Tag: Consumer Proposal

Categories
Brandon Blog Post

WHEN ARE 2019 TAXES DUE CANADA: 4 AMAZING WAYS TO CRA PERSONAL DEBT RELIEF

The Ira Smith Trustee Team Is Absolutely Operational And Ira, In Addition To Brandon Smith, Is Readily Available For A Telephone Consultation Or Video Meeting.

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22427″]

When are 2019 taxes due Canada introduction

I have noticed recently that Canadians are searching online the question “when are 2019 taxes due Canada“. That leads me to believe that many people are unclear about the changes this year. Some people are searching because they don’t want to miss the payment deadline. Others may be searching because they want to know when the deadline is that they are going to miss because of the COVID-19 pandemic has hit them right in the wallet or purse.

The purpose of this Brandon’s Blog is to go over for individuals:

  • the important tax filing and payment dates for 2019 taxes;
  • what needs to happen on those dates and what if you can’t make it on time; and
  • ways you can deal with Canada Revenue Agency (CRA) to eliminate your tax debt

I remind you that I and my Firm are not personal or corporate tax advisors. We are licensed insolvency trustees. This Brandon’s Blog is not meant to be income tax advice or to replace professional income tax advice. To learn when are 2019 taxes due Canada for your personal situation, contact your own professional income tax advisor.

Is the Tax Deadline Delayed for 2019 Tax Returns?

You may have wondered how COVID-19 influences the filing of your 2019 tax return, repayment of any income tax owing and your tax obligations generally in terms of deadlines, or payments or refunds and tax credits. Apart from those that are self-employed, the income tax return filing date is usually April 30 of every year.

Identifying the turmoil brought on by COVID-19, the CRA provided most Canadians extra time to submit a 2019 tax return. CRA provided us till June 1, 2020, aside from self-employed people operating as a proprietorship or partnership. For those self-employed people, the filing day remained June 15, 2020, for a 2019 tax return.

So since that due date has passed, nevertheless, this year there might be a technicality as I describe below. The government wants every cent they are owed and they want it in a good time. Thus, there are fines for filing a late income tax return if you have an unpaid tax amount. If you are entitled to a refund or your tax balance is nil, there will be no charges for sending in your return after the deadline date.

Charges for filing your income tax return late when you owe the CRA are levied. The CRA will charge you a late-filing penalty if you file your 2019 income tax return after September 30, 2020 (notwithstanding the actual filing date was June 1), and you owe tax obligation that continues to be unpaid. The fine is 5% of your 2019 tax owing, plus 1% of your income tax owing for each complete month your return was filed after September 30, 2020, to a maximum of twelve months.

So without making you any guarantees, there is a real possibility that if you missed out on the June 1 due date, if you submit and pay on or prior to September 30, 2020, and you do not have any kind of prior years’ late-filing penalty, one may not be levied for 2019.

If the CRA charged a late-filing penalty on your return for 2016, 2017, or 2018 your late-filing fine for 2019 may be 10% of your 2019 balance owing, plus 2% of your 2019 balance owing for each and every complete month your return was submitted after September 30, 2020, to a maximum of 20 months.

So it seems the CRA will forgo arrears interest on 2019 tax obligations related to the specific income tax returns from April 1, 2020, to September 30, 2020. This procedure for your 2019 tax obligation does not terminate penalties and interest on a taxpayer’s account prior to April 1, 2020, to September 30, 2020. It does make it less complicated on a taxpayer’s 2019 tax debt that it will certainly not rise via interest charges throughout this challenging coronavirus pandemic time.

Why file by the June 1 deadline if no payment is due until September 30?

Filing your income tax return on time lessen any negative results on your tax credits and benefits payments. If your 2019 return has actually not been assessed by the CRA, details from your 2018 return will be used to compute benefits as well as credits payments up until September 2020. That will guarantee you continue to obtain vital payments. Nevertheless, without filing your 2019 tax return, you may not be getting exactly the correct amounts you are entitled to.

I doubt you desire any kind of disturbance to benefit payments you get for government programs such as the Canada Child Benefit (CCB) and GST/HST tax credits, as well as amounts from provincial programs that are carried out by the CRA.

By filing a return by the due date, you will lessen this impact. Also, if you are owed a refund, the earlier you file, the earlier it will show up in your pocket. By registering for direct payment, you’ll get your refund quicker.

If you are expecting a tax refund for sure you would certainly want to submit on time. CRA may not chase you for it if you don’t owe them for 2019. Submitting your tax return is the only way to get that refund. Remember, a refund means that you gave too much of your money to CRA during the year. For sure you want it back!

However, registering for a direct deposit could lead to other problems. For more information on that, read my Brandon’s Blog CANADA REVENUE AGENCY LOGIN: MASSIVE CREDENTIAL STUFFING CAUSES MANY PROBLEMS.

When are 2019 taxes due Canada: Are there new deadlines for GST/HST returns and payments as well?

Excellent information for the self-employed as well as entrepreneur small-business owners: while the CRA is not changing the filing target dates for GST/HST returns, it is forgoing late filing charges for returns submitted by the end of June. As for payments, any type of GST/HST installments that are due March 27 through June 2020 can be deferred up until June 30, interest-free.

When are 2019 taxes due Canada: What is the payment date?

The target date to pay amounts owed was initially extended to September 1, 2020. On July 27, the CRA revealed that the payment deadline for a person’s 2019 income tax obligation was additionally extended to September 30, 2020.

There are a few other concerns surrounding the declaring of your 2019 income tax return and the payment of any balance owing that you must understand:

  • Some taxpayers may have received a Notification of Assessment that says the date for settlement is April 30, 2020, or September 1, 2020. If you did get such a notice giving those dates for when are 2019 taxes due Canada, it is now incorrect.
  • On May 15, it was revealed that qualified Canadians who are currently obtaining the GST/HST credit and/or CCB payments will continue to get them up until the end of September 2020. Benefits starting in July 2020 and those arranged for August and September won’t be disrupted.
  • If CRA is unable to evaluate your 2019 return by early September 2020, your estimated benefits and/or credits will certainly stop in October 2020 and you’ll have to repay the approximated amounts that were released to you starting in July 2020.
  • By prolonging the due dates for federal returns and instalments, the CRA is additionally expanding the due dates for provincial/territorial individual returns and instalments. Note that the CRA does not administer the tax system for the province of Quebec.

When are 2019 taxes due Canada: What if I owe CRA and cannot pay it?

If you find yourself to be in a financially challenging situation then you need to take proactive activity. The COVID-19 pandemic has hit Canadians hard. I envision there will be many individuals that do not have the needed cash to pay their 2019 income tax debt by September 30. It is necessary to be proactive and positive since the CRA has special powers.

The CRA does have the capacity to take collection procedures without having to go via the court system. The federal government can garnishee your wages or salary, get the money you have on deposit at a bank as well as freeze your bank accounts. They can also make demand on anyone they think owes you money.

There are 4 ways to CRA personal debt relief:

  • If you are able to, borrow the money you owe and pay it to CRA on or before September 30. I don’t think this option needs any further explanation.
  • Contact a CRA collection officer and make a payment arrangement repayment plan. A payment arrangement is an agreement you make with the CRA. This allows you to agree on a monthly amount to pay that you can afford and then provide CRA with a series of post-dated cheques.
  • Consider filing a consumer proposal to consolidate your income tax and other debts so you can make one manageable monthly payment. Through a consumer proposal, you will pay much less than the total of all your debts.
  • If you cannot see your way to being able to do any of the three options listed above, the final one is to use personal bankruptcy to eliminate your income tax and other debts.

If you are able to make a settlement arrangement you have to maintain the payment plan by making certain your regular monthly post-dated cheques clear the financial institution every single time. Also, ensure that all your returns are filed promptly. If you fail to do any of these things, they can terminate the payment arrangement and begin collection action to recoup the tax debt.

September 30, the date when are 2019 taxes due Canada is coming up fast. If you know that you will not be able to pay that liability, don’t fret and don’t waste time. Give us a call. We will help you put together the best strategy that meets your overall needs.

When are 2019 taxes due Canada: A consumer proposal

A consumer proposal is a government-regulated debt negotiation program submitted with a Licensed Insolvency Trustee (Trustee). The purpose of submitting one is to eliminate problem financial debts to make sure that you can start the process of resuming life debt-free.

It can just be filed with a Trustee. When you sign your papers, they are filed with the federal government. It is a legal process under the Bankruptcy and Insolvency (Canada) (BIA).

This procedure is a lawful arrangement between you and you’re unsecured creditors to eliminate all of your debt by repaying only a part of the debt that you owe. If a simple majority by dollar amount accept the terms you have offered, then your consumer proposal is binding on all your unsecured creditors.

This court-sanctioned procedure enables you to bargain negotiation with your creditors. When you are carrying out your consumer proposal by making your required payments, you must also file your income tax returns as normal. CRA manages your refunds in the normal course. If you owe tax for any time period after the filing date of your consumer proposal, you additionally pay that amount as regular.

In a consumer proposal, you maintain your assets and as long as you make all the required payments you promised to make, nobody can garnishee your salary or earnings. If you have filed a consumer proposal, personal income tax obligations arising before your filing is an unsecured debt. When you have filed CRA can’t take any type of additional action against you, like wage garnishment, or freezing your bank accounts. As the Trustee, we alert CRA once you file as well as advise it to stop any additional action against you.

For further information on how a consumer proposal could work for you, please get in touch with me. If you know that when are 2019 taxes due Canada you will not be able to pay them, give us a shout so we can help put together a plan of attack for you.

When are 2019 taxes due Canada: Personal bankruptcy in Canada

If none of the above ways can work for you, then you will have to consider personal bankruptcy in Canada. Personal bankruptcy should be considered by anyone who:

  • is insolvent;
  • has seen a Trustee who has assessed you and determined that you will not be able to complete a consumer proposal; and
  • owes more than $1,000.

As soon as you become bankrupt you will be required to surrender most assets to the Trustee, other than those that are exempt under provincial law or are fully encumbered. These assets will then be sold and the money gained from the sale of the properties will be dispersed according to the BIA. You may additionally have to pay a part of your earnings to the Trustee for the benefit of your creditors.

Personal tax obligations can be discharged when you receive your discharge from personal bankruptcy. Many various other financial debts will also be released. If you have liability to CRA from being a director of a company, those financial obligations can also be discharged.

If you have actually declared personal bankruptcy, personal income tax debt is an ordinary unsecured financial debt. As soon as you’ve applied for bankruptcy CRA can’t take any kind of additional action versus you, consisting of a wage garnishment or freezing your accounts. We will inform CRA when you file as well as instruct it to quit any additional activity against you to try to collect their debt.

Your spouse will not be affected by your bankruptcy unless your spouse:

  • co-signed a debt;
  • owns assets with you jointly; or
  • has received a transfer of property from you at a time when you owed CRA money.

A creditor can go after your spouse for payment in these circumstances and also he/she will be called to account and pay.

You may also wish to check out our Top 20 personal bankruptcy FAQs. So if you know now that when are 2019 taxes due Canada you will not be able to pay it, consider giving us a call and we can run through your various options and tailor a plan to fit your unique circumstances.

