Tag: BIA

WILL BANKRUPTCY VS CONSUMER PROPOSAL EVER GO TO THE DOGS?

Post author By Brandon Smith
Post date April 10, 2019

Bankruptcy vs consumer proposal: Introduction

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

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

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

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

Bankruptcy vs consumer proposal: Case study dog facts

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

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

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

Bankruptcy vs consumer proposal: Case study issues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bankruptcy vs consumer proposal: What about you?

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

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

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

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

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

Brandon Blog Post

MY BILLS ARE HIGH: 6 THINGS TO IMMEDIATELY DO

Post author By Brandon Smith
Post date March 25, 2019

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

My bills are high: Introduction

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

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

First thing – household budget

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

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

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

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

The 4 corners

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

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

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

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

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

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

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

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

Balance the rest of your expenses

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

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

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

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

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

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

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

Second thing – rebuilding credit

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

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

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

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

Third thing – credit counselling

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

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

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

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

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

Fourth thing – debt consolidation

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

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

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

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

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

Fifth thing – consumer proposal

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

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

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

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

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

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

The advantages of a consumer proposal are:

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

Sixth thing – bankruptcy

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

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

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

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

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

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

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

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

Brandon Blog Post

CANADA FEDERAL BUDGET PLAN: RETIREE BANKRUPTCY PROTECTION REJECTED

Post author By Brandon Smith
Post date March 20, 2019

Canada federal budget plan: Introduction

Like many Canadians, on March 19 I was watching to see if the Conservative Party would be successful or not in blocking Finance Minister Bill Morneau’s budget speech. In the end, the Liberals took the drop on Parliament by getting the budget introduced early, before the Finance Minister’s speech. That allowed the media in lockup to start broadcasting the details of the Canada federal budget plan before the Finance Minister gave his speech!

Canada federal budget plan: Retiree bankruptcy protection

I was also looking to see what the budget had in it about retiree bankruptcy protection. This matter has been in the news over the past two years. High profile insolvency cases such as Sears Canada and U.S. Steel Canada brought this matter to the forefront. I have written a few blogs on the topic of proposals to amend the Bankruptcy and Insolvency Act (Canada) (BIA) and the Companies’ Creditors Arrangement Act (Canada) (CCAA) to provide protection to retirees. This included private members’ bills introduced by Hamilton Mountain NDP MP Scott Duvall, Bloc Québécois MP Marilène Gill and Senator Art Eggleton, P.‍C.

As I have previously written, the issue for retirees (and current employees) relates to the employee health benefits plan and pension plan when a company enters into an insolvency administration. Insolvent companies have been allowed to put a moratorium on reimbursements to employees and retirees on valid health benefits claims. Also, the employee pension plan suffers a shortfall because the insolvent company has not made the required contributions. This automatically creates reduced pension benefits for retirees.

Pensions are delayed earnings. In either a bankruptcy or bankruptcy protection reorganization, there is generally nothing left for employees.

Given the recent high-profile insolvency cases, employees now recognize just how unsecure their pension plans and health benefits might be in the case of insolvency, reorganization or bankruptcy.

The Liberal Party already recognizes that this is a major problem. However, in this budget, they decided to ignore the issue.

Canada federal budget plan: What this budget is

Rather, this budget screams please re-elect the Liberal party. In the wake of the SNC Lavalin debacle, Prime Minister Justin Trudeau is trying to win votes by spending, spending and then more spending.

The Government of Canada market debt is projected to climb by $31 billion in the coming fiscal year, to strike a total amount of $754 billion. This brand-new funding demand comes along with $250 billion of existing debt that will be maturing and will require to be refinanced.

The Finance Minister estimates that Canada’s deficit will rise as a result of the $22.8 billion of new spending. The 2018-19 deficit projection is now set at $14.9 billion, slightly reduced from the Government’s estimate in Fall 2018. However, not surprisingly for an election budget, the Liberals found a way to spend those savings and then some. Their 2019-20 deficit projection is $19.8 billion.

Canada federal budget plan: What is in this budget

This budget has a bit of something for almost everyone. I am not an economist and this Brandon’s Blog is not meant to be an economic analysis of the budget. There are many sources for an in-depth analysis. However, some of the budget highlights are:

$1.25 billion over 3 years on a shared-equity home loan program for first-time home buyers.
RRSP withdrawal limit for new home buyers increases to $35,000 from $25,000.
To aid Canadians with uncommon medical conditions or diseases access to the medications they require, Budget 2019 proposes to invest up to $1 billion over two years into a National Pharmacare program, starting in 2022–23, with up to $500 million per year afterwards.
$3.25 billion to Indigenous Services for water quality, child welfare, education and other supports.
$2.2 billion for a one-time doubling of Gas Tax cash for cities’ infrastructure spending.
Personalized Canada Training Credit of $250 a year (up to $5,000 lifetime) for job retraining.
A credit of up to $5,000 for the acquisition of electric vehicles.
The rate of interest on Canada Student Loans decreased to prime and will be interest-free for 6 months after graduation.
Low-income working seniors can earn more without losing GIS benefits.
$595 million to sustain journalism will include 15% tax credit for electronic news subscriptions.
A promise of high-speed internet for all Canadians by 2030.

Canada federal budget plan: Vote for me

So as you can see, this budget is full of promises; a little something for everyone. The two glaring omissions seem to be nothing really for business and ignoring retiree bankruptcy protection. It appears that the Federal government went for the easy stuff – spending money, as opposed to harder things like amending the BIA and CCAA.

It is obviously an election budget. Details on how the new legislation and spending will work are scarce within Budget 2019. No doubt the devil will be in the details. The new proposed housing provisions will no doubt spur demand, which will keep the construction industry going which is a good thing. However, increased demand will probably mean higher prices in the major Canadian cities, especially in Toronto and Vancouver. So, it will take time to see if affordability gets worse or not for new home buyers.

