Tag: financial affairs

BANKRUPTCY LAWYER: IS ONE ESSENTIAL TO FILE FOR BANKRUPTCY IN ONTARIO?

Post author By Brandon Smith
Post date August 7, 2023

bankruptcy lawyer

Bankruptcy lawyer: Introduction

Step right into this week’s edition of Brandon’s Blog, where we’re embarking on a profound exploration. Our focus today delves into a crucial theme that carries substantial weight within the psyche of a myriad of Canadian consumers grappling with financial adversity, as well as Canadian business owners navigating their enterprises with too many business debts through fiscal quandaries. The question at the forefront: do the circumstances warrant enlisting the expertise of a bankruptcy lawyer when contemplations of insolvency filings in Canada take center stage?

Venturing through the intricate landscape of insolvency and the realms of personal or corporate bankruptcy has the potential to stir feelings of frustration and helplessness. This sentiment amplifies mainly when the trajectory of your personal or corporate fiscal destiny hangs in a precarious balance, swaying like a delicate pendulum. The gravity of making prudent choices during this trying juncture cannot be overstated. At its core, lies the quintessential need to not only identify the right course but also to discern the adept professional from whose wellspring of wisdom guidance should be sought.

In this Brandon’s Blog, I will outline the scenarios in which consulting with a bankruptcy lawyer is highly advised, but as you will see, it is not essential in every circumstance. Whether you are taking into consideration submitting a restructuring proposal or seeking bankruptcy protection, recognizing who to turn to for specialist assistance for legal and financial advice can substantially affect the result of your financial journey.

I will discuss the intricate details surrounding insolvency as well as bankruptcy law in Canada. By diving into the significance of professional assistance and support, I intend to equip you with the understanding needed to make enlightened decisions during this difficult phase. Join me as we decipher the secrets of insolvency and bankruptcy and empower ourselves to safeguard a better financial future.

Bankruptcy lawyer: Overview of the insolvency and bankruptcy process in Canada

The bankruptcy procedure in Canada is governed by the Bankruptcy and Insolvency Act (BIA). It is a legal statute developed to supply relief to people and companies that are unable to pay their financial obligations. The process always includes the services of a Licensed Insolvency Trustee that is responsible for administering the insolvency process.

The Licensed Insolvency Trustee is first required to assess the debtor’s entire financial situation, including the causes of the insolvency, the current financial position and the nature of the assets and liabilities of the debtor. The Licensed Insolvency Trustee then needs to make recommendations to the debtor to solve their current financial crisis. Once agreed on, what insolvency or bankruptcy process will be implemented, the BIA and the restructuring consumer proposal, Division I proposal or the bankruptcy, is put into operation to offer a fresh start for the debtor while making certain there is fair treatment for the creditors.

A Licensed Insolvency Trustee is the only professional licensed in Canada by the federal government to administer the Canadian insolvency process chosen. In many cases, the process can be carried out without the advice of a bankruptcy lawyer.

bankruptcy lawyer

Bankruptcy lawyer: Formal insolvency options in Canada

Navigating the intricate labyrinth of bankruptcy within Canada unfurls as a legal undertaking of profound significance, extending its benevolent embrace to both individuals and enterprises ensnared within the inescapable clutches of their fiscal commitments. This orchestrated progression finds its regulatory compass in the venerable BIA, its vigilant guardianship entrusted to a duly licensed sentinel of fiscal adversity, recognized as a Trustee.

Commencing this odyssey, the debtor sets forth to formally lodge their supplication for bankruptcy, an entreaty promptly received by the Licensed Insolvency Trustee, who, in turn, undertakes the judicious scrutiny of the debtor’s economic constellations. From this intricate appraisal blooms a stratagem, a masterwork designed to navigate the undulating terrain of debt repayment, fostering equilibrium amid the ranks of creditors.

