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IF YOU DECLARE BANKRUPTCY WHAT HAPPENS? A COMPREHENSIVE OVERVIEW

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Introduction to Financial Hardships

In life, we often face unexpected challenges that test our resilience and determination. Such is the experience of people we help who have encountered financial hardships due to an unforeseen event outside of their control such as job loss. The burden of mounting debts and looming financial uncertainty weighs heavily on people, pushing them to explore solutions that would lead them toward a path of financial recovery.

That is who we help – the honest but unfortunate debtor. Dealing with financial hardships is a journey that tests our resilience and determination. It’s a path filled with unexpected twists and turns, challenging us to find the strength within ourselves to overcome the obstacles that come our way.

People with financial difficulties, particularly in the face of job loss, credit card debts, income tax debts and the contemplation of bankruptcy, learn valuable lessons about financial recovery, overcoming challenges, and the empowerment that comes from taking control of your financial future. That and if you declare bankruptcy what happens, is what this Brandon’s Blog is about.

Impact of That Unforeseen Event Outside Of Your Control On Your Financial Situation

The impact of that uncontrollable event such as losing your job goes beyond just the loss of income. It disrupts the stability we have worked so hard to build, leaving us feeling vulnerable and uncertain about the future. When someone becomes unemployed, they struggle to make ends meet, juggling bills and expenses with a limited budget. The stress and anxiety that come with financial insecurity can be overwhelming, but it’s during these challenging times that we discover our inner strength and resilience.

Struggles with Credit Card Payments and Bills

One of the most daunting aspects of financial hardships is the burden of credit card payments and bills that seem to pile up with each passing day. People find themselves caught in a cycle of debt, where the minimum payments barely make a dent in the overall balance. The constant worry about falling behind on payments and the fear of accumulating more debt can weigh heavily on our minds, affecting our peace of mind and overall well-being.

Considering Bankruptcy as a Viable Option

When individuals are confronted with substantial debt and limited solutions, the prospect of bankruptcy may arise as a challenging but potentially necessary step toward financial recovery. In my capacity as a licensed insolvency trustee (formerly known as a bankruptcy trustee), I assist individuals through a process of thorough research and consultation. My role involves guiding and comprehending the bankruptcy process, and its ramifications and exploring viable alternatives to bankruptcy. Opting for bankruptcy is a significant decision that individuals are supported in making through a careful evaluation of their financial circumstances, prospects, and personal aspirations.

Throughout the bankruptcy process, the individuals I work with gain invaluable insights into financial empowerment and the importance of seeking assistance when encountering financial challenges. While bankruptcy may lead to temporary implications on one’s credit rating, it also presents an opportunity for a fresh start and the possibility to rebuild a secure financial foundation. Engaging in the bankruptcy process fosters financial resilience and enhances individuals’ ability to navigate future financial decisions effectively.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Exploring Options: The Role of Licensed Insolvency Trustees

A journey towards financial recovery will lead you to a consultation with a licensed insolvency trustee. This no-cost initial consultation will become a guiding light offering insights and solutions to your financial challenges.

Engaging in consultations with a licensed insolvency trustee marks a crucial juncture in your financial path. Our proficiency and empathy equip debtors to comprehend the various solutions at their disposal and make well-informed choices regarding their financial destiny. By engaging in transparent and candid dialogues, you acquire the requisite insight to navigate the intricate bankruptcy process with strength and resolve.

In your journey towards your financial empowerment, the Trustee serves as a pivotal figure in facilitating the bankruptcy application process with the Office of the Superintendent of Bankruptcy Canada (OSB) and guiding you every step of the way. By taking this initial step, you are relieved of the responsibility of making direct payments to unsecured creditors and are granted a stay of proceedings, preventing creditors from initiating or pursuing collection or legal actions against you. This offers a sense of comfort and security, shielding you from additional financial pressures.

Despite the challenges you may be facing, you will find solace in knowing that certain assets may be safeguarded by provincial and federal laws, ensuring a measure of stability during this turbulent time. The Trustee’s guidance on surplus income payments, credit counselling sessions and debt repayment strategies instills a sense of discipline, confidence and commitment toward overcoming financial obstacles.

While the journey toward financial recovery may have its hurdles, the Trustee reassures you that every step taken will lead you closer to a brighter future. Though some people may have a narrow category of debts that may not be discharged, the prospect of rebuilding your financial foundation fills you with hope and optimism.

Through this experience, will learn that resilience in finance is not just about overcoming challenges but also about embracing the opportunity for growth and renewal. As you navigate through the bankruptcy process support provided by the Trustee paves the way for a new beginning filled with hope and possibilities.

If You Declare Bankruptcy What Happens? What is bankruptcy?

Definition of bankruptcy

Canadian bankruptcy is a legal process where an individual, a business or a company declares they are insolvent and are unable to meet their financial obligations. They work with a licensed insolvency trustee to legally file an assignment in bankruptcy. They do so to assign their unencumbered assets to the Trustee and get relief from their overwhelming debt load.

Laws governing bankruptcy in Canada

Navigating the intricate realm of bankruptcy in Canada is a dance choreographed by the Bankruptcy and Insolvency Act (Canada) (BIA). This piece of legislation orchestrates the delicate balance between debtors, creditors, and Trustees, each playing a unique role in the bankruptcy waltz.

When a debtor takes the courageous step of filing for bankruptcy, they are required to bear their financial soul to the Trustee, laying out their assets, liabilities, and monetary intricacies. The Trustee, like a wise conductor, then ensures a harmonious distribution of the debtor’s assets among their creditors, aiming to untangle the financial web that binds them.

For individuals, bankruptcy offers a chance at rebirth, a fresh canvas on which to paint a new financial future. However, for a company or business, it may signify the final curtain call for that legal entity. Yet, there exists a glimmer of hope in the form of selling core assets to a willing successor, potentially salvaging jobs and keeping the business flame alive.

In this intricate ballet of financial redemption, the Bankruptcy and Insolvency Act stands as the maestro, guiding the players toward a resolution that seeks to balance the scales of financial responsibility.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Who qualifies for bankruptcy?

Criteria for qualifying for bankruptcy

In Canada, debtors facing significant debt challenges and unable to meet their financial obligations to creditors may be eligible for bankruptcy relief. To qualify for bankruptcy, debtors must have a minimum of $1,000 in unsecured debt and have been residing in Canada for at least the previous six months before filing, or have a substantial connection to the country.

Alternatives to bankruptcy – Individuals

Depending on how pressing the person’s debts are, there are several alternatives to personal bankruptcy that a licensed insolvency trustee can walk you through. The most common alternatives are:

  1. Credit counselling and budgeting assistance: Sometimes people just need help understanding where their family income comes from and how it is spent. In cases like this, going to a non-profit credit counselling service to get some tips and help in developing a monthly household budget and sticking to it is all that is necessary for the household to get back on track.
  2. Debt consolidation: If you still can borrow money at a rate lower than the amounts you are currently being charged on high-interest-rate credit cards and payday loans, you need to look at debt consolidation. Rather than having several to many high-rate debts, if you can borrow the total amount of your debt from a bank or credit union at a much lower rate than you are currently paying and use that new loan to pay off your high-interest rate debts, that will help immensely. Now you have one lower interest rate loan to repay.
  3. Consumer proposal: A consumer proposal is a formal filing under the BIA, however, it is not bankruptcy. It is where you make a contract with your creditors to pay less than you owe in total. It is based on your monthly income, to offer making monthly payments to the Trustee towards your debt. Normally you pay around 25% of your total debt to the Trustee. If your creditors agree, you can take up to 60 months to complete a consumer proposal. When you have finished making your payments, you get a Certificate of Full Performance and the balance of your debt is wiped away.

Alternatives to bankruptcy – Companies

  1. Asset sales: Are there underused or redundant assets in the company that could be sold to raise needed cash to significantly reduce or eliminate corporate debt? This should first be explored.
  2. Refinancing: Can the company refinance to take advantage of a loan opportunity that will help with its cash flow through lower interest, monthly payments or both? Retiring expensive debt and replacing it with more manageable debt is another avenue to explore.
  3. Formal restructuring – BIA Proposal: Companies that have a viable but insolvent business can look at a formal restructuring. Although it is an alternative to avoid bankruptcy, it is commonly referred to as bankruptcy protection. A proposal under the BIA is where the company can negotiate with creditors to come up with a plan to repay its debts over some timeperiod of time. Just like in a consumer proposal, the company pays less than 100% of its debt load, but upon completion, eliminates all of its unsecured debt.
  4. Formal restructuring – Companies’ Creditors Arrangement Act (CCAA): Companies that owe $5 million or more can also restructure as long as they have a viable business. The CCAA allows a company to restructure its debts and business operations under the supervision of a court-appointed monitor. It is essentially the same as a BIA Proposal, but just under a different Canadian statute.
  5. A BIA Proposal and a CCAA restructuring a similar processes you always hear under the US bankruptcy law of bankruptcy chapter 11.

