Last week we told you about professional athletes who earned enormous fortunes and blew it all on lavish, unsupportable lifestyles. The end result was bankruptcy. There is another group of professional athletes who also earned millions and ended up using a bankruptcy alternative to avoid bankruptcy, but not because they blew it all. They were trying to shield their money from taxes through complex offshore tax structures. However, the Canada Revenue Agency (CRA) reassessed them and now they had a huge tax bill and needed debt forgiveness CRA.
This is certainly not a new phenomenon. The newspapers and tabloids often feature stories about famous people who the tax department reassesses for using complex tax structures designed by agents, managers, accountants, and lawyers. In this case, our very own Olympian, Donovan Bailey, had to file a proposal under the Bankruptcy and Insolvency Act (Canada), as a result of an offshore tax scheme to try to beat the CRA. And, sadly, he’s not the only one.
Debt forgiveness CRA: Her Majesty outruns the offshore tax scheme
The offshore tax scheme that nearly bankrupted Donovan Bailey was designed to lessen the amount of income tax to be paid. Donovan Bailey made a “charitable donation”. It went through a complicated series of transactions. The money made its way back to Mr. Bailey, through an offshore account. It was supposed to come back in tax-free.
The problem was that the tax authority reassessed Donovan Bailey. They said the charitable donation was no more than a sham to avoid paying taxes. Instead of tax-free money Donovan Bailey found himself in debt to the CRA to the tune of $2.3 million in unpaid taxes and ended up in bankruptcy court.
Debt forgiveness CRA: CRA gets tough
The CRA has vowed to get tough on tax evaders and the tax professionals who help them. CRA threatens with increased fines and jail sentences. They have a strategy to root out high-risk wealthy Canadians and corporations that stash cash in offshore accounts to avoid taxes. And, they’re spending $444 million on these measures, and expect to recoup $2.6 billion in added revenue over five years.
Debt forgiveness CRA: What to do if you have too much debt
The Ira Smith Team has a cumulative 50+ years of experience dealing with diverse issues and complex files. We deliver the highest quality of professional service. Don’t settle for less. Give us a call today and Starting Over, Starting Now you can overcome your financial difficulties.
Last week I provided you with my infographic, video and blog to give you information on the Canadian corporate bankruptcy Canada process. I focussed on how an incorporated business files for a voluntary bankruptcy in Canada. This week, I want to describe how an individual files for voluntary bankruptcy. I also want to answer what I have found to be the personal bankruptcy Canada faq. So look at the infographic and watch the video below. Feel free to read in more detail below the video.
Personal bankruptcy Canada faq: Personal bankruptcy process in Canada
One of the most asked questions is “What is the bankruptcy process in Canada?”. Last week our infographic and video described the corporate bankruptcy process in Canada. This week’s video describes the personal bankruptcy process in Canada.
VIDEO – Personal bankruptcy Canada faq
Personal bankruptcy Canada faq # 1 – How do I recognize if I am in financial trouble?
If you are having difficulty paying your debts or have actually quit paying them altogether then you are in financial difficulty. Call an expert, a government qualified trustee to check your choices for reducing your debt and eliminating your stress and pain.
Personal bankruptcy Canada faq # 2 – Is bankruptcy my only alternative to get relief from debt?
The short answer is no; there are other options. You should always start first with a free consultation with a licensed insolvency trustee (LIT or Trustee). A LIT is a private party licensed by Industry Canada to carry out the restructuring and liquidation rules under the Canadian Bankruptcy and Insolvency Act (BIA). The LIT will discuss options with you to first avoid bankruptcy. These options include:
Bankruptcy does not deal with debts such as home mortgages, vehicle loan, spousal support or child support. Debt settlement firms try to bargain with your lenders to lower the amount owing. They also prepare a payment plan for you to settle the debt; they do not “erase your debt”.
The Canadian government is in the process of implementing new rules to curb the activities of some debt settlement companies. Some of them charge you for reviews that a licensed insolvency trustee performs for free. They also sell you products you don’t need, under the guise of helping you improve your credit score.
Personal bankruptcy Canada faq # 3 – I have actually seen advertisements from Debt Settlement firms stating they could erase my debt without making use of a Trustee in bankruptcy. Just how does that work?
They don’t and their ads are misleading. If you first have a free consultation with a LIT, you will learn that a number of choices available to you that include yet are not restricted to debt reduction including a consumer proposal.
Understand that these debt settlement firms are not licensed trustees. Eventually, they stop charging you for things a LIT would do for free. Then they ultimately hand you over to a LIT for either a consumer proposal or bankruptcy. You could have just gone to see a professionally licensed Trustee to start with!
Personal bankruptcy Canada faq # 4 – Do I get approved for bankruptcy?
You qualify for individual bankruptcy in Canada if you are financially troubled, insolvent and owe greater than $1,000.
Personal bankruptcy Canada faq # 5 – Should I file bankruptcy?
Without the detailed information of your unique circumstance, that decision cannot be made. Get In touch With Ira Smith Trustee & Receiver Inc. for a complimentary no commitment session so you will understand your options for ending your debt pains, Starting Over, Starting Now.
Personal bankruptcy Canada faq # 6 – If I declare bankruptcy, will I lose my house and car?
There are certain claims that are not released by your discharge from bankruptcy. Examples are home mortgages and car loans, if you choose to keep them. It comes down to what is your equity in those assets. The answer to that question and your ability to cash-flow those debts will be the determining factor. There is a list of items that are exempt from seizure. Call Ira Smith Trustee & Receiver Inc. to find out more.