Through the procession of this intricate ballet, the debtor finds sanctuary from the clamorous onslaught of creditor collections, an ephemeral respite nestled within the folds of the overarching process. This respite, however, is not a sojourn of idle reprieve; it entails the debtor’s obligatory participation in the convocations of credit counsel, a didactic interlude intended to illuminate the labyrinthine corridors of fiscal wisdom.

Once the intricacies of this design garner the seal of approval, the gears of asset liquidation are set into motion, unfurling a cascade of transactions wherein the debtor’s holdings metamorphose into liquid currency, a tribute disseminated among the consortium of creditors who await their apportioned spoils.

The culmination of this voyage heralds the debtor’s liberation from the shackles of residual indebtedness, a phoenix rising from the embers of fiscal duress, reborn into a realm unburdened by the obligations that once ensnared them.

The formal insolvency options in Canada are described below.

Insolvency and debt relief solutions for individuals –

Restructuring by making monthly payments under a consumer proposal for those who owe $250,000 or less (not including any debts secured by and registered against a person’s residence).
Financial restructuring under a Division I proposal, for those who owe more than $250,000.
Personal bankruptcy.

Insolvency and debt relief options for companies –

Financial restructuring under a Division I proposal as an alternative to bankruptcy.
Sale of assets through a receivership enforcement process initiated by a secured creditor.
Restructuring for companies that owe $5 million or more under the Companies’ Creditors Arrangement Act (CCAA).
corporate/business bankruptcies..

How a bankruptcy lawyer can assist you: Importance of seeking legal advice in certain situations

In certain situations, looking for the advice of a Canadian bankruptcy lawyer is of utmost significance. An insolvency or bankruptcy filing is an intricate legal process that needs careful consideration of an individual’s financial scenario. A bankruptcy legal representative can assist with whether corporate or personal bankruptcy, as the case may be, is the best option, the kinds of insolvency processes readily available, and the connected lawful obligations and effects.

Furthermore, individuals can seek assistance from a bankruptcy lawyer to guide them through the legal procedures. It is highly recommended that consumer debtors seek advice from both a licensed insolvency trustee and a bankruptcy lawyer in certain circumstances. Some typical scenarios that warrant additional counsel from a bankruptcy lawyer well-versed in insolvency law include:

They are involved in complex family law proceedings.
There are one or more legal actions against you that allege unlawful behaviour, such as fraud or fraudulent misrepresentation or the conversion of someone else’s property, such as funds held in trust.
The bankrupt’s application for discharge from bankruptcy is being opposed and therefore there will be a court hearing.
Their financial situation is intertwined with other issues where confidential consultation with legal advice is required and that advice must be protected by solicitor-client privilege.
There are special asset considerations where a privileged discussion with a bankruptcy lawyer is essential before seeking advice and assistance from a Licensed Insolvency Trustee.

In corporate insolvency situations, we always recommend that the Directors obtain legal advice from a bankruptcy lawyer in addition to the corporation obtaining legal assistance.

A bankruptcy lawyer can provide customized guidance in such touchy situations as well as representation to guarantee the most effective feasible outcome for their clients.

bankruptcy lawyer

Can I file for bankruptcy without a bankruptcy lawyer in Canada?

While it is possible to declare bankruptcy without a bankruptcy lawyer in Canada, it is recommended to seek legal counsel for complex corporate and personal filings. Hiring a bankruptcy attorney supplies several advantages, including knowledge of insolvency legislation, assistance in more complex proceedings and guidance on unusual issues, specific unique creditor issues or claims and personal liability under any personal guarantees.

In addition, a bankruptcy lawyer can represent you in court proceedings such as with litigants who have obtained approval of the court to continue litigation against the debtor and on a personal bankruptcy discharge hearing. This will guarantee that your legal rights are safeguarded throughout the process. Therefore, in these kinds of consumer and corporate insolvency matters, it is smart to talk to a qualified bankruptcy lawyer to ensure a smoother and much more successful bankruptcy process in Canada.

