Tag: Consumer Proposal

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CERB CANADA: THE ENORMOUS DEBT PROBLEM NOW FACING CANADIANS

The Canada Emergency Response Benefit (CERB Canada) has been closed but is not over

The government is ramping up its efforts to verify CERB Canada eligibility for payments made under the Canada pandemic support program. Many Canadians have been told to return some or all of the funds received in the past. The Canada Revenue Agency (CRA) and Employment and Social Development Canada are working together to ensure that those who received COVID-19 pandemic individual benefits were eligible for them. CRA also announced that they are sending out Notices of Redetermination to Canadians who were ineligible for some or all of the CERB Canada benefits they received.

The CERB Canada benefit was rolled out quickly and there was a lot of confusion about who was eligible for it. It was created to help those in Canada who the COVID-19 pandemic directly impacted. The program provided financial assistance to employees and self-employed workers. The benefit was worth a maximum of $2,000 every 4-week period for up to four months.

The issue that troubles me is that the benefit was mostly paid to people who otherwise would not have been able to afford rent or food. The CERB Canada benefit money was spent immediately and a long time ago. So if CRA and Service Canada have now determined that some people should not have gotten that benefit, what are those people supposed to do if CRA demands the money back?

In this Brandon’s Blog, I discuss what the options may be for people who receive a demand for repayment of the CERB Canada benefit.

Who was eligible for CERB Canada?

To qualify for the CERB payment from the government support program, you must have met certain conditions during the period you applied. The Government of Canada stipulated the following eligibility criteria:

  • You did not look for or receive, CERB Canada or Employment Insurance benefits from Service Canada for the same qualification period.
  • You did not stop your work willingly on your own. You were forced to stop your work by someone else.
  • You are a Canadian resident who is at least 15 years old.
  • You must have earned at least $5,000 (before taxes) in the preceding 12 months, or in 2019, from one or more of the following:
    • job income
    • self-employment income earnings
    • benefits relating to pregnancy or parental leave from the province

The program was designed to help Canadian employees and self-employed Canadians who lost their jobs or saw a significant decrease in income due to the COVID-19 pandemic and the COVID-19 lockdown order resulting in business shutdowns. The program came to an end on December 2, 2020.cerb canada

Sending your CERB Canada payment back

If you have received a letter from Service Canada asking you to repay an overpayment, the CRA says you need to follow the instructions on the letter to return the payment.

You will have the opportunity to provide more evidence to support your claim that you were entitled to the CRA’s full CERB benefit payment. Based on your responses, you may need to repay the full amount you received.

If you received any CERB Canada payments and they now say you didn’t fit into the group of eligible workers, you have the option to pay back what you owe in full right now or over time. They expect you to repay it in full either way.

Now consider this. The federal government paid nearly $12 million in CERB Canada payments to more than 1,600 people with foreign addresses during the first seven months of the pandemic! How did that happen if one of the criteria of this program was you had to be a resident of Canada?

The way the CERB Canada benefit is taxed is by taking it out of your paycheque – wasn’t that enough?

The CERB Canada benefit was not a grant or any other kind of freebie. Anyone who received it had to include it in their taxable income. That is fair because the benefit was meant to replace lost income.

In April 2020, Prime Minister Trudeau announced that the Government of Canada would be taking extensive and decisive action to support Canadians and businesses who were struggling due to the COVID-19 global pandemic through an expansion of this program.

The Prime Minister went on to say that no Canadian should have to choose between protecting their health, putting food on the table, paying for their medication or caring for a family member. He said this is why the government introduced the CERB Canada Benefit, a taxable benefit.

There have even been CRA, Employment and Social Development Canada and court decisions confirming that the CERB Canada payments are taxable and that it was definitely not a free ride. The demand for repayment of benefits from Canadians who CRA and Service Canada now feel were not eligible workers seems totally anti-social. The program was rolled out hastily and under unclear, confusing circumstances, and Canadians have been paying income tax on the benefits they received. Surely our federal government has better places to spend its time clawing back wasteful spending.cerb canada

Mom was shocked when her maternity leave benefits were cut in half due to the CERB Canada benefit

A mother was shocked to see that her most recent parental benefits instalment had been cut in half. She said that maternity and parental benefits are paid to parents so they can take time off from paid work to do another kind of work: care work.

She was receiving half of her parental leave benefits for three weeks, which were already about half of her regular earnings. The reason for the reduction was because it was determined that the CERB Canada benefit she received for every four-week period, increased her income to the point where the reduction was warranted.

Then she received a demand for repayment. She hadn’t expected to have to repay the benefit. Shortly after the COVID-19 outbreak hit in March 2020, she was let go from her work because there wasn’t enough work to go around. She thought she qualified under the eligibility requirements for the CERB Canada benefit.

She couldn’t repay the full amount in one shot so she tried to arrange a repayment plan with CRA. She said that she had to fax about a dozen documents and field several questions from federal government employees to prove she is experiencing “financial hardship” in order to qualify for a payment plan. I don’t understand why payment plans have to be approved rather than just being automatically set up. These are not rich people that they are demanding repayment from, so why make them jump through hoops?

The British Columbia court has ruled that the CERB Canada payment must be deducted from the damage award for wrongful dismissal

Here is another example that the CERB Canada benefit is not a tax-free payment or a non-taxable grant. In Reotech Construction Ltd. v Snider, 2022 BCSC 317 the trial judge awarded the employee damages for a 4.5-month reasonable notice period and declined to deduct his CERB Canada payments.

After reviewing the case, the Supreme Court of British Columbia decided that the original trial judge was incorrect in choosing not to reduce the damage award by the $9,000 in benefits received. The court decided that these payments should be deducted from the award.

There was no indication that the employee would have to repay the CERB Canada benefit to the government. If the CERB payments are not deducted, then the employee would be in a better position than if there had been no breach of the employment contract. The employee would not have received the benefit if he had not been dismissed, making the benefit an indemnity for the wage loss caused by the dismissal.cerb canada

How to repay the CERB Canada benefit

If you received the CERB Canada and now find out that you did not meet the eligibility requirements, as shown above, you must repay the money. There are a few different ways that you can repay the amount demanded.

The easiest way to repay the CERB Canada amount is through your online service CRA My Account. You can log into your account and select “Repay CERB” under the “My Account” tab. If you do not have a CRA online account, you can repay the amount you owe either by sending a cheque through Canada Post to the CRA mailing address you can find online. You can also pay it at your financial institution using the government-issued remittance form.

But what if you are just one of the many hard-working Canadian workers living paycheque to paycheque? What if you do not have the money to repay what they say you owe, either all at once or by taking an amount out of each of your future paycheques that CRA will agree to?

What if you cannot repay because the government stepped up its efforts to verify CERB Canada payments and made demands on you?

As stated above, if you cannot afford to repay the full amount being demanded of you all at once, you can hopefully convince CRA that you deserve a payment plan over time due to “financial hardship”. This assumes that the government is right that you were not originally entitled to the amount that you received for the CERB Canada benefit. But what if you cannot afford to repay it at all, no matter what sort of payment plan you can enter into?

The outcome will depend on if you are insolvent. Being insolvent doesn’t necessarily mean bankruptcy. Insolvency (aka financial failure) is a financial condition that occurs when a person or company doesn’t have enough assets to pay off all debts if they were to be liquidated. It also means that the person or company has stopped paying their bills on time in the normal course.

If the person is NOT insolvent, they are expected to sell assets or use cash on hand to pay their bills.

If you’re insolvent, you can take advantage of Canadian insolvency legislation, the Bankruptcy and Insolvency Act (Canada) (BIA). The debt to repay the CERB Canada benefit is an ordinary unsecured claim that will be eliminated through a successful financial restructuring under either a consumer proposal or a Division I proposal. As a last resort, you could also file for bankruptcy.

I would rather refer you back to some of my earlier Brandon’s Blogs that go over the requirements for each insolvency option, rather than go through all of them individually here. They are:

  1. Consumer proposal –CONSUMER PROPOSAL TORONTO: THE COMPLETE #1 WAY TO ELIMINATE DEBT IN ONTARIO
  2. Division I Proposal –THE EASIEST WAY TO ACTUALLY LIKE WHAT IS A DIVISION i PROPOSAL ONTARIO
  3. Personal bankruptcy – BEYOND BANKRUPTCY SERVICES: OUR BEST PERSONAL INSOLVENCY FAQ 2 JUMPSTART YOUR FINANCIAL LIFE

CERB Canada: Canadian workers now under fire

In summary, CRA now says it’s “time to pay up” for Canadians who were paid the CERB Canada benefit during the pandemic. Although CRA has a right to claw back the amount if it is correct that the person was not eligible, what CRA’s insistence means for many Canadian workers is they now have to choose between paying back their CERB or paying for food, rent or medicine.

This is so ironic because the benefit payments were designed to help those people in making those payments when their incomes dried up. The amounts were taxed so the government earned income that way. Now they are causing unneeded stress and worry to the people they aimed to help.

I hope this Brandon’s Blog was helpful to you in understanding more about this problem now facing many Canadians. If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life.cerb canada

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BEYOND BANKRUPTCY SERVICES: OUR BEST PERSONAL INSOLVENCY FAQ 2 JUMPSTART YOUR FINANCIAL LIFE

Bankruptcy services and FAQ information

Bankruptcy is a last resort for Canadian individuals, entrepreneurs and companies looking for a debt solution. However, bankruptcy services are just one of the available options we canvass with you to provide the opportunity to rebuild your financial affairs and your life.

I help people and senior company management understand bankruptcy and the other options available to rebuild their life. Frankly, bankruptcy is always the last option and hopefully in most cases, can be avoided.

In this Brandon’s Blog, I provide my best FAQ answers to common questions about personal bankruptcy services. The answers below will contain all the information you need to know. So here we go. In the future Brandon’s Blogs, I will talk about corporate bankruptcy services in addition to personal and corporate restructuring as alternatives to bankruptcy services.

Bankruptcy services: Who files for bankruptcy and why?

Many people who are considering looking into the need for the bankruptcy process may feel alone and lost. This is because they may not know anyone who has gone through the same thing, making them feel like they have no one to talk to about it. Bankruptcy can be very scary and intimidating, especially if you feel like you’re the only one experiencing financial difficulties.

Financial problems affect people from all walks of life and all income levels. It doesn’t discriminate, affecting married and single people alike, regardless of age. Seniors and those just starting out in life, consumers and companies are all susceptible to needing bankruptcy services.

The Office of the Superintendent of Bankruptcy Canada (OSB) keeps insolvency statistics. It used to be affiliated with a part of the federal government called Industry Canada. Now it is part of what is called Innovation, Science and Economic Development Canada. The OSB has not yet released the 2021 annual insolvency statistics. In 2020 99,244 insolvencies were filed in Canada. This was a 29.5% decrease in insolvencies filed with the OSB in 2020 compared to 2019. This is the largest annual decrease ever. The decrease can be largely attributed to the outbreak of COVID-19 and the various emergency response measures that followed.

The number of consumers filing for insolvency decreased from 137,178 to 96,458, while the number of businesses filing for insolvency decreased from 3,680 to 2,786. The proportion of proposals among consumer insolvency filings increased from 60.3% to 65.9%.

There are two things to remember from these statistics:

  1. You are not alone. Many people face financial difficulties.
  2. There are options available for avoiding bankruptcy services.

    bankruptcy services
    bankruptcy services

Bankruptcy services: Can bankruptcy clear debt in Canada?

Most outstanding debt owed to unsecured creditors is cleared not by a person filing for bankruptcy, but by that person receiving their absolute bankruptcy discharge.

Even after bankruptcy, some debts still need to be paid. This includes a student loan if it has been less than 7 years since you stopped being a student, alimony and child support, fines and penalties imposed by the court, and any debts due to fraud.

Also, any secured debts, such as a registered car loan or mortgage against real estate are not discharged by a bankruptcy – either personal bankruptcy or corporate bankruptcy.

