Tag: Consumer Proposal

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PERSONAL FINANCIAL RESPONSIBILITY: WHAT TO DO ABOUT GROWN CHILDREN WHO EXPECT MONEY

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Personal financial responsibility: Introduction

A few weeks ago, my blog was about PARENTS HELPING CHILDREN BUY A HOUSE: THE SECRET TO KNOWING WHAT TO DO – ASSUMING YOU REALLY HAVE THE MONEY. In that blog I looked the factors parents should consider and possible ways they could help, if proper. I assumed in writing the blog that the adult children were being financially responsible. It reminded me about a recent consultation I performed on a 30ish year old woman who had no personal financial responsibility.

Personal financial responsibility: The referral

An accountant we know referred his client, the father of this woman, to us. I spoke with the father briefly on the telephone and invited his daughter to contact me. As we do with people referred to us, I provided the daughter with a free first consultation where I obtained information about her assets, liabilities, income and expenses.

Personal financial responsibility: The first free consultation

We discussed potential options. At the end of the consultation, my process is to provide the person with our standard intake sheet called the Debt Relief Worksheet (DRW). I asked her to fully complete it with supporting documentation where requested. I also told her that not making another trip to our office, she could scan and email it to me. That way she would not have to take time off work.

Personal financial responsibility: The issues

So far so good. However, things did not stay that way for long. The purpose of the DRW is to give me all the information I need to properly advise someone and to be able to create a solution as unique as that person. It is also designed to allow for financial rehabilitation, by creating a balanced budget for the person to be able to live within their means. There is no point putting someone through an insolvency process, if they don’t come out at the end having learned why financial responsibility is important.

When I received the more or less completed DRW, several things jumped out at me:

  1. The woman graduated from university with a social work degree. However, instead of going into social work, she became a yoga instructor. I found out that yoga instructors, or at least this one, don’t make much money for all the hours worked.
  2. She was one of those people living way beyond your means. On social media, she regularly posted weekend party pictures at bars and clubs.
  3. She could barely pay the rent on her apartment.
  4. She was supplementing her income with credit cards and only paying the minimum monthly payments.
  5. She would soon not be able to borrow any more money from her credit cards and that is why she called for help from her father.

Personal financial responsibility: The father talk

To say the least, I was alarmed. This woman was out of control. Her father was looking to me to tell him if he should lend her (more) money. I called up her father to have a private discussion. I couldn’t disclose the details of the daughter’s financial mess, but I did want to send him a very strong message. The father was already aware of most of her debts, so there really wasn’t any information he was missing.

I told the father the following:

  1. Under no circumstances should he ever lend her money. I doubted she would ever have the capacity to pay him back. This yoga instructor had credit card and income tax debt totalling about $82,000 so a few thousand was not going to cut it.
  2. His daughter should undergo an insolvency proceeding. If he wanted to help, he could fund her consumer proposal as a lump sum, so that this would not be hanging over her head for a long time.
  3. Either a consumer proposal or bankruptcy would create the required debt settlement.
  4. More importantly, whichever insolvency process was chosen, I would make sure that financial rehabilitation would be an outcome. She would learn how to budget, how to not spend more than she earns, net of income tax, and she would gain personal financial responsibility.

Her father was extremely appreciative.

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Personal financial responsibility: Consumer proposal vs. bankruptcy

I then met with the adult child again. I explained to her the process of both a consumer proposal and bankruptcy and how each differed. I also explained that her consumer proposal has to be a better offer to her creditors than they could expect in her bankruptcy. I also told her that I spoke with her father, and he was prepared to fund a consumer proposal. I assured her that through a consumer proposal, we could get full debt settlement and she could avoid bankruptcy.

Personal financial responsibility: The yoga instructor had not yet fully grasped the concept of aparigraha

We then got to the budget discussion. In that discussion, she quickly realized that in an insolvency proceeding, she would have to live on what she earned. Her credit cards would be cut off by the lenders and she would not be able to supplement her income with credit card purchases and advances. She stared at me for what seemed to be the longest time. I didn’t know if it was her drishti or she was gearing up to lash out at me.

She then began her mantra “that is not fair, that is not fair, that is not fair”. I asked what isn’t fair? She said she would not have money to party every weekend! Together we each had our aha moment. I quickly learned that her parents never learned how to stop enabling this grown child. She quickly learned that she was not prepared to alter her behaviour and become financially responsible. She thanked me, got up and left. It was pleasant, but not exactly namaste.

