Tag: insolvent

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Brandon Blog Post

BANKRUPTCY ACT CANADA: ARE YOU REALLY PREPARED FOR IT?

Introduction

No person wishes to go make a filing under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (Bankruptcy Act Canada), however occasionally it is inevitable. You might think that people who file are just those that are careless with their finances. However, with most of the people I see, it is usually an event outside of their control that pushes them over the edge.

In personal bankruptcy, things such as illness, divorce, job loss, unanticipated catastrophes, identity theft and fraud are many times the causes of insolvency. Of course, lack of proper budgeting, overspending and inappropriate uses of credit are also involved. In corporate insolvency, the #1 cause always seems to track back to management.

Insolvency filings happen every year. In 2018, a total amount of 128,846 insolvency filings were made with the Office of the Superintendent of Bankruptcy (OSB). This is 2.4% more from 2017. Consumer insolvency filings increased 2.5% (125,266 filings), while company filings dropped 0.8% to 3,580.

At the very same time, people choosing to avoid bankruptcy by filing a proposal continued increasing in 2018, bringing this number to a brand-new level. Proposals represented 52.6% of consumer filings in 2017. In 2018, they expanded by 6.6% to 56% of all personal filings.

Are you considering a Bankruptcy Act Canada filing, or at least speaking to a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) (Trustee)? In order to help you start your fact-finding, I want to tell you what will happen to your bank accounts, retirement accounts and your other important financial funds. Understanding what to anticipate can assist you to stay clear of some pricey blunders.

Bankruptcy or (consumer) proposal

Being insolvent is that you are not able to settle your financial debts. People with severe financial problems can make Bankruptcy Act Canada filing by filing either for bankruptcy, a consumer proposal or Division I proposal.

Proposals are official methods controlled by the Bankruptcy Act Canada for personal filings. Dealing with a Trustee you make a proposal to:

  • Pay your creditors a portion of what you owe them over a particular time period not going beyond 60 months
  • Extend the time you need to settle the debt
  • Or a mix of both

The Proposal is made via the Trustee, who uses the money in your proposal fund to pay the cost of administration and distribution to each of your creditors their pro-rata share. A consumer proposal needs to be finished within 5 years from the day of filing.

Proposal

People with severe financial problems can apply for bankruptcy. They can also try to avoid bankruptcy by using the Proposal provisions of the Bankruptcy Act Canada.

There are numerous advantages to avoiding bankruptcy. The main differences between proposals and bankruptcy are:

  • Unlike informal debt settlement, a Proposal produces a binding discussion forum where each of your unsecured creditors has to participate in for your debt restructuring.
  • You can keep your property, including your home, if you can afford to in your budget.
  • Lawsuits against you and enforcement proceedings, such as wage garnishments, cannot begin or continue.
  • In a successfully completed Proposal, you do not need to file for bankruptcy.

Keep in mind that financial institutions have “set-off” legal rights, implying that if you declare bankruptcy or file for bankruptcy when you’re behind in payments to them, they will take the funds in your accounts to try to cover all or some of what you owe them. This is notwithstanding that there is a stay of proceedings once a Bankruptcy Act Canada filing takes place and such an offset really should not take place.

So if you are thinking of filing either for bankruptcy or a proposal, I want you to be prepared for what might happen to your financial assets.

Your bank account

In a bankruptcy, the cash in your bank account is a property which must be paid over to the Trustee. Upon your filing, the Trustee will put all your banks on notice to provide the funds in any accounts maintained with them to the Trustee. As noted above, the bank may very well offset cash in your savings or chequing account against the money you may owe them, including credit card debt.

In a Proposal, you do not lose control of the money in your bank accounts. Rather, they are considered by the Trustee in formulating the type of Proposal you should offer your creditors. Remember, your Proposal must offer your creditors a better alternative than your bankruptcy would. However, even though there is a stay of proceedings invoked once you file your Proposal, it is not uncommon for a bank where you maintain an account and to whom you owe money, to take the money in your account and offset it against what you owe them.

So the moral of this story is that you are best to have bank accounts at financial institutions to whom you do not owe any money.

Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Deferred Profit Sharing Plan (DPSP)

In a bankruptcy, your RRSP, RRIF or DPSP are excluded from seizure. However, the Trustee is entitled under the Bankruptcy Act Canada to receive the equivalent to any amounts contributed to these accounts in the 12 months preceding your filing date. In a Proposal, this 12-month amount must be included by the Trustee in the calculation of what amount your Proposal should offer your creditors.

Canada Pension Plan (CPP) and Old Age Security income (OAS)

Canada Revenue Agency (CRA) is the only one permitted to garnish your CPP earnings if you have an unpaid personal income tax. By filing either for bankruptcy or a Proposal, the stay of proceedings will be invoked and CRA will have to stop the garnishment of your CPP and you will get the CPP payments you are qualified for.

However, the earnings obtained from CPP and OAS will certainly be taken into account by the Trustee in determining if you have any surplus income payment obligation in bankruptcy. In a Proposal, that amount also has to be considered in developing your Proposal.

Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and other non-registered account investments

In a bankruptcy, just like any other non-exempt property, the amount held in your TFSA and any other non-registered investment account must be paid to the Trustee. In a Proposal, these amounts need to be taken into account in determining what type of Proposal to make. It may very well be that these accounts are collapsed in order to help fund a Proposal.