If You Declare Bankruptcy What happens to your assets, debts, and income during bankruptcy?

Going through a financial crisis can be incredibly challenging, but it’s important to remember that there is always a way forward. The people we help who go through the bankruptcy process are a testament to the resilience in finance and the power of financial empowerment as they use bankruptcy to turn their lives around.

Treatment of assets in bankruptcy

One of the concerns people have when considering bankruptcy is what happens to their assets. When someone goes bankrupt, they may not have to give up all of their assets. Let me explain as follows:

Secured debts: When you have assets where there are secured loans against those assets, such as a house or a motor vehicle, the Trustee’s interest is only the bankrupt’s equity in that asset. If there is little or no equity, and your monthly budget shows that you can afford to make the monthly loan payments and you wish to keep the asset, then you can do so. The Trustee will discuss with you ways in which the Trustee can realize the bankrupt’s equity without that asset being taken away.

Exempt assets: Certain provincial and federal laws safeguard some of your possessions when you file for bankruptcy. As provincial laws vary, you need to get the complete list from a licensed insolvency trustee in the area where you live.

Non-exempt assets: Non-exempt assets refer to assets owned by a bankrupt individual that are not protected by a secured creditor’s security interest or are exempt under provincial or federal laws. These assets fall within a category that the Trustee must liquidate to benefit the creditors involved in the bankruptcy proceedings.

Treatment of debts in bankruptcy

Once the bankruptcy application is filed with the OSB, a significant burden is lifted off the bankrupt’s shoulders. Direct payments to creditors cease, and the Trustee notifies all the creditors and there is an immediate stay of proceedings.

This means that any legal actions cannot be commenced or continued against the bankrupt and all collection activities, such as wage garnishment are put on hold. This offers the person much-needed relief from the constant financial pressure.

Some debts cannot be discharged, such as alimony, child support, valid secured loans and certain types of student loans. A Trustee in your no-cost initial consultation will look at the details of your debts and advise you if any would not be discharged from your bankruptcy estate.

While the decision to make the bankruptcy filing may seem daunting, it is a necessary step toward regaining control of your finances and eliminating the stress in your life. Knowing that your wages are protected from garnishment provides a sense of security during this challenging time.

Treatment of income during bankruptcy

While in bankruptcy, the Trustee monitors the person’s monthly income and expenses. The Trustee is required by the OSB and under the BIA, to do a calculation to determine if the bankrupt person has sufficient income to contribute towards his or her total debts by making surplus income payments to the Trustee.

The Trustee is required to do this calculation both at the time of the bankruptcy filing and throughout the time the person is an undischarged bankrupt. If the person’s income changes, either up or down, this will affect the calculation.

Although judgment creditors cannot garnish wages, it is possible that until the person gets their bankruptcy discharge, they may have to contribute something from their monthly income under the surplus income calculation. A licensed insolvency trustee can explain the calculation to you.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? How long does personal bankruptcy last?

Personal bankruptcy typically lasts for 9 months for a first-time bankrupt in Canada. Your first-time bankruptcy will extend to 21 months if you have to pay surplus income. If this isn’t your first bankruptcy, it will last longer.

At the end of this time, if you have fulfilled all of your bankruptcy duties and neither the Trustee nor any creditor who has proven their bankruptcy claim opposes your discharge, then you are entitled to your bankruptcy discharge. It is at the time you receive your discharge from bankruptcy, that your debts can be discharged.

If You Declare Bankruptcy What Happens? What Are Your Duties During Bankruptcy?

Responsibilities and obligations during bankruptcy

The primary responsibilities entail the disclosure of all assets, liabilities, income, and expenses. It is required to provide bank statements and other relevant records to support the information provided. In the event of a creditors’ meeting, attendance is mandatory.

Attendance at credit counseling sessions

Participating in the two mandatory counselling sessions is an essential component of a bankrupt’s journey toward financial recovery. Each counselling session is held with a person from the Trustee’s office who the OSB has licensed as a credit counsellor.

If You Declare Bankruptcy What Happens? What Is The Impact On Your Credit Score?

Impact on credit score during and after bankruptcy

Filing for bankruptcy in Canada can have a significant impact on your credit score, both during and after the bankruptcy process. Here’s a breakdown of what you can expect:

During Bankruptcy:

  1. Initial Credit Score Decline: Upon filing for bankruptcy, it is common for individuals to experience a substantial decrease in their credit score, typically by 100-200 points or more. This decline is largely attributed to the fact that bankruptcy is a matter of public record, leading lenders to perceive it as a high-risk event.
  2. Credit Reporting: Your credit report will reflect the bankruptcy filing and remain on your report for at least 6 years from the date of discharge (more on discharge below).
  3. Credit Inquiries: Lenders may conduct credit inquiries to assess your creditworthiness, which can further lower your credit score.

After Bankruptcy:

  1. Credit Score Recovery: After bankruptcy, your credit score will gradually recover over time. The rate of recovery depends on your credit habits and the steps you take to rebuild your credit (see next discussion).
  2. Credit Reporting: The bankruptcy notation on your credit report will remain for roughly 6 years from the date of discharge. After that, it will be removed from your report.
  3. Credit Score Objectives: Strive to attain a credit score ranging between 600 and 650 within 2-3 years post-bankruptcy. This will enhance your eligibility for improved loan conditions and interest rates.

Discharge:

In Canada, bankruptcy typically lasts for 9-21 months, depending on your financial situation and the type of bankruptcy you file for (e.g., consumer proposal or personal bankruptcy). Once you’ve completed the bankruptcy process and received a discharge, the bankruptcy notation will be removed from your credit report.

Rebuilding credit after bankruptcy

Tips for Rebuilding Credit After Bankruptcy:

  1. Monitor your credit report: Conduct a thorough review of your credit report to verify its accuracy and pinpoint any potential areas for improvement.
  2. Make on-time payments: It is imperative to make payments on time for all financial obligations to showcase a commendable track record of credit responsibility.
  3. Keep credit utilization low: Maintain a disciplined approach to managing credit by ensuring your credit utilization remains low and refraining from excessive spending. Additionally, exercise caution when seeking new credit opportunities by minimizing credit inquiries and refraining from submitting multiple applications within a condensed timeframe.
  4. Avoid new credit inquiries: Limit the number of credit applications you make and try to avoid applying for multiple credit products within a short timeframe. This will help you maintain a stable credit profile and minimize the impact of new credit inquiries on your credit score.
  5. Credit Score Rebuilding: If you’re looking to improve your credit after facing financial challenges, some practical steps you can take include applying for a secured credit card, becoming an authorized user on a family member’s credit account, or taking out a small loan. One relatively accessible option post-bankruptcy is getting an RRSP loan, where the RRSP is held at the same financial institution you’re borrowing from.

These kinds of loans must normally be repaid within 1 year. Making all loan payments on time and doing the same thing again the following year not only will rebuild your credit, but also build your savings.

If you declare bankruptcy what happens
if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? What are the consequences for your spouse’s credit and assets?

Spouse’s liability for joint debts

In Canada, when one spouse files for bankruptcy, sometimes it can have consequences for the other spouse’s credit and assets, depending on the type of bankruptcy and the couple’s financial situation. Here’s a breakdown of the most common issues.

  • Credit Score Impact: The non-bankrupt spouse’s credit score could be affected if they are jointly liable for certain debts with the bankrupt spouse. This is because it may view the non-bankrupt spouse as being the next to default.
  • Joint Debts: If the couple has joint debts, such as a mortgage, car loan, or credit card, the non-bankrupt spouse will still be responsible for paying those debts. This is because joint debts are considered a shared responsibility.
  • Assets at Risk: Any of the non-bankrupt spouse’s assets that are jointly owned with the bankrupt spouse, will be at some level of risk. For example, if the couple owns a jointly held property, the Trustee must recover the non-exempt equity of the bankrupt spouse’s assets. In jointly held property, this will on a practical level impact and involve the non-bankrupt spouse, who is the natural purchaser of the bankrupt spouse’s equity.
  • Credit Reporting: The non-debtor spouse’s credit report may reflect the bankruptcy filing depending on the type of bankruptcy, the credit reporting agency and any joint debts or debts guaranteed by the non-bankrupt spouse.

