As a bankruptcy trustee in Toronto (now called a licensed insolvency trustee), I took great interest in reading a recent poverty line Canada study. A new research project whose results were announced in July 2018, studied poverty in Canada. It finds higher than 25% of respondents feel they have stress over financial matters. Not just a part-time stress; it is a full time feeling. Instead of just analyzing income levels, the survey considers the daily realities of making ends meet and how that can take a toll on people.
Many are unable to spend on simple things like going to the movie theatre, but also on more serious needs, like warm clothes for winter time and dental care. Some are late paying bills or cannot pay them at all and many say they can’t afford better quality food at the grocery store.
Researchers also found of the people who struggle most, 20% make well above what’s considered low income. However, the study finds that doesn’t always go far particularly in major urban cities. You can be making what many would consider middle-class earnings and still feel stressed. The survey showed many feel on the edge with their ability to have a life with some level of comfort or relaxation.
Bankruptcy trustee in Toronto: 4 major groups
This ARI research identified four groups:
the struggling (16%);
on the edge (11%);
recently comfortable (36%); and
always comfortable (37%).
As expected from these labels, the struggling is dealing with economic difficulties that are adversely influencing their lifestyle. Those on the edge are a stone’s throw behind them.
Bankruptcy trustee in Toronto: The study’s other main findings
The study’s other main findings are:
nearly a third (31%) really feel extremely worried about money regularly– either usually or constantly;
about half (52%) think hardship has actually been rising;
almost ten percent (9%) feel that financial hardship has been decreasing;
thirty percent (30%) are downhearted concerning their individual finances over the near future;
more think their youngsters’ finances will be worse (43%) compared to those who think their children will be financially better (32%);
all 4 state financial anxiety exists, yet there is more for both lower groups; and
the anxiety felt by the always comfortable group is a fret about future troubles as opposed to their present life.
Bankruptcy trustee in Toronto: Canada Without Poverty
Canada Without Poverty charitable organization states that roughly 5 million Canadians, or 1 in 7, live in poverty. However, the ARI study shows that the participants in the study estimate that about one third live in poverty. As you can see, their views were shaped by their own feelings of money anxiety.
Bankruptcy trustee in Toronto: Are you are “on the edge”?
Do you feel you are in the “on the edge” or the “recently comfortable” groups? Are you always feeling financially stressed? Are you worried that you may not be able to absorb an unexpected expense of $1,000 or more? If so, why not get a free financial checkup?
We know your pain and the stress you feel because of your finances. Our Firm has helped many others restructure their debt and return to a financially healthy life. Give us a call today. We can give you peace of mind and set you on a path to debt free living. We are a bankruptcy trustee in Toronto.
After fully completing a consumer proposal or receiving a discharge from bankruptcy, it is important to start immediatelyrebuilding credit Canada. The purpose of this Brandon’s Blog is to provide you with our foolproof and painless 3 step plan to eliminate those negative credit checks and fix your credit trouble by rebuilding credit Canada.
Rebuilding credit Canada: Step 1 – Create good habits with a plan for discipline and self-control
After your discharge from bankruptcy or the full completion of a consumer proposal, you must create good habits of discipline and self-control. You won’t have any credit accounts and your goal is to show the credit bureaus that you can use credit responsibly and work your way back from bad credit score.
To do that, you need good new financial habits. You need to start creating a good payment history. A lack of these habits might have been partly responsible for your current situation, so working on changing bad habits, and creating new ones will lay the groundwork for a successful financial future.
Research has shown that on average, it takes more than 2 months before a new behaviour becomes automatic – 66 days in fact. So, while at the beginning, having to be disciplined and exert self-control over spending money mistakes might seem like hard work, stick with it for a couple of months, and very soon it will just become part of your daily routine.
Learn discipline through budgeting. You may be able to find a pretty good yet simple budget calculator spreadsheet. Aside from rebuilding your credit, learning how to create a realistic budget by looking at your essential expenses compared to your current level of everyday purchases. This will allow you to get a good handle on what your income requirements are and then sticking to it is the most important step of rebuilding credit Canada after bankruptcy or consumer proposal.
You’ll be looking closely at your money and personal income anyway, so use this time to get a real grasp on your entire financial situation. Take a look at credit cards and related statements. By only making the minimum monthly payment you are being charged interest. Look carefully at what the rate on purchases is that you are really paying.
Understand where your money comes from, and, more importantly, where you spend every penny. You’re going to need to make friends with spreadsheets and familiarize yourself with all your bank and bill statements. Create categories of all your expenses (e.g. rent, electrical bills, car insurance, groceries etc.) Using your past bank statements, look at your current spending plan in each category. You’ll probably be surprised at how much money you spend in some!
Set limits for how much you will spend per month in each category. This will likely mean making some sacrifices to ensure your budget balances (the total amount being spent does not exceed the total amount coming in). However, be realistic – don’t tell yourself you’re going to stop doing things you enjoy together. Instead, cut down on how often you do them. E.g. the budget spending plan for a meal out could be once a month rather than a couple of times a week.
Get in the habit of planning and recording every single expense, no matter how small. Keep receipts and go over where your money has gone every month. Plan rewards for different milestones along the way. It’s important to have things to look forward to and motivate you along the way.
Budgeting takes discipline and sacrifice but stays focused on the goal. You’re doing this to ensure you don’t fall back into the same bad habits as before. You are going to have to change some things – and what better time than while you’re starting over? You’re already doing the work, now the trick is to make this disciplined.
Practice self-control in your spending (and saving!) The golden rule of spending? Learn to live within your means – it sounds simple, but it can very hard to do. However, those who live within their means do not get into trouble with debt, and that’s what you’re working towards for the future! You’ve created a budget, you know exactly what you can spend in each category, now you need to execute on that. By following your
While in bankruptcy or a consumer proposal, any excess money you earn is going to go to your debtors. That may make it seem impossible to save. However, saving money should always be in your plan.