Similarly, RESPs are not excluded in personal bankruptcy. In a Proposal, the amount must be considered as an asset in calculating how much must be offered in your Proposal to stand a chance for success.

The reason that an RESP is not excluded from seizure in bankruptcy is relatively straightforward. Your child does not acquire ownership or other entitlement to the RESP funds as parents can take possession of the funds prior to the child becoming a post-secondary school student. For that reason, it is the parents who have ownership of the funds.

Consequently, the Trustee of an insolvent mother or father that has an RESP can collapse it. If the parent in bankruptcy wants the RESP to not collapse, adequate arrangements need to be made with the Trustee for the equal amount of funds in the RESP at the filing date be paid to the Trustee for the bankruptcy estate and the bankrupt’s creditors.

Annuity revenue in bankruptcy

Annuities are agreements where you pay a company (normally an insurance company) a specific amount, in order to get regular monthly payments for a specific period of time or for the remainder of your life.

If an annuity contract is properly set up with an insurance company, it will be exempt from seizure in bankruptcy. However, the income stream it produces will be considered by the Trustee in determining whether the bankrupt person has a surplus income obligation.

Your RRIF can also be considered as an annuity as it provides a legislated stream of payments. The RRIF is exempt from seizure in a bankruptcy, other than for any contributions in the 12 months immediately prior to filing. Like an annuity, the entitlement to payments will be considered by the Trustee in doing the surplus income calculation.

In a Proposal, you don’t give up ownership of an annuity contract or RRIF, but the income must be considered in preparing a suitable Proposal.

Bankruptcy Act Canada summary

Do you have financial problems? Do you not have enough money to pay your bills in full when due?

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. A consumer proposal is a federal government licensed debt settlement plan to eliminate your debt. 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.

Call the Ira Smith Team today. We have generations and decades of experience helping people and companies looking for debt restructuring and a debt settlement plan to AVOID bankruptcy.

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

bankruptcy act canada

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Brandon Blog Post

CONSUMER PROPOSALS: HOW MANY ARE REJECTED?

Introduction

When people with high debt come to see me for their free consultation, many times I shock them. They are shocked when I tell them that bankruptcy might not be required. I then tell them about consumer proposals. I also explain why I think they would be able to successfully complete a consumer proposal (CP) and therefore avoid bankruptcy.

What are consumer proposals?

I have written on the topic many times. In summary, a consumer proposal is a streamlined process under the Bankruptcy and Insolvency Act (Canada) (BIA). This process allows insolvent people to make a formal deal with their creditors. This government approved debt settlement plan is to repay only a portion of what you owe and you can take as long as 5 years of regular monthly payments to do so.

To qualify, the person must be insolvent and owe $250,000 or less to all creditors, other than for any debts secured by way of registration against your principal residence, such as a mortgage.

The person will then ask me how many we have done were rejected. They are trying to determine what the odds are for their deal to be accepted by their creditors. What I tell them is that I first do an assessment and tell them what amount of offer I think they need to make to gain the approval of their creditors. I also tell them that so far, anyone who has followed my advice has had their consumer proposal accepted by their creditors. Therefore, the number of those rejected by people who follow my advice is ZERO.

The benefits

There are benefits to submitting a successful debt settlement payment plan sanctioned under the BIA. The benefits include:

  • Unlike an informal debt arrangement, the CP develops a forum where each of your unsecured creditors has to participate in for your debt restructuring.
  • You maintain your assets and don’t have to give them up.
  • Lawsuits against you or your property and financial debts, or enforcement actions such as wage garnishments, cannot proceed.
  • You do not need to submit an assignment in bankruptcy

The process

Once prepared, the CP is submitted to the Office of the Superintendent of Bankruptcy Canada (OSB), the government department that controls Licensed Insolvency Trustees (formerly called bankruptcy trustees) (Trustee). The Trustee acts as the Administrator of the CP.

Once it is submitted, you will quit paying your unsecured creditors for past debts. The Trustee will send a notice of the filing along with a copy of the CP to all creditors affected by the CP. This includes anyone suing you or garnishing your earnings. Those activities against you will stop also.

Your creditors will have 45 days to accept or decline the debt settlement CP deal. If your unsecured creditors are disappointed with the proposal, they can vote against. In that case, the Trustee will discuss modifications with you that the Trustee believes the creditors might accept. That discussion will take place prior to the against vote counting. Usually, this means offering more money to them over the maximum 5 year period. The key is that you have to be able to afford to make those higher monthly payments. It will still be only a portion of the total you owe.

In order for consumer proposals to be accepted, a simple majority of your creditors by dollar value who has filed a proof of claim must approve it. If creditors who have filed a proof of claim choose not to vote, that is considered a vote in favour. You also may not even need to have a meeting of creditors. Unless creditors holding 25% in dollar value of the claims filed to request a meeting, or the OSB requests a meeting, there is no need to hold one. If a meeting is not requested, the proposal is deemed to be accepted by the creditors. This is all part of the streamlining.

Acceptance and performance

If your CP is accepted, the OSB (or any type of other interested parties) has 15 days to ask the Trustee to go to court to have the deal court approved. If no such demand is made, the debt plan is deemed to have actually been accepted by the court. More streamlining.

After acceptance and approval, the person is then accountable for making the regular monthly payments to the Trustee that was promised in the debt management plan. There will also be 2 counselling sessions for the person to attend with the Trustee to help them with their financial issues and behaviour.