A few days later she sent me an email to say that she would not be going through with an insolvency process. I wished her shanti. My understanding is that she did has not filed with another licensed insolvency trustee. So, the only thing left is that Daddy is doing what he originally asked me about – lending or giving her money.

Personal financial responsibility: What to do about grown children who expect money

This is a very sad case. I know I could have helped this woman, but she didn’t want to be helped. She is very happy being one of those adults financially dependent on parents. She is one of those children who has never learned personal financial responsibility.

When your grown child makes bad financial decisions and comes to you for help, what will you do? If you can afford to, will you just enable them or will you seek out a real solution. I am always honoured when a professional believes that I can help someone, especially if it is their child or family member. That is the greatest compliment which has happened several times.

If your child or relative is experiencing financial problems, or if you are as a result of helping your kids, or for any reason, contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.

Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.

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PAY BANKRUPTCY FEES ONLINE? BE LIKE NIKKI HALEY AND DON’T GET CONFUSED

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Introduction

A ruling in a proposed class action against a defunct Orlando Florida attorney firm, claimed a lawyer goes against government law “if he instructs a client to pay his bankruptcy related legal costs making use of a credit card.” That would also include using a credit card, either directly or through a third-party site, to pay bankruptcy fees online with a credit card.

Note to professionals encouraging clients considering bankruptcy: tell them to keep that plastic in their pocketbooks.

United States Court of Appeals for the Eleventh Circuit ruling

In a judgment likely to resonate with bankruptcy and debt settlement legal representatives, the United States Court of Appeals for the Eleventh Circuit ruled a lawyer violates government regulation “if he advises a customer to pay his bankruptcy-related legal charges using a credit card.” This of course would include an instruction to pay bankruptcy fees online.

The opinion released March 30, 2018 reversed a lower court decision and renewed a Florida class action against shut down Kaufman, Englett & Lynd filed by a previous client. The Orlando Sentinel reported the firm dissolved in April 2016 after the suit was filed.

The panel found a lawyer who advised his client to “sustain more debt” by billing his lawful fees on a credit card contravenes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Yes, it is fraud

That individual would certainly be committing fraud, and so would the attorney. This is because they’re making a charge knowing they never ever plan to pay that credit card.

The problem was that Kaufman Englett violated the Bankruptcy Code that does not permit a debt relief firm– consisting of a law practice– to “advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.”

My Canadian view

I would suggest that the outcome in Canada would be as disastrous for both the bankrupt and the licensed insolvency trustee (bankruptcy trustee or trustee). However, that does not mean that a bankruptcy trustee cannot encourage online payments; just not those using a credit card. Before getting into my reasons why, let’s first explore the issue of online payments.

Online payment choices

I think it is important to first understand what the various online payment choices are. The report “Canadian Payment Methods and Trends: 2017” by Michael Tompkins, Research Lead, Research Unit, and Viktoria Galociova, Research Associate, Research Unit, Payments Canada. In their report, they review the various online payments:

  • credit cards;
  • Interac® online debits;
  • online transfers include online e-wallet and electronic P2P transactions initiated through online services and providers, which are either prefunded or linked to deposit accounts at financial institutions (e.g., Interac e-Transfers, PayPal and Tilt); and
  • prepaid app store cards (or virtual cards)

Credit cards are the most used for online payments. But as you can see, there are ways of making online payments using cash.

You can but not by credit card

I submit that you can use an online payment method to pay for Canadian bankruptcy costs, just not by credit card. What this means is that you can transfer cash to your bankruptcy trustee (or consumer proposal administrator) using an online system.

Why not by credit card?

My view is that it would be unlawful to use a credit card for paying a bankruptcy fee in installments or in one payment. The more likely scenario would be paying it all at once just before filing.

My reasons are as follows:

  1. Using a credit card to charge expenses or take cash advances against knowing that you are about to file for bankruptcy and will not repay it is fraud. Fraud of course is illegal. So the insolvent debtor, about to become a bankrupt, will be in trouble. Just like in the USA as cited by the Court that I mentioned at the start of this blog.
  2. Likewise, any bankruptcy trustee who accepts payment by a credit card in the name of and from the insolvent debtor would be in trouble. The same trouble would befall the professional if he or she encouraged the insolvent debtor to take a cash advance against the credit card to pay bankruptcy fee online.

    pay bankruptcy fees online
    pay bankruptcy fees online

Here’s why:

  • It is against the rules of professional conduct of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). The rules need a member to maintain the good reputation of the profession and perform professional services with integrity.
  • The General Rules of the Bankruptcy and Insolvency Act (Canada) (BIA) requires that a bankruptcy trustee maintain the high standards of ethics that are central to the maintenance of public trust. It also requires that trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process.