What debts cannot be discharged through personal bankruptcy services in Canada?

See the section “Bankruptcy services: Can bankruptcy clear debt in Canada?” directly above.

Bankruptcy services: How much debt must you accumulate in order to file for bankruptcy in Canada?

The minimum amount of unsecured debt needed to file for bankruptcy in Canada is $1,000, as stipulated by the Bankruptcy and Insolvency Act (Canada) (BIA). In addition, the person, partnership or company must also be insolvent. Bankruptcy is a legal process. Insolvency is a bad financial situation.

Bankruptcy services: What debts are not erased in bankruptcy?

See the section “Bankruptcy services: Can bankruptcy clear debt in Canada?” directly above.

bankruptcy services
bankruptcy services

Bankruptcy services: What are the three types of bankruptcies?

There are several ways I could answer that question. For example, there are:

  1. Personal bankruptcy is also sometimes referred to as consumer bankruptcy.
  2. Small business bankruptcy. This would mainly be for a proprietorship or partnership.
  3. Corporate bankruptcy – small or large companies.

Another way of answering the same question would be:

  1. Voluntary bankruptcy – an assignment in bankruptcy being filed by the person or company.
  2. Involuntary bankruptcy – a bankruptcy happening because one or more creditors issued a bankruptcy application resulting in a bankruptcy order.
  3. Bankruptcy protection is not bankruptcy at all. It is a financial restructuring performed by a licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada maintains a searchable list of individuals licensed to act as a licensed insolvency trustee in Canada.

My final way of answering the same question is:

  1. Consumer proposal – This is a financial restructuring under the BIA to avoid bankruptcy for a person who owes $250,000 or less not including any debts secured against the person’s principal residence.
  2. Proposal – This is a financial restructuring under the BIA to avoid bankruptcy for a person who owes more than $250,000 (not including any debts secured against the person’s principal residence) or for a company with any amount of debt.
  3. Financial restructuring under the Companies’ Creditors Arrangement Act – This is what the media calls bankruptcy protection in order to restructure and avoid bankruptcy. To qualify to file under the Companies’ Creditors Arrangement Act statute, the company must have a debt load of $5 million or more.

All of the above bankruptcy services can only be administered by a licensed insolvency trustee (formerly called a bankruptcy trustee or trustee in bankruptcy), but they are not all bankruptcy.

I guess these are really 9 types!! It all depends on how you wish to look at it.

Bankruptcy services: What are the consequences for your assets when declaring bankruptcy?

A bankruptcy does not mean you have to give up all your assets. There are rules about bankruptcy exemptions in bankruptcy law. Also, every province/territory has laws that say what assets you can keep and how much equity you can have. These types of assets are called exempt assets. There are certain assets that you are allowed to keep that are not accessible to your creditors during a bankruptcy. These assets are exempt under federal law, provincial law or both.

In order to understand what exempt assets are in bankruptcy in Ontario, we must first look at the BIA. Section 67(1) of the BIA addresses the bankruptcy exemption issue specifically. It outlines what property of the bankrupt is available to creditors does and does not include.

Property that is not included is:

  • Property that is held in trust by the bankrupt for any third party.
  • Assets that are not subject to seizure under provincial law.
  • Payments to the bankrupt are made under a program that can be described as social assistance provided by the federal or provincial government.
  • Retirement Savings Plans – The bankrupt’s RRSP (other than for the total of payments made in the 12 months before bankruptcy) or RRIF cannot be touched even in bankruptcy.

As mentioned before, one type of asset that cannot be seized during bankruptcy is any property that is protected under provincial law. In Ontario, the amounts prescribed for exemptions are outlined in the Ontario Execution Act.

These exemptions include:

  • Household furnishings and household appliances – $14,180.
  • Tools and other personal property used to generate income:
  • Exemptions for farmers, being a debtor engaged exclusively in cultivating the soil or farming (and therefore it is that farmer’s principal source of primary income), $31,379 for livestock, fowl, bees, books, tools and implements, and other chattels ordinarily used by the debtor; $14,405 for any other case.
  • $7,117 for a motor vehicle.
  • $10, 783 for a principal residence.

Since these exemptions are provincial, you need to look at provincial/territorial laws for other jurisdictions in Canada.

bankruptcy services
bankruptcy services

Bankruptcy services: What are the implications of personal bankruptcy on retirement plans?

There are 4 main ways Canadians save to live comfortably in retirement. They are:

  1. The principal residence.
  2. RRSP..
  3. Investments.
  4. Private pension plan.

#1 – The principal residence and bankruptcy

For many Canadians, their house is the biggest investment they make and the majority of their savings are tied up in it. Owning a home makes people more confident about their financial future.

If the owner of a home becomes bankrupt, either through an assignment in bankruptcy or bankruptcy order, the debtor’s equity in the home is an asset for the licensed insolvency trustee to sell. The exception is if the home is fully encumbered so that there is only $10,783 or less of equity (in Ontario) in the home.

If the bankrupt is a joint owner, then the Trustee only has access to the bankrupt’s interest, which would be half the equity.

The loss of wealth from the sale of the house or the encumbrance of the house will make it take much longer to build back the equity by paying off the mortgage(s). In the case of joint ownership, the natural purchaser would be the non-bankrupt spouse or partner who owns the other half. The person would likely have to take on more debt to buy the equity from the Trustee.

The loss of wealth as a result of bankruptcy can mean having to work longer than originally planned. This is one way that bankruptcy can affect retirement.

#2 – Your RRSP and bankruptcy

It is the rare debtor that seeks an insolvency option and has a significant amount in their RRSP. This is notwithstanding that a creditor cannot seize your RRSP funds in Ontario.

If you think about it, if you have a 7-figure RRSP and a 6-figure total debt, then you are not insolvent. To be eligible to use the Canadian insolvency process, you must meet certain conditions, one of which is being insolvent.

The only amount of your RRSP that is affected by bankruptcy is any contributions made to the RRSP in the 12 months before the bankruptcy happened. That amount is subject to seizure by your Trustee. Rather than seizing that amount from your RRSP, the Trustee will require you to pay that amount to the Trustee for the benefit of your bankruptcy estate.

Not having a sizeable RRSP to start withdrawing at retirement obviously will affect your retirement plans.

#3 – Bankruptcy and investments

People who are able to save for retirement invest their money to make it grow in addition to an RRSP and principal residence. Investments such as stocks, bonds and mutual funds are very typical. There are two general ways these investments can be held: (i) investment in funds maintained by a life insurance company naming a designated beneficiary (either a spouse or blood relative); and (ii) investments held with your broker.

If you have investments through a contract of insurance and you name your spouse, child, parent, or grandchild as the beneficiary, then those investments are exempt from seizure in Ontario. If you file an assignment in bankruptcy will not have any effect on these investments, and you will be able to keep them. Therefore, this will not affect your retirement plans.

If your investments are through the brokerage arm of your bank, then your investments can be seized in Ontario. These investments will be lost in your bankruptcy and this will affect your retirement plans. If your spouse or partner purchases your interest in these investments from the Trustee, then whatever debt the purchaser had to take on to buy them may affect retirement plans.

#4 – Bankruptcy and a private pension plan

Not everyone in Canada has a private pension plan through their employer. Individuals who are self-employed certainly don’t have it. Having a private pension plan can relieve some of a person’s financial worries as they head toward retirement.

In Ontario, private pensions are protected from seizure and therefore not available for the Trustee. However, if you are already retired and are receiving the private pension income, that income is taken into account when calculating any surplus income payments you may have to make to your Trustee.

bankruptcy services
bankruptcy services

How bankruptcy services work in Ontario: What is the average length of time for a person to be discharged from bankruptcy in Canada?

To be discharged from bankruptcy in Canada can differ based on whether it is a first or second bankruptcy, and whether the bankrupt has any surplus income contributions to make. For a first-time bankrupt it can take 9 months (no surplus income) -21 months (with surplus income contributions). For a second time or more bankruptcy, it takes 24 months (no surplus income) to 36 months (surplus income).

Bankruptcy services: Surplus income

Surplus income is not an ideal term to describe the extra money an individual has. Many people would not feel they have surplus income, especially when they are dealing with debt. However, in the bankruptcy context, surplus income refers to a calculation that determines how much money a bankrupt individual must pay into their bankruptcy estate for the benefit of their creditors.

When you file an assignment in bankruptcy or have a bankruptcy order made against you in Canada, your monthly income is taken into consideration. To have what is supposed to be a practical standard of living during the bankruptcy period, the Office of the Superintendent of Bankruptcy Canada establishes a standard on an annual basis.

The earnings criteria are adjusted for inflation each year and based on information collected by Statistics Canada. Your licensed insolvency trustee decides how much you pay by making monthly payments into your bankruptcy estate each month based on these standards.

It is really the Canadian poverty line that is established by the Office of the Superintendent of Bankruptcy Canada. Regardless of where you reside in Canada, there is no difference between an expensive city as well as a remote area. Just the most fundamental demands of individuals in addition to members of the family are considered.

Bankruptcy services: Debt problems got you down? Feeling overwhelmed?

I hope this Brandon’s Blog on personal bankruptcy services was helpful to you in understanding more about the personal bankruptcy system in Canada.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life.

bankruptcy services
bankruptcy services

 

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CONSUMER PROPOSAL TORONTO: THE COMPLETE #1 WAY TO ELIMINATE DEBT IN ONTARIO

Consumer proposal Toronto: What is a consumer proposal in Ontario?

If you’re drowning in debt and find you are falling further behind every month, there may be options available to help you regain total control over all aspects of your life and eliminate your stress. If you’re struggling with debt, a consumer proposal may be a good option for you. This guide will explain what they are, and the benefits, and answer some frequently asked questions. If you’re struggling with debt and live in the GTA, a consumer proposal Toronto may be a good option for you. This guide will explain what they are, and the benefits, and answer some frequently asked questions.

This debt settlement plan is a legal process administered under the Bankruptcy and Insolvency Act (Canada) (BIA). It allows you to pay back part of your debt over a period of time. The benefit to you of a consumer proposal Toronto is that once you finish paying back the portion that you agreed to, you will be totally debt-free.

Consumer proposal Toronto: Who can file a consumer proposal?

To qualify for this government-sanctioned debt settlement plan, you must be insolvent and owe $250,000 or less to all your creditors (excluding any secured creditor financial debts secured by registration against your personal residence such as mortgages or lines of credit).

This is a good option for people who:

  • are employed
  • can budget their money to make the required monthly payments
  • want to avoid bankruptcy
  • can’t stand all the collection calls from the collection agencies anymore

    consumer proposal toronto
    consumer proposal toronto

Consumer proposal Toronto: How to make a consumer proposal in Toronto

Under the BIA, a licensed insolvency trustee (formerly called a bankruptcy trustee) will administer the consumer proposal. In fact, the licensed insolvency trustee is called the consumer proposal administrator.

The licensed insolvency trustee will submit the required documents to the Office of the Superintendent of Bankruptcy (OSB). Your payment to unsecured creditors will stop as of the date of your filing. You will also have stopped paying any secured creditors if you have decided to do so because you could not afford to keep the secured assets and you, therefore, handed them over to the lenders.

When you file a consumer proposal Toronto, any legal action your unsecured creditors have started against you in the Greater Toronto Area will be stopped. If a creditor already has a judgment against you are issuing wage garnishees, that will also stop. This will give you some relief and the time to work out the debt settlement plan.

The licensed insolvency trustee will present your creditors with your proposal, a list of your assets and liabilities, as well as the reasons for your financial difficulties.

The creditors will have 45 days to decide whether to accept or reject the proposal. They can do this either before or at the meeting of creditors if one is held.

Consumer proposal Toronto: Why would my creditors be willing to agree?

To have a consumer proposal Toronto approved, a majority of your creditors by the dollar value of their unsecured debts, who have filed a proof of claim for their unsecured debts, need to authorize it. If creditors who have filed a proof of claim choose not to vote, that is considered a vote in favour.