Types of Bankruptcy and Their Impact on the Non-Debtor Spouse

Consumer Proposal: A consumer proposal is a debt settlement agreement between the insolvent spouse and their creditors. In this case, the non-insolvent spouse is not directly affected by the consumer proposal filing, but they may still be responsible for paying joint debts.

Personal Bankruptcy: Personal bankruptcy is a more severe type of bankruptcy that involves the liquidation of assets to pay off debts. In this case, the non-insolvent spouse’s assets may be at risk if they are jointly owned by the bankrupt spouse.

Protection of spouse’s assets during bankruptcy

The time to put plans in place to protect the assets of each spouse is upon the acquisition of each asset when neither spouse is insolvent. Any transfers of assets aiming to shield them from creditors, will not be successful. Here are some tips:

Separate Property: If the non-insolvent spouse has separate property, such as a separate bank account or a separate property, it is generally protected from the bankrupt spouse’s creditors.

Exemptions: In Ontario, individuals going through bankruptcy can keep certain assets as exempt property. These include household furnishings and appliances valued up to $14,180, livestock, tools, and other items used in farming up to $31,379 for farmers, tools of trade up to $14,405 for self-employed individuals, one motor vehicle worth up to $7,117, equity in a primary residence not exceeding $10,783, and funds in registered plans like RRSPs, RRIFs (other than contributions in the 12 months preceding the bankruptcy), and life insurance policies with designated beneficiaries such as a parent, spouse or child.

Credit Counseling: Additionally, credit counselling might be a good idea for the non-bankrupt spouse.

If You Declare Bankruptcy What Happens After You Are Discharged From Bankruptcy?

Discharge from bankruptcy

The effects of an absolute discharge from personal bankruptcy for the person are substantial. As soon as an outright discharge is granted, the debtor is no longer accountable for any type of unsecured debts that existed at the date of bankruptcy (with a few specific exceptions). The debtor is launched from needing to pay back debts that they took on before applying for bankruptcy.

This indicates that the debtor no longer has to stress over paying back those financial debts and can move on with their life. This supplies a clean slate for the borrower and helps them return to their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged? If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9-month bankruptcy period. To qualify for this automatic discharge, you must have:

  • attended the two mandatory financial counselling sessions with the Trustee;
  • no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate
  • according to guidelines set by the OSB or Official Receiver); and no opposition to his or her discharge. The only party that can authorize an
  • automatic discharge
  • in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

Rehabilitation and rebuilding finances after bankruptcy – A Path to Financial Freedom

Rehab after personal bankruptcy entails a combination of finance management, debt administration, and as indicated above, credit rebuilding. The goal is to produce a sustainable economic strategy that permits you to manage your debt, reconstruct your credit, and achieve lasting financial security.

The key steps to rehabilitation are:

  1. Get your bankruptcy discharge: Attend the two mandatory financial counselling sessions with your licensed insolvency trustee firm, fulfill all your other duties in the bankruptcy administration and obtain your discharge from bankruptcy
  2. Create a Budget: Continue tracking your income and expenses to identify areas where you can cut back and allocate funds more effectively. A budget will help you prioritize your spending and make informed financial decisions.
  3. Prioritize Debt Repayment: Focus on starting within your budget spending so that you can pay your bills every month on time in full.
  4. Rebuild Credit: Use the tips I listed above to rebuild your credit.
  5. Screen Credit Reports: Obtain a duplicate of your credit report and correct any type of mistakes or errors to guarantee your credit score is accurate.
  6. Seek Professional Guidance: If you feel you need an element of accountability to help you in your rehabilitation, seek out a non-profit credit counsellor or financial coach to give you personalized guidance and support to help you navigate the rehabilitation process and achieve your financial goals.

Rehabilitation after bankruptcy can have numerous benefits, including:

  • Improved credit scores
  • Reduced debt burden
  • Increased financial stability
  • Greater financial flexibility
  • A fresh start

    If you declare bankruptcy what happens
    if you declare bankruptcy what happens

If You Declare Bankruptcy What Happens? Looking Towards a Brighter Future Conclusion

The people we help through personal bankruptcy for their journey of financial recovery are filled with a sense of gratitude and hope. The impact of understanding their credit rating, navigating the bankruptcy process, and embracing the steps toward recovery are profound. It not only tests their resilience in finance but also empowers them to envision a brighter future filled with possibilities through a fresh start.

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

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

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

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

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

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

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

If you declare bankruptcy what happens
if you declare bankruptcy what happens
Categories
Brandon Blog Post

PROS AND CONS OF BANKRUPTCIES CANADA: A HEALTHY FRESH START OR THE LAST RESORT?

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Evaluating the pros and cons of bankruptcies Canada: Introduction

When you are in debt, it can feel like you are stuck in quicksand – the more you struggle, the deeper you sink. If you are considering bankruptcy, you are not alone. According to the Office of the Superintendent of Bankruptcy (OSB), almost 100,000 Canadians filed either a consumer proposal or for bankruptcy in 2021. The numbers for 2022 are rising above the 2021 level.

Before you make a decision, it is crucial to weigh the pros and cons of filing for bankruptcy in Canada. On the positive side, bankruptcy can give you a fresh start. It can discharge your debts and give you a chance to rebuild your finances. On the negative side, bankruptcy can damage your credit score more than one of the bankruptcy alternatives.

If you are struggling with debt, there are other options to consider before bankruptcy. You may be able to negotiate with your creditors and set up a payment plan. You can also improve your financial situation by cutting expenses and increasing your income. If you decide that you do need an insolvency process, a consumer proposal or a Division I Proposal may be better for you.

In this Brandon’s Blog post, I wish to aid you in gaining a better understanding of the pros and cons of bankruptcies Canada. Then you can make a much more educated choice about your financial debt issues.

What are the pros and cons of bankruptcies Canada?

When it comes to making the decision to file for bankruptcy, it is important to understand all of the implications that this will have on your life. In Canada, bankruptcy is a legal process that allows individuals to discharge all of their debts if they are unable to repay them. This process is overseen by the OSB, and there are certain requirements that must be met in order to be eligible for bankruptcy.

While bankruptcy can provide relief from debt, it is not without its drawbacks. Once you have been declared bankrupt, your credit rating will be significantly damaged, which can make it difficult to obtain new lines of credit in the future. Additionally, your assets may be seized in order to repay your creditors.

Before making the decision to file for bankruptcy, it is important to weigh the pros and cons carefully. Speak with a financial professional to get advice that is specific to your situation. Now for a more detailed discussion on the pros and cons of bankruptcies Canada.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The pros of bankruptcies Canada

A fresh start

If you’re sick of being in debt, bankruptcy might be a good option for you. It can be a fresh start, and it’ll get creditors off your back. You can move on with your life without all that stress.

Rebuild your credit

As stated above, bankruptcy will cause some damage to your credit. However, it can stop the continuous damage you may be facing now. You can begin rebuilding your credit rating, rather than having to face extra charges from missed payments as well as receiving those pesky telephone calls from bill collectors.

Get rid of most if not all of your debts

In most cases, all of your obligations will be cleared by your bankruptcy discharge. Normally cleared debts are your unsecured debts like credit card debt, lines of credit, personal loans, payday loans, and income tax debts. A bankruptcy filing will let you not worry about a ton of bills but will force you to focus on balancing your budget.

There are some obligations that bankruptcy cannot clear, like child or spousal support payments, or payments for fines or penalties awarded by a court. You can get your student loans discharged too as long as you’ve been out of school for 7 years or even more.

Stop debt collectors cold

Creditors and their debt collectors making their collection calls can be pretty aggressive when they’re trying to get paid. Bill collectors demand and try to scare you as to what will happen if you do not pay up. Answering your phone or checking your VM becomes terrifying. You might also have a ton of mail from them stacking up in your mailbox, inbox, and so on.

If you’re losing the battle of staying up to date with your bill payments, personal bankruptcy might be a good option for you. Declaring bankruptcy stops all collection efforts, including calls as well as letters from your creditors. This is called the “automatic stay of proceedings”. When you’ve filed an assignment in bankruptcy, the automatic stay goes on and offers you some breathing space.