As soon as you are discharged from bankruptcy or your consumer proposal, start saving money every month. Work a specific amount (we recommend 10%) into your budget so that you learn to live within that new budget spending plan. Setting up automatic payments and transfers into your savings account on payday will ensure your money goes where it needs to before you even have time to think about spending it.
So where should this money go? First, establish an emergency fund so that you can avoid facing bankruptcy again in the future. A good emergency fund should cover at least 3 months of living expenses. Once your emergency fund is built, continue to save by contributing to your RRSP or TFSA as much as you possibly can while still meeting your month-to-month expenses.
Forming good habits of discipline and self-control is key to your permanent financial rehabilitation. Once you do so, you’ll find that building your credit will be relatively easy!
Rebuilding credit Canada: Step 2 – Work to rebuild your credit after bankruptcy or consumer proposal
It is true that a record of your insolvency filing will stay on credit reports. This is so for both a consumer proposal (3 years!) or a bankruptcy (7!). However, you can actually start rebuilding credit Canada right away.
There’s an old saying that goes “The best time to plant a tree was 20 years ago. The second-best time is now.” We recommend that you don’t wait 20 years, or even 3.
Here’s what you need to know to start building credit and improving your credit reports today:
Secured Credit Card – A secured credit card looks and functions just like a regular unsecured credit card, with your lender reporting to the credit bureaus on a regular basis. The only difference is that you put up an initial deposit as a security deposit in the form of cash. The minimum deposit or the maximum deposit you can afford to make acts as collateral upfront makes it a secured credit card. The amount of cash you put up as a deposit dictates your credit limits.
rebuilding credit canada
This protects the lender from the possibility of you defaulting on what you owe because your security fund will be used to cover any outstanding amounts. When you use this type of card, as far as the vendor is concerned, it acts just like an unsecured credit card. Every month when you pay off the balance by making your payments on time, it is reported to the credit bureaus. Then each credit bureau can update their records showing you are paying it off on time. That is how it can rebuild credit Canada.
A Secured Line of Credit – Much like a secured card, a secured line of credit is a revolving credit that is secured by the money or other security, you offer up in the beginning. As you use your line of credit and you make your payments on time, you will establish a picture of good money reminders habits which will both boost your credit score. These lines of credit are available through most banks. Again, creditworthiness and collateral, if required, set the credit limits.
Create Your Own Credit Building Programs – Credit building programs are one of the most effective methods for rebuilding credit after bankruptcy or consumer proposal. Programs like borrowing a small amount to invest in your RRSP. Then repay the loan in full before the next RRSP year.
This is beneficial in 3 ways: You don’t have to come up with the funds, you are investing in your future and by repaying the loan, you are showing you can handle credit properly which improves your credit score. This should also be combined with a secured card or line of credit, do double up on your credit score building program. Paying your bills on time also improves your credit score.
You want to follow your budget carefully. Avoiding late payments, making the full payment each month on your monthly credit card balance, not just the minimum payment, and don’t have a missed utility payment. Having timely payments and no late payments on your Canadian credit history, will take a poor credit score and start improving your credit rating by creating a new positive credit history.
An improved credit rating and improving credit reports will overturn the negative effects of your bad credit history, get your credit score ranges to improve, get you the credit score increase you deserve and catch the attention of the credit card company and improve your chances of access to credit products.
These new types of credit becoming available to you, and perhaps even existing credit card issuers giving you a credit limit increase, all go towards your rebuilding credit Canada. But you still need to stick to your spending plan. Just because you are getting access to credit again, does not mean you can abandon your proper budgeting. You don’t want to go back to the old habits that produced the poor credit history.
Whatever kind of credit loans you are looking to take out to help rebuild your credit, make sure you understand things properly. Read the credit applications carefully to see what you are really signing up for. If approved, read the credit agreement carefully so you will fully understand all the terms of the rebuilding credit Canada loan product.
As your credit reports improve, you will find new companies offering you new credit accounts and credit card providers either increasing your credit card limit or sending you applications for new credit cards lines. Again a word of caution. Don’t get carried away with all sort of credit products in your daily life. Keep it simple and stick to your budget. You really may only need one regular credit card from amongst the wide range of Canadian credit cards becoming available to you.
rebuilding credit canada
Rebuilding credit Canada: Step 3 – Maintain your spending plan good habits for the rest of your life
Rebuilding credit Canada is not a one-time event. Think of rebuilding your credit after bankruptcy like losing weight. In the beginning, dragging yourself to the gym and making kale smoothies is hard work. However, as you start to see the weight drop, it becomes easier and easier.
What happens when you reach your goal weight? Do you stop going to the gym and start eating pizza for breakfast? No! You just carry on as you are now – because it’s become a habit, and if you slip back into old habits, you’re quickly going to see all of your hard work come undone.
Regularly checking your full credit reports from both credit reporting agencies will help you see how your good habits are paying off. Kinda like weighing yourself to make sure you’re still where you want to be. If you start seeing negative results, take stock of what’s happening in your life that could be causing it and make changes to quickly get back on track. You want to keep seeing improvement in your credit reports.
Ultimately, whether you’re declaring bankruptcy or entering into a consumer proposal, it will be emotionally difficult. There is a light at the end of the tunnel though. Many people don’t realize that you can start building credit while going through both a bankruptcy or consumer proposal so that at the time of discharge, you’re already a few steps ahead. Follow these steps and you’ll find that rebuilding your credit after bankruptcy isn’t that difficult.
Rebuilding credit Canada: Do you know anyone who needs to get back on the road to financial recovery?
