Tag: bankruptcy trustee

MOVE FAST TO OBJECT TO AN ONTARIO RECEIVERSHIP COURT ORDER

Post author By Brandon Smith
Post date April 24, 2019

What is a receiver in insolvency?

A recent case heard in the Court of Appeal for Ontario clarifies what the time limit is to object to an order made in a Court-appointed receivership of a company in Ontario. The bottom line is you better move fast. Before I describe this very interesting decision, I should first remind newer readers on some receiver 101 basics.

What is it?

A receivership is a remedy for secured creditors to enforce their security. In the event, the company defaults on its loan agreement, normally by non-payment, the secured creditor. There are two types of these proceedings in Canada; 1) privately appointed or; 2) court appointed. A receiver might additionally be selected in an investor dispute to complete a task, liquidate assets or market a business.

Typically, the process begins with the secured creditor consulting with a Receiver. If it is decided that there should be a receiver appointed, the secured creditor then makes a choice. They can either appoint the receiver by written appointment letter (privately appointed) or make a motion to the Court for an Order appointing the receiver (court-appointed).

The Bankruptcy and Insolvency Act (Canada) (BIA) states that only a licensed insolvency trustee (formerly called a bankruptcy trustee) can act as a receiver. A privately appointed receiver acts on behalf of the appointing secured creditor. A court-appointed receiver has a duty of care to all creditors.

What are the duties of a receiver?

The receiver’s first duty is to take possession and control of the assets covered by the secured creditor’s security in a private appointment, or all the assets indicated in the court order in a court appointment. The receiver must decide whether it can get a higher value for the assets if it operates the business. Alternatively, the receiver may decide that the risk of operating the business is not worth it in terms of any meaningful increase in the value of the assets.

The receiver then develops a plan to on the running of the business and for the eventual sale of the assets. The type of business and the nature of the assets will dictate what approach the receiver will take. In the meantime, the receiver must inventory all the assets, protect them and make sure there is adequate insurance in place for what the receiver wishes to do in terms of running the business and selling the assets.

In a private appointment, the receiver needs to get the approval of the secured creditor before embarking on the business and asset plan. In a court appointment, the receiver requires the approval of the court.

What happens when a company goes into receivership?

When the company goes into receivership, senior management and the Directors lose most of their authority for decision making. The Directors’ general corporate duty of maintaining corporate records continues, but any decision-making about the running of the business or its assets will not be effective. This is especially true in a court appointment. The subject of Director liability is too broad to start mentioning in this Brandon’s Blog. i am planning to soon write a blog on that topic.

Management’s and employees’ responsibilities about the business in a practical sense will stop upon the appointment of the receiver. Their advice and help are only required if requested by the receiver. They certainly will not be paid for any efforts unless the receiver agrees in writing to make money available for their pay.

Court of Appeal for Ontario says you better move fast

Why the confusion? Isn’t the process for an appeal of a court order straightforward? The confusion comes about because, in the standard model Appointment Order of the Commercial List of the Ontario Superior Court of Justice, the court-appointed receiver is appointed under two statutes:

Section 101 of the provincial Ontario Courts of Justice Act, RSO 1990, c C.43 (CJA).
The federal BIA, section 243(1).

The applicant, in this case, was the purchaser of assets from a court-appointed receiver of a company. One of the standard provisions in the Appointment Order is that anyone wishing to take legal action against the receiver must first get the approval of the court to do so.

They brought an application for authorization to sue the receiver over a disagreement arising from the purchase of the assets from the receiver under the asset purchase agreement. On May 17, 2018, the lower court judge dismissed the application, finding that their allegations were not supported by the evidence. On November 8, 2018, the same judge refused their demand to resume the application based on new evidence.

The applicant filed appeals from both decisions. Its notices of appeal were on time under the provincial CJA, under which there is a 30-day time limit for commencing an appeal. They were late under the federal BIA, which imposes a 10-day time limit.

The lower court judge dismissed the appeals. He held that the BIA was the governing authority for the appeal, not the CJA. He stated that the origin of authority under which the receiver was appointed was section 243( 1) of the BIA and therefore appeals are governed by the BIA, not the CJA. He further went on to say that the appointment also under the CJA did not have the result of ousting the BIA as the source of authority. He further held that it also cannot supersede the federal BIA holds paramountcy over the provincial CJA.

receivership

Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269

The Court of Appeal for Ontario decision was released on April 8, 2019. The appeal court found that this was a very narrow issue to decide so that it did not have to get into the merits of the case of the purchaser wanting to sue the receiver over a disagreement arising from the purchase of the assets from the receiver under the asset purchase agreement.

The Court of Appeal rejected the applicant’s appeal and did not find that the chambers judge made any errors. They said that when the order sought to be appealed was made in reliance on jurisdiction under the BIA, the proper appeal path is the BIA.

The lower court, the Ontario Superior Court Justice Commercial List, rejected the purchaser’s demand to sue the receiver, which is the decision the applicant wishes to appeal. The requirement to get leave of the court to sue the receiver comes from the Appointment Order. The court’s authority to include that arrangement order comes from the statutory power to appoint a receiver under s. 243( 1) of the BIA.

The Court of Appeal agreed that the legal power to appoint a receiver is also found in s. 101 of the CJA. But considering that authority for the leave to take legal action against the receiver comes from the BIA in spite of that the receiver was appointed under both laws, the appeal is governed by the BIA as a matter of paramountcy.

Therefore the Court of Appeal for Ontario dismissed the applicant’s appeal and awarded costs against them.

Does your company need to move fast?

Does your company have way too much debt? Is your company’s cash flow not enough to meet all of its financial obligations? Are you afraid that your company’s main secured creditor is about to demand repayment of its loan in full and you just can’t move fast enough to save your company?

If you answered yes, call the Ira Smith Team today so we can end the tension and anxiousness that these financial problems have triggered. We will develop a plan special for your company, to save it from extinction.

Call the Ira Smith Team today. We have years and generations of experience restructuring and saving companies looking for financial restructuring or a debt settlement approach. As a licensed insolvency trustee, we are the only professionals acknowledged, accredited and supervised by the federal government to provide insolvency advice to save companies.

You can have a no-cost analysis to aid you so we can repair your company’s debt problems. Call the Ira Smith Team today. This will certainly allow you to get back to Starting Over Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, cja, commercial list, company goes into receivership, court appointed, court appointed receiver ontario, courts of justice act, duties of a receiver, licensed insolvency trustee, Ontario Superior Court of Justice, privately appointed receiver ontario, receiver in insolvency, receivership, receivership court order, standard model receivership order

Brandon Blog Post

WILL JULIAN ASSANGE FACE CANADIAN BANKRUPTCY LAWS?

Post author By Brandon Smith
Post date April 22, 2019

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

Canadian bankruptcy laws Introduction

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

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

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

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

What happens if I declare bankruptcy in Canada?

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

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

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

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

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

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

How much does it cost to file bankruptcy in Canada?

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

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

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

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

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

Can you file bankruptcy and keep your credit cards?

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

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

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

How long does bankruptcy last Canada?

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

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

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

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

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

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

Does bankruptcy ruin your credit forever?

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

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

Two easy ways are:

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

Do you have to declare your bankruptcy after 7 years?

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

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

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

Does a bankruptcy automatically come off?

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

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

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

What are the disadvantages of filing for bankruptcy?

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

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

They are:

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

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

Do I need to retain a bankruptcy lawyer near me?

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

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

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

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

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

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

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

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

Canadian bankruptcy laws summary

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

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

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

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

Tags bankruptcy and keep your credit cards, bankruptcy discharge, bankruptcy lawyer, bankruptcy lawyers near me, bankruptcy trustee, canadian bankruptcy laws, credit card during bankruptcy, declare bankruptcy, declare bankruptcy in canada, disadvantages of filing for bankruptcy, does a bankruptcy automatically come off, does bankruptcy ruin your credit forever, how long does bankruptcy last canada, how much does bankruptcy canada cost, Ira Smith Trustee, licensed insolvency trustee, will I lose my house and car if I file bankruptcy in canada

Brandon Blog Post

WILL BANKRUPTCY VS CONSUMER PROPOSAL EVER GO TO THE DOGS?

Post author By Brandon Smith
Post date April 10, 2019

Bankruptcy vs consumer proposal: Introduction

In this Brandon’s Blog, we discuss the issues about bankruptcy vs consumer proposal. We will use a real-life case study involving a woman and her pet, to show the reasons why consumer proposals are better than bankruptcies.

First, I should provide a very brief outline of how a dog or cat pet medical insurance works. A pet medical insurance policy runs just like those for humans. They typically have a yearly insurance deductible, need you to pay regular monthly costs and include you filing a claim for benefits after paying your vet for pet care.

