds, which may make total sense as between contracting parties, is not enforceable in bankruptcy.

**The anti-deprivation rule in the Canadian insolvency and bankruptcy act matters**

Neither the Bankruptcy and Insolvency Act (Canada) (BIA) nor the Companies’ Creditors Arrangement Act (CCAA) stops non-defaulting parties to a contract, from relying upon agreement provisions that create an inevitable result when a debtor declares bankruptcy. The common law becomes pertinent in these situations.

Canadian courts still refer to these anti-deprivation provisions as “ipso facto” provisions and also this idea as the fraud upon the bankruptcy law concept. In more current times, this has been described as the anti-deprivation rule.

The SCC has recognized the anti-deprivation rule since the 1890s. However, the contemporary application of this principle in Canadian law greatly originates from an Ontario court decision in 1995 – Canadian Imperial Bank of Commerce v. Bramalea Inc., 1995 CanLII 7262 (ON SC) (Bramalea decision).

This is a decision from the Ontario Court of Justice (General Division). Canadian courts have thought about and decided upon the anti-deprivation rule in many insolvency and bankruptcy act cases since then.

**The Bramalea case and its relevance of insolvency and bankruptcy act matters**

Luckily for me, Ira Smith was the receiver responsible for the file that involved the Bramalea decision. So, I have a bird’s-eye view of that case which started it all leading to the SCC Chandos decision.

In the Bramalea insolvency and bankruptcy act case, a group of companies, including Bramalea Inc. (Bramalea) was in a partnership agreement to develop and operate a shopping mall in Markham, Ontario called Shoppes on Steeles. In 1995, Bramalea was placed into receivership and bankruptcy. Bramalea’s partners included Sears Canada and a private real estate development company.

Amongst the different provisions of the partnership agreement was a specific provision in the contract which considers insolvency. It said that, in case of the insolvency of any of the partners, the non-insolvent partner(s) (given it does not waive the event of insolvency) can buy the interest of the financially troubled partner at the lesser of book value or fair market value.

The paradox of this case was that the large company partners at the time of the drafting of the partnership contract were concerned about what happens if the private property developer one day became insolvent? None of the partners ever believed that it would be that private company that would be the only one that was not insolvent. We all know what happened to Sears Canada!

The moving parties sought to exercise that right by serving a notification to buy the Bramalea passion at book value, approximated to be around $200,000. This was opposed by the receiver and also other stakeholders.

The receiver gave evidence that the fair market price surpassed book value by as much as $2 million to $3 million. The moving parties acknowledged that the fair market value of Bramalea’s stake in the partnership was more than book value. They did not agree with the receiver’s evidence regarding the amount of that difference. They additionally did not submit their own fair market valuation.

**The Bramalea insolvency and bankruptcy act decision**

Based on the evidence, the court took the view that the specific spread between book value and fair market value was not trivial. The court was satisfied that the distinction is greater than marginal, and enough to properly draw the interest of the receiver and the creditors.

The receiver’s position was that there is a higher principle in play and that the concern is not one of hindering the freedom of contract. Rather it was just one of whether or not that part of the partnership contract is void as being contrary to the public interest.

The receiver submitted that while the arrangement might quite possibly stand as between the contracting parties, it is void as against the receiver and also the bankruptcy trustee in the Bramalea insolvency and bankruptcy act proceedings.

The court agreed with the receiver’s position in this insolvency and bankruptcy act case. The court decided that it was clear from the provisions of the partnership agreement itself that the parties contemplated a transfer to one of the partners of the other partner’s partnership interest, only in case of insolvency, at a price less than what could be acquired for that interest on the open market.

The court specified that this stipulation made perfect sense, as between the contracting parties. It made total sense in regards to maintaining their partnership and their respective interests. Nevertheless, the court likewise specified that the clause cannot survive through the scrutiny of the “fraud on the bankruptcy law” principle.

The receiver ended up selling Bramalea’s partnership interest to the other partners for fair market value.

insolvency and bankruptcy act

**The Chandos Alberta court case and the anti-deprivation rule for insolvency and bankruptcy act matters**

Chandos was the general contractor for a condo project contracted with Capital Steel to give $1.3 million worth of steelwork. In the subcontract, Capital Steel agreed that if it became insolvent, Chandos was entitled to all costs arising from the suspension of the contract and it would forfeit 10% of the total subcontract price as an inconvenience fee. Capital Steel performed the majority of its commitments, nevertheless, it filed an assignment in bankruptcy before completing full performance.

