Tag: financial difficulties

MAXED OUT CREDIT? YOU NEED TO KNOW HOW TO INCREASE CREDIT SCORE: OUR 13 INTRIGUING TIPS TO IMPROVE YOUR CREDIT SCORE

Post author By Brandon Smith
Post date May 1, 2023

how to increase credit score

Our mission includes helping you know how to increase credit score with our free online course

The objective of this Brandon’s Blog is to furnish readers with comprehensive insights on improving their credit rating, alongside introducing them to our complimentary no-cost e-learning module, “How to Increase Credit Score: How To Improve Your Canadian Credit Score”. This user-friendly course provides a definitive guide on increasing your credit score, thereby paving the way for better financial prospects. The brief video above describes the course and how you can access it.

This Brandon’s Blog provides highlights common problems faced by those with low credit scores, including being declined for credit or having to pay high-interest rates. I also provide valuable tips on how to increase credit score. The focus is primarily on the significance of maintaining a good credit score in order to get approval for reasonably priced loans, mortgages, or credit cards.

Explanation of maxed-out credit: Know how to increase credit score

Maxed-out credit happens when an individual has reached their credit limit and is unable to borrow any more and make further purchases. It results in high-interest rates, missed payments, and damaged credit scores. However, there are effective ways to increase your credit score and eliminate debt. This Brandon’s Blog, combined with our free e-learning course, delivers easy-to-understand strategies and expert counsel to equip consumers with everything they need to know to improve their credit scores to unlock better financial prospects.

Through the knowledge I am sharing, individuals can successfully navigate the complex world of credit ratings and experience marked improvements in their daily lives. By embracing sound fiscal practices, one can effectively manage their money, avoid bankruptcies or consumer proposals, and ultimately earn a more favourable financial life. So take control of your financial situation today and with our help, begin your journey towards a more stable and prosperous financial future with our “How to Increase Credit Score: How To Improve Your Canadian Credit Score”.

how to increase credit score

Importance of improving credit score: Know how to increase credit score

In today’s world, a good credit score functions as the cornerstone for getting financial freedom. For people that have grappled with debt, insolvency, bankruptcy or consumer proposals, improving their credit rating may look like an overwhelming obstacle. Yet, with the specific devices and insights we are supplying to you, any person will be able to take control of their very own financial life heading in the direction of a brighter tomorrow.

This is exactly why we have created “How to Increase Credit Score: How To Improve Your Canadian Credit Score“. Our recommendations and our tried-and-tested techniques will move you toward a better credit score, eventually unlocking excellent loan and mortgage opportunities from Canadian lenders, and enabling you to accomplish your financial goals. Take control of your future and bid farewell to higher interest rates and declined credit applications by going through our “How to Increase Credit Score: How To Improve Your Canadian Credit Score” today.

Description of what a credit score is, how it is determined and then how to increase credit score

A person’s credit worthiness is represented by a numerical score known as the credit score. This score is derived from various financial information such as payment history, credit utilization rates, length of credit history, types of credit used, and new credit inquiries.

Credit scores range from 300 to 900, where a higher score is indicative of better credit history and financial stability. The credit report, maintained by Canada’s two credit reporting agencies, Equifax Canada and TransUnion Canada (Equifax/TransUnion), is the source of credit ratings and it is what the Canadian banks will look at.

how to increase credit score

Importance of knowing your credit score and how to increase credit score

Maintaining a good credit score is a key factor in today’s financial landscape, irrespective of whether you are a student, a young professional, a business owner or are retired. Knowing your credit score is important so that you can stay informed on what others think of your creditworthiness and financial standing. Sometimes adverse information may find its way into your credit report as an error. By knowing what your credit report says, you will be able to prove any errors that should be eliminated which produces a lower credit score than what you are entitled to. It is important to have any errors fixed to avoid any negative impact on any assessment of your creditworthiness.

A low credit score can lead to being denied for credit, higher interest rates, and unfavourable loan terms from Canadian lenders. It is essential to maintain a high credit score as it paves the way for obtaining the best possible deals on loans and credit card products from financial institutions at the most favourable rates. Therefore, it is crucial to keep a tab on the various financial factors that contribute to your credit score to ensure a sound financial standing.

That is why we developed our complimentary no-cost e-learning module, “How to Increase Credit Score: How To Improve Your Canadian Credit Score”. To teach you how to improve your credit score.

Knowing how to obtain your free credit report is the 1st step in how to increase credit score

Maintaining vigilance over your credit report is a prudent method for verifying the precision of your credit history and score, both of which serve as significant benchmarks of your monetary stability. Fortunately, procuring a complimentary credit report has become effortless. It is your lawful right to receive an annual free credit report from each of the two Canadian credit bureaus.

Submit a formal request for your credit report via their digital portal or through the Canadian postal service. When you get it, meticulously examine it to identify any inconsistencies or inaccuracies that may be impeding your creditworthiness.

If you find yourself struggling with debt, don’t despair. Our complimentary e-learning module, “How to Increase Credit Score: How To Improve Your Canadian Credit Score” can provide you with valuable insights and practical strategies to enhance your credit score and overcome financial setbacks. You can trust us to help you take control of your financial future today.

how to increase credit score

Common credit score issues that create lower credit scores: How to increase credit score

A low credit score can present significant obstacles, particularly when making significant purchases on credit or seeking loans. Although there are many parts contributing to an individual’s credit score, certain concerns are regularly associated with reduced scores.

A number of widespread credit score difficulties can bring about lower scores, such as:

Late payments: Not making your payments on time will have a major negative impact on your credit score, whether we are talking about credit cards, loans or lines of credit. Late payments reflect badly on your credit report and can significantly affect your overall score. Paying your debts on time, and not just your minimum payment, has a positive impact on your credit rating.
High credit utilization: A higher credit utilization rate will adversely impact your credit score. Financial institutions prioritize borrowers who exhibit responsible credit management practices; hence, maintaining a low credit utilization ratio (usually below 30%) is fundamental.
Errors on your credit bureau report: As already stated, inaccuracies on a credit report, ranging from erroneous personal details to accounts that are not legitimately attributable, can harm your credit rating. To safeguard against such potential pitfalls, it is imperative to maintain an annual review of your credit report and promptly challenge, with evidence, any inaccuracies that may be encountered.
Defaulting on a loan: Be it a mortgage or an automobile loan, defaulting will lead to a deterioration in your creditworthiness. Therefore, you have to make sure when you are approved for a loan that you can afford the monthly payments and meet all other repayment terms. This is of prime importance.
Applying for too much credit: Requesting too much credit can have negative effects on your credit rating. Potential lenders, and especially credit card companies, may interpret this as a sign of your nervousness over your financial hardship and a greater chance of you eventually defaulting on the loan. As such, you should exercise moderation when applying for credit. Moderation and realism is the key to maintaining a healthy credit profile.
Accounts in collection: Having accounts in collection leads to a decrease in your credit score. This is because you have now shown that you cannot handle credit responsibly. It is imperative that you promptly settle any outstanding amounts and work with the creditor or its appointed collection agency to eliminate that account from your credit report. If you don’t, there will be a negative impact on your creditworthiness.
“Hard credit check” versus “soft credit checks”: See the next section for this discussion.

By steering clear of these typical credit score complications, you can keep a good credit score and heighten the probability of obtaining credit approval in the foreseeable future.

“Hard hits” versus “soft hits”: Know how to increase credit score

The first issue is having too many hard inquiries on your credit report. These hard inquiries occur when lenders pull your credit report and do a credit score check as the first step in determining if you’re going to be approved for a loan or other credit product you applied for.

What are hard inquiries on your credit report?

When seeking new credit such as a loan, credit card or mortgage, hard inquiries are initiated on your credit report. A hard inquiry is a request for a copy of your credit report and it remains on your credit report for two years. However, it only affects your credit score for one year.

What are soft inquiries on your credit report?

A soft inquiry is an informational check of your credit that does not impact your credit score. Soft inquiries appear when you or an authorized user view your own credit report, or when a business checks your credit for pre-approved offers or account reviews.

Soft inquiries are also known as “soft pulls” because they do not impact your score, unlike hard inquiries which do.

how to increase credit score

13 tips on how to address these issues and how to increase credit score in Canada

We understand that managing finances can be challenging, especially when you are maxed out on your credit and can’t repay the debt. You may be feeling overwhelmed and unsure of what to do next, but don’t worry, we are here to help.

Developing sound credit practices is the cornerstone of financial literacy. Learning and regularly practicing such practices is crucial as it will improve your financial outlook. By timely payment of bills, responsible use of credit cards, and staying on top of what is in your credit report, you can improve your credit score and secure a path to financial triumph.

This, in turn, can enable you to establish a robust credit history, thereby qualifying you for lower interest rates on all credit products. Sticking with the sound tips indicated below, it will grant you access to more advantageous lending options that may not be easily available to the masses.

Developing sound credit practices means unfailing commitment, meticulous planning, and unwavering attention to detail. However, you will reap the benefits because these tips and activities will help you achieve your long-term financial goals and establish a solid foundation for your and your family’s financial future.

Here are our 13 tips on how to address these issues and how to increase credit score in Canada:

Assessing your debt situation
You have to start by truthfully analyzing your whole financial status to successfully manage your financial debt. This involves meticulously gathering all the information from charge card statements, and loan agreements, and identifying all other outstanding debts to calculate the total amount owed, the individual interest rates you are being charged by product, and all your monthly payments. Only by doing so, can you after that begin to create a realistic plan to pay off your financial debts in a timely and efficient way.
Creating a budget plan
Now that you have collected all of your debt information, it’s time to develop a household budget that includes all incomes as well as expenses. Ensure you include all of your fixed expenditures like rent or mortgage payments, utilities and vehicle loan payments. Then you need to list all of your variable costs like food and entertainment.
Once you have a clear idea of your expenditures, compute your income on a monthly basis and subtract your expenses from it. This will show you where you need to cut down on expenses and/or take on a side gig to raise your income.
Keep in mind that you cannot be spending more than you earn in any month. Ideally, you want to spend less each month than your monthly income, so that you can then have money to dedicate to paying down your debts and building up an emergency savings fund.
Incidentally, do not neglect to include the income tax you need to pay on your income, broken down into a regular monthly cost. Include that amount as a monthly expense also.
Contacting your creditors
It’s crucial to reach out to your creditors promptly if you’re having trouble keeping up with your debt payments. You might find that they’re receptive to collaborating with you on a customized repayment scheme that meets your financial capabilities. By disregarding your debts, you’ll only exacerbate the problem, which could lead to late charges, sanctions, and a negative impact on your credit report.
Please keep in mind that unless you have first done the two steps listed above, you will not have a good understanding of what kind of accommodation you need to ask each creditor for. If you go in well-prepared knowing all of your numbers, you will significantly increase your chances of success in these negotiations.
Explore debt consolidation
If you’re dealing with numerous debts, you could want to take into consideration debt loan consolidation. It’s a viable option where you can secure a single loan at a lower rate of interest than the weighted average interest rate from every one of your debts that you’re currently paying.
You then use the funds from this new loan to fully pay off or otherwise settle all your other debts. As a result, you will then only have one debt to concentrate on, with a reduced month-to-month repayment. This will certainly assist you handle your debts successfully and reduce the amount of interest you’re paying. This also saves you cash that you can then put toward building up your emergency fund and savings.
Reduce credit utilization
Decreasing credit utilization is an essential part of increasing your credit score. Firstly, take stock of your existing credit usage, and attempt to pay off the balances on the highest-interest accounts first. Think about settling your debts with a debt consolidation loan or a zero-percent balance transfer credit card. You can enjoy a healthy financial future by reducing your credit card balances and limiting how many times you apply for credit within a year. Enhance your credit score by lowering your credit utilization ratio.
Pay your bills on time
Always paying your bills on time is key to maintaining your credit rating in good shape. A constant history of timely repayments will help you build a higher credit score and which improves the look of your credit report. It is critical to keep your bills paid on time to show a positive payment history and not have a damaging influence on your credit history.
Use Your Credit Responsibly
Avoid maxing out your charge cards and try to keep your credit utilization rate low as previously stated. It will help you keep a great credit rating or improve your existing one by showing lenders that you are a responsible borrower.
Monitor Your Credit Report
Maintaining an accurate credit report and safeguarding against identity theft are critical financial practices. You are legally entitled to get from the Canadian credit reporting bureaus a complimentary copy of your credit report annually.
Thoroughly review it so that you can detect any fraudulent activities or errors that could result in severe damage to your credit rating. Hopefully, there are not, but you must remain alert and well-informed about your credit standing to ensure your financial well-being.
Limit New Credit Applications
It is important for you to remember that each credit application you make reduces your credit score. Therefore, you must be cautious and limit the number of credit applications you make. You should only try to get new credit when it is absolutely needed. This advice also goes for applying for a credit limit increase of an existing credit product.
Developing a Strong Credit Profile
Having no or very little credit history can pose a huge problem when you make a credit application. Your credit file does not have enough information in it to show that you can handle credit responsibly. It is recommended to begin developing a positive credit history early on in your adult life. You should consider alternatives such as getting a secured credit card account or a 1-year term personal loan that requires you to make regular monthly payments. If you make your payments on time, you will begin establishing an excellent credit track record which brings about a good credit score.
A word of caution. As you are just starting out, make sure that you only set reasonable loan or credit card limits so that you can afford the monthly payments to repay what you owe on the credit accounts during the period of time allowed by the lender.
Explore professional credit counselling
Individuals grappling with financial challenges may find it advantageous to seek the expertise of a seasoned credit counsellor. This prudent move can afford them a series of invaluable benefits, all of which serve to bolster their financial literacy and improve their overall monetary management. Prominent advantages of credit counselling include, but are not limited to:
- Enhanced Debt Management: Credit counselling can help individuals struggling with debt to manage their finances better. The counsellors can offer valuable advice on debt repayment strategies, budgeting, and managing the debt load effectively.
- Financial literacy: The acquisition of financial knowledge is essential for individuals to navigate the complexities of financial management with success. To this end, credit counsellors offer an imperative service by imparting essential financial education that equips individuals with the necessary skills to cultivate sound financial habits, make informed financial decisions, and preemptively avoid potential financial obstacles.
- Improved credit score: Credit counselling services can provide individuals with the valuable expertise necessary to improve their credit scores. People who go through credit counselling obtain the tools necessary to practice the habit of responsible financial management which over time improves their credit scores.
- Emotional Support: The credit counsellor can help people through the rough patches of anxiety and worry about their financial situation until they start feeling better about themselves and their improving financial situation.
Speak to a licensed insolvency trustee
There are benefits to having a no-cost consultation with a Canadian licensed insolvency trustee if you are facing financial difficulty. Here are a few:
- - Expert advice
  - Protection from creditors
  - Debt relief
  - Guidance through the process
  - Financial education
Overall, speaking with a Canadian licensed insolvency trustee can help you take control of your finances and achieve a fresh start.
Watch the video at the top of this Brandon’s Blog

You will find out how to access our no-cost e-learning module, “How to Increase Credit Score: How To Improve Your Canadian Credit Score”.