Creditors who hold 25% or more of the total dollar amount of submitted claims may request a meeting, or the OSB may request one. If no meeting is requested, the proposal is considered accepted by the creditors.

There is not a whole lot to understand. As I mentioned, a simple majority by dollar value tells the tale. There is either a majority to accept or refuse your consumer proposal. Why would your unsecured creditors agree to your consumer proposal? Simple. The licensed insolvency trustee acting as the administrator in your consumer proposal has clearly shown them that it is a better deal than they will get in your bankruptcy.

If your proposal is accepted, then for the next 15 days, either the OSB or a creditor can ask to be put on the Court docket to seek Court approval. If no such demand is made, the proposal will be considered to have been approved by the Court.

consumer proposal toronto
consumer proposal toronto

If your consumer proposal Toronto is accepted

An accepted proposal is a legally binding agreement between you and your creditors. You have committed to making regular payments to the licensed insolvency trustee for a period of up to 60 months. You will fulfil your obligations under the proposal by making all the required payments on time.

If you attend two mandatory credit counselling courses run by the licensed insolvency trustee and make all the required payments, you will have discharged the balance of your debt. This also means you have successfully avoided bankruptcy as a consumer proposal Toronto is the best alternative to bankruptcy in Toronto.

Can you pay off a consumer proposal earlier than the specified timeframe?

A consumer proposal in Ontario is an interest-free loan that is much less than what you originally owed your unsecured creditors. So, it may be beneficial to you not to pay it off early to get the full benefit of the proposal.

However, we structure all of our proposals to give you flexibility. You can take the full 5 years if you need to. If you are able to pay it off early and you have good reasons for wanting to do so, then you can.

When we word it this way, we won’t have to go back to the creditors or the court to make any timeline changes. It’s all included. Also, with other loans, there’s usually a penalty for paying them off early. But with this loan, there’s no penalty for doing so.

If your consumer proposal Toronto is not accepted

If your proposal ends up being rejected, you have a few options:

  • Try again with different, improved terms
  • Look into other options for solving your financial issues
  • File for bankruptcy

In other words, if you finish making all the payments and attend the two financial counselling sessions, you will have paid off your debt in full. Additionally, you will have avoided having to declare bankruptcy.

consumer proposal toronto
consumer proposal toronto

Consumer proposal Toronto: A consumer proposal will have an impact on your credit rating

A person who files this kind of proposal is typically given the lowest credit rating.

The information that affects your credit report is typically removed after a certain period of time. In Ontario, the notation of your consumer proposal insolvency proceeding stays on your credit record for 3 years after you have completed all of your payments and received your certificate of full performance.

Once you are done you can then start to rebuild your credit. One way to do so is by demonstrating that you can handle credit responsibly. This will involve making timely payments on your debts and maintaining a good credit history going forward. Over time, these positive steps will help to improve your credit score.

Consumer proposal Toronto: Are consumer proposals a good way to get out of debt?

You had financial difficulties and your assets and employment income were in jeopardy. Perhaps you even had wage garnishments. You needed debt solutions and you chose the only government-sanctioned debt settlement plan available in Canada. You were successful in completing it and as a result, you were able to shed all your debt in return for paying only a portion of it. You also avoided personal bankruptcy.

Without a doubt, that makes it worth it.

consumer proposal toronto
consumer proposal toronto

Consumer proposal Toronto: Benefits of filing a consumer proposal making it better than bankruptcy

There are several advantages to filing this kind of proposal, including:

  • the elimination of all unsecured debt in return for paying only a fraction of what is owed;
  • filers are able to keep their home, vehicle, and other assets as long as they can afford to make any mortgage payments or other loan payments against them;
  • a successful consumer proposal will let you avoid bankruptcy;
  • your proposal payments will be spread out over a longer period of time, making them more affordable.

Consumer proposal Toronto: Potential drawbacks of filing a consumer proposal

Some potential drawbacks to consider before filing a proposal include:

  • you may not be able to borrow money for a few years after your proposal is completed;
  • your credit score will be negatively affected but not as bad as someone who files for bankruptcy;
  • if you cannot afford to keep up the debt payments on a secured loan, such as a car loan, you will have to give it up;
  • the BIA says that your proposal must be a better alternative for your creditors than in a bankruptcy, so, working with the licensed insolvency trustee, you have to make an offer that will be approved by a majority of your creditors, and they may not agree to the first set of terms you propose.

    consumer proposal toronto
    consumer proposal toronto

CRA income tax debt can be included in consumer proposals

Definitely. CRA is an abbreviation for Canada Revenue Agency, whose purpose is to manage Canada’s revenue by collecting income taxes and other taxes owing by Canadians. CRA is the government department responsible for collecting income tax and GST/HST. CRA Canada tax debt refers to any outstanding tax debt owed to the Canadian government. If you have CRA tax debt, then you can eliminate it through a consumer proposal with a licensed consumer proposal administrator.

I have helped many people with CRA income tax debt. Examples are people who:

  • were a Director of a company and became personally liable for unremitted HST
  • filed their income tax returns and paid their income tax every year, but who are now faced with a large income tax reassessment that they cannot afford to pay
  • did not keep up with their tax filings, and once caught up, realize that they have a huge debt they cannot afford to pay

For all these people, a consumer proposal Toronto was a better alternative for both them and their creditors than a bankruptcy. If you fall into one of these categories, then I can help you eliminate that debt.

Debt consolidation versus consumer proposals

You already know from this Brandon’s Blog what a consumer proposal in Toronto, Ontario is and can do for you.

A consolidation loan is financing that lets you consolidate numerous financial obligations and pay them off with one lower interest rate loan. This aids you to conserve cash because of the lower rate of interest. Your regular monthly payment on the one loan is now much more workable. To qualify, you’ll need to have a good credit score and demonstrate that you have the income and assets to repay the loan.

Financial debt consolidation can assist you to get your finances in order, however, a consumer proposal may be a much better option if you’re struggling with financial obligations.

What will happen if I am unable to make payments on my consumer proposal?

If you stick to the terms you agreed to, your creditors and collection agencies can’t hound you. If you break the terms of your proposal or miss 3 months of payments, the proposal becomes void. If that happens, you won’t be able to file another one.

This is another disadvantage of a consumer proposal. If it becomes annulled, the only thing left would be a bankruptcy filing.

Consumer proposal Toronto: What is the popularity of consumer proposals in Toronto?

Consumer proposals are the only government-approved debt repayment program. It has become quite popular in recent years. Consumer proposals are a great option for those who are struggling to meet their financial obligations and who want to eliminate their debt.

How popular are they? The OSB recently reported that across Canada, the proportion of proposals in consumer insolvencies increased to 70.2% of all consumer insolvency filings during the 12‑month period ending February 28, 2022. So consumer proposal Toronto filings and for the rest of Canada, represent the huge majority of consumer insolvency filings.

As I already stated, you can only do this if you are insolvent and your outstanding debts to creditors are less than the maximum allowed for a consumer proposal discussed above.

consumer proposal toronto
consumer proposal toronto

For those who owe more than the consumer proposal limit, we use another section of the BIA allowing them to restructure and eliminate debt.

What is the cost of a consumer proposal Toronto?

To see if this choice is best for you, you’ll need to weigh the costs. There are two different types of costs to take into account: 1. the amount you need to offer to get creditor approval; and 2. the professional fees that you will be responsible for.

During your free consultation with the licensed insolvency trustee, you will learn what your creditors could expect from your bankruptcy. As I have already said, the BIA requires your creditors to have a better outcome than they would in your bankruptcy. The licensed insolvency trustee will make the recommendation to you of what a successful debt settlement strategy would be.

The professional fee and disbursements that a licensed insolvency trustee is allowed for administering your proposal are fixed by the BIA regulations and are called a tariff. The tariff is the same whether you live in Toronto, Ontario or anywhere else in Canada. The proposal document reads that the licensed insolvency trustee is allowed to take its tariff from the total of the proposal fund that you will pay over time. As you have already read in this blog, what you need to offer your creditors is driven off of what they can expect from your bankruptcy. The cost of the proposal administration is not taken into account in that calculation.

In a successful consumer financial restructuring, the tariff is taken from the amount the creditors would otherwise receive. So your creditors are paying the cost, not you. Therefore, you do not pay anything for the professional fee and disbursements.

Consumer proposal Toronto: What happens after a consumer proposal?

After you have successfully completed your proposal, including the credit counselling sessions, you have hopefully learned proper budgeting skills. You are now better equipped to make wiser credit decisions and know that you cannot spend more than you earn, on an after-tax basis.

There are now ways for you to start rebuilding your credit:

  • Get a secured credit card. You put down a cash deposit and that amount is your credit limit. When you pay your secured credit card debt balance in full each month and do not let the credit card company take it from your cash deposit, this will be reported to the credit reporting agencies. This improves your credit score over time.
  • You can take out a small RRSP loan when you first get your certificate of full performance. You can then pay off the loan within the next 12 months. If you make your loan payments on time, it will be reported and this improves your credit score.

You don’t want to get into debt problems again. Be careful with credit.

consumer proposal toronto
consumer proposal toronto

Consumer proposal Toronto: How to avoid being ripped off

No one wants to be cheated, especially for something as important as picking from available debt management plans or debt-relief options, the best one for you for resolving your unmanageable debt problems. Here is what you can do to protect yourself from getting taken advantage of. Before making a decision on which debt settlement company to go with, be sure to do your research. This means reading online reviews and talking to people who have gone through a restructuring proposal, to get as much information as possible.

Keep in mind that there are a lot of debt settlement companies who will promise you that either they can eliminate your debt without using a BIA insolvency process or through a consumer proposal. They charge upfront fees. Check to see if such companies are actually licensed insolvency trustees. You can do so through the OSB website.

Anyone who charges an upfront fee is not a licensed insolvency trustee. As I said, an insolvency trustee like me provides a no-cost initial consultation. As I have also told you, in a successful restructuring, it is your creditors who pay the professional fee tariff. Remember, a licensed insolvency trustee is the only debt professional who is both licensed and supervised and is the only one able in Toronto or anywhere else in Canada to be the consumer proposal administrator.

For help with a consumer proposal Toronto, please contact us

I hope you found this consumer proposal Toronto Brandon’s Blog informative. Hopefully, you now see how a successfully completed proposal can eliminate their unsecured debt from their name. It is a legally binding agreement with your creditors that can only be filed through a licensed insolvency trustee.

We understand how stressed out and anxious you have become because you cannot fix your financial situation on your own. As a government-licensed insolvency professional firm, we can help you get your finances back on track.

Trustees, like we are, are the only government-licensed and accredited professionals who provide insolvency advice and debt relief solutions. A consumer proposal is a federal government-licensed debt settlement approach that can eliminate your debt. We can help you choose what is right for you.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

If you’re struggling with debt, the Ira Smith Team can help. We have the experience and knowledge to assist individuals and companies in restructuring their debt to prevent a bankruptcy legal proceeding. Everyone’s debt story is different. We offer a free debt assessment to help you identify the best solution for your personal debt issues. Call us today and get back on the path to a healthy stress-free life.

consumer proposal toronto
consumer proposal toronto
Categories
Brandon Blog Post

CONSUMER PROPOSAL STUDENT LOANS STEP-BY-STEP DEBT RESCUE: HOW TO FIX YOUR STUDENT DEBT PROBLEMS

consumer proposal student loans

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Consumer proposal student loans: Student Loans and Consumer Proposals

In the event of student loan debt, you may be able to eliminate certain student loans through a bankruptcy or consumer proposals. Student loans are given special treatment under the Bankruptcy and Insolvency Act (Canada) (BIA). The seven-year waiting period is a requirement for consumer proposals related to student loans (by the way, the concept is similar in personal bankruptcy).

Throughout this Brandon Blog, when I refer to student loans, I am referring to loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or any provincial act that provides loans or guarantees for student loans.

I am not talking about any loan debt not meeting this definition. A private loan or a loan from a financial institution that is not covered by the above-noted legislation would be examples, including other loans taken out for professional training.

