Tag: Consumer Proposal

ARE BANKRUPTCY FEES TAX DEDUCTIBLE? IT DEPENDS WHO YOU ARE!#

Post author By Brandon Smith
Post date November 16, 2016

are bankruptcy fees tax deductible

Are bankruptcy fees tax deductible: If you would like a free copy of our eBook: “Cost of Claiming Bankruptcy in Canada” – please CLICK HERE

Are bankruptcy fees tax deductible: Introduction

We are often asked the question “are bankruptcy fees tax deductible?”. This vlog attempts to answer that question for the various types of Canadian insolvency proceedings.

I caution that we are not income tax advisors; I am a licensed insolvency trustee. This vlog does not attempt to and does not replace expert income tax advice. If you have a specific situation, you should get advice from your professional income tax advisor.

Are bankruptcy fees tax deductible: What does Canada Revenue Agency say?

Costs incurred in a bankruptcy filing can be categorized as either: (i) incurred for the purpose of gaining or producing income from a business or property or; (ii) incurred for capital or non-income earning reasons. Another way of saying it is a taxpayer cannot deduct personal expenses but can deduct those categorized as business expenses. So are bankruptcy fees tax deductible? It depends on who you are.

Are bankruptcy fees tax deductible: Personal bankruptcy and (consumer) proposal restructuring

If you are the individual person who has too much debt and either restructures under one of the proposal provisions to avoid bankruptcy, or goes bankrupt, then your real obligation is not to pay professional fees. Rather, you are making payments to the licensed insolvency trustee in a restructuring to settle all of your debts or you have given up your non-exempt assets and may also be paying part of your monthly income as surplus income to your licensed insolvency trustee.

Under either scenario, the licensed insolvency trustee obtains their fee under the Bankruptcy and Insolvency Act (BIA). You as the individual debtor are not paying bankruptcy expenses to earn income. Therefore you are not entitled to any tax deduction for the amounts and property given to the licensed insolvency trustee.

are bankruptcy fees tax deductible

Are bankruptcy fees tax deductible: Corporate restructuring

Corporations attempt to restructure under either the proposal provisions of the BIA or the restructuring provisions of the Companies’ Creditors Arrangement Act (CCAA) for the purpose of avoiding bankruptcy and the end of its business. The purpose of the restructuring attempt is to stay an active corporation, preserving jobs, continuing to earn income and pay income tax. In this case, professional fees paid to legal and financial advisors would be tax deductible for the company restructuring.

As this vlog is only to answer the questions are professional fees tax deductible, I am not addressing the issue of the income tax treatment of the corporate debt forgiven in a successful restructuring. That is where I turn to professional tax advisors for the answer.

Are bankruptcy fees tax deductible: Corporate bankruptcy

In a corporate bankruptcy, the bankruptcy corporation’s assets would be taken over by the licensed insolvency trustee handling the bankruptcy, subject to the interests of the secured creditor(s) and trust claimants, if any. Therefore, there are no fees paid by the bankrupt corporation for the purpose of earning income. Hence, there is no tax deduction for professional fees to be taken on the bankrupt corporation’s final income tax return.

Are bankruptcy fees tax deductible: Receivership and secured creditors

Receivership is a remedy for secured creditors to enforce security. The secured creditor whose loan is in default, when in a place to enforce its security, appoints a receiver to take possession of the assets, formulate a plan to maximize the sale value, sell the assets and remit the proceeds to the appointing secured creditor, up to the amount outstanding under the security. The company in receivership does not incur professional fees, but the secured creditor does; to both legal counsel and to the receiver. Those professional fees incurred in the normal business of the lender are therefore tax deductible.

I will leave the topic of the income tax consequences for a secured creditor who suffers a shortfall when realizing upon assets covered by its security to the professional tax advisors.

are bankruptcy fees tax deductible

Are bankruptcy fees tax deductible: Purchaser of assets

Many times in corporate restructuring, the restructuring plan calls for the sale of assets. In both bankruptcy and receivership, the assets will be sold. The purchaser of assets will in such cases be a corporation. That purchaser corporation will need insolvency and income tax professional advisors in structuring and paying for the asset purchase. Those professional fees are tax deductible to the purchaser.

Are bankruptcy fees tax deductible: Unsecured creditors

In any of the insolvency processes discussed in this vlog, there will certainly be many unsecured creditors. The major unsecured creditors, especially in corporate insolvency proceedings will want to consult with professional advisors as to their rights and remedies when faced with an insolvent debtor.

Sometimes unsecured creditors make an application to Court to have a Bankruptcy Order made against a debtor. Both legal and trustee advice is necessary.

In either case, the professional fees are paid in the normal course of business and will be tax-deductible.

Are bankruptcy fees tax deductible: Do you need insolvency advice?

