Tag: insolvency

WHAT IS A CONSUMER PROPOSAL? OUR AMAZING EXCELLENT INSOLVENCY FAQ PRIMER

Post author By Brandon Smith
Post date December 23, 2019

what is a consumer proposal

What is a consumer proposal introduction

Let us start with a what is a consumer proposal definition: A consumer proposal is a formal binding offer made to your creditors to settle your debt for less than the full amount owing.

To help you decide if a consumer proposal is the right option for you, I will provide answers to the most frequently asked questions I receive about what is a consumer proposal in Canada.

What is a consumer proposal?

A consumer proposal is a government-regulated debt settlement program filed with a Licensed Insolvency Trustee (Trustee). The purpose of filing one is to get rid of problem debt so that you can start the process of rebuilding your credit debt-free.

It can only be filed with the Trustee. When you sign your documents, they are then filed with the federal government. It is a legal process under the Bankruptcy and Insolvency Act (Canada) (BIA).

This process is a legal agreement between you and your creditors to repay part of the debt that you owe. If a simple majority, in dollars, of creditors agree to the terms you have offered, then your proposal is binding on all your unsecured debts.

What is a consumer proposal? It is a court-sanctioned process that allows you to negotiate a settlement with your unsecured creditors. This kind of arrangement does not deal with secured creditors.

What is a consumer proposal: Is it worth it?

I would say definitely yes. A successful restructuring is binding on all unsecured creditors. It is a legally binding deal between you and your creditors if the offer is accepted. A consumer proposal is the ideal debt repayment plan for individuals who are able to repay a portion of their debts, but not the full amount.

What is a consumer proposal? This consumer proposal process is a way to avoid filing bankruptcy by making a deal with your creditors to repay a portion of what you owe. If you have high or even just regular monthly income, it is a more sensible option to eliminate your debt obligation than to file for bankruptcy. This process results in a legally binding agreement between you and your creditors that allows you to settle your unsecured debts at a much lower rate, interest-free, over an extended period of time.

The Trustee’s motivation in a consumer proposal is to find a common sweet spot. A number is high enough that it is a better alternative for your creditors than your bankruptcy. A number that the creditors will likely accept yet still a number low enough that it is affordable for you to pay each month.

A consumer proposal is often the way of achieving that objective. In fact, the number one advantage is that you get to keep all assets. Such a proposal can last up to a maximum of 5 years. It is a debt relief solution that allows you to significantly reduce your debt and repay a portion without interest while keeping your assets. That is what is a consumer proposal.

What is a consumer proposal? How do you qualify for one?

A consumer proposal is for individuals who are able to make payments to creditors (either monthly or as a lump sum), but need to change the current arrangement of their payments.

You can file one if you are a person who owes $250,000 or less in unsecured debt.

The big difference between bankruptcy and this kind of restructuring plan is the monthly payment. Once the negotiation is complete and the arrangement agreed to, you make a single payment each month while the proposal is running.

The consumer proposal is one of the most frequently used options for getting out of debt in Canada. If you and your Trustee determine that a proposal is better for your financial situation than bankruptcy or any other debt relief option, you and your Trustee will begin to craft a settlement offer. Your offer will be reviewed by your creditors.

A consumer proposal is typically the preferred alternative to bankruptcy, both in terms of financial affordability and credit ratings. Part of deciding whether bankruptcy or a debt settlement is right for you is knowing what kinds of debts can be included and will be discharged when the process is successfully completed.

A consumer proposal does not deal with secured creditors. Filing one can make keeping up with your mortgage or car loan more affordable. This assumes that in your monthly budget, you can afford to keep them. If not, you will have to give them up to be able to get ones that you can afford. This process does NOT affect the mortgage on your principal residence or a secured car loan. That is what is a consumer proposal is not.

A proposal is an agreement made between the Trustee and your creditors. Through a legally-binding document, it requires you to pay off a percentage of your debts and/or extend the time you need to pay off your debts in full. For those who cannot afford to repay their debts, it is the best debt consolidation program available. If you are looking for debt relief, this is a better option.

For most people, a consumer proposal is a more attractive alternative to bankruptcy; however, it is still considered a form of the insolvency process. For Canadians seeking debt relief, it is an option for insolvent debtors that isn’t as severe as filing for bankruptcy. During your initial no-cost consultation, your Trustee will explain all your debt relief options to determine which one is the right solution for you.

The Trustee acting in your consumer proposal acts as the Administrator. Within ten days after filing with the official receiver, the Administrator will prepare a report containing the results of its investigation, the Administrator’s opinion as to whether the consumer proposal is fair and reasonable to the creditors and the debtor, and whether the consumer debtor will be able to perform it.

If the documents have been successfully filed, accepted by your creditors, court-approved, and then paid through completion, a certificate is given indicating the full performance of the proposal to you and the Official Receiver.

What is a consumer proposal? What does it do to your credit?

Getting out of debt with a consumer proposal is often the first step to rebuilding credit. As with any repayment program, including a debt management plan, this process will for a short while lower your credit score. However, most clients see an improvement in their credit scores shortly after completing the program.

For those who don’t want to go through the bankruptcy process, or want to keep more of their assets, the proposal is less invasive. A proposal is combined with mandatory credit counselling. Trustee fees come out of any monies paid to creditors. If you are unable to repay all of the unsecured debt that you owe but have a steady job and income you could find that a proposal is a viable alternative to bankruptcy.

Once your consumer proposal is completed, you are in the next phase of taking control of your finances.

A proposal is a viable alternative if you have significant surplus income or assets you want to keep. A proposal is a legal proceeding under the BIA that provides a stay of proceedings that immediately stops all creditor actions. This includes most wage garnishments and calls from creditors and collection agencies. If you are dealing with creditor calls or being threatened with legal action, this debt settlement process can help you eliminate your debts and stop dealing with those creditors again.

Payments in a consumer proposal are negotiated upfront. The duties required in a proposal are less than those in bankruptcy. A proposal has fewer required duties than bankruptcy. As you can see, it is a viable way to eliminate all your overwhelming unsecured debt and get your life back on track.

A consumer proposal is also something to consider if your debts are higher than $10,000 and your monthly payment under a debt management plan may be too high for you to afford. Your monthly payment on your consumer proposal is remitted to your creditors once all applicable fees have been paid.

A consumer proposal will eliminate income tax owing

For spouses, if your debts are generally common, you can make a joint consumer proposal. If such a joint filing is made, the unsecured debt threshold increases to $500,000.

A consumer proposal is the only method that can be used to negotiate a reduced balance owing to taxes to the Canada Revenue Agency. A consumer proposal is a safe and reliable way to get out of debt but it can also be the cheapest in terms of monthly payments. The consumer proposal will only include taxes owed from tax returns that were filed prior to the proposal date.

Because each personal situation is unique, the benefit of what is a consumer proposal is that it can be tailored specifically to meet your needs. This is the only government-approved debt settlement option for resolving your debts in Canada, besides filing an assignment in bankruptcy. A consumer proposal is an option to negotiate repayment terms with your creditors through the Trustee, for much less than what you owe today.

No matter what stage in this process you may be at (even if you are still considering one), you probably have questions about what to expect after your consumer proposal is finished. A consumer proposal is a little better than a bankruptcy with regard to your credit score. A consumer proposal is an R7 rating and a bit of an improvement in exchange for the effort of repaying a portion of what you owe. A successful consumer proposal will actually help you avoid bankruptcy.

Another advantage of an arrangement like this is that your Trustee is often able to negotiate greater principal and interest reductions than you could on your own. What sets this plan apart from paying the minimum payments to your creditors on your own is the fact that a consumer proposal includes freezing your interest payments and an agreement that your creditors will consider your debts paid in full for less than what you actually owe.

A consumer proposal is a very commonly used way to settle your debts, without declaring bankruptcy, (or filing for full bankruptcy, as it is referred to by many of our clients). The consumer proposal is a very powerful legally binding way to settle your debts, which normally puts an end to garnishments and other legal actions against you, stops collection calls, and allows you to maintain control of your assets.

Is a Consumer Proposal Right for You?

This is an exceptional program for individuals, families, and sole proprietors who are facing financial hardship and need a practical solution to their debt problems. This process has no hidden fees. While a consumer proposal often lasts longer than bankruptcy proceedings, the total cost to you may be less because you retain your assets and there are no surplus payments.

