Tag: Bankruptcy

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AUTO INSURANCE IN ONTARIO CHANGE PUSHES FAMILY CLOSER TO BANKRUPTCY

auto insurance in ontario

12 hours made

Who would have believed that a mere 12 hours could cost a family over $1.9M and put them on the verge of bankruptcy? Sadly this is exactly what happened to a family because of the auto insurance in Ontario rule change that came into force 12 hours on the same day before Adam Bari’s motorcycle was T-boned. Although Mr. Bari was not at fault, it did not help his cause.

What is this new auto insurance rule that has this family on the verge of bankruptcy?

When I tried to contact Go Skippy, they explained that this new auto insurance rule change affects the evaluation of injuries. It’s a miracle that Mr. Bari survived. He was in a coma for one month and survived with major injuries including significant brain trauma, multiple broken bones in his right arm, leg and hand, as well as internal organ damage. Although absolutely unbelievable, Mr. Bari’s injuries are no longer considered severe enough under new auto insurance in Ontario guidelines to be deemed catastrophic.

It all boils down to defining catastrophic. Under the old guidelines, the Glasgow Coma Scale (GCS) was used to evaluate functionality. If a car crash victim had a GCS rating of nine or less, they were automatically considered catastrophically impaired and were eligible for increased benefits. At first, Mr. Bari scored a three on the scale which is considered to be the most severe result with the patient being completely unresponsive. Later on, his score rose to an eight, still leaving him catastrophically impaired. New auto insurance in Ontario rules no longer use the scale, though it remains a common evaluator for trauma teams.

What does this mean financially for the Bari family?

According to the personal injury lawyer representing the family, if the accident had happened 12 hours earlier before the new guidelines came into effect, the family would have received $2M in compensation. Instead, they received a pathetic $86K, which can’t even begin to cover the astronomical medical bills the family is facing. Mr. Bari may never recover sufficiently to return to work. His wife is working greatly reduced hours to care for him and there are twins to support. He’s going to require specialized equipment at home, extensive rehabilitation, a personal support worker, therapy and medication.

What recourse does the Bari family have?

They have retained a personal injury lawyer and are planning to sue the driver of the vehicle that hit Mr. Bari to help recover damages for health care expenses. Careless driving charges have also been laid against the driver. Unfortunately, nothing can be done about the new auto insurance rule change that has shamefully put the Bari family on the verge of bankruptcy.

Auto insurance in Ontario: What should you do if you are hit with an emergency that ruins your family budget and finances?

Hopefully, you will never find yourself in the same place as the Bari family but should you feel that you’re on the verge of bankruptcy contact Ira Smith Trustee & Receiver Inc. Sadly we can’t change the auto insurance guidelines but we can help you deal with serious financial issues. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Contact us today so that Starting Over, Starting Now we can put you back on track to financial well-being.

Image Courtesy: CheapFullCoverageAutoInsurance.com

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INSOLVENT ESTATES CANADA 3 QUESTIONS WE ALWAYS ARE ASKED

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INSOLVENT ESTATES CANADA

Insolvent estates Canada: Introduction

We previously discussed the aspect of death and insolvency in two blog posts:

When it comes to insolvent estates Canada, among the various questions asked of us, these three questions are always asked:

  1. What are the duties of an executor/personal representative when the estate has more liabilities than assets?
  2. Can the executor(s) pay bills before the creditors actually file a claim?
  3. Do executors or beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?

We prepared the above video to answer these 3 questions. Below is a more detailed discussion of the last 2 questions.

Insolvent estates Canada: The loss of life of a debtor occurs; who’s responsible for the money owed?

Although some creditors may try to collect from the spouse or other relatives, money owed doesn’t transfer because of marriage or death. If the debt is “joint”, the survivor has taken on the obligation directly and is liable on the account.

Debts are normally paid out of the assets of the property of the deceased before distributions to heirs (before paying heirs, the deceased’s debts must be paid). If the estate is insolvent (the assets of the estate are not enough to pay the amounts owed), then the order of charge is commonly prescribed by way of provincial rules.

If warranted, the executors could apply to Court for an order letting them assign the deceased’s estate into bankruptcy. In that situation, then the Bankruptcy and Insolvency Act (Canada) (“BIA”), the federal legislation, will prescribe the order of payment.