When are 2019 taxes due Canada: Summary

I hope you found this is Canada when are 2019 taxes due Canada Brandon’s Blog informative. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy, and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

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

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

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

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

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

when are 2019 taxes due Canada
when are 2019 taxes due Canada
Categories
Brandon Blog Post

BANKRUPTCY MEANS: SERIOUSLY, CAN IT EVER MEAN BEGGING FOR A BANKRUPTCY ANNULMENT?

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

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22327″]

Bankruptcy means introduction

From my perspective, bankruptcy means that a person or company has either filed an assignment in bankruptcy or the court has issued a bankruptcy order against the debtor. The debtor has taken the voluntary action to seek relief and the benefits obtained by doing so under the Bankruptcy and Insolvency Act (Canada) (BIA). Or a court, based on the application of one or more creditors, has ordered that the BIA applies and the debtor is adjudged bankrupt.

As I have written in the past, this is different from insolvency. Insolvency is the financial state where a company or person cannot meet their liabilities as they come due or whose assets, if sold at fair value, would not be enough to pay off all of the liabilities. Bankruptcy is a legal state.

I recently read an article about Mr. Stanley Frank Ostrowski aka Frank Ostrowski, who lives in Winnipeg, Manitoba. Mr. Ostrowski filed an assignment in bankruptcy on February 12, 2019. He listed his assets having a value of $250. He stated that his liabilities were $259,621. This is his second bankruptcy. His first was in 1983 and he received an absolute discharge in 1985.

The article states that Mr. Ostrowski has now made an application to the court to annul his bankruptcy. This Brandon’s Blog looks at: Is it possible to annul a bankruptcy and under what circumstances? Put another way, is it really the case that bankruptcy means you can file for bankruptcy and then say oops, I didn’t really want to file? I am not really sure that is how bankruptcies work.

The reasons why Mr. Ostrowski thinks bankruptcy means it can be annulled

In May 1987, a jury decided that Mr. Ostrowski was guilty of first-degree murder. In March 1992, he was found guilty of possession of cocaine for the purposes of trafficking. He was sentenced to 15 years in prison, concurrent with his life sentence for murder.

He served 23 years, 2 months and 24 days in prison. He got out of jail on December 18, 2009. In 2014, then federal justice minister Peter MacKay asked Manitoba’s Court of Appeal to review the case. Then justice minister MacKay believed that there was a miscarriage of justice with respect to the murder conviction.

In a November 2018 decision, the Court of Appeal set aside the conviction after it discovered a miscarriage of justice took place when two vital details were not revealed to the defence or the court. While the court set aside his conviction, it did not acquit him. In their decision, the three-judge panel said they thought there was enough proof against the accused, which the court could have found him guilty even if full disclosure had been made.

The court also held that it would be unfair to have another trial given that it had been 32 years since the shooting. The court also entered a judicial finding that the charge is stayed from further prosecution.

In June 2020, Mr. Ostrowski retained legal counsel to commence an action for damages because of his wrongful conviction. His lawyers have not yet launched the claim but they plan to. The article said that he will be seeking $16 million in compensation.

Now he wants to have his 2019 bankruptcy annulled. He believes he has a realistic chance of receiving sufficient compensation to be able to settle all his debts. So with all this background information, do I think his bankruptcy means that he can get his bankruptcy annulled?

Bankruptcy means: what happens if I declare bankruptcy?

I have written before about what happens when a person or company declares bankruptcy. There is a responsibility to make full disclosure to the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) all of your assets, liabilities, income and expenses. The debtor also must give to the Trustee all provincially non-exempt assets so that the Trustee can sell them for the benefit of the creditors.

In his bankruptcy filing documents, Mr. Ostrowski did not make mention of this potential lawsuit that had not yet been launched. He also did not indicate that he had the right to such an asset. If he had, there would be two realistic options.

He could have taken the position that the amount of recovery in a lawsuit not yet launched is unknown and speculative. So, the action should only be valued at $1 as a placeholder. By doing so, he would have made full disclosure to his creditors and to his Trustee as to the existence of this potential asset.

If Mr. Ostrowski had disclosed this asset and valued it at more than $259,371, then he would not have met the asset test for being insolvent and potentially would not have been able to file for bankruptcy. I say potentially because, in his affidavit, Mr. Ostrowski makes no mention of what his income and expenses were at the time of filing for bankruptcy or now. Mr. Ostrowski does not disclose in his affidavit whether or not he has to pay any surplus income to his Trustee for the benefit of his creditors.

Can bankruptcy be annulled?

Annulling a bankruptcy is more than just cancelling a bankruptcy. It is erasing it to the point as if it never happened. It is a complete elimination of the bankruptcy. If it was the person’s first bankruptcy, and it was annulled, they could honestly say they never were bankrupt.

To figure out what are the odds that Mr. Ostrowski will be successful in his application to annul his bankruptcy, we need to look at several factors. First, what reasons does Mr. Ostrowski say are the basis as to why his bankruptcy should be annulled?

In his affidavit sworn June 8, 2020, the reasons he gives are:

  1. “I have a realistic chance of receiving sufficient compensation to be able to settle my debts with my creditors in a manner that would be more advantageous to the creditors than if I pursue bankruptcy.”
  2. “I am advised by…” my lawyer “…that when he advised…” my Trustee, “… of my intention to seek an order annulling my assignment in bankruptcy…” my Trustee “…did not object to it.”.

That is it. No other reasons. To Mr. Ostrowski, his bankruptcy means that maybe perhaps he can do better for his creditors than they would get in his bankruptcy and his Trustee doesn’t object to his trying to annul his bankruptcy.

With all due respect to his legal counsel on this bankruptcy annulment application who only has what he has to work with, I rate those reasons somewhere between weak and lame! The bankruptcy annulment process was not designed for the convenience of the bankrupt.

Bankruptcy means when will a court annul a bankruptcy?

First, Section 181(1) of the BIA gives the court the authority to annul a bankruptcy. It says:

“181 (1) If, in the opinion of the court, a bankruptcy order ought not to have been made or an assignment ought not to have been filed, the court may by order annul the bankruptcy.”

This authority is discretionary. Generally, the court will only annul an assignment if it is shown that:

  • The debtor was not insolvent at the time of filing.
  • It was an abuse of process of the court
  • The debtor was trying to commit a fraud on his or her creditors.

If Mr. Ostrowski’s affidavit is the only evidence submitted in his application to annul his bankruptcy, he has not shown that the bankruptcy assignment “ought not to have been filed”.

Second, there have been cases where an assignment in bankruptcy has been annulled. The list of general reasons why the court found that a bankruptcy order ought not to have been made or an assignment ought not to have been filed are:

  1. An assignment in bankruptcy was completed and was to be held in escrow while the debtor negotiated with his creditors. The assignment was only to be filed if a resolution could not be worked out. A deal was reached but the assignment was filed in error. In other words, a verifiable mistake.
  2. The bankruptcy was of no benefit to the creditors. The creditors would receive a distribution but would bear all the costs of the bankruptcy administration.
  3. The debtor was restrained by court order from dealing with all of his assets without giving his estranged wife seven clear days’ notice and he filed an assignment in bankruptcy with no notice given.
  4. Joint assignment by a husband and wife where it was evident that a large amount of debt was from the husband’s unincorporated business and the wife was not in partnership with him.
  5. A bankruptcy assignment purportedly filed by an infant!
  6. The second assignment filed before the bankrupt received a discharge from the 1st bankruptcy.
  7. The husband filing an assignment in bankruptcy in an attempt to disgorge himself of his assets while embroiled in bitter family law proceedings.
  8. Directors of a company whose assets were already being administered under a court-appointed receiver having filed an assignment in bankruptcy for the company.

In all the above situations, the court DID annul the bankruptcy. The court did not agree that bankruptcy means it was the right choice in those situations.

Bankruptcy means when will a court NOT annul a bankruptcy?

Third, there have been cases where an assignment in bankruptcy was NOT annulled. The list of general reasons why the court found refusing the annulment request was appropriate are:

  1. The sole purpose of the bankruptcy was to rearrange the priorities of certain creditors.
  2. A bankruptcy to defeat the enforcement attempts of a judgment creditor.
  3. The sworn statement of affairs failed to show the name and amount of a creditor.
  4. The debtor had no assets.
  5. Debtor was insolvent and did not bring an application to annul the bankruptcy until 4 months after filing an assignment in bankruptcy. The court decided that an application to annul a bankruptcy only because the debtor did not wish to continue with the bankruptcy process should be brought immediately after the filing of the assignment in bankruptcy.

The last reason why the court did not annul a bankruptcy, is pretty much the reason Mr. Ostrowski says he wants his bankruptcy annulled. Only in his case, he is bringing the application some 18 months after becoming a bankrupt.

Interestingly enough, that last reason was a Manitoba case, Baker (Bankrupt), Re, 1997 CanLII 23100 (MB QB). In that case, the bankrupt contended that the Trustee filed the bankruptcy documents with the Office of the Superintendent of Bankruptcy in error. However, she waited for 4 months and the court was not persuaded that the filing was an error!

In Mr. Ostrowski’s case, his reasons boil down to it will be more convenient for him! As you can probably tell by now, I don’t place a high probability of his chances of success in persuading the court to annul his bankruptcy. But then I am not the judge.

Bankruptcy means what should Mr. Ostrowski do?

The answer as to what his bankruptcy means and what Frank Ostrowski should do lies within the BIA. Mr. Ostrowski has two choices and I believe it will be what the court decides.

First, the BIA allows for a bankrupt, with the permission of the inspectors in his bankruptcy, if any, to file a restructuring proposal. He could get that started right now without any court application.

If his debts are truly over $250,000, based on the claims filed to date, then he can file a proposal under part III division I proposal under the BIA. If the claims filed are a total under $250,000, then he could file a consumer proposal. Either way, the administration would continue under the BIA.

His proposal would be a very simple one. It would essentially say that he has a claim against several parties for what his lawyer believes is $16 million. He knows he will get at least enough to pay all of his creditors in full. So, if you vote in favour of my proposal, if I win, enough money will be paid to the Trustee to pay all the creditors in full. If I don’t win, or there isn’t enough money to pay everyone in full, all creditors will share in whatever is available.

Once the restructuring proposal is accepted by his creditors and approved by the court, his bankruptcy is annulled. He will get exactly what he is asking for. His creditors will get paid presumably in full. They will not just get the chance to have their debts settled as Mr. Ostrowski states in his affidavit.

Second, section 144 of the BIA says that the bankrupt is entitled to any surplus remaining after payment of all creditor claims in full, with interest, and the cost of the bankruptcy administration. So, if Mr. Ostrowski is successful and gets $16 million, that money would go to his Trustee, after the legal costs of winning that award. The Trustee would keep what is necessary to pay all the claims in full, with interest, and the costs of the bankruptcy administration. Mr. Ostrowski would keep the rest.

I recommend the first way, the restructuring proposal route because that could get Mr. Ostrowski’s bankruptcy annulled fairly quickly, which is what he is asking for.

It will be interesting to see what the court decides. I will let you know when I find out.

Bankruptcy means summary

I hope you found this bankruptcy means Brandon’s Blog informative and interesting.

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

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

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

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days. Some people think that bankruptcy means the end of their life. Bankruptcy should be a last resort for anyone. We strive to help people and companies avoid bankruptcy. But if bankruptcy is necessary, do not think of it as the end of life. It really is a fresh new beginning. That is what bankruptcy means.