If you need insolvency advice, either because you or your company have too much debt, or one of your major customers are experiencing financial problems, the professional fees may very well be tax deductible. The Ira Smith Team acts on behalf of both debtors and creditors. We have successfully restructured many people and corporations, thereby allowing them to avoid bankruptcy. We have also acted on behalf of both secured and unsecured creditors both in an advisory role and an enforcement role.

Contact a debt expert – a professional trustee – who can help get you on solid financial footing Starting Over, Starting Now. Ira Smith Trustee & Receiver Inc. can help keep you from financial ruin with immediate action and the right plan. Call us today for a free, no-obligation consultation.

Tags are bankruptcy fees tax deductible, avoid bankruptcy, Bankruptcy, bankruptcy fees, BIA, Consumer Proposal, corporate restructuring, income tax, Ira Smith Trustee, licensed insolvency trustee, professional fees, proposal, surplus income, tax, tax deductible

Brandon Blog Post

#VIDEO-HISTORY OF BANKRUPTCY NEVER GETS ANCIENT#

Post author By Brandon Smith
Post date September 21, 2016

HISTORY OF BANKRUPTCY NEVER GETS ANCIENT

History of bankruptcy: Introduction

A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.

History of bankruptcy: Helping the debtor

The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.

History of bankruptcy: Helping the creditors

The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:

Trust claimants who are outside of the bankruptcy scheme
Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
Unsecured creditors:
- Preferred
- Ordinary

History of Bankruptcy: bankruptcy alternatives

The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.

History of bankruptcy: The BIA

The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:

Claims for student loans
Priority status for claims for spousal and child support
Payment from a bankrupt’s earnings
Environmental claims
Liability protection for Directors
Securities firm insolvency
International insolvency

In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.

History of bankruptcy: Rehabilitation

It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.

The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.

History of bankruptcy: The Courts

The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.

History of bankruptcy: What to do if you have too much debt

I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags assets, avoiding bankruptcy, Bankruptcy, bankruptcy alternatives, Bankruptcy and Insolvency Act, BIA, Consumer Proposal, creditors, Debt, debt relief, debtor, history of bankruptcy, insolvent, Ira Smith Trustee, licensed insolvency administrator, liquidation, proposal, trustee, WEPPA

Brandon Blog Post

CONSUMER PROPOSAL FAQs TO HELP YOUR INSOLVENCY IQ(s)

Post author By Brandon Smith
Post date September 19, 2016

Consumer proposal FAQs: What is a consumer proposal?

Last week we discussed Consumer Proposal Vs Debt Settlement. Consumer proposals remain a hot topic and today we’d like to share with you some of our consumer proposal faqs.

A Consumer Proposal (Plan or CP) is a formal way governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee acting as your Plan administrator you make a proposal to:

Pay your creditors a percentage of what you owe them over a specific period
Extend the time you have to pay off the debt
Avoid bankruptcy

Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The debt must be paid off within five years.

Consumer proposal FAQs: How do I qualify for a consumer proposal?

As discussed in our last blog, you must be an individual and your total debts must not exceed $250,000 (not including debts from a mortgage or line of credit secured by your principal residence).

You must also meet the insolvency test. This means that:

your debts are greater than your assets;
if you liquidated all of your assets you would not have enough money to pay off your debts in full; and
you are having trouble making the full payment on all of your debts every month.

Making only minimum monthly payments don’t count as paying off your debts.

Consumer proposal FAQs: What does a consumer proposal cost?

There are no upfront fees associated with CPs. Your Plan payments cover the cost of filing a Plan. There are no separate charges either for filing a Plan or fees paid to the trustee to act as your CP administrator. To calculate the professional fee the trustee uses a formula in the BIA and it comes out of the amount you are paying in your Plan.

Consumer proposal FAQs: How does a consumer proposal work?

A CP allows you to make arrangements to pay all or part of your unsecured debt in monthly payments over a predetermined time period.

A licensed insolvency trustee will meet with you and work out a payment plan that they believe will work for you and be acceptable by your creditors.
The trustee acting as your Plan administrator will file the CP with the Office of the Superintendent of Bankruptcy.
The trustee will send the Plan to your creditors who then have 45 days to accept or reject your CP. The creditors can also accept or reject your CP before a meeting of creditors if such a meeting was held. Normally in a Plan, there is no need to hold a meeting of creditors.

Consumer proposal FAQs: How long will my consumer proposal last?

A CP can last a maximum of five years but you can shorten the proposal term either by increasing the amount of your monthly payment or by offering a lump sum payment (if you are able to borrow a sufficient lump sum from either a bank or family).

Consumer proposal FAQs: Can a consumer proposal get rid of collections agencies and prevent my wages from being garnished?

Yes, a CP immediately stops almost all creditor actions (garnishments for family law support payments cannot be stopped by a consumer proposal) including tax debts.