Consumer proposal student loans: Filing a consumer proposal for student loan debt

In previous posts, I discussed consumer proposals and how they can be used as an alternative to bankruptcy and as a means to negotiate repayment terms of your entire debt with creditors. Canada’s only federally authorized debt settlement program is the consumer proposal. Only licensed insolvency trustees (formerly called bankruptcy trustee) can administer consumer proposal student loans or for any other kind of debt. By using consumer proposals, you can negotiate away the majority or all of your debt in return for making monthly payments for a fraction of that amount and over an extended period of time, not exceeding five years, without incurring any interest. The seven-year rule affects consumer proposal student loans under the student loan legislation.

When you submit a consumer proposal, one of the major benefits is a stay of proceedings, just as in bankruptcy. You will no longer be subject to collection efforts including collection calls, legal action and wage garnishments. Private or financial institution loans taken out while you were a student, not covered by student loan legislation, may be eliminated under the BIA without regard to the seven-year rule. Private student loan debt such as a line of credit or credit card debt incurred while you were a student would be examples.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Think of insolvency waiting periods like a clock with a start date and an end date

In either personal bankruptcy or consumer proposals, student debt is treated differently under government student loan legislation than normal ordinary unsecured consumer debt. The 7-year waiting period is a mandatory waiting period set by the BIA. This is why it is so important.

Student loan debt relief under section 178(1)(g) of the BIA is not available to people who have filed for bankruptcy or a consumer proposal and have not yet ceased to be a full-time or part-time student or who are within 7 years of ceasing to be a full- or part-time student.

A consumer proposal or personal bankruptcy can be filed by insolvents after they stop being full-time or part-time students more than seven years after ceasing to be students. In that case, the student loans debt can either be discharged by bankruptcy or by consumer proposals.

Counting the 7 years may also not be as straightforward as it sounds. In most cases, students take out a series of loans for each year of college or university. Do the 7-year counts take place on a loan-by-loan basis individually, or is it treated collectively? If in doubt, group them together.

The person must consider all three aspects of the calculation in order to do the calculation correctly:

  • the date the personal bankruptcy or consumer proposal was filed;
  • When the insolvent person ceased to be a student;
  • After ceasing to be a full-time student or part-time student, the length of time the person must wait before a consumer proposal student loan compromises the debt or the loan is discharged through an absolute discharge from bankruptcy.

Consumer proposal student loans: Potential “Court-Ordered Discharge” under hardship provision where 5-year waiting period satisfied

Under section 178(1.1) of the BIA, there is a provision that only applies in bankruptcy. It does not apply for consumer proposal student loans. Since we are discussing student loan debt, I would be remiss if I did not mention it.

Under this section, the court can order that the 7-year waiting period does not apply to a bankrupt who has student loan debt under federal or provincial student loan legislation 5 years after ceasing to be a full-time or part-time student. It would then actually be only a five-year waiting period.

Only a five-year waiting period can be allowed by the court if these conditions are met:

  1. the bankrupt acted in good faith in connection with its student loan debt; and
  2. it is likely that the bankrupt will continue to face financial difficulties to such an extent that it is impossible for them to repay their student loan debts.

What does the compulsory waiting period entail? When should we choose between a 7-year and 5-year waiting period? The 7-year waiting period has already been discussed. In determining whether a bankrupt is entitled to the hardship reduction for the lower 5-Year waiting period, the court considers the following factors:

  1. How was the money used? For the purpose, it was borrowed for?
  2. Was the bankrupt honest in his or her attempt to complete the educational program?
  3. Has the bankrupt gained employment in an area directly related to his or her education?
  4. Did the bankrupt make reasonable efforts to make monthly payments or otherwise make student loan payments against the loan or did the bankrupt make an immediate assignment into bankruptcy?
  5. Are there any repayment assistance programs options for student loan debt relief that the bankrupt can take advantage of concerning the outstanding student loans, such as interest relief or loan forgiveness and has the bankrupt applied for such repayment assistance programs?
  6. Did the bankrupt overspend or behave irresponsibly with personal or family finances?
  7. When the loan applications were made, was the person’s disclosure about his or her circumstances fair and accurate?

The court decisions on obtaining financial hardship relief show that it is not easily obtained. A bankrupt normally have to show that they have exhausted all efforts, their financial hardship is not a result of their actions or inaction and that their financial situation cannot reasonably be expected to improve without the undue hardship relief.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Paying Student Loans During Your Bankruptcy or Consumer Proposal

What if:

  • Your financial circumstances are you have too many unsecured debts and your unsecured creditors are taking legal action against you?
  • You have a history of rolling over payday loans and are deep in financial trouble.
  • You have to go see one of the licensed insolvency trustees in your area and ultimately use one of the debt-relief tactics of bankruptcy or consumer proposal.

If you stopped being a student:

  • 5 or 6 years ago but you know that you could not qualify for the financial hardship provision relief; or
  • the last time you went to school was less than 5 years ago; and
  • you need to start repaying your student loans.

To rebuild a solid foundation for a good financial future in such a situation, either bankruptcy or a consumer proposal would have to be filed. Despite the fact that you would not be able to eliminate or compromise your student loans, you would be able to escape the clutches of your otherwise crushing other unsecured debts.

In such a case, it may make sense to file for an insolvency process, even though you would be paying student loans during your bankruptcy or consumer proposal.

Consumer proposal student loans summary

I hope you found this consumer proposal student loans Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

consumer proposal student loans
consumer proposal student loans
Categories
Brandon Blog Post

WHAT DOES BANKRUPTCY DISCHARGED MEAN FOR 1 BANKRUPTCY TRUSTEE AND SOMEONE WHO IS SERIOUSLY BANKRUPT?

 

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What does bankruptcy discharged mean: Restrictions placed on undischarged bankrupts

By enabling debtors to file an assignment in bankruptcy or consumer proposal, the Bankruptcy and Insolvency Act (BIA) provides relief to an honest but unfortunate debtor. Garnishment of wages (other than marital support) ceases, legal actions and collection calls cease, and the debtor receives some breathing space. If a bankrupt fails to fulfill his or her obligations, what happens? Can they receive a discharge from bankruptcy?

This Brandon Blog examines a recent case from Nova Scotia dealing with what does bankruptcy discharged mean for both a bankrupt person and for the licensed insolvency trustee. I also describe what does it mean for an undischarged bankrupt if the bankruptcy trustee gets its discharge when the bankrupt person does not have their bankruptcy discharge.

I will eventually get to the Court case, but there is first some background information that I will provide which sets the stage for a better understanding of the Court decision.

What does it mean to be an undischarged bankrupt?

In the event, you were unable to fulfill your obligations under your personal bankruptcy proceedings, your Trustee, and maybe a creditor or two would have opposed your discharge from bankruptcy. A bankrupt who has not been discharged poses many potential problems. Therefore, if you are an undischarged bankrupt, it is because you have failed to fulfill one or more of your obligations as a bankrupt.

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts eliminated by bankruptcy discharge

A bankruptcy discharge means that you have completed your personal bankruptcy process and are no longer legally liable for any outstanding debt you included in the bankruptcy filing (with the exception of a few which I will describe soon). Upon receiving an absolute discharge from bankruptcy (we’ll get to that shortly), you are no longer responsible for any discharged debts.

The discharge in bankruptcy eliminates most of your debts, including unsecured debts such as credit card bills, medical bills, and payday loans. When you are discharged from bankruptcy, not the fact that you filed for bankruptcy, is what eliminates your debts. You need your discharge to get rid of your debts, which explains why it’s so important. That is what does bankruptcy discharged mean, really means.

What does bankruptcy discharged mean: Bankruptcy law can resolve tax debts

As well as the usual unsecured debts mentioned above, if you owe Canada Revenue Agency (CRA) money because you were not able to pay your whole personal income tax obligation when you filed your taxes, then a payment arrangement makes sense.

Collections officers from the CRA contact taxpayers regarding outstanding income tax debt arising from their tax filings and notices of assessment. They attempt to collect from delinquent taxpayers. When you say that you cannot pay the full amount at that time, they will offer you the option of a payment arrangement. The interviewer will ask you about your financial situation and may ask you to submit documents to support your income and expense claims.

They recommend a settlement plan after evaluating the information. Only if all attempts at collection have failed will legal action be taken. You must send the CRA postdated cheques to cover the agreed-upon monthly payment to participate in such a plan. Additional payments can be made if you have money to spare. The interest clock does not stop with a CRA payment plan. Be certain that all your cheques clear the bank as well. The entire payment plan can be cancelled if only one is returned NSF.

Should you enter into a payment plan? Yes. You should demonstrate to CRA that you want to work with them, and avoid tax debt collection activities that will disrupt your life. The most common enforcement activity involves freezing and taking money from your bank accounts, as well as garnishing your salary or wages if you’re employed. If you are a proprietor, they can notify your customers and claim your receivables. Furthermore, a federal judgment can be obtained without your knowledge to place a lien on your home.

You do not need to experience CRA’s more drastic collection methods. Be sure to pay your obligations on time. A tax garnishment, third-party assessment, or an asset lien is never pleasant. The consequences are severe and disruptive. In most cases, CRA only takes this step if you fail to comply with their efforts to enter into and maintain a CRA payment arrangement.

CRA tax debts can be discharged under bankruptcy law if no payment plan can be arranged. If bankruptcy is successfully discharged or a consumer proposal is fully completed, the income tax debt can be eliminated. We assume that CRA hasn’t already obtained a judgment against your interest in your home and registered it against it. Upon doing so, the CRA has successfully turned an unsecured debt into secured debt, and bankruptcy law no longer applies.

Several other things to keep in mind are:

  • A bankrupt who owes more than $200,000 in personal income taxes and whose personal income tax debt represents at least 75% of their total unsecured proven claims is considered a high-tax debtor. In this situation, you cannot be automatically discharged. It is unavoidable that the Trustee will object to your discharge and there will be a discharge hearing before the Bankruptcy Registrar in the Bankruptcy Courts. Additionally, the CRA will oppose your discharge and will make submissions at your hearing. I am certain you will receive a conditional discharge, at least with the condition that you pay a portion of your income tax debt to the Trustee for distribution among your creditors.
  • Unremitted employee source deductions owed by a proprietor or partner of an unincorporated business will not be helped by bankruptcy law. Generally, bankruptcy will eliminate HST obligations. For now, CRA ranks the debt as unsecured in a consumer proposal, but as CRA provides the accommodation, it is not a part of bankruptcy law. If the outstanding HST is extremely large, the CRA may argue that since you held the HST in trust for them, it still remains a claim even if you declare bankruptcy. Under Canadian bankruptcy law, they can do this, but I have not seen them do it yet.
  • Director liability for unremitted employee source deductions or HST is an unsecured claim against you for your personal liability as a Director. Bankruptcy and a properly worded Proposal will both eliminate that debt.

    what does bankruptcy discharged mean
    what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts never discharged in bankruptcy

In personal bankruptcy, there are certain types of debts that are not discharged. Section 178(1) of the BIA outlines the following debts that are nondischargeable debt:

  • Any type of fine, penalty, restitution order, or other order similar to a fine, penalty or restitution order, imposed by a court for an offence, or any kind of debt arising from a recognizance or bond;
  • Damages awarded by a court in a civil case for:
    • bodily injury intentionally caused, or sexual assault, or
    • wrongful death as a result of these acts;
  • the payment of spousal support or an alimentary pension;
  • any financial obligation or liability arising under a judgment establishing an association or regarding support, maintenance, or an agreement for maintenance and support of a spouse, former spouse, previous common-law partner, or child who is not living with the bankrupt;
  • a financial obligation or liability that results from fraud, embezzlement, misappropriation or defalcation in a fiduciary capacity or, in the Province of Quebec, while acting as a trustee or administrator;
  • apart from debts and responsibilities arising from equity claims, any debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation;
  • unless a creditor had notification or understanding of the bankruptcy and didn’t take reasonable action to prove a claim, the liability for the dividend that a creditor would have received on any provable claim not disclosed to the trustee; or
  • student loans if the bankruptcy occurred before the bankrupt stopped being a full- or part-time student or within seven years of the date the bankrupt stopped being a full- or part-time student.