If insurance was bought to pay off a specific debt such as a bank issued mortgage or loan, then upon the death of the individual the insurance company will repay the bank and the debt will not exist in the deceased’s estate.

What are your alternatives and your responsibilities, as an executor upon the death of a debtor?

If the estate is insolvent, before or after paying the testamentary costs, you have alternatives:

  1. Pay the money owed out of your personal resources.
  2. Allow the estate to go bankrupt.

Emotionally you may wish to pay the money owed because you believe in your heart that it is the proper thing to do and you don’t wish to dishonour the memory of your loved one with a string of bad debts and bankruptcy. But before you decide, you need to know that there is no liability for an executor or heir to take on the debts of the deceased.

Even though there may be a stigma connected to bankruptcy, the reality is that you are not responsible for the money owed, so why should you assume this burden and in all likelihood put your family in financial jeopardy?

Bankrupting the estate makes economic sense. An executor can sidestep the minefield of issues involved in administering the deceased’s insolvent estate by bankrupting it.

What should executors and heirs be aware of?

If you and/or another family member is the executor, be aware:

  1. The executors have a legal responsibility for all acts completed, and for all acts not accomplished that they should have.
  2. Notwithstanding everyone’s best efforts, they may unknowingly be inviting proceedings from lenders or heirs for difficult issues. This happens when family members, who are well-intentioned but not skilled at monetary, insolvency or legal issues, are executors because she or he is named, however actually has no know-how in this region.
  3. By putting the property into bankruptcy, which requires the previous approval of the bankruptcy court, the executors are relieving themselves of personal legal responsibility because the estate will now be administered under the BIA and all creditors by the Licensed Insolvency Trustee.
  4. The executor will relieve him or herself of coping with collection calls.
  5. As long as there are sufficient funds in the estate to pay the funeral costs, that can be paid out first in the case of a bankruptcy of the deceased’s estate because of S.136. (1)(a) of the BIA states:

Priority of claims

“136 (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:

(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;”

It is the first debt with a preferred status that can be paid.

What should I do if I am an executor and I find that the liabilities are greater than the assets?

If you are an executor of a will and you find out that the estate is insolvent, after speaking with the estate lawyer, contact Ira Smith Trustee & Receiver Inc. as soon as possible. We will evaluate the situation and give you sound financial advice on how best protect yourself as executor and the heirs, so that you will be able to go ahead Starting Over, Starting Now.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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#VIDEO-HISTORY OF BANKRUPTCY NEVER GETS ANCIENT#

HISTORY OF BANKRUPTCY NEVER GETS ANCIENT

History of bankruptcy: Introduction

A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.

History of bankruptcy: Helping the debtor

The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.

History of bankruptcy: Helping the creditors

The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:

  • Trust claimants who are outside of the bankruptcy scheme
  • Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
  • Unsecured creditors:
    • Preferred
    • Ordinary

History of Bankruptcy: bankruptcy alternatives

The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.

History of bankruptcy: The BIA

The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:

In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.

History of bankruptcy: Rehabilitation

It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.

The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.

History of bankruptcy: The Courts

The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.

History of bankruptcy: What to do if you have too much debt

I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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COMPANY WENT BANKRUPT AND DIDN’T PAY ME WAGES: IT DOESN’T HAVE TO BE HARD

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Previous blogs for the company went bankrupt

The issue of the company went bankrupt and didn’t pay me wages is not a new one. We previously wrote two blogs on this topic:

We have noticed a surge of renewed interest in this topic based on recent activity from readers of our Brandon’s Blog, so, we thought it would be a good idea to put together a short video on this topic.

People ask us what if the company didn’t pay me wages?

We answer if wages are owed by your employer because the employer went bankrupt with unpaid employees or is in receivership don’t despair; there is hope for you to recuperate monies owed to you. The Wage Earner Protection Program (“WEPP”) Act – WEPPA – in conjunction with an amendment to the Bankruptcy and Insolvency Act (Canada) – BIA – created a mechanism for employees to be compensated for claims of unpaid wages, commissions and vacation pay accrued in the six months preceding the employer files for bankruptcy or being placed in receivership and wages are owed to you along with claims for unpaid termination and/or severance pay.