When a family pet isn’t acting normal, the last thing you need is to be fretting over is just how you’re most likely be spending a lot of money for their emergency treatment. That’s why pet medical insurance coverage intends to exist. They cover your pet’s treatment when it comes to an unforeseen illness. This way you do not need to select between your pet’s health and wellbeing and your savings.

With pet medical insurance, you are financially in charge of paying your vet for all services and treatments. Like human medical insurance coverage, you then file a claim with the insurance company. They pay your claim for all eligible expenses, subject to any deductible in your policy.

Bankruptcy vs consumer proposal: Case study dog facts

When our potential client came to our office for a free first consultation, she provided us with a list of all of her assets, including her pet dog. Her dog was not a “Best in Show” winner of any prestigious dog shows. Therefore, the dog’s value was emotional to the owner but had no real financial value. Therefore, under Ontario law, technically speaking, the dog, along with her other personal property, was exempt from seizure by a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) in a bankruptcy!

She also listed as an asset, a health benefit claim. In our discussion, she advised that this was a pet medical insurance claim she filed for vet services for her dog and she was awaiting payment. The amount was significant to this woman and it got me thinking.

If the woman was insolvent, how did she pay the vet? Did she use a credit card that had room on it that will never be repaid? The woman told me that she is single. Did a friend or relative pay the vet on her behalf and when the insurance claim comes in, she will give them the money?

Bankruptcy vs consumer proposal: Case study issues

These seemingly innocuous facts contain various issues in bankruptcy versus a consumer proposal. Here are the various issues that I was pawing around with.

Paid by credit card and DID RECEIVE insurance claim proceeds before filing

If she paid by credit card and received the insurance claim payment before filing for bankruptcy, that is not a problem. This was actually the case. Any amount received not used to live on would presumably be a balance in her bank account. That cash balance would have to be accounted for in her bankruptcy.

In her case, based on the information she told me, there was a very small amount of cash on hand and no other non-exempt assets for a Trustee to seize. The surplus income calculation also showed that she had none. Therefore, in that case, there would not be any dividend paid from her bankruptcy estate to the unsecured creditors.

As you will recall from earlier Brandon’s Blogs, other than for exempt assets, upon bankruptcy, the assets of the insolvent person vest in the Trustee. The Trustee then sells the assets and distributes the money in the order established by the Bankruptcy and Insolvency Act (Canada) (BIA). Surplus income, is a calculation set by the Superintendent of Bankruptcy that a Trustee must do, to decide what amount of an insolvent person’s income they must contribute to their bankruptcy estate if any.

You may have a moral issue with the fact that she was repaid for the vet cost she put on her credit card and the credit card company will not receive a payment. However, in bankruptcy, there is no legal issue. The credit card company may choose to oppose her discharge from bankruptcy for this or other reasons. If they did, she could not receive an automatic discharge from bankruptcy. The matter would go to Court for a discharge hearing.

In a consumer proposal, it is a non-issue. The creditors must vote either in favour of or oppose the consumer proposal. The consumer proposal, by definition, has to be a better offer to the creditors than what they would receive in bankruptcy. In this case, in bankruptcy, they would receive nothing. In a consumer proposal, the creditors would receive a payment. If the required majority of creditors voted or were deemed to have voted in favour of the consumer proposal, the Court (was deemed to have) approved it and the insolvent person fully paid the entire amount promised, the creditors are better off with their choice.

Paid by credit card and DID NOT receive insurance claim proceeds before filing

If this was the situation, and the woman filed for bankruptcy, then it is really simple. The amount receivable from the insurance company under her claim would be an asset of the bankruptcy estate, payable to the Trustee. The Trustee would have to put the insurance company on notice of the bankruptcy, and demand that the insurance company pay the claim to the Trustee. When paid, those funds become part of the Bankruptcy Estate.

In a consumer proposal, the value of this asset must be taken into account when formulating the offer to creditors. As previously mentioned, a consumer proposal must offer a better alternative for the creditors.

A friend or relative pay the vet on her behalf and she DID NOT REPAY the person before filing

In this situation, the person who paid the vet bill is an unsecured creditor of the woman. In either a bankruptcy or a consumer proposal, the person would have the right to file a proof of claim in the insolvency proceeding. If the claim was approved by the Trustee, which it would be if submitted with proper proof of payment, the person would be entitled to any dividend to be paid. This is a very simple situation.

A friend or relative pay the vet on her behalf and she DID REPAY the person before filing

In the bankruptcy of the woman, this is a big problem for the friend or relative. The reason the repayment would have been made prior to filing is simple. The money was owed, and the insolvent woman did not want to see her friend or relative go unpaid before filing. The issue is that there are other creditors too, and they are being treated differently than this friend or relative.

Section 141 of the BIA states “…all claims proved in bankruptcy shall be paid rateably”. The corollary is that all ordinary unsecured creditors should be treated equally. The friend or relative who made the payment to the vet on behalf of the insolvent woman, who is an ordinary unsecured creditor, must be treated the same as the rest of them. So how is this to be done?

Sections 95 and 96 of the BIA are the sections which deal with how to enforce this principle of the BIA. Section 95 deals with Preferences. Section 96 deals with any transfer of property by the insolvent person at undervalue (Transfer at undervalue). In this example, the preference section comes into play.

A preference is defined as the transfer of any property, including a cash payment, made by the insolvent person to any creditor who is dealing either at arms’ length or non-arms’ length with the insolvent person. The transaction must be one that has the intention of preferring that creditor over the others. In this example, the definition certainly fits.

Such transactions, limited only in time, are attackable by the Trustee in bankruptcy. If the friend or relative is dealing at arms’ length with the insolvent person, then the Trustee can challenge any transactions which occurred within the 3 months before the date of the first bankruptcy event and ending on the date of the bankruptcy. If the friend or relative was deemed to not be dealing at arms’ length with the woman, then the time period is extended from 3 months to 12 months.

An initial bankruptcy event for a person is essentially the first day an insolvency proceeding started. For a person, the most likely initial bankruptcy events would be the date on which one of the following filings occurred:

How would the Trustee challenge it? The challenge starts with a letter to and a conversation with the bankrupt person and the friend or relative. The Trustee would outline the powers of the Trustee to get a Court order against the friend or relative for the repayment to the Trustee of the insurance repayment in question. The Trustee would make a demand for payment on the friend or relative. There should be evidence of the payment being demanded in the Trustee’s files. We wouldn’t want the Trustee to be barking up the wrong tree.

If the friend or relative pays the amount over to the Trustee, then it is over. The Trustee has recovered the funds intended to prefer the friend or relative over the other unsecured creditors. The Trustee now has the funds so that all ordinary unsecured creditors can be treated equally.

Should the Trustee’s demand goes unpaid, the Trustee could then make application to Court for an order against the friend or relative declaring that a preference was given and that the funds must be paid over to the Trustee. The evidentiary bar for the Trustee is not set high at all. As long as the transaction has the effect of giving the friend or relative a preference, it is assumed to have been a preference. It is up to the friend or relative to have to prove by way of evidence to the contrary, that it was not a preference.

As I mentioned previously, a consumer proposal must offer the creditors a better alternative than in the case of the person’s bankruptcy. So, the preference payment must be taken into account in assessing what type of consumer proposal to offer. This includes the total payment to be made by the insolvent woman to the Trustee to pay a dividend to the unsecured creditors.

For best practices in the consumer proposal administration, the Trustee should add a clause in the consumer proposal that states that the provisions of the preference section of the BIA do not come into play. The reason for doing so is to make it clear that the Trustee, acting as Administrator in the consumer proposal, has no right to demand payment from the friend or relative. The reason is that the amount was already taken into account in formulating the total amount paid under the consumer proposal.

It also acts as a signal to the unsecured creditors, to highlight the issue of the preference. The Trustee should explain the issues to the creditors and show how the amount of the preference has already been taken into account. In this way, full disclosure has been accomplished.

Bankruptcy vs consumer proposal: Is a consumer proposal a good idea

A successful consumer proposal is one of the bankruptcy alternatives. It is always a good idea to avoid bankruptcy if you can. There are many reasons why consumer proposals are better than bankruptcies. By having a successful consumer proposal, you will avoid:

having to file monthly income and expense statements;
being subject to a surplus income recalculation;
a bankruptcy on your credit record;
bankruptcy negatively affecting your credit score;
having a discharge process that could be opposed; and
a court discharge hearing

Bankruptcy vs consumer proposal: What about you?

Do you have excessive debt? Are you having trouble making your month-to-month payments? Is your business not taking care of financial challenges that you simply cannot figure out how to escape from?