Personal bankruptcy Canada faq # 7 – Once I file bankruptcy, exactly what occurs to the money I owe?
Once you declare bankruptcy you will be required to surrender certain non-exempt assets to the Trustee. These assets will then be sold and the money earned from the sale of the assets distributed among your creditors.
Personal bankruptcy Canada faq # 8 – Even though I have not located work in my field, I still owe on my student loans. Will my bankruptcy get rid of that debt?
Is your date of bankruptcy within 7 years of when you discontinued to be a full or part-time student? If so, your student loan debt will not be released by your discharge from bankruptcy. In particular instances, you could be able to apply to the court for a discharge of your student debt obligations under the “hardship provision”.
Personal bankruptcy Canada faq # 9 – What takes place to my salary or wages throughout a bankruptcy?
Salaries and wages are not influenced by bankruptcy. However you will need to complete an Income and Expense Form noting your household earnings as well as costs. This becomes part of your budgeting procedure. If your earnings goes beyond specific requirements developed by the Office of the Superintendent of Bankruptcy (OSB) (“surplus income”), you will be required to pay part of the surplus income into the bankruptcy estate through the trustee.
Personal bankruptcy Canada faq # 10 – Canada Revenue Agency has actually frozen my bank accounts and has a garnishee with my employer on my earnings. Just how can I stop all that?
If you have filed personal bankruptcy, personal income tax debt is an unsecured debt. As soon as you’ve declared bankruptcy or made a consumer proposal, Canada Revenue Agency (CRA) cannot start or continue taking any kind of enforcement activity versus you, consisting of wage garnishment or freezing your assets. Your Trustee will alert CRA once you file. The LIT will also advise both CRA and your bank and employer that any enforcement activity against you for your debt cannot continue.
Personal bankruptcy Canada faq # 11 – Will I still owe loan after I state bankruptcy?
Maybe, due to the fact that bankruptcy does not cover secured lenders – home mortgages, auto loan, student loans (if it is less than 7 years given that you discontinued to be a full or part-time student). It also does not cover certain other debts:
penalties or fines enforced by the court;
spousal support;
child support; or
debts arising from fraud.
Personal bankruptcy Canada faq # 12 – How long will I be bankrupt?
The time you spend in bankruptcy will depend on whether this is a first or 2nd bankruptcy and if you have surplus income. Get In touch with Ira Smith Trustee & Receiver Inc. to find out more.
Personal bankruptcy Canada faq # 13 – Who will know that I have declared bankruptcy?
As soon as you declare bankruptcy your Trustee will tell your creditors, CRA, and the Superintendent of Bankruptcy. The two Canadian credit bureaus, Equifax and TransUnion, obtain filing records from the Superintendent of Bankruptcy, so it will be on your credit report.
Bankruptcy filings are a public document. On top of that particular personal bankruptcies, those with non-exempt assets estimated to realize more than $15,000, need an ad in the “legal” section of a local newspaper.
Personal bankruptcy Canada faq # 14 – How will bankruptcy influence my creditscore ranking?
An individual that files bankruptcy gets the lowest credit score ranking. Details of your bankruptcy that influences your credit report is inevitably eliminated many years after your discharge from bankruptcy.
Personal bankruptcy Canada faq # 15 – What does a LIT/Trustee do?
A Trustee is an individual or company licensed by the OSB to carry out mandates under the BIA such as bankruptcy, proposal, consumer proposal, summary administration bankruptcy and business reorganizations. A LIT is an officer of the Court. The Trustee has a duty of care for the rights of both the debtor and the creditors.
The LIT also makes certain that the legal rights of the insolvent/bankrupt are not abused.
Here is a listing of standard steps taken by a Trustee:
Reviews and counsels debtors on available alternatives
Prepares official documentation that is both filed with the OSB and used to tell creditors
Ensures the validity of creditors’ claims
Ensures that debtors are provided with mandatory counselling and access to mediation services if there is a dispute about any income they are required to contribute
Sells the debtor’s assets, except those exempt from seizure by provincial and federal laws, and hold the proceeds in trust for distribution to creditors
Administers the bankrupt estate from beginning to end
Assesses the debtor’s conduct both before and during a bankruptcy, as well as the cause(s) of the bankruptcy; and
Arranges for (and if necessary reports all the above to the Court) for the bankrupt’s application for a discharge (in the case of personal debtors)
Personal bankruptcy Canada faq # 16 – How do I pick the ideal Trustee?
Make an appointment for your free consultation. Meet with the Trustee and ask any questions you might have about alternatives to bankruptcy, consumer proposal, debt settlement/restructuring, bankruptcy and/or the bankruptcy procedure. Get a feel for not only the answers you receive, but how interested does the Trustee seem in you as a person. Can you see yourself relating well to that person. Does the Trustee make you feel comfortable and the type of person you want to work with.
If not, consult with a different Trustee firm and repeat the procedure until you find a Trustee that you really feel comfy working with.
Personal bankruptcy Canada faq # 17 – Is my spouse/partner impacted by my bankruptcy?
Your partner/spouse will not be financially affected by your bankruptcy unless they have co-signed a debt or own assets jointly with you. A creditor could pursue your spouse/partner for any debt that they have co-signed for. This includes a mortgage on your jointly owned home.
Personal bankruptcy Canada faq # 18 – How will my bankruptcy impact my present divorce case?
In Canada, the bankruptcy process does not interfere with the majority of the divorce proceeding. The Trustee will stand in the shoes of the bankrupt spouse when it comes to the rights for either the equalization payment or the division of property. All issues about spouse and child support and child custody issues carry on as if there was no bankruptcy at all.