A consumer proposal is a viable option to deal with small business debts in a proprietorship if the total debts do not exceed $250,000. This program does not deal with debts owed by an incorporated business. It is one of the best, and safest, debt consolidation options available.

What is a consumer proposal good for? It is a great way to take advantage of many of the advantages of bankruptcy without the severe drawbacks such as the loss of assets you must endure during the bankruptcy process. All of your assets are protected from a seizure when your consumer proposal is accepted, and the more you can offer your creditors, the greater the likelihood that they will accept your proposal, thereby allowing you to keep all your assets.

Both bankruptcy and consumer proposals are debt relief options allowing those who are in a significant amount of debt to get out from under what they owe. However, the consumer proposal is far less disruptive to their lives.

Deciding to file a consumer proposal is about dealing with your debt, but I understand that you may be concerned about the impact a consumer proposal has on your credit report.

If your financial situation is such that budgeting or refinancing cannot resolve your ongoing financial crisis, a consumer proposal is one of the options under the BIA to resolve your debts. A consumer proposal may be the best way to help you avoid bankruptcy and achieve real relief from your outstanding debts.

Each situation is different. Each program is tailored to fit the budget and circumstances of each person. The payments you make are then divided among your unsecured creditors. As with bankruptcy, one of the immediate pros of entering such a debt settlement program is that it stops wage garnishments.

Even during the time that this debt settlement process is noted on your credit history, it may still be possible to obtain new credit, including renewal of ongoing commitments such as your mortgage, financing the purchase of a new vehicle, or even a credit card. For consumers who worked seasonally or have fluctuating income, a consumer proposal can be structured so that higher payments are made during peak earning times and lower payments are made during low earning times. Individuals who file a consumer proposal must complete two mandatory financial counselling sessions with a qualified insolvency counsellor.

What is a consumer proposal summary

I hope you found this Brandon’s Blog about what is a consumer proposal 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 realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

what is a consumer proposal

Tags Bankruptcy, Bankruptcy and Insolvency Act, BIA, Consumer Proposal, consumer proposal canada, Debt, how do you qualify for consumer proposal, insolvency, Ira Smith Trustee, is a consumer proposal right for you, is consumer proposal worth it, licensed insolvency trustee, offical receiver, Office of the Superintendent of Bankruptcy, trustee, what is a consumer proposal

Brandon Blog Post

WILLS AND ESTATES: SELLING DECEASED ESTATE PROPERTY

Post author By Brandon Smith
Post date December 16, 2019

If you would like to hear the audio version of this wills and estates Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

Earlier this year, I wrote several blogs dealing with the administration of wills and estates. As I previously wrote, Ira Smith and I got very interested in this area. The reason was that we saw that the skill set required and the activities undertaken by an executor of a deceased estate, were quite similar. In Ontario, the executor of a deceased estate is called an estate trustee.

My series of blogs on the administration of a deceased estate in Ontario, in no particular order, were:

The purpose of this Brandon’s Blog is to review a very interesting recent Court of Appeal for Ontario decision appealing a lower Court’s ruling in an estate matter. The appeal was launched by the Estate Trustee who felt the lower court judge erred in approving a sale of an estate asset for a lower price than the Estate Trustee thought was proper. The Court of Appeal for Ontario upheld the lower court’s decision.

This could very well happen to a receiver or trustee in an insolvency file. Again, another similarity between the role we take on in an insolvency file administration and the role Smith Estate Trustee Ontario takes on as Estate Trustee in the administration of a deceased estate.

Wills and estates definition

First some basics. An estate is the property that an individual owns or has a lawful controlling interest in. The term is usually made use of to define the assets and liabilities left by a person after death. A will is a document that states your final wishes. It is a document that becomes operative after your death. It will appoint one or more people to act as an estate trustee. It will also provide for how you want your assets to be divided up amongst your beneficiary or beneficiaries.

On December 6, 2019, the Court of Appeal for Ontario released its decision in the legal case Loran v. Weissmann, 2019 ONCA 962 (CanLII). As I mentioned, the Estate Trustee appealed the lower court’s decision released in January 2019. The issue was one that could easily come up in other wills and estates. Since the issue being appealed was the lower court’s decision on a sales price for an asset, this issue also can arise in insolvency files. Just a different context.

Wills and estates Ontario: What was the issue?

This appeal by the estate trustee occurred out of a disagreement regarding a provision in the will concerning the sale of the business owned by the deceased. Unfortunately, this happens all too frequently. The provision in dispute was regarding the sales price of the business.

The will stated that the respondent, a long-time employee of the business, could purchase the business. The purchase price stated in the will was “…the lesser of $1.75 million or “the price determined by multiplying the earnings of…(averaged over the last three fiscal periods) by a factor of 5.5”.

The will also stated that the price paid by the respondent will be provided by way of a promissory note, with interest payable at 5% per year. There will be an annual repayment to the estate of not less than $180,000, to be made in month-to-month payments. The promissory note was to be secured by a general security agreement against the assets of the business and by the registration of a mortgage against the respondent’s house.

So far it sounds pretty simple, or so you would think.

They couldn’t reach a deal

The long-time employee tried to purchase the business, but the estate trustee and the employee could not agree on the purchase price. That is how they ended up in court.

The lower court judge hearing the evidence ruled that the sales price will be $529,611. He calculated this as $716,921, using the formula in the will, minus $187,310. This latter amount was an amount the Judge ruled was improperly paid by the company to the estate. The Judge also ruled that the employee was not required to provide the collateral mortgage. The estate trustee felt that this went against the will.

The appeal by the estate trustee

The appellant submitted that the application judge made the following mistakes:

he treated the respondent as a beneficiary as opposed to a favoured buyer;
he ignored the need of a collateral mortgage;
he approved the respondent’s evidence about the amount to be attributed to the deceased owner’s wages for the purposes of computing the earnings of the company; as well as
he incorrectly subtracted from the sales price the $187,310 paid out of the company to the estate.

The Court of Appeal for Ontario did not agree with any of these grounds for appeal.

The reasons were given by the Court of Appeal for Ontario

Beneficiary vs favoured buyer – The appellate court did not find any error in the lower court ruling on this. The Court of Appeal for Ontario noted that the will did not try to maximize the value of the business. It did not state that the estate trustee had to run a marketing effort to obtain the best price under the circumstances.

You would expect this to be the case in any sale by either an estate trustee or a receiver or licensed insolvency trustee. The appeal court noted this absence of intention. Rather, they agreed with the lower court that the intention was for the long-time employee to buy the business under the formula in the will.

Collateral mortgage – The evidence before the lower court was that at the time the will was written, the long-time employee did not own a home. The will also did not have any language about what minimum amount of equity the long term employee’s home had to have to provide for the collateral mortgage security. There was no argument that the lower court judge had the right to apply commercially reasonable terms. So, since the will was so unclear on what wording and real value the collateral mortgage security had to have, the lower court judge ruled that it would be meaningless and was unnecessary in the circumstances. The Court of Appeal for Ontario agreed again with the lower court judge.

The owner’s salary adds back to normalize earnings – The evidence was that at trial, both the appellant and respondent provided expert witness reports on this issue. The lower court judge preferred the respondent’s expert evidence. The appellant took issue with this. The Court of Appeal found that the lower court judge had the right to rely on one or the other of the expert’s reports and made a judgment call. There was nothing in that decision to be overturned.

Payment of $187,310 – The appellant’s position was that this payment would one day be rectified by the company recording this payment as a dividend. The appellant stated that the company had the right to pay dividends, which it had in the past. The lower court judge agreed that, as long as the payment of dividends did not render the company insolvent, it could do so.

The lower court judge also found that in the past the company had paid a dividend. However, it did not characterize this payment as a dividend, but rather, just payment to the estate. The lower court judge ruled that the purchaser should get the benefit of those funds having been stripped out of the company by a reduction in the purchase price of that same amount.

It turned out that the estate trustee caused the company to make that payment to the estate so that the estate could then pay out those funds to support the deceased’s widow. The company did not record that payment as a dividend or as salary to the widow. The lower court drew a distinction between dividends and gratuitous payments from the company’s bank account. The appeal court found that decision was within his discretion and there is no basis to interfere with the lower court judge’s finding.

