Tag: covid-19

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

Post author By Brandon Smith
Post date May 11, 2020

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

Stay healthy and safe everybody.

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

Introduction

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

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

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

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

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

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

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

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

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

Closure of non-essential businesses

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

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

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

COVID-19 insolvency frequently asked questions

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

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

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

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

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

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

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

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

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

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

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

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

Everything old is new again or “Throwback Thursday”

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

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

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

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

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

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

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

Summary

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

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

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

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

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

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

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

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

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

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

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

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

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

Stay healthy and safe everybody.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, Consumer Proposal, coronavirus, corporate restructuring, covid-19, credit counselling, debt settlement, debt settlement plan, debt settlement restructuring, insolvency, Ira Smith Trustee, licensed insolvency trustee, meeting of creditors, office superintendent bankruptcy canada, part III division I proposal, social distancing

Brandon Blog Post

CANADA STUDENT LOAN: GET STUDIOUS ON CANADA STUDENT LOANS SUSPENDED

Post author By Brandon Smith
Post date May 4, 2020

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

Stay healthy and safe everybody.

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

Introduction

For plenty of students, the month of May generally marks the beginning of a summertime job. But now, due to the COVID-19 pandemic, it might be actually challenging for them to get any kind of work. They could have already been trying for weeks to find a job without any success. The purpose of this Brandon’s Blog is to describe what the Canadian government is doing to help students in general, and especially those with a Canada student loan.

“Banks were once places to hold money and were very careful in lending to finance families as they built a future – bought homes, bought cars, took out student loans.” – Elizabeth Warren

Government of Canada student loan program announcement

Prime Minister Justin Trudeau revealed comprehensive assistance of close to $9 billion for post-secondary students and also recent graduates. The plan was developed to give assistance to students for the financial backing they need this summer, help them proceed with their research studies in the fall, and help them get the experience they require to start their jobs.

These measures consist of:

the Canada Emergency Student Benefit, which gives assistance to students as well as new graduates that are not eligible for the Canada Emergency Response Benefit. This benefit gives $1,250 monthly for qualified students or $1,750 each month for qualified students with dependents or disabilities. The benefit would be offered from May to August 2020.
the new Canada Student Service Grant, which will help students gain useful job experience and also skills while they help their communities throughout the COVID‑19 pandemic. For students that pick to do serve their community, this new program will offer as much as $5,000 for their 2020-21 education.

On March 30, 2020, the Government of Canada also announced a six-month interest-free moratorium on the repayment of any Canada student loan for all people that are in the process of paying off their student debt. To reassure the student loan borrowers, the government went on to say that all pre-authorized debits taking payments automatically out of people’s accounts will stop.

This will certainly provide interest and payment relief to virtually 1 million Canada student loan borrowers. This delaying payment date of September 1, 2020 ties into the same moratorium given on other types of payments for both Canadian business and individual taxpayers.

“I think my mom and dad both wanted to get across to me that… I obviously grew up with great privilege and was very lucky and was able to afford college and not have student loans, and they would pay for college, but beyond that, it would be up to me to make a living.” – Anderson Cooper

Summer jobs for 2020

The federal government is developing 76,000 work for students in addition to the Canada Summer Jobs program. These placements will be in industries that need an additional hand today or that are on the cutting edge of this pandemic.

“I am just one of the overwhelming majority of Americans who is responsible and hard-working and at one point in their life benefited greatly from government programs such as student loans, Medicare, and Social Security.” – Tammy Duckworth

Fall 2020 to 2021 assistance for post-secondary students

Adjustments to the Canada student loan program have also been done so students facing financial difficulties from COVID-19 can access and manage post-secondary education. Pending federal government authorization, the new measures will come into force on August 1, 2020, for students for a one year period. The Canada Student Service Grant will help those who would rather volunteer and serve their neighbours and country during this health crisis.

These changes include:

Doubling of the student grants for all eligible full-time students to up to $6,000 and for part-time students up to $3,600 in 2020-21. The Canada student grants for students with long-term disabilities and students with dependents will also be doubled.
Widen eligibility for student financial assistance by getting rid of the expected student’s and spouse’s payments in 2020-21, given there will be struggles saving for university for next year.
Boost the program by raising the maximum amount that can be provided weekly to a student in 2020-21 from $210 to $350.
Extra support for First Nations, Inuit, and Métis students going after post-secondary education by giving an additional $75.2 million in 2020-21.
Extend ending government graduate research scholarships and postdoctoral fellowships, and supplement existing federal research study funding, to support students and postdoctoral fellows, by supplying $291.6 million to the government approval councils. Furthermore, the government wants to boost work opportunities for graduate students and postdoctoral fellows via the National Research Council of Canada.

“I would get my student loans, get money, register and never really go. It was a system I thought would somehow pan out.” – Ray Romano

Summary

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

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

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

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

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

“Bankruptcy laws allow companies to smoothly reorganize, but not college graduates burdened by student loans.” – Robert Reich

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

Stay healthy and safe everybody.

Tags Canada Emergency Response Benefit, canada emergency student benefit, canada student loan, canada student loans, canada student loans suspended, canada student service grant, covid-19, Government of Canada, Ira Smith Trustee, justin trudeau, pandemic, student financial assistance, student loan, university

Brandon Blog Post

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

Post author By Brandon Smith
Post date April 29, 2020

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

Stay healthy and safe everybody.

<h2

Consumer proposal in Ontario: Introduction

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

Consumer proposals in Ontario: The issue

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

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

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

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

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

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

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

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

consumer proposals in ontario

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

Effect of COVID-19 on consumer proposals in Ontario

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

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

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

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

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

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

The Court first defined two specific terms:

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

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

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

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

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

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

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

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

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

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

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

Consumer proposals in Ontario: Summary

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

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

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

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

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

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

Stay healthy and safe everybody.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy protection, bankruptcy trustee, BIA, Canada Revenue Agency, Consumer Proposal, consumer proposals, consumer proposals in ontario, coronavirus, covid-19, CRA, Ira Smith Trustee, licensed insolvency trustee, Office of the Superintendent of Bankruptcy, OSB, pandemic

Brandon Blog Post

SMALL BUSINESS RELIEF PROGRAM: CANADA EMERGENCY COMMERCIAL RENT ASSISTANCE

Post author By Brandon Smith
Post date April 27, 2020

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

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

Stay healthy and safe everybody.

Introduction

I want to describe what is known right now about the most recent Canadian small business relief program. The program named the Canada Emergency Commercial Rent Assistance (CERC) Program was set up to help small companies cover their commercial rent payments for April, May and June. This kind of program is necessary because of the COVID-19/coronavirus pandemic.

The latest small business relief program announcement

On Friday, April 24, Prime Minister Justin Trudeau announced the launch of the CERC for small companies that have been strongly impacted by the coronavirus pandemic. It is designed to reduce rental costs by 75 percent for impacted local businesses.

The CERC will provide forgivable loans to commercial landlords that qualify under the plan to cover half of the three regular monthly rent payments. It is designed to help small businesses experiencing financial difficulty throughout April, May and June.