Personal bankruptcy Canada faq # 19 – What is Chapter 7?
Chapter 7 is not applicable in Canada. It is the liquidation section of the U.S. Bankruptcy Code, the federal law governing bankruptcy in America.
Personal bankruptcy Canada faq # 20 – What is Chapter 11?
Chapter 11 is not applicable in Canada. It is the corporate restructuring section of the U.S. Bankruptcy Code, the federal law governing bankruptcy protection in America.
Personal bankruptcy Canada faq – What Now?
I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.
The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.
Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.
Hannah Bell beats PEI NDP leader was certainly a great headline. However, the one we want to focus on is “Hannah Bell Beats Her Debt Problems”. The purpose of this Brandon’s blog is to tell the story of the financial woes of Hannah Bell. She is a Prince Edward Island woman who recently won a by-election in Prince Edward Island. Hannah Bell, PEI Charlottetown-Parkdale, is the 2nd Green Party MLA sworn into the legislature. Ms. Bell is a very accomplished woman. Here is a link to the Hannah Bell PEI bio.
Hannah Bell beats PEI NDP Leader: Hannah’s story is like so many others
Hannah’s story is like so many others who have filed for either bankruptcy or a consumer proposal, the best bankruptcy alternative. It is also like many who have consulted and filed with our firm; life got in the way. The only difference is that none of our clients hold public office like Hannah Bell PEI green party member Charlottetown-Parkdale.
Hannah Bell beats PEI NDP Leader: Hannah’s tax problem
A Federal memorial submitted versus her, the Green Party candidate that won the District 11 Charlottetown-Parkdale by-election in a surprise victory over the Liberals and Progressive Conservatives. The judgment, submitted in September 2016, reveals she owes $26,252 to the federal government in tax obligations.
She was reassessed a $26,000 tax obligation after the Canada Revenue Agency (CRA) carried out a review of her tax returns going back many years. She states she had gotten some bad tax recommendations when relocating her government pension plan into a private plan after leaving a federal government position. The outcome was this costly tax obligation.
Be proactive and proud like Hannah Bell
She says she is not embarrassed by this tale of her financial woes. She states that she has worked very hard through some difficult times to provide for herself and her child as a single mother. Her debt was such when– after a previous costly custody fight and living life as a single mom– that she determined the most effective means to manage this issue was to file a consumer proposal through a Licensed Insolvency Trustee.
Ms. Bell states it’s unfortunate her economic problems had to come to light as part of the other candidates’ political agenda. “Most of us don’t have emergency funds that go into the tens of thousands of dollars,” Bell said.
Ms. Bell is somewhat philosophical about her journey:
“It puts me a bit closer to everybody’s regular story, which is – I can tell you what it feels like to run out of money and wonder what you’re going to do and that you have to make really good decisions. So for that, there is no shame in this.”
She is not alone
Ms. Bell is by far not alone. In previous blogs, we have shown that even the rich and famous have run into financial problems and declared bankruptcy.
Family and Human Services Minister Tina Mundy’s individual economic debts ended up being front-page fodder in 2015. Premier Wade MacLauchlan had actually picked her for cabinet then, and one day after being sworn in, approved her resignation after it concerned him that Ms. Mundy had submitted a consumer proposal.
The financial woes of Hannah Bell could happen to anyone. From our experience, we agree with Ms. Bell’s assessment that her journey puts her a bit closer to many people’s regular story.
What to do if you have too much debt
This story shows that anything is possible. Against all odds, Hannah Bell won the election and her debt problems. With our help, you can beat your debt problems too.
Have you been reassessed by CRA and don’t have the money to pay them in a reasonable period? Do you have unmanageable debts from any other reason? Be proactive, just like Hannah Bell and Tina Mundy. It’s time to repair the cycle of debt while you still have alternatives.
The Ira Smith Team has years of experience assisting Canadians like you, getting you back on track to debt free living. CallIra Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.
Can you file personal and corporate bankruptcy: Introduction
Can you file personal and corporate bankruptcy is a question all small business owners ask us when they come to our office for a free consultation. We discuss local business bankruptcy with entrepreneurs in our office. Their personal and business lives are intertwined. There’s very little distinction between the individual their small business.
This is especially true if their business in unincorporated and is being operated as a proprietorship. Our role is to first understand them as a person and as a business separately. This way we can give the best possible advice. If the business is a proprietorship, then we are only talking personal bankruptcy, or alternatives to avoid bankruptcy, such as a consumer proposal or restructuring proposal.
Can you file personal and corporate bankruptcy: Better to be separate legal entities
If their business legal form is that of a corporation, then we look at both the corporate and personal issues separately. The reason for this is because in the eyes of the law, the corporation and the individual are separate people. Many times it is not necessary for both the corporation and the individual to each file an insolvency process. Maybe only one has to.
Separating your business and personal assets and liabilities is a great reason for incorporating your business. When discussing bankrupting an incorporated company, we also need to consider if there are any Director liabilities. We must also consider the owner’s personal situation. This is so we can make sure they do not do themselves more personal harm than good. We also first look to see if there is a way to restructure and save the corporation.
Can you file personal and corporate bankruptcy: What is bankruptcy
Bankruptcy is a lawful method for the honest but unfortunate company or person to get a remedy from the burden of the financial debts that cannot be repaid. When an assignment in bankruptcy is submitted a “stay of proceedings” is invoked.
