Tag: insolvency trustees

NAVIGATING BUSINESS INSOLVENCY IN CANADA: A LAWYER AND ACCOUNTANT’S COMPREHENSIVE GUIDE TO MASTERING INSOLVENCY LAW

Post author By Brandon Smith
Post date April 22, 2024

Introduction to Business Insolvency

Welcome to our Brandon’s Blog where we will explore the intricate world of insolvency and its profound impact on businesses in Canada from my perspective as a professional in the field. In this exploration of business insolvency, we will uncover the implications that insolvency brings for creditors, shareholders, their lawyers and accountants, and employees alike.

Understanding the complexities of financial distress is crucial for businesses to navigate through turbulent times successfully. Join me as we discuss effective strategies and best practices to mitigate the challenges of insolvency, ensuring a smoother transition toward financial stability.

Definition of Business Insolvency

Business insolvency in the Canadian context refers to the financial state of a business where it is unable to pay its debts as they become due. It is a financial condition, not a legal one. Do not confuse the business or company with the financial condition of being an insolvent person with the legal condition of being involved in bankruptcy proceedings. Corporate insolvency is not corporate bankruptcy.

Corporate insolvency results in the business being unable to pay its debts when due which may make it impossible for the business to continue its operations. Insolvent companies may very well end up in the legal state of bankruptcy or as an alternative to bankruptcy, in insolvency restructuring proceedings.

Business insolvency can force the business to choose one of the insolvency options for businesses, including bankruptcy filings or proposals for restructuring and repayment plans under the Bankruptcy and Insolvency Act (Canada) (BIA).

In Canada, the number of business insolvencies has been on the decline for many years, but the impact of the COVID-19 pandemic has seen a reversal of this trend. Business insolvency filings are on the rise again. However, there are many small businesses where a business bankruptcy process does not make any sense as there are either no or few assets to offset the large company debts. We get calls daily from entrepreneurs of such companies where we tell them it is in their best interests to merely close the business doors rather than spend money to put their company into bankruptcy.

Causes and Warning Signs of Business Insolvency

Economic Downturn and Market Volatility

One of the primary contributors to business insolvency in Canada is the unpredictable nature of economic fluctuations and market volatility. As businesses strive to adapt to shifting market trends and consumer demands, they are often met with unforeseen challenges that can strain financial resources. Economic downturns, changes in consumer behaviour, and global market dynamics all play a pivotal role in determining the financial health of businesses across various sectors.

Cash Flow Problems: Overleveraging and Excessive Debt Burden

Another significant factor that can precipitate business insolvency is overleveraging and an excessive debt burden. While leveraging can be a strategic tool for growth and expansion, it becomes problematic when businesses accumulate debt beyond their capacity to repay. High levels of debt, coupled with declining revenues or profitability, can create a precarious financial situation, ultimately leading to insolvency if left unaddressed.

Poor Financial Planning and Management

Effective financial management and planning are essential components of sustainable business operations. However, inadequate financial oversight and poor planning can leave businesses vulnerable to insolvency. From misaligned budgeting strategies to ineffective cash flow management, deficiencies in financial management practices can exacerbate existing challenges and hasten the onset of insolvency.

Regulatory Compliance and Legal Challenges

Navigating the complex regulatory landscape in Canada can pose significant challenges for businesses, especially concerning compliance and legal matters. Failure to adhere to regulatory requirements, such as tax obligations or industry-specific regulations, can result in legal disputes, penalties, and fines, placing additional strain on financial resources. Moreover, litigation and legal challenges can further impede business operations and contribute to business insolvency.

Technological Disruption and Industry Shifts

The rapid pace of technological innovation and industry shifts can disrupt traditional business models and market dynamics, presenting both opportunities and challenges for businesses in Canada. Failure to embrace technological advancements or adapt to changing industry trends can render businesses obsolete or inefficient, leading to a decline in competitiveness and financial viability. As such, businesses must remain agile and proactive in leveraging technology to stay ahead of the curve and mitigate the risk of insolvency.

External Shocks and Unforeseen Events

External shocks and unforeseen events, such as natural disasters, geopolitical instability, or pandemics, can have profound implications for business continuity and financial stability. The unprecedented disruptions caused by such events can severely impact supply chains, disrupt operations, and erode consumer confidence, thereby jeopardizing the financial health of businesses. While certain external shocks may be beyond the control of businesses, proactive risk management and contingency planning are essential to mitigate their adverse effects.

Remember, proactive planning, decisive action, and collaboration with knowledgeable professionals are the cornerstones of navigating business insolvency effectively.

Business Insolvency: Overview of Insolvency Law in Canada

In Canada, insolvency law plays a vital role in guiding businesses through financially distressed situations. As a professional knowledgeable in this field, I will delve into the types of insolvency proceedings and the key legislation and regulations that govern insolvency processes.

Types of Insolvency Proceedings: In Canada, businesses can navigate various types of insolvency proceedings:

- bankruptcy;
- proposal;
- corporate restructuring;
- receivership.

Bankruptcy involves the liquidation of assets to repay creditors, while a proposal allows for negotiating repayment plans to avoid bankruptcy. For larger corporations, corporate restructuring under different legislation than a proposal (discussed next) is available. Finally, when a secured creditor enforces its security to liquidate the business assets, that is receivership.

