Tag: Debt

Categories
Brandon Blog Post

DEBT CONSOLIDATION: DEBT CONSOLIDATION LOAN MAY START PLAYING HARD TO GET

 

Debt consolidation

Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process

Introduction

On November 16, 2018, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) issued a press release on the state of consumer insolvencies in Canada. Hidden in the information was data which leads me to believe that debt consolidation may be tougher in 2019 and certainly in 2020.

A perfect storm is brewing

A historically low rate of interest and accessibility to credit have enabled some Canadians to stay up to date with debt and debt payments that would otherwise have gone into default. Interest rates are now rising and it is expected that the Bank of Canada will continue to raise its benchmark rate into 2019. Canadian household debt is on average at its highest level ever and is forecast to continue to rise. Rising household debt combined with rising interest rates is not a good combination.

Until now, Canadian real estate values have continued to rise, so consumers have been able to combine unsecured credit card and other debt into new mortgage or home equity line of credit debt secured by Canadian real estate. However, times have changed. Effective January 1, 2018, a new mortgage stress test came into effect. We described it in our blog “CANADA MORTGAGE STRESS TEST: WE EXPOSE THE SECRET TO TURN YOU FROM ZERO TO HERO”.

The mortgage stress test has resulted in one of its prime goals; a noticeable downturn in new mortgage loans. The second result is a slowing down of the runaway real estate markets in Vancouver and Toronto. If Canadian household debt continues to rise, interest rates keep rising making debt payments tougher and Canadians can no longer combine their unsecured debts by taking out a new loan by borrowing against their homes, debt defaults are going to rise.

That is why I say that debt consolidation loans may start playing hard to get.

The important relationships to consider

Below is a chart displayed in the CAIRP press release which I have reproduced here.debt consolidation 3

 

CAIRP came to some interesting conclusions about interest rates and consumer insolvencies, based on the trends shown in these charts. However, I believe they overlooked what I think is the central issue.

In the top chart, it shows that insolvency filings increased in the 2009-2010 years. CAIRP surmised that there was a lag between the time interest rates rose in the years 2006 through 2008 and the increased filings. This is true. However, the increase in filings mirrors the increase in unemployment in the 2009-2010 period. My personal view is that the more important finding is that the unemployment rate lagged the interest rate increase and it is the increase in the unemployment rate that produced a higher level of insolvencies.

With higher interest rates, corporations are paying more on their debt. Corporations want to show a steady increase in their profits year over year. If debt costs rise, companies have to find other costs to save. One cost that can be reduced in the short-term is labour costs. The forecast shows that as employees are terminated, the unemployment rate rises. Not everyone can find new work in the same time frame. This leads to increased consumer insolvency filings. In my view, the unemployment rate is a more important relationship to consumer insolvency filings.

Looking at 2019 and 2020

The bottom chart shows the relationship between household debt to income and the inflation rate. As you can see, the household debt to income ratio has kept a steady climb in 1996 through 2017 years. This steady climb has continued in 2018 and is forecast to rise even more in 2019 and 2020. The forecast also shows that inflation will nudge up to the 3% rate in 2020. So prices are expected to rise with inflation, and the household debt to income ratio is expected to rise also. This will put more pressure on Canadians trying to keep up with their debt payments.

The upper chart shows us that in 2019-2020, the forecast is that GDP stays flat, while interest rates continue to rise. In the same time frame, the downward trend in the unemployment rate bottoms out and begins to rise. Again, more unemployment and higher interest rates lead to problems for people trying to pay off debts. If you agree with my hypothesis that Canadians won’t be able to merge debt by borrowing more against their homes, this will lead to more financial problems and presumably an increase in consumer insolvency filings.

What you can do now

All is not doom and gloom. There are many things a person with a lot of debt can do now before things get out of control. There are many things that you can do right now to avoid a disaster down the road. My 5 steps for anyone who wants to resolve debt issues now are:

  1. Review your household budget now and cut spending on “wants” vs. “needs”. If you don’t have a household budget, develop a realistic one NOW!
  2. Rework the budget so that you spend less each month than you are currently spending. Look for ways to economize. Use that extra cash to paying down debt.
  3. Start paying more than the minimum monthly payment on your credit card and other unsecured debt. The more you can pay, the faster you can pay it off.
  4. Pay down the debt with the highest interest rate first. The less you pay in interest the better. That means more is going to pay down the principal debt.
  5. Perhaps you need to consider taking on a part-time extra gig to bring in more income.ira smith trustee

What if I can’t pay off my debts?

For Canadians that discover themselves not able to handle their debt on their own, there is a range of alternatives to take into consideration:

Identifying which choice is most appropriate depends upon a person’s scenarios as well as their unique asset and liability structure.

Debt consolidation: How we can help you

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to recognize all of your alternatives. The alternative you pick based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

debt consolidation

Categories
Brandon Blog Post

407 ETR RATES: THE ONLY GUARANTEED TO WORK 407 ETR DEBT SETTLEMENT PLAN

407 etr rates

We are trying something new. At the bottom is an audiogram of this 407 etr rates Brandon’s blog. If you would prefer to listen to it, and not read it, scroll down to the bottom and press on the play button. Let us know what you think by sending us a message in the Question box below.

407 etr rates: Introduction

The purpose of this 407 etr rates is not to tell you what the new toll rates are. The simple answer is that they are always going up! Rather, it is an update to our earlier blogs for people who are having trouble paying their 407 toll payment.

As you probably know, the 407 etr has an arrangement with the Province of Ontario where if you have unpaid 407 etr charges, you will be put on plate denial the next time you have to renew your vehicle plate. For many, being denied a plate renewal means the end of your ability to earn an income.

Before the update, a bit of history to put everything into perspective for you.

407 etr rates: Our prior blogs

We previously wrote about how the 407 etr was trying to use the provincial law as a collection tool, even when a person filed for a debt settlement restructuring consumer proposal or for personal bankruptcy. Our prior blogs were:

I won’t repeat the history here as you can check those blogs yourself. Suffice to say they argued in Court, unsuccessfully, that the Province had the right to enforce its own plate issuance rules.

The lower Court and the Court of Appeal for Ontario disagreed with their right to enforce the plate issuance rules when it was a blatant action to collect an ordinary unsecured debt caught in the priority scheme of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). The Courts also found that they were trying to trump Federal law through Provincial law, which is illegal. Finally, the Supreme Court of Canada refused to hear their appeal, so that is where it ended, sort of.

407 etr rates: So that is where it ended, sort of

With those rulings, the 407 etr stated that they would comply and drafted a policy which was an extremely literal wording of the BIA. It technically complied with the Court rulings, but still had the effect of being very draconian and not changing their administrative policy.

The debts of an insolvent person, who has made a debt restructuring consumer proposal or bankruptcy filing, are not discharged until the insolvency process is complete. For a debt settlement plan, it is when the person finishes making their payments and receives their Certificate of Full Performance. In a bankruptcy, it is when they receive their absolute discharge.

How those processes work deserves their own blogs. Suffice to say the processes can take anywhere from a minimum of 9 months (first-time bankruptcy, no surplus income, no assets and no discharge opposition) up to 5 years (debt settlement plan). So the plate denial actually stayed in force for a long time.