What the stay of proceedings means
The stay of proceedings results in stopping creditors from beginning or continuing with litigation against the company or person. The stay of proceedings also stops an unsecured creditor who has obtained a judgement. It stops them from garnishing funds from a bank account or part of the person’s wages. For unsecured creditors, the stay of proceedings also calls a timeout to make sure that one unsecured creditor does not get a benefit over others in regards to the settlement of financial obligations. Keep in mind that the bankruptcy process could also be started by one or more unsecured creditors. They must be owed at least $1,000 in total.
Can creditors push you into bankruptcy?
The unsecured creditor(s) could file a motion with the Court requesting that a Bankruptcy Order be issued against the company or person. The method of bankrupting a corporation in Canada is the same as that of a person. In addition to being able to prove that the company or person owes this unsecured creditor or group at least $1,000, they also need to prove that at least one act of bankruptcy has been committed in the 6 months prior to the filing of the motion.
The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) identifies the various acts of bankruptcy. The most common one is “ceases to meet his liabilities generally as they become due”.
Secured creditors are generally not impacted by bankruptcy. They can realize upon the assets of the company or person covered by the security. In return for the original loan, the lender required that the borrower put up the security as a condition of the loan. The reason for this was so that if insolvency happens, the lender could sell the assets to try to repay the loan, interest and costs.
The secured creditor only really takes part in the bankruptcy process if after they have sold all the assets covered by their security, they are still owed money. The balance they are still owed is an unsecured debt.
Personal bankruptcy
If an individual’s business is a single proprietorship or a partnership, but not a corporation, legally, the person or people are also the business. So when they deal with the possibility of bankruptcy, all their assets are included, subject to provincial exemptions. Simply put, the assets of the business are not held different from their individual assets, so a small business bankruptcy of this kind is personal bankruptcy. Where does Canada Revenue Agency fit in?
There are generally 3 types of claims that Canada Revenue Agency (CRA) has against a business. It does not matter if the business is incorporated or is a sole proprietorship.
The 3 kinds of CRA claims generally are:
Unremitted source deductions from employee payroll
Net HST owing
Unpaid income tax from profitable years
Both the HST liability and income tax, in a bankruptcy, is an unsecured claim. However, the HST liability is also a personal claim against the Director(s) of a corporation. Unremitted source deductions are both a deemed trust claim against the bankrupt’s assets and in the case of a corporation, a personal claim against the Director(s) of the company.
When we do our first consultation with a business owner, when the business is run in a corporation, whenever unremitted source deductions or HST is involved, this always leads to a talk about the person’s situation in the event CRA would make a claim against the Director. Some bankruptcy statistics
According to the Office of the Superintendent of Bankruptcy Canada, for the 12 months ending September 30, 2017, there were 125,912 insolvencies in Canada. This is a decrease of 3% over the same time period a year earlier. Consumer insolvency filings were 122,296 or 97.1% of total filings. The consumer filings were split into 59,192 bankruptcies and 63,104 consumer proposals – roughly half and half.
Business insolvency filings for the same time period in all of Canada totalled 3,616, a decrease of 8.1% from the 12 month period one year earlier. Business insolvency filings were split into 2,719 bankruptcies and 897 proposals. These statistics do not include filings by very large corporations under the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36).
As you can see, for a country the size of Canada, there were not a lot of business insolvencies during the first 9 months of 2017. The consumer filings were split roughly even between bankruptcy and a consumer proposal, the best consumer bankruptcy alternative.
Alternatives to Declaring Bankruptcy
A consumer proposal entails paying back a part of your financial debts in return for your unsecured creditors forgiving the remaining balance owing. A consumer proposal provides a significant benefit for a proprietor or partner in an unincorporated business. Unlike in a bankruptcy, your assets are not available for seizure by the licensed insolvency trustee (LIT).
You can take up to 60 months to pay off your consumer proposal. How much you will have to offer your creditors depends on what the unsecured creditors could expect in your bankruptcy. Working with a LIT, you work out that amount through discussion and analysis. A LIT can explain the entire process to you. From a financial viewpoint, a consumer proposal is better than your bankruptcy because it permits the unsecured creditors to recoup a larger part of the debt than they would receive in your bankruptcy.
What is best for you and your business?
If you find you or your business is in a financial danger zone, contactIra Smith Trustee & Receiver Inc. We’re full-service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.
Your financial problems can be solved with immediate action and the right plan. Give us a call today.
Section 227 (4) of the Income Tax Act (Canada) (ITA) and the mirrored provisions in the Employment Insurance Act (Canada), create deemed trusts against the property of a tax debtor. When a tax debtor doesn’t remit employee source deductions or HST collections, a deemed trust Canada Revenue Agency claim arises.
Deemed Trust Canada Revenue Agency claim: Parts of the Initial Order
In every Court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA), there are several standard provisions in the Initial Order issued by the Court. In addition to the stay of proceedings provision, there’s also the need to make sure that the insolvent company has:
sufficient debtor in possession (DIP) funding to survive the restructuring process;
the Directors incentivized to stay in their capacity; and
The normal way of achieving this is to give Court-ordered priority charges. Examples are for the borrowing authority, the Directors’ Charge and the Administrative Charge. This is so the lender, the Directors and the Court-appointed Monitor and its legal counsel know that there is a source of (re)payment.
Priority charges are made when certain affected parties may not be represented in Court. Therefore, a standard “comeback clause” is also in the standard Initial Order. This allows any affected party to make a motion before the Court to amend such Court-ordered priority charges.
