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DEBT MANAGEMENT PROGRAM VS. BANKRUPTCY: OUR CHEAT SHEET HELPS YOU TO CHOOSE THE RIGHT OPTION FOR YOUR FINANCIAL SITUATION

A split picture. On one side is a woman sitting at a neat and clean desk symolizing that all of her debts are under control. On the other half of the split screen is a worried man standing in front of a messy desk with bills spilling all over the place to symbolize a person with debts out of control and needing a debt management plan or to file for bankruptcy.

Debt Management Program: Introduction

Are you drowning in credit card debt, tax debt or any other debt and feeling overwhelmed by mounting interest charges? Are you behind in some or all of your debt payments? Is there a collection agency hounding you? It’s a common struggle, especially with the recent increases in interest rates. But fear not, there are debt relief options available to help you regain control of your finances. Two popular choices are a debt management program and bankruptcy, but there are key differences to consider.

In this Brandon’s Blog post, we will explore the differences between these two options and guide you on how to choose the right one for your unique financial situation. Read on to discover the path to financial freedom.

Understanding a Debt Management Program

A debt management program offers a way to pay off high-interest credit card balances without resorting to bankruptcy. However, it’s important to note that a debt management program may not be the best solution for everyone. It is most effective when your debt amount is manageable and you have assets you want to protect.

If you find yourself in this situation, a debt management plan can help you lower your overall payment to a more affordable amount, without the need for legal filings or interventions. This means you can keep your valuable possessions, such as homes, cars, and other assets. Additionally, debt relief allows for a more gradual approach, giving you the flexibility to regain your financial footing over time.

Is a debt management program right for you?

When you find yourself overwhelmed by debt, exploring debt management program options may provide a much-needed solution. However, determining whether a debt management plan is ideal for your situation requires careful consideration.

Debt Amount Consideration

A debt management program tends to be most effective when your debt amount is manageable. While the specific threshold varies depending on individual circumstances, having a debt level that you can realistically work to pay off over time is typically more conducive to successful debt management program outcomes.

You also need to separate secured debt from unsecured debt. Secured debt is what its name sounds like. The debt is secured against one or more of your assets, such as an auto loan. If you need the asset and its value is greater than the amount of debt against it, the secured lender will not be motivated to amend the amount you owe.

One of the key advantages of a debt management program is that it generally does not necessitate any legal filings or interventions. This streamlines the process and makes it more accessible to individuals seeking relief from their financial burdens. By avoiding legal procedures, a debt management program can offer a more straightforward and efficient path to debt resolution.

Use of Credit and Affordability

A debt management program allows you to continue using credit while you work towards repaying your debts. This can be particularly beneficial for maintaining essential expenses and managing unexpected costs during the debt management program process. Additionally, a debt repayment program often offers an affordable and gradual approach to debt repayment, making it suitable for individuals looking to regain financial stability without experiencing overwhelming financial strain or having the negative impact on your credit score that happens with bankruptcy.

Overall, the decision to pursue a debt management program should be based on a comprehensive evaluation of your financial situation and goals. By considering factors such as the amount of debt you owe, the convenience of the process, and the affordability of the options available, you can determine whether a debt management program aligns with your needs and priorities.A split picture. On one side is a woman sitting at a neat and clean desk symolizing that all of her debts are under control. On the other half of the split screen is a worried man standing in front of a messy desk with bills spilling all over the place to symbolize a person with debts out of control and needing a debt management plan or to file for bankruptcy.

Debt Management Program: Considering Bankruptcy

A bankruptcy filing, on the other hand, provides a more immediate solution for those facing crushing debt loads. It can be the right choice when you owe significant amounts of credit card debt, unsecured personal loans, or other unsecured debts that far exceed your means. The bankruptcy process offers unparalleled debt elimination, but it comes with serious trade-offs.

Your credit score may be negatively impacted for a period of seven to ten years, making it a less favourable option if you have good or marginal credit and owe only a few thousand dollars. However, if your credit is already severely impaired, filing bankruptcy may be a quicker and more efficient way to resolve your debt burdens.

Is bankruptcy right for you?

Bankruptcy is a difficult financial decision that many individuals may consider when they find themselves overwhelmed by debt and unable to manage their financial obligations. While bankruptcy is a serious process under the Bankruptcy and Insolvency Act (Canada) with long-term consequences, it can also provide a fresh start for those in dire financial circumstances.

Relief from Crushing Debt Load

One of the primary reasons individuals opt for bankruptcy is the overwhelming burden of debt they carry. When debts become unmanageable, it can lead to constant stress, sleepless nights, and strained relationships. Filing for bankruptcy can provide relief by allowing individuals to eliminate or restructure their debts to a more manageable level.

By working with a Licensed Insolvency Trustee (LIT), individuals can develop a repayment plan or proceed with liquidating assets to pay off debts. This process can help individuals regain control of their finances and start anew with a more sustainable financial future.

Solution for Badly Damaged Credit

For individuals with severely damaged credit, bankruptcy can offer a way to address their financial challenges and start rebuilding their credit history. While bankruptcy harms credit scores initially, it also provides an opportunity for a fresh start.

By discharging debts through bankruptcy, individuals can eliminate the burden of overdue payments and past defaults that have been dragging down their credit rating. With a clean slate, individuals can gradually rebuild their credit by managing new credit responsibly and demonstrating improved financial habits.

Unlike other debt management program options, bankruptcy offers a relatively quick resolution to financial problems. Depending on the type of bankruptcy filed, individuals can receive a discharge of their debts within less than 1 year to a few years, depending on the circumstances. This allows them to move forward without the weight of excessive debts.