The 407 etr also set up a very document intensive 407 etr login process that made applying for the eventual rescission of the plate denial very cumbersome.

407 etr rates: The class action lawsuit

The firm that independently runs Highway 407 ETR in the Greater Toronto Area agreed to pay $8 million to clear up this claim. The settlement, approved in November 2016, finishes the litigation that began in 2012.

The lawsuit affirmed that the toll freeway consortium unlawfully used provincial regulations to stop motorists that were insolvent or bankrupt from restoring their automobile permit plates. 407 ETR refutes it did anything incorrect and does not confess obligation in approving the out of court negotiation.

407 etr rates: Now for the update – The only 407 etr debt settlement plan guaranteed to actually work

The licensed insolvency administrator (LIT) acting as either the bankruptcy Trustee or consumer proposal Administrator, acting as either the bankruptcy Trustee or consumer proposal Administrator, will issue the Notice of Bankruptcy or Consumer Proposal. 407 ETR must be listed on your sworn Statement of Affairs as a creditor. It will then be sent a copy of the notice by the LIT.

Upon receipt, 407 ETR will end from plate rejection any amounts still owing from before the date of filing either for bankruptcy or a consumer proposal. This includes toll charges, interest, penalties and costs. They will then advise the Ministry of Transportation to upgrade their documents to show this change ending plate denial. This is a major change. You do not have to have completed your full insolvency process to get the lifting of the plate denial. This is the way fairness dictates it always should have been from the start.

There is a simple rule that you have to follow. It is the same rule that you need to follow in dealing with any leases or secured debt that you wish to continue to carry and that you can afford to. That is, you must not have any amounts owing to 407 etr for charges after your filing date which would qualify for plate denial.

407 etr rates: Are you worried about or need relief from plate denial

  1. Are you under plate denial, or afraid you will be soon?
  2. Will plate denial negatively affect your income and you need debt relief fast?
  3. Do you have other debts that need to be addressed too?
  4. Do you need budgeting help?
  5. Are you already experiencing financial difficulties?

If you answered yes to just one of these questions, you need a professional trustee. If yes, call the Ira Smith Team. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door.

We always offer a free consultation. We listen to your issues and give you a full range of realistic options to help you get out of debt. Finding the best solution for YOU is just the right thing to do to help you meet total debt freedom.

The earlier you contact us, the more options we will have to carry out. Whether it is a corporate restructuring or personal debt settlement through a consumer proposal, the goal is to avoid bankruptcy. However, if bankruptcy turns out to be the best option, we can assist there too.

You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, ending the pain and stress you are feeling forever. Call Ira Smith Trustee & Receiver Inc. today for your free consultation.

Categories
Brandon Blog Post

CONSUMER PROPOSAL ONTARIO: AMAZING GOVERNMENT PLAN TO REDUCE CONSUMER DEBT

 


Consumer proposal Ontario: Introduction

I am finding that more people are calling me to ask about a consumer proposal Ontario. This is a Canadian federal government authorized program for people to lower their consumer debt.

What is triggering the boost in these queries?

Consumer proposal Ontario: New Ipsos Canadian consumer debt survey

A brand-new study by Ipsos might assist. It paints an unpleasant scene of just how much debt some Canadians are holding on to. Of those asked 31% claim they do not make an adequate amount to pay their costs monthly. More state they are having a hard time to merely to survive. Ontario residents in this predicament are candidates for consumer proposal Ontario.

The study discovers many people are sorry for the sort of spending they’ve done to find themselves with such debt. Peoples’ incomes aren’t maintaining pace with the increase in their costs. I am not just talking about extras; I am also talking about the basics of life such as food and shelter.

Consumer proposal Ontario: Bank of Canada benchmark interest rate hike

At the very same time, on October 24, 2018, Stephen Poloz, the Governor of the Bank of Canada (BOC) announced the Bank of Canada interest rate hike by a quarter-point to 1.75%. This increases the cost of borrowing for Canadians. This is the 5th bump since the summertime of 2017.

The Bank of Canada states that the Canadian economic situation remains running near capacity and is reasonably broad-based. The rising cost of living is close to target so what stands apart is that the current rate at 1.75% is still negative in actual terms adjusting for inflation.

Since the old Free Trade Agreement, the new USMCA appears to be resolved, several think with this 800-pound gorilla out of the room, it’s most likely to unlock the Bank of Canada’s ability to continue with rate hikes.

Consumer proposal Ontario: How will higher interest rates affect you?

If you stay in a variable price home mortgage or credit line, your rate of interest has risen. What that indicates for your capital is that your month-to-month repayment has actually risen. If your home mortgage is half a million bucks, your month-to-month repayment has actually increased by sixty-five dollars.

It does not feel like a great deal. Nevertheless, if your loan(s) rate of interest rises during the rest of the year and right into 2019, that will certainly maintain raising your repayments.

It isn’t simply your variable price home mortgage. Canadians additionally lug debt with credit lines, automobile financings as well as bank cards. Each rate of interest rise will certainly increase the price of borrowing on those variable price financings.

The raised repayments will certainly maintain consumption in your capital. So for those battling to make ends meet, rates of interest boosts will just make life harder. A consumer proposal Ontario won’t help with secured debt, but it will help eliminate unsecured debt

Consumer proposal Ontario: Higher interest costs lead to belt-tightening

To regulate debt, Canadians need to be aggressive with their budgeting. Individuals need to take ways to boost their monetary scenario, such as:

When talking to a LIT, ask about how a consumer proposal Ontario can help you.

Consumer proposal Ontario: Nonetheless, many Canadians are still seeking help

Many Canadians continue to be haunted by debt. They experience remorse towards their existing and future debt scenario. Fifty percent are not certain that they will not have any kind of debt in retired life, while 44% are not certain they will have the ability to cover all living expenditures in the next year, without taking on additional debt.

Some Canadians are thinking about bankruptcy. Their first step must be to go to a Trustee. A Trustee is an expert that is certified by the Office of the Superintendent of Bankruptcy Canada (OSB). The OSB is the government organization that controls the insolvency system in Canada.

Consumer proposal Ontario: A government-approved strategy to end consumer debt

To most of our potential clients’ shock, I have told many that bankruptcy might not be essential for them. Sometimes I suggest that it is possible to remove their debt via a government-approved strategy to decrease consumer debt called a consumer proposal Ontario.

Your government authorized debt settlement program is an offer made to your creditors. The offer is to repay only a percentage of what you owe, over a duration of no more than 5 years.ira smith trustee

Consumer proposal Ontario: The benefits to you

There are benefits for you to file such a debt settlement plan. First, you keep your assets. Next off, an approved proposal binds all creditors to the arrangement.

We begin with having the individual complete the standard intake form that we call, the Debt Relief Worksheet. When totally filled in, it gives us a listing of the individual’s assets as well as what they owe. It additionally aids them to budget their income and expenses. Utilizing that info, I am able to formulate a proposal based on your capacity to pay.