Canada federal budget plan: I can’t spend more than I earn, how about you?

Our government has made no secret that it will be spending last year’s savings and then look to spend more than it takes in. The way they can do that is by just issuing more debt. This is certainly not unique to the Canadian government. All governments do it.

Unfortunately, normal working people can’t just take on more debt because we want to spend more. Eventually, I would run out of lenders willing to let me borrow more money, and my income would not be enough to make all my monthly payments, let alone repay the original loans! Rather, like you, I need to budget to make sure that my necessities are covered and that I have enough money for the other things I need to spend on. This includes my savings and emergency savings fund.

Have you lost the ability to borrow more money? Are you having trouble making your monthly payments? Is your business facing financial challenges that need to be addressed?

If so, call the Ira Smith Team today. We have years along with generations of experience helping people and companies in need of financial restructuring or a debt settlement plan. As a licensed insolvency trustee, we are the only professionals accredited as well as supervised by the Federal government to supply insolvency advice and services to help you avoid bankruptcy.

You can have a no-cost consultation to help you to fix your debt troubles. With you, we will discover your financial pain factors and offer you the strategy to finish them in your life. This will absolutely allow you to begin a clean slate, Starting Over Starting Now.

Call the Ira Smith Team today so you can start ending your stress and pain today. With the roadmap we create unique to you, we will quickly return you right into a healthy and balanced carefree life.

Tags Art Eggleton, Bankruptcy, Bankruptcy and Insolvency Act, BIA, bill morneau, canada federal budget plan, Canadian government, CCAA, Companies’ Creditors Arrangement Act, Federal government, Government of Canada, insolvency advice and services, justin trudeau, licensed insolvency trustee, retiree bankruptcy protection, Scott Duvall, sears canada, U. S. Steel Canada

Brandon Blog Post

TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date February 20, 2019

Trustee Act Ontario: Introduction

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

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

My prior estate blogs

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

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

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

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

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

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

Things an estate trustee must be aware of

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

Power of court to appoint new trustees

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

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

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

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

Power and discretion of trustee for sale

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

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

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

Sales by trustees not impeachable on certain grounds

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

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

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

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

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

Trust funds and investing

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

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

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

Security by the person appointed

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

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

Actions for torts

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

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

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

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

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

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

Trustee Act Ontario: Summary

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

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

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

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

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

trustee act ontario

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

Brandon Blog Post

PRIVACY BREACH LAWSUIT AGAINST LICENSED INSOLVENCY TRUSTEE FAILS

Post author By Brandon Smith
Post date January 9, 2019

Privacy breach lawsuit: Introduction

A licensed insolvency trustee (formerly known as a bankruptcy trustee) and a Court appointed Receiver are both officers of the Court. As such, they have a duty of care to all stakeholders and parties. A decision of the Supreme Court of British Columbia released in late 2018 deals with an application to begin a class action privacy breach lawsuit against a licensed insolvency trustee (LIT or Trustee).

The case I am referring to is Netlink Computer System Inc. (re),2018 BCSC2309. Netlink Computer System Inc. (Netlink) was a British Columbia-based business that marketed computers and associated software solutions. In late 2017, Netlink went bankrupt.

Privacy breach lawsuit: The request to go ahead

As is required under the Bankruptcy and Insolvency Act (Canada) (BIA), any party wishing to initiate litigation against a bankruptcy trustee must first get the permission of the Court to do so.

In the Netlink case, a former Netlink customer wanted to start a class action lawsuit against the Trustee. The customer claimed that the Trustee breached the personal privacy of Netlink’s customers by permitting their personal details to be revealed. The unproven claim was that the Trustee sold to or, otherwise, allowed 3rd parties to get personal information of the Netlink customers.

This particular customer wished to start an action versus the Trustee for breach of privacy. If leave is approved, this customer would then seek certification of his case as a class action lawsuit.

Privacy breach lawsuit: The issue in requesting the leave of the Court

The Court’s task was to figure out whether to exercise its discretion to allow the claim to go ahead. The Court had to look at the nature and scope of the proposed claim taking into account the evidence. Leave is rarely given. If leave was granted in this case, it would be the first time in Canada a bankruptcy Trustee has been taken legal action against in a potential class action proceeding.

The BIA does not give any type of specific advice about the elements the Court ought to take into consideration in thinking about an application for leave to start an action against a LIT. These have just been developed through case-law analyzing and using s. 215 of the BIA.

For almost 150 years, Courts and legal scholars have been of the view that the bar for approving the commencement of litigation I versus a Court-appointed receiver or Trustee is not a high one. It is designed to protect the receiver or LIT against only frivolous or vexatious actions which have no basis.

The leading cases on the issue of leave to go ahead with litigation against either a Court-appointed receiver or LIT can be summarized as follows;

Leave to take such legal action should not be given if the action is frivolous or vexatious. Manifestly unmeritorious claims need to not be allowed to continue
Actions need to not be allowed to continue if the evidence submitted on behalf of the action, does not show a cause of action against the Trustee.
The court is not required to make a final evaluation of the benefits of the claim prior to granting leave.

This threshold tries to strike the ideal balance between the security of bankruptcy trustees and Court appointed receivers from the interruption of an insolvency administration from unimportant or simply tactical suits and preserving to the maximum degree possible the legal rights of creditors and other stakeholders.

Privacy breach lawsuit: This Netlink application

In this privacy breach lawsuit case, the claimant states that his affidavit evidence provides proof reveals a real case against the Trustee. The Trustee says that the proposed claim and the evidence on its behalf does not satisfy the relatively reduced threshold called for to prove leave.

The claimant described in his materials, his potential claim. . He also discloses that he has already begun a claim against the auction company who sold the bankruptcy company’s assets, Netlink and Netlink’s landlord. (The action versus Netlink has remained stayed due to the fact that Netlink is in bankruptcy). The proposed claim against the LIT is exactly the same and consists of practically the same phrasing as the action already started. There is no separate accusation that the Trustee did anything different from the auctioneer, Netlink, or the landlord.