Are there any exceptions? What are the rules?

There are a few exceptions to the company went bankrupt and didn’t pay me wages. You are generally not eligible if, during the period for which your wages are owed to you by your employer, you:

  • were an officer or a director of your former employer
  • had a controlling interest in the business of your former employer
  • were a manager whose responsibilities included making binding financial decisions impacting the business of your former employer, and/or making binding decisions on the payment or non-payment of wages by your former employer

Who is eligible for the WEPP? You may apply if wages are owed to you by your employer and:

  • your former employer has filed for bankruptcy or is subject to a receivership
  • wages are owed to you by your employer, vacation pay, termination or severance pay from your former employer
  • amounts earned during the eligibility period or, in the case of termination or severance pay, your employment was terminated during the eligibility period ending on the date of bankruptcy or receivership

One more very important exception – it only applies if wages are owed to you by your employer and your employer is in either receivership or bankruptcy and owes you wages. If your employer is attempting a corporate restructuring under a Notice of Intention to Make a Proposal, a Division I Proposal or the Companies’ Creditors Arrangement Act, then WEPPA and its provisions do not come into play.

Claim limits when the company went bankrupt and didn’t pay me wages

Regardless of the total amount owing to you, the maximum any employee can receive under WEPPA is the greater of $3,200 or four times the maximum weekly insurable earnings under the Employment Insurance Act (which is now around $3,900).

Once employees file claims with both the Trustee/Receiver and Service Canada, Service Canada pays their claims for owed wages by the employer and Service Canada becomes the creditor. The amendment to the BIA has recognized WEPPA and created a priority charge that supersedes all secured charges except CRA’s deemed trust claim (and the reclaiming rights of farmers and suppliers) to a max of $2,000 per employee, secured against current assets.

Documentation needed if the company went bankrupt and didn’t pay me wages

While no one wants – or expects – to be part of a receivership or bankruptcy, you should always keep detailed records of hours worked for any pay period. On any occasion when you discover there will be no paycheque, record the loss that you will suffer, such as not being able to pay bills or buy groceries. Ask for a formal explanation from your employer and keep detailed notes on your efforts. It’s important to prove that when owed wages by an employer; you still expect to be paid, even if it’s late.

If your employer is in receivership or bankruptcy proceedings, and you believe you have a claim for owed wages by the employer, find the trustee and get in touch with Service Canada. Have your records ready and make sure you get your Proof of Claim.

What should I do if I have too much debt and the company went bankrupt and didn’t pay me wages?

This is an important issue. If you are experiencing financial problems, contact Ira Smith Trustee & Receiver Inc. We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make.

Contact us today. We are a licensed trustee and will listen to your issues and offer compassionate, professional assistance to aid you to avoid bankruptcy, so that you can regain control of your life, Starting Over, Starting Now.

company went bankrupt and didn’t pay me wages

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

 

 

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GTA VAUGHAN BANKRUPTCY TRUSTEE: BANKRUPTCY AND DIVORCE FINANCIAL SOLUTIONS

gta vaughan bankruptcy trusteeIntroduction to bankruptcy and divorce from a Vaughan licensed insolvency trustee (“GTA Vaughan bankruptcy trustee”)

As a GTA Vaughan bankruptcy trustee, I’ve never met anyone who had something good to say about bankruptcy and divorce. At times both are a necessary evil, but it’s never fun. Although divorce has been the butt of jokes by comedians for decades, it’s no laughing matter, especially financially.

This quote may be more telling than funny:

Let’s be blunt: If you hire a divorce lawyer today, there is a good chance you will hire a bankruptcy lawyer within two or three years.

Gene Meyer

GTA Vaughan bankruptcy trustee discusses debt issues and divorce financial solutions

When couples decide to divorce, few have any idea of what the split is really going to cost and what each party will be left with after the divorce. The goal of divorce and the divorce process and results are two very different things. Here’s the reality of most Canadians’ financial situations:

  • The debt-to-disposable income ratio was 165.3% for the first three months of 2016 (Statistics Canada)
  • Households owe $1.65 in debt for every dollar of disposable income they have (Statistics Canada)
  • Total household debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $1.933 trillion at the end of the first quarter (Statistics Canada)
  • Balances on consumer loans including credit cards and lines of credit grew by 2.6% year-over-year, driven primarily by the continued popularity of lines of credit and auto loans (RBC)
  • Mortgage loan balances were up 6.2% from the same quarter of the prior year (RBC)
  • The average Canadian owed $21,580 in non-mortgage debt during the most recent quarter (TransUnion)

