Tag: covid-19

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DEBT AND UNPOPULAR INTEREST RATE HIKES, HOW IS THE ECONOMY FARING?

What is the definition of debt?

Debt is the money that a person or company owes to others. That is the simplistic definition. It is really one of life’s most stressful parts. Some people grow up in debt. For them, it’s just part of their lives, and they can make it work. Others live from paycheque to paycheque and save little to nothing. For them, it is crippling and can consume their lives, making their existence a daily struggle. For others, it is a parasite, feeding on their mind and their body. It can destroy their life, pulling them down and limiting their options and choices.

Consumer debt and household debt come from a number of places. Some source of debt is from emergency situations, and some of it is from buying expensive things but useful and worth the cost. That is how people have viewed real estate over the last decade, especially during the unprecedented pandemic. However, I also see some situations where high levels are just from bad decisions.

Business loans and corporate debt come in handy for a number of reasons. Perhaps you need some extra cash to get your business up and running. Or, maybe you’re looking to expand your operations by opening a new branch or purchasing new equipment. In any case, a business loan can provide the funds you need to reach your goals. Or, like in the last 2 years, perhaps the bottom has fallen out of the economy due to the COVID-19 pandemic and in order to survive, the business has had to take on government-support loans to increase the business debt load substantially.

All of these are now coming together in a perfect storm, as the Bank of Canada attempts to battle inflation and high Canadian real estate prices by beginning a pattern of interest rate hikes.

In this Brandon’s Blog, I look at how interest rate hikes, higher Canadian household debt and more Canadian business bankruptcies are the most recent signs of the Canadian consumer debt burden, as well as the major indicator of the current state of business in Canada.debt

Policy Interest Rate – Bank of Canada

The Bank of Canada’s primary business is to conduct monetary policy for the Canadian economy. This means that the Bank uses its tools of monetary policy to try to hit its target for inflation, which it does by adjusting the Bank of Canada’s policy interest rate. The Bank of Canada’s policy interest rate is the rate at which it lends money to financial institutions.

At the beginning of March, the Bank of Canada increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. This Fed interest rate hike was the biggest increase in two decades. The reason? To fight inflation.

The world’s biggest central bankers have long argued that ultra-low interest rates encourage spending and investment, helping to boost growth and employment. So at the outset of the pandemic with the world economies in tatters, all major central bankers, including the Bank of Canada, set borrowing costs at record lows. Those actions, amongst other things, contributed to the current state of inflation in the economy.

Macklem won’t rule out an inflation-driven, super-sized rate hike

The central bank predicts that inflation will remain high, averaging almost six percent in the first half of this year and remaining elevated in the second half of 2022. It is expected to ease in the second half of next year before returning to the two-per-cent target in 2024.

What are the factors causing this inflation? The global financial situation has become more difficult and unpredictable. Prices for oil, natural gas, and other commodities have risen sharply, contributing to inflation in many parts of the world. Supply disruptions resulting from Russia’s invasion of Ukraine have caused the prices of energy and other commodities to increase even further.

Looking to the future, Bank of Canada Governor Tiff Macklem stated that the Bank will be taking another 50-basis-point step which has already been baked into the financial markets. He believes that the economy needs higher rates and can handle them. It is evident that Macklem is dedicated to using Canada’s policy interest rate to bring inflation back to target. As inflation continues to surge to new highs, an even bigger interest rate hike may be on the horizon. Bank of Canada Governor Tiff Macklem indicated that further and faster rate hikes could be necessary to keep inflation in check.

The problem is that Canadian inflation is as much from a global impact as it is local. Raising interest rates may slow down home buying and mortgage growth. While it is true that mortgage debt is Canadians’ single largest obligation, increasing interest rates won’t fix the sky-high pricing at the gas pumps and the supermarkets.debt

As interest rates increase, so is household debt!

The latest figures from Statistics Canada, the agency responsible for collecting and disseminating statistics related to the economy of Canada, indicated that the total amount of household debt in the country increased by 0.5% in March 2022, up $14.4 billion to $2.69 trillion.

The increase of $13.2 billion came largely from debt related to the real estate market, such as mortgage borrowing and home equity lines of credit (HELOCs). This amount totalled $2.16 trillion outstanding. However, Statistics Canada also reported that credit card debt has increased for the second consecutive month, growing at a faster rate than mortgage debt!

Now as the Bank of Canada embarks on a hiking cycle that could go faster and further than before, and sky-high inflation squeezes household budgets, economists and capital markets are once again raising the red flag.

In a recent poll, 31% of Canadians polled say they already don’t make enough to cover their bills and required payments. Economists look at the rise in credit card debt and attribute it to a rise in personal spending. This is true. However, with prices rising much faster than wages, the increase could be a troubling sign that Canadians are spending on basics by using credit to replace the money they do not have and will not have to repay the new rising liabilities.

The rising cost of debt payments is already putting a strain on Canadians

If you’re borrowing money, interest is what you pay to your lender for using their money. It is your debt cost. If interest rates go up, the amount you have to pay each month for a mortgage, line of credit, or other loans with variable interest rates will increase. The minimum payment required each month on variable rate loan products will increase as interest rate hikes continue. At some point, you’ll also need to renew a fixed interest rate mortgage or loan. When interest rates are rising, the renewal rate on the fixed debt cost will be higher.

Raising borrowing costs to quell rising consumer prices may pose some risks, especially since Canada has a high level of household debt. In terms of household debt to income, Canada ranks 4th highest in the world.debt

What are the most effective ways to reduce your debt?

Paying down debt as much as possible will help counter the effects of a rise in interest rates and provide you with much-needed debt relief. Here are some of the best ways to reduce your debt burden thereby improving your credit score and credit rating:

  • Cut up your credit cards and only use cash for an extended period of time until things are back in control.
  • Make a budget and stick to it.
  • You should have an emergency fund to pay for unexpected expenses arising from external events out of your control.
  • Create a payoff plan. Look at your various categories of debt and make a plan that is most realistic for each type of debt.
  • Save money on interest by paying down the outstanding amount with the highest interest rate first.
  • Debt consolidation. Consolidate your liabilities with the highest interest rates into a single loan with a lower interest rate. By keeping your payments the same, and paying more than the monthly minimum payment, you’ll be able to pay it off faster and save money in the long run.
  • Avoid getting the biggest mortgage or line of credit that you’re offered.
  • Get a part-time job or begin a side hustle to boost your income.
  • Think first about how borrowing more money could impede your ability to save for future objectives.
  • Speak to a financial advisor or one from a wide variety of other financial professionals to find out how to teach you how to create a plan to be debt-free.

What will happen now with external debt and business bankruptcies?

As businesses continue to experience insolvencies, it’s important to note that the Canadian business bankruptcy rate is on the rise, according to a recent report by Statistics Canada and the Office of the Superintendent of Bankruptcy Canada. This increase underscores the importance of taking measures to protect your business from financial hardship.

Business bankruptcies in Canada increased by almost 34 percent year-over-year in the first quarter of 2022, which some experts warn could be the start of a growing wave of failures. This is closer to pre-pandemic levels. The number of business bankruptcies and proposals increased in the first quarter of 2022, with 807 cases compared to 733 in the previous quarter and 603 in the first quarter of 2021.

Business bankruptcies in Canada are increasing as government support comes to an end and businesses face a difficult post-pandemic recovery with high costs, supply chain problems and a shortage of workers. The financial support provided by the government through the COVID-19 pandemic assisted in delaying the surge in bankruptcies. Funding sources are becoming more expensive also.

Small business owners are feeling increased pressure from inflation in comparison to the average Canadian. With each budget line costing more, filing for bankruptcy is often the only option left. The data doesn’t capture the number of insolvent businesses that are forced to close without any formal filing, but the trend is now becoming evident.

Do you think that debt levels and bankruptcy filings will surpass pre-pandemic levels?

The state of the economy and how inflation and supply chain issues are managed will determine if the number of bankruptcy filings will rise in the coming months or not. As you can see, inflation, supply chain issues, interest rate hikes, household debt problems, business owners searching for more solutions and business bankruptcy filings are all now coming together in a perfect storm.

I hope this Brandon’s Blog on the current state of Canadian interest rates, household debt and business bankruptcies was helpful to you in understanding more about the corporate bankruptcy system in Canada.

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

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

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

 

 

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BANKRUPTCY PROTECTION: THE UNDENIABLE BEST THING YOU NEED TO KNOW TO CASH YOUR INSOLVENT CUSTOMER’S CHEQUE SAFELY

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

Bankruptcy protection: What happens if a company gets into financial trouble?

A Canadian company seeking bankruptcy protection has two choices when it is financially troubled and wants to reorganize. By hiring insolvency legal counsel and a licensed insolvency trustee to get both insolvency and bankruptcy law advice and financial advice, they can protect themselves from their creditors, either by:

  • using the Companies’ Creditors Arrangement Act (CCAA) to file for bankruptcy protection; or
  • working with an insolvency trustee and filing a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (BIA) you can obtain bankruptcy protection.

In order to reorganize in Canada, an insolvent company files for bankruptcy protection. If you are insolvent in Canada, then you must file for bankruptcy protection, which is equivalent to Chapter 11 in the United States. The process is called financial restructuring or financial reorganization. By doing this, the company will try to restructure while it continues to operate to come up with a restructuring plan that allows the company to survive while satisfying the needs of the creditors to some degree.a

This Brandon Blog discusses a recent court decision that demonstrates that there is a risk to creditors who receive payments from the insolvent company under bankruptcy protection for goods or services supplied if the restructuring fails.

What happens to the company that files for bankruptcy protection?

An organization that files for bankruptcy protection, or as it is sometimes called, creditor protection, differs from an organization that files for bankruptcy. A pure bankruptcy procedure consists of a liquidation. The company ceases to operate unless the Trustee sees value in continuing to operate the company for a limited period of time.

