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IF YOU DECLARE BANKRUPTCY WHAT HAPPENS? A COMPREHENSIVE OVERVIEW

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Introduction to Financial Hardships

In life, we often face unexpected challenges that test our resilience and determination. Such is the experience of people we help who have encountered financial hardships due to an unforeseen event outside of their control such as job loss. The burden of mounting debts and looming financial uncertainty weighs heavily on people, pushing them to explore solutions that would lead them toward a path of financial recovery.

That is who we help – the honest but unfortunate debtor. Dealing with financial hardships is a journey that tests our resilience and determination. It’s a path filled with unexpected twists and turns, challenging us to find the strength within ourselves to overcome the obstacles that come our way.

People with financial difficulties, particularly in the face of job loss, credit card debts, income tax debts and the contemplation of bankruptcy, learn valuable lessons about financial recovery, overcoming challenges, and the empowerment that comes from taking control of your financial future. That and if you declare bankruptcy what happens, is what this Brandon’s Blog is about.

Impact of That Unforeseen Event Outside Of Your Control On Your Financial Situation

The impact of that uncontrollable event such as losing your job goes beyond just the loss of income. It disrupts the stability we have worked so hard to build, leaving us feeling vulnerable and uncertain about the future. When someone becomes unemployed, they struggle to make ends meet, juggling bills and expenses with a limited budget. The stress and anxiety that come with financial insecurity can be overwhelming, but it’s during these challenging times that we discover our inner strength and resilience.

Struggles with Credit Card Payments and Bills

One of the most daunting aspects of financial hardships is the burden of credit card payments and bills that seem to pile up with each passing day. People find themselves caught in a cycle of debt, where the minimum payments barely make a dent in the overall balance. The constant worry about falling behind on payments and the fear of accumulating more debt can weigh heavily on our minds, affecting our peace of mind and overall well-being.

Considering Bankruptcy as a Viable Option

When individuals are confronted with substantial debt and limited solutions, the prospect of bankruptcy may arise as a challenging but potentially necessary step toward financial recovery. In my capacity as a licensed insolvency trustee (formerly known as a bankruptcy trustee), I assist individuals through a process of thorough research and consultation. My role involves guiding and comprehending the bankruptcy process, and its ramifications and exploring viable alternatives to bankruptcy. Opting for bankruptcy is a significant decision that individuals are supported in making through a careful evaluation of their financial circumstances, prospects, and personal aspirations.

Throughout the bankruptcy process, the individuals I work with gain invaluable insights into financial empowerment and the importance of seeking assistance when encountering financial challenges. While bankruptcy may lead to temporary implications on one’s credit rating, it also presents an opportunity for a fresh start and the possibility to rebuild a secure financial foundation. Engaging in the bankruptcy process fosters financial resilience and enhances individuals’ ability to navigate future financial decisions effectively.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Exploring Options: The Role of Licensed Insolvency Trustees

A journey towards financial recovery will lead you to a consultation with a licensed insolvency trustee. This no-cost initial consultation will become a guiding light offering insights and solutions to your financial challenges.

Engaging in consultations with a licensed insolvency trustee marks a crucial juncture in your financial path. Our proficiency and empathy equip debtors to comprehend the various solutions at their disposal and make well-informed choices regarding their financial destiny. By engaging in transparent and candid dialogues, you acquire the requisite insight to navigate the intricate bankruptcy process with strength and resolve.

In your journey towards your financial empowerment, the Trustee serves as a pivotal figure in facilitating the bankruptcy application process with the Office of the Superintendent of Bankruptcy Canada (OSB) and guiding you every step of the way. By taking this initial step, you are relieved of the responsibility of making direct payments to unsecured creditors and are granted a stay of proceedings, preventing creditors from initiating or pursuing collection or legal actions against you. This offers a sense of comfort and security, shielding you from additional financial pressures.

Despite the challenges you may be facing, you will find solace in knowing that certain assets may be safeguarded by provincial and federal laws, ensuring a measure of stability during this turbulent time. The Trustee’s guidance on surplus income payments, credit counselling sessions and debt repayment strategies instills a sense of discipline, confidence and commitment toward overcoming financial obstacles.

While the journey toward financial recovery may have its hurdles, the Trustee reassures you that every step taken will lead you closer to a brighter future. Though some people may have a narrow category of debts that may not be discharged, the prospect of rebuilding your financial foundation fills you with hope and optimism.

Through this experience, will learn that resilience in finance is not just about overcoming challenges but also about embracing the opportunity for growth and renewal. As you navigate through the bankruptcy process support provided by the Trustee paves the way for a new beginning filled with hope and possibilities.

If You Declare Bankruptcy What Happens? What is bankruptcy?

Definition of bankruptcy

Canadian bankruptcy is a legal process where an individual, a business or a company declares they are insolvent and are unable to meet their financial obligations. They work with a licensed insolvency trustee to legally file an assignment in bankruptcy. They do so to assign their unencumbered assets to the Trustee and get relief from their overwhelming debt load.

Laws governing bankruptcy in Canada

Navigating the intricate realm of bankruptcy in Canada is a dance choreographed by the Bankruptcy and Insolvency Act (Canada) (BIA). This piece of legislation orchestrates the delicate balance between debtors, creditors, and Trustees, each playing a unique role in the bankruptcy waltz.

When a debtor takes the courageous step of filing for bankruptcy, they are required to bear their financial soul to the Trustee, laying out their assets, liabilities, and monetary intricacies. The Trustee, like a wise conductor, then ensures a harmonious distribution of the debtor’s assets among their creditors, aiming to untangle the financial web that binds them.

For individuals, bankruptcy offers a chance at rebirth, a fresh canvas on which to paint a new financial future. However, for a company or business, it may signify the final curtain call for that legal entity. Yet, there exists a glimmer of hope in the form of selling core assets to a willing successor, potentially salvaging jobs and keeping the business flame alive.

In this intricate ballet of financial redemption, the Bankruptcy and Insolvency Act stands as the maestro, guiding the players toward a resolution that seeks to balance the scales of financial responsibility.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Who qualifies for bankruptcy?

Criteria for qualifying for bankruptcy

In Canada, debtors facing significant debt challenges and unable to meet their financial obligations to creditors may be eligible for bankruptcy relief. To qualify for bankruptcy, debtors must have a minimum of $1,000 in unsecured debt and have been residing in Canada for at least the previous six months before filing, or have a substantial connection to the country.

Alternatives to bankruptcy – Individuals

Depending on how pressing the person’s debts are, there are several alternatives to personal bankruptcy that a licensed insolvency trustee can walk you through. The most common alternatives are:

  1. Credit counselling and budgeting assistance: Sometimes people just need help understanding where their family income comes from and how it is spent. In cases like this, going to a non-profit credit counselling service to get some tips and help in developing a monthly household budget and sticking to it is all that is necessary for the household to get back on track.
  2. Debt consolidation: If you still can borrow money at a rate lower than the amounts you are currently being charged on high-interest-rate credit cards and payday loans, you need to look at debt consolidation. Rather than having several to many high-rate debts, if you can borrow the total amount of your debt from a bank or credit union at a much lower rate than you are currently paying and use that new loan to pay off your high-interest rate debts, that will help immensely. Now you have one lower interest rate loan to repay.
  3. Consumer proposal: A consumer proposal is a formal filing under the BIA, however, it is not bankruptcy. It is where you make a contract with your creditors to pay less than you owe in total. It is based on your monthly income, to offer making monthly payments to the Trustee towards your debt. Normally you pay around 25% of your total debt to the Trustee. If your creditors agree, you can take up to 60 months to complete a consumer proposal. When you have finished making your payments, you get a Certificate of Full Performance and the balance of your debt is wiped away.