If you have too much debt, are unhappy with your debt situation and need someone to talk to about how a consumer proposal or even personal bankruptcy can fix your credit issues and improve your financial life, call the Ira Smith Team. We are professional credit counsellors and can help you learn good spending habits. Through consumer proposal payment arrangements you can make steady payments on prescribed payment dates. This will allow you to avoid bankruptcy by paying only a fraction of your total debt yet eliminate all of your debt. It will also get you credit repair.
We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a no-cost initial consultation. We will look at your debt utilization and make recommendations to you on how to fix it. So why not? All you have to lose is your stress while rebuilding credit Canada. Why not fix things now so that your credit checks improve.
We will advise you whether or not we think you are a candidate for either a consumer proposal or bankruptcy. If we feel you can solve your financial problems without an insolvency process, we will tell you straight. The Ira Smith Team understands the stress you are under and the pain it is causing you and your loved ones.
We can eliminate your pain. I guarantee that you will start feeling better right away after our free initial consultation. Taking action after that will put you on the right path, Starting Over Starting Now
We always perform an initial free consultation with people thinking about filing either a consumer proposal or bankruptcy. People ask me, what if I can’t create a list of all my creditors?
Consumer proposal or bankruptcy: A refresher
If you are a regular reader of my Brandon’s Blog, then you know the difference between a consumer proposal vs bankruptcy. For those of you who need a brief refresher, both the consumer proposal and bankruptcy are different processes under the Bankruptcy and Insolvency Act (Canada) (BIA). To file either one, the person must be insolvent. That means that they cannot meet their liabilities as they become due and if they liquidated all their assets, it would not produce enough cash to pay of all the debts.
Consumer proposal – This is a restructuring process to avoid bankruptcy for any person who owes $250,000 or less, not including any mortgage or line of credit debts secured by a mortgage registered against their home. The purpose of a consumer proposal is to AVOID bankruptcy.
Division I proposal – This is a restructuring process for people who owe too much money to fit under the consumer proposal rules. A company can also reorganize under this section of the BIA.
Bankruptcy – If a person cannot successfully carry out a restructuring proposal but requires relief from their crushing debts, then they would file for bankruptcy. In this process, subject to certain provincial exemptions, you would hand over your assets to the licensed insolvency trustee (Trustee). The Trustee would then sell the assets for cash, call for your creditors to file a proof of claim with the Trustee and then distribute the money according to the rules of the BIA.
Consumer proposal or bankruptcy: A common question
Regardless of whether the person is thinking about a consumer proposal, Division I proposal or bankruptcy, a common question is: (i) what if I don’t know who all my creditors are; or (ii) what if I leave off some creditors from my sworn statement of affairs; or (iii) do I have to list all of my creditors?
Some of our clients come to us, tell us that they don’t even know who their creditors are. Sometimes it’s been such a long time that they don’t even receive the bills or notices anymore and their memories aren’t good enough. So here is an easy hack so that you can put together a list of most, if not all, of your creditors.
Consumer proposal or bankruptcy: The easy hack
We will add CRA to your statement of affairs. If you don’t know how much you owe them, we will put them in showing either “$1” or “Unknown” as a placeholder
Every person must file an income tax return. Most people know whether they are current or not in their tax filings. So Canada Revenue Agency (CRA) should always be listed.
CRA cannot file an accurate proof of claim if you have not been current in your income tax filings. So we tell everyone to file all outstanding tax returns and provide us with a copy before filing either a consumer proposal or bankruptcy.
Pull your credit report
You may obtain your credit report from either Equifax or TransUnion. Your credit report will list all those who you owe money to and who wanted to update their files with your new credit score. We will add those creditors to your statement of affairs also.
Check your mail and save the bills
No doubt your creditors will keep mailing your statements. Even if all it says is balance forward unpaid, or is from a collection agency or lawyer, it will list their address, their name and the amount they say you owe. We will put that information on your statement of affairs.
Have your lawyer do an execution search
Your lawyer can easily do an execution search. This search will show who holds a judgement against you and some basic details. We will add those details to your statement of affairs.
Consumer proposal or bankruptcy: The test is due diligence, not perfection
The test is, did you use your best efforts to identify all of your creditors on your sworn statement of affairs. It is very rare that any of our clients know exactly how much they owe. It is normal for the amounts according to the sworn statement of affairs to be different from the proofs of claim filed. That is OK.
Sophisticated large creditors pay the Superintendent of Bankruptcy to get a download of insolvency filings on a regular basis. They match the names of those who have filed against their client database. If a client shows up that they did not have listed as having filed, they contact the Trustee. Once they contact us, we send them a creditor’s package. They will then be able to further check their records and if owed money, can file a proof of claim.
We had a client who said they mistakenly left off a few creditors in their proposal filing. Those creditors found out. All those creditors had judgements against the person who filed the restructuring proposal. These creditors were very mad at being left off the list, although they did not suffer any damages.
It made it much tougher for the person and us to get a deal struck with all the creditors. At the end of the day, a deal was struck and the person is currently performing and is currently making their payments under the restructuring proposal. The anger of these creditors rubbed off on creditors who would have otherwise been happy with a lesser proposal. So in the end, leaving these creditors off the initial sworn statement of affairs just cost them more money!
Consumer proposal or bankruptcy: Corporate filings
In terms of a corporation filing either a restructuring proposal or bankruptcy, we normally don’t incur the same issues. A company will have an accounting department and/or an accounting system. They will be able to produce a list of creditors. The amounts shown may not be current, but the list of names and addresses will be reasonably accurate.
However, the easy hack I described above also works for a company.