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

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

bankruptcy means
bankruptcy means
Categories
Brandon Blog Post

INSOLVENCIES IN CANADA: THE CALM BEFORE THE SCARY STORM?

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

Insolvencies in Canada introduction

Insolvencies in Canada are at a record low. Is it the calm before the scary storm?

Consumer insolvencies in Canada have been driven to unusually reduced degrees in recent years because of sustained low-interest rates and strong property values.

In this Brandon’s Blog, I discuss what could very well happen in the 4th quarter of 2020 and into 2021.

Insolvencies in Canada – recent history

The lower number of insolvency filings is not a new phenomenon. Insolvencies in Canada have been at historically low levels for many years. It was not until last year that personal insolvency filings increased year over year.

In 2019, consumer insolvencies for the 12-month period finishing December 31, 2019, increased by 9.5% compared to the 12-months ending December 31, 2018. Personal bankruptcy decreased by 1.2%, while consumer proposals were 17.9% higher.

After many successive years of steady decline, business bankruptcies in Canada had reached a plateau level in 2019. Typically speaking, business bankruptcies in Canada have been stable.

During the 1st quarter of 2020, the Office of the Superintendent of Bankruptcy Canada (OSB) reports that between the 4th quarter of 2019 and the end of the 1st quarter of 2020, for insolvencies in Canada:

  • Total insolvency filings decreased by 5.4%.
  • Consumer filings were down by 5.5%.
  • Business insolvency filings were 2.6% lower.
  • In all cases, bankruptcy filings were drastically lower and restructuring proposals were essentially flat.
  • For personal filings, Alberta was basically flat while the other provinces and territory showed decreases.
  • In business filings, Ontario showed a slight increase (8.3%) and British Columbia showed a huge increase (43.5%). Again, it was restructuring proposals, not bankruptcy, making up the majority of business filings. All other provinces and territories showed a decrease.

Then the effects of the economic shutdown of the country started taking hold in April 2020.

April 2020 insolvencies in Canada and the United States

The total variety of insolvencies in Canada (both bankruptcy and proposal filings) decreased by 38.7% in April 2020 contrasted to March 2020. Personal bankruptcy decreased by 41.5% and proposals decreased by 37.2%.

The number of insolvencies filed in April 2020 was 43.5% less than the total in April 2019. Consumer bankruptcies decreased by 43.1%, while consumer proposals decreased by 54.8%.

The story in the United States is very similar. American Banker reports that presently in the US, personal bankruptcy filings are actually reduced year over year. It reports that according to information from the federal courts, there were 186,000 consumer bankruptcy cases in the first quarter of 2019. By comparison, there were 175,000 for the initial quarter of 2020.

A lot more noticeably, the rate of consumer insolvency cases for April of 2020 was 46% lower than in April of 2019.

There are a variety of reasons in both countries. From my discussions with a couple of US bankruptcy lawyers, I am friendly with, it seems the reasons in both countries are generally the same.

In no particular order, the main reasons are:

  • Mortgage payment deferral programs masking what might otherwise be increased delinquencies.
  • Lower overall credit card spending while people are at home in self-quarantine.
  • Various government programs supplying much-needed cash to unemployed people and businesses.
  • Government programs deferring the timing for filing income tax returns and the payment of income tax.
  • Moral suasion so far stopping banks, credit card companies and collection agencies from aggressively making collection attempts during this time.
  • The closure of the courts making it impossible to sue anyone.

    insolvencies in canada
    insolvencies in canada

The economy is starting to reopen

In conjunction with the federal government, the provinces and territories are starting to reopen cities and businesses. No doubt there will be a lot of growing pains as the economy reopens. What should we expect? What will it mean for insolvencies in Canada?

In his first speech as Governor of the Bank of Canada, on June 22, 2020, Tiff Macklem stated that he expects there will be an initial boost to the Canadian economy as it reopens and activity resumes. He does not expect that good news to last very long. Rather, he expects there will be the 2nd stage of economic recovery that will certainly be long and slow, due to the remaining unpredictability around the coronavirus.

The federal government will need to wean Canadians off of the various support programs. When that happens, all the financial pain currently hiding under the radar will rise to the forefront. COVID-19 support programs, payment deferrals and other “time outs” will end and the courts will reopen. Creditors will get back to business as usual in chasing delinquent accounts. The federal, provincial and territorial governments will feel they have done enough to the tune of trillions of dollars. Their attitude will be, in so many words, it is now time for you to stand on your own two feet again.

In fact, some government attitudes are already changing.

Will temporary layoffs be a harbinger for business insolvencies in Canada?

Throughout the coronavirus pandemic, BC seemed to handle their lockdown and other COVID-19 things a bit differently than the other provinces and territories. As they now consider reopening, BC businesses are worried.

British Columbia businesses are discouraged by Labour Minister Harry Bains’s failure to recognize the seriousness of problems facing the mainly small and medium-sized businesses. Their issue is the possibility for thousands of companies to have to make an insolvency filing. Their main worry is that they will be compelled to make severance payments as a result of the unexpected scenarios brought by the COVID-19 pandemic.

The Minister has it within his power to supply a Ministerial Order to expand the temporary layoff time frame under the Employment Standards Act to provide companies with the breathing room” required to survive, recoup, and facilitate return-to-work for laid-off staff.

All provinces and territories face extraordinary difficulties as a result of the economic results from COVID-19. Few business owners can plan for or have the cash-on-hand to terminate all or a considerable part of their labour force at the same time throughout the very best of times.

BC companies will be faced with fears as the clock ticks to target dates beginning in very early July requiring several companies to either recall or permanently terminate laid-off staff members. They don’t have enough business or money to rehire everyone. They also don’t have the cash to make the severance payments. Without legislative support, this problem will face all Canadian businesses.

In the nick of time, the federal government has come to the rescue. On June 23, 2020, Prime Minister Justin Trudeau announced that the federal government has expanded the period for temporary layoffs by as much as 6 months. Employers now have more time to recall staff members who were laid off due to COVID-19.

Now, for employees who were laid off before March 31, the government has proposed that their employers have the earlier of 6 months or up until December 30 to recall their staff. For employees laid off between March 31 and September 30, their company will have up until December 30, unless a later recall day was given on their layoff notification.

I caution that this is a proposal floated by our PM right now and not actual legislation. Labour legislation is largely left up to the provinces and territories. It is interesting to note that the Feds seem to be stepping into this. As we all know, ultimately, businesses will either be able to survive or will have to restructure under our laws for insolvencies in Canada.

Will extending employee recalls be a harbinger for personal insolvencies in Canada?

So now that employees can expect to remain unemployed for longer, what is that going to mean? For several years now polls have shown that Canadians are on the brink of insolvency. As I already mentioned, rock-bottom interest rates and rising real estate values, leading to lots of home equity lines of credit room to borrow on. This has kept Canadians in debt and out of becoming one of the statistics for insolvencies in Canada.

So the question is, once the Canada Employment Response Benefit (CERB) runs out, what will the unemployed do? Seems to me there are a few options, none of them good:

  1. Cut back on spending as much as possible. In places like the Greater Toronto Area (GTA), you have to be a magician to be able to live on $2,000 per month (after putting away the amount you will have to pay eventually in CERB income tax).
  2. Burn through the rest of your savings until you have no cash.
  3. As a result of 1 or 2, go deeper into debt on your lines of credit and credit cards until you have no more borrowing room.

Once all of this has happened, the only thing left to do will be to consult with a licensed insolvency trustee (formerly called a bankruptcy trustee) to discuss your realistic options for eliminating debt.

Insolvencies in Canada summary

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

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

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

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

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

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

insolvencies in canada
insolvencies in canada
Categories
Brandon Blog Post

THE CONTROVERSIAL QUEBEC PLAN TO REDUCE CREDIT CARD DEBT IN CANADA

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

Stay healthy, well balanced and safe and secure everyone.

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22283″]

Credit card debt in Canada introduction

Yesterday I received my current credit card statement in the mail. I scanned the pages and something on the page titled “Important Changes To Your Credit Card Agreement” caught my eye. The province of Quebec is trying to reduce credit card debt in Canada for its residents. I will explain it in this Brandon’s Blog.

Average Canadian household debt 2020

Credit rating agency Equifax Canada says typical consumer debt boosted 2.7% to get to $72,950 on average per household at the end of 2019. At the end of 2019, TransUnion reported that Canadians charged $100 billion in bank card financial obligations for the first time ever and they’re not done contributing to it. So credit card debt in Canada was certainly out of control then.

I won’t bother quoting what both the Equifax and TransUnion projected as to what would happen to average Canadian household debt in 2020, or about credit card debt in Canada. Suffice to say that in late 2019, an Ipsos poll carried out for Manulife Canada found that 45% of Canadians report spending more than they take home, and also 40% question if they will ever get rid of all of their debt. Nearly half of Canadians are afraid of being indebted for life, and 67% assume everyone is in the very same situation.

In the first quarter of 2020, unemployment was low and the Canadian economy felt like it was in decent shape. Then came the coronavirus pandemic. The fallout from COVID-19 and the shutdown of the Canadian economy have yet to be fully felt. My crystal ball is definitely broken because of it.

Average line of credit debt in Canada

Suffice to say from everything that I have read so far, average Canadian household debt is going up, due mainly to job losses and falling incomes. The Canadian government statistics about Canadians receiving the Canada Emergency Response Benefit (CERB) are staggering. As of June 4, 2020, the government has processed applications from 8.4 million Canadians. Overall as of that date, the federal government has paid out $43.5 billion of CERB benefits.

So with close to 9 million people getting CERB payments up until now, lots of Canadians are making a great deal less money than they did two months back. According to Statistics Canada, Canadians earned monthly, on average, $4,383; those on CERB make $2,000 a month. While it’s great to have some cash coming in, that gap (as well as it will certainly be a lot more for some) is likely to be a significant problem for out-of-work Canadians.

The Quebec plan to slow down credit card usage in Canada did not start out being controversial

To understand what additional pressure there will be on Quebeckers come August 1, 2020, we first have to understand the history of the issue. Quebec’s intentions started out being very good, especially for the time it was developed. But, that was then and now is now!

On November 15, 2017, Quebec’s Bill number 134, “An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs”, was enacted. On August 1, 2019, particular elements of this legislation, aimed at trying to suppress charge card financial obligations in Quebec, began. So everyone had advance warning to change their spending ways.

Starting then, new credit card accounts opened required the minimal monthly payment to be upped to 5% of the outstanding balance on those brand-new charge cards. For cards provided prior to August 1, 2019, cardholders could continue to pay a minimum of 2% of the monthly balance. They had until 2025 to start paying the brand-new minimum of 5%. Nonetheless, the minimum monthly payment was gradually being boosted by half a percentage point annually. This starts on August 1, 2020, up till it gets to the five percent level.

At the time, consumer advocates felt that other provinces will be watching carefully what Quebec is doing. The Quebec government certainly thought that credit card debt in Canada was a problem. It wanted to be proactive in dealing with this problem for Quebeckers. If you had to pay more every month on your old debt, hopefully, people would start feeling the pinch and adjust their budgets to spend less using credit cards. That was the theory.

So that was what was printed on my credit card statement. A reminder that if you lived in Quebec and were responsible for repaying the debt on the credit card, the minimum monthly payment was about to increase.

