Tag: Bankruptcy

STATUTE OF LIMITATIONS IN ONTARIO: THE UNCERTAINTY BEHIND ONTARIO’S LIMITATION PERIOD IN BANKRUPTCY NOW ABSOLUTELY SETTLED

Post author By Brandon Smith
Post date June 7, 2021

statute of limitations in ontario

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

If you would prefer to listen to the audio version, please scroll to the very bottom and click play on the podcast.

Statute of limitations in Ontario: The uncertainty behind Ontario’s limitation period for debt collection

Many individuals have a problem determining the statute of limitations in Ontario for financial debt collection under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. This confusion is all-natural because the time duration is computed based upon the moment when a creditor knew, or ought to have actually recognized that it had a claim to get legal advice on and initiate legal action for recovery.

The unpredictability emerges because the point you need to begin determining from is not necessarily a certain date you can indicate on the calendar. Rather, it may need to be presumed from the realities in any specific situation.

Why does the limitation period matter? It matters because if a creditor does not initiate legal action within the allowed period of time in Ontario within 2 years of knowing, or having out to have known, that it had a claim to litigate, the claim is then statute-barred. What this means is that the claim can no longer be pursued as a valid debt.

In this Brandon Blog, I describe what seems to be the final word now on the statute of limitations in Ontario and proving your claim in bankruptcy.

Statute of limitations in Ontario: Time limits, collections and bankruptcy

If you think it was confusing for only the average Ontario citizen, think again. It was also confusing for lawyers and licensed insolvency trustees. In my March 15, 2021, Brandon Blog titled “STATUTE OF LIMITATIONS: IS STATUTE BARRED DEBT A BASIC PROPER BANKRUPTCY CLAIM IN ONTARIO?“, I described the decision of Master Mills (as she then was) who has since been elevated to the position of a Judge.

Her decision released on March 8, 2021, in. the legal proceeding of In re: John Trevor Eyton, 2021 ONSC 1719 (CanLII), has changed the way we look at creditors who file a proof of claim in either a consumer proposal, restructuring proposal or a bankruptcy. Just to refresh your memory, she decided that if a claim was past the two-year limit under the statute of limitations in Ontario, then the creditor could not even file a proof of claim in bankruptcy on that debt.

In that blog, I also described what the statute means for debt collectors. I also said that the Eyton decision was going to be appealed. Well, it was and we now have the ruling from a Judge of the Ontario Superior Court of Justice (In Bankruptcy and Insolvency).

Statute of limitations in Ontario and bankruptcy

The appeal raises a rarely-considered and narrow issue: is a claim which is statute-barred under the statute of limitations in Ontario able to be included by a creditor in filing a Form 31 proof of claim in the bankruptcy of the debtor?

On May 19, 2021, Justice S.F. Dunphy released his decision regarding the appeal of the Eyton decision. I won’t repeat the original decision here because I discussed it in detail in my above-noted blog.

Suffice to say that the basis of this litigation is that the Trustee disallowed the creditor’s filed proof of claim because the last payment made on the debt was in April 2016. The creditor did not take legal action against the debtor.

This made the claim now more than two years old before the date of bankruptcy. Therefore the Trustee said since the claim is statute-barred, it cannot be a debt to be proved in this bankruptcy.

Statute of limitations inForm 79 Ontario: When it is too late to sue?

As previously mentioned, the creditor appealed the Trustee’s decision to Master Mills and lost. Now the creditor was appealing the Master’s decision to the Judge.

The issue to be decided was when:

it is far too late to take legal action to try to collect on the debt;
the debtor has actually submitted either for a restructuring proposal or for bankruptcy under the Bankruptcy and Insolvency Act (Canada) (BIA);
the debtor has actually included the amount of that creditor’s claim in the sworn Statement of Affairs; and
under the statute of limitations in Ontario, the financial debt is statute-barred yet is not extinguished,

can the creditor file a claim for that financial obligation in the insolvency proceeding?

***Statute of limitations in Ontario* and the Effect of *Form 79 Statement of Affairs***

The creditor’s first point in the appeal was that its debt was listed in the debtor’s sworn Statement of Affairs. Since the debtor recognized the debt, and the debt is not extinguished, then a proof of claim for the amount should be admitted by the Trustee.

The Judge did not think much of this argument. He stated that just because an amount is listed as a liability on the Statement of Affairs, each creditor is still required to prove their claim. The distinction is that a debtor may think that the debt is a provable claim, but a creditor still has to prove their claim. Stated another way, every claim is a potential claim until proven in accordance with the BIA.

In most restructuring proposals or bankruptcy administrations, the debtor’s listing of claims for at least the unsecured debt will never exactly match the final list of proven claims. That is just the way it is.

**Can statutes of limitation barred claims be proved in bankruptcy?**

As the BIA is federal law, then all provincial limitations laws in Canada are in play. Not just the two-year limitation period in the statute of limitations in Ontario. The creditor’s legal counsel advanced the following arguments regarding civil claims in bankruptcy:

The BIA does not define provable claims with any reference or qualification relating to any provincial applicable limitation periods.
The Supreme Court of Canada in Schreyer v. Schreyer, 2011 SCC 35 (CanLII), [2011] 2 SCR 605 decided that the meaning of the term provable claims in the BIA is that if the debt exists and can be liquidated and if the underlying obligation exists as of the date of bankruptcy and if no provincial exemption rule applies, the claim will be deemed to be provable.
The two-year limitation period in the statute of limitations in Ontario is procedural in nature because it does not extinguish the debt, it just says that a proceeding, such as the issuance of a statement of claim, cannot begin.
In one of the Ontario cases I mentioned in my earlier blog (Re: Temple), the Judge, in that case, found that a claim that was older than the basic limitation period in Ontario could be used as a debt owing for the purpose of launching a Bankruptcy Application seeking a Bankruptcy Order being made against a debtor.

The Judge was not persuaded by any of these arguments. He shot them down one by one. I can summarize all of his comments as follows. The purpose of the BIA is to have an equitable distribution of the bankrupt’s assets amongst the creditors, in the priority laid out in the BIA. The claims of all unsecured creditors are to be treated equally and each unsecured creditor is to receive their pro-rata share.

If a creditor who cannot enforce its claim in respect of payment can receive the same share as a creditor who still can enforce its claim for payment, then the claims of all unsecured creditors are not being treated equally.

So Judge Dunphy of the Ontario Superior Court of Justice (In Bankruptcy and Insolvency) dismissed the appeal. I have been told by the lawyer for the creditor who appealed the Master’s decision to the Judge that he does not feel he has a chance to win an appeal to the Court of Appeal for Ontario. So the law on claims barred by the statute of limitations in Ontario in an insolvency proceeding is now settled. Such a claim is not a claim provable and probably cannot even be used as the basis of a claim in a Bankruptcy Application.

What does this mean for proceedings and intended proceedings in Ontario?

As far as what this means for debt collectors trying to collect a claim in respect of any statute barred debt and for a debt collection agency, whether they are trying to collect on personal debts such as a credit card debt or on commercial debts, look at my previous blog where I discuss what it means for a debt collection agency.

As far as what it means for an insolvency process, there are several takeaways for me on this. First, whenever a creditor files a completed Form 31 proof of claim, there needs to be a schedule attached to the form that clearly shows how the debt is calculated. If there is not going to be any distribution to the unsecured creditors then there is no need to vet every claim to the nth degree.

However, where there will be a distribution to the unsecured creditors, then the Trustee is going to have to take great care in reviewing and vetting each claim. The Trustee will have to make a determination in each case if the claim is barred by the statute of limitations in Ontario or not. If there is insufficient detail in the schedule attached to the Form 31 proof of claim, the Trustee will have to go to each such creditor and get more details. I suspect there will be a whole lot more claims being disallowed than in the past.

Of course, each creditor whose claim has been disallowed by the Trustee because it is barred by the statute of limitations in Ontario has the right to appeal the Trustee’s decision to the Master sitting in the Ontario Superior Court of Justice in Bankruptcy and Insolvency).

***Statute of limitations in Ontario:* *Get a personalized debt free plan today***

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

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

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

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

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

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Brandon Blog Post

4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA

Post author By Brandon Smith
Post date May 24, 2021

NOTE: On January 13, 2022, three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. You can read all about the Settlement Administration Plan and how to file a claim by CLICKING HERE to read our latest 4 Pillars blog.

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

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

**The 4 Pillars lawsuit class-action**

In my November 25, 2019, Brandon Blog titled “HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE“ I wrote about the litigation involving 4 Pillars Debt and Credit Restructuring Company, 4 Pillars Consulting Group Inc. and other entities (4 Pillars or the 4 Pillars lawsuit), Pearce v 4 Pillars Consulting Group Inc., 2019 BCSC 1851.

Mr. Pearce is suing for damages for the fees billed by 4 Pillars to all persons that paid fees to it in British Columbia in connection with: (i) a consumer proposal under the Bankruptcy and Insolvency Act (Canada) (BIA); or (ii) an informal debt settlement negotiation proposal with the individual’s creditors, all after April 1, 2016.

Mr. Pearce claims that it is appropriate for the refunding fees paid, damages for alleged losses stemming from breaches of the provincial Business Practices and Consumer Protection Act (BPCPA) and BIA, and damages based upon the claim that the fees billed were unscrupulous under section 8 of the BPCPA.

In this Brandon Blog, I describe what the 4 Pillars lawsuit is all about and why the Court of Appeal for British Columbia has allowed it to proceed as a class action proceeding, dismissing the 4 Pillars objections.

4 Pillars lawsuit: What is a class action proceeding?

As part of that litigation, Mr. Pearce applied to the BC Court to have his litigation turned into a class action proceeding. The Court ruled that there were enough grounds for his legal action to move forward as a class-action claim. As can be expected, 4 Pillars objected to that motion. They also unsuccessfully argued that certain sections of the claim should be stricken.

4 Pillars appealed that decision to the Court of Appeal for British Columbia. On May 17, 2021, the Court of Appeal for British Columbia released its decision. In this Brandon Blog, I discuss the appeal, what the appeal court had to say and what it decided in the 4 Pillars lawsuit appeal.