Understanding the nuances between these proceedings is essential for businesses facing financial challenges. All of these proceedings are described in detail in my previous blogs in the Lawyer and Accountant Series over the last few weeks.

Key Legislation and Regulations: The BIA applies to all business bankruptcy, proposal and receivership proceedings in Canada. The Companies’ Creditors Arrangement Act (CCAA) applies to corporations that owe more than $5 million to creditors who wish to avail themselves of Canadian bankruptcy protection to restructure their operations and finances.

These are the pivotal legislation for an insolvent person, be they a consumer, individual, proprietorship, partnership or corporation. They govern personal insolvency and business insolvency in Canada. The BIA will govern any personal bankruptcy or corporate bankruptcy.

Understanding these aspects of insolvency law is imperative for businesses as they navigate through financial difficulties. By recognizing the procedures and regulations outlined in the key legislation, businesses can protect their interests and work towards a successful resolution of insolvency issues.

As we continue to unravel the intricate landscape of insolvency law in Canada, I will now explore the specific roles of lawyers and accountants in business insolvency, shedding light on their invaluable contributions to navigating insolvency proceedings effectively.

Role of a Lawyer in Business Insolvency

Lawyers play a critical role in guiding businesses through the challenging landscape of insolvency. There are many complexities and responsibilities involved in representing clients during financial distress. Let’s explore the legal responsibilities and duties, as well as effective strategies for representing clients in insolvency proceedings.

Legal Responsibilities and Duties

A lawyer’s primary responsibility is to ensure that their clients navigate the legal proceedings smoothly, legally and ethically. Upholding the highest standards of professionalism and compliance with relevant laws is paramount in protecting the interests of all involved parties. From providing sound legal advice to negotiating on behalf of clients, every action must align with the legal framework outlined in insolvency law.

In insolvency proceedings, it’s essential to draft and review legal documents meticulously, such as restructuring plans and agreements, to safeguard the rights of creditors, shareholders, and employees. Transparency and adherence to the law are non-negotiable aspects that guide a lawyer’s responsibilities in representing clients effectively.

Strategies for Representing Clients

When representing clients in business insolvency cases, adopting a strategic approach is key to achieving successful outcomes. Clear communication with clients to understand their objectives and concerns forms the foundation of developing a tailored strategy. By conducting in-depth research, analyzing financial documents, and collaborating with other professionals like accountants and insolvency practitioners, lawyers can offer comprehensive legal services.

Each client’s situation is unique, requiring a personalized strategy that addresses their specific needs and goals. Through a combination of legal expertise, practical considerations, and proactive communication, lawyers strive to navigate the complexities of insolvency proceedings effectively. By working collaboratively with clients and other professionals, especially the insolvency professionals, they can secure the best possible resolutions for their clients’ insolvency challenges.

Role of an Accountant in Business Insolvency

Accountants also play a critical role in the realm of business insolvency. The CPA understands the importance of financial analysis and compliance with accounting standards in navigating through the complexities of insolvency. Let’s explore how accountants play a pivotal role in helping businesses facing financial distress.

Financial Analysis and Reporting

Financial analysis and reporting are fundamental aspects of dealing with business insolvency. The accountant’s role involves carefully assessing the financial health of a company experiencing insolvency issues. By analyzing crucial financial statements, cash flow projections, and other relevant data, CPAs can provide insights that help the business understand its current financial situation.

Through their expertise in financial analysis, CPAs identify key areas of concern and create accurate reports that are essential for stakeholders, including creditors, shareholders, and employees, to make informed decisions. Effective financial analysis enables businesses to develop strategies for managing financial distress, paving the way for a smoother resolution of insolvency issues.

Compliance with Accounting Standards

Compliance with accounting standards is a cornerstone for businesses navigating insolvency in Canada. The CPA will ensure that the financial statements are prepared in adherence to the relevant accounting principles and regulations. This commitment to compliance promotes transparency and upholds the integrity of financial reporting.

By maintaining strict compliance with accounting standards, businesses demonstrate their dedication to ethical practices and financial accuracy. This, in turn, fosters trust among creditors, shareholders, and other stakeholders during times of financial distress. Upholding accounting standards is crucial for businesses to mitigate legal and financial risks, emphasizing the need for meticulous attention to regulatory requirements.

CPAs recognize the significance of financial analysis and compliance with accounting standards in guiding businesses through the insolvency process. By providing invaluable financial expertise ensuring adherence to regulatory guidelines, and working with other professionals, especially the insolvency professionals, the external CPA supports businesses in making well-informed decisions and navigating the complexities of business insolvency successfully.

This is how both non-insolvency lawyers and accountants can still play a meaningful role in business insolvency, especially in a business restructuring process. A successful outcome of the business restructuring is the best way for the existing lawyer and accountant to maintain both the client but also a close meaningful business relationship for the long term.

Impact of Business Insolvency

Job Losses and Unemployment

The impact of Canadian business insolvency on job losses and unemployment can be significant. When a business becomes insolvent, it may be forced to lay off employees or shut down entirely, leading to job losses. This can result in a higher unemployment rate as workers find themselves without a job and struggle to secure new employment.

The COVID-19 pandemic has exacerbated these challenges, with many entrepreneurial businesses in Canada continuing to face financial difficulties and the continued risk of closure. Such businesses are still struggling to return to normal revenues, carry unpaid debt taken on during the pandemic, and face rising costs and a shortage of labour.