The trustee in bankruptcy takes possession of all assets that are either not subject to valid claims by secured creditors (typically financial institutions) or that belong to third parties (for example, equipment under lease or goods undergoing repair that are in the company’s possession). A licensed insolvency trustee then formulates a plan for selling the unencumbered assets of the company to maximize the proceeds. Afterwards, the Trustee distributes the funds in accordance with the BIA.

In the case of a company filing for bankruptcy protection, this is one of the alternatives to bankruptcy. The intention is to continue operating while it tries to restructure. Most of the time, this entails downsizing. A plan will be devised to repay some of the remaining debt in exchange for the creditors writing off the balance that is owed. With success, the company can retain employees and continue to operate. Creditors will be able to earn money by supplying the reorganized company in the future.

The CCAA allows companies that owe at least $5 million to their creditors to file for bankruptcy protection. Either the business will be restructured and continue to exist on new financial terms or a wind-down will be supervised to pay back anyone owed money by selling assets. BIA restructuring provisions can be used by companies that owe less than $5 million.

In other words, a company that goes bankrupt will shut down. Those who file for bankruptcy protection want to keep operating. As disruptive as bankruptcy and restructuring are, they can be beneficial for businesses, individuals and the economy since they preserve value and prevent assets from being wasted.

As soon as the company enters bankruptcy protection (or bankruptcy), proceedings against it are stayed. As a result, all collection rights for creditors are suspended. A “time-out” gives the company a chance to restructure, or the Trustee can handle its duties in bankruptcy without interference from creditors. Additionally, it “freezes” all creditors at the time of the filing, so that one cannot gain an advantage over another.

bankruptcy protection
bankruptcy protection

A record number of companies have sought creditor protection under COVID-19 and more are on the way?

The list of large Canadian companies with outstanding debts looking for bankruptcy protection from creditors got to a decade high in May and June 2020. Numerous financial commentators believed there would be a full-blown financial crisis and that a lot more would certainly file as a result of COVID-19 caused the economic downturn. Despite this, the number of corporate insolvency filings appears to have stabilized and also slowed down in 2021. One main reason is the number of government programs supporting Canadian business. In the same way as the virus itself, COVID-19 has actually taken a hefty financial toll on companies with pre-existing conditions.

Some familiar Canadian corporations in the list of companies that filed in that time due to their financial situation were:

  1. Reitmans
  2. Frank & Oak
  3. Aldo
  4. DavidsTea
  5. Cirque Du Soleil
  6. Mendocino
  7. Bow River Energy
  8. FlightHub
  9. Christian charity, Gospel for Asia
  10. Cequence Energy
  11. Delphi Energy
  12. Sail

Twenty-two major Canadian companies sought creditor protection in May and June 2020, almost four times the usual rate. The list obviously does not include major U.S. names such as Chesapeake Energy, J Crew, Neiman Marcus, Brooks Brothers, Pier 1 and Boy Scouts of America.

The bankruptcy protection court case facts

I want to tell you about Schendel Mechanical Contracting Ltd (Re), 2021 ABQB 893. On November 9, 2021, the Honourable Mr. Justice Douglas R. Mah released his decision.

Schendel Mechanical Contracting Ltd. (Schendel) was one of three associated companies that at one time collectively formed a major construction concern in Alberta under the Schendel name. As a result of financial difficulties, it was an insolvent entity and it filed a Notice of Intention to Make A Proposal under the BIA on March 22, 2019. Schendel continued operations as part of its restructuring effort. On various Schendel projects, Schendel bought HVAC equipment from the supplier between April 2018 and May 2019.

Ultimately, Schendel’s debt restructuring plan failed. Schendel was deemed to have filed for bankruptcy when it failed to implement a successful BIA Proposal restructuring. Schendel went bankrupt immediately. Its secured creditor applied to the Court for the appointment of a Receiver, which was granted.

As a result of reviewing the company’s books and records, the Receiver found and disputed the legality of a $40,000 payment from Schendel, an insolvent company, to one of its suppliers. According to the Applicant Receiver, the payment was prohibited for a number of reasons and the funds should be returned. The recipient supplier asserted that the payment was both innocent and validly received and that it was entitled to retain it.

In this case, a cheque dated July 8, 2019, to make the payment. Due to an unknown reason, the supplier did not negotiate the cheque until 11:48 AM on July 19, 2019. Schendel was also deemed to have filed for bankruptcy and the Court made the Receivership Appointment Order all on the same day, July 19, 2019. The Court had, however, no evidence regarding the exact moment the receivership and bankruptcy decision was made on that same day.

bankruptcy protection
bankruptcy protection

The bankruptcy protection case: The Receiver’s position

It is noteworthy that the action to recover the $40,000 was brought by the Court-appointed Receiver and not the insolvency trustee of the bankruptcy estate. According to the Receiver, the funds should be returned on the following grounds:

  • the automatic stay under section 69(1) of the BIA was in effect at the time of filing and throughout the extension of the proposal period, so the supplier was without recourse against Schendel;
  • the Court-ordered stay contained in the Receivership Appointment Order of July 19, 2019, as well as the concurrent stay imposed by a deemed bankruptcy under the BIA, deprived the supplier of all collection remedies as of that date;
  • as an alternative, the payment may be prohibited under the Fraudulent Preferences Act; or
  • it may be in violation of the Statute of Elizabeth (see note below).

NOTE: The English Parliament passed this statute in 1571 with the purpose of prohibiting transfers that would defraud creditors or hinder their collection efforts. As a result of widespread fraudulent transactions designed to defraud creditors, the 13 Elizabeth Statute was passed. It is still in effect in Alberta today.

The bankruptcy protection case: The supplier’s position

The recipient supplier said that it received the payment both innocently and legally and that it is entitled to retain it. In addition, the recipient supplier said:

  • besides some routine questions about payment, the supplier had not engaged in any activity to try to collect the debt;
  • the relationship with Schendel was arm’s-length;
  • both of the last two extension orders for the NOI define a process by which Schendel may pay, and the Receiver has fallen short to prove that the procedure was not followed when it comes to the subject payment; and
  • for either the Fraudulent Preferences Act or the Statute of Elizabeth, the required intent cannot be shown.

Since the bankruptcy trustee was not involved in this case, nobody was claiming that the payment was a preference or transfer under value under the BIA.

bankruptcy protection
bankruptcy protection

The bankruptcy protection case: The Judge’s decision

The Court was not presented with evidence on whether the $40,000 payment in question was approved within the proposal extension process or whether it was not approved. There was evidence to support Schendel’s compliance with approved procedures. In the post-NOI period, the supplier was found to have provided goods to various Schendel projects worth $34,476.75.

There was evidence that the payment was not just a payment on account of a pre-filing debt without further transactions post-filing. According to the Judge, the stay would not apply to indebtedness arising from goods or services supplied to Schendel after the filing of the NOI. This is because such indebtedness would not be a claim that could be a proven claim in the bankruptcy.

The Judge further stated that it is the Receiver’s responsibility to prove that the payment violated the stay. Schendel and the supplier did continue to do business together after the NOI was filed, according to the evidence. During the hearing, the Judge said that he should not simply assume facts in the Receiver’s favour. Additionally, the evidence indicated that some of the $40,000 payment was applied to the post-NOI supply of goods. A total of $34,476.75 worth of product was supplied to Schendel after the NOI was filed.

As a result, the Judge rejected all of the Receiver’s arguments and dismissed his Application in its entirety. Consequently, the supplier kept the $40,000.

Bankruptcy protection: How to cash your insolvent customer’s cheque safely

Companies filing for bankruptcy protection, whether under the CCAA or BIA, are reorganizing to stay in business. Businesses require purchasing goods and services and paying for them. It’s possible that some pre-filing debts will be paid after the filing date even though the debts are frozen from a collection perspective.

The stay does not necessarily prohibit every post-NOI payment by an insolvent company to a creditor. Such payments are valid when they are necessary to enable the company to move forward with restructuring. For example, a creditor may require payment of all or a portion of its pre-filing debt in order to supply post-filing.

Parties can agree to repay past debts in order to secure future supplies. First and foremost, the BIA process aims to encourage a debtor to reorganize as a going concern. Both creditors and debtors benefit from the debtor’s continued operation during this critical time. The BIA’s stay provisions and preference provisions give debtors breathing room to reorganize their finances. Setting up legitimate agreements with key suppliers is an integral part of that process.

In the end, it is critical to determine whether the payment of past indebtedness is a valid condition of post-NOI supply, which is required for restructuring to proceed. In that case, the post-filing payment of the pre-filing amount will be valid. If not, the insolvency trustee can recover it from the supplier.

Creditors seeking to recover pre-filing debts must make the payment as a condition of a post-filing supply arrangement. Additionally, because all of this is playing out in real-time in higher-risk settings, a supplier is free to amend the pricing post-filing. Similarly, if the supplier can secure it, there is no reason for them to not try to go from an unsecured creditor to a secured creditor on the post-filing supply by taking security or requesting a letter of credit. This would all be done out of an abundance of caution because as stated above, unpaid post-filing debts are not a claim provable in the company’s bankruptcy if the restructuring is unsuccessful.

bankruptcy protection
bankruptcy protection

Bankruptcy protection summary

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

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

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

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

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

Call us now for a no-cost consultation. We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

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

bankruptcy protection
bankruptcy protection
Categories
Brandon Blog Post

EXPENSIVE REAL ESTATE MARKET IN TORONTO MAY SLOW DOWN SAFELY DUE TO HOMEBUYER’S GRIDLOCK

real estate market in toronto
real estate market in Toronto

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

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

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

Real estate market in Toronto introduction

Over the last few years, a lot has been written about the red hot real estate market in Toronto and Vancouver. Not even the COVID-19 pandemic has been able to slow them down. Many have predicted that the real estate market in Toronto is a dangerous bubble about to burst.