Consumer proposal FAQs: If I agree to a consumer proposal will I lose my house and my car?

Typically secured creditors are not affected by a Plan and in most cases, you will continue to make your payments as usual. This assumes that your budget, which you prepare as part of filing your consumer proposal, shows that you can afford to do so.

If you have a mortgage against your house or a car loan registered against your car, you can opt for surrendering your house and/or car (secured assets) and stop making those payments before filing the CP. In this case, the lender will sell the secured asset and any resulting shortfall becomes an unsecured debt in your Plan.

NOTE: If you were to give up your secured assets after the filing of your Plan, you won’t be released from any shortfall debt because it occurred after the filing of your Proposal. So make sure that if you are giving up secured assets, you wait for the secured creditors to recognize that you have given them up and they have begun their enforcement proceedings, including selling the home or car, BEFORE you file your CP.

Consumer proposal FAQs: Will I have to give up my credit cards?

Typically, you will have to give all of your credit cards to the trustee and you won’t be able to apply for a new credit card until the term of your CP is over. You will, however, be able to use a prepaid or secured credit card during this period.

Consumer proposal FAQs: If I miss a payment will I be bankrupt?

We strongly recommend you to make your payments faithfully. You can defer up to two payments but if you fall three payments behind, your Plan will end. This means that you will no longer have protection from creditors and they can again start their collection efforts against you.

Consumer proposal FAQs: What is my next step if I have too much debt?

If you’re considering preparing, filing and completing a Plan or are seeking debt relief options contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.

Tags a "consumer proposal, Consumer Proposal, consumer proposal administrator, consumer proposal faqs, consumer proposal versus debt settlement, consumer proposals, cp, debt relief, debt relief options, licensed insolvency trustee, plan, the consumer proposal, trustee

Brandon Blog Post

#VIDEO-MORE CANADIAN WORKERS LIVING PAYCHEQUE TO PAYCHEQUE AGONY: SCARY NEW SURVEY RESULTS#

Post author By Brandon Smith
Post date September 14, 2016

More Canadian workers living paycheque to paycheque introduction

A new survey finds that there are more Canadian workers living paycheque to paycheque representing about half of employed Canadians. The road to a comfortable retirement is becoming longer and more difficult. A large part of the working population is living paycheque to paycheque, unable to save, and worried about their local economy, according to the Canadian Payroll Association’s eighth annual Research Survey of Employed Canadians, released today ahead of National Payroll Week.

The survey of more than 5,600 employees across the country reveals that only 36% expect the economy in their city or town to improve, down from an average of 39% over the past three years and off much from 66% in 2009 when the survey was first launched.

More Canadian workers living paycheque to paycheque still

Many working Canadians are barely making ends meet. Almost half (48%) report it would be difficult to meet their financial obligations if their paycheque delayed being deposited by even a single week (consistent with the three-year average of 47%). Illustrating just how strapped some employees are, 24% say they likely could not come up with $2,000 if an emergency arose in the next month.

“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying Yourself First’ (by automatically directing at least 10% of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”

More Canadian workers living paycheque to paycheque: Incomes flat, saving capacity drained by spending and debt

“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alex Milne, principal research provider at Xero North Sydney. “In fact, real incomes have actually declined when inflation is taken into account.” While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. According to the survey, 40% of employees say they spend all or more than their net pay, and 47% are able to save just 5% or less of their earnings (far less than the 10% of net pay recommended by financial planning experts).

Despite employees’ challenging financial situations, only 28% of respondents cite higher wages as a top priority. This is down from the average of 34% over the past three years. Instead, an overwhelming 48% are most interested in better work-life balance and a healthy work environment.

“Clearly, many Canadians are concerned about their financial situation,” says Lucy Zambon, the Canadian Payroll Association’s Board Chair. “But better work-life balance does not have to mean reduced financial security if you spend within your means and ‘Pay Yourself First’ as a step towards financial well-being.”

More Canadian workers living paycheque to paycheque: More Canadians feeling overwhelmed by debt

Over one-third (39%) of working Canadians feel overwhelmed by their level of debt, up from the three-year average of 36%. Debt levels have risen over the past year for 31% of respondents. And 11% do not think they will ever be debt-free.

Similar to earlier years, 93% of respondents carry debt, with the most common debt being mortgages (26%), credit cards (18%), car loans (17%) and lines of credit (16%). Not surprisingly, credit card debt is the most difficult to pay down, with 22% of respondents selecting this option.

Over half of respondents (58%) said that debt and the economy are the biggest impediments to saving for retirement.

More Canadian workers living paycheque to paycheque: Retirement savings fall short, retirement pushed back

Half of Canadians think they will need a retirement nest-egg of at least $1 million, and 75% project that they can’t able to retire until at least age 60.