The proposal is submitted to the OSB. Once submitted, you can quit paying your unsecured creditors. If creditors are garnishing your income or suing you, those activities are stopped. As soon as the proper documents are submitted with the OSB, I then send out the proposal to every one of your creditors.

The creditors then have 45 days to approve or decline the deal. If creditors are unhappy with the proposal, as the Trustee I can work out changes such as greater payments. However, it all is based on what you can still manage to safely pay.

I tell people that if the proposal is turned down, the individual will certainly need to consider various other alternatives to resolve their monetary troubles. This might include bankruptcy.

Once we get approval, you are then in charge of making routine payments to the LIT as the proposal administrator. The LIT will certainly use that cash to pay your creditors.

As part of the consumer proposal process, you will need to go to 2 counseling sessions in the LIT’s office. This will aid you to get back on your feet monetarily. If you fully complete your plan, you will certainly be legitimately released from your unsecured financial obligations.

Consumer proposal Ontario: There are 2 consumer proposal FAQs everybody asks me

What this affect my credit score?

Yes, it will certainly be influenced, I tell every person. Once the regards to the proposal are fulfilled, people can begin reconstructing their credit history and their economic future.

Just how much does it cost?

The cost is established by the Federal government. How much an individual pays in for an effective consumer proposal is totally unrelated to the allowable government authorized to charge. The Trustee earns the fee from the amount you pay into your debt settlement restructuring plan. So, that means, the cost is FREE!

Consumer proposal Ontario: That freedom feeling

Our clients who complete their consumer proposal are so pleased to get that letter from us enclosing their Certificate of Full Performance. That is the document that confirms they have become debt-free.

The Ira Smith Team has years of experience of negotiating with creditors for debtors. If you owe less than $250,000, other than for any mortgages against your home, you can enter into a consumer proposal debt settlement plan. If you owe more or are a corporation, we can still negotiate with your creditors and restructure you with a restructuring proposal debt settlement plan.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, recover your money and move on to the next investment opportunity.

Call us today for your free consultation.consumer proposal ontario

Categories
Brandon Blog Post

CANADIAN INTEREST RATE HIKE POSSIBLY SCARIER THAN HALLOWEEN

canadian interest rate hikeCanadian interest rate hike: Introduction

Does Bank of Canada chief Stephen Poloz anticipate good times generally in the Canadian economic climate to continue or is the marketplace an indicator of a problem in advance? The most recent Bank of Canada interest rate announcement was a Canadian interest rate hike boosting its benchmark rate by 25 basis points to 1.75%.

This is the 5th rise given since July 2017. All indicators show the Bank of Canada rate will boost right into 2019.

Canadian interest rate hike: The tale of two economies

There are presently 2 stories about the Canadian economy. The initial one is that the economic climate is doing well. Sufficiently so that we require to be increasing rates of interest. Mr. Poloz thinks there is a requirement to be tightening up that a bit.

At the exact same time, the second one, the other story, points to an economy that isn’t so great. The marketplace has recently made the case for pessimism. That story is that:

  • we’re at the actual end of a long great financial run;
  • a trade battle with China is the precursor of tough times ahead, and
  • investors are frightened that this can be the time that things start to turn down.

Canadian interest rate hike: What does it mean for you?

There’s a great deal of discussion regarding what that indicates specifically for Canadians. It isn’t that the cautions have not been there for a while. The Bank of Canada records that the typical Canadian household debt is around 170 percent of disposable earnings. The ordinary Canadian owes $1.70 for every single dollar of revenue earned each year, after tax.

Twenty years ago, the ratio was at 100%. So as you can see, there has been a steady climb since the 1990’s in Canadians appetite for more debt.

We have among the highest debt proportion of any of the Organisation for Economic Co-operation and Development participant nations. The concern is have we started to learn the message?

Initially, former Bank of Canada Governor Mark Carney and the former Federal Finance Minister, the late Jim Flaherty desired the Canadian consumer to place the economy on their back and march it up this lengthy high hillside. We did and it worked. Nonetheless, this is the result of it.

Currently, we start to see some indicators that the Canadian consumer is thinking of their budgeting. Stats Canada is reporting that retail sales have actually started to see a slowing down. Individuals are thinking of just how their variable priced loans are costing them more.

The sensible people will certainly begin restricting their purchases to just their needs and not give in to their wants. All this to attempt to maintain their debt in check. Rates of interest are rising so debt costs are going up and will set you back even more. Individuals will certainly concentrate on the requirement to bring costs as well as debt under control. This will lead to a cooling off in the Canadian economy.

Canadian interest rate hike: The US situation

I anticipate the very same practices will certainly happen in the United States. President Trump is already disturbed that the United States central banker Jay Powell is currently raising interest rates. However, Trump is disturbed that elevating rates will certainly tinker negatively with the US dollar. It could also slow down the US economy. If that happens, Donald Trump’s fears his worst nightmare. He won’t be able to truthfully boast how well the US economy is doing under his administration. There have been times already where he’s been plainly irritated the economy is refraining from doing what he wants of it. Mind you, to date, he has not let the truth get in the way of a good boast!

So climbing rates of interest will certainly have a result on the North American economic situation and the marketplaces. Whether interest rate hikes will be scarier than Halloween, only time will tell.

Canadian interest rate hike: Are you uneasy about your household debt?

Do you feel rising debt costs will put you and your family in peril? Do you need budgeting help? Are you already experiencing financial difficulties? If you answered yes to just one of these questions, you need a professional trustee. If yes, call the Ira Smith Team. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door.

We always offer a free consultation. We listen to your issues and provide you with a full range of realistic options to help you get out of debt. There have been numerous times where thinking about all the Canadian debt solutions available, we have advised debtors that they do not need an insolvency process. Rather, maybe they can avoid it by implementing an informal process. If that is your case that if fine with us; finding the best solution for YOU is just the right thing to do to help you achieve total debt freedom.

The earlier you contact us, the more options we will have to implement. Whether it is a corporate restructuring or personal debt settlement through a consumer proposal, the goal is to avoid bankruptcy. However, if bankruptcy turns out to be the best option, we can assist there too.

You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, ending the pain and stress you are feeling forever. Call Ira Smith Trustee & Receiver Inc. today for your free consultation.ira smith trustee

Categories
Brandon Blog Post

CANADIAN DEBT SOLUTIONS: AVOIDING THE BANKRUPTCY PROCESS

Canadian debt solutions: Introduction

This blog discusses a very interesting recent decision in the British Columbia bankruptcy case of Hervias (Re), 2018 BCSC 1579 (CanLII). A licensed insolvency trustee (LIT or Trustee) (formerly known as a bankruptcy trustee) is trained to develop Canadian debt solutions. Sometimes the best debt solution does not involve a formal insolvency process; either a consumer proposal or personal bankruptcy. The purpose of this blog is to describe the case of Mr. Hervias and why sometimes the best advice is that you don’t need to go bankrupt. This is a story of Canadian debt help – the good, bad & ugly.

