Tag: Ira Smith Trustee

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THE RISING COST OF LIVING IN TORONTO AND ELSEWHERE: WILL YOU BE PUSHED INTO HUGE DEBT?

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

Cost of living in Toronto and elsewhere: Canada’s rising annual inflation rate is a cost-of-living crisis

Two articles about living costs for Canadians were published this week. According to a recent Angus Reid poll, many Canadians’ quality of life is further diminishing as more debt is accumulated and the pandemic continues. Then Statistics Canada announced that the annual inflation rate reached its highest level since February 2003 in September.

When you hear the term “cost of living“, it’s often accompanied by the phrase “rise” or “have risen”. Recent data shows that Canada as a whole has experienced an increase in the cost of living. In this Brandon Blog, I describe how the rising cost of living in Toronto and elsewhere has the potential to create more debt and therefore more stress on Canadians.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: What is the Consumer Price Index?

Consumer Price Index (CPI) is a national measure of prices based on living costs across major cities in Canada. As the most quoted measure of living costs today, the CPI shows how costs have changed from year to year and illustrate that not everything is as cheap as it once was.

It is inflation that tells the whole story. A rising cost of goods and services reduces the purchasing power of the dollar. Cost increases are measured by this indicator. A CPI calculation represents the average cost of an accepted basket of the standard of living items, such as:

  • food prices;
  • cost of housing;
  • transportation costs; and
  • medical costs

How does inflation affect our daily lives? Inflation increases food, gasoline, and utility costs, reducing savings and discretionary spending. Price increases create economic inequity. They are tough on the middle class, and even harder on the lower class.

What is behind the rise in prices? The federal government, via Statistics Canada, reports that the consumer price index in September was up 4.4 percent compared to last year. In August, the reading grew by 4.1% year-over-year. Last month, consumers paid 32.8 percent more for gasoline than in September 2020. This increase in gas prices is what drove most of the increase.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: The negative side of the cost of living increases

As the cost of living and the inflation rate rises, Canadians are often caught short by unexpected financial burdens that can quickly devour their earnings. At the same time, the cost of day-to-day living, like food and housing, is increasing, which makes it hard for Canadians to save money for the future. Research shows that for low-income families, housing, food, transit and child-care costs generally are all increasing at a faster rate than incomes. This can easily push poorer households below the poverty line.

All of us have heard about the cost of living increases, and so far it has been a controversial topic. We haven’t reached a consensus regarding this issue. Some say we shouldn’t worry about it, while others say we need to act.

The surge in inflation highlighted the failure of Prime Minister Justin Trudeau’s economic policies, said Erin O’Toole during the recent federal election. How did PM Trudeau respond? In his view, monetary policy is not one of the top priorities for his government after the election. He continued:

“When I think about the biggest, most important economic policy this government if re-elected, would move forward, you’ll forgive me if I don’t think about monetary policy. You’ll understand that I think about families.”

Canadians were encouraged by Erin O’Toole to vote out the government. Well, that did not happen!

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: How the rising Consumer Price Index affects you

Researchers at Angus Reid Group conducted an online poll of 2,015 Canadians in September to determine the affordability of living in Canada. The survey found 26% of respondents had incurred at least one new debt, with 72% reporting that this debt has negatively affected their lives. The most common type of new debt was credit card debt.

In a previous Brandon Blog, I reported that many households were able to pay off higher-rate credit card debt during the lockdown while receiving payments from federal government COVID-19 pandemic support programs. After a return to normal, however, that will look, those same households run the risk of increasing their credit card balances again. The reality is that most people used their credit cards as a supplement to their income to pay for living expenses and/or lifestyles due to insufficient income.

According to the new survey, Canadians have now started taking on new credit card debt. As a result, their quality of life is further diminished as more debt accumulates and the pandemic continues. Canadians’ savings have also been impacted by increased spending on essentials, job loss and lower-income, according to the survey.

High real estate prices are forcing many Canadians to delay home ownership, according to the survey. Meanwhile, we have seen that the one thing the pandemic couldn’t stop was the booming real estate market in large Canadian cities. Even areas not typically associated with significant price increases are showing growth in real estate prices now that more big city dwellers are opting for a more flexible lifestyle by working remotely. Based on these results, it is clear that there is a larger gap between those who can afford to buy a home and those who cannot.

60 percent of Canadians said they would prioritize saving for an emergency fund or nest egg. In other words, Canadians’ priorities have shifted in 2022, with most thinking about saving for emergencies, retirement, and a major purchase like a house, car, or cottage.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: Tips to combat the financial hit of rising living costs

If we spend $10 at a coffee shop every day, what should we do differently ahead of time so that we’re not tempted to spend that $10? All of these things become habits, and habits are hard to break.

Regular readers know that in prior blogs about household debt and spending, I have stressed the importance of household budgets. Every source of family income and every expense must be considered. You need to look critically at all family expenses and separate the wants from the needs. Attempt to cut every expense you have (yes, every single one!) with the aim of saving 10% – 50% right now. Also, consider creatively if you can earn extra income in any other way.