Conclusion: How to increase credit score

Managing your debts can be challenging, but with the right plan in place, it’s possible to get back on track. Remember to assess your debt situation, create a budget plan, contact your creditors, explore debt consolidation, and consider bankruptcy only as a last resort option. With these steps, you can take control of your finances and work towards a debt-free future. Having a maxed-out credit can be stressful and overwhelming. However, it is also an opportunity to take control of your finances and work towards improving your credit score.

With our complimentary no-cost e-learning module, “How to Increase Credit Score: How To Improve Your Canadian Credit Score”, you can learn practical strategies and expert advice on how to boost your credit score and secure better financial opportunities. By following our simple steps, you can finally put an end to being denied credit or paying high-interest rates. With dedication and perseverance, you can unlock financial freedom and achieve your goals. So, don’t wait any longer; start your journey towards a healthier credit score today and join countless individuals who have already benefited from our guide.

I hope you enjoyed this how to increase credit score Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. 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. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

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

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

CLICK THE PICTURE BELOW TO GET OUR COMPLIMENTARY NO-COST E-LEARNING MODULE, “HOW TO INCREASE CREDIT SCORE: HOW TO IMPROVE YOUR CANADIAN CREDIT SCORE”

Brandon Blog Post

TORONTO PAYDAY LOANS: UNLOCKING FINANCIAL FREEDOM OR PAINFUL FINANCIAL SLAVERY?

Post author By Brandon Smith
Post date December 19, 2022

Toronto payday loans

Toronto payday loans popularity

The city of Toronto is Ontario’s largest city and is home to a growing number of individuals and families who are financially strapped and in need of quick financial assistance. Payday loans, which are short-term personal loans typically used to cover unexpected expenses, are becoming increasingly popular amongst Toronto residents due to the ease and convenience of applying for this quick loan product.

Payday loans offer borrowers immediate access to capital (either the same or within 1 business day) and these cash loans can be used to cover emergency costs, such as medical bills or car repair costs, when you don’t have the money to do so otherwise. There are many payday loan lenders in Toronto, each offering different terms and conditions regarding loan amounts, repayment terms, and fees. The one thing all of these providers with their alternative payday loans have in common is that the financial solutions they offer are very pricey.

This Brandon’s Blog provides a beginner’s primer to the Toronto payday loans industry. We will analyze the associated regulations, and different loan options, and provide some practical advice.

Toronto payday loans regulations

Payday lenders are usually the first and also the last stop for those who would be unable to secure a loan through more traditional banking institutions. They are the most vulnerable so the province implemented additional regulations to further regulate this industry. The Government of Ontario has enacted regulations for payday loan services in Toronto and the rest of Ontario. It is an essential part of trying to protect consumers residing in one of Canada’s most populous provinces. These regulations are aimed at ensuring that individuals accessing this kind of short-term loan services are provided with effective consumer protection.

The city of Toronto defines Toronto payday loans lenders as any establishment providing payday loans from physical locations, or any portion thereof, operating as a payday lender as outlined in the Ontario Payday Loans Act. In 2018, the City of Toronto limited the number of permits issued to businesses that offer payday loan services, setting the cap at the number of licenses already issued by that time.

Toronto payday loans

Ontario Payday Loans Act

The Ontario Payday Loans Act, 2008, S.O. 2008, c. 9 has been established to enforce regulations on the payday loan industry in Ontario. Since its implementation, numerous amendments have been made in an effort to safeguard consumers in Ontario who utilizes payday loan services. This piece of legislation lays out the requirements for eligibility, the maximum allowable rate of interest, and various repayment plan choices.

Four key provisions of this Act are:

The borrower retains the right to settle any or all of the payday loan prior to the expiration of the loan agreement. The lender is not authorized to receive or request any part of the borrowing cost from the borrower prior to the end of the payday loan contract.
The cost of borrowing related to a payday loan agreement may be limited if the amount of the advance is $1,500 or less (or, if a different amount is prescribed, that amount or less) and, if the agreement has a duration of 62 days or less (or, if a different number of days is prescribed, that number).
A lender is permitted to levy a charge of up to 2.5 percent per month on the unsettled principal balance in the event of delinquency, not compounded unless an alternative rate has been explicitly prescribed.
A payday loan agreement should not impose any default charges upon the borrower beyond reasonable legal costs incurred by the lender in attempting to collect the required payment. A dishonoured cheque, pre-authorized debit, or other instruments of payment may incur a fee of up to $25.

The Canadian Criminal Code sets the maximum interest rate that can be charged in Canada at 60% per annum. However, payday lenders are exempt. So in spite of the federal and provincial guidelines, payday lenders in Ontario are typically authorized to collect interest of $15-$20 for every $100 borrowed. When expressed as an annual percentage rate (APR) – the same metric applied to credit cards, mortgages, auto loans, etc. – this translates to the cost of borrowing permitted being an APR ranging from 391% to more than 521%!

What other paperwork is required for making an application for Toronto payday loans?

When applying for Toronto payday loans, it is important to ensure you have all the necessary documents to submit alongside your application. These documents include:

government-issued photo identification, such as a driver’s license or passport;
a void cheque or a debit payment authorization form;
an active bank account statement with 30-60 days of account activity;
proof of where you live, such as a utility bill; and
a recent pay stub to prove your source of income and your regular income or monthly salary.

It is important to note that these documents are used to verify your identity and demonstrate your financial status.

Toronto payday loans

Toronto payday loans interest rates and fees

Payday loan interest rates and fees in Toronto can vary greatly depending on the lending institution. Credit scores play an important factor in determining the applicable rate, as each lender has their own set of policies and regulations. Alongside the interest rate, fees also are charged.

When considering Toronto payday loans, it is essential to investigate and compare the various lenders available to ensure you secure the most competitive interest rate and fees. Prior to signing any loan agreement, be sure to read it thoroughly and check that all applicable fees and interest rates are correctly stated.

The Toronto payday loans application process

If you can’t make it to one of the brick-and-mortar payday loan locations for a time of day during regular business hours, don’t fret about it. Toronto payday loans have an application process that can be easily completed through one of the many online payday lenders with payday loan online applications which can be completed with minimal effort. Simply provide one of these online lenders with your personal and financial information and they will assess your eligibility. Upon passing the approval process, access to funds can be accessed by way of transferring to your account in a timely manner.

Before beginning the application process for Toronto payday loans, it is essential to thoroughly familiarize yourself with all the applicable terms and conditions. Furthermore, it is highly recommended to plan and budget for the loan repayment in order to avoid any extra fees and charges.

Toronto payday loans

Toronto payday loans: What if I am on ODSP?

A certain group of Canadians use the convenience of quick access to short-term funds. But for those receiving Ontario Disability Support Program (ODSP) payments in Toronto, the question becomes: is it possible to apply for and receive an online payday loan?

The answer is not so simple, as many lenders have restrictions against lending to individuals receiving ODSP.

Toronto payday loans: The Canadian government survey

The Financial Consumer Agency of Canada (FCAC) performed a study on payday advance loans, producing insightful and sometimes surprising results. The survey exposed that, while cash advances are a practical method for customers to gain access to credit, they are a pricey form of loan, with a common interest rate of 546%. Moreover, fewer than 43% of respondents recognized the loan terms for this kind of financing.

The findings also indicate that a large proportion of individuals lack the financial literacy needed to make sound borrowing decisions that are beneficial to their financial situation. It has been observed that the percentage of Canadian households using these forms of debt has risen significantly in recent years, reaching 4%. Furthermore, 45% of the respondents indicated that they commonly resort to such loans to cover unexpected expenses.

Survey results showed that 41% of respondents utilized temporary payday advance loans for necessary and also predicted costs. Consider that statement. Another way of phrasing it is that 41% of the people who participated in the study said that they use payday advances to get cash for budgeted costs (although I am certain none of those individuals actually put together a budget plan). That indicates that their anticipated regular monthly expenditures are greater than the money they earn each month.

According to the survey, the majority of users of these types of loans tend to have lower to moderate incomes, with over half reporting annual incomes of under $55,000. However, it should be noted that approximately 20% of users who answered the survey stated that their household incomes were above $80,000 and 7% of respondents said they had a household income in excess of $120K.

The survey results, not surprisingly, showed that most of the users rarely looked for financial advice even when it was needed.

Toronto payday loans

Toronto payday loans: Are there alternatives?

For those with a bad credit history, a bad credit score or for whatever reason no access to traditional banking and financial institutions, payday loans are an expensive option but are normally the only option. Toronto residents have access to several alternatives which may provide a more cost-effective solution. Some of these alternatives include credit unions, installment loans and peer-to-peer lending.

Many times when people have to resort to Toronto payday loans it really means that they are experiencing serious financial difficulties. The best option, rather than taking on payday loan debt is to seek help from either a non-profit credit counselling agency or even seek a no-cost consultation from a licensed insolvency trustee.

The unfortunate truth is that Toronto is an incredibly costly city to live in. If a single person or a family is making only $55,000 a year, they are barely scraping by. No matter how much financial knowledge and understanding one has, the reality remains the same. Therefore, it is essential that we start educating children in school so they will gain an understanding of what I believe are the 3 main foundations of financial literacy:

the cost of credit;
the need for emergency savings; and
seeking professional advice for both financial opportunities or financial problems.

Tips for repaying Toronto payday loans

Payday loans can be a great way to manage your finances in a pinch, but it’s important to remember to pay them back on time. Here are five tips to help you successfully repay payday loans in Toronto:

Set a repayment date and mark it in your calendar. Knowing when your payday loan payment is due will help you plan and budget accordingly.
Make more than the minimum payment. Paying more than the minimum will help reduce the total amount of interest you pay over the life of the loan.
Pay by direct deposit whenever possible. Setting up direct deposit for your loan payments can help ensure that you never miss a payment.
Call your lender if you can’t make your payment. Most lenders will be willing to work with you to reschedule your loan payment if necessary.
Create a budget and stick to it. Developing a budget and sticking to it will help you avoid taking out more payday loans in the future.

Toronto payday loans: Instant approval of instant problems?

I hope you enjoyed this Toronto payday loans Brandon’s Blog.

Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

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

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

Brandon Blog Post

RECEIVERSHIP IN CANADA: THE COMPLETE STORY OF WHOSE HAPPY RECEIVER IS IT ANYWAY?

Post author By Brandon Smith
Post date November 21, 2022

receivership in canada

Receivership in Canada: What does receivership mean?

I have just read a decision of the Ontario Superior Court of Justice Commerical List dealing with an important aspect of receivership in Canada. The case is concerned with what happens when two equally applicable provincial laws appear to be working at cross purposes in the context of the receivership in Canada process.

I will explain the case and the process of company receivership in Canada. By understanding the process, the case will make more sense.

Secured lenders may enforce their security to recover loans from borrowers who have defaulted. This remedy available to secured creditors when a borrower, usually a company defaults, is known as receivership.

What does going into receivership in Canada mean?

A receivership is a legal process available to secured creditors, whereby a company’s affairs, business and property are entrusted to a receiver to manage and eventually sell the assets. Secured lenders may enforce their security to recover loans from borrowers who have defaulted. This remedy available to secured creditors is known as receivership.

If a business debtor does not make payments or otherwise defaults on a secured loan, the secured creditor would have the right to appoint a receiver to collect the money owed. Before appointing a receiver, a secured creditor must first issue a “Section 244” notice of intention to enforce security. This is a notification that secured creditors must send to defaulting debtors before appointing a receiver. Section 244 refers to that section number in the Bankruptcy and Insolvency Act (Canada) (BIA).

The notice states that the security covers certain assets, that the company in default owes a specified amount to the secured creditor, and that the creditor may enforce the security after 10 days. The company in default may waive the notice period and consent to the appointment of the receiver.

Under the BIA, only a licensed insolvency trustee (formerly called a trustee in bankruptcy) can be a receiver. No other party is licensed to administer a receivership in Canada.

receivership in canada

Receivership in Canada: What is the difference between a court-appointed receiver and a privately appointed receiver?

A privately-appointed receiver is a licensed trustee who is appointed by a contract between the insolvency trustee and the secured creditor. A private receiver is typically used when there is no dispute to ranking among secured creditors or various claims to ownership of the company’s assets. The powers of a receiver listed in the security document give the privately appointed receiver more limited powers than a court-appointed receiver gets under a court order.

A receiver is court-appointed when the secured creditor makes an application to the court for the appointment of a receiver with more expanded powers. Like a privately-appointed receiver, a court-appointed receiver takes control of a company’s property because of financial distress and when there is a dispute among secured creditors and others as to the ranking of secured claims and ownership of property.

Both kinds of receivers are tasked with protecting and preserving the value of the company or property and are certainly given broader powers by the court to do so.