Keep in mind that your discharge of debt does not take place until you are discharged from your bankruptcy. A few kinds of debt cannot be discharged through bankruptcy, but most people get their entire debt discharged.

Additionally, bankruptcy provides legal protections against creditors, wage garnishment, and foreclosure. Once an individual files for personal bankruptcy, an automatic stay goes into effect, preventing creditors from taking collection actions such as wage garnishment or repossession of assets.

This legal protection can provide individuals with much-needed relief and breathing room to address their financial situation. The downside of bankruptcy of course is that your non-exempt assets must be turned over to the Trustee to be sold.

The only Debt Management Program Approved By The Canadian Government

There is only one debt management program approved by the Canadian Government and it is an excellent option for those with a steady income. This government-approved form of debt relief is called a consumer proposal. It is the only government-approved debt settlement plan available in Canada and is an alternative to a liquidation bankruptcy. It is not as drastic as personal bankruptcy but has most of the bankruptcy protection elements making it more potent than in a debt management program.

A consumer proposal is a legal process also under the BIA designed to help individuals settle their debts with creditors in a manageable way. It provides a structured framework for debt repayment while offering protection from creditors’ collection actions. Let’s delve deeper into the key aspects of a consumer proposal.

When an individual is struggling with overwhelming debt and is unable to keep up with payments, a consumer proposal can be a viable solution. This process involves working with a LIT to create a formal proposal to creditors outlining a revised payment plan. The proposal typically includes an offer to repay a portion of the total debt over a set period, based on the individual’s financial situation.

Once the consumer proposal is submitted to the creditors, they have the opportunity to review and vote on the proposal. If the majority of creditors accept the terms of the proposal, it becomes a legally binding agreement, and the individual is bound to fulfill the revised payment plan.

Allows Debtor to Make a Formal Proposal to Creditors

One of the key benefits of a consumer proposal is that it allows debtors to take an active role in addressing their financial difficulties. Instead of facing aggressive collection actions from creditors or considering bankruptcy as the only option, individuals can work with a LIT to craft a proposal that is fair and feasible for both parties.

By making a formal proposal to creditors through a consumer proposal, debtors have the opportunity to demonstrate their commitment to repaying their debts in a structured manner. This not only helps in resolving financial issues but also allows individuals to regain a sense of control over their financial future.

Provides Protection from Creditors’ Collection Actions

Like bankruptcy, one of the significant advantages of opting for a consumer proposal is the protection it offers from creditors’ collection actions. Once the proposal is filed, an automatic stay of proceedings is initiated, which prevents creditors from pursuing legal actions, such as wage garnishments or asset seizures, against the debtor.

This protection provides individuals with relief from the constant stress and pressure of dealing with aggressive collection attempts. It allows them to focus on adhering to the terms of the consumer proposal and working towards becoming debt-free without the fear of immediate consequences from creditors.

In conclusion, a consumer proposal is a valuable tool for individuals facing overwhelming debt and seeking a structured way to settle their obligations with creditors. By understanding the legal process, the opportunity it provides to make a formal proposal, and the protection it offers from debt collectors’ collection efforts and legal actions, individuals can make informed decisions to improve their financial situation and work towards a debt-free future.A split picture. On one side is a woman sitting at a neat and clean desk symolizing that all of her debts are under control. On the other half of the split screen is a worried man standing in front of a messy desk with bills spilling all over the place to symbolize a person with debts out of control and needing a debt management plan or to file for bankruptcy.

Meeting with a nonprofit credit counsellor to assess your financial situation

Consider credit counseling sessions with a certified nonprofit credit counsellor for expert recommendations. If you’re unsure about the best course of action to take regarding your debt, seeking advice from a certified nonprofit credit counselor can provide invaluable insights. These professionals working at a nonprofit credit counseling agency can assess your financial situation, provide personalized recommendations, and guide you toward effective debt management strategies.

WARNING: Stay away from for-profit debt settlement companies. A nonprofit credit counselor or a bankruptcy trustee can provide you with the same advice at no charge.

Choose between a debt management program or bankruptcy based on your specific circumstances

When deciding between a debt management program and bankruptcy, several factors should be taken into account. First, carefully assess your full financial situation and long-term goals. Consider the amount of debt you owe, your ability to make payments, and the impact on your credit score.

If you have assets you want to protect and prefer a more affordable and gradual approach, a debt management program might be the better option. On the other hand, if you are facing wage garnishment, or foreclosure, or need a quicker resolution, bankruptcy may be the right debt solution choice for you.

A consumer proposal or bankruptcy can be a viable option for individuals facing insurmountable debt, damaged credit, and the threat of financial instability. While it is a significant decision with long-lasting consequences, bankruptcy offers a path to financial relief, a fresh start, and legal protections against creditor actions.

It is essential for individuals considering bankruptcy to seek the advice of a financial advisor or bankruptcy professional to fully understand their options and make an informed decision about their financial future.

Debt Management Program: The bottom line

When it comes to managing debt, making informed decisions is crucial. Here are some key takeaways to help you navigate this challenging situation:

  • Carefully assess your financial situation and long-term goals.
  • Before taking any steps toward resolving your debt problems, it’s essential to have a clear understanding of the current financial position of your assets and all your outstanding debts.
  • Take stock of your monthly income and living expenses, so that you can create an accurate monthly budget to see where your money is being spent. Don’t forget to deduct from your monthly income your actual income taxes deducted from your monthly pay.

Debt Management Program: Conclusion

Assess your finances and goals, seek advice from a nonprofit credit counselor, and decide between a debt management program, consumer proposal or bankruptcy based on your specific circumstances. You can also have a no-cost consultation with a LIT to get personalized advice and find out how a consumer proposal or bankruptcy would work in your specific situation.