Deemed Trust Canada Revenue Agency claim: The Canada North Group Inc. decision
The decision goes through a very interesting analysis as to whether a deemed trust Canada Revenue Agency claim provides Her Majesty with the ownership of the property of the company or is merely a secured interest in the property. Section 227 (4) of the Income Tax Act (Canada) and the mirrored provisions in Employment Insurance Act (Canada), create deemed trusts. Section 37(2) of the CCAA explicitly preserves their operation. Specifically, can Court-ordered priority charges under a CCAA restructuring prime the deemed trust Canada Revenue Agency claim.
Deemed Trust Canada Revenue Agency claim: Section 227(4.1) of the ITA
Section 227(4.1) of the ITA states:
“Extension of trust
(4.1) Notwithstanding any other provision of this Act, the Bankruptcy and Insolvency Act (except sections 81.1 and 81.2 of that Act), any other enactment of Canada, any enactment of a province or any other law, where at any time an amount deemed by subsection 227(4) to be held by a person in trust for Her Majesty is not paid to Her Majesty in the way and when provided under this Act, property of the person and property held by any secured creditor (as defined in subsection 224(1.3)) of that person that but for a security interest (as defined in subsection 224(1.3)) would be property of the person, equal in value to the amount so deemed to be held in trust is deemed
(a) to be held, from the time the amount was deducted or withheld by the person, separate and apart from the property of the person, in trust for Her Majesty whether or not the property is subject to such a security interest, and
(b) to form no part of the estate or property of the person from the time the amount was so deducted or withheld, whether or not the property has in fact been kept separate and apart from the estate or property of the person and whether or not the property is subject to such a security interest
and is property beneficially owned by Her Majesty despite of any security interest in such property and in their proceeds, and the proceeds of such property shall be paid to the Receiver General in priority to all such security interests.”
deemed trust canada revenue agency claim
Deemed Trust Canada Revenue Agency Claim: What is the nature of Canada Revenue Agency’s interest?
The Court raised, amongst other things, the following two questions:
What is the nature of Canada Revenue Agency’s interest?
Does the statutory secured status deemed trust Canada Revenue Agency claim elevate it above a priority charge?
Canada Revenue Agency relied on the trust provisions in the Fiscal Statutes. It argued that it holds a proprietary and not secured interest in the debtor’s property. Key to its position under its deemed trust claim is the concluding phrase in s 227(4.1) described above.
Canada Revenue Agency asserted that these words take it beyond a mere secured creditor. They stated it was so because they do not just consider the Crown to be the owner of the interest. Rather, the statute says that it is the owner. However, previous decisions in Canada have found that the deemed trust is not in truth a real one as the subject of the trust cannot be identified from the date of creation of the trust.
The Court also stated that, in principle, the deemed trust is similar to a floating charge over all the assets of the tax debtor. This is because the tax debtor is free to deal with its property. When it does, the trust releases the disposed-of property and attaches to the proceeds of sale. To find otherwise would freeze the tax debtor’s assets and prevent it from carrying on business. The Court found that this was not a result intended by Parliament.
The Court concluded that Canada Revenue Agency’s interest is a security interest, not a proprietary interest.
Deemed Trust Canada Revenue Agency Claim: Can the statutory deemed trust Canada Revenue Agency claim be raised?
The Court stated that it may seem that certain sections of the CCAA conflict with the deemed trust sections in the Fiscal Statutes on a strict reading of only the above-noted section of the ITA. That is what Canada Revenue Agency did to support its interpretation.
However, the Court went on to say that one must not read these provisions in a vacuüm. The Fiscal Statutes, the BIA, and the CCAA are part of complex legislative schemes that run concurrently. They must be read in their entire context. The aims of the statutes and Parliament’s intention kept in mind.
The Court agreed with earlier cases that the purpose of the CCAA is to let the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating its assets. The Court also stated that the CCAA legislation is remedial in the purest sense. It provides a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of business operations can be avoided. It allows for a Court-supervised attempt to reorganize the financial affairs of the company.
Deemed Trust Canada Revenue Agency Claim: The Supreme Court of Canada on the Indalex deemed trust
Following the Supreme Court of Canada decision in the Indalex deemed trust decision, the Court agreed that the securing of the DIP facility is a key aspect of the debtor’s ability to attempt a workout. The harsh reality is that commercial imperatives govern the lending practices of the lenders, not the interests of the policy considerations that lead the government to legislate in its favour.
The Court also found that the priority charges aid in the restructuring process. Certain examples of such priority charges are:
Interim DIP lender’s charge providing both an incentive and guarantee to the lender the recovery of funds advanced during the restructuring.
The priority charge in favour of Directors is important. The charge keeps the captains aboard the sinking ship. Without the benefit of this charge, directors might abandon the ship.
A priority charge for administrative fees is critical to a successful restructuring. It is the only protection the Court-appointed Monitor and its legal counsel have to make sure that their bills are paid.
Further, the Court found that the Section 11.52(2) of the CCAA codifies and elaborates on priority charges. Previously, the Court used its inherent jurisdiction in granting priority charges. The Court found that this shows Parliament’s intention that secured creditors’ interests could be eroded if the Court felt the need.
Deemed Trust Canada Revenue Agency Claim: The Court’s Decision
The Court stated that Canada Revenue Agency’s position that the deemed trust Canada Revenue Agency claim cannot be primed, fails to reconcile that the goal of the Canadian insolvency restructuring regime and Parliament’s continued commitment to facilitating complex corporate CCAA restructurings, even if it requires erosion of security.