How is receivership in Canada different from bankruptcy proceedings?

Many people mistakenly use the terms “receivership” and “bankruptcy” interchangeably. However, bankruptcy and receivership are two distinct legal proceedings with different implications.

Bankruptcy vs. receivership can be confusing, but once you understand the key differences between the two, it is fairly straightforward. Whether it is a private appointment or a court-appointed receiver, the differences between bankruptcy and receivership in Canada are the same.

A receivership is a legal remedy available to secured creditors to enforce their security rights against a defaulting debtor. A receiver is appointed to manage the debtor’s property and assets and sell them under a properly run and fair sales process.

The Canadian bankruptcy process is a distinct legal process. An insolvency trustee does not represent secured creditors in bankruptcy proceedings. Instead, under the bankruptcy regime, they represent the unsecured creditors of the bankrupt estate. A corporate debtor may be subject to both bankruptcy and receivership proceedings simultaneously.

One of the major differences has to do with the creditors. In a bankruptcy administration, the bankruptcy trustee must call a meeting of creditors. This is where the insolvency trustee provides its report on the affairs and conduct of the bankrupt debtor and unsecured creditors get to vote on any matters of importance. In receivership, there is no such requirement to hold a meeting of creditors.

receivership in canada

What are the key distinctions between receivership in Canada and liquidation?

So you know what receivership is by now. The federal BIA doesn’t govern liquidation, that’s done under the provincial Business Corporations Act or Wind-Up Act.

A liquidation is for a solvent company where the shareholders, Officers and directors decide to cease business operations. The company puts up its assets for sale and uses the proceeds to pay off its creditors with cash. Any funds left over are then distributed to the shareholders.

A liquidator can be appointed either privately by the company’s directors or by a court order. Liquidation is therefore different from both bankruptcy and receivership in Canada.

Can individuals be placed into receivership in Canada?

The answer is yes. When a secured creditor wishes to take enforcement action upon the security agreement they have against a debtor’s property, as indicated above, they have the remedy of receivership in Canada. This remedy allows them to collect as much of their secured debt as possible.

There are no restrictions as to who can go into receivership in Canada. One of our more famous (infamous?) receivership cases over the years has been the receivership of the assets, property and undertaking of Norma and Ronauld Walton.

receivership in canada

Receivership in Canada: Whose receiver is it anyway?

Now for the court case where two different provincial laws caused a fight amongst secured creditors over the appointment of a receiver. The case is Canadian Equipment Finance and Leasing Inc. v. The Hypoint Company Limited, 2618905 Ontario Limited, 2618909 Ontario Limited, Beverley Rockliffe and Chantal Bock, 2022 ONSC 6186. The two competing provincial statutes are the Mortgages Act and the Personal Property Security Act.

The business is conducted through two affiliated entities. One owns the property and the other operates the business. This is quite a typical arrangement.

One creditor funded the purchase of equipment and took PPSA security over it. Another creditor funded the acquisition of the real property and has a traditional mortgage security. The security agreements extend over different assets, and the outcome is usually uncomplicated.

However, when equipment that has been purchased is attached to real property, there is disagreement about whether and how it can be removed, and whether such removal will negatively affect the value of both the equipment and the real property. The question is now more complicated: which creditor’s rights should take priority over this matter?

Both the equipment lender and the mortgagee are seeking to enforce their security. The equipment lender has filed a motion with the court to appoint a receiver over both the operating company (Opco) that owns the pledged equipment and the holding company (Holdco) that owns the real estate. This would allow the receiver to manage and sell the assets of both companies in order to repay the outstanding debt.

In this case, Opco was a commercial marijuana operation that was unable to get off the ground due to its heavy debt load and startup problems.

Although the mortgagee began power of sale enforcement proceedings, they do not object to a receiver being appointed over the equipment only. The mortgagee wishes to continue its power of sale proceedings and opposes the receiver being appointed over the building. The mortgagee in possession is of the opinion that the equipment is attached to the building and cannot be removed.

The mortgagee concurred that the court has the power to assign a receiver over the property of both Opco and Holdco according to section 101 of the Ontario Courts of Justice Act. They stated that, if a receiver is appointed, the receiver needs to be a firm chosen by them.

Both the licensed insolvency trustee firm preferred by the mortgagee and the firm nominated by the equipment lender filed a consent to act with the court.

What are the conditions under which a receiver may be appointed?

The court looked at numerous factors in order to make a decision on whether or not to appoint a receiver, and if so, which one, including those that have historically in receivership in Canada cases been taken into account in such determinations:

Although it is not essential for a creditor to establish irreparable harm if a receiver is not appointed where the appointment is authorized by the security documentation, the court considered if no order is made, will irreparable harm be caused?
The size of the debtor company’s equity in the assets and the need for protection or safeguarding of assets during litigation are important factors to consider when assessing the risk to the security holder.
The kind of property it is.
The potential for the assets to be wasted or dissipated.
The need to safeguard the property until a legal ruling is made.
The parties’ respective balance of convenience needs to be considered when making the decision.
Pursuant to the loan documentation, the creditor has the right to an appointment.
Enforcing the security instrument when the security holder experiences or anticipates difficulties with the debtor.
The principle of appointing a receiver should be approached with caution.
The court will determine whether appointing a receiver is necessary to enable the receiver to carry out its duties efficiently.
The effect a receivership order will have on the parties.
The parties’ conduct.
How long a receivership may last.
The financial impact on the parties.
The likelihood of maximizing return to the parties is increased.
The goal of ensuring the smooth running of the receiver’s duties.

As everyone agreed that all assets of both Opco and Holdco should be sold to maximize recovery for all creditors, but cannot agree on the process by which that should be undertaken, resulting in the entire process being stalled, the judge was satisfied that it is just and convenient to appoint a receiver.

The court found that either proposed receiver was acceptable and decided that the receiver nominated by the mortgagee would be appointed by the court to administer all assets. The receiver would eventually come back to court with a sales plan to maximize the value of all the assets subject to the security of all stakeholders.

receivership in canada

How the entrepreneur can avoid receivership in Canada

As a business owner, the way to avoid the receivership process is long before financial difficulties ever become serious financial problems. Here are a few tips on how to do just that:

Keep a close eye on your finances. This means regularly reviewing your income and expenses, and making sure you have a good handle on your cash flow.
Stay current on your bills. This includes not only making timely payments but also staying on top of any changes in your billing terms or amounts.
Keep good records. This means having up-to-date financial statements and documentation for all of your income and expenses.
Make a plan. If you do find yourself in a financial bind, have a plan in place for how you’ll get out of it. This may include negotiating with creditors, seeking new financing, or making cuts to your expenses.
Seek professional help from a licensed insolvency trustee with commercial insolvency experience. If your business is viable and you seek help early enough, there may be many options. The most common ones are refinancing with or without financial restructuring. Reviewing your business allows us to make restructuring recommendations allowing your viable company to become healthy and profitable once again.

Receivership in Canada summary & speak with a licensed insolvency trustee

I hope you enjoyed this receivership in Canada Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

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

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

Tags assets for sale, assets subject, bankrupt estate, bankruptcy and receivership, bankruptcy proceedings, bankruptcy process, bankruptcy regime, bankruptcy trustee, Bankruptcy vs. receivership, business operations, business owners, Canadian bankruptcy, commercial insolvency experience, company defaults, company in default, company receivership, court appointed receiver, creditors in bankruptcy, debtor company, differences between bankruptcy, financial difficulties, insolvency trustee, insolvent companies, legal proceedings, legal process, licensed trustee, meeting of creditors, notice of intention, outstanding debt, private appointments, private receiver, real estate, receivership in Canada, receivership proceedings, receivership process, sales process, secured creditors, secured debt, secured lender, security agreement, security instrument, security rights, solvent company, Trustee and Receiver, trustee in bankruptcy, unsecured creditors

Brandon Blog Post

CORPORATE BANKRUPTCY FAQ: USE OUR HACK TO SOLVE YOUR CHALLENGING INSOLVENT COMPANY ISSUES

Post author By Brandon Smith
Post date May 23, 2022

Corporate bankruptcy: An overview

Corporate bankruptcy is a legal process by which businesses can reorganize their financial affairs or liquidate their assets. Although bankruptcy can be complicated and stressful, it can provide businesses with a fresh start.

When it does happen, the corporate bankruptcy process can be complicated. Insolvency can take a toll on your company’s employees, customers, and shareholders. A solid understanding of corporate bankruptcy can help you properly restructure and reorganize your company using an insolvency process without killing your business.

Last week, I gave my best FAQ answers to common questions about personal bankruptcy services. A business partnership or sole proprietorship means that the individual(s) operate the business in their personal name. Answers about business bankruptcies for those forms of business would fall under the personal bankruptcy process that was covered in last week’s personal bankruptcy FAQ blog.

When a corporation conducts business, some of the questions, and answers, are different. In this Brandon’s Blog, I answer the most frequently asked questions about corporate bankruptcy.

**Can a business declare corporate bankruptcy?**

As stated previously, only a corporation can declare corporate bankruptcy. A corporation is its own legal entity. A “person” is eligible for relief under federal bankruptcy law. A “person” is typically defined in the Canadian bankruptcy legislation to include an individual, part of a partnership, a proprietorship, a company, an unincorporated association, a cooperative society, or a cooperative organization. corporate bankruptcy canada

What are the different types of corporate bankruptcy in Canada?

There are 2 different types of bankruptcy that a company can file for under the Bankruptcy and Insolvency Act Canada (BIA). They are:

Liquidation: This is when the insolvent company is unable to pay its debts and its business is no longer viable. The only real option for it is to sell off its assets to repay its secured creditors and unsecured creditors as best as possible since it files for bankruptcy in the priority outlined in the BIA.
Restructuring: This is when the company is insolvent and is incapable to repay its debts due to its financial difficulties, yet all or a sufficient portion of the company’s business is still viable. So, the company negotiates brand-new terms with creditors to lower its financial obligations and also might have the ability to sell some assets to settle its financial debts. Restructuring is the most well-known alternative to bankruptcy. Restructuring under insolvency legislation is also described in the media as bankruptcy protection.

**What factors lead to corporate bankruptcy proceedings?**

A company always shows signs of trouble before it needs to file for corporate bankruptcy. Some of the early danger signals are:

continued history of losses;
dwindling cash position;
the departure of key management or employees;
difficulty meeting loan or lease obligations;
the breaking of loan covenants; and
difficulty meeting payroll.

Corporate bankruptcy: What does it mean for a company when it liquidates?

As stated above, when a company liquidates it means that the company is unable to pay its debts and its business is no longer viable. The only real option for it is to sell off its assets to repay secured creditors and unsecured creditors as best as possible through bankruptcy and then shut down. corporate bankruptcy canada

**What happens to debt in corporate bankruptcy?**

If the purpose of the corporate bankruptcy is to shut down and have liquidation of business assets, then we first need to see what the net proceeds of sale from those assets are. The BIA describes the order in which funds must be distributed by a licensed insolvency trustee (formerly called a bankruptcy trustee) in bankruptcy. The order in which the debts must be repaid, in whole or in part, is called the priority.

The priority of the rights of creditors to be repaid in a corporate bankruptcy is:

Trust and deemed trust claimants – These are parties whose property is being held or is deemed to be held in trust for them by the bankrupt corporation. The most common type of deemed trust claim in a corporate bankruptcy is Canada Revenue Agency for unremitted employee source deductions.
Secured creditors – Creditors who hold valid security over the assets of the company get paid next. There could be more than just one secured creditor. Within the secured creditor group, the order of priority is based on the ranking of the security registration dates.
Preferred creditors – These are unsecured creditors who have been given certain priority in a corporate bankruptcy under federal bankruptcy laws. The most common examples in a corporate bankruptcy would be Trustee fees, the Trustee’s lawyer’s fee, the levy payable to the Office of the Superintendent of Bankruptcy Canada on any distribution made by the Trustee to a creditor and certain salary, wages or commissions due to employees.
Ordinary unsecured creditors – This group comes after the preferred creditors. They are all creditors who have supplied goods or services and do not hold any security and do not fit into the definition of a preferred creditor.

The balance of any unpaid debt ends up getting written off on the books of the creditors because there are no assets left in the company to claim against.

**How does a company get into corporate bankruptcy and what happens to the company?**

The way a company gets into bankruptcy is the exact same way an individual can. For a liquidation, either the company can file a voluntary assignment into bankruptcy. If it is one or more creditors owed at least $1,000 trying to push the company into bankruptcy, then they would file a Bankruptcy Application with the court requesting the court to make a Bankruptcy Order. corporate bankruptcy canada

**Why might a company choose to file for corporate bankruptcy protection and restructure under a BIA proposal?**

Corporate bankruptcy protection and restructuring under a BIA proposal can provide a company with financial difficulties a much-needed relief and a chance to return to profitability. When a company files for protection, the BIA proposal offers an orderly and reliable process for restructuring, which can be appealing to businesses that have a good chance of a turnaround.

A corporation that has a viable business and can return to profitability after restructuring, with support from creditors, has all the right ingredients for a successful restructuring. This is why a company might choose to file for corporate bankruptcy protection and restructure under a BIA proposal. The company will survive and jobs will be saved.

Who is responsible for developing the reorganization plan for the company?

Reorganization is the restructuring of a business to gain efficiency, improve workflow, and drive profits. Reorganization plans vary in length and detail and take a certain period of time to properly develop. They generally describe desired outcomes and final goals. Sometimes a company will undergo a complete reorganization, while other plans focus on aspects that require reorganization, such as a business unit or department.

The reorganization plan of a company is essential to ensure its smooth transition. The reorganization plan involves restructuring various departments of the business, reducing operational costs, and streamlining the workflow. Writing a reorganization plan requires a lot of time, effort, and money.

