This short video (found at the bottom of this page) explains the differences between a consumer proposal vs. personal bankruptcy. A consumer proposal is a deal to end your debts. A consumer proposal is a legally binding process that is administered by a licensed trustee. Ira Smith Trustee & Receiver Inc. is a Toronto bankruptcy trustee and consumer proposal administrator.
We have written previous blogs about consumer proposals, including:
We offer personal bankruptcy and consumer proposal services, as well as corporate restructuring and corporate receivership and bankruptcy services to residents of the Greater Toronto Area. We explain the differences between a consumer proposal vs. personal bankruptcy. In most cases we can get a consumer proposal done and it usually results in a substantial reduction in the amount you have to repay. The amount you are required to pay when you file a consumer proposal depends on a number of factors as explained in this short video. We hope that you find the short video informative and interesting. If you have any topics about debt, insolvency or finances that you would like us to cover in future videos, please let us know by leaving a comment.
If you are experiencing financial problems, or you know that you are insolvent and are considering a consumer proposal vs. personal bankruptcy, or looking at all of your realistic options, including all alternatives to bankruptcy, contactIra Smith Trustee & Receiver Inc. We offer sound advice, a free consultation and a solid plan for Starting Over, Starting Now so that you’ll be well on your way to a debt free life in no time.
Debt relief from credit card debt is something we see in our personal insolvency cases all the time. We read in the newspaper and hear in the media about the high level of Canadian debt. Credit cards, after mortgages, are one of the main types of debt being carried.
People always ask us how to reduce debt and the first way is to have realistic expectations about what you can afford. The next way, is not to fall for advertisements that seem too good to be true and require you to input your credit card information for a “free trial”.
I’m sure you’ve heard the expression, “There’s no such thing as a free lunch”; that may be true for free trials as well. These so called free trials most commonly incur what we call “grey charges”. Grey charges are big business and responsible for big debt. According to Aite Group, there are 233 million grey charges a year, amounting to $14.3-billion (U.S.).
What are grey charges?
Free-to-paid are the most common grey charges. You sign up for a free trial period (typically a magazine or online service subscription) after which it becomes a paid subscription if you forget to cancel by a certain deadline. How many people forget to cancel by the deadline? There are over 115 million free-to-paid transactions a year, adding up to over $6 billion, according to Aite Group.
Phantoms are extra products and services added onto another transaction.
Zombies are subscription fees continually billed to you even after cancellation.
We are seeing more grey charges creeping into credit card debt requiring overall debt relief.
Why are they called grey charges?
They’re called grey charges because although they’re legal, they are morally in a grey area.
These grey charges can go on year after year and all the while you’re accumulating debt. “Nine out of 10 people don’t check their credit card charges carefully,” says Mick Weinstein, vice-president of software company BillGuard. “And even if they do, it’s too time-consuming to dispute those charges. So most people simply let them go.”
So the first avenue to obtain debt relief, is to look at all your credit card charges closely and take the time to dispute the ones that do not look authorized.
Four ways to catch grey charges
Don’t be on auto-pilot when it comes to your finances. Take action against grey charges with these 4 tips.
Check your credit card statements carefully each and every month. These may seem like small charges, but they can add up and hurt you.
Don’t sign up for free trials. Remember, there’s always a hook. So if you wouldn’t pay monthly for it, don’t sign up. There is no such thing as a free lunch.
If you do sign up for a subscription, make sure you read the fine print. You need to understand exactly what your financial obligation is.
Check for phantoms. You may be paying for features you don’t want or need.
Serious debt requires serious professional help
Debt is serious business that requires the help of serious professionals. If you’re struggling with debt and are in need of debt relief, contact the Ira Smith Team as soon as possible. We’re a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. We have helped many individuals obtain the debt relief they so desparately require. Take the first step towards financial freedom today.