The proposed claimant’s main points were:

He purchased a product from Netlink and provided personal information, including, his name, address and credit card details.
The Trustee contracted with the auctioneer to sell the assets.
During that process, the Trustee allowed customers’ private information, including addresses, credit card numbers, and various other sensitive information (the “Private Information”) to be exposed and offered to or otherwise acquired by 3rd parties, including criminals.
The Trustee provided the auctioneer computers and Netlink servers and other records containing the Private Information.
Criminals that obtained the Netlink servers offered the information to other criminals, consisting of cybercriminals and identity thieves.
The trustee knew that customer details are often included in the property of such bankrupt’s estates and it took no steps to safeguard the information when taking guardianship of Netflix’s property.
The Trustee’s choice to offer the Private Information, or at a minimum, the Netlink servers including the Private Information, was intended and deliberate and was made knowing that Netlink customers had not consented to their details being shared.
Customers have suffered damages.

Privacy breach lawsuit: This evidence

The Court examined the claims and the evidence. Unfortunately, the claimant did not have first-hand knowledge of what the Trustee did or did not do. Rather, the claimant submitted two sworn affidavits of what he believed took place. The information contained in the two affidavits was derived mainly from blog posts and YouTube videos that the claimant believed to be true.

The Trustee submitted 2 sworn affidavits of the LIT responsible for the Netlink file. The Trustee’s evidence was mainly why the relatively low threshold for allowing a claim against a Trustee or Court appointed receiver were not met. It did not provide much information about what the Trustee actually did (or did not do).

The Court had no choice but to rule that the claimant’s evidence was mainly hearsay and not admissible. With no real evidence before the Court to support the accusations, the Court dismissed the application and leave to begin the action against the Trustee was denied.

Privacy breach lawsuit: My take

Based on my reading of this case, I believe the Trustee was very lucky that there was no real evidence against it. There is no information indicating what steps the Trustee took to make sure that all Private Information was protected prior to the assets being sold. It is imperative that privacy breaches do not take place. Once a Trustee or Court appointed receiver to take possession of assets that may contain private or sensitive information, steps must be taken to ensure that the information does not fall into the hands of 3rd parties who have no right to that information. It does not matter whether the information is stored on computer hard drives, in the cloud, or physically in books or on paper.

The claimant still has its action against the auctioneer and the landlord. My understanding is that the landlord is involved because once the auction sale was completed and the auctioneer left the premises, there were still books, records and papers that contained some or all the Private Information. The landlord disposed of such papers in a way that did not protect the Private Information.

My Firm’s standard practice is to remove hard drives that contain Private Information so that computers would be sold minus a hard drive. With respect to physical records, any documents not required that would contain Private Information, we have shredded. We do not just throw it into a dumpster intact for someone to find. These are minimum steps required to protect Private Information.

Unfortunately, in the Netlink case, the Court’s Reasons for Decision does not include any information indicating the Trustee took such steps.

Privacy breach lawsuit: What does it all mean?

What it all means is that in any insolvency assignment, the LIT needs to know what it is he or she has taken possession and control of. Decisions must be made that protect the interests of all stakeholders, as best possible. There are always competing interests. The LIT must balance them all carefully when making decisions.

Do you have too much debt because you are a victim of identity theft? Does your company have too much debt and is in danger of shutting down? Is the pain and stress of too much debt now negatively affecting your health?

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

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

Tags Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, Canada, court appointed receiver, cyber criminal, Debt, identity theft, Ira Smith Trustee, Lawsuit, leave, licensed insolvency trustee, LIT, Netlink Computer System Inc., privacy breach lawsuit, receiver, trustee

Brandon Blog Post

BANKRUPTCY BLOG REVIEW: A LOOK AT MY TOP 2018 BANKRUPTCY BLOGS

Post author By Brandon Smith
Post date December 26, 2018

Bankruptcy blog review: Introduction

I hope that you are all enjoying quality family time together over the holidays. As 2018 is nearly over, I thought that it would be interesting to do a bankruptcy blog review on my Brandon’s Blog. So here is a review of the 7 most viewed blogs over the past year.

Bankruptcy blog review: The 7 most viewed blogs in 2018

BANKRUPTCY AND INSOLVENCY ACT: COURT MAY NOT LISTEN TO BANKRUPTCY TRUSTEE

This blog was about a very interesting case decided in the Court of Appeal of British Columbia. The bankrupt’s creditors applied to have the transactions reviewed under section I00 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”). One of the areas of contention was that the judge in the lower court found he could not rely on the bankruptcy trustee’s opinion of value in the circumstances.

MORTGAGE LENDING CRITERIA SELF EMPLOYED: BIGGEST MYTH MAY BE RIGHT

In this Brandon’s Blog, I wrote about mortgage lending criteria self-employed, I discussed a Court decision that shows when it comes to a self-employed person’s mortgage, if there is a deemed trust claim by Canada Revenue Agency (CRA), you cannot solely rely upon the registry system.

STALKING HORSE CREDIT BID: WE NEED COURT APPROVAL BEFORE STARTING A COURT SUPERVISED SALES PROCESS

This bankruptcy blog review post came from our corporate case files. I discussed the decision making process the Court goes through when being asked to approve a stalking horse sales process and the stalking horse credit bid being recommended by the licensed insolvency trustee (formerly called a bankruptcy trustee).

CREDIT KARMA CANADA REVIEW: IS IT REALLY FREE AND LEGITIMATE?

Since 2007, Credit Karma USA has attempted to simplify credit and finance for more than 60 million Credit Karma members. They advertise very heavily on US television to attract new members. Becoming a member is free, and it allows any member to get access to their free credit score and credit report, with the option to update every single week. Credit Karma also provides financial education to put credit into context.