Dealing with overwhelming debt is no easy task, but there is hope. By understanding the differences between a debt management program, consumer proposal and bankruptcy, you can choose the right option for your financial situation. A debt management program offers a manageable and gradual approach, protecting your assets while you work towards becoming debt-free.

Bankruptcy, on the other hand, provides a quicker resolution and is best suited for those with significant debt loads and impaired credit. Remember to carefully evaluate your circumstances and consult with an expert if needed. With the right choice and determination, you can pave the way to a brighter financial future. Don’t let debt hold you back any longer – take control today and improve your financial health and your life.

I hope you enjoyed this debt management program Brandon’s Blog. Individuals and business owners must take proactive measures to address financial difficulties, consumer debt and company debt and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns and more associated with your company debt are obviously on your mind.

The Ira Smith Team understands these financial health concerns. More significantly, we know the requirements of the business owner or the individual who 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 and it does not mean that you are a bad person. 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 uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now! We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.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.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, to begin your debt-free life, Starting Over, Starting Now.A split picture. On one side is a woman sitting at a neat and clean desk symolizing that all of her debts are under control. On the other half of the split screen is a worried man standing in front of a messy desk with bills spilling all over the place to symbolize a person with debts out of control and needing a debt management plan or to file for bankruptcy.

 

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CONSUMER DEBT PROPOSALS: UNLEASH THE MANY PROFOUND BENEFITS OF ELIMINATING DEBT

consumer debt proposals
consumer debt proposals

consumer debt proposals

Consumer debt proposals eliminate your debt stress

Are you stressed out and overwhelmed by debt and don’t know how to begin to eliminate it? We know your pain and can help you because this Brandon’s Blog “Consumer Debt Proposals: The Ultimate Solution for Managing Debt” has got you covered! I provide realistic advice on how to manage and even get rid of debt through a binding debt settlement agreement.

I describe what consumer debt proposals are all about and also look at other debt-relief options like debt consolidation and credit counselling. I will also talk about the recent Canadian government’s warning about taking on high-interest debt from certain companies.

Consumer debt proposals: How Does a Consumer Proposal Work?

If you’re in a tough spot financially, in Canada you can submit a consumer proposal if you owe $250,000 or less (not including any debt registered against your home is one of the types of secured debts that must be paid according to your secured loan repayment terms). It’s an official way to get some debt relief, and it’s all legit according to the Bankruptcy and Insolvency Act. Basically, you work with a Licensed Insolvency Trustee who helps you come up with a plan for paying off what you owe. Then you negotiate with your creditors and hopefully, they accept the proposal.

Making a consumer proposal that unsecured creditors will accept is one of the debt solution alternatives to bankruptcy that requires a few steps to get it done:

  • Reach out to a qualified Licensed Insolvency Trustee and book a no-cost debt assessment consultation.
  • During the appointment, answer any questions the Trustee may have truthfully and to the best of your ability.
  • The Trustee will work with you to come up with a payment plan that fits into your budget and allows you to pay off your debt.

Once you’ve submitted your consumer proposal, your creditors will look it over and then decide if they want to accept it as is or negotiate an adjustment (higher) to your periodic payments to eliminate the amount you owe. They have the option to do either one.

Your creditors can decide to:

  1. Agree to the terms you have proposed (cast their vote in favour).
  2. Decline the terms (vote no).
  3. Decline the terms and suggest a meeting with creditors.
  4. Take no action (which is the same as voting yes).

Your consumer proposal is automatically approved unless more than 25% of the dollar value of the claims of your creditors indicates that they would like to have a meeting of creditors. In that case, that is what will happen.

Once you’ve taken the step of filing for a consumer proposal, you’ll be able to rest easy knowing that you have immediate legal protection from creditors and debt collectors through this financial and legal process. This is called a stay of proceedings where your creditors cannot chase you for the money you owe.

Filing under the bankruptcy process in Canada isn’t your only option! You can work out a legally binding agreement with your creditors through the popular alternative and powerful alternative of consumer debt proposals. With a consumer proposal, you and your creditors can come to an agreement on what portion of the debt you can pay off- and the rest will be written off!

consumer debt proposals
consumer debt proposals

Consumer debt proposals: The voting process

When it comes to a consumer proposal, it’s important to understand the process of how creditors come to a decision to accept or reject the plan. This section will provide insight into how the voting process works.

Once a consumer proposal is submitted, creditors are allowed 45 days to express their decision. They can either accept the proposal or reject it in one of the following ways: replying to the Licensed Insolvency Trustee with their acceptance, not responding at all (which is seen as approval), communicating their rejection or requesting a meeting of creditors.

At the creditors’ meeting, creditors will have the opportunity to decide whether to accept the consumer proposal as is or to make adjustments to it.

Consumer debt proposals: What happens if your offer is approved?

If your proposal gets the green light, you’ll need to abide by what you promised – whether that’s a single payment or regular installments to the Licensed Insolvency Trustee. Plus, you must meet any other conditions that were laid out in the proposal.

In a successful proposal, you can keep your assets (as long as you keep paying what you owe to creditors who have a lien on your assets), and go to the two financial counselling sessions held by the Licensed Bankruptcy Trustee. Of course, you’ve got to pay the Licensed Bankruptcy Trustee on time over the entire period of time your proposal is for.

Failure to do so could result in the revocation of the proposal, the accrual of interest and fees, and even legal action. It’s important to remember that while a consumer proposal can provide much-needed relief, it’s ultimately up to you to stay current with the payments you promised to make.

consumer debt proposals
consumer debt proposals

Consumer debt proposals: What happens should your consumer proposal be declined?