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

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

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

Tags avoid bankruptcy, Bankruptcy, bankruptcy alternatives, bankruptcy and insolvency act canada, bankruptcy trustee, bankruptcy versus consumer proposal, bankruptcy vs consumer proposal, BIA, Consumer Proposal, credit card, Debt, Ira Smith Trustee, Is a consumer proposal a good idea, licensed insolvency trustee, Office of the Superintendent of Bankruptcy, pet medical insurance, reasons why consumer proposals are better than bankruptcies, surplus income

Brandon Blog Post

BANKRUPTCY IN ONTARIO CANADA SECRETS REVEALED

Post author By Brandon Smith
Post date March 27, 2019

Bankruptcy in Ontario Canada: Introduction

Most people are afraid of filing for bankruptcy in Ontario Canada and rightly so. It should be a last resort. There are many options available to people in financial trouble. All of them should be canvassed before deciding to declare bankruptcy.

In my professional practice, during the first free consultation appointment, we look at all options with the person to avoid bankruptcy. We naturally have a discussion about what it is and how it will affect the person. That way, the potential client is aware of all the options and can make an educated decision.

In this Brandon’s Blog, I discuss the questions that I am most often asked about the process. Hopefully, by the end of this blog, I will have demystified the process for you and helped in aiding your understanding.

The secrets we will show

Bankruptcy in Ontario Canada is definitely something nobody wants to talk about. So, therefore, it makes it seem very mysterious and secretive. It is also very scary. Therefore, from now on in this blog, so as not to scare you unnecessarily, I will try to refer to it only as “the B word”. I will only use the B word if the context requires it. This Brandon’s Blog will hopefully pull back the curtain in answering the most often asked questions thereby reducing the mystique and hopefully, your anxiety about this topic.

Where do I begin?

The first step is recognizing that you have financial problems and that bankruptcy in Ontario Canada might be your new reality. If you are having difficulty meeting all of your financial responsibilities or have actually quit paying all of your bills on time, you have a financial problem. As a licensed insolvency trustee (Trustee) we are the only professional licensed and supervised by the Federal government – Industry Canada (OSB).

If you are having financial problems, you must contact a Trustee as soon as possible, to have a free consultation to check your situation and to understand all the options available to you, including the B word. In that free appointment, you will learn that the B word may not be your only alternative to leave your debt behind. There are a number of choices that include, however, are not restricted to:

Should I declare the B word and what happens immediately if I do?

Declaring the B word is obviously a very serious step and a difficult personal choice. If the Trustee has properly explained all the realistic options available to you, it will make your choice much less scary. The first question is do you even qualify to file for the B word. You must be insolvent, owe more than $1,000 in unsecured debt to qualify for it in Canada.

As far as filing for the B word in Premier Doug Ford’s province, you must have:

carried on business in the province during the year immediately preceding your B word; or
lived in the province during the year before your B word; or
where 1 or 2 above don’t apply, the majority of your property is in the province.

Note that the first test is that you are actually insolvent. Insolvent or insolvency is a financial condition. It means that you are:

Unable to meet your obligations generally as they become due.
You have ceased paying your current debts as they come due.
The fair value of all of your assets is less than the total amount of your debts.

The B word is a legal state. Insolvency is a financial condition.

If I go for the B word, will I lose everything?

If you declare the B word, no, you will certainly not lose everything. There is a listing of things that are excluded from seizure in Ontario. The list is:

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

So if you go the way of the B word, based on this listing, you won’t lose everything. However, as you can see, if your share of the equity in your home is significant, the B word very likely is not for you. One of the other options is probably more suitable and you should pursue one of them.

What happens to the money I owe?

Once you go with the B word, all of your unsecured debts are frozen. Creditors cannot begin or continue any legal action against you. Any garnishee on either your wages or your bank account must come off. Normally if you owe money to Canada Revenue Agency (CRA) and have not kept up with a payment plan to them, they will garnishee your bank account which stops you from using it. The B word stops a CRA garnishee against your bank account or salary or wages also.

Similarly, a creditor who sues you and gets a judgement against you cannot continue any execution against your assets.

Once you are in the B word, the Trustee sends a notice to all of your creditors, along with a proof of claim form and instructions. With certain limited exceptions, the only remedy your unsecured creditors have is to file a proof of claim with the Trustee.

This does not apply to any of your debts owed to lenders who hold valid security against a specific asset. Examples would be a bank holding a mortgage against your home in return for the mortgage money or a lender who has security against your car for an auto loan.

What takes place to my salary or wages once I file?

Your income is not impacted by the B word process. You will continue to receive your normal salary or wages as you always have. You will need to complete Income and Expense Forms throughout detailing your and your spouse’s earnings and expenses. This is part of your budgeting procedure to meet one of the aims of the B word process; financial rehabilitation.

If your family income goes beyond specific requirements developed by the OSB, you will need to pay a part to the Trustee. This is called a surplus income payment requirement. In the first free consultation, I always tell potential clients whether they will have such a requirement. We also then look at that requirement, if any, to see if a consumer proposal would be more beneficial to the person than the B word.

Will the B word process get rid of my student loans?

If the B word date is within 7 years of when you stopped being a full-time or part-time student, your student loan debt will not be released by the B word process. Nevertheless, in particular situations, you might have the ability to make an application to the court for a discharge of your student loan financial obligations under the “hardship provision.” It is almost impossible to get that court-ordered discharge, but the slim possibility is there.

Will I still owe money after I file?

Only for a limited amount of debts. A discharge from the B word process does not cover:

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

What length of time will I be in the B word system?

The length of time you will be in the B word system depends on whether this is an initial or 2nd time and whether you have surplus income. The minimum length of time is 9 months. That is if you don’t have any surplus income, none of your creditors oppose your discharge and it is your first time.

If it is your first time, none of your creditors oppose your discharge and you do have surplus income, then the 9 months increases to 21 months.

If it will not be your first time, the length of time before you can get a discharge will depend on many factors. We certainly discuss it during your first free consultation.

Who will find out that I have filed?

As soon as you declare the B word your Trustee will tell your creditors, the CRA, the credit bureaus and the OSB. The filing is public information and it will show up in your credit history.

Where your non-exempt assets given to the Trustee are worth more than $15,000, there must be a legal notice of your B word filing in the local paper.

Exactly how will it impact my credit score?

A person who files drops down to the least favourable credit rating (R9) immediately. After you declare the B word, you must start to work on improving your credit score. Once you are discharged, you will have more options to improve on your credit score and rebuild your credit.

Notice of the B word process will stay on your credit record for 7 years after you get your discharge.

How is my partner or spouse affected by my filing?

Your spouse or partner is not directly impacted by your filing. Your spouse or partner will have to show his or her income as part of your surplus income calculation. The partner or spouse will be liable to repay any loan they have co-signed or guaranteed for you. They will also have to repay any credit card balance on your account for which they have and used a supplementary card to make purchases.

Will my bankruptcy impact my ongoing divorce case?

In Canada, the B word rules do not conflict with most of the family law system and process. So the Trustee will not get involved in your family law proceedings, with two main exceptions.

There is an aspect of your divorce in Ontario that will be affected because Ontario is an equalization province. There are generally only 2 parts of your divorce proceedings your Trustee will certainly get involved in. One is when it pertains to the person who filed legal rights to entitlement to an equalization payment. Second is when the debtor owns property (either jointly with the spouse or alone) and such property has not already been dealt with in the family law proceedings.

How do I choose the right Trustee for me?

Sometimes people just say that “I want to go to the closest Trustee near me”. If travelling or time is an issue for you then that approach is quite legitimate.

The better way is making an appointment for a cost-free no commitment first consultation with a Trustee. If you can, it is best to get a referral from someone you trust. Otherwise, perform an online search and see which Trustee’s website resonates best with you. Ask any kind of questions you might have about your particular situation and the options you may have.

If after that appointment you feel comfortable with the knowledge and demeanour of the Trustee, and you felt confident that you received proper answers to your questions, then great. If not, make an appointment for a free first consultation with a different Trustee. Use that experience to compare both to see who you would like to put your trust in. At the end of the day, you have to know who you will be dealing with and feel comfortable with them. You have to know that your Trustee gets you!

Do you have too much debt? Are you having a problem making your month-to-month bill payments? Is your company dealing with financial obstacles that you just can’t figure the way out of?

If so, call the Ira Smith Team today. We have years and generations of experience aiding individuals and businesses looking for financial restructuring or a debt settlement plan. As a licensed insolvency trustee, we are the only experts recognized, licensed and supervised by the Federal government (the OSB) to provide insolvency recommendations and solutions to help you prevent the B word.

Call the Ira Smith Team today so you can end the stress and anxiety financial problems create. With the special roadmap, we develop unique to you, we will promptly return you right into a healthy and balanced stress-free life.