Alternatives to bankruptcy – Companies

  1. Asset sales: Are there underused or redundant assets in the company that could be sold to raise needed cash to significantly reduce or eliminate corporate debt? This should first be explored.
  2. Refinancing: Can the company refinance to take advantage of a loan opportunity that will help with its cash flow through lower interest, monthly payments or both? Retiring expensive debt and replacing it with more manageable debt is another avenue to explore.
  3. Formal restructuring – BIA Proposal: Companies that have a viable but insolvent business can look at a formal restructuring. Although it is an alternative to avoid bankruptcy, it is commonly referred to as bankruptcy protection. A proposal under the BIA is where the company can negotiate with creditors to come up with a plan to repay its debts over some timeperiod of time. Just like in a consumer proposal, the company pays less than 100% of its debt load, but upon completion, eliminates all of its unsecured debt.
  4. Formal restructuring – Companies’ Creditors Arrangement Act (CCAA): Companies that owe $5 million or more can also restructure as long as they have a viable business. The CCAA allows a company to restructure its debts and business operations under the supervision of a court-appointed monitor. It is essentially the same as a BIA Proposal, but just under a different Canadian statute.
  5. A BIA Proposal and a CCAA restructuring a similar processes you always hear under the US bankruptcy law of bankruptcy chapter 11.

If You Declare Bankruptcy What happens to your assets, debts, and income during bankruptcy?

Going through a financial crisis can be incredibly challenging, but it’s important to remember that there is always a way forward. The people we help who go through the bankruptcy process are a testament to the resilience in finance and the power of financial empowerment as they use bankruptcy to turn their lives around.

Treatment of assets in bankruptcy

One of the concerns people have when considering bankruptcy is what happens to their assets. When someone goes bankrupt, they may not have to give up all of their assets. Let me explain as follows:

Secured debts: When you have assets where there are secured loans against those assets, such as a house or a motor vehicle, the Trustee’s interest is only the bankrupt’s equity in that asset. If there is little or no equity, and your monthly budget shows that you can afford to make the monthly loan payments and you wish to keep the asset, then you can do so. The Trustee will discuss with you ways in which the Trustee can realize the bankrupt’s equity without that asset being taken away.

Exempt assets: Certain provincial and federal laws safeguard some of your possessions when you file for bankruptcy. As provincial laws vary, you need to get the complete list from a licensed insolvency trustee in the area where you live.

Non-exempt assets: Non-exempt assets refer to assets owned by a bankrupt individual that are not protected by a secured creditor’s security interest or are exempt under provincial or federal laws. These assets fall within a category that the Trustee must liquidate to benefit the creditors involved in the bankruptcy proceedings.

Treatment of debts in bankruptcy

Once the bankruptcy application is filed with the OSB, a significant burden is lifted off the bankrupt’s shoulders. Direct payments to creditors cease, and the Trustee notifies all the creditors and there is an immediate stay of proceedings.

This means that any legal actions cannot be commenced or continued against the bankrupt and all collection activities, such as wage garnishment are put on hold. This offers the person much-needed relief from the constant financial pressure.

Some debts cannot be discharged, such as alimony, child support, valid secured loans and certain types of student loans. A Trustee in your no-cost initial consultation will look at the details of your debts and advise you if any would not be discharged from your bankruptcy estate.

While the decision to make the bankruptcy filing may seem daunting, it is a necessary step toward regaining control of your finances and eliminating the stress in your life. Knowing that your wages are protected from garnishment provides a sense of security during this challenging time.

Treatment of income during bankruptcy

While in bankruptcy, the Trustee monitors the person’s monthly income and expenses. The Trustee is required by the OSB and under the BIA, to do a calculation to determine if the bankrupt person has sufficient income to contribute towards his or her total debts by making surplus income payments to the Trustee.

The Trustee is required to do this calculation both at the time of the bankruptcy filing and throughout the time the person is an undischarged bankrupt. If the person’s income changes, either up or down, this will affect the calculation.

Although judgment creditors cannot garnish wages, it is possible that until the person gets their bankruptcy discharge, they may have to contribute something from their monthly income under the surplus income calculation. A licensed insolvency trustee can explain the calculation to you.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? How long does personal bankruptcy last?

Personal bankruptcy typically lasts for 9 months for a first-time bankrupt in Canada. Your first-time bankruptcy will extend to 21 months if you have to pay surplus income. If this isn’t your first bankruptcy, it will last longer.

At the end of this time, if you have fulfilled all of your bankruptcy duties and neither the Trustee nor any creditor who has proven their bankruptcy claim opposes your discharge, then you are entitled to your bankruptcy discharge. It is at the time you receive your discharge from bankruptcy, that your debts can be discharged.

If You Declare Bankruptcy What Happens? What Are Your Duties During Bankruptcy?

Responsibilities and obligations during bankruptcy

The primary responsibilities entail the disclosure of all assets, liabilities, income, and expenses. It is required to provide bank statements and other relevant records to support the information provided. In the event of a creditors’ meeting, attendance is mandatory.

Attendance at credit counseling sessions

Participating in the two mandatory counselling sessions is an essential component of a bankrupt’s journey toward financial recovery. Each counselling session is held with a person from the Trustee’s office who the OSB has licensed as a credit counsellor.

If You Declare Bankruptcy What Happens? What Is The Impact On Your Credit Score?

Impact on credit score during and after bankruptcy

Filing for bankruptcy in Canada can have a significant impact on your credit score, both during and after the bankruptcy process. Here’s a breakdown of what you can expect:

During Bankruptcy:

  1. Initial Credit Score Decline: Upon filing for bankruptcy, it is common for individuals to experience a substantial decrease in their credit score, typically by 100-200 points or more. This decline is largely attributed to the fact that bankruptcy is a matter of public record, leading lenders to perceive it as a high-risk event.
  2. Credit Reporting: Your credit report will reflect the bankruptcy filing and remain on your report for at least 6 years from the date of discharge (more on discharge below).
  3. Credit Inquiries: Lenders may conduct credit inquiries to assess your creditworthiness, which can further lower your credit score.

After Bankruptcy:

  1. Credit Score Recovery: After bankruptcy, your credit score will gradually recover over time. The rate of recovery depends on your credit habits and the steps you take to rebuild your credit (see next discussion).
  2. Credit Reporting: The bankruptcy notation on your credit report will remain for roughly 6 years from the date of discharge. After that, it will be removed from your report.
  3. Credit Score Objectives: Strive to attain a credit score ranging between 600 and 650 within 2-3 years post-bankruptcy. This will enhance your eligibility for improved loan conditions and interest rates.

Discharge:

In Canada, bankruptcy typically lasts for 9-21 months, depending on your financial situation and the type of bankruptcy you file for (e.g., consumer proposal or personal bankruptcy). Once you’ve completed the bankruptcy process and received a discharge, the bankruptcy notation will be removed from your credit report.