If you miss 3 monthly payments, or you are greater than 3 months overdue since your last payment, the proposal will be considered annulled. This indicates to your creditors that they are now able to either resume or begin collection actions against you. Not a good thing.

Full performance

As I previously mentioned, the person must successfully complete the debt management settlement plan by making all the required payments and attending the 2 counselling sessions. When completed, the person is entitled to receive a Certificate of Full Performance. This means that you have successfully completed the CP and that all debts caught by it are discharged.

The Trustee will then finalize the administration of your debt settlement plan, get the necessary OSB approval and distribute the money to all the creditors who have filed a proof of claim. The Administrator also is entitled to the government approved fee.

Summary

Consumer proposals must provide your creditors with a better outcome than what they would get in your bankruptcy. I have never had a consumer proposal rejected for someone who took my advice and made all the payments required.

Are you in financial distress? Do you not have enough funds to pay your bills as they come due?

As a Trustee, we are the only professionals acknowledged, accredited and also managed by the federal government to provide insolvency advice and services. A consumer proposal is a federal government licensed debt settlement approach to eliminate your debt. We will certainly help you to pick what is best for you to clear your own debt issues.

Call the Ira Smith Team today so we can eliminate the stress, anxiety, discomfort and pain from your life that your cash problems have produced. With the distinct roadmap, we develop just for you, we will swiftly return you right into a healthy and balanced problem-free life.

We have years and generations of experience assisting people and companies looking for debt restructuring to PREVENT bankruptcy. You can have a no-cost analysis so we can help you to fix your financial troubles. Call the Ira Smith Team today. This will certainly allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

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Brandon Blog Post

INSOLVENT MEANING RESTORED IN COURT OF APPEAL FOR ONTARIO

insolvent meaning

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

Introduction

On November 28, 2018, I published my Brandon’s Blog titled “INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE”. I wrote about a then recent decision of the Ontario Superior Court of Justice in Bankruptcy and Insolvency in Kormos v. Fast, 2018 ONSC 6044 (CanLII). In that decision, the Judge gave a new twist on deciding whether or not Mr. and Mrs. Fast was insolvent.

If they were found to not be insolvent, their respective consumer proposal and bankruptcy filings would be annulled. In that event, Mr. and Mrs. Kormos would be able to continue enforcing their judgement against Mr. and Mrs. Fast. If unsuccessful in annulling the filings, then their only remedy would be to file a proof of claim in each insolvency proceeding. That would result in a payment far less than what might otherwise be available.

The lower court ruling

Mr. and Mrs. Kormos submitted evidence that the Fast’s assets had a value greater than their total liabilities. They submitted that therefore, Mr. and Mrs. Fast was not insolvent and should not have been able to file under the Bankruptcy and Insolvency Act (Canada) (BIA).

The evidence submitted by Mr. and Mrs. Kormos was not challenged. However, the Judge seized upon the fact that the income and expense statement of each of Mr. and Mrs. Fast indicated that on a monthly basis, their income was much less than their expenses. The Judge, therefore, concluded that Mr. and Mrs. Fast was insolvent and their separate insolvency filings should not be annulled. Accordingly, he dismissed the application by Mr. and Mrs. Kormos.

The appeal

Mr. and Mrs. Kormos did not believe that this ruling was either fair or appropriate. Therefore, they appealed the Judge’s decision with respect to Mrs. Fast only to the Court of Appeal for Ontario. On May 23, 2019, the Court of Appeal for Ontario released its unanimous decision in Kormos v. Fast, 2019 ONCA 430.

The position of Mr. and Mrs. Kormos was that the Judge erred in dismissing their application by not annulling Mrs. Fast’s assignment in bankruptcy and not deciding that her filing was a misuse of the bankruptcy procedure. They further submitted that therefore, the Judge legitimized an unjustified technique to protect the equity in Mrs. Fast’s home.

The Court of Appeal agreed with Mr. and Mrs. Kormos. They stated that the lower court erred in failing to decide that Mrs. Fast was not an insolvent person. It is for that reason, it was not necessary for the Court of Appeal to decide if her filing was a misuse of the bankruptcy scheme and procedure.

The Court of Appeal Judges determined that on the day of her bankruptcy, Mrs. Fast was not an “insolvent person” as that term is specified under s. 2 of the BIA. Her assets substantially went beyond and were readily available to pay off all of her liabilities.

Apart from the unexplained regular monthly cash deficiency, there was no proof that she could not satisfy or had actually stopped paying her liabilities as they normally came due. Instead, the undisputed proof was that she could. The only single item submitted as proof of any kind of financial hardship was that Mrs. Fast had not paid the debt owed to Mr. and Mrs. Kormos under their judgement.

The Court’s power for bankruptcy annullment

Under s. 181(1) of the BIA, a court might annul a bankruptcy order if it feels that it ought not to have actually been made. An annulment will be approved where it is revealed either:

  1. the bankrupt was not an insolvent individual when he or she made the assignment in bankruptcy, or
  2. the bankrupt abused the procedure of the court or performed a fraud on his or her creditors.

What is an insolvent person?

Section 2 of the BIA specifies an “insolvent person” as:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

Mrs. Fast plainly did not meet any of the requirements to be considered insolvent. The lower court erred by ignoring Mrs. Fast’s capacity to satisfy her liabilities and her accessibility to considerable assets.

On the day of her bankruptcy, Mrs. Fast’s real value of her assets over her liabilities, including her share in the value of the real estate, was $417,581.24. The debt owing to Mr. and Mrs. Kormos under their judgement was $25,565.64 plus interest. Therefore, she definitely was not insolvent.