What are the risks?

The risk for the trustee, of course, is serious – the loss of his or her license to practice. But what are the risks for the insolvent debtor?

For the undischarged bankrupt, in my view, the risks are twofold: (i) criminal; and (ii) civil. The criminal repercussions are obvious. The laying of one or more fraud charges would happen and the result would be a criminal conviction, jail time and a restitution order.

In the civil sense, I focus on the bankruptcy discharge process.

Forget about getting a discharge from bankruptcy

The credit card issuer would certainly oppose the bankrupt’s discharge. In the meantime, the credit card company would get a lifting of the stay of proceedings which protects an undischarged bankrupt from lawsuits, to start litigation to find that at least the debt incurred by the debtor to pay for the Canadian bankruptcy costs was a claim against the debtor for a debt not released by order of discharge. Sections 178(1) (a) and (e) are the most likely section of the BIA that would be relied upon.

So the credit card issuer and the trustee (probably by now the substituted trustee!) must oppose the bankrupt’s discharge. I am certain that the oppositions would be successful. The most likely result would be that the Court would flat-out refuse to hear the bankrupt’s application. The result of this is complex and should be discussed in a separate blog. Suffice to say that the bankrupt will have a very hard time ever getting out of bankruptcy without making full restitution. Even then, I would expect the Court to only grant a discharge upon certain conditions being met.

In other words, it would be a disaster and a mess for both the trustee and the bankrupt. These are my reasons why I feel that to pay bankruptcy fee online using cash is fine, but not by a credit card.

Pay bankruptcy fees online: What about you?

Are you facing financial problems? The Ira Smith Team can develop a restructuring plan for you. Debt problems are stressful and confusing. But with our help, you can be just like Nikki Haley and say “I don’t get confused”!

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.

Our debt settlement plan process can ease this stress. The Ira Smith Team has a great deal of experience in helping people avoid bankruptcy while resolving their debt problems. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put you back on a healthy profitable path, Starting Over, Starting Now.

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PAYDAY LOANS AROUND ME: DO PAYDAY LOANS CAUSE A BANKRUPTCY?

payday loans

Introduction

We’ve been sounding the alarm bells about payday loans long and loud, but it seems that many Canadians are still unaware of their dangers. According to the Financial Consumer Agency of Canada (FCAC), many loan users are unaware of the high costs of these loans compared to their alternatives. This includes all such loans around me and you. This just goes to confirm what we already knew – there’s a great need to continue to raise consumer awareness about the costs of, and alternatives to, payday loans.

What the FCAC survey shows

The FCAC recently conducted a survey on payday loans and the results were quite insightful and at times quite surprising:

  • They are an expensive way for consumers to borrow money. The annual percentage rate (APR) is typically 546%.
  • Fewer than 43% of respondents understood that this kind of loan is more expensive than available alternatives. This suggests that many do not have enough knowledge to consistently make the borrowing decisions that best serve their financial well-being.
  • The use of these loans has more than doubled in Canada recently to 4% of Canadian households.
  • 45% of respondents reported typically using such loans for unexpected, necessary expenses.
  • 41% used them for expected, necessary expenses.
  • Users are primarily those with low-to-moderate incomes (more than half lived in households with annual incomes under $55,000).
  • 20% of respondents who used this kind of loans reported household incomes exceeding $80,000.
  • 7% of respondents who used them reported household incomes over $120,000.
  • Many of the users surveyed indicated that they rarely sought financial advice even when they felt it was necessary.

Why not go to a bank or credit union?

Why didn’t respondents access credit from a bank or credit union?

  • 90% said payday lending was the fastest or most convenient option.
  • 74% said payday lending was the best option available to them.
  • 55% said payday lending offered the best customer service.
  • 27% said a bank or credit union would not lend them money.
  • 15% said they did not have time to get a loan from a bank or credit union.
  • 13% said they did not want to get money from a bank or credit union.

Can payday loans lead to bankruptcy?