Many Canadians are already teetering on the edge of financial disaster without throwing divorce into the mix. Even if you have an amicable divorce, the cost of an uncontested divorce ranges from $1,000 to $3,500, according to a 2015 Canadian Lawyer’s legal fees survey. If your divorce gets messy the fees can be astronomical. Living two separate lives costs a lot more than living together as a couple. Do you have a clear understanding of what your monthly expenses are? Do you have a budget? These are just some of the divorce financial solutions that as a Vaughan bankruptcy trustee we recommend to people that they have to know about it beforehand.

What can I do if I have too much debt – divorce or no divorce?

Whether you live in the GTA or elsewhere, take the advice of a GTA Vaughan bankruptcy trustee and get your financial house in order before you begin divorce proceedings or you may be looking at bankruptcy and divorce or bankruptcy alternatives down the road. Contact the Ira Smith Team for advice and a solid plan to deal with serious debt issues. We will give you a free first consultation to discuss your options and we can help you get out of debt Starting Over, Starting Now.

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#VIDEO-HOW TO HANDLE EVERY CHAPTER 13 BANKRUPTCY CANADA CHALLENGE WITH EASE USING THESE TIPS#

Is there such a thing as chapter 13 bankruptcy Canada?

In Canada, we don’t have something called chapter 13 bankruptcy Canada. A chapter 13 bankruptcy is part of the United States Bankruptcy Code. It is also called a wage earner’s plan. It allows people with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

We don’t have chapter 13 bankruptcy Canada. The equal in Canada is a consumer proposal. It is a bankruptcy alternative used to avoid bankruptcy by a debtor who is an individual who in total (excluding any mortgages registered against his or her home) owes $250,000 or less.

How does our chapter 13 bankruptcy Canada provisions work?

A consumer proposal is making a formal offer under the Bankruptcy and Insolvency Act (Canada) (“BIA”) to creditors to settle debts under conditions other than the original terms, for less than the face value of the debts. The maximum length of time that a debtor is given to make monthly payments under a consumer proposal is 60 months.

So rather than it being called chapter 13 bankruptcy Canada, we call it a consumer proposal. If you owe more than $250,000, then an individual can use the proposal provisions used by companies. Either way, it is a creative use for people with large debts to do what is commonly referred to a “restructuring” or “reorganization”, thereby avoiding bankruptcy.

There used to be no provision available to small individual debtors in the BIA. Parliament wished to find a way to offer for these smaller consumer debtors to have a restructuring alternative. So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990’s, the consumer proposal legislation was enacted. It was a way for Canada to get a chapter 13 bankruptcy Canada like provision.

Our chapter 13 bankruptcy Canada like provisions allow you to avoid bankruptcy

Now, the consumer proposal provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA. So Canadians are now AVOIDING bankruptcy more while still obtaining the help and counseling of a licensed insolvency trustee. So as you can see, our consumer proposal provisions are just like a chapter 13 bankruptcy Canada statute.

The main use of the (consumer) proposal provisions of the BIA is to allow you as a debtor to keep your assets, if you can afford to in your budget, AVOID bankruptcy, and give a better alternative to your creditors than a bankruptcy would. In this way, you are allowed to be relieved of your debts, for an amount less than the total face value of all of your debts.

When is it best to use the chapter 13 bankruptcy Canada like provisions?

It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest!

What can I do if I have too much debt but wish to find out more about chapter 13 bankruptcy Canada?

We hope that knowing these tips will better equip you to navigate the chapter 13 bankruptcy Canada challenge. If you have too much debt, but after viewing this video wish to avoid bankruptcy but you are unable to pay your debts in full, this may be just the ѕесrеt you need to know!

We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living Starting Over, Starting Now. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make. Contact us today.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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BANKRUPTCY OPTIONS: DO YOU REALLY NEED A $100K PERSONAL ASSISTANT?

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Many people are under the misconception that bankruptcy options don’t apply to the rich and famous or the rich and not famous because they don’t have money problems. In fact, rich people can and do have money problems.