Consumer proposal or bankruptcy: More free stuff
I hope that you have found my free easy hack useful to answer the question of how to create a list of all my creditors. You can use it if you wish to do proper budgeting, which everyone should do. You don’t have to wait until you are insolvent!! With proper budgeting, you can avoid insolvency and therefore bankruptcy.
If you have too much debt and need someone to talk to about consumer proposal vs bankruptcy, call the Ira Smith Team. We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a free initial consultation. So why not? All you have to lose is your stress. We will advise you whether or not we think you are a candidate for either a consumer proposal or bankruptcy. If we feel you can solve your financial problems without an insolvency process, we will tell you straight.
The Ira Smith Team understands the stress you are under and the pain it is causing you and your loved ones. We can eliminate your pain. I guarantee that you will start feeling better right away after our free initial consultation. Taking action after that will put you on the right path, Starting Over Starting Now.
Bankruptcy is sometimes necessary for the financially troubled individual or company. In Canada in 2017, there were 125,807 insolvency filings; 60,669 bankruptcies and 65,138 proposals. Bankruptcy in Ontario Canada accounted for 15,968 of the 2017 filings. The majority of these across Canada filings were people, not companies.
Bankruptcy in Ontario Canada: Not entirely unexpected
This is an expected statistic once you understand the purpose of the Canadian insolvency system to get rid of financial obligations. It is also for the financial rehabilitation of people and companies and if possible, allow them to do so while retaining their assets. In a down economic climate, even more, debtors use bankruptcy to protect their wide range of interests. Although on a per capita basis Canadians are savers, more recently, especially related to real estate, we are a country of borrowers. A lot of people are overloaded with debt, including credit card debt. Bankruptcy in Ontario Canada: Bankruptcy is not always right
Any debtor with severe monetary troubles must think about bankruptcy. Bankruptcy isn’t always the right response though. In my practice, we first run through the various options available to avoid bankruptcy.
It is proper only when you have too many financial obligations that you cannot realistically repay, in whole or in part, from your future earnings or from selling your assets. This is the meaning of the financial state of insolvency.
If you make $100,000 a year and your financial obligations are only $20,000 (assuming you have no assets), why go bankrupt? Temporary financial sacrifice on your part could pay off your debts in full. This is definitely more suitable for bankruptcy. What about a proposal?
Although each case is unique, generally speaking, if your unsecured financial debts are less than 60 percent of your net yearly pay, stay clear of bankruptcy. You could use a self-help remedy to pay off your debts in full. Alternatively, you could look to the proposal or consumer proposal mechanisms under the Bankruptcy and Insolvency Act (Canada).
Under the proposal provisions of the BIA, a person or company could take up to 5 years to pay off part of the debt. A successful proposal forgives the balance of your debt (subject to certain ones indicated below). Many creditors will wait if you show good faith and make organized repayments that provide your creditors with a better result. A filing may protect some assets
A bankruptcy or proposal filing may also be necessary to secure your assets; this is especially true for companies looking to restructure. In a BIA filing, all civil actions against you instantly stop— whether they are legal actions, CRA garnishments or secured creditor seizure and enforcement (the last under specific conditions). Every creditor must obey the automatic stay of proceedings imposed by the BIA. A proposal filing gives you the possibility to solve your economic issues with lenders who would certainly otherwise seize and sell your assets. Timing is everything
I advise every person and company in need of restructuring that timing is crucial. It is human nature for debtors to regularly wait far too long. By waiting too long, they shed possible advantages from an earlier restructuring filing. The longer a person or company waits, the fewer options they have. Also, if you wait too long, the less creative I can be to protect your assets.
5 general tips
Collect your tax refunds prior to your filing. When you file for bankruptcy, any tax refund owing to you prior to the date of bankruptcy belong to your bankruptcy estate. Your licensed insolvency trustee (Trustee) collects the payments.
The insolvency process is meant to treat all creditors fairly and all ordinary unsecured creditors equally. Seek the advice of a Trustee prior to making payments to specific unsecured creditors prior to filing. Your good intentions may prove to have created transactions that the Trustee can attack. The Trustee will then seek recovery from those parties.
Consider how the causes of your insolvency will look to your creditors. Uncontrolled lifestyle spending looks a lot different from ongoing costs due to a mental or physical illness or an addiction. The causes of your insolvency sometimes dictate whether a proposal or bankruptcy filing is preferable.
Have you contributed to an RRSP in the 12 months before filing for bankruptcy? That amount will have to be paid over to your Trustee under bankruptcy or accounted for in what type of proposal can be successful.
If you have student loans, was the last time you were either a full or part-time student more than 7 years prior to your filing? If no, you won’t be able to end the student loan debt. However, it may be enough to relieve yourself of your other unsecured debts to have enough funds every month to start repaying the student loans.
Some debts can’t be discharged
Bankruptcy will not end every debt. There are certain debts that cannot be discharged through bankruptcy. Examples are:
student loans as described above
child support and alimony under either a court order or written separation agreement
fines or restitution ordered by a Court
debts arising out of fraud, embezzlement or misappropriation while acting in a fiduciary capacity
amounts owing to secured creditors registered against your assets, such as a mortgage or car loan. Any amount still owing after the asset is sold, if any, is an unsecured claim which is discharged in a bankruptcy
Bankruptcy must be your last option
Bankruptcy could be your ideal choice if the amount of your debt and the amount you can realistically repay will not settle it. If you have few possessions to lose in bankruptcy, then a bankruptcy filing may be your best choice. By meeting with a Trustee early to discuss your options, you will get a good understanding of what may be possible.
I always advise every person or company never file for bankruptcy without first striving to solve a case without bankruptcy. Bankruptcy must be your last option, not your very first – avoid bankruptcy if you can.
Think about all readily available options prior to determining that bankruptcy is genuinely the best decision for you and your situation. If you find you are in too deep and can’t dig out fast enough, then you do need professional help.