As a result, Chandos was forced to finish the contract at an estimated expense of $22,800. Up until that point, Chandos owed Capital Steel $149,618 in outstanding invoices for the job it had performed.

Chandos relied upon the agreement and said that it was qualified to deduct its cost of finishing the job plus 10% of the total contract cost from the amount owing. Given the price of the subcontract, the 10% deduction eliminated Chandos’ balance owing plus an extra amount of $10,511. Chandos declared that gave them a provable claim in the Capital Steel insolvency and bankruptcy act case.

The Trustee’s application to the Alberta Court of Queen’s Bench

On March 6, 2017, the Trustee applied to the Alberta Court of Queen’s Bench seeking advice and directions on whether Chandos was entitled to rely on the provision in the contract or was it void pursuant to the anti-deprivation rule in common-law.

The chambers judge acknowledged that the common law anti-deprivation rule stops parties from contracting out of insolvency and bankruptcy act regulations. The judge stated that if that provision was a liquidating damages provision as opposed to a penalty, it would not violate the rule.

The chambers judge ruled that the condition was an authentic pre-estimate of costs, which imposed liquidated damages and not a penalty. He additionally held that the provision represented a bona fide commercial arrangement that did not have as its predominant objective the deprivation of Capital Steel’s property. Consequently, the chambers judge decided that Chandos can implement the clause against the Trustee.

**Trustee appeals the Chandos insolvency and bankruptcy act decision to the Court of Appeal for Alberta**

The Trustee appealed the Chandos decision to the Court of Appeal for Alberta. The appellate court reviewed the lower court decision in this insolvency and bankruptcy act case and decided that:

The chambers court properly determined the presence and application of the fraud on the bankruptcy law principle in Canada.
In describing the scope of the anti-deprivation rule, however, the chambers judge erred.
The lower court embraced the purpose-based technique set out by the Supreme Court of the United Kingdom
The appropriate technique is to check out the impact of the provision. Its purpose is a different analysis.
Chandos certainly had a genuine commercial interest it was looking to protect.
However, the clause conflicts with the BIA‘s scheme of distribution. The common law anti-deprivation rule revokes the clause and Chandos cannot count on it to defend its claim against the Trustee.

**Chandos appeals to the SCC in this insolvency and bankruptcy act anti-deprivation rule case**

One of the key goals of the insolvency and bankruptcy act law is to make certain there is a fair distribution among creditors. In order to fulfill the objective, the legislation restricts specific contractual stipulations that trigger when one of the parties goes into insolvency proceedings (ipso facto clauses).

As seen in the Bramalea situation, one of these limitations is the anti-deprivation rule. It holds that ipso facto conditions that rob the debtor’s creditors of assets they are qualified to receive in insolvency and bankruptcy act matters are void. This is likewise what the Court of Appeal for Alberta decided. Chandos appealed that decision to the SCC.

The Chandos appeal was heard on January 20, 2020. The SCC split decision was released on October 2, 2020. On the facts of Chandos, the SCC dismissed the Chandos appeal. The SCC refused to promote a contractual stipulation that the subcontractor Capital Steel waive 10 percent of the agreed price if Capital Steel became insolvent or bankrupt.

The SCC majority maintained that the test for application of the contractual provision is effects-based and not purpose-based. The SCC majority confirmed that the anti-deprivation rule stands under Canadian common law and it has not been eliminated in dismissing the appeal in this corporate insolvency and bankruptcy act case.

insolvency and bankruptcy act

Insolvency and bankruptcy act summary

I hope you have enjoyed this insolvency and bankruptcy act Brandon’s Blog. Hopefully, you have better insight now into the fact that a sick insolvent company’s business can be saved by doing a sale of its assets to a healthy organization.

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Tags anti-deprivation rule, Bankruptcy, bankruptcy estate, bankruptcy trustee, bramalea, Canadian Imperial Bank of Commerce v. Bramalea Inc., capital steel, chandos construction, Chandos Construction Ltd. v. Deloitte Restructuring Inc., fraud on the bankruptcy law, insolvency, insolvency and bankruptcy act, ipso-facto, ira smith team, Ira Smith Trustee, licensed insolvency trustee, receiver, trustee, unsecured creditors

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