Get rid of any wage garnishment

If you file for bankruptcy, you don’t need to worry about wage garnishment or legal action anymore. The stay of proceedings also prevents any further attempts at collection, including wage garnishment. Creditors and collectors also won’t be able to take you to court.

Bankruptcy is not forever

So, if you’re thinking about filing for the bankruptcy process, know that it usually takes about nine months to go through the process for a first-time bankrupt who does not have any surplus income payments to make to your Trustee. And, if the Licensed Insolvency Trustee handling your case finds that you have surplus income, you won’t be able to get a discharge for 21 months.

If this is your second bankruptcy, it will take longer. If you don’t have surplus income payments to make, it will take 24 months. If you do need to make surplus income payments, it will take 36 months.

These are the pros when considering the pros and cons of bankruptcies Canada. Now for the cons!

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The cons of bankruptcy

There are many cons of filing bankruptcy, including:

Your credit rating

If you file for bankruptcy, it’ll rank you as an R9 on your credit report, which is pretty bad news for your credit score. The damages to your credit rating will not last forever. Your very first personal bankruptcy will be noted on your credit record for 6 years after the day of your bankruptcy discharge. A second bankruptcy will certainly harm your credit score for a lot longer.

At the outset of your bankruptcy journey, you cannot see the light at the end of the tunnel. At least you now have a roadmap to restoring your credit and have a date when your credit will be cleared of any damage. You can start to rebuild your credit even before you are discharged from bankruptcy.

Your assets may be liquidated

This doesn’t mean that you’ll lose everything. Your personal belongings – like clothes, household items, work tools, and even a car under a certain value – usually can’t be taken away from you in bankruptcy. This means that the proceeds from the sale of your other non-exempt assets will be used to repay your creditors.

RRSP contributions in the past 12 months are not exempt

Your retirement savings are protected, but any contributions you made in the past 12 months to your RRSP are not exempt.

Surplus income and the cost of bankruptcy

If you’re making more money than the surplus income threshold, you’ll also have to make surplus income payments to your Licensed Insolvency Trustee. If you don’t have any assets and don’t have to pay the surplus income requirement, you or a relative will have to pay your Trustee’s fee.

Complete financial disclosure

You will need to make full financial disclosure to your Trustee. Your Licensed Insolvency Trustee will use that information to help you complete a Statement of Affairs. This disclosure details your financial position and will even potentially highlight certain financial transactions. Essentially your Trustee and the court will know everything about your finances and your creditors will get a peek too.

When you’re going through bankruptcy, you’ll need to hand over your tax docs and pay stubs to show how much you’re earning. This is how the Trustee decides if you’ve gone over the surplus income threshold.

A lasting record

Once you file for bankruptcy, the paperwork will become part of the public record in Canada. To start your bankruptcy, your Licensed Insolvency Trustee files your bankruptcy documents with the OSB. It then becomes part of the public record.

Most people who file for bankruptcy will only have their Trustee, the OSB, the court, their creditors and the two Canadian credit bureaus know about it.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Bankruptcy alternatives from pros and cons of bankruptcies Canada

Now that you understand the pros and cons of Canadian bankruptcies, you must just consider this option as a last choice. If you can solve your financial problems without experiencing the unfavourable elements of personal bankruptcy, that is the most effective way to go.

During your initial no-cost consultation, the Licensed Insolvency Trustee will help you should explore all the bankruptcy alternatives. I have written before in more detail about each of the bankruptcy alternatives listed below. I have included a link to each of those more detailed blogs. The main alternatives to bankruptcy are:

Debt consolidation

If you’re aiming to leave financial debt behind, debt consolidation could be a good alternative for you. By rolling all your financial obligations into one financing with a lower rate of interest, you will save money from the lower rate of interest on the new consolidation loan and leave your debt behind much faster.

Just make sure that you understand the current interest rates you are being charged, the total of your monthly payments that you currently may or may not be able to afford, the interest rate being offered to you on a debt consolidation loan, what your new monthly payment will be and make sure that you have a realistic budget of your monthly income and monthly expenses that shows that you can afford the new payments on a monthly basis.

Credit counselling

Credit counselling is a process whereby a person in debt meets with a credit counsellor to discuss their options for dealing with their debt. The credit counsellor will assess the person’s financial situation and provide advice on how to best deal with the debt. This may include negotiating with creditors to reduce interest rates or monthly payments and setting up a debt management plan.

As I have written many times before, you should only go to a community-based non-profit credit counselling agency that does not charge any fees. If the credit counsellor you choose wants to charge you fees, get out of there. It is not the best choice for you.

Debt settlement

Debt settlement is a process in which you can negotiate with your creditors to pay less than the full amount you owe. This can be a good option if you are not able to pay your debts in full and you are willing to negotiate with your creditors.

Debt settlement works well if you only have 1 or a few creditors. If you have many creditors, debt settlement is much more difficult in making sure that everyone remains on board with the negotiated settlement and that you will have enough money to pay the lower settled amounts you promised.

Many times with a multitude of creditors, either a consumer proposal or a Division I Proposal is the most effective way to bind everyone in a debt settlement process.

Like in credit counselling, I urge you to stay away from debt settlement companies that charge fees. What they do is charge you unnecessary fees, try to sell you products you don’t need and then when they cannot sell you any more products and their debt settlement techniques do not work, they then walk you to their favourite Licensed Insolvency Trustee for an insolvency process, which might just be a bankruptcy.

I would rather see you use your accountant or lawyer if you do not feel comfortable negotiating yourself. Those professionals will have your best interests at heart in return for their fee. They also won’t try to sell you more products.

Consumer proposals

When it comes to debt of $250,000 or less (other than for secured debts registered against your home), there are a number of options available to help you get back on track. One option is a consumer proposal.

A consumer proposal is a formal debt relief and debt-settlement option available in Canada. It is a legally binding agreement between you and your creditors. Under a consumer proposal, you agree to repay a portion of your debts, and your creditors agree to forgive the rest.

A consumer proposal can be an attractive option for many reasons. First, it can help you get out of debt without having to declare bankruptcy. Second, it can help you keep your assets, such as your home or car. Third, it can give you a fresh start by wiping away most, if not all, of your unsecured debts.

If you’re considering a consumer proposal, it is necessary to obtain assistance from a qualified expert. A Licensed Insolvency Trustee, who is also a consumer proposal administrator in Canada, can walk you through the process and answer your questions. This will allow you to see if it’s the right choice for you.

Division I Proposal

If you owe more than $250,000, a Division I Proposal is a great option to settle your debts. It’s not as streamlined as a consumer proposal, but it’s still a great way to get out of debt.

Other than these technical differences, it has the same aim as a consumer proposal: to provide a debt settlement option that will bind all unsecured creditors and get the person back onto their feet free of the stress and burden of their unmanageable debts.

Either a consumer proposal or a Division I Proposal are excellent debt relief options approved by the Canadian government. One of the other benefits of either of these two debt settlement options is that the person will also receive two mandatory financial counselling sessions. Getting this education will help put the person on the right track for the rest of their life.

Understanding the advantages of bankruptcy and also the disadvantages of bankruptcy for companies

When a company faces overwhelming debt, bankruptcy may seem like the only way out. However, there is only one advantage and one disadvantage to bankruptcy for a company.

One advantage of this situation is that the Trustee may be able to sell the assets to a purchaser who will then be able to use those assets to continue the former business of the company in a profitable way. This could potentially save some jobs, at least for the key employees of the old business.

The one disadvantage is that unlike a person, when a company goes bankrupt, the corporate legal entity is now dead.

Before the Directors of a company decide to bankrupt the company, they should determine if certain divisions or parts of the business can be saved and operate profitably if the unprofitable part(s) could be eliminated. If so, a financial restructuring can be done to turn this unprofitable company into a viable and profitable one and save some jobs in the process.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Pros and cons of bankruptcies Canada: Summary

I hope you enjoyed this Brandon’s Blog on the pros and cons of bankruptcies Canada.

People are falling behind with stagnant wages or tiny wage increases while there is runaway inflation and they are falling deeper and deeper into debt. Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

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, while explaining the pros and cons of bankruptcies Canada or any other of our recommendations.

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. There are many pros and cons of bankruptcies Canada. Whatever process we recommend for you will, we will do so in order to minimize any cons you may experience.

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 financial life, Starting Over, Starting Now.