There is no doubt that rising inflation, ongoing economic challenges worldwide, and the risk of interest rates going up are causing many Canadians to feel stressed and stretched to the limit. But it is still possible to spend less and build savings, even as your living costs rise.

As you do so, here are a few tips to help you stay on top of your finances and avoid debt in spite of rising costs:

  • Even though restaurants reopen, that doesn’t mean you have to buy most of your meals there. You can buy food at grocery stores instead.
  • Take advantage of what’s on sale or can be purchased at a discount when planning your meals.
  • If you can, buy bigger packages when they’re on sale for a lower price than smaller packages.
  • Analyze all your household and utility bills to find savings.
  • Savings are possible in many areas, including the bank account, cell phone, and internet plans.
  • Those $10 a day you spend at coffee shops add up to $170 a month if you do it 4 days a week.

When you’re looking forward to preserving your overall well-being through a sound money management plan, it’s easy to remember why you’re making frugal choices.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere summary

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

cost of living in toronto
cost of living in toronto

 

Categories
Brandon Blog Post

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

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

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

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

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

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

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

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

What is in the Bankruptcy and Insolvency Act of Canada?

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

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

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

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

Growth in consumer proposals and business proposals

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

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

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

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

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

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

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

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

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

The Bankruptcy and Insolvency Act of Canada case

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

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

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

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

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

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

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

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

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

bankruptcy and insolvency act of canada
bankruptcy and insolvency act of canada

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

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

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

According to the Registrar:

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

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

Bankruptcy and Insolvency Act of Canada summary

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

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Brandon Blog Post

CONSTRUCTION LIEN ACT OF ONTARIO: THE GRIPPING FIGHT BETWEEN LIEN FILING, A PRIOR MORTGAGE & RECEIVER FEES

construction lien act of ontario
construction lien act of ontario

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

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

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

Construction Lien Act of Ontario: What is a Construction Lien?

The Construction Lien Act of Ontario regulates how payments are made to parties who provide services or materials to a construction project. Construction liens may be filed when a project owner does not make prompt payment to the contractors or suppliers. You can register a construction lien on the title if you have provided materials or services to improve the property.

Having enacted amendments to the Construction Lien Act of Ontario (now the Ontario Construction Act, R.S.O. 1990, c. C.30), Ontario is achieving its plans to modernize provincial construction laws in order to improve efficiency and competitiveness for construction firms.

In this Brandon Blog, I examine the recent Ontario court decision regarding the treatment of court-appointed receiver fees when mortgagees and construction lien claimants disagree over the priority of their claims.

construction lien act of ontario
construction lien act of ontario

Construction Lien Act of Ontario: Construction lien and holdback rules

Disclaimer: I am by no means an expert in this area. Nevertheless, as a licensed insolvency trustee, I have acted as a court-appointed receiver over incomplete construction projects. Therefore, I have encountered various construction lien issues in receiverships.

General changes made to the Construction Lien Act of Ontario are related to prompt payment rules and the establishment of new dispute resolution mechanisms (adjudication). According to provincial construction law, prompt payment refers to the payment of an invoice after a “proper invoice” is issued.

A general contractor’s invoice must be paid within 28 days of receipt by the owner. The owner has 14 days to notify the contractor if he disapproves of the amount, quality, or invoice of the work as outlined in the invoice. In place of the old requirement of 45 days, liens must be filed/preserved within 60 days now.

This policy change aims to improve cash flow within the construction pyramid by resolving conflicts more quickly. The dispute resolution procedure is now an adjudication process for the adjudication of construction disputes are handled by qualified adjudicators. The is also a code of conduct for adjudicators.

In the absence of an agreement to extend the timeline, the adjudication procedures state that the adjudication decision will be made within 46 days after it is initiated. If an adjudicator’s decision is not followed, the party expecting payment is also entitled to suspend the work under the contract or terminate it.

Holdbacks are what they sound like. The holdback process requires that for any project owner, contractor, or subcontractor to hold back 10% of the price of materials or services they provide is known as a holdback. With the amendments to the Construction Lien Act for Ontario, holdbacks remain at 10% of the value of improvements, but security can be offered in lieu of cash. Now a letter of credit or repayment bond can be used to maintain holdback.

In light of modern-day construction projects’ long-term nature, the Act expands the options for the make-up of holdback payments. They may now be made annually or in phases or portions, depending on the terms of the agreement.

construction lien act of ontario
construction lien act of ontario

Lien Filing under the Construction Lien Act of Ontario

Now for the case. The decision of the 3 Judge panel in the Ontario Superior Court of Justice Divisional Court was released on October 5, 2021. This case essentially deals with the ranking between the fee and costs of a Court-appointed receiver, the interest and costs owing to a mortgagee whose mortgage was registered prior to the registration of construction lien actions and the construction lien claims which then arose.