Payday loans are a huge problem. In fact, the Canadian Payday Loan Association reports that nearly 2 million Canadians use payday loans each year. And many borrowers often find it very difficult to repay the full loan amount with the interest and fees. Now they’re trapped. They take out another payday loan to pay off the first payday loan and then take out another and another. It’s not difficult to imagine payday loans causing bankruptcy.

Are you caught in a payday loan trap?

If you’re caught in the payday loan trap, borrowing more money is not the answer – professional help is. Seek the advice of a professional trustee. Contact Ira Smith Trustee & Receiver Inc. today. You need answers, options and realistic plan for recovery and you need help now.

We’ll evaluate your situation and help you to arrive at the best possible solution for your problems, whether that solution is a bankruptcy alternative like credit counselling, debt consolidation or a consumer proposal or bankruptcy. Starting Over, Starting Now we can help you become debt-free.

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SECRET DEBT IN MARRIAGE: MANY CANADIANS ARE NOT CRAZY WITH THEIR LOVED ONE’S FINANCES

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Secret debt in marriage: Introduction

Now that Valentine’s Day is over, we need to not lose that loving feeling. Many Canadians are not crazy with their love one’s finances. They may wish to book a financial date evening. Many are keeping debt secrets from their partner, or fear they are hiding financial information from them. Perhaps now is the time to come clean with secret debt in marriage.

Secret debt in marriage: A recent survey

A brand-new survey identified that Canadians in a relationship (whether living separately, common law or wed) wish they can change a minimum of one of their partner’s financial behaviours. But their loved one could be oblivious. Many reported seldom or never ever talking money or budgeting with them.

Secret debt in marriage: We have previously written about this tender subject

Spouses or partners holding secret debt in marriage is nothing new. We have previously written on the topic, and others involving couples, including the following blogs:

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secret debt in marriage

Secret debt in marriage: Couples best practices

When it concerns taking care of debt as a couple, I recommend complete and honest disclosure. Work together to check your debts and make a household budget. Plan together how your household income will allow you both to pay ordinary monthly expenses, pay off debt and hopefully, save for emergencies and retirement.. Budgeting discussions are not easy, but if you can prepare a realistic one and stick to it, your relationship will find a new level of love.

Secret debt in marriage: What if you find out that talking and budgeting is not enough?

Although we are not social workers or marriage counselors, we are expert in helping people work through their financial challenges.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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ONTARIO BANKRUPTCY DISCHARGE CERTIFICATE: CANADIAN BANKRUPTCY LAW

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Ontario bankruptcy discharge certificate: Introduction

I have written before on the more practical aspects of Ontario bankruptcy discharge certificate issues and process within Canadian bankruptcy and insolvency law. The most recent blogs are:

  1. BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION – September 13, 2017
  2. GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY? – January 31, 2018

I recently reviewed the Ontario Court of Appeal decision in Cole v. RBC Dominion Securities Inc., 2017 ONCA 1009. This case is very interesting as it highlights an issue that we often don’t talk enough about when advising a person on what they might expect at their hearing under Canadian bankruptcy and insolvency law.

The facts

Henry Cole, age 52, had a Bankruptcy Order made against him in 2011 upon motion by Royal Bank of Canada (“RBC”), after he misappropriated $5 million from clients while working as their investment advisor. While in bankruptcy, he had a net monthly income of $14,600, resulting in surplus monthly income of $12,500. He nevertheless failed to make any surplus income payments.

To understand what surplus income in a bankruptcy is, see my June 1, 2016 vlog titled WHY SURPLUS INCOME IS SO POPULAR UNTIL YOU ARE FORCED INTO BANKRUPTCY.

The Ontario Court of Appeal (“ONCA”) upheld the two lower Court decisions

As is the case in bankruptcy matters, Mr. Cole’s bankruptcy discharge hearing came before the Master in Bankruptcy Court who also sits as the registrar in bankruptcy. Mr. Cole appealed the Master’s decision (discussed below) unsuccessfully to a Judge of the Bankruptcy Court. The Judge dismissed Mr. Cole’s appeal, thereby upholding the Master’s decision. As indicated above, the ONCA agreed with the Judge (and the Master) in dismissing Mr. Cole’s appeal.

Now for the interesting stuff!