There is always a need for housing in Toronto. COVID-19 with the Ontario lockdowns and stay-at-home orders has created much change but has not slowed down the real estate market in Toronto. Many people are moving to the suburbs to get more space now that they have been working and living in their homes 24/7. As a result of travel bans, immigration into Canada has temporarily slowed down immigrants still moving to Toronto.

I recently read two articles that are about totally different aspects affecting the real estate market in Toronto. However, when I put these two very different ideas together, it leads me to the conclusion that natural economic forces may be enough to slow down the market for now without any government intervention.

Real estate market in Toronto: Canadians piled on mortgage debt during COVID-19

In my June 9, 2021, Brandon Blog, IS MORTGAGE DEBT NOW THE OBSESSION FOR MANY CANADIANS? I wrote about the mortgage debt surge and its effect on the overall rise in Canadian consumer debt according to Equifax Canada.

An article published in the Toronto Star on June 30, 2021, looked at Canadians who piled on mortgage debt during COVID-19 and how some economists fear a significant correction in the market. The thrust of the article is about:

  • the upward pressure on the average price of a home because of bidding wars;
  • how first-time buyers are being squeezed out of the real estate market in Toronto given the rise in the average home price/average selling price of a home in the GTA;
  • both first-time homebuyers and homeowners in urban centres looking to move farther out and even into the country both for affordability and to get more space since they plan to make working from home a permanent feature in their life;
  • how people have maxed themselves out on mortgage debt and how an increase in interest rates may cause financial problems for those homeowners and ultimately a significant correction in the housing markets and a drastic drop in housing prices.

    real estate market in toronto
    real estate market in Toronto

US interest rates

The US Federal Reserve recently announced that based on its expectations for rising inflation this year, it has advanced the timeline for interest rate hikes. However, the Fed offered no indication as to when it will begin reducing its aggressive bond-buying program. Fed Chairman Jerome Powell acknowledged that the topic was reviewed at a recent Fed meeting.

Advancing the time frame for raising the rate of interest is all relative. The policymaking Federal Open Market Committee left its benchmark short-term borrowing rate at near zero. Yet officials indicated that rate increases won’t come until 2023, after saying last March, it saw no increases until at the very least 2024. So interest rates in the US are anticipated to stay very low for the foreseeable future. So if the US Fed is not increasing interest rates any time soon, mortgage rates should not be either.

Canadian interest rates

At its June 9, 2021 conference, the Bank of Canada held its target for the overnight rate of 1/4 percent, with the Bank Rate at 1/2 percent and the deposit rate at 1/4 percent. The Bank is maintaining its present expectations for the overnight rate. This is strengthened and also supplemented by the Bank’s quantitative easing program, which continues at a target pace of $3 billion each week.

With vaccinations proceeding at a quicker pace and provincial constraints easing over the summertime, the Canadian economy is anticipated to rebound strongly, led by consumer spending. Real estate market activity is expected to moderate yet stay very active. Solid developments in global demand and higher prices for commodities ought to bring about a strong recovery in exports and business investment.

real estate market in toronto
real estate market in Toronto

The real estate market in Toronto and interest rates

Therefore, it seems that there will not be upward pressure on interest rates, and therefore probably not on mortgage rates either, soon. Both the US Fed and the Bank of Canada do not seem to be in any hurry to increase interest rates.

Another factor in Canada is the newer mortgage stress test. This newer stress test was created to ensure that borrowers can meet a more stringent economic test to qualify for a home mortgage. Effective June 1 of this year, the newer test requires borrowers to qualify at the higher of an annual rate of interest of either 5.25 percent or 2 percent over the current published home mortgage market rate they can get.

This makes it harder for some to qualify for a home mortgage. The federal government hopes this will lead to lowering the pool of qualified borrowers and therefore at some point, decreasing house prices.

Both the US and Canadian governments seem happy to not try to battle inflation through increased interest rates. Coming out of the pandemic, both countries will welcome their economies bouncing back and growing. Inflation will be a natural by-product of the resurgent economies. Higher prices will mean that employers will have to increase minimum wages if they wish to attract employees to handle business growth. A higher minimum wage without any government intervention of new legislation because of inflationary pressures will be a dream come true, especially in the United States. In Canada, it is always good to head into an election while there is good economic growth.

Given all of the above, I don’t see that the real estate market in Toronto being affected by increased mortgage rates, because, there won’t be an increase in 2021 and possibly not even in 2022. So I don’t see higher interest rates being a factor at all in causing downward pressure on house prices, especially in Canada’s largest city.

Real estate market in Toronto: Homebuyer’s gridlock

The second article deals with homebuyer’s gridlock. How does this relate to the real estate market in Toronto? We have seen that people staying in their homes 24/7 during the coronavirus pandemic has allowed them to reevaluate their long-term housing needs and lifestyle choices. This has kept the Canadian real estate market strong as people see what they like and what they don’t like in their current homes. They want to get more of what they like and want, put their home up for sale and buy that home they feel will suit their needs better.

Other than for perhaps empty-nesters, those making the move are generally buying larger homes. The normal progression is that immigrants coming into Canada, which has been reduced during the pandemic, generally start as renters in Canada’s biggest cities. The dream of all renters is to become first-time homebuyers.

Prospective homebuyers start looking for their starter home. It could be a condominium, a townhouse or semi-detached or detached house. They end up buying from someone who is selling their first home. That person now looks for a larger purchase in the mid-tier. They buy from someone looking to go up into a much larger and perhaps their dream luxury home. Ultimately, the empty-nester luxury home dweller looks to downsize and more than likely will be looking to buy in the condo market. All this market activity fuels the Canadian housing market activity keeping real estate prices strong and strong demand for all types of housing.

Zillow Canada commissioned a new study from Ipsos Reid. Buried among the usual analyses on things like affordability was an unusual item. Home prices across Canada have increased so much, lots of property owners can’t afford to sell. A quarter of house owners all set to sell have not listed, since they can’t afford their next move. This is what a homebuyer’s gridlock is. People are “locked” into their circumstances. It only happens throughout the frothiest of markets, which we are apparently in.

But what happens to market activity if one or more of these different buyer types cannot afford that next move? It means that there will not be as many sellers at different levels of homes. If the number of buyers does not decrease in ratio to the decrease in sellers, this will cause bidding wars and upward pressure on prices.

To determine if there is going to be downward or upward pressure, we have to know the supply and demand statistics for each level of housing. One thing for sure though, if the number of buyers decreases, this means less demand. Less demand means that prices would not increase. They may not drop dramatically, but they certainly will not increase either.

real estate market in toronto
real estate market in Toronto

Real estate market in Toronto summary

With borrowing costs remaining low, the mortgage stress test making sure that borrowers can afford their mortgage at higher interest rates and now many would-be sellers not able to afford that next move up, I don’t agree with those market watchers who are predicting a huge real estate market in Toronto bubble about to burst.

Rather, I see market conditions remaining relatively stable, with perhaps less volume of activity than we have seen over the last couple of years. Average house prices may go down, but I don’t believe it is going to be a huge drop. Rather, I think the real estate market in Toronto may take a bit of a rest, until the next round of price appreciation. Ultimately, population growth in and around the GTA should fuel a new cycle of pent-up demand that will create new demand for ownership housing in Canada’s major cities.

I hope that you found this real estate market in Toronto Brandon Blog interesting. Problems can arise when there are increases in the prices of the goods and services that you need when you already have too much consumer debt.

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

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

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

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

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

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

Call us now for a no-cost bankruptcy consultation.

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

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

Categories
Brandon Blog Post

THE I NEED FINANCIAL HELP IMMEDIATELY CANADA PLAN TO BECOME FINANCIALLY STRONG

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.

We hope that you and your family are safe and healthy. For those that celebrate it, we wish you all a very Merry Christmas. To everyone, we wish you a healthy, happy and secure 2021.

I need financial help immediately Canada introduction

“I need financial help immediately Canada” is something we have heard daily as a result of the COVID-19 pandemic. Many have either lost their jobs entirely or have had their hours cut back dramatically. Canadians have been battling to make ends meet daily. It is therefore not a shock that individuals have been looking for financial assistance from the Federal Government throughout and other methods just to say afloat.

Sadly yet at the same time thankfully, the Government of Canada and the Provinces, including where I live, Ontario, acted quickly to provide some emergency financial relief. This Christmas holiday season will be very different for so many individuals in Canada and internationally.

The purpose of this I need financial help immediately Canada Brandon’s Blog is to look at where we have come from so far from the onset of COVID 19 so far in Canada and what financial assistance programs remain for individuals in Canada in the weeks and months ahead for 2021.

I need financial help immediately Canada: A review of 2020 emergency benefits for individuals

Canada Emergency Response Benefit (CERB)

The main program for individuals saying “I need financial help immediately Canada” was the CERB, which is now closed. CERB payments cannot be released after December 31, 2020. The application window for retroactive CERB applications closed on December 2. Applications need to be authorized by today in order for the funds to be paid out in time.

This coronavirus induced support program has helped millions of individuals with income support payments in 2020. The most recent published Federal Government statistics are only as of October 4, 2020. That information published by the Government of Canda indicates that:

  • 27.57 million applications were submitted
  • $81.64 billion was paid out to provide financial assistance

The final numbers are not in yet, but it is clear that over $100 billion will have been paid out in CERB monthly payments.

CERB and the self-employed

In previous blogs, I provided a summary of who was eligible for CERB payments. You will also recall the ongoing snafu that occurred to self-employed people in what the Canada Revenue Agency (CRA) claims that they misinterpreted the minimum income requirements. I explained that whole kerfuffle in my recent blog “CERB REQUIREMENTS: ASTONISHING MIXUP UNDERSTANDING CERB REQUIREMENTS LEADS TO A BAD OUTCOME“.