This issue is more prevalent than you think and we’ve written a series of blogs about it in the hopes of removing the stigma of bankruptcy.

Being rich doesn’t make you smart about money. Often times the money begets a lifestyle that’s intoxicating but unsustainable – mansions, yachts, a fleet of luxury vehicles and exotic travel.

If you are willing to admit to having financial problems at the first sign of trouble, then there are various insolvency choices available. But if you wait until you have lost it all, and then some, then bankruptcy, or perhaps one of the bankruptcy options, will be available for you.

Trent Richardson acted quickly on his options when he realized he was facing financial problems

Trent Richardson, an NFL player who most recently played for the Baltimore Ravens, discovered that from January 2015 – October 2015 his family and friends spent $1.6 million of his money. This is a perfect example of someone making a small fortune and placing too much trust in others to manage his money. In reality, he didn’t have a clue about his money.

Thankfully he looked at his bank statement before it was too late. He couldn’t believe the charges which included 11 Netflix and 8 Hulu accounts in addition to ordering bottle service while dropping his name at clubs. The irony is that Trent Richardson doesn’t drink. And now for the mother of all expenses – his brother Terrell was earning $100,000 a year as his personal assistant.

Although Mr. Richardson is luckier than most would be in his place because he signed a fully guaranteed deal worth $20.5 million over 4 years originally with the Cleveland Browns on July 2012, he could have, like others before him, lost it all. He did the smart thing and cut all extraneous expenses, including his $100k personal assistant. This is the best of the financial choices: reigning in your spending and getting on a proper budget.

Act quickly; we can help you make the right decision

Let this be a wakeup call to everyone. Regardless of how much money you have, you need to be smart about money, lest you find yourself in deep debt. And that’s where a professional trustee comes in.

We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living Starting Over, Starting Now. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make. Contact us today.

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#VIDEO-DEBT MANAGEMENT PROGRAMS REVIEW#

Not all debt management programs are created equal

I have written previous blogs and made vlogs in the past about debt management programs, including:

Non-profit credit counselors are the good guys in the debt relief industry, which is otherwise full of players that are bursting with lies, scams and sketchy practices.

We have done the consumer proposal or bankruptcy of many people who first paid upwards of $2,500 to for profit “counselors” who ultimately did no more than pass the people on to a licensed insolvency trustee. They could have received a better service just going straight to a trustee for a free consultation.

Contrary to popular belief, a licensed insolvency trustee by law must first evaluate to see if the person can AVOID bankruptcy. So as you can see, not all debt management programs and companies are equal.

Do debt management programs work for everyone?

Debt management credit counselors need to acknowledge that their signature offering — the debt management plan — doesn’t work for everyone.

Debt management programs are promoted as the best bankruptcy alternative and an affordable way to pay back credit card debt. Borrowers make payments to the counseling agency, which then pays the creditors. Thanks to standing agreements that counselors have with credit card companies, the plans typically cut the interest rates, fees and payments that borrowers need to make. Full repayment of the debt often takes four to five years.

If borrowers make all the payments and repay the principal completely, debt management programs have much less impact on their credit scores than other types of debt relief.

Debt management programs were rampant in the United States

During the financial crisis in 2007-2009, debt management programs could be found on infomercials day and night. There were so many shady characters in the industry, the States ultimately had to enact laws to reign the shady operators in.

Needless to say, the shady operators did not give any worthwhile service for the fees they charged. But even the legitimate and well-meaning credit counselors mistakenly believed that their debt management programs were good for everyone. What I have found in my experience as a licensed insolvency trustee, is that no two people’s situations are the same, and one size does not fit all.

The story of Francine Bostick

Francine Bostick, a woman who lives in Kansas and paid off more than $120,000 in credit card debt in 2012, says she emerged with credit scores good enough to buy her first-ever new car. “It was exciting and made me a little nervous when they did the credit check,” says Mrs. Bostick, 66. “We got 0 percent interest for the life of the loan.”

This sounds great, but, yet Mrs. Bostick is also an example of what may be wrong with credit counseling because:

  1. Her husband Jim Bostick had Alzheimer’s disease and she was his caregiver
  2. Francine worked 12-hour days to earn the money to make debt payments while also caring for her increasingly incapacitated husband, who died in May
  3. She had to do this when others her age were retiring
  4. She never got to spend quality time with Jim before his death

If she lived in Toronto or Vaughan, what would I have advised?