If 50% or more of the creditors vote to reject the consumer proposal, then the Licensed Insolvency Trustee must issue a notice and the consumer proposal dies. In this situation, creditors are free again to pursue collection actions against the debtor.

If 25% or more of the creditors request a meeting, that meeting is referred to as the Meeting of Creditors. At this meeting, an agreement will try to be reached by a majority of the creditors. If the agreement can not be reached, the debtor may need to amend the proposal and resubmit it or look for other ways to solve their financial issues.

If a consumer proposal is declined, it means that the creditors do not agree with the terms of the proposal put forth by the debtor. The main reasons for rejection may be that the debtor is not offering enough money or has proposed an unsuitable repayment schedule.

It is important to note that if you fail to fulfill the requirements of your consumer proposal, it will be deemed null and void. However, it does not free you from your existing debt, and the failure to adequately repay your loans or pay off debts within the terms of the agreement could affect your credit score. Collectors for debts are within their right to renew collection calls and seek legal action for retrieving the debts that they owe. They can sue you and if they get a judgment, they can then get a wage garnishment against you. It is never recommended to default on a consumer proposal.

Consumer debt proposals: If you fulfill the requirements of your consumer proposal

If you fulfill the requirements of your consumer proposal, you will have successfully completed the agreement between yourself and your creditors. This means that you will have made the agreed-upon payments and met all other terms of the proposal. The balance of your unsecured debts that you did not pay off is also eliminated if you fulfill the requirements of your consumer proposal.

One of the benefits of fulfilling a consumer proposal is that you will have lower regular payments monthly, which are based on what you can afford, rather than high monthly payments regardless of your income. Additionally, you will have protection from creditors, as they will not be able to contact you or take money directly from your wages.

After fulfilling a consumer proposal, it will come off your credit report maintained by the Canadian credit bureaus three years after the completion. This report will show that the consumer proposal has been successfully completed and you can rebuild your credit rating and credit score simultaneously.

You will also receive from the Licensed Insolvency Trustee (LIT) acting as the Administrator in your consumer proposal a “Notice of Successful Completion of Consumer Proposal”. This is a very important document, as you will be able to provide it to current or future credit grantors to prove that you successfully completed your consumer proposal and avoided personal bankruptcy.

It is important to note that if you fail to fulfill the requirements of your consumer proposal, it will be deemed null and void. However, it does not free you from your existing debt, and the failure to adequately repay your personal loans, lines of credit or pay off debts within the terms of the agreement could negatively affect your credit score. Creditors are within their right to use collection activity and use legal action for retrieving the debts that you owe. It is never recommended to default on a consumer proposal.

consumer debt proposals
consumer debt proposals

Advice for Consumers: Considerations for Debt Relief and Credit Repair Services

Improving your credit score or credit rating will take time, and requires showing creditors that your habits have improved and that you are paying back your debt on time. Be cautious when seeking help to pay off debt or repair your credit, as some companies may offer misleading solutions. I have been warning about the dangers of such “for-profit” debt settlement companies for years now.

One option for getting help with debt is a debt management plan, which is an informal proposal made by a non-profit community credit counselling agency credit counsellor to your creditors on your behalf. This plan consolidates your debts into one affordable monthly payment and in some cases, you may not have to continue to pay interest on your debt.

However, consumers should be aware that the “for-profit” debt settlement companies may charge high fees, including upfront or advance fees, and may not be able to get creditors to reduce your debt. Additionally, it is important to note that even while using a debt management plan, you are still required to keep making payments on any other debts you owe, which may result in no change to your credit score.

Overall, it is important to be cautious when seeking help to pay off debt or repair your credit and to thoroughly research any company or solution before proceeding. It is also important to consider the potential consequences, fees and overall effectiveness of the solution. A LIT during an initial no-cost consultation will provide many of the services that a “for-profit” debt management company charges for.

Consumer debt proposals: Organizations or firms cannot guarantee the resolution of your financial obligations

Be aware of companies or agencies that claim they can quickly resolve your debt problems by negotiating a deal with the companies you owe money to and letting you only pay back a fraction of your debt. These promises may not be reliable, so it’s best to be wary.

It’s important to remember that if certain creditors don’t agree to your payment plan, you may need to work out a different agreement with them directly. Alternatively, you can consult a LIT about doing a consumer proposal.

It’s also worth keeping in mind that anyone can call themselves a debt consultant, but that doesn’t mean they have the proper training or they’ll be able to help you with your finances.

consumer debt proposals
consumer debt proposals

Consumer debt proposals: No company or agency can give you a fast and easy boost to your credit rating

No Canadian debt consultant, company, or agency can promise a fast solution to your credit score. Improving your credit rating takes time and commitment; you have to show a history of paying your debts punctually.

If you’re looking to boost your credit score, one option to consider is a non-profit credit counselling agency. A credit counsellor can offer a variety of services like one-on-one advice, group sessions, and tips on how to better manage your debt. Just keep in mind that simply talking to a credit counsellor won’t do the trick.

If you’re looking to give your credit score a boost, try paying off some of what you owe. Bringing down your debt-to-credit ratio to under 75% of your credit limit will help. You could also ask your credit card companies or financial institution lenders to raise your credit limit and perhaps even amend your terms of repayment (though the latter will be very difficult) – that’ll help increase your credit score. Ideally, try to use less than a third of your available credit and keep it low, ideally below 30%.

Remember, there’s no shortcut when it comes to improving your credit score. Anyone promising you the fast and easy way is not looking out for your best interests. It takes determination and effort to get your credit back on track. Do your research and make sure you understand any associated fees or consequences before you commit.

Consumer debt proposals: Paying off a consumer proposal early

Sure, you can settle your consumer proposal early, but that might not be the best choice for everyone.