I notice that even right now, the Government of Canada website shows:

“The Benefit is available to workers:……

Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application;…”

So the Federal Government’s own website still shows a misleading description of which self-employed individuals were eligible for CERB. If the interpretation is really “net income” as CRA contends, shouldn’t their own website say that? Self-employment income is a misleading term. “Self-employment net income” is a standard accounting term and is what CRA says it meant.

It is unfortunate that the self-employed who are screaming to our Federal politicians “I need financial help immediately Canada” cannot rely on the plain English words on the government’s own website.

CERB was part of Canada’s coronavirus economic response plan. Additional financial assistance was given to individuals by the Government of Canada in the form of:

Employment insurance program

Temporary modifications to the employment insurance program (EI) to better support Canadians who require financial aid. Since September 27, 2020, the minimum payment is $500 weekly on a gross basis (before income tax).

Canada Recovery Sickness Benefit (CRSB)

The CRSB gives $500 each week for as much as 2 weeks, for employees that:

  • Are not able to work for a minimum of 50% of the week due to the fact that they have gotten ill with coronavirus.
  • Are self-isolated for reasons connected to the coronavirus.
  • Have underlying conditions, are going through treatments or have acquired other sicknesses that, in the viewpoint of a medical practitioner, nurse practitioner, individual in authority, government or public health authority, would make them more prone to contracting the coronavirus.

Canada Recovery Caregiving Benefit (CRCB)

The CRCB offers $500 weekly for up to 26 weeks per household for employees:

  • Incapable of working at least 50% of the week since they are parents with children who need to care for a youngster under the age of 12 or family member since schools, day-cares or care facilities are shut because of the coronavirus since the child or member of the family is sick and/or required to quarantine or goes to high danger of severe illness because of the coronavirus.

Mortgage payment deferral

Most mortgage deferral programs have now ended. House owners who said I need financial help immediately Canada, who needed a time out from making their mortgage payments, might have qualified for a mortgage payment deferral.

The deferral was an agreement between the borrower and the banks or other mortgage lenders. I described the program in more detail in my blog “MORTGAGE DEFERRAL CANADA IS ENDING: 3 KILLER WAYS TO DEAL WITH COVID-19 RELATED MONEY PROBLEMS“.

These were the programs to help the average Canadian feeling the pinch and saying “I need financial help immediately Canada” because of the Covid 19 pandemic.

i need financial help immediately canada
i need financial help immediately canada

I need financial help immediately Canada: A review of 2020 emergency benefits for businesses

Canadian small businesses have no doubt been hit the hardest in this Covid 19 mess. Provinces and regions within provinces have had differing approaches in severity, but they have all involved lockdowns. Due to the variety of goods sold in some big box stores, they have been allowed to stay open while specialty small retailers who spent money on making sure they abided by all Covid 19 protocols had to shut down. This has been especially hard on small retailers during the holiday retail shopping season.

There were several programs paying various amounts available as support for businesses. In no particular order, the main Government of Canada support programs for businesses are:

Canada Emergency Wage Subsidy (CEWS)

The Federal Government is paying up to 75% of employees’ salaries for qualifying eligible employers, with this CEWS subsidy rate now running until June 2021. The CEWS wage subsidy allows businesses to maintain and also re-hire staff members and hopefully stay clear of having to lay off employees.

Canada Emergency Business Account (CEBA) interest-free loans

The CEBA supplied an original amount of $40,000 in interest-free loans, to small businesses and not-for-profits. This program is to help support small businesses that have seen revenue drops because of the coronavirus yet face continuously fixed costs.

The government has just recently increased CEBA to consist of an additional interest-free $20,000 funding, raising the maximum amount to $60,000. If paid off by December 31, 2022, the amount of $20,000 is forgiven. If not, interest begins being charged on the full amount.

Businesses have until March 31, 2021, to apply for the $60,000 CEBA loan or the $20,000 increase. Applications are made to the banks or credit unions with which the business maintains one or more business accounts.

Canada Emergency Commercial Rent Assistance Program (CERC)

On Friday, April 24, Prime Minister Justin Trudeau revealed the launch of the CERC for small businesses that were strongly affected by the coronavirus pandemic and the resultant first lockdown. It was developed to reduce premises rent costs by 75 percent for affected local businesses.

The CERC was supposed to provide forgivable loans for commercial landlords that qualify under the strategy to cover half of the three normal monthly rent payments. It was designed to assist local businesses experiencing financial difficulties throughout April, May and June 2020.

The expense and monitoring of the CERC were shared by the provinces and the feds. So in Ontario, the Ontario provincial government and the Canadian Government were to share equally. Unfortunately, the program, like many of the others, had to be created very quickly. Although commercial tenants wanted this relief, the program was largely unsuccessful due to many uncooperative commercial landlords.

Canada Emergency Rent Subsidy (CERS)

As a result of this and businesses still clamouring “I need financial help immediately Canada“, the CERS program came into being replacing the CERC.

The CERS supplies a direct and easy-to-access rental cost and mortgage aid of approximately 65% of eligible expenditures to qualifying services, charities and non-profits. The aid prices hold up until December 19, 2020. This support is offered straight to lessees.

Lockdown Support

Businesses that have been substantially limited by a required public health order issued by a qualifying public health authority are truly screaming “I need financial help immediately Canada” and for good reason. They can obtain an added 25% of rental assistance via the Lockdown Support.

The consolidated impact of the rental cost subsidy and the Lockdown Support is that hard-hit companies, non-profits and charities subject to a lockdown can receive commercial rent assistance of a maximum of 90%.

The CERS and the Lockdown Support are both offered for businesses until June 2021.

Loan Guarantee for Small and Medium-Sized Enterprises

Through the Business Credit Availability Program, Export Development Canada (EDC) is dealing with banks and other financial institutions for this emergency loan program. The EDC will guarantee 80% of brand-new operating credit as well as term loans of as much as $6.25 million to both small and medium-sized businesses (SMEs).

This funding assistance is to be made use of for operational expenses as well as is available to both exporters and non-exporting firms.

This program is currently readily available at different banks and credit unions. This support is offered until June 2021.

Canada United Small Business Relief Fund

The Canada United Small Business Relief Fund gives grants of up to $5,000 to local businesses. These funds can be utilized for eligible expenses of particular initiatives: buying PPE, refurbishing physical rooms, or developing your website or e-commerce abilities.

These are the main programs for Canadian businesses saying to Ottawa “I need financial help immediately Canada” due to difficulties brought on by Covid 19.

I need financial help immediately Canada: 2021 emergency measures for individuals and businesses

Now that I have reviewed the 2020 programs, some of which are continuing, I want to highlight the help for financial hardship that is still available in 2021 for the many who are still saying to Ottawa “I need financial help immediately Canada“. I caution that the information is as of the date of Brandon’s Blog. Any changes, additions or cancellations of or to support programs due to the Covid 19 crisis are not reflected.

I need financial help immediately Canada – Individuals

Canadians who still say to our federal politicians “I need financial help immediately Canada” can still avail themselves of several programs. The first is the Canada Recovery Benefit Fund (CRB). The CRB essentially replaces the CERB.

The CRB gives $500 weekly for no more than 26 weeks as a Covid 19 response. It is for people that have quit working or had their income lowered by at least 50% because of the coronavirus, and that are not qualified for Employment Insurance Benefits.

The main remaining programs available to individuals saying in 2021 “I need financial help immediately Canada“, are:

  • EI
  • CRSB
  • CRCB

I need financial help immediately Canada – Small Businesses

The main remaining emergency federal support programs for small businesses still saying “I need financial help immediately Canada” are the CEWS, CEBA and the CERS. They are all explained above.

I need financial help immediately Canada summary

I hope that you have enjoyed this I need financial help immediately Canada Brandon’s Blog. The COVID-19 pandemic has brought health damage and financial concerns to many Canadians.

The Canadian government quickly invoked many new financial support programs for both Canadian companies and individuals to try to lessen the financial strain and bring peace of mind to many.

For all the various glitches, the Federal Government has done a very decent job in rolling out these economic support measures to try to keep the Canadian economy going.

At the same time, our front-line health care workers have been heroes. They fight daily to keep all of us safe. We owe them a great deal of gratitude.

If you are worried because you are facing significant financial challenges and you don’t fully understand the options available to you, including, filing a consumer proposal versus bankruptcy. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore.

The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.

Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations.

Call Ira Smith Trustee & Receiver Inc. today. All you have to lose is your debt!

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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.

We hope that you and your family are safe and healthy. For those that celebrate it, we wish you all a very Merry Christmas. To everyone, we wish you a healthy, happy and secure 2021.

i need financial help immediately canada
i need financial help immediately canada
Categories
Brandon Blog Post

FILE BANKRUPTCY IN CANADA ONLINE: OUR COMPLETE GUIDE ON HOW TO FILE BANKRUPTCY ONLINE

We hope that you and your family are safe and healthy.

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.

File bankruptcy in Canada online introduction

People have been asking us recently, “Can I file bankruptcy in Canada online?”. The most honest answer is yes, just not all alone with your computer and internet connection. Doesn’t sound very definitive, does it? That is because you cannot file bankruptcy yourself.

The only one the federal government authorizes in Canada to do bankruptcy filings is a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) (Trustee). The process itself requires anyone experiencing financial problems either themselves or with their company, needs to meet with a Trustee for an initial consultation.

However, since the onset of the COVID-19 pandemic and the lockdowns that have accompanied it since March 2020, the way a Trustee meets with people considering bankruptcy has changed. It has essentially gone online given the current operating environment. I will explain what I mean and how it might help you with your individual situation.

Can I file bankruptcy in Canada online?

Virtually anything and everything can be done online. The lockdown has increased our use of online purchasing. Whether it is clothes, office supplies, or toilet paper, it can all be ordered online and shipped to our homes. The taxi industry has been under assault for some time now from both Uber and Lyft.