Canadian debt solutions: The position of the stakeholders

Mr. Hervias made a Court application to annul his bankruptcy. He says that the bankruptcy assignment ought not to have been submitted because his only creditor of any significance was the Canada Revenue Agency (CRA). The evidence showed that CRA would have accepted a voluntary proposal to settle his tax liability in regular monthly payments affordable to him. He claims that the Trustee never asked such questions of CRA prior to recommending that he file for bankruptcy.

CRA does not challenge an annulment. It is encouraging his proposal to repay the debt. They likewise intend to file a memorial on the title to his home in which he has equity higher than the debt owed to CRA!

The Trustee is the only party to oppose the annulment application. The LIT insists that when Mr. Hervias sought his help, Mr. Hervias was insolvent because CRA was garnishing his pension and had frozen his bank account. Mr. Hervias had a previous bankruptcy and a couple of other minor creditors. Mr. Hervias had significant equity in buildings he owned with his son and his wife.

Canadian debt solutions: How could this even happen?

Mr. Hervias owed CRA, his major creditor, unpaid income tax of $23,820.50, including penalty and interest. In April 2017, CRA froze his only bank account. He sought help from a debt consultant, Canada Debt Helpline. He required CRA debt forgiveness. On the second meeting with an agent of Canada Debt Helpline, they introduced him to a LIT.

The Trustee met Mr. Hervias at the offices of Canada Debt Helpline. The LIT argues that Mr. Hervias sought bankruptcy guidance when he initially met with him. The Court determined that Mr. Hervias was presented to the Trustee by the debt counselor. The evidence showed that Mr. Hervias looked for the help of a debt consultant; not for a bankruptcy trustee!

The Court found that at the date of bankruptcy, Mr. Hervias had net equity in real estate of $95,000 – far more than the total of his debts! I question whether Mr. Hervias was even insolvent at the date of bankruptcy.

His bankruptcy happened because a debt consultant, who had a cozy relationship with a LIT, recommended a bankruptcy trustee with whom no doubt a financial relationship existed.

Canadian debt solutions: Debt consultants cause harm

I have written before on the evils of the debt consulting/debt settlement industry:

  1. DEBT SETTLEMENT COMPANIES FINALLY TAKEN TO TASK IN ONTARIO – December 17, 2013
  2. HOW ADVANTAGES OF CONSUMER PROPOSALS SAVES YOU FROM DEBT SETTLEMENT COMPANIES – June 30, 2015
  3. CONSUMER PROPOSAL VS DEBT SETTLEMENT – October 1, 2015
  4. DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: NEW CANADIAN GOVERNMENT REPORT EXPOSES DEBT SETTLEMENT COMPANIES HARMING CONSUMERS – May 3, 2017
  5. DIFFERENCE BETWEEN DEBT SETTLEMENT AND CONSUMER PROPOSAL: DEBT SETTLEMENT COMPANIES ARE PROS WHEN IT COMES TO CONS ON INSOLVENT CONSUMERS – May 10, 2017

Canadian debt solutions: Technically or temporarily insolvent?

At the time of the bankruptcy, Mr. Hervias declared some other little financial obligations including:

  • a possible debt of roughly $900 to a Recreational Vehicle park chain;
  • $213 owed to Telus Mobility from an old phone agreement; and
  • a $186 debt to Best Buy for a laptop computer that he had not repaid in full.

Mr. Hervias had assets that well surpassed his obligations. Notwithstanding, he met the technical interpretation of a bankrupt person under s. 2 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). Since the CRA had frozen his only bank account, he had no access to his income to fulfill his commitments as they came to be due.

Because he had a poor credit score, he was not able to arrange to finance on the real property he owned jointly. His wife was also not ready to consent to the financing because she was back in her homeland of the Philippines looking after her elderly mother. She asked her husband to wait until she returned to Canada.

Canadian debt solutions: Was there a realistic option for an insolvency process?

Definitely. The evidence showed that CRA would have agreed to an informal proposal, allowing Mr. Hervias time to repay his debt to CRA. As stated above, his other debts were minor. His bankruptcy was unnecessary.

This is a prime example of the dangers of debt consultants and the Trustees who are in bed with them. For the record, my Firm does not have a relationship with any debt consulting or debt settlement firm.

Canadian debt solutions: The Court’s concerns

The main concerns for the Court were:

  • did the Court have jurisdiction to annul a bankruptcy in circumstances where the bankrupt was insolvent when the bankruptcy occurred and there is no finding that the bankrupt abused the Court’s process or committed fraud on his creditors in filing an assignment in bankruptcy;
  • if the court has jurisdiction, whether it should exercise its discretion to annul the bankruptcy in this case; and
  • in granting the application to annul, whether it should be subject to payment of the trustee’s fees.

The Court determined that it was absurd that someone with considerable assets which created income would assign himself into bankruptcy. This is especially so when the main creditor is prepared to accept payment over a longer time span in amounts that the debtor can afford. The Court concluded that these circumstances were both special as well as uncommon.

Canadian debt solutions: The Court’s decision

However, just because bankruptcy ought not to have taken place, an annulment does not instantly follow. The law is clear that the bankrupt must additionally satisfy the Court that in all the conditions of the case, thinking about all the different stakeholder interests, the discretion needs to be worked out in favour of annulment. Furthermore, the jurisprudence guides the Court to think about the legal rights of the insolvent, the creditors and the public policy issues.

The Court was critical of the LIT. The Court found that prior to the assignment in bankruptcy, the Trustee should have consulted with CRA. Certainly, had he done so, he would have found out that an informal proposal was possible and there would have been no need for any insolvency process, especially a bankruptcy.

In the Court’s view, Mr. Hervias and his creditors are not harmed by an annulment, while the public interest in the integrity of the bankruptcy process is not undermined by annulling this bankruptcy under these unique conditions. Mr. Hervias’ bankruptcy was annulled according to s. 181 of the BIA. Mr. Hervias was ordered to pay the Trustee’s fee and disbursements immediately, subject to taxation.

Canadian debt solutions: Our approach

If you or your company are experiencing financial difficulties, you need a professional trustee. If yes, call the Ira Smith Team. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door.

First of all, we always offer a free consultation. We listen to your issues and offer you a full range of realistic options to help you get out of debt. There have been many times where thinking about all the solutions available, we have advised debtors that they do not need an insolvency process. Rather, maybe they can avoid it by implementing an informal process. As a result, we do not earn any fees from such advice; it is just the right thing to advise and do in those circumstances to help you make total debt freedom.

The earlier you contact us, the more options we will have to carry out. Whether it is a corporate restructuring or personal debt settlement through a consumer proposal, the goal is to avoid bankruptcy. However, if bankruptcy turns out to be the best option, we can assist there too.

You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, ending the pain and stress you are feeling forever. Call Ira Smith Trustee & Receiver Inc. today for your free consultation.

canadian debt solutions

Categories
Brandon Blog Post

CANADIAN INSOLVENCY LAWS: ALIENATION OF ASSETS

 

Canadian insolvency laws: Introduction

In today’s commercial world, our economy focuses on and requires Canadian insolvency laws. Insolvency is the financial condition where you cannot pay your debts as they come due and if you liquidated all of your assets, there would not be enough cash to pay off all of your debts.