Targeted measures and support for small businesses are crucial to prevent closures and job losses. By assisting, such as financial aid, access to resources, and support for restructuring, the impact of business insolvency on job losses and unemployment can be mitigated. Additionally, policies like the recent amendments to prioritize creditor claims related to defined-benefit pension plans can help protect employees’ financial security in the event of insolvency.

Effects on Suppliers and Creditors

The effects of Canadian business insolvency on suppliers and creditors can be significant. When a business becomes insolvent, suppliers may face challenges in receiving payment for goods or services provided to the business. This can result in financial difficulties for the suppliers themselves, especially if they rely heavily on the insolvent business as a major customer.

Creditors, including financial institutions and other lenders, may also experience losses when a business files for bankruptcy or proposes a restructuring plan. In most cases, creditors will not receive the full amount owed to them, or they may have to wait a significant amount of time to receive any repayment.

Overall, Canadian business insolvency can have a ripple effect on suppliers and creditors, leading to financial challenges and losses for those involved in the business’s operations. Suppliers and creditors need to assess their credit risks before extending credit and take appropriate measures to protect their interests in the event of a business insolvency.

Potential Closure or Sale of the Business

In Canadian business insolvency, the potential closure or sale of the business can have significant implications for the business owner, employees, creditors, and the economy as a whole. If an entrepreneurial business is unable to meet its financial obligations and is forced to close its doors, it can result in job losses, financial losses for creditors, and a decrease in economic activity in the local community.

For the business owner, the closure or sale of the business can mean the end of their entrepreneurial venture, financial loss, and potential personal liability for both Director liabilities as well as any corporate debt personally guaranteed by the entrepreneur. Such liabilities can have a significant impact on their financial well-being and prospects.

For employees, the closure of a business can result in job loss, uncertainty, and financial hardship. They may struggle to find new employment, especially if the closure is due to broader economic challenges in the industry or region.

For creditors, the closure of a business can mean they probably will not recover the full amount owed to them. They may have to write off the debt as a loss, which can impact their financial stability and ability to extend credit to other businesses.

In terms of the economy, the closure or sale of a business can contribute to a decrease in economic activity, reduced consumer confidence, and a negative impact on the overall business environment. It can also lead to a loss of tax revenue for the government, further impacting public services and infrastructure.

Overall, the potential closure or sale of a business in a Canadian business insolvency is a complex and challenging situation that requires careful consideration of the implications for all stakeholders involved. It underscores the importance of effective financial management, planning, and risk mitigation strategies for entrepreneurial businesses to avoid insolvency and closure in the first place.

Reputation Damage

Reputation damage arising from a Canadian business insolvency can have long-lasting effects on a company. When a business becomes insolvent, it is unable to fulfill its financial obligations, leading to creditors and suppliers losing trust in the company. This can result in difficulty in securing credit, partnerships, and contracts in the future.

Moreover, news of a business insolvency can spread quickly, damaging the company’s reputation among customers and stakeholders. Customers may lose faith in the company’s ability to deliver products or services, leading to a loss of business and revenue. Employees may also become concerned about job security and employee wages. Morale suffers and the most qualified employees can find new jobs quickly. All of this leads to morale suffering which makes the business insolvency closer to a self-fulfilling prophecy.

Reputation damage from a business insolvency can be difficult to overcome. Rebuilding trust with creditors, suppliers, customers, and employees may take time and effort. Companies trying to implement a restructuring insolvency plan need to implement strong communication strategies to address concerns and demonstrate a commitment to financial stability and responsibility.

Overall, reputation damage arising from Canadian business insolvency can have significant consequences for a company’s long-term success and viability. Businesses need to address insolvency issues promptly and transparently to mitigate potential reputational harm.

Navigating Business Insolvency Proceedings

Initiating the Insolvency Process

In Canada, the process of initiating insolvency proceedings is a critical step for businesses facing financial distress. There are two kinds of processes; 1. voluntary and 2. involuntary.

The voluntary process normally begins with the insolvent business formally declaring insolvency by filing for bankruptcy protection under either the BIA or CCAA to begin the restructuring process. Alternatively, the insolvent business can file corporate bankruptcy if liquidation is the only answer for a business that is no longer viable.

The involuntary process would normally begin with either a secured creditor privately appointing or making an application to the Court for the appointment of a receiver. Alternatively, one or more unsecured creditors owed in total at least $1,000 can launch a Bankruptcy Application against the insolvent company.

Seeking professional guidance from experts like insolvency lawyers and licensed insolvency trustees is essential to navigate this complex process effectively. Businesses can begin addressing their financial challenges by initiating insolvency proceedings and working toward a resolution.

Managing Stakeholder Relationships

Managing stakeholder relationships is paramount during times of business insolvency in Canada. Creditors, shareholders, and employees all have vested interests in the outcome of insolvency proceedings. Effective communication and transparency are essential to build trust and mitigate potential conflicts. By keeping stakeholders informed, addressing their concerns, and involving them in decision-making processes, businesses can navigate insolvency proceedings with clarity and confidence.

Business insolvency is a complex issue that requires careful navigation. By understanding the implications for all stakeholders and seeking professional advice, businesses can better prepare for financial challenges.