When a business downsizes, it reduces its workforce to a smaller number. Such a reduction can be a painful process that even threatens to collapse the business. The company needs to have a plan in place to accomplish this reorganization while still running the business. When downsizing occurs, businesses require reorganization plans. Involving and informing employees of the process makes them more likely to follow new plans and less resistant to change.

All of the various individual department organization plans and product sales plans need to be combined into an overall business plan. This overall business plan must also include financial information to show how the company, emerging from restructuring, will operate profitably.

Now that the overall plan is set, senior management must work with its outside financial and legal restructuring professionals to establish the restructuring commercial proposal or plan of arrangement to be presented to the creditors to be voted upon. An excellent communication program must be put into place so that creditors can understand the benefits to them of supporting and voting in favour of the restructuring proposal. Normally negotiations with certain creditors or creditor groups must take place in order to come up with a final and successful restructuring plan that will gain both creditor support and pass through the legal proceedings of court approval. corporate bankruptcy canada

**What becomes of a corporation after corporate bankruptcy?**

Going through corporate bankruptcy means your company’s assets have been sold to pay off some portion of its debts. Bankruptcy also by operation of law terminates all of the employees. So the corporation is left with no assets and no employees. All it has is debt and a deficit equal to the total debt less the amount that is shown on the balance sheet for the company’s preferred and common stock.

Therefore, the corporation, as a legal entity, is then left to just float away into the stratosphere. There are only 2 ways that a company can survive a corporate bankruptcy:

from the sale of the corporate assets, pay off 100% of all of its business debt plus interest; or
file a BIA proposal, obtain creditor support and court approval and successfully complete it.

The first way will almost never happen. The second way can happen if there is a good reason to try to make sure that the corporation as a legal entity survives. A reason for doing this might be that there is value to the shares. After becoming bankrupt, a successfully completed proposal annuls the bankruptcy. By definition, the proposal will discharge all of the company’s outstanding debt. The company is now debt-free.

The common stock may have value because it is a public company and the shares can be relisted on the stock exchange. Now the corporate shell is attractive to a private company that wishes to go public and can do so by amalgamating with this public shell. Alternatively in a private company, or in a public company, there may be significant tax loss carryforwards available for use if this corporate shell is merged with the right kind of profitable company. the only way to use the tax losses is first by owning all the shares.

This is all possible, but, the normal outcome for a company that has gone through a corporate bankruptcy is just to fade away, never to be heard from again.

**When a company declares corporate bankruptcy, what will happen to your stock or bond?**

When you invest money in a company by investing your capital, your money is legally represented by the stock or bonds that you purchased. When you see a company declaring bankruptcy, it means the company can no longer afford to pay its debts.

If a company just liquidates its assets during corporate bankruptcy, the existing shares will likely be worth very little or nothing at all. For a private company, a successful corporate restructuring might increase the value of the shares as the company will emerge from its restructuring with much less debt than before.

The value of a company’s shares is most likely to lower if it effectively restructures its financial affairs. It might have to issue brand-new stock to creditors that will not be paid back in full, watering down the value of the business’s shares.

As far as corporate bonds are they secured or unsecured against the company’s assets? If secured, they could be repaid in whole or in part depending on where they stand in the secured assets pecking order. If unsecured, then it just becomes part of the larger unsecured creditor pool. In a corporate bankruptcy that is a liquidation, those bondholders will receive their share of any distribution made by the Trustee to the ordinary unsecured creditors if there is such a distribution made.

Corporate bankruptcy and insolvency at a glance

In conclusion, bankruptcy and insolvency of course go together, although many people prefer to think of bankruptcy as an economic failure while insolvency is more accurately a sign of a business’s financial failings.

In the same way I hoped last week’s personal bankruptcy blog helped your understanding, I hope this Brandon’s Blog on corporate bankruptcy was helpful to you in understanding more about the corporate 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.

CLICK HERE TO GET THE FREE HOW TO CLOSE YOUR BUSINESS WITHOUT BANKRUPTCY OFFER

Brandon Blog Post

BUSINESS BANKRUPTCY: SHOULD CANADA ADOPT A SATISFYING COMPLETE USA-STYLE PROCESS FOR SMALL BIZ RESTRUCTURING?

Post author By Brandon Smith
Post date February 21, 2022

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Business bankruptcy: Insolvency for business

Hundreds of thousands of small businesses around the world have been affected by the lockdowns caused by the Coronavirus pandemic. There have been many company closures, and others have been forced to restructure. Although restructuring may be painful, it is necessary if you want to come out from under crippling debt and grow your business.

Many businesses experiencing financial difficulties simply shut their doors rather than restructure. Most small businesses cannot reorganize their company debts under the Bankruptcy and Insolvency Act (Canada) (BIA) due to the high costs of administration. A small business owner does not benefit from spending money to have a business bankruptcy. It is therefore only possible to lock the door and give the key to one of the secured creditors, usually the bank or to the landlord.

Globally, small and medium-sized businesses play an important role. In 2019, I wrote a Brandon Blog post about business bankruptcy issues that US bankruptcy experts identified as problems for small business bankruptcy restructuring with Chapter 11 restructurings. This process was not working for these businesses. Chapter 11 restructurings are expensive, ineffective, and impractical. The US insolvency system therefore could not help many businesses in need of restructuring in the USA.

In this Brandon Blog, I provide an update on the successful experience and unanimous calls to extend the US subchapter V of Chapter 11 of the United States Bankruptcy Code. Therefore, I revisit the question as to whether such a small business bankruptcy tool should exist in Canada.

Business bankruptcy and Insolvency at a glance

Congress passed the Small Business Reorganization Act (SBRA) on July 23, 2019. On August 1, the Senate passed the bill. In August 2019, it became law.

SBRA makes business bankruptcy protection easier for small and medium-sized enterprises. Chapter 11, subchapter V of the US Bankruptcy Code (Title: Small Business Debtor Reorganization) is the result. Increasing its affordability will help save otherwise viable owner-managed businesses.

SBRA defines a small company as one with non-contingent debts of $2,725,625 or less, leaving out financial obligations to affiliates or parties not dealing at arm’s length, and which elects to be dealt with under the SBRA. A new subchapter V to Chapter 11 of the US Bankruptcy Code is included in the Act. In this new approach, small companies are able to restructure efficiently with greater ease and at a lower cost.

The primary purpose of this legal process is:

Secured creditors and unsecured creditors cannot lodge a Chapter 11 restructuring plan that it is prepared to support. Only businesses with debt problems can. In most cases, the company’s plan must be filed within 90 days of when it filed for bankruptcy protection.
To manage each case, trustees similar to those selected in a personal restructuring (Chapter 13) situation will be selected.

A creditors committee will not be established.
If the home loan/mortgage secured by the home was used to fund the business, the Chapter 11 plan can change the legal rights of the lender.
It is possible for a Court to approve a small business bankruptcy restructuring plan without the approval of any class of creditors. If the court is satisfied that all creditors are treated fairly and no creditor class is prejudiced, it will approve the restructuring plan,.
A restructuring plan must ensure that all earnings received during the restructuring will be available to fund the restructuring for a period of 3 to 5 years in order to be fair and equitable.

Consequently, it is the responsibility of the creditors to carefully review all cases filed under SBRA. The creditors should consult bankruptcy experts for guidance. Their role will be to ensure that restructuring cases are fairly examined by courts and that all creditors are treated equally. For those without the support of their creditors, this will be particularly true.

It will be very interesting to see if this new legislation accomplishes its goal of simplifying and reducing the costs associated with business bankruptcy restructuring for small businesses.

business bankruptcy

Business bankruptcy: The bottom line on the SBRA

This tool was successful in protecting small businesses from bankruptcy liquidation. Republicans and Democrats alike have embraced this obscure federal program that allows small-business owners to shed debt in bankruptcy protection so much, they are now considering extending it. Republican and Democratic agreement on anything is very rare these days.

In a Subchapter V bankruptcy, closely-held businesses can file for bankruptcy much more quickly and inexpensively than they would in a Chapter 11 bankruptcy. The government appoints a trustee with limited powers who assesses the company’s finances and helps reach a consensus with creditors. Rather than official creditor committees, there is only a trustee appointed by the government. Furthermore, company owners don’t risk losing control of their companies to creditors, a common outcome in bankruptcy.

When the pandemic ravaged thousands of small businesses, the government raised the debt threshold to qualify for Subchapter V to $7.5 million from $2.7 million and extended it an additional year. In the absence of another renewal, the higher limit will expire next month, shutting out thousands of companies that could benefit as they deal with new challenges such as supply chain issues and higher interest rates.

**The main benefits of the SBRA business bankruptcy protection**

Quick response

Since the program began, more than 2,800 cases have been filed. Restructuring advisers predict that number will rise as banks and landlords become more aggressive in collecting overdue loans and back rent.

Government assistance and eviction moratoriums have enabled small businesses to exist in limbo but that won’t last. Experts predict that more subchapter V filings will take place in 2022.

The American Bankruptcy Institute studies bankruptcy statistics. They state that the quick turnaround time of Subchapter V has attracted and will attract more filings.

Corporation envy

Some distressed corporations are so envious of Subchapter V that restructuring advisers are hunting in vain for strategies that might let their bigger clients qualify. For example, there was a company with 130 company-owned locations that filed for bankruptcy protection in 2020. It initially attempted to file individual brick-and-mortar locations under the program, before switching to a chapter 11 proceeding.

This business bankruptcy restructuring statute has proved to be a lifeline for smaller companies and should be extended.

business bankruptcy

The Canadian business bankruptcy and restructuring landscape

Canada lacks an equivalent streamlined corporate insolvency restructuring statute. There are two Canadian insolvency regimes: the Companies’ Creditors Arrangement Act (CCAA) and the BIA. For large corporations, the CCAA applies. The process is heavily governed by the courts. In my opinion, it would not be possible to sufficiently streamline the CCAA for small businesses to have enough staying power during restructurings under the CCAA to survive.

A streamlined restructuring process is possible under the BIA for small and medium-sized businesses. There was a streamlined restructuring process for individuals so that consumer bankruptcies can be avoided. These consumer proposals are found in Part I Division II of the BIA. So why not a special restructuring proposal section for smaller companies? I called it a new Part I Division III of the BIA in my earlier Brandon blog I referred to above – a general scheme for small business proposals (SBP) section of the BIA. The aim is to provide small businesses with the opportunity to restructure business debts on a cost-effective basis rather than to make Canadian bankruptcies the only real option to consider.

In the US, using a streamlined restructuring model has been so successful. That’s why I am bringing back my idea from 2019. I won’t repeat everything, however. You can see what my recommendations were by reading my blog – BANKRUPTCY EXPERTS WEIGH IN ON US & CDN SMALL BIZ RESTRUCTURING.

Business bankruptcy: The debtor (owes money) not the creditors (are owed money) would control the reorganization

An insolvent corporation, sole proprietors, or partnership that is set up to conduct business should be able to access the new SBP. The total amount of their debt should not exceed $1.5 million. Such a number is not based on any scientific calculations.

In order to determine an appropriate debt level, Statistics Canada could assess the average debt load of Canadian businesses. In this discussion, I’ll use the $1.5 million amount.

Loans from affiliates or from people with a non-arm’s-length relationship would not be excluded as in US law. A Canadian company’s first funding is usually provided by its owners. Chartered banks require owners to make a commitment with their personal assets before they are willing to lend. To get the business off the ground, the owners sacrificed their own money. Because they had to finance the company that way, I would not exclude that debt from the calculation.

The Canadian business landscape differs from the American one. We tend to be smaller in size. For non-arm’s-length debt to be excluded, the debt threshold would have to be lowered. Keeping that debt threshold in mind, let us include all debt, whether it’s secured or unsecured, related, or arms’ length.

This new SBP would not be applicable to people who are not conducting business in their own name. Those people will fall into either Division I or Division II restructuring proposals which include two mandatory credit counselling sessions.

Restructuring proposals can currently only be administered by a licensed insolvency trustee (formerly called a bankruptcy trustee). A licensed insolvency trustee is known as the Proposal Trustee under Division I Proposals. As part of Division II personal restructurings, they are known as the Administrator.

Therefore, I will call the Trustee the Small Business Administrator for the new SBP. As a result, it is obvious that it is the restructuring of a business that qualifies under Division III. The use of the word “administrator” is consistent with the words used by Parliament for consumer proposals. Again, this means that the Trustee is administering a streamlined restructuring for small businesses.

The main points I recommended in my earlier blog in a Canadian small business streamlined restructuring statute include:

Currently, it is possible for a company or person to begin the restructuring process by filing either a Notice of Intention to Make A Proposal (NOI) or a Proposal itself. Regardless of the filing method, there is a 10-day limitation period under which the debtor must submit a cash-flow statement that has been reviewed and approved by both the company or person and the Trustee. A company or individual filing an NOI then has an additional 20 days (30 days after the filing date of the NOI) to file a Proposal (unless the court extends the time).

I propose extending the deadline for filing a Proposal from 30 days to 90 days after the filing of an NOI, without the need to go to the Court for an extension. As a result, the business should have enough time to get all of its tax and corporate filings up to date and, hopefully, avoid the need to adjourn the meeting of creditors.

A creditor would file a proof of claim in the same way they do now in a BIA Proposal.
There is a concept of deemed creditor approval and deemed court approval in the current consumer proposal legislation. A creditors’ meeting is not necessary unless creditors holding 25% of the proven claims request it. In addition to the proof of claim process, creditors receive voting letters to cast their vote when they submit a proof of claim. If there is no obligation to convene a meeting, a consumer proposal is considered accepted.If a consumer proposal is either accepted or deemed accepted by the creditors, the Trustee Administrator will probably not need to seek approval from the Court. There are no deeming provisions in corporate restructuring, either for creditor acceptance or for court approval. The new SBP section should include similar provisions regarding creditor acceptance and court approval. This would save time and money, thus enhancing efficiency.
The Meeting of Creditors if required, would be held 21 days after the Trustee Administrator recognizes that the small business restructuring did not receive deemed approval.
When creditors fail to vote in favour of a Division I Proposal or when the court does not approve it, it is automatically deemed an assignment in bankruptcy. This does not apply to consumer proposals. Debtors return to their normal state without creditor protection after an unsuccessful consumer proposal attempt.For the new streamlined business restructuring proposal law, if creditors fail to accept or the court does not approve the restructuring plan, then that does not automatically mean there is a bankruptcy. The debtor small business would simply return to its normal unprotected insolvent state and must defend itself against creditors.A voluntary assignment into bankruptcy may result, but not automatically. A bankruptcy proceeding does not make sense in certain corporate situations. If a chartered bank holds security over all assets it will enforce its security through a receivership, this is especially true.