For this and the other reasons listed above, the Court determined that the CCAA gives the Court the ability to rank the priority charges ahead of the deemed trust Canada Revenue Agency claim and the resultant security interest.
Deemed Trust Canada Revenue Agency Claim: Is Your Company In Need of Financial Restructuring?
The CCAA’s aim is to help business survival and avoid the multiple traumas caused by business failure. The Ira Smith Team have decades of experience in both complex personal and corporate financial restructurings.
If you or your company cannot survive without a restructuring, contact Ira Smith Trustee & Receiver Inc. NOW for a free consultation. You are just one phone call away from getting back on the road to financial health and reducing your stress levels, Starting Over, Starting Now.
Below is our list of 5 stupid credit check failed reasons stopping you from getting that loan you can repay. You likely recognize that not paying your credit card on schedule or missing out on a settlement could harm your credit score. That is probably the most common credit check fail. So, those reasons are not on our list of credit check failed reasons. There are much less clear methods to sink your rating. You could be doing some without understanding the influence you’re triggering.
Below are 5 unexpected methods you could be damaging your credit score:
Credit check failed reasons: Decreasing your credit line
You might assume that you’re increasing your credit score by reducing your credit line on your credit card. However that could be having the other impact. Credit score use is the second-most vital credit score aspect, after history of credit card repayments.
Your credit use is your compared with just how much you’re using. When you lower that proportion, that is a good thing. Many professionals suggest maintaining it around 30 to 35 percent.
By reducing your authorized credit amount, you’re really increasing your credit use proportion.
Toronto financial advisor Seun Adeyemi says that most people are not aware that cancelled credit lines, even after making full repayment, can hurt your credit score.
Here is an example. Say you have 2 credit cards:
a Visa with a $1,500 balance as well as a $4,000 credit limit;
as well as a MasterCard with $1,500 outstanding and a $6,000 credit authorization.
Your credit usage is just 30 percent since you’re making use of $3,000 of your readily available $10,000.
If you reduced your credit limit to $4,000 on that MasterCard, you’re currently utilizing $3,000 of a readily available $8,000. This presses your credit usage to over 35%.
credit check failed reasons
Credit check failed reasons: Leasing an automobile with a debit card as opposed to a credit card
When you’re leasing, it’s a great deal less complicated when you make use of a credit card.
Utilizing your debit card will lead to a pull on your credit report. While it could be a soft pull– implying it does not harm your debt– there’s a chance it might be a hard check. A hard check does affect your credit rating.
The procedure changes slightly in the auto rental business. Making use of a debit card will certainly result in a soft credit inquiry. However, when using a debit card to rent a car, there will probably be a hard pull on your credit rating at the first time (when you check-in and get the car).
There would not be a credit check if you use of a credit card for renting a car.
An included incentive of renting your car with a credit card as opposed to debit: Many credit cards offer vehicle rental insurance coverage. This saves you even thinking about taking the car rental company’s costly insurance package.
Credit check failed reasons: Not paying your library fines (yes, libraries still exist!)
Not paying your penalties might lead the library to withdraw your privileges, as well sending your past due account to a collection company. When a collection agency obtains your overdue account, if you don’t pay, it will be noted on your credit report that you are in collection and have not paid. This will adversely influence your credit score.
credit check failed reasons
Normally, you need to owe around $40 or more before the account being sent to collections. To prevent all this, check your public library’s plan on fines, as well as, obviously, paying your late charges in a prompt fashion.
Credit check failed reasons: Not paying your parking tickets
When it concerns vehicle parking tickets, you have 2 choices:
you could pay them; or
go to Court and fight them.
Just what you do not want to do is disregard your parking tickets.
If you do choose to or forget to pay them, after a specific duration, your account will certainly go to collections. The policies on vehicle parking penalties differ by city. For instance, in Toronto, the use of debt collectors starts when your vehicle remains in plate rejection. This is when you could not restore your plate sticker label or acquire brand-new plates– for 2 years. Also, your tickets outstanding balance is more than $300.
Credit check failed reasons: Owing the taxman
If you have an outstanding amount payable on your income tax return, it’s important to settle that financial obligation to the Canada Revenue Agency (CRA). Overdue tax obligations could cost you in penalties and interest. It will also make it more challenging to get loans.
When submitting your tax return, any amount owing is due on April 30th, or the next Monday if April 30 falls on a weekend.
Credit check failed reasons: Not paying CRA is a self-inflicted indirect hit
Not paying your taxes does not directly hit your credit rating. However, two standard questions on any loan application are:
what is the last year you filed your income tax return for; and
how much do you owe to CRA for personal tax.
Not being current in your filing, or having an amount owing to CRA, will limit your chances to get that loan you are applying for.
When applying for a mortgage or home equity line of credit, most lenders ask for a duplicate of your Notice of Assessment from the previous 2 years. If the potential lender sees that you owe the CRA a great deal of money, they might offer you a higher rate of interest than the posted rate or worse, refuse your application.
Credit check failed reasons: What to do if you can’t repay your debts – even if you still have an OK credit score
Maintaining a good credit score is more than just paying your credit card on schedule, yet it does not need to be made complex. You should always aim to pay any type of arrears in a prompt style, as well as understand how every activity or transaction can affect your credit score.
If you are having problems repaying your debt, don’t be afraid to seek professional help. Don’t be enticed by the commercials for debt settlement. A recent study by the federal government shows that people who first go to a debt settlement company, end up paying more to settle their debts than if they just went to see a . That same study shows that ultimately, the debt settlement program alone does not work and the person ends up filing a consumer proposal with a licensed insolvency trustee.
credit check failed reasons
The Ira Smith Team has helped many people in debt get back on track and living debt free lives Starting Over, Starting Now. Take the first step and give us a call today.