Debtor Warning – Debt Consultants Sometimes Not What They Appear

**What 4 Pillars say their organization’s role is**

4 Pillars states that they are professionals who provide a variety of services specific to individuals in debt. They say they outline the choices readily available and also walk people through the procedure. They say that your financial debt settlement will likely be one of the following, which they will manage on your behalf:

informal debt settlement
consumer proposals
bankruptcy

They also say they will work with the person on their aftercare. They also say that their role ranges from providing individual debt settlements on behalf of debtors with collection agencies and their creditors to negotiating with Licensed Insolvency Trustees (individually a Trustee, Bankruptcy Trustee or LIT) on behalf of a debtor in determining the terms of a consumer proposal.

What the Court of Appeal for British Columbia says about the role of 4 Pillars

The Court of Appeal described them this way:

4 Pillars sell their debt restructuring services as debt advisors to individuals on the brink of insolvency who are seeking debt restructuring. They are unlicensed and charge fees above those professionals who are licensed and regulated.
Their debt consulting business is not licensed or registered, and they charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
Their debt consulting services are:
- to meet and work with consumers who are struggling with debt;
- to help them draft a consumer proposal to present to a LIT:
- and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
All of these services are provided with the goal that the LIT will then present the consumer proposal to the debtor’s creditors.
4 Pillars may then provide input, on the debtor’s behalf, on any response or request from the creditors.

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Just to remind you, this is what the lower BC Court and the Court of Appeal for British Columbia found the 4 Pillars services to be:

to meet and work with consumers who are struggling with debt;
to help them draft a consumer proposal to present to a LIT:
and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
Provide input, on the debtor’s behalf, on any response or request from the creditors.
They charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
Charge fees above those professionals who are licensed and regulated.

This is very common amongst all the debt restructuring businesses. It is questionable what value they provide if any at all. Their business model preys on people’s fears of getting advice straight from Licensed Insolvency Trustees.

The services described above a LIT provides at no additional cost above and beyond what the government-approved tariff fee is. The reality is that you do not need the 4 Pillars Consulting Group Inc.

As a LIT, I provide financial advice regarding your unmanageable debt and if you are a candidate for informal debt settlement, I will tell you exactly what to do in our no-cost initial consultation. If you have too much personal debt and are not a candidate for an informal settlement, I have many times prepared consumer proposals that work. As part of that process, I also act as a licensed credit counsellor.

Is Debt Settlement Really Worth It?

Debt settlement is really worth it. Going to one of these unscrupulous debt settlement companies, instead of a licensed insolvency trustee for debt settlement is NOT.

If you’ve been struggling with debt, it’s time to consider debt settlement through a consumer proposal with the services of a LIT. It likely won’t sound appealing at first, and you may feel that you are taking a gamble, but the process of debt settlement can be incredibly beneficial to you. Keep in mind that even 4 Pillars introduce you to a LIT in order for you to relieve yourself of your debts, hopefully through a consumer proposal process.

A consumer proposal is the only government-approved debt relief program. A LIT can get you a true debt settlement, without having to pay extra unnecessary fees to any of the debt relief companies.

Now let’s see what the Court of Appeal for British Columbia had to say about this 4 Pillars Consulting debt restructuring services business’s appeal from the lower court decision.

Class action waiver not effective to resist class action certification

The Court of Appeal of British Columbia believes the class action waiver clause is unenforceable as being contrary to public policy. The class action waiver significantly interferes with the administration of justice. It would have the effect of precluding class action lawsuits.

It has the impact of precluding Mr. Pearce, and class participants, from having access to justice and to a dispute resolution procedure in accordance with the law for claims developing from the connection between these parties. Therefore, the class action certification was upheld.

Other grounds of appeal in the 4 Pillars lawsuit

Having reviewed the evidence filed in respect of 4 Pillars’ applications for summary dismissal and after considering their arguments, the lower court judge was not satisfied that Mr. Pearce’s arguments in the 4 Pillars lawsuit, that 4 Pillars was acting for, or representing, a debtor in arrangements or negotiations with their creditors is bound to fail.

The evidence suggested that 4 Pillars had a role in the negotiations between a debtor and their creditors regarding a consumer proposal – even if they were not directly engaged with creditors.

The lower court’s view was there is a genuine issue to be decided at trial on a full evidentiary record. Accordingly, the judge dismissed the 4 Pillars attempt to strike the portions of the pleadings in respect of the Plaintiffs’ claims under the BPCPA.

The Court of Appeal for British Columbia agreed that it will be necessary to have a trial to figure out if claims can occur from offences of the BIA. Therefore, 4 Pillars was likewise unsuccessful in getting this issue stricken from the 4 Pillars lawsuit.

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

It will be very interesting to see how this class action 4 Pillars lawsuit winds its way through the BC court. Absent an appeal to the Supreme Court of Canada, it is now game on. Mr. Pearce and all members of the class have the green light to continue the litigation. If successful, it goes to the heart of the 4 Pillars business model. Every franchisee across Canada needs to worry.

I hope you found this 4 Pillars lawsuit Brandon Blog informative.

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

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

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

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

Call us now for a no-cost consultation.

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

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

Brandon Blog Post

FROZEN BANK ACCOUNT: DISCOVER MY RUNDOWN OF WHAT RIGHTS YOU HAVE AND WHAT YOU NEED TO DO NEXT

Post author By Brandon Smith
Post date April 19, 2021

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

Frozen bank account: Can my bank seize my accounts if I file a consumer proposal or bankruptcy?

A frozen bank account is something people usually worry about when they have unpaid financial debts and need to know. There is plenty of mistaken beliefs worrying Canadians about what legal authority the government or creditors need to seize your chequing or interest-bearing accounts, confiscate various other properties including garnishing your income. This is incredibly troubling for people with too much debt considering filing either a consumer proposal or personal bankruptcy.

I know people freak out about their frozen bank account. Rightly so, but it’s not that bad. In this Brandon Blog, I’m going to give you a basic rundown of what rights you have and what you need to do next.

In this Brandon Blog, I discuss the ins and outs of who and how can your bank accounts can get frozen and how an insolvency filing can help you not only to lift the hold on a frozen bank account. It can also get you complete debt settlement and allow you to move forward debt and stress-free.

Who can freeze your bank account in Canada?

We are always asked the question: “Who can freeze my bank account?” There are essentially three different parties who can create your frozen bank account in Canada. They are:

The bank.
The government.
A creditor with unpaid debt from you sued you and won (the judgment creditor).

The latter two require the cooperation of your bank, which they will give.

What does a frozen bank account mean?

When you have a frozen bank account, it means that the bank has for some reason blocked you from using that account. It can be your personal bank account or something else such as a joint account or a business account. The bank for some reason has either temporarily or permanently made the frozen bank account and seized the cash. You will definitely be wanting to start making phone calls to your banking customer service representative!

You can get your bank accounts frozen due to:

Court action because a judgment creditor has had it seized to get repaid, in whole or in part, for an outstanding debt.
Canada Revenue Agency has seized the funds because you or your business owes them money.
Your bank suspects some sort of and the bank flags suspicious activity running through the account they feel they must investigate. Perhaps they suspect money laundering, other criminal activity or other illegal activities. Something running through your account has piqued their activity to create your frozen bank account.
You owe money to the bank for one or more bank loans that have matured and have not been repaid. The bank agreements and loan agreements that you signed gives the bank the right to offset. So not only can they freeze your accounts, they can without getting a judgment offset any balances held by the bank to your credit against the money you owe them. More on this later.

The exact terms of creating the frozen bank account will vary depending on provincial law. What it does mean is that the account holder cannot take any money out. The funds in the account can still be used by the bank to cover any amount owing to them, but the account holder cannot access the funds.

Unpaid Debts to the Government: Canada Revenue Agency (CRA) caused the frozen bank account

There are some standard reasons why CRA may cause your frozen bank account. They are:

You owe money to CRA for personal income tax debts.
Your proprietorship or partnership owes it money for unremitted HST or employee source deductions.
Your company owes CRA money for the unpaid HST tax debts or employee deductions not turned over to them as they should be.

When the Canada Revenue Agency (CRA) freezes your bank account, it is doing it by one of two mechanisms. It has provided your bank with either a third party demand for any funds payable to you or with a Federal Court Order called a “Memorial“.

Either way, CRA has provided your bank with the official documentation requiring your bank to freeze your bank account and remit all funds payable to the bank account owner over to CRA.

The CRA does this in order to get money owed to them. CRA can freeze any bank account. In Ontario, this includes TFSAs and absent a bankruptcy filing, your RRSP is also subject to seizure.

In this Brandon Blog, I am only talking about a frozen bank account and not property in general. What property is subject to a person’s claim of exemption from seizure is a matter of provincial law. Likewise, wage garnishment is also governed by provincial law and is not the subject of this Brandon Blog.

Unpaid debts through creditors: How can creditors freeze my bank account?

If a creditor is looking to collect from you, once they have run out of patience with you, one of the first steps they will take is to sue you. They begin their litigation against you to get a judgment for the amount you owe. If successful, in Ontario, they then provide that judgment to the Sheriff to freeze your bank account. Once the Sheriff serves the judgment notice on the bank, it suspends your right to use your money or assets held at the bank. If a creditor causes you to have a frozen bank account, you will not be able to access your money until the issue is resolved.

It does not matter what the original debt was for – credit card debts default under your credit card agreements, an unsecured loan, payday loans from one or more payday lenders, damages under a contract or any other type of commercial debt. Once the creditor has obtained a judgment, they can get your bank to have your bank account frozen.

Frozen bank account: How to get my bank account unfrozen when I am not insolvent

If you now have an extremely icy bank account as the outcome of a judgment against you or a CRA garnishee, perhaps following a tax audit, you are probably really feeling scared and powerless. While there are no guarantees, there are actions you can take to help get your frozen bank account thawed out and your financial life back on course.

Since you are not insolvent, you cannot even consider an insolvency proceeding. But there are some things you can do.

The first thing you need to do is find out who the perpetrator is that forced your bank to create this deep freeze. Most creditors will get the bank to freeze your account to get you to concentrate on the reality that you need to take care of them. Various other means they have actually made use of to engage with you have clearly not worked. Ask your bank representative who is it that has triggered the icy account.