You can have a no-cost consultation to aid you so we can repair your debt problems. Call the Ira Smith Team today. This will definitely enable you to make a fresh start, Starting Over Starting Now.

Tags Bankruptcy, bankruptcy in ontario, bankruptcy in ontario canada, bankruptcy trustee, Canada Revenue Agency, Consumer Proposal, CRA, Debt, DPSP, financial problems, insolvency recommendations and solutions, Ira Smith Trustee, licensed insolvency trustee, Ontario, OSB, RRIF, RRSP, surplus income

Brandon Blog Post

MY BILLS ARE HIGH: 6 THINGS TO IMMEDIATELY DO

Post author By Brandon Smith
Post date March 25, 2019

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

My bills are high: Introduction

It is very common when I sit down with a person who has come to my office for a free consultation to hear them say “my bills are high”. As a licensed insolvency trustee, my role is to first understand the person’s entire situation. It is quite possible that I can recommend a few alternatives to avoid bankruptcy.

The purpose of this Brandon’s Blog is to talk about the importance of budgeting and more things a person with financial problems can do before even considering the “B” word.

First thing – household budget

I will show you how to catch up when you are behind on your financial obligations by using a proper household budget plan process. I must warn you that there is no magic wand to wave to make things right. You will have to learn the budgeting technique and be willing to invest a great deal of effort, time and personal and family sacrifices. But it will be worth it. When you are back on track and living within your means, you will have a new stress-free outlook on life.

To start the monthly budget plan process, it does not matter if you use an electronic spreadsheet, a paper listing of income and expenses or a clean calendar. Whatever you are most comfortable using. The process will be the same.

The starting point is for you to list all your bills with their due dates. Don’t forget to make note of any special expenditures during any specific month, such as a spouse or child’s birthday present. Make sure you list all of your expenses regardless if you pay them by cheque, cash, credit card or online payment.

Next, list your monthly income by the date(s) during the month your wages or salary end up in your bank account. Make sure that you are listing your net take-home pay, net of income tax. That is the actual amount of income that you have to spend in any given month.

The 4 corners

Now that you know exactly how much money is coming in every month available for you to pay your expenses, you have to organize your expenses. You first need to know what I call your four corner expenses. These are the expenses that you will have to pay before anything else. This is true whether you continue working at the same place or you lose your job and are looking for new work. The expenses that I call the four corners are:

Rent or mortgage payment.
Food costs.
Heat and electric bills.
Clothing expenses.

These are your essentials. Nothing else can be considered before them. So fill in your regular monthly amount for each one. Total up the amount of your four corners expenses and deduct it from your take-home pay. The difference is what you have left over each month to spend on other expenses.

Now go down the list of the rest of your expenses. Car payments, gas and vehicle maintenance, insurance, cable, internet, credit card payments and anything else that you have listed. See what all those expenses total. If the total of those is more than you have leftover cash from the four corners exercise above, then you have to make adjustments. You either have to reduce your other expenses or you have to increase your income. Perhaps it may even be a combination of the two.

If you are behind on any of your payments, because your bills are too high right now, you are going to have to work into your budget increasing the amount of the monthly expenses that you are behind on. However, there is an exception. The exception is that you start with your four corners payments you are behind on.

It won’t help you to bring your credit cards current if the gas company is about to shut off your ability to heat your home. Bringing a life insurance payment current won’t help you if you are behind on your rent or mortgage payments. So again, your four corners payments have to be brought current first. Then you can focus on your other expenses.

Do not worry about anything else. You put it on hold due to the fact that at the end of the day, if you were to have lost your job, the four corners is what you require to make it through, not a credit card payment. You don’t need to fret about your credit rating decreasing since if you are starting this trip you are not looking to borrow more money that needs your credit score to be spot-on. That will come over time after you have your financial house in order.

You worry about taking care of your four corners first. That is a good mind trick to getting yourself out of the loop of being addicted to letting your bills go late. imagine if you would have lost your job you would have no other choice but to not pay the credit cards.

Balance the rest of your expenses

Now, normally when you’re behind on payments that mean that you don’t have enough money to cover all your bills and that is totally fine. I need to emphasize that is totally fine. You will be able to catch up eventually. Most people find ways to catch up by either:

Further reducing expenses.
Selling stuff.
Using an annual bonus.
Increasing income with overtime, a part-time job or side hustle.

You need to take care of business. That way you are treading water, not sinking in it!

Now, what about the non-four corners monthly payments that you are deferring. Yes, eventually the credit card company, such as, is going to start hounding you. You will have to explain your temporary problems, tell them what you are doing to correct things, and when you think you will really begin to resume payment. It doesn’t matter who the creditor is. The process of explaining the issues and getting a deferment or grace period is the same. Do not hide from your creditors. Explain the situation and show them that you have a solution for your common problem.

For additional ways to pay down your debt, take a look at my blog DEBT HELP NEAR ME: OUR TORONTO DEBT REPAYMENT CALCULATOR STRATEGY. In it I explain the two most common methods of paying down bills you are behind on; the debt snowball method and the debt avalanche technique.

If you budget properly and stick to your budget, you will get caught up and your credit will recover with time. Now that you actually have control over your expenses and you know to the day of every month what you earn and what you pay, you can then look at some alternatives if you cannot get current before a creditor stops waiting and is beginning to take action against you.

Once you have the budget process mastered and you are following your budget, you won’t have to say “my bills are high”.

Second thing – rebuilding credit

Rebuilding credit is essential. There are many points beyond your control that could have contributed to you’re getting behind on your bills and your resulting bad credit ranking – losing your job, an illness or a divorce. The most vital thing is to recognize what is within your control that got you into difficulty and ensure that you don’t repeat the same mistakes twice.

There are many strategies that you can use to restore your credit score. Here are a few suggestions:

Continue with the budget plan I showed you above and continue to pay down your debt.
Pay your expenses in a timely manner
Contact a creditor instantly if you are having a problem making payments to advise them and work out a payment plan that you can honour.

If you do not qualify for any type of loan, apply for a secured credit card and stop using the normal credit cards that got you into trouble.

Third thing – credit counselling

The first two things I have mentioned are for those who can do it on their own. If you discover yourself experiencing money problems and feel that you need the help of an expert, credit counselling is a great place to start.

A certified credit counsellor professional, can look at your current situation and offer you many alternatives for taking care of the debt.

Credit counselling can solve debt problems. It will also give you the skills to properly budget, pay down your debt and then go on to live debt free. Credit counselling solutions consist of the budgeting process and credit repair that I have already talked about. It also will include lessons on how to use debt wisely. It may also include a proper debt administration program.

Debt administration programs are made to aid you to repay debt. You enlist willingly in a debt administration program; it is not court mandated. When you enlist, a debt counsellor will contact your creditors and ask for their participation in lowering your debt. Your lenders might agree to decrease the amount of debt owing or eliminating or reducing the interest owing. Not all financial debts are covered under a debt monitoring program. Secured debts are generally not included. This is because the creditor can repossess the house or car if you do not make your payments.

One word of caution. We have had cases where certain debt administration firms failed to provide any type of purposeful solution for the people. They charged costs and didn’t give any kind of results. We suggest that you contact what you believe to be a reputable credit counselling firm, you do not retain them until after getting and vetting a couple of references of people who have gone through the program you are considering and you receive positive reviews.

Fourth thing – debt consolidation

Debt consolidation is a loan that allows you to settle all your financial obligations to several or all of your lenders simultaneously, leaving you with just one loan payment. Your debt consolidation loan interest rate must be less than the average interest rate of the debts you are settling.

Not all debts can be included in a debt loan consolidation financing. Secured financial debts like your home mortgage or car loan cannot be included; however unsecured debt like credit card debt and other regular monthly bills that you are now behind on can be.

In order to qualify for a debt loan consolidation, you will require to have an acceptable credit score and sufficient income to show to the lender that you can make your new month-to-month payment in addition to your other regular monthly expenses. Debt consolidation is something you ought to consider before you are in more significant financial troubles. If you have a poor credit score you will certainly not qualify.

There are many benefits to a debt loan consolidation financing that include yet are not limited to:

Interest rates are less than the rates of interest on credit cards
Your unsecured creditors will be paid in full
You will have the benefit of making only one monthly payment
You ought to be able to keep a good credit report rating

Fifth thing – consumer proposal

Your financial problems may have gotten to the point where you just don’t have enough time to get current using one or a combination of the 4 things I have already explained. Worse, you may have gotten breathing room and accommodation from your creditors. However, you were not able to keep current on your new payment plan. If this is the case, do not fret because there is a solution.

By using a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee), you can reach a binding deal with your creditors to settle your debts at less than the amount you owe in total. The process for this debt settlement plan is called a consumer proposal.