 

 

pros and cons of bankruptcies canada
pros and cons of bankruptcies Canada pros and cons of bankruptcies canada
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Brandon Blog Post

DEBT MANAGEMENT IN ONTARIO PLAN: HOW TO GET A METICULOUS ONE TO WORK FOR YOU IMMEDIATELY

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

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

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

debt management in ontario
debt management in ontario

What is debt management in Ontario?

The term “debt management in Ontario” can mean a lot of things to Ontario residents. There are debt management companies that offer a range of services, from credit counselling to debt settlement. In Ontario, these organizations offer their debt management services exclusively to individuals and not to businesses. Debt management is a process that helps you manage your debt and get it under control. A debt management program can only be successful if the person also learns new behaviours in how they deal with money and debt.

WARNING: The Canadian government has put out a consumer alert. This alert, titled Consumer Alert: What you need to know when getting help to pay off debt or repair your credit, warns Canadians about unscrupulous debt settlement companies and what you need to know. In many Brandon Blogs, I have also put out that same warning. There are only two choices when seeking the right credit counsellor to review your alternatives to deal with out-of-control unsecured debt, including tax debt. Legitimate debt management services in Ontario are provided via two types of specialists: accredited community-based non-profit credit counselling agencies and federal government accredited and supervised licensed insolvency trustees.

I recognize that debt is a huge issue for many people in Ontario and all of Canada. Most individuals do not also understand the massive influence it can have on them but trust me, it is all too genuine. In this Brandon Blog post, I review the different alternatives readily available to people looking for debt management in Ontario.

What is debt management in Ontario plan?

A debt settlement plan (debt management plan or DMP) is a tool supplied by a non-profit credit counselling agency that can help you get control of your money and back on course to living the debt-free life you wish to lead. Your dedicated credit counsellor can help you identify if becoming part of a DMP is appropriate for you. If not, the non-profit credit counsellor can lay out all your available alternatives.

For hard-working people who struggle to meet their monthly bills, a debt management plan might be the answer. Under the terms of a DMP, a person consolidates all of their unsecured debt under one plan. This plan, developed by any one of the many qualified counsellors, usually involves making a single regular payment, a monthly payment, under a debt repayment program, to the credit counselling service. The non-profit accredited credit counselling agency then distributes this money to creditors.

This kind of repayment plan can take normally as long as 5 years to pay off 100% of your unsecured type of debt, but it can also be the solution that allows a person to become debt-free quickly. It’s important to note that such an informal debt management in Ontario plan may not be the best option for everyone.

What to consider before you sign up for debt management in Ontario

There is one major thing to consider before you sign up for a DMP. Before you take out a DMP, you want to make sure that you are in a position that allows you to pay off your debt without the assistance of your creditors.

In a DMP, you are promising to pay your creditors 100% of the principal you owe them when entering into the debt management plan, with no reduction from the total owing. So you need to have established a realistic budget working with your credit counsellor, for the entire DMP period showing you will be able to afford to maintain the monthly payment you are promising to make.

Will creditors continue to contact me while I’m on a Debt Management Plan?

debt management in ontario
debt management in ontario

Most people view the DMP as merely a temporary solution until you have paid off all debts. But in fact, if done properly and taken seriously, it is a legitimate solution and behavioural modification program. If you learn the budgeting skills and accept the financial advice in the program and follow them as a permanent change to your money management behaviour, it will allow you not only to focus on paying down your debt load while you are in the program but teach you the necessary skills to not get into financial crisis in the future. You will have the money to make each regular payment to pay off your normal bills and live a financially healthy life.

Once you’ve signed up for a DMP, your credit counsellor will communicate with your unsecured creditors to advise that you are under their program and that payments to creditors will be coming from the non-profit credit counselling agency. Your unsecured creditors will note that in their respective files and focus their communications to be with the debt management program credit counselling agency.

Does debt management in Ontario hurt your credit?

Most people entering a program for debt management in Ontario are on the financial edge of the ledge already. If they default on their debts, it will produce a lower credit score. While a DMP will lower your credit score at first, in the long run, if you keep up with the program and stick to your payment schedule and make your debt payment plan payments on time as agreed, your credit score will eventually improve.

Do I have to give up my credit cards in debt management in Ontario Program?

The question of whether you need to give up your credit cards in a DMP is among the most common inquiries we get asked by debtors. The answer is although there is no law that says you must surrender your bank card for financial debt management in Ontario plan, you do need to quit borrowing. This includes using your existing credit cards.

However, you can still utilize a secured credit card up to the limit you set with your financial institution that issued it. More likely though, the credit card firm will certainly remove your account once they obtain notification of your DMP.

When you’ve effectively finished your financial debt management in Ontario program, you will become eligible for a normal credit card once more.

What to do during your debt management plan

The Canadian government recommends that you:

  • ask the credit counselling agency for timely written reports on the status of your plan,
  • keep good records of all amounts you pay to the agency, and
  • get receipts of all money you pay to them as well as regular reports of amounts they pay to your unsecured creditors for you.

Carefully review your records and the regular reporting you receive from the agency. Ensure they are paying your creditors on time. This will keep you clear of any type of late fees or further adverse notations on your credit report.

debt management in ontario
debt management in ontario

What are the disadvantages of debt management in Ontario plan?

There are a few possible drawbacks to hopping on a DMP. However, in my view, they are not enough to stop you from doing one if you can afford it. The disadvantages are also common to any debt settlement in Ontario plan.

In no particular order, they are:

  • It won’t cover every one of your outstanding debts. DMPs typically won’t include your secured debts and some unsecured debts, such as student loans. This is especially true if you are still in university or college, have not finished your course of study and need to continue to apply for student loans because you wish to continue either as a full-time or part-time student.
  • Credit counsellors can guide you but will have to take your secured debt payments into account when establishing your monthly budget. You’ll typically need to manage those debts on your own. If you do not have any money left over each month after accounting for secured debt payments, rent or mortgage, food, income tax and other essential monthly purchases, then a DMP will not be possible for you.
  • There could some service charges to pay for the DMP.
  • As indicated above, no real accessibility to credit.

During the initial counselling session, the credit counsellor can help you review your realistic options. Perhaps you can still qualify for an Ontario debt consolidation loan. Keep in mind that if that is an option, you will need to be mindful of the effective interest rate you will be paying on your loan, albeit at an annual rate much less than on your existing debt.

If neither a DMP nor a debt consolidation program are viable debt consolidation options or debt settlement options for you, then you will need to explore with a licensed insolvency trustee the other debt relief options of either a consumer proposal or bankruptcy to eliminate your unsecured debt.

How long can you legally be chased for debt in Ontario?

The answer is two years. A Judge of the Ontario Superior Court of Justice In Bankruptcy and Insolvency recently released a decision. It was an appeal from the decision of a Master sitting in the same court. The case was about the issue of a claim which is statute-barred under the Ontario Limitations Act.

Section 4 of this Act says that you cannot enforce an outstanding debt for a claim the creditor has after 2 years from when the claim was discovered. This includes the day on which a creditor initially should have recognized they had a claim which called for enforcement.

This case was about a creditor filing a proof of claim in a debtor’s personal bankruptcy. The licensed insolvency trustee disallowed the claim because the claim was statute-barred. The creditor appealed the Trustee’s decision to the Master sitting in bankruptcy court. The creditor argued that although legal action cannot be taken on the debt, it does not mean that the debt still does not exist. The Master dismissed the creditor’s appeal and upheld the Trustee’s decision.

The creditor then appealed the Master’s decision to a Judge sitting in the same court. The Judge reviewed the matter and upheld the Master’s decision.

What this decision says is that not only can a debtor not be chased for a debt if no legal action was commenced within the 2 year period, they can’t even file a proof of claim in the debtor’s consumer proposal or bankruptcy!

However, keep in mind that just because it is no longer a legal debt, the creditor would have made a notation with the credit bureau for your credit report before the two-year period ended. So the damage to your credit score has already taken place.

Can a Trustee do a debt management plan?

The answer is a Licensed Insolvency Trustee can do for you the equivalent of a DMP. Consumer proposals can only be administered by a Trustee. Consumer proposals are also the only federal government-approved debt settlement plan in Canada. To be equal to the result of a DMP, you would offer to your unsecured creditors to pay them 100% of all the unsecured debt that you owe. Remember, above I stated that a DMP pays 100% of your unsecured debt.