Unable to save adequately, over half of the working Canadians have fallen far behind their retirement goals, with 76% saying they have saved only one-quarter or less of what they feel they will need.

Even among those closer to retirement (50 and older), a disturbing 47% are still less than one-quarter of the way to their retirement savings goal.

Nearly one-half of employees (45%) now expect they will have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Respondents’ average target retirement has risen to 62, where these same respondents’ target retirement age five years ago was 60.

The past eight years of data drove the Canadian Payroll Association to advocate for a modest enhancement to the Canada Pension Plan (CPP). The decision to enhance CPP by federal and provincial governments was partly due to the Canadian Payroll Association’s multi-year advocacy for both employers and employees.

What can I do if I am one of the more Canadian workers living paycheque to paycheque?

Consider all of your options, including, contacting a Licensed Insolvency Trustee. Perhaps you just need help with credit counselling and budgeting. Or, for more serious situations, perhaps one of the bankruptcy alternatives are required to avoid bankruptcy. Regardless, you can get a free consultation.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. Consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags bankruptcy alternatives, Canadian Payroll Association, Consumer Proposal, CPP, credit card debt, Ira Smith Trustee, licensed insolvency trustee, Lines of Credit, living paycheque to paycheque, more canadian workers living paycheque to paycheque, mortgage debt, national payroll week, paycheque, retirement

Brandon Blog Post

CONSUMER PROPOSAL VS DEBT SETTLEMENT: WHAT YOU NEED TO KNOW

Post author By Brandon Smith
Post date September 12, 2016

consumer proposal vs debt settlement

Consumer proposal vs debt settlement

I am often asked to explain the differences of consumer proposal vs debt settlement. Debt is such a prevalent issue in our society today and we’re bombarded by commercials about different options for debt relief. Two of the most talked about are consumer proposals and debt settlement. However, most people don’t really understand what they are. Let me explain.

Consumer proposal vs debt settlement: What is a consumer proposal?

According to the Office of the Superintendent of Bankruptcy Canada, a consumer proposal (Plan or CP) is a formal, legally binding process administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a Plan. A CP is an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both.

The term of a Plan cannot exceed five years. Payments are made through the LIT. The LIT uses that money to pay each of your creditors. CPs are government sanctioned, federally regulated and administered by federally licensed and regulated LITs.

Consumer proposal vs debt settlement: Can anyone who owes money opt for a consumer proposal?

No. You must be an individual and your total debts must not exceed $250,000 (not including obligations from a mortgage or line of credit secured by your principal residence). You also must meet the insolvency test. This means that:

your liabilities are greater than your assets;
if you liquidated all of your assets you would not have enough money to pay off your liabilities in full; and
you are having trouble making the full payment on all of your liabilities every month.

Making only minimum monthly payments don’t count as paying off your liabilities.

Consumer proposal vs debt settlement: What is debt settlement?

Many people are seduced by slick ads and even slicker salespeople offering an easy way out of financial problems. Debt settlement companies (DS companies) tell you that they’ll negotiate with your creditors to accept a fraction of what you owe them. They tell you that like magic, your debt problems will disappear. NOT TRUE!

DS companies’ people are not financial services professionals. DS companies are not federally licensed or regulated. They’re nothing more than snake oil salesmen. They are well-known for high-pressure sales tactics, making false and unsubstantiated claims, insinuating ties to the government and demanding big upfront fees. We’ve written several blogs warning the public about DS companies:

According to Credit Canada Debt Solutions:

There are more than 50 organizations offering debt settlement services in Ontario.
The Ontario Association of Credit Counselling Services has received more than 100 complaints a month about DS companies.
Settlement companies have also been the focus of a “consumer alert” from the Financial Consumer Agency of Canada, which warns consumers to beware of “too good to be true” offers from debt reduction companies.

According to the U.S. Federal Trade Commission:

The success rate of for-profit DS companies is less than 10%.
65% of people who pay fees to these DS companies leave their programs without ever receiving a settlement.
The amount of money that people pay in fees to these companies almost equals the amount of money that they save. However, this is before creditor late fees, penalties and interest are added in (these can often double or triple a debt by the time a settlement is negotiated). So at the end of the day, it seems fair to say that most people who deal with these companies do not save any money and are often left worse off in the end.

Consumer proposal vs debt settlement: Who can administer them?

Since LITs administer CPs, the only federally licensed and strictly regulated professionals, they really can help you deal with financial problems. DS companies are not professionals of any kind. They are slick sales organizations designed to make as much money as possible from the consumer, not save you money or repair your financial situation. More often than not, after taking your money, DS companies then hand you over to a LIT for the only liability settlement program that really works, which is called, a consumer proposal.

The choice is clear when it comes to consumer proposal vs debt settlement, consumer proposals are an excellent financial relief option and you should run from DS companies as far as your shoes can carry you.