Resolving Legal issues Within a Business Insolvency

There are two main avenues for addressing legal issues within insolvency cases: 1. Negotiation and Mediation Techniques, as well as 2. Litigation and Court Proceedings. I will now delve into the strategies and approaches essential for navigating through challenging financial times successfully.

Negotiation and Mediation Techniques

When faced with legal issues within insolvency cases, negotiation and mediation techniques can be powerful tools for finding amicable solutions. Insolvency trustees find that engaging in constructive dialogue with stakeholders can often lead to mutually beneficial outcomes. By exploring innovative and collaborative approaches, businesses can avoid unnecessary conflicts and costly legal battles.

Effective negotiation involves understanding the concerns and needs of all parties involved.
Mediation offers a platform for open communication, ensuring that diverse perspectives are heard and respected.
Skilled mediators facilitate the process, guiding toward agreements that protect the interests of creditors, shareholders, and employees.

By adopting a strategic and empathetic approach to negotiation and mediation, businesses can navigate the complexities of insolvency issues with resilience and integrity. The ability to find common ground and explore creative solutions is essential in any business restructuring.

Litigation and Court Proceedings

While negotiation and mediation are preferred methods for resolving legal issues within the insolvency case, there are instances where litigation and court proceedings become inevitable. This is more so within a liquidating bankruptcy proceedings rather than in a business reorganization. Licensed insolvency trustees understand the importance of legal recourse in protecting the rights and interests of all stakeholders involved.

Litigation provides a formal platform for resolving disputes and making legally binding decisions.
Court proceedings ensure that insolvency matters are adjudicated fairly and by the law.
Legal experts specializing in insolvency law offer invaluable guidance throughout the litigation process.

By preparing meticulously and engaging competent legal representation, businesses can navigate the complexities of court proceedings with confidence. While litigation may signify a more adversarial approach, it can also lead to definitive resolutions that provide clarity and direction in times of financial turmoil.

4 Common Business Insolvency FAQs

What is the difference between company insolvency and personal bankruptcy?

Company insolvency refers to a company that is unable to pay its bills and debts owed, while personal bankruptcy is a legal process for individuals who cannot pay their bills to eliminate debt.

When should a company consider filing for bankruptcy?

A company should consider filing for bankruptcy or bankruptcy protection to restructure when they are facing overwhelming financial difficulties, such as a loss of income, high levels of debt, inadequate cash flow, and reliance on personal credit to meet obligations. This only makes sense if action is taken relatively early in the insolvency when there are still assets that can be used in perhaps a different corporate form to continue to run the viable part of the insolvent business.

How much debt does a business need to owe to file for bankruptcy in Canada?

In Canada, an insolvent person or insolvent business needs to owe $1,000 or more to unsecured creditors to be eligible to file for bankruptcy.

Can sole proprietorships and partnerships file for business bankruptcy?

Yes, sole proprietorships and partnerships can file for business bankruptcy, and they would need to work with a Licensed Insolvency Trustee to do so. In these forms of business, it is the sole proprietor or partners who would be filing bankruptcy. As this would be a consumer insolvency, the bankruptcy rules dealing with the insolvency of individuals would guide this kind of bankruptcy process.

Business Insolvency Conclusion

Navigating business insolvency in Canada is a multifaceted challenge that requires careful consideration and strategic planning. As a licensed insolvency trustee, I have explored the intricacies of insolvency law and its impact on businesses, creditors, shareholders, and employees. Understanding the complexities of insolvency is pivotal for businesses to weather financial storms successfully for a brighter financial future.

The role of corporate lawyers and accountants in helping to guide businesses through insolvency proceedings is an important one. By recognizing the significance of legal responsibilities, financial analysis, and compliance with accounting standards, businesses, with the help of a Licensed Insolvency Trustee and insolvency legal counsel can tackle insolvency issues with confidence and resilience.

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

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

The Ira Smith Team understands these overwhelming debt financial health concerns. More significantly, we know the requirements of the business owner or the individual who has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious. It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore.

The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now! We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt.

On the contrary. We helped turn their companies around through financial restructuring. We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel. Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, to begin your debt-free life, Starting Over, Starting Now.

Tags bankruptcy proceedings, benefit of creditors, business bankruptcy, business insolvency filings, canadian businesses, company debts, consumer insolvency, Corporate Bankruptcy, corporate insolvency, employee wages, financial distress, insolvency of individuals, insolvency options, insolvency process, insolvency professionals, insolvency trustee, insolvency trustees, legal proceedings, secured creditor

Brandon Blog Post

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

Post author By Brandon Smith
Post date August 7, 2023

bankruptcy lawyer

Bankruptcy lawyer: Introduction

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

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

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

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

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

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

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

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

bankruptcy lawyer

Bankruptcy lawyer: Formal insolvency options in Canada

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

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

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

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

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

The formal insolvency options in Canada are described below.

Insolvency and debt relief solutions for individuals –

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

Insolvency and debt relief options for companies –

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

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

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

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

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

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

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

bankruptcy lawyer

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

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

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

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

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

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

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

bankruptcy lawyer

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

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

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

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

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

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

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

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

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

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

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

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

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

Bankruptcy lawyer: Conclusion

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

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

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

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

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

Individuals must take proactive measures to address financial difficulties and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

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

It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now!