It was an appeal from a Judge’s decision on appeal from a Master’s (now called Associate Judge) decision who regularly dealt with construction lien cases. This appeal is primarily about the interpretation of section 78(3) of the then Construction Lien Act of Ontario. Prior mortgages have priority over lien claimants when there are arrears in interest charges, fees, or expenses related to the mortgage. The case also discusses how priority is determined when a previous mortgage is in default.

The report by the Associate Judge was issued on May 24, 2018. At trial, the issue was a priority contest between lien claimants, who were now bankrupt and represented by their licensed insolvency trustee, and the mortgagees. There was a court-supervised receivership over the property. During the receivership, my Firm was managing the court-supervised receivership on behalf of the husband and wife who owned the company which owned the property.

According to the Associate Judge, the mortgagee had priority over the lien claimants. As a result, the court-approved receiver fee and costs, mortgage interest, mortgage principal, and other charges ranked ahead of the construction lien claims.

The Trustee appealed that decision. The appeal was successful insofar as it was determined that the Associate Judge’s report was in error and that she failed to determine whether the mortgagee had priority over lien claimants with respect to a deduction for the court-approved receiver‘s fee and costs, mortgage interest, mortgage principal, and other charges. Consequently, the Judge ruled that the mortgagee did not have such priority for interest arrears, enforcement costs, and charges and that any funds paid into court should be given to the Trustee on behalf of the claimants of construction contracts.

Now, the mortgagee has appealed the Judge’s decision. Prior mortgages and building mortgages are covered in section 78(3) of the then Construction Lien Act of Ontario. Mortgages used for property acquisition are known as prior mortgages, and building loans are used for construction funds. For the mortgage advances to be entitled to priority, they must have been made before the registration of claims under the construction lien regime.

construction lien act of ontario
construction lien act of ontario

The court decision of this Construction Lien Act of Ontario case

According to the Judges hearing this appeal, the arrears of interest and the reasonable expenses, and fees that relate to enforcing security (i.e., the mortgage) cannot be adjudicated in a priority proceeding. Arrears in interest and reasonable expenses incurred on a defaulted mortgage should be determined through proceedings such as the power of sale proceedings, bankruptcy proceedings or the appointment of a Trustee.

The court overseeing the receivership administration approved the sale of the property during the court-supervised receivership proceedings. That same court also affirmed the receiver’s fee and costs, as well as reviewing the evidence and rendering an opinion regarding what the mortgagee was entitled to under the mortgage registered and advanced before a construction lien claim arose. All stakeholders were served with the original court application to appoint the receiver. Lienholders were included in this process as well. The Appointment Order specifies the priority of the receiver’s fee and costs. Nobody questioned the priority and even the lien claimants did not object to it.

All things considered, the judicial panel had to agree with the Associate Judge that all the amounts approved by the Judge ruling on the receivership and all the advances made before any construction lien claims arose ranked in priority for all legitimate costs and arrears of interest. In deferring to the assessment of the receivership Judge, this panel showed deference. As a result, the lower court Judge’s decision was reversed and the Associate Judge’s decision was upheld. The Trustee was ordered to pay costs.

construction lien act of ontario
construction lien act of ontario

Construction Lien Act of Ontario summary

I hope you found this Construction Lien Act of Ontario Brandon Blog informative. This case was really one big construction dispute resolution process. The provincial court deals with receivership matters to adjudicate under the applicable insolvency law.

With too high debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

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

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

It’s good that you’ve come to this site, where you’ll find answers to your questions, sort through your options, and discover that you can get help. You’re not alone, and the professionals at Ira Smith Trustee & Receiver Inc. are committed to helping you find a debt solution that’s best for you.

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

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

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

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

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

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

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

 

Categories
Brandon Blog Post

CEBA LOAN UPDATE: 3 INTRIGUING CREATIVE WAYS FOR ENTREPRENEURS TO CONQUER CEBA LOAN DEFAULT

ceba loan update

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

CEBA loan update introduction

Canada Emergency Business Account (CEBA) loan application deadline was on June 30, 2021. As of right now, COVID-19 support for businesses and individuals soon will be ended by the federal government. The assistance from government programs has been both necessary and very helpful. CEBA was merely one product from an array of government support for Canadians and Canadian businesses.

Many entrepreneurial businesses have lost confidence in their financial prospects due to uncertainty over the fate of ongoing federal pandemic support, according to the Canadian Federation of Independent Business (CFIB). It is pushing the Liberals for more life support to avoid a flood of insolvencies.

This Brandon Blog provides a CEBA loan update and answers a question that many entrepreneurs have asked us: What counts as a CEBA loan default? The blog also tells you about three intriguing creative ways for entrepreneurs to conquer CEBA loan default.

CEBA loan update: Original CEBA eligibility requirements

The CEBA online application process began on April 9, 2020. It was part of the general program to supply Canadian companies with access to credit and support for business operations under the COVID-19 support introduced by PM Trudeau. Under the original program, federally guaranteed financing was provided to each qualifying company for $40,000 by financial institutions.