Jewellers making mortgage and car loans in the shadow lending market are afraid of the truth
If you really knew who you were dealing with for that loan and what the real costs were, and how they felt about you, you certainly would question the wisdom of doing it. Here is what one such jeweller famous for his television commercials said:
The shadow lending market Canada and the shadow lending mortgage market Canada
How times have changed! Did you ever think you’d see the day when television commercials featured jewellers offering you mortgages? Yes, there are now a growing number of “alternative lenders” offering mortgages; of course at interest rates well above what traditional financial institutions are charging. One mortgage broker (who was not identified by name) said that although major Canadian lenders offer five-year fixed mortgage rates at about 2.5% to qualified borrowers, rates in the private market range from 7% – 15%. In addition to higher service fees, the market is also weakly regulated, allowing lenders to take advantage of the estimated 20% – 30% of Canadians with limited or no options at traditional financial institutions due to low income or a poor credit score.
The shadow lending market is growing fast
This shadow lending market is growing faster than it can be regulated and preying on the most indebted, vulnerable Canadians. A CIBC report from earlier this year noted that lending by non-commercial bank lenders has doubled since 2012. The Bank of Canada warned about the risks inherent in the shadow banking sector in its most recent Financial System Review last month. The shadow market is estimated at less than 10% of Canada’s mortgage market, much less than the 30% estimated for the pre-crash U.S. market. Low interest rates make it very attractive for people to continue borrowing and pile up debt, making it an ideal climate for the shadow lending market to continue to grow at an ever faster pace.
Why are Canadians falling prey to these shadow lenders?
They have multiple mortgages, taking equity out of their homes to cover other debts
When they get into financial difficulty, the homes have been used as ATM machines because of the increasing values
Then they fall behind on mortgage payments and are threatened with foreclosure. Mortgages in Canada are considered “full recourse” loans, which means the borrower is responsible for repaying a loan even in the case of the lender taking over and selling the home through power of sale proceedings because you could not keep up the mortgage payments. Canadians who don’t qualify for a bank loan have been forced to refinance in the shadow lending market to avoid losing their home.
Our insolvency clients, be they personal or corporate, usually want to start a consultation by asking us bankruptcy questions. However, I first start by obtaining a full understanding of the person’s or company’s financial challenges, so that we may consider all of the realistic options before discussing the topic of bankruptcy. I first wish to find the best alternative to bankruptcy.
I am finding now that many families, even high earners, are struggling in the “new economy”. We’ve spoken about their plight in our blogs:
There is yet another group that is now in great danger of bankruptcy – families whose previously very healthy income has taken a serious downturn and are now struggling to maintain a lifestyle they can no longer support. These families need to act fast and consider their alternatives to bankruptcy before it is too late to take remedial action. The natural inclination is to tough it out and hope for better times, but serious financial times demand serious financial decisions, not a hope and a prayer. As these families wait for better times to come they are burning through whatever savings they have, going further into debt by living off credit and will eventually run out of both money and credit.
This is not the best approach. At the first sign of financial trouble, these families should seek the advice of their legal counsel or accountant. These trusted professionals will be able to refer the families in financial trouble to a trustee in bankruptcy that they trust. With the trust factor bridge now in place with the trustee, that trustee can review the situation and provide the families with their realistic alternatives to bankruptcy.
If you’re struggling to support a lifestyle you can no longer afford, take immediate action and contact a professional trustee and explore your alternatives to bankruptcy. There are alternatives to personal bankruptcy – credit counselling, debt consolidation and consumer proposals. However, regardless of the choice that’s right for you, a balanced budget is always part of the equation. As we’ve stressed before, a balanced budget is to financial health what a balanced diet is to physical health. You’ll have to take a realistic look at your lifestyle and a serious look at your big ticket items – luxury home(s), exotic vacations, luxury cars, designer clothes and expensive entertaining and start living within your budget in order to benefit from one of the alternatives to bankruptcy .
The Ira Smith team approaches every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Contact us today and Starting Over, Starting Now you can be on the path to a debt free life.
This blog was originally published on July 21, 2015. It was updated on March 22, 2021.
Bankruptcy Sales: What Is a Stalking-Horse Bid?
A stalking horse bid, in the Canadian insolvency context, is an attempt by a company (and/or its Monitor,Receiver or Trustee ) in a Court supervised insolvency proceeding, to set what will be the baseline that must be met and beaten by any other bids for the assets. The intent is to maximize the value of its assets as part of a Court supervised sales process and to discourage any bid below a certain value.