The internet also includes a wealth of knowledge on thousands of different subjects. Financial topics are no exception. I find that anyone contacting me who is struggling with their, or their company’s financial problems, debts and paying their bills, including credit card bills, have already looked online for information and help to try to recover for their financial future.

Although people may not understand everything about insolvency and bankruptcy with all its nuances, which is to be expected, callers are definitely more educated in options for help in dealing with their secured creditors, unsecured creditors and different types of debts – both secured debt and unsecured debt.

So nowadays, everyone expects that you can do everything online, including the ability to file bankruptcy in Canada. This is true for people who think bankruptcy might be a solution for them. They are curious to understand if they can declare bankruptcy online. It is no longer just a bankruptcy in-person system.

file bankruptcy in canada
file bankruptcy in canada

How the coronavirus pandemic pushed bankruptcy online

The bankruptcy law in Canada is a federal statute. So the Canadian government supervises the administration of the insolvency process in Canada through the Office of the Superintendent of Bankruptcy Canada (OSB). On March 13, 2020, as a result of COVID-19, the OSB provided guidance to Trustees about how elements of the process for filing bankruptcy in Canada have changed. The document issued by the OSB is called Temporary Guidance for LITS During the COVID-19 Pandemic.

In that guidance, the OSB pushed the Canadian insolvency system as close to how can you file bankruptcy online. The only thing you still cannot do is file bankruptcy online yourself.

There was great growing concern in Canada about COVID-19. Insolvency practitioners had to take action to reduce in-person meetings. The OSB supported the Trustee community in these initiatives while keeping the stability of Canada’s insolvency system.

The OSB encouraged Trustees to make use of the considerable flexibilities that exist in the OSB’s Directives when determining which measures may be appropriate, in light of the pandemic.

To allow for the necessary social distancing, while still allowing people to file bankruptcy in Canada, the OSB advised the Trustee community:

  • Assessment of a person’s or company’s financial situation – Trustees are allowed to make use of techniques besides in-person meetings. The OSB recognized the COVID-19 pandemic as a remarkable circumstance.
    • Trustees did not need to get separate approval to conduct assessments making use of techniques aside from in-person. Where a video conference is not feasible, evaluations and discussions about a person’s or company’s debt situation may be carried out through a mix of telephone discussion and email.
    • In these assessment meetings, we discuss various debt relief options and alternatives to bankruptcy to avoid bankruptcy. We talk about credit counselling sessions, debt consolidation, debt settlement, various financial management techniques. We even discuss is a debt consolidation loan a realistic prospect?
    • Then we move on to the insolvency remedies of a consumer proposal for financial reorganization and debt settlement, corporate financial reorganization, personal bankruptcy or corporate bankruptcy. Whatever is appropriate. Then we give the person our recommendations and help them pick the best solution for them. The aim is always to avoid bankruptcy, wherever possible.
  • Insolvency financial counselling – Trustees and the accredited credit counsellors in their office are allowed to give financial management counselling via video conferencing. The OSB also allowed for credit counseling over the telephone, when video conferencing is not feasible. That is how I have been doing each credit counselling session and it has been working very well.
  • Meeting of Creditors – The Chair of the meeting is now allowed to hold creditors’ meetings either by video or conference call. The Chair can count on the representations by those in attendance to confirm their identity. It is mainly the unsecured creditors who are interested in the meeting of creditors.
  • Oaths and Signatures: Filing for bankruptcy and the bankruptcy process, involves bankruptcy forms. We are now urged to trade bankruptcy paperwork using e-mail. Trustees also explain to anyone filing bankruptcy, be it personal bankruptcy or corporate bankruptcy, using video conferencing.
  • This also the case for a consumer proposal filing. So even though we are not sitting in the same room as the person, we give the debtor the required support to explain the bankruptcy forms by using Zoom, FaceTime or over the phone.

What I do for taking oaths is that I confirm the person’s name and ask them to hold up their birth certificate or driver’s licence to their webcam or mobile phone. I also watch them sign the official bankruptcy documents. Then, I ask them to scan everything, including the identification they used, email it to me right away and then put the originals in the regular Canada Post mail.

So far, this has worked quite well. It has allowed people to file bankruptcy in Canada even during a pandemic. It has worked so well, we are now helping people and entrepreneurs looking for debt relief options who otherwise could not travel to our office. They would not travel to see us in person because although they are in Ontario, they are not in the Great Toronto Area.

file bankruptcy in canada
file bankruptcy in canada

Trustees already use an online bankruptcy filing system

Once the Trustee receives the documents by email from the person, they then turn to the electronic online bankruptcy filing system. It is called the E filing system. The Trustee can upload certain computer files into the E filing system, to tell the OSB all the information it needs to issue the Certificate of Appointment.

It is the same system across the country, regardless of what province you are in when someone wants to file bankruptcy in Canada. When the OSB issues the Certificate, that is the moment when a person or company officially becomes bankrupt and the Trustee is appointed.

This same E filing system is used also for all filings. Things like a consumer proposal, corporate receivership and corporate restructuring filings are also uploaded through the same online portal.

File bankruptcy in Canada: The rest of the process is the same as before

Once the type of online bankruptcy or consumer proposal filing is made to help you with the debt solutions you need, the rest of the process is the same. How bankruptcies work in Canada from this point on is not really different, other than as stated above, the two mandatory counselling sessions are done by either video or telephone meeting. Also, the effect on someone’s credit report is the same.

To find out the information on how the overall process works when you file bankruptcy in Canada, take a look at my Brandon’s Blog – HOW TO FILE FOR BANKRUPTCY IN CANADA: PERSONAL BANKRUPTCY MODUS OPERANDI. That will give you a very good read on the entire process.

File bankruptcy in Canada online: A word of warning

A word of caution for you. Bear in mind at the beginning I told you that only a Trustee is licensed to do any insolvency filing in Canada. You should understand that to file bankruptcy in Canada or file a consumer proposal online in Canada with someone that is not licensed by the federal government as a Trustee isn’t a choice.

You must be aware of fake organizations, firms, or service providers that attempt to trick people right into believing they can do any kind of insolvency filing for you. This includes anyone wanting to file bankruptcy in Canada.

Sadly, there are many debt consultant bankruptcy scam artists that state that they can help you do a debt settlement for you for a fee. DO NOT think of them under any circumstances. All they do is charge you for the first bankruptcy assessment of a person’s financial situation that a Trustee will do for you at no cost.

Then they try to offer you more items that the state will certainly help improve your credit score. This may also include giving you a high-interest rate loan but holding back all the cash to make the monthly payments out of until gone. Then when they cannot sell you any more products, they walk you down the block to file with a Trustee either to do a consumer proposal or to file bankruptcy in Canada.

Do not fall for these scammers that make it seem like they can file bankruptcy in Canada for you.

File bankruptcy in Canada summary

I hope you have enjoyed this file bankruptcy in Canada Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges and you think the only thing you can do is file bankruptcy in Canada. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. We know that we can help you the way we take the load off of your shoulders and devise a debt settlement plan.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. We help many people and companies avoid bankruptcy.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

We hope that you and your family are safe and healthy.

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.

file bankruptcy in canada
file bankruptcy in canada
Categories
Brandon Blog Post

CERB REQUIREMENTS: ASTONISHING MIXUP UNDERSTANDING CERB REQUIREMENTS LEADS TO A BAD OUTCOME

cerb requirements
cerb requirements

We hope that you and your family are safe and healthy.

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.

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

CERB requirements introduction

This year that is soon ending (YAY!!) has certainly been full of new learning experiences because of the COVID-19 pandemic. CERB requirements are just one of them. Since March, I have been writing about different financial issues relating to Canada’s COVID-19 Economic Response Plan, including the Canada Emergency Response Benefit (CERB). My two prior blogs on CERB were:

Even though the CERB program has ended, we now find that a new CERB requirements issue has just arisen concerning self-employed people. I will describe it for you.

A CERB requirements refresher

Just to refresh your memory, I think an overview of the Canadian CERB requirements will nicely set the stage.

To be eligible for the $2,000 CERB payment by applying to the Canada Revenue Agency (CRA), you have to have met particular CERB requirements for each of the CERB periods you were applying for. The Government of Canada specified the eligibility criteria to be:

  • You did not try to find or get, CERB or Employment Insurance from Service Canada for the specific CERB dates being applied for.
  • You did not stop your work voluntarily.
  • You reside in Canada and are at least 15 years of age.
  • You earned a minimum of $5,000 (before taxes) in the preceding 12 months, or in 2019, from 1 or more of:
    • work earnings
    • self-employment income
    • provincial benefit payments for maternity or parental leave
    • 1 of:
      • Your work hours have in fact been decreased as a result of COVID-19.
      • You have actually quit or will quit working because of COVID-19.
      • You are unable to work as a result of COVID-19, for example, due to the fact that you are caring for a person.
      • You have actually been paid EI benefits for at the very least one week of benefits after December 29, 2019, and finished your entitlement to such benefits.
  • One of:
    • If you are applying for the first time: You have actually quit or will stop working, or you are working decreased hours, as a result of the coronavirus. Additionally, you don’t expect to earn over $1,000 in gross employment or self-employment income for at least 14 days straight during the 4-week period.
    • If you are applying for a subsequent period: You are still not employed or self-employed, or you are doing lowered hours because of COVID-19. You do not anticipate making over $1,000 in gross employment or self-employment income, and you expect this to continue throughout the whole 4-week duration.

The Canadian CERB program is finished. The CRA accepted and paid retroactive applications until December 2, 2020. Now they are doing audits to see if people who received CERB did not actually qualify. This has uncovered a problem unique to self employed people.

The $5,000 CERB requirements problem

The $5,000 consists of all employment income and self-employment income. This includes among others: gratuities you have declared as earnings; non-eligible dividends; nominal amounts paid to emergency service volunteers; and royalties (e.g., paid to artists). If you are not eligible for Employment Insurance, you might additionally include pregnancy and parental benefits you obtained from the Employment Insurance program and/or comparable advantages paid in Quebec under the Quebec Parental Insurance Plan.