So, the appeal court dismissed the appeal entirely and ordered that the appellant pay the respondent’s costs fixed in the amount of $10,000.

Summary

As I stated at the beginning, there are a lot of similarities between acting as an estate trustee and administering an insolvency file. Disputes normally arise in insolvency files. As this case shows, disputes also arise regularly in the administration of a deceased estate.

As a result of the similarities, we started this year Smith Estate Trustee Ontario. We currently have several estate trustee administrations underway. Our mix of empathy, experience and impartiality provides us with a distinct viewpoint. We have the capability to appropriately administer a deceased estate. Through our efforts, we minimize problems and accomplish outcomes for all stakeholders in an economical way.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation. Get our no cost full-scale analysis of your issues and our recommended options to solve your problems allowing you to move forward confidently. Check out our website by clicking HERE.

Tags beneficiary, Court of Appeal for Ontario, deceased estate, estate trustee, executor, insolvency, Ira Smith Trustee, licensed insolvency trustee, receiver, selling deceased estate property, smith estate trustee ontario, will, wills and estates, wills and estates definition, wills and estates ontario

Brandon Blog Post

INSOLVENCY LAW CANADA AMENDMENTS FOR INTELLECTUAL PROPERTY RIGHTS

Post author By Brandon Smith
Post date November 6, 2019

Insolvency Canada news

The Federal government published in the Canada Gazette, Part II, Volume 153, Number 18, its intention to amend Canadian insolvency law for intellectual property rights (IP). On November 1, 2019, those changes came into effect. This change was part of the Canadian 2019 Budget. In Brandon’s Blog, I will discuss what the changes are and why they were made.

Insolvency law amendments for IP in Canada

Amendments relating to how IP is treated under Canadian insolvency law were made to the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) and the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA) was made. The BIA controls liquidations and restructurings for people and companies, and the CCAA covers large company restructurings.

The changes are meant to shield IP user rights in cases where the IP licensor becomes insolvent.

The BIA, as well as CCAA changes in the Budget Implementation Act, 2019, No. 1, are intended to improve retired life protection by making the insolvency procedure fairer and much more clear.

Previous Canadian IP insolvency law

Previously, Canadian insolvency law only explicitly dealt with IP in restructuring proceedings. Both the BIA and the CCAA allows for a debtor to disclaim or resiliate agreements. There are certain conditions that the debtor business must meet. This essentially boils down to being able to prove that the agreement in question is either so onerous and/or costly to the debtor business, that a successful restructuring is impossible if the debtor must continue honouring that agreement.

Specifically, as it relates to IP, the BIA, and CCAA if a debtor who is a licensor under an IP agreement disclaims the agreement, the licensee has rights. The licensee can continue to use the IP and gain all benefits it had bargained for, as long as the licensee continues to perform its responsibilities under the IP agreement concerning the use of that IP.

There was no such equivalent section for the receivership or bankruptcy of the debtor. So, if there was a liquidation, the licensee was not protected the same way they would be if the licensor debtor business disclaimed the agreement in financial restructuring.

Insolvency law reform

The amendments in Budget Implementation Act, 2018, No. 2 were done to protect copyright (IP) individual rights in situations where the IP licensor comes to be insolvent.

Effective for all filings beginning on November 1, 2019, or later, there are changes to the BIA and the CCAA, Canada’s main insolvency statutes. The November 1 amendments are done so that the rights of a licensee under an IP agreement where the licensor has disclaimed the agreement will be the same in a financial restructuring or a liquidation through either receivership or bankruptcy.

The following modifications accomplish the goal of safeguarding IP customer’s rights in instances where the IP licensor ends up being insolvent:

Many times as part of a corporate restructuring, the Court authorizes the company that filed a Notice of Intention To Make a Proposal, or a Proposal, to sell assets. The new amendments now make it so that if the corporation being restructured is the licensor under an IP agreement and sells it, the licensee retains its rights to use the IP, as long as they are and stay current under the agreement.
If a bankruptcy trustee (now called a licensed insolvency trustee) (Trustee) administering the bankruptcy (or receivership) of a licensor under an IP agreement sells the agreement, the licensee retains its rights under that agreement. Again, the licensee must be current in its obligations to continue enjoying the benefit of the IP agreement.
The Trustee disclaims the debtor licensor’s interest in an IP agreement as part of a bankruptcy (or receivership) administration. The licensee will continue to enjoy the rights and benefits of the IP agreement as long as it is current in all of its responsibilities under that same agreement.
If that IP is sold in a CCAA restructuring, the CCAA legislation has now been amended, for administrations that began after October 31, 2019, offers that an IP licensee in excellent standing can continue to utilize the IP.

Proposed BIA wording for IP insolvency proceedings

These are new amendments. There have not been any court decisions on these new amendments yet. The new legislation is not available yet as far as I know. However, my understanding is that the BIA will be amended, in part, to implement the changes concerning IP agreements as I have discussed, along the following lines:

“Intellectual property — sale or disposition

246.1 (1) If the insolvent person or the bankrupt is a party to an agreement that grants to another party a right to use intellectual property that is included in a sale or disposition by the receiver, that sale or disposition does not affect that other party’s right to use the intellectual property — including the other party’s right to enforce an exclusive use — during the term of the agreement, including any period for which the other party extends the agreement as of right, as long as the other party continues to perform its obligations under the agreement in relation to the use of the intellectual property.

Intellectual property — disclaimer or resiliation

(2) If the insolvent person or the bankrupt is a party to an agreement that grants to another party a right to use intellectual property, the disclaimer or resiliation of that agreement by the receiver does not affect that other party’s right to use the intellectual property — including the other party’s right to enforce an exclusive use — during the term of the agreement, including any period for which the other party extends the agreement as of right, as long as the other party continues to perform its obligations under the agreement in relation to the use of the intellectual property.”

Summary

I hope you enjoyed this Brandon’s Blog on the insolvency amendments effective November 1, 2019. Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex corporate restructuring. However, more importantly, we understand the needs of the entrepreneur. You are worried because your company is facing significant financial challenges. Your business provides income not only for your family. Many other families rely on you and your company for their well-being.

The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your company’s problems; financial and emotional. The way we deal with this problem and devise a corporate restructuring plan, we know that we can help you and your company too.

We know that companies 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 company restructuring process as unique as the financial problems and pain it is facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, CCAA, Companies’ Creditors Arrangement Act, corporate restructuring, financial restructuring, insolvency, insolvency law, insolvency law canada amendments, insolvency law reform, intellectual property rights, Ira Smith Trustee, licensed insolvency trustee, notice of intention to make a proposal, proposal, receivership, trustee

Brandon Blog Post

CANADA INSOLVENCY CHANGES: FEDS PRESS RELEASE OFFERS FEW DETAILS

Post author By Brandon Smith
Post date September 9, 2019

If you would like to listen to the audio version of this Canada insolvency Brandon’s Blog, scroll to the bottom and click on the podcast

Introduction

On September 4, 2019, the Government of Canada department of Innovation, Science and Economic Development, issued a press release. They announced that there would be changes coming to the Canada insolvency legislation.

I have previously written about the fallout from the Sears Canada insolvency. Specifically, about the plight of retired employees seeing their medical benefits eliminated and their pension entitlement slashed. After that, there have been several private member bills trying to fix the Canada insolvency laws.

Budget 2019

As I have written in previous Brandon’s Blogs, the concern is for retired people (and present employees) when a company enters into an insolvency proceeding. Like in the Sears case, the worry is associated with the staff member’s health benefits plan which could be gutted for retirees. An equally important concern, are underfunded pension plans when a firm enters into bankruptcy protection.

Insolvent employers have placed a moratorium on reimbursements to workers and especially retirees on valid medical claims. Also, the staff member pension plan payments can be cut for retirees because the insolvent firm has not made the called for contributions. The retirees are in the weakest position as they can never make up for what they are now losing.

Pension payments are postponed income. In an insolvency filing, there is generally absolutely nothing left for current (other than perhaps their WEPPA claim in bankruptcy or receivership) and retired employees.

The reality is that all politicians currently acknowledge simply exactly how unsecure pension plans and health plans may be in the case of insolvency, restructuring or bankruptcy.

The Liberals acknowledge that this is a significant issue. Nonetheless, in this budget, they chose to ignore the problem.