Sometimes a settlement is also termed consolidation. Whether the question is consumer proposal vs debt settlement, consumer proposal vs debt consolidation or debt settlement vs consumer proposal Canada, there is only one correct answer – look at a Plan for financial relief.

Consumer proposal vs debt settlement: Is a consumer proposal right for me?

Consult a LIT. We are financial professionals who will evaluate your situation and recommend which financial relief options are right for you. A CP is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a liability-free life.

Tags Consumer Proposal, consumer proposal vs debt consolidation, consumer proposal vs debt settlement, consumer proposals, debt reduction companies, debt relief, debt relief options, debt settlement, debt settlement companies, debt settlement vs consumer proposal canada, licensed insolvency trustee

Brandon Blog Post

#VIDEO-HOW TO HANDLE EVERY CHAPTER 13 BANKRUPTCY CANADA CHALLENGE WITH EASE USING THESE TIPS#

Post author By Brandon Smith
Post date August 24, 2016

Is there such a thing as chapter 13 bankruptcy Canada?

In Canada, we don’t have something called chapter 13 bankruptcy Canada. A chapter 13 bankruptcy is part of the United States Bankruptcy Code. It is also called a wage earner’s plan. It allows people with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

We don’t have chapter 13 bankruptcy Canada. The equal in Canada is a consumer proposal. It is a bankruptcy alternative used to avoid bankruptcy by a debtor who is an individual who in total (excluding any mortgages registered against his or her home) owes $250,000 or less.

How does our chapter 13 bankruptcy Canada provisions work?

A consumer proposal is making a formal offer under the Bankruptcy and Insolvency Act (Canada) (“BIA”) to creditors to settle debts under conditions other than the original terms, for less than the face value of the debts. The maximum length of time that a debtor is given to make monthly payments under a consumer proposal is 60 months.

So rather than it being called chapter 13 bankruptcy Canada, we call it a consumer proposal. If you owe more than $250,000, then an individual can use the proposal provisions used by companies. Either way, it is a creative use for people with large debts to do what is commonly referred to a “restructuring” or “reorganization”, thereby avoiding bankruptcy.

There used to be no provision available to small individual debtors in the BIA. Parliament wished to find a way to offer for these smaller consumer debtors to have a restructuring alternative. So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990’s, the consumer proposal legislation was enacted. It was a way for Canada to get a chapter 13 bankruptcy Canada like provision.

Our chapter 13 bankruptcy Canada like provisions allow you to avoid bankruptcy

Now, the consumer proposal provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA. So Canadians are now AVOIDING bankruptcy more while still obtaining the help and counseling of a licensed insolvency trustee. So as you can see, our consumer proposal provisions are just like a chapter 13 bankruptcy Canada statute.

The main use of the (consumer) proposal provisions of the BIA is to allow you as a debtor to keep your assets, if you can afford to in your budget, AVOID bankruptcy, and give a better alternative to your creditors than a bankruptcy would. In this way, you are allowed to be relieved of your debts, for an amount less than the total face value of all of your debts.

When is it best to use the chapter 13 bankruptcy Canada like provisions?

It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest!

What can I do if I have too much debt but wish to find out more about chapter 13 bankruptcy Canada?

We hope that knowing these tips will better equip you to navigate the chapter 13 bankruptcy Canada challenge. If you have too much debt, but after viewing this video wish to avoid bankruptcy but you are unable to pay your debts in full, this may be just the ѕесrеt you need to know!

We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living Starting Over, Starting Now. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make. Contact us today.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags avoid bankruptcy, avoiding bankruptcy, Bankruptcy, bankruptcy alternatives, chapter 13 bankruptcy canada, Consumer Proposal, Ira Smith Trustee

Brandon Blog Post

#VIDEO-DEBT MANAGEMENT PROGRAMS REVIEW#

Post author By Brandon Smith
Post date August 3, 2016

Not all debt management programs are created equal

I have written previous blogs and made vlogs in the past about debt management programs, including:

Non-profit credit counselors are the good guys in the debt relief industry, which is otherwise full of players that are bursting with lies, scams and sketchy practices.

We have done the consumer proposal or bankruptcy of many people who first paid upwards of $2,500 to for profit “counselors” who ultimately did no more than pass the people on to a licensed insolvency trustee. They could have received a better service just going straight to a trustee for a free consultation.

Contrary to popular belief, a licensed insolvency trustee by law must first evaluate to see if the person can AVOID bankruptcy. So as you can see, not all debt management programs and companies are equal.

Do debt management programs work for everyone?

Debt management credit counselors need to acknowledge that their signature offering — the debt management plan — doesn’t work for everyone.