Out and out lies

Mrs. Fast was motivated to take the actions she did because Mr. and Mrs. Kormos was beginning to execute on their judgement and there was real value in the real estate to eventually get paid from. So, Mrs. Fast lied on her sworn statement of affairs she completed with her licensed insolvency trustee (formerly called a bankruptcy trustee) (LIT). She also manufactured an income and expense statement to show that on a cash basis, she suffered a monthly loss.

It is obvious that first, her LIT did insufficient work to establish the bona fides of the values Mrs. Fast used in her bankruptcy filing. Second, the lower court Judge ignored what should have been obvious. Mrs. Fast should not have been allowed to file an assignment in bankruptcy. At least now we are back to the tried and true definition of an insolvent person with clarity from the Ontario appellate court.

The Court of Appeal ordered the annulment of Mrs. Fast’s bankruptcy. They also awarded costs to Mr. and Mrs. Kormos on a partial indemnity basis in the amount of $2,000, including disbursements and HST.

Are you insolvent?

Are you unable to pay your debts as they come due? Are your bills past due and you don’t know how you are going to pay them? Is the true value of your assets less than what you owe to your creditors? If so, then you are insolvent, and we can help end your pain and anxiety.

A LIT is the only insolvency expert accredited, licensed and supervised by the federal government to handle debt restructuring. As a LIT, our personalized strategy will assist you to know all your alternatives. The alternative you choose based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

Nobody wants to visit a bankruptcy trustee. However, the Ira Smith Team has decades and generations of experience people and companies in financial trouble. We will treat you with the respect and dignity that you deserve. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create a result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life.

Call us today for your free consultation, Starting Over, Starting Now.

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Brandon Blog Post

INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO

Insolvent definition: Introduction

The basis of the Canadian insolvency system is to assist the honest but unfortunate person or company shed their debt (with certain limitations) and start over fresh. There are many terms defined in the Canadian insolvency legislation. The most basic one is the insolvent definition.

Last week I reviewed a decision of the Ontario bankruptcy Court that really did give me a new focus. It doesn’t change the bottom line of the advice I would give an insolvent debtor, but it did change my focus. That is one of the things I love about being a licensed insolvency trustee (formerly called a bankruptcy trustee). I never stop learning.

Insolvent definition: Two examples

The Oxford dictionary definition is:

“insolvent

ADJECTIVE

Unable to pay debts owed.

‘the company became insolvent’”

Section 2 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) defines an insolvent person as:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

Insolvent definition: The concept of net worth

Insolvent person refers to both people and companies. The BIA definition incorporates the common English definition. The BIA definition also incorporates the accounting concept of net worth. Net worth = Assets – Liabilities. If the difference is positive, you have a positive net worth. If the difference is negative, you have negative or no net worth.

For those that want to read more about the concept of net worth, look at the Addendum I wrote which is at the bottom of this blog. Since many of you already have an advanced understanding of net, I don’t want to insert it in here.

When giving our free first consultation, my advice to anyone with lots of debt but positive net worth is that in bankruptcy, they will lose their non-exempt assets. If the major asset providing the positive net worth value is their home, I advise the person that they will lose their equity in their home which is not a good outcome. So, my first advice is always to see if the person can either refinance the home or sell it. Then they can use the funds to pay off their debts. In a sale, any balance can be used as a down payment on a smaller home or can set them up nicely to rent.

I normally don’t think of part (c) of the BIA insolvent definition as being mutually exclusive. However, after reading the Court decision and looking again at the BIA definition, I am reminded that it really is. Let me describe the Court’s decision to explain.

Insolvent definition: Kormos v. Fast, 2018 ONSC 6044 (CanLII)

Mr. and Mrs. Kormos got a judgment against their neighbours, Mr. and Mrs. Fast. The Small Claims Court at St. Catherines issued the judgment for $25,565.64. This judgment comes about from problems arising from flooding in their home which was triggered by the Fasts.

After the judgment was given, the Fasts were contacted by Mr. Kormos’ licensed insolvency trustee (Trustee). The Trustee advised that Mr. Fast had submitted a consumer proposal under the BIA many months previously, on August 24, 2016. Mr. Fast did not previously mention anything about his consumer proposal or his later filing of an assignment in bankruptcy.

Fifteen days after the Kormos plaintiffs started enforcement of the judgment by serving a notice of examination on Mrs. Fast, she made an assignment in bankruptcy under the BIA on April 25, 2017.

In their different bankruptcy filings, each of the Fasts attested in their respective sworn Statement of Affairs, that their home in Queenston, Ontario (Home) was worth $630,000.

Mr. and Mrs. Kormos provided evidence by way of an expert witness appraisal who also testified in Court, showing that the Home was considerably underestimated in the BIA filings by Mr. Fast on August 24, 2016, and Mrs. Fast on April 25, 2017, when she made an assignment in bankruptcy.

The Kormos’ lawyer stated that when a reasonable value is designated to the Home, neither Mr. Fast nor Mrs. Fast was insolvent when their corresponding filings were made under the BIA. They were obviously relying on the fact that each of Mr. and Mrs. Fast really had a positive net worth.

Mr. and Mrs. Kormos were looking for an Order under the BIA (i) annulling Mr. Fast’s consumer proposal as well as, if required, his 2014 bankruptcy; as well as (ii) annulling Mrs. Fast’s bankruptcy.