Since you now know who it is, connect with them. Attempt to reach a bargained negotiation in return for them lifting the freeze promptly on your account. As an example, entering into a payment plan by providing the CRA financial debt collector with a collection of post-dated cheques that will settle your tax debt in full. Absent an insolvency procedure, the CRA agent must decline anything less than 100 cents on the dollar.

If it is a judgment creditor, you may have an opportunity to negotiate a minimized settlement amount if paid instantly. Clearly, the amount will certainly need to be greater than what the creditor anticipates obtaining from your icy bank account. Alternatively, you can enter into a payment schedule that you can honour.

There is no maximum number of hours or days where you can prepare for having your chequing or savings account unfrozen. Each condition will absolutely differ. The intricacies of your negotiations as well as the length of time they take will normally be the guiding aspect.

Consequently, any bargained settlement needs to include an arrangement that will instantly result in your bank raising the freeze and allow you to maintain your cash. Either you or the creditor or both will need to supply your bank with proof of the satisfactory payment arrangement that includes the unfreezing of the frozen bank account.

The one thing I can guarantee you is that neglecting the problem will only slow down the process and will not help your frozen bank account. Your financial institution will certainly clear out your account one way or the other. If you owe your bank, the tried seizure of your account is a default on your loan. The bank will certainly take the cash in your account and offset it versus your loan. Then they will tell the judgment creditor there is no cash available for them.

If it is CRA, your financial institution will send the cash off to them.

If you do not owe your bank any kind of cash, they will send your money to the judgment creditor.

Regardless of which of the above 3 potential outcomes is, if you do not respond to an icy account, the economic repercussions can end up being far more severe.

Frozen bank account: What bankruptcy protection does the Bankruptcy and Insolvency Act provide to get my bank account unfrozen

If you find yourself with too much financial debt, especially from unsettled tax obligations, you might be thinking of bankruptcy. Though the word “bankruptcy” is frequently made use of to explain any type of situation in which a person is unable to pay their debts, the legal term “bankruptcy” really describes a particular legal process administered by the Bankruptcy and Insolvency Act (Canada) (BIA).

In reality, there are three possible provisions of the BIA that can be used by a person to not only do a government-authorized debt settlement program. It also has the added benefit of immediately unfreezing your bank account. The three possible choices are:

Consumer proposal debt settlement plan
Division I proposal debt settlement plan
Bankruptcy

Let’s focus on the bankruptcy protection possibilities, being a consumer proposal or a Division I proposal, rather than a pure bankruptcy liquidation. If you have a bank account that is iced, a filing under the BIA invokes an immediate stay of proceedings. This means that once a person has filed with the licensed insolvency trustee, any action to try to enforce collection on debt cannot be started or continued. This includes the frozen bank account as part of a seizure. Therefore the bank account must be unfrozen once the bank receives notice of the filing.

There are only two exceptions to this for your frozen bank account: one lawful and one debatable.

Lawful – If the seizure has been completed before the bank receives notice of the filing, then it is game over. Your account is unfrozen, but there is no cash left in it. This means the bank has made the payment to itself already, already transferred the money to CRA.

In the case of a creditor, the Sheriff has had to have distributed the money and it has to have already been received by the creditor. If the Sheriff still has it, he cannot proceed to send it on to the creditor. In the case of a proposal, he must return it to the insolvent person who has filed. If a bankruptcy, the Sheriff must hand the money over to the Trustee.

Debatable – You owe the bank money. Once they receive notice of your filing, your lender takes the position that they have the right to offset any money on deposit to your credit against any amount you owe them. After you file and they receive notice, they empty out your account and apply for the money to be put against your bank loan or credit card debt. This action of maintaining your frozen bank account and keeping the cash is debatable.

Can you open a new bank account if your account is frozen? Definitely, just not at the same bank!

Most people can open a new bank account when they have a frozen bank account. However, why would you want to open a new one up with the same bank? They probably view accounts frozen for nonpayment as accounts that are high risk. Your creditors also now know where you bank. If you owe your bank money, as I have already discussed, you cannot keep your cash there anymore anyway.

The frozen bank account prevents you from withdrawing your money. If you have had your bank accounts frozen multiple times, the bank simply won’t issue another account and will be very happy to see you leave.

We always advise anyone contemplating filing a proposal or for bankruptcy, to set up a new account. Then, advise anyone who automatically deposits money into your account, that they should start depositing into your new account. Like your employer or the government.

It is also important to tell anyone you have granted a pre-authorized withdrawal to of the new bank account and make arrangements for them to pull the money out of the new account once there is money in it. Like your mortgagee you make your monthly mortgage payment to or your landlord you pay rent to, utilities, the vehicle loan company. Now your bank or their credit card division cannot automatically take your money to offset your liability to them.

We normally steer people towards one of the online banks, as it is unlikely that they owe money to them. We do not earn any commission for steering business to any bank, so we do not have a conflict. Something like a Simplii or EQ Bank savings and chequing accounts seem to work just fine. Then the person files and nobody can take some debatable action against the funds in their bank account.

Frozen bank account: Get a personalized no-cost debt-free plan today

I hope you enjoyed the frozen bank account Brandon Blog post. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

There may be sufficient value to take care of the secured creditor, but nothing for anyone else, including the unsecured creditors. There may be some business units that should not survive, but if cut out, the business will be viable. A receivership might very well accomplish the goals for the entrepreneur also. I have many times structured a receivership process, in order to meet the goals of the entrepreneur, while satisfying the requirements of the secured creditor.

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

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

Call us now for a no-cost consultation.

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

Brandon Blog Post

STATUTE OF LIMITATIONS: IS STATUTE BARRED DEBT A BASIC PROPER BANKRUPTCY CLAIM IN ONTARIO?

Post author By Brandon Smith
Post date March 15, 2021

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

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

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

***Know Your Limitations: The Basic Limitation Period in Ontario***

The basic limitation period in Ontario is 2 years from the date knowledge of the claim arises. The phrase “statute of limitations” is used to describe this time period. This is the time period between when you discover you have a claim and when you are legally permitted to bring that claim forward in a court of law. If you do not file your lawsuit within the 2-year limitation period, your right to sue will be extinguished and your claim will be forever lost. This is known as your claim being statute barred.

Statute of limitations: ***Limitations Act, 2002*, S.O. 2002, c. 24, Sched. B**

Each province has its very own rules, but the policies are comparable throughout the nation. In Ontario, the period is set by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (Act). The Act sets out a time limit as to when legal proceedings might be commenced by suing. It defines the time in which an aggrieved person can start a claim developing from any type of injury, loss, or damage that happened as a result of an act or an omission.

The Act sets out the two-year limitation period as follows:

“Basic limitation period

4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4″

This is where the 2-year statute barred period of time is set in Ontario limitations law.

Can Your Debt Be Eliminated by the Statute of Limitations in Ontario?

Most people don’t realize that their debts can expire, just like the milk at the back of your fridge. In fact, while you can’t get rid of your debt by throwing it in the garbage, it can be eliminated by the basic statute of limitations under the Act. Debt is not considered timeless in Ontario.

There are two other main concepts under the Act also, which are not part of the discussion in this statute of limitations Brandon Blog. The two other main concepts are:

Ultimate limitation period (Section 15 of the Act).
The different proceedings in respect of for which limitation periods do not apply and therefore there are no time periods or time limits to worry about (Section 16 of the Act).

To keep it simple, when it comes to unsecured debt, the proceeding in respect of trying to recover on a debt by initiating legal action, and the focus of this blog, the applicable limitation period is the 2 year time statute of limitations period.

Statute of Limitations: How long can a debt collector pursue an old debt in Ontario

Last week I wrote a blog on various experts predicting that as the economy reopens, there will be increased activity by collection agencies and debt collectors. In that blog, I discuss the role of the debt collection agency and that they are all governed by provincial law. I also highlighted that they get their work either by trying to collect on the debts of their clients or they purchase accounts in default for less than the total amount owed and then try to collect as principal. Outstanding credit card debt is fertile ground for debt collectors and the debt collection process.

What do you do when a debt collector is pursuing you for an old debt? If it’s one you know you can’t pay, your first step should be to contact the agency and inform them of your situation. It’s important, to be honest, and precise when you tell them why you can’t pay what you owe.

Debt can be a very scary thing. When you owe money, you can feel like your life is one big bill you need to pay. It’s easy to want to hide from your creditors, but the more you avoid them, the more likely they will be to take drastic measures to collect their money. If you find yourself in such a situation, the best thing you can do is to face the music and get the matter settled. If you are in Ontario and have questions about your debt, or how to get it resolved, you can contact a Licensed Insolvency Trustee.

Statute of limitations: What does Ontario limitations law say about making a claim on debts even if I can’t sue?

In Ontario, there used to be substantial support for the interpretation that the right to be paid is not extinguished by the Act, but only the remedy of starting legal action in respect of the debt was eliminated. Various other provinces in Canada have passed provisions in their legislation that expressly states that upon the expiration of a limitation period, civil liberties are extinguished.

However, Ontario has not. In Ontario, the old way of thinking was that a financial obligation is snuffed out if an action on the financial debt is not brought within two years of its being due. Instead, the financial obligation continues to be owed.

There was even Ontario judicial authority for this position in:

Re Bankruptcy of Kenneth Temple, 2012 ONSC 376 (CanLII) (the Temple case)
Duca v. 2203824 Ontario Inc., 2020 ONSC 3119 (CanLII) (the Duca case)

But that is now in doubt given the recent decision of Master J. E. Mills (as she then was) who is now Justice J.E. Mills (the Registrar in Bankruptcy). Her decision released on March 8, 2021, In re: John Trevor Eyton, 2021 ONSC 1719 (CanLII), may have changed that. I say may, because the Temple and Duca cases were decided by a judge in the Ontario Superior Court of Justice. The Registrar in Bankruptcy sits below the Justices. However, she distinguished the Eyton case before her from the above two judicial decisions.

As you will read below, that decision may very well lead to a great statute of limitations period in respect of defence against any debts that a debt collector is trying to recover on, either by themselves or through legal action, where the debt went into default 2 years or more before.