A stalking horse is a process that allows a potential buyer (the stalking horse bidder) to make a public bid for a company’s assets in order to set a floor price for the amount of money to be received by the company’s creditors in a (bankruptcy) sale. The stalking horse bidder will get to purchase the company’s assets if no other bidder comes forward. The stalking horse provision allows for the bidding process terms and conditions to be set in a court-supervised sale.
In this Brandon Blog, I describe the stalking horse bid process and how it works
What’s a stalking horse bid? Example of a stalking horse bid
According to Wikipedia:
“The term stalking horse originally derived from the practice of hunting, particularly of wildfowl. Hunters noticed that many birds would flee immediately on the approach of humans, but would tolerate the close presence of animals such as horses and cattle. Hunters would therefore slowly approach their quarry by walking alongside their horses, keeping their upper bodies out of sight until the flock was within firing range. Animals trained for this purpose were called stalking horses.”
In an insolvency context, a stalking horse bid stands to test the market to see how the market values the assets for sale. If the market values the assets less than the amount of the stalking horse bid, then no one will bid higher and the party who made the stalking horse bid will be successful in acquiring the assets.
If the market values the assets more than the amount of the stalking horse bid, the higher offers will be made for the assets and for the Court to consider for approval. Presumably, a higher offer will be approved, the purchaser will purchase the assets and the stalking horse bid will not prevail.
stalking horse bid
How a Stalking-Horse Bid Works
The stalking-horse bid method allows a distressed company to avoid receiving low ball bids as its assets are being sold. Once the stalking-horse bidder has made its offer and it has been negotiated and court-approved, other potential buyers may submit competing bids for the company’s assets.
By setting the low end of the bidding range, the insolvent company hopes to realize a higher price on its assets. Insolvency proceedings are public. The public nature allows for the disclosure of more information about the deal and the buyer than what would be available in a private deal.
Stalking-horse bidders can generally negotiate which particular assets and liabilities it hopes to acquire. After the stalking horse bid is negotiated resulting in an asset purchase agreement, it will be necessary for the company, Receiver or Trustee to obtain Court approval of not only the stalking horse bid but also for the entire sales process to be implemented.
If the company is attempting to restructure and requires “bankruptcy protection”, then those corporate proceedings would be either under the Companies’ Creditors Arrangement Act (“CCAA”) or the Proposal provisions of the Bankruptcy and Insolvency Act (Canada) (the “BIA”). In that situation, it is the company making an application to the Court with the support and assistance of the monitor or proposal trustee.
If it is a corporate receivership or bankruptcy proceeding, then it is either the receiver or bankruptcy trustee making the application. In the case of bankrupt corporations, then it is the bankruptcy court that needs to approve the stalking horse bid, the entire sales process and approve the sale.
What does it take to get bankruptcy court approval?
When applying to the Court, approval for an entire sales process is being sought, a component of which is the stalking horse agreement. The Court has various considerations in determining if a stalking horse sale process should be approved. They are:
Is a sale transaction warranted at this time?
Will the sale benefit the whole “economic community”?
Do any of the debtors’ creditors have a bona fide reason to object to a sale process of the business?
Is there a better viable alternative?”
In the event the stalking horse bid is not the successful winner because of the other potential bidders at least one made a better offer, it is normal for the stalking horse purchaser to receive some form of compensation. The compensation is for the time, cost and resources invested to perform its due diligence, to make its offer which was found to be reasonable in the circumstances and to expose that offer to the marketplace to stand as a stalking horse bid, and for that bidder to not end up as the successful purchaser.
Our Firm has been involved in situations where the stalking horse bid has been both the successful bidunsuccessful bid. If the compensation, commonly known as break-up fees, is fair and reasonable, it will not dissuade other purchasers from coming forward in the sales process, and it will also be fair to the stalking horse bidder if they are unsuccessful. It is fair to the stalking horse bidder to have these bid protections incorporated into their offer.