Insolvency laws are required in a mature economy. It reassures investors that there is a way to “recycle” assets. Asset recycling makes them once again valuable and revenue producing, should insolvency set in on a person or company.

Canadian insolvency laws: My goal with this blog

An insolvency process is used as a means of liquidating one’s whole legacy (i.e. the totality of one’s assets) in order to attempt to please all of the creditors that have grown way beyond the ability of the person or company to repay. Emotions always run high in insolvency procedures. We are dealing with the lives of real people that may be losing their jobs, income, homes and other assets.

The purpose of this vlog is not to teach you about insolvency laws. I want to caution anyone considering going into business how important it is to structure things properly. Your aim is to make sure that you are protecting yourself, your business and your family. If your business falters and becomes insolvent you will be glad that you did.

Canadian insolvency laws: Believe it or not, it may be good for you to meet a licensed insolvency trustee

So naturally, as a licensed insolvency trustee (formerly called a bankruptcy trustee) the first focus is on restructuring. Sometimes bad things happen to good people and companies. Bad judgement, bad luck and bad management all contribute to personal and corporate insolvency. Our primary focus is to use various ways to help people and companies recover from insolvency.

The potential ramifications of insolvency procedures can be minimized. A person can no longer afford to keep their assets. A company has too many problems to continue its business. However, those same assets can be used very successfully in a new business or by someone else. So insolvency laws and procedures help to avoid a total loss of asset values.

In many of our cases, this can involve particular minor legal procedures which could eventually conserve a fortune. For financial institutions, this can be especially good news.

Canadian insolvency laws: Why you need to “alienate” your assets


If you are running a company, or are likely to do so in your career, you must minimize your exposure by safeguarding your assets. By doing so, you are protecting yourself and your family for the future, especially if something in business goes wrong. The time to protect yourself is when you are starting out and there are no problems. If you do so when the problems have already arisen, it is too late. Any asset protection steps you take knowing yourself to be insolvent, will not stand up to attack.

By running a company, you will probably become a Director. If your business needs to borrow money from the Bank to operate, you will probably be required to guarantee the bank debt. So, if you anticipate yourself collecting considerable unsecured financial obligations in the coming years, you need to act. Starting out properly protecting yourself, allows you to either avoid or successfully defend, any challenges on the sequestration of your assets.

Canadian insolvency laws: Why you want to be an “alien”

You will make sure that the properties you have “alienated” no longer form part of your estate. The alienation ensures that the possessions from which you will still benefit cannot be gotten by your financial institutions if the business is unsuccessful and they are looking for any assets you may have to honour the financial obligations you accumulate.what does a court appointed receiver do

Canadian insolvency laws: Use your lawyer


When setting up a company, you need a lawyer. Make sure that you choose a lawyer that can also counsel you on how to protect your assets in the event your business venture fails. We are not lawyers, and the general advice I am going to give you is not meant to replace the advice of a lawyer.

Canadian insolvency laws: You may need more than one company to conduct your business

The first thing to think about is incorporating a limited liability company. Depending on the type of business, you may need to incorporate several, within which to house your operations, the leased or owned premises you operate out of and your shareholdings. Conducting your business through a company will require more documentation and therefore cost.

However, it is well worth it. It removes and protects you personally to the greatest extent possible from personal liability. The goal is to minimize or eliminate the destruction of you and your family. If you choose not to go through a corporate body, for whatever reason, protecting your personal assets becomes even more important. There will not be one or more corporate entities to serve as the first line of protection.

Canadian insolvency laws: Examples of multiple corporations in running a business

Examples of how multiple corporations will better insulate you and your business assets are:

Operating company. Your operating company is the one you conduct business through. It is the vehicle which will attract the most liability. There is always a risk in running any business. However, there is no law that requires you to hold all your business assets in your operating company.

Single purpose corporation. You may want to incorporate a second single purpose company to hold valuable assets used to conduct the business of your operating company. Tangible assets such as machinery and equipment are obvious. You are operating out of premises; either leased or owned.

You may wish to have a corporation that holds the tangible assets. Another company that is simply the real estate company. If you also have valuable intangible assets such as copyrights, licenses, trademarks, you may wish a separate company to hold all of the intangible assets.

These single-purpose corporations will then lease the assets to your operating company to conduct its business. Your operating company will pay rental charges, lease payments and licensing fees to the respective sole purpose companies. You need your lawyer to carefully document in writing everything. By now you can probably see the value in separating out the various important and valuable assets from your normal business operations.

Canadian insolvency laws: Alienating your most valuable asset

The most significant and most important property most of us will own is our house. The time to transfer your ownership interest to your partner ideally is before the first day of your going into business. Waiting until there are business problems and you are insolvent, any transfer will be successfully attacked. Obviously, you have to believe that you and your partner have a solid loving relationship before making the transfer as you will no longer have your ownership interest in the house.

Canadian insolvency laws: Does your company have too much debt?

To set up your company and structure your affairs properly, we urge you to use the best lawyer for your needs. This blog cannot replace the advice of your lawyer. However, if your company is experiencing financial difficulties, you need a professional trustee. If yes, call the Ira Smith Team. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door.

The earlier you contact us, the more options we will have to implement. Whether it is a corporate restructuring or personal debt settlement through a consumer proposal, the goal is to avoid bankruptcy. However, if bankruptcy turns out to be the best option, we can assist there too.

You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, ending the pain and stress you are feeling forever. Call Ira Smith Trustee & Receiver Inc. today for your free consultation.canadian insolvency laws 1

Categories
Brandon Blog Post

BANKRUPTCY IN ONTARIO CANADA & CONSUMER PROPOSAL ONTARIO

Bankruptcy in Ontario Canada: Introduction

Bankruptcy is sometimes necessary for the financially troubled individual or company. In Canada in 2017, there were 125,807 insolvency filings; 60,669 bankruptcies and 65,138 proposals. Bankruptcy in Ontario Canada accounted for 15,968 of the 2017 filings. The majority of these across Canada filings were people, not companies.

Bankruptcy in Ontario Canada: Not entirely unexpected

This is an expected statistic once you understand the purpose of the Canadian insolvency system to get rid of financial obligations. It is also for the financial rehabilitation of people and companies and if possible, allow them to do so while retaining their assets.

In a down economic climate, even more, debtors use bankruptcy to protect their wide range of interests. Although on a per capita basis Canadians are savers, more recently, especially related to real estate, we are a country of borrowers. A lot of people are overloaded with debt, including credit card debt.

Bankruptcy in Ontario Canada: Bankruptcy is not always right

Any debtor with severe monetary troubles must think about bankruptcy. Bankruptcy isn’t always the right response though. In my practice, we first run through the various options available to avoid bankruptcy.

It is proper only when you have too many financial obligations that you cannot realistically repay, in whole or in part, from your future earnings or from selling your assets. This is the meaning of the financial state of insolvency.

If you make $100,000 a year and your financial obligations are only $20,000 (assuming you have no assets), why go bankrupt? Temporary financial sacrifice on your part could pay off your debts in full. This is definitely more suitable for bankruptcy.

What about a proposal?