The expense and management of the CERC will be shared by the provincial and federal governments. It should be accessible by mid-May.

“A big business starts small.”
-Richard Branson

The Ontario program

Since I practise in the province of Ontario, that is the provincial program I will comment on. Other than for the level of money contributed, presumably, the federal program works the same way in all provinces. When all the details come out, we will then know for sure.

The Ontario Government is devoting $241 million to partner with the federal government to supply more than $900 million in immediate aid. This small business relief program is for both small businesses and their landlords via a brand-new program, the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA).

The OCECRA will offer forgivable loans to qualified commercial property owners experiencing potential rental income deficiencies since their local business lessees have been greatly affected by the COVID-19 crisis.

The program has been created to share the cost of small businesses with property owners. Local business occupants, as well as landlords, will each be asked to pay 25 percent of the previous rent cost, before profit. The provincial and federal governments will share the remaining 50 percent.

For example, say the monthly rent payment under a commercial lease for a local business is $10,000. In this instance, presume the property owner doesn’t make a profit (How this will be determined/monitored/enforced right now is anyone’s guess). The landlord gives up $2,500 (25% of rent). The small company would be accountable for paying $2,500 (25% of the rent). The government would cover $5,000. The federal/provincial split will be $3,750 from the federal government (37.5%) and $1,250 (12.5%) from the provincial government.

To obtain the funding, commercial property owners will need to reduce the rental expenses of small company tenants for April through June 2020 by a minimum of 75%. The funding is also contingent on the finalizing of an agreement or letter for rent reduction between the impacted tenant and the landlord. In addition to confirming the rent abatement for the 3 month period, it would also include a halt on distraint or termination for three months.

“You don’t build a business, you build people, then people build the business.”
-Zig Ziglar

How to apply for OCECRA

The OCECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC). Applications can be filed up until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.

“Bringing great people onto your team is about demonstrating that size really doesn’t matter – people do.”
-Jess Campbell

Are there any restrictions on the CERC/OCECRA?

The OCECRA small business relief program would apply to commercial properties with small business occupants. Commercial with a residential component, and mixed-use residential and commercial properties with at least 30% of the space being commercial, qualify as it relates to the commercial rental only.

The property owner must be both the registered owner landlord of the property. If a property owner does not have a mortgage registered against the commercial rental building, the owner has to contact CMHC. Then there will be a discussion if the property owner/landlord has any other type of debt that would allow it to qualify under the program.

What are the qualification demands for small businesses?

“Make something people want” includes making a company that people want to work for.”
-Sahil Lavingia

Are there any qualifications the small business commercial tenant must meet?

A qualified small company lessee is one that:

Pays a regular monthly rental not more than $50,000 in gross lease payments; and
is a non-essential local business that has had to shut down or that is experiencing a 70% drop in pre-COVID-19 earnings (identified by comparing earnings in April, May or June to the very same month in 2019.

Not-for-profit organizations and charitable entities would also be taken into consideration for the program.

“A small business is an amazing way to serve and leave an impact on the world you live in.”
-Nicole Snow

Are any kind of small businesses omitted from the CERC/OCECRA program?

The following excludes any business from this small business relief program:

businesses owned by people holding political office;
companies that promote physical violence, incite hatred or discriminate; and
a company placed in their lender’s special accounts group prior to March 1, 2020.

The impact this small business relief program will have depends of course on all the fine print that has not yet come out. For it to be successful, landlords have to agree to the program. A commercial tenant cannot apply on its own.

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”
-Jack Welch

Summary

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

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

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

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

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

“Find a great mentor, someone who has already been through the many challenges of being an entrepreneur..”
-Jodi Levine

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

Stay healthy and safe everybody.

Tags bankruptcy alternatives ontario, canada emergency commercial rent assistance, cerc, commercial tenant, coronavirus, covid-19, justin trudeau, letter for rent reduction, ocecra, ontario-canada emergency commercial rent assistance, pandemic, prime minister justin trudeau, small business relief program, small business relief program canada, small business relief program ontario

Brandon Blog Post

WHEN ARE TAXES DUE CANADA 2019?: ARE YOU SERIOUSLY CONFUSED?

Post author By Brandon Smith
Post date April 22, 2020

The Ira Smith Team is operating fully and both Ira, as well as Brandon Smith, are available for a telephone appointment, conference call or online video chat.

Stay healthy and balanced and safe everybody.

Introduction

This is the time of year where you see all the advertisements for income tax preparation services. There are always two parts to every income tax season: 1. preparing and filing your income tax return, and 2. getting your refund or paying what you owe. I have in the last couple of weeks received several phone calls from people asking when are taxes due Canada 2019? People seem to be confused.

So, in today’s Brandon’s Blog, I discuss when personal and corporate income taxes are due for both filing and payment. I also discuss what happens if you owe money and cannot pay and if CRA payment arrangements are possible.

“One thing is clear: The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government.”
― Ron Paul

When are taxes due Canada 2019 for Canadians?

This year, due to COVID-19, Canadians are allowed to file taxes later.

When can I file my taxes 2019 canada: When are taxes due Canada 2019? The deadline for people to file has been postponed to June 1, 2020. The due date to pay any kind of amounts owing has been extended to September 1, 2020. This includes the June 15, 2020, instalment payment for those who have to pay by instalments.

CRA self-employed income tax deadline: For individuals carrying on a business either as a sole proprietor or an unincorporated partnership in 2019, when are taxes due Canada 2019? Your return for 2019 needs to be filed on or before June 15, 2020. However, if you have a balance owing for 2019, you need to pay it on or prior to September 1, 2020. The June 15, 2020 instalment payment, for those that need to pay by instalments, is also due September 1.

When are corporate taxes due in Canada: When are taxes due Canada 2019? June 1, 2020, is the filing due date for all corporations that would otherwise have their filing due after March 18 and before June 1, 2020. The payment date for the fiscal tax year is September 1, 2020. This includes balances and instalments under Part 1 of the Canadian Income Tax Act due on or after March 18 and before September 1, 2020.

So when are taxes due Canada 2019 for trusts and charities? I am glad that you asked!

Trusts: When are taxes due Canada 2019? The filing for the current tax year, including the T3 information return, is extended to May 1, 2020. This applies to charities with a tax year-end of December 31, 2019.

The new filing date for all trusts that would otherwise have a filing due in April or May is extended to June 1, 2020.

Payment for the current tax obligation year is now September 1, 2020. This applies to income tax obligation balances and instalments due on or after March 18 and before September 1, 2020.

Charities: When are taxes due Canada 2019? The filing for charities with a Form T3010 due between March 18 and December 31, 2020, is now December 31, 2020. Obviously, registered charities do not need to bother with knowing their payment date, because they do not have one!

when are taxes due Canada 2019

What about International students?

I have seen a lot of chatter online about international students studying in Canada. This group has a challenging time determining whether they ought to file a Canadian tax return. This is because international students may not owe Canadian taxes or have access to all tax refunds or credits.