What the press release said

The Government of Canada said that it is dedicated to far better safeguarding the rights of pensioners, employees and others during insolvency procedures. They say they can guarantee all Canadians can have satisfaction when it pertains to retirement. They say they can do this while maintaining laws that continue to support growth, advancement and also great jobs in Canada.

The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development Canada said, that beginning November 1, 2019, reforms to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) announced in Budget 2019 will be enacted. He said that this will be done to enhance retired life security by making the insolvency procedure fairer, much more clear and also easily accessible.

So what is being planned?

The press release was consistent with the wording in Budget 2019. The press release went on to say that the BIA and CCAA modifications pertaining to boosting retirement protection will:

call for participants in an insolvency process to act in good faith (isn’t that already enshrined in our legislation and enforced by our Courts?);
offer the possibility of court-ordered disclosure of a creditor’s real financial interest in an insolvent business (how does this help retirees?);
enforce director obligations in suitable cases for senior management compensation settlements in the lead-up to an insolvency proceeding (whatever appropriate means);
limit the choices that can be taken initially in a CCAA administration to measures necessary to avoid the immediate liquidation of an insolvent company, thus boosting participation of all players (does this mean the government plans to outlaw a liquidating CCAA?);
exclude assets held in registered disability savings plans from creditors’ claims in bankruptcy;
reforms to the BIA and CCAA to guarantee the safeguarding of intellectual property user rights in insolvency, announced in Budget 2018, will also be enacted for November 1.

The devil is in the details

The Minister stated:

“It is unacceptable that some pensioners face hardship because of their employer’s insolvency and underfunded pension plans. Our government believes that after a lifetime of hard work, Canadians deserve a secure and dignified retirement. With these reforms, we are protecting Canadians’ retirement security and the ability of businesses to invest, grow and create more good jobs.”

This sounds great, but what does it mean? I don’t see anything in Budget 2019 or this recent press release that actually provides specifics on how retirees will be helped. There are no words talking about the super-priority of the amount of underfunding of pension plans. There is also no language on directors’ liability for such underfunding when the company continues to pay dividends to shareholders or bonuses to executives while the pension plan is underfunded.

We will have to wait to see how the proposed legislation actually reads. The other issue is our upcoming Federal election. Insolvency legislation is not a hot topic that gets votes. Perhaps real protection for retirees does. The government had a chance to really lay out how they will protect retirees, but they failed to do so. They talk about many issues in the press release. However, I don’t see anything directly related to retiree protection.

So I hope that the current federal government will follow through with legislation that has real teeth to protect retirees. But the 2019 Canadian federal election is scheduled to happen on or before October 21, 2019. That means that campaigning will have to begin very soon. So when will there be time to introduce the required legislation to be effective on November 1?

The federal government must have a plan otherwise they would not have put out the November 1 date in the press release. So let us wait and see and cross our fingers that retiree protection will be for real.

Canada insolvency summary

Are you nearing retirement with too much debt? Is your employer’s employee pension plan underfunded? Are you worried about how you will make ends meet in retirement?

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Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy protection, BIA, canada insolvency, CCAA, Companies’ Creditors Arrangement Act, insolvency, insolvency legislation, Ira Smith Trustee, pension plans, receivership, restructuring, retirees, sears, WEPPA

Brandon Blog Post

FINANCIAL LITERACY: FINANCIAL LITERACY FOR HIGH SCHOOL STUDENTS IN ONTARIO

Post author By Brandon Smith
Post date August 26, 2019

If you would prefer to listen to the audio version of this financial literacy Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

When I was in high school, I was very fortunate. I thankfully took two accounting courses, in addition to the normal reading, writing and arithmetic. It was in accounting, that I received some financial literacy education. Anyone who did not take accounting did not get any exposure to basic financial education.

When Ontario grade 10 students go back to school next week, their course curriculum is now amended so that a financial literacy course is mandatory. The purpose of this Brandon’s Blog is to discuss why financial literacy is important and what the new course will offer these students.

What is financial literacy and why is it important?

Financial literacy is the education, learning and understanding of different financial subjects related to handling personal money, budgeting and investing. This topic focuses on the capability to manage individual finance matters in a reliable way.

With such education, people gain an understanding of making suitable decisions about their personal money. Without a basic financial understanding, how can people develop their financial skills? Where will you learn about things such as investing, insurance, budgeting, saving, retired life and income tax concepts?

Why is financial literacy important for students?

The typical high school curriculum of education and learning is extremely important. People generally do not get specialist education until they are in a career program. To become a medical professional, an auto mechanic or a web developer requires specialist education for career success. The one area of education that is generally missing to equip our youth to be able to make smart economic decisions in their lives is proper financial education.

Our society values money and entrepreneurship, yet for some reason, our institutions appear to assume you will somehow just know or pick up the proper financial skills to succeed. Perhaps if there was a mandatory financial education system in place we would see the gap between the rich and poor lessen. Teaching basic financial concepts and skills can go a long way to make sure that people can learn good financial habits and keep their heads above water.

How do you get financial literacy?

The Ontario curriculum for Grade 10 career studies for the first time this school year will include a section on financial literacy. The provincial government believes that it is important for students to understand budgeting and financial management. I applaud this effort.

The education system’s overall expectation is that students will get an understanding of responsible monitoring of financial resources and of services readily available to support their financial proficiency as they prepare for post-secondary life. This is an excellent thing.

I remember my first day at university. Day one all the banks have tables to entice students to sign up for a new credit card. Young adults who have student loans and have never been exposed to financial management courses will now have the ability to take on more debt. Not a good thing.

The specific expectations are that students will:

Learn the principles of financial responsibility
Evaluate the advantages of a variety of financial savings options
Explore financial planning tools available with banks and other sources

What are the three main components of financial literacy?

The three main components that the new financial literacy piece to career studies program will cover are:

Financial responsibility
- setup and follow a budget
- sensibly handling bill payments and using credit wisely understanding the difference between
- knowing the difference between a bank and a credit union
- managing their very own bank accounts
- defending themselves against monetary scams and fraud

Financial savings choices
- types of interest-bearing accounts and their associated rate of interest
- tax-free savings accounts (TFSAs)
- registered retirement savings plans (RRSPs)

Different kinds of borrowing and their advantages and disadvantages
- federal government student loans
- provincial government student financings, such as those available with the Ontario Student Assistance Program (OSAP)
- loans or bursaries from their local cities and towns
- personal (unsecured) loans from a financial institution, be it a chartered bank or a credit union
- lines of credit, credit card and overdraft products
- recognizing the benefits and disadvantages of the numerous kinds of credit products
- how the responsible use of a credit card can boost an individual’s credit score ranking
- how improper use of the same credit card can hamper a person’s credit score ranking
- that the proper use of bank loans can allow a person to pay for a costly item, such as a car or home
- how the improper use of loans and excessive debt can lead to a poor credit rating, money troubles and even insolvency and bankruptcy
- How borrowing from family or close friends can be advantageous, but how defaulting on repayment can negatively impact personal relationships

The teacher’s role

The teacher’s role will be to provide illustrations to drive home these points. In the context of spending and personal finance, the students will learn the difference between “needs” and “wants”. Teachers will ask the students to reflect on exactly how a person’s values will influence their wants or the ways in which they satisfy their needs. Students will learn what “living within your means” really means.

The teacher will lead a discussion on exactly how a person can do this successfully. Students will consider what the impact on a person will be from not paying expenses promptly and from using numerous credit cards.

Students will learn the benefits of beginning to save at a young age. They will be exposed to the advantages of then having a formal financial savings plan. All this will naturally lead to a realization that budgeting for both short-term objectives, such as purchasing clothes, differs from budgeting for long-term goals, such as buying and maintaining a car. Students will also learn about the different types of savings vehicles as well as debt products. They will also learn the proper use of debt.

In my view, the students will learn about the three most important parts of any financial literacy program: 1. proper budgeting techniques; 2. the importance of saving from an early age and the various savings vehicles available; and 3. debt and how to use it properly.

Summary

Hopefully, by exposing grade 10 students to these concepts, they will be motivated to keep learning and using proper financial management techniques. My hope is that more students will come out of high school and begin their post-secondary career, whatever that may be, by having better financial management skills and therefore fewer people will be able to stay clear of insolvency.