Canadian chartered banks processed and financed the loans based on the applications from businesses. The Canada Emergency Business Account is not a business account, despite its name. Instead, it serves as a non-revolving loan. It is a government-guaranteed loan of $40,000. The CEBA are interest-free loans that do not need to be repaid until December 31, 2022. Interest will accrue after that date.

The Canadian government created the CEBA to assist small and medium companies and non-profit organizations with their most pressing cash needs during the COVID-19 crisis. The entire process was conducted online. A pre-screening tool was implemented as part of the process. Applicants completed the questionnaire and provided the necessary information. After that, the online application process system:

  • issued a CEBA pre-screen tool reference number;
  • advised that your bank had submitted the application;
  • explained that your bank has no involvement in the application process; and
  • that you will hear back within 7 to 10 business days.

The approval requirements for the $40K CEBA were not difficult to meet. On or before March 1, 2020, any incorporated company or non-profit relying on their respective CRA Business Numbers and having a Canada Revenue Agency Business Number (BN) could apply for the CEBA. A company or non-profit also needed to be a business with payroll and have a total 2019 payroll of $50,000 to $1 million with the Canada Revenue Agency Business Payroll Number (BN).

There was also an online attestation to sign confirming all the information was correct. Each financial institution had its own form. So, for example, if you applied through The Toronto-Dominion Bank (TD), there was a TD website application attestation.

ceba loan update
ceba loan update

CEBA loan update: Expanded CEBA eligibility requirements

Then there was a CEBA loan update since it was first announced as additional government assistance for businesses’ additional funding. There were changes to the maximum loan balance, eligibility criteria, and other details. As part of the CEBA program extension, businesses that were in operation in Canada on March 1, 2020, were now eligible for a $60,000 grant. Businesses must be all-Canadian corporations, partnerships or proprietorships.

The $60,000 CEBA and $20,000 CEBA expansion financing is not available to other types of business. The $40K CEBA amount already funded automatically qualifies you for the $20,000 CEBA expansion, if you were approved for the $40K CEBA amount in the first place. Now, sole proprietors and partners in business partnerships are also eligible. Corporations owned by family members continue to qualify. Not-for-profit organizations apparently still did not qualify.

To be eligible, applicants for this CEBA loan update had to have a payroll amount between $20,000 and $1,500,000 in the 2019 fiscal year. If not, the expansion allowed them to apply for the non-deferrable expense stream (applicants whose total payroll was $20,000 or less in the 2019 calendar year).

The actual program requirements were written in a funny way. Rather than payroll expenses, it talks about having paid employment income. Apparently, Parliament wanted to emphasize that the money should be used to employ Canadians, so they can earn the employment income being paid by the business payroll!

Eligible businesses are ones that:

  • CRA Business Numbers – has an active business account with a CRA-issued BN registered before March 1, 2020.
  • Has a business chequing/operating account with the proposed lending institution they are applying through when the application process begins. An example would be an account at BMO B M O business banking relationship or a similar account at any other Canadian chartered bank. You should not have any problem meeting this requirement of having an active business chequing account if you have a Canadian operating business.
  • In order to qualify for the entire $60,000 CEBA, applicants must not have previously used the Canada Emergency Business Account Program; they also cannot request support under the CEBA Program at any other financial institution. The $20K loan could be added to the $40K loan that you already received.
  • The plan was to remain open or to reopen as soon as the restrictions were lifted.

CEBA loan update: Repayment terms, rate of interest, other fees and charges

The main provisions of the CEBA term loan are:

  • Business owners have access to a single tranche $60,000 loan through CEBA.
  • Interest is 0% until December 31, 2022.
  • Interest-only until then;
  • Loans are fully open, so the non-forgiven portion of principal repayment can be done in full or in part before January 1, 2023.

    ceba loan update
    ceba loan update

CEBA Forgiveness: Pay it back on time and get free money

To fully repay the loan by December 31, 2022, a borrower needs to repay only a portion of the amounts outstanding. They only need to pay $40,000 of the $60,000 principal, or $30,000 if you only took a $40,000 CEBA loan. If the loan is repaid by 2022, there will be $20,000 forgiven. According to the federal government, this is actually called a loan forgiveness program. This portion represents forgivable loans for early repayment.

After December 31, 2022, any outstanding balance will bear interest at the 5% rate per year for ‘Extended Term.’ Extended Term ends on December 31, 2025. Essentially, the Extended Term converts it to a 3-year term loan after the interest-free period, which is December 31, 2022. Interest will be payable every month on the outstanding principal during this period. No later than December 31, 2025, the full principal balance of $60,000 is due.

CEBA loan update: Default, Notice of Default and Demand for Repayment

There are some CEBA loan update default events. Each default event is fairly straightforward. You may be required to repay a loan if any of the following defaults occur:

  • non-payment under CEBA funding;
  • the repayment of any other business loans not covered by CEBA to the same financial institution is not made under their terms.
  • violation of any term of the CEBA agreement, including making false or deceptive statements in the CEBA application;
  • the business becomes insolvent or commits one or more acts of bankruptcy;
  • a receiver is appointed.