There are many similarities between a consumer proposal and a DMP if you offer 100%. But as I indicate below, you can still have a successful consumer proposal by offering less than 100% to settle all of your unsecured debts. For details on how a consumer proposal works, check out my Brandon Blog, CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS.

debt management in ontario
debt management in ontario

Which is better? A debt management plan In Ontario vs consumer proposal

Everyone’s financial situation is unique. A DMP will not be as harmful to your credit score as with a consumer proposal, nor will it jeopardize any of your assets as with bankruptcy. You’ll also gain money management skills that can help you in the long term and avoid debt in the future. But if you cannot get an Ontario debt consolidation service loan or a debt management plan is not appropriate for you, then there is another formal option that avoids bankruptcy.

In a consumer proposal, you will also gain money management skills. In addition to your no-cost initial consultation, there are also 2 mandatory credit counselling sessions with an accredited credit counsellor in the Trustee’s office. In a DMP, you need to pay 100% of your unsecured debt. In a consumer proposal, the amount you need to pay is calculated against what your unsecured creditors can expect to receive from your bankruptcy. In most cases, it will be much less than 100%. On average, you can expect to only repay about 25% of your total outstanding unsecured debt, including any tax debt.

A consumer proposal is for any person that owes $250,000 or less, other than for any loans secured against your principal residence. If you owe more than this limit, or your company owes too much debt, then you can still get debt relief under a different proposal section of the Bankruptcy and Insolvency Act (Canada) (BIA).

Bankruptcy is of course the very last option anyone should consider. This should be considered only if you do not have the necessary cash flow to successfully complete any debt management plan.

So what is best for you? Give me a phone call and I will let you know whether debt management in Ontario plan or a proposal under the BIA is better for you. I will tell you at no cost to you.

Debt management in Ontario summary

I hope that you found this debt management in Ontario Brandon Blog informative. Many people feel that they are trapped in a cycle of credit card debts, unsecured lines of credit, tax debt and generally an unmanageable level of debt. You may want to do something about those debts but you aren’t sure what to do.

If you have any debts they can be overwhelming because they are so much money and you don’t know how to deal with them. There are various debt management plans available that can help you reduce the amount of money you owe and help you deal with your debts.

If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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

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

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

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

Call us now for a no-cost consultation.

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

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

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

Categories
Brandon Blog Post

4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA

NOTE: On January 13, 2022, three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. You can read all about the Settlement Administration Plan and how to file a claim by CLICKING HERE to read our latest 4 Pillars blog.

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

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

4 pillars lawsuit
4 pillars lawsuit

The 4 Pillars lawsuit class-action

In my November 25, 2019, Brandon Blog titled “HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE“ I wrote about the litigation involving 4 Pillars Debt and Credit Restructuring Company, 4 Pillars Consulting Group Inc. and other entities (4 Pillars or the 4 Pillars lawsuit), Pearce v 4 Pillars Consulting Group Inc., 2019 BCSC 1851.

Mr. Pearce is suing for damages for the fees billed by 4 Pillars to all persons that paid fees to it in British Columbia in connection with: (i) a consumer proposal under the Bankruptcy and Insolvency Act (Canada) (BIA); or (ii) an informal debt settlement negotiation proposal with the individual’s creditors, all after April 1, 2016.

Mr. Pearce claims that it is appropriate for the refunding fees paid, damages for alleged losses stemming from breaches of the provincial Business Practices and Consumer Protection Act (BPCPA) and BIA, and damages based upon the claim that the fees billed were unscrupulous under section 8 of the BPCPA.

In this Brandon Blog, I describe what the 4 Pillars lawsuit is all about and why the Court of Appeal for British Columbia has allowed it to proceed as a class action proceeding, dismissing the 4 Pillars objections.

4 Pillars lawsuit: What is a class action proceeding?

As part of that litigation, Mr. Pearce applied to the BC Court to have his litigation turned into a class action proceeding. The Court ruled that there were enough grounds for his legal action to move forward as a class-action claim. As can be expected, 4 Pillars objected to that motion. They also unsuccessfully argued that certain sections of the claim should be stricken.

4 Pillars appealed that decision to the Court of Appeal for British Columbia. On May 17, 2021, the Court of Appeal for British Columbia released its decision. In this Brandon Blog, I discuss the appeal, what the appeal court had to say and what it decided in the 4 Pillars lawsuit appeal.

4 pillars lawsuit
4 pillars lawsuit

Debtor Warning – Debt Consultants Sometimes Not What They Appear

What 4 Pillars say their organization’s role is

4 Pillars states that they are professionals who provide a variety of services specific to individuals in debt. They say they outline the choices readily available and also walk people through the procedure. They say that your financial debt settlement will likely be one of the following, which they will manage on your behalf:

  • informal debt settlement
  • consumer proposals
  • bankruptcy

They also say they will work with the person on their aftercare. They also say that their role ranges from providing individual debt settlements on behalf of debtors with collection agencies and their creditors to negotiating with Licensed Insolvency Trustees (individually a Trustee, Bankruptcy Trustee or LIT) on behalf of a debtor in determining the terms of a consumer proposal.

What the Court of Appeal for British Columbia says about the role of 4 Pillars

The Court of Appeal described them this way:

  • 4 Pillars sell their debt restructuring services as debt advisors to individuals on the brink of insolvency who are seeking debt restructuring. They are unlicensed and charge fees above those professionals who are licensed and regulated.
  • Their debt consulting business is not licensed or registered, and they charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Their debt consulting services are:
    • to meet and work with consumers who are struggling with debt;
    • to help them draft a consumer proposal to present to a LIT:
    • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • All of these services are provided with the goal that the LIT will then present the consumer proposal to the debtor’s creditors.
  • 4 Pillars may then provide input, on the debtor’s behalf, on any response or request from the creditors.

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Just to remind you, this is what the lower BC Court and the Court of Appeal for British Columbia found the 4 Pillars services to be:

  • to meet and work with consumers who are struggling with debt;
  • to help them draft a consumer proposal to present to a LIT:
  • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • Provide input, on the debtor’s behalf, on any response or request from the creditors.
  • They charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Charge fees above those professionals who are licensed and regulated.

This is very common amongst all the debt restructuring businesses. It is questionable what value they provide if any at all. Their business model preys on people’s fears of getting advice straight from Licensed Insolvency Trustees.

The services described above a LIT provides at no additional cost above and beyond what the government-approved tariff fee is. The reality is that you do not need the 4 Pillars Consulting Group Inc.

As a LIT, I provide financial advice regarding your unmanageable debt and if you are a candidate for informal debt settlement, I will tell you exactly what to do in our no-cost initial consultation. If you have too much personal debt and are not a candidate for an informal settlement, I have many times prepared consumer proposals that work. As part of that process, I also act as a licensed credit counsellor.

4 pillars lawsuit
4 pillars lawsuit

Is Debt Settlement Really Worth It?

Debt settlement is really worth it. Going to one of these unscrupulous debt settlement companies, instead of a licensed insolvency trustee for debt settlement is NOT.

If you’ve been struggling with debt, it’s time to consider debt settlement through a consumer proposal with the services of a LIT. It likely won’t sound appealing at first, and you may feel that you are taking a gamble, but the process of debt settlement can be incredibly beneficial to you. Keep in mind that even 4 Pillars introduce you to a LIT in order for you to relieve yourself of your debts, hopefully through a consumer proposal process.

A consumer proposal is the only government-approved debt relief program. A LIT can get you a true debt settlement, without having to pay extra unnecessary fees to any of the debt relief companies.

Now let’s see what the Court of Appeal for British Columbia had to say about this 4 Pillars Consulting debt restructuring services business’s appeal from the lower court decision.

Class action waiver not effective to resist class action certification

The Court of Appeal of British Columbia believes the class action waiver clause is unenforceable as being contrary to public policy. The class action waiver significantly interferes with the administration of justice. It would have the effect of precluding class action lawsuits.

It has the impact of precluding Mr. Pearce, and class participants, from having access to justice and to a dispute resolution procedure in accordance with the law for claims developing from the connection between these parties. Therefore, the class action certification was upheld.

4 pillars lawsuitOther grounds of appeal in the 4 Pillars lawsuit

Having reviewed the evidence filed in respect of 4 Pillars’ applications for summary dismissal and after considering their arguments, the lower court judge was not satisfied that Mr. Pearce’s arguments in the 4 Pillars lawsuit, that 4 Pillars was acting for, or representing, a debtor in arrangements or negotiations with their creditors is bound to fail.

The evidence suggested that 4 Pillars had a role in the negotiations between a debtor and their creditors regarding a consumer proposal – even if they were not directly engaged with creditors.