Determining the necessity of enlisting the services of both a bankruptcy lawyer and a Licensed Insolvency Trustee: Is a bankruptcy lawyer required to initiate bankruptcy proceedings in Canada?

Filing for bankruptcy in Canada can be a complex as well as stressful process, however, as defined above, it is feasible to do it without the help of a bankruptcy lawyer. A bankruptcy lawyer cannot launch the bankruptcy process in Canada. In Canada, bankruptcy, as well as any other insolvency process, is launched and administered by Licensed Insolvency Trustees that are qualified and also supervised by the Office of the Superintendent of Bankruptcy (OSB). So when someone files for bankruptcy, it is done with a trustee in bankruptcy (this is the old name for a Licensed Insolvency Trustee).

Trustees are accountable for overseeing and handling the Canadian bankruptcy and insolvency procedures, including the liquidation of assets and the distribution of proceeds to creditors for unsecured debts. They additionally offer debtors financial counselling, therapy and support on how to handle their financial resources in the future. To end up being a Trustee, people need to satisfy particular educational and professional requirements, consisting of completing specialized training, courses and examinations. Thus, Canadians can trust that their insolvency, as well as personal bankruptcy procedures, are being managed by qualified and also experienced professionals.

Regardless of the guidance and aid regarding your financial affairs from a Licensed Insolvency Trustee before and also after the initiation of a financial restructuring or personal bankruptcy process, a Licensed Insolvency Trustee practically acts on behalf of the unsecured creditors. So, for circumstances like those described above, if any debtor has an extra complicated scenario, is associated with sticky scenarios or is concerned about the director or personal responsibility as a result of a business restructuring or bankruptcy, then the recommendations of a bankruptcy lawyer should be acquired before entering into any insolvency procedure.

bankruptcy lawyer

Bankruptcy lawyer and a Licensed Insolvency Trustee: Determining the necessity of enlisting the services of both a bankruptcy lawyer and a Licensed Insolvency Trustee

There arise certain junctures where the imperative of engaging a proficient bankruptcy lawyer to adroitly navigate the intricate labyrinth of the Canadian bankruptcy process becomes unequivocal. As expounded upon earlier, should your fiscal panorama manifest intricacies reminiscent of a Byzantine tapestry, replete with an entanglement of debts and creditors, the tutelage and expertise proffered by a bankruptcy lawyer morph into an invaluable compass.

The determination of the exigency to enlist the services not only of a bankruptcy lawyer but also of a bankruptcy trustee constitutes a pivotal crossroads for both individuals and enterprises ensnared in the throes of financial quandaries. While a bankruptcy lawyer adroitly dispenses legal counsel and advocates in the corridors of justice, a bankruptcy trustee’s role expands to encompass the labyrinthine realm of debt reorganization, proposal filings, and the art of debt alchemy. Their convergence encapsulates a holistic stratagem in the pursuit of resolving the monetary labyrinth.

Grasping the complexity inherent in bankruptcy law is tantamount, and a seasoned bankruptcy lawyer deftly steers through the legal firmament, charting a course that aligns with the best nexus of legal tenets. Conversely, a Licensed Insolvency Trustee proffers a detached analysis of the financial constellation, endowing clients with an array of options extending beyond the binary realm of bankruptcy and answering any questions about bankruptcy you may have.

At its essence, the verdict to summon forth both the prowess of a bankruptcy lawyer and the sagacity of a Trustee should hinge upon the unique tapestry woven by individual circumstances and the crystalline aspirations of the client. Ultimately, it comes down to the complexity and sensitivity of the person’s or company’s overall situation.

How to find a qualified bankruptcy lawyer or Licensed Insolvency Trustee in Ontario

When confronted with financial troubles in Canada, it’s important to make informed choices. If you’re thinking about bankruptcy, it’s smart to seek guidance from a Licensed Insolvency Trustee. These professionals can assist you through the intricate procedure and also give important understanding.