If the borrower defaults, the only recourse for the bank would seem to be to advise the borrower that full repayment is due immediately. A CEBA loan agreement contains no other specifics that grant additional powers to a lender.

Personal guarantees are not included in CEBA loans. The CEBA agreement does state that any successors or personal representatives, including executors and administrators, are bound by the CEBA agreement. When only corporations could apply in the beginning, this language did not make sense. The language now makes sense since the CEBA update expanded CEBA to include sole proprietors and partners, who are people, not companies.

Keep in mind that if you are a sole proprietor or partner in an unincorporated business, the loan was made to you personally. So although there is no personal guarantee, if you run an unincorporated business, you are personally liable.

ceba loan update
ceba loan update

CEBA Loan Update: Now For The 3 Ways For Entrepreneurs To Conquer CEBA Loan Default

In the same way that I mentioned the findings of the CFIB in the introduction to this CEBA loan update Brandon Blog, I’ve been contacted by entrepreneurs who applied for and received the $60K CEBA loan funds only to lose confidence in the financial prospects of their business. The company is still in financial trouble and its operating costs are still greater than the revenue being earned. It is just the case that the business managed to hang on longer. Business owners want to understand the risks associated with CEBA repayment if:

  • their business fails;
  • it closes; or
  • If their financial institution appoints a receiver over the assets due to other loans that are in default or, the business goes bankrupt.

So far, I have informed them of my understanding of CEBA loan terms and CEBA loan default events. Entrepreneurs should also make sure the company’s books and records can demonstrate receipt of the CEBA interest-free loan and that used funds were appropriate for the company’s needs.

So here are the CEBA loan update 3 ways for entrepreneurs to conquer a CEBA loan default:

  1. The first CEBA loan update loan default tip is to relax because right now, nothing is due. Not interest or principal. Interest-only begins on January 1, 2023, and then it is a 3-year term loan with monthly payments of interest calculated at 5% per annum. So if your business is still running, for $250 a month, you can buy yourself another 3 years to see if things get better. Maybe things will look brighter as you get closer to the end of 2022 or 2026, as the case may be.
  2. If the CEBA loan borrower is an incorporated company, relax. You are not personally liable. This is my second CEBA loan update loan default tip.
  3. My third CEBA loan update loan default tip is we need to talk if you are a sole proprietor or partner. Don’t relax. Will you continue your business? Is it possible for the partners to pay off the CEBA loan and obtain a 25% loan forgiveness? I can develop strategies for you to reduce the damage of your personal obligations to the Bank if this isn’t possible.

CEBA loan update summary

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

ceba loan update
ceba loan update
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Brandon Blog Post

EXECUTOR DUTIES ONTARIO: OUR COMPLETE GUIDE TO MAKE A 1ST TIME EXECUTOR LOOK LIKE A PRO

executor duties ontario
executor duties ontario

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

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

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

Executor duties Ontario: What is an executor or estate trustee?

Executors, or Estate Trustees as they are now called in Ontario, are people named in a Will to become the personal representatives of the deceased. Executor duties Ontario is a complicated process.

The Estate Trustee accepts the role, authorizes the liquidation of the estate assets and the payment of money. The Executor directs and administers the deceased estate both in accordance with provincial and federal laws while abiding by the declared wishes of the deceased.

Executors are people who are legally responsible for the estate of someone who has died. They are required to manage the estate according to the wishes of the deceased person. To be an executor, you must meet certain minimum legal requirements. You should:

  • have already turned 18;
  • be financially stable;
  • reside in Ontario;
  • have good organizational skills;
  • be able to keep complete records of all the estate’s transactions;
  • have a good knowledge of financial matters; and
  • be able to make effective decisions about the estate.

Suppose there were no Will? What happens? Without a Will, a court can appoint an Estate Trustee Without A Will.

Through our other business, Smith Estate Trustee Ontario, my Firm acts as a Court-appointed Executor/Estate Trustee. Far too often, the person who ends up with the responsibility of settling the estate of a deceased family member or friend is unprepared to do so. This commonly leads to emotional stress, confusion, and financial hardship.

From this Brandon Blog, you’ll learn everything you need to know about effectively fulfilling your duties as an Estate Trustee in Ontario. You will learn how to handle the estate settlement process in Ontario and properly fulfill the duties using our Executor duties Ontario checklist.

Executor duties Ontario: What does an Executor/Estate Trustee Do Right Away?

Executors are people who are appointed to carry out the Will or trust of a person who has died. They are given the authority to make decisions on behalf of the deceased, as long as those decisions are consistent with the wishes expressed in the deceased’s Will or trust. There can be as many Estate Trustees as are indicated in the Will or trust document. When there is a Will, in Ontario, the role is one of Estate Trustee Under A Will.