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

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

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

Brandon Blog Post

CONSUMER PROPOSAL CALCULATOR: CONSUMER PROPOSAL GREAT SECRETS REVEALED!

Post author By Brandon Smith
Post date November 28, 2022

consumer proposal calculator

Consumer proposal calculator: When should you think about a consumer proposal?

Debt can be a heavy burden, and it seems like there’s no end in sight. If you’re having a hard time making ends meet and debt is taking over your life, you may be asking yourself if a consumer proposal is right for you.

If you’re finding it impossible to pay off your financial debt, a consumer proposal could be a perfect choice for you. As soon as approved by your creditors and also authorized by the court, a consumer proposal is an enforceable deal between you and your creditors. You only need to pay off a part of your financial debt and in return, they write off the balance. This is an excellent method to pay off your debt as well as get your life back on course.

There are 2 main points to keep in mind when thinking of a consumer proposal. First, just an insolvency trustee (Trustee) can carry out a consumer proposal. They will first evaluate your situation and determine if this is the very best choice for you.

Secondly, you need to be able to make the promised payments to the Trustee. If you cannot, then a consumer proposal may not be right for you. There are also several non-insolvency debt relief options for people when looking at their unsecured debt and I describe them below.

Knowing how much you may need to pay in a consumer proposal in order to extinguish all of your unsecured debt is an important part of the decision-making. That is why I created this consumer proposal calculator located down below in this Brandon’s Blog.

Consumer proposal calculator: Option 1 – Pay off your debt on your own

If you have adequate savings and are in a financial situation to pay your financial obligations in a timely manner, excellent. Yet that is not every person’s circumstance. It’s not unusual for individuals to find themselves in a state where they have financial obligations coming due for payment, but, they do not have the cash. If you’re in this situation, you might be unsure about exactly how you can repay the money you owe but do not have.

There are a couple of things you ought to remember if you’re seeking to pay off the financial debt by yourself. First, you need to ensure you have a clear plan for exactly how you’re likely to pay off the money. This means establishing a budget plan and staying with it.

Second, you ought to keep communication open with the individual or company you owe the money. By doing this, they’ll understand what you’re doing to pay back the debt and can provide support if needed.

Finally, it is very important to be patient. Settling a financial debt can take time, however as long as you’re sticking to your strategy and seeing progress, you’ll ultimately get there to financial freedom.

consumer proposal calculator

Consumer proposal calculator: Option 2 – Debt consolidation

Combining your financial obligations, such as the total debt on all your credit cards, into one new debt consolidation loan can aid you to become debt-free faster and get your funds back on the right track. It can help you to repay your financial debts a lot faster and also right-size your finances. Before consolidating your financial debts and making debt consolidation payments, there are a couple of things you need to understand:

Prior to you trying to settle your financial debts through debt consolidation, it’s important to recognize just how debt consolidation loan payments work as well as what type of impact it can have on your credit rating.
See to it that you recognize what you’re getting into. Consolidating your financial debts through new loan funding to settle your existing financial obligations, ensure you recognize the terms of the new financing, including the rate of interest and how much the regular monthly payment will be.
Search for the very best deal available. There are a variety of companies that provide financial debt consolidation funding. Shop around to find the best rates of interest as well as terms.
Combining your debts will lead to a lower single monthly payment. Make sure it fits into your budget.
Making your new loan monthly payments on time will work to improve your credit rating.

Consumer proposal calculator: Option 3 – Credit counselling

If you’re struggling with credit card debt, you’re not alone. It’s one of the most common types of debt in Canada. But there’s help available. Credit counselling can help you get your debts under control and develop a plan for you.

Credit counselling can be a very therapeutic process that assists people to address their debt obstacles as well as enhance their total financial health and wellness. Your best choice is to go for credit counselling offered by a nonprofit credit counselling agency.

Credit counselling commonly involves working with a credit counsellor to develop a spending plan, understand your economic alternatives, and produce a plan to settle your financial debts. More often than not the credit counsellor can get your creditors to agree to allow you to pay off the principal amount of your debt without adding any more interest charges.

Credit counselling can aid you to get out of debt, improve your credit score, and also teach you how to make better financial decisions in the future. If you’re seriously thinking about credit counselling as an option for you, it is very important to pick a reputable firm to deal with in order to produce a personalized plan to address your unique financial situation.

consumer proposal calculator

Consumer proposal calculator: Option 4 – Debt Settlement

If you’re struggling to make your financial debt settlements and are dealing with economic difficulty, financial debt settlement may be a great choice for you. This is where you work out with your creditors to resolve your debt for less than the amount of the individual debt amounts you owe.

There are a couple of points to remember if you’re thinking about financial debt settlement:
Your credit score will take a hit.
Your creditors might send your debt to their lawyer to take legal action against you or they might send your debt to a collection agency to plague you with collection calls as soon as you divulge that you cannot settle them in full.

If you’re looking at this kind of financial debt negotiation, it is very important to evaluate the pros and cons and speak with a professional advisor to see if it’s the right option for you.

WARNING:

A for-profit debt settlement company charges fees, just like any other business. Before any of your money is used to settle your personal debts, you must pay their fees upfront. No fees are charged by the non-profit credit counsellor.

When you cannot pay anymore, the for-profit debt settlement company walks you over to their friendly Trustee for you to file either a consumer proposal or an assignment in bankruptcy.