For those with especially complicated financial circumstances, or who is a corporate director of an insolvency company, it might be essential to employ the help of a seasoned bankruptcy lawyer.

Starting your search for trustworthy professionals can be frustrating. Nonetheless, a calculated strategy can aid. Begin by discovering the Law Society of Ontario’s website, where you’ll discover a comprehensive list of competent legal experts that concentrate on bankruptcy and insolvency.

To locate a bankruptcy trustee near you, explore the computerized database of the OSB. This will certainly give a list of bankruptcy trustees in your locale to seek insight, advice and assistance. For both a bankruptcy lawyer as well as a Trustee, it is essential to engage in a comprehensive conversation with any prospective advisor, delving into their specialist background, navigational technique, and cost structure.

Efficiency is not the only aspect to think about; reliability and also the personal vibe you get from that person to see if you make a connection are likewise essential elements that need to inform your decision. By locating an ally who can give adept support throughout this challenging period, you can navigate this hard juncture with greater ease as well as confidence.

Finally, check out Google and other online reviews. There is nothing better than reviews from people who were in your shoes before and sought assistance from a Licensed Trustee, bankruptcy lawyer or both. Their experience and insight into specific professionals will help you immensely. Things to look for include:

What service did they perform for the person?
Does the reviewer live in your general area?
Did the professional do a good job?
What were some of the reviewer’s favourite things in working with that professional?
Did they work with any specific people in the firm that they highly recommend?
How did the Licensed Insolvency Trustee or bankruptcy lawyer they chose to compare to others they may have consulted with?
Are there any tips the reviewer offers to others?

Bankruptcy lawyer: Conclusion

Looking for legal advice when considering bankruptcy is not needed in every scenario. However, it is necessary when it concerns complicated plans. Hiring a qualified bankruptcy lawyer can provide countless benefits. They have the proficiency as well as knowledge to advise you before embarking on a bankruptcy process and afterwards to assist you with the whole procedure.

When considering filing an assignment in bankruptcy in Canada, it is crucial to comprehend the complexities of the process and also the potential effects. While it may be possible to navigate through it without an insolvency lawyer, talking to one will supply the specialist expertise necessary to guarantee a smooth and efficient process when you have complex or unique issues in your situation.

From evaluating your financial situation to exploring alternatives such as a restructuring proposal, a bankruptcy lawyer can direct you through the legal puzzle and also suggest the most ideal strategy. When it concerns matters as substantial as bankruptcy, seeking expert help is a sensible choice to secure your best interests and also secure a fresh financial start.

I hope you enjoyed this bankruptcy lawyer Brandon’s Blog. Problems with making ends meet are a growing concern in Canada, affecting individuals of all ages and income levels.

Creating a solid financial plan can be the key to unlocking a brighter and more prosperous future. By taking control of your finances, you can prioritize your expenses, set clear financial goals, and build a strong foundation for your dreams to come true. With the right mindset and approach, financial planning can empower you to regain control, eliminate this issue as a source of stress in your life and find peace of mind.

Individuals must take proactive measures to address financial difficulties 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 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 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 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, Starting Over, Starting Now.

Brandon Blog Post

UNDISCHARGED BANKRUPTS: WHAT ALARMING RESTRICTIONS ARE PLACED ON CANADIAN UNDISCHARGED BANKRUPTS?

Post author By Brandon Smith
Post date August 1, 2022

undischarged bankrupts

Undischarged bankrupts: Declaring bankruptcy may not make all of your debts disappear

What? I thought the point of filing bankruptcy was to make all of a person’s debts go away.

For many years, people have used debt repayment strategies such as the debt snowball, debt avalanche and debt stacking to pay off their credit card debts and other unsecured liabilities. Each strategy has its own set of pros and cons in attempting to straighten out your financial affairs.

If you’re struggling with too much debt and you feel your financial affairs are in a mess, you can always try financial restructuring. This involves working with a licensed insolvency trustee to reorganize your finances. It is a sensible next step people take when they’re trying to get their debt under control.