Credit Karma Canada arrived this past year from the United States. Its website is creditkarma.ca. The purpose of this blog was to describe what Credit Karma Canada is and to let you decide if it would be helpful or not for you or someone you know.

IS GOODWILL A NON PROFIT ORGANIZATION? ARE YOU SCARED BECAUSE YOUR COMPANY HAS TURNED INTO ONE?

The Goodwill Toronto bankruptcy confused and astonished many people. After all, how can Goodwill, a non-profit organization, go bankrupt? Isn’t the very nature of a non-profit or not-for-profit that it doesn’t have to make a profit? This Brandon’s Blog discussed the issues.

FILING FOR BANKRUPTCY IN CANADA: MENTAL HEALTH & DISCHARGED BANKRUPTCY

This bankruptcy blogspot dealt with filing for bankruptcy in Canada and the bankruptcy discharge process when mental health issues are involved.

POOR CREDIT PERSONAL LOANS GUARANTEED APPROVAL CANADA: REDUCE AND DON’T INCREASE DEBT TO IMPROVE YOUR CREDIT SCORE

This Brandon’s Blog was a discussion about and a warning against being seduced by ads from companies for poor credit personal loans guaranteed approval. We pointed out the pitfalls of the products being offered. We also showed how people with poor credit can go about settling their debts and improving their credit score.

Bankruptcy blog review: Conclusion

These are my 7 top viewed Brandon’s Blogs in 2018. Four are about personal debt issues or personal bankruptcy blog items and three are about corporate insolvency issues. Three are about a review of a then-recent court case.

I hope that the year 2019 will be a happy, healthy and prosperous New Year for you and your families.

Have you taken on too much debt in 2018 or the years before? Is the pain and stress of too much debt now negatively affecting your health?

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

Tags Bankruptcy and Insolvency Act, bankruptcy blog, bankruptcy blog review, bankruptcy blogspot, bankruptcy trustee, BIA, Canada, Canada Revenue Agency, court of appeal, CRA, Credit Karma, financial restructuring services, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy blog, toronto

Brandon Blog Post

WHAT IS THE DIFFERENCE BETWEEN BANKRUPTCY AND INSOLVENCY CANADA

Post author By Brandon Smith
Post date December 5, 2018

What is the difference between bankruptcy and insolvency Canada: Introduction

Encountering major money troubles is life-shattering, especially if you automatically think that bankruptcy is your only alternative. As a matter of fact, lots of people erroneously think that serious financial difficulties immediately suggest the only answer is bankruptcy. The most common question I am asked is, “what is the difference between bankruptcy and insolvency Canada”.

What is the difference between bankruptcy and insolvency Canada: Insolvency

If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are insolvent, not bankrupt. Insolvent is a cash flow problem; bankruptcy is a legal state. You can read a detailed discussion on the definition of being insolvent in my last week’s vlog INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE.

What is the difference between bankruptcy and insolvency Canada: Bankruptcy is a legal рrосеѕѕ

Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.

If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened, and the cost of the bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.

In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) (formerly known as a bankruptcy trustee) all уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and the proceeds will be used to рау for the bankruptcy administration and then make a distribution to уоur сrеdіtоrѕ.

What is the difference between bankruptcy and insolvency Canada: Assets exempt in a bankruptcy in Ontario

In Ontario, where my practice is, the following assets are exempt from seizure in a personal bankruptcy:

Your necessary clothing without any dollar restriction.
Family furnishings and appliances up to a value of $13,150.
Your tools and other personal property used to earn income from your occupation up to a value of $11,300.
One vehicle with equity of no more than $6,600.
Registered Retirement Savings Plan and Registered Retirement Income Fund savings, other than payments made within the 12 months immediately before the bankruptcy filing.
The equity in your house if up to the amount of $10,000. Note that the current thinking is that if your equity is more than $10,000, then your exemption is zero.

If you have very little property, all of it may be рrоtесtеd so that you will not lose it.

What is the difference between bankruptcy and insolvency Canada: Surplus income

How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be ѕоld fоr and whether you will be required to pay “surplus income” to your LIT. For a detailed discussion on surplus income, read my May 28, 2013 blog CAN YOU REALLY HAVE SURPLUS INCOME IF YOU’RE BANKRUPT?

Among all the things that seem to perplex many people when it involves the bankruptcy procedure is surplus income. It’s tough to get your head around the concept of surplus income when you are heading towards bankruptcy. Can that really be true if you are insolvent?

What is the difference between bankruptcy and insolvency Canada: What is surplus income

Surplus income in a bankruptcy describes the amount the bankrupt must pay to the Trustee monthly. The Canadian bankruptcy system attempts to balance your right to end your debt and start over with the rights of creditors to be paid.

To permit Canadians to keep a sensible right to make a living throughout the bankruptcy administration, the federal government has established limits or standards on revenue a person can keep (after tax obligations and certain limited deductions) throughout their bankruptcy. The Office of the Superintendent of Bankruptcy establishes the limit restriction every year tied into the cost of living.

How do you figure surplus income?

The Federal Government establishes the formula used to calculate surplus income payments. The same formula is used for all of Canada.

The limits for surplus income are based off across the country “poverty line”. Surplus income has absolutely nothing to do with what you have left over monthly. It is a federal government formula that considers your revenue, specific non-discretionary costs as well as your household size.

The calculation is to find if you will need to contribute from your earnings monthly to your Trustee, for the benefit of your creditors.

Bankruptcy discharge

The final step of your bankruptcy process will be to get your discharge. Your discharge from bankruptcy acts as the trigger to discharge you from all of your debts. This means that you will not have to рау them (with possibly certain exceptions depending on your circumstances).

Whether you get an absolute discharge from your bankruptcy will depend essentially on your conduct. Before your bankruptcy, did you treat all your creditors the same? Does anyone feel aggrieved by your actions? That will decide if any of your creditors will oppose your discharge.