Seek the advice of a professional trustee
Many people and companies facing serious financial issues don’t know where to go for professional help or are too embarrassed. There’s no shame in seeking professional, financial help. Licensed insolvency trustees evaluate your situation and help you to arrive at the best possible solution for your problems.
Ira Smith Trustee & Receiver Inc. is here to help. We’re federally regulated and subject to a strict code of ethics. We offer a depth of expertise and provide a high quality and cost-effective service. I understand your pain and we can end it. You will find that we use a friendly, non-judgmental method.
August 30, 2018 – NEW BONUS VIDEO AT THE BOTTOM OF THIS BLOG
Introduction
Although I can’t now fathom a world without the Internet, there are some reasons to wax nostalgic about the good old days. Most notably, many families lived nicely on one income and people retired from their jobs with a defined pension plan. They did not have to worry about repayment of student loans Canada. It was commonplace for students to put themselves through college working summers and weekends during the school year.
There is a new reality
Those days are gone! Two incomes are now an absolute necessity for most families and defined pensions have all but disappeared. To pay for university, even with working summers and weekends, students are saddled with enormous loans. In the 2015-16 school year, 497,000 students enrolled in the Canada Student Loans Program.
Students #1 worry
Dan Allan, Director of the Student Budget Consultation Program, states:
“While students are concerned about unemployment after school, their biggest worry is about their university debt and the cost of education being a huge hurdle going forward”
Why is there so much student loans debt?
Government funding dropped from over 77% in 1992 to less than 55% in 2012. To make up the difference, post-secondary institutions turned to students. Tuition fees began to rise – 115% between 1980 and 1995 (Glenn Burley, Canadian Centre for Policy Alternatives)
By 2016-17, the average Canadian university tuition was about 40% higher than it had been in 2006. (Fred Lum/Globe and Mail)
Tuition fees increased by 3.1% per cent for undergraduate programs in the 2017-18 academic years (Statistics Canada)
The average tuition cost for a Canadian university — before the cost of books, travel and supplies — is $6,500 per year (Statistics Canada)
The average amount owing for both bachelor and master’s graduates is $26,000 and $41,100 for doctorate graduates (Statistics Canada)
What happens when students can’t repay their student loans?
According to Dan Allan, the current Liberal government wrote off $200 million dollars in outstanding student loans on which it will never be able to collect. This is the third time in the past four years that the government has had to write off outstanding loans for reasons that include bankruptcy. There is a six-year legal limit on collection and debtors who can no longer be found. This results in direct student loans loan forgiveness.
How can young people get ahead when student loans are holding them back? As a society, we must increase our investment in education. Instead of the government writing off hundreds of millions of dollars in uncollectable student loan debt, wouldn’t that money be better spent on funding education?
Repayment of student loans Canada: What to do if you have too much debt
You can certainly contact Canada student loans to find out about their program for those having trouble repaying their student loan debt. If you’re a graduate with student loan debt that you can’t repay, and you were not able to work out an arrangement with Canada student loans then you are in a student loans debt crisis. If you are struggling with student loan debt, or debt for any other reason, you need professional help and you need it now. We understand your pain points and we know how to relieve you of the stress and pain.
This is always a hot topic. I am asked often how does debt relief Canada work? I recently wrote blogs about professional athletes who made a lot of money in their careers and who are now broke, or worse, bankrupt.
I am going to tell you about former tennis star Boris Becker. He is trying to avoid bankruptcy, diplomatically.
First some background information. The inviolability of diplomats is among the oldest rules of international law. During the Greek Empire, it was unlawful to abuse, apprehend or detain a country’s agent. In contemporary times, there is polite resistance from court territory as a matter of global regulation. The purpose of this is to make certain the reliable efficiency of diplomatic features preventing the holding authority from intervening with the diplomat’s job.
Debt relief Canada: Diplomatic immunity
Diplomatic immunity separates into 3 categories. The resistance of the consular office properties and residential properties. The buildings, cars, archives and diplomatic communications. While the holding authority has a task to shield the diplomatic properties from any type of damages, the embassy remains immune from any kind of law enforcement actions. The authorities cannot enter the consular office other than to safeguard human life for instance of a severe emergency.
The 2nd kind is within the premises. The resistance of the employees functioning in the consular office from the local court’s jurisdiction. Mediators are immune from any kind of type of law enforcement like arrest, search as well as apprehension.
The 3rd kind is that the diplomat, as well as his/her family members, are additionally immune in the hosting country from paying taxes other than the settlement for solutions like electricity or water.
It likely raised a few eyebrows when Boris Becker revealed he was pursuing a 2nd profession in diplomacy In April 2018 as the Central African Republic’s attaché for Sports/Humanitarian/Cultural Affairs in the European Union.
The statement came while Becker had a claim made against him over a loan he presumably owes to exclusive financial institution Arbuthnot Latham, after the sports celebrity’s bankruptcy in 2017. His lawyers claim that his diplomatic function grants him immunity under the 1961 Vienna Convention on Diplomatic Relations. They state this indicates he cannot be subject to any kind of lawful procedure in the courts of any nation. Additionally, they say this protection is for as long as he stays an identified diplomatic representative.
The Boris Becker method of debt relief
His legal representatives have also provided those claims to Britain’s High Court, saying that British Foreign Secretary Boris Johnson in addition to the Central African Republic would need to decide whether any kind of suits could continue. This takes the bankruptcy of a previous tennis star transforming it into a politically delicate matter. The Court process against Becker might lead various other countries can potentially make use of the situation. In the same fashion British diplomats abroad could lose immunity if certain countries wished to make a point.