Consumer proposals are options to avoid bankruptcy. A consumer proposal is available to people whose total financial debts do not go beyond $250,000. This limit is not including financial obligations for mortgage or line of credit loans registered against your principal home.

Consumer proposals have formal rules governed by the Bankruptcy and Insolvency Act (BIA). Dealing with a Trustee you make a proposal to:

Pay your creditors a percentage of what you owe them over a specific time period (not more than 5 years).
Extend the time you need to pay off the debt.
It could be a combination of both.

Payments are made to the Trustee who is the administrator of your consumer proposal. The Trustee then uses that money to pay each of your creditors their part of the payments.

The advantages of a consumer proposal are:

You maintain all of your possessions
Collection actions against you by unsecured creditors, such as garnishments are stopped
Unlike informal debt settlement, the consumer proposal is a legal process where every one of your creditors must heed your restructuring
You do not have to claim bankruptcy

Sixth thing – bankruptcy

If you have left things too late, or other reasons why none of the 5 things I have already described will work for your situation, then the sixth thing is bankruptcy. Personal bankruptcy is meant to allow the honest but unfortunate person shed themselves of their debt. That way you can start over fresh and new.

Our goal as a Trustee is to ensure that you understand the bankruptcy process and how it can be used to get your life back on track.

We will first help you understand the 5 things I have already described that might be available to you to avoid bankruptcy. If bankruptcy is the only solution, we will guide you back on the roadway to financial health and wellness. We design solutions to ease the stress you meet and bring you:

Relief from bothering calls from debt collectors.
Freedom by extricating you from garnishments.
Provide you the ability to live better than just hanging on one paycheque to the next.
Improve your credit scores.
Give you an improved and enhanced wellness and well-being.

My bills are high: Do you have too much debt and need help?

If so, call the Ira Smith Team today. We have years as well as generations of experience aiding individuals and companies needing financial restructuring. As a licensed insolvency trustee, we are the only professionals accredited and followed by the Federal government to provide debt restructuring options.

You can have a no-cost appointment for us to gather the necessary information to advise you on how to fix your debt difficulties. We can end your pain so that you will begin your clean fresh start, Starting Over Starting Now.

Tags Bankruptcy, bankruptcy and insolvency act canada, bankruptcy trustee, BIA, budget, certified credit counsellor, Consumer Proposal, credit counselling, Debt, Debt administration, debt consolidation, debt counsellor, household budget, Ira Smith Trustee, licensed insolvency trustee, my bills, my bills are high, rebuilding credit

Brandon Blog Post

BANKRUPTCY HELP: SIGNS YOU NEED HELP

Post author By Brandon Smith
Post date March 4, 2019

bankruptcy help

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

Bankruptcy help: Introduction

When people ask for bankruptcy help, they really don’t want to talk about bankruptcy. What they are really asking for is help in eliminating the pain, suffering and stress they are going through dealing with their unmanageable debt. They want solutions to avoid bankruptcy. In this Brandon’s Blog, I discuss the debt danger signals and provide solutions to avoid bankruptcy.

As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and monitored by the Federal Government. We provide options and proposed solutions to people and companies with too much debt. Our main goal is to help people and companies AVOID bankruptcy while solving their debt problems.

Bankruptcy help: 10 signs that you need help

Your total debt has increased over the past year. You may be making minimum payments on some debt, paying down other debt, but increasing your debt in total. You have not accomplished anything in reducing your debt in the past year and this means you need help.
Justified purchasing a new vehicle even though your existing one is fine, just not new. Taking on more debt just because of a “want” but not a “need” is irresponsible. You need help.
Bought a new house with a larger mortgage, or mortgages, because you expect your income to rise in the future. Wages and salaries are not increasing in any real way. They are flat. Voluntarily carrying a larger debt load hoping that sometime in the future your income will catch up to your cash needs is not a responsible way of handling your affairs. You need help with your debt.
Have borrowed money to go on a vacation. You should never go into debt to purchase something that is going to vanish in a week or two. The vacation will be gone but the debt will remain. If you can’t afford a vacation, you can’t go on one.
Justify purchases based on what your peers are buying. Again, going into more debt because you want things your friends are buying is not a good reason. Their situation is not your situation. Maybe they can afford those things but you can’t. Maybe they can’t afford those things and will end up in bankruptcy. You just don’t know. Again, you can’t go into debt for “wants”.
You have no emergency fund saved up. Recent surveys have shown that Canadians may be a few hundred dollars away from a financial disaster. Many Canadians are living paycheque to paycheque. You don’t know when a medical emergency, job loss or the need to replace a major appliance will happen. You need an emergency cash fund to cover those emergencies. If you have too much debt and no emergency fund savings, you need debt help.
No retirement savings. It is never too soon to start planning to save a certain part of your take-home pay for retirement. A proper household budget will allow for such savings. If you are constantly battling your debt and have no money for savings, you need debt help.
You quit your job without having another one lined up. This is probably the most irresponsible thing you can do. It may seem obvious to you, but trust me, I have seen it. The best way to land a better paying job or position is when you already have one. Trying it any other way is pure folly, especially when you have too much debt. Your regular monthly debt payments will not wait for you to have your income stream rolling again. Keep in mind that I am not talking about someone who is downsized and was given a package. I am talking about someone who quits without having new employment ready to go to.
You are always borrowing from one source to pay down another. There isn’t enough money from your earnings to make your required debt payments. The fact is that you are borrowing from Peter to pay Paul. You’re in trouble and need debt help.
You ignore your partner’s bad money habits or worse, financial infidelity. Your money habits may be impeccable. However, ignoring your partner’s money problems will bring you down too. You both need debt help.

Bankruptcy help: How we provide debt help

The first thing we offer is a free first consultation. You explain to us the financial issues you are facing. Then we talk to you about your family assets, liabilities and income. We then describe to you some possible options to help you overcome your debt problems. More information will be needed from you, but at least we start by setting your mind a bit at ease by telling you that your situation is not hopeless and we can give you solutions. All of the solutions we offer, except maybe one, are all so you can avoid bankruptcy.

The takeaways we want everyone to get from this free consultation is that you feel:

We have empathy for your situation.
A rapport has been built.
We are the kind of people you can see yourself working with.
You trust us.

If you wish to go ahead with our solving your financial and debt problems, the next step is that we have you complete our standard intake sheet called the Debt Relief Worksheet. A fully completed worksheet, complete with backup documents, allows us to drill down into all the issues and come up with our definitive recommendations.

Bankruptcy help: What are some possible solutions

The range of possible solutions depends on when we get to speak with you. Most people wait until they have no more credit line to use. Sometimes it takes a major event like the Canada Revenue Agency garnisheeing their bank account or wages before they realize they have a debt problem. The earlier you recognize there might be a problem and come speak with us, the more options we will have for you to solve your debt problems.

The range of options might include:

Credit counselling

Credit counselling is in fact debt therapy. We give advice with a host of concerns connected to debt consisting of budgeting, debt remedies, working with your lenders as well as restoring credit scores.

Debt consolidation

Debt consolidation is replacing all of your debts with new single financing at a lower overall interest rate so that you only have one debt to focus on reducing.

Consumer proposal

A consumer proposal is an official deal made to your creditors under the Bankruptcy and Insolvency Act (Canada) to customize your repayments; e.g. paying a lesser amount every month for a longer amount of time and paying in total less than you owe. Another benefit is that the interest clock stops the moment you file your consumer proposal.

If none of the above 3 possible solutions to avoid bankruptcy will work for you, then you are a candidate to file for bankruptcy so that you can end the pain and stress your debts are causing you. This way you can be Starting Over, Starting Now.

Bankruptcy help: Do you have too much debt?

Do you have too much debt? Are you stressed that future interest rate increases will make currently affordable payments completely unaffordable? Is the pain, stress and anxiety hurting your wellness and health?

If so, speak to the Ira Smith Team today. We have decades and generations of helping people and companies looking for financial restructuring. As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only experts licensed and supervised by the Federal government to provide insolvency services.

Call the Ira Smith Team today for your free consultation and to make sure that we can begin assisting you to return right into a healthy, balanced, hassle-free life.

Tags avoid bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy help, bankruptcy trustee, Canada, Canada Revenue Agency, Consumer Proposal, credit counselling, Debt, debt consolidation, debt help, insolvency services, Ira Smith, licensed insolvency trustee

Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE RECEIVER APPOINTED BY COURT ERRORS TO AVOID

Post author By Brandon Smith
Post date February 27, 2019

Licensed insolvency trustee: Introduction

I want to chat with you today about the independence of the licensed insolvency trustee (LIT or trustee) (formerly called a bankruptcy trustee) acting as a court-appointed receiver. I have seen many times when a secured creditor needs to resort to a court appointment, and not privately appoint the receiver, yet feel they still can control every aspect of the court-appointed receiver’s actions and conduct.