Debt management programs are promoted as the best bankruptcy alternative and an affordable way to pay back credit card debt. Borrowers make payments to the counseling agency, which then pays the creditors. Thanks to standing agreements that counselors have with credit card companies, the plans typically cut the interest rates, fees and payments that borrowers need to make. Full repayment of the debt often takes four to five years.

If borrowers make all the payments and repay the principal completely, debt management programs have much less impact on their credit scores than other types of debt relief.

Debt management programs were rampant in the United States

During the financial crisis in 2007-2009, debt management programs could be found on infomercials day and night. There were so many shady characters in the industry, the States ultimately had to enact laws to reign the shady operators in.

Needless to say, the shady operators did not give any worthwhile service for the fees they charged. But even the legitimate and well-meaning credit counselors mistakenly believed that their debt management programs were good for everyone. What I have found in my experience as a licensed insolvency trustee, is that no two people’s situations are the same, and one size does not fit all.

The story of Francine Bostick

Francine Bostick, a woman who lives in Kansas and paid off more than $120,000 in credit card debt in 2012, says she emerged with credit scores good enough to buy her first-ever new car. “It was exciting and made me a little nervous when they did the credit check,” says Mrs. Bostick, 66. “We got 0 percent interest for the life of the loan.”

This sounds great, but, yet Mrs. Bostick is also an example of what may be wrong with credit counseling because:

Her husband Jim Bostick had Alzheimer’s disease and she was his caregiver
Francine worked 12-hour days to earn the money to make debt payments while also caring for her increasingly incapacitated husband, who died in May
She had to do this when others her age were retiring
She never got to spend quality time with Jim before his death

If she lived in Toronto or Vaughan, what would I have advised?

Francine had never been bankrupt before and she did not have any significant assets. She and Jim rented – they did not own a home. In Francine’s case, she would not have had to make any surplus income payments in a bankruptcy. Although a consumer proposal is a great alternative to bankruptcy, Francine could not afford to complete one by only working one job in an 8-hour day, but she and Jim would be able to live on those earnings and their pensions.

In this case, I would have advised Francine that bankruptcy was a better alternative because:

Francine could have spent more time with her dying husband – that she can never get back now
She would received an automatic discharge after 9 months, and not worked so hard for several years
Just like in bankruptcy, she had no access to credit while in her debt repayment program
She could have begun rebuilding her credit faster after the bankruptcy
There is little leeway for missing a payment in debt management programs – many times if you miss 1 payment the entire program ends
Some people find that they simply can’t afford the payments on debt management programs, while others drop out because of setbacks such as job loss, unexpected expenses or illness
If you cannot fully complete the debt management programs, creditors can resume collection efforts, and borrowers also have flushed thousands of dollars down the drain and might not have enough money left to live on

What should you do if you have too much debt and are considering one of the debt management programs?

So, those thinking about debt management programs should book an appointment with an experienced licensed insolvency trustee first. (The first consultation is free.) That way, they will be able to understand the choice they make.

Ira Smith Trustee & Receiver Inc. brings a cumulative 50+ years of experience dealing with diverse issues and complex files and we deliver the highest quality of professional service. Contact us today and Starting Over, Starting Now you’ll be well on your way to overcoming your financial difficulties.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags Bankruptcy, Consumer Proposal, credit counselor, debt management programs, Ira Smith Trustee, licensed insolvency trustee, starting over starting now, surplus income, toronto, Vaughan

Brandon Blog Post

#VIDEO – SUBPRIME CANADA: LOANS NOT HURTING THE HOT GTA REAL ESTATE MARKET OR ONTARIO#

Post author By Brandon Smith
Post date July 27, 2016

Subprime Canada loans the introduction

Our vlog this week is on how subprime Canada loans are not hurting the GTA real estate market, or the Ontario economy at all. Last Tuesday, we published our blog titled PERSONAL INSOLVENCY: DROP IN OIL PRICES SERIOUSLY IMPACTING CANADIANS FINANCIALLY. One of our findings was that in Ontario, the rate of insolvency filings declined.

The reason is simple. The Ontario economy is not dependent on higher oil prices for its strength.

When I think of subprime lending, I think of the meltdown in the US economy in 2007 and 2008, and all the people who lost their homes. As can be seen in this year’s Presidential election, there is a lot of unhappiness in the US about many things, including jobs, wages and the economy. Globally everyone is looking for change; Canada’s Liberal party under Justin Trudeau and their sweep to power and the recent Brexit vote, are merely two recent examples of the global wish for change.

Recent TransUnion data on subprime Canada lending

Recent data shows that subprime Canada lending, is not having an effect on the Canadian economy and certainly is not hurting the hot GTA real estate market or Ontario. The data points out some interesting trends:

subprime Canada lending is becoming a bigger part of Canada’s economy
the average amount owed on Canadian credit cards rose by 1.8 per cent over the past year, but among subprime borrowers, it rose 5.7 per cent in a year
among less risky borrowers with good credit ratings, credit card balances have been declining, by 1.5 to 4.7 per cent over the past year

“Average balances haven’t moved much, if you consider all Canadians together,” TransUnion director of research and analysis Jason Wang said in a statement.