Prior to the new mandatory curriculum, the first exposure many people had to financial literacy education was as part of insolvency counselling, which means they already made mistakes before having a chance to learn the basics.

Are you on the edge of insolvency? Are bill collectors hounding you? Are you ducking all your phone calls to the point where your voicemail box is always full?

If so, you need to call me today. As a licensed insolvency trustee (formerly called a trustee in bankruptcy) we are the only professionals licensed, recognized as well as supervised by the federal government to give insolvency assistance. We are also the only authorized party in Canada to apply remedies under the Bankruptcy and Insolvency Act (Canada). I can definitely help you to choose what is best for you to free you from your financial debt issues.

Call the Ira Smith Team today so we can get free you from the stress, anxiety, and discomfort that your cash issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, budget, budgeting, credit card, credit score, financial literacy, financial literacy course, financial literacy for high school students, financial literacy for students, how do you get financial literacy, insolvency, Ira Smith Trustee, licensed insolvency trustee, trustee in bankruptcy, what are the three main components of financial literacy?, what is financial literacy and why is it important, why is financial literacy important for students

Brandon Blog Post

FILING BANKRUPTCY IN CANADA: RETAILER BANKRUPTCIES AND CO-TENANCY

Post author By Brandon Smith
Post date July 15, 2019

If you would prefer to listen to an audio version of this filing bankruptcy in Canada Brandon’s Blog, please scroll to the bottom and click on the podcast.

Introduction

I read one article and one legal case over this past weekend that gave me the idea for this Brandon’s Blog about filing bankruptcy in Canada. The article was about the large US jewelry and accessories retailer Charming Charlie’s filing Chapter 11 bankruptcy for the second time in just over a year. In its 2018 filing, the retailer shed almost half of its 400 stores in a restructuring. Unfortunately, that was not good enough to save them. They have now filed again and announced they are closing their remaining stores.

The case I read is Old Navy (Canada) Inc. v. The Eglinton Town Centre Inc., 2019 ONSC 3740 (CanLII). This decision of the Ontario Superior Court of Justice was released on June 21, 2019. This case involves a retail tenant’s right to put into play rights it has as a result of a co-tenancy requirement under its commercial lease.

What Is Co-Tenancy Provision?

Simply put, a co-tenancy clause in retail lease agreements permits retail tenants to reduce their lease payments if key renters or a specific variety of lessees leave the retail premises. The idea being that certain tenants are major draws to a shopping centre and produce traffic for themselves and the other tenants. Those types of tenants are called anchor tenants.

A retail tenant agrees with the landlord to specific lease terms, especially the amount of rent to be paid. The commercial tenant agrees to those terms expecting a certain level of traffic in the mall or shopping centre. If anchor tenants leave, a co-tenancy provision allows a tenant to decide if it wishes to remain or not. If it decides to stay, then the lower amount of rent to be paid when a co-tenancy provision comes into play is meant to compensate the tenant for the lower traffic volume.

The Players

Old Navy is a famous retailer of clothes. It runs stores throughout Canada, the United States, and worldwide. Old Navy is a subsidiary of Gap Inc. (GAP), which is headquartered in San Francisco, California. Old Navy’s operations and stores are owned and operated by GAP.

GAP is the biggest specialty retailer in the USA. It has roughly 3,700 locations globally, consisting of 240 shops in malls and strip/power centres throughout Canada. GAP also owns the Banana Republic brand. Of the three, Banana Republic is taken to be on the top end of the GAP household of brand names, while Old Navy is the reduced level, affordable or budget brand name.

The landlord, The Eglinton Town Centre Inc., is owned and run by Lebovic Enterprises, a major Canadian property developer with its head office in Toronto, Ontario. Among others, it owns and runs the “Power Centre”, situated at Eglinton Opportunity East (the Centre).

The Old Navy Canada Lease

The Old Navy Canada lease, of course, had many terms in it. It included a co-tenancy provision. The clause named the key retailers (Key Shops) and their square footage. The Key Shops are the following retailers with the flooring area indicated:

Key Shops	Square footage
Cineplex	68,000 sf
Roots	6,545 sf
Globo Shoes	12,084 sf
Danier Leather	6,548 sf

Although the co-tenancy clause had various alternative remedies in it, all of them are not essential for you to know for the purpose of this Brandon’s Blog.

It is important for us to know that the co-tenancy section consisted of three main parts: (i) the number of Key Shops; (ii) a gross leasable area test; and (iii) a requirement for the landlord to advise the tenant in writing when a co-tenancy failure has actually happened.

Simply put, if the co-tenancy provision kicked in Old Navy Canada had the option to either:

Shut down its store and leave on proper notice to the landlord; or
Remain and pay a lesser “Alternate Rent” for the period that the co-tenancy issue remained unresolved.

The Danier Leather bankruptcy

Danier Leather (Danier) was a prominent Canadian seller of leather clothing and related leather items. The landlord entered into a lease with Danier for a preliminary 10-year term from June 10, 1999, to June 9, 2009. Danier’s lease was renewed in 2009 and Danier continued to be a renter of the Centre up until 2016. Danier’s premises of 6,548 square feet of space was out of a total of 285,425.37 square feet of gross leasable area in the Centre. Danier’s retail outlet represented just 2.3% of the gross leasable area.

Danier was a public company. Its shares were traded on the Toronto Stock Exchange. Nonetheless, public filings showed that Danier had been battling financial issues since 2014. Decreased earnings and yearly losses were unfortunately now its norm.

The negative operating results were thought to have been attributable to a change in the preferences of the buying public. There was a sentiment among some people to stop wearing leather items and apparel. On February 4, 2016, Danier submitted a Notice of Intention to File a Proposal (NOI) under the Bankruptcy and Insolvency Act, R.S.C., 1985 c. B-3.

Certainly, Danier’s insolvency was major news in the retail market. It was publicly reported in the nationwide media. At the time of the NOI filing, Danier operated 84 stores throughout Canada. Every one of the shops was leased. Ultimately, nonetheless, Danier determined not to submit a proposal and instead made an assignment in bankruptcy. A receiver was also appointed over Danier to liquidate the shops. Danier continued running until July 2016.

Definitely, every one of the occupants at the Centre, including the local staff of the Old Navy shop, would have recognized that Danier was conducting a going out of business inventory sale. It was unclear if anyone from Old Navy Canada told this to its senior management at the GAP.

Throughout the duration of the closing of the Danier outlet, the various other retailers at the Centre were growing. The Centre’s construction had long been completed and was well over 90% rented at the time of Danier’s insolvency. Cineplex was drawing audiences daily. The remaining stores in the portion of the Centre in which the Old Navy shop was located, across the parking area from the Danier outlet, were all operating. There was no proof they were not operating well and profitably.

The Dispute

The landlord believed that the closure of Danier had no material impact whatsoever on traffic at the Centre or on Old Navy’s sales. Given its interpretation of the co-tenancy requirements, the landlord ruled out that a co-tenancy failing had actually occurred. Therefore it did not provide any notice to the Old Navy care of GAP.

By September 15, 2016, GAP asserted they had ultimately found out about Danier’s filing bankruptcy in Canada. Thus, Old Navy issued a Notice of Co-Tenancy Failure to the Landlord and took the view that:

Danier’s bankruptcy constituted a “co-tenancy failure” under the lease;
that the landlord had breached the lease by not advising Old Navy of Danier’s bankruptcy; and
that Old Navy was, as a result, exercising its “right” under the lease to pay the lesser rent to the landlord, retroactive to May 1, 2016.

The landlord argued that the Centre was in co-tenancy failure as a result of the closure of Danier and stated that if the current lease was not paid, the landlord would declare Old Navy Canada to be in default under the terms of the lease.

Various communications took place between lawyers for the landlord and Old Navy Canada. The landlord also kept them up to date on discussions it was having with various potential retailers that would be interested in either the Danier space or larger premises. One such retailer was a global party supply store chain. Another, that ultimately entered into a lease and began operating in the Centre, was a retailer of pets and pet products.

Old Navy Canada, through its parent the GAP, took the position that only a retailer of upscale clothing like Danier was, would be a suitable replacement. It also stated that it had a corporate policy not to be located in shopping centres that had a pet retailer as a tenant.