Please stay away from for-profit debt settlement companies. I do not recommend for-profit debt settlement arrangements or debt settlement programs. These types of debt counsellors are not the debt-help professionals you should go to see.

Consumer proposal calculator: Option 5 – About consumer proposals

If you’re battling with a mountain of debt, do not worry, there is help and it avoids bankruptcy. A consumer proposal is a legal process that is the only federally-approved debt settlement process. A consumer proposal can only be carried out by a Trustee.

If you’re thinking about a consumer proposal, it is very important to understand just how the process works and also what it will indicate for your financial future. I have actually written several of Brandon’s Blogs giving a comprehensive on what consumer proposals are and how they work.

If you’re insolvent and owe $250,000 or less to your creditors (excluding any secured creditor debt like mortgages or lines of credit that are secured by registration against your personal residence), you can qualify for this government-sanctioned debt settlement plan.

This could be a good option for people who are employed and can budget their money to make the required monthly payments under this plan to the Trustee. It helps to avoid personal bankruptcy, and not have to deal with collection calls from agencies anymore. This is the best alternative to bankruptcy.

For more information, check out either one of the following Brandon’s Blogs:

consumer proposal calculator

Consumer Proposal Calculator: What will my monthly payments be in a consumer proposal?

Here is how a debt calculator calculates your total debt and estimates what your monthly payments will be in a consumer proposal debt management plan. Below you will be asked for all your unsecured debts, including any government debt or income tax debts.

Consumer proposal calculator	$

What is the total of your credit card debt?
What is your income tax debt?
What is the total of any online loan?
How much is your other government debt?
Total of other unsecured debt?
What is your payday loan debt?
Total unsecured personal loan debt?

Your total unsecured debt

# of months you wish to take to pay (max 60 months)	60

Monthly payment = (Your total unsecured debt
divided by # of months) X20%

Use this consumer proposal calculator method to compare what a monthly payment would be for you under a consumer proposal as compared to what your monthly debt payments are now. Keep in mind that in a consumer proposal, you are getting rid of all your debt if successfully completed. Right now, you may only be paying the interest charges and not making any dent in the principal reduction.

To figure out your exact monthly payment, give us a call.

Consumer Proposal Calculator: We can help you with a consumer proposal

I hope you enjoyed this consumer proposal calculator on 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.

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

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

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

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

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

Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE FEES: WHAT UNDENIABLE EVIDENCE IS NEEDED FOR COURT APPROVAL OF INSOLVENCY TRUSTEE FEES?

Post author By Brandon Smith
Post date July 4, 2022

Licensed insolvency trustee fees: How is a licensed insolvency trustee paid?

Are your debts or your company’s debts and financial situation causing you so much stress that you are considering speaking to a licensed insolvency trustee (formerly called a bankruptcy trustee or trustees in bankruptcy), but you are worried about the licensed insolvency trustee fees? Are you concerned about the professional fees to be paid because you think that businesses with debt problems already cannot afford to hire professionals? Your concerns are valid and relevant but you should not let that stop you from your initial inquiry. An insolvency trustee will always provide you with a no-cost initial consultation, discuss realistic options and explain the cost of each option to you.

Licensed insolvency trustee fees are set by bankruptcy laws and rules contained in the Bankruptcy and Insolvency Act (Canada) (BIA). They are reviewed by the Office of the Superintendent of Bankruptcy and must be approved by the bankruptcy court. Fees are either drawn from the funds accumulated in the insolvency file from the sale of assets in the receivership or bankruptcy administration or the monthly payment funding of the restructuring proposal. If there are insufficient assets in the insolvency file, then the insolvency trustee gets its fee from a third-party retainer.

In this Brandon’s Blog, I describe how licensed insolvency trustee fees are calculated. Then, I review a recent Ontario court decision to show what kind of evidence the Trustee needs to provide the court in order for its fees to be approved.

Licensed insolvency trustee fees: Disbursements included in a streamlined personal insolvency process

Licensed insolvency trustees offer a range of services for both individuals and businesses. For individuals, there are two streamlined insolvency processes:

summary administration personal bankruptcy; and
consumer proposals.
licensed insolvency trustee fees

Licensed insolvency trustee fees in a summary administration personal bankruptcy

The summary administration personal bankruptcy process applies when the assets of the bankrupt person to be sold are expected to sell for $15,000 or less. Licensed insolvency trustee fees for a summary administration personal bankruptcy are set by a formula called a tariff.

In a summary administration bankruptcy, the fees that insolvency trustees are entitled to are calculated as follows:

100 percent on the first $975 or less of receipts;
35 percent on the portion of the receipts exceeding $975 but not exceeding $2,000;
50% of receipts exceeding $2,000;
for counselling fees of $75 per session, totalling $150; and
an allowance for administrative disbursements of $100.

The reason the formula refers to receipts (of cash) rather than net proceeds from asset sales is that, in any personal bankruptcy, there are two types of cash receipts: 1. from the sale of assets; and 2. surplus income payments made by the bankrupt person, if any.

Licensed insolvency trustee fees: How much will it cost me to file a consumer proposal?