What does bankruptcy discharged mean: Absolute discharge vs. conditional discharge and so on and so forth

In order to obtain a discharge, a bankrupt person must have fulfilled all of their bankruptcy duties. These personal bankruptcy duties include:

  • providing all books, records or documents to the Trustee that identify the assets and liabilities of the debtor;
  • prepare and submit to the Trustee within 5 days after filing for personal bankruptcy, unless the Office of the Superintendent of Bankruptcy Canada extends the time, a sworn statement of affairs detailing the person’s assets and liabilities, and for each of the bankrupt’s creditors, their respective names, addresses and the amount owing;
  • disclose to the Trustee complete details of all dispositions of property within 1 year before the date of the bankruptcy;
  • make a disclosure to the Trustee of all the details of property disposed of by gift or settlement without adequate valuable consideration within a 5 year time period before the date of bankruptcy;
  • if a creditors’ meeting is called, attending it;
  • making any required surplus income payments to the Trustee;
  • participating in two mandatory financial counselling sessions; and
  • offering whatever assistance is requested by the Trustee.

If the bankrupt fulfill all of their duties, then the Trustee will not have a reason to oppose the discharge. If no creditor opposes, then the bankrupt is entitled to an absolute discharge. As already stated, the discharge is what eliminates unsecured debts.

In addition to an absolute discharge, there are other types of discharge under bankruptcy law available to a bankrupt person upon having a discharge hearing:

  • conditional discharge;
  • suspended discharge; and
  • refused discharge.

To read more on the different kinds of discharges available to be applied to a bankrupt person, and for what does bankruptcy discharged mean, take a look at my August 2021 Brandon Blog “A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON“.

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean: At long last, the Nova Scotia case

The Nova Scotia bankruptcy case deals with the discharge of the Trustee in a personal bankruptcy matter. Once the Trustee brings on the bankrupt’s application for discharge and a discharge Order is made by the Court, and the Trustee completes the rest of the administration of the bankruptcy estate, the Trustee is entitled to a discharge. If the bankrupt did not receive an absolute discharge and has not completed his or her duties, including complying with a conditional discharge order, eventually, the Trustee can still apply for its discharge. Upon the Trustee’s discharge two things occur:

The bankrupt goes into bankruptcy purgatory. No discharge occurs. The Trustee has fulfilled its obligation to present the bankrupt’s discharge request to the court and the court has issued an Order. Whenever the bankrupt wants to prove they have fulfilled all their obligations, obeyed the discharge order, and now deserve an absolute discharge, he or she will need to retain a bankruptcy lawyer and apply to the Bankruptcy Courts.

On the day the Trustee is discharged, the stay of proceedings that had protected the bankrupt from any enforcement action by creditors whose debts were owed at the date of bankruptcy no longer applies. As a result, creditors can now pursue the bankrupt person since the debts have not been eliminated and the stay of proceedings is no longer in place.

It is interesting to examine how far the Registrar in Bankruptcy directed the Trustee in this Nova Scotia bankruptcy case to ensure that all creditors understood that they still had the right to pursue the bankrupt.

The decision in Frost (Re), 2021 NSSC 296 can be boiled down to the following facts:

  • Mr. Frost went bankrupt.
  • He failed to fulfill his duties and moved to the UK permanently.
  • He didn’t inform the Trustee of his new address and telephone number.
  • His actions left his Trustee and other stakeholders to fend for themselves, explicitly telling the Trustee he wasn’t going to fulfill those duties and didn’t intend to do so.
  • A hearing was held for the bankrupt’s discharge and Mr. Frost was refused discharge.
  • The Court previously directed the Trustee to appear before it to be heard on the Trustee’s application for discharge.

The Court concluded that the Trustee completed the administration of the bankruptcy estate and gave the Trustee its discharge. However, the reason why the Registrar in Bankruptcy wanted the Trustee to attend such a hearing was so the Registrar could take things one step further. In the normal course, the Trustee sends out a notice to all those whose proof of claim was admitted of the results of the bankruptcy administration and of the Trustee’s discharge. However, the Registrar wanted to make sure that it was crystal clear to all creditors.

The Registrar wrote a cover letter for the Trustee and directed the Trustee to send it along with the normal statutory notice to creditors (or their debt collectors of record). Here is a copy of that letter:

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean summary

I hope you found this what does bankruptcy discharged mean Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

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

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

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

what does bankruptcy discharged mean
what does bankruptcy discharged mean
Categories
Brandon Blog Post

BANKRUPTCY AND INSOLVENCY ACT OF CANADA TR1ES TO GIVE EVERYONE UNDENIABLE EQUITABLE TREATMENT

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

What is the purpose of the Bankruptcy & Insolvency Act of Canada?

With all the talk of the economy, supply chain problems and the uncertainty of the future these days, it’s no wonder that many people aren’t sure how they will end up when things become “normal” again.

For Canadian people and businesses with too much debt, an insolvency proceeding under the Bankruptcy and Insolvency Act of Canada might just be the answer to getting back to a healthy stress-free life. Notwithstanding that using this federal statute can be a very effective strategy for managing financial difficulties, it is a very scary one that people do not like to talk about.

The Bankruptcy and Insolvency Act of Canada is based on the principle of balancing fairness, equity and a fresh start. A recent court decision in Saskatchewan exemplifies these principles. In this Brandon Blog, I describe a little bit about the Bankruptcy and Insolvency Act of Canada, explain the court decision and how the court used these principles in reaching its decision.

What is in the Bankruptcy and Insolvency Act of Canada?

Canadian citizens, businesses, and companies who run into financial difficulties can turn to the Bankruptcy and Insolvency Act of Canada for assistance. This federal legislation contains the laws, rules, and guidelines that all involved parties must abide by. It details how different financial options work legally, and defines the roles of the various stakeholders – the Office of the Superintendent of Bankruptcy, the Licensed Insolvency Trustees, the debtor, and the secured creditors and unsecured creditors (both preferred and ordinary).

Despite the fact that provincial legislation in Canada may overlap or affect stakeholder rights, federal bankruptcy legislation has priority over provincial legislation in insolvency matters. Therefore, provincial governments cannot do indirectly what is prohibited directly. However, there are cases where provincial laws will still apply. The laws surrounding property exemptions and enforcement of court orders differ from province to province and territory to territory. These provincial and territorial regulations continue to apply even under bankruptcy laws.

It is the Bankruptcy and Insolvency Act of Canada that governs all bankruptcies and proposals (either Division I or consumer proposals) in Canada. Receiverships are also governed by the Bankruptcy and Insolvency Act of Canada. The Laws of Canada – Bankruptcy and Insolvency, are meant to give the honest but unfortunate debtor, be it a person, business or company, a fresh start in life.

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

Growth in consumer proposals and business proposals

A person who files for the personal bankruptcy process submits an assignment in bankruptcy and related documents to a Licensed Insolvency Trustee. These documents outline the person’s assets, liabilities, income, and expenses. An insolvent person’s reason for insolvency must also be included in the documents. Individuals typically give the reason for not being able to pay their bills in a timely manner. Consumer proposals require very similar documentation as bankruptcy, except for the assignment in bankruptcy document.

In order to file a Division I Proposal under the Bankruptcy and Insolvency Act of Canada, insolvent companies must describe their assets and liabilities and provide a realistic cash flow statement documenting how they intend to operate under the proposed insolvency process. They must also explain how they became insolvent. Personal insolvency is less complex than corporate insolvency.

Despite a long-term decline in individual bankruptcy filings, consumer proposals have gained in popularity among individuals. The decrease in bankruptcy filings and the increase in proposals can be attributed to several different reasons. Under a proposal, a financial reorganization or restructuring is what is done. Bankruptcy is simply a liquidation.

Regardless of whether it is a consumer proposal, a Division I proposal, or bankruptcy, the Bankruptcy and Insolvency Act of Canada governs these proceedings. The Companies’ Creditors Arrangement Act, another federal government statute, governs reorganizations of very large corporations. This is especially true if there are separate insolvent corporations under the corporate umbrella in different countries, requiring foreign proceedings.

Why does one choose a consumer proposal instead of filing for bankruptcy?

A consumer proposal has many advantages over bankruptcy proceedings. By filing a consumer proposal, you’re able to retain the property you own such as your home, car, boat, etc. and extinguish all of your debts while only paying back a portion. A consumer proposal doesn’t require any of those items to be sold, as long as you can afford them with the monthly payment made under the proposal and your other living expenses.

Changing your lifestyle can help you get out of debt more quickly with a consumer proposal. Bankruptcy means losing everything, except for some assets that are exempt under provincial laws. You have equity if you do not fully encumber your assets by way of secured loans from financial institutions, your house, car, boat, furniture, clothing, jewelry, or anything else of value. You can keep this equity in a consumer proposal, but you will lose it in bankruptcy.

The main reason why people should attempt to perform a successful consumer proposal instead of going straight into bankruptcy under the Bankruptcy and Insolvency Act of Canada is because of this. As you will see in the recent court case I am about to describe, if you don’t pay close attention to how you conduct your affairs once you declare bankruptcy, you might be exposed to another minefield even after receiving your discharge.

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

The Bankruptcy and Insolvency Act of Canada case

This judgment of the Registrar in Bankruptcy of the Queen’s Bench for Saskatchewan was released on October 6, 2021. It is a relatively simple case, but it described so well the equitable nature of the Bankruptcy and Insolvency Act of Canada.

In this legal process case, there are two unsecured creditors who are the Applicants. They jointly loaned money to an individual debtor, who is now an insolvent debtor and a bankrupt individual on an unsecured basis. They also filed their proof of claim for this debt with the insolvency trustee. They then applied for an order pursuant to s. 69.4 of the Bankruptcy and Insolvency Act of Canada lifting the bankruptcy stay that is in effect with regard to the bankrupt.

The purpose of section 69.3 is to prevent bankruptcy creditors from initiating or continuing enforcement proceedings against a bankrupt debtor. In bankruptcy, a creditor has no recourse against the debtor or the debtor’s property, and may not commence, continue, or seek any action for the recovery of money for a claim that is provable in the bankruptcy.

Nevertheless, Section 69.4 allows a court to lift the stay if it decides that the applicant has established that the continued operation of the stay is likely to cause material harm to him or her, or if there are other equitable grounds for lifting the stay.

The case: How the Bankruptcy and Insolvency Act of Canada works for fairness and equity

The bankruptcy process generally compromises the debt obligation of the bankrupt, resulting in creditor claims run through the bankruptcy claims process. Generally, unsecured creditors lose their right to enforce their types of debts and, as a result, realize less than 100% of their debt. Some creditors do not receive anything from an estate in bankruptcy.

There are two major objectives of bankruptcy (and consumer proposal or commercial proposal) proceedings under the Bankruptcy and Insolvency Act of Canada. For one thing, it provides an equitable system for distributing the proceeds from the estate in bankruptcy among the bankrupt’s unsecured creditors. According to the laws Of Canada – bankruptcy and insolvency, unsecured creditors are expected to be treated predictably and fairly. However, it does not guarantee that creditors will receive a dividend in all cases.

Secondly, it is intended to give an honest but unfortunate bankrupt an opportunity to be freed from the crushing burden of debt and receive financial rehabilitation to become a contributing member of society. That is one reason why every person who does an insolvency filing must attend two financial counselling sessions.

In bankruptcy, an automatic stay allows the bankrupt to re-establish himself or herself financially and restart his or her financial affairs so that he or she can meet his or her credit obligations moving forward without being hampered by debt enforcement proceedings.