The lower court’s view was there is a genuine issue to be decided at trial on a full evidentiary record. Accordingly, the judge dismissed the 4 Pillars attempt to strike the portions of the pleadings in respect of the Plaintiffs’ claims under the BPCPA.

The Court of Appeal for British Columbia agreed that it will be necessary to have a trial to figure out if claims can occur from offences of the BIA. Therefore, 4 Pillars was likewise unsuccessful in getting this issue stricken from the 4 Pillars lawsuit.

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

It will be very interesting to see how this class action 4 Pillars lawsuit winds its way through the BC court. Absent an appeal to the Supreme Court of Canada, it is now game on. Mr. Pearce and all members of the class have the green light to continue the litigation. If successful, it goes to the heart of the 4 Pillars business model. Every franchisee across Canada needs to worry.

I hope you found this 4 Pillars lawsuit Brandon Blog informative.

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

Categories
Brandon Blog Post

DECLARING BANKRUPTCY IN CANADA: NEVER WORRY WHAT TO DO AGAIN WITH THESE AWESOME TIPS

declaring bankruptcy in canada
declaring bankruptcy in canada

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

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

Declaring bankruptcy in Canada: Introduction

Declaring bankruptcy in Canada is a legal process through which you may be discharged from your financial obligations (with certain minor exceptions). Its purpose is to permit an honest but unfortunate debtor to obtain a discharge from many financial debts, based on affordable conditions.

The Office of the Superintendent of Bankruptcy (OSB) is charged with the administration of the Bankruptcy and Insolvency Act (Canada) (BIA), the Companies’ Creditors Arrangement Act (CCAA) and their respective rules. All documents associated with filings under either of those Acts can be found at the OSB’s internet site. The OSB likewise licenses and supervises the actions of licensed insolvency trustees (LITs ). LITs are accredited to:

  • administer the estates of bankrupts;
  • manage alternatives to bankruptcy such as consumer proposals and commercial proposals in order for debtors to get creditor protection and restructure in order to avoid bankruptcy; and
  • serve as a monitor under the CCAA.

When can you declare bankruptcy in Canada?

Any insolvent person in financial difficulty can declare bankruptcy in Canada any time through a bankruptcy assignment after they have seen a licensed insolvency trustee and made suitable arrangements for the Trustee to administer handle the bankruptcy administration. The bankruptcy trustee prepares the necessary documents for the debtor to sign for filing for bankruptcy.

The licensed trustee then files certain legal documents with the OSB. The OSB then issues its Certificate to evidence the bankruptcy of the person or company. The date and time indicated on the Certificate are when a voluntary bankruptcy starts.

If you are not able to get a LIT to accept your data, or if you cannot afford to work with a LIT in order to declare bankruptcy in Canada, the OSB’s Bankruptcy Assistance Program might have the ability to help. This is provided that you are not and have actually not just recently been, involved in commercial activities or you are not in jail.

What happens when you declare bankruptcy in Canada?

There are three different avenues that can have someone declare bankruptcy in Canada:

  1. Voluntary assignment – A financially troubled insolvent person or company can make a voluntary assignment in bankruptcy. This is where they voluntarily make a general assignment in bankruptcy for the general benefit of all of their creditors.
  2. Bankruptcy application – A creditor who is owed at least $1,000 on an unsecured basis submits an application to the court for obtaining a bankruptcy order against the debtor and the debtor’s property.
  3. Deemed bankruptcy – When a debtor who has made the choice to start an insolvency process under the BIA to gain debt relief through trying to restructure their unsecured debt, has fallen short to satisfy the requirements for:
    1. submitting a Division I proposal;
    2. gaining the necessary votes in favour of the proposal from the unsecured creditors; or
    3. obtaining court approval for the proposal.

Under a deemed bankruptcy, the moment the debtor fails in one of these ways, the BIA says that the debtor is deemed to have made an assignment in bankruptcy.

The bankrupt is able to earn a living after filing for bankruptcy. For this objective, the bankrupt can work or run a company, after the bankruptcy event. However, an undischarged bankrupt cannot be a director of a company. Also, upon the onset of the bankruptcy, the debtor must turn over to the licensed insolvency trustee, any shares of companies owned by the bankrupt.

The Trustee will send a notice to your creditors informing them of the bankruptcy. If there needs to be a meeting of creditors, the Trustee will hold it. The Trustee will also provide the bankrupt person with two credit counselling/financial counselling sessions with an individual who is an OSB qualified credit counsellor from the Trustee’s office, as part of the overall bankruptcy administration.

As you can see, not every way of declaring bankruptcy in Canada is totally voluntary.

declaring bankruptcy in canada
declaring bankruptcy in canada

Declaring bankruptcy in Canada: What assets do you lose in bankruptcy?

One of the most important tasks a Trustee has in the entire personal bankruptcy process or corporate bankruptcy process after the debtor chose declaring bankruptcy in Canada is to:

  • take an inventory of the debtor’s assets;
  • make sure they are physically secure and insured;
  • formulate a plan to sell the assets for the most amount possible under the circumstances;
  • review the financial affairs of the bankrupt, including the household income and financial situation of the bankrupt in a personal bankruptcy filing, and prepare a report to the creditors; and
  • then pay a dividend to the creditors.

There are however certain exemptions allowed for people. Few are based on federal law. Most are based on provincial law. So exempt assets may differ from province to province. In Ontario, assets that are exempt, and therefore not subject to seizure by a Trustee, are:

  • The equity in your home of no greater than $10,000.
  • A vehicle with an equity value of no more than $6,000.
  • Garments and medical/dental aids.
  • Household furnishings up to a worth of $13,100.
  • Tools of the trade with a value of no greater than $11,300.
  • Pension plans, RRIF, RRSP (other than any kind of RRSP payments made within 12 months of the date of bankruptcy).
  • Farmers– no greater than $29,100 for animals and also tools & equipment.

Even though someone has decided that filing bankruptcy is the route they must go, there are certain assets they will not have to give up.

Declaring bankruptcy in Canada: Does Bankruptcy clear tax debt in Canada?

The short answer is yes. Income taxes payable calculated on your tax return but not paid is a type of debt that is released when a person gets their bankruptcy discharge. However, you should know that there is a wrinkle for anyone who owes $200,000 or more in income tax debt and if that debt to Canada Revenue Agency (CRA) equals 75% or more of the total unsecured proven claims in the bankruptcy. If that is the case, then that affects the bankrupt’s ability to get a discharge after declaring bankruptcy in Canada.

If it is the person’s first time filing bankruptcy and they do not have to make surplus income payments, then they are still entitled to a discharge after 9 months from the date of bankruptcy. If it is their first time but they do have surplus income payments, then they cannot apply for a discharge until after 21 months.

If this is the person’s second time filing bankruptcy, if they do not have any surplus income payments, then rather than being able to apply for a discharge after 9 months, they must wait 24 months. If they do have surplus income payments, then it is extended to 36 months.

If someone has been bankrupt more than one time before and has at least $200,000 of income tax debt representing 75% or more of the total proven unsecured claims, then regardless of their surplus income payment situation, they must wait 36 months.

Such a bankrupt is called a high tax debtor. A high tax debtor is not entitled to have the Trustee issue an automatic bankruptcy discharge when the time has expired. Rather, there must be a court hearing for the bankrupt’s application for discharge.

CRA will oppose an absolute discharge at least on the basis of the fact that they are a high tax debtor. The Trustee does not have to oppose the discharge on this basis. However, if the bankrupt has failed to live up to any of their duties, including making the required surplus income payment, the Trustee will oppose.

The court will make a conditional order of discharge. At least one of the conditions will be to pay a certain amount to the Trustee for the benefit of the unsecured creditors. The amount depends on the unique circumstances of that bankrupt, but you can assume that the amount will be about 25% of the income tax owing.

So anyone how has income tax debt and is contemplating declaring bankruptcy in Canada, needs to look at their total liabilities carefully. If at all possible, you do not want to be a high tax debtor when declaring bankruptcy in Canada.

Declaring bankruptcy in Canada: What debt does bankruptcy not cover?

Some people think that in a personal bankruptcy filing, the bankruptcy filing itself is what eliminates the person’s debts. That is wrong. At the moment of declaring bankruptcy in Canada, nothing actually happens to your debts. It is the person’s discharge from bankruptcy that “discharges” the person from their debts.