Statute of limitations: Time limits, collections and bankruptcy

So what is the Eyton bankruptcy decision all about? The issue was a creditor appealing the Trustee’s decision disallowing the creditor’s proof of claim pursuant to s. 135(4) of the Bankruptcy and Insolvency Act (Canada) (BIA) (Form 77—Notice of Disallowance of Claim). The basis of the disallowance was that the Trustee took the position that the claim was statute barred.

The claim was for an unsecured loan where the last payment made was more than 2 years before the date of bankruptcy. Although there may have been some security agreement entered into, it was not perfected under Ontario law at the time of the bankruptcy. Therefore, there was no valid and enforceable security agreement in place.

The Trustee decided that the creditor, being a reasonable person, would have known about the default on the unsecured loan when the next scheduled payment was missed. That was more than 2 years before the bankruptcy and they did not take any action, including legal action. The Trustee went on to say that if the claim in respect of this unsecured loan could no longer be made, then the debt no longer exists.

Limitations analysis by the Court

It was indisputable by the creditor that the financial obligation owed by the bankrupt person was statute-barred under the Act and was not enforceable by way of legal action. The creditor relied upon the Temple and Duca cases listed above. They said that it stood for the proposition that although there was finality in respect of the fact that the creditor could not sue in court, the liability in respect of this unsecured debt remained.

The Trustee countered with a long background of case law which has held that in order to be a provable claim in bankruptcy, the financial obligation must be recoverable by legal process. If the financial obligation is statute-barred at the date of bankruptcy, the proof of claim is not sustainable. This principle was adopted by the Privy Council in 1943, the Alberta Court of Appeal in 1988 and the Court of Appeal for Ontario in 1996.

The court considered both lines of cases and decided that the cases cited by the Trustee, especially the 1996 Ontario Court of Appeal decision, bound the Registrar in Bankruptcy. She decided that the Temple and Duca cases could be distinguished and did not bind her decision.

Therefore, the creditor’s appeal was dismissed and the Trustee’s decision that if you can’t sue the debt is no longer a valid one was the correct interpretation.

What the Eyton statute of limitations analysis by the Court means for bankruptcy proceedings

There are some crazy results flowing from this Eyton decision which I am sure will result in more court decisions down the road.

First, the Registrar in Bankruptcy’s decision was in line with the Ontario Court of Appeal, but not certain judges’ decisions as decided in the Temple and Duca cases. The Temple and Duca cases were decided in a court lower than the Court of Appeal for Ontario but higher than the court in which the Registrar in Bankruptcy sits. So until a judge adopts her reasoning that the Temple and Duca cases are distinguishable, the first crazy result is that you have the various levels of the Ontario court system misaligned on this issue.

As a result of this decision in Eyton, we now have a second anomaly. In Temple, one of the judge’s findings was that a debt that is statute barred because of the statute of limitations can be used as the basis for qualification to launch a Bankruptcy Application against a debtor.

The Registrar in Bankruptcy noted that the line of cases relied upon by the Trustee in Eyton was not put before Justice Newbould (as he then was) when he heard Temple. Justice Newbould found in Temple that there was no Canadian authority for the suggestion that a statute barred debt could not support an application for a Bankruptcy Order.

The Registrar in Bankruptcy said that declaration was appropriate in the Temple case. As a result of these decisions, the legislation as it presently stands in Ontario is that a debt that is statute barred due to the statute of limitations, can be used in support of a Bankruptcy Application but after that could not constitute a provable claim in that same bankruptcy. This of course makes no sense.

Statute of limitations for unsecured debts and bankruptcy – What next?

My understanding is that the Eyton decision is being appealed. The appeal must be heard by a judge. Whatever the outcome of the appeal is, it will hopefully do away with these anomalies that currently exist.

UPDATE: THE APPEAL DECISION HAS BEEN RELEASED. TO READ OUR DISCUSSION ABOUT THE APPEAL RESULT, CLICK HERE.

The things to further consider are:

Has the debtor given written confirmation of the existence and enforceability of the debt prior to the expiration of the limitation period and before the date of bankruptcy? If yes, then it is a valid debt and is a provable claim in bankruptcy.
The disclosure of a statute barred financial obligation in the sworn Statement of Affairs by the insolvent debtor does not make up a recognition of the debt or the waiver of any limitation period for Limitations Act purposes.
In respect of claims, the debtor is unsure of and the debtor has not given the written confirmation identified above, then the best treatment would be to include the creditor on the Statement of Affairs but as a contingent creditor. This will give that creditor notice of the bankruptcy and they can decide whether or not to file a proof of claim with backup. If filed, the Trustee will then review the claim and make a determination as to its validity and amount.
statute of limitations

Statute of limitations summary

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

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

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

Call us now for a no-cost consultation.

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

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

Brandon Blog Post

HOW TO BEAT 407 PLATE DENIAL RULES EACH AND EVERY MONTH FOREVER

Post author By Brandon Smith
Post date March 10, 2021

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

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

how to beat 407 plate denial

How to beat 407 plate denial: What happens if you don’t pay 407?

Last week I received an inquiry from a woman who owes 407 ETR some $25,000. She wanted to know how to beat 407 plate denial. Being a licensed insolvency trustee and having written on the topic before, I thought it was already well known that there is only one real sure-fire way to beat them from denying your plate sticker when you show up to pay your renewal plate fee. So I am writing this Brandon Blog as a refresher since it is still a question people ask.

If you’re not paying your 407 tolls, chances are you’re going to get a letter in the mail asking you to pay up. You’ve probably also heard that the 407 is a hotbed for toll dodgers, but how many of them actually get found out?

According to figures from the 407 ETR, the company’s collection agencies and police forces find that only about 2% of toll dodgers pay up voluntarily. However, 407 ETR has the ultimate collection weapon; Ontario can enforce plate denials against those who have an outstanding 407 toll bill. People are always interested in how to beat 407 plate denial.

How do I fight my 407 payment?

You really cannot fight with 407 on your payment. The tolls are calculated based on your usage of the toll road. They know where you entered and exited the highway. They also have a picture of your vehicle and plate. So, unless you can prove that the amount you were billed is false charges, you cannot fight it. You may be able to negotiate, sort of, but you can’t fight it.

Can you negotiate 407 bill?

The 407 bill is one of the most intimidating bills that people receive in Ontario. It is called the 407 bill because it is associated with the 407 highway and that’s also where the tolls are collected. The 407 bill is the toll amount that you need to pay based on your trip. If you drive on the 407, you will have to pay the 407 bill.

The 407 bill is issued by 407 ETR, a company that operates the 407 highway. If you have received a 407 bill, you should pay it right away. If you do not pay it, you will receive a collection notice from the company.

407 ETR offers an Exceptional Hardship plan to aid consumers that have accumulated substantial tolls and who would suffer “exceptional hardship” with the denial of their licence plate. The plan permits a consumer to pay the amount owing over an agreed time period, rather than all at once.

Approval is at the sole discernment of 407 ETR. Their decision is final and there is no avenue for appeal. As you can see, it isn’t much of a negotiation.

As you will see below, the only way to successfully negotiate the 407 bill is with the assistance of a licensed insolvency trustee.

How to beat 407 plate denial: Does 407 affect credit?

It’s common knowledge that unpaid traffic tickets can result in fines and penalties galore, but did you know unpaid 407 ETR tolls can also result in toll fines and penalties? And, like unpaid traffic tickets, they can also affect your credit score and therefore your credit rating. When you do not pay your bills on time, they will eventually send the unpaid bills to a collection agency. Once in the hands of the collection agency, it gets reported to the credit bureaus. That reporting negatively affects your credit score.

How to beat 407 plate denial: Can 407 ETR garnish wages?

If 407 ETR sued people in court and obtained a judgement, then yes they could garnish wages. But they don’t sue. Rather, they rely upon their powers of license plate suspension to block those seeking license plate renewal.

It is stopping anyone from being able to how to beat 407 plate denial that is the real collection tool. That is the reason why 407 ETR had to amend their procedures because of a Supreme Court of Canada decision.

If you can’t pay the 407 toll charges, only a licensed insolvency trustee can show you how to beat 407 plate denial

Denying license plates were found by the court to be a collection tool. In Canada, there is only one professional who can stymie the 407 collection tool. So if you can’t fight 407 bills and you really can’t negotiate with them, then how to beat 407 plate denial seems to be a long shot, no? That is where the Supreme Court of Canada in the “Moore Decision” comes into play.

Our firm, Ira Smith Trustee & Receiver Inc., has assisted individuals in negotiating their 407 bills. A debtor who becomes our client is very easy to work with since they do not deny that they have debt and they know that they must pay. Our firm takes the 407 on. We start communicating with them by listing 407 ETR as a creditor in your bankruptcy or consumer proposal.

How to beat 407 plate denial: Highway Toll Arrears and the “Moore Decision”

In my blog titled 407ETR FAIRNESS-ONTARIO COURT OF APPEAL ENSURES FRESH START I described to you the decision of the Court of Appeal for Ontario in 407 ETR Concession Company Limited v. Superintendent of Bankruptcy (In the Matter of the Bankruptcy of Matthew David Moore) (the Moore Decision).

The highway’s owners appealed that decision to the Supreme Court of Canada (SCC). On Friday, November 13, 2015, the SCC released 3 decisions all dealing with the very same fundamental problem: does the federal government’s Bankruptcy and Insolvency Act (BIA) take paramountcy over provincial laws professing to handle the concerns of debt and bankruptcy in Canada. The SCC answer was a resounding YES!

What did the SCC decide about the provincial law about 407 debt settlement?

The SCC dismissed the appeal of the 407. The SCC considered whether the plate denial stipulations of the Highway 407 Act conflicted with the discharge provisions of the BIA. 407’s position was that provincial regulation about plate denial needs to apply after a person’s discharge from bankruptcy. The Attorneys General for several provinces, including Ontario, advanced arguments on behalf of the right of the province to enforce all laws for vehicle licensing.

The SCC’s decision supported the Moore Decision which found that the discharge section of the BIA bypasses and overrides the plate rejection arrangements of the Highway 407 Act.