For an in-depth discussion of the personal bankruptcy discharge process, check out our vlog BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION.

Is your debt keeping you up at night?

Do you have extreme debt and have no concept of how to handle it? Are your debt woes keeping you up at night and causing you stress, pain and maybe even depression? We understand that pain and can cut it from your life.

Ira Smith Trustee & Receiver Inc. has helped many companies and people throughout the Greater Toronto Area (GTA) juggling too much debt in their lives that requires a blueprint for Starting Over, Starting Now. Do not delay. Help is 1 phone call away. You can fix your financial troubles while avoiding bankruptcy as long as you take swift action. Call the Ira Smith Team today for your free consultation.

Tags absolute discharge, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy discharge, bankruptcy trustee, BIA, Debt, insolvency, Ira Smith Trustee & Receiver Inc., personal bankruptcy, Registered Retirement Income Fund, registered retirement savings plan, RRIF, RRSP, Summary Administration, trustee, what is the difference between bankruptcy and insolvency canada

Brandon Blog Post

INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date November 28, 2018

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO

Insolvent definition: Introduction

The basis of the Canadian insolvency system is to assist the honest but unfortunate person or company shed their debt (with certain limitations) and start over fresh. There are many terms defined in the Canadian insolvency legislation. The most basic one is the insolvent definition.

Last week I reviewed a decision of the Ontario bankruptcy Court that really did give me a new focus. It doesn’t change the bottom line of the advice I would give an insolvent debtor, but it did change my focus. That is one of the things I love about being a licensed insolvency trustee (formerly called a bankruptcy trustee). I never stop learning.

Insolvent definition: Two examples

The Oxford dictionary definition is:

“insolvent

ADJECTIVE

Unable to pay debts owed.

‘the company became insolvent’”

Section 2 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (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;”

Insolvent definition: The concept of net worth

Insolvent person refers to both people and companies. The BIA definition incorporates the common English definition. The BIA definition also incorporates the accounting concept of net worth. Net worth = Assets – Liabilities. If the difference is positive, you have a positive net worth. If the difference is negative, you have negative or no net worth.

For those that want to read more about the concept of net worth, look at the Addendum I wrote which is at the bottom of this blog. Since many of you already have an advanced understanding of net, I don’t want to insert it in here.

When giving our free first consultation, my advice to anyone with lots of debt but positive net worth is that in bankruptcy, they will lose their non-exempt assets. If the major asset providing the positive net worth value is their home, I advise the person that they will lose their equity in their home which is not a good outcome. So, my first advice is always to see if the person can either refinance the home or sell it. Then they can use the funds to pay off their debts. In a sale, any balance can be used as a down payment on a smaller home or can set them up nicely to rent.

I normally don’t think of part (c) of the BIA insolvent definition as being mutually exclusive. However, after reading the Court decision and looking again at the BIA definition, I am reminded that it really is. Let me describe the Court’s decision to explain.

Insolvent definition: Kormos v. Fast, 2018 ONSC 6044 (CanLII)

Mr. and Mrs. Kormos got a judgment against their neighbours, Mr. and Mrs. Fast. The Small Claims Court at St. Catherines issued the judgment for $25,565.64. This judgment comes about from problems arising from flooding in their home which was triggered by the Fasts.

After the judgment was given, the Fasts were contacted by Mr. Kormos’ licensed insolvency trustee (Trustee). The Trustee advised that Mr. Fast had submitted a consumer proposal under the BIA many months previously, on August 24, 2016. Mr. Fast did not previously mention anything about his consumer proposal or his later filing of an assignment in bankruptcy.

Fifteen days after the Kormos plaintiffs started enforcement of the judgment by serving a notice of examination on Mrs. Fast, she made an assignment in bankruptcy under the BIA on April 25, 2017.

In their different bankruptcy filings, each of the Fasts attested in their respective sworn Statement of Affairs, that their home in Queenston, Ontario (Home) was worth $630,000.

Mr. and Mrs. Kormos provided evidence by way of an expert witness appraisal who also testified in Court, showing that the Home was considerably underestimated in the BIA filings by Mr. Fast on August 24, 2016, and Mrs. Fast on April 25, 2017, when she made an assignment in bankruptcy.

The Kormos’ lawyer stated that when a reasonable value is designated to the Home, neither Mr. Fast nor Mrs. Fast was insolvent when their corresponding filings were made under the BIA. They were obviously relying on the fact that each of Mr. and Mrs. Fast really had a positive net worth.

Mr. and Mrs. Kormos were looking for an Order under the BIA (i) annulling Mr. Fast’s consumer proposal as well as, if required, his 2014 bankruptcy; as well as (ii) annulling Mrs. Fast’s bankruptcy.

Insolvent definition: The Court’s analysis

Mr. and Mrs. Kormos wanted:

An Order according to s. 66.3(1) of the BIA annulling the consumer proposal submitted by Mr. Fast.
Since an outcome of such an annulment would be that Mr. Fast is considered to make an assignment in bankruptcy under s. 66.3(5) of the BIA, they also were looking for an annulment of his bankruptcy on the ground that Mr. Fast is not presently insolvent.
An order according to ss. 181(1) as well as 187(5) of the BIA annulling the bankruptcy of Mrs. Fast.
An Order according to Rule 60.07 of the Rules of Civil Procedure issuing a writ of seizure and sale of the Home.

The Fasts did not challenge the expert appraisal opinion. The Court accepted the expert’s appraisal as being the value of the Home on the relevant dates of Mr. and Mrs. Fast’s respective filings under the BIA.

The Court looked at the insolvent definition in the BIA, which again is:

(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

In her bankruptcy filing, Mrs. Fast filed her statement of monthly income and expenses. According to the statement, her monthly expenses exceed her monthly income by $2,010. When looking at the definition of an insolvent, the Court concluded that Mrs. Fast was unable to meet her obligations and had stopped paying her current obligations. Notwithstanding that the Court found that Mrs. Fast probably understated the value of her interest in the Home, the Court was not persuaded to annul her bankruptcy as she met the definition of an insolvent person.