Rebuilding credit after bankruptcy

Tips for Rebuilding Credit After Bankruptcy:

  1. Monitor your credit report: Conduct a thorough review of your credit report to verify its accuracy and pinpoint any potential areas for improvement.
  2. Make on-time payments: It is imperative to make payments on time for all financial obligations to showcase a commendable track record of credit responsibility.
  3. Keep credit utilization low: Maintain a disciplined approach to managing credit by ensuring your credit utilization remains low and refraining from excessive spending. Additionally, exercise caution when seeking new credit opportunities by minimizing credit inquiries and refraining from submitting multiple applications within a condensed timeframe.
  4. Avoid new credit inquiries: Limit the number of credit applications you make and try to avoid applying for multiple credit products within a short timeframe. This will help you maintain a stable credit profile and minimize the impact of new credit inquiries on your credit score.
  5. Credit Score Rebuilding: If you’re looking to improve your credit after facing financial challenges, some practical steps you can take include applying for a secured credit card, becoming an authorized user on a family member’s credit account, or taking out a small loan. One relatively accessible option post-bankruptcy is getting an RRSP loan, where the RRSP is held at the same financial institution you’re borrowing from.

These kinds of loans must normally be repaid within 1 year. Making all loan payments on time and doing the same thing again the following year not only will rebuild your credit, but also build your savings.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? What are the consequences for your spouse’s credit and assets?

Spouse’s liability for joint debts

In Canada, when one spouse files for bankruptcy, sometimes it can have consequences for the other spouse’s credit and assets, depending on the type of bankruptcy and the couple’s financial situation. Here’s a breakdown of the most common issues.

  • Credit Score Impact: The non-bankrupt spouse’s credit score could be affected if they are jointly liable for certain debts with the bankrupt spouse. This is because it may view the non-bankrupt spouse as being the next to default.
  • Joint Debts: If the couple has joint debts, such as a mortgage, car loan, or credit card, the non-bankrupt spouse will still be responsible for paying those debts. This is because joint debts are considered a shared responsibility.
  • Assets at Risk: Any of the non-bankrupt spouse’s assets that are jointly owned with the bankrupt spouse, will be at some level of risk. For example, if the couple owns a jointly held property, the Trustee must recover the non-exempt equity of the bankrupt spouse’s assets. In jointly held property, this will on a practical level impact and involve the non-bankrupt spouse, who is the natural purchaser of the bankrupt spouse’s equity.
  • Credit Reporting: The non-debtor spouse’s credit report may reflect the bankruptcy filing depending on the type of bankruptcy, the credit reporting agency and any joint debts or debts guaranteed by the non-bankrupt spouse.

Types of Bankruptcy and Their Impact on the Non-Debtor Spouse

Consumer Proposal: A consumer proposal is a debt settlement agreement between the insolvent spouse and their creditors. In this case, the non-insolvent spouse is not directly affected by the consumer proposal filing, but they may still be responsible for paying joint debts.

Personal Bankruptcy: Personal bankruptcy is a more severe type of bankruptcy that involves the liquidation of assets to pay off debts. In this case, the non-insolvent spouse’s assets may be at risk if they are jointly owned by the bankrupt spouse.

Protection of spouse’s assets during bankruptcy

The time to put plans in place to protect the assets of each spouse is upon the acquisition of each asset when neither spouse is insolvent. Any transfers of assets aiming to shield them from creditors, will not be successful. Here are some tips:

Separate Property: If the non-insolvent spouse has separate property, such as a separate bank account or a separate property, it is generally protected from the bankrupt spouse’s creditors.

Exemptions: In Ontario, individuals going through bankruptcy can keep certain assets as exempt property. These include household furnishings and appliances valued up to $14,180, livestock, tools, and other items used in farming up to $31,379 for farmers, tools of trade up to $14,405 for self-employed individuals, one motor vehicle worth up to $7,117, equity in a primary residence not exceeding $10,783, and funds in registered plans like RRSPs, RRIFs (other than contributions in the 12 months preceding the bankruptcy), and life insurance policies with designated beneficiaries such as a parent, spouse or child.

Credit Counseling: Additionally, credit counselling might be a good idea for the non-bankrupt spouse.

If You Declare Bankruptcy What Happens After You Are Discharged From Bankruptcy?

Discharge from bankruptcy

The effects of an absolute discharge from personal bankruptcy for the person are substantial. As soon as an outright discharge is granted, the debtor is no longer accountable for any type of unsecured debts that existed at the date of bankruptcy (with a few specific exceptions). The debtor is launched from needing to pay back debts that they took on before applying for bankruptcy.

This indicates that the debtor no longer has to stress over paying back those financial debts and can move on with their life. This supplies a clean slate for the borrower and helps them return to their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged? If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9-month bankruptcy period. To qualify for this automatic discharge, you must have:

  • attended the two mandatory financial counselling sessions with the Trustee;
  • no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate
  • according to guidelines set by the OSB or Official Receiver); and no opposition to his or her discharge. The only party that can authorize an
  • automatic discharge
  • in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

Rehabilitation and rebuilding finances after bankruptcy – A Path to Financial Freedom

Rehab after personal bankruptcy entails a combination of finance management, debt administration, and as indicated above, credit rebuilding. The goal is to produce a sustainable economic strategy that permits you to manage your debt, reconstruct your credit, and achieve lasting financial security.

The key steps to rehabilitation are:

  1. Get your bankruptcy discharge: Attend the two mandatory financial counselling sessions with your licensed insolvency trustee firm, fulfill all your other duties in the bankruptcy administration and obtain your discharge from bankruptcy
  2. Create a Budget: Continue tracking your income and expenses to identify areas where you can cut back and allocate funds more effectively. A budget will help you prioritize your spending and make informed financial decisions.
  3. Prioritize Debt Repayment: Focus on starting within your budget spending so that you can pay your bills every month on time in full.
  4. Rebuild Credit: Use the tips I listed above to rebuild your credit.
  5. Screen Credit Reports: Obtain a duplicate of your credit report and correct any type of mistakes or errors to guarantee your credit score is accurate.
  6. Seek Professional Guidance: If you feel you need an element of accountability to help you in your rehabilitation, seek out a non-profit credit counsellor or financial coach to give you personalized guidance and support to help you navigate the rehabilitation process and achieve your financial goals.

Rehabilitation after bankruptcy can have numerous benefits, including:

  • Improved credit scores
  • Reduced debt burden
  • Increased financial stability
  • Greater financial flexibility
  • A fresh start

    If you declare bankruptcy what happens
    if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Looking Towards a Brighter Future Conclusion

The people we help through personal bankruptcy for their journey of financial recovery are filled with a sense of gratitude and hope. The impact of understanding their credit rating, navigating the bankruptcy process, and embracing the steps toward recovery are profound. It not only tests their resilience in finance but also empowers them to envision a brighter future filled with possibilities through a fresh start.

I hope you enjoyed this if you declare bankruptcy what happens Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

If you declare bankruptcy what happens
if you declare bankruptcy what happens
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Brandon Blog Post

BANKRUPTCY LAWYER IN TORONTO VS. BANKRUPTCY TRUSTEE IN TORONTO: WE EXPLORE AND EXPLAIN COMPLETELY THE DIFFERENCES FOR YOU

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

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

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

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

Bankruptcy lawyer in Toronto introduction

Canada is recognized for its cultural diversity, but it can be a battle to locate trustworthy information on the nation’s laws. Bankruptcy is a difficult topic to learn about; both learning the technical side and dealing with the emotional one.

If you or your company are thinking about bankruptcy, you might think you need a bankruptcy lawyer in Toronto. However, you do not necessarily require one. A licensed insolvency trustee in Toronto (formerly called a bankruptcy trustee in Toronto) can help you pick the perfect insolvency process for you and make certain that you survive it as best as possible.