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

The case: Role of unsecured creditors trying to lift the stay of proceedings

The Registrar, in this case, followed the reasoning of a 2001 decision from the Court of Appeal for Ontario. It is far from routine to lift the stay, and therefore the court has to make sure that the reasons for lifting the stay are sound and consistent with the objectives of the Bankruptcy and Insolvency Act of Canada.

In the case of Mcculloch (Re), 2021 SKQB 259 (CanLII), the two creditors were alleging that Ms. Mcculloch induced them to loan her the money on a fraudulent basis. It was their argument that they should be allowed to continue legal action against the bankrupt so that they could prove in a separate court action that the debt was a result of fraud and that, therefore, their claim would survive the bankruptcy and her discharge. In addition, they stated that they would be more severely affected than the commercial creditors if the bankruptcy stay bars them from taking action against McCulloch.

According to the Registrar:

  1. Bankruptcy often disproportionately affects individual creditors over commercial creditors. Generally, creditor relationships are based more on trust than on cost-benefit analysis. When advancing a loan, the commercial creditor such as a credit card company, unpaid suppliers, or a sophisticated secured creditor, generally assesses the risk and determines whether it can absorb the loss in the event of default. Individual lenders do not usually do this.
  2. If this form of prejudice is sufficient to support lifting the stay, other individual creditors may be able to apply to lift the stay merely on the basis of relative disadvantage to individual creditors. Lifting the stay on this basis is inappropriate.
  3. The Trustee objects to this application on the grounds that it will significantly increase the costs of bankruptcy administration at the expense of other creditors. In this case, the Registrar sided with the Trustee.
  4. According to the lawyer representing the bankrupt, the creditors have not established any material prejudice or other equitable grounds for lifting the stay. The Registrar agreed.
  5. Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
  6. However, these 2 creditors still have rights in the bankruptcy. The court still has the right to hear their submissions at the discharge hearing. Additionally, they continue to have the right to pursue Ms. McCulloch once the bankruptcy proceedings are over.
  7. At this time, lifting the stay would not benefit the applicants or their creditor claims since during the bankruptcy, Ms. McCulloch’s either the bankruptcy vests her assets in the Trustee for the benefit of the creditors or remain exempt from execution under Saskatchewan law. This disposition of property makes it simply impossible for these creditors to realize much from this stage, prior to the bankrupt’s discharge.
  8. In this case, the equity does not support the court’s exercise of its authority to declare that the bankruptcy stay, established under section 69.3 of the Bankruptcy and Insolvency Act of Canada, does not apply to this litigation.

As a result, the Registrar denied the applicant’s request for what they thought was their legal rights in lifting the stay. Clearly, the Registrar was guided by the Bankruptcy and Insolvency Act of Canada‘s aims of fairness and equity to all stakeholders.

Bankruptcy and Insolvency Act of Canada summary

I hope you enjoyed this Bankruptcy and Insolvency Act of Canada Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

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

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

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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Brandon Blog Post

A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON

bankruptcy discharged
bankruptcy discharged

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

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

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

Your Bankruptcy Discharged – But Wait

Well, that took no time at all. Last week I told you about a bankruptcy discharge hearing I attended where the bankrupt person had his bankruptcy discharged by the Master in the Ontario Superior Court of Justice In Bankruptcy and Insolvency.

The Master’s decision was released on August 13, 2021. On August 20, 2021, we received the Notice of Motion of the opposing creditor appealing the Master’s decision to give this person his discharge from bankruptcy. That is their right.

In this Brandon Blog, I want to discuss the reasons for the opposition to the fact that this bankrupt had his bankruptcy discharged and my thoughts on one scenario of how this may play out. First, I just want to refresh your memory about the bankruptcy process and specifically how the discharge under bankruptcy law in Canada process works. Then I will get into this real-life story.

Canada’s Bankruptcy and Insolvency Act (BIA) gives people the option of filing a debt management plan restructuring consumer proposal if they are unable to pay back all unsecured debt owing to their unsecured creditors. This option offers the consumer a way to maybe keep their home and car that is heavily financed, as long as they can maintain the payments to the secured creditors such as the financial institution who financed the purchase of the home by way of the mortgage, or the auto loan, and it makes sense in their budget.

A successful consumer proposal is also the way to avoid bankruptcy. Like bankruptcy, the process starts with a no-cost consultation for financial advice with a licensed insolvency trustee. A licensed trustee is the only party able to administer a consumer proposal in Canada (or a bankruptcy). The Trustee can help you lose your debt load.

A first-time bankrupt who fulfills all of their obligations, including attending 2 mandatory credit counselling sessions, is entitled to a discharge after 9 months from the date of bankruptcy.

bankruptcy discharged
bankruptcy discharged

A bankruptcy discharged: First and second bankruptcy (or more)

When an insolvent debtor files for bankruptcy for a second time, you cannot be discharged after a nine months bankruptcy period. When you don’t need to pay the Trustee any surplus income payments, a second bankruptcy lasts for a minimum of 24 months. A second-time bankruptcy filer with surplus income must make those payments for 36 months to qualify to get their bankruptcy discharged.

A third or subsequent bankruptcy follows the same timeline as a second bankruptcy. There is, however, a high probability that the Trustee or creditors will oppose the discharge. Where there is opposition, there must be a court bankruptcy discharge hearing and the court can impose any conditions it deems appropriate.

What does bankruptcy discharged mean in Canada?

It is a Canadian legal term used to describe the release of a consumer debtor or business proprietorship from their obligations, responsibilities, debts, and legal claims. “Bankruptcy” is a legal proceeding to protect the estate of a person or company. “Discharge” fulfills the requirement that a person is released from their obligations, responsibilities, debts, and legal claims through the bankruptcy process. There is no equivalent requirement for a company.

The insolvent debtor filing for bankruptcy merely invokes the legal protection to the person and puts a bankruptcy trustee in place to realize upon any available assets in the bankruptcy estate for the benefit of the creditors. Bankruptcy filings do not relieve the person of their debts. It is when the person is bankruptcy discharged, that they are released from their debts (other than for a select list of exceptions).

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged: Types of bankruptcy discharge

The licensed insolvency trustee can usually issue an automatic discharge when there is no trustee in bankruptcy opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties during bankruptcy.

In case of opposition or if the bankrupt meets one of the criteria that prevents automatic discharge (for example, the bankruptcy process finds the bankrupt to have a high tax debt situation), a discharge hearing in court is held, which is conducted by the Master of the Bankruptcy Court. There are four types of the bankruptcy discharge and a fifth outcome is also possible. Here they are:

  1. Absolute discharge – An absolute discharge means that the bankrupt may obtain a discharge immediately. If the bankrupt has fulfilled all of their duties and there is no insolvency trustee or creditor opposition, this can be provided by the licensed insolvency trustee of the bankruptcy estate handling the bankruptcy administration;
  2. Conditional discharge – can get discharged if certain conditions are met. Typically, to get bankruptcy discharged this way, conditions include payment to the licensed insolvency trustee;
  3. Suspended – the bankruptcy discharge will be granted at a later date and may very well be combined with an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. Refused– because the debtor has not made full disclosure or done other bankruptcy duties; or
  5. “No order” – the insolvency trustee informs the court that the bankrupt has not fulfilled all of his or her obligations and has failed to respond to the Trustee’s demands for information despite the passing of time. The licensed insolvency trustee is at liberty to seek its discharge when the “no order” order is provided. When the bankrupt has actually complied with the court’s requirements, he or she may apply for a hearing for discharge. When the Trustee gets its discharge, the stay of proceedings preventing collection actions against the bankrupt disappears.

A bankruptcy discharged: The appeal just served upon us – a true story

To refresh your memory about the discharge hearing itself you can CLICK HERE. The appeal just served upon us seeks an Order setting aside the decision of the Master made on August 13, 2021. The grounds for the appeal can be described as throwing everything including the kitchen sink! The stated grounds are that the Learned Registrar erred:

  • by granting the bankrupt an absolute discharge from bankruptcy;
  • in holding that the Receiver’s interest in the discharge application is not firmly established and by not recognizing that should the Receiver be paid an amount in excess of the debt owed to the secured creditor, any surplus funds would be available for the other creditors of the
    corporate bankruptcy estate;
  • in holding that the discharge hearing is not the proper forum in which to make determinations as to the propriety of the various transactions that the Receiver has raised;
  • in finding that the bankrupt has generally cooperated with me as his Trustee;
  • in declining to consider the bankrupt’s conduct in the corporate bankruptcy because that the trustee in the corporate bankruptcy had remedies available to it;
  • in finding that the failure of the company’s business was due to the loss of its 1 customer and pricing related to that arrangement;
  • in relying on her finding that the corporate trustee may be the only truly interested party on the discharge or would benefit most from the conditional order sought if the secured debt is otherwise repaid;
  • in exercising her discretion in finding that an order of discharge requiring payment of the significant amount proposed by the Receiver is not reasonable;
  • in finding that the bankrupt has no ability to pay and that his future prospects to pay are unknown;
  • in finding that an order for a conditional discharge of the magnitude sought would be tantamount to a refusal;
  • by omitting to consider relevant evidence or the absence thereof, in relying on irrelevant considerations, and/or giving improper weight to the evidence before the Court; and
  • anything else the lawyers may want to say.

    bankruptcy discharged
    bankruptcy discharged

Standard of review to getting a personal bankruptcy discharged

Such an appeal from a bankruptcy discharge hearing has a standard of review. According to BIA S. 192(1), the bankruptcy registrar can, among other things, grant orders of discharge. S. 192(4) of the BIA permits a party dissatisfied with a registrar’s order or decision to appeal it to a judge.

Registrars are exercising judicial discretion when granting discharges in bankruptcy cases. As long as the registrar acted reasonably, the judge should not set it aside or ignore it. Furthermore, if an appeal from a bankruptcy discharge order is based on alleged errors in factual findings, the court will not intervene if the findings of fact can be justified based on credible evidence. If the registrar has materially misinterpreted the law or made an error in respect of the facts underpinning his or her discretion, discretionary decisions can, of course, be overturned.

If the registrar decides that in order for the person to get their bankruptcy discharged, the court imposes conditions, those conditions must be realistic to allow the bankrupt to meet the requirements in a reasonable amount of time. If an amount ordered in order for the person to get their bankruptcy discharged is unrealistic and the discharge is conditional on making additional payments, the appellate court in such cases previously held that results in an error of law. The appellate judge can either substitute other conditions or refer the matter back to the registrar for reconsideration.

A bankruptcy discharged: What my gut is telling me

I normally am not in the prediction business. However, having been the insolvency trustee responsible for administering the consumer bankruptcy, having written the reports to the court on the bankrupt’s application for discharge, having attended the discharge hearing and having heard all the evidence, having read the Registrar’s decision and the Appeal documentation, I believe that the appeal should be dismissed.

You might recall that opposing the bankrupt getting bankruptcy discharged was the Receiver of the company previously operated by the bankrupt. As a result of complaints regarding the bankrupt and his family in relation to the company’s operations, the Receiver has filed lawsuits against several parties. The proceedings are still pending. According to previous court rulings, the court should not consider the issues raised in other proceedings when deciding whether to discharge the bankrupt. A discharge hearing is a summary proceeding. It is important to see how the debtor behaved during HIS bankruptcy.

As for the judge’s decision, only time will tell. I’ll keep you up to date as always.

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged summary

I hope that you found this bankruptcy discharged Brandon Blog helpful in telling this real-life story of an appeal to a person getting their bankruptcy discharged. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

 

Categories
Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE VAUGHAN: THE COMPLETE GUIDE FOR YOUR HAPPY DEBT FREE L1FE

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

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. Through the use of video meetings, we can help you even if you do not live close to our office in the Jane Street Hwy. 7 area. It is just like we are coming to you!

The bankruptcy trustee in Vaughan: We transformed into a licensed insolvency trustee Vaughan

The bankruptcy trustee in Vaughan went through a metamorphosis similar to a caterpillar becoming a butterfly. The term “bankruptcy trustee” turned into a “licensed insolvency trustee“. The licensed insolvency trustee designation was mandated to all licensed trustees by the Industry Canada Office of the Superintendent of Bankruptcy (OSB). The OSB licenses and supervises the activities of all licensed insolvency trustees across Canada. This includes us as a licensed insolvency trustee Vaughan, Ontario.