International students need to submit a tax return if they owe tax or if they intend to claim a refund or credits.

Considering that Canadian-earned income is constantly taxed in Canada, employment with a Canadian firm is a clear sign that you should submit an income tax return, even as a non-resident. Therefore, international students employed in Canada may find themselves either owing to tax or being able to claim a refund.

Students who have actually established considerable property connections to Canada can be considered residents of Canada. Significant property connections consist of a home, whether owned or rented, Canadian savings account or drivers’ license or living with a spouse or dependents.

Like all other Canadian citizens, international students under this classification are eligible for GST credits, tuition carry-forward credits, and other provincial credits or tuition rebates.

Students who spend less than 183 days (6 months) in Canada, and who do not establish residential ties in Canada, are usually classified as non-residents. Non-residents are not qualified for benefits or credits. They are just required to submit an income tax return to either pay taxes or to receive a refund on earnings from Canadian sources.

CRA payment arrangements

So you will remember I said there are two parts to when are taxes due Canada 2019 season: 1. preparing and filing the return, and 2. paying what you owe. Possibly you owe CRA back taxes and cannot afford to pay 2019 income tax. Regardless of when are taxes due Canada 2019, you have tried very hard to pay, but especially in this COVID-19 coronavirus world, you just won’t have the money.

If this sounds familiar, then one day you can expect to get a call from a CRA collection officer because of when are taxes due Canada 2019. They will listen to your story and suggest that you enter into a payment arrangement with CRA. They will, of course, expect you to pay the most possible. Once you reach an agreement, and you provide post-dated cheques to CRA, then you just need to make sure that each cheque clears on the payment due date.

But what happens if all the post-dated cheques you gave to CRA is only for say, one year’s worth of payments that do not pay off what you owe in total? Or worse, what if one of your cheques does not clear your bank for insufficient funds.

You will then get a call from a collection officer who says what you have done so far is not good enough. They will want details from you about your bank accounts. If it is your proprietorship, partnership or company, CRA will want a copy of your accounts receivable listing and all your bank account information, other than for the account you have given the post-dated cheques on. If you have a job, they already know who you work for.

What do they do with that information? They garnishee your wages and your bank accounts. By doing that, they can shut you or your company down without even having to go to Court. Then you will not be able to buy food, pay your rent or mortgage or run your business.

At that stage, you will have only one choice. That will be to not walk but run, to a licensed insolvency trustee in order to take steps for a formal restructuring of your debt. This will provide you with the time to free up your wages and bank accounts and run your business. That is the only way you will be able to survive.

Summary

I hope that you enjoyed this when are taxes due Canada 2019 Brandon’s Blog.

We are all citizens of Canada and we need to coordinate our initiatives 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.

I hope that you got some useful information from this when are taxes due Canada 2019 Brandon’s Blog. Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

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

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

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

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

Stay healthy and safe everybody.

Tags canadians are allowed to file taxes later, charities, coronavirus, corporate income tax, corporate tax, covid-19, cra payment arrangements, cra self employed income tax deadline, international students, Ira Smith Trustee, personal income tax, personal tax, self employed, trusts, when are corporate taxes due in canada, when are taxes due canada 2019, when can i file my taxes 2019 canada

Brandon Blog Post

REDWATER ALBERTA NEWS: $1.7B TO CLEAN UP ORPHANED WELLS DUE TO COVID-19

Post author By Brandon Smith
Post date April 20, 2020

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

Stay healthy and safe everybody.

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

Introduction

When it went insolvent in 2015, Redwater Energy Corp. (Redwater Alberta or Redwater) might have been a small business, with only 19 generating wells and 90 dormant wells. However, a relatively small oil producer was responsible for a huge Supreme Court of Canada (SCC) decision.

Basically, the SCC decided in the Redwater Acase, that if a business goes belly up, its environmental obligation needs to be paid before secured creditors. I have written before on the Alberta Courts’ decisions and the SCC decision. As a result of COVID-19, the Canadian government just announced a $1.7 billion fund to create jobs in the Canadian oil patch.

Redwater Alberta history of cases

In my previous blogs, I described the Alberta court decisions. The Alberta Courts concurred with the receiver and held that the regulator’s enforcement activities to force Redwater’s adherence to its previously agreed requirements to clean up and permanently cap its oil site, in bankruptcy was not enforceable.

The Courts stated that given the bankruptcy of the company (in addition to a receivership), the Bankruptcy and Insolvency Act (Canada) (BIA) took paramountcy over the provincial law. The provincial Courts said that the BIA took paramountcy because:

Allowed the receiver protection from the promises of Redwater Alberta as the licensee in connection with the Redwater properties disclaimed by the receiver/trustee, according to s. 14.06(4) of the BIA.
The priority for the distribution of a bankrupt’s assets is regulated under the BIA, not provincial legislation. If the provable claim of the Regulator, an unsecured creditor, was paid in advance of the claims of Redwater’s secured creditors, that would not be the regime laid out in the BIA.

The SCC decision

In the SCC 5 to 2 judgment in the Orphan Well Association v. Grant Thornton Ltd. case, the SCC ruled that financially troubled companies like Redwater can no longer disclaim or merely bow out of properties they don’t want. In this situation, non-producing oil wells, when abandoned or orphaned, leave the resulting ecological cleaning to Alberta’s Orphan Well Association. It is a non-profit operating for the Alberta Energy Regulator.

What the SCC decision in the case of the Redwater Alberta receivership means is that the costs of properly and permanently sealing an oil well that is to be abandoned is a first ranking charge against the producer’s assets. In the Redwater case, the receiver had to turn over the proceeds (about $600,000) from the asset sales to the Alberta regulator. There was absolutely nothing left for any other creditor, either secured or unsecured.

This case was obviously difficult and contentious, given that it was a 5-2 decision and not unanimous. The majority decision stated that:

The regulator’s use of its provincial powers is not in conflict with the BIA to trigger the doctrine of federal paramountcy.
Section 14.06(4) of the BIA deals with the personal liability of receivers and trustees and does not let a trustee ignore the environmental liabilities of the estate.
The regulator is not asserting any claims provable in the bankruptcy.
There is no attempt by the regulator to upset the scheme of priorities stipulated by the BIA.
There is not a conflict by the regulator tagging the Redwater receiver as a licensee under Alberta legislation.

The Supreme Court decision goes on to say that the rules cannot be ignored just because there is a bankruptcy. Insolvency professionals must abide by valid provincial laws in administering corporate bankruptcy. It also found that receivers and trustees must:

conform with non-financial requirements the insolvent company must still adhere to that do not create a provable claim in the insolvency administration; and
Adhere to the parts of the provincial legislation that does not go against the BIA, notwithstanding that it might prove harmful to the position of one or more groups of creditors.

COVID-19 and orphaned wells

Near the end of March 2020, Finance Minister Bill Morneau said that help for the oil and gas industry would be announced. This industry has been hit by two different factors:

Reduced demand due to people self-quarantining because of COVID-19 and therefore there is less demand for oil and gas.
The price battle between Russia and Saudi Arabia. Oil on the world market is at an all-time low. At one point, a barrel of Canadian oil was selling for less than $5. The industry cannot operate with oil prices that low.