What is the effect of a bankruptcy or consumer proposal on ETR debt settlement?

The effect of the SCC’s decision is that pre-bankruptcy amounts owed to the ETR are provable claims under the BIA and the plate rejection scheme under the Highway 407 Act, 1998, S.O. 1998, c. 28 can no longer be used to collect pre-filing amounts. Therefore, 407 etr financial debt settlement is possible.

Upon the filing of bankruptcy or consumer proposal, in which 407 ETR is provided for in the sworn Statement of Affairs as a creditor, 407 ETR will remove from plate rejection any amount still owing from the period before your Assignment in Bankruptcy, or filing of consumer proposal (that includes interest and any other type of charges incurred on those amounts). The Ministry of Transportation will be told to amend its records to show this change.

You will be removed from plate denial if:

you have not incurred any type of brand-new financial obligation with 407 ETR for which you might remain barred from how to beat 407 plate denial since the filing of your bankruptcy or consumer proposal; and
you have no debts with the Ministry of Transportation (e.g. parking tickets) causing plate denial.

In both instances, once the balance owing is adjusted from your account, then, the individual is allowed to get plate renewal from the Province.

***How to beat 407 plate denial*: This seems to be the end of the discriminatory plate denial**

407 ETR must and is following the SCC decision. They have set up the procedure for those who have been rejected from plate renewal and who have filed either for bankruptcy or a consumer proposal. The 407 ETR debt, including penalty and interest, is reversed and plate revival issued.

Remarkably enough, there was no evidence whatsoever in any one of the Court hearings, including this one heard by the SCC, as to the 407 ETR’s right to reject anyone from providing credit to them. When you get your transponder, the 407 ETR is actually extending credit to you, in the form of using the toll highway with the promise to pay when your bill arrives. It is no different than you making purchases on your credit card and your bank expects you to pay them when it shows up on your bill.

How to beat 407 plate denial summary

I hope that you found this how to beat 407 plate denial Brandon Blog interesting. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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

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

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

Call us now for a no-cost consultation.

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

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

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

Tags 407 etr, 407 ETR bill, 407 ETR Concession Company Limited v. Superintendent of Bankruptcy, 407 tolls, Bankruptcy, Can 407 ETR garnish wages, Can you negotiate 407 bill, Does 407 affect credit, Highway 407 Act, How do I fight my 407 payment, how to beat 407 plate denial, Ira Smith Trustee, license plate renewal, license plate suspension, licensed insolvency trustee, Matthew David Moore, proposal, What happens if you don't pay 407

Brandon Blog Post

FILE FOR BANKRUPTCY: CAN YOU FILE FOR BANKRUPTCY CANADA FROM THE LUXURIOUS CARIBBEAN?

Post author By Brandon Smith
Post date February 22, 2021

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

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

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

File for bankruptcy introduction

You have all probably read about or heard about the Ontario judge who presided over Toronto-area court cases from the Caribbean. With today’s technology, it is electronically possible to attend Zoom court from anywhere in the world. That got me thinking. Can a Canadian file for bankruptcy from the Caribbean or anywhere else in the world?

So I did the research. In my opinion, using what is right now permissible technology, I think it is possible for a licensed insolvency trustee to either accept a Canadian filing bankruptcy or make it happen from the luxurious Caribbean or anywhere else outside of Canada. In this Brandon Blog, I will explain the bankruptcy process and why I think a person or company can file for bankruptcy from outside Canada.

You owe money: Considering bankruptcy?

To file for bankruptcy is a difficult decision to make, especially considering the financial and personal consequences it has on you and your family. But sometimes, there is no other option. If you find yourself unable to pay your debts, filing for bankruptcy may be your best bet for a fresh financial start. But before you decide to file for bankruptcy, you must assess your situation and understand the consequences.

It’s easy to be overwhelmed when you’re facing the prospect of filing for bankruptcy. Bankruptcy is a complicated legal proceeding, and the law has established procedures that must be followed in a specific order. If you’re considering bankruptcy, it’s important that you understand how the process works and the critical role a licensed insolvency trustee (formerly called either a trustee in bankruptcy or a bankruptcy trustee (Trustee) plays in that process.

As a Trustee, I can tell you that bankruptcy is a serious undertaking. It can have a big impact on you financially and emotionally, and there are many important decisions you must make before, during, and after the process. The decisions you make now will have a big impact on your future. As a Trustee, I always first try to help people and companies look at the alternatives to bankruptcy in order to avoid bankruptcy, rather than file for bankruptcy. Personal bankruptcy or business bankruptcies are truly a last resort when there is no other choice.

How to file for bankruptcy Canada: Let the licensed insolvency trustee no-cost consultation happen first

You may be considering filing for bankruptcy in Canada because you have debts that you can no longer pay. If you are drowning in debt, you might feel like there is no way out. But bankruptcy isn’t the end of the world. In fact, it can help many people get a fresh start by eliminating debts they can no longer pay. But as I always say, an individual or company may not need to file for bankruptcy. You have to consider all of your options. But in this section, we will focus on the bankruptcy filing process.

It all starts with you going to see a Trustee for a free, no-obligation initial consultation. The Trustee will listen to the facts you describe and ask you some questions to gain a better and deeper understanding of your specific situation. The Trustee will then tell you about the various debt relief options he or she believes are available to you. The Trustee will then provide you with his or her recommendation as to what is best for your situation and why.

Many factors will play into the Trustee’s recommendations, especially around your debt issues, including:

The types of debts.
Your unsecured debt vs. secured debts.
Do you have any student debt and if so, when did you graduate from the program that you acquired the student loan debt for?
The total amount of your Canadian debts and any foreign debt you may have.
Is Canada Revenue Agency hounding you for tax debt?
How appropriate are all the various debt options for your situation?
What percentage of debts are related to your assets that you cannot afford to lose.
What is the nature and extent of all of your assets?
Which assets are exempt from seizure and which are non-exempt?
Do you have any joint (co-signed) debt and how will your insolvency filing affect the other person?
Is the pressure from debt you are feeling right now require an immediate filing or could you wait a bit to see how some things play out over the short-term future?
Do you need immediate protection from debt and the related creditors or debt collectors taking collection actions right now such as trying to enforce against your assets, sue you or garnish your wages under a judgement?
How is your burden of debt currently affecting you and your family?
Comparing your current debt situation pre-filing to what your debt after filing and after your discharge will look like under each of the available alternatives.
How does the Trustee’s debt assessment factor into the realistic alternatives available to you to avoid bankruptcy?
Does your debt level at this stage that of overwhelming debts or are you right now only feeling mild indigestion? Perhaps you could work out of your debt problems on your own with just one or two strategies the Trustee will share with you at the no-cost consultation stage.

The Trustee considers all of this to see if you have an unmanageable debt to determine the best options available to you, including having you file for bankruptcy. You don’t want to do a consumer bankruptcy filing for yourself or have your company filing bankruptcy if it is not necessary to fix the debt problems.

How to file for bankruptcy – How the bankruptcy process starts

Alright, now for getting to answering the question I posed in the title and at the beginning of this Brandon Blog. Can a Canadian file for bankruptcy from the luxurious Caribbean? Can Canadian bankruptcy filings start from outside of Canada? To answer this question, we must look at what are the requirements of both the debtor, be it a person or company, and the Trustee, for a bankruptcy file to begin? All of my comments below, with appropriate amendments for context, will apply to:

an individual filing a debt settlement consumer proposal;
a person filing for personal bankruptcy;
either a person or a company filing a debt settlement financial restructuring proposal under Part III Division I of the Bankruptcy and Insolvency Act (Canada) (BIA); or
a company filing an assignment in bankruptcy.

Before the COVID-19 pandemic, the debtor and Trustee met in-person at the Trustee’s office in order for the Trustee to assess the debtor’s financial situation. If an insolvency process was required to help fix the debtor’s financial problems, then there was also an in-person meeting at the Trustee’s office to sign up the filing documents. Since the pandemic began, the Office of the Superintendent of Bankruptcy Canada (OSB) Messages to LITs concerning COVID-19 gave Trustees the authority to hold meetings by video conference. This is how the whole world has been operating for almost 1 year now. So this is how the insolvency process begins.

In addition to the initial consultation and signup. other meetings are also held via video meetings. Examples are a Meeting of Creditors and the two credit counselling sessions. Although the OSB’s guidance does say that Trustees can use methods other than in-person…..” for those areas where they have an approved resident or non-resident office…” keep in mind that a Trustee is licensed to act within an entire province! I won’t get into the semantics of the apparent conflict between the OSB’s guidance and its licensing approval process in this Brandon Blog.

Who can file for bankruptcy?

Any insolvent person can file for bankruptcy. Section 2 of the BIA defines an insolvent person as:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,
(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or
(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”
So to file for bankruptcy, amongst other requirements, the person or company must reside, carry on business or have property in Canada.

The locality of the debtor

Once all the documents are signed up to file for bankruptcy, the Trustee has to file them with the OSB in the “locality of the debtor“. Section 2 of the BIA defines “locality of the debtor” as:

“locality of a debtor means the principal place

(a) where the debtor has carried on business during the year immediately preceding the date of the initial bankruptcy event,

(b) where the debtor has resided during the year immediately preceding the date of the initial bankruptcy event, or

(c) in cases not coming within paragraph (a) or (b), where the greater portion of the property of the debtor is situated;”

If the debtor has been living in the Caribbean for 4 months immediately preceding the date of the filing of the assignment in bankruptcy, do they qualify? The answer is yes. Court decisions have determined that the word “during” means “at some time” during the year preceding the date of bankruptcy. It does not mean continuously. So during these pandemic days where we meet with everyone online, it is possible for the Canadian person to be in the Caribbean, meet with the Trustee for the initial consultation, decide on an insolvency process, in this case, bankruptcy and then initiate the bankruptcy proceedings, all from the luxury of a Caribbean vacation spot.

Let’s not delve into how a debtor who needs to file for bankruptcy can afford to live in the Caribbean or whose villa it is. That is beyond the scope of this Brandon Blog.

What about the Trustee?