Becker’s defence method has actually likewise set off inquiries over his motivations as well as timing in accepting a polite duty with the Central African Republic— a nation in the midst of a bloody civil conflict and humanitarian situation. It appears now the Republic has more important matters to focus on. Its social and sporting activities ties to Europe cannot be a current priority.
The former tennis champ condemned the choice to start bankruptcy procedures versus him as unjustified and unjust and introduced he would look for payment for the totally unneeded affirmation of bankruptcy that he was pushed into.
Debt relief Canada: The precedent story of Sheikh Walid Juffali
The Article 29 of the Vienna Convention on Diplomatic Relations I previously referred to, has actually long been controversial. In 2014, the little Caribbean island of Saint Lucia named Saudi business owner Sheikh Walid Juffali its irreversible representative. Moreover, this appointment occurred after his former spouse Christina Estrada separated from him and instituted divorce proceedings.
Britain’s High Court ruled that his diplomatic status was totally fabricated. Britain’s Foreign Office slammed the judgment when stating it can result in problems with British diplomats’ immunity abroad. The Court said that Sheikh Walid Juffali, a permanent resident of Britain, is not protected by his diplomatic status. Estrada’s award was about $100 million.
Applying the very same reasoning in Becker’s instance would negate any diplomatic immunity claim by the long-time British homeowner.
What if you can’t claim diplomatic immunity?
Boris Becker’s uses a very novel and entertaining defence to avoid lawsuits to recover debts. However, most of us don’t have the ability to get diplomatic status from a country and then claim immunity. We deal with creditors suing us on our debts. We have to take a less dramatic and more common sense approach. Here is my list of options for those looking for debt help in Canada.
Debt relief Canada: Credit counselling
This addresses debt troubles without bankruptcy and supplies you with the skills to live debt totally free. Credit counselling solutions consist of budgeting, just how to use debt intelligently, restoring credit as well as debt management programs. Debt management programs are developed to aid you to settle your debt. You enlist willingly in a debt monitoring program; the court did not mandate it. When you enlist a credit counsellor will call your financial institutions and ask for their collaboration in minimizing your debt. Your creditors could agree in ways like minimizing the amount of debt owing. A debt management program cannot cover all debts. It cannot cover secured debts. A mortgage, line of credit registered against your home or an auto loan are examples of debts not covered.
Debt relief Canada: Debt consolidation
Debt consolidation is getting a loan that enables you to settle your financial debts to a number of or all your unsecured creditors, leaving you with simply one loan. Usually, this approach is ideal to deal with your unsecured debts. The theory is that the debt consolidation loan will have a lower annual interest rate than many of your unsecured debts.
Debt relief Canada: Proposals
Consumer proposals and Division 1 proposals are alternatives to bankruptcy. Although similar in many areas, there are some major distinctions. Consumer proposals are readily available to people whose overall financial debts do not go beyond $250,000, not consisting of debts secured by your house. Division 1 proposals are for both companies as well as people whose financial obligations go beyond $250,000 (excluding the mortgage on their primary residence). Proposals are governed by the Bankruptcy and Insolvency Act (BIA). Collaborating with a licensed insolvency trustee you make a proposal to:
✥Pay your creditors a percentage of what you owe them over a certain amount of time, without any interest
✥Extend the time you need to repay the debt
✥Or a mix of both
Proposal payments are made to your trustee. The trustee uses that money to pay each of your creditors. You can take up to 5 years to complete a proposal.
The last resort: Bankruptcy
As a last resort, you can declare bankruptcy. The Government of Canada licences and supervises us. We can look at your circumstance and discuss with you the options available to you to avoid bankruptcy. We can also advise you what is involved in the bankruptcy option and administer it for you.
Do you have too much debt?
I can’t provide you diplomatic immunity from your debts. However, If you’re thinking about a consumer proposal or are looking for ways to end your financial debt, or you need CRA debt forgiveness, call Ira Smith Trustee & Receiver Inc. We understand the stress and pain your financial problems are causing you. We feel your pain and we can end it for you.
Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress-free life.
With filing for bankruptcy in Canada, if a person’s discharge is opposed, there must be a court hearing. At the hearing, the court will decide if the discharge will occur. Once the discharge is granted, the person will be relieved of his or her debts as of the day he or she filed for bankruptcy (with certain exceptions) and will be free to start rebuilding his or her credit rating and financial future.
Filing for bankruptcy in Canada: Court of Appeal for Ontario decision
The purpose of my blog is to describe a March 2018 Court of Appeal for Ontario decision, Kuczera (Re), 2018 ONCA 322 (CanLII). This is an important decision in how mental health issues intersect with the bankruptcy discharge process.
Mr. Kuczera’s financial problems began with a costly and hotly contested divorce proceedings. With his debts mounting and the divorce proceedings continuing, Mr. Kuczera filed a consumer proposal. As a result of the ongoing family law battle, his mental health deteriorated and he became clinically depressed. He was no longer able to cope with life and was unable to work.
Filing for bankruptcy in Canada: Defaulting on the consumer proposal
Filing for bankruptcy in Canada: The bankruptcy discharge hearing
Mr. Kuczera represented himself in Bankruptcy Court on his discharge hearing. He tried to show the Registrar in Bankruptcy that he tried his best to live up to all of his bankruptcy obligations to the licensed insolvency trustee, but due to his mental health issues, he could not. Unfortunately, his evidence was only a basic report from his psychiatrist.
The Registrar did not grant an absolute discharge. Rather, based on the evidence in front of her, she ordered that a discharge be granted only after payment of the outstanding balance under the consumer proposal, and one other minor condition. The Registrar went on to state that he was held responsible for his situation.