As a result, there have been massive job losses in British Columbia, Saskatchewan and Alberta oil patches. As well, the regulators do not have the money to reclaim and permanently seal off the abandoned orphaned wells. It is currently estimated that the total cost could be in the $8 billion range.

On Friday, April 17, Prime Minister Justin Trudeau announced that the federal government will invest at least $1.7 billion to the orphaned well cleanup. The money is to be used to create oil patch jobs to allow for the environmental cleanup.

So COVID-19 or coronavirus, has forced the Canadian government to create this support for the Canadian oil and gas industry. It will create jobs badly needed and allow for the cleanup of some orphaned oil wells.

Details of the support package have not been released. Presumably, the legislation will have to be drafted and passed in the House of Commons. No doubt, more information will come out in the coming days or weeks.

Summary

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

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

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

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

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

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

Stay healthy and safe everybody.

Tags $1.7 billion, Bankruptcy and Insolvency Act, BIA, clean up, coronavirus, covid-19, insolvent, insolvent company, Ira Smith Trustee, justin trudeau, orphaned wells, provable claim, receiver, receivership, redwater alberta, Redwater Energy, Supreme Court of Canada, trustee

Brandon Blog Post

INSOLVENCY TRUSTEE TORONTO NEWFANGLED COVID-19 BUSINESS RESTRUCTURING PLAN

Post author By Brandon Smith
Post date April 16, 2020

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

Introduction

The COVID-19 pandemic has upended our world. Everyone is scared, has many questions and there is a lot of misinformation out there. So many businesses have shut down and do not know if they will ever be able to start up. As a licensed insolvency trustee Toronto, I fully understand the fear and panic that has set in.

First, I hope you and your family are safe and healthy. The purpose of this Brandon’s Blog is to show a newfangled business restructuring approach that recently occurred in the United States. As far as I can tell, there is no reason why this kind of restructuring plan could not work in Canada also.

Modell’s Sporting Goods, Inc. et al Chapter 11 bankruptcy proceedings

On March 12, 2020, U.S. Bankruptcy Court District of New Jersey Judge Victor Papalia issued the Order approving the Chapter 11 bankruptcy protection application of Modell’s Sporting Goods, Inc. and related companies (Modell’s) filed on March 11.

Modell’s is America’s oldest, family-owned ran store of sporting products, athletic footwear, active clothing and fan gear. It was founded in 1889 by Morris A. Model. The initial Modell’s store was located on Cortlandt Road in lower Manhattan, New York City. Four generations of the Modell household have run and grown the family company into a chain of over 150 stores throughout the Northeast.

Mitchell Modell, the company’s CEO and President said the company’s poor financial performance resulting in the Chapter 11 bankruptcy protection filing was because of many reasons, including:

unseasonably warm winter season;
six fewer days in the shopping season this year between Thanksgiving and Christmas;
competition from Amazon;
the futility of NYC’s sports franchises business like the Knicks, Jets and Giants has not helped either; and
the coronavirus pandemic

I personally doubt the losing records of the local sports franchises was a reason for Modell’s failure. How many years were the Toronto Maple Leafs awful but you always saw lots of Leaf fans with jerseys, caps and flags?

The novel court Order

On March 27, 2020, the Honourable Justice Papalia granted Modell’s court application making an order providing for both a bankruptcy suspension and an operational suspension. The bankruptcy suspension froze the bankruptcy protection proceedings until April 30, 2020 (the Suspension Period). The operational suspension, allows Modell’s to shut down all stores and not operate. The judge also gave Modell’s the right to apply on short notice to the court to extend the Suspension Period. The order went on to state the stay of proceedings is in effect during the suspension.

Novel times call for novel solutions. As part of their application, Modell’s filed a modified budget to indicate what sources of cash it would have and what expenditures it would pay during the Suspension Period. It also indicated what expenditures were being incurred, but not paid. Commercial rent on all of its stores was one of the items being accrued, but not paid.

The reason Modell did not include any commercial rent payments in its modified budget was simple. They had to close down all of their stores as a result of the coronavirus pandemic. Stores closed means no sales. They were not going to pay rent on stores that were not generating cash.

The court order approved the modified budget. It also confirmed that the only payments that Modell’s would make were those indicated as essential. The company deemed payments to all of its landlords as non-essential. The court order did indicate that the accrued but unpaid expenditures were not and were not deemed to be waived or not payable at some time.

Pier 1 Imports took a page from the Modell playbook

In February 2020, Pier 1 Imports, Inc. (Pier 1) filed for Chapter 11 bankruptcy protection as part of looking for a buyer of its operations. It then closed all of its stores in Canada and many in the United States.

On Tuesday, March 31, 2020, following the Modell’s precedent, sent a request to the U.S. Bankruptcy Court for the Eastern District of Virginia to temporarily stop paying commercial rent on its retail locations along with certain payments to suppliers, shippers, and distributors.” Pier 1 has now had to shutter all of its shops as a result of the COVID-19 outbreak.

Judge Kevin Huennekens throughout the hearing provided approval of these activities while allowing for it to be reassessed each month. Judge Huennekens additionally provided authorization to hold off on any motions anyone other than Pier 1 may wish to file up until at the very least 45 days after Pier 1 returns to normal operations and payments.

Could this happen in Canada?

So the question is, could an insolvency trustee Toronto help a company get this newfangled Modell’s/Pier 1 precedent happen in a Canadian bankruptcy protection restructuring? Right now landlords are reeling from their commercial tenants telling them that rent for April is not going to be paid due to the business closures. No doubt this will be the same story for every month that the closures continue.

Most landlords should be willing to work with their tenants. The reason behind the non-payment is from forces outside of everyone’s control. But what if a commercial landlord plays hardball. Can a Canadian company file for bankruptcy protection in Canada and obtain a Court order approving the non-payment of rent?

The two corporate restructuring statutes in Canada are the Part III Division I section of the Bankruptcy and Insolvency Act (Canada) (BIA) and the Companies’ Creditors Arrangement Act (CCAA).

There are no express provisions in either statute to invoke a bankruptcy or operational suspension. In fact, the opposite is true. In either a restructuring or liquidation, rent is calculated on a per diem basis for as long as the company in a restructuring or the insolvency trustee Toronto in a corporate bankruptcy, is using the premises. Fairness is part of the Canadian insolvency landscape. There are years of cases on this issue and they all end up the same. If you are in occupation, the rent must be calculated and ultimately paid.

However, there are two similar sections in each of the BIA and CCAA. Section 183(1) of the BIA reads as follows:

“183 (1) The following courts are invested with such jurisdiction at law and in equity, as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act…”.

The words “auxiliary and ancillary” has been interpreted by the courts to mean that the bankruptcy court in each province has the jurisdiction to sanction and authorize all acts required to be done for the proper administration of the Canadian insolvency system. This holds whether it is a bankruptcy protection filing or outright bankruptcy.