The Court in considering the approval of a stalking horse bid also considers if the breakup fee, and the entire stalking horse bid, has been negotiated between arms’-length parties and has the support of the stakeholders involved in the insolvency proceeding.
stalking horse bid
The Pros and Cons of Being A Stalking Horse Bidder for Assets In Bankruptcy
There are various pros and cons to being a stalking horse bidder and making the stalking horse bid. First the advantages:
First to tie up the company’s management, perform due diligence thereby dealing exclusively with the company for the proposed purchase of its assets.
Gaining the advantage of time and access to the company’s financial information.
Having the time to be able to understand the company’s problems and challenges.
Getting under contract for the assets the purchaser wants to acquire.
The cons of making the stalking horse bid are:
Making sure that you set the break fee high enough to fully compensate the stalking horse bidder.
Not having too long a time period between approval of the stalking horse bid and the time when other bids must be submitted to avoid the assets or the company’s operations worsening through the process.
Would it have been better not to have been the stalking horse bidder and see how the company and its assets fare before having to submit a bid?
If the stalking horse bidder is not a secured lender, is there a likelihood the secured lenders will bid their security which will outbid yours?
If there is more than one acceptable bid, then an auction process is required to determine the successful bidder. The stalking horse bidder may not wish to participate in such an auction and will end up losing out.
Can a secured creditor credit bid? Cirque du Soleil agrees to ‘stalking horse’ takeover bid from lenders worth $375M
One of the most recent high-profile successful stalking horse bids was the Cirque du Soleil insolvency proceeding under the CCAA. In that case, a takeover proposal from the Cirque du Soleil’s secured creditors has been approved as the benchmark bid for a court-supervised auction of the insolvent entertainment company.
That is called a credit bid. When the secured creditor bids all or a portion of its outstanding loan. This will be done in situations where the secured creditor believes that the value of the assets to be sold is less than the amount owed, yet the company’s assets can be used to run a viable business. In that situation, the secured creditor would rather bid its security with the company debt to take over the assets.
By making a credit bid, the secured creditor potential purchaser does not need to come up with cash for the purchase price. However, cash will be required to make certain payments to parties the company business cannot operate without and to have working capital going forward.
If they bid the full amount of their loan and get outbid in other purchase agreements, it means they get fully paid out. Otherwise, they get the assets to run the company, bring it back to financial good health and profitability. Eventually, then they will sell the healthy company to recoup their money plus make a profit.
Stalking horse bid summary
If your company is experiencing financial difficulties, don’t waste your time stalking horses or any other animal. Seek the advice of your professional advisers. The earlier you seek financial help the more options will be open to you. ContactIra Smith Trustee & Receiver Inc. today. We’ll review your corporate issues and come up with a sound plan so that Starting Over, Starting Now you can enjoy financial peace of mind.
Financial infidelity is on the rise and for some strange reason marriage finances is a taboo subject for many married people. Spouses are lying to each about how much they earn. Forty percent (40%) could not correctly identify which salary range their spouse falls into. Couples are not being honest about what they spend, what they spend it on and the amount of debt that they are carrying. As you will see below, financial infidelity is a major issue. Couples break their promise of being financially faithful to each other.
Financial infidelity: What some studies say
A new study from the National Endowment for Financial Education conducted with Harris Interactive reports:
33% of people who have joint accounts said they have committed financial infidelity
35% said they have been the victim of their spouse’s financial deception
According to CreditCards.com:
2 million Americans have a bank account or credit card that their spouse doesn’t know about
20% of Americans have hidden a purchase of $500 or more from their significant other
Financial infidelity: We can help get you back on the right path
Financial infidelity can be a “recipe for disaster,” said Matt Schulz, a senior analyst at CreditCards.com. “It’s incredibly difficult to keep a household budget when you don’t know how much money is coming in and out, he said. It could lead to late bill payments, which can harm your credit score”. As we have previously discussed, a balanced budget is to financial health what a balanced diet is to physical health.
When it comes to marriage finances, honesty is the best policy. If you have been either the perpetrator or the victim of financial infidelity, you may be in serious financial jeopardy. Don’t wait until you are out of options. Contact a professional trustee as soon as possible. The Ira Smith team is a full service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. We can help. Call today.