In this Brandon Blog, I discuss the roles of a bankruptcy lawyer in Toronto and a licensed insolvency trustee. Sometimes they can overlap and many times they do not. We will take a detailed look at a bankruptcy lawyer in Toronto vs a licensed insolvency trustee. We will discuss the differences between the two and exactly how they can each help you.

Bankruptcy lawyer in Toronto – Do you need one to file personal bankruptcy?

Whether it is personal bankruptcy proceedings, or one of the formal alternatives to bankruptcy such as a consumer proposal or a Division I Proposal that are being contemplated, a bankruptcy lawyer in Toronto or elsewhere is not involved in the actual bankruptcy filing. or the Canada – restructuring & insolvency filing. That is what trustees in bankruptcy do.

When a person or company is contemplating an insolvency process, they can get a no-cost consultation with any one of the bankruptcy trustees they choose to meet with. During the consultation, information is gathered by the Trustee, analyzed and possible solutions are discussed.

Trustees must always be careful to not tread into areas that could possibly give them a conflict in providing their financial services. People wanting advice on asset transfers, asset protection, or preferring one or more creditors over others are areas that Trustees should not wade into.

In situations like that, I always advise potential bankruptcy clients that as there is no privilege in our discussions and we should not talk about those things so that I will not be conflicted. Rather, the person should get advice from a bankruptcy lawyer in Toronto or elsewhere where the discussions and the legal advice are protected by solicitor-client privilege.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Do You Need a personal bankruptcy lawyer in Toronto to get your bankruptcy discharge?

As I have written before in several Brandon Blogs, there are 6 possible outcomes in a bankrupt’s application for discharge. This depends on whether the discharge is being opposed by either the Trustee and/or one or more creditors. The possible bankruptcy discharge outcomes are:

  • Automatic – This discharge is absolute and is given by the Trustee at the earliest possible time the bankrupt person is entitled to a discharge. It means that the bankruptcy has performed all of his or her duties, has fully cooperated with the Trustee and nobody has opposed the discharge.
  • Absolute – An absolute discharge is obtained when the Trustee issues the automatic discharge. it is also possible to obtain an absolute discharge when a creditor opposes the bankrupt’s discharge, the matter goes to court for a hearing, but the court does not believe the evidence presented by the opposing creditor is persuasive and the court orders an absolute discharge.
  • Conditional – In this type of discharge, there was opposition to the bankruptcy receiving an absolute discharge. The court considered the evidence and concluded that the bankrupt must fulfill one or more conditions before being entitled to a discharge from bankruptcy. More often than not, a conditional discharge includes a certain amount of money the bankrupt must pay to the Trustee for the general benefit of the creditors.
  • Suspended – A suspended discharge is given when there is opposition to the bankrupt’s discharge and the matter goes to court for a discharge hearing. Based on the evidence, the court believes that the bankrupt, either before or during the bankruptcy estate file administration, has conducted himself or herself in such a way that although a discharge will be given, it should be delayed. The suspension acts to delay the discharge and can be combined with conditions.
  • Refused – The bankrupt’s discharge is opposed probably by at least the Trustee and probably one or more creditors. There is sufficient evidence before the court that the bankrupt has not lived up to his or her duties and has probably failed to fully cooperate and provide full disclosure to the Trustee. The court, based on the evidence, refuses to consider the bankrupt’s application for discharge until such time as the bankrupt performs all duties and discloses all information.
  • No order – This is not an actual discharge type, but can be the outcome of a discharge hearing. The court can issue a “no order” instead of a refusal. The facts are probably similar to when the court can issue a refusal. However, in a “no order” situation, the bankrupt remains in bankruptcy but the Trustee is then free to pursue its discharge. Once the Trustee gets its discharge, the bankrupt lose the protection offered by the stay of proceedings. Creditors are then free to pursue all of their rights and remedies against the bankrupt in the enforcement of their trying to collect their respective debts.

When the time comes for the bankrupt to get his or her discharge from bankruptcy, if the Trustee or a creditor opposes, the bankrupt would be well advised to consult with a bankruptcy lawyer in Toronto or elsewhere. The Trustee cannot give an automatic discharge and the matter is going to court for a trial. The bankrupt should get the benefit of legal advice and probably will need to retain the lawyer to provide legal services in representing the bankrupt in court. That is not the job of the Trustee.

Corporate Bankruptcy in Canada – Corporate bankruptcy lawyer in Toronto, Canada – Do you need one to file corporate bankruptcy?

As I will explain, every Canadian corporate insolvency file requires probably several, not just one bankruptcy lawyer in Toronto or elsewhere. Insolvency law is complex and lawyers will help all the parties involved.

The current economic climate in Canada is going to be challenging for Canadian businesses and I expect there will be many financial difficulties. Government COVID-19 support programs are scheduled to end soon. Companies have been tapped out while shut down just trying to stay alive with little or no revenue being earned. Companies will need cash now that it is time to start everything up again. No doubt there will be business casualties.

However, not all businesses are created equal. Some will be able to restructure, some will file for bankruptcy and others will merely shut their doors and fade away.

Among the keystones of a restructuring proceeding under either the Companies’ Creditors Arrangement Act or the Bankruptcy and Insolvency Act is the debt workout. The restructuring is designed to maintain the debtor’s business and negotiate a financial debt repayment strategy with its creditors. The aim is to save jobs, allow the company to continue while avoiding bankruptcy liquidation.

Key components of a debt workout normally include debtor-in-possession lending (DIP lending) while the company is reorganizing, new capital for the company coming out of its restructuring and getting unsecured creditors, and possibly secured creditors, to agree to accept less than they are owed. In the very large corporate restructuring files, there are normally lending syndicates due to large and complex lending arrangements. They too will need lawyers to help them with the insolvency law.

If a restructuring proceeding is not possible or does not succeed, then either the company’s secured creditor will begin receivership enforcement proceedings or the company will file an assignment in bankruptcy or a creditor will launch a bankruptcy application to put the company into bankruptcy.

In every corporate insolvency file, legal services are required by all the stakeholders. Canadian counsel plays an important part in providing advice. In the larger files, a large team of lawyers will be needed for both the company and its main creditors. The Board of Directors will need their own independent legal team. The bankruptcy trustee in Toronto will also need a dedicated team of lawyers to help navigate through the formal restructuring in court or help in a court-appointed receivership, private receivership or bankruptcy.

As you can see, in pretty well every corporate file, a bankruptcy lawyer in Toronto or elsewhere is pretty well a must-have requirement. Lawyers will be able to help the company, its Board of Directors, its creditors and the insolvency professional create effective solutions. The best ones will also make sure that they are also practical solutions.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Other situations where you could need a bankruptcy lawyer in Toronto, Barrie, GTA, or elsewhere

When looking for a bankruptcy lawyer in Toronto, Barrie, GTA and elsewhere, you want to find one that has substantial experience. Depending on the situation you or your company are involved in, the experience could be in one or more of:

  • financial reorganizations;
  • debt reorganizations and debt restructurings;
  • debtor legal rights and creditor rights;
  • security enforcement;
  • forbearance/standstill arrangements;
  • lender liability suits;
  • receivership and related matters for banks or other secured lenders, court and privately appointed receivers;
  • insolvency and bankruptcy litigation or other complex matters; and
  • acting for receivers and Trustees, debtors, secured creditors, unsecured creditors or any other stakeholder in an insolvency process.

Take Your First Step Towards A Debt Free Life

I hope that you found this bankruptcy lawyer in Toronto Brandon Blog interesting and that you now have a better appreciation for when getting bankruptcy legal advice is necessary. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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

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

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

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

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Call us now for a no-cost bankruptcy consultation.