Insolvent definition: The Court’s analysis

Mr. and Mrs. Kormos wanted:

  1. An Order according to s. 66.3(1) of the BIA annulling the consumer proposal submitted by Mr. Fast.
  2. Since an outcome of such an annulment would be that Mr. Fast is considered to make an assignment in bankruptcy under s. 66.3(5) of the BIA, they also were looking for an annulment of his bankruptcy on the ground that Mr. Fast is not presently insolvent.
  3. An order according to ss. 181(1) as well as 187(5) of the BIA annulling the bankruptcy of Mrs. Fast.
  4. An Order according to Rule 60.07 of the Rules of Civil Procedure issuing a writ of seizure and sale of the Home.

The Fasts did not challenge the expert appraisal opinion. The Court accepted the expert’s appraisal as being the value of the Home on the relevant dates of Mr. and Mrs. Fast’s respective filings under the BIA.

The Court looked at the insolvent definition in the BIA, which again is:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

In her bankruptcy filing, Mrs. Fast filed her statement of monthly income and expenses. According to the statement, her monthly expenses exceed her monthly income by $2,010. When looking at the definition of an insolvent, the Court concluded that Mrs. Fast was unable to meet her obligations and had stopped paying her current obligations. Notwithstanding that the Court found that Mrs. Fast probably understated the value of her interest in the Home, the Court was not persuaded to annul her bankruptcy as she met the definition of an insolvent person.

As for Mr. Fast, the Court decided it would not annul his consumer proposal. The Judge went on to say that even if he was persuaded to do so, Mr. Fast was still a bankrupt and the Judge had no evidence for the proposition that his bankruptcy should also be annulled.

So, the Judge did not grant the application, the Fasts are under their respective BIA proceedings and Mr. and Mrs. Kormos can file their claim with the Fasts’ Trustee.

Insolvent definition: The Trustee

Now the Trustee has an interesting situation. The Trustee is now aware of the expert valuation of the Home. The Trustee will have to use that information to decide if the Fasts have equity in their home. If yes, then as far as Mrs. Fast, her equity will have to be realized upon because she is bankrupt. Her equity in the Home devolves to the Trustee as an asset (if it is more than the minuscule provincial exemption).

Is Mr. Fast’s consumer proposal has already been (deemed) accepted by the creditors and (deemed) approved by the Court. If yes, then he will just have to keep making the agreed payments to fully complete his consumer proposal and get out of bankruptcy. If not, the Trustee will now have to take his real equity in the Home into account. The Trustee will have to decide if the consumer proposal can still be recommended to the creditors, or if it must be improved because of the increased total asset value.

Insolvent definition: Are you insolvent?

Are you unable to pay your debts as they come due? Are your bills past due and you don’t know how you are going to pay them? If so, then you are insolvent, and we can help end your pain.

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to know all your alternatives. The alternative you choose based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create a result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

Insolvent definition: NET WORTH ADDENDUM

Regularly monitoring your finances reveals invaluable lessons. A most important aspect of building wealth is to find it. People that constantly increase their net worth track it to direct it. So, the starting point is understanding what the net worth definition for a person is.

Seeing the measurable results of your spending and investing decisions is the first step to take control of them. Contrarily, people in the worst monetary shape have no concept where their money is spent and are too afraid to know what their net worth might be since it will not be pretty.

Which extreme more closely matches your mindset? You can’t handle what you don’t measure. Consider it: if you were seriously rich, you’d invest a long time weekly handling some element of your finances.

A beginner variation of a financial tracking approach is needed to begin improving your financial condition.. In addition, the more money you build up, the more financial assets and liabilities to keep an eye on. I ‘d wager that you won’t own them for long if you don’t have your financial tracking system set up before you acquire them. If you don’t see and feel the gains and losses of your monetary choices–you are playing the complex money-game of life without any scorecard.

This is how so many people with good income still find their way into financial trouble. You need to have navigation reference points to know if you are going toward developing wealth or ruining wealth. It is by monitoring your net worth that you’ll begin to discover the monetary impact and effects of your decisions.

The beginning point for financial measuring is a simple statement of net worth (or balance sheet). It is a list of the current market price of whatever you own and what you owe to others. Your net worth is the difference between these 2 numbers. This is the number that you want to measure and increase every month. As with a business, as soon as you start determining the monetary repercussions of your habits you can begin making your own individual financial guidance. Basic insights and rules like these will help increase your net worth. This will lead to bigger insights and develop into bigger gains.

If you find that you have a lot of debt that is reducing your net worth, or possibly a negative net worth, then what guidance about debt are you going to develop for yourself? Think about including a guideline to read a new personal finance book each year. Your money rules and net worth statements can be as advanced or as basic as you wish to make them.

When you have computed your calculation of net worth, you begin having the ability to plan for purchases and payments. As an easy example, if your auto insurance coverage costs get paid annually, you can calculate just how much cash that you must to set aside monthly to easily pay it when the bill arrives. Or if you are getting a new car, you’ll be a lot better prepared for the first costs before you get squeezed at the end of the month and wind up paying a couple of bills late.

After you get comfortable with a net worth statement, you can move on to an income & expense sheet. How much net worth will you need by when? The answer is based upon the financial routines, tools and education you will establish. However, it can all start with your very first net worth statement.