Pensions, student loans and bursaries are ruled out as employment income and must not be included.

So why is the $5,000 threshold of CERB requirements a problem for the self-employed?

Are CERB requirements gross?

The issue that has recently been uncovered for self-employed workers in the calculation of income. The employment and or self employment income does not need to be earned in Canada, but you need to reside in Canada. But the eligibility requirements, rules and eligibility criteria when it comes to self employed income have been misinterpreted.

Self employed Canadians have said that when they reviewed the government of Canada’s CERB website, they read that their business had to have earned (before taxes) a minimum of the $5,000 threshold. The devil is really in the details.

To “earn” $5,000, if you are deducting business expenses, which you should be, then your net income must be the minimum of $5,000 in order for you to earn $5,000. CRA and Service Canada spokespeople have now confirmed this.

Unfortunately, it appears that many self employed individuals misinterpreted this. They believed that if they billed gross income of a minimum of $5,000 (before taxes) in the preceding 12 months, or in 2019, then they met the cerb. They applied for CERB and received their payments totalling some $14,000. If they billed way more than $5,000 and after deducting expenses to earn that income their net income before tax is still above the $5,000 threshold, then there is no problem.

However, if they billed not much more than the $5,000 and after deducting expenses their net income is either minimal or has created a business loss, then they do have a problem because they will not have met the threshold of the CERB requirements.

So the CERB requirements are not gross. They are net.

cerb requirements
cerb requirements

What is CRA now saying?

CRA has now sent letters to many self employed people. It has been estimated in the media that CRA has identified to date some 200,000 self employed that CRA believes received CERB but did not meet the CERB requirements. The letters advise that, for self-employed Canadians, the qualifying earnings had to be “net pre-tax income,” which means gross income minus the expenses incurred to earn that gross income.

Self employed Canadians who misinterpreted the CERB requirements and requested and received CERB based upon their gross income made a mistake. They are being told by CRA that they will need to pay back up to $14,000 worth of benefits, according to many social media posts and news reports. Sounds simple, right?

It may sound simple, but, the misinterpretation of the CERB requirements has now caused many problems. The money was applied for because Canadians needed help with daily living expenses due to the economic effects of the COVID-19 pandemic. The money has been spent.

If the CERB money is not returned to the government before January 1, 2021, every self employed person in this conundrum will have to pay tax on the CERB amount received in 2020. Hopefully paying income tax on the CERB is not something these Canadians also did not overlook or misinterpret. Even if they pay the income tax when they file their 2020 income tax return, there is no guarantee that CRA will not still continue trying to collect the CERB payments.

There is a simple fix, but, will the Federal Government use it?

In my view, there is a simple fix for anyone who ran their own business as either a sole proprietor or partner and who received such a letter from CRA about their not having met the CERB requirements. It is a simple fix, but it will require what must be considered out of the box thinking for the government.

These people applied for CERB because they were hurting financially. They needed this help to buy food, pay rent, make mortgage payments. It wasn’t used for travel and fancy dinners. The last thing these people need is to repay the money they do not have anymore. So what is the simple fix? Let them keep the money and do not demand repayment. Let these people pay the income tax on that money.

If critics want to make sure that it does not look like these people took from the government in order to merely survive, then you could always deny them business expenses that would otherwise qualify up to the amount of CERB money they received. That way the government will collect additional income tax from them.

Given all the circumstances and the true reason for sending out the CERB money in the first place, it would be an awful ending for these people to be faced with being chased by CRA collection people for repayment.

CERB requirements summary

I hope you have enjoyed this CERB requirements Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

We hope that you and your family are safe and healthy.

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.

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Brandon Blog Post

CRA PAYMENT ARRANGEMENTS CONTACT A TRUSTEE FOR COMPLETE DEBT RELIEF

cra payment arrangements
cra payment arrangements

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. We hope that you and your family are safe and healthy.

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

CRA payment arrangements –introduction

Are you experiencing income tax problems with the Canada Revenue Agency (CRA)? Some people still call CRA by their old name, Revenue Canada. You may need to make CRA payment arrangements. If you are burdened with serious tax debt and tax problems, although CRA may be your most pressing problem, it still may only be one of several creditors that you have to deal with.

You may be bombarded with advertisements from tax lawyers trying to scare you into believing that you need a tax lawyer in Canada to deal with CRA debt. However, if you can’t enter into proper CRA payment arrangements directly with them, consulting with a licensed insolvency trustee Trustee) may be a much better option to get you into a payment arrangement to take care of your tax debt.

What should I do when the CRA collections officer is calling me?

Neglecting the CRA’s letters or phone calls is never a good suggestion. This will just cause extra extreme collection initiatives and make them much less receptive to reasonable CRA payment arrangements.

Make sure you the options that relate to you under Canada’s tax regulations before you react to any inquiries or requests from the CRA. As an example, if a CRA agent asks for your financial information or a listing of your business customers, request time to adhere to this demand. Then use that time to promptly seek the help of a proper tax professional.

Keep all documents and also make sure CRA payment arrangements and other discussions and agreements are confirmed in writing by the appropriate CRA collections officer.

Then armed with proper advice, you can make the choice that best suits your situation.

What are the CRA payment arrangements?

The CRA isn’t looking to prosecute you; the collections officer is looking for debt collection of money from you when you did not include the required payment with your tax filing. One of the ways they can do that is through CRA payment arrangements.

A payment plan with the CRA allows you to make smaller-sized repayments over time till you have paid your entire financial debt. In any payment plan, even though you are making payments, interest continues to be charged on the outstanding tax debt.

To help the CRA establish your capability to pay, they will of course first look up your prior tax returns tied into your social insurance number. They will do that first to see what our average reported income has been over the last few years to get an initial idea of your ability to repay.

Financial disclosure will be important. They will certainly want you to give current information on your financial situation. This will include evidence of your current income, expenditures, assets, and debts to others. CRA already knows how much you owe them!

If they agree to get into CRA payment arrangements with you, they will want either a series of post-dated cheques or your entering into a pre-authorized debit agreement. They will also warn you that if any cheque is not honoured by your bank, then your deal with CRA is off. At that point, they will go back into full collection mode.

Why enter into a payment arrangement?

If you have an income tax obligation as a result of not being able to pay your full personal income tax obligation when filing your income tax return, then a payment arrangement makes sense.

Since the onset of COVID-19, CRA staff, including the group that includes the collections officer, have been working from home. That is continuing and the tax system in Canada is functioning. Since September 2020, they are calling and writing taxpayers about their existing income tax debt arising from your tax filing and the resultant notice of assessment.

The CRA will reconnect with taxpayers to re-evaluate their financial situation and agree to a settlement plan, where feasible. CRA would prefer to get the money you owe through CRA payment arrangements. They do not want to initiate legal action unless all collection efforts have failed.

So why enter into a payment arrangement? To show CRA that you want to work with them and to avoid tax debt collection activities that will most certainly disrupt your life.

Can you apply to CRA to reduce penalty, interest and tax debt?

Tax lawyers that advertise on television make a big deal out of making an application to the Minister of Revenue to have parts of the individual tax debt either reduced or eliminated. This process is called filing under the taxpayer relief provisions of the Income Tax Act.

When there is a legitimate basis in tax law to do so, of course. However, I have done many consumer proposals for people who went to such a TV tax lawyer who first touted the benefits of making such an application. It is very seductive to be told by a professional that if the taxpayer relief petition is successful, your tax debt will vanish, or at least you will get relief of penalties and there will be no need for CRA payment arrangements.

The problem is that when you have no real basis, it won’t work. It does take a long time for CRA to decide on your relief request so pushing it off way into the future is attractive. However, I have not seen one such application touted by the TV tax lawyer work. What has happened is the person has paid about $10,000 to that tax lawyer to fill in a couple of pieces of paper for a process that did not work.

As I mentioned, those same people then come back to me to file their consumer proposal to settle all their debts. I understand why they would prefer not to. I just hate to see people spend money they can’t afford to because they were sold a dream that can never be fulfilled. Now the person owes even more because of accrued interest. Entering into CRA payment arrangements has a much higher chance of success than applying for taxpayer relief when there is no basis in income tax law to do so.

cra payment arrangements
cra payment arrangements

Without CRA payment arrangements, what can CRA do to enforce payment of my tax liability?

Enforcement activity will usually include freezing and taking the money in your bank accounts, garnishing (taking) your salary or wages if you are an employee. If you are a proprietor of a business, they can notify your customers and seize your receivables. Also, without notice to you, they can get a federal judgment to place a lien on your residence.

You really do not want to experience any of these more drastic collection methods used by CRA. You want to try your best to meet your payment obligations. Third-party assessments, asset liens, tax garnishments are not fun.

These actions are severe and will totally disrupt your life. Keep in mind that CRA usually only goes to this extent if you have shown non-compliance with their attempts to enter into CRA payment arrangements.

What if I am experiencing financial hardship?

If you are experiencing financial hardship and perhaps have unmanageable debts above and beyond income tax debt, then CRA payment arrangements are probably also out of reach for you. In that case, contact a Trustee. I will review your entire financial situation and give you options in eliminating your debts. This initial consultation will be at no cost to you.

Hopefully, you will be able to avoid bankruptcy by filing a consumer proposal. A consumer proposal is the only debt settlement plan approved and supervised by the Canadian government.

If you run a business through a proprietorship, keep in mind that there are two kinds of tax debt that cannot be eliminated, even by bankruptcy. The first is unremitted source deductions from your employee payroll. The other is GST/HST that you collected but have not remitted to CRA.

The reason is that these are trust amounts. The tax law says that you are holding those amounts in trust for the government. So, if you have any tax debts that are trust amounts, those will have to be paid in full. Through a consumer proposal, I can get you into separate CRA payment arrangements so that you will get some time to pay the trust claims. No one, including TV tax lawyers, can do anything better for you for trust amounts.