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

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

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Brandon Blog Post

IS CANADA IN A RECESSION: OUR 9 EASY STEPS TO SOLVE COVID-19 INDUCED FINANCIAL PROBLEMS

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.
If you would prefer to listen to the audio version of this is Canada in a recession Brandon’s Blog, please scroll to the very bottom and click on the podcast.
is canada in a recession
is canada in a recession
Is Canada in a recession introduction

One question that people are searching online for answers is: Is Canada in a recession? Last month I wrote a blog titled Canada in recession: Will the economy fall into a great depression? In that blog, I described the views of Nouriel Roubini is a world-known economist and a professor of economics at New York University’s Stern School of Business. He has some stark current thoughts on just how bad the Canadian economy can go. I invite you to again read that blog to see what his thoughts are.

That blog accepted the signals that Canada is in a recession. The purpose of this Brandon’s Blog is to take a step back and answer the question: Is Canada in a recession?

Is Canada in a recession? What is a recession?

To begin to answer is Canada in a recession, we first need to understand what a recession is.

A recession is a short-term period of overall economic decline. Economies go via cycles, which implies there are periods of growth as well as durations of decline. The COVID-19 pandemic has actually thrust our economic climate into a decrease, a lot like just how a considerable, unanticipated expense can upend your own household budget plan.

The federal government identifies when our economy has actually entered a recession and when it has left by measuring key economic signals. These signs are sensitive to what happens locally and internationally. They include, for circumstances, declines in various industry sectors, agriculture or manufacturing, and also disruptions to international trade.

The C.D. Howe council defines a recession as a pronounced, persistent, and pervasive decline in total economic activity. It considers both GDP and employment as its major rulers. Is Canada in a recession? It stated that Canada is formally in an economic crisis and recession.

What did some economists forecast about is Canada in a recession

Economists were checking out financial indicators of the health of the Canadian economy near the end of 2019 and very early in 2020 to try and forecast the future. So, what were economists saying about is Canada in a recession?

What some economic experts were predicting prior to the coronavirus pandemic was that they really did not assume we would see one this year. However, on the other hand, last October David Rosenberg, chief economist at Gluskin Sheff & Associates, assumed there would certainly be an 80% chance of an economic downturn coming to Canada this year.

The complete level of its economic impact will certainly not be known for some time. It seems clear to economists that the United States will certainly go into an economic downturn in 2020 if it hasn’t already. Since 1970, Canada has experienced economic crises at roughly the very same time as the USA, showing the interconnectedness of the two economies. So it appears that all of North America is in a recession.

How bad will Canada’s COVID-19 recession be?

Canada is only now seeing the tip of the economic iceberg from COVID-19. It is clear that its economic effect will be like nothing seen since the Great Depression. Economists state the overview for employment and the economic climate will be stark. The only silver lining may be that the deepness and suddenness of the decrease might offer hope for a fast rebound.

As I previously reported, Dr. Roubini thinks there are pressures that not only would make is Canada in a recession, but it could go into a depression! His view is that there is going to be a U-shape recuperation due to the fact that this is an international shock. Both households and businesses will need to invest less and save more. Precautionary savings are most likely to go higher. Income is most likely to be lower. This will convert into much less business capital spending. He claims there will certainly be a worldwide investment slump due to a global savings excess.

How long will this is Canada in a recession last?

The rapid spread of coronavirus led to unprecedented personal, the social, and economic impact that caught the world largely unprepared. Although the government of Canada responded decisively with programs and grants to lessen the economic devastation, the recovery period remains to be seen. And by most indicators, this downturn is looking like a long and steep uphill climb.

If we’re looking specifically at negative growth, then economists anticipate that this trend won’t continue for long. There are 2 reasons:

  • Lockdown mandated by the government. Whatever was closed down by government mandate which takes place much faster than a shutdown due to economic issues.
  • Government bailouts. The government is supporting the whole economy. Yes, we’ll need to pay back the government in taxes eventually yet that can only occur when the economy is recovering. This suggests that economic growth will certainly be slower.

Parliament budget officer Yves Giroux believes that the Canadian deficit this year will strike $256 billion, consisting of a 6.8% decline in economic development, the most awful showing since the 1981-1982 economic recession.

Is Canada in a recession? Are there any predictors of a recession recovery?

Indicators like stagnant salaries, low home financial savings, as well as high consumer financial debt, don’t predict economic crises, yet they do forecast just how challenging the healing will be when an economic downturn hits. Below are some signs and symptoms that can indicate a recession:

  • the surge in joblessness;
  • an increase in bankruptcies;
  • defaults or repossessions;
  • the falling rate of interest;
  • reduced consumer spending;
  • decreased consumer confidence; and
  • falling asset prices.

A healthy and balanced labour market as well as a turnaround in the housing sector helped the Canadian economy expand at a modest rate in 2019. This supports the contention that in order to come out of an economic downturn, companies and consumers need to feel confident to invest and spend.

What can you do when is Canada in a recession

If you believe the answer to the question is Canada in a recession is yes, after that there are several things that you can do. I have written on these problems before under several headings such as financial literacy, household debt and the benefits of having an emergency savings fund on hand in case of, well, an emergency situation.

You can’t regulate the country’s economic climate, yet you can control your very own. Every person requires to take a look at:

  • Using this time to examine your overall household budget and figure out some practical yet difficult goals for your cash.
  • This is the time to live according to your emergency situation budget and look at what your typical spending plan will certainly resemble once you are back to work.
  • Consider your typical budget based upon what it looked like before COVID-19 hit and the insights you’ve gotten around your spending behaviours since you’re living more frugally.
  • Making a plan to eliminate credit card debt. Try to find a no or extremely reduced rate of interest balance transfer charge card to transfer the balance to if you have some credit card financial debt lingering around.
  • A strategy to include a savings element in your family budget will aid to shield you when you face a reduction or a full loss of your earnings.
  • Dealing with the pandemic as a wake-up call to recession-proof your funds. If your income was impacted by the pandemic, what length of time could you have survived had the government, banks and other financial institutions and different corporations not actioned in with procedures to get cash back into your wallet through deferrals?
  • Can you work at a couple of jobs that amount to providing you with a full-time revenue? This might first take some efficient networking before you can discover the appropriate mix of work.
  • Have an emergency fund all set up. It will go a long way to helping you weather a recession.
  • No matter your current scenario, the very best way to recession-proof you and your family is with an emergency savings account.

In the post-COVID years, there is a likelihood that lenders will be stingier with exactly how much cash they loan to customers. So guarantee that your budget permits constant debt repayment when you resume a stable income that resembles your pre-coronavirus income level.

That is exactly why it is crucial to focus on your financial situation now and take steps to guarantee your long-term personal financial stability.

Is Canada in a recession summary

It certainly feels that way. I hope you found this is Canada in a recession Brandon’s Blog informative. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

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

 

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Brandon Blog Post

CANADA IN RECESSION: WILL THE ECONOMY FALL INTO A GREAT DEPRESSION?

canada in recession
canada in recession

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

If you would prefer to listen to the audio version of this Canada in recession Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Canada in recession introduction

It’s official. C.D. Howe Institute has declared that Canada in recession because COVID-19 is now a reality. Canada’s economy is in a recession. Nouriel Roubini is a world-known economist and a professor of economics at New York University’s Stern School of Business. He accurately forecasted the credit crisis of 2007-2008. He has some stark current thoughts on just how bad the Canadian economy can go. He has written and talked at length lately about the components that could take Canada in recession to a depression.