Business bankruptcy summary

A streamlined small business bankruptcy protection section is working in the US and both Republicans and Democrats want it extended and made to be able to handle even more bankruptcy cases. So why should we not have one in Canada too? I know that it could work.

I hope you found this business bankruptcy Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you or your company to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are your credit cards maxed out? Are you worried about what will happen to you? Do you need to search out easy-to-understand debt solutions and realistic ones for your family debt problems? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

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Brandon Blog Post

TRUSTEE IN BANKRUPTCY ONTARIO: THE BEST MODERN RULES FOR GETTING PAID

Post author By Brandon Smith
Post date November 26, 2021

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

Trustee in bankruptcy Ontario introduction

One of two reasons led you to this page:

you regularly read my Brandon Blog; or
you typed in a search term something like “bankruptcy trustee Ontario“, “licensed insolvency trustee Ontario“, “insolvency trustee Ontario,” “trustee in bankruptcy Ontario” or a variation of these terms.

The bankruptcy process is one of several insolvency options available to the honest but unfortunate debtor in Canada to try to get back to financial stability.

Trustee compensation is charged in one of two distinct ways. It depends on the type of insolvency proceeding, as I will explain below. Trustees are sometimes only permitted to charge a relatively fixed fee, known as a “tariff”. Trustees cannot charge time-based fees in such cases.

On other occasions, the Trustee will charge the individual levels of staff by the hour. To charge time-based remuneration, the remuneration must be approved by the court. This is called taxation. All of this is governed by the Bankruptcy and Insolvency Act (Canada) (BIA), which is a federal government statute.

I discuss an unreported case from Ontario in this Brandon Blog, which was the topic of a webinar I attended this week. The first thing I will do is lay the groundwork, followed by a story of how a trustee in bankruptcy Ontario did not get the entire fee being requested upon the taxation of its accounts.

Trustee in bankruptcy Ontario: What is a Licensed Insolvency Trustee?

Individuals and businesses with debt problems can seek advice and services from licensed insolvency trustees, a federally regulated profession. It used to be called a trustee in bankruptcy Ontario to refer to an insolvency trustee licensed in Ontario.

What can a trustee in bankruptcy Ontario do for you? Depending on your needs, he or she can provide you with an array of options including alternatives to bankruptcy. Government-regulated insolvency proceedings are the only Canadian government-approved way through which you can be discharged of your debts.

You can trust that, when you hire a trustee in bankruptcy Ontario, you’re dealing with someone who has demonstrated that they possess the knowledge, experience, and skills that are required to be licensed by the Office of the Superintendent of Bankruptcy (OSB).

The insolvency system in Canada is regulated by the federal government. The OSB oversees an insolvency trustee and mandates that they adhere to federal standards of practice such as the Code of Ethics for Trustees. If you are unable to resolve a problem with a trustee in bankruptcy Ontario, you can file a complaint with the OSB. All complaints are reviewed and assessed.

trustee in bankruptcy ontario

Trustee in bankruptcy Ontario and the OSB: Who can act as trustee in bankruptcy Canada?

According to Canada’s Bankruptcy and Insolvency Act (BIA), the OSB oversees the administration of bankruptcy and receivership proceedings. It also has some responsibilities regarding the restructuring of large companies covered by the Companies’ Creditors Arrangement Act (CCAA).

Under each of these Canadian statutes, a person, business, or company experiencing financial difficulties may be discharged from most of their debts. Insolvency cases must be administered by a licensed insolvency trustee. On the OSB’s website, you can find contact information for all of Canada’s licensed insolvency trustees.

**What does a trustee in bankruptcy Ontario cost?**

Depending on the services they provide, the cost of an insolvency trustee in Ontario varies. Providing a no-cost initial consultation is standard practice for professional trustee firms. In this confidential consultation, our team collects information about your assets, liabilities, income, and expenses to gain a thorough understanding of your situation.

Then, we explain what debt relief options you or your business could benefit from, including any insolvency process. We will then explain our recommendations and provide you with a cost estimate. Insolvency costs depend on the type of insolvency proceeding. You will see why shortly.

trustee in bankruptcy ontario

Personal bankruptcy – summary administration

Summary administrations are consumer bankruptcy proceedings in which the realizable value of non-exempt assets (the value of non-exempt assets) after the claims of secured creditors are deducted does not exceed $15,000. For summary administrations, the professional Trustee cannot charge for their time spent. They are compensated according to a tariff. The tariff for summary administrations is:

100% of cash receipts up to $975;
the portion exceeding $975 but not exceeding $2,000 is taxed at 35%;
above $2,000, 50%;
each of the two mandatory counselling session’s tariff fee;
court fees;
an administrative and overhead fee of $100; and
HST/GST.

Personal and corporate bankruptcy – ordinary administration

Personal bankruptcy is classified as an ordinary administration if the net recovery after the claims of secured creditors will be more than $15,000. Corporate bankruptcy is always an ordinary administration. Corporate bankruptcy does not currently have a streamlined version as does personal bankruptcy.

An ordinary administration bankruptcy allows the Trustee to charge by time spent, subject to approval by the Inspectors of the bankruptcy estate (if any), the OSB and taxation by the court.

Consumer proposal

As regular readers of my Brandon Blog know, a consumer proposal process is the only federal government-approved debt settlement program in Canada and is always administered by a trustee in bankruptcy Ontario or elsewhere in Canada. It is also the only consumer insolvency choice in Ontario other than for a summary administration bankruptcy. A consumer proposal is available to any individual who has $250,000 or less in debt, not including any debt registered against their home. A consumer proposal is a way of eliminating debts while avoiding bankruptcy.

A professional Trustee, acting as the Administrator in a consumer proposal, cannot charge for time spent on consumer proposals. Compensation is based on a tariff. A consumer proposal tariff is as follows:

$750 upon filing the consumer proposal with the OSB;
when the consumer proposal is approved or deemed approved, another $750;
20% of the money distributed to creditors, when it is distributed:
the fee for each of the two mandatory credit counselling sessions;
court costs; and
HST/GST

Division I Proposal

A consumer proposal streamlines the process. Individuals with too much debt to qualify for a consumer proposal may submit a Division I proposal. Under the BIA, every corporate restructuring plan must be a Division I proposal.

Under a Division I Proposal, the Trustee can charge by the amount of time spent, subject to approval by the Inspectors (if any are allowed for and appointed), the OSB, and taxation by the court.

Receivership – private or court-appointed

Receivership is a remedy for secured creditors legal process. A trustee in bankruptcy Ontario and elsewhere in Canada can charge for time spent in a receivership. In a private appointment, there is no taxation. The secured creditor who appointed the receiver must approve the fee.

In a court-appointed receivership, there is taxation by the court. The stakeholders can approve or oppose the Receiver’s fee and costs.

The OSB is not involved in either type of appointment.

Restructuring of companies under the Companies’ Creditors Arrangement Act

Canada has a federal statute that governs large corporate restructurings, the Companies’ Creditors Arrangement Act (CCAA). It is a court-led restructuring process for companies with debts of $5 million or more. A licensed trustee serves as a Monitor under the CCAA. The fee for the Monitor is determined by the amount of time spent. The court must assess its fee and costs.

Having set the background information for you, I can now discuss the unreported court decision discussed in the webinar.

trustee in bankruptcy ontario

The unreported court decision: Background

A trustee in bankruptcy Ontario and two Ontario insolvency lawyers presented this unreported decision in the webinar. According to the licensed trustee who presented this court ruling, it was his file. If it had been my file, I would not have been so courageous as to use it as a teaching moment for members of the Ontario insolvency community.

The insolvent person is a real estate broker who has experienced substantial income growth. She incurred significant tax liabilities as a result of poor tax planning advice. She owes $417,060 to the Canada Revenue Agency (CRA), her single largest creditor. Other notable creditors include two chartered banks who are owed $119,196 and $44,025, respectively.

The debtor lodged her Division I proposal with the trustee in bankruptcy Ontario which he filed on October 31, 201. The debtor offered to pay her creditors $348,000 in 60 monthly installments of $5,800 under her proposal. A meeting of creditors took place on November 21, 2019. At CRA’s request, the meeting was adjourned to allow for further examination, as is normal when CRA is a major creditor.

The debtor amended her proposal on December 11, 2019, increasing the Proposal Fund to $408,000 payable at $6,800 per month for 60 months. The Amended Proposal was presented to the reconvened meeting of creditors on December 12, 2019. Upon submitting the Amended Proposal, the requisite majority of creditors approved it.

The Amended Proposal was approved by the court on January 28, 2020. The debtor made the 3 monthly payments of $6,800 promised in the Amended Proposal between February and April 2020. In June 2020, the debtor paid a lump-sum payment of $367,600 instead of continuing with monthly payments for the remainder of the 5-year term. The Trustee issued the Certificate of Full Performance of Proposal to the debtor and prepared the documentation needed to request a comment letter from the OSB.

It was stated in the original proposal and the Amended Proposal that the Trustee’s fee would be based upon 12.5% of proceeds plus a $5,000.00 deposit paid by the debtor, plus HST. The total proceeds were $413,007.13. As a result, the Trustee calculated and claimed a fee of $56,000 (plus HST). $56,000 was calculated as an amount equal to $5,000 for the initial deposit paid by the debtor, plus 12.5% of $408,000 (or $51,000).

**The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts**

Taxations of this nature are done “over the counter”, unless the Associate Justice has questions. Trustees in bankruptcy prepare the necessary motion material and submit it electronically to the court. The accounts are taxed and the court order issued without the need for the Trustee to appear in court unless the Associate Justice has questions or concerns.

Taxation of the Trustee’s Final Statement of Receipts and Disbursements was conducted by the Associate Justice on July 13, 2020, in writing at which time she adjourned the taxation so that the Trustee could provide the following:

The Trustee’s Report to the Court for approval of the debtor’s Amended Proposal.
Time records of the Trustee.
An explanation of where the proposal money came from, and how the proposal could have been completed within 6 months of filing.
trustee in bankruptcy ontario

**The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts continues**

The matter came back in July in writing. By letter dated July 14, 2020, the Trustee responded to the court’s requests as follows:

The Trustee provided the Report to the Court filed upon the approval of the
Amended Proposal.
The Trustee confirmed that no time dockets were kept as the terms of the Amended Proposal provided for the calculation of fees.
The source of the funds to pay out the proposal was the re-financing and mortgaging of the debtor’s primary residence.

On July 29, 2020, the Associate Justice adjourned the taxation so that it could proceed by video conference. The Associate Justice ordered the Trustee to give notice of the taxation to the debtor, the
creditors and the OSB. The Associate Justice also directed the Trustee to be prepared to speak to whether
the fee claimed was fair given the 5-year debt restructuring plan took only 6 months to complete.

Neither the creditors nor the OSB attended the video taxation hearing. Therefore it was unopposed to the taxation and the fee claimed by the Trustee.

The unreported court decision: The court’s analysis

As a result, the court considered both positive and negative factors in deciding whether to approve the $56,000 fee for the Trustee.

FOR:

by virtue of their approval of the Amended Proposal, the creditors have accepted the Trustee’s fee claim;
The Amended Proposal and fee were approved by the court;
unsecured creditors will receive a substantial dividend of 54.1% on the ordinary unsecured claims proven;
they will receive their dividends much sooner than expected;
The Trustee has sent a copy of the Final Statement to all creditors with proven claims and all creditors have been notified of the taxation; no creditors have objected to the fee sought by the Trustee or opposed the approval of the taxation; and
the clean OSB comment letter supports taxation and approval of the fee claimed by the Trustee and the OSB did not attend this hearing.

AGAINST:

A time docket was not kept by the Trustee to justify the fees claimed in the administration of the estate. There is no record of the hours spent by each level of staff at their normal hourly rate to prove the Trustee’s efforts.
Compensation for work not performed by the Trustee is neither fair nor justifiable because it was not done or was not necessary.
About five and a half years before the deadline, the debtor made full payment of the Amended Proposal. However, the trustee did not investigate the source of the funds. Although the Trustee claimed that the funds were proceeds from the debtor’s re-financing of her principal residence, he could not provide any additional information.
According to the sworn statement of affairs, the debtor had a 50% interest in the principal residence with resulting equity of $47,000 and total equity from the debtor’s interests in two other properties totalling $95,000. Even so, the debtor managed to raise $408,000 through allegedly refinancing only the principal residence. She raised more money against this one asset than the equity listed in all her assets in her sworn statement of affairs!
Would the ordinary unsecured creditors have accepted the Amended Proposal if they were aware of more assets available?

The Associate Justice held that the court still has the right to supervise the administration of the estate, and the BIA obligates the court to tax the fee requested by the Trustee. Further, taxation by the court is not a rubber stamp.

trustee in bankruptcy ontario

The unreported court decision: The court’s decision and the aftermath

The lack of time dockets made it difficult for the court to determine an appropriate level of compensation. The court would have been able to assess whether the $56,000 fee was reasonable and justified if the Trustee had kept time records. According to the Associate Justice, the trustee in bankruptcy Ontario had not discharged his responsibility for proving that the fee is justified.

Taking everything into account, the court reduced the Trustee’s fee by $15,000 from what was claimed. Accordingly, the court approved a fee of $41,000 plus HST.