The calculation of the amount you need to offer your creditors in your consumer proposal has no relation to what the licensed insolvency trustee fees will be. Licensed insolvency trustee fees for a licensed trustee acting as the Administrator in the consumer proposal process is also governed by a tariff. It is calculated as follows:

$750 on the filing of the proposal with the official receiver;
$750 on the approval or deemed approval by the court;
20% of moneys distributed payable on distribution; and

counselling fee of $75 for each counselling session for a total of $150.

In a consumer proposal, administrative disbursements are paid out of the above fee calculation.

In both summary administrations and consumer proposals where the licensed insolvency trustee fees are only the tariff, there is no need for court approval.

licensed insolvency trustee fees

What factors influence licensed insolvency trustee fees in other administrations?

There are no streamlined provisions for any corporate insolvency administration. In addition to administering summary administration bankruptcies and consumer proposals, licensed insolvency trustees also can provide the following services:

business review of a company to identify its solvency and future prospects so that financial advice can be given
ordinary administration personal bankruptcy
commercial bankruptcy
personal Division I restructuring proposal to creditors (for consumers who cannot qualify for a consumer proposal)
corporate Division I restructuring proposal
private corporate receivership
court-appointed corporate receivership
winding-up corporate liquidation, either voluntary or court-supervised
corporate restructuring under the Companies’ Creditors Arrangement Act

In all of the above government-regulated insolvency proceedings/insolvency procedures, there are only two factors that influence the licensed insolvency trustee fees. They are:

Hours spent by the level of staff working.
The professional hourly rate of the staff.

Licensed insolvency trustee fees: How does an insolvency practitioner receive compensation?

In all of the non-streamlined insolvency processes, I just described, how the licensed trustee gets the fees it is charging requires approval. In private appointments, the licensed trustee needs the approval of the client. In a court appointment or administration for bankruptcy services or any other mandate under the BIA, the licensed trustee needs court approval.

What evidence do licensed insolvency trustees need to provide to prove the time that was spent doing the work? The documentation expected of a licensed trustee is the same that is expected from an insolvency lawyer or any other kind of lawyer. What is expected are detailed time dockets, so that everyone can see who spent what time, on what day on what activity.

But what if proper dockets are not kept? Well, that is exactly what the court case I want to describe to you is all about.

licensed insolvency trustee fees

Licensed insolvency trustee fees: How do practitioners of insolvency get compensated – it takes a Final Statement of Receipts and Disbursements

I am writing this Brandon’s Blog to be informative, not to embarrass anyone. So I will not be providing the case reference of the case I am now going to describe. This is actually the second such case in Ontario that I am aware of in the last 12 months.

The case deals with a bankruptcy trustee who submitted its final statement of receipts and disbursements (SRD) to the court for approval. Contained in this final statement is amongst other things, the line item for the fee and disbursements the Trustee is seeking court approval for. The court expects to see a sworn affidavit from someone on the insolvency trustee’s staff who has knowledge of the time spent and the fee charged outlining what was done and why it was necessary. The court also expects to see detailed time dockets.

In this case, and the very similar one that came before it, the insolvency trustee’s material did not include detailed time dockets. Both Trustees applied for taxation of their SRD in an individual debtor’s Division I Proposal. In both cases, the Office of the Superintendent of Bankruptcy issued clean letters of comment. The primary issue raised on this taxation is whether the insolvency trustee’s fees are to be approved. In the ordinary course, the debtor and the creditors have not been given notice of the taxation but it would appear that there is unlikely to be any objection.

The taxation raises the question of how the Trustee is supposed to establish its entitlement to fees when there is no time dockets kept or otherwise available to support the trustee’s claim. In this case (and the one before it), the Trustee is relying solely on the terms of the proposal. The proposal contains the methodology for calculating the fees to be taken by the Trustee in administering the proposal. The Trustee is relying on the fact that a Proposal is a contract between the debtor and its creditors, the court has already approved the Proposal and the Proposal includes the Trustee’s remuneration.

Licensed insolvency trustee fees: Bankruptcy trustees – why not keep accurate time records?

The Trustee requested fees (plus HST) based on the formula set out in the debtor’s proposal. While the Trustee provided an affidavit in support of its taxation, the Trustee did not provide any evidence of actual time spent at each staff level. The taxation came before the Associate Justice on September 1, 2021. She adjourned the taxation and requested time dockets.

The Trustee filed a report in response to the September 1, 2021 endorsement and request for time dockets, supporting the taxation and approval of the fees claimed, but no time dockets were included. In its report, the Trustee noted that it did not keep formal, detailed time records, as the terms of the Trustee’s fees and expenses are set forth in the Proposal as a “fixed fee” formula. This fee formula was accepted by creditors and approved by the Court. Therefore, the Trustee is relying upon that in not keeping time dockets.