If you’ve got the funds, paying off your consumer proposal earlier could help kickstart your credit repair – but don’t expect it to save you money or guarantee a good credit rating. So think carefully before you commit to paying it off early. In the following section, I describe a very troublesome issue which has now attracted the attention of the Office of the Superintendent of Bankruptcy Canada (OSB).

Paying off your consumer proposal early will do wonders for your mental health – and it’s perfectly acceptable! It’s no secret that financial hardship is incredibly stressful, and five years seems like a lifetime. So treating yourself to an early payoff will help you feel a huge weight being lifted off your shoulders.

If you want to shorten how long your consumer proposal lasts, you can change how often you make your proposal payments. Usually, they’re monthly, but if you switch to making extra payments by paying bi-weekly, you can pay off your proposal faster. Once you’re done paying off your consumer proposal, the unsecured debts you’ve been worrying about will be marked as taken care of on your credit report.

consumer debt proposals
consumer debt proposals

Consumer debt proposals: LITs cannot talk you into getting a loan with a high-interest rate to pay off your consumer proposal early

On January 11, 2023, the OSB issued its position paper titled “LITs Promoting and Facilitating Loans to Debtors“. The problem is that some lenders are offering high-interest loans to people who are about to or are going through a consumer proposal. It looks like they’re giving loans to help people pay off their consumer proposals early, but it’s really just taking advantage of people’s tough financial situations.

The OSB has noticed that some LITs are promoting and encouraging people to take out loans without mentioning the potential drawbacks. They do this by talking up the positives and downplaying the negatives, and they may even pressure people into taking out a loan.

The OSB has come to the conclusion that it’s not in line with the Code of Ethics for Trustees or a LIT’s duties under the Bankruptcy and Insolvency Act and General Rules for LITs to promote or facilitate such loans. Furthermore, such actions are not allowed.

There is also evidence that LITs who receive engagements directly from “for-profit” debt consultants, may be entering into inappropriate arrangements with them. No trustees should ever accept a commission, payment, or any other type of reward from a third party for recommending work concerning a professional engagement, nor should they give out any commission, compensation, or another type of benefit to a third party for obtaining a professional engagement.

For the record, my Firm does not have any arrangements with any party regarding the referral of files and we neither accept nor pay a referral fee

Paying off your consumer proposal early isn’t really an issue. In fact, it can be great if you can afford it thanks to a financial windfall or change in circumstances. Everybody benefits in that scenario. But if you don’t have the means to pay off your consumer proposal quickly, don’t worry. Don’t take out an interest-bearing loan to pay off a consumer proposal. The consumer proposal itself should be considered an interest-free loan.

Look, if a debtor is trying to rebuild their credit with a loan after insolvency, there’s nothing wrong with that. They’re making the choice themselves, so it’s all good. In this case, LITs should explain the pros and cons of these loan products to the debtor. And, it’s important that they don’t push any company or product in particular.

The OSB believes that LITs should not be promoting or facilitating loans since it contravenes the Bankruptcy and Insolvency Act and its Rules. This practice has a negative impact on the LIT profession and the insolvency system. The OSB will be keeping an eye on this issue and taking appropriate action.

You Have Outstanding Financial Obligations — Consumer Debt Proposals

I hope you enjoyed our consumer debt proposals Brandon’s Blog.

There are many financial blogs. Ours focuses mainly on issues of importance to those individuals and businesses with financial challenges or worse, financial hardship, caused by debt problems. Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses with debt problems. 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.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

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

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

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

consumer debt proposals
consumer debt proposals

 

 

 

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Brandon Blog Post

CAN A LICENSED INSOLVENCY TRUSTEE NEAR ME OR ELSEWHERE POOCH OUT OF ESSENTIAL DUTIES?

licensed insovlency trustee near me
licensed insovlency trustee near me

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You can easily find a licensed insolvency trustee near me or you

There are Licensed Insolvency Trustees (LITs) (formerly called a bankruptcy trustee or trustees in bankruptcy) all over Canada who can help you with your debt problems. They’re the only debt professionals and debt advisors regulated by the federal government and are experienced in helping individuals and businesses figure out the best way to deal with their financial difficulties. There are about 1,066 individual Trustees and 218 different Insolvency Trustee Firms/bankruptcy companies in Canada, making it easy to find a licensed insolvency trustee near me or you.

The primary concern is finding a Trustee that you feel comfortable working with to discuss your debt issues and that is an ideal match for you or your business. You also need to find one that is willing to carry out its required functions. This is the same whether it is businesses with debt problems or it is people in debt.

Today’s Brandon’s Blog is about a recent decision from the Court of Appeal for Ontario which confirms that there are certain tasks in the administration of bankruptcy, be it a personal bankruptcy or corporate bankruptcy, or one of the alternatives to bankruptcy under the BIA, a Division I proposal or consumer proposal, that the licensed insolvency trustee cannot opt-out of.

The court’s decision confirms that a Trustee has certain duties under the Bankruptcy and Insolvency Act (Canada) (BIA) which are not optional, regardless of any difficulty that may be involved or the wishes of the party funding the Trustee. The case is Conforti Holdings Limited (Re), 2022 ONCA 651 (CanLII) which is the appeal by the licensed insolvency trustee of the lower court finding. I will describe it in a minute.

Licensed insolvency trustee near me: LITs are federally regulated to ensure consistent standards and supervision throughout Canada

If you’re struggling with debt, a Licensed Insolvency Trustee can help. These federally regulated professionals provide advice and services to individuals and businesses and can help you make informed choices about dealing with your financial difficulties. With their help, you can get back on track and start moving forward.