The purpose of this Brandon blog is to offer an overview of our role in the Greater Toronto Area with our licensed insolvency trustee Vaughan insolvency trustee firm head office.

The purpose of this Brandon blog is to offer an overview of our role in the Greater Toronto Area with our licensed insolvency trustee Vaughan insolvency trustee firm head office.

Role of a Licensed Insolvency Trustee Vaughan (formerly called Trustee in Bankruptcy Vaughan)

A licensed insolvency trustee Vaughan can fulfill various roles. It all starts with providing a no-cost consultation for a person or company that finds themselves in a troubling financial situation that worries them about their prospects for a bright financial future.

Due to the various roles, a licensed insolvency trustee Vaughan can play, we are also known as “receivers”, “trustee in bankruptcy” or “financial restructuring professionals”. We are appointed when a company or person is financially distressed and either has no other options to get out of financial difficulty and is unable to pay its bills. A licensed insolvency trustee is the only party licensed by the Government of Canada to perform a federal government-approved debt settlement plan, being a consumer proposal consolidation.

As a licensed insolvency trustee Vaughan firm, there are different roles we can play.

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

Find the right option with the help of a Licensed Insolvency Trustee Vaughan

Personal situation insolvency

For individuals who are insolvent, we can provide and act in the following:

  • A no-cost initial consultation to provide advice about debt relief.
  • Credit counselling. to help with your household budget and determine if you really need one of the available debt relief options.
  • Consumer Proposal – Toronto and GTA – Act as Consumer Proposal Administrator to conduct a Consumer Proposal Process for people who owe $250,000 or less in unsecured debts (not including any debts registered against their home) who wish to eliminate their debt and wish an alternative to bankruptcy so that they can avoid filing bankruptcy. This is a government-approved interest-free debt settlement plan that can be paid over as much as five years.
  • Division I Proposal – Toronto and GTA – This process is not quite as streamlined as a consumer proposal, but it is for people who wish to eliminate their debt while avoiding personal bankruptcy.
  • These 2 proposal remedies are the only accredited government debt relief programs in Canada.
  • Personal bankruptcy – Toronto and GTA – As a licensed insolvency trustee Vaughan, we can of course assist anyone who wishes filing for bankruptcy. In your no-cost consultation with us, we first get to know you and your financial situation in order to determine if you qualify for one of the bankruptcy alternatives. If not, we will discuss the entire bankruptcy process with you, including the cost of bankruptcy. If you wish to proceed, we will accept your assignment in bankruptcy.

All collection activities against you cease when you make an assignment in bankruptcy, or file a debt settlement restructuring proposal. Legal action against you may include wage garnishment, collection calls, or a legal action against you. You get legal protection as a result of the stay of proceedings afforded by an insolvency filing.

The two most common types of debt we encounter in our personal insolvency practice are credit card debt and income tax debt. We have successfully handled for clients serious negotiations with Canada Revenue Agency in order to achieve debt settlement for people with a financial history of income tax debt.

Corporate insolvency

For companies, and especially entrepreneurial family businesses that are insolvent, we can provide and act in the following:

  • A no-cost initial consultation to provide advice about debt restructuring options.
  • Restructuring & Turnarounds.
  • Business analysis, business review and monitoring.
  • Receivership – Toronto and GTA – Only a licensed insolvency trustee can act as a receiver on behalf of a secured creditor. As a licensed insolvency trustee Vaughan, we act as a privately-appointed receiver on behalf of a secured creditor. We also act as a court-appointed receiver upon the application to a court by a secured creditor or other stakeholders.
  • Winding-Up and Liquidator – Toronto and GTA – For solvent companies that wish to wind up operations through a legal process, we act as either privately appointed or court-appointed Liquidator.

    licensed insolvency trustee vaughan
    licensed insolvency trustee vaughan

Selecting The Right Licensed Insolvency Trustee in Vaughan

Experience and professionalism

You might not find the expertise to solve your financial difficulties with someone just around the corner. You can start your search for the right Trustee by visiting the website of the Canadian Association of Insolvency and Restructuring Professionals. Both Ira Smith and Brandon Smith are members of the Canadian Insolvency and Restructuring Professional Association. It shows an individual’s commitment to staying up to date with all the latest industry advancements by belonging to this organization. Check the website of the OSB to ensure that the Trustees you are considering are not suspended or under file management by the regulator.

Interacting with them on many levels is essential

As a beginning, they must be able to quickly understand your needs and desires, as well as provide you with a realistic plan that can be followed. If you have issues or concerns, they also need to be available to you. Look for their interest in you. How enthusiastic are they about their industry? Do you really feel their compassion for you? Do you feel you are going to get along on an inter-personal basis with this person?

That’s exactly how you measure enthusiasm. The most effective solutions and suggestions will be offered by a knowledgeable insolvency trustee. You may not find this type of person within walking distance of your home or workplace.

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

Licensed insolvency trustee Vaughan: Are you able to agree on the same concepts?

It is not a totally free service to engage a professional trustee. The complexity of your situation could affect the bankruptcy cost. Your trust in a bankruptcy trustee is diminished if you feel they view you as just another dollar sign. Look for those who seem to have similar values to you. It may not be the closest to your home to find such a licensed insolvency trustee.

Websites for licensed insolvency trustee Vaughan

Searching for “bankruptcy trustee near me” or “licensed insolvency trustee Vaughan” on a search engine today will bring up various websites to visit. How does the website make you feel? What bankruptcy FAQs do they provide? Can you see pictures of the people you would deal with? From their blog, do they demonstrate that they have a deep knowledge base?

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

You can meet with more than one Trustee

Unless you sit across the table from him or her, you won’t know which one is the right fit for you. Comparing two bankruptcy trustees is a good idea. You want to be able to compare two or more for your own validation purposes. The one you feel best about is the one to go with. Trust your gut!

3 Best Licensed Insolvency Trustees in Vaughan, ON

Throughout the years my firm has been inspected for 50 points, including reviews, ratings, reputation, history, complaints, satisfaction, trust, cost, and general excellence. The results have allowed us to rank consistently among the top 3 Best Licensed Insolvency Trustees in Vaughan, ON.

Licensed insolvency trustee Vaughan summary

I hope that you found this licensed insolvency trustee Vaughan Brandon Blog helpful in describing our role as debt professionals and my thoughts on how to go about choosing the one you think is the best fit for anyone in a financial crisis. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

Categories
Brandon Blog Post

DIFFERENCE BETWEEN CONSUMER PROPOSAL AND BANKRUPTCY: THE PROVEN CANADIAN WAY TO GET DEBT FREE

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

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

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

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

Difference between consumer proposal and bankruptcy: Know your options

Regular readers of my Brandon Blog know that there are a lot of steps you need to go through to financially reorganize your life. I have written before different blogs on various aspects of both consumer proposals and bankruptcy. The purpose of this Brandon blog is to discuss in one place, the difference between consumer proposal and bankruptcy.

Many people opt for one of these options because life has thrown them a curveball, they no longer have the cash flow to pay off their debts and want to start fresh. There are some great benefits to filing bankruptcy. They include eliminating creditors and debts, getting control over your personal finances, and having a stress-free life, Starting Over, Starting Now. But if you’re considering a first-time bankruptcy, or the bankruptcy option even if you are familiar with the Canadian bankruptcy process from a prior time, you should consider the pros and cons of a consumer proposal, the only government-approved debt settlement plan in Canada. It will be good for you to know the options that I explain below.

Consolidation loans vs consumer proposals

What’s the distinction between a consumer proposal and a debt consolidation loan? The consumer proposal process is an insolvency procedure that allows you to resolve all the amounts you owe to your unsecured creditors via an arrangement with your creditors. It does this without needing you to file bankruptcy. A consumer proposal can only be carried out by a licensed insolvency trustee. A consumer proposal allows you to get rid of all the amount owed by repaying only a part of your financial obligations over time.

A consolidation loan means that you still have sufficient assets and income and a good enough credit score, in order to borrow the total amount you owe. The loan must carry an interest rate lower, and hopefully much lower, than the average interest rate of your combined total debt. You use the loan proceeds to repay 100% of your debts. You now have only one loan with a monthly payment you can afford. Taking out a consolidation loan is not an insolvency process.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

The main difference between consumer proposal and bankruptcy

The consumer proposal is a fundamental part of our personal insolvency system. It is an insolvency procedure controlled by the Bankruptcy and Insolvency Act (Canada) (BIA) that allows individuals who owe $250,000 or less (not including any financial debts secured against their principal home). It permits you to pay a portion of your financial debts with time, yet eliminate all of them if fully executed. It is an alternative to declaring bankruptcy. It is an alternative to bankruptcy.

Bankruptcy is also a fundamental part of our insolvency system under the BIA. However, rather than restructuring, in personal bankruptcy, the person surrenders all of their non-exempt assets to the licensed insolvency trustee for the benefit of the person’s creditors. Once the bankrupt person has fulfilled all of their duties, they are entitled to receive a discharge from bankruptcy, subject to the Trustee or a creditor opposing it.

Personal bankruptcy involves the liquidation of the bankrupt’s assets in return for the eventual elimination of their unsecured debts. It is not considered a restructuring like a consumer proposal is.

Difference between consumer proposal and bankruptcy: The process of filing a consumer proposal vs bankruptcy

You start by talking to a Trustee who will provide you basic guidance on both a consumer proposal and also bankruptcy. The Trustee will likewise inform you specifically just how each process functions. If at the end of that discussion you inform the licensed bankruptcy trustee that you really feel good in wanting to take the next steps with them, the Trustee will provide you with their intake form. When the form is completed, you send it to the Trustee, including supplying any kind of backup documents asked for, the Trustee can then provide you advice for your unique financial difficulties.

If you choose a consumer proposal, the licensed insolvency trustee will prepare the necessary filing documents for you to sign. This includes assisting you with preparing the best possible proposal that works for both you and your creditors. You then meet with the Trustee to sign the documents. The Trustee then files the documents electronically with the Office of the Superintendent of Bankruptcy (OSB). The OSB then issues the Certificate evidencing the filing and the formal process begins.

After seeing your completed intake sheet, the Trustee will advise on whether or not a consumer proposal would work for you, or if your best or only option is filing for bankruptcy. Similarly, in bankruptcy filings, the Trustee prepares all the required filing documents for your signature. The Trustee explains all of them to you, you sign them and the Trustee then electronically files the filing documents with the OSB. The OSB then issues its Certificate evidencing the bankruptcy and that formal process begins.

You initially meet with the licensed bankruptcy trustee, in-person, by video or phone, to share details of your personal situation, and working together, you determine whether a consumer proposal, an alternative to filing bankruptcy, or personal bankruptcy is the best option for you. With COVID-19, we have been holding all of our no-cost consultations and meetings by phone and video. We can do the sign-up process by video and email. We have found this is very convenient for our clients as they are not required to take the time to attend our office in person.

As you can see, the process of filing a consumer proposal vs bankruptcy is not that different. For filing, there is not really a difference between consumer proposal and bankruptcy.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Major difference between consumer proposal and bankruptcy

Is there a major difference between consumer proposals and bankruptcy? Yes. So far in this discussion, there have not really been major differences. But there really are as the consumer proposal is akin to filing for bankruptcy protection while the other is bankruptcy. Both provide legal protection from creditors. But a consumer proposal gives a person what the media calls filing for bankruptcy protection. When you file for bankruptcy, that calls for the liquidation of non-exempt assets.

Both bankruptcy and a consumer proposal can be excellent options for somebody who is experiencing a challenging financial position. A consumer proposal is an excellent choice for individuals who have the ability to make monthly payments to their creditors totalling less than the amount they owe, yet eliminating all their debts, while keeping the equity they have in assets they wish to keep. Bankruptcy is an excellent choice for those who are bewildered by their financial obligations, and who don’t have a consistent income, making it actually hard or impossible to manage making payments at any level to their creditors.