Filing for bankruptcy in Canada: Appeal of the Registrar’s decision
Mr. Kuczera was able to hire a lawyer to appeal the Registrar’s decision to a Judge sitting in Bankruptcy Court. The Judge refused to consider fresh evidence in the form of more descriptive psychiatric reports supporting the summary findings presented at the original discharge hearing. The Judge dismissed Mr. Kuczera’s appeal.
Filing for bankruptcy in Canada: Appeal of the Judge’s decision
He now had his lawyer appeal the Judge’s decision to the Court of Appeal for Ontario. The Court of Appeal disagreed with the approach of the appeal judge. The Court of Appeal could not understand why the appeal judge would not allow the more detailed reports from Mr. Kuczera’s treating psychiatrist. These new detailed reports were further to the summary report provided to the Registrar.
The Court of Appeal went on to say that neither the Registrar nor the appeal judge gave proper weight to the psychiatric evidence. It also went on to say that a discharge condition requiring Mr. Kuczera to pay the payments due under the consumer proposal would not be “difficult”, as described by the Registrar. Rather, the Court of Appeal said that it would be “crushing”.
Filing for bankruptcy in Canada: What the Court of Appeal found
So the Court of Appeal found that:
the appeal judge erred by not considering the fresh psychiatric report evidence;
The need for the bankrupt to pay the balance of the consumer proposal payments would be crushing; and
The fresh psychiatric evidence was compelling.
Given the length of time that Mr. Kuczera remained in bankruptcy, and considering the above factors, the three-judge panel in the Court of Appeal for Ontario unanimously agreed that Mr. Kuczera gets his absolute discharge from bankruptcy.
Filing for bankruptcy in Canada: Mental health issues
Mental health issues are at the forefront of the news. Most recently, both Kate Spade and Anthony Bourdain committed suicide because of mental health issues. I believe that as society recognizes mental health issues as a legitimate illness or disability, you will see it influencing Bankruptcy Court decisions. That certainly was the case for Mr. Kuczera.
Filing for bankruptcy in Canada: Debt after your bankruptcy discharge
After receiving your bankruptcy discharge, NOBODY can try to collect this debt again. Discharged debt cannot appear on your credit report as anything other than a zero balance. Sometimes collection agencies report a discharged debt to the credit bureaus, hoping you will pay off the debt and not correct the information with the credit bureaus. The debt will still incorrectly appear on your credit report.
Filing for bankruptcy in Canada: Discharged debt and your credit report
When discharged debt re-appears on your credit reports, it affects your credit score and can result in higher interest rates or credit denials. Sometimes debt collectors buy discharged debt, knowing they can’t collect on it, but hoping you don’t know that.
These debt collectors may tell you that the discharge doesn’t apply to them because they are not the original creditor. Don’t be fooled. Creditors who attempt to collect a discharged debt are violating a court order. The court can stop them, and they may even have to pay damages. Discharged debt should not show on your credit report except as a zero balance – Monitor your credit report and be proactive. A discharged debt is not valid and is not collectible.
Filing for bankruptcy in Canada: Do you have too much debt?
I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.
The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.
Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.
Last week we told you about professional athletes who earned enormous fortunes and blew it all on lavish, unsupportable lifestyles. The end result was bankruptcy. There is another group of professional athletes who also earned millions and ended up using a bankruptcy alternative to avoid bankruptcy, but not because they blew it all. They were trying to shield their money from taxes through complex offshore tax structures. However, the Canada Revenue Agency (CRA) reassessed them and now they had a huge tax bill and needed debt forgiveness CRA.
This is certainly not a new phenomenon. The newspapers and tabloids often feature stories about famous people who the tax department reassesses for using complex tax structures designed by agents, managers, accountants, and lawyers. In this case, our very own Olympian, Donovan Bailey, had to file a proposal under the Bankruptcy and Insolvency Act (Canada), as a result of an offshore tax scheme to try to beat the CRA. And, sadly, he’s not the only one.
Debt forgiveness CRA: Her Majesty outruns the offshore tax scheme
The offshore tax scheme that nearly bankrupted Donovan Bailey was designed to lessen the amount of income tax to be paid. Donovan Bailey made a “charitable donation”. It went through a complicated series of transactions. The money made its way back to Mr. Bailey, through an offshore account. It was supposed to come back in tax-free.
The problem was that the tax authority reassessed Donovan Bailey. They said the charitable donation was no more than a sham to avoid paying taxes. Instead of tax-free money Donovan Bailey found himself in debt to the CRA to the tune of $2.3 million in unpaid taxes and ended up in bankruptcy court.
Debt forgiveness CRA: CRA gets tough
The CRA has vowed to get tough on tax evaders and the tax professionals who help them. CRA threatens with increased fines and jail sentences. They have a strategy to root out high-risk wealthy Canadians and corporations that stash cash in offshore accounts to avoid taxes. And, they’re spending $444 million on these measures, and expect to recoup $2.6 billion in added revenue over five years.
Debt forgiveness CRA: What to do if you have too much debt
The Ira Smith Team has a cumulative 50+ years of experience dealing with diverse issues and complex files. We deliver the highest quality of professional service. Don’t settle for less. Give us a call today and Starting Over, Starting Now you can overcome your financial difficulties.
In this vlog, I try to provide answers to the most asked questions about a consumer proposal in Canada (the Proposal, the Plan or CP). A Proposal is an official method controlled by the Bankruptcy and Insolvency Act (BIA) readily available to people.
Consumer proposal in Canada: Collaborating with the trustee
Collaborating with a licensed insolvency trustee (LIT) serving as administrator of your Plan you make an offer to:
pay your creditors part of the total you owe them over a specific duration;
expand the length of time you need to repay that part of your financial debts; and
Consumer proposal in Canada: The consumer proposal payments
Payments are made with the LIT. The LIT uses that cash to pay each of your creditors their in a proportionate share based on the proven claims filed by them with the LIT. The financial obligations need to be repaid through the CP within 5 years.