Given the current state of the Canadian economy and people’s personal financial affairs, this requirement in Quebec to pay more every month on your credit card debt cannot be good news.

Total credit card debt in Canada, not monthly payments, is the real problem

This leads to what or who is the real culprit. Quebeckers having to pay more each month as a minimum monthly payment is not the problem. I don’t mean to single out Quebec residents. I only mention them because it is Quebec that enacted the legislation. The real problem is that Canadians’ total credit card debt in Canada is too high and people cannot pay off the balance they charged each month on the due date. So, they are only making minimum monthly payments, while continuing to charge more, to stay alive until the next month.

Increasing minimum monthly payments is not making a plan to be debt-free

High charge card debt is clearly jamming a lot of people. Time will tell just how effective a technique it is to elevate the minimum monthly payment to 5% to tackle outstanding credit card debt. Due to the current situation, it is pointless to start looking at data for the rest of 2020. Hopefully, this year is not indicative of what future years will look like.

In my opinion, it would have been a lot more impressive for Quebec to at the very same time develop online financial education modules for its people. What is truly required is to show people that paying just the minimum monthly balance doesn’t solve their total debt problem.

As I have stated in many of my blogs, to create a real plan to be debt-free, people need to:

Unpaid credit card debt consequences Canada and how to avoid them

Right now, there is an unofficial moratorium on the banks and collection agencies calling people who are delinquent in their credit card payments. All the lenders are treading lightly, given the many problems currently in the Canadian economy. Given all the problems, now may be the best time to try to resolve long outstanding credit card debt issues.

Once things get back to whatever normal is going to look like, lenders and collection agencies will be calling everyone again. If a satisfactory payment plan is not entered into, lenders may sue once the courts open up again. Once a lender gets a judgment against you, they can garnishee your wages or your bank account.

Under the Ontario Wages Act, R.S.O. 1990, c. W.1, a financial institution that has a judgment against you (like a bank or bank card business) can garnishee up to 20% of your net wages (after statutory deductions for taxes, CPP, and EI). Try living with that kind of wage garnishee and/or your bank account frozen.

So anyone with debt problems needs to realistically look at the various solutions that may be available. I have already talked above about how to start tackling debt problems, especially credit card debt in Canada.

Once you have redone your budget, have family buy-in so everyone is onside helping the household and you are following it, there are extra actions that you can take in dealing with your creditors. These steps include:

Negotiating yourself with the credit card company – Right now is the perfect time to negotiate. Lenders are not receiving payments and many have deferral programs set up. If you have cash on hand, now is the perfect time to approach a lender and offer a discounted amount that you can afford to pay if they agree. Make sure you have properly budgeted so that if you pay that cash out now, you can still survive until your work and income returns back to what it was pre-pandemic.

Non-profit credit counselling agency help – If you don’t feel you can negotiate on your own, go to a community non-profit credit counselling agency. They can review your budget to make sure that it is realistic and give you additional help. They can also try to strike a deal with your creditors for you to either pay the full balance out over time without additional interest or penalties or, a reduced payout now.

Consolidation loan – If you are working from home and still have all your income, a decent credit rating and you can get a loan to consolidate your debts to pay them out, that has many benefits. The issue is that the annual interest rate charged on the consolidation loan must be significantly less than the average interest rate you are paying on your debts. Now you can pay off either your total debt, or the lower negotiated balance, and then just have the lower interest rate one loan to repay.

This can be done under either the self-negotiating method or if you are using a not for profit local credit counselling agency to help you. Either way, stay away from payday loan lenders.

Consult with a licensed insolvency trustee (formerly called a bankruptcy trustee) – Whether things are too far gone to use any of the above methods, or you just want to know what all of your options are, consult with a licensed insolvency trustee to determine how best to deal with your credit card debt in Canada.

Most licensed insolvency trustees, including my Firm, provide a no-cost initial consultation. I can go over with you all of your options. We will discuss all that I have already mentioned, plus the concepts of a consumer proposal, Division I Proposal and bankruptcy. I will give you the pros and cons of each, give you my best recommendation and then you will have all the information you need to decide.

Credit card debt in Canada summary

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

I hope you have found this credit card debt in Canada Brandon’s Blog helpful. Quebec’s original plan for helping its residents reduce credit card debt in Canada did not start out to be controversial. It was designed to get Quebeckers to think about how they were getting into credit card debt and to force them to work into their budget a larger monthly minimum payment. The aim was to curb out of control spiralling credit card debt. The COVID-19 pandemic and the resulting economic shutdown combined with the upcoming August 1 changes will no doubt make things harder for Quebeckers only able to make minimum monthly payments on their credit card balances.

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

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

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

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

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

credit card debt in canada
credit card debt in canada

Stay healthy, well balanced and safe and secure everyone.

 

Categories
Brandon Blog Post

BANKRUPTCIES IN ONTARIO: OUR EXCLUSIVE 6 THINGS LIST CREDITORS MUST KNOW ABOUT CANADIAN BANKRUPTCY

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

Stay healthy, well balanced and safe and secure everyone.

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22272″]

Bankruptcies in Ontario -Introduction

Much of the insolvency chatter developing from the COVID-19 pandemic world in which we find ourselves is now concentrating on the waterfall of brand-new bankruptcies in Ontario that are predicted to arrive. I have previously written about some of the big-name US retailers that have filed for Chapter 11 bankruptcy protection.

Businesses shut down, job losses, government funding for people and businesses to try to hang on through this coronavirus are all in the headlines. What our “new normal” will look like and which companies and jobs will survive, right now, is anybody’s guess.

In this Brandon’s Blog, I want to highlight things creditors must know about canadian bankruptcy and bankruptcies in Ontario. By being well-versed, creditors will hopefully be able to better understand what is in store for them and for the debtors.

1. Bankruptcies in Ontario – the automatic stay of proceedings

In Canadian insolvency matters, an automatic stay of proceedings happens when a company or person files under the Bankruptcy and Insolvency Act (Canada) (BIA) for either:

  1. Bankruptcy
  2. Consumer proposal
  3. Corporate or large personal restructuring

The stay of proceedings is automatic under the BIA. Other than in one specific situation which I will touch on in a minute, absent proof that some sort of fraud is being committed on the court, a judge will not interfere with the automatic stay provisions. So an unsecured creditor will not be able to start or continue any action for collecting on a debt.

The one exception is in a restructuring where the major secured creditor goes to court and provides evidence that no matter what the restructuring may look like, they will never support it. The secured creditor would at the same time be requesting the court to lift the stay of proceedings so that they can enforce on their security.

Absent a restructuring proposal that promises to pay out that secured creditor 100% PLUS proof that the company or person has a realistic chance of refinancing to take out that secured creditor. Even in that situation, the court could give the debtor some time to pull it off, but it will be a very short lease. Otherwise, the secured creditor will probably get their wish and the restructuring effort will end.

In the case of a privately appointed receiver, there is no automatic stay of proceedings. This is notwithstanding that the conduct of the receiver in a private receivership is also governed by the BIA. The reason there is no automatic stay of proceedings is that a private receivership is not a filing under the BIA.

In either a court-appointed receivership or a corporate restructuring under the Companies’ Creditors Arrangement Act (Canada) (CCAA), the stay of proceedings authority does not come from statute per se. The respective statutes allow for the judge to order a stay of proceedings. That language is then incorporated into the court order appointing the receiver or authorizing the bankruptcy protection CCAA filing. In these cases, the court is available for anyone to make an application to lift the stay if they can prove that they are being prejudiced. Again, normally only secured creditors will be able to show prejudice.

2. Bankruptcies in Ontario – Know whether, when, and where proof of claim needs to be submitted

For bankruptcies in Ontario and restructurings, it is important to know what kind of insolvency proceeding is taking place. The notice you receive from the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) will tell you what kind of proceeding it is. It will also provide a proof of claim form to be completed. The notice will provide all the details.

It is important that you know:

  • The details.
  • How to complete a proof of claim form.
  • Where to send it into.
  • What timelines there may be.

Some creditors wish to file a proof of claim only so that if a dividend is declared they will get one. In that case, you can complete and file the proof of claim any time before the Trustee issues a final dividend. The Trustee must send a final notice to all named creditors who have not yet filed a proof of claim before issuing a final dividend.

Some creditors wish to actively participate in the insolvency process. They may wish to attend the meeting of creditors, vote on a restructuring proposal under the BIA. If creditors wish to actively participate in bankruptcies in Ontario, they should complete and file the proof of claim with the Trustee within the time-frame indicated in the notice accompanying the proof of claim form.

In a receivership, there will only be a need to file a proof of claim if the receiver has realized enough money from the sale of assets to pay out the trust claims and secured creditor claims in full and now has money for the unsecured creditors. This is very rare. In that situation, the receiver will conduct a claims bar process later on in the administration. That is when a notice with a blank proof of claim form will be sent out to the known creditors.

In a restructuring under the CCAA, first, the restructuring plan, called the Plan of Arrangement, is finalized. Then the Trustee will send out notices and blank proof of claim forms for creditors to complete and submit. Filling out the form at that stage will allow creditors to actively participate in the meeting and voting on the plan, as well as be in line to receive a payment.

3. Bankruptcies in Ontario – Obtaining a preference repayment from a future bankrupt debtor is not illegal or unethical, but you may have to give it back

If a customer of yours offers to pay you money, even if it turns out to be on the eve of an insolvency filing, take it! Always take the money; stress over any claim for it by a Trustee later.

The premise of the BIA is that all unsecured creditors will be treated equally. So, if certain unsecured creditors receive partial or full payment on the eve of filing, and then the debtor goes bankrupt, there is a presumption of a preference. The onus is on the creditor who received payment to rebut the presumption of a preference. If the Trustee is successful in attacking such a transaction, then the creditor must pay over the money to the Trustee. The creditor will also have spent money on its own legal fees. There will also probably be a cost award for all or a portion of the Trustee’s legal costs also.

Notwithstanding all this, it is better to have the money than not. Perhaps the Trustee will not knock on your door. Or, maybe you can avoid a lot of heartache by agreeing to and paying over a settlement amount that is less than 100% of what you received. Finally, there is a very limited number of defences to rebut the presumption of a preference. Perhaps your situation falls under one of them.

Taking the money is not immoral, unethical or illegal. You just may not be able to keep it if your customer files for bankruptcy after making the payment to you.

4. Bankruptcies in Ontario – review the Trustee’s Report very carefully and ask questions

The Trustee’s report outlines issues of importance regarding the conduct of the debtor both pre and post-filing. Sometimes, there may be an action that the Trustee could take to enhance the recovery of an asset, but lacks the funding to do so.

In those cases, a creditor or a group of creditors can choose to either:

  1. Fund the Trustee to take the action for the general benefit of all unsecured creditors.
  2. Get court approval to take the action in their own name under s.38 of the BIA.

It would be unusual for creditors to fund the Trustee. The simple reason is that they would be responsible for 100% of the costs but have to share any recovery with all the other unsecured creditors on a pro-rata basis. For this reason, it is not done.

Many times a creditor or group of creditors will choose to obtain court permission to take on the action in their own name. The court will insist that the creditor group make the opportunity to all creditors. However, a “buy-in” will be set. Most of the time other creditors won’t pony up to join in. Either they are not sophisticated enough to realize the potential benefit or they feel it is not worth their spending money in that way.