Francine had never been bankrupt before and she did not have any significant assets. She and Jim rented – they did not own a home. In Francine’s case, she would not have had to make any surplus income payments in a bankruptcy. Although a consumer proposal is a great alternative to bankruptcy, Francine could not afford to complete one by only working one job in an 8-hour day, but she and Jim would be able to live on those earnings and their pensions.

In this case, I would have advised Francine that bankruptcy was a better alternative because:

  1. Francine could have spent more time with her dying husband – that she can never get back now
  2. She would received an automatic discharge after 9 months, and not worked so hard for several years
  3. Just like in bankruptcy, she had no access to credit while in her debt repayment program
  4. She could have begun rebuilding her credit faster after the bankruptcy
  5. There is little leeway for missing a payment in debt management programs – many times if you miss 1 payment the entire program ends
  6. Some people find that they simply can’t afford the payments on debt management programs, while others drop out because of setbacks such as job loss, unexpected expenses or illness
  7. If you cannot fully complete the debt management programs, creditors can resume collection efforts, and borrowers also have flushed thousands of dollars down the drain and might not have enough money left to live on

What should you do if you have too much debt and are considering one of the debt management programs?

So, those thinking about debt management programs should book an appointment with an experienced licensed insolvency trustee first. (The first consultation is free.) That way, they will be able to understand the choice they make.

Ira Smith Trustee & Receiver Inc. brings a cumulative 50+ years of experience dealing with diverse issues and complex files and we deliver the highest quality of professional service. Contact us today and Starting Over, Starting Now you’ll be well on your way to overcoming your financial difficulties.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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#VIDEO-HIDING ASSETS IN BANKRUPTCY: HIDE AND SEEK WITH SERIOUS CONSEQUENCES#

Hiding assets in bankruptcy is a huge mistake

When you are contemplating filing for bankruptcy, don’t believe that hiding assets in bankruptcy proceedings will work for you. A licensed insolvency trustee is very good at finding undisclosed property. And if you intentionally try to hide assets, you could face severe consequences.

Some people filing for bankruptcy think that if they don’t list property in their sworn statement of affairs, they can dupe the licensed insolvency trustee and keep the property. This is a huge mistake and illegal.

The first assessment

A licensed insolvency trustee does a full assessment of the person considering filing for bankruptcy, to decide if they can avoid bankruptcy. The Trustee will get a written statement from the debtor of his or her assets and liabilities.

In addition to requesting the person to list all of his or her assets, there will also be certain questions, such as:

  • Have you sold, disposed of, or transferred any assets in the past twelve months?
  • Have you sold or transferred any property in the past five years while you knew yourself to be insolvent, either in Canada or Elsewhere?
  • Have you made any gifts to a relative or other person that was of a value in excess of $500.00 in the past five years?
  • Have you received any lump sum payments or settlements in the last 12 months?

The purpose of these intake questions is so that the Trustee can get a full picture of the person’s situation, to give the best advice possible about using bankruptcy proceedings, or some other options that are available to the person as an alternative to and a way to avoid bankruptcy.

The Trustee’s analysis, which includes comparing the answers to these questions to, the person’s current budget of income and how they spend their money, their expenses, and the assets listed by them, may very well highlight inconsistencies, which will lead to more questions, and probably uncover the assets that the person is attempting to hide.

As part of the Trustee’s analysis, the Trustee will also want to look at some recent bank statements as well as your filed income tax return and notice of assessment for the previous year. There may very well be things jumping out of this review that will highlight inconsistencies, if someone is trying for hiding assets in bankruptcy.

Finally, the person’s creditors have a lot of information about the debtor’s financial affairs. Once the person files for bankruptcy, his or her creditors get notice of the bankruptcy and look at the disclosure on the sworn statement of affairs. If they are aware of an asset that has not been disclosed, I can guarantee you that they will call the Trustee to ask what about that other asset – and then tell the Trustee when they say, what are you talking about?