Once you are notified that you are named as the Executor or one of the Estate Trustees, the first thing you need to do is to decide if you wish to act. Are you capable of doing the job and are you free from any conflict of interest? It is possible to recuse yourself before taking any steps to act as the Executor. However, once you start acting as the Executor, it is very difficult to resign.

An Executor will obtain a copy of the Will as one of the first things they do. As a result, the person’s most recent Will automatically becomes the last Will of the deceased. Some people are unaware that a Will is only as good as its Executors and how they perform their Executor duties Ontario.

Executor duties Ontario: Follow this guide to look like a professional Estate Trustee

Action #1 – Funeral Arrangements and other Day 1 action

If the family is not taking care of this themselves, then you must arrange for the funeral immediately after death. Religious observance of the family and the wishes of the deceased should be your guide. Other things Executor duties Ontario include are:

  • Arrange for organ donation if applicable.
  • Find the Will.
  • Coordinate with family members to notify friends and family of the passing.
  • Request multiple copies of the Proof of Death Certificate from the funeral director.
  • Apply for a provincial Death Certificate.
  • Make necessary arrangements for the ongoing care for dependents/minor children and pets.
  • Contact the deceased’s bank to ensure that all amounts on deposit are safeguarded, access to any safety deposit box is secured and change signing authorities to Executor(s) so that necessary payments can be made.
  • Confirm payment to the funeral home.

Action #2 – Submit official paperwork on behalf of the Estate

There are many other notifications that should be made within say, 1 to 2 weeks after the funeral. These Executor duties Ontario consist of:

  • File the CPP death benefit claim.
  • Transfer the pension to the spouse by applying for CPP Survivor’s Benefits.
  • Canada Revenue Agency Notification to Update Record.
  • Submit OAS/CPP/GIS notifications.
  • Send the Notice of Death to Equifax and TransUnion, the two Canadian credit bureaus.

    executor duties ontario
    executor duties ontario

Action #3 – Protect the hard assets

Concerning any hard assets, as soon as possible after the funeral, Executor duties Ontario include:

  • Identify and secure all assets: the home, the contents of the home, and other real estate assets.
  • Direct the post office to forward the mail care of the Estate Trustee.
  • Inform utilities, landlords, and other service providers.
  • Review all documents associated with asset ownership, business, investment, including insurance, mortgages, and leases.
  • Analyze all financial documents, including contracts, divorce papers, or separation agreements, court orders.
  • Secure personal property, business, vehicles, perishable goods, and safety deposit boxes.
  • To keep the insurance coverage active, find out what action you need to take if there is a vacant property.
  • Have all the hard assets appraised.

Action #4 – Protecting financial assets

I already mentioned that I would contact any known financial institution. Other Executor duties Ontario to protect financial assets as soon as possible after the funeral, include:

  • Gather information about debts and expenses.
  • Cut off all unnecessary expenses. People rarely think about memberships or subscriptions until the bill or publication arrives in the mail.
  • The other banks or credit unions, investment advisors, and life insurance companies should be notified.
  • All credit cards and debit cards should be cancelled.

    executor duties ontario
    executor duties ontario

Action #5 – Contacting beneficiaries

Other Executor duties Ontario include:

  • Completing the inventory of assets and their values on the date of death.
  • Contacting each of the beneficiaries of Estate individually.
  • Explaining the Estate administration process to them.
  • Estate beneficiaries need to know they only receive distributions upon the probate of the Will, completion and filing of all final tax returns, and full payment of the estate’s debts and debts of the deceased. How the estate is handled will also depend on its size and nature.
  • Depending on the circumstances, the Executor of the estate can make interim distributions.

It is important to keep in mind that Estate Trustees are personally liable. This means if you pay out too much on an interim basis and don’t have enough to cover all the debts, you will be in trouble if you can’t claw back any money.

Action #6 – The probate process

Generally, probate involves completing the necessary Ontario government forms for the confirmation and appointment of the Executor(s), who will manage the estate distribution. The Executor duties Ontario for probate include, say within 30 days after death:

  • Speak to the estate administration lawyer for assistance.
  • Calculate the estate administration tax for the Ontario estate.
  • With the help of the estate administration lawyer, prepare the probate application.
  • The probate application, along with all relevant documents, should be filed with the deceased’s local probate court. The required documents, including the original Will and payment of the estate administration tax.

    executor duties ontario
    executor duties ontario

Action #7 – While you are waiting for the Certificate of Appointment of Estate Trustee With A Will

The court can take many months to respond to your probate application, especially in Toronto. In the meantime, there are things that Executor duties Ontario allow you to do without the need to show the Certificate of Appointment. You can use a copy of the Will. These include:

  • The deceased’s passport, driver’s license, and Ontario health card can be cancelled.
  • Meeting with the investment advisor, banker, and insurance agent to gain a better understanding of the estate’s assets.
  • Finalize the list of assets.
  • Developing a strategy to liquidate the assets of the estate.
  • Choose a real estate broker, negotiate the rate and prepare the listing for posting after the grant of probate is received. Be sure you obtain a professional appraisal first to determine the current market value. You don’t want to rely on just the broker’s estimate of market value.
  • Organize an estate sale to dispose of personal belongings that have not been claimed by the family. When appropriate, arrange donations.
  • Prepare the property for sale. In almost all cases, minor repairs, painting, cleaning, and staging are necessary.
  • Prepare life insurance forms (to be submitted once you have your Certificate evidencing the appointment of the Estate Trustee(s)).
  • Stay in constant contact with the beneficiaries to inform them that you are still waiting for the grant of probate and that things are proceeding normally.