Now for the interesting stuff. The Master determined that there was enough evidence to show that Mr. Cole, as a bankrupt, committed various bankruptcy offenses. The Master determined facts for which discharge may be refused, suspended or granted conditionally, under Section 173(1) of the Canadian bankruptcy and insolvency law called the Bankruptcy and Insolvency Act (Canada) (“BIA”).

The Master determined that Mr. Cole had failed to provide information to enable the Licensed Insolvency Trustee to calculate surplus income. Mr. Cole also conceded to the following facts:

  1. his assets upon bankruptcy were not of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities. Mr. Cole gave no evidence why he should not be held responsible;
  2. he failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; and
  3. he brought on, or contributed to, his bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of his business affairs

With these findings, the Master, under Section 172(2) of the BIA, had to not grant an absolute discharge and to:

  1. refuse the discharge of a bankrupt;
  2. suspend the discharge for such period as the court thinks proper; or
  3. make the bankrupt, as a condition of his discharge, to do such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.

I must point out that the options available to the Master are not mutually exclusive. So, just like in Mr. Cole’s case, you could have the Court come up with a mixture of a suspension and a condition to pay moneys.

What the Master decided

The Master made several decisions. First, the Master dealt with the surplus income issue. The Master ordered Mr. Cole to pay $284,346 to the Trustee as surplus income, payable at a rate of $5,000 per month.

The Master also considered Mr. Cole’s criminal behaviour and that he had real income while not working any longer as an investment advisor. Given the amount of Mr. Cole’s liabilities, and for the integrity of the Canadian bankruptcy system, the Master ordered as further conditions that:

  1. Mr. Cole pay an extra $5,000 per month to the Trustee for a further six years for a total more payment of $360,000; and that
  2. his discharge from bankruptcy be suspended for two years.

The dismissed appeals

Mr. Cole argued before first the Judge, and then the ONCA, primarily that the Master’s treatment of surplus and other income was in error. He also argued that the Judge’s finding in dismissing his appeal was an error. The ONCA disagreed and dismissed his appeal.

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So what is the lesson to be learned?

It is important for the Trustee, when sitting down with the person contemplating an insolvency proceeding, to understand all the facts. By properly understanding all the facts, we can provide proper professional advice and guidance.

Someone who had a facts situation like Mr. Cole, we would have strongly advised him or her to avoid bankruptcy and to contemplate performing a Division I Proposal to compromise his debts. The reasons we would have advised this are:

  1. the debtor has real income to successfully do a Proposal;
  2. Mr. Cole never would have qualified for an absolute discharge from bankruptcy given his facts situation and any discharge conditions would be onerous;
  3. avoiding the ongoing calculation of surplus income up to the time of his bankruptcy discharge hearing; and
  4. with the support of his major creditors, it is possible that the Proposal amount could have been somewhat less than $644,000 (subject to knowing the value of his assets at the date of bankruptcy).

he person needs our advice in plain English before making any decisions

We also would have advised the debtor the type of the rough ride they were in for if they chose to go ahead with the bankruptcy option. We would have explained in detail how we believed the Canadian bankruptcy and insolvency law system would treat him, so at least there would be no surprises during the bankruptcy administration.

Many times people we speak with do not like to hear the truth, and begin “Trustee shopping” until they find a Trustee that does not tell them all the bad news up front. People like this believe that if they aren’t told it, it can’t happen. This is a mistake. We believe everyone deserves to know the truth about their situation, to help them make the best decision possible.

In Mr. Cole’s case, not only did he find out the hard truth from the Court, he then spent money on his lawyers appealing the Master’s and Judge’s decisions. That obviously was extra money spent with no benefit received.

FULL DISCLOSURE: Our firm has never met with Mr. Cole and was not considered to be his Trustee.

What to do if you have too much debt

Declaring personal bаnkruрtсу in Canada is a big deal. So is getting your Ontario bankruptcy discharge certificate. While it can be a way out for the honest but unfortunate debtor who is deep in debt and looking for a new start, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?

Gambling debt bankruptcy: Introduction

Since there are various provincial run casinos, horse racing and lotteries, we are often asked if you can have a gambling debt bankruptcy. More importantly, what clients really want to know is, can gambling debt be discharged in bankruptcy?

Gambling debt bankruptcy: What is gambling debt in bankruptcy?

We first must go back to basics. There are two types of gambling debts:

  1. Debts for loans taken out, either direct loans or through credit cards; and
  2. Loans directly from a casino with “markers”.