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO insolvent definition

 

 

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GUIDE TO THE DIFFERENCE BETWEEN DEBT SETTLEMENT AND CONSUMER PROPOSAL

Difference between debt settlement and consumer proposal: Introduction

In last week’s vlog, “DEBT SETTLEMENT VS CONSUMER PROPOSAL CANADA: NEW CANADIAN GOVERNMENT REPORT EXPOSES DEBT SETTLEMENT COMPANIES HARMING CONSUMERS”, we reported on the recently released report by the Superintendent of Bankruptcy (OSB). The report is titled: “Review of Licensed Insolvency Trustee business practices to the administration of consumer insolvencies”. We gave an overview summary of the findings. In this vlog, we wish to get into some of the specifics of the OSB’s findings. The difference between such a settlement and consumer proposal when using a debt settlement company.

Difference between debt settlement and consumer proposal: Forced to pay money they can least afford

Cases handled by a Licensed Insolvency Trustee (LIT) that were referred by these types of settlement companies generally wound up paying much more for their insolvency case.

The debt consolidation companies called for a debtor to authorize a costly contract for speaking with the debt management company before being presented to a “picked LIT”. The people normally comprehended that the only function of the LIT as being restricted to the filing of the consumer proposal created by the settlement company!

In cases evaluated by the OSB, the consulting charge section of the contract contained a large amount for the debt consolidation company’s “help”. It was in the range of $2,400 to $4,200. For smaller consumer proposals, the OSB found that the consulting charge typically varied from 20% to 40% of the amount of the proposal.

Therefore, my read of this leads me to believe that certain LITs cooperated with such settlement companies to force insolvent debtors to pay thousands of dollars more than they otherwise needed to. These people could not afford this and did not deserve to be treated this way.

Debt specialist charges were purported to cover the expense of advising, conferences, recommendations as well as prep work of the consumer proposal. In all situations, the costs paid to the debt management company were IN ADDITION to the fees established under the Bankruptcy and Insolvency Act (Canada) charged by those LITs.

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Difference between debt settlement and consumer proposal: If that isn’t horrendous enough, the debt management company sold them a larger bill of goods!

OSB’s study discovered that debtors were often marketed more products by the debt settlement companies. As a result, there were billings for extra recurring costs throughout the life of their consumer proposal!

The products the debt management companies pushed on these vulnerable people included:

  • loans charging a high rate of interest;
  • brand-new credit score tools;
  • a proposal insurance policy; and
  • “credit score restoring” loans.

All products carried either high-interest rates or high price tags.

Difference between debt settlement and consumer proposal: Forced to pay more than they should have

A technique identified throughout the OSB’s review entailed advertising and marketing “proposal insurance coverage”. This was normally billed as a month-to-month expenditure at a price of around 10% of the worth of the consumer proposal. This financing had recurring repayments supposedly for “credit rating fixing”.

In one instance, a debtor with a $31,900 consumer proposal signed up for proposal insurance coverage, structured as a loan. That base cost was about $6,300. Various extra fees, the month-to-month management cost as well as a 15% interest rate, the insurance coverage priced out at $9,150.

So, with the debt management company’s management fee of $2,300, the consumer proposal that the creditors voted to accept in the amount of $31,900 cost the insolvent individual $43,350!!! In my view, being merely associated with this type of behaviour is against the BIA, OSB Directives and the Canadian Association of Insolvency and Restructuring Professionals code of conduct for its members. As a LIT, I would never be associated with such disgraceful behaviour.

Difference between debt settlement and consumer proposal: Consumer proposals are like a 5-year interest-free loan, so why would you borrow to pay it off early?

An additional pattern observed in consumer proposals submitted by LITs dealing with debt management companies was the intro of “price cut terms”. This arrangement is for enticing the debtors to borrow money under arrangements made by the debt settlement company.

Incorporation of a discount rate provision provokes a debtor to become part of a brand-new as well as expensive loan scheme. To capitalize on a 25% discount rate condition in a $10,000 proposal, a debtor would finance $7,500. With paying $1,400 in compulsory charges, this brought the lending overall to $8,900. At a promoted rate of interest of 22.99 %, with a payment timetable of $214 over 84 months, the borrower would certainly pay $10,475 in charges as well as a rate of interest, for an overall of $17,975.

A consumer proposal is like an interest-free loan. The same debtor with the same beginning consumer proposal of $10,000, would only pay that amount if they went directly to the LIT first. The debtor would have had a maximum of 60 months to complete making the payments with no interest charges at all. A savings of $7,975 and lower monthly payments.

As you can see, involving the debt settlement company increased the cost for an insolvent person dramatically for no value.

Difference between debt settlement and consumer proposal: Other findings

Other findings by the OSB include:

  • the LIT files did not contain any obvious evidence of debt settlement company certification or experience in credit counselling or the counselling of insolvent debtors;
  • consumers who filed with a LIT through the debt settlement company did not have a good understanding of the insolvency process, the options that were available to them or the other charges they were paying to the debt settlement company
  • the consumers were not aware that they could have avoided charges such as paying a debt consultant to prepare the consumer proposal
  • that the documentation made ready for the consumer proposal filing by the debt settlement company and used by the LITs contained many errors
  • Statements of Affairs, as well as Income and Expense Forms submitted, were incorrect in different ways
  • Debt settlement company fees were not disclosed
  • Real estate was always undervalued compared to LIT files where there was no involvement of a debt settlement company

Difference between debt settlement and consumer proposal: What you can do

The OSB is considering its next steps. The OSB is requesting comments. We have already provided ours. Our recommendation was that all LITs who cooperated with debt settlement companies as we have described here should be brought up on disciplinary charges by the OSB. If you agree that this way of doing business on vulnerable and unsuspecting consumers who are truly looking for professional help must stop, please click here to offer your own comments to the OSB.