Canada in recession – When will there be a recovery?

Dr. Roubini sees three possible scenarios for how things are going to develop in the global economy. He says:

  1. His baseline assumption for North America this year is one of a U-shape recovery.
  2. The equity markets in the US are pricing in a V-shaped recovery with very strong growth in the second half of the year into next year.
  3. There is a risk of a greater depression for the rest of the decade but not for this year.

He believes there are forces that are going to lead Canada into a depression. His view is that there is going to be a U-shape recovery because this is a global shock. Both households and corporations will have to spend less and save more. Precautionary savings are going to go higher. Income is going to be lower. This will translate into less business capital spending. He says there will be a global investment slump because of a global savings glut.

That is a recipe for a very anemic recovery.

Could external forces push the US and Canada in recession into a depression?

The question is how long and how deeply related to this crisis the recession will be? Although in the short term there is Canada in recession, later in the decade is when there will be a price to be paid. That potential for depression and deep slump happens later in the decade as a result of fear and panic leading people and companies to save more and spend less.

So, what can governments do to stave off a worse depression? Dr. Roubini is very pessimistic and believes a greater depression will happen sometime later in the decade. He believes it is only a matter of when and not whether it will happen.

He describes the North American economy as a train wreck in slow-motion. It won’t happen this year but there are fundamental forces like debt and deficits leading people and businesses to insolvency. There will be an inability to fund liabilities coming from demographics that become worse. There will be deflation that is going to make more people insolvent. The need for quantitative easing will debase currencies. The need will be because of the large fiscal deficits that eventually are going to lead to inflation by the middle of the decade.

There is also digital disruption because manufacturers will have to substitute labour with the capital in equipment and technology because businesses will have to cut costs to save more and spend less. That implies more automation and more robotics; especially if we are going to try to lessen our dependence on China for goods.

We are in the process of a democracy backlash. People who are scared are becoming more populist and will try to elect authoritarian populist governments to come to power all over the world. Relations with China will probably become colder because of the coronavirus related anger towards China. It is going to get very ugly.

There will be digital rivalries including cyber warfare. It will get worse over the next few years. This is the way warfare is going to be. It will not be the conventional words the enemies of the Western Hemisphere be it China, Russia, Iran or North Korea. They cannot fight the USA using conventional weapons.

Events in the 2016 US election and the COVID-19 pandemic in 2020 shows our enemies that they can use cyber and biological war to successfully weaken the North American economy and create societal problems. They will continue to interfere with the US democratic process and use man-made disasters. Pandemics and global climate change are two things they can weaponize to try to destabilize our way of life.

This has the potential to make us wind up into a great depression. Government fiscal policy cannot do much about it. That is not the tool we need to fight these new threats.

What about internal forces pushing the US and Canada in recession into a depression?

One huge issue is the debt level; both personal debt and sovereign. We are in way over our heads. We were before this crisis. In terms of how we get out of it is there a natural path that would resolve it? It doesn’t seem clear right now because governments are having to spend trillions of dollars to keep their economies afloat during the coronavirus pandemic. What has kept things in check prior to the pandemic is that interest rates were close to zero, if not negative, like in Europe and Japan. The current economic environment is going to make it impossible for governments to change the historically low-interest rates for the foreseeable future.

I have written many times before discussing different issues relating to record high Canadian household debt levels. The debt levels are the single most internal reason why Canada in recession could become Canada in depression.

Canada in recession summary

I don’t mean to be pessimistic when talking about Canada in recession. However, today, I just don’t see any silver lining. I am sure there is one, I just can’t see it right now.

I hope you have found Canada in recession Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

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

 

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Brandon Blog Post

CANADA EMERGENCY WAGE SUBSIDY: HELPING YOUR COVID-19 BUSINESS RECOVERY

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

Introduction

Statistics Canada says the annual cost of living rate went negative in April as the economy came to a standstill in the very first full month of the pandemic. The agency says the consumer price index for April fell 0.2 percent compared with a year ago as energy rates did a nosedive. It was the very first year-over-year decline in the CPI since September 2009. As a result, on May 15, Prime Minister Justin Trudeau announced some amendments to existing Federal government support programs, including the Canada Emergency Wage Subsidy program, to help during this COVID-19 pandemic.

Millions of Canadians have actually lost their jobs due to the COVID-19 pandemic. As our economic recovery gradually begins, any place feasible to do so securely, Canadians need to return to work. Businesses opening up again safely will bring life back into the Canadian economic climate. That is exactly why the federal government generated the Canada Emergency Wage Subsidy (CEWS) (initially called the Canada Emergency Response Benefit) in March.

Canada Emergency Wage Subsidy extended

I have previously written about the federal government assistance programs to help both workers and employers. The overall umbrella name for all the programs is the COVID-19 Economic Response Plan. When the CEWS program was launched, critics quickly pointed out that it did not cover all types of businesses. They also wondered if the original program, scheduled to end June 30, was long enough to really help the economy.

On May 15, PM Trudeau introduced amendments to the program to help businesses get ready for reopening. These companies need to be able to rehire workers and with any luck perhaps hire even more than they had when the state of an emergency shutdown was declared. So, the CEWS is extended for 3 extra months to August 29. The CEWS covers 75% of an employee’s salaries– up to $847 per week – for eligible employers. For those able to additionally benefit from the Temporary 10% Wage Subsidy for a period, any credits taken under that program for a pay period will decrease the amount available to be claimed under the CEWS for that exact same time period.

The 1 part of your business your customers are most worried about

So businesses currently have some runway to get restarted. This is a good thing as businesses will certainly need funding to reactivate. Specific businesses might need a few extra staff members than they had before the shutdown. I just read this morning an article about what restaurants and other businesses may have to do to make customers feel at ease about returning.

The one area of the business that people might fear is the washroom. The article raises the following questions that should be answered before reopening:

  • How many people can be in there at one time?
  • Is every other urinal in the men’s room going to have to be sealed off?
  • Are the barriers between stalls and urinals sufficient?
  • Do the sinks have automatic taps or will patrons have to use the handles to turn on the water?

So a new job category that really hasn’t been seen much since the early 1960s might just come back – the washroom attendant. The business will have to make sure they can prove to their customers and clients that the washrooms are being cleaned on a very regular basis. Someone will have to make sure that there are only a limited number of people in a washroom at one time so that social distancing can be maintained. This could lead to new jobs!

Other amendments to the CEWS

The CEWS will ideally keep encouraging companies to rehire staff and even broaden where possible. The federal government has actually pledged, for moving forward, that it will work with company and labour stakeholders on any other changes that might be required.

Among the important things, they will certainly be looking at the 30% income drop limit for eligibility. As companies start-up, satisfying that revenue test should not be an obstacle to growth. Although all businesses require aid, certain ones could not fulfill the revenue decline test. There are two main factors. The revenue decline examination is on a monthly basis. Considering that the first half of March businesses were operating normally, many could not meet the test for that month. Startup companies probably couldn’t either.

Other businesses did not qualify not because of the revenue decline test, but because their business did not meet the original definition. So, Justin Trudeau announced broadened eligibility for the CEWS benefit. Previously, only corporations and charitable organizations were eligible employers for this wage subsidy benefit. Now the list has been expanded.