In the first case, the loans or credit card debts could be direct – using the cash advance to gamble with, or indirect – used to make purchases for the necessities of life because the person gambles away their employment or other income. The use of markers at a casino is obviously a direct gambling debt.

In the context of this discussion, it does not matter if the gambling debts are direct or indirect. As discussed in this blog, the gambling debts are legally enforceable. As such, gambling debts in bankruptcy (or a proposal) are claims provable under the BIA.

Gambling debt bankruptcy: Gambling debt and bankruptcy

You can declare bankruptcy on a gambling debt. So is it really as simple as declaring bankruptcy? The answer is no. There are various issues that you must first consider with the licensed insolvency trustee during your first free consultation. The major issues are:

  1. Your assets
  2. What is your annual income
  3. Have you ever been bankrupt before
  4. The nature and amount of your other debts because you lost cash in gambling
  5. Have you not been paying your taxes because of gambling losses and Canada Revenue Agency is also a major creditor
  6. Getting gambling addiction advice
  7. Getting a discharge from bankruptcy
  8. Is there another option available to you in order for you to avoid bankruptcy

Gambling debt bankruptcy: There are many issues in addition to just getting gambling addiction debt help

If you are insolvent and you choose the bankruptcy route, you will face the following issues:

  1. If you have non-exempt assets or equity in non-exempt assets, your interest in those assets will be taken over by your trustee. For example, your interest in the matrimonial home would come to the trustee and now your spouse, or other friend or relative, would have to purchase your interest back to the cash could go to your creditors. Go explain that to your spouse!
  2. Earning more than essentially a poverty line amount will cause you to have to pay surplus income to the trustee for the benefit of your creditors. If you are a first time bankrupt, with surplus income, you will have to pay the surplus income for 21 months. You can’t seek a discharge from bankruptcy until then.
  3. If you have been bankrupt before, the 21 months becomes 36 months.
  4. Once you show that your debts are due to gambling losses, you can expect your lenders and credit card companies to oppose your discharge from bankruptcy.

    gambling debt bankruptcy
    gambling debt bankruptcy

Gambling debt bankruptcy: Including your discharge from bankruptcy and your gambling addiction

  1. If you owe a large amount of unpaid income tax to Canada Revenue Agency, you can expect them to vigorously oppose your discharge from bankruptcy.
  2. Your trustee must oppose your discharge from bankruptcy when your bankruptcy is a result of gambling debt. The reason is under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”), there are various facts, if proven, it is impossible to get an absolute discharge from bankruptcy.
  3. Section 172 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”) allows the Court to make an order of discharge which is either absolute, conditional or suspended. Where a fact under s. 173 of the BIA is proven, an absolute discharge is precluded.
  4. Gambling which brings on or contributes to bankruptcy is a recognized s. 173 fact. (BIA, s. 173(e)). That is why your trustee would have to oppose your discharge from bankruptcy.
  5. In reaching any decision on your discharge, the Court and the trustee need to maintain the integrity of the Canadian insolvency system. You can assume that your discharge will at least be conditional upon you paying a certain sum of money to your trustee for the benefit of your creditors. A bankruptcy discharge suspension for a certain time after you fulfill the payment condition is also possible. If your behaviour was especially egregious, your discharge from bankruptcy may be outright refused.
  6. The bankruptcy discharge hearing is a full Court hearing. You will be well advised to retain experienced insolvency legal counsel to come with you to Court. This is an expense you may not even be able to afford.
  7. If you want to have a chance in obtaining a discharge from bankruptcy, you will also have to show that you are taking concrete steps to deal with your gambling addiction by getting gambling addiction advice. That will include proving in Court that you enrolled, attended and completed at least one recognized rehabilitation program for gambling addicts.

Gambling debt bankruptcy: Going bankrupt doesn’t seem to be an easy fix

You are right about that. As if the above 11 issues weren’t enough, depending on your specific circumstances, there could be more. Therefore, I always recommend to debtors that if there is hope for the person to be able to successfully restructure through either a consumer proposal or Division I BIA Proposal, that must be seriously looked at and considered preferable to going bankrupt.

Gambling debt bankruptcy: What must you do if you have gambling debts and are considering personal bankruptcy?

Do you have unmanageable debts from gambling, other addictions or for any other reason? Be proactive; it’s time to rehabilitate yourself and deal with your 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. Call Ira Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.