The same way the debtor, or a judge, can transact business by video meeting from outside Canada, the same is true for the Trustee. As long as the Trustee can access all his or her office documents and systems online from outside of the office, there is no reason why the Trustee could not operate from the Caribbean as well to handle the person or company that wants to file for bankruptcy.

I am not advocating for this position, especially when you consider both the danger of and the appropriateness of travelling during these times of hardship and sacrifice. But since the question was “Can a Canadian file for bankruptcy from the Caribbean or anywhere else in the world?”, the answer is YES.

So whether you are a judge in the Ontario court, an insolvent debtor or a Trustee, I do not see any legal reason why someone could not file for bankruptcy from the Caribbean or anywhere else in the world.

File for bankruptcy summary

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

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

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

Call us now for a no-cost consultation.

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

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

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

Tags avoid bankruptcy, Bankruptcy, Bankruptcy and Insolvency Act, Consumer Proposal, debt assessment, debt collectors, debts, file for bankruptcy, filing bankruptcy, insolvency, insolvent person, Ira Smith Trustee, licensed insolvency trustee, locality of the debtor, Office of the Superintendent of Bankruptcy Canada, student debt, Toronto-area court cases, unsecured debt

Brandon Blog Post

6 DISADVANTAGES OF CONSUMER PROPOSAL ARE NOT ENOUGH TO STOP A HEALTHY RETURN TO ENJOYING LIFE

Post author By Brandon Smith
Post date February 3, 2021

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

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

Disadvantages of consumer proposal: What is a consumer proposal?

As regular readers of Brandon Blog know, I have written many blogs about consumer proposals. I normally focus on the advantages of a consumer proposal. As I have never written about the disadvantages of consumer proposal, I thought I would do so now. There are many more advantages than there are disadvantages; however, there are a couple of points you should know. Some people may see them as drawbacks or disappointments. It depends on your unique situation.

Consumer proposals can be called an individual’s insolvency debt settlement agreement in Canada. It is a proposal to your unsecured creditors to pay off a portion of your frustrating unsecured debts over a set period of time. If you successfully complete the consumer proposal by making all the needed payments, the total amount of your unsecured financial obligations are forgiven at the end of the settlement period. Consumer proposals are created to get the debt freedom to consumers who cannot afford to pay off their total debt. It is a legally binding contract between the debtor and the unsecured creditors to eliminate debt carried out under the Bankruptcy and also Insolvency Act (Canada).

So consumer proposals are the best alternative to bankruptcy. To find out about all the advantages of consumer proposals, I recommend my recent blog post, CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS.

Disadvantages of consumer proposal: When is a consumer proposal appropriate?

Consumer proposals are appropriate for individuals that:

Have a secure income flow, such as from full-time employment.
Are insolvent.
Are serious about getting rid of all of their unsecured financial obligations by paying only a portion of the total owed.
Wish to stay clear of bankruptcy.

To discover if a consumer proposal is an appropriate selection for you, set up a no-cost conference with a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) (LIT or Trustee) to discuss your personal scenario. The LIT will examine your monetary situation and see if you have the economic capacity to efficiently complete a consumer proposal. The Trustee will certainly describe the pros and cons of the various options that might assist you to resolve your financial troubles.

If you choose to submit a consumer proposal, the LIT will work with you to develop a proposal that benefits both you as well as your unsecured creditors. If you file a customer proposal, you have to:

give the LIT a complete list of your assets and liabilities;
attend the first meeting of creditors, if one is requested by your creditors;
participate in 2 counselling sessions;
keep the LIT updated of any change of address; and
help the LIT in administering the proposal.

Disadvantages of consumer proposal: When is a meeting of creditors held?

The first disadvantage to talk about is when is a meeting of creditors held? The only time a meeting of creditors is called in consumer proposals is if creditors representing 25% or more of the proven claims filed request it. This would mean that at that point, you do not have a great relationship with creditors. They do not like the original consumer proposal you have submitted for their consideration.

A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The Office of the Superintendent of Bankruptcy Canada (OSB) can also direct the LIT to call a meeting of creditors at any time within that same period.

The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal, or any amended proposal tabled at the meeting.

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors regardless of any objections received.

Disadvantages of consumer proposal: How will a consumer proposal affect my credit rating?

The disadvantages of consumer proposal include the fact that it will have a negative impact on your credit rating. Generally, a person who declares bankruptcy is assigned the lowest possible credit score. Normally, with proposals, you are assigned a rating of R7. With bankruptcies, it is a worse rating of R9, the lowest possible. With proposals, The record of your consumer proposal will show up on your credit report. It will certainly be there for possibly 3 years after you have actually fully finished making all the payments. This is less than how long it will stay on your credit report because of bankruptcy.

Your ability to obtain and make use of credit after a consumer proposal relies on encouraging lenders of your personal financial maturity as well as the capability to repay the credit you are requesting. There are no guarantees and nobody is required to extend credit to you.

Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance.” To make sure your credit record is updated, send a copy of that document to the major credit-reporting agencies, TransUnion Canada and Equifax Canada. Be sure to keep all of your proposal-related documents for reference by future lenders.

Disadvantages of consumer proposal: Why are consumer proposals rejected?

Adding to the disadvantages of consumer proposal is the possibility that the creditors will decline it. Consumer proposals are commonly the last option for creditors, other than for consumer bankruptcy. In most cases, creditors accept a well thought out debt settlement plan since they wish to recuperate some of the funds that would otherwise be lost forever. Consequently, LITs who prepare well-drafted and properly explained consumer proposals get them approved by creditors.

Nevertheless, creditors can reserve their right to reject them. When consumer proposals are rejected, it’s commonly a result of the belief of the creditor that the proposal is in reality, not a better realization than in a bankruptcy process. Conversely, creditors see that they may need to wait as much as 5 years to receive what they deem a paltry reward. They prefer to finish the pain now and get nothing in the individual’s bankruptcy than have to carry holding and administering the account for 5 years to get next to nothing, notwithstanding it is a better outcome than the borrower’s filing for bankruptcy.

Disadvantages of consumer proposal: What happens if you miss a consumer proposal payment?

As long as you are following the agreed terms of your proposal, your creditors cannot take any further action against you. If you fail to meet the agreed terms of your proposal and/or miss three months of payments, the proposal will be deemed annulled. If this happens, you are barred from filing another consumer proposal.

However, there is a temporary COVID-19 special accommodation now allowed for by the OSB. A Trustee can explain what the special rules are.

So, subject to certain temporary COVID-19 accommodation, one of the disadvantages of consumer proposal is that if you default by missing 3 months of payments, your proposal is deemed annulled. The only thing left would be a bankruptcy filing.

How long does it take to rebuild credit after a consumer proposal?

Another one of the disadvantages of consumer proposal is that you will need to rebuild your credit. Although it is difficult and takes time, it is not impossible. To begin rebuilding your credit after a consumer proposal, work with your Trustee to make sure that everything you do is reported to the credit bureaus. The more positive reports that you have on file with TransUnion and Equifax, the better your credit score will be.

I always advise clients that the first thing they should do is get a secured credit card. Not the kind you buy at the drug store. Rather, it is a credit card from one of the banks. You put up a sum of money that the bank will keep as a security deposit, They then issue you a credit card with a limit equal to the deposit you put up. Each month, when you pay the credit card off in full on time, the bank reports this to the credit bureaus. Every month they report favourably is another month that you are working on improving your credit score.

The next thing you can do is take out a small loan to invest the funds in an RRSP. Use your tax refund or the extra tax you did not have to pay, to pay down the loan. Make sure that you pay off the balance of the loan within 1 year. Make your monthly payments on time. Again, your proper use of this credit will be reported to the credit bureaus and will work in your favour.

It will take a few years, and initially you may pay a higher rate of interest than if you didn’t need to file a consumer proposal. After a few years of using credit properly, you will find that your credit is now rebuilt.

***Disadvantages of consumer proposal*: Are consumer proposals bad?**

In my view, the disadvantages of a consumer proposal are not enough to ever stop anyone from entering into the only government-approved debt settlement plan. To summarize, I see the disadvantages as:

The possibility that it may take a lot longer and be more expensive than you hoped for to reach a deal with your creditors if 25% or more of the dollar value of the proven claims vote against your initial offer.
Negative impact on your credit rating.
Rejection by your creditors and no agreement on an amended proposal forcing you into bankruptcy.
You miss 3 payments causing you to default on your consumer proposal. Again, if this happens, your only real option is to file for personal bankruptcy, which is what you tried to avoid.
It will take you time to rebuild your credit.
It only allows you to wipe away your unsecured debt. If you have secured debt that you cannot afford to continue paying, your LIT will counsel you on the best way to deal with that secured debt BEFORE you file.

Disadvantages of consumer proposal summary

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

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

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

Call us now for a no-cost consultation.

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

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

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

Tags are consumer proposals bad, avoiding bankruptcy, Bankruptcy, Consumer Proposal, consumer proposals, disadvantages of consumer proposal, filing for bankruptcy, how long does it take to rebuild credit after a consumer proposal, how will a consumer proposal affect my credit rating, Ira Smith Trustee, licensed insolvency trustee, meeting of creditors, what happens if you miss a consumer proposal payment, what is a consumer proposal, when is a consumer proposal appropriate, when is a meeting of creditors held?, why are consumer proposals rejected

Brandon Blog Post

CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS

Post author By Brandon Smith
Post date January 27, 2021

consumer proposal faq

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

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

consumer proposal faq

Consumer proposal faq introduction

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

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

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

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

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

consumer proposal faq

Consumer proposal faq: What does a consumer proposal cost?

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

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

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

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

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

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

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

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

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

consumer proposal faq

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

consumer proposal faq

Consumer proposal faq: Can consumer proposal affect employment?

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

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

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

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

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

Consumer proposal faq summary

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

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

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

Call us now for a no-cost consultation.