As a result, the Trustee sought legal advice. An appeal was filed by the Trustee to a Justice of the Ontario Superior Court of Justice Commercial List appealing the Associate Justice’s decision. The appeal was dismissed. The judge deferred to the experience and discretion of the Associate Justice, who taxes Trustee accounts regularly.

Trustee in bankruptcy Ontario: The moral of this story

I said at the beginning that, had I been in charge of the case, I would not have been so courageous as this Trustee in turning it into a webinar for my colleagues. There is a simple lesson here. The trustee in bankruptcy in Ontario and the rest of Canada must also be a good timekeeper for every insolvency file for which no tariff applies. The Trustee must also be a good record keeper so that questions from the OSB or the court can be adequately answered. Lastly, if something doesn’t make sense, like how you can raise $400,000 from assets that are only worth $142,000, find out why.

Trustee in bankruptcy Ontario summary

I hope you found this trustee in bankruptcy Ontario Brandon Blog informative. Are you in financial distress and a debt crisis? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

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

Tags alternatives to bankruptcy, bankruptcy trustee Ontario, confidential consultation, consumr proposal, federally regulated, financial difficulties, financial stability, Government-regulated insolvency proceedings, insolvency proceedings, insolvency process, insolvency trustee Ontario, licensed insolvency trustee Ontario, no-cost initial consultation, personal bankruptcy, professional trustee, taxation, trustee in bankruptcy, trustee in bankruptcy ontario, type of insolvency

Brandon Blog Post

BANKRUPTCY AND INSOLVENCY ACT OF CANADA TR1ES TO GIVE EVERYONE UNDENIABLE EQUITABLE TREATMENT

Post author By Brandon Smith
Post date October 18, 2021

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

bankruptcy and insolvency act of canada

What is the purpose of the Bankruptcy & Insolvency Act of Canada?

With all the talk of the economy, supply chain problems and the uncertainty of the future these days, it’s no wonder that many people aren’t sure how they will end up when things become “normal” again.

For Canadian people and businesses with too much debt, an insolvency proceeding under the Bankruptcy and Insolvency Act of Canada might just be the answer to getting back to a healthy stress-free life. Notwithstanding that using this federal statute can be a very effective strategy for managing financial difficulties, it is a very scary one that people do not like to talk about.

The Bankruptcy and Insolvency Act of Canada is based on the principle of balancing fairness, equity and a fresh start. A recent court decision in Saskatchewan exemplifies these principles. In this Brandon Blog, I describe a little bit about the Bankruptcy and Insolvency Act of Canada, explain the court decision and how the court used these principles in reaching its decision.

What is in the Bankruptcy and Insolvency Act of Canada?

Canadian citizens, businesses, and companies who run into financial difficulties can turn to the Bankruptcy and Insolvency Act of Canada for assistance. This federal legislation contains the laws, rules, and guidelines that all involved parties must abide by. It details how different financial options work legally, and defines the roles of the various stakeholders – the Office of the Superintendent of Bankruptcy, the Licensed Insolvency Trustees, the debtor, and the secured creditors and unsecured creditors (both preferred and ordinary).

Despite the fact that provincial legislation in Canada may overlap or affect stakeholder rights, federal bankruptcy legislation has priority over provincial legislation in insolvency matters. Therefore, provincial governments cannot do indirectly what is prohibited directly. However, there are cases where provincial laws will still apply. The laws surrounding property exemptions and enforcement of court orders differ from province to province and territory to territory. These provincial and territorial regulations continue to apply even under bankruptcy laws.

It is the Bankruptcy and Insolvency Act of Canada that governs all bankruptcies and proposals (either Division I or consumer proposals) in Canada. Receiverships are also governed by the Bankruptcy and Insolvency Act of Canada. The Laws of Canada – Bankruptcy and Insolvency, are meant to give the honest but unfortunate debtor, be it a person, business or company, a fresh start in life.

bankruptcy and insolvency act of canada

Growth in consumer proposals and business proposals

A person who files for the personal bankruptcy process submits an assignment in bankruptcy and related documents to a Licensed Insolvency Trustee. These documents outline the person’s assets, liabilities, income, and expenses. An insolvent person’s reason for insolvency must also be included in the documents. Individuals typically give the reason for not being able to pay their bills in a timely manner. Consumer proposals require very similar documentation as bankruptcy, except for the assignment in bankruptcy document.

In order to file a Division I Proposal under the Bankruptcy and Insolvency Act of Canada, insolvent companies must describe their assets and liabilities and provide a realistic cash flow statement documenting how they intend to operate under the proposed insolvency process. They must also explain how they became insolvent. Personal insolvency is less complex than corporate insolvency.

Despite a long-term decline in individual bankruptcy filings, consumer proposals have gained in popularity among individuals. The decrease in bankruptcy filings and the increase in proposals can be attributed to several different reasons. Under a proposal, a financial reorganization or restructuring is what is done. Bankruptcy is simply a liquidation.

Regardless of whether it is a consumer proposal, a Division I proposal, or bankruptcy, the Bankruptcy and Insolvency Act of Canada governs these proceedings. The Companies’ Creditors Arrangement Act, another federal government statute, governs reorganizations of very large corporations. This is especially true if there are separate insolvent corporations under the corporate umbrella in different countries, requiring foreign proceedings.

Why does one choose a consumer proposal instead of filing for bankruptcy?

A consumer proposal has many advantages over bankruptcy proceedings. By filing a consumer proposal, you’re able to retain the property you own such as your home, car, boat, etc. and extinguish all of your debts while only paying back a portion. A consumer proposal doesn’t require any of those items to be sold, as long as you can afford them with the monthly payment made under the proposal and your other living expenses.

Changing your lifestyle can help you get out of debt more quickly with a consumer proposal. Bankruptcy means losing everything, except for some assets that are exempt under provincial laws. You have equity if you do not fully encumber your assets by way of secured loans from financial institutions, your house, car, boat, furniture, clothing, jewelry, or anything else of value. You can keep this equity in a consumer proposal, but you will lose it in bankruptcy.

The main reason why people should attempt to perform a successful consumer proposal instead of going straight into bankruptcy under the Bankruptcy and Insolvency Act of Canada is because of this. As you will see in the recent court case I am about to describe, if you don’t pay close attention to how you conduct your affairs once you declare bankruptcy, you might be exposed to another minefield even after receiving your discharge.

bankruptcy and insolvency act of canada

**The Bankruptcy and Insolvency Act of Canada case**

This judgment of the Registrar in Bankruptcy of the Queen’s Bench for Saskatchewan was released on October 6, 2021. It is a relatively simple case, but it described so well the equitable nature of the Bankruptcy and Insolvency Act of Canada.

In this legal process case, there are two unsecured creditors who are the Applicants. They jointly loaned money to an individual debtor, who is now an insolvent debtor and a bankrupt individual on an unsecured basis. They also filed their proof of claim for this debt with the insolvency trustee. They then applied for an order pursuant to s. 69.4 of the Bankruptcy and Insolvency Act of Canada lifting the bankruptcy stay that is in effect with regard to the bankrupt.

The purpose of section 69.3 is to prevent bankruptcy creditors from initiating or continuing enforcement proceedings against a bankrupt debtor. In bankruptcy, a creditor has no recourse against the debtor or the debtor’s property, and may not commence, continue, or seek any action for the recovery of money for a claim that is provable in the bankruptcy.

Nevertheless, Section 69.4 allows a court to lift the stay if it decides that the applicant has established that the continued operation of the stay is likely to cause material harm to him or her, or if there are other equitable grounds for lifting the stay.

**The case: How the Bankruptcy and Insolvency Act of Canada works for fairness and equity**

The bankruptcy process generally compromises the debt obligation of the bankrupt, resulting in creditor claims run through the bankruptcy claims process. Generally, unsecured creditors lose their right to enforce their types of debts and, as a result, realize less than 100% of their debt. Some creditors do not receive anything from an estate in bankruptcy.

There are two major objectives of bankruptcy (and consumer proposal or commercial proposal) proceedings under the Bankruptcy and Insolvency Act of Canada. For one thing, it provides an equitable system for distributing the proceeds from the estate in bankruptcy among the bankrupt’s unsecured creditors. According to the laws Of Canada – bankruptcy and insolvency, unsecured creditors are expected to be treated predictably and fairly. However, it does not guarantee that creditors will receive a dividend in all cases.

Secondly, it is intended to give an honest but unfortunate bankrupt an opportunity to be freed from the crushing burden of debt and receive financial rehabilitation to become a contributing member of society. That is one reason why every person who does an insolvency filing must attend two financial counselling sessions.

In bankruptcy, an automatic stay allows the bankrupt to re-establish himself or herself financially and restart his or her financial affairs so that he or she can meet his or her credit obligations moving forward without being hampered by debt enforcement proceedings.

bankruptcy and insolvency act of canada

**The case: Role of unsecured creditors trying to lift the stay of proceedings**

The Registrar, in this case, followed the reasoning of a 2001 decision from the Court of Appeal for Ontario. It is far from routine to lift the stay, and therefore the court has to make sure that the reasons for lifting the stay are sound and consistent with the objectives of the Bankruptcy and Insolvency Act of Canada.

In the case of Mcculloch (Re), 2021 SKQB 259 (CanLII), the two creditors were alleging that Ms. Mcculloch induced them to loan her the money on a fraudulent basis. It was their argument that they should be allowed to continue legal action against the bankrupt so that they could prove in a separate court action that the debt was a result of fraud and that, therefore, their claim would survive the bankruptcy and her discharge. In addition, they stated that they would be more severely affected than the commercial creditors if the bankruptcy stay bars them from taking action against McCulloch.

According to the Registrar:

Bankruptcy often disproportionately affects individual creditors over commercial creditors. Generally, creditor relationships are based more on trust than on cost-benefit analysis. When advancing a loan, the commercial creditor such as a credit card company, unpaid suppliers, or a sophisticated secured creditor, generally assesses the risk and determines whether it can absorb the loss in the event of default. Individual lenders do not usually do this.
If this form of prejudice is sufficient to support lifting the stay, other individual creditors may be able to apply to lift the stay merely on the basis of relative disadvantage to individual creditors. Lifting the stay on this basis is inappropriate.
The Trustee objects to this application on the grounds that it will significantly increase the costs of bankruptcy administration at the expense of other creditors. In this case, the Registrar sided with the Trustee.
According to the lawyer representing the bankrupt, the creditors have not established any material prejudice or other equitable grounds for lifting the stay. The Registrar agreed.
Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
However, these 2 creditors still have rights in the bankruptcy. The court still has the right to hear their submissions at the discharge hearing. Additionally, they continue to have the right to pursue Ms. McCulloch once the bankruptcy proceedings are over.
At this time, lifting the stay would not benefit the applicants or their creditor claims since during the bankruptcy, Ms. McCulloch’s either the bankruptcy vests her assets in the Trustee for the benefit of the creditors or remain exempt from execution under Saskatchewan law. This disposition of property makes it simply impossible for these creditors to realize much from this stage, prior to the bankrupt’s discharge.
In this case, the equity does not support the court’s exercise of its authority to declare that the bankruptcy stay, established under section 69.3 of the Bankruptcy and Insolvency Act of Canada, does not apply to this litigation.

As a result, the Registrar denied the applicant’s request for what they thought was their legal rights in lifting the stay. Clearly, the Registrar was guided by the Bankruptcy and Insolvency Act of Canada‘s aims of fairness and equity to all stakeholders.

Bankruptcy and Insolvency Act of Canada summary

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

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

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

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

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

Call us now for a no-cost consultation.

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

Brandon Blog Post

WHERE IS LAURENTIAN UNIVERSITY WITH ITS HELPFUL CONCLUSIVE COMPENSATION CLA1MS PROCESS?

Post author By Brandon Smith
Post date July 28, 2021

where is laurentian university

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Where is Laurentian University in dealing with ‘An ugly stain for years to come’: Laurentian University students, staff reeling from cuts

As regular Brandon Blog readers know, I have been writing about the financial difficulties leading to the Laurentian University creditor protection filing under the Companies’ Creditors Arrangement Act (CCAA) as major events unfolded. The filing for bankruptcy protection was to allow for ongoing operations to continue and to come up with a Plan of Arrangement to deal with creditor claims.

The end of this week was scheduled to be another milestone in the Laurentian CCAA insolvency process, but it appears that event won’t happen on time. The purpose of this Brandon Blog is to discuss where is Laurentian University at with its compensation claim process for current and terminated faculty and staff?

Laurentian University situation so dire, it couldn’t afford to pay staff

This post-secondary institution faced a cash crisis and many financial issues leading to having filed its application for creditor protection on February 1, 2021. So far, I have written on:

LAURENTIAN UNIVERSITY FACING INSOLVENCY MAKES STARTLING CCAA NEWS FILING FOR CREDITOR PROTECTION. I wrote about what creditor protection in the Canadian context is for companies under financial strain and why Laurentian University did so.
LAURENTIAN UNIVERSITY INSOLVENCY RESTRUCTURING – OUR UPDATED GUIDE ON ITS MASSIVE CUTS TO GAIN FINANCIAL HEALTH. I discussed what went wrong in this Northern Ontario Sudbury-based university leading to the Laurentian University insolvency restructuring.
LAURENTIAN UNIVERSITY IN SUDBURY: THE LAURENTIAN FEDERATED UNIVERSITIES SUFFERED A CRUSHING DEFEAT. I explained the court rulings in favour of Laurentian University in Sudbury in its effort to terminate all of its federated agreements with the independent universities: the University of Sudbury, Thorneloe University and Huntington University.
COMPANIES’ CREDITORS ARRANGEMENT ACT: CREDITORS ARE NOW ABLE TO MAKE BOLD CLAIMS AGAINST LAURENTIAN. I wrote about the CCAA Claims Process having begun, other than for compensation claims of current and terminated faculty and staff. I described the rules for creditors to file their claims.
LAURENTIAN UNIVERSITY OF SUDBURY: LAURENTIAN SCORES HUGE WIN OVER THORNELOE UNIVERSITY. I discussed the Laurentian University of Sudbury decision of the Court of Appeal for Ontario concerning the request of one of the independent universities, Thorneloe University.
CUSHMAN WAKEFIELD TORONTO: COURT READILY APPOINTS FIRM TO REVIEW LAURENTIAN’S MASSIVE REAL ESTATE HOLDINGS. I discussed the Cushman Wakefield Toronto appointment as the Sudbury school plans a real estate review in Phase 2 of its court-guided restructuring process. The purpose of the independent third-party review is to see what Laurentian University might sell to get out of its financial hole and get it back onto a proper financial footing.