Arestructuring and turnaround process that does not garner the support of the creditors can lead to bankruptcy. Bankruptcy ends up being a result of an attempt to save the business that has gone awry.
Bankruptcy and Insolvency Act (“BIA”): Contains 275 sections and is intended to be a complete code for bankruptcies. The law dealing with bankruptcies is within the BIA itself
Companies’ Creditors Arrangement Act (“CCAA”): Deals with corporate restructuring and turnaround (as does the BIA) and contains 22 sections. Most of the law dealing with the CCAA has developed from Court decisions as the statute is very thin!
Once in motion it’s extremely difficult to set aside an assignment into bankruptcy. That is why the interests of all stakeholders must be carefully considered and addressed in order for a restructuring and turnaround plan to be successful. Take for example the motion which was recently brought before the Ontario Superior Court of Justice (In Bankruptcy and Insolvency) by Casimir Capital Ltd., an intermediary or broker of various underwritings and placements. Up until January 31, 2014 when it resigned, it was a member and registered as a securities dealer with the Investment Industry Regulatory Organization of Canada (“IIROC”).
Casimir Capital Ltd. brought a motion seeking to set aside its deemed assignment into bankruptcy, and a review of a decision of a trustee to allow certain creditors to vote against a proposal put forth by the firm to settle its debts. At that meeting, 93.7% of the creditors voted against the proposal. However, in the motion, Casimir argued that some of the creditors should not have been allowed to vote as it disputes the validity of their claims.
The decision: In Re Casimir Capital, 2015 ONSC 2819 (CanLII), Casimir’s motion was dismissed. In his ruling The Honourable Mr. Justice Pattillo stated that the trustee “…was correct in allowing the Disputed Creditors to vote.” and “…the steps taken by the Proposal Trustee in reviewing and validating the proofs of claims filed, including the Disputed Creditors, for the purpose of voting at the first meeting were more than sufficient.”
The court noted that even if the votes of the disputed creditors were disallowed, 69.4% of the other creditors, whose claims are not disputed, voted against the proposal. The Court also agreed with the trustee that the debtor’s motion to have its deemed assignment in bankruptcy set aside fails in any event because even if the disputed creditors votes are set aside, the votes of the remaining creditors still defeat the proposal. As you can see, this restructuring and turnaround attempt was doomed for failure, as essentially none of the needs of the stakeholders were successfully addressed. Therefore in this case, a deemed assignment in bankruptcy was the end result. I am sure the professionals involved did the best they could with what they had to work with, but it obviously was not enough.
Unfortunately many companies and individuals find themselves in financial difficulties and surviving these financial difficulties can be a daunting task. Ira Smith Trustee & Receiver Inc. has helped many companies to not only survive, but prosper. Our corporate restructuring and turnaround strategies not only deal with short term crisis management but the long term viability of corporations. Contact us today so that Starting Over, Starting Now once again your company can a financially viable entity.
The need for seniors debt relief is gaining more attention in Canada. Seniors in our country are having a very rough time. “A financially secure retirement is becoming the exception, not the norm”, says Lee Anne Davies, CEO of Agenomics, a consulting firm specializing in money management and ageing. We’ve spoken about the plight of our seniors in several blogs:
However gray liabilities are on the rise and this problem is not going away any time soon. According to the Vanier Institute:
Bankruptcy rates for those aged 55 to 64 have increased by more than 600% over the last twenty years.
Agenomics reports:
The insolvency rate for those aged 65+ increased by 1,747% over the last twenty years.
The elderly, in particular, were 17 times more likely to become insolvent in 2010 than they were in 1990.
These are only two sources of the many who have written on this issue.
Why are elderly liabilities on the rise?
Mortgages: People nearing retirement are taking on mortgages thinking that the property will appreciate substantially and quickly, providing them with a nest egg or retirement income when they sell. Others are mortgaging their homes to help out their kids.
There really isn’t any seniors debt relief available from a secured creditor, such as a mortgagee, who holds a valid charge against your property.