It turns out that assertion was untrue. The landlord produced evidence that there is a power centre in the west end of Toronto where the opposite is true. That centre was the Stock Yards Village, where the anchor was Target Canada until it failed several years ago. There is an Old Navy store operating in that shopping centre along with a PetSmart retail outlet. This contradicted Old Navy Canada’s and the GAP’s position on suitable co-tenants.

The landlord and Old Navy Canada continued to agree to disagree. Old Navy Canada continued to pay the normal rent but under protest. Ultimately, Old Navy Canada launched the litigation against the landlord looking for reimbursement of rent that it asserts to have actually overpaid to the Landlord.

The Court’s decision

The Court went through a complex analysis of legal precedents that are beyond the scope of this Brandon’s Blog. After careful consideration of the lease, the issues involved and precedent case law, the Judge decided:

Old Navy’s interpretation of the provisions of the lease for the co-tenancy requirements is rejected.
He accepted the landlord’s interpretation of the relevant terms as being the most objective.
GAP/Old Navy’s evidence which was speculative.
It was not sensible for GAP/Old Navy to anticipate to be able to occupy the facilities for the rest of its lease term without paying proper rent, merely because of a technical issue that had no noticeable effect on its operations.
The landlord acted throughout in a commercially reasonable way.

Summary

What this case shows is that the bankruptcy of a retailer may very well invoke co-tenancy rights. However, it is not the bankruptcy that is the determining factor. Rather, it is the terms of the co-tenancy clause and its formulas contained in the clause that we have to look to. As seen in this example, the breach was not just because one of the Key Shops no longer operated. The terms of the Old Navy Canada Lease also forced a gross leasable area calculation to be performed. If the gross leasable area test was not met, then there was no breach.

Is your company experiencing financial problems? Are you on the brink of insolvency just like Danier was? Don’t wait until it is too late to properly restructure your company’s financial affairs. You don’t have to be another one filing bankruptcy in Canada.

As a Trustee, we are the only professionals licensed, authorized and supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy Act Canada. We will help you to select what is best for you to free you from your debt issues.

Call the Ira Smith Team today so we can eliminate the anxiousness, tension, discomfort and pain from your life that your cash problems have caused. With the unique roadmap, we develop just for you, we will promptly return you right into a healthy and balanced problem-free life.

Tags anchor tenant, Bankruptcy, Bankruptcy and Insolvency Act, chapter 11, charming charlie's, co-tenancy provision, danier leather, filing bankruptcy in canada, insolvency, insolvent, Ira Smith Trustee, Office of the Superintendent of Bankruptcy, retail, Target Canada, trustee

Brandon Blog Post

BANKRUPTCY CANADA NEW EVENTS (2019)

Post author By Brandon Smith
Post date May 8, 2019

Introduction

There has been two recent bankruptcy Canada new events that I believe are important to discuss. I believe you will hear more about it over the next few months. The two are unrelated.

One deals with the insolvency of oil and gas companies. The other with the rights of retired people and their company pensions and health benefits when their former employer goes into insolvency proceedings.

Bankruptcy Canada – The Redwater decision fallout

I have previously written about the Supreme Court of Canada decision in the Redwater Energy Corporation matter. On January 31, 2019, the top Federal Court released its decision in the case of Orphan Well Association v. Grant Thornton Ltd. The Supreme Court reversed 2 Alberta lower Court decisions. It is now the law of the land that, prior to lenders or creditors getting any type of repayment, the receiver or trustee will need to invest the funds from the sale of assets on the environmental remediation costs on all orphaned wells, that provincial legislation may need.

The decision made it clear that the receiver or trustee does not need to spend cash it does not have from the sale of assets or other recoveries. However, whatever amount it recoups from the sale of assets, on a net basis, will initially need to go to provincially mandated clean-up costs of the financially troubled company’s wells. This is before secured or unsecured creditors see a penny.

Trident Exploration Corp.

Now for the fallout. Natural gas producer Trident Exploration Corp. (Trident) ceased operations on April 30, 2019. On May 3 on application to the Court by the Alberta Energy Regulator’s Orphan Well Association, Trident was placed in receivership.

Its staff and contractors have been terminated and its 3,600+ wells are being transitioned to the Alberta regulator.

The company claimed it had functioned openly and collaboratively with its lenders and the regulator since February. It further reported that it was unable to see that a successful restructuring could be accomplished in a timely fashion. Therefore, Trident’s lender stopped supporting the business. Due to this, Trident does not have the funds to run its infrastructure or enter into insolvency proceedings. Consequently, they have determined to walk away, leaving greater than 3,600 sites, a number of them active, without an operator.

The regulator then issued its order for the sites to be properly decommissioned and capped off. On April 30, Trident, without replying to the regulator’s order or addressing their environmental obligations, the Directors ceased operations, terminated its staff and contractors. The Board then resigned. Trident’s wells will soon be transferred to the Orphan Well Association.

The Redwater effect

Trident blamed the recent Redwater Supreme Court decision which ruled that capping of orphan oil and gas wells and environmental remediation should take priority over lenders when a business goes bankrupt and leaves behind orphan wells.

Trident also said that the Redwater decision, regulatory uncertainty and current low pricing has developed a treacherous setting for energy companies that dare to risk their capital in Canada.

Trident estimates that its total abandonment and improvement obligations are about $329 million. They estimate that with those costs, any recovery by secured lenders is unsure and there would be no funds for either unsecured creditors or shareholders.

The Redwater effect is that the Court’s decision has had the unintended result of increasing Trident’s financial distress and accelerating the abandonment of its wells, has it had no funds to live up to its obligations.

Only time will tell if other insolvent energy producers take the route of Trident by just shutting down and abandoning its business and leaving its wells for the regulator to deal with.

Bankruptcy Canada – Retiree pension and health benefit rights protection in insolvency proceedings

Another topic I have previously written about is the lack of protection for retirees for pension and health benefit payments when the former employer enters insolvency proceedings. Rank-and-file members of the United Steelworkers (USW) from across Canada were on Parliament Hill to consult with MPs and requesting a commitment to legislate protection for retired workers. The USW very much want to make this a 2019 federal election issue.

The 2019 federal budget plan was very quiet on any type of commitment to shield workers and retirees by treating them as protected or priority creditors in our insolvency laws.

As a result of high-profile cases such as Nortel in Ottawa, Stelco in Hamilton and Sears, the USW is committed to campaigning for retirees to have a safe future.

Retirees understand just how unsecure their pension plans and benefits might be if a firm gets into restructuring under the Companies’ Creditors Arrangement Act (CCAA) or any proceeding under the Bankruptcy and Insolvency Act (Canada) (BIA).

Pensions are delayed earnings and, by the time financial institutions as well as various other creditors are paid, there is nothing left for workers for any shortfall or benefit payments. The USW feels that all Canadians ought to be outraged by the treatment of retired Canadians in corporate insolvency matters.

This is why they met with MPs Senators. They want to focus on a collection of recent Bills presently before the House of Commons and the Senate. Two are before the House of Commons but they have not progressed. One is sponsored by the New Democratic Party, and the other by the Bloc Québecois. They are focused on reforming the CCAA and the BIA to offer top priority to claims by workers arising out of an underfunded pension plan and the removal of benefits.

An additional Bill, presented in the Senate late last year by now-retired Senator Art Eggleton, likewise aims to grant secured standing for pension claims.

It will be interesting to see if the Conservative Party picks up on this important debate and turns it into an election issue. The Liberal Party had promised to deal with this issue in the last four years, but alas, they have not delivered.

Bankruptcy Canada – Summary

Corporations that cannot afford to properly shut down their business and retirees losing out on benefits they worked their whole life for are important issues in insolvency. Does your company not have enough cash to continue its operations? Did you not receive all amounts you are entitled to and now are facing personal financial problems?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people and companies trying to find financial restructuring or a financial debt negotiation strategy. As a licensed insolvency trustee, we are the only professionals licensed, recognized and supervised by the federal government to supply insolvency advice and carry out strategies to aid you to stay clear of personal bankruptcy.

Call the Ira Smith Team today so you can cut the stress, anxiousness and pain from your life that your financial issues have caused. With the special roadmap, we establish just for you, we will immediately return you right into a healthy and hassle-free life.