In a proposal filing we recently did, the person, in making an honest mistake, forgot to tell us of a piece of real estate they own with a sibling, bought for their mother to live in. The mother pays the running costs of the property. With all the stress the person was under, they sincerely forgot to tell us.

Once we mailed our notice to creditors, two days later a creditor emailed us asking what about the real estate, and supplied us with a title search to prove that the real estate is apparently half owned by our client! We then had to rework the proposal to account for this extra value.

So what if I just don’t list the asset(s) – will this work for hiding assets in bankruptcy?

If you think that hiding assets in bankruptcy is a good way to hang on to your property; think again. This is not a minor matter. In fact it’s a violation of the Bankruptcy and Insolvency Act (BIA) and the Criminal Code and it’s punishable by hefty fines and/or prison time.

Committing fraud against the government is never a good idea and the likelihood is that you will get caught. When the Trustee has reason to believe that an offence exists, we report it to the Office of the Superintendent of Bankruptcy Canada (OSB). The Superintendent sends the file to one of its special investigation units.

The investigation units work closely with the Royal Canadian Mounted Police (RCMP). The OSB encourages people to report fraudulent activities that relate to a bankruptcy file and they even have a toll-free number to call 1-877-376-9902. The OSB will encourage the RCMP to press criminal charges.

In addition to fines and/or prison time, if you are trying for hiding assets in bankruptcy:

  • You will not get a discharge of your debts
  • The Trustee can revoke your discharge and those debts cannot be discharged in future bankruptcies

Still think that hiding assets in bankruptcy is a good idea?

Honesty is always the best policy. If you make an honest mistake, just let your Trustee know, so they can figure out the best way to handle it.

If you are thinking of declaring bankruptcy, contact Ira Smith Trustee & Receiver as soon as possible. We will guide you through the process and Starting Over, Starting Now get you well on your way to living a debt free life.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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LICENSED INSOLVENCY TRUSTEE TORONTO SAYS LOTTERY JACKPOT CAUSES BANKRUPTCY

licensed insolvency trustee toronto

Introduction

As a licensed insolvency trustee Toronto, when I first came across this study, frankly I was quite surprised. After all, how could my neighbour’s good luck have such an adverse effect on me? Nevertheless, according to a study co-authored by University of Alberta professor, Barry Scholnick for the Federal Reserve Bank of Philadelphia, if your neighbour wins a big lottery you could go bankrupt.

Why would the neighbours of lottery winners go bankrupt?

It all boils down to “keeping up with the Jones”. The study says that your going bankrupt likelihood increases when your neighbour buys a big house, fancy cars, boats; anything that’s highly visible or showy. Then the neighbours, feeling pressure to keep up or compete, also go on a spending spree. However, without the cash from a lottery win, the neighbours’ finance their spending sprees with debt and beat a clear path to bankruptcy. Sadly, it’s not just the neighbours of lottery winners that go bankrupt. As a licensed insolvency Trustee Toronto I can say that a high percentage of lottery winners go bankrupt too.

How many lottery winners go bankrupt?

  • 44% of those who’ve ever won large lottery prizes became broke within five years, according to a 2015 Camelot Group study.
  • 33% declared bankruptcy according to the Certified Financial Planner Board of Standards.
  • Other studies show that lottery winners often become estranged from family and friends, and incur a greater incidence of depression, drug and alcohol abuse, divorce, and suicide than the average person. As a licensed insolvency trustee Toronto, we must also help the person seek help for their medical condition/addiction, as part of helping them solve their financial problems.

All of a sudden lottery winners have an enormous amount of money on their hands and they have no idea what to do with it. Instead of seeking financial advice from a licensed professional and investing a large part of their money for the future, they go on wild spending sprees and pretty soon they’re worst off then they were before. Then they have to go see someone like me, the bankruptcy trustee.

Can a licensed insolvency trustee Toronto help me?

What the study shows is that a big lottery win will not grant you immunity from bankruptcy. Regardless of the reasons that you’re in serious debt, you need the help of a professional trustee. Ira Smith Trustee & Receiver Inc. approaches every file with the attitude that we will solve your corporate or personal financial problems given immediate action and the right plan. Give us a call today and take the first step towards a debt free life. We are a licensed insolvency trustee Toronto that can get you back on the road to financial health, Starting Over, Starting Now.

Call a Trustee Now!