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

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

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

Tags Bankruptcy, bankruptcy trustee, Can consumer proposal affect employment, Can you keep a credit card with a consumer proposal, Consumer Proposal, consumer proposal faq, consumer proposal in canada, Debt, Does a consumer proposal ruin your credit, financial debts, Ira Smith Trustee, licensed insolvency trustee, What are the common benefits of filing a consumer proposal, What are the main differences between a consumer proposal and bankruptcy, What debts can be included in a consumer proposal, What does a consumer proposal cost, What happens if creditors reject consumer proposal, what happens when you file a consumer proposal, What percentage do you pay in a consumer proposal

Brandon Blog Post

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

Post author By Brandon Smith
Post date January 25, 2021

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

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

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

Small business in Canada introduction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Small business in Canada summary

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

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

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

Call us now for a no-cost consultation.

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

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

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

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

Brandon Blog Post

BANKRUPTCY FRAUD: QUICK GUIDE TO BANKRUPTCY FRAUD AND BANKRUPTCY EXAMINATIONS

Post author By Brandon Smith
Post date January 18, 2021

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

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

If you would prefer to listen to the audio version of this bankruptcy fraud Brandon Blog, please scroll to the very bottom and click play on the podcast.

Bankruptcy fraud introduction

Bankruptcy fraud is not something that the vast majority of individual Canadians engage in. Personal insolvency case filers can be for either a consumer proposal, Division I proposal or consumer bankruptcy filings under the Bankruptcy and Insolvency Act (Canada) (BIA) so that individuals can get the debt relief they need. Entrepreneurs can file a Division I proposal, or for corporate bankruptcy for when their company needs to either restructure or liquidate under the BIA. They can also file a Plan of Arrangement under the Companies’ Creditors Arrangement Act if their company qualifies under Canada’s insolvency laws.

Most of these individuals are honest and would never even think about bankruptcy fraud. They or their company have actually experienced such substantial financial difficulties leading to their insolvent financial condition, that the only thing they can do to solve the financial problems is to get relief within the Canadian insolvency system. Their problems may result from a job loss, a change in their household situation like divorce, a major disease resulting in loss of income and/or medical bills they cannot pay, bad financial advice, or most recently, the bottom falling out of their lives because of the COVID-19 pandemic.

There are instances, however, where an individual is not a victim and perhaps they are trying to pull off a bankrupt fraud crime. They will use misconduct to create abuse of the system and continue to trade and get credit understanding that they will never be able to pay back the money they are borrowing. There are people who try to use the insolvency system in Canada to get out of problems that they have created themselves through bad faith or fraud. They may even unknowingly cross the line into a white-collar financial crime and bankruptcy fraud.

In this Brandon Blog, I first discuss what bankruptcy fraud is and then comment on a very recent decision of the Supreme Court of British Columbia in Bankruptcy and Insolvency on what level of suspicion is necessary in order for the court to order an examination of the bankrupt or by extension, the designated officer of the bankrupt company.

What is bankruptcy fraud?

When I talk about bankruptcy fraud, it could include criminal fraud under the Criminal Code of Canada, but not necessarily. Bankruptcy fraud is a white-collar criminal activity that can be in several different forms.

The more common fraudulent activity that either is or are indicators of bankruptcy fraud committed under Canadian bankruptcy law (which may be just a bankruptcy offence or can also be a criminal code crime, depending on the circumstances) are:

Disposing of or concealing assets prior to or right after the bankruptcy to avoid having to hand them over to the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy).
Records false transactions in a statement of account or hides, destroy or purposely misstates a schedule or other document pertaining to his/her/its assets or affairs.
Obtains credit or any other goods or services arising from false depictions;
Conceals claims or debt obligations against the debtor;
Obtains credit without advising the people he is dealing with that he/she is bankrupt;
Refuses to answer fully and honestly to questions posed in an examination taking place under the Bankruptcy and Insolvency Act (Canada) (BIA).

Anyone who is found guilty of an offence, whether from criminal fraud charges or not and is responsible, on a summary conviction basis, to a dollar fine not exceeding $5,000 or to jail time for a term not going beyond one year or to both, or on conviction on indictment, to a penalty not surpassing $10,000 or to jail time for a term not going beyond three years, or to both. So there are penalties from a bankruptcy offence finding and a bankruptcy fraud conviction.

What are bankruptcy offences and how are they and bankruptcy fraud discovered?

The bankruptcy offences are set out in sections 198-201 of the BIA, Canada’s bankruptcy law. They represent the kinds of activities that form the types of bankruptcy fraud outlined above. There are 3 normal ways that a Trustee can start identifying bankruptcy offences and bankruptcy fraud.

When a consumer proposal, larger corporate or personal restructuring proposal or a bankruptcy is filed, the licensed insolvency trustee is required to review the available books and records. Insolvency trustees must look for transactions that appear questionable.

Insolvency trustees prepare a report for the creditors in which the conduct of the insolvent debtor, including any issues like suspicious transactions, entered into, or suspected bankruptcy fraud, are reported. In a restructuring, the bankruptcy trustee must also advise what effect the transaction has on the creditors and what actions, if any, the licensed insolvency trustee is going to take. That is the first way that bankruptcy fraud and bankruptcy offences can be discovered.

The second way that bankruptcy offences and bankruptcy fraud can be discovered is from information available from creditors. The creditors have been dealing for some time with the individual or company filing for bankruptcy or the restructuring proposal. Creditors may very well have information about the debtor’s affairs that would be very useful. That information might just lead the licensed trustee to discover the offences.

The third way of getting more information about suspected bankruptcy fraud and offences is through conducting examinations.

Examination of the bankrupt or the designated officer of the bankrupt company

In this section, I will use the examination of the bankrupt regarding his or her property and examination of the designated officer concerning the company’s property and affairs, interchangeably.

Section 161(1) of the BIA allows for the examination of the bankrupt by the official receiver. An official receiver is a qualified person in the local office of the Superintendent of Bankruptcy Canada. In personal bankruptcy, this examination could be held any time prior to the discharge of the bankrupt.

The official receiver can examine the bankrupt under oath relative to the insolvent’s conduct, the reasons for the bankruptcy and the disposition of the bankrupt’s property. The official receiver can generally ask any questions they wish about the bankrupt’s conduct and affairs.

Section 163(1) of the BIA allows the Trustee, by ordinary resolution passed by the creditors or inspectors, may, without a court order, examine under oath before the registrar of the court or other authorized person:

the bankrupt;
any person fairly believed to have knowledge of the bankrupt’s affairs; or
anyone who is or has been an agent, or a clerk, an officer, management or an employee of the bankrupt.

Essentially, anyone who has knowledge of the bankrupt’s affairs. This also includes anyone in possession of any books, records or documents regarding the affairs of the bankrupt. Such persons would also have to hand over those documents.

Section 163(2) allows any creditor or another interested person on sufficient cause being revealed (such as the suspicion of bankruptcy fraud) can apply for an order to be made for the examination of the bankrupt, under oath, before the registrar or other accredited person.

So as you can see from this description, the existence of this section of the BIA allowing for the ability to examine a person in connection with a bankruptcy filing is quite generous. The suspicion of the bankrupt trying to commit bankruptcy fraud can lead to a request for an examination of the bankrupt.

So the question becomes, can the examination process be used for a fishing expedition or does the Trustee or creditor need to have some evidence of wrongdoing? Do they need to have more than just a hunch? The BC court decision I am going to now describe seems to answer that question.

***Bankruptcy fraud*: Examination of the bankrupt court case background**

The matter is Hanlon (Re), 2021 BCSC 40. Mr. Hanlon wants his bankruptcy discharge. However, a major creditor of his has reason to suspect that there is more information to be learned about Mr. Hanlon’s conduct, affairs and property. The creditor made an application under section 163(2) of the BIA.

A lady called Ms. Johnson acquired a judgment against Mr. Hanlon after a five-day defamation trial that occurred in August 2018. Ms. Johnson was granted an award of $27,500 against Mr. Hanlon.

On June 14, 2019, Mr. Hanlon filed a proposal under BIA. The proposal was unsuccessful and Mr. Hanlon was deemed to have filed an assignment in bankruptcy. The effect was as if Mr. Hanlon chose himself filing for bankruptcy. At the meeting of creditors, Mr. Hanlon said, which is recorded in the Minutes, that “there was an expectation that any amounts owing to his mother would be deducted from his inheritance.” The lawyer from the law firm representing Ms. Johnson was appointed an Inspector in the bankruptcy administration.

Ms. Johnson opposed the bankrupt’s discharge as she suspects bankruptcy fraud. On February 3, 2020, she filed an amended proof of claim. In it, she made an unsecured claim for $94,443.01, consisting of the original judgment, post-judgment interest, and a claim of $66,788.26 for special costs.

***Bankruptcy fraud*: The position of the bankrupt, creditor and Trustee**

The creditor

Ms. Johnson is concerned that the bankrupt is trying to commit bankruptcy fraud. She argues that Mr. Hanlon and his mother should each be subjected to an examination for the purposes of finding more information to ensure that she can canvass concerns connected to:

If he is a beneficiary under his mother’s will and the potential of an inheritance being received.
Info about the status of his chequing account and credit cards, including his use of his mom’s bank card.
Cash and loans Mr. Hanlon might have received from his mom and step-father.
Exactly How Mr. Hanlon is paying for expenditures.
Particulars any businesses the bankrupt runs, the revenue he gains, and whether he has been purposefully underemployed.

She says that examinations are necessary considering that the evidence produced to date sustains that “something is amiss” and also there is “a disconnect” with his current financial situation.

Ms. Johnson also wants approval to examine his mother about any financial arrangements between them. She also wants to examine the mother about any inheritance that her son is entitled to. Finally, she also wants to see a copy of the will. She suggests that his mother is directly attached to the bankruptcy estate.

The Trustee

The Trustee did not take any position on Ms. Johnson’s application. The Trustee advised the court that:

An examination of Mr. Hanlon under oath happened already.
Mr. Hanlon has been extremely honest with everything that he has been asked
To her knowledge, there are no outstanding requests.
It would be an uncommon request to demand the supply of a will from a person who is still living. If Mr. Hanlon’s mom passes away then the Trustee will take all needed actions to investigate the situation and the bankruptcy estate.

Ultimately, the Trustee is of the view that the bankrupt’s discharge hearing should happen as soon as possible. It has already been postponed. The Trustee had no indication that the bankrupt was trying to commit bankruptcy fraud.