Deciding to file for bankruptcy is never very easy, however, it may be the most effective choice for getting a fresh start to straighten out your financial affairs. If a do-it-yourself or restructuring method is not an option for someone after that bankruptcy will certainly be the required action.

Nobody likes to think of the possibility of personal bankruptcy, yet it is essential to understand the procedure. In this Brandon’s Blog post, I’ll discuss the insolvency process, what limitations are placed on individuals that have actually filed for bankruptcy and are still undischarged bankrupts, and also when in bankruptcy is the time financial obligations are gotten rid of.

Undischarged bankrupts: How bankruptcies work in Canada

The Canadian bankruptcy legislation is designed to help insolvent and not viable companies, or insolvent, honest but unfortunate people, obtain relief. Subject to trust claimants’ rights and the rights of secured creditors, the company or person is assigning all of their unencumbered assets to the licensed insolvency trustee.

After going through bankruptcy and being discharged, most of your debts will be gone. There are a few exceptions, but for the most part, you will be relieved of a great financial burden.

undischarged bankrupts

Undischarged bankrupts: Are there any debts not forgiven when I get my discharge from bankruptcy?

It’s crucial to remember that once undischarged bankrupts are released from bankruptcy, they are no longer responsible for the financial obligations they had at the time of bankruptcy. The discharge is a key part of this process, and it helps to give individual bankrupts a fresh start.

A bankruptcy discharge provides relief from most debts, except for:

support payments for a former spouse or your children;
penalties and fines assessed by the court;
any financial debts resulting from fraud or fraudulent breach of trust; and
student loans within the last seven years before your date of bankruptcy while you were a part-time or full-time student.

Additionally, the debts owing to secured creditors holding valid security fall outside of the bankruptcy process. Those secured loans must stay current or else the secured creditor can look to the default provisions of its loan in order to preserve their rights to collect.

Problems for undischarged bankrupts – What are the consequences of a bankrupt not being discharged?

The implications of not being discharged from bankruptcy are significant for undischarged bankrupts.

Being unable to obtain credit

If you are bankrupt (i.e., not discharged from bankruptcy), you may only borrow $1,000 or less without informing the lender (e.g., credit card company) that you are an undischarged bankrupt. If you fail to do this, it is an offence under the Bankruptcy and Insolvency Act Canada (BIA) and you could be fined and/or imprisoned.

Being unable to work in certain jobs or professions

Undischarged bankrupts in Canada, will not be able to work in certain jobs or professions. Examples are:

If possible employment requires you to pass a security clearance, you may not be able to pass it. If you cannot pass, then you will not be hired.
As someone who is not yet discharged from bankruptcy, you are not able to serve as a Director of a company.
You cannot operate a trust account so that is a problem for certain professions such as real estate brokerage or lawyer.
If you’re bankrupt and haven’t been discharged, you won’t be able to get bonded. So any jobs that require that are out of the question.

How long the information lasts on your credit report

The six to seven years AFTER your bankruptcy discharge that your bankruptcy information stays on your credit file is like a stain that just won’t come out. For undischarged bankrupts, the clock hasn’t even started ticking yet. Your credit score is negatively affected for anyone who goes bankrupt, especially for undischarged bankrupts.

Being subject to certain restrictions in relation to their property and finances

While you are an undischarged bankrupt, your property and finances are in play.

While you are an undischarged bankrupt, your property and finances are up for grabs! You cannot have any assets other than those allowed for by the exemptions allowed in the province where you live. So if you acquire any before your discharge from bankruptcy, they belong to your licensed insolvency trustee!

The most often cited examples are things that are out of your control, such as a windfall, like winning the lottery or getting an inheritance.

An undischarged bankrupt may be subject to having to make surplus income payments to their licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada sets a minimum threshold in bankruptcy proceedings based on the person’s family income and the number of people in the household. That minimum threshold is essentially the Canadian poverty line. Any monthly income earned by an undischarged bankrupt above that minimum threshold set is subject to surplus income payments.