In the meantime, if you have too much debt, please DO NOT be fooled by the debt settlement companies. Stay far away from them. Instead, contact a LIT directly.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. We will do so in a free consultation. A consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.

You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

difference between debt settlement and consumer proposal

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#VIDEO-HISTORY OF BANKRUPTCY NEVER GETS ANCIENT#

HISTORY OF BANKRUPTCY NEVER GETS ANCIENT

History of bankruptcy: Introduction

A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.

History of bankruptcy: Helping the debtor

The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.

History of bankruptcy: Helping the creditors

The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:

  • Trust claimants who are outside of the bankruptcy scheme
  • Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
  • Unsecured creditors:
    • Preferred
    • Ordinary

History of Bankruptcy: bankruptcy alternatives

The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.

History of bankruptcy: The BIA

The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:

In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.

History of bankruptcy: Rehabilitation

It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.

The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.

History of bankruptcy: The Courts

The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.

History of bankruptcy: What to do if you have too much debt

I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. 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. You’re only one call away from taking the steps towards a debt free life.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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#VIDEO – HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY?#

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

NOT MUCH!

We are always asked, how much do you have to owe to file bankruptcy? The real question is, here are my assets and my debts, what are my options? In Canada, the Bankruptcy and Insolvency Act (Canada) (“BIA”) states that you must owe at least $1,000 of unsecured debt to file for bankruptcy. The same holds true if someone owes you money. They must owe you at least $1,000 on an unsecured basis to apply to the Court to make an Order judging a person or company into bankruptcy. As you can see, the threshold is not very high.

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

ARE YOU INSOLVENT?

Facing serious financial difficulties is devastating, especially if you believe that personal bankruptcy is your only option. In fact many people mistakenly believe that dire financial problems automatically mean personal bankruptcy. If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvent is a financial condition; bankruptcy is a legal state.

Bаnkruрtсу is a legal рrосеѕѕ under the BIA that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the shortened Summary Administration part of the BIA. If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administration provisions. Don’t worry about these distinctions now. For now, just know that the streamlined summary administration rules is a simpler process, and the Superintendent of Bankruptcy sets the cost of the bankruptcy administration.

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

THE BANKRUPTCY PROCESS

In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) all of уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and the proceeds used to рау for the bankruptcy administration and then to distribute to уоur сrеdіtоrѕ.

If you have very little property, all of it might be рrоtесtеd so that you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property sells fоr and whether you must pay “surplus income” to your LIT.

The last step of your bankruptcy process, will be to get your discharge from your debts, meaning that you will not have to рау them all (with certain exceptions).

HOW MUCH DO YOU HAVE TO OWE TO FILE BANKRUPTCY –

SEE A TRUSTEE EVEN IF YOU DO NOT WANT TO GO BANKRUPT!

People think that they should only see a LIT if they need to file for bankruptcy. Every LIT will give you a free 1 hour consultation, to go over your situation and offer you your available options. The topics the LIT will discuss with you are:

As you can see, bankruptcy is only one of many topics discussed, in determining what your options are, allowing you to choose the one that makes the most sense to you. No other professional can discuss this full range of topics with you, and especially not for free!

WHAT SHOULD YOU DO IF YOU OR YOUR COMPANY HAS TOO MUCH DEBT?

If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.

We’re not only bankruptcy experts; we’re experts in dealing with debt. Contact Ira Smith Trustee & Receiver Inc. today for a free consultation and you will be well on your way to regaining your former quality of life Starting Over, Starting Now.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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BANKRUPTCY AND DIVORCE: NOT ALL REASONS TO GO BANKRUPT ARE GOOD

Bankruptcy and divorce, how to file bankruptcy in canada, information on bankruptcy, bankruptcy alternatives, bankruptcy, Bankruptcy and Insolvency Act, Blatherwick, Blatherwick v Blatherwick, Blatherwick v Blatherwick, 2015 ONSC 2606 (CanLII), debt, divorce, equalization payment, grey divorce support groups, insolvent, Mareva injunction, Revenue Canada, starting over starting now, trusteeBankruptcy and divorce

Whenever we speak to groups about bankruptcy and divorce, and especially to grey divorce support groups, the same questions always arise regarding the interplay between the Federal Bankruptcy and Insolvency Act (BIA) and the Ontario family law provisions. I thought it would be best to address one such interesting issue in this week’s blog.

You may hate your soon-to-be ex, but the courts won’t allow you to use bankruptcy as a weapon against that spouse. Bankruptcy is legal proceeding involving an insolvent person or business that is unable to repay outstanding debts. It is not a way to avoid paying alimony or child support. There was a recent case that clearly demonstrates the court’s view on this very issue.

Blatherwick v Blatherwick

The case is Blatherwick v Blatherwick, 2015 ONSC 2606 (CanLII). The parties separated after 39 years of marriage. The wife was seeking spousal support and equalization, among other things. The husband disputed the amounts that the wife was seeking. The wife obtained a Mareva injunction which is a court order preventing a defendant from transferring assets until the outcome of the associated law suit is decided. However, the husband breached the Mareva injunction by declaring bankruptcy. And, to make matters worse he made false representations in bankruptcy, including the valuation of corporate assets and reporting of income. The husband thought that if he declared bankruptcy he would be putting his assets beyond the reach of his wife’s claim for equalization. (In a bona fide bankruptcy, it is true that an equalization claim is not a claim provable in the bankruptcy, unlike a claim for alimony and child support which cannot be extinguished as a result of a bankruptcy).