Although each case is unique, generally speaking, if your unsecured financial debts are less than 60 percent of your net yearly pay, stay clear of bankruptcy. You could use a self-help remedy to pay off your debts in full. Alternatively, you could look to the proposal or consumer proposal mechanisms under the Bankruptcy and Insolvency Act (Canada).

Under the proposal provisions of the BIA, a person or company could take up to 5 years to pay off part of the debt. A successful proposal forgives the balance of your debt (subject to certain ones indicated below). Many creditors will wait if you show good faith and make organized repayments that provide your creditors with a better result.

A filing may protect some assets

A bankruptcy or proposal filing may also be necessary to secure your assets; this is especially true for companies looking to restructure. In a BIA filing, all civil actions against you instantly stop— whether they are legal actions, CRA garnishments or secured creditor seizure and enforcement (the last under specific conditions). Every creditor must obey the automatic stay of proceedings imposed by the BIA. A proposal filing gives you the possibility to solve your economic issues with lenders who would certainly otherwise seize and sell your assets.

Timing is everything

I advise every person and company in need of restructuring that timing is crucial. It is human nature for debtors to regularly wait far too long. By waiting too long, they shed possible advantages from an earlier restructuring filing. The longer a person or company waits, the fewer options they have. Also, if you wait too long, the less creative I can be to protect your assets.

5 general tips

  1. Collect your tax refunds prior to your filing. When you file for bankruptcy, any tax refund owing to you prior to the date of bankruptcy belong to your bankruptcy estate. Your licensed insolvency trustee (Trustee) collects the payments.
  2. The insolvency process is meant to treat all creditors fairly and all ordinary unsecured creditors equally. Seek the advice of a Trustee prior to making payments to specific unsecured creditors prior to filing. Your good intentions may prove to have created transactions that the Trustee can attack. The Trustee will then seek recovery from those parties.
  3. Consider how the causes of your insolvency will look to your creditors. Uncontrolled lifestyle spending looks a lot different from ongoing costs due to a mental or physical illness or an addiction. The causes of your insolvency sometimes dictate whether a proposal or bankruptcy filing is preferable.
  4. Have you contributed to an RRSP in the 12 months before filing for bankruptcy? That amount will have to be paid over to your Trustee under bankruptcy or accounted for in what type of proposal can be successful.
  5. If you have student loans, was the last time you were either a full or part-time student more than 7 years prior to your filing? If no, you won’t be able to end the student loan debt. However, it may be enough to relieve yourself of your other unsecured debts to have enough funds every month to start repaying the student loans.

Some debts can’t be discharged

Bankruptcy will not end every debt. There are certain debts that cannot be discharged through bankruptcy. Examples are:

  • student loans as described above
  • child support and alimony under either a court order or written separation agreement
  • fines or restitution ordered by a Court
  • debts arising out of fraud, embezzlement or misappropriation while acting in a fiduciary capacity
  • amounts owing to secured creditors registered against your assets, such as a mortgage or car loan. Any amount still owing after the asset is sold, if any, is an unsecured claim which is discharged in a bankruptcy

Bankruptcy must be your last option

Bankruptcy could be your ideal choice if the amount of your debt and the amount you can realistically repay will not settle it. If you have few possessions to lose in bankruptcy, then a bankruptcy filing may be your best choice. By meeting with a Trustee early to discuss your options, you will get a good understanding of what may be possible.

I always advise every person or company never file for bankruptcy without first striving to solve a case without bankruptcy. Bankruptcy must be your last option, not your very first – avoid bankruptcy if you can.

Think about all readily available options prior to determining that bankruptcy is genuinely the best decision for you and your situation. If you find you are in too deep and can’t dig out fast enough, then you do need professional help.

Seek the advice of a professional trustee

Many people and companies facing serious financial issues don’t know where to go for professional help or are too embarrassed. There’s no shame in seeking professional, financial help. Licensed insolvency trustees evaluate your situation and help you to arrive at the best possible solution for your problems.

Ira Smith Trustee & Receiver Inc. is here to help. We’re federally regulated and subject to a strict code of ethics. We offer a depth of expertise and provide a high quality and cost-effective service. I understand your pain and we can end it. You will find that we use a friendly, non-judgmental method.

Give us a call today and let us help you solve your financial problems Starting Over, Starting Now.bankruptcy in ontario canada

Categories
Brandon Blog Post

DEBT RELIEF CANADA: CAN YOU DIPLOMATICALLY AVOID BANKRUPTCY?

2 1920x1080 3

Debt relief Canada: Introduction

This is always a hot topic. I am asked often how does debt relief Canada work? I recently wrote blogs about professional athletes who made a lot of money in their careers and who are now broke, or worse, bankrupt.

I am going to tell you about former tennis star Boris Becker. He is trying to avoid bankruptcy, diplomatically.

First some background information. The inviolability of diplomats is among the oldest rules of international law. During the Greek Empire, it was unlawful to abuse, apprehend or detain a country’s agent. In contemporary times, there is polite resistance from court territory as a matter of global regulation. The purpose of this is to make certain the reliable efficiency of diplomatic features preventing the holding authority from intervening with the diplomat’s job.

Debt relief Canada: Diplomatic immunity

Diplomatic immunity separates into 3 categories. The resistance of the consular office properties and residential properties. The buildings, cars, archives and diplomatic communications. While the holding authority has a task to shield the diplomatic properties from any type of damages, the embassy remains immune from any kind of law enforcement actions. The authorities cannot enter the consular office other than to safeguard human life for instance of a severe emergency.

The 2nd kind is within the premises. The resistance of the employees functioning in the consular office from the local court’s jurisdiction. Mediators are immune from any kind of type of law enforcement like arrest, search as well as apprehension.

The 3rd kind is that the diplomat, as well as his/her family members, are additionally immune in the hosting country from paying taxes other than the settlement for solutions like electricity or water.

Article 29 of the Vienna Convention on Diplomatic Relations states that diplomatic immunity could only be forgoed by the sending out government.

Debt relief Canada: The Boris Becker story

It likely raised a few eyebrows when Boris Becker revealed he was pursuing a 2nd profession in diplomacy In April 2018 as the Central African Republic’s attaché for Sports/Humanitarian/Cultural Affairs in the European Union.

The statement came while Becker had a claim made against him over a loan he presumably owes to exclusive financial institution Arbuthnot Latham, after the sports celebrity’s bankruptcy in 2017. His lawyers claim that his diplomatic function grants him immunity under the 1961 Vienna Convention on Diplomatic Relations. They state this indicates he cannot be subject to any kind of lawful procedure in the courts of any nation. Additionally, they say this protection is for as long as he stays an identified diplomatic representative.

The Boris Becker method of debt relief

His legal representatives have also provided those claims to Britain’s High Court, saying that British Foreign Secretary Boris Johnson in addition to the Central African Republic would need to decide whether any kind of suits could continue. This takes the bankruptcy of a previous tennis star transforming it into a politically delicate matter. The Court process against Becker might lead various other countries can potentially make use of the situation. In the same fashion British diplomats abroad could lose immunity if certain countries wished to make a point.