Under an s.38 action, if successful, the creditor can first pay back all its costs in doing the action. Next, they are entitled to keep up to the full amount of their claim. If any funds are left over, they must be paid over to the Trustee.

I am administering a bankruptcy file right now where there was foreign real estate. I did my investigation and determined that although saleable, the properties would take many years to sell and then to repatriate the money back to Canada. The major unsecured creditor wished to take control of the sales process. So, her lawyer got court approval for her to do so under s.38 of the BIA. No other creditor joined in with her. The properties are now sold, we have so far received a six-figure payment from the surplus sitting in her Canadian lawyer’s trust account after she was fully repaid all of her costs and the amount of her claim.

There is another six-figure amount sitting in a foreign country. We have retained legal counsel in that country now to get the rest of the funds repatriated into our trust account. Once received, we will finalize our vetting of all proofs of claim and make a distribution to the unsecured creditors.

5. A discharge from personal bankruptcies in Ontario ends the debtor’s liability for pretty well all debts

Unless the Trustee of a bankrupt corporation raises enough money for all of the creditors to be paid off in full, with interest, a corporation is never discharged from bankruptcy. In personal bankruptcy, the debtor is eventually entitled to an absolute discharge. The absolute discharge can be:

  • Received straight away when the debtor is able to be discharged.
  • Given once the bankrupt fulfills all of the conditions of discharge.

There are only a handful of claims that are not discharged upon the discharge of the bankrupt. Those are:

  1. Trust claims.
  2. Secured claims.
  3. Those claims which fall under s.178 of the BIA.

If a debtor wishes to get out of a liability where the creditor holds security, such as vehicle financing, the debtor needs to trigger a default prior to filing for bankruptcy. So continuing with the vehicle example, the debtor could tell the lender that it cannot afford to make any more payments. The debtor would then give the vehicle and the keys to the lender.

The debtor should then wait for notice from the lender that the vehicle has been sold, the lender has suffered a shortfall and demands payment for the shortfall. The shortfall is an unsecured claim. The debtor now files for bankruptcy after the shortfall claim has crystallized. There now is no longer a secured claim for this debt.

If the debtor does not wait for the shortfall notice from the lender, they run the risk that the shortfall occurs after the date of bankruptcy. In that case, the shortfall unsecured claim will not be a debt discharged by the bankrupt’s discharge.

I have previously written about the s.178 claims. You can read about them in my blog.

Lacking affirmative action by a debtor or Trustee, all secured claims go through the bankruptcy unaffected. It is incumbent on the Trustee to get a lawyer’s security opinion on the validity of any secured creditor’s security as against the Trustee. I have a corporate bankruptcy file now where the legal opinion was that the security was not valid. I advised the creditor who did not object. I guess they already knew!

6. Bankruptcies in Ontario – A fully completed restructuring also discharges most debts

The most essential element of reorganization situations under the BIA and CCAA that creditors need to know is about how debts get discharged in a restructuring. Similar to a personal bankruptcies in Ontario, in a successfully completed corporate restructuring, the debtor’s debts are discharged. Again, except for trust claims and secured creditor claims, the ordinary unsecured debts of a corporation are fully discharged when a restructuring plan that has been accepted by the creditors and approved by the court is fully completed. When the payout is made to the creditors and the company has successfully completed it, there are no pre-filing debts remaining.

So what is the significance to creditors? Well, if you are a director of the company, any debts that would have been a director liability, other than for a trust claim, vanishes. As there is no debt left, there is nothing left for the director to be responsible for.

Likewise, if someone personally guaranteed a premises lease to the landlord, if the lease is disclaimed as part of the restructuring, then the landlord has an unsecured claim. Once that claim is fully discharged in the restructuring, there is no debt left for the guarantor to be responsible for.

Creditors should also know that a company in a restructuring, may come to you to renegotiate your agreement with the company. If you refuse, the company could disclaim the agreement and any claim you have will be an unsecured claim in the restructuring.

7. Bankruptcies in Ontario bonus tip

It is better to get professional advice about extending credit to a customer and the best way to do it before you approve the credit. Getting professional advice after they have filed for bankruptcy limits your options.

Bankruptcies in Ontario – Summary

I hope you have found this bankruptcies in Ontario Brandon’s Blog helpful.

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

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

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

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

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

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

Stay healthy, well balanced and safe and secure everyone.

bankruptcies in ontario
bankruptcies in ontario
Categories
Brandon Blog Post

HOW TO USE DEBT RELIEF CANADA COVID TO ACHIEVE THE BENEFIT OF MORE TIME

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

Stay healthy, well balanced and safe and secure everyone.

If you wish to listen to the audio version of this debt relief Canada COVID Brandon’s Blog, please scroll to the bottom and click play on the podcast

Debt relief Canada COVID introduction

I have written before many blogs about debt relief in Canada and debt relief Canada COVID. I have written about:

Personal insolvency –

Corporate insolvency

  • Bankruptcy protection restructuring, both under the Companies’ Creditors Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada)
  • Receivership
  • Liquidation
  • Bankruptcy

Debt relief Canada COVID specific:

Now the federal government has drafted legislation to guarantee that Canadians, as well as Canadian companies, have the ability to meet governing time frames and target dates found in federal statutes. Some key target dates for debt relief Canada COVID found in the BIA and other statutes, such as the Canada Labour Code, given the COVID-19 pandemic and the courts essentially being shut down and only hearing emergency matters.

In this Brandon’s Blog, I discuss the proposed Time Limits and Other Periods Act (COVID-19). The purpose of this proposed statute will aid debt relief Canada COVID.

Canadian Department of Justice concerns

On May 19, 2020, the Canadian Department of Justice unveiled draft legislation. The government has posted it online and is allowing 10 days for any comments to be submitted on the proposed Time Limits and Other Periods Act (COVID-19). The federal government is concerned about debt relief Canada COVID and all other issues federal legislation deals with.

As I previously wrote, the OSB, went to court in each province to get certain deadlines suspended so that debt relief in Canada would not suffer. The OSB ensured that the system would work for debt relief Canada COVID. The federal government believes that so many Canadians, as well as Canadian companies, could be impacted in other federal statutes not designed for financial restructuring or debt settlement. The government is concerned that they may encounter possible legal jeopardy if, due to the COVID-19 pandemic, they fall short to meet target dates.

Consequently, the Government of Canada published draft legislation, which outlines prospective remedies that the Federal government might apply to deal with these essential problems. The draft legislative proposal for dealing with debt relief Canada COVID is online for 10 days. Interested stakeholders are invited to share their comments by May 29.

What the draft legislation is designed to do

The draft legal proposal is designed to suspend specific time frames as well as enable government ministers to prolong or put on hold other time limits consisted of in government regulations to:

  • Ensure that Canadians, as well as Canadian companies, are able to satisfy governing time frames and deadlines found in federal statutes, such as some key due dates found in the BIA for debt relief Canada COVID and under the Canada Labour Code during the coronavirus pandemic.
  • Protect Canadians’ rights and access to justice in the context of civil proceedings before the courts, by making sure that people and companies are protected to assert their rights and not miss a time limit or deadline during the COVID-19 pandemic.

The draft legislation includes stipulations to make certain that short-term extensions or suspensions cannot be made after September 30, 2020, and could be retroactive to March 13, 2020 when the COVID-19 pandemic officially began.

What the draft legislation says

As already mentioned, the draft relief is designed to protect Canadians under federal statutes designed for debt relief Canada COVID and other federal laws. So here are the highlights of what the draft Time Limits and Other Periods Act (COVID-19) currently proposes.

Section 3 defines a time frame. It says such time periods that are either suspended or prolonged under this Act, then, during the period that the suspension or extension holds, every mention in any Act of Parliament to that time restriction or duration is to be read as referring to the time limit or period as it is suspended or expanded.

Section 4 states that the Act does not refer to any time frame or any other duration related to the investigation of an offence or a proceeding arising from an offence.

Sections 6 and 7 deal with time limits related to proceedings. The proposed legislation purports to:

  • Put on hold, as of March 13, 2020 as well as until September 13, 2020, or an earlier day set by the Governor in Council, certain time frame certain proceedings, aside from proceedings from offences, before the courts.
  • Allow courts to adjust the suspension within particular limits and take measures regarding the results of a failure to satisfy a put on a hold time limit.
  • Allow the Governor in Council to waive such suspensions in particular scenarios.
  • Permit ministers, in respect of defined regulations, to put on hold or prolong time limits and also prolong other durations for no greater than six months, as well as to offer such suspensions or extensions retroactive to March 13, 2020.
  • A time frame might be put on hold or extended and also a time duration might be expanded for a total maximum period of 6 months.
  • permit ministers in the case defined in the previous point to give specified persons, bodies or tribunals some adaptability in applying these suspensions or expansions.
  • Prevent these powers from being exercised after September 30, 2020.

This draft Act would certainly permit the Governor in Council to restrict or enforce conditions on the powers provided to ministers. Having a federally mandated “time out” will certainly aid debt relief Canada COVID.

Summary

It appears that the federal government realizes that there are many federal laws where time periods must be met. During the coronavirus emergency shutdown of the courts, it may not be possible to meet all the deadlines. So, this omnibus proposed legislation aims to suspend or expand time frames to September 13, 2020. The hope is that it will allow for more orderly conduct for debt relief Canada COVID under the BIA and for other purposes different federal legislation allows.

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

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

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

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

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

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

Stay healthy, well balanced and safe and secure everyone.

You may also be interested in:

PERSONAL BANKRUPTCY CANADA FAQ: VIDEO – PERSONAL BANKRUPTCY FAQ CANADADEBT REDUCTION PROGRAM: MY TOP 10 STEPS ANYONE CAN START IMMEDIATELY TO STOP BEING IN DEBT VIDEODEBT REDUCTION PROGRAM: MY TOP 10 STEPS ANYONE CAN START IMMEDIATELY TO STOP BEING IN DEBT VIDEODEBT REDUCTION PROGRAM: MY TOP 10 STEPS ANYONE CAN START IMMEDIATELY TO STOP BEING IN DEBT VIDEO

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22250″]

Categories
Brandon Blog Post

OFFICE SUPERINTENDENT BANKRUPTCY CANADA – COVID-19 AND “THROWBACK THURSDAY”

office superintendent bankruptcy canadaThe Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

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

Introduction

As issues about COVID-19 in Canada grows, insolvency practitioners are doing their part by having determined it is needed to take steps to reduce in-person contact. The Office Superintendent Bankruptcy Canada has helped Licensed Insolvency Trustees (formerly called bankruptcy trustees) (Trustee) in these initiatives while keeping all aspects of Canada’s insolvency system running.

In my April 29 Brandon’s Blog, CONSUMER PROPOSALS IN ONTARIO TEST POSITIVE FOR COVID-19, I described how the Superintendent of Bankruptcy went to Court in Ontario. They made a motion to have the Court direct how certain procedures would change during the state of emergency lockdown. Part of that will be how the government wants to have Trustees resurrect an old methodology in personal debt settlement plans and corporate restructuring plans not really been used in the last 25 years.

Since then the government has come out with additional information and clarifications on how they see the bankruptcy Canada process continuing to work during the coronavirus shutdown. In Brandon’s Blog, I talk about these issues.