The CCAA offers more flexibility in a bankruptcy protection corporate restructuring than the BIA does. In general, the Court will reach its decisions in a CCAA restructuring on the basis of fairness and reasonableness. The court needs to be concerned that what is being proposed is not illegal and there are cogent reasons as to why what is being proposed serves to benefit all or the majority of creditors affected by the restructuring.

The CCAA, therefore, offers more judicial discretion than the BIA. Courts err on the side of giving the CCAA statue a large and liberal interpretation. The court supervising a CCAA restructuring will exercise its equitable jurisdiction. The application of equitable jurisdiction can be interpreted to mean equity considers done what ought to be done.

The judge in a CCAA bankruptcy protection case overseeing the CCAA proceeding is in a unique position. He or she is in the best position to determine whether or not an agreement should be suspended in the face of overly aggressive creditors who if allowed to act, would upend the entire CCAA process. Finally, Section 11 of the CCAA allows a judge to “…make any order that it considers appropriate in the circumstances.”.

So, to answer the question as to whether a Modell’s or Pier 1 type order could be made under a BIA or CCAA corporate restructuring in Canada, my answer would have to be yes. It is possible. I don’t believe it could be gotten on a regular basis, but, in this COVID-19 pandemic world, I can see it being obtained in the face of an aggressive and uncooperative commercial landlord. It would, of course, be uncommon, but these are unique times.

So the answer for a large Canadian retailer facing an unreasonable and aggressive landlord when the commercial rent is not being paid may be to file for bankruptcy protection under either the BIA or CCAA, as appropriate.

Insolvency trustee Toronto summary

The Ira Smith Team family hopes you and your family are staying safe, healthy and well-balanced. Our hearts go out to every person who has been affected either through inconvenience or personal family tragedy.

We are all citizens of Canada and we have to coordinate our efforts to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Family members are literally separated from each other. We look forward to the time when things can return to something close to normal and we can all be together again physically.

Ira Smith Trustee & Receiver Inc. has always employed clean and safe habits in our professional practice and continues to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Should you take advantage of the CEBA? I say a resounding YES!. I just wanted to highlight all of the issues that you should consider.

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

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

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

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

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

Tags Bankruptcy, Bankruptcy and Insolvency Act, BIA, CCAA, chapter 11, chapter 11 bankruptcy protection, commercial rent, Companies’ Creditors Arrangement Act, coronavirus, corporate restructuring, covid-19, insolvency trustee toronto, Ira Smith Trustee, licensed insolvency trustee Toronto, modell's, pier 1, restructuring

Brandon Blog Post

COVID 19 BUSINESS SUPPORT: CANADA EMERGENCY BUSINESS ACCOUNT REVIEW

Post author By Brandon Smith
Post date April 13, 2020

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

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

Introduction

The full information about the Canada emergency business account (CEBA) is now revealed. The Canada emergency business account application form, full details and the online-only application procedure appeared on April 9, 2020. Prime Minister Trudeau announced that this new program as part of the federal government’s overall program to provide COVID 19 business support. This program will see financial institutions supplying $40,000 in a loan guaranteed by the federal government. The loans are being processed and administered by the Canadian banks. The CEBA is really not a business account. It is a government-guaranteed loan of $40,000 that is interest-free till December 31, 2022.

In Brandon’s Blog, I will describe who qualifies for a CEBA and how it works. I will also point out some issues, which from what I can tell, have not yet been reported in the media.

The Ira Smith Team family hopes you and your loved ones are staying secure, healthy and balanced. We pray for every person that has been affected either through inconvenience or tragedy.

If you need our assistance, rest assured that Ira or Brandon can still assist you. We, of course, are not meeting anyone face to face. Telephone consultations and/or online meetings are available for anybody who has any questions or concerns they wish to discuss, either in a personal or business scenario.

The Canada emergency business account program

The CEBA has actually been specifically created by the Canadian government to provide COVID 19 business support to small and medium enterprises (SMEs) and non-profit organizations (NPOs) with their most immediate cash requirements during the COVID-19 crisis. The federal government will provide as much as $25 Billion to finance the CEBA program. The CEBA is a federal government assured funding to each qualified business of $40,000 that is interest-free up until December 31, 2022.

Loans under the CEBA will be interest-free for the first year and a half. As well, 25% of the loan, or $10,000, will be forgiven if the other 75% is repaid by the end of 2022.

“Don’t worry ’bout a thing, cause every little thing’s gonna be alright.” – Bob Marley

Canada emergency business account requirements

So who qualifies for the $40K CEBA? The requirements in order to qualify for a CEBA are not hard to meet. The CEBA is only available to incorporated companies and NPOs who have a registered federal business number that was operational on or before March 1, 2020. The CEBA is open to SMEs and NPOs with a total 2019 payroll between $50,000 and $1 million.

The CEBA COVID-19 business support plan is made to supply much-needed relief for Canadian SMEs and NPOs. It helps them to take care of and sustain them through this tough time. The CEBA is not available to proprietorships or partnerships. Therefore it is not available to the self-employed who did not set up their business through a corporation.

On the one hand, this might exclude an important group of businesses in Canada. On the other hand, when you think about it further, it makes sense. Given the extent of the underground economy in Canada, I doubt there are any unincorporated businesses in Canada with employees that in 2019 have run a payroll account, taken deductions and remitted them to Canada Revenue Agency. More than likely any unincorporated business in Canada that does have employees operates on a cash basis!

COVID 19 business support through small business relief

I have seen the CEBA described in the press as a federal program that will provide a $40,000 line of credit to qualified businesses at 0% interest until Dec. 2022. The CEBA is actually a one-time loan. It is not a revolving line of credit. What that means is that if approved, the SME or NPO gets the COVID 19 business support and receives the full $40,000 loan in one tranche upon approval. It then gets repaid according to its terms (further discussed below).

A traditional line of credit lets you borrow what you need up to your authorized amount. Then, when you deposit money into the account associated with the line of credit, the line automatically goes down by that amount. That then gives more borrowing room equal to the amount of your deposit. The CEBA does not work that way. It is a term loan, with specific repayment and default provisions. Once you make a partial payment against the loan, you cannot borrow against it further.

“Keep calm and carry on,” – British government WWII posters

The Canada emergency business account how to apply

The CEBA application process for COVID-19 business support is done all online. You apply through your bank where your corporation or non-profit keeps a business account. The application process is very simple. The best way is to show you.

So this is the application for the CEBA form. As you can see there are just a few steps you have to do to apply. You have to attest that:

you have the authority to bind the corporation
it is an operating business since March 1st 2020; and
that you have a federal tax registration number

You need to supply:

your CRA business number; and
that total employment income paid in 2019 is between $50,000 and $1 million.

You need to know that you can prove that amount by providing the 2019 T4 summary.

You have to have an active business and a business chequing operating account with the lender you are applying through for 90 days or more. You can only apply for the program once. Once approved, you cannot apply again through a different financial institution.