As for Mr. Fast, the Court decided it would not annul his consumer proposal. The Judge went on to say that even if he was persuaded to do so, Mr. Fast was still a bankrupt and the Judge had no evidence for the proposition that his bankruptcy should also be annulled.

So, the Judge did not grant the application, the Fasts are under their respective BIA proceedings and Mr. and Mrs. Kormos can file their claim with the Fasts’ Trustee.

Insolvent definition: The Trustee

Now the Trustee has an interesting situation. The Trustee is now aware of the expert valuation of the Home. The Trustee will have to use that information to decide if the Fasts have equity in their home. If yes, then as far as Mrs. Fast, her equity will have to be realized upon because she is bankrupt. Her equity in the Home devolves to the Trustee as an asset (if it is more than the minuscule provincial exemption).

Is Mr. Fast’s consumer proposal has already been (deemed) accepted by the creditors and (deemed) approved by the Court. If yes, then he will just have to keep making the agreed payments to fully complete his consumer proposal and get out of bankruptcy. If not, the Trustee will now have to take his real equity in the Home into account. The Trustee will have to decide if the consumer proposal can still be recommended to the creditors, or if it must be improved because of the increased total asset value.

Insolvent definition: Are you insolvent?

Are you unable to pay your debts as they come due? Are your bills past due and you don’t know how you are going to pay them? If so, then you are insolvent, and we can help end your pain.

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to know all your alternatives. The alternative you choose based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create a result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

Insolvent definition: NET WORTH ADDENDUM

Regularly monitoring your finances reveals invaluable lessons. A most important aspect of building wealth is to find it. People that constantly increase their net worth track it to direct it. So, the starting point is understanding what the net worth definition for a person is.

Seeing the measurable results of your spending and investing decisions is the first step to take control of them. Contrarily, people in the worst monetary shape have no concept where their money is spent and are too afraid to know what their net worth might be since it will not be pretty.

Which extreme more closely matches your mindset? You can’t handle what you don’t measure. Consider it: if you were seriously rich, you’d invest a long time weekly handling some element of your finances.

A beginner variation of a financial tracking approach is needed to begin improving your financial condition.. In addition, the more money you build up, the more financial assets and liabilities to keep an eye on. I ‘d wager that you won’t own them for long if you don’t have your financial tracking system set up before you acquire them. If you don’t see and feel the gains and losses of your monetary choices–you are playing the complex money-game of life without any scorecard.

This is how so many people with good income still find their way into financial trouble. You need to have navigation reference points to know if you are going toward developing wealth or ruining wealth. It is by monitoring your net worth that you’ll begin to discover the monetary impact and effects of your decisions.

The beginning point for financial measuring is a simple statement of net worth (or balance sheet). It is a list of the current market price of whatever you own and what you owe to others. Your net worth is the difference between these 2 numbers. This is the number that you want to measure and increase every month. As with a business, as soon as you start determining the monetary repercussions of your habits you can begin making your own individual financial guidance. Basic insights and rules like these will help increase your net worth. This will lead to bigger insights and develop into bigger gains.

If you find that you have a lot of debt that is reducing your net worth, or possibly a negative net worth, then what guidance about debt are you going to develop for yourself? Think about including a guideline to read a new personal finance book each year. Your money rules and net worth statements can be as advanced or as basic as you wish to make them.

When you have computed your calculation of net worth, you begin having the ability to plan for purchases and payments. As an easy example, if your auto insurance coverage costs get paid annually, you can calculate just how much cash that you must to set aside monthly to easily pay it when the bill arrives. Or if you are getting a new car, you’ll be a lot better prepared for the first costs before you get squeezed at the end of the month and wind up paying a couple of bills late.

After you get comfortable with a net worth statement, you can move on to an income & expense sheet. How much net worth will you need by when? The answer is based upon the financial routines, tools and education you will establish. However, it can all start with your very first net worth statement.

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO

Tags Bankruptcy, Bankruptcy and Insolvency Act (BIA), bankruptcy court, bankruptcy trustee, BIA, Consumer Proposal, Debt, debts, insolvent, insolvent definition, Ira Smith Trustee, lawyer, licensed insolvency trustee, Net worth, personal finance book, Small Claims Court, toronto, trustee

Brandon Blog Post

ONTARIO PENSION PLAN: DOUG FORD GUARANTEES ONTARIO PENSION PLAN RELIEF FOR ALGOMA STEELWORKERS

Post author By Brandon Smith
Post date November 5, 2018

We are trying something new. At the bottom is an audiogram of this Ontario pension plan Brandon’s blog. If you would prefer to listen to it, and not read it, scroll down to the bottom and press on the play button. Let us know what you think by sending us a message in the Question box below.

Ontario pension plan: Algoma Steel

Ontario’s Premier Doug Ford is promising his help for Ontario steelworkers as well as their Ontario pension plan following the United States’ federal government’s 25 percent tariff on Canadian steel.

In news recently to Algoma Steel Inc. staff members in Sault Ste. Marie, Ont., Ford claimed the provincial government would assist in passing revisions under the Ontario Pension Benefits Act, R.S.O. 1990, c. P.8, along with insurance coverage from the Pension Benefits Guarantee Fund, subject to particular conditions.

Premier Ford didn’t provide any additional information on what specifically the help might be. However, he stated that negotiations are happening and extra info about just how Ontario is sustaining Algoma will certainly be introduced as quickly as possible.

Ontario pension plan: United Steelworkers

At the same time, the United Steelworkers union is prompting the federal government to enact regulations that would safeguard pension plans as well as benefits in situations of company bankruptcy, reorganization or liquidation. Union participants will be meeting legislators to check regulations focused on changing the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA) and the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA).