Office Superintendent Bankruptcy Canada approves social distancing

There are many ways that the Office Superintendent Bankruptcy Canada has approved social distancing for Trustees.

Initial free strategy session – Most if not all Trustees will provide a no-cost consultation for a personal or corporate insolvency discussion. In the pre-coronavirus era, most of these were done in a face to face meeting. Trustees can and do use methods aside from in-person assessments. These methods were always reserved for extraordinary circumstances. Boy, are we in one now!

So, the Office Superintendent Bankruptcy Canada has reminded Trustees that the COVID-19 pandemic is such a phenomenal circumstance and Trustees can conduct assessments making use of approaches other than face to face. Where video-conferencing is not viable, assessments may be done using a mix of telephone conversations and e-mail.

Credit counselling in personal debt settlement or bankruptcy cases – Trustees can offer counselling through telephone conversations or videoconference. The government is updating its software to allow for Trustees to file confirmation of credit counselling done this way as before it was not available. I am finding that our “customers” like this way of being able to deal with credit counselling. They don’t need to travel to our office and appreciate that we are still checking in with them.

Meetings of Creditors – The Office Superintendent Bankruptcy Canada is encouraging Trustees as the Chair of the creditors’ meeting to hold the meetings on time using either telephone conference call or video methods. Trustees can rely on the oral representation from everyone on the call as proof of attendance. The notice and legal ad calling the meeting of creditors looks a bit different than we are normally used to seeing because of this change. At the top of this Brandon’s Blog is an image of the legal notice I ran in a local newspaper.

Signatures/Oaths – I am now circulating papers that call for signature by means of e-mail. I then supply debtors the necessary support to explain the papers via videoconference. I then ask the debtor over the Zoom meeting if they swear or affirm that what is in the document is true. When they respond affirmatively, I then ask them to sign in the space provided. I then commission the document on my end, ask them to email me a copy of the signed document and put the original signed paper in the mail to me. So far it has been working smoothly.

Closure of non-essential businesses

The provinces have ordered the closure of non-essential businesses. So far, the businesses of lawyers and accountants have been deemed essential. The Office Superintendent Bankruptcy Canada has confirmed to Trustees that it wants the Canadian insolvency system to continue operating smoothly. So, the Trustee business is considered to fall under these same categories as being essential.

As you are aware, creditors right now seem to be choosing to either explicitly or implicitly forbear on amounts owing to them. They are trying to be supportive of people by recognizing that with reduced or no income, they need some breathing room. Although there are media reports to the contrary, as of now, debtors seem to be getting a break. Trustees are also encouraged to do the same if someone is having trouble making a surplus income payment in their bankruptcy right now. In fact, Trustees will probably be held to a very high standard when their conduct is reviewed by the Court.

In my April 29 Brandon’s Blog, I spoke about the whole issue of a debtor in a consumer proposal who misses three payments. If that happens, the consumer proposal is considered annulled. In this case, the Order the Ontario Court issued essentially gives debtors up to the end of 2020, and in some cases, beyond that date, to make up the missed payments.

COVID-19 insolvency frequently asked questions

There are some frequently asked questions that are coming up. So, I want to give the questions and answers to help people better understand what is going on right now in the Canadian insolvency system.

Q: Do consumer proposal debtors need to make up all missed payments by December 2020?

Response: This was not previously well explained. The answer is No. As much as an extra three monthly payments can be missed between March 13, 2020, and December 31, 2020, before a consumer proposal is considered annulled. Missed payments will need to be made up by the end of the proposal or a modified proposal will certainly need to be authorized by creditors. I am advising debtors to carefully think about whether it is necessary to miss making payments. There is no guarantee that later on, debtors will be able to make up the missed payments. So I am telling debtors that if they can still afford to make the payments, they should. Don’t choose to miss payments you otherwise can afford to. What if you can’t catch up? Do you really want your consumer proposal to be annulled later on after potentially you have paid everything except a few payments? That would be terrible..

Q: If a proposal was deemed annulled before April 27, 2020, when does it need to be revitalized to be covered by the order?

Response: A proposal that is revived by the steps taken under the Bankruptcy and Insolvency Act (BIA) on or prior to June 30, 2020, will certainly be covered by the order.

Q: If three payments were missed on or before April 27, 2020, but the Trustee did not send notices of deemed annulment, does anything require to be done to be covered by the order?

Response: Yes. When three payments prior to April 27, 2020, are missed out on the BIA states that a consumer proposal is regarded annulled despite administrative actions that may or might not have been taken. Thus, where the equivalent of three or even more payments has been missed out on, the consumer proposal will certainly need to be revived according to the BIA on or before June 30, 2020, in order to be active under the order.

Q: Is the duration under which a consumer proposal can be automatically revived likewise extended?

Response: No. The order allows the equivalent of as much as three extra payment defaults or an added three months time during the March 13 to December 31, 2020 timeline, prior to a deemed annulment of a consumer proposal. After this happens, a notice of revival has to still be filed within 30 days of the deemed annulment.

Q: Will the five-year restriction on consumer proposals be lengthened in order to offer debtors the time required to make up the missed out on payments?

Response: The BIA says that a consumer proposal needs to say that it will be completed within 5 years. Consequently, all payments, including missed repayments, have to be made during this same timeline. The only thing that will change that is if an amended proposal is filed and approved. After saying that, the BIA does not offer instant repercussions for defaults that lead to non-performance during this 5 year time period. If a consumer proposal has exceeded the five-year period but has actually not been annulled, it remains in force and therefore, in my view, can be completed.

This assumes no interested party goes to Court to ask for a court-ordered annulment. The Office Superintendent Bankruptcy Canada has formally stated that where hold-up in completion is due to COVID-19 reasons, they will not be seeking an annulment.

Everything old is new again or “Throwback Thursday”

There is one area that has not yet been covered off by the Order obtained by the Office Superintendent Bankruptcy Canada. When a person who does not fit under the $250,000 debt limit of consumer proposals, and for all companies, debt settlement restructuring plans under the BIA are done under Part III Division I Proposal section.

If a restructuring proposal cannot be filed straight away, the BIA allows for the filing of a Notice of Intention To Make A Proposal (NOI). The BIA statute says that unless extended by the Court, a Proposal needs to be filed within 30 days after the filing of the NOI. The Court can extend the timeline for a period not exceeding 45 days for any individual extension. In total, extensions cannot be more than 5 months. So in total, a debtor who has filed an NOI can be operating under the NOI for a maximum of 5 months and 30 days.

The Court has to order the extension prior to the expiry of the earlier time period trying to be extended. But the Courts are currently closed. They are only hearing emergency applications via telephone conference call or videoconference. Are a bunch of businesspeople fighting over money with the debtor asking for more time to file a Proposal an emergency? I can’t answer that right now. So if they can’t get into Court, what is the answer?

The Office Superintendent Bankruptcy Canada has recommended an old method. In the “old days”, before 1992, there was no NOI provision. So what did a person or company who needed more time to formulate and file a Part III Division I Proposal debt settlement plan, but needed to hold off creditors right now, do? They filed what was called a “holding proposal”. A holding proposal is no more than a proposal that says I promise to file a debt settlement plan that will clearly say how I plan to settle my debts either by a certain date or when a specific set of events happen.

The benefit was that the debtor got help from the immediate stay of proceedings. If the debtor could, he, she or it filed an amended proposal at the meeting of creditors which really said how the debts would be settled and then paid. If not, the creditors could consider the issues holding up the filing of the real proposal. If they felt it was in their best interests, they voted in favour to give the debtor the necessary time. If not, they voted it down and the debtor was immediately deemed to have filed an assignment in bankruptcy.

Where the creditors gave the debtor more time under the holding proposal, the Court approved them as long as the requirements the Court had to review were met. It was ultimately the creation of the NOI that was made to make it easier for debtors who were not ready to file a definitive proposal but needed relief from creditors to get it.

So now, the Office Superintendent Bankruptcy Canada is recommending for those cases where you just can’t get into Court, file a holding proposal. I am glad that Ira has kept a copy of a holding proposal in our document template file!!

Summary

I hope you found this case review helpful. It should be of particular interest to contractors, developers and builders in Ontario.

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

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

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

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

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

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

[monkeytools msnip=”http://monkeyplayr.com/playr.php?u=5173&p=22219″]

 

Categories
Brandon Blog Post

CONSUMER PROPOSALS IN ONTARIO UNFORTUNATELY TEST POSITIVE SADLY FOR COVID-19

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

<h2

Consumer proposal in Ontario: Introduction

The Superintendent of Bankruptcy (OSB) went to Court in Toronto on April 24, 2020, to see if consumer proposals in Ontario tested positive for the coronavirus. The Honourable Chief Justice Morawetz issued his decision on Monday, April 27. He put it to the test and it came out testing positive. The OSB is making similar applications in all the different provinces to obtain the same relief. In this Brandon’s Blog, I explain everything.

Consumer proposals in Ontario: The issue

In Ontario, an emergency was proclaimed on March 17, 2020, and the Courts were closed, except for proven emergency situations. This emergency status was extended from April 14 until May 12, 2020, subject to further review. The clock on any provincial limitation period for any proceeding in Ontario was stopped, retroactive to March 16, 2020 (Suspension Period). Ontario is not unique in this. All other provinces have taken similar action.

The closure of the Courts was to assist in slowing the spread of COVID-19. Emergency applications are being held only by conference calls either by telephone or online video. This unprecedented action has created delays in every Court hearing that is not an emergency. This included most insolvency or bankruptcy court cases.

All licensed insolvency trustees (formerly called bankruptcy trustees) (Trustee) started to review all of their cases to see which files were affected. It was not just what cases were scheduled for a court hearing. It actually had more to do with stipulated timelines in the Bankruptcy and Insolvency Act (Canada) (BIA). Various sections of the BIA layout time frames by which certain actions need to be taken.

The emergency situation created by COVID-19 and its containment procedures is impeding the ability of insolvency specialists, borrowers, financial institutions and other stakeholders to meet the timelines of the BIA. This is especially true of all the people in Ontario who chose to avoid bankruptcy by filing consumer proposals in Ontario.

The most important thing that allows someone to perform a successful personal debt restructuring plan is the fact that they are employed. They put their best foot forward and file for personal bankruptcy protection by making a personal debt settlement offer to their creditors. The creditors accept it and the person is making his or her monthly payments on time. Now because of COVID-19 they are laid off and don’t have their salary or wages they have been relying upon both to live and to fund their consumer proposal.

Although there are many timelines in the BIA, such as when a meeting of creditors needs to be held after bankruptcy or debt restructuring filing. However, the OSB helped alleviate certain of the impediments caused by the coronavirus pandemic by allowing Trustees to hold meetings by either telephone or online video meetings.

One timeline that could not be fixed by a telephone call or video chat is an insolvent debtor, either a person or company, making the debt restructuring payments on time. With no job, no income or not much corporate revenue for a business that had to shut down, those debtors were at serious risk of defaulting on its debt restructuring plan caused by these never before experienced issues facing all of us.