You must acknowledge that:

you might have to answer some surveys;
you have to not be a government organization or union that generates a portion of its revenue carrying on active business;
the owner doesn’t hold political office and
that your business does not promote violence, hatred, discrimination.

Then you have to click the box to certify you are in agreement with those conditions and that the information you provided is true and correct. Then you need to fill in the:

legal business name;
phone number;
email address;
bank branch and account numbers;
the business account number;
The business address; and then
your information as the business owner

You should read the loan agreement and the privacy agreement. Once completed, you click the checkbox to acknowledge that you read those documents, you agree to the terms and then click the submit button which will open up after you put in all the information and check the required boxes.

“The only thing we have to fear is fear itself” – President Franklin Roosevelt’s 1933 inaugural address

Canada emergency business account details important to know

There are some details in the loan agreement that everyone applying needs to know. Nothing I am going to tell you is meant to say do not apply for this COVID 19 business support. The opposite is true. Every business that needs this government-assisted loan should apply. I just want to provide value to you by pointing out some issues not publicized in the media.

The loan agreement is relatively simple. It sets out the terms and conditions of the loan being made. Here are the details:

Loan amount: $40,000
Initial term date: December 31, 2022
Extended term date: December 31, 2025
Interest rate: 0% per annum during the initial term. 5% per annum during the extended term
First interest payment date: January 31, 2023
Frequency of interest payments: monthly

At any time during the term of the loan, you may prepay all or any portion of it without penalty. If you have repaid at least 75% of the loan amount on or prior to December 31, 2022, the bank will forgive the remaining balance of the loan amount provided that an event of default has not occurred (more on that soon).

“A life lived in fear is a life half lived,” – Baz Luhrmann, director and co-writer of the 1992 Australian film “Strictly Ballroom”

Canada emergency business account – apply carefully

Now, the details that I am going to tell you will show you that you have to be careful which bank where your SME or NPO has a bank account you apply to. The $40,000 loan is deposited into your business account. Your business account will continue to operate in the normal course.

If there is a negative balance in your business account, as a result of an overdraft facility or otherwise, the proceeds of the loan will automatically repay the amount outstanding up to the loan amount.

So, if you are running an overdraft, first, the bank gets paid off. So in that case, you don’t get the full $40,000 to put into your business. This is obviously a perk to the banks provided by the federal government.

Next is the events of default. It is pretty simple. The bank may require you to repay

the loan, upon the occurrence of any one of the following events of default:

you default in paying any amount due under the CEBA loan;
you default in paying any other loan to the bank;
you fail to comply with any of the provisions of the CEBA agreement (which are not onerous), you make any false or misleading representation to the bank, including without limitation, in your CEBA application;
The SME or NPO commits an act of bankruptcy or becomes insolvent; or
a receiver is appointed for the business or any part of its property.

So this is why I say that if you have a business account at more than one bank for at least 90 days before March 1, 2020, you need to choose wisely which bank you apply through. As I already said, if you are running an overdraft at the bank, the first proceeds of the CEBA loan will go to pay off that overdraft. Second, if you choose a bank where you have other loans, if you default on any loan with that bank, not only is it an event of default on that loan, it is also an event of default under the CEBA loan.

“Worry is like a rocking chair: It gives you something to do but never gets you anywhere,” – Erma Bombeck

Although the CEBA is an unsecured loan, the bank has been given the right to call a default under the CEBA if you have done something unrelated to cause a default in another loan product. So, for example, if you have an event of default under your operating or capital term loan, that will cause a default in the CEBA also.

The loan is not personally guaranteed by the person applying on behalf of the SME or NPO. However, the loan agreement reads that it is binding “…on you, your heirs, your successors and personal representatives – including executors and administrators”. Now the words “You”, “Your” and “Yours” are defined in the loan agreement to mean the recipient of the loan under the CEBA agreement.

As far as I can tell, the applicant is the SME or NPO. I am not sure how those legal entities can have executors. Also, how could the agreement be binding on me personally or my heirs? Does that mean anyone who applies on behalf of their SME or NPO has personally guaranteed the CEBA loan? It looks that way, however, there is no express provision that the loan is personally guaranteed, other than for the wording I have shown you.

So that is what CEBA COVID-19 business support is all about. I applaud the federal government for this initiative. Whether it will be enough, along with the wage support that I previously wrote about, only time will tell.

“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” – physicist Marie Curie

Summary

Ira Smith Trustee & Receiver Inc. has always employed clean and safe habits in our professional practice and continues to do so.

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

“Don’t worry, be happy” – Bobby McFerrin

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

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

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

“Things could always be better, but things could always be worse,” – Marla Gibbs

Tags Bankruptcy, canada emergency business account, canada emergency business account (ceba), canada emergency business account application, canada emergency business account application form, canada emergency business account apply, canada emergency business account details, canada emergency business account program, canada emergency business account requirements, ceba, covid 19 business support, covid-19, insolvency, Ira Smith Trustee, who qualifies for 40k ceba

Brandon Blog Post

HST IN ONTARIO: NEED I USE THE HST IN ONTARIO 2020 DEFERRAL

Post author By Brandon Smith
Post date April 8, 2020

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

Introduction

The Canada Revenue Agency (CRA) has announced that it will allow businesses to postpone, up until the end of June 2020, any type of HST in Ontario (and other provinces) payments that are owing on or after March 27, 2020, and before June 2020.

This is all part of Canada’s COVID-19 Economic Response Plan. In this Brandon’s Blog, I outline this program and then discuss the issues surrounding taking advantage of this HST in Ontario 2020 coronavirus deferral.

The program

The due date for businesses located in Ontario and the other Canadian provinces to file their returns is the same. Those that are able to, must file their information return on-time reporting their net tax for the reporting period. Identifying the difficult circumstances many businesses find themselves in, the CRA has also said that it will not penalize a filer where a return is filed late provided that it is filed by June 30th.

If your business only has to file annually, any HST instalment payments due on or after March 27, 2020, and prior to June 2020 can be deferred until the end of June 2020. Again, there will not be any penalty or interest charged as long as the required amount is paid by the end of June 2020.

HST returns that are filed electronically will be processed as usual unless they require a CRA representative to become involved to get additional information or documents. In the case where a CRA human needs to get involved, those returns will not be processed until everything returns to normal. If you file your HST return by paper, they will not be processed until things return to normal.

If you are entitled to an HST refund, as long as you filed electronically, the refund will be processed normally and paid. This assumes that you do not owe any other amount to CRA that they could offset your refund against.

“Death, taxes and childbirth! There’s never any convenient time for any of them.”
― Margaret Mitchell, Gone with the Wind

An Ontario business using the HST in Ontario 2020 coronavirus deferral

It is certainly understandable that many businesses will take advantage of this deferral opportunity. The COVID-19 situation is unbearable for many companies. Businesses are either closed down or in most cases, earning fewer sales revenue. Cash needs to be preserved, and there may be more pressing needs for the cash than to pay the HST liability that is payable at this time.