Action #8 – Selling the assets in Estate

Some of the following Executor duties Ontario could be done only with a certified copy of the Will. Some will require a Certificate from the court appointing the Estate Trustee:

  • Open an estate bank account with your preferred financial institution if you have not already done so.
  • Merge all bank accounts into the estate account.
  • List any real property for sale.
  • Request that all mutual funds, stocks, bonds be liquidated and the funds transferred to the estate
    account.
  • Incorporate all estate sale proceeds and any other cash assets into the estate trust account.

    executor duties ontario
    executor duties ontario

Action #9 – Pay all debts and calculate and pay all taxes

To make the final distribution, the creditors and amounts owing to Canada Revenue Agency must be settled in full. In this phase, Executor duties Ontario include:

  • Clear debts.
  • Make sure that tax documents are in order.
  • Prepare all necessary income tax returns, including the estate tax return, with the help of an accountant or other tax specialist.
  • If your Notice of Assessment has been received and the CRA has been paid all amounts owed, you can request a Tax Clearance Certificate from them.

Action #10 – Final distribution to estate beneficiaries and completion of Estate records

Now it is time to make the distribution to beneficiaries and close your file. These Executor duties Ontario are:

  • If you are charging a fee, including a care and management fee for having administered the estate, calculate it and pay yourself.
  • Prepare and issue the distribution to beneficiaries of the remainder of the estate.
  • Prepare a final accounting and issue it to all beneficiaries.
  • Get releases from beneficiaries.
  • Closing the estate bank account.
  • Terminate the deceased’s social insurance number.

    executor duties ontario
    executor duties ontario

Executor duties Ontario: Compensation for estate trustees

The Ontario estate laws and associated regulations provide a framework for the management of a deceased person’s estate and for the distribution of the property. The laws and regulations also deal with the duties and responsibilities of the Executor and compensation for the Estate Trustee.

All Estate Trustees are legally permitted to charge fees. A fee that isn’t in the Will must be an amount that is considered fair and reasonable. The amount depends on the value of your estate and the amount of work your Estate Trustee has to do.

Even though the fee calculation is more complicated than this, for our purposes, you should use as a benchmark 5% of the estate’s value. Additionally, an additional care and management fee of 2/5 of 1% of the average annual value of the assets is sometimes charged.

Executor duties Ontario summary

I hope you found Executor duties Ontario Brandon Blog helpful. If you are concerned because there is an Estate that needs a professional Estate Trustee, Smith Estate Trustee Ontario can help you. Since we are also a licensed insolvency trustee firm, we can also help if the deceased Estate is insolvent. We can also help if you or your business have debt problems.

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

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

Categories
Brandon Blog Post

THE CANADIAN BANKRUPTCY AND INSOLVENCY ACT EASY BEGINNER’S GUIDE

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

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

What is in the Canadian Bankruptcy and Insolvency Act?

Canada’s bankruptcy and insolvency laws are governed by two major pieces of federal legislation: the Canadian Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. Additionally, provincial legislation intersects with the Canadian Bankruptcy and Insolvency Act. During bankruptcy, a debtor can keep certain types of property based on provincial legislation. Details may differ amongst each Canadian province. Provincial governments and territories have their own laws regarding property exemptions, court orders, and debt collection.

The Canadian Bankruptcy and Insolvency Act (often referred to as the “BIA” or the “Bankruptcy Act“) is a federal government statute that sets out the rules and procedures governing insolvency proceedings in Canada. These rules and procedures will apply to all corporations, individuals and partnerships that are parties to an insolvency filing. The whole point of bankruptcy legislation is to allow the honest but unfortunate debtor to shed themselves of their debts and to allow for the sale of assets or reorganization and refinancing of insolvent persons so that there is also fairness for the different claims of creditors.

Under the Companies’ Creditors Arrangement Act (CCAA), financially troubled corporations are given the opportunity to restructure their affairs in order to avoid bankruptcy. A corporation must have debts of at least $5 million to qualify for the CCAA.

The Canadian insolvency landscape is a complex one, with many different insolvency proceedings being used to deal with many different types of debtors. In this Brandon Blog, I provide an easy beginner’s guide of the Canadian Bankruptcy and Insolvency Act, as a primer into Canadian insolvency legislation and the administration of estates.

This Brandon Blog is not about the nuts and bolts of filing for bankruptcy. Other blogs I have written cover that topic and more. You can use the search function above to search for those Brandon Blog topics.