You can have a no-cost analysis so we can help you fix your debt troubles. Call the Ira Smith Team today. This will most certainly allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

bankruptcy canada

Tags avoid bankruptcy, Bankruptcy and Insolvency Act, bankruptcy canada, bankruptcy trustee, BIA, CCAA, Companies’ Creditors Arrangement Act, insolvency, Ira Smith Trustee, licensed insolvency trustee, Orphan Well Association, receiver, Redwater Energy, Redwater Energy Corp., sears canada ccaa, Supreme Court of Canada, Trident Exploration, trustee

Brandon Blog Post

SOMETIMES EVEN A BONA FIDE SHARK NEEDS BANKRUPTCY AND INSOLVENCY HELP

Post author By Brandon Smith
Post date April 8, 2019

If you would prefer to listen to the audio version of this bankruptcy and insolvency Brandon’s Blog, please scroll to the bottom and click on the podcast.

Bankruptcy and insolvency: Introduction

Not every innovation that is seen on The Shark Tank is bound to be one of the very best. Among the winners, Fizzics is a machine that makes use of sound waves that improve the taste and quality of a beer. Not even a Shark can stop its company from being driven to bankruptcy and insolvency Chapter 11 bankruptcy protection. This proves that often an ingenious and fantastic invention being marketed with the assistance of a Shark might not truly interest people.

bankruptcy and insolvency

Fizzics was seen on the season 8 première of The Shark Tank. The judges, in spite of the early skepticism, accepted this pitch. It currently seems to be backfiring in a huge way. The idea of making a bottle of beer taste better, just like a draft beer from the tap, isn’t a silly way to invest your time. But a better tasting beer is a big luxury. Many people may check out is the brand-new shiny plaything on the block. It is something wacky and cute but not completely effective or needed.

What is difference between bankruptcy and insolvency in Canada?

What is insolvency? – Individuals are considered to be insolvent when they are not able to pay the financial debts they owe their creditors on their respective due dates. If you become insolvent, you might choose to declare bankruptcy, or you could handle your financial debts with other options such as a consolidation loan or a debt settlement consumer proposal.

Insolvency and bankruptcy are 2 terms that are often very closely associated when discussing debt. However, they have very different meanings. Insolvency describes an economic state. It is when you cannot afford to pay your debts when due. If you liquidated all of your assets, there would not be enough money to pay off all your debts in full.

What is bankruptcy? – Bankruptcy is a legal process. It means that a creditor has gone to court and obtained a Bankruptcy Order to place a person or company into the legal status of bankruptcy. Or, the person or company has filed an Assignment in Bankruptcy. The Bankruptcy and Insolvency Act (BIA) is the Canadian bankruptcy law legislation regulating all administrations of the BIA in Canada.

The various kinds of insolvency proceedings under the BIA are:

corporate bankruptcy;
personal bankruptcy; either a summary administration bankruptcy or an ordinary administration.
consumer proposals;
Part III Division I Proposal; and
receiverships.

Canadian BIA insolvency proceedings and bankruptcy proceedings can only be administered by licensed insolvency trustees (formerly called trustees in bankruptcy). The short form for a trustee in bankruptcy is now LIT, licensed insolvency trustee (Trustee). Trustees are licensed and supervised by the Office of the Superintendent of Bankruptcy (Canada) (OSB) which is part of Industry Canada. The OSB is responsible for the administration of bankruptcies in Canada.

Bankruptcy and Insolvency: Does the consumer really need it?

Eventually, these types of ideas are those that often tend to seem like the most effective thing since sliced bread. Their shiny brand-new finish tends to subside promptly given the expense of creating them. Even tougher, is finding a large enough market of people who truly intend to quit the dependable and old ways to carry out something. The uniqueness will swiftly wear away. The equipment will then come to be a chunk of scrap that is most likely to rest on the counter and seldom gets used. That might seem unkind, however, usefulness and need to at some point seem to divide the wheat (or barley) from the chaff!

So Fizzics, for all that it is able to do, turned out to be not the sort of device that has the ability to make a great deal of sense in a business setting. It is just for home-usage. In a bar, people go to consume alcohol and socialize. They are not there to wait on a number of sound waves to make their drink preference taste and look better. If they want a draft beer, they will order from the tap. If they want a bottled beer, that is what they will order.

For home usage, it is an excellent novelty. Everyone has their favourite beer. People anticipate it to taste the way they know it too – straight out of the bottle or can.

The Fizzics Business: The Sharks bit and invested money

Philip Petracca and his partner, David McDonald, made it to ABC’s “Shark Tank” in 2016, offering beer to a hesitant panel. They eventually turned most of the judges into followers. Lori Greiner and fellow Shark Mark Cuban agreed to spend $2 million into Fizzics for a consolidated 16.67 percent equity. Fizzics attained its objective of expanding its selling networks.

With the help of the Sharks, Fizzics entered Target, Best Buy, Brookstone, on Amazon, and several other areas– including Bed, Bath & Beyond. They have been reviewed in many renowned publications, and on several websites such as Yahoo! Tech as well as CNet. The Fizzics beer-making device was called absolutely nothing short of a wonder.

They increased their patented modern technology and generated a much more portable item called the Fizzics Waytap. Beer fanatics were still going crazy about the original dispenser in magazines.

On March 12, 2019, Fizzics Group, Inc. applied for Chapter 11 bankruptcy in Delaware under the United States insolvency and bankruptcy code. It reported assets of between $100,000 as well as $500,000 and debts of between $1 million and $10 million (based on contingencies and disputed claims). Time will tell if the business can be reorganized and saved, or if the remaining product inventory will end up in the clearance area!

Bankruptcy and insolvency: Do you need help?

I hope you enjoyed this Fizzics Shark Tank bankruptcy and insolvency blog. Do you or your business have excessive debt? Are you having an issue making your month-to-month expenses? Is your company handling its financial obstacles something you simply can’t figure the way out of? Are you looking for a business restructuring plan or an individual debt negotiation plan?

If so, call the Ira Smith Team today. We have years and generations of experience helping people and companies seeking financial restructuring or a debt settlement strategy. As a licensed insolvency trustee, we are the only specialists recognized, accredited and supervised by the Federal government to give insolvency advice and remedies to assist you and to prevent bankruptcy.

Call the Ira Smith Team today so you can end the stress and anxiety financial problems create. With the special roadmap, we will develop with and special to you, we will promptly return you right into a healthy, balanced hassle-free life.

You can have a no-cost appointment to assist you so we can fix your debt troubles. Call the Ira Smith Team today. This will certainly allow you to make a fresh start, Starting Over Starting Now.

Tags Bankruptcy, bankruptcy and insolvency, bankruptcy protection, chapter 11, chapter 11 bankruptcy, chapter 11 bankruptcy protection, counter fizz, Debt, Fizzics, fizzics bankruptcy, fizzics shark tank, insolvency, insolvency and bankruptcy, insolvency and bankruptcy code, Ira Smith Trustee, shark tank

Brandon Blog Post

SUCCESSION LAW REFORM ACT OPPORTUNITIES FROM A TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date February 25, 2019

If you would prefer to listen to the audio version of this Succession Law Reform Act Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Succession Law Reform Act: Introduction

I wish to focus on the last provincial statute that is also important for the administration of a deceased estate; the Succession Law Reform Act, R.S.O. 1990, c. S.26.

This is my last blog in this collection to show how it would certainly be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.

As always, given that we are not lawyers, and I am not offering in this or any of the other Brandon’s Blogs in this series, suggestions on wills or estate issues. For that, you have to consult your lawyer.

My estate trustee blogs

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I discussed some crucial issues when it entails a deceased estate and why a LIT would certainly be exceptionally knowledgable and qualified to serve as an estate trustee.

In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I discussed why many times moms and dads attempt doing the correct thing by selecting their youngsters as estate trustees and the several times it simply ends up all wrong.

In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the needs and stipulations of the Estates Act are already very familiar to a bankruptcy trustee. As a matter of fact, a lot of the tasks called for by the Estates Act are currently carried out in the insolvency context by a LIT.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I clarified why a LIT is an appropriate specialist to lead the management of Estates Act Canada.

In the blog TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE, I describe the duties of a trustee under the Trustee Act Ontario and how a bankruptcy trustee is experienced to carry out those duties.