However, there are five issues that I have identified that entrepreneurs and businesses, in general, need to consider. I am not saying to take advantage of the deferral or not. I am just pointing out issues to be wary of.

So the five issues I see are:

Cash flow in June 2020 – Right now it does not look like the current situation is going to change dramatically between now and June 2020. So, on June 30, 2020, your business may be in the same or worse shape than it is now from a cash perspective. If CRA does not extend the deadline, you are no better off. The ball was just kicked down the road for a few months.

When the “all clear” is sounded – Assuming CRA does not require payment until the “all clear” is sounded, your business will need whatever cash it can get its hands on to get up and running again. These costs could be significant. Staff needs to be brought back on and marketing will have to be ramped up.

There may very well be a lag between the time you incur and pay for those up front starting up again expenses and when the cash from your sales come in. Will CRA take these real business needs into account and give more lag time? Or, given all the money the government has to spend in fighting the COVID 19 epidemic, will CRA start demanding payments immediately after the “all clear” is sounded to try to improve the government coffers as quickly as possible?

Will your HST issues be doubled? – If you are not an annual filer, then in July 2020, there will be one or more periods for which HST could be owing. Will your business have the cash to spare to make up the payment for two or more HST periods all at once if CRA demands it? This could spell cash flow trouble for businesses also.

Director liability – Directors are always liable for unremitted HST in Ontario and other provinces. If your company takes advantage of the deferral, then the Director’s liability begins to compound. There is no way of getting around it, but it is an issue to consider.

Trust claim – A business that collects HST, holds the amounts collected from its customers in trust for CRA. Any unremitted amounts owing to CRA for each reporting period is a deemed trust claim against all of the assets of the company.

“You don’t pay taxes-they take taxes.”
― Chris Rock

Businesses are not supposed to make use of the deemed trust amount in their cash flow. On a practical level, all businesses do. If net HST is not paid, the CRA can garnish bank accounts, accounts receivable and any other income. Although they have not yet done it, they could also confiscate other assets.

If you have a deemed trust debt owing to the CRA, the business’s property is actually the property of CRA until the debt is paid off. A business, when it operates normally, is always making sales and collecting the tax on them. In between filing periods, even if the tax is all paid up with the previous filing, there is always a stub period between filings. So, technically, this debt works as revolving debt. So CRA always has that charge over a registrant’s property.

So once everything returns to the new normal, what will happen during the lag that is needed for businesses to use cash resources to get back up and running. Will CRA collectors continue to give a grace period, or will they start hammering your business right away using its normal collection procedures to collect the outstanding debt? Only time will tell.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
― Winston S. Churchill

Summary

These are the issues facing entrepreneurs and their companies and businesses concerning the HST in Ontario deferment. Should you take advantage of the deferral being offered by CRA? Only you can answer that question for yourself and your business. I just wanted to highlight all of the issues that you should consider. It isn’t a simple yes or no answer.

We are all part of our community and we have to all cooperate to help stop the spread of this infection. Social distancing and self-quarantining are sacrifices that are not optional. Families are physically separated from one another. I hope this information is helpful to you.

Ira Smith Trustee & Receiver Inc. has always employed clean and safe habits in our professional practice and continues to do so.

If anyone needs our assistance, rest assured that Ira or Brandon can still help you. Telephone consultations and/or virtual meetings are available for anyone wanting to discuss their personal or corporate situation.

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.”

― Mark Twain

The Ira Smith Team understands these fears. More notably, we know the requirements of the business owner or the person who has too much individual debt. Because you are dealing with these stressful financial issues, you are anxious.

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

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

“…but in this world nothing can be said to be certain, except death and taxes.”
― Benjamin Franklin

The Ira Smith Team is totally operational and both Ira and Brandon Smith are here for a telephone consultation, conference calls and virtual meetings.

Keep healthy and safe everybody.

Tags Canada Revenue Agency, coronavirus, covid-19, COVID-19 Economic Response Plan, CRA, hst deferral, hst in ontario, hst in ontario 2020, hst in ontario 2020 coronavirus deferral, hst in ontario deferral, hst instalment, hst refund, Ira Smith Trustee

Brandon Blog Post

CANADIAN TRANSPORTATION AGENCY APPROVES CEASE OPERATIONS TO CASH REFUNDS

Post author By Brandon Smith
Post date April 6, 2020

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

Introduction

As a result of the unprecedented situation caused by the COVID-19 pandemic, global airlines have either suspended operations entirely or are flying a shadow of their former schedule. Travellers are clamouring to get their money back. People who cannot work due to the coronavirus pandemic, need their money back to buy groceries or make their next rent or mortgage payment. While the Canadian government is working at warp speed to try to make things financially better for Canadians in the face of this virus crisis, it has also given the Canadian Transportation Agency the approval to give the airlines the clear for takeoff to ground your cash refund.

In this Brandon’s Blog, I describe how the government has given the airlines the green light to red light your refund and provide some useful suggestions.

The contract of carriage

Practically every country shut its borders to outsiders. On March 13, 2020, the Government of Canada provided a blanket travel advisory against all non-essential travel outside of Canada. Airlines, in action to the travel limitation, have cancelled trips. The friendly skies are a lot quieter these days.

When you purchase a flight you become a party to the airline’s contract of carriage. It is full of the usual legalese that you don’t read and just click accept as fast as you can. You do this because you really want to buy the ticket and you are afraid of losing that special reduced fare. It is a contract that sets out obligations between the airline and you and what happens in various events such as delay, cancellation by the airline and cancellation by the passenger.

The initial response of the airlines to COVID-19

Early on, the COVID 19 virus was just something that happened in China. It wasn’t something close to home. As the COVID-19 situation unfolded, the airlines implemented a number of policy changes to try to instill consumer confidence in members of the public who were thinking of voluntarily choosing not to fly. Most waived change penalties and allowed customers to seek credit for a future flight.

Most airlines became generous and allowed credit for even the most restrictive tickets, ones that normally become worthless when the passenger cancels. But what if the passengers didn’t proactively cancel and are left holding tickets for flights that aren’t operating because of the airlines, for one reason or another, cancelled on the passenger? Canadians are wondering now what happens to their money, at a time where they are already worried about an uncertain economic landscape.

Then the Canadian Transportation Agency changed everything

It is generally accepted under most contracts of carriage that when an airline cancels your flight they need to rebook you or provide a refund back to the original payment. COVID-19 has put all airlines in a liquidity crisis and they, like everyone else, need to conserve their cash. So, they do not want to give refund payment for all the cancelled flights. Especially with little to no revenue coming in right now.

Then the Canadian Transportation Agency came out with some important announcements. They were framed as public service announcements in keeping their staff and the general public safe from the coronavirus.