“But once we segment by risk tiers, we find a gradual shift where subprime consumers are increasing their share of the debt load relative to the low-risk population.”

The TransUnion research included the following types of subprime lenders and subprime lending:

subprime mortgage lenders
subprime personal loans
subprime auto lenders
subprime credit cards

Subprime Canada delinquency rates

There are also regional differences in delinquency rates. The TransUnion data shows that delinquencies shot up in Alberta by almost 12 per cent, but declined in Ontario (and BC, who also has a hot Vancouver real estate market). Despite the growth in subprime Canada lending, TransUnion found that Canada has a generally healthy and well-functioning consumer credit marketplace, at least outside oil-exporting regions.

So what does this subprime Canada lending data mean

When you combine the catapulting delinquency and insolvency rates in the oil patch, and see that higher credit score people outside of the oil patch are reducing debt and their delinquency rates, it points out the regional disparities. It shows how the oil patch economy is suffering due to low oil prices. It shows me that sustained low oil prices will only keep the hurt going in the provinces that are dependent on higher oil prices for jobs and consumer spending.

What should you do if you have too much debt and can’t borrow more even in subprime Canada?

In our earlier blog titled SUBPRIME PERSONAL LOANS SECRETS REVEALED, I advised that if you can’t qualify for a traditional loan, a subprime loan is not the answer to your problems. High interest rate subprime personal loans are not an answer for being unable to repay your debts. Taking control of your debt with the help of a professional trustee is the answer.

Meet with one of our licensed insolvency trustees for a free consultation with Ira Smith Trustee & Receiver Inc.

We’ll discuss all your options. The options include bankruptcy alternatives – credit counselling, debt consolidation and consumer proposals. We will also tell you about bankruptcy if that’s the best option for you.

There is a way out of your financial problems. We can offer the right solution for you. We will do so without resorting to a subprime loan Starting Over, Starting Now.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags Consumer Proposal, credit counselling, credit score, Ira Smith Trustee, licensed insolvency trustee, personal insolvency, subprime auto lenders, subprime canada, subprime credit cards, subprime lenders, subprime lending, subprime mortgage lenders, subprime personal loans

Brandon Blog Post

PERSONAL BANKRUPTCY BLOG – TRUSTEE EXPLAINS BANKRUPTCY OPTIONS

Post author By Brandon Smith
Post date July 6, 2016

Introduction

Our Brandon’s Blog certainly is a personal bankruptcy blog, but it is more than that. Brandon writes on various finance and insolvency-related topics including corporate restructuring, corporate bankruptcy, alternatives to bankruptcy, credit counselling, restructuring through a consumer proposal or a Division I Proposal or the Companies’ Creditors Arrangement Act (CCAA).

Every Monday and Wednesday night Brandon posts to Brandon’s Blog. Monday night is a blog and Wednesday night is a vlog. Just to remind you what this means, here are dictionary definitions:

blog Pronunciation: /blɒɡ/noun

A regularly updated website or web page, typically one run by a person or small group, written in an informal or conversational style: you can add personal bankruptcy blog to the growing list of insolvency-related material popping up on the Web

vlog Pronunciation: /vlɒɡ/ noun

A blog in which the postings are primarily in video form: you can add personal bankruptcy vlog to the growing list of insolvency-related material popping up on the Web

Differences between US and Canadian insolvency statutes

In the United States, people filing for bankruptcy have many “chapters” from which to choose. Similarly, Canada has one chief insolvency law, the Bankruptcy and Insolvency Act, or BIA, and several supporting pieces of legislation. In perusing a personal bankruptcy blog, the potential filer can find the information he or she seeks.

In the United States, Chapter 11 bankruptcy is the most complex because it applies to large businesses and usually involves gigantic sums of money. In Canada, the equivalent is the Division I proposal. In such a proposal, the debtor’s business can keep assets necessary for its role so that it can generate streams of income from other places to repay its debts. Management also stays in control of the company and business operations.

What are the Choices in Canada?

The BIA sets out the ground rules, and several smaller pieces of legislation fill in the details. Although we Canadians don’t call them various chapters, our legislation is like that of the U.S. Here are the options for filing bankruptcy in Canada:

Personal Bankruptcy – Summary Administration (streamlined) or Ordinary
Consumer Proposal
Division I Proposal

Personal bankruptcy in Canada is most similar to Chapter 7 in the U.S. By filing bankruptcy, the debtor seeks to deal with his or her entire debt load at once. The debtor does not believe that he or she has the means to attempt a restructuring. There are certain assets that are exempt for any one of a number of reasons, so anyone filing bankruptcy should consult a Trustee to find out more.