Essentially, one-half of the person’s monthly income, net of income tax, above the minimum, must be paid over. A licensed insolvency trustee administering the personal bankruptcy must recalculate the person’s obligation to pay, up or down, as the person’s income changes. The longer you remain an undischarged bankrupt, the longer your ability to keep all that you earn is restricted.

undischarged bankrupts

What is the meaning of undischarged bankrupts?

As soon as you declare personal bankruptcy, the individual bankrupt’s status is that of an undischarged bankrupt. People that have actually not yet gotten their discharge from personal bankruptcy are called undischarged bankrupts.

How does an individual bankrupt person get their discharge? By completing all of the required duties, including making full disclosure of all assets and liabilities to the licensed insolvency trustee and delivering non-exempt assets to the Trustee. You are expected to attend the two mandatory counselling sessions and any other meetings that may be called.

You are entitled to an automatic discharge after 9 months if you are a first-time bankrupt and do not need to pay surplus income. This assumes that you have met all of your obligations as an undischarged bankrupt, fully cooperated with the licensed insolvency trustee and that no creditor is opposing your discharge.

If you are a first-time bankrupt and subject to surplus income, you must pay it for 21 months before you are entitled to a discharge. Longer timelines apply if you are a second or more time bankrupt.

Suppose the Trustee has evidence that the bankrupt has not been forthcoming and cooperative, or has committed one or more bankruptcy offences. In that case, the Trustee needs to oppose the bankrupt’s application for discharge. Such undischarged bankrupts are not entitled to an automatic discharge. Unsecured creditors who have filed a proof of claim in the person’s bankruptcy on account of their unsecured liabilities may also object.

If your income tax debt is equal to or more than $200,000 and 75% or more of your total debt, you are not entitled to an automatic discharge either. If you have been bankrupt before, the Office of the Superintendent of Bankruptcy Canada may object. This would happen if they believe the person is abusing the Canadian bankruptcy system.

If you’re a secured creditor, you’re usually not affected by bankruptcy. That’s because bankruptcy is designed to help unsecured creditors with unsecured liabilities, not creditors who have a security interest in some or all of the bankrupt debtor’s assets. Secured creditors have the right to enforce their security, take possession of the asset(s) covered under the security, sell the asset(s) and get paid back all or a portion of their secured debt. Secured creditors who are not repaid in full after the sale of the secured asset(s), can file a claim in the person’s bankruptcy as an unsecured creditor for the unpaid unsecured liabilities.

Undischarged Bankrupts in Canada – Your Options

The Trustee is only responsible for filing an undischarged bankrupt’s application for discharge once in the bankruptcy proceedings. The system requires that the Trustee make the first application on their behalf. It is ultimately the responsibility of the bankrupt person to ensure that their application is filed.

If either the Trustee or one or more unsecured creditors oppose your application for discharge, the matter will need to go to a hearing in bankruptcy court. This will essentially put a hold on the bankruptcy proceedings until the court hearing.

Undischarged bankrupts are never sure what to do next. This is understandable, so, here are a few options to consider:

1. Contact your Trustee – They’ll be able to help you understand your options and what’s best for your situation. You’ll need to speak to your licensed insolvency trustee to find out why they’re opposing your discharge. It might be something as simple as not having had your second counselling session yet, or forgetting to give the Trustee some information or a document.

If the Trustee or creditor opposes your discharge for any reason, it may be more difficult to remedy the situation, but the best place to start is by talking to the Trustee and getting a copy of any notice of opposition filed.

This way, undischarged bankrupts can understand the issues preventing them from getting an automatic discharge from bankruptcy.

2. Get in touch with a bankruptcy lawyer – They can give you more specific advice about your options and what might be the best course of action for you. Undischarged bankruptcy may need to retain a bankruptcy lawyer for advice and representation in court.