Becker’s defence method has actually likewise set off inquiries over his motivations as well as timing in accepting a polite duty with the Central African Republic— a nation in the midst of a bloody civil conflict and humanitarian situation. It appears now the Republic has more important matters to focus on. Its social and sporting activities ties to Europe cannot be a current priority.

The former tennis champ condemned the choice to start bankruptcy procedures versus him as unjustified and unjust and introduced he would look for payment for the totally unneeded affirmation of bankruptcy that he was pushed into.

Debt relief Canada: The precedent story of Sheikh Walid Juffali

The Article 29 of the Vienna Convention on Diplomatic Relations I previously referred to, has actually long been controversial. In 2014, the little Caribbean island of Saint Lucia named Saudi business owner Sheikh Walid Juffali its irreversible representative. Moreover, this appointment occurred after his former spouse Christina Estrada separated from him and instituted divorce proceedings.

Britain’s High Court ruled that his diplomatic status was totally fabricated. Britain’s Foreign Office slammed the judgment when stating it can result in problems with British diplomats’ immunity abroad. The Court said that Sheikh Walid Juffali, a permanent resident of Britain, is not protected by his diplomatic status. Estrada’s award was about $100 million.

Applying the very same reasoning in Becker’s instance would negate any diplomatic immunity claim by the long-time British homeowner.

What if you can’t claim diplomatic immunity?

Boris Becker’s uses a very novel and entertaining defence to avoid lawsuits to recover debts. However, most of us don’t have the ability to get diplomatic status from a country and then claim immunity. We deal with creditors suing us on our debts. We have to take a less dramatic and more common sense approach. Here is my list of options for those looking for debt help in Canada.

Debt relief Canada: Credit counselling

This addresses debt troubles without bankruptcy and supplies you with the skills to live debt totally free. Credit counselling solutions consist of budgeting, just how to use debt intelligently, restoring credit as well as debt management programs.

Debt management programs are developed to aid you to settle your debt. You enlist willingly in a debt monitoring program; the court did not mandate it. When you enlist a credit counsellor will call your financial institutions and ask for their collaboration in minimizing your debt. Your creditors could agree in ways like minimizing the amount of debt owing. A debt management program cannot cover all debts. It cannot cover secured debts. A mortgage, line of credit registered against your home or an auto loan are examples of debts not covered.

Debt relief Canada: Debt consolidation

Debt consolidation is getting a loan that enables you to settle your financial debts to a number of or all your unsecured creditors, leaving you with simply one loan. Usually, this approach is ideal to deal with your unsecured debts. The theory is that the debt consolidation loan will have a lower annual interest rate than many of your unsecured debts.

Debt relief Canada: Proposals

Consumer proposals and Division 1 proposals are alternatives to bankruptcy. Although similar in many areas, there are some major distinctions. Consumer proposals are readily available to people whose overall financial debts do not go beyond $250,000, not consisting of debts secured by your house. Division 1 proposals are for both companies as well as people whose financial obligations go beyond $250,000 (excluding the mortgage on their primary residence).

Proposals are governed by the Bankruptcy and Insolvency Act (BIA). Collaborating with a licensed insolvency trustee you make a proposal to:

✥ Pay your creditors a percentage of what you owe them over a certain
 amount of time, without any interest

✥ Extend the time you need to repay the debt

✥ Or a mix of both

Proposal payments are made to your trustee. The trustee uses that money to pay each of your creditors. You can take up to 5 years to complete a proposal.

The last resort: Bankruptcy

As a last resort, you can declare bankruptcy. The Government of Canada licences and supervises us. We can look at your circumstance and discuss with you the options available to you to avoid bankruptcy. We can also advise you what is involved in the bankruptcy option and administer it for you.

Do you have too much debt?

I can’t provide you diplomatic immunity from your debts. However, If you’re thinking about a consumer proposal or are looking for ways to end your financial debt, or you need CRA debt forgiveness, call Ira Smith Trustee & Receiver Inc. We understand the stress and pain your financial problems are causing you. We feel your pain and we can end it for you.

Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress-free life.

debt relief canada

Categories
Brandon Blog Post

WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

what happens to debt when you die canada
what happens to debt when you die canada

If you would prefer to listen to the audio version of this what happens to debt when you die Canada Brandon’s Blog, please scroll down to the bottom and click on the podcast.

What happens to debt when you die Canada introduction

When discussions of debt come up, people often joke around and say they’ll finally be free of debt when they die. But, is that true? Although we’ve written about this issue before, we thought this would be a good opportunity to update you. Does debt survive death? In Brandon’s blog, I want to explore with you what happens to debt when you die Canada.

In this what happens to debt when you die Canada blog, I use the terms Estate Trustee and Executor interchangeably. Here are some previous blogs I wrote on the topic of debt and death.

 

 

 

What are an Estate, Executors, and Beneficiaries?

When you pass away, all of the assets (your life belongings) and obligations (your financial debts) in your name enter into a separate legal entity called your estate. Your will certainly names one or more people or firms to act as your Estate Trustee to sort out the finances, administer the estate and ultimately, make the necessary distributions to the beneficiaries. There are no special requirements to be an Estate Trustee. It is really up to the wishes of the deceased.

The Estate Trustee or executor first needs to be a copy of the Death Certificate. That document is required for the executor to do what is necessary for administering the estate. The will expresses the desire of the deceased in dealing with his or her estate.

The Estate Trustee is in charge of securing, insuring and either selling or distributing your possessions. The Estate Trustee must also collect all relevant documents of the deceased that might indicate the extent of the assets and liabilities.

They are also liable for making sure that the debts of the deceased are also paid off before there is any distribution to the beneficiaries. The Estate Trustee must make sure that they understand what happens to debt when you die Canada. There are specific rules that an executor must follow. Each province establishes its own rules.

Beneficiaries are the parties named in the will of the deceased entitled to receive either specific assets or possessions and/or cash from their sale. An Estate Trustee can be a pal or relative that the deceased had full trust and confidence in who is willing and capable to do the task.

Choosing a close friend or relative to act makes sense because they are trusted. However, not everyone views such an appointment as an honour. Rather, it can be viewed as an obligation they do not feel comfortable carrying out. Anyone thinking of naming a close friend or relative should discuss it first with them to make sure they are willing to take on the role.

It can also be an independent professional or company that is experienced in acting as an Estate Trustee. We have been appointed as Estate Trustee when relatives or friends do not feel comfortable, choose the option to renounce their responsibility and a new executor must be appointed. As you can see, there are many steps that an Estate Trustee must take to properly administer the estate.

what happens to debt when you die canada
what happens to debt when you die canada

What happens to debt when you die Canada: When Debt Collectors Call

Taking care of the financial debts of the deceased person can be confusing. Along with the psychological stress and the countless jobs that require scrutiny, you now have the debt collectors calling trying to collect on the outstanding bills.

Debt collectors can commonly call the family of the departed to do their best to collect the outstanding debt. Guidelines vary between provinces. Collection agencies will use many deceptions to try to collect debts that only the deceased is responsible for. All such calls should be directed to the Estate Trustee who should request that all communications come only in writing.