The decision of the Court of Appeal of Alberta released on February 4, 2019, in Jaycap Financial Ltd v Snowdon Block Inc, 2019 ABCA 47 (Jaycap), highlights the issue.

Licensed insolvency trustee: Back to basics

To better understand the Jaycap decision, I want to talk about a few basic points. In a private receivership, the receiver’s primary duties are to act:

On behalf of and have a duty of care primarily to the secured creditor who appointed the receiver.
In a commercially reasonable way.
Lawfully.

In a court appointment, the court-appointed receiver:

Acts on behalf of the Court as a Court officer.
Be and be seen to be independent of all stakeholders.
Owes a duty of care to all stakeholders.
Must act in a commercially reasonable and lawful way.

Various practices have evolved over time to indicate the independence of the court-appointed receiver. They aren’t necessarily rules or laws. However, they are indicators that the Court looks to in determining if its court-appointed receiver is seen to be independent and is actually independent of specific stakeholders, normally, secured creditors.

Examples of these indicators are:

The court-appointed receiver has its own legal counsel and does not rely upon legal counsel for one of the secured creditors.
The court’s receiver has obtained sufficient independent appraisals of the assets and has not taken the word of or earlier appraisals commissioned by a secured creditor.
A sales process being recommended by the court-appointed receiver is fair to all parties and does not favour one or more stakeholders over others.
The analysis performed by a court-appointed receiver in making its recommendations to the court is seen to be free from undue influence.
The court-appointed receiver has not shared its appraisal or other information which could influence the outcome of the receivership administration with any of the stakeholders.
The court-appointed receiver has not treated some stakeholders differently than others.
Any information shared by the court-appointed receiver or meetings held to share information has been done with all secured creditors, not just a senior secured creditor or the secured creditor who made the court application to appoint the receiver.

Licensed insolvency trustee: The Jaycap situation

The receiver was appointed by the court as receiver and manager of Snowdon Block Inc. (Snowdon) in February 2016. The only material possession of Snowdon was land and building in Calgary. In July 2016 the receiver started a sales procedure to ask for deals for the property. In October 2016 the Receiver ultimately received 2 offers for the real estate. The receiver accepted a conditional offer from a third party.

After months of extensions, the potential buyer was incapable to remove its conditions and the sale did not continue.

Jaycap was the primary lender of Snowdon and was funding the
receivership. Jaycap became interested in capping the increasing costs and safeguarding its financial investment. The receiver advised Jaycap that a credit bid would be a possible option to get title to the real estate and bring the receivership to an end.

On July 5, 2017, Jaycap emailed the Receiver that it would credit bid its “current costs” as a specific amount. Jaycap scheduled a numbered company it managed to be the buyer. For simplicity, I will refer to Jaycap’s nominee company as the buyer.

Licensed insolvency trustee: The first Jaycap credit bid

An agreement of purchase and sale (APS) was prepared and entered into by Jaycap and the Receiver on August 2, 2017. The total debt was defined to be the amount included in the July 5, 2017 e-mail and that amount was likewise the acquisition cost.

On August 21, 2017, the Receiver obtained the approval and vesting order authorizing the APS. The guarantors of the Jaycap debt did not oppose this application as there would be no shortfall that they would be responsible for.

It is somewhat unclear as to the reasons for what happened next. The receiver states in its 3rd report that on August 28, 2017, legal counsel for Jaycap indicated that there was an error in the purchase price. The report after that states that the receiver’s legal counsel advised it that a common mistake occurred about the purchase price as set out in the APS. They further advised that court authorization was needed to fix this mistake.

The transaction subject to the APS was not completed at the end of August 2017.

Licensed insolvency trustee: The second Jaycap credit bid

On September 6, 2017, the receiver and Jaycap entered into a new agreement (the 2nd APS), which decreased the purchase price. On September 8, 2017, the receiver filed an application to abandon the first approval and vesting order and sought approval of the 2nd APS.

The guarantors were served with the new application. One of the guarantors, a Mr. Richardson, sent out a series of letters to the receiver’s legal counsel asking for information as well as papers to support that a mistake had actually occurred. The receiver’s lawyer answered some, however not all, of these demands.

The application was to be heard on September 19, 2017. It was adjourned to October 26, 2017. The chambers judge reserved to think about the submissions and to evaluate Mr. Richardson’s materials which had not made it into the court documents prior to the hearing.

She released her decision a week later approving the 2nd APS and providing the necessary vesting order. She discovered that she was not prevented from abandoning the first order and providing another.

The chambers judge considered the merits of the 2nd APS and whether it fulfilled the requirements established in Royal Bank of Canada v Soundair Corp (Soundair). She was satisfied the 2nd APS was sensible in the circumstances, whether the receiver had made sufficient efforts to get the best price and was not acting improvidently. She kept in mind the lack of offers, the lack of ability to complete an earlier conditional deal, the earlier order approving the sale, and the changed acquisition price, which was still higher than the property’s appraised value.

Licensed insolvency trustee: The guarantor’s appeal

Under the 1st APS, there was no shortfall and the guarantors had no liability. Under the 2nd APS, there was a shortfall in excess of $1 million that the guarantors would be responsible for.

The guarantors appealed the approval of the 2nd APS specifying that the court erred in finding there was a mutual mistake. Further, given the lack of information provided to Mr. Richardson to his reasonable request for information, the guarantors say that the receiver’s conduct casts doubt on the honesty of the process. They say that the Receiver did not discharge its independent obligation and was following guidelines and instructions from Jaycap, that had a change of mind about the transaction and wanted to decrease the price.

Their position was that the 2nd approval and vesting order needs to be vacated, the 1st APS ought to be reinstated, and the guarantors should be alleviated of their responsibility under the guarantee.

Licensed insolvency trustee: The Appeal Court’s analysis

The Court of Appeal of Alberta agreed with the guarantors that the evidence did not support a mutual mistake was made. They found that it was a mistake for the chambers court to conclude that the test was satisfied.

While the guarantors were successful on this ground, this does not finish the matter. The appeal cannot be successful unless the guarantors establish a reviewable error in the chambers court’s Soundair evaluation.

The guarantors raised two concerns sustaining their allegation that the integrity of the process was jeopardized. First, the receiver fell short in not disclosing all relevant records about what transpired after August 2, 2017. Second, the receiver did not seem to be acting independently of Jaycap.

The Appeal Court agreed that the receiver’s proof about what transpired after August 2, 2017, was not sufficient, also taking into consideration the evidence from the confidential supplement to the third report. The receiver’s lawyer’s conclusion that there was a mutual mistake was inappropriate. That was for the court to decide.

As far as the conduct of the receiver, the Appeal Court had this to say. While insolvency proceedings undergo special procedural rules and are not surprisingly time delicate in nature, these considerations do not relieve the receiver from its basic responsibilities to the stakeholders and the court. Also, it does not excuse the Receiver from supplying proof to fulfill its requirement to provide sufficient evidence to the requisite standard for each application that it brings.

The Appeal Court went on to say that:

A court-appointed receiver is an officer of the Court appointed to
discharge certain duties listed in the appointment order.
When a court-appointed receiver is appointed, the receiver-manager is given exclusive control over the assets of the company and in this regard, the board of directors is displaced.
The significance of a receiver’s power is to clear up liabilities and sell off assets.
It is well developed that a court-appointed receiver owes a duty of care not just to the Court, but likewise to all parties who may have an interest in the debtor’s assets. This includes competing secured creditors, guarantors, unsecured creditors, contingent creditors, and shareholders.
A receiver has the duty to work out such reasonable treatment, supervision, and control of the debtor’s property as a regular person would give to his or her very own.
A receiver’s duty is to perform the receiver’s powers truthfully and in good faith.
A receiver’s responsibility is that of a fiduciary to all interested stakeholders involved with the borrower’s assets, properties.

The Appeal Court was harsh in its criticism of both the receiver and Jaycap. The court found that the absence of details about what occurred and the method the receiver and Jaycap used to skirt around the issues in its application materials definitely did not assist in showing the receiver’s independence.

The optics of the circumstances most likely added to the guarantors’ uncertainty that what had taken place warranted even more inquiries and that the Receiver was following Jaycap’s instructions to hide from the guarantors the real state of affairs.

Jaycap and the receiver were jointly represented by the same legal counsel before the Alberta Court of Appeal, which was unhelpful and was in the court’s view, highly unusual. Jaycap could not address questions the Receiver would be anticipated to know. Throughout the hearing, the panel discovered that the guarantors’ arguments were convincing.