The eligible employer list has now been expanded and includes:

  • individuals (including trusts)
  • taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
  • non-profit organizations
  • agricultural organizations
  • boards of trade
  • chambers of commerce
  • non-profit corporations for scientific research and experimental development
  • labour organizations or societies
  • benevolent or fraternal benefit societies or orders
  • registered charities
  • partnerships consisting of eligible employers

Public institutions continue to not be eligible for the subsidy. This includes municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals.

Canadian Emergency Business Account (CEBA)

In my April 13 blog, COVID 19 BUSINESS SUPPORT: CANADA EMERGENCY BUSINESS ACCOUNT REVIEW, I described the CEBA in detail, as the program then existed. On May 15, at the same time, he was announcing the extension and changes to the CEWS, PM Trudeau also announced an expansion of the CEBA program. The expansion is meant to include an important part of the Canadian economy that was previously excluded. I think the exclusion was inadvertent, in the government’s rush to get the program out. So Justin Trudeau announced that the CEBA program will also now include:

  • Sole proprietorships/partnerships.
  • Any other form of owner-operated businesses.
  • Businesses that hire contractors but not employees, so they do not have a payroll account with the Canada Revenue Agency.
  • Family-owned businesses where remuneration is paid via dividends, not salary.
  • Businesses where the proprietor uses a personal bank account for business purposes rather than a business operating account.
  • Newly created businesses.

This should go a long way to removing previous inequities in the CEBA program.

So now, the list of ineligible businesses is relatively narrow, being:

  • A government organization or body, or an entity owned by a government organization or body.
  • A union, charitable, religious or fraternal organization or an entity owned by such an organization or if it is, it is a registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services.
  • A business owned by any Federal Member of Parliament or Senator.
  • One that promotes violence, incites hatred or discriminates on the basis of sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, contrary to applicable laws.

Summary

I hope you found this Canada Emergency Wage Subsidy Brandon’s Blog helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.canada emergency wage subsidy

 

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Brandon Blog Post

BANKRUPTCY HELP: SIGNS YOU NEED HELP

bankruptcy help

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

Bankruptcy help: Introduction

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

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

Bankruptcy help: 10 signs that you need help

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

Bankruptcy help: How we provide debt help

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

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

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

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

Bankruptcy help: What are some possible solutions

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

The range of options might include:

Credit counselling

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

Debt consolidation

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

Consumer proposal

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

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

Bankruptcy help: Do you have too much debt?

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

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

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

 

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Brandon Blog Post

ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET

Estates Act Ontario: Introduction

I am continuing my series of blogs to show how it would be very natural to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate under the Estates Act Ontario. In this blog, I am going to focus on that piece of provincial legislation that guides the activities of an estate trustee.

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I set the stage by going over some basics when it comes to a deceased estate and why a LIT would be very comfortable with those basic requirements for an administration of a deceased estate. In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I described why in some cases parents trying to do the right thing by making all their children an estate trustee could turn out very wrong.

In this and the next two blogs, I want to focus on the three main Ontario statutes that govern the conduct, duties and responsibilities of an estate trustee of a deceased estate. The three statutes that I will talk about are:

  1. Estates Act, R.S.O. 1990, c. E.21;
  2. Estates Administration Act, R.S.O. 1990, c. E.22; and
  3. Trustee Act, R.S.O. 1990, c. T.23

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

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.

Provisions a LIT is familiar with

Jurisdiction

Section 5 of the Estates Act Ontario states that letters of administration shall not be granted to a person not residing in Ontario. Similarly, a bankruptcy trustee must be licensed by the Superintendent of Bankruptcy in each province the LIT wishes to practice in.

Posting of security

Section 14(2) of the Estates Act Ontario requires that the administrator appointed to administer a deceased estate may be required to post security as the court might require.

Section 5(3)(c) of the Bankruptcy and Insolvency Act (Canada) (BIA) states that the Superintendent of Bankruptcy can:

“…require the deposit of one or more continuing guaranty bonds or continuing suretyships as security for the due accounting of all property received by trustees and for the due and faithful performance by them of their duties in the administration of estates to which they are appointed, in any amount that the Superintendent may determine…”

The posting of security is another common area that a LIT understands well.

Court can appoint

Section 29 of the Estates Act Ontario deals with the appointment of an estate trustee. This section gives the Ontario Superior Court of Justice the authority to appoint an estate trustee where:

  • a person dies intestate;
  • the estate trustee named in the will refuses to prove the will;
  • where the named estate trustee(s) ask another person be appointed to administer the deceased’s estate; or
  • where there are special circumstances.

Section 243(1) of the BIA gives the Court the power to appoint a receiver. So, assessing the appropriateness of acting as a Court officer and providing consent to do so is something a LIT is quite familiar with.

Accounts to be rendered

Section 39 of the Estates Act Ontario requires the estate trustee to “…render a just and full account…” of the estate trustee’s activities. The LIT is fully familiar with this process. In both a Court-appointed receivership and a bankruptcy administration, the LIT must submit full and detailed accounts showing its activities, fees and disbursements for approval by the Court. This approval process is called taxation. This is another common area between the duties of an estate trustee administering a solvent deceased’s estate and the duties of a LIT.

Admitting and disallowing claims

Sections 44 and 45 of the Estates Act Ontario deals with the rules to be followed in contesting claims made against the deceased’s estate. The LIT is very familiar with this process. Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.

The LIT is a perfect party to be able to decipher claims made against a deceased’s estate and follow the provincial statute in the allowance and disallowance of claims.

Disputes as to ownership

Section 46 of the Estates Act Ontario describes the process for handling the claim by any third party to ownership of personal property in the estate not exceeding $800 in value. There are steps in the BIA that a LIT must follow when faced with claims of ownership of property by a third party in the possession of the bankrupt. So resolving such disputes is very familiar to the LIT.

Summary

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

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

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 Estates Administration Act and how a LIT is most familiar with them also.

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

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Brandon Blog Post

3 RECENT DEBT HEADLINES

Debt headlines: Introduction

There have been three recent debt headlines that have attracted a lot of people’s attention. In this Brandon’s Blog, I discuss all three.

Debt headlines: Bankruptcy statistics

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. In my blog, BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?, I described the statistics. Many financial writers started to forecast doom and gloom. However, in my blog, I comment that I don’t see it that way. Insolvency filings in November 2018 were down from October 2018. The business writers quoted the statistic that there was a 5.2% increase in November 2018, compared to November 2017. However, insolvency filings have been unusually low for close to 10 years. So the increase really is not a big deal.

The actual problem is not these stats. Instead, it is the historically high degree of Canadian house debt collected when rates of interest went to near almost 0%. Since we stay in a slowly boosting rates of interest environment for the near future, not every person or business will be able to carry their high debt. This will lead to more insolvency filings.

Debt headlines: 46% of Canadians on the verge of bankruptcy as rates increase: Study

I have written before about Canadians and their debt load. Personal debt loads are of some worry. There’s brand-new information that casts a brand-new alarming light on the state of Canadians’ personal balance sheets.

A current study reveals that 46% of Canadians are on the verge of bankruptcy as interest rates increase. I begin by stating a word of caution. The survey size was a small pool so I don’t want to generalize. Canadians have a great deal of debt. What does that tell us about what these people are saying?

This really did not occur overnight. These are long-lasting financial obligations that have been gathered over a long time. The weight of them is actually having an influence. These are individuals that live paycheque to paycheque.

Well, these people are claiming that 46% who answered the survey would not have enough cash or are within $200 or much less to manage their debts and expenses at the end of the month. If something shows up that can interfere with that whether its rates of interest going higher, they might lose their job, or they might have unanticipated emergency costs. So what this informs us is that practically half of Canadians that were surveyed are truly living really near to the margin.