Lifestyle Debt: Many retirees are still living the same lifestyle as they were during their working years, but now they don’t have to money to fund it and as a result are falling into debt. Usually, the type of debt that signifies lifestyle debt would amount owing to numerous credit cards. This would be unsecured debt from which relief is available. However, the necessary lifestyle changes that seniors debt relief would require would be significant, as the credit card liabilities have risen from spending more than the seniors earn.
Payday Loans: The number of elderly taking out payday loans is on the rise. Now retired, they may not qualify for traditional loans so they are falling prey to payday loan companies. Relief is available for unsecured payday loans, but like credit cards, the solution will involve lifestyle and spending changes.
Are you struggling financially, you require seniors debt relief (or not so grey relief) and don’t know where to turn? ContactIra Smith Trustee & Receiver Inc. today. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. Call us today and take the first step towards living a debt-free life.
How to prevent identity theft. In our last blog we discussed Identity Theft: Are You at Risk? This week we’ll be discussing how to recognize if you’re a victim of identity theft.
The best way to know how to prevent identity theft, or at least minimize the impact of identity theft, is to recognize the signs early. Monitor your hard copy or online financial accounts frequently. Check your credit report on a regular basis because unexpected changes to your credit information are often the first signs that you’ve been victimized by identity theft.
Knowing what to look for is how to prevent identity theft. These are the signs that you are a victim of identity theft:
There are withdrawals from your bank account that you didn’t make.
Your regular bank or credit card statements fail to appear.
You notice that other mail is missing.
You receive credit card statements or other bills in your name, which you did not apply for.
Telephone calls or letters state that you have been approved or denied by a creditor that you never applied to.
A company that you have an account with had a data breach and your information was compromised.
You find accounts and/or charges on your credit report that aren’t yours.
You are denied a loan even though you believe that you have an excellent credit report.
How to prevent identity theft requires constant monitoring of the signs listed above. If you’ve been a victim of identity theft, sadly we can’t turn back the clock; but if you’re in financial jeopardy as a result and you have collection agencies hounding you, we can help.
Ira Smith Trustee & Receiver Inc. is an insolvency and financial restructuring practice for individuals and companies in the Greater Toronto Area (GTA) facing financial crisis. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. Contact us today, your Vaughan bankruptcy trustee, and put your financial problems behind you.
Watch for our next blog when we’ll be discussing Identity Theft – What To Do If You’re A Victim.
40 Park Lane Circle, 44 Park Lane Circle Toronto for sale: it seems that life in Toronto’s very exclusive Bridal Path is not always what it appears to be. We tend to categorize the people who own these properties as “the rich and famous” while in reality some of them are “not so rich and infamous”. Two Bridal Path properties have garnered quite a bit of attention #40 Park Lane Circle which used to be owned by Mahvash Lechcier-Kimel and #44 Park Lane Circle which used to be owned by Norma Walton and Ronauld Walton.
Are financial problems contagious?
Are financial problems contagious between 40 Park Lane Circle, 44 Park Lane Circle Toronto for sale or just the entire street? Of course not; but when you get caught up in a high flying Bridal Path lifestyle and have to support a massive property like either one of these, or any other property that the average person would describe as a mansion, it’s very easy to accumulate enormous amounts of debt, leaving you to house rich and cash poor. And, if the spending is not controlled and the debts keep piling up it can be easy to lose everything.
Everyone needs a realistic and proper budget
A realistic and proper budget should be an important part of your life. It will keep you from overextending yourself while trying to keep up with your next-door neighbours. Without a proper budget, it’s very easy to get caught up in a cycle of overspending – bigger houses, faster cars, and exotic vacations. The lure of luxury is intoxicating, especially in the low-interest-rate environment we currently live in; but what happens when you wake up and find letters from creditors in the mail demanding payment? How many of those demand letters do you think found their way to the mailboxes of these two luxury Bridle Path?
Call us for a no-cost consultation
So whether you are in over your head with debt due to the ownership of a massive property or for other reasons, such as you’re living a lifestyle that you can’t afford and are being hounded by creditors and collection agencies, now’s the time to contact a professional trustee today. The Ira Smith team can set you back on a path to financial health with immediate action and a solid financial plan. Starting Over, Starting Now you can live a debt-free life.
consumer proposal vs. personal bankruptcy