In this blog, I will explain why a bankruptcy trustee would be extremely comfortable working with this provincial legislation.

Things an estate trustee must be aware of

The Act has 79 sections and regulations. Sections 1 through 43 inclusive, set the ground rules for establishing wills and their validity.

The Act figures out how your estate and assets will be allocated to family members based on based upon guidance and a collection of policies.

This statute is different from the other ones I reviewed affecting acting as an estate trustee in a deceased estate. The Act is really just a set of guiding rules.

Intestacy and the entitlement of spouse and the preferential share

Section 44 of the Act deals with a person who has a spouse and no living children who die intestate. This section says that his or her spouse is entitled to all the property.

Section 45(1) of this Act deals with the situations where a person dies intestate and has both a spouse and living children. It says that where the value of the deceased’s property is not more than the preferential share, which is a defined term, then the spouse is entitled to all the property.

Preferential share is set by Ontario Regulation 54/95. It says that for the purpose of section 45 of the Act, the preferential share is $200,000.

Section 45(2) of the Act deals with the person who dies intestate, has a spouse and living children, and whose property is worth more than the preferential share. This section says that the spouse is absolutely entitled to the preferential share or the amount of $200,000. Presumably, the spouse and children then have to either agree or litigate about who is entitled to how much of the value above $200,000.

Just to add another wrinkle, Section 45(3) deals with the situation where the deceased dies with a will dealing with some property but intestate to the balance of the property and is survived by both a spouse and children. This section states that the spouse is always entitled to the preferential share out of the property not governed by a will. If the spouse is entitled to property under a will having a value of more than the preferential share ($200,000), then there is no need to be concerned with the workings of the preferential share.

Residue: spouse and children

Section 46(1) of this provincial statute says that where a person dies intestate and has a spouse and one living child, the spouse is entitled to one-half of the residue of the property AFTER payment of the preferential share.

Section 46(2) states that if the intestate dead person has a spouse and more than one child, the spouse is entitled to one-third of the residue. Again, this is after payment of the preferential share. Section 46(3) deals with the situation of any children predeceasing the parent who died intestate. This section says that for the purposes of calculating the spouse’s share, assume the deceased child(ren) is alive.

Distribution of kin

Section 47 of the Succession Law Reform Act deals with how property should be distributed when a person dies intestate. The general principle starts with the property being divided between the spouse and living children as described above. The balance of the section deals with the treatment of grandchildren, parents, siblings and nephews and nieces when a person dies intestate.

This section ultimately says that if there are no kin, then the intestate property becomes the property of the Crown under the Escheats Act, 2015.

Succession Law Reform Act: Designation of beneficiaries of interest in funds or plans, survivorship and support of dependants

The balance of the Act deals with specific rules about:

the designation in plans or funds of specific beneficiaries;
how to deal with the death of two or more persons at the same time who either hold property together or may be entitled to all or some of the other’s property; and
support of dependants.

Summary

I really hope that this collection of blogs show to you just how the various provincial statutes describing the obligations of a trustee or estate trustee tracks actually near to exactly how a LIT executes in either a Court-appointed receivership or bankruptcy mandate.

If you have any type of concerns about a deceased estate and the requirements for an estate trustee, whether it is solvent or insolvent, call the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

If you have any questions at all, contact the Ira Smith Team.

Tags A TORONTO BANKRUPTCY TRUSTEE, administration of estates act canada, Bankruptcy, bankruptcy trustee, court appointed receiver, escheats act, estate trustee, estates act, insolvency, Ira Smith, licensed insolvency trustee, succession law reform act, Toronto bankruptcy trustee, trustee, trustee act, trustee in bankruptcy, trustee of deceased estate

Brandon Blog Post

FINANCIAL DISASTER PREPAREDNESS: 4 STEP PLAN TO STOP FINANCIAL DISASTER

Post author By Brandon Smith
Post date January 16, 2019

Financial disaster preparedness: Introduction

The people drowning in debt are always scared of the thought of speaking to a licensed insolvency trustee (formerly known as a bankruptcy trustee (Trustee). The purpose of this Brandon’s Blog is to allow me, a Trustee, to give you some basic points on financial disaster preparedness in a non-scary way. Hopefully, it can help you avoid a financial disaster.

On the 27th day of the United States Federal government closure, many federal employees that are already under money stress and anxiety are not surprisingly asking whether an insolvency proceeding is the only alternative.

These people did not ask for this. Although they will eventually receive all their back pay, that doesn’t help their cash flow today.

Some personal bankruptcies are started by events beyond somebody’s control. The US government shutdown is such an example. Alternatively, unlike the shutdown, a number are completely within an individual’s control.

Here are four ideas on just how to maintain your finances from falling off the edge right into insolvency.

Financial disaster preparedness: #1 – Keep an eye on your credit cards

Try to pay your monthly credit card bill, and all your expenses, on or before their due date. If timely payments cannot happen, pay it back asap or arrange a repayment strategy to decrease late charges as well as interest charges.

Never ever carry over a credit card balance. Attempt to pay your balances, including all your expenses, promptly.

Similarly, be conscientious what your credit history is. Almost every person will certainly have a time in their lives when they’ll need to borrow cash for some major expenditure.

Your credit score will affect the borrowing rates you are offered. Knowing one’s credit history can aid people to make a better decision on when to jump, or hold back, on a choice to borrow.

Financial disaster preparedness: #2 – Know your monthly expenses (and savings too)

When I do credit counselling and speak to people about loan basics, I discuss spending behaviours and always talk about the difference between wants and needs. I always encourage people striving for economic self-reliance to begin with a straightforward exercise: document every single expense in a month.

By mapping out all the spending, people can rank where their cash should, as well as shouldn’t, be going. For example keep an eye out for the daily latte, which is a habit because, it builds up, A more expensive specialty coffee is a want, not a need. A less expensive plain coffee could suffice.

There is one routine I always urge. Make a routine that you will set aside a particular percentage of your income for an emergency fund. The same goes for socking away, at the very least a little, to an RRSP. Work these savings into your budget.

In my experience, all consumer insolvencies commonly entail inadequate financial savings to cover the unanticipated. This is a common problem among Canadians that I have previously written about in my blogs.

Credit cards are also a significant cause of personal insolvencies. Many of our personal insolvency clients use credit cards to supplement their income. Rather than budgeting, they use their credit cards for various expenditures that they really cannot afford and are unable to pay down their credit card balances.

Financial disaster preparedness: #3 – Boost your financial literacy

There are various ways to begin early in life to prevent financial disaster problems. If these guidelines sound familiar, that’s because they are. However, yet few individuals appreciate them. That’s partly because they’re not taught it in the schools.

Canadians have a financial literacy problem. Many people think that some people are born rich and others aren’t. The reality is that those who are well off just have a more realistic understanding about spending and saving within one’s earnings.

Financial literacy, like civics education, needs to be a requirement in all elementary school, high school and university educational programs.

Financial disaster preparedness: #4 – Preserve your financial self-reliance

Those who lived through the great depression understand how fragile funds can be. Clipping coupons and looking for the most affordable prices is just part of their normal behaviour.

Insolvency filings have been at their lowest point since 2007, and there are varying explanations for the decline.

During the last decade, Canadians have amassed debt. Now that interest rates are rising, it is expected that personal insolvency filings will rise. Personal insolvencies will be more a part of our world as a result of unexpected disasters and negative decisions.

Corporate bankruptcies will always be a part of the system as markets change and businesses experience threats they cannot survive.

We must all be financially vigilant. I hope these tips will help you in avoiding any form of financial distress.

Financial disaster preparedness: What about you?

Do you have excessive debt? Are you in need of financial disaster preparedness? Does your business have way too much financial debt and is in danger of shutting down? Are you concerned that the future rate of interest hikes will make currently workable financial obligations totally uncontrollable? Is the pain, stress and anxiety currently adversely influencing your health and wellness?

If so, contact the Ira Smith Team today. We have years and generations of helping people and businesses seeking financial restructuring. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to offer financial restructuring solutions.

We provide a free consultation to assist you to solve your problems. We know the discomfort financial obligations causes. We can end it as soon as possible from your life. This will permit you to start a fresh start, Starting Over Starting Now.

Call the Ira Smith Team today so that we can start helping you get back into a healthy and balanced, stress-free life.

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