Licensed insolvency trustee: The Appeal Court’s decision

What was missing was transparency. The process should be transparent. It should enable the court and interested parties to make an informed decision as to whether the sale can be considered fair and reasonable in the circumstances. Given the significant questions left unanswered by the Receiver, the Appeal Court had serious concerns about the efficacy, fairness, and integrity of the process the Receiver followed between August 2, 2017, and the hearing of the application to approve the 2nd APS. As a result, the Alberta Court of Appeal disagreed with the chambers judge that the Receiver met the requirements of Soundair.

The appeal was allowed, and an order was made returning the matter to the lower court for a rehearing before a different judge.

Licensed insolvency trustee: Summary

This decision clearly states what a court expects from a court-appointed receiver.

Does your company have too much debt and is in danger of shutting down? Are you concerned that future interest rate hikes will make currently manageable debt totally unmanageable? Is the pain and stress of financial problems now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee, we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.

Tags bankruptcy trustee, court appointed receiver, court of appeal, Court of Appeal of Alberta, insolvency trustee, Ira Smith, Jaycap, Jaycap Financial Ltd v Snowdon Block Inc, licensed insolvency trustee, receiver appointed by court, receiver manager, Royal Bank vs Soundair Corp., Snowdon Block Inc., Soundair, trustee

Brandon Blog Post

SUCCESSION LAW REFORM ACT OPPORTUNITIES FROM A TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date February 25, 2019

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

Succession Law Reform Act: Introduction

I wish to focus on the last provincial statute that is also important for the administration of a deceased estate; the Succession Law Reform Act, R.S.O. 1990, c. S.26.

This is my last blog in this collection to show how it would certainly be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

As always, given that we are not lawyers, and I am not offering in this or any of the other Brandon’s Blogs in this series, suggestions on wills or estate issues. For that, you have to consult your lawyer.

My estate trustee blogs

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I discussed some crucial issues when it entails a deceased estate and why a LIT would certainly be exceptionally knowledgable and qualified to serve as an estate trustee.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I discussed why many times moms and dads attempt doing the correct thing by selecting their youngsters as estate trustees and the several times it simply ends up all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the needs and stipulations of the Estates Act are already very familiar to a bankruptcy trustee. As a matter of fact, a lot of the tasks called for by the Estates Act are currently carried out in the insolvency context by a LIT.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I clarified why a LIT is an appropriate specialist to lead the management of Estates Act Canada.

In the blog TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE, I describe the duties of a trustee under the Trustee Act Ontario and how a bankruptcy trustee is experienced to carry out those duties.

In this blog, I will explain why a bankruptcy trustee would be extremely comfortable working with this provincial legislation.

Things an estate trustee must be aware of

The Act has 79 sections and regulations. Sections 1 through 43 inclusive, set the ground rules for establishing wills and their validity.

The Act figures out how your estate and assets will be allocated to family members based on based upon guidance and a collection of policies.

This statute is different from the other ones I reviewed affecting acting as an estate trustee in a deceased estate. The Act is really just a set of guiding rules.

Intestacy and the entitlement of spouse and the preferential share

Section 44 of the Act deals with a person who has a spouse and no living children who die intestate. This section says that his or her spouse is entitled to all the property.

Section 45(1) of this Act deals with the situations where a person dies intestate and has both a spouse and living children. It says that where the value of the deceased’s property is not more than the preferential share, which is a defined term, then the spouse is entitled to all the property.

Preferential share is set by Ontario Regulation 54/95. It says that for the purpose of section 45 of the Act, the preferential share is $200,000.

Section 45(2) of the Act deals with the person who dies intestate, has a spouse and living children, and whose property is worth more than the preferential share. This section says that the spouse is absolutely entitled to the preferential share or the amount of $200,000. Presumably, the spouse and children then have to either agree or litigate about who is entitled to how much of the value above $200,000.

Just to add another wrinkle, Section 45(3) deals with the situation where the deceased dies with a will dealing with some property but intestate to the balance of the property and is survived by both a spouse and children. This section states that the spouse is always entitled to the preferential share out of the property not governed by a will. If the spouse is entitled to property under a will having a value of more than the preferential share ($200,000), then there is no need to be concerned with the workings of the preferential share.

Residue: spouse and children

Section 46(1) of this provincial statute says that where a person dies intestate and has a spouse and one living child, the spouse is entitled to one-half of the residue of the property AFTER payment of the preferential share.

Section 46(2) states that if the intestate dead person has a spouse and more than one child, the spouse is entitled to one-third of the residue. Again, this is after payment of the preferential share. Section 46(3) deals with the situation of any children predeceasing the parent who died intestate. This section says that for the purposes of calculating the spouse’s share, assume the deceased child(ren) is alive.

Distribution of kin

Section 47 of the Succession Law Reform Act deals with how property should be distributed when a person dies intestate. The general principle starts with the property being divided between the spouse and living children as described above. The balance of the section deals with the treatment of grandchildren, parents, siblings and nephews and nieces when a person dies intestate.

This section ultimately says that if there are no kin, then the intestate property becomes the property of the Crown under the Escheats Act, 2015.

Succession Law Reform Act: Designation of beneficiaries of interest in funds or plans, survivorship and support of dependants

The balance of the Act deals with specific rules about:

the designation in plans or funds of specific beneficiaries;
how to deal with the death of two or more persons at the same time who either hold property together or may be entitled to all or some of the other’s property; and
support of dependants.

Summary

I really hope that this collection of blogs show to you just how the various provincial statutes describing the obligations of a trustee or estate trustee tracks actually near to exactly how a LIT executes in either a Court-appointed receivership or bankruptcy mandate.

If you have any type of concerns about a deceased estate and the requirements for an estate trustee, whether it is solvent or insolvent, call the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

If you have any questions at all, contact the Ira Smith Team.

Tags A TORONTO BANKRUPTCY TRUSTEE, administration of estates act canada, Bankruptcy, bankruptcy trustee, court appointed receiver, escheats act, estate trustee, estates act, insolvency, Ira Smith, licensed insolvency trustee, succession law reform act, Toronto bankruptcy trustee, trustee, trustee act, trustee in bankruptcy, trustee of deceased estate

Brandon Blog Post

TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date February 20, 2019

Trustee Act Ontario: Introduction

I want to highlight a provincial statute that is also important for the administration of a deceased estate; the Trustee Act, R.S.O. 1990, c. T.23 (Trustee Act Ontario). This blog continues my blog series to show how it would be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

As always, since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

My prior estate blogs

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I looked at some essential matters when it involves a deceased estate and why a LIT would be extremely knowledgable and competent to act as an estate trustee of a deceased estate with those basic requirements.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I explained why many times parents try doing the proper thing by appointing their children as estate trustees and how many times it just turns out all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the requirements and provisions of the Estates Act are already very familiar to a bankruptcy trustee. In fact, most of the duties required by the Estates Act are already performed in the insolvency context by a LIT.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I explained why a LIT is a right professional to lead the administration of Estates Act Canada.

In this and my next blog, I will focus on two more Ontario statutes that impact the administration of a deceased estate by an estate trustee. The three statutes are:

As you have by now correctly guessed, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of this provincial legislation.

Things an estate trustee must be aware of

There are various sections of the Trustee Act Ontario that affects the duties and responsibilities of an estate trustee in administering a deceased estate. All the concepts are very familiar to a LIT.

Power of court to appoint new trustees

Section 5(1) of this statute gives the Ontario Superior Court of Justice the authority to make an Order for the appointment of a new trustee. This is the same Court that we attend for Court-appointed receivership and bankruptcy matters. So, a LIT is very familiar with the workings and requirements of this Court.

Who may apply for the appointment of a new trustee, or vesting order

Section 16(1) of this provincial statute says that anyone who has a beneficial interest in the property of the trust can apply for the appointment of a new trustee. This is very similar to how a Court-appointed Receiver is appointed. Although it is normally a secured creditor who makes the application, in theory, it could be any party that has an interest. Section 101(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 states that a receivership Order may be made “…where it seems to a judge of the court to be just or convenient to do so.”. It is the “just and convenient” clause that was relied upon by the judge when we were appointed Receiver and Manager of the assets, properties and undertakings of The Suites at 1 King West condo strata hotel back in August 2007.

For this reason, as a LIT, we are very familiar with this aspect of appointing a trustee.

Power and discretion of trustee for sale

In my blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I referred to sections 16 and 17 of the Estates Administration Act. Section 17 in particular, provides the estate trustee with the power to pay off the debts of the deceased. It also allows a trustee to distribute or divide the estate among the beneficiaries.

Section 17 of the provincial Act provides the trustee with the authority to sell, but subject to the requirements of the Estates Administration Act.