Trustees across Canada, both individually and through the two professional organizations, brought the issues forward to the OSB to seek clarification and a solution. That led to the OSB’s Court application. Of particular concern is the section of the BIA that states that a consumer proposal goes into default once three payments are missed.

consumer proposals in ontario
consumer proposals in ontario

Although the Court was asked to consider various issues, I am focussing on the necessity to keep up the monthly payments under a consumer proposal (or a Division I proposal).

Effect of COVID-19 on consumer proposals in Ontario

The OSB’s position was that COVID-19 associated interruptions have both increased economic pressures on consumer debtors and made adhering to legal demands for creditor protection more difficult. When consumer debtors fail to pay in accordance with their consumer proposal, it can be considered annulled under the BIA.

In that case, the consumer debtor then loses the bankruptcy protection from his or her creditors. Upon default and annullment, the legal rights of creditors get revived. While the Courts are closed, this may only result in harassing phone calls from collection agencies. However, when the Courts inevitably reopen, then the lawsuits can either continue or start flying. Remember, the Suspension Period halted the time clock, so, no one loses their rights because of the passage of time.

More importantly, because of the default, the consumer debtor is banned from filing another consumer proposal without court approval. If the person is bankrupt and is trying their best to annul their bankruptcy through a BIA debt settlement proposal, the default causing the debt restructuring plan to be eliminated as if it never happened, keeps the person in bankruptcy.

The OSB also submitted evidence to the Court that lots of people who filed consumer proposals in Ontario were already in arrears in their payments before COVID-19. It further stated that it expects that the defaults in payments are set to rise significantly because of this unique situation..

Consumer proposals in Ontario: The Court’s analysis and decision

Mr. Justice Morawetz went through a very detailed analysis of both the submissions and the law. He noted that what he was being asked to approve was “extraordinary”. He agreed with the OSB that these are unusual times.

The Court first defined two specific terms:

  1. The “Period of the Emergency” starts on March 13, 2020, and ends on June 30, 2020.
  2. The “Suspension Period” begins on the date of the Court’s Order, being April 27, 2020, and ends on June 30, 2020.

The Court then went on to say that its Order applies to:

  1. All active Division I Proposals are those filed with the OSB up to the end of the Period of the Emergency.
  2. All active consumer proposals in Ontario (Division II proposals) are the ones filed with the OSB or revived by the BIA up to the end of the Period of the Emergency. They exclude all those that were already deemed annulled, annulled or that were completely performed on or prior to April 27, 2020.
  3. All active bankruptcies are defined as all bankruptcies filed with the OSB up to the end of the Period of the Emergency. For further clarification, all bankruptcies where the bankrupt received his or her discharge before April 27, 2020, are not included. This makes sense because a discharged bankrupt is no longer subject to laws for undischarged bankrupts. The only party left to abide by timelines is the Trustee.

The Court then ordered the following concerning Commercial Proposals, consumer proposals and bankruptcies:

  • Division I or Commercial Proposals – the time for holding the meeting of creditors that is to take place during the Period of the Emergency, is expanded by the time of the Suspension Duration.
  • Consumer proposals in Ontario –
    • the time for holding the meeting of creditors that needs to be held during the Period of the Emergency is extended by the time of the Suspension Period.
    • an active consumer proposal will not be regarded as annulled unless the consumer debtor remains in default of:
      • When payments are to be made on a regular monthly basis or faster, the day on which the consumer debtor is equal to more than the amount of three payments and an extra amount equal to up to another three payments for defaults that occurred during the period of March 13, 2020, to December 31, 2020.
      • For payments are to be earned less often than on a regular monthly basis, the day that is 3 months after the day on which the consumer debtor is in default in regard of any type of payment except for those due between March 13, 2020, to December 31, 2020, will be the day that is 6 months after the day on which the consumer debtor defaulted.
  • Active bankruptcy matters –
    • The Trustee’s commitment to applying for a court hearing in the Period of the Emergency is to be extended by the time of the Suspension Period.
    • The time for the holding of the meeting of creditors scheduled to take place during the Period of the Emergency is expanded by the time of the Suspension Period.
    • The period fo time for setting up a mediation appointment that needs to happen during the Period of the Emergency is lengthened by the time of the Suspension Period.

      consumer proposals in ontario
      consumer proposals in ontario

Consumer proposals in Ontario: What about the major creditors in an insolvency filing?

In most personal insolvency filings, Canada Revenue Agency (CRA) is a creditor. In fact, it is quite normal for CRA to be the majority creditor. In order for consumer proposals in Ontario to be successful, the first step is to get the support of your major creditor.

Debtors have suffered a loss of employment or a reduction of earnings as a result of the COVID-19 outbreak. People are scared that they will default on their proposals. So the CRA is taking an approach consistent with the position of the OSB. It wishes to make sure that all Canadians are supported if they are experiencing economic challenges due to the COVID-19 pandemic.

So where the CRA is the majority creditor and the debtor is suffering financial hardship, CRA has advised that:

  • For Commercial Proposals, the CRA is providing a waiver of the default and providing a deferment of payments to September 1, 2020. The waiver and extension also apply to amounts owing to unremitted source deductions.
  • For consumer proposals in Ontario, the CRA supports the approval of an amended proposal that requires a deferment of settlements up to September 1, 2020.

Ideally, this will offer debtors the time to concentrate on other facets of their lives and wellbeing without having to go bankrupt. The September 1, 2020 date ties into other COVID-19 programs the government is running to help Canadian taxpayers during this crisis. For example, HST and income tax payments which would otherwise come due between March and July 2020 also have an extended payment program to this same September date.

Consumer proposals in Ontario: Summary

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

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

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

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

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

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

consumer proposals in ontario
consumer proposals in ontario

Stay healthy and safe everybody.

Categories
Brandon Blog Post

HST REMITTANCE REVIEW: UNPAID HST & THE DIRECTOR’S JOINT BANK ACCOUNT

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22037″]

Introduction

I have previously written about joint bank accounts and joint credit cards. I recently read a decision of the Tax Court of Canada that will be of interest to every entrepreneur whose company may be behind in their HST remittance and who has a joint bank account with their spouse.

Joint bank account considerations

Opening a joint bank account is a relatively easy procedure. People who share a joint savings or chequing account can each make deposits and withdrawals from the account without the signature of the person they share the account with. As a matter of fact, any person listed on the joint account can close it using proper identification. Data held by a bank on the owners of the joint account, similar to any other account, consists of personal identifiers of the holders of the account, which enables anyone legally authorized to get that information.

I have written before on the dangers of a joint bank account. The dangers have nothing to do with the bank per se. They are more non-bank related. Examples of problems include:

  • Sometimes moms and dads will share an account with a small child. The reason is to begin providing the youngster with financial literacy education. However, if you share a bank account with your minor child and your spouse, you are taking a chance that your partner can access that joint bank account that you share with your child without your authorization.
  • There is a threat with a joint account between partners when you have a saver as well as a spender who each has access to the account without the other’s signature. It can trigger family, relationships or business problems.

I wanted to give this brief background information, but it is not what is of most interest to entrepreneurs. The following Tax Court of Canada decision which I will now describe is.

Tammy White and Her Majesty The Queen facts

This judgement was rendered on February 4, 2020, in the Tax Court of Canada in Vancouver, BC. Ms. White appealed an assessment by Canada Revenue Agency (CRA) against her under subsection 160(1) of the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (Income Tax Act) and subsection 325(1) of the Excise Tax Act (R.S.C., 1985, c. E-15) (Excise Tax Act). You will recall that last week, I spoke about the danger of receiving transfers of property from someone who owes money to CRA in my blog, DO YOU INHERIT DEBT IN CANADA: CRA SAYS YES TO PROPERTY TRANSFERS. That blog dealt with debt in death and the deceased Estate. This week, nobody died. You are probably wondering what this has to do with entrepreneurs and joint bank accounts. I will now tie it all together. I promise!

The appeal deals with the concern of whether the deposit of funds by a person into a joint account held with the entrepreneur’s partner comprises a transfer of property under subsection 160(1) of the Income Tax Act and subsection 325(1) of the Excise Tax Act.

The facts of the case are as follows:

  • On March 1, 2016, Mrs. White was assessed $49,962.45 under section 160 of the Income Tax Act and $90,886.35 under section 325 of the Excise Tax Act. She appealed both assessments to the Court. The assessments are a result of amounts that her husband, former business owner Andy White, apparently moved to his wife between March 15, 2013, and October 30, 2015.
  • On March 26, 2014, Andy filed a consumer proposal under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA).
  • Department of Justice counsel on behalf of CRA at the hearing backed off part of the claim by agreeing that any kind of purported transfers made after the date of the consumer proposal is beyond the range of the assessments in concern in this appeal.
  • Tammy and Andy were married in 1984 and always held the same joint bank account.
  • For the last 35 years, Andy and Tammy have made use of the joint bank account to pay their personal expenditures and the costs of running their family household.
  • Andy was a part-owner of White & Davidson Logging Limited, a company he started working for from a very young age.
  • The company began to experience financial troubles in 2004 as a result of weak demand in the British Columbia forestry industry and also a government-mandated decrease in cutting rights. These troubles resulted in the business selling its assets in 2006 and discontinuing business. At the time the business stopped operating, it had not remitted all amounts it had held back as payroll source deductions. It also did not make the required payment of the amounts it owed as HST tax obligations. Accordingly, it was not current in its tax obligations and did not make its final payroll or HST remittance.
  • Andy was a Director of the defunct company and therefore was assessed by CRA personally for the company’s unremitted payroll source deductions and unpaid HST.
  • After a while, and after being assessed by CRA, Andy eventually found full-time employment and deposited his pay into the joint bank account he shared with Tammy.
  • Andy owed CRA almost $91,000 for the company’s unremitted HST.
  • Tammy was also employed in a retail store. In the late 1990s, she opened up a bank account only in her name. Her pay was deposited into that new account.
  • Tammy was the sole owner of the family’s home. She admitted under oath that she made payments out of the joint account to pay the mortgage, utilities, property taxes and any other costs of running the home.
  • Certain amounts were also transferred from the joint account into Tammy’s personal account.

The issues

The issues are fairly narrow. In last week’s blog, I went through the criteria a court must look at to determine if there was a transfer of property at a time when the transferor owed an amount to CRA. You can refresh yourself on the criteria by clicking here.

CRA’s position was that a transfer of property from Andy to Tammy took place the moment his pay was deposited into the joint bank account. They also stated that Tammy gave no consideration for this.

Tammy’s position was that no transfer could have taken place by merely depositing the funds into the joint bank account. Andy maintained full control of the money. CRA, or the Sheriff, acting on a valid judgement, could garnishee Andy’s share of the funds in the joint bank account.

At the time in question, Andy’s pay that was deposited into the joint bank account totalled $89,806.72.