The only individuals who are authorized to administer Canadian government-regulated insolvency services that would allow you to be discharged from your debt are Licensed Insolvency Trustees. If you are in significant financial difficulty, speaking to a Licensed Insolvency Trustee near me or you to get debt management advice is the right thing to do to learn of the debt restructuring options available to come up with the right debt solution for your specific situation.

If you are not happy with the actions or decisions of a Licensed Trustee that you are unable to resolve, you can file a complaint with the federal regulator. LITs are mandated to follow all federal statutes, rules and guidelines, and your allegations will be given the appropriate consideration.

licensed insovlency trustee near me
licensed insolvency trustee near me

Licensed Insolvency Trustee near me: We’ll speak with your creditors for you

After you file for a consumer proposal, Division I proposal, corporate bankruptcy, or personal bankruptcy, the Trustee will manage your affairs with your creditors. This includes sending out a notice with additional documents required by the BIA to all creditors listed on your sworn statement of affairs.

If creditors have questions, they should be speaking with the Trustee, not you. Also, unsecured creditors cannot continue or initiate any collection action or legal proceeding against the debtor who has filed either for financial restructuring or bankruptcy. The collection calls stop in either the consumer proposal process or the bankruptcy process.

Remember, only Licensed Insolvency Trustees are authorized to conduct government-regulated insolvency proceedings – qualified professionals who understand the complexities and nuances of this process. This ensures that your insolvency proceeding is handled correctly, efficiently and with the utmost care.

Locate a Licensed Insolvency Trustee near me who is currently active

So how would I choose a Licensed Insolvency Trustee near me for my problem financial situation and find debt relief solutions? There are 3 main ways that I recommend to anyone who asks me:

  • Ask a professional that you trust and feel that you can confide in for a referral. Your lawyer, insurance agent, banker or a non-profit credit counselling agency are but a few examples.
  • If you’re thinking about personal bankruptcy or bankruptcy for your business, it is very important to pick a Trustee you really feel comfortable with. A fast Google or Bing search for “Licensed Insolvency Trustee near me” to check out various internet sites can help you get a feel for various Trustees’ tones. If one resonates with you, make a no-cost confidential consultation to discuss your circumstance.
  • The Office of the Superintendent of Bankruptcy (OSB) has a database that is complimentary to search to find every Trustee in Canada. Do that search and choose a few. I still suggest looking at their internet site and getting a free appointment before making any kind of decision on the various debt relief options.

    licensed insovlency trustee near me
    licensed insolvency trustee near me

How does a Licensed Insolvency Trustee near me get paid?

The Trustee’s fee and disbursements in a financial restructuring are normally paid out of the funds that the person or company makes available when compromising the debt of the unsecured creditors. In other words, it is the creditors who are actually paying the Trustee.

In a receivership or bankruptcy, the Trustee is paid from the proceeds of the sale of assets. If there are insufficient assets to cover the Trustee’s fees, the Trustee may seek a guarantee from a third party who is willing and able to pay, either by putting up a cash retainer, through monthly payments or both.

The guiding philosophy is that the Trustee has done its job and done so properly. This leads us to today’s discussion of the case.

Licensed insolvency trustee near me: What does a Trustee do?

A Trustee is responsible for administering the insolvency estate. This includes tasks such as collecting and selling assets, vetting and adjudicating creditor claims and distributing funds to the creditors. This is a perfect introduction to the recent Court of Appeal for Ontario decision in Conforti Holdings Limited (Re), 2022 ONCA 651 (CanLII).

Conforti Holdings Limited (CHL) as well as the Trustee in the Division I Proposal (Proposal Trustee) appealed the dismissal of the Proposal Trustee’s application for an order advising as well as directing the Proposal Trustee to not carry out the adjudication of the Moroccanoil, Inc. (Moroccanoil) proof of claim or the cross-claim by CHL versus Moroccanoil, as called for by s. 135 of the BIA. They also seek the lifting of the stay of proceedings to allow the parties to continue litigating in New Jersey.

CHL had been operating a chain of 52 hair salons for many years and had been embroiled in litigation with Moroccanoil in New Jersey for over seven years, over differences related to the supply of hair products. When told that CHL had filed a notice of intention to make a proposal pursuant to the BIA on September 28, 2020, the New Jersey court stayed proceedings there, at Moroccanoil’s request, and over CHL’s objections. The New Jersey proceedings have been case managed and the presiding judge said that the case could proceed to trial if the stay were lifted by the Canadian bankruptcy court.

Moroccanoil filed a proof of claim for $2,807,478.12 in CHL’s proposal proceedings. The Proposal Trustee filed a motion to be relieved of its obligations to determine whether the claim was provable or to value it.

This is a very basic cornerstone duty of all Licensed Insolvency Trustees. I am surprised that the Trustee and the company would prefer to continue with costly litigation in the United States, rather than reach an agreement on what value the claim should be allowed for.

By the very nature of the financial restructuring proceedings, CHL would not be paying the claim in full. Perhaps they were worried that Moroccanoil would vote against the Proposal and could carry the vote. In that case, CHL would become automatically bankrupt. However, as part of CHL agreeing to an amount of claim to allow, they could extract from Moroccanoil the quid pro quo that Moroccanoil would vote in favour of the Proposal.

licensed insovlency trustee near me
licensed insolvency trustee near me

Licensed insolvency trustee near me: What the lower court said

The motion was denied for two reasons:

  1. It was a requirement under s. 135(1.1) of the BIA for the Trustee to determine the claim, and there was no jurisdiction to exempt the Trustee from carrying out this basic duty.
  2. The judge ruled that even if the court had the authority to make the requested order, the order was not warranted as it was not one of the clear cases that justifies the court departing from the usual process for valuation of claims under the BIA. He was not convinced that permitting the New Jersey proceedings to continue would be more efficient than adjudicating the Moroccanoil claim in the proceedings under the BIA.