If assets pass to you as a beneficiary, the only time a beneficiary, who has not co-signed or guaranteed any debts of the deceased would be responsible for any related debt, is if the debt is secured. For example, if the will calls for you to inherit the home or vehicle of the deceased, there could be a mortgage against the home or vehicle financing involved. Those debts are secured and follow the asset.

Unsecured debt is outstanding debt that is not specific to any asset. The Estate Trustee must make sure that all unsecured debts, including income tax debt, are fully paid off before any distribution is made to the beneficiaries.

What happens to debt when you die Canada if there is a secured debt against specific assets and the beneficiary of those assets cannot afford to maintain the loan payments? If proper estate planning was not done, such as using a life insurance policy to cover secured debts or large unsecured debt like income tax debt, then it is probably best that the Estate Trustee takes the option of selling the asset in question.

The cash obtained from the sale, after paying off the related secured debt, and any income tax liability arising from the sale of the asset, can then be paid to the beneficiary who was entitled to that asset. Obviously, the Estate Trustee will have to discuss this with the beneficiary before taking any action with an asset and get their agreement.

It is clear that the Estate Trustee role is not a simple one. Most often, legal advice is necessary to make sure that mistakes are not made.

What happens to debt when you die Canada: Who is responsible for the debts?

All of your assets that are registered solely in your name make up your estate. Examples of such assets are bank accounts, like savings and chequing accounts, cash, real estate, stocks, etc. Your estate will then go through a process called probate to decide its value.

Before your assets can be bequeathed as you’ve requested in your will, your estate uses them to pay off your financial obligations. An executor takes care of these things. Only after your bills are paid off will your heirs inherit anything.

If there aren’t enough assets in your estate to pay off your liabilities, any co-signer will be on the hook for the specific debts they co-signed on. If the estate is insolvent, then the Estate Trustee would be forced to make an application to the bankruptcy court for authority to assign the deceased’s insolvent estate into bankruptcy.

Yes, a dead person can become bankrupt, believe it or not. I have done several bankruptcies of deceased estates. That is what happens to debt when you die Canada if there are not enough assets that when liquidated, will pay off all of the debts of the deceased.

What assets are safe from creditors?

Typically retirement accounts and insurance policies, as long as they name a designated beneficiary, are safe from creditors. However, they are not safe if the deceased designated his or her estate as the beneficiary.

what happens to debt when you die canada
what happens to debt when you die canada

What happens to debt when you die Canada: There are different types of debt

Mortgages:

Mortgages are secured obligations, meaning that they’re among the first to claim your assets to get paid. If someone inherited the home or the home was owned jointly and each owner was registered as joint tenants, then they’re responsible for the mortgage. It can be considered not only as a secured loan but, in the case of joint tenants, a joint mortgage loan!

UPDATE: Check out our blog

WHAT HAPPENS TO MORTGAGE WHEN YOU DIE CANADA: DEBT PHILOSOPHY EXPLAINED.

Vehicle Loans:

Auto loans, like mortgages, are another example of secured loans, meaning that they’re among the first to claim your asset(s) that were pledged as security for the loan, to get paid. If the estate can’t pay off the amount owing and you have a co-signer or guarantor responsible for what is now a joint debt, they will be responsible for the car loan. If the loan isn’t repaid by the estate or the co-signer (if there is a joint debt holder), the car will likely be repossessed.

When the lender sells the vehicle, if the net proceeds (net of all recovery and enforcement costs) yields insufficient funds to pay off the loan, then the estate (and co-signer) are responsible for this shortfall.

Credit Card Debts:

Credit card debt, unlike a mortgage or a car loan, isn’t secured. This means that if the estate can’t pay back the amount owing on each credit card, the creditors are out of luck. However, if there is a joint credit card holder, who holds a supplementary credit card then they are responsible to pay back the debt.

Many people don’t know that merely holding a supplementary credit card makes that person a joint debt holder who is responsible to repay the balance owing in full. That is a term of a standard credit card agreement of the credit card issuer. Credit card insurance is available to take care of credit card debt, but it is costly. Normally the bank lines up an insurance company to provide that life insurance policy coverage.

UPDATE: Check out our blog

CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

What happens to debt when you die Canada summary

I hope you enjoyed this what happens to debt when you die Canada Brandon Blog. The Estate Trustee is the administrator charged with the responsibility of properly administering the estate of the deceased.

Don’t pass on your financial obligations to anyone else after your death; it’s important to deal with debt while you’re alive. Give us a call today. The Ira Smith Trustee & Receiver Inc. Team can help you get rid of debt Starting Over, Starting Now.

We understand the pain you are in because of too much debt. We also know how to end your pain. Don’t pass that pain on to your loved ones. You don’t have to wonder what happens to debt when you die Canada.

Contact us today so we can begin healing you to lead a stress-free life.

Being debt-free will give you the peace of mind that all is in order and that you’re not burdening your heirs with financial hardship.

Categories
Brandon Blog Post

FINANCIAL HARDSHIP: ARE YOU GOING BROKE SPLURGING ON THE KIDS?

financial hardship
financial hardship

Financial hardship: Introduction

As parents, you want to give your kids every advantage, but how much is too much? And do you really need to splurge on non-necessities if it’s putting a financial hardship on the family? It’s ironic to hear rich and celebrity parents say that they’re really trying to give their children a normal upbringing, without over-the-top excess; while on the other side of the fence, average, working families are making birthday parties that cost thousands of dollars. Does your child’s birthday party really have to feature pony rides, live entertainment and loot bags that cost a fortune? Clearly the days of BBQ and “pin the tail on the donkey” have gone the way of the dodo.

Financial hardship: Strain on the family budget

Extracurricular activities can also put a strain on the family budget. How many extracurricular activities are your kids participating in? And what are these activities costing you? According to an Ipsos poll commissioned by Global News:

  • Canadian parents spent an average of $1,120 to enroll their children in extracurricular, community and sports activities during the last school year
  • For some, the cost of a busy after-school schedule was even higher, with nearly one in 10 parents shelling out over $2,000
  • Many families are overstretched to pay for it all, with over half of parents saying the cost of kids activities puts a strain on family finances
  • Nearly a third of respondents who were Gen X parents (between the ages of 35 and 54) said they had taken on debt to pay for things like dues, fees and equipment.

If your child is in a competitive dance program, costumes alone can cost thousands of dollars. Hockey is extremely expensive and the costs of competitive hockey are not for the faint of heart.

Financial hardship: Be realistic

Parents, you have to be realistic about what you can or can’t afford. Going into debt for birthday parties and after school activities makes no sense. Scale back. Make a birthday party that makes financial sense for the family, not the neighbours. Choose an after school activity with your child that they’ll enjoy and you can afford. Not only will you save a lot of money, but you’ll have some money to put away for your child’s education – a better investment in their future than a birthday party or extracurricular activities.

Financial hardship: Are you in too much debt?

If you’re already overextended and feeling the pinch of financial hardship, don’t wait until the situation becomes dire. Contact the Ira Smith Trustee Team as soon as possible. We can help you manage debt and put you on a path to debt free living Starting Over, Starting Now. Make an appointment today for a free, no cost, no obligation consultation. You’ll be glad that you did.

Call a Trustee Now!