3. File a consumer proposal – this is another option that might be available to you, depending on your circumstances. A consumer proposal filed by a bankrupt person that makes a sufficient offer to the unsecured creditors that is accepted and fully performed acts to annul the person’s bankruptcy. By doing this, the need for a bankruptcy discharge hearing is eliminated.

undischarged bankrupts

You owe money—The 5 types of bankruptcy discharges available to undischarged bankrupts

Automatic discharge from bankruptcy –

After you file for bankruptcy, you will be automatically discharged nine months later from your bankruptcy proceedings if:

this is the first time you were ever bankrupt;
unless your trustee, creditors, or the Office of the Superintendent of Bankruptcy oppose it;
you have gone to your 2 mandatory counselling sessions;
your income tax debt is less than $200,000 and less than 75% of your total debt; and
you have not been told to pay surplus income to the bankruptcy estate.

If you do have to make payments, and you qualify for an automatic discharge, you will get it after 21 months of payments.

If this is your 2nd bankruptcy, after 24 months of bankruptcy, you may be eligible for an automatic discharge if you don’t have to make payments of surplus income.

If you need to pay surplus income and are bankrupt for the second time, you must pay this money to your Trustee for 36 months. After that, you qualify to be automatically discharged.

If you do not get an automatic discharge, then you are required to attend a bankruptcy court hearing to consider all the evidence to decide what type of discharge you are entitled to. The court has various options available.

Absolute order of discharge –

As part of the bankruptcy proceedings, there are many factors the bankruptcy court will consider when you apply for discharge. Some of these may include:

What was your conduct before and during bankruptcy, as set out in the Trustee’s Section 170 Report?
Did you attend the financial counselling sessions and pay any required surplus income to the Trustee for your creditors as agreed?
How much do you earn annually?
Do you have any assets that are exempt from seizure (such as RRSPs)?
Do you have just one creditor, such as the Canada Revenue Agency or a litigation creditor?

The court will issue an absolute order of discharge if it is satisfied that there are no factors that would disqualify you from receiving your bankruptcy discharge immediately.

Conditional order of discharge –

If the court feels that your discharge should be conditional on you meeting certain conditions to obtain an absolute discharge, the court will order a conditional discharge.

This usually involves paying a certain amount of money over a set period of time. The court may also impose other conditions. Once you’ve met all the conditions, you’ll be given an absolute discharge.

Suspended order of discharge –

A suspended discharge is one that delays the absolute discharge to a later date. It can also be combined with a conditional order of discharge.

Refused discharge –

If the evidence demonstrates that the bankrupt individual is taking advantage of the bankruptcy process, has not worked cooperatively with the licensed insolvency trustee, or their conduct is deemed unacceptable, the court can refuse to grant a discharge.

In this instance, undischarged bankrupts must take measures to improve the situation before being able to apply again to court to hear the bankrupt’s application for discharge.

Undischarged bankrupts summary

I hope you enjoyed this Brandon’s Blog on undischarged bankrupts. 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. 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 can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost initial consultation.

Tags absolute discharge, application for discharge, automatic discharge, bankrupt person, bankruptcy proceedings, breach of trust, Consumer Proposal, discharge from bankruptcy, financial affairs, income tax, individual bankrupt, Ira Smith Trustee, secured creditors, surplus income, surplus income payments, undischarged bankrupt, undischarged bankrupts, unsecured creditors, unsecured liabilities

Brandon Blog Post

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

Post author By Brandon Smith
Post date May 16, 2022

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:

You are not alone. Many people face financial difficulties.
There are options available for avoiding 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.

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Bankruptcy services: What are the three types of bankruptcies?

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

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

Another way of answering the same question would be:

Voluntary bankruptcy – an assignment in bankruptcy being filed by the person or company.
Involuntary bankruptcy – a bankruptcy happening because one or more creditors issued a bankruptcy application resulting in a bankruptcy order.
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:

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.
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.
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.

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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:

The principal residence.
RRSP..
Investments.
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.

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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.