CRA payment arrangements summary

I hope you have enjoyed this CRA payment arrangements Brandon’s Blog. I can help you solve tax and other debt problems.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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. We hope that you and your family are safe and healthy.

Categories
Brandon Blog Post

THE MORTGAGE DEFERRAL PROGRAM IS FINISHED: ARE YOU NOW SUFFERING BADLY?

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. We hope that you and your family are safe and healthy.

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

mortgage deferral program
mortgage deferral program

Mortgage deferral program introduction

Better Dwelling, Canada’s largest independent housing news outlet, recently reported that Canadian banks still have over 254,000 mortgage deferral program.

Most mortgage deferral program ended on September 30, 2020. The purpose of this Brandon’s Blog is to discuss what the mortgage deferral program was and since it is over, now what?

What was the mortgage deferral program?

The mortgage deferral program was an agreement between borrowers and their mortgagees, being Canadian banks. It permits mortgagors to delay their home loan payments for a specified amount of time.

After the deferral period ends, they return to making normal home loan payments. Once payments resume, they need to also pay off the home mortgage payments that were put on hold. Your financial institution figures out just how people repay the deferred payments.

Who could apply for the mortgage deferral program?

Financial institutions evaluate the qualification criteria for home loan deferrals on an individual basis. People might have been eligible for the mortgage deferral program if:

  • you, or any person in your household, are out of work as a result of COVID-19; or
  • you, or any person in your family, experienced a considerable reduction in revenue as a result of COVID-19.

What to expect from the mortgage deferral program

A mortgage deferral program does not cancel, get rid of or eliminate any amount owed on your home mortgage. Interest charges also do not stop when on a payment deferral program. At the end of the arrangement, you will have to return to normal payments according to your original amortization schedule.

The interest that hasn’t been paid throughout the deferral period continues to be added to the principal owing on your home loan. This obviously affects the full amount you owe and therefore the amount of total interest you will pay over the life of your mortgage.

Loan repayments are comprised of both interest and principal. The interest accrues daily. When a payment is made, the amount from the total payment needed to pay down interest is allocated that way. The leftover from that monthly payment is applied to pay down the principal balance.

Over time as the primary balance goes down, the amount of interest from each payment becomes less. The way the arithmetic works, means, as less interest is being paid, more of the monthly blended payment is allocated to repaying principal. The more time that passes where the principal balance does not decrease due to the mortgage deferral program the more interest winds up being paid.

What about paying certain fees during the mortgage deferral program period?

Particular charges for either the administration of or for additional products connected with mortgages could not be waived during the mortgage deferral program. Sometimes, people opt for the bank’s additional mortgage life, disability or critical illness insurance policies to cover their mortgage payments in the event of illness or death. The insurance premium is added to the monthly blended mortgage payment.

Likewise, many people pay one-twelfth of their annual property taxes each month added to their normal monthly mortgage payment. The property tax portion is subject to annual adjustment to account for the difference between the estimated annual property taxes and the actual property tax, once known.

These kinds of payments had to continue notwithstanding any mortgage deferral program period.

mortgage deferral program
mortgage deferral program

What can I expect once my mortgage deferral is over?

When the mortgage deferral program is over and routine payments return, you’ll have the option to maintain payments as they were or increase them. If you can, you could also make a round figure payment amount. The aim is to catch up as quickly as possible on the interest that accrued during the mortgage deferral program period.

You can catch up to your pre-deferral amortization without incurring any type of extra charges. As soon as you’re caught up, any additional payments you might make would be based on your mortgage’s terms and conditions concerning making lump sum or pre-payment to your principal balance without incurring a penalty.

The mortgage deferral program has ended: What if I still can’t pay?

Just because the mortgage deferral program has ended, it does not necessarily mean that everyone can afford to go back to making normal mortgage payments. The coronavirus pandemic with its business closures and always looming lockdowns has not become easier for many.

People whose financial situation has not become better since the pandemic hit, are frightened. I have checked out some “what to do” short articles about if you are having difficulty making your regular home mortgage payments. Most point readers to looking at how a consumer proposal or bankruptcy might help.

Just so you understand, a consumer proposal or bankruptcy are not designed to help you make mortgage payments. In fact, they may lead to you having to sell your home.

Your mortgagee is a secured creditor, presuming its mortgage security is valid and properly registered. A consumer proposal or bankruptcy is a technique of handling your unsecured creditors. The mortgagee has rights if you default on your home loan whether or not you are involved in an official insolvency process.

If you have way too much financial debt and inadequate income to service all that debt, you may very well need to think about an insolvency filing. Yet it is not a straight answer to your mortgage deferral program finishing.

So in order, below are my 3 top suggestions of what you could do when your home mortgage deferral program finishes and also you believe you will remain in financial trouble.

3 steps you can take if you still have trouble making your mortgage payments

Take a critical look at your family household budget plan

I cannot stress sufficiently just exactly how essential the household budget is to your financial safety and security. A spending plan is a listing of all family earnings and all household expenses. Do it on a month-to-month basis. It allows you to prepare just how you need to spend your cash and if there is anything left over monthly for savings for a reserve or for financial investment.

Rather than money just flying out of your pocketbook, you make intentional choices on where you want your money to go. You’ll never ever question at the end of the month where your money went or search for spare change in your purse or wallet.

So if you already have a home budget that you follow, take a look at it carefully. If you don’t’ have one, prepare it right away. Consider the last 6 months and see what your typical monthly earnings have been and what your typical monthly expenditures were. Note them full blast line by line for both earnings and also costs. Then adjust any line that you think might change in the coming months.

After that have a look at it and see if you are spending less or more than you make. If you are spending more, then you need to reduce particular expenditures, raise your revenue, or a mix of both. Reduce any costs that you can. Get to the point where, as a minimum, you are not spending more than you earn. Ideally, you want to spend less than you earn, on an after-tax basis, so that you can build up an emergency fund in case of, an emergency.

Talk to your banker

Be proactive and get in touch with your banker when you suspect a problem. Let them know that you have an existing family budget plan and it reveals that you may require some help. Tell your banker that with the end of the mortgage deferral program period, you still need help.

Your banker will be impressed that you:

  • have a spending plan that you are tracking; as well as
  • you are being proactive and also not triggering the lender to chase you since you turned up on the computer screen as a late payment.

That already makes you the most liked person in the 10% to 20% of individuals who are experiencing trouble paying their home mortgage. Ideally, your lender will be able to do something for you to help.

Call me

If your spending plan shows that you do not have enough family revenue to pay all the family members’ financial obligations on a regular monthly basis, call me. I will take a look at your family budget plan and perhaps get more financial details from you. After evaluating all of it, I will give you my ideal recommendations to meet your unique economic difficulties.

Remember that this is not your fault. The COVID-19 pandemic and the resulting shutdown of the Canadian economic climate continue to cause trouble for the majority of Canadians.

Mention this blog, and I will not charge you a cent for this assistance. I really want you to prosper.

Mortgage deferral program summary

I hope you have found the mortgage deferral program 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 Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

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Brandon Blog Post

CEWS APPLICATION: OUR COMPLETE CEWS EXTENSION PRIMER TO GREATLY HELP YOUR BUSINESS

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. We hope that you and your family are safe and healthy.

CEWS Application introduction

The expansion of the Canada Emergency Wage Subsidy (CEWS) until June 2021, is one of the last few remaining Canadian government subsidies for business as a result of the COVID-19 pandemic. The subsidy that a CEWS application can be made remains at the current subsidy level of a maximum of 65% of qualifying payroll until December 19, 2020. This measure is the government’s dedication to producing over 1 million jobs and hopefully bring back employment to the degree it was before the COVID-19 pandemic.

The purpose of this Brandon’s Blog is to provide you with our CEWS extension primer to answer what we believe are the most common questions regarding the CEWS application program extension.

CEWS application: What is the CEWS?

The federal government is providing organizations with wage help towards worker wages if they are able to reveal a decrease in earnings as a result of COVID-19. Businesses will be eligible to receive the subsidy for the wages they have actually paid their staff members from March 15th, 2020 to June 2021.

Most of CEWS guidelines stay the very same– except for:

  • The computation for the top-up, which had actually been based upon a 3-month standard, will now be calculated upon the existing month’s revenue loss to supply more help to those employers needing to close down again.
  • The subsidy rate will be capped at 0.8 times the income reduction (max of 65%), until December 19, 2020.

As indicated above, the program runs until June 2021.

CEWS application: Who is an eligible employer?

A lot more types of employers have been added as eligible employers, including seasonal operations and also amalgamated companies. For a complete list of who qualifies, check out the Canadian government CEWS application website.

The program does not look at the number of staff on the payroll. Rather, the main requirement is that the business had a CRA payroll account as of March 15, 2020. If your business did not have a CRA payroll number since your third-party payroll provider made remittances for you under their number, you can create one now and still be considered eligible.

How do I calculate my gross revenue drop for the CEWS application?

A revenue decline is the percent of gross revenue shed in a month in comparison to a pre-COVID-19 time frame. To determine your gross revenue, you can pick between two accounting techniques. You can choose to record revenue when received and expenditures when paid (the cash approach) or you can pick to recognize revenue and expenses in the period they are incurred (the accrual method).

Once you have picked your accounting approach, you will need to use that same bookkeeping approach for all periods. If you decide to change from one accountancy method to the other, you will then need to refile for all previous periods. That way, you will still only be using one method in your CEWS application.

To calculate the level of the revenue decline you will need to choose between:

  • contrasting current month revenue to the same month in 2019 (the general method); or
  • comparing current month revenue to your average revenue in January and February 2020 (the alternative method).

Whatever strategy you use, you will need to continue to make use of that exact same method for Periods 1 to 4. The only time you will be able to change your approach from one to the other will be Period 5, after which you will need to use that very same approach for the remainder of the CEWS application periods.