The Court’s decision

The court did not agree with CRA. The Judge found that:

  • Just depositing the funds in a joint account does not comprise a transfer. Mr. White did not unload himself of the funds when they were deposited into the joint account. He continued to have complete access to the funds in the account. As a matter of fact, the evidence was that Andy, as he had done since 1984, used some of the funds to pay his personal expenses and specific costs of his household.
  • Andy did not defeat or whatsoever prevent the Minister of Revenue from collecting any tax he owed by placing his compensation in the joint account. CRA could have taken collection activity relative to funds in the joint account. In fact, part of the evidence before the court was that the joint bank account was garnished by a third party to repay one of Andy’s debts.
  • As soon as the funds were put in the joint bank account, Tammy had the ability to impact a transfer. Nonetheless, such transfer did not happen until the funds were removed from the joint account and placed into the account only in Tammy’s name.
  • The Judge was very critical of CRA. They did not properly identify funds taken out of the joint account and put into Tammy’s account. There was limited evidence before the court. So, the Judge had to “guesstimate” as best as possible from the scant evidence how much was transferred from the time Tammy opened up her sole account and the date of Andy filing a consumer proposal.
  • The Judge determined that the amount of property Andy transferred to Tammy during the relevant period for no consideration was the amount of $34,052.
  • Accordingly, the Judge allowed the appeal and vacated the assessment. He referred it back to the Minister of Revenue to reconsider a reassessment of Tammy in the amount of $34,052.

HST remittance and the entrepreneur

So what does this mean for the entrepreneur? It tells me that if you are:

  1. Director of an insolvent company that owes unremitted source deductions or unpaid HST;
  2. the company goes either into receivership or bankruptcy or otherwise has to shutdown;
  3. you are assessed personally by CRA because you were the Director; and
  4. you get another job and deposit your pay into a joint bank account you hold with a spouse or child.

Your spouse or child will not be liable under the property transfer laws of the Income Tax Act and/or the Excise Tax Act by the mere depositing of your money into the joint bank account. What it also tells me is, if you are in this situation and do not have a joint bank account, maybe you should! If so, go back to the “Joint bank account considerations” section of this blog to see if it is the right thing for you to do in your situation.

Summary

I hope you enjoyed this blog on HST remittance and joint bank accounts. The Ira Smith Team is available to help you at any time. We offer sound advice and a solid plan for Starting Over Starting Now so that you’ll be well on your way to a debt-free life in no time.

Do you or your company have too much debt? If yes, then you need immediate help. The Ira Smith Team comprehends just how to do a debt restructuring. Much more notably, we know the demands of the business owner or the person who has too much debt. Due to the fact that you are managing these stressful financial problems, you are anxious.

It is not your fault you cannot fix this issue on your own. You have just been shown the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief now.

At Ira Smith Trustee & Receiver Inc., we take a look at your whole condition and layout a strategy that is as unique as you are. We take the load off of your shoulders as a part of the debt negotiation approach we will create just for you.

We understand that individuals facing financial troubles require a lifeline. That is why we can establish a restructuring procedure for you as well as end the pain you feel.

Call us now for a no-cost consultation. We will certainly get you or your business back on the road to a well balanced and healthy life and end the pain factors in your life, Starting Over, Starting Now.

hst remittance

Categories
Brandon Blog Post

DO YOU INHERIT DEBT IN CANADA: CRA SAYS YES TO PROPERTY TRANSFERS

[monkeytools msnip=”https://monkeyplayr.com/playr.php?u=5173&p=22014″]

Introduction

When conversations of financial obligations happen, people usually joke around and state they’ll finally be without debt upon their death. Many people who come to me for their no-cost consultation also ask, do you inherit debt in Canada? A recent decision of the Tax Court of Canada inspired me to write this Brandon’s Blog to discuss the issue.

What happens to debt when you die in Canada?

In general, what happens to debt when you die in Canada is that your Executor or Executrix (in Ontario it is called an Estate Trustee) needs to understand all of the deceased’s assets and liabilities. The Estate Trustee needs to make sure that all debts are paid off before making any distribution to the beneficiaries. Unless you have co-signed for or guaranteed someone else’s loan, you are not responsible for your spouse’s or parent’s debts upon their death. There at generally two exceptions.

The first is credit card debt where usually a spouse has a supplementary credit card on the same account. In that case, you need to look at the credit card agreement because the supplementary cardholder might be responsible for the debt. So if there are insufficient assets in the estate to pay off the credit card debt, the supplementary cardholder may have to.

Section 160(1) of the Income Tax Act (Canada)

Section 160(1) of the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (Income Tax Act), and its equivalent, S. 325 of the Excise Tax Act (Canada), can be utilized by the Canada Revenue Agency (CRA) to assess tax obligation liability to those who received a transfer of property from persons with tax obligations at the time of the transfer. This indicates if a person offers you something of value (virtually anything), while they have a tax debt, the CRA can and will certainly pursue you. CRA’s view is that the original tax obligation debtor ought to have sold whatever was transferred, and the funds used to pay off the tax debt.

This section of the Income Tax Act (or Excise Tax Act) especially comes into play during irathe administration of a deceased Estate or in an insolvency filing.

The Court decision, released on February 10, 2020, highlights this issue that death is no excuse when it comes time to pay the taxman!

The Court case facts

The CRA assessed the two daughters of the deceased father $96,640.96 each under section 160(1) of the Income Tax Act in respect of a transfer of property from their father prior to his death. Each daughter has appealed the assessments to the Tax Court of Canada. The two appeals were heard together as the evidence and facts were identical.

The agreed statement of facts was:

  1. The father was the annuitant of a Franklin Templeton Investments life income fund (the Income Fund) and prior to his death, he designated each of his daughters as his irrevocable beneficiaries under the Income Fund.
  2. In his last will and testament, he named his daughters as Estate trustees and beneficiaries of his estate.
  3. The father died on June 8, 2011.
  4. On or about July 26, 2011, $96,640.96 was transferred to each of the daughters.
  5. Each of the daughters received the $96,640.96 distribution on July 26, 2011, in satisfaction of their beneficial interest following the father’s death.
  6. The daughters provided no consideration in regard to the transfer of the $96,640.96.
  7. On July 3, 2015, the Minister of Revenue assessed each of the daughters $96,640.96 on the basis of subsection 160( 1) of the Income Tax Act.
  8. The father had an outstanding tax liability of not less than $96,640.96 with respect to his 2011 taxation year.

Tax liability re property transferred not at arms’ length

Section 160(1) of the Income Tax Act reads as follows:

“Tax liability re property transferred not at arm’s length

160 (1) Where a person has, on or after May 1, 1951, transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to

(a) the person’s spouse or common-law partner or a person who has since become the person’s spouse or common-law partner,

(b) a person who was under 18 years of age, or

(c) a person with whom the person was not dealing at arm’s length,

the following rules apply:

(d) the transferee and transferor are jointly and severally, or solidarily, liable to pay a part of the transferor’s tax under this Part for each taxation year equal to the amount by which the tax for the year is greater than it would have been if it were not for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of any income from, or gain from the disposition of, the property so transferred or property substituted for it, and

(e) the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of

(i) the amount, if any, by which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property, and

(ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.”

When identifying the applicability of section 160, you need to also consider the interpretation of arm’s length in subsection 251(1) and the interpretation of related persons in subsection 251( 2 ). Subsection 251(1) defines related persons not dealing with each other at arm’s length.

It likewise considers a taxpayer and certain trusts not to deal at arm’s length. Finally, it offers that, in any other case, it is an inquiry of fact whether individuals not related to each other are, at a certain time, dealing with each other at arm’s length.

Paragraph 251(2)(a) of the Income Tax Act provides that, for the objectives of the Income Tax Act, related persons or persons related to each other are individuals linked by blood relation, marital relationship, common-law or adoption. Paragraph 251(6)(a) specifies that, for the purposes of the Income Tax Act, individuals are connected by blood relationship if one is the child or various other offspring of the other or one is the sibling of the other.

The Federal Court of Appeal

The Federal Court of Appeal had already determined that the following 4 standards must be used when taking into consideration subsection 160(1):

  1. The transferor needs to be liable to pay tax at the time of transfer;
  2. There need to be a transfer of property, either straight or indirectly, through a trust or any other method;
  3. The transferee must either be:
  • The transferor’s spouse or common-law relationship at the time of transfer or a person who has since come to be the person’s spouse or common-law partner;
  • A person who was under 18 years of age at the time of transfer; or
  • An individual with whom the transferor was not dealing at arm’s length.

4. The fair market value of the property transferred needs to be greater than the true value of the consideration given by the transferee.

The position of the parties

CRA’s position was that this was a transfer of property from the father to the daughters prior to his death at a time when he had an outstanding income tax liability.

The daughters stated that they accept that three of the four criteria set out by the Federal Court of Appeal have been satisfied. Particularly, the Appellants agree that their father indirectly transferred the property to each of them, that he owed income tax relating to the tax year in which the transfer took place or a previous tax year and that no consideration was paid by the daughters.

Accordingly, both CRA and the daughters agreed that the only issue before the Court to determine is whether the father and his daughters were dealing with each other at arms’ length.

The daughters’ position was that at the time of the actual cash transfer their father was dead. He did not exist, and for that reason, he was not a related individual within the meaning of Subsection 251(6), and therefore was not in blood relation with them.

CRA’s position was simple. First, the time of the transfer was not when the investment firm paid the cash to the daughters. Rather, it was when the father designated them as irrevocable beneficiaries. Second, the father and his daughters were related not by contract, but by blood. So, even death cannot take away that relationship.

The Court’s decision

The Court agreed totally with CRA’s position, upheld the assessments against each of the daughters and dismissed the appeals. They were found to have received the transfer of the property for no consideration at a time when the father owed income tax of a greater amount. The daughters were each liable to pay the amount of $96,640.96 to CRA. So in this case, if the daughters were asked do you inherit debt in Canada, they would have to answer a resounding YES.

Insolvent and alive

I also come across this issue when providing a no-cost consultation to an insolvent person wanting to know their options. Whenever they disclose that they have an income tax debt, I ask about transfers between the person and his or her spouse or children. I do this to see if there are may section 160(1) transfer of property issues.

If there are, an insolvency filing will merely highlight the transfer issue to CRA. When they get notice of the consumer proposal or the bankruptcy, they start their deep-dive investigation into the affairs of the bankrupt. As a licensed insolvency trustee (formerly called a bankruptcy trustee), I also have to advise the creditors of any issues like a transfer between related parties for no or little consideration. Once CRA determines a transfer took place between blood relations for little or no value being given or paid, they will assess the spouse or child under section 160(1) of the Income Tax Act. The outcome will be the same as in this Court case.

Do you inherit debt in Canada summary

So alive or dead, transfers of property between blood relatives for little or no value is always troublesome when it comes to income tax debt outstanding at the time, insolvency and death. I hope you enjoyed this do you inherit debt in Canada Brandon’s Blog and that you have a better understanding that it is possible.

I am finding that I am getting involved more often in deceased estate matters. My involvement is in advising people who are the Estate Trustee of an insolvent estate. I also have acted as the licensed insolvency trustee of a bankrupt deceased estate.

That work has now naturally led to obtaining assignments where my skill set as a licensed insolvency trustee comes in handy in a deceased estate. Two examples are having acted as the Estate Asset Manager in selling off assets in an estate and as acting as an Estate Trustee where there is no bankruptcy involved.

Because of that work, Ira Smith Trustee & Receiver Inc. has opened up a new business division called Smith Estate Trustee Ontario. In that business, as Estate Trustee, we offer options for the complicated estate concerns. We end the discomfort and irritations the stakeholders are experiencing. We use the experience and integrity that we have built up over the years, with compassion, to help the parties navigate the messy estate issues. We strive for a win for all beneficiaries, adding value by reaching the settlements and distributions they were unable to accomplish by themselves.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation.do you inherit debt in canada

Call a Trustee Now!