Licensed insolvency trustee near me: Leave to appeal to the Court of Appeal for Ontario

The Trustee and CHL asked to appeal the lower court decision, but the Court of Appeal for Ontario said no. The appellate court said that there wasn’t obvious merit to the appeal.

The motion judge decided that it wouldn’t be right to have proceedings involving CHL and Moroccanoil go ahead in two different jurisdictions. The Court of Appeal for Ontario said that this decision could not be appealed. The proposed appeal is from the order made, not the reasons.

This doesn’t surprise me. There are two basic truths for any court-appointed officer:

  1. The court officer will not be excused from performing the most basic duties.
  2. Don’t ask the court to retrospectively approve a mistake you may have made. You just need to work through it.

    licensed insovlency trustee near me
    licensed insolvency trustee near me

Licensed insolvency trustee near me: Are you sick of being in debt?

If you’re seeking to leave financial debt behind and live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

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 many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We know that you are worried because you are facing significant financial challenges. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

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 give you the best management advice to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

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

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

licensed insovlency trustee near me
licensed insolvency trustee near me
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Brandon Blog Post

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

Bankruptcy services and FAQ information

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

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

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

Bankruptcy services: Who files for bankruptcy and why?

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

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

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

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

There are two things to remember from these statistics:

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

    bankruptcy services
    bankruptcy services

Bankruptcy services: Can bankruptcy clear debt in Canada?

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

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

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

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

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

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

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

Bankruptcy services: What debts are not erased in bankruptcy?

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

bankruptcy services
bankruptcy services

Bankruptcy services: What are the three types of bankruptcies?

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

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

Another way of answering the same question would be:

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

My final way of answering the same question is:

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

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

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

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

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

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

Property that is not included is:

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

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

These exemptions include:

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

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

bankruptcy services
bankruptcy services

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

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

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

#1 – The principal residence and bankruptcy

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

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

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

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

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

#2 – Your RRSP and bankruptcy

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

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

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

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

#3 – Bankruptcy and investments

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

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

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

#4 – Bankruptcy and a private pension plan

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

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

bankruptcy services
bankruptcy services

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

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

Bankruptcy services: Surplus income

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

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

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

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

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

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

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

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

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

bankruptcy services
bankruptcy services

 

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Brandon Blog Post

WHAT DOES A LICENSED INSOLVENCY TRUSTEE DO TO HELP IN YOUR MANAGING DEBT FOR A PROFOUND QUALITY OF LIFE?

what does a licensed insolvency trustee do

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.

What does a licensed insolvency trustee do?: What is a licensed insolvency trustee?

Frequently I am asked what does a licensed insolvency trustee do? How is it different from a bankruptcy trustee? The answer is it isn’t different. The term bankruptcy trustee is dated.

The new title is Licensed Insolvency Trustee. The Office of the Superintendent of Bankruptcy (OSB) changed it in 2015. Among the reasons for the name change were the submissions made by the Canadian Association of Insolvency and Restructuring Professionals. As the name suggests, a licensed insolvency trustee can offer a wider array of financial solutions.

This Brandon’s Blog is intended to describe what does a licensed insolvency trustee do and to provide useful information for you to help you better understand the debt relief advice that a Trustee provides to people, entrepreneurs, and their companies experiencing financial trouble.

What does a licensed insolvency trustee do?: Licensed insolvency trustees are professionals who are federally regulated

There are many terms in the insolvency field that the average person isn’t familiar with, which is why it’s important to understand what the licensed insolvency trustee does. Trustees are licensed and supervised by the federal government through the OSB to act as personal and corporate insolvency administrators. This means they act to protect the interests of all involved parties while assisting debtors, acting as a debt counselor, a restructuring advisor, and if required, overseeing the bankruptcy process.

Licensed insolvency trustees are professionals with a background in finance, law, accounting, and insolvency. They assist businesses and individuals who are struggling financially. Typically, licensed insolvency trustees meet with clients to discuss their financial situation and offer advice and recommendations to help get the client out of a financial bind.

what does a licensed insolvency trustee do
what does a licensed insolvency trustee do

What does a licensed insolvency trustee do?: The credit counselor or a debt management program as an alternative

Financial guidance is offered by licensed insolvency trustees, credit counselors, and debt management programs. These services differ greatly from each other.

A licensed insolvency trustee can simply offer you financial advice and help you plan on how to repay your debts if that is all you need. A trustee is also the only person who can file a bankruptcy or consumer proposal for you. A Trustee will provide you with an initial no-cost confidential consultation to see if there are alternatives to bankruptcy for you. Credit counselors, credit counselling companies, and debt management businesses can give you financial advice and information. They can help you make a budget and make plans to repay your debt.

What does a licensed insolvency trustee do when you have debt but do not need to resort to one of the insolvency processes? During the free initial consultation, if a consumer proposal or bankruptcy is not right for you, the Trustee will refer you to see a community organization-based credit counselor who will be able to help you and also will not charge you a fee.

What does a licensed insolvency trustee do?: The Consumer Proposal Process

Consumer proposals to creditors are made by debtors and are legally binding agreements. You group all your debts into a consumer proposal to creditors. This is a debt solution to avoid bankruptcy. Your creditors agree to accept a reduced amount as full payment. The consumer proposal is a legal alternative to bankruptcy. Only a licensed insolvency trustee can administer it.

The only consumer insolvency restructuring proceeding regulated by the Canadian government is referred to as a consumer proposal (which is the only one of the consumer insolvency government-regulated insolvency proceedings that allow debt consolidation, debt settlement, or debt adjustment). In the end, your creditors write off the remainder of your debt, and you are released from those legal obligations.