Yet, there is still a category of debts that are not covered and not discharged when a personal bankruptcy discharge occurs. The debts that are not covered or discharged, are outlined in section 178(1) of the BIA. These such debts are:

  • any type of penalty, fine, restitution order or other order comparable in nature to a penalty, fine or restitution order, enforced by a court in regard of an offence, or any kind of debt developing out of a recognizance or bond;
  • any damages award by a court in civil process for:

    ( i) physical injury intentionally caused, or sexual assault, or

    ( ii) wrongful death resulting therefrom;
  • any type of financial debt or responsibility for spousal support or alimentary pension;
  • any kind of financial obligation or liability developing under a judgment establishing an association or about support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, previous common-law companion or child not living with the bankrupt;
  • any type of financial obligation or liability occurring out of fraudulence, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;
  • any financial debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation, apart from a debt or responsibility that arises from an equity claim;
  • liability for the dividend that a creditor would have been qualified to receive on any kind of provable claim not disclosed to the trustee unless the creditor had notification or understanding of the bankruptcy and fell short to take reasonable activity to confirm the claim; or
  • student loans if the bankruptcy filing happened before the person stopped being a full or part-time student or within seven years after the day on which the bankrupt stopped to be a complete- or part-time student

Declaring bankruptcy in Canada summary

I hope you enjoyed this declaring bankruptcy in Canada Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore. The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

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

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

Call us now for a no-cost consultation.

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

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

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WHAT IS A LICENSED INSOLVENCY TRUSTEE? READ OUR BEST AND COMPLETE 12 STEP CHECKLIST

what is a licensed insolvency trustee
what is a licensed insolvency trustee

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

If you would prefer to listen to the audio version of this what is a Licensed Insolvency Trustee Brandon’s Blog, please scroll to the very bottom and click on the podcast.

What is a Licensed Insolvency Trustee introduction

What is a Licensed Insolvency Trustee is a question I see asked regularly. Is it the same as a bankruptcy trustee? The answer is yes. A bankruptcy trustee is an old name. Licensed Insolvency Trustee is the new name. The Office of the Superintendent of Bankruptcy (OSB) changed the name in 2015. The change came about partly because of submissions made by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

The change came about since the new name more precisely explains the breadth of solutions they offer to consumers and businesses. The purpose of this Brandon’s Blog is to describe for the stressed-out person who is facing financial challenges, or the entrepreneur whose business is in financial trouble, what is a Licensed Insolvency Trustee all about and give a 12 point checklist to help you find the best one for you.

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is a financial and debt specialist licensed and supervised by the OSB. The OSB released a directive calling for trustees to utilize the classification of Licensed Insolvency Trustee to more precisely show the solutions they offer.

What is the difference between a Licensed Insolvency Trustee, a credit counsellor, and a debt settlement business?

Licensed Insolvency Trustees, credit counsellors, and financial debt settlement companies, all provide financial guidance. However, they are extremely different.

A Licensed Insolvency Trustee is the only person who can file a bankruptcy or consumer proposal for you. A trustee can also offer you financial advice and help you plan on how to repay your debt. Credit counsellors and debt settlement businesses can give you financial advice and information. They can help you make a budget and make plans to repay your debt. But they can’t file a bankruptcy or consumer proposal for you.

Unlike the others, a Licensed Insolvency Trustee is an Officer of the Court, and as such, is the only financial debt relief professional in Canada legally allowed to administer insolvency proceedings under the Bankruptcy and Insolvency Act (Canada) (BIA).

What is a Licensed Insolvency Trustee and what can they do for me?

A Licensed Insolvency Trustee will first gather info to comprehend the individual’s or business’s entire circumstance, examine the effects of different choices, discuss them with you and also suggest the one he or she really feels is ideal for you. When filing a restructuring debt settlement proposal or for bankruptcy, Licensed Insolvency Trustees will direct the debtor through the whole procedure, will certainly prepare and submit the needed paperwork, and be the one to deal directly with all of your creditors.

So what is a Licensed Insolvency Trustee? It is the only expert that can offer you a complimentary consultation and advice as well as recommendations. After that, she or he will either direct you what to do if you do not need an insolvency process to repair your financial concerns or administer the insolvency procedure if one is required.

what is a licensed insolvency trustee
what is a licensed insolvency trustee

What is a Licensed Insolvency Trustee and what sets them apart?

By now you should realize that a Licensed Insolvency Trustee is licensed and supervised by the OSB. No other professional dealing with consumer or business debt issues is. Licensed Insolvency Trustees also have to go through a rigorous course of study and examinations in order to obtain that license.

So what is a Licensed Insolvency Trustee? It is someone who:

  • successfully complete the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP), the CIRP National Insolvency Exam and the Insolvency Counsellor’s Qualification Course;
  • passed an Oral Board of Examination;
  • has been found to be a person of good character and reputation; and
  • has been cleared through an RCMP investigation.

What is a Licensed Insolvency Trustee and how are their fees calculated?

There are set calculations and rules that all Licensed Insolvency Trustees must strictly follow when administering a bankruptcy or proposal. Trustee fees are calculated and drawn from the funds that have been paid into each individual proceeding. Licensed Insolvency Trustees are not allowed to simply set their own fees and rates.

In most bankruptcies and proposals, the Licensed Insolvency Trustee’s fees are based on a tariff set by the BIA. Unlike other professionals, working with a Licensed Insolvency Trustee is not a “fee for service” – this means that a phone call to discuss any questions you have or get ongoing support throughout the process won’t result in an invoice.

What is a Licensed Insolvency Trustee and how do I find one?

The best way to find one is through a referral from someone that you trust. This could be your lawyer, accountant, a relative or a close friend. Someone you trust, who refers you to someone they trust, is always the best. I take pride that my Firm has many times helped relatives of lawyers and accountants who we work with. If they are willing to refer a family member to us, that is the highest compliment anyone can pay to me as a professional.

You can also contact a local non-profit credit counselling service. There are two benefits to doing this. A local non-profit credit counselling organization is probably one of the most objective places to find out about all your debt relief options. They’re not trying to sell you anything, and they’re not paid on commission. So they can actually help you look at all your options and see if insolvency (a consumer proposal or bankruptcy) is your best option or if there is something else that might make sense.

The OSB maintains a searchable database of all Licensed Insolvency Trustees in Canada. You can search for a trustee located near you. Finding a trustee near you may be convenient, but, it will not give you a sense of whether you feel you can work with that professional.

You can also search for “licensed insolvency trustee” or “bankruptcy trustee” in your favourite search engine. Just be mindful that the companies who appear at the top of your search results with the word “Ad” next to their name have paid for that listing. It has nothing to do with their expertise or rating.

Looking at the online reviews given by people who have worked with them is a great way to start to get a feel for each professional. If they write blogs or have videos posted online, that will also help to get a feel for the personality of the Licensed Insolvency Trustee.

What is a Licensed Insolvency Trustee and have they been recognized by any rating agencies?

Best Bankruptcy trustees in Vaughan

I am pleased to report that, for the 5th year in a row, Ira Smith Trustee & Receiver Inc. has been voted as one of the Top 3 Licensed Insolvency Trustees in Vaughan, ON. (Yes, there are more than 3!). It is gratifying to get recognition fo the professional services we provide and our commitment to full service and support for our clients.

So what is a Licensed Insolvency Trustee and how should I go about choosing one? There are many factors that you must consider. Below is our 12 step checklist to make the best choice for you.

What is a Licensed Insolvency Trustee? Our 12 step checklist to help you find the best one for your situation

  • Do they have the necessary qualifications?
  • How many cases like yours have they done before?
  • Do they go to Court also or do you have to hire a lawyer to do so?
  • Is bankruptcy right for you and is it your only option?
  • How much will it cost you?
  • Will you be dealing with the actual licensee ultimately responsible to the OSB for your file?
  • Will you only be seeing one of many clerks once you enter the insolvency process?
  • How did you feel after meeting the people at their office after your initial consultation?
  • Do they practice exclusively in the bankruptcy/insolvency area?
  • Do they have experience in only personal insolvency matters, only corporate insolvency matters, or both?
  • Do they have enough experience and the time to handle your matter?
  • Will they communicate in a timely manner with you throughout?

As you can see, when trying to answer what is a Licensed Insolvency Trustee and who is the right one for me question, there are many things to consider.

What is a Licensed Insolvency Trustee summary

I hope you found this what is a Licensed Insolvency Trustee Brandon’s Blog about helpful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.
It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation.

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

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

Call a Trustee Now!