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HANNAH BELL BEATS PEI NDP LEADER: WE EXPOSE HER SECRET TACTIC TO BEAT YOUR DEBT PROBLEMS

Hannah Bell beats PEI NDP Leader: Introduction

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. Call Ira Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.

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BANK OF CANADA INTEREST RATE HIKE: THE HARSH REALITY WHY CANADIANS FEAR INTEREST RATES GOING UP

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Bank of Canada interest rate hike: Introduction

Unfortunately for many Canadians, their fears are about to be realized. On Wednesday, January 17th the Bank of Canada interest rate hike began. The Bank of Canada raised its key lending rate by a quarter percentage point to 1.25%. This is the third time it’s moved its benchmark rate from once-record lows last summer.

Bank of Canada interest rate hike: How will changes in the prime lending rate affect Canadians?

Changes in the prime lending rate affect variable-rate mortgages, lines of credit and other lending linked to the benchmark rate, and this means that borrowers will be paying more. And the Bank of Canada interest rate hike has a ripple effect.

The Royal Bank of Canada raised its prime lending rate by a quarter of a percentage point, to 3.45%, effective Thursday, January 18th. Canadians expect that Canada’s other big banks will do the same. Already all of Canada’s Big Six banks raised their listed five-year mortgage rates by 15 basis points to 5.14%.

It’s now going to be more difficult for home buyers to qualify for mortgages, particularly with the new stricter guidelines. As you can see, a rise in interest rates can have far-reaching effects.

Bank of Canada interest rate hike: Reasons Canadians are concerned

With so many Canadians walking a financial tightrope, the last thing they wanted to see was an increase in interest rates. A recent survey by Ipsos showed that:

  • 48% of Canadians are within $200 of not being able to meet their financial obligations
  • 40% of Canadians worry that they’ll be in financial trouble if interest rates keep rising
  • 33% of Canadians can’t keep up with their monthly bills and make their debt repayments
  • 30% of Canadians are concerned that rising interest rates could push them close to bankruptcy

Bank of Canada interest rate hike: Are you worried about the interest rate hike?

If you’re like many Canadians who worry that the rise in interest rates will push you over a cliff financially, now is the time to seek professional help. A licensed trustee can give you answers, options and a realistic plan for recovery.

Contact Ira Smith Trustee & Receiver Inc. We’ll evaluate your situation and help you to arrive at the best possible solution for your problems, whether that solution is a bankruptcy alternative like credit counselling, debt consolidation or a consumer proposal or bankruptcy. Give us a call today and Starting Over, Starting Now you can be on your way to debt free living.

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CAN YOU FILE PERSONAL AND CORPORATE BANKRUPTCY? SMALL BUSINESS OPTIONS

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.

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 you file personal and corporate bankruptcy

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:

  1. Unremitted source deductions from employee payroll
  2. Net HST owing
  3. 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, contact Ira 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.

can you file personal and corporate bankruptcy
can you file personal and corporate bankruptcy
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PERSONAL BANKRUPTCY IN ONTARIO CANADA: THE SOLUTION TO YOUR NAGGING DEBT?

Declaring personal bankruptcy in Ontario Canada: Introduction

Facing serious financial difficulties is devastating, especially if you believe that declaring personal bankruptcy in Ontario Canada is your only option. In fact, many people mistakenly believe that dire financial problems automatically mean personal bankruptcy.

If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvency is a financial condition; bankruptcy is a legal state.

Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (Canada) (“BIA”) that help you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.

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


Declaring personal bankruptcy in Ontario Canada: A summary of the bankruptcy steps

In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) all of уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and use the proceeds to рау for the bankruptcy administration and then distribute to уоur сrеdіtоrѕ.

If you have very little property, all of it may be рrоtесtеd. In that case, you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be sold fоr and whether you will be required to pay “surplus income” to your LIT (more on
this later).

The final step of your bankruptcy process will be to get your discharge from your debts. This means that you will not have to рау them (with certain exceptions).

Declaring personal bankruptcy in Ontario Canada: Know the basic rules BEFORE filing for bankruptcy

Gеnеrаllу, going through bankruptcy helps реорlе with debts get a fresh start. Hоwеvеr, many реорlе have false ideas about how it can help them. Bеfоrе deciding you need to fіlе for bаnkruрtсу, you should know some of the bаѕіс rules. That way you will know what bankruptcy can and cannot do for you.