Numerous people do live in this way. Having debt repayments that stay in the mix since that is something that is non-negotiable, will certainly increase in time if you do not resolve it. Rates of interest will certainly increase. Do we understand what percentage of these individuals is facing that? I’m going say a fair number.

The reason I say this is due to the fact that if you return to the start of the monetary crisis in 2008, the Bank of Canada decreased rates of interest in an initiative to boost the economic climate. Ten years actually. I recognize rates of interest have actually begun to go higher however when you’re in this low-interest atmosphere you can carry a lot of debt.

People have. I’m not speaking about the tiny expenses placed on a charge card. I am speaking about paying an astronomically high price for a house in a rising real estate market, not having the ability to manage those home mortgage repayments, tackling that costly debt using your charge card.

43% of those surveyed stated they are sorry for some of the debt that they incurred. They would certainly enjoy a getaway today however if you cannot pay for it that vacation credit card debt is still there.

Just how concerned do you get when you hear that rates of interest are increasing? You are most likely to need to be getting ready to get your affairs in order.

Debt headlines: Canadian financial institutions might drop by ‘a minimum of’ 50% says a US Hedge Fund


Canadians following our markets look to see what’s happening with the Canadian financial institutions. There is one short seller following the Canadian banks. Denver-based Crest Capital believes the Canadian real estate market will lead Canada into an economic downturn. Nonetheless, the huge 6 financial institutions have actually taken care of proving the cynics incorrect in the past.

Kevin Smith is the founder and CEO of Crest Capital, a hedge fund with $53 million in assets under administration. Crest Capital also has an excellent track record. He is shorting the Canadian financial institutions and thinks now is the moment. He thinks it actually boils down to China.

Kevin Smith thinks that:

  • there is a real estate bubble in Canada;
  • housing debt to GDP has been blown up and been trouble for a time;
  • house prices have increased for a very long time; and
  • the cash streaming in from China that has actually pushed up housing prices and
  • compelled Canadians themselves to extend to purchase real estate.

He believes the China credit bubble is ultimately going to break. China has this credit bubble which has actually been taking place for years. The cash has actually been spilling around the globe yet he believes the funding streams currently from China are truly beginning to run out and perhaps also turn around. There has actually been a lot of cash leaving China right into Canada. This is what has aided the Canadian real estate market and the economic climate.

He said that we are 10 years right into a worldwide financial cycle. He thinks Canada’s personal high debt to GDP ratio will leave the financial institutions holding the bag on this debt trouble. I do not know if he is right, yet that is what he is banking on.

Debt headlines: Can you afford your debt payments with a higher interest rate?

Do you have too much debt? Are you worried that the future interest rate hikes will make presently affordable commitments entirely unmanageable? Is the discomfort, tension and anxiousness presently detrimentally affecting your health and wellness as well as health?

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

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

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Brandon Blog Post

BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?

bankruptcy statistics

If you would rather listen to the Bankruptcy statistics Canada 2018 blog audio file, please scroll down to the end for the podcast.

Bankruptcy statistics: Introduction

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. Most of the headlines on this report quoted that Canadian insolvencies rose 5.2% in November 2018. While true, that headline alone could create the impression that we now have runaway bankruptcies in Canada. Nothing could be further from the truth. Let me explain.

Bankruptcy statistics: The latest numbers

Total insolvencies in November 2018 was 5.2% higher than total insolvencies in November 2017. That is what the press has quoted. However, that statistic by itself is meaningless. The complete number of insolvency filings (proposals and bankruptcies) in Canada lowered by 2.5% in November 2018 contrasted to the previous month.

For the 12-months ending November 30, 2018, total insolvencies boosted by 2.0% compared with the 12-month period ending November 30, 2017. This is a fairly modest total increase. Keep in mind that insolvencies in Canada have been at historically low levels for the last 9 years! A total annual increase of 2% from a historic low number is hardly an epidemic.

Consumer insolvencies for the 12-months ending November 30, 2018, increased by 2.0% compared to the 12-months ending November 30, 2017. Consumer personal bankruptcies were down by 5.0%, while consumer proposals were up by 8.4%. The percentage of proposals in consumer insolvencies increased to 55.7% during the 12-month period finishing November 30, 2018, up from 52.4% throughout the 12-months ending November 30, 2017. This means that over half of those Canadians who made an insolvency filing in this time period avoided bankruptcy. This is a good thing.

Business insolvencies for the 12-month period ending November 30, 2018, decreased by 0.6% compared to the 12-month period ending November 30, 2017. The industries with the largest decrease in insolvencies were mining and oil and gas. The industries with the largest increase in insolvencies were building and construction and retail.

Bankruptcy statistics: What is the real issue

The real issue is not these statistics. Rather, it is the historic high level of Canadian household debt amassed when interest rates were at near zero percent levels. Now that we are in a gradually increasing interest rate environment for the foreseeable future, not every person or company carrying high debt will be able to continue meeting their obligations and will have to resort to an insolvency proceeding.

I have written about the dangers of carrying too much debt for many years now. We are now entering the period where the rubber meets the road. Stephen Poloz, Governor of the Bank of Canada, feels the Canadian economy is doing sufficiently well to slowly boost rates of interest. Mr. Poloz believes to be tightening up that a bit. At the exact very same time, the latest insolvency statistics show that the marketplace now tells a story that there may be room for some actual pessimism about the Canadian economy.

Previous Bank of Canada Governor Mark Carney and the former Finance Minister, the late Jim Flaherty, warned the Canadian consumer to place the economy on their back and march it up a high hill. We did and it worked. This is now the outcome of it.

Bankruptcy statistics: Canadian household debt

There’s a good deal of conversation on what that suggests specifically for Canadians. It isn’t that the warnings have actually not been there for a while. The most recent statistics show that Canadian household debt is around 170 percent of disposable income. The regular Canadian owes $1.70 for every single buck of revenue made each year, after tax.

Twenty years ago, the proportion was 100%. So as you can see, there has been a stable climb in Canadians’ cravings for more financial debt. We have among the greatest financial obligation percentage of any of the Organisation for Economic Co-operation and Development participant nations. For those carrying high debt, it is now time to buckle your seat belts as interest rates will continue to rise.

There were indications that the Canadian consumer was thinking of their budgeting. Statistics Canada previously reported that retail sales were slowing down. Now in the latest insolvency statistics, we see that retail is one of the industry sectors that had an increase in corporate insolvency filings.

With rates of interest increasing, so does the cost of borrowing and the cost of maintaining variable rate loans. Fixed rate loans that mature will need to be refinanced at higher interest rates if the loan cannot be repaid in full.

Bankruptcy statistics: Debt in a rising interest rate environment

Do you have too much debt? Does your company have too much debt and is in danger of shutting down? Are you concerned that future interest rate hikes will make currently manageable debt totally unmanageable? Are the pain and stress 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.

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PRIVACY BREACH LAWSUIT AGAINST LICENSED INSOLVENCY TRUSTEE FAILS

privacy breach lawsuitPrivacy 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.

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:

  1. He purchased a product from Netlink and provided personal information, including, his name, address and credit card details.
  2. The Trustee contracted with the auctioneer to sell the assets.
  3. 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.
  4. The Trustee provided the auctioneer computers and Netlink servers and other records containing the Private Information.
  5. Criminals that obtained the Netlink servers offered the information to other criminals, consisting of cybercriminals and identity thieves.
  6. 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.
  7. 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.
  8. 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

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