The bankrupt

The bankrupt stated that his mom and stepfather are alive and generally in good health. If his mother passes away everything will certainly go to his stepfather. They have been wed for 40 years and their house remains in joint-tenancy. He advised that his mother is currently 85 years of age, she does need the use of a wheelchair and is deaf in both ears. His stepfather is either 72 or 73 years old. He opposes the examination of his mom as being in the nature of a fishing exploration.

He disputed that there is anything amiss about the documents provided and that he has not committed any bankruptcy offence or crime and that he has not entered into any suspicious transaction. He explains that there is a senior’s discount referral on his bank account due to the fact that it is a joint account with his stepfather who is elderly. He described that the only time he has used his mom’s charge card was to pay a process server (in one of his prior paralegal businesses) who called for a credit card over the phone. He rejects ever accessing his mother’s bank account.

He submits that he has supplied a description of his work history, consisting of what companies he was paid by. He also stated that he has provided all items the Trustee has ever asked for. He further submitted that the application should be dismissed as it is without benefit, a fishing expedition, and is being made solely for the purpose of delaying his discharge hearing.

Mr. Hanlon presented himself as an honest but unfortunate person that is not trying to commit bankruptcy fraud.

Bankruptcy fraud: The court decision for the request to examine the bankrupt

The court accepted there were issues raised that need more information. An example of one is that the bankrupt did not list any debts owing to either his mother or stepfather in his sworn Statement of Affairs. He stated at this hearing that he was not conscious that such household debts were to be included in his bankruptcy. The situation of loans from his mother or stepfather and the arrangements need more clarification.

It is not totally clear to what degree there has actually been some intermingling of the bankrupt’s affairs with his mother’s yet the evidence does support that he has utilized her credit card. He claims it was only once however the creditor is entitled to explore this issue. The bankrupt admitted that his mom supplies him with money to pay a specific expense or expenses. He is living with his mother and stepfather in a self-contained bachelor suite and is not paying rent.

The particulars of his revenue and work are also uncertain and there was a discrepancy between the bankrupt’s evidence and one record of employment he received. An examination would shed additional light on this incongruity in addition to the allegation made that he is purposefully underemployed.

The judge was persuaded that sufficient cause has been revealed by Ms. Johnson to support an examination of Mr. Hanlon under s. 163( 2) of the BIA. The judge was also satisfied that such an examination has the possibility of benefitting the general body of creditors and it is not just a fishing expedition. Accordingly, the court ordered that the bankrupt attend an exam at a time and location to be fixed. The assessment will be limited to two hours. The expenses of the exam and getting a transcript will certainly be for Ms. Johnson’s account.

The court decision about the request for documents and to examine the bankrupt’s mother

The court felt that the applicant was looking for too wide an order for the production of documents. The court directed that Ms. Johnson set the particulars of the documents she is looking for using a letter to Mr. Hanlon, with a copy to the Trustee. This letter laying out the particulars of the documents should be supplied at the very least three weeks before the exam takes place. The judge ordered that the bankrupt will deliver the files he has in his possession or control no later than 7 days prior to the day scheduled for his exam.

Concerning his mother’s will, the court was not encouraged that the production of the will to prove that the bankrupt will be getting any type of inheritance was necessary. Even if he is a beneficiary under his mom’s will, she is alive and there was no evidence that he will certainly acquire anything as a beneficiary either now or in the future.

The evidence established that his mother is married with the majority of the value of her assets registered in joint-tenancy with her husband. The evidence also showed that his stepfather is more than 10 years younger than his mother. The court decided that the will should not be produced, but that did not restrict Ms. Johnson from checking out issues associated with any kind of prospective inheritance at the examination.

The judge was not satisfied that his mother ought to be required to participate in interviews. Such an examination would be oppressive because of his mother’s age, being 85 years old, her current health standing, although she did not have any specific illness, as well as the existing COVID-19 pandemic.

The court also took judicial notice of the fact that in the sworn statement of service, the server deposes that when he served the application on the bankrupt’s mother, she did not appear to comprehend that she was being served with legal papers. So any inquiries regarding the use of her credit cards by the bankrupt or how he is paying for his living expenditures can be canvassed at the exam of the bankrupt. Ms. Johnson’s application to examine the mother was denied.

Bankruptcy fraud and examination of the bankrupt: Other matters

The judge was also completely satisfied that an order should be made that any discharge hearing happens after the examination has been completed. In order that there is no delay, the court directed that the examination is to be finished before February 28, 2021. The bankrupt is to cooperate by establishing a day for the exam within this period. The discharge hearing can be set up for a day beginning in March 2021.

It will be up to the presider of the discharge hearing to ultimately decide what consideration ought to be given on any kind of possible inheritance when determining the disposition of the bankrupt’s application for discharge.

Finally, Ms. Johnson was awarded costs against the bankrupt. This cost award is a post-filing debt that will not be released by the bankrupt’s discharge from bankruptcy.

Bankruptcy fraud summary

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

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

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

Call us now for a no-cost consultation.

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

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

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

Tags bankrupt fraud crime, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy examination, bankruptcy fraud, bankruptcy offences, BIA, consumer bankruptcy, Consumer Proposal, Corporate Bankruptcy, criminal fraud, Designated Officer, Division I Proposal, examination of bankrupt, financial difficulties, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy

Statute of limitations in Ontario: The uncertainty behind Ontario’s limitation period for debt collection

Statute of limitations in Ontario: Time limits, collections and bankruptcy

Statute of limitations in Ontario and bankruptcy

Statute of limitations inForm 79 Ontario: When it is too late to sue?

Statute of limitations in Ontario and the Effect of Form 79 Statement of Affairs

Can statutes of limitation barred claims be proved in bankruptcy?

What does this mean for proceedings and intended proceedings in Ontario?

Statute of limitations in Ontario: Get a personalized debt free plan today

The 4 Pillars lawsuit class-action

4 Pillars lawsuit: What is a class action proceeding?

Debtor Warning – Debt Consultants Sometimes Not What They Appear

What 4 Pillars say their organization’s role is

What the Court of Appeal for British Columbia says about the role of 4 Pillars

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Is Debt Settlement Really Worth It?

Class action waiver not effective to resist class action certification

Other grounds of appeal in the 4 Pillars lawsuit

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

Frozen bank account: Can my bank seize my accounts if I file a consumer proposal or bankruptcy?

Who can freeze your bank account in Canada?

What does a frozen bank account mean?

Unpaid Debts to the Government: Canada Revenue Agency (CRA) caused the frozen bank account

Unpaid debts through creditors: How can creditors freeze my bank account?

Frozen bank account: How to get my bank account unfrozen when I am not insolvent

Frozen bank account: What bankruptcy protection does the Bankruptcy and Insolvency Act provide to get my bank account unfrozen

Can you open a new bank account if your account is frozen? Definitely, just not at the same bank!

Frozen bank account: Get a personalized no-cost debt-free plan today

Know Your Limitations: The Basic Limitation Period in Ontario

Statute of limitations: Limitations Act, 2002, S.O. 2002, c. 24, Sched. B

Can Your Debt Be Eliminated by the Statute of Limitations in Ontario?

Statute of Limitations: How long can a debt collector pursue an old debt in Ontario

Statute of limitations: What does Ontario limitations law say about making a claim on debts even if I can’t sue?

Statute of limitations: Time limits, collections and bankruptcy

Limitations analysis by the Court

What the Eyton statute of limitations analysis by the Court means for bankruptcy proceedings

Statute of limitations for unsecured debts and bankruptcy – What next?

Statute of limitations summary

How to beat 407 plate denial: What happens if you don’t pay 407?

How do I fight my 407 payment?

Can you negotiate 407 bill?

How to beat 407 plate denial: Does 407 affect credit?

How to beat 407 plate denial: Can 407 ETR garnish wages?

If you can’t pay the 407 toll charges, only a licensed insolvency trustee can show you how to beat 407 plate denial

How to beat 407 plate denial: Highway Toll Arrears and the “Moore Decision”

What did the SCC decide about the provincial law about 407 debt settlement?

What is the effect of a bankruptcy or consumer proposal on ETR debt settlement?

How to beat 407 plate denial: This seems to be the end of the discriminatory plate denial

How to beat 407 plate denial summary

File for bankruptcy introduction

You owe money: Considering bankruptcy?

How to file for bankruptcy Canada: Let the licensed insolvency trustee no-cost consultation happen first

How to file for bankruptcy – How the bankruptcy process starts

Who can file for bankruptcy?

The locality of the debtor

What about the Trustee?

File for bankruptcy summary

Disadvantages of consumer proposal: What is a consumer proposal?

Disadvantages of consumer proposal: When is a consumer proposal appropriate?

Disadvantages of consumer proposal: When is a meeting of creditors held?

Disadvantages of consumer proposal: How will a consumer proposal affect my credit rating?

Disadvantages of consumer proposal: Why are consumer proposals rejected?

Disadvantages of consumer proposal: What happens if you miss a consumer proposal payment?

How long does it take to rebuild credit after a consumer proposal?

Disadvantages of consumer proposal: Are consumer proposals bad?

Disadvantages of consumer proposal summary

Consumer proposal faq introduction

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

Consumer proposal faq: What does a consumer proposal cost?

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

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

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

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

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

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

Consumer proposal faq: Can consumer proposal affect employment?

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

Consumer proposal faq summary

Small business in Canada introduction

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

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

***Statute of limitations in Ontario* and the Effect of *Form 79 Statement of Affairs***

**Can statutes of limitation barred claims be proved in bankruptcy?**

***Statute of limitations in Ontario:* *Get a personalized debt free plan today***

**The 4 Pillars lawsuit class-action**

**What 4 Pillars say their organization’s role is**

***Know Your Limitations: The Basic Limitation Period in Ontario***

Statute of limitations: ***Limitations Act, 2002*, S.O. 2002, c. 24, Sched. B**

***How to beat 407 plate denial*: This seems to be the end of the discriminatory plate denial**

***Disadvantages of consumer proposal*: Are consumer proposals bad?**

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

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

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

***Bankruptcy fraud*: Examination of the bankrupt court case background**

***Bankruptcy fraud*: The position of the bankrupt, creditor and Trustee**