Unfortunately for Mr. Blatherwick, the intersection of bankruptcy and divorce does not work that way!

The Judge’s view on Mr. Blatherwick’s bankruptcy

The Judge stated:

“303 I find as a fact that Mr. Blatherwick made false statements which were significant in his Statement of Affairs.

304 I find as a fact that he made the assignment into bankruptcy to avoid making an equalization payment to Mrs. Blatherwick and to avoid his financial obligations arising from his voluntary disclosure to Revenue Canada.

305 I find as a fact that the purpose of Mr. Blatherwick going bankrupt was to obtain a collateral benefit in the matrimonial proceedings.

306 I conclude there was no bona fide financial reason for making a voluntary assignment into bankruptcy.”

Accordingly, the court annulled the bankruptcy. In the truest sense, it was as if the bankruptcy never happened at all. In this case, bankruptcy and divorce did could not be combined.

Summary

Trying to cheat the system by making false statements on your sworn statement of affairs to make yourself appear insolvent is never a good idea and can even lead to criminal charges. The bankruptcy can, as demonstrated in this case, be annulled.

If you are insolvent and are considering bankruptcy, contact Ira Smith Trustee & Receiver Inc. We offer sound advice 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.

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ALTERNATIVES TO PERSONAL BANKRUPTCY: DON’T AVOID THE BANKRUPTCY DISCUSSION

bankruptcy, alternatives to personal bankruptcy, bankrupt, Office of the Superintendent of Bankruptcy Canada, insolvent, lines of credit, credit score, trustee, starting over starting nowThankfully, there are alternatives to personal bankruptcy. Say the word bankruptcy and people naturally recoil. I don’t know if there is more stigma attached to another word in the English language. In reality bankruptcy is not something to be ashamed of, it should not be avoided at all costs and it’s not a deep dark hole; it can be the light at the end of the tunnel. As with other alternatives to personal bankruptcy, it is an option. Let’s explore why avoiding bankruptcy can do more harm than good.

What is bankruptcy? Bankruptcy is incredibly misunderstood. According to the Office of the Superintendent of Bankruptcy Canada Bankruptcy is a legal process designed to relieve honest but unfortunate debtors of their debts. At the end of the process, the bankrupt is released from the obligation to repay the debts they had when the bankruptcy was filed (with some exceptions).

Why avoiding bankruptcy can do more harm than good: Although there are alternatives to personal bankruptcy which merit review, bankruptcy is often a good thing. A recent report by the Federal Reserve Bank of New York states:

  • People who filed bankruptcy had access to more new lines of credit than those who limped along in a poor financial state which clearly puts to rest the misconception that filing bankruptcy closes the door to new credit.
  • Those who didn’t file bankruptcy were described as insolvent.
  • The individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt
  • Insolvent individuals who do not go bankrupt exhibit more financial stress than those who do.

Are you insolvent and looking for solutions? The Ira Smith Team is here to offer alternatives to personal bankruptcy and bankruptcy help in Vaughan and throughout the GTA. Starting Over, Starting Now, Ira Smith Trustee & Receiver Inc. can help you overcome your financially difficulties. Contact us today.

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IS CANADA’S 1% IMMUNE FROM INSOLVENCY OR BANKRUPTCY?

bankrupt, bankruptcy, insolvent, insolvency, financial plan, 1 percenters, trustee, canadian bankruptcyThere has been quite a bit of buzz recently about Canada’s high income earners, affectionately referred to as the “1% or 1 percenters”. According to a National House Survey in 2011, to be considered in such illustrious company you have to earn a minimum of $191,100. However, the average income among the top 1% was $381,300 while the average Canadian earns $38,700. The typical member of the 1% club is male, married or living common-law, between the ages of 45 and 64 and lives in Toronto, Montreal, Calgary or Vancouver.

Earning $191,100+ may sound rich to the average Canadian but they would probably be shocked to know that many 1 percenters have ZERO savings or investments and are living paycheque to paycheque. Many are living lifestyles far beyond their means with sky-high mortgages, luxury vehicles, wining, dining, exotic travel, personal grooming, household staff… They are candidates for Canadian bankruptcy. There is no correlation between money earned and money saved. Living a high flying lifestyle can be intoxicating and very difficult to give up. Sadly, those seeking luxury are younger than ever. American Express Cardmember and merchant data reports that Canada’s Generation Y (born from 1983 onwards) as the biggest spenders on fine dining, luxury and travel. Living on a financial high wire is risky business. It equates to flirting with disaster. These 1 percenters are no different from the celebrities who blow through millions in earnings per year and declare bankruptcy. Few are super rich enough to become immune from insolvency and bankruptcy.

In fact it doesn’t take much for some 1 percenters to become insolvent or bankrupt – a downturn in the market, an illness, job loss, bad investment… If you’re walking a financial high wire, it’s time to come down to safety. Contact Ira Smith Trustee & Receiver Inc. We’ll evaluate your situation and come up with a realistic financial plan so that Starting Over, Starting Now you can live a happy, productive life without the fear of falling off a financial high wire.

Call a Trustee Now!