In reality, it is to help Canada’s airline industry. I am not saying that protecting Canada’s airlines is unnecessary or wrong, it isn’t. It just works against Canadians who need to be counting every penny. The announcements are:

Exempting the airlines from having to pay additional compensation to anyone whose flight was either delayed or cancelled.
Paused the dispute resolution mechanism between airlines and passengers until June 30, 2020. While passengers can continue to submit complaints, nothing is going to be done with them. The June 30 date is also subject to extension, depending on circumstances at that time.
Canadian regulations concerning the conduct of our airlines were created in anticipation of relatively localized and temporary flight interruptions. None contemplated the kind of global mass flight terminations that have taken place over recent weeks as a result of the pandemic. It is necessary to consider just how to strike a reasonable and also sensible balance between airlines and their passengers in these remarkable and also unprecedented situations. They went on to say that in general, a suitable method in the existing context could be for airlines to provide affected travellers with coupons or credits for future travel, as long as the vouchers or credits do not expire in an unreasonably short period of time (24 months would certainly be considered practical most of the times).

So there you have it. In one fell swoop, the Canadian government, through the Canadian Transportation Agency, sanctioned the airlines to not have to pay compensation or give people back their cash when the airline cancelled flights because of the travel bans.

What the airlines are doing

The airlines’ stance is that they are offering affected passengers a credit equal to the value paid, for use on future travel, for up to 24 months. I was one of the affected travellers. In response to an email, I received advising my flights were cancelled, my airline was insistent that I had to state, either in writing or on a recording, that I was cancelling my flight before I could receive the credit.

Hold on – I am not cancelling; the airline already cancelled my flight and my contract entitles me to a refund. The airlines are referring to the statement issued by the Canadian Transportation Agency which, after suspending hearing passenger disputes, seeks fairness amongst parties because they see the COVID-19 pandemic as a force majeure. Something outside of anyone’s control. Their guidance seeks to balance things by directing airlines to provide credit, not a refund.

So what can affected passengers do?

Customers who bought their tickets from the airline and paid by credit card may wish to attempt to initiate a chargeback. Credit card issuers are pushing back and a 3-way fight will ensue as they act as a mediator between passengers and airlines. I believe in most cases the offer of credit will be viewed as a reasonable compromise by the card issuers, in light of the Canadian Transportation Agency CTA guidance. Otherwise, they will have to either take the credit or see if they can book the same trip far enough out to guess when the “all clear” will be sounded and when they think they could get time off work to travel again.

Now, some people may think that since they bought insurance for their trip, they can claim against the policy. Wrong! If you have trip interruption insurance, that only covers you if you have already gone on at least the first leg of your journey, and are away from home. It covers your additional expenses if you need to return home sooner or later than planned and compensates you for non-refundable portions of unused, pre-paid travel arrangements.

Similarly, trip cancellation coverage also won’t help you. That coverage is in case you need to cancel your trip at the pre-departure stage. It can repay 100% of your trip price if you require to cancel your trip for a reason that is covered by the insurance.

What is so bad about credit for future travel?

So what’s so bad about a credit? When everything returns to normal, whenever that may happen, people will want to travel again and will have credit. Unfortunately, that doesn’t help anyone who really needs the money now that they paid for a vacation they can’t take anyway.

Worse, a credit, as opposed to a future confirmed reservation, is not payment for a defined service. Rather, it is your prepaid deposit and the airline’s ordinary unsecured debt to you. What if the airlines need to seek bankruptcy protection as a result of the financial stress being placed on them? What if like Air Canada bankruptcy protection, which it has already done twice before, they need to restructure under the Companies’ Creditors Arrangement Act (Canada) (CCAA). That unsecured debt could easily be compromised to the point where it either partially or totally vanishes. At least a future reservation cannot be eliminated (we hope!).

On March 27, 2020, a class-action lawsuit was filed in the Federal Court in Vancouver, B.C. It is on behalf of all Canadians who paid for flights not taken, cancelled and not refunded. The class is seeking a refund of the payment in its original form. So, if you paid by credit card, you get the cash put back on your card. If you paid in cash, you get back the cash. It will be interesting to see how that litigation eventually shakes out.

Summary

The Ira Smith Team family hopes you and your family members are remaining safe, healthy and balanced. Our hearts go out to every person who has been negatively affected either by mere inconvenience or misfortune. We salute Canada’s front line health care, police, fire emergency and safety workers.

All Canadians need to do their part to stop the spread of this infection. Social distancing and self-quarantining are sacrifices that are not optional. Unfortunately, families are separated from each other.

Ira Smith Trustee & Receiver Inc. has always employed clean and safe techniques in our professional practice. We continue to do so. We are not allowing any visitors to our office. If anyone needs our assistance, Ira or Brandon are available to help you. Telephone consultations and/or virtual meetings are available for anyone wanting to discuss their personal or corporate situation.

Are you now worried about how you are going to survive? Are you worried about how long your company will be able to pay employees who are not working and meet all of its other obligations? Those worries are normal. The executives at Canada’s airlines are also worried about the survival of their respective companies. Airlines may have to file for bankruptcy protection in order to do restructuring and turnaround.

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

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

Tags Air Canada bankruptcy, canadian transportation agency, canadian transportation agency cta, cash refund, CCAA, class-action lawsuit, Companies’ Creditors Arrangement Act, contract of carriage, coronavirus, covid-19, credit card, flight cancellation, Ira Smith Trustee, liquidty crisis, OTC-CTA Canada, pandemic

Introduction

Office Superintendent Bankruptcy Canada approves social distancing

Closure of non-essential businesses

COVID-19 insolvency frequently asked questions

Everything old is new again or “Throwback Thursday”

Summary

Introduction

Government of Canada student loan program announcement

Summer jobs for 2020

Fall 2020 to 2021 assistance for post-secondary students

Summary

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

Stay healthy and safe everybody.

Consumer proposal in Ontario: Introduction

Consumer proposals in Ontario: The issue

Effect of COVID-19 on consumer proposals in Ontario

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

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

Consumer proposals in Ontario: Summary

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

Introduction

The latest small business relief program announcement

The Ontario program

How to apply for OCECRA

Are there any restrictions on the CERC/OCECRA?

Are there any qualifications the small business commercial tenant must meet?

Are any kind of small businesses omitted from the CERC/OCECRA program?

Introduction

When are taxes due Canada 2019 for Canadians?

What about International students?

CRA payment arrangements

Summary

Introduction

Redwater Alberta history of cases

The SCC decision

COVID-19 and orphaned wells

Summary

Introduction

Modell’s Sporting Goods, Inc. et al Chapter 11 bankruptcy proceedings

The novel court Order

Pier 1 Imports took a page from the Modell playbook

Could this happen in Canada?

Insolvency trustee Toronto summary

Introduction

The Canada emergency business account program

Canada emergency business account requirements

COVID 19 business support through small business relief

The Canada emergency business account how to apply

Canada emergency business account details important to know

Canada emergency business account – apply carefully

Summary

Introduction

The program

An Ontario business using the HST in Ontario 2020 coronavirus deferral

Summary

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

Introduction

The contract of carriage

The initial response of the airlines to COVID-19

Then the Canadian Transportation Agency changed everything

What the airlines are doing

So what can affected passengers do?

What is so bad about credit for future travel?

Summary