Where is Laurentian University with the Amended and Restated Claims Process Order?

I previously wrote about the Laurentian University Amended and Restated Claims Process Order (A&R Claims Process Order) when it was obtained from the Court on May 31, 2021.

Among other things, the A&R Claims Process Order developed a claims process to recognize, identify and deal with certain claims of creditors. The A&R Claims Process Order left out Compensation Claims to allow Laurentian, with the help of the Monitor and in discussions with the Laurentian University Faculty Association (LUFA) and also Laurentian University Staff Union (LUSU), to establish a process as well as a method for the identification of Compensation Claims.

Compensation Claims usually consist of the claims of current and previous employees, retirees, and also the labour unions relative to employment, benefits, pension, and/or labour contracts among the stakeholders and Laurentian University, and also claims of specific third parties relative to involvement of their employees in the retirement health benefit plan.

In their application to Court last May, Laurentian University told the Court that they would be back to have the Compensation Claims process approved no later than July 30, 2021.

Where is Laurentian University with its creditor protection compensation claims program now?

Laurentian told the Court that its Compensation Claims process will:

develop the key groups of claims to be covered in a Compensation Claims
procedure;
determine what info and also how the information needed to calculate such
claims can be assembled based upon the information in the hands of Laurentian and third-party service providers;
develop the Compensation Claims Methodology; and
think about alternate procedures for notice as well as claims handling.

In its motion record dated July 23, 2021, Laurentian has advised the Court that although it is working diligently with the Monitor, LUFA and LUSA, Laurentian will not be able to serve materials explaining its Compensation Claims process in time to seek Court approval no later than July 30. So, Laurentian is asking for an extension from July 30 to August 20, 2021. In the motion record, it is not stated exactly where is Laurentian University in this process. Laurentian has advised that its lawyers have booked time with the Court to hear the motion on August 17, 2021, at 9:30 AM.

UPDATE: On July 28, 2021, the Court approved amending paragraph 46 of the Claims Process Order to extend the date that Laurentian University must bring a motion to the Court to seek approval of: (a) the Compensation Claims Methodology, and (b) the process for notification of Employees and claims process, from “no later than July 30, 2021” to “no later than August 20, 2021”.

***Where is Laurentian University? Ask current President* *Dr. Robert Haché***

In support of this motion for an extension of time, the motion material includes the affidavit of Dr. Robert Haché, University President and Vice-Chancellor of Laurentian University of Sudbury, sworn on July 23 (the Haché Affidavit).

The Haché Affidavit really doesn’t say much and unfortunately, it does not say exactly where is Laurentian University in the finalization of the Compensation Claims process. It summarizes the background about the bilingual university financial troubles as to how this post-secondary education institution got to where it is today in the Laurentian CCAA insolvency process and advises the Court that:

Laurentian and the Monitor have been working diligently on settling the Compensation Claims Methodology, nonetheless, as a result of a variety of competing and urgent demands put on the University’s limited resources, (which presumably includes the demands of day to day operations) development has actually been slower than expected.
Although the information-gathering phase took longer than anticipated, drafts of the Compensation Claims Methodology have been prepared and also shown to LUFA and LUSU.
Regardless of best efforts, Laurentian was not able to finalize the Compensation Claims process in order to have everything in time for the Compensation Claims Methodology to be provided for Court authorization by July 30, 2021, based on the A&R Claims Process Order.
Therefore, the University looks for a short extension to that date. This requires a change to paragraph 46 of the A&R Claims Process Order to prolong the day whereby Laurentian can bring a motion to the Court to seek the authorization for the Compensation Claims Methodology to no later than August 20, 2021.

The Haché Affidavit is light on details as to what the issues getting in the way are, what has been agreed to so far and where is Laurentian University in all this? Close or still far off? It provides no real useful information to determine where is Laurentian University on this issue. My review of documents that were made public sheds no more light than what I am telling you in this Brandon Blog. They are obviously hoping that this request will not meet with any opposition so that it will allow for a positive impact on the financial restructuring.

So, unfortunately, there is no real insight into what is holding up the Compensation Claims process for claims of current and former faculty and staff, including severance payments, which certainly will be in the millions of dollars.

I doubt that anyone will wish to try to upset the restructuring over this issue. As of the time of writing this Brandon Blog, there is not a current Monitor’s Report in support of this motion yet made public.

Where is Laurentian University in all of this? I suspect that Laurentian will receive the extension it is requesting.

Where is Laurentian University summary

I hope that you found this where is Laurentian University Brandon Blog interesting. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

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

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

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

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Tags 'An ugly stain for years to come': Laurentian University students, A&R Claims Process Order, application for creditor protection, CCAA, CCAA Claims Process, Companies’ Creditors Arrangement Act, compensation claims, Compensation Claims Methodology, Court of Appeal for Ontario, creditor protection, Cushman Wakefield Toronto, Dr. Robert Haché, financial difficulties, financial issues, financial strain, Huntington University, independent third-party review, independent universities, insolvency, it couldn't afford to pay staff, Laurentian, Laurentian CCAA insolvency, Laurentian University, Laurentian University creditor protection, Laurentian University Faculty Association, laurentian university of sudbury, Laurentian University situation so dire, Laurentian University Staff Union, LUFA, LUSA, post-secondary institution, staff reeling from cuts, Sudbury school plans a real estate review in Phase 2 of its court-guided restructuring process, Thorneloe University, University of Sudbury, University President, where is Laurentian University

Brandon Blog Post

DIFFERENCE BETWEEN CONSUMER PROPOSAL AND BANKRUPTCY: THE PROVEN CANADIAN WAY TO GET DEBT FREE

Post author By Brandon Smith
Post date July 26, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

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

Difference between consumer proposal and bankruptcy: Know your options

Regular readers of my Brandon Blog know that there are a lot of steps you need to go through to financially reorganize your life. I have written before different blogs on various aspects of both consumer proposals and bankruptcy. The purpose of this Brandon blog is to discuss in one place, the difference between consumer proposal and bankruptcy.

Many people opt for one of these options because life has thrown them a curveball, they no longer have the cash flow to pay off their debts and want to start fresh. There are some great benefits to filing bankruptcy. They include eliminating creditors and debts, getting control over your personal finances, and having a stress-free life, Starting Over, Starting Now. But if you’re considering a first-time bankruptcy, or the bankruptcy option even if you are familiar with the Canadian bankruptcy process from a prior time, you should consider the pros and cons of a consumer proposal, the only government-approved debt settlement plan in Canada. It will be good for you to know the options that I explain below.

Consolidation loans vs consumer proposals

What’s the distinction between a consumer proposal and a debt consolidation loan? The consumer proposal process is an insolvency procedure that allows you to resolve all the amounts you owe to your unsecured creditors via an arrangement with your creditors. It does this without needing you to file bankruptcy. A consumer proposal can only be carried out by a licensed insolvency trustee. A consumer proposal allows you to get rid of all the amount owed by repaying only a part of your financial obligations over time.

A consolidation loan means that you still have sufficient assets and income and a good enough credit score, in order to borrow the total amount you owe. The loan must carry an interest rate lower, and hopefully much lower, than the average interest rate of your combined total debt. You use the loan proceeds to repay 100% of your debts. You now have only one loan with a monthly payment you can afford. Taking out a consolidation loan is not an insolvency process.

The main difference between consumer proposal and bankruptcy

The consumer proposal is a fundamental part of our personal insolvency system. It is an insolvency procedure controlled by the Bankruptcy and Insolvency Act (Canada) (BIA) that allows individuals who owe $250,000 or less (not including any financial debts secured against their principal home). It permits you to pay a portion of your financial debts with time, yet eliminate all of them if fully executed. It is an alternative to declaring bankruptcy. It is an alternative to bankruptcy.

Bankruptcy is also a fundamental part of our insolvency system under the BIA. However, rather than restructuring, in personal bankruptcy, the person surrenders all of their non-exempt assets to the licensed insolvency trustee for the benefit of the person’s creditors. Once the bankrupt person has fulfilled all of their duties, they are entitled to receive a discharge from bankruptcy, subject to the Trustee or a creditor opposing it.

Personal bankruptcy involves the liquidation of the bankrupt’s assets in return for the eventual elimination of their unsecured debts. It is not considered a restructuring like a consumer proposal is.

Difference between consumer proposal and bankruptcy: The process of filing a consumer proposal vs bankruptcy

You start by talking to a Trustee who will provide you basic guidance on both a consumer proposal and also bankruptcy. The Trustee will likewise inform you specifically just how each process functions. If at the end of that discussion you inform the licensed bankruptcy trustee that you really feel good in wanting to take the next steps with them, the Trustee will provide you with their intake form. When the form is completed, you send it to the Trustee, including supplying any kind of backup documents asked for, the Trustee can then provide you advice for your unique financial difficulties.

If you choose a consumer proposal, the licensed insolvency trustee will prepare the necessary filing documents for you to sign. This includes assisting you with preparing the best possible proposal that works for both you and your creditors. You then meet with the Trustee to sign the documents. The Trustee then files the documents electronically with the Office of the Superintendent of Bankruptcy (OSB). The OSB then issues the Certificate evidencing the filing and the formal process begins.

After seeing your completed intake sheet, the Trustee will advise on whether or not a consumer proposal would work for you, or if your best or only option is filing for bankruptcy. Similarly, in bankruptcy filings, the Trustee prepares all the required filing documents for your signature. The Trustee explains all of them to you, you sign them and the Trustee then electronically files the filing documents with the OSB. The OSB then issues its Certificate evidencing the bankruptcy and that formal process begins.

You initially meet with the licensed bankruptcy trustee, in-person, by video or phone, to share details of your personal situation, and working together, you determine whether a consumer proposal, an alternative to filing bankruptcy, or personal bankruptcy is the best option for you. With COVID-19, we have been holding all of our no-cost consultations and meetings by phone and video. We can do the sign-up process by video and email. We have found this is very convenient for our clients as they are not required to take the time to attend our office in person.

As you can see, the process of filing a consumer proposal vs bankruptcy is not that different. For filing, there is not really a difference between consumer proposal and bankruptcy.

Major difference between consumer proposal and bankruptcy

Is there a major difference between consumer proposals and bankruptcy? Yes. So far in this discussion, there have not really been major differences. But there really are as the consumer proposal is akin to filing for bankruptcy protection while the other is bankruptcy. Both provide legal protection from creditors. But a consumer proposal gives a person what the media calls filing for bankruptcy protection. When you file for bankruptcy, that calls for the liquidation of non-exempt assets.

Both bankruptcy and a consumer proposal can be excellent options for somebody who is experiencing a challenging financial position. A consumer proposal is an excellent choice for individuals who have the ability to make monthly payments to their creditors totalling less than the amount they owe, yet eliminating all their debts, while keeping the equity they have in assets they wish to keep. Bankruptcy is an excellent choice for those who are bewildered by their financial obligations, and who don’t have a consistent income, making it actually hard or impossible to manage making payments at any level to their creditors.

While both bankruptcy, as well as a consumer proposal, can supply a financial clean slate, there are a few vital distinctions.

In a consumer proposal, you normally get to keep all of your assets. In a bankruptcy, if you have equity in assets that you want to keep, you or someone friendly to you has to pay that equity to your Trustee for the benefit of your creditors. Otherwise, you need to surrender all non-exempt assets to the Trustee for the Trustee to sell them and then put the cash towards the claims of your creditors. The assets covered by your bankruptcy exemptions do not need to be surrendered.

In bankruptcy, you also have the issue of needing to obtain your bankruptcy discharge. If either the Trustee or one or more creditors object to your discharge, then you will not get your automatic bankruptcy discharge and you will have a discharge hearing in Court. You may also be subject to surplus income payments in a bankruptcy, which you will need to make to your Trustee (21 months for a first time bankrupt, 36 months for a second time or more bankruptcy).

The amount to offer your creditors in a consumer proposal has to be a better amount than they would receive from your bankruptcy. After doing the calculations I spoke about above, including any surplus income obligation, you will better understand what amount needs to be offered to your creditors.

Another difference between consumer proposal and bankruptcy is that there is a benefit of a consumer proposal in that you can spread the monthly payments for the amount determined over a term of up to 60 months, interest-free. In a bankruptcy, you are typically required to make any required payments over the term of your bankruptcy, which is much shorter than in a proposal. Therefore the consumer proposal allows you to term out a slightly higher settlement over a longer period of time. This makes the monthly repayment less complicated on your cash flow as well as your budget plan.

Once your consumer proposal is (deemed) accepted by the creditors and (deemed) approved by the Court, you just need to make your promised monthly payments to the Trustee. The Trustee handles making payments at regular intervals to your creditors. Once you have completed the payment promised under the consumer proposal, you receive your Certificate from the Trustee showing that you completed the consumer proposal. That is it. No discharge hearing can be opposed and no extra surplus income payments. It is already accounted for in the amount offered to your creditors in your consumer proposal.

The cost difference between consumer proposal and bankruptcy

When doing a consumer proposal, the fee of the licensed insolvency trustee is included in the payment you negotiate with your creditors. As I mentioned above, the calculation of what to offer in a consumer proposal does not include what the fee and costs are. Rather, it is compared to what the unsecured creditors can expect in bankruptcy.