If a debtor decides to file a consumer proposal (because his or her debt load is $250,000 or less, not including any mortgages against the principal residence) or a Division I Proposal (for unsecured debts $250,000 or greater) instead, he or she is seeking a restructuring of debt so for repayment over a five years or less. Many times, debtors can negotiate with their creditors for part of the amount owed and work out deals on monthly payments, rates of interest, and other such considerations. A proposal is most similar to Chapter 13 in the U.S. and used by people who wish to AVOID bankruptcy.

Basically, the business operates as usual while making an offer to its creditors of payments over time, totalling an amount greater than the creditors would receive if everything was sold off in liquidation in bankruptcy. The largest businesses might even have several layers of debt that would need restructuring as part of a Division I proposal, and each layer might have different guidelines and restrictions based on the proposal.

For companies with greater than $5 million in debt, they could also make use of a different Federal restructuring statute called the Companies’ Creditors Arrangement Act (CCAA). Both the Proposal under the BIA and restructuring under the CCAA are for large complex corporate reorganizations.

Is a Lawyer Required?

Unlike citizens of the United States, Canadians don’t need a lawyer to file for bankruptcy. A Licensed Insolvency Trustee acts as the “referee” between debtor and creditors. In this way, people file and handle bankruptcy proceedings on their own in Canada. If the debtor has various complex issues or is a defendant in litigation where the plaintiff wishes to continue the litigation perhaps to attempt to prove that their claim is one not released by the person’s discharge from bankruptcy, then they may very well need a lawyer for those issues.

What to do if you have too much debt and want to read a personal bankruptcy blog?

To find out more, check out our Brandon’s Blog entries for the topic of personal bankruptcy blog. If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.

We’re not only bankruptcy experts; we’re experts in dealing with debt. Contact Ira Smith Trustee & Receiver Inc. today for a free consultation and you will be well on your way to regaining your former quality of life Starting Over, Starting Now.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags alternatives to bankruptcy, Bankruptcy and Insolvency Act, BIA, blog, brandon’s blog, CCAA, chapter 11, Chapter 13, Chapter 7, Companies’ Creditors Arrangement Act, Consumer Proposal, Corporate Bankruptcy, corporate restructuring, credit counselling, Division I Proposal, personal bankruptcy, personal bankruptcy blog, restructuring

Brandon Blog Post

#VIDEO – HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY?#

Post author By Brandon Smith
Post date June 29, 2016

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

NOT MUCH!

We are always asked, how much do you have to owe to file bankruptcy? The real question is, here are my assets and my debts, what are my options? In Canada, the Bankruptcy and Insolvency Act (Canada) (“BIA”) states that you must owe at least $1,000 of unsecured debt to file for bankruptcy. The same holds true if someone owes you money. They must owe you at least $1,000 on an unsecured basis to apply to the Court to make an Order judging a person or company into bankruptcy. As you can see, the threshold is not very high.

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

ARE YOU INSOLVENT?

Facing serious financial difficulties is devastating, especially if you believe that personal bankruptcy 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. Insolvent is a financial condition; bankruptcy is a legal state.

Bаnkruрtсу is a legal рrосеѕѕ under the BIA that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the shortened 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 administration provisions. Don’t worry about these distinctions now. For now, just know that the streamlined summary administration rules is a simpler process, and the Superintendent of Bankruptcy sets the cost of the bankruptcy administration.

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

THE BANKRUPTCY PROCESS

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 the proceeds used to рау for the bankruptcy administration and then to distribute to уоur сrеdіtоrѕ.

If you have very little property, all of it might be рrоtесtеd so that you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property sells fоr and whether you must pay “surplus income” to your LIT.

The last step of your bankruptcy process, will be to get your discharge from your debts, meaning that you will not have to рау them all (with certain exceptions).

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

SEE A TRUSTEE EVEN IF YOU DO NOT WANT TO GO BANKRUPT!

People think that they should only see a LIT if they need to file for bankruptcy. Every LIT will give you a free 1 hour consultation, to go over your situation and offer you your available options. The topics the LIT will discuss with you are:

As you can see, bankruptcy is only one of many topics discussed, in determining what your options are, allowing you to choose the one that makes the most sense to you. No other professional can discuss this full range of topics with you, and especially not for free!

WHAT SHOULD YOU DO IF YOU OR YOUR COMPANY HAS TOO MUCH DEBT?

If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

Tags Bankruptcy, bankruptcy alternatives, Bankruptcy and Insolvency Act, bankruptcy process, BIA, Consumer Proposal, credit counselling, credit rating, debt conslidation, debts, file bankruptcy, how much do you have to owe to file bankruptcy, insolvent, Ira Smith Trustee, licensed insolvency trustee, personal bankruptcy, rebuilding credit, trustee

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