Ontario pension plan: Proposed federal legislation to date

We previously described the efforts of Scott Duvall, MP for Hamilton MountainA, , MP for Manicouagan and Senator Art Eggleton:

TORONTO BUSINESS BANKRUPTCY PROTECTION: NDP WANTS FEDERAL INSOLVENCY LAWS CHANGED SO THERE IS PENSION PLAN SECURITY WHEN FINANCIALLY TROUBLED BUSINESSES FAIL
Posted on September 27, 2017
SEARS CANADA IS CLOSING: THE #1 REASON YOU HAVE TO RUN AND NOT JUST WALK TO REDEEM YOUR GIFT CARDS AND CREDITS
Posted on October 18, 2017
SEARS CANADA CLOSING: POLITICIANS WANT NEW LAWS TO PROTECT PENSIONERS DUE TO SEARS CANADA CLOSING
Posted on November 1, 2017
SEARS CANADA DEFINED BENEFIT PENSION PLAN SHORTFALL: MP SCOTT DUVALL COMES THROUGH ON HIS PROMISE IN CANADIAN PARLIAMENT
Posted on November 8, 2017
CORPORATE BANKRUPTCIES CANADA: SENATOR EGGLETON PROPOSES NEW PENSION FUND CANADA LAW
Posted on October 22, 2018

Ontario pension plan: Canadian Association of Retired Persons

The Canadian Association of Retired Persons (CARP) is calling out the federal government, claiming it’s unreasonable that Sears Canada could pay out millions of dollars in shareholder dividends, a large part of which went to the US. At the same time, the pension plans of Sears Holding Corp.’s American staff members will be safeguarded by the U.S.’s Pension Benefit Guaranty Corp. while Canadian workers will certainly see benefits cuts.

“It’s time for the government to take decisive action to protect Canadian pensioners,” said Wanda Morris, chief advocacy and engagement officer at the CARP, in a press release.

Ontario pension plan: Private member’s Bill C-405

On October 17, 2018, Bill C-405 was presented by Conservative Erin O’Toole, MP for Durham. It is called “An Act to amend the Pension Benefits Standards Act, 1985 and the Companies’ Creditors Arrangement Act”.

The proposal is to change the Pension Benefits Standards Act, 1985 (R.S.C., 1985, c. 32 (2nd Supp.)), setting out what ought to take place if a business is under liquidation with the CCAA or Part III of the BIA.

His proposed changes lay out what should happen if a company is under liquidation through the CCAA or BIA. It proposes to allow, pending the permission of participants and beneficiaries, to transform the framework of the plan and/or move the pension’s assets to one more plans.

Granted this would probably be a necessary part of any global overhaul of pension plans. However, it is important to realize that it doesn’t do anything to safeguard the pensions or give the plan members and beneficiaries greater priority.

Ontario pension plan: Has a life event thrown you a curveball

Life has a way of throwing curve balls sometimes to good people. In the event of:

Illness;
addiction;
divorce;
family death; or
job loss

unbearable financial pressures can occur.

The Ira Smith Team has generations and decades of experience in dealing with people or their companies fighting the pain, stress and suffering that comes with financial problems and too much debt.

Our method for each person is to develop an outcome where Starting Over, Starting Now occurs. This begins the minute you come through our door. You’re just one call far from taking the essential actions to return to leading a healthy and balanced life, moving forward pain-free.

Call us today for your cost-free consultation.

Tags advocacy and engagement officer, Art Eggleton, Bankruptcy and Insolvency Act (BIA), BIA, Canada, Canadian Association of Retired Persons, CARP, CCAA, Companies’ Creditors Arrangement Act, Federal government, Hamilton Mountain NDP MP Scott Duvall, Ira Smith Trustee, Marilène Gill, Ontario, ontario pension plan, Pension fund, sears canada, Wanda Morris

Brandon Blog Post

CANADIAN DEBT SOLUTIONS: AVOIDING THE BANKRUPTCY PROCESS

Post author By Brandon Smith
Post date October 24, 2018

Canadian debt solutions: Introduction

This blog discusses a very interesting recent decision in the British Columbia bankruptcy case of Hervias (Re), 2018 BCSC 1579 (CanLII). A licensed insolvency trustee (LIT or Trustee) (formerly known as a bankruptcy trustee) is trained to develop Canadian debt solutions. Sometimes the best debt solution does not involve a formal insolvency process; either a consumer proposal or personal bankruptcy. The purpose of this blog is to describe the case of Mr. Hervias and why sometimes the best advice is that you don’t need to go bankrupt. This is a story of Canadian debt help – the good, bad & ugly.

Canadian debt solutions: The position of the stakeholders

Mr. Hervias made a Court application to annul his bankruptcy. He says that the bankruptcy assignment ought not to have been submitted because his only creditor of any significance was the Canada Revenue Agency (CRA). The evidence showed that CRA would have accepted a voluntary proposal to settle his tax liability in regular monthly payments affordable to him. He claims that the Trustee never asked such questions of CRA prior to recommending that he file for bankruptcy.

CRA does not challenge an annulment. It is encouraging his proposal to repay the debt. They likewise intend to file a memorial on the title to his home in which he has equity higher than the debt owed to CRA!

The Trustee is the only party to oppose the annulment application. The LIT insists that when Mr. Hervias sought his help, Mr. Hervias was insolvent because CRA was garnishing his pension and had frozen his bank account. Mr. Hervias had a previous bankruptcy and a couple of other minor creditors. Mr. Hervias had significant equity in buildings he owned with his son and his wife.

Canadian debt solutions: How could this even happen?

Mr. Hervias owed CRA, his major creditor, unpaid income tax of $23,820.50, including penalty and interest. In April 2017, CRA froze his only bank account. He sought help from a debt consultant, Canada Debt Helpline. He required CRA debt forgiveness. On the second meeting with an agent of Canada Debt Helpline, they introduced him to a LIT.