What is the safe harbour CEWS application regulation?

The safe harbour regulation allows organizations who would have been eligible for the 75% wage subsidy under the old CEWS application rules, to still obtain a minimum of 75% under the brand-new regulations for Periods 5 and 6 only.

So, an eligible employer with an earnings reduction of 30% or more in Periods 5 and 6 will be able to receive at the very least a 75% subsidy, or possibly much more under the new rules if their revenue reduction is very high.cews application

How do I determine which employees’ wages are eligible for the CEWS application?

Eligible employees must be those employed only in Canada to qualify for the wage aid under a CEWS application. On top of that, for Periods 1 to 4 only, they can’t lack pay for 14 or more consecutive days within a CEWS application period. This guideline does not apply from Period 5 and beyond.

You will then have to figure out whether the staff member is arm’s length or non-arm’s length (usually household members/owners) and if they are on a paid leave or not.

How do I calculate the pre-COVID payroll amount for the CEWS application?

For Period 7 onwards, the baseline (pre-crisis) pay is just required for workers that are on leave with pay, and also staff members who are non-arm’s length. That baseline pay is the average wage paid from a specific payroll period before COVID-19.

To optimize your staff member’s baseline pay, you will need to establish which prior period offers your worker the biggest average wage. After that, add up all the amounts paid to the employee during the chosen base CEWS application time period.

What is the deeming rule for the CEWS application?

Phase 1 qualification for 75% CEWS application wage support required a decline of 15% from compared period revenues for Period 1 (March 15– April 10). It also needed a 30% decline in revenue throughout each of the three subsequent Periods (2, 3 & 4) through to July 4.

The only exemption to this was a deeming rule that said that if you receive the subsidy from your CEWS application in any one Period, you do not have to prove revenue decrease in the immediate succeeding Period. Essentially, this meant that any business that qualified would automatically get CEWS application wage assistance for eight weeks. It would after that need to requalify through a new CEWS application for any kind of later Period.

This guideline is being adjusted to be a more flexible offering because of the developing assistance levels under the guidelines for Phase 2.

Any Phase 1 CEWS application subsidy period, which ended on July 4, provided a single degree of wage assistance, i.e., 75%. Those calculations and CEWS application decisions made are unaffected by the new guidelines.

The CEWS application calculations are complex

You are right. The CEWS application process in Phase 1 was somewhat confusing and complex. For CEWS 2.0, the government has developed a better online CEWS calculator to make the calculations easier.

The CEWS calculator has actually been updated to do more of the complicated CEWS application computations for you.

Before using it, please understand that the calculator does not accumulate or keep the info you input. Also, making use of the calculator itself does not cause an audit or for alarm bells to ring at the tax authorities.

It is recommended that you utilize the calculator in one sitting so as not to lose your calculations. It is likewise suggested that you print/save your computations in case the Canada Revenue Agency does ask sometime in the future to see just how you did the numbers in your CEWS application.

Business is slow. What should I do to keep my business going besides a CEWS application?

Regrettably, this is happening to lots of businesses. The government has revealed a number of programs to aid businesses through this difficult COVID-19 pandemic time. There are additional actions you can take to plan for your business’s future.

Look at your income and expenses. Are you able to pay your fundamental business expenses? If not, can you get any relief from your vendors? Speak to your accountant/bookkeeper about your alternatives and whether it makes good sense to stay open, temporarily stop your business, or shut it down waiting for better times.

Redo your business plan, budgets and cash-flow statement for this new reality. Things are tough. Make certain you have a plan as to how your business is going to survive. Does and can your business model change to help you weather this storm?

You may need to sit down with both your accountant and a licensed insolvency trustee (Trustee). The Trustee can run through the various options available to restructure your business. Hopefully, a restructuring can be done to allow for either refinancing or the opportunity to bring in an investor. Maybe a sale of the business is possible and the purchaser will want to keep senior staff on for continuity under a multi-year employment contract.

There are many possibilities for the viable but insolvent company to avoid bankruptcy. You can call me today if your company is experiencing difficulties and you don’t know which way to turn.

CEWS application summary

I hope you have enjoyed this CEWS application Brandon’s Blog. Hopefully, you have better insight now into the CEWS program extension.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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. We hope that you and your family are safe and healthy.

cews application

Categories
Brandon Blog Post

FINANCIAL LITERACY MONTH 2020: THE LATEST AND GREATEST NEWS YOU NEED TO KNOW

financial literacy month 2020
financial literacy month 2020

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. We hope that you and your family are safe and healthy.

If you would prefer to listen to the audio version of this financial literacy month 2020 Brandon’s Blog, please scroll to the very bottom and click on the podcast.

Financial literacy month 2020 introduction

November is financial literacy month 2020. This is the 10th anniversary of financial literacy month in Canada.

Throughout financial literacy month, the Financial Consumer Agency of Canada (FCAC) engages with Canadians and interact with organizations from the private, public, and charitable sectors to help enhance the financial literacy of people.

For the entire month, organizations from throughout the country are urged to host seminars and share information intended at helping Canadians comprehend their finances and equipping them to manage their money and debt wisely.

In this Brandon’s Blog I discuss the importance of financial literacy and financial literacy month 2020.

Financial literacy month 2020: What is financial literacy?

Financial literacy in Canada means having the skills and knowledge to make educated choices regarding managing your money. Understanding fundamental financial ideas allow individuals to know how to browse the financial system. Individuals with financial literacy abilities make far better monetary choices and handle cash much better than those without these abilities.

Why is financial literacy month 2020 important​?

Regular readers of Brandon’s Blog understand that one of the major reasons I discuss financial and insolvency issues is to assist to reinforce Canadian financial literacy. Especially, exactly how entrepreneurs, their business and people, in general, can much better handle their financial obligations.

The major benefit of financial literacy is that it equips us to make smart financial decisions. It supplies the understanding and skills we need to handle cash properly– budgeting, conserving, loaning, and investing. This suggests that we are far better furnished to reach our financial goals and attain financial security with a greater understanding of money matters.

As the economic market expands and becomes progressively more complicated, it is important that Canadians have the knowledge, abilities and self-confidence to make enlightened decisions about their money, budgeting and debt. Financial literacy is as important today as basic literacy.

Dedicating a financial literacy month 2020 to remind everyone how important financial literacy is, especially this year, is a great idea.

financial literacy month 2020
financial literacy month 2020

Financial literacy month 2020 content being shared

Canadian financial literacy month 2020 is dedicated to and therefore titled: Get Back to Basics! There is an entire calendar of events aimed to help you to update your studies in money matters.

This month, take some time to equip on your own and develop your very own understanding, abilities and confidence in handling money matters to ensure that you can make important financial choices. In these times we are experiencing, being better able to handle money matters is currently more crucial than ever before.

New content started on November 1st. The calendar of events include:

  • Money Basics (Nov 1-7).
  • Lay the foundation for smart financial planning with insights into subjects like financial investments, insurance coverage and retired life preparation Buying Basics (Nov 8-14).
  • The fundamentals of exactly how to be smarter with your money, including details on savings accounts, and all things worldwide of basic personal money planning basics. A broad range of information on how to make smarter purchases – both large and little! Find out more regarding credit reports, consumer debt and mortgages. (Nov 15-21).
  • Life Event Basics. Financial literacy hits you when major life events are involved. Check out the financial impact of events such as getting married, having children, losing a job and when illness strikes (Nov 22-27).

Financial literacy month 2020 aimed at giving you tips and tools to understand your finances

This year, financial literacy month aims to aid Canadians to find out just how to handle their funds in tough times. Keeping track of your money by making a spending plan will help a person to stick to a budget and remain on top of their finances.

Minimize debt: get only what you need. If you should borrow money, understand the cost of debt and have a plan to pay it back. CPA Canada has actually assembled resources to assist manage your financial resources and also provide you with the tools you require throughout this pandemic, during financial literacy month 2020 – and beyond.

Each November, Canadians celebrate financial literacy month. Urge your family members to discover new ways to become extra savvy with their money! Financial literacy month 2020 information even includes financial information for students and financial information for children. There is a plethora of information for all ages, including financial literacy for kids.

And finally, financial literacy month 2020 and the coronavirus

The Chartered Professional Accountants of Canada (CPA Canada) has just publicized its Canadian Finance Study 2020. According to this brand-new nationwide study, one-third of Canadians claim the tension associated with money management has increased due to the COVID-19 pandemic. This is understandable.

Survey participants state their income has been lowered as an outcome of the coronavirus. Thirty percent of participants report that in the early days of the COVID-19 lockdown, their savings rate decreased. However, 55% say that they are spending less as a result of the coronavirus. That is a good thing.

Recent information from Statistics Canada gives insight into the economic behaviour of Canadians during the COVID-19 pandemic. The second quarter of 2020 saw a spike in the savings rate to 28.2%. This is the highest savings rate since 1961!!

COVID-19 has had a clear effect on life worldwide. This further emphasizes the significance for individuals to take preventative measures in managing financial resources in the middle of the pandemic.

Some parents have the ability to keep their children at home to do online learning because they are too nervous about sending them to school. This is an opportunity for parents to add money management skills to your child’s education. The trick is to do projects with your children that teach lessons and skills that you must show them anyhow about money.

There are simple things you can do with very young children during financial literacy month 2020 and beyond, such as:

  • Show them different denominations of coins and bills.
  • Let the children sort through coins into like piles.
  • Let them then count the coins and come up with a total of each pile. Right down each total and then have them add up all the individual amounts into one grand total.
  • Use simple examples to teach your children how to make the change. This teaches them both arithmetic skills and financial skills. They need to know this to manage their lives, so why not do it this month?

I think all parents would feel very good about teaching these money skills to their children. This is much more preferable than leaving it up to the school and hoping that they properly understood the simpler money concepts they will use for their entire life.

Financial literacy month 2020 summary

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