If you owe $250,000 or less (not including any personal mortgages) and are insolvent, then you can qualify for a consumer proposal. Month-to-month payments over no more than 60 months need to be made to the Trustee. You pay just a part (generally 25%) of your total financial obligations gradually to the Trustee and when ended up, the rest of the balance owing to your unsecured creditors is written off.

what does a licensed insolvency trustee do
what does a licensed insolvency trustee do

What does a licensed insolvency trustee do?: The bankruptcy process

Canadian bankruptcy is a process whereby a person or company can declare itself bankrupt. The bankruptcy process starts in the provincial or territorial office of the OSB where the debtor is located.

In Canada, personal bankruptcy entails a number of stages. The debtor must be insolvent, meaning that they cannot repay their debts with the assets that they own or the income they earn. With the help of the Trustee, they must file statements of affairs and a statement of current income and expenses. There are other obligations on an undischarged bankrupt but that is not the purpose of this blog.

Upon receiving their discharge from bankruptcy, that is the moment that the debtor’s debts are forgiven or discharged.

What does a licensed insolvency trustee do?: The assignment of assets

When people file assignments in bankruptcy, what does a licensed insolvency trustee do with the assets? Any assets not charged by a secured creditor are available for the Trustee to take possession of. Those assets are usually things like real estate, cash, and vehicles. When assets are seized in bankruptcy the proceedings usually lead to them being sold and the proceeds are shared with creditors.

This is the main difference between a consumer proposal and bankruptcy. In a consumer proposal, there is no assignment of assets to the Trustee like in a bankruptcy. The debtor in a consumer proposal keeps their assets and makes monthly payments. It is the total of the monthly payments that the Trustee distributes to the creditors in a consumer proposal. In a bankruptcy, it is the proceeds of the asset sales.

what does a licensed insolvency trustee do
what does a licensed insolvency trustee do

What does a licensed insolvency trustee do?: Opting for a consumer proposal

Many people I deal with have significant debt problems. However, a consumer proposal may not be the best option for everyone. Opting for a consumer proposal means not only do you qualify under Canadian insolvency legislation to use one. It also means that it is a better alternative for you than personal bankruptcy. It means that you are able to restructure and not need bankruptcy services from a licensed insolvency trustee.

A consumer proposal is a way to get out of debt without declaring bankruptcy. If you are having trouble paying back credit card bills, medical bills, rent payments, and you don’t want to declare bankruptcy, a consumer proposal might be right for you.

Before opting for a consumer proposal, you must meet the following requirements:

  1. Total liabilities of $250,000 or less.
  2. Monthly payments can be made to your creditors, but not 100% of the total amount due.
  3. You cannot repay all of your debts with the money you have.
  4. If you work and are able to budget, you can pay your budgeted monthly expenses and have money left over for regular monthly payments to the Trustee. Under a debt management plan, your creditors will agree to write off a portion of your debt if you pay a fraction of what you owe.
  5. You may also be lucky enough to have a relative willing to put up a lump sum of money that represents a fraction of what you owe so that your unsecured creditors will accept it instead of all that you owe. This means that you can be in and out of your consumer proposal fairly quickly if you are in this fortunate position.

To summarize, consumer proposals are best suited to people with a sufficient disposable income. Consumer proposals offer the best way of restructuring, eliminating your unsecured debts, and avoiding bankruptcy.

There are restructuring provisions in the Bankruptcy and Insolvency Act (Canada) for people who owe more than they can discharge in a consumer proposal or in business insolvency. Despite some differences in the rules, the overall theme of restructuring remains the same.

What does a licensed insolvency trustee do?: Going the bankruptcy route

Given the above, what can a person do to eliminate their unsecured debt if they cannot qualify for filing a consumer proposal as an alternative to bankruptcy? Going the bankruptcy route will probably make the most sense.

Bankruptcy is when a person cannot pay their bills. They file Canadian personal bankruptcy to get a fresh start. Filing a consumer bankruptcy must be your last resort after exhausting all other options to avoid bankruptcy. Bankruptcy means debts are written off when the person receives their absolute discharge from bankruptcy. The bankruptcy law in Canada protects people from dishonest, unfair, or abusive practices by creditors.

However, in return for getting the relief of eliminating debts through bankruptcy, an undischarged bankrupt also has certain responsibilities.

These include:

  1. Making full disclosure to the Trustee.
  2. With the assistance of the Trustee, preparing the sworn Statement of Affairs and Statement of Income and Expenses.
  3. Delivering all assets and properties to the Trustee to be sold (other than for certain provincial exemptions).
  4. Attending the First Meeting of Creditors if one needs to be held.
  5. Attending two financial counselling sessions with the Trustee or a member of the Trustee’s staff. Attendance at credit counseling sessions is also the case in a consumer proposal.
  6. Providing monthly statements of income and expenses while an undischarged bankrupt.
  7. Generally providing any assistance requested by the Trustee.

In providing debt-relief options, the Canadian bankruptcy system is designed to provide fairness to both debtors and creditors while allowing the person to financially rehabilitate themselves.

what does a licensed insolvency trustee do
what does a licensed insolvency trustee do

What does a licensed insolvency trustee do?: Final thoughts

What does a licensed insolvency trustee do? Licensed insolvency trustees are insolvency practitioners. They are debt professionals who deal with and provide services to individuals and businesses with debt problems that are experiencing financial issues that can only be resolved through an insolvency process. Licensed insolvency trustees are professionals, offering affordable solutions to financial struggles.

I hope you found this what does a licensed insolvency trustee do 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.

what does a licensed insolvency trustee do
what does a licensed insolvency trustee do
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