While both bankruptcy, as well as a consumer proposal, can supply a financial clean slate, there are a few vital distinctions.

In a consumer proposal, you normally get to keep all of your assets. In a bankruptcy, if you have equity in assets that you want to keep, you or someone friendly to you has to pay that equity to your Trustee for the benefit of your creditors. Otherwise, you need to surrender all non-exempt assets to the Trustee for the Trustee to sell them and then put the cash towards the claims of your creditors. The assets covered by your bankruptcy exemptions do not need to be surrendered.

In bankruptcy, you also have the issue of needing to obtain your bankruptcy discharge. If either the Trustee or one or more creditors object to your discharge, then you will not get your automatic bankruptcy discharge and you will have a discharge hearing in Court. You may also be subject to surplus income payments in a bankruptcy, which you will need to make to your Trustee (21 months for a first time bankrupt, 36 months for a second time or more bankruptcy).

The amount to offer your creditors in a consumer proposal has to be a better amount than they would receive from your bankruptcy. After doing the calculations I spoke about above, including any surplus income obligation, you will better understand what amount needs to be offered to your creditors.

Another difference between consumer proposal and bankruptcy is that there is a benefit of a consumer proposal in that you can spread the monthly payments for the amount determined over a term of up to 60 months, interest-free. In a bankruptcy, you are typically required to make any required payments over the term of your bankruptcy, which is much shorter than in a proposal. Therefore the consumer proposal allows you to term out a slightly higher settlement over a longer period of time. This makes the monthly repayment less complicated on your cash flow as well as your budget plan.

Once your consumer proposal is (deemed) accepted by the creditors and (deemed) approved by the Court, you just need to make your promised monthly payments to the Trustee. The Trustee handles making payments at regular intervals to your creditors. Once you have completed the payment promised under the consumer proposal, you receive your Certificate from the Trustee showing that you completed the consumer proposal. That is it. No discharge hearing can be opposed and no extra surplus income payments. It is already accounted for in the amount offered to your creditors in your consumer proposal.

The cost difference between consumer proposal and bankruptcy

When doing a consumer proposal, the fee of the licensed insolvency trustee is included in the payment you negotiate with your creditors. As I mentioned above, the calculation of what to offer in a consumer proposal does not include what the fee and costs are. Rather, it is compared to what the unsecured creditors can expect in bankruptcy.

However, if you were to file bankruptcy, the fee is based on the surplus income you may have to pay (based upon a criterion that includes income and family size) and also any assets that you are required to assign over to the Trustee. You might also have to make month-to-month contributions to cover the fee and costs if your income and non-exempt assets are insufficient to pay for the bankruptcy proceedings.

If there is no surplus income or assets, you, or someone on your behalf, will need to pay the bankruptcy fee which will be approximately $1,800 plus HST.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Difference between consumer proposal and bankruptcy: What’s worse? Credit rating impact of a bankruptcy vs consumer proposal

Both a consumer proposal and bankruptcy are insolvency proceedings under the BIA. Therefore both will negatively affect your credit rating. In a consumer proposal, your credit rating will show as an R9 on your credit report while you are making payments. Once you have completed your consumer proposal, your credit rating will be an R7 for 3 years after completion.

For a first-time bankrupt, if you were to file for bankruptcy, your credit report will show an R9 rating for 6-7 years after being discharged.

The difference between consumer proposal and bankruptcy summary

I hope that you found this difference between consumer proposal and bankruptcy Brandon Blog interesting. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

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CREDIT CARDS MAXED OUT: THAT SCARY CRUSHING FEELING WHEN CANADIAN INSOLVENCY AT HIGHEST LEVEL

credit cards maxed out

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

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

How do credit cards maxed out affect your credit score?

Your credit score is one of the most important things you have to offer anyone who is seeking to lend you money, whether it’s from a bank, a different credit card issuer, or even a landlord. Your credit score is a sort of credit health report that measures how much you owe, how much you owe on different kinds of credit, and how likely you are to default on payments.

Credit cards can be a convenient and effective way to manage your finances. However, the best use of a credit card may not be the best use when it comes to your credit score. Lenders consider one or more credit cards maxed out as a reason for your credit score to decline.

Right now we have a very unique situation when it comes to consumer debt. The average Canadian’s monthly credit card balance is lower today than it was 2 years ago. People’s credit card balance for months has declined. So it is not the case right now that credit cards maxed out. Yet, a recent poll shows that Canadians’ stress levels about their potential insolvency are the highest ever.

In this Brandon Blog, I look at the issues and provide some tips as to what positive things you can do if you are concerned about insolvency. Let’s look at the issues.

Changing habits as pandemic adds to debt load

There has actually been a surge in total Canadian consumer debt. It came mainly from financial debt growth in home mortgage debt and also automobile loans. Home mortgage balance increases originated from both refinancings of existing home loan debt and brand-new mortgage applications.

The thinking with vehicle financings is that it arose from Canadians acquiring vehicles that they had actually intended to purchase earlier. Concerning home loans, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a brand-new higher home mortgage amount, at greatly reduced rates of interest.

Throughout the last 18 months approximately of the COVID-19 pandemic, Canadians have actually partially paid for or totally repaid their high-interest-rate consumer debt by turning it into low-rate debt from bigger home mortgages along with residence equity credit lines. They have used their real estate to obtain a debt consolidation loan.

Now that the Canadians have in fact done that, the Ipsos survey discovered that 50% of Canadians are now more worried about not having the capability to repay their financial obligations than they used to. Yet one-third of respondents say they will spend more as the economy resumes.

As the economy slowly resumes, many Canadians are looking at a great amount of debt incurred during the pandemic and are stressed over making ends meet without taking on even more financial obligations. They have maxed out the possibility of getting even more cash from their homes.

The reasons are that either there is no more asset value to borrow from and/or their income cannot sustain any more financial obligations. So where is one of the most likely areas this brand-new financial debt is most likely to come from? Paid down credit cards are going to increase once more and many will sooner rather than later have credit cards maxed out from additional credit card debt.

credit cards maxed out
credit cards maxed out

Canada on verge of widespread insolvency and restructuring surge in COVID-19 new normal

Statistics Canada recently reported that overall household debt increased by 0.8% for the 2nd straight month to over $2.5 trillion. Mortgage debt and also home equity credit lines made up $1.98 trillion of that total amount. Over the initial 5 months of 2021, households had $57.5 billion in home mortgage financial obligations, compared to $34.3 billion over the exact same time period in 2020.

At the same time, non-mortgage debt climbed by 0.4% in May to $786.2 billion. Growth in credit card debt as well as other personal loans was the main driver. While charge card debt rose for the third month straight, it was still down by 3.3% from May 2020.

These statistics seem to bear out my thoughts that Canadian consumers now have no more room to borrow against their homes, so now, they will need to turn back to their credit cards and increase their credit card debt in order to fund their expenses. This will not turn out well in the long run. I foresee people having maxed out the amount they can borrow against their homes and then once again having their credit cards maxed out.

Lots of people do not understand how financial problems are created pushing individuals to seek out a remedy such as bankruptcy or a consumer proposal to restructure. The majority think that people get into financial trouble because they can’t properly handle their money. However, in most cases, it is because of an unforeseen trigger. Divorce, job loss, illness and the present pandemic are examples of triggers.

People in financial trouble feel shame and unfortunately, stop them from connecting with us early. Reaching out to a licensed insolvency trustee early is so important.

Credit cards maxed out Is a bad idea

By maxing out your credit cards you’re boosting your credit utilization ratio. This accounts for 30% of your credit score. As such, a maxed-out credit card can adversely impact your credit rating.

Theoretically, yes, you can pay off your credit card by just making the minimum payment. However, it can take you years to pay it off if you are only making the minimum payment. Your interest charges will be higher than your minimum monthly payments.

Your credit utilization ratio and therefore your credit score will suffer. Many people try to solve this problem by just applying to the credit card issuer for an increased credit limit. This may work once, but it does not make any sense. You cannot eliminate debt by increasing it!

Furthermore, you’ll be carrying that debt and paying for it at a very high rate of interest. On the other hand, if you make your repayment by the due date, or make big routine payments to pay it off, you will certainly pay no or extremely little in interest.

credit cards maxed out
credit cards maxed out

Are your credit cards maxed out? Here’s some personalized tips for paying off credit card debt

What can you do trying to be credit card debt-free? My 4 step strategy can help you get there.

1. Credit cards maxed out: Take control

It isn’t simple or comfortable to take a hard look at your finances, but it is essential. Analyze your household expenses, as well as the interest rates linked to every resulting financial obligation. Track your monthly expenses to really understand what your credit card purchases get you on a monthly basis.

This is the first step in understanding your expenditures and cutting down on the ones that are not needed. To recognize where you are going, you need to recognize where you have in fact been.

2. Credit cards maxed out: Minimize interest rates

The normal rate of interest on a bank card is about 19 percent. That’s rather high, so you may wish to think of doing a balance transfer by moving your credit card debt to a card with a minimized or zero-interest offer to assist in paying it off a lot faster.

A word of care: you’ll probably require to pay a transfer fee in doing so. Likewise, you will need to repay the debt in full before that promotion price finishes. Otherwise, the remaining balance on your new balance transfer card will again attract a greater rate of interest, possibly the very same or higher than the card you moved the debt from.

Although I do not hold out a lot of hope, you can ask your credit card firms if they will lower your rate of interest.

3. Credit cards maxed out: Credit counselling as well as debt paydown approaches

If you merely cannot make sufficient earnings to fund your debt repayments, consider a non-profit credit counselling service. At no charge to you, they can get you into a Debt Settlement Plan. Bear in mind that as soon as you are in such a strategy, your charge cards will certainly be cut off.

Do not go to any one of the financial debt settlement services that market often on television or social media. All they do is charge you a fee to take down basic information that a certified non-profit credit counselling agency or a licensed insolvency trustee would certainly do for no cost. After that, they run you through their “program” charging you a lot more fees until you can pay no more. After that, they send you to a qualified bankruptcy trustee.

There are 2 regular financial debt settlement strategies– avalanche method and also snowball method. The avalanche technique of getting out of the credit card financial debt is you initially put all your available cash to pay down your highest interest rate debt. As soon as that’s cleaned up, you start settling the following most costly debt. You keep repeating this up until all your consumer debts are gone.

Sometimes, the snowball technique offers a great deal of extra motivation. With this method, you settle the tiniest financial debt initially, to improve your mood. You use that power to resolve what is the next tiniest debt and so on. You are grabbing steam like a snowball rolling downhill.

It does not matter which strategy you utilize. The vital thing is that you start now and stick with it.

4. Credit cards maxed out: Adhere to it.

Remember your single focus should be reducing debt, not new non-essential spending. So do not prepare any kind of sort of travel getaways or big purchases in the meantime. You could backslide or strike some road bumps yet do not let that distract you or depress you.

Now for the challenging part. When possible, save some money to assist with unpredicted expenses that you would typically place on your credit card. This will certainly minimize the amount you would have to borrow by paying with real cash.

It’s an incredibly lengthy as well as agonizing trip to fully pay off your credit cards maxed out. It also can be an extremely lonely one. People don’t get into the bank card debt trap overnight, so you can’t leave it without some effort.

Credit cards maxed out summary

I hope that you found this credit cards maxed out Brandon Blog interesting. I wrote this now because I fear the trend I see from both the Ipsos survey and the Statscan report shows that now that Canadians have done their debt consolidation and credit card balances are low, the credit cards are now being run up again. The end result will be higher debt than the average Canadian started with.

Problems will arise when you are cash-starved and in debt, especially with a maxed-out credit card. There are several insolvency processes available to a person or company with too much debt.

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

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

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

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

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

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

Call us now for a no-cost bankruptcy consultation.

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

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

credit cards maxed out
credit cards maxed out
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