Consumer proposal in Canada: Who qualifies?
You need to be a person and not a corporation. Your overall financial debts need to not surpass $250,000. This limit doesn’t include debts from a home loan, mortgage or credit line supported by your primary house. You need to likewise satisfy the insolvency requirements. This implies that:
your financial debts value is above the value of your possessions;
if you sold off your assets you wouldn’t adequate funds to repay your financial obligations completely;
you are having difficulty making a complete settlement on every one of your financial obligations monthly
Making just the minimal month-to-month payments as disclosed on your credit card or loan statements do not count as repaying your financial debts.
Consumer proposal in Canada: What is the price of a consumer proposal? Your Plan payments also cover the fee for the Proposal. There are no different costs either for:
submitting a Plan; or
charges paid to the LIT to administer your CP
Consumer proposal in Canada: How long will my consumer proposal take?
A Plan could last for no more than 5 years. You could reduce the term either by boosting the amount of your month-to-month repayment or by providing a round figure repayment all at once. The one-time repayment makes sense if you can get an adequate loan from either a financial institution or family member.
Consumer proposal in Canada: What are the steps of a consumer proposal?
A CP permits you to pay all or part of your unsecured debt in regular monthly amounts over time. The maximum length of time is 5 years. In drafting your Plan, the LIT must make sure that your consumer proposal provides a better result for your creditors than in your bankruptcy. The normal steps are:
A LIT will consult with you and develop a Plan that you both think will work for both you as well as serve the needs of your financial institutions and others you owe money to
The LIT will mail out the CP to your creditors who then have 45 days to approve or deny it
The creditors can approve or deny your Plan at a meeting of creditors.
Typically, in a CP in Canada, there is no need to hold a meeting.
Consumer proposal in Canada: Can a consumer proposal eliminate debt collectors and avoid my income from being seized?
Yes, as soon as the filing of a Plan happens, all creditor seizure activities stop. However, it does not stop family law payments under a proper settlement agreement or court order.
Consumer proposal in Canada: In a consumer proposal will I hand over my home and my auto?
KEEP IN MIND: If you were to surrender your secured properties after declaring your Proposal, you will not be relieved from any type of financial debt shortfall since it happened after the declaring of your consumer proposal. Make certain that if you are offering up secured assets, wait until they have started their enforcement and are claiming any shortfall against you BEFORE you give your CP. Normally lenders who register a mortgage or other security for a loan are outside the Plan process. It is the equity you have in your residence or car that must be considered when you and the LIT first sit down to work out a budget. This will affect the type of offer you are going to make. If you have enough income to keep paying the mortgage against your home and/or your auto loan and you wish to keep the assets, you can do so. Again, your equity must be considered in the offer you make to your creditors. Your income and expenses must be reviewed to make sure you can afford all these expenses plus the monthly payment under your Proposal.
Consumer proposal in Canada: Will I need to surrender my charge cards?
Generally, you should be ready to offer every one of your charge cards to the LIT and you will not be able to ask for a brand-new charge card until after your Plan is finished. You nevertheless can make use of a guaranteed/secured credit card throughout this CP process.
Consumer proposal in Canada: If I miss out on repayment will I automatically become bankrupt?
We highly recommend you to make your repayments consistently and on time. If you drop 3 behind, your consumer proposal will certainly finish. If that were to happen, you will no longer have protection from your creditors and their collection efforts. However, you will not automatically become bankrupt if you default on your Proposal.
Consumer proposal in Canada: What should I do if I have excessive financial debt?
If you’re thinking about a debt settlement program or are looking for ways to end your financial debt call Ira Smith Trustee & Receiver Inc. We understand the stress and pain your financial problems are causing you. We feel your pain and we can end it for you. Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress-free life.
I know that earning over $400 million and going bankrupt seems unbelievable to most of you, but it’s true. Just ask Mike Tyson. And he’s not the only one. There are many former pro athletes who are broke. They have made fortunes and lost them, with nothing to show for it. No secure investments, no retirement fund, nothing put away for a rainy day.
Former pro athletes who are broke: They don’t know where the money went
They wake up one day and the money’s all gone, the credit cards have been cancelled, the bank has foreclosed on the mansions and the fleet of exotic cars is being repossessed. The worst part is that most of them don’t even know where the money went.
Former pro athletes who are broke: Evander Holyfield
It’s easy to blow through a fortune. Evander Holyfield spent $230 million in no time flat. He bought a 235-acre Utah estate with 109 rooms that included at least one monthly electric bill of $17,000. There was also a $550,000 loan he took out to pay for landscaping; $200,000 in back taxes, plus alimony and child support for three ex-wives and 11 children.
Former pro athletes who are broke: Boris Becker
It adds up fast when you’re spending like a drunken sailor. Boris Becker is the latest of the sports stars to declare bankruptcy in spite of enormous earnings. The marriages, girlfriends, children and an unsupportable lifestyle finally caught up with Boom Boom. The list of these bankrupt athletes goes on and on and on.
Former pro athletes who are broke: According to Charles Barkley….
Charles Barkley estimates that 60% – 70% of professional athletes go broke and there are many reasons.
Buying lavish gifts and giving money to family and friends
Former pro athletes who are broke: So what does it all mean?
Having enormous amounts of money is no guarantee of financial security as you can see. And financial problems can plague both the rich and not-so-rich.
If you’re having trouble paying the bills, don’t wait until you’ve hit rock bottom. The earlier you seek help, the more options will be available to you. With immediate action and the right plan, the Ira Smith Team can have you on your way to financial peace of mind Starting Over, Starting Now. Give us a call today.