The Trustee advised that its rationale for the development of a fixed fee formula to be charged by the Trustee, and for its decision to eliminate time docketing in such Division I proposals containing a formula for fixing a fee, were as follows:

The fixed fee formula was designed by the Trustee to provide more certainty about the costs of administration for the Division I proposal. This formula also takes into account contingencies such as the time needed to negotiate the terms of the proposal and to verify the debtor’s financial information.
The fixed fee formula was designed to make billing and accounting more efficient by eliminating the need to track chargeable time.
The fixed fee formula was based on the consumer proposal tariff, to a certain extent.
The fixed fee formula’s structure helped the Trustee keep initial costs low, so creditors could start getting dividends from the debtor’s monthly payments sooner.
The fixed fee formula was designed to minimize unexpected increases in costs of administration and a resulting decrease in dividends.
Not once has a creditor balked at the Trustee’s fixed fee.
The court approved the proposal with the fixed fee formula, so the Trustee did not keep time dockets.
There are many proposals whose administration is underway or completed that the Trustee has relied upon the fixed fee formula, and therefore has not maintained time dockets.
The trustee’s fees, as claimed under the fixed fee formula, have not been objected to by the Office of the Superintendent of Bankruptcy Canada.
licensed insolvency trustee fees

Licensed insolvency trustee fees: The court’s analysis and decision

The BIA provides for the determination of a Trustee’s remuneration in section 39. The Associate Justice said that s. 39(5) of the BIA provides the jurisdiction to increase or reduce the remuneration claimed by a Trustee. Further, the court was not a “rubber stamp” obliged to approve the fees claimed by the Trustee merely because they were in the Proposal. The court noted that it is common for Trustees to request remuneration based on the time spent and hourly rates charged. The burden is on the Trustee to convince the court that the amount claimed for remuneration is warranted.

The Associate Justice listed the following principles that must be considered when it comes to taxation:

Trustees should be given proper compensation for their services.
Prevent unjustifiable payments for Trustee fees that harm the insolvent estate and its unsecured creditors.
The efficient and conscientious administration of an estate for the benefit of creditors and, to the extent that the public is concerned, in the interests of the proper carrying-out of the objectives of the BIA, should be encouraged.

This Associate Justice also dealt with the previous case I mentioned above, which involved the taxation of a statement of receipts and disbursements in a Division I proposal where no time dockets were kept. In that case, she held that the lack of time dockets was not fatal to the approval of fees. She said the court is in a difficult position when there is no corroborative evidence as to the time and effort spent in the administration of the proposal.

So due to the lack of evidence justifying the time spent by the various staff members of the Trustee firm at their normal hourly rates, the Associate Justice was forced to look at the entirety of the Trustee’s administration. She found issues with it and therefore concluded that the Trustee was not entitled to the full fee being requested, based on the formula contained in the Division I Proposal. The Associate Justice determined, with the benefit of hindsight as to how the Division I Proposal turned out, that the debtor could have filed a consumer proposal and the creditors would have then been better off with a higher dividend distribution.

The Associate Justice ruled that, in this case, fees and disbursements will be set on a consumer proposal tariff basis. The proposal fund totalled $31,500. Using the formula for a consumer proposal, the Trustee was therefore entitled to fee and disbursements of $7,620 (plus HST) and not the $9,973.46 fee and $14,252.01 of disbursements (plus HST) formula amount.

The Associate Justice was also very critical of the Trustee’s administration and she had strong words overall for Trustees coming to court without proper evidence of the time spent when requesting approval for fees and disbursements at taxation. Her warning was that she did not accept the Trustee’s submissions that:

The court’s jurisdiction over approving the SRD and the fees to be claimed by the Trustee is replaced by the approval of the creditors and the OSB. Creditor and OSB approval are not determinative when it comes to taxation, but their approval is still relevant.
The appropriateness of the Trustee’s fees is not considered in an application for court approval of a Division I proposal. The court is not prevented from taxing the Trustee’s fee and disbursements upon the taxation of the SRD.
Any benefits to having a set fee remove the court’s jurisdiction to approve the Trustee’s fees. If the Trustee decides to save time by not documenting their hours worked, they do so at their own risk. The responsibility is always on the Trustee to justify their fees.
Creditors who want to know how much the Trustee’s fee will be cannot override the Trustee’s responsibility to explain to the court why the fee is fair and reasonable.

The court directed the Trustee to redo its SRD on the basis decided by the court, resubmit it to the Office of the Superintendent of Bankruptcy for its comment letter and then resubmit the entire package to the court for the taxation order.

A tough day in court to be sure.

Licensed insolvency trustee fees: Call us for debt-free solutions

I hope you found this licensed insolvency trustee fees Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you or your business are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt relief advice in setting up one of various possible debt management plans using debt relief options for you or your company.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective. We are debt professionals who know how to use the new innovative tools to solving debt problems while avoiding a bankruptcy filing.

We’re passionate about permanently solving your financial problems with you and getting you or your company out of debt. We offer innovative services and alternatives, and we’ll work with you to develop a personalized preparation for becoming debt-free which does not include bankruptcy. We are committed to helping everyone obtain the relief they need and are worthy of.

You are under a lot of pressure. We understand how uncomfortable you are. We will assess your entire situation and develop a new, custom approach that is tailored to you and your specific financial and emotional problems. We will take the burden off of your shoulders and clear 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 realize that people and businesses in financial difficulty need a workable solution. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution and improving your financial future, let us know. Starting Over, Starting Now.

Call us now for a no-cost consultation to find out what your debt relief options are.

Brandon Blog Post

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

Post author By Brandon Smith
Post date March 21, 2022

what does a licensed insolvency trustee do

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

These include:

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

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

what does a licensed insolvency trustee do

What does a licensed insolvency trustee do?: Final thoughts

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

I hope you found this what does a licensed insolvency trustee do Brandon’s Blog about helpful. Sometimes things are too far gone and more drastic and immediate triage action is required.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

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

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

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

Call us now for a free consultation.

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