The Trustee met Mr. Hervias at the offices of Canada Debt Helpline. The LIT argues that Mr. Hervias sought bankruptcy guidance when he initially met with him. The Court determined that Mr. Hervias was presented to the Trustee by the debt counselor. The evidence showed that Mr. Hervias looked for the help of a debt consultant; not for a bankruptcy trustee!

The Court found that at the date of bankruptcy, Mr. Hervias had net equity in real estate of $95,000 – far more than the total of his debts! I question whether Mr. Hervias was even insolvent at the date of bankruptcy.

His bankruptcy happened because a debt consultant, who had a cozy relationship with a LIT, recommended a bankruptcy trustee with whom no doubt a financial relationship existed.

Canadian debt solutions: Debt consultants cause harm

I have written before on the evils of the debt consulting/debt settlement industry:

DEBT SETTLEMENT COMPANIES FINALLY TAKEN TO TASK IN ONTARIO – December 17, 2013
HOW ADVANTAGES OF CONSUMER PROPOSALS SAVES YOU FROM DEBT SETTLEMENT COMPANIES – June 30, 2015
CONSUMER PROPOSAL VS DEBT SETTLEMENT – October 1, 2015
DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: NEW CANADIAN GOVERNMENT REPORT EXPOSES DEBT SETTLEMENT COMPANIES HARMING CONSUMERS – May 3, 2017
DIFFERENCE BETWEEN DEBT SETTLEMENT AND CONSUMER PROPOSAL: DEBT SETTLEMENT COMPANIES ARE PROS WHEN IT COMES TO CONS ON INSOLVENT CONSUMERS – May 10, 2017

Canadian debt solutions: Technically or temporarily insolvent?

At the time of the bankruptcy, Mr. Hervias declared some other little financial obligations including:

a possible debt of roughly $900 to a Recreational Vehicle park chain;
$213 owed to Telus Mobility from an old phone agreement; and
a $186 debt to Best Buy for a laptop computer that he had not repaid in full.

Mr. Hervias had assets that well surpassed his obligations. Notwithstanding, he met the technical interpretation of a bankrupt person under s. 2 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). Since the CRA had frozen his only bank account, he had no access to his income to fulfill his commitments as they came to be due.

Because he had a poor credit score, he was not able to arrange to finance on the real property he owned jointly. His wife was also not ready to consent to the financing because she was back in her homeland of the Philippines looking after her elderly mother. She asked her husband to wait until she returned to Canada.

Canadian debt solutions: Was there a realistic option for an insolvency process?

Definitely. The evidence showed that CRA would have agreed to an informal proposal, allowing Mr. Hervias time to repay his debt to CRA. As stated above, his other debts were minor. His bankruptcy was unnecessary.

This is a prime example of the dangers of debt consultants and the Trustees who are in bed with them. For the record, my Firm does not have a relationship with any debt consulting or debt settlement firm.

Canadian debt solutions: The Court’s concerns

The main concerns for the Court were:

did the Court have jurisdiction to annul a bankruptcy in circumstances where the bankrupt was insolvent when the bankruptcy occurred and there is no finding that the bankrupt abused the Court’s process or committed fraud on his creditors in filing an assignment in bankruptcy;
if the court has jurisdiction, whether it should exercise its discretion to annul the bankruptcy in this case; and
in granting the application to annul, whether it should be subject to payment of the trustee’s fees.

The Court determined that it was absurd that someone with considerable assets which created income would assign himself into bankruptcy. This is especially so when the main creditor is prepared to accept payment over a longer time span in amounts that the debtor can afford. The Court concluded that these circumstances were both special as well as uncommon.

Canadian debt solutions: The Court’s decision

However, just because bankruptcy ought not to have taken place, an annulment does not instantly follow. The law is clear that the bankrupt must additionally satisfy the Court that in all the conditions of the case, thinking about all the different stakeholder interests, the discretion needs to be worked out in favour of annulment. Furthermore, the jurisprudence guides the Court to think about the legal rights of the insolvent, the creditors and the public policy issues.

The Court was critical of the LIT. The Court found that prior to the assignment in bankruptcy, the Trustee should have consulted with CRA. Certainly, had he done so, he would have found out that an informal proposal was possible and there would have been no need for any insolvency process, especially a bankruptcy.

In the Court’s view, Mr. Hervias and his creditors are not harmed by an annulment, while the public interest in the integrity of the bankruptcy process is not undermined by annulling this bankruptcy under these unique conditions. Mr. Hervias’ bankruptcy was annulled according to s. 181 of the BIA. Mr. Hervias was ordered to pay the Trustee’s fee and disbursements immediately, subject to taxation.

Canadian debt solutions: Our approach

If you or your company are experiencing financial difficulties, you need a professional trustee. If yes, call the Ira Smith Team. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door.

First of all, we always offer a free consultation. We listen to your issues and offer you a full range of realistic options to help you get out of debt. There have been many times where thinking about all the solutions available, we have advised debtors that they do not need an insolvency process. Rather, maybe they can avoid it by implementing an informal process. As a result, we do not earn any fees from such advice; it is just the right thing to advise and do in those circumstances to help you make total debt freedom.

The earlier you contact us, the more options we will have to carry out. Whether it is a corporate restructuring or personal debt settlement through a consumer proposal, the goal is to avoid bankruptcy. However, if bankruptcy turns out to be the best option, we can assist there too.

You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, ending the pain and stress you are feeling forever. Call Ira Smith Trustee & Receiver Inc. today for your free consultation.

canadian debt solutions

Tags Bankruptcy, Bankruptcy and Insolvency Act (BIA), BIA, canada debt helpline, canadian debt help - the good, canadian debt solutions, Consumer Proposal, cra debt forgiveness, Debt, debt consultant, debt settlement, debt settlement companies, debt solutions, get out of debt, Ira Smith Trustee & Receiver Inc., licensed insolvency trustee, LIT, total debt freedom, trustee