Declaring personal bankruptcy in Ontario Canada: What bаnkruрtсу may do for you, dереndіng on your sіtuаtіоn

  1. Dіѕсhаrgе уоur unѕесurеd debts; depending on your assets and income, you may not рау or lose anything. If you do, you will рrоbаblу рау less than you owe.
  2. Give you a short-term “аutоmаtіс stay” аgаіnѕt уоur сrеdіtоrѕ.
  3. As opposed to bankruptcy, one of the bankruptcy alternatives under the BIA will help you work out a repayment plan that lets you take longer to рау your debt and/or рау less than you owe. If your budget allows for this approach, the (consumer) proposal, allows you to keep property that ѕесurеѕ a debt. Examples of such assets would be your home or car. It can also allow you to keep nоn-еxеmрt аѕѕеtѕ that you would рrоbаblу lоѕе in a bankruptcy filing. This is one bankruptcy alternative.

Declaring personal bankruptcy in Ontario Canada: What bankruptcy does not do for you

Getting a dіѕсhаrgе of уоur debts through the bankruptcy process will not discharge:

  1. Any award of damages by a court in civil proceedings in respect of:
    1. i) bodily harm intentionally inflicted, or sexual assault, or
       ii) wrongful death resulting therefrom
  2. A debt or liability for alimony or alimentary pension.
  3. Any debt or liability arising under a judicial decision establishing affiliation or in connection with support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt.
  4. Debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others.
  5. Any debt or liability resulting from obtaining property or services by false pretenses or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
  6. Liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his claim.
  7. Any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred:i) before the date on which the bankrupt ceased to be a full or part-time student, as the case may be, under the applicable Act or enactment, or
    ii) within seven years after the date on which the bankrupt ceased to be a full or part-time student;
    iii) any debt or obligation in respect of a loan made under the Apprentice Loans Act where the date of bankruptcy of the bankrupt occurred: a. before the date on which the bankrupt ceased, under that Act, to be an eligible apprentice within the meaning of that Act, or

    b. within seven years after the date on which the bankrupt ceased to be an eligible apprentice; or
  1. Any debt for interest owed with an amount referred to in the above list.declaring personal bankruptcy in ontario canada

Declaring personal bankruptcy in Ontario Canada: More things bankruptcy does not do for you

  1. The bаnkruрtсу court can refuse to dіѕсhаrgе your debts if it finds that you are abusing the рrосеѕѕ. Thеrеfоrе, you cannot run up debt just before filing for bаnkruрtсу and automatically have it forgiven. The Court will look at what you ѕреnt the money on and can deny you a discharge if it finds that you have abused the ѕуѕtеm. You must be truthful and not try to hide аѕѕеtѕ.
  2. Will not help you with any debts you take on during and after you begin the bаnkruрtсу рrосеѕѕ.
  3. Will not give you a clean slate on уоur credit report (except to show what debts have been dіѕсhаrgеd). Bankruptcy reduces your credit rating to R9. This rating remains on your record for 6 years after your discharge for the first time bankrupt. These ratings are set by the relevant credit bureaus whose rules may vary.
  4. Will not protect some kinds of іnсоmе and рrореrtу you get during the соurѕе of the bankruptcy until you are discharged (such аѕ іnhеrіtаnсе, tax refund, gifts, lottery winnings).
  5. May not dіѕсhаrgе all of уоur debts without some ѕасrіfісеѕ. If you have very few аѕѕеtѕ and little іnсоmе, you may not lоѕе anything. Debtors with more assets and income above the poverty line can lose some of their assets and have to pay surplus income.
  6. Will not allow for your discharge after 9 months if you are required to pay surplus income. A first time bankrupt must pay surplus income for 21 months and a second or more time bankrupt will have to pay surplus income for 36 months. Whether or not a first time bankrupt will be entitled to an automatic and absolute discharge after paying the required surplus income depends on the specifics of your circumstances.
  7. A second or more time bankrupt is not entitled to an automatic absolute discharge and there must first be a Court hearing to decide what form of discharge is most appropriate given your circumstances.

Filing fоr bаnkruрtсу is a big deal

Declaring personal bаnkruрtсу in Ontario Canada is a big deal. It can be a trеmеndоuѕ rеѕоurсе for the honest but unfortunate debtor who needs a new start. However, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ to соnѕіdеr before jumping in hеаdfіrѕt.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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