However, if you were to file bankruptcy, the fee is based on the surplus income you may have to pay (based upon a criterion that includes income and family size) and also any assets that you are required to assign over to the Trustee. You might also have to make month-to-month contributions to cover the fee and costs if your income and non-exempt assets are insufficient to pay for the bankruptcy proceedings.

If there is no surplus income or assets, you, or someone on your behalf, will need to pay the bankruptcy fee which will be approximately $1,800 plus HST.

Difference between consumer proposal and bankruptcy: What’s worse? Credit rating impact of a bankruptcy vs consumer proposal

Both a consumer proposal and bankruptcy are insolvency proceedings under the BIA. Therefore both will negatively affect your credit rating. In a consumer proposal, your credit rating will show as an R9 on your credit report while you are making payments. Once you have completed your consumer proposal, your credit rating will be an R7 for 3 years after completion.

For a first-time bankrupt, if you were to file for bankruptcy, your credit report will show an R9 rating for 6-7 years after being discharged.

The difference between consumer proposal and bankruptcy summary

I hope that you found this difference between consumer proposal and bankruptcy Brandon Blog interesting. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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

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

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Tags 407ETR bankruptcy debt, alternative to bankruptcy, alternative to filing bankruptcy, automatic bankruptcy discharge, Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy filings, bankruptcy proceedings, BIA, Canadian bankruptcy process, consolidation loan, consolidation loans vs consumer proposals, Consumer Proposal, consumer proposal process, consumer proposal vs bankruptcy, consumer proposals, cost difference between consumer proposal and bankruptcy, credit rating, credit report, credit score, debt consolidation loan, difference between consumer proposal and bankruptcy, filing bankruptcy, filing for bankruptcy, financial difficulties, first-time bankruptcy, icensed bankruptcy trustee, insolvency, insolvency process, licensed insolvency trustee, non-exempt assets, Office of the Superintendent of Bankruptcy, OSB, personal bankruptcy, R9, surplus income, the main difference between consumer proposal and bankruptcy, the process of filing a consumer proposal vs bankruptcy, trustee, unsecured creditors, What's worse? Credit rating impact of a bankruptcy vs consumer proposal

Brandon Blog Post

BANKRUPTCY LAWYER IN TORONTO VS. BANKRUPTCY TRUSTEE IN TORONTO: WE EXPLORE AND EXPLAIN COMPLETELY THE DIFFERENCES FOR YOU

Post author By Brandon Smith
Post date July 19, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

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

Bankruptcy lawyer in Toronto introduction

Canada is recognized for its cultural diversity, but it can be a battle to locate trustworthy information on the nation’s laws. Bankruptcy is a difficult topic to learn about; both learning the technical side and dealing with the emotional one.

If you or your company are thinking about bankruptcy, you might think you need a bankruptcy lawyer in Toronto. However, you do not necessarily require one. A licensed insolvency trustee in Toronto (formerly called a bankruptcy trustee in Toronto) can help you pick the perfect insolvency process for you and make certain that you survive it as best as possible.

In this Brandon Blog, I discuss the roles of a bankruptcy lawyer in Toronto and a licensed insolvency trustee. Sometimes they can overlap and many times they do not. We will take a detailed look at a bankruptcy lawyer in Toronto vs a licensed insolvency trustee. We will discuss the differences between the two and exactly how they can each help you.

Bankruptcy lawyer in Toronto – Do you need one to file personal bankruptcy?

Whether it is personal bankruptcy proceedings, or one of the formal alternatives to bankruptcy such as a consumer proposal or a Division I Proposal that are being contemplated, a bankruptcy lawyer in Toronto or elsewhere is not involved in the actual bankruptcy filing. or the Canada – restructuring & insolvency filing. That is what trustees in bankruptcy do.

When a person or company is contemplating an insolvency process, they can get a no-cost consultation with any one of the bankruptcy trustees they choose to meet with. During the consultation, information is gathered by the Trustee, analyzed and possible solutions are discussed.

Trustees must always be careful to not tread into areas that could possibly give them a conflict in providing their financial services. People wanting advice on asset transfers, asset protection, or preferring one or more creditors over others are areas that Trustees should not wade into.

In situations like that, I always advise potential bankruptcy clients that as there is no privilege in our discussions and we should not talk about those things so that I will not be conflicted. Rather, the person should get advice from a bankruptcy lawyer in Toronto or elsewhere where the discussions and the legal advice are protected by solicitor-client privilege.

Do You Need a personal bankruptcy lawyer in Toronto to get your bankruptcy discharge?

As I have written before in several Brandon Blogs, there are 6 possible outcomes in a bankrupt’s application for discharge. This depends on whether the discharge is being opposed by either the Trustee and/or one or more creditors. The possible bankruptcy discharge outcomes are:

Automatic – This discharge is absolute and is given by the Trustee at the earliest possible time the bankrupt person is entitled to a discharge. It means that the bankruptcy has performed all of his or her duties, has fully cooperated with the Trustee and nobody has opposed the discharge.
Absolute – An absolute discharge is obtained when the Trustee issues the automatic discharge. it is also possible to obtain an absolute discharge when a creditor opposes the bankrupt’s discharge, the matter goes to court for a hearing, but the court does not believe the evidence presented by the opposing creditor is persuasive and the court orders an absolute discharge.
Conditional – In this type of discharge, there was opposition to the bankruptcy receiving an absolute discharge. The court considered the evidence and concluded that the bankrupt must fulfill one or more conditions before being entitled to a discharge from bankruptcy. More often than not, a conditional discharge includes a certain amount of money the bankrupt must pay to the Trustee for the general benefit of the creditors.
Suspended – A suspended discharge is given when there is opposition to the bankrupt’s discharge and the matter goes to court for a discharge hearing. Based on the evidence, the court believes that the bankrupt, either before or during the bankruptcy estate file administration, has conducted himself or herself in such a way that although a discharge will be given, it should be delayed. The suspension acts to delay the discharge and can be combined with conditions.
Refused – The bankrupt’s discharge is opposed probably by at least the Trustee and probably one or more creditors. There is sufficient evidence before the court that the bankrupt has not lived up to his or her duties and has probably failed to fully cooperate and provide full disclosure to the Trustee. The court, based on the evidence, refuses to consider the bankrupt’s application for discharge until such time as the bankrupt performs all duties and discloses all information.
No order – This is not an actual discharge type, but can be the outcome of a discharge hearing. The court can issue a “no order” instead of a refusal. The facts are probably similar to when the court can issue a refusal. However, in a “no order” situation, the bankrupt remains in bankruptcy but the Trustee is then free to pursue its discharge. Once the Trustee gets its discharge, the bankrupt lose the protection offered by the stay of proceedings. Creditors are then free to pursue all of their rights and remedies against the bankrupt in the enforcement of their trying to collect their respective debts.

When the time comes for the bankrupt to get his or her discharge from bankruptcy, if the Trustee or a creditor opposes, the bankrupt would be well advised to consult with a bankruptcy lawyer in Toronto or elsewhere. The Trustee cannot give an automatic discharge and the matter is going to court for a trial. The bankrupt should get the benefit of legal advice and probably will need to retain the lawyer to provide legal services in representing the bankrupt in court. That is not the job of the Trustee.

Corporate Bankruptcy in Canada – Corporate bankruptcy lawyer in Toronto, Canada – Do you need one to file corporate bankruptcy?

As I will explain, every Canadian corporate insolvency file requires probably several, not just one bankruptcy lawyer in Toronto or elsewhere. Insolvency law is complex and lawyers will help all the parties involved.

The current economic climate in Canada is going to be challenging for Canadian businesses and I expect there will be many financial difficulties. Government COVID-19 support programs are scheduled to end soon. Companies have been tapped out while shut down just trying to stay alive with little or no revenue being earned. Companies will need cash now that it is time to start everything up again. No doubt there will be business casualties.

However, not all businesses are created equal. Some will be able to restructure, some will file for bankruptcy and others will merely shut their doors and fade away.

Among the keystones of a restructuring proceeding under either the Companies’ Creditors Arrangement Act or the Bankruptcy and Insolvency Act is the debt workout. The restructuring is designed to maintain the debtor’s business and negotiate a financial debt repayment strategy with its creditors. The aim is to save jobs, allow the company to continue while avoiding bankruptcy liquidation.

Key components of a debt workout normally include debtor-in-possession lending (DIP lending) while the company is reorganizing, new capital for the company coming out of its restructuring and getting unsecured creditors, and possibly secured creditors, to agree to accept less than they are owed. In the very large corporate restructuring files, there are normally lending syndicates due to large and complex lending arrangements. They too will need lawyers to help them with the insolvency law.

If a restructuring proceeding is not possible or does not succeed, then either the company’s secured creditor will begin receivership enforcement proceedings or the company will file an assignment in bankruptcy or a creditor will launch a bankruptcy application to put the company into bankruptcy.

In every corporate insolvency file, legal services are required by all the stakeholders. Canadian counsel plays an important part in providing advice. In the larger files, a large team of lawyers will be needed for both the company and its main creditors. The Board of Directors will need their own independent legal team. The bankruptcy trustee in Toronto will also need a dedicated team of lawyers to help navigate through the formal restructuring in court or help in a court-appointed receivership, private receivership or bankruptcy.

As you can see, in pretty well every corporate file, a bankruptcy lawyer in Toronto or elsewhere is pretty well a must-have requirement. Lawyers will be able to help the company, its Board of Directors, its creditors and the insolvency professional create effective solutions. The best ones will also make sure that they are also practical solutions.

**Other situations where you could need a bankruptcy lawyer in Toronto, Barrie, GTA, or elsewhere**

When looking for a bankruptcy lawyer in Toronto, Barrie, GTA and elsewhere, you want to find one that has substantial experience. Depending on the situation you or your company are involved in, the experience could be in one or more of:

financial reorganizations;
debt reorganizations and debt restructurings;
debtor legal rights and creditor rights;
security enforcement;
forbearance/standstill arrangements;
lender liability suits;
receivership and related matters for banks or other secured lenders, court and privately appointed receivers;
insolvency and bankruptcy litigation or other complex matters; and
acting for receivers and Trustees, debtors, secured creditors, unsecured creditors or any other stakeholder in an insolvency process.

Take Your First Step Towards A Debt Free Life

I hope that you found this bankruptcy lawyer in Toronto Brandon Blog interesting and that you now have a better appreciation for when getting bankruptcy legal advice is necessary. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

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

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

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Tags alternatives to bankruptcy, bankrupt's application for discharge, Bankruptcy and Insolvency Act, bankruptcy discharge, bankruptcy filing, bankruptcy lawyer in Toronto, Bankruptcy lawyer in Toronto - Do you need one to file personal bankruptcy?, bankruptcy litigation, bankruptcy trustee in toronto, bankruptcy trustees, barrie, Board of Directors, Canada, Canada - restructuring & insolvency, Canadian counsel, Companies’ Creditors Arrangement Act, company into bankruptcy, complex matters, Consumer Proposal, Corporate Bankruptcy in Canada - Corporate bankruptcy lawyer in Toronto, corporate insolvency, creditor rights, debt restructurings, dedicated team, Division I Proposal, Do You Need a personal bankruptcy lawyer in Toronto to get your bankruptcy discharge?, effective solutions, financial difficulties, GTA, insolvency law, legal advice, legal services, legal team, lender liability suits, lending syndicates, licensed insolvency trustee, licensed insolvency trustee in toronto, practical solutions, restructuring proceeding, team of lawyers, trustees in bankruptcy, unsecured creditors

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How does a company get into corporate bankruptcy and what happens to the company?

Why might a company choose to file for corporate bankruptcy protection and restructure under a BIA proposal?

Who is responsible for developing the reorganization plan for the company?

What becomes of a corporation after corporate bankruptcy?

When a company declares corporate bankruptcy, what will happen to your stock or bond?

Corporate bankruptcy and insolvency at a glance

Business bankruptcy: Insolvency for business

Business bankruptcy and Insolvency at a glance

Business bankruptcy: The bottom line on the SBRA

The main benefits of the SBRA business bankruptcy protection

Quick response

Corporation envy

The Canadian business bankruptcy and restructuring landscape

Business bankruptcy: The debtor (owes money) not the creditors (are owed money) would control the reorganization

Business bankruptcy summary

Trustee in bankruptcy Ontario introduction

Trustee in bankruptcy Ontario: What is a Licensed Insolvency Trustee?

Trustee in bankruptcy Ontario and the OSB: Who can act as trustee in bankruptcy Canada?

What does a trustee in bankruptcy Ontario cost?

Personal bankruptcy – summary administration

Personal and corporate bankruptcy – ordinary administration

Consumer proposal

Division I Proposal

Receivership – private or court-appointed

Restructuring of companies under the Companies’ Creditors Arrangement Act

The unreported court decision: Background

The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts

The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts continues

**Can a business declare corporate bankruptcy?**

**What factors lead to corporate bankruptcy proceedings?**

**What happens to debt in corporate bankruptcy?**

**How does a company get into corporate bankruptcy and what happens to the company?**

**Why might a company choose to file for corporate bankruptcy protection and restructure under a BIA proposal?**

**What becomes of a corporation after corporate bankruptcy?**

**When a company declares corporate bankruptcy, what will happen to your stock or bond?**

**The main benefits of the SBRA business bankruptcy protection**

**What does a trustee in bankruptcy Ontario cost?**

**The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts**

**The unreported court decision: The taxation of the trustee in bankruptcy Ontario accounts continues**

**The Bankruptcy and Insolvency Act of Canada case**

**The case: How the Bankruptcy and Insolvency Act of Canada works for fairness and equity**

**The case: Role of unsecured creditors trying to lift the stay of proceedings**

***Where is Laurentian University? Ask current President* *Dr. Robert Haché***

**Other situations where you could need a bankruptcy lawyer in Toronto, Barrie, GTA, or elsewhere**