We’re approaching tax season and income tax scams in Canada are rampant. It’s more than just the Canada Revenue Agency (CRA) that wants your money. Income tax scams in Canada are big business and it seems that every day there’s a new scam designed to fool you into giving up your information and ultimately your money. Don’t let your guard down because these fraudsters are good.
We regularly warn our readers about scams in blogs such as:
If you receive any sort of communication from the CRA – telephone, mail, email, text message – requesting personal information such as your social insurance number, credit card information, bank account number or passport number, it’s a scam. The CRA will never:
ask for personal information of any kind by email or text message
request payments by prepaid credit cards
give taxpayer information to another person, unless you give formal authorization
leave personal information on an answering machine
send email with a link and ask you to divulge personal or financial information (There is one exception: If you call the CRA to ask for a form or a link for specific information, a CRA agent will send an email containing links)
Tax scams in Canada: How to protect yourself
Never give out personal information via the email, text, voice mail or Internet
Guard your passwords, IDs, PINs and access codes
Do your due diligence when selecting a tax preparer. Preferably get a referral from a trusted source
Shred unwanted documents
Tax scams in Canada: What to do if you’re a victim
Many people don’t report these types of crimes because they’re ashamed. Don’t be! If you suspect you may be the victim of fraud or tricked into giving personal or financial information, contact your local police service.
Tax scams in Canada: Are you experiencing financial hardship?
People land in financial hardship for many reasons. If you’re experiencing financial hardship and are looking for a way out, contact Ira Smith Trustee & Receiver Inc. With immediate action and the right plan for moving forward we can set you on a path to debt free living Starting Over, Starting Now. All it takes is one phone call.
9 out of 10 Canadians do not have a debt to CRA because they pay their taxes on time. Beginning in February every year, people who not only have too much debt on their credit cards right after the Holidays, but they also owe income taxes, consult us.
Do you have a debt to tax authorities? Do you owe taxes or other government amounts like overdue student loans, or EI and CPP overpayments? If so, the Canada Revenue Agency says it wants to help you get back on track. They tell you that paying what you owe to them is easier than ever with a variety of online payment alternatives. And if you can’t offer the full amount right off, they tell you that they can work with you to set up a payment plan that would allow you to make payments over a term.
Michael’s nice story
The tax collectors then tell you a nice story. Take Michael for instance. He has an indebtedness with and he can’t pay the full amount right now. On their website, he was able to set up a monthly pay plan to pay his debt to them. Michael was also happy to pay interest on his debt to CRA until it’s paid off.
This is such a nice sounding story. However, based on the people who consult with us over their debt to CRA, it ignores the fact that people with too much debt do not have the money to pay off their debt to CRA and their other debts. The people who consult with us want to pay off their debt to CRA, but can’t. Life has gotten in their way!
The real story
If you owe money to the CRA and you’ve been contacted by the CRA about it, collection acts could be underway. Shunning your indebtedness will not make it easier for you. By working together with the CRA as early as possible, you can hopefully avoid legal and monetary penalties.
However, there are issues in dealing with CRA directly and pitfalls to avoid. Here is our top list of things to be aware of:
The CRA collector does not have the authority to agree to accept a lesser amount than what you owe. The collector can only agree to you’re paying off 100% of the tax, penalty and interest you owe.
The CRA collector will be looking for you to pay off the full amount in a relatively short period of time; say, 6 months.
The CRA collector has a lot of information t his or her fingertips. After all, you have provided CRA with very personal information for many years!
The CRA collector will try to get updated financial information from you such as the identification of your bank accounts, current employment, do you own or rent, if you own, what mortgages are against your property. The reason for this is so that if you fail to reach a payment plan, or default on your payment plan, then they will try to garnish and seize your cash, wages and other assets. It is a lot easier for them to do so when you have already told them where to look!
What should you do if you have too much debt?
So if you can’t get some peace of mind by joining the 9 out of 10 Canadians who sleep easy knowing that their taxes are in order and their tax indebtedness has been paid – contact us. The Ira Smith Team has helped many individuals and corporations avoid bankruptcy and settle their debt to CRA for less than the full amount owing. Here is a little known secret – the only way CRA will accept less than 100% is if you are working with a professional licensed insolvency trustee in a debt restructuring proposal.
Starting Over, Starting Now, we can help you get squared away with CRA and return you to living a productive stress-free life. Call us today for our free consultation.
Our previous blogs on tax fraud phone calls and similar scams
We have before written about tax fraud phone calls. These are scams perpetrated by criminals purporting to represent Canada Revenue Agency (CRA). Our previous blogs are:
People are falling for the tax fraud phone calls all the time
These scams have also been well reported in the press. CRA estimates that losses from these scams are in the millions of dollars. CRA and the Canadian police forces estimate that the scam has worked on 9 in 10 Canadians.
How many types of scams are there?
CRA advises that there are many known scams, pitches and fraud types with new ones invented daily. The more common ones are:
Telemarketing/tax fraud phone calls scams
Online scams
Email scams
Identity theft
Business scams
Mail scams
How do these scams work?
They all involve posing as a CRA. CRA advises you should be wary of phishing scams asking for personal private information. The CRA would never ask for this type of information.