A LIT, either in receivership or bankruptcy, is extremely acquainted and experienced in the sale of real and personal property. The LIT likewise makes certain that the creditors are paid in the correct order of priority.

Sales by trustees not impeachable on certain grounds

Section 18(1) deals with a certain aspect of the sale of the property. It states that unless it is proven that there was an inadequate sales price, a sale properly made cannot be impeached by any beneficiary. Any beneficiary wanting to try to impeach a sale must prove that the process used resulted in a sales price at less than fair market value.

Similarly, in a Court-appointed receivership or bankruptcy, the LIT must be able to prove that both the conditions of the sales process and the sales price achieved, was right for the types of assets in the circumstances.

The leading case is the Ontario Court of Appeal decision in Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). The process a LIT must follow is known as the “Soundair principles”. This is the test used when deciding whether a receiver or trustee applying for Court approval of a sales process and the authority to sell assets has acted properly. The Court must decide whether the receiver or trustee has:

made a sufficient effort to get the best price and has not acted improvidently;
considered the interests of all parties;
Devised a fair process that has integrity by which offers were obtained; and
Introduced any element of unfairness in the working out of the process.

Therefore, I submit, that a LIT is very experienced in devising a sales process and selling assets in a way that is fair to all stakeholders or beneficiaries to attempt to maximize sales proceeds.

Trust funds and investing

Section 26 of the Act deals with the area of the requirement for a trustee to maintain trust accounts and to invest trust property in a way that will maximize the return while not putting the capital at risk to swings in investment pricing, inflation or income tax.

The LIT is very familiar and experienced in trust accounts and the investing of trust funds. Section 25 of the Bankruptcy and Insolvency Act (Canada) (BIA) deals with the requirement of a trustee to establish trust accounts. Also, the Superintendent of Bankruptcy Directive no. 5R5 deals with Estate funds and banking. The Superintendent also monitors the banking of trust funds by all LITs across Canada.

Therefore a LIT is very knowledgeable and experienced in the banking, investing and protection of trust funds.

Security by the person appointed

If letters of administration were granted under the Estates Act, R.S.O. 1990, c. E.21, section 37(2) of the provincial legislation requires every trustee to post security.

I discussed in my blog ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, the experience of a LIT in the posting of security by way of an insurance company bond.

Actions for torts

Section 38(1) of the provincial statute gives authority to an estate trustee of a deceased person to maintain an action for all torts and injuries to the deceased person or his or her property, except in cases of libel and slander. Any recovery forms part of the deceased’s personal estate. Section 38(3) provides for a limitation on such actions. The action cannot be brought after the expiration of two years from the date of death.

As a LIT, this is a familiar concept to us. When a person or company is insolvent and has a chose in action against one or more parties, such action can be started or continued by a receiver or bankruptcy trustee. In fact, in a bankruptcy, the action actually vests in the trustee.

The receiver or trustee has to make sure that they have a legal opinion on the likelihood of success. The receiver or trustee also has to make sure that they can afford to fund the litigation. The litigation cost cannot reduce the value of the assets under administration. This includes the issue of costs if the action proves unsuccessful.

Distribution of assets under trust deeds for benefit of creditors, or of the assets of the intestate

Section 53(1) of the Act lays out the requirements of a trustee to make a distribution for the general benefit of creditors. As I have described in previous blogs, Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.

A LIT is an expert at sorting out creditor claims and could certainly do so under the Trustee Act also.

Trustee Act Ontario: Summary

I hope that this blog reveals to you how the provisions of this provincial statute, detailing the duties of a trustee or estate trustee tracks really close to how a LIT performs in either a Court-appointed receivership or bankruptcy administration.

Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of a trustee as described in this provincial legislation.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Succession Law Reform Act and how a LIT is most familiar with it also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

trustee act ontario

Tags Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, court appointed receiver, estate administration act ontario, estate trustee, estate trustee ontario, estates act ontario, executor, Ira Smith, licensed insolvency trustee, LIT, Ontario Court of Appeal, Ontario Superior Court of Justice, section 38 trustee act ontario, Soundair Corp., Toronto bankruptcy trustee, trustee, trustee act ontario

Brandon Blog Post

ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO

Post author By Brandon Smith
Post date February 18, 2019

If you would rather hear an audio version of this administration of estates act Canada, please scroll down to the bottom of this page and click on the podcast.

Administration of estates act Canada: Introduction

I want to discuss with you another provincial statute that is very important for the administration of estates act Canada; the Estates Administration Act, R.S.O. 1990, c. E.22. It continues my series of blogs to show how it would be very natural to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

In this and the next two blogs, I want to focus on the three more Ontario statutes that deal with the duties and responsibilities of an estate trustee of a deceased estate. The three statutes are:

As you have by now correctly guessed, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of the Estates Administration Act.

As always, since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Administration of estates act Canada: Things an estate trustee must be aware of

Payment of debts out of the residuary estate

Section 5 of the Estates Administration Act states that both the personal property and the real property (subject to the rights of mortgagees) is available to pay the debts, funeral and testamentary expenses and the costs of the estate trustee in administering the deceased estate. The LIT is familiar with such a provision.

Section 136(1)(a) of the Bankruptcy and Insolvency Act (Canada) (BIA) prioritizes the reasonable funeral and testamentary expenses incurred by the deceased’s legal representatives. In a bankruptcy, those costs are paid as a preferred unsecured claim, behind trust and secured claims but before payment of ordinary unsecured claims.

Vesting of real estate not disposed of within 3 years

Section 9(1) of the Estates Administration Act states that real property not disposed of or conveyed within three years after the date of death is automatically vested in the persons beneficially entitled to such real property. The exception is if the personal representative or estate trustee has registered a caution on the title, then the three-year period starts from the date the last caution was registered.

The purpose and intent of the BIA is that all property of the bankrupt, not subject to a valid trust claim, security interest or is otherwise exempt, will automatically vest in the bankruptcy trustee. Section 40(1) of the BIA establishes the rules a trustee must follow to return to the debtor any property that could not be realized upon, despite the LIT’s best efforts.

Powers of executors and administrators about selling and conveying real estate

Sections 16 and 17 of the Estates Administration Act gives the power to sell real estate to a personal representative or estate trustee. It also says that additional powers are not just for paying off the debts of the deceased, but also for distributing or dividing the estate among the beneficiaries.

A LIT, either in a receivership or bankruptcy, is very familiar with and experienced in the sale of real and personal property. The LIT also ensures that the creditors are paid in the proper priority.

Protection of purchasers from personal representatives and beneficiaries

Sections 19 and 21(1) of the Estates Administration Act protects a purchaser of real property in good faith and for value from a personal representative or estate trustee. The purchaser can hold the asset free and clear from any debts or liabilities of the deceased, or any claims of the beneficiaries. The only exception would be those claims secured by a specific charge on title against the real property, such as a mortgage.

In an insolvency context, and especially in a Court-appointed receivership or bankruptcy, a purchaser would be wise to insist on the receiver or bankruptcy trustee obtaining the approval of the Court and vesting Order. The purpose would be to have Court orders approving the sale to the purchaser and vesting the assets in the purchaser.

In this way, the purchaser gains protection against any claims to the assets. The vesting Order vests out the asset(s), replacing it with the cash paid by the purchaser. Those with claims against the asset(s) now have to prove their claim against the cash. A LIT is very familiar and experienced in this aspect of selling assets.

Powers of personal representative about leasing and mortgaging

Section 22(1) of the Estates Administration Act gives the power to the personal representative or estate trustee to lease out real property to provide the deceased’s estate with income. It also allows for the mortgaging of real property to pay off the debts of the deceased.

Section 30(1) of the BIA gives various powers to a bankruptcy trustee. The leasing out of the real property and borrowing money, including giving mortgage security against real property, are two such powers. A Court-appointed receiver would get the same powers from the Order appointing the Receiver. A privately appointed receiver could also, with the permission of the secured creditor who made the private appointment, does the same thing. Therefore, a LIT is very familiar and experienced in exercising these powers and making the necessary business decisions.

Administration of estates act Canada: Summary

I hope that in this blog I have shown you that the provisions of the Estates Administration Act outlining the responsibilities of an estate trustee tracks very closely what a LIT does in either a Court-appointed receivership or bankruptcy administration.

Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of an estate trustee as described in the Estates Act Ontario.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Trustee Act and how a LIT is most familiar with them also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

Tags administration of estates act canada, Bankruptcy, bankruptcy trustee, court appointed receiver, Court officer, Debt, estate trustee, estates act, estates administration act, Ira Smith, personal representative, receivership, receivership or bankruptcy, succession law reform act, Toronto bankruptcy trustee, Trust law, trustee, trustee act