Some of these scams ask for this personal information. Others refer you to a website resembling the CRA’s. At the website, you are prompted to confirm your identity by entering personal information. You should not click on links included in these emails. Email scams may also contain embedded malicious software that can harm your computer. The software can also send them your sensitive personal information which you enter online.
The latest, and most aggressive scam works something like this. Often, people are getting calls to their home by someone claiming to be a CRA agent. They notify the resident of some bogus tax arrears amount. They then say they are about to be taken to court or police are about to come to their door to arrest them.
A fake tax agent has even shown up at homes demanding payment as part of the scam. It used to be the scam was only done over the phone or computer. Now the thieves are getting more brazen. They are enlisting the services of confederates to show up at your home!
More information about the types of tax scams can be found at some of the following sources:
Protect yourself against tax fraud phone calls – Agence du revenu du Canada www.cra-arc.gc.ca › Home › Security Apr 5, 2016 – Informing yourself is the best protection against fraud. … If you receive a call saying you owe money to the CRA, you can call us or check My … Is the requester asking for information I would not provide in my tax return? Is the …
Beware of new tax fraud phone calls scams – Agence du revenu du Canada www.cra-arc.gc.ca › Home › Newsroom › Alert Jun 10, 2015 – Victims receive a phone call from a person claiming to work for the … If you get such a call, hang up and report it to the Canadian Anti-Fraud Centre. … and businesses have in the CRA is a cornerstone of Canada’s tax system.
Tax season brings more tax fraud phone calls on CRA tax scam | CTV Ottawa News ottawa.ctvnews.ca/tax-season-brings-more-calls-on-cra-tax-scam- 2804420 Mar 4, 2016 – It was an automated call, accusing him of tax fraud and requesting him to phone a 6-1-3 number back immediately or “face the consequences.”.
Canada Revenue Agency warning of aggressive tax scam, millions … www.citynews.ca/…/canada-revenue-agency-warning-of-aggressive- tax-s…Feb 4, 2016 – “A lot of it has to do with tax fraud phone calls and demanding immediate payment, threatening arrest, threatening jail, using really aggressive language …
Tax Fraud Phone Calls and Tax Scams | TurboTax Canada https://turbotax.intuit.ca/tax-resources/tax…/tax-fraud-and-tax-scams.jsp Taxpayers who knowingly engage in tax fraud and tax scams face fines, penalties … Unsolic Phone fraud – Wikipedia, the free encyclopedia https://en.wikipedia.org/wiki/Phone_fraud Communications fraud is the use of telecommunications products or services without intention … A variant is a call forwarding scam, where a fraudster tricks a subscriber into …. monopoly and/or excessive taxation of inbound overseas calls.
Here is the 1 simple secret technique to protect yourself from tax fraud phone calls and similar scams
There is 1 simple secret technique though that most people do not know about. Knowing this will allow you to not fall for the tax fraud phone calls and other tax scams. When you are contacted, do not give out any personal information. Then, either go to your CRA My Account login online or call CRA to check the status of your tax account. You will know that you are dealing with the real CRA and can find out the true status of your tax account. Once you learn that there are no problems with your tax account, then you will not fall prey to the scammers.
Then contact the Canadian anti-fraud centre or phone the CRA fraud phone number. Report the contact the thieves made with you.
What can you do if you have too much debt and now you have been scammed out of the money you were going to use to pay those debts?
Are you insolvent and looking for solutions? The Ira Smith Team is here to offer alternatives to bankruptcy and bankruptcy. We offer the help in Vaughan and throughout the GTA.
Are you an individual or company who feels your situation is hopeless? Ira Smith Trustee & Receiver Inc. can prepare and put in place the plan MADE JUST FOR YOU. The plan will free you from the burden of your financial challenges. With our help, you will go on to live a productive, stress-free, financially sound life.
For sure loan scams will continue. One main reason is that Canadians on a per capita basis are in debt at the highest level in all of Canadian history, and one of the highest in the entire world! This is a very lucrative and enticing market for the scammers to perpetrate loan scams Canada!
How can I protect myself against loan scams Canada?
There are three general themes in common with all of the loan scams. If you don’t fall for them, that is the best protection. Here is our list of the three common loan scam Canada themes and how to protect yourself:
Never give money or your credit card information over the telephone or in person to someone you don’t know – even if they sound like they’re from an established organization. Request additional information to be sent to you, review it with friends or family, or simply hang up if the whole thing sounds fishy!
It’s important to know that no bank, store or Canada Revenue Agency will ever ask you for your password via email or telephone, so never respond to these requests. If you receive an email that has a sense of urgency requesting personal information, first contact the purported sender to see if the email is legitimate.
Reputable lenders for personal loans will never ask you to pay an up-front insurance or application fee. Also, reputable lenders will never give you a guarantee that you will receive the loan approval before you provide your information. If the person you are dealing with asks for the up-front fee, or guarantees that no one is ever declined, stop dealing with them.
What to do if you have too much debt and not enough cash
Rather than resorting to high interest rate payday loans or to lenders who charge up-front fees in return for all sorts of promises, talk to a licensed insolvency trustee. Contact us now to obtain a solution, before bankruptcy is your only alternative.
We help individuals and companies throughout the Greater Toronto Area (GTA) facing financial crisis to avoid bankruptcy or bankruptcy, if the problems have been left too long without any corrections that need a plan for Starting Over, Starting Now. The Ira Smith Team brings a cumulative 50+ years of experience dealing with diverse issues and complex files, and we deliver the highest quality of professional service. Don’t worry about debt; instead take immediate action.
Debt forgiveness CRA: Introduction
: Introduction