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

Everyone knows you should do your best to stay out of too much debt, but for many people, it’s an impossible feat. When you’re over your head in debt, you’re having to keep up just to pay the interest on your debt. When you are spending more than you are making, you can’t pay your bills on time, or your assets when liquidated are worth less than your total liabilities, you are insolvent. Insolvency is the main test to see if you, or insolvent companies, qualify to start a bankruptcy process or a formal restructuring process, either under the Canadian Bankruptcy and Insolvency Act or the CCAA.

The Bankruptcy Act was designed to help Canadians who find themselves in financial difficulty. It is the main piece of Canadian insolvency legislation that governs bankruptcy proceedings, receivership and personal and corporate restructuring proceedings through consumer proposals and commercial proposals. Commercial proposals are also available for those people with consumer debt levels greater than the amount allowed to qualify for a consumer proposal. All Canadian bankruptcies, proposals and receiverships are governed by the Act. It contains bankruptcy laws, rules and guidelines for all stakeholders: the Superintendent of Bankruptcy (which is part of Industry Canada) the Licensed Insolvency Trustee, the debtor, and the creditors.

canadian bankruptcy and insolvency act
canadian bankruptcy and insolvency act

What options are available under the Canadian Bankruptcy and Insolvency Act?

The Canadian Bankruptcy and Insolvency Act provides a number of ways to deal with a financially troubled company or person. Most involve a court-supervised process. The options for a person or business in financial trouble and not able to right themself or itself are:

  • Consumer proposal

It is an offer to your creditors to repay a portion of your unsecured debt obligations in exchange for their elimination (with certain limited exceptions as laid out in the Bankruptcy Act). You can qualify if you owe $250,000 or less, excluding any debts registered against your home, such as mortgage debt or secured home equity line of credit debt.

A person proposes a plan to make monthly payments to the Licensed Trustee acting as the consumer proposal Administrator. The total amount offered to your unsecured creditors must be agreed upon by them. Within 60 months, you must pay off the entire amount accepted. Creditors typically accept a total payment of 25% or less of your total unsecured debt. Individual situations vary, however.

A successfully completed consumer proposal allows the insolvent person to eliminate their debts and avoid an assignment into bankruptcy.

  • Commercial proposal

Commercial proposals are also known as Division I proposals. The reason for this is because it is provided under Canadian Bankruptcy and Insolvency Act, Part III, Division 1 (consumer proposals are found under Part III Division II). An insolvent corporation or person can use it for restructuring proceedings. When a consumer’s debt exceeds the limits of a consumer proposal, a “commercial proposal” would be filed. If a definitive commercial proposal cannot be immediately prepared but the debtor needs to file in order to invoke the stay of proceedings (discussed in the next section), they can get the immediate protection they need by first filing a Notice of Intention To Make A Proposal.

A commercial proposal works in a very similar way to a consumer proposal, except for some differences as follows:

    • A commercial proposal may have various classes of creditors. A consumer proposal normally does not.
    • Unlike for a person, there is no streamlined reorganization process for companies. Therefore, even if its debt is $250,000 or less, a company cannot file a consumer proposal.
    • A meeting of creditors must be held as part of a commercial proposal. If the Official Receiver (being a representative of the Superintendent of Bankruptcy), doesn’t wish to chair the meeting, it can be delegated to the Trustee. A creditor who has filed a valid proof of claim has voting rights. They have the right to vote ahead of the creditors’ meeting by using a voting letter or in person. An official meeting of creditors is only held in a consumer proposal if 25% of the proven creditors’ claims request one.
    • In a consumer proposal, if a meeting is not requested, the consumer proposal is deemed approved and there are no voting rights to be concerned about. If a meeting is requested, then the creditors who attend the meeting can vote by ordinary resolution for the acceptance of the consumer proposal. In a commercial proposal, it is a two-pronged test: 3/4 of the $ value voting AND a majority in the number of those voting.
    • If the commercial proposal is voted down, the person or company is immediately deemed to have filed an assignment in bankruptcy. There is no such automatic bankruptcy if a consumer proposal is not accepted.

As soon as the commercial proposal is accepted by the creditors and approved by the court, the debtor starts making the payments promised in the proposal to the Insolvency Trustee. Once full payment has been made, the trustee in bankruptcy will issue to the person or company their Certificate of Full Performance. At this point, all provable claims, regardless of whether they filed a proof of claim or not.

As part of a successful restructuring process, the Trustee will run a claims process, vet every proof of claim to ensure that they are valid and that only an allowable claim is considered for distribution purposes. The Trustee will then comprise a scheme of distribution in order to distribute the funds promised to the creditors in the commercial proposal.

Restructuring under either the Canadian Bankruptcy and Insolvency Act or CCAA becomes possible for companies with debts greater than $5 million.

  • Receivers and Secured Creditors

Receiverships are remedies for lenders who have loaned money out and taken security over the debtor’s assets. It is most common in Canada for financial institutions to be lenders to Canadian businesses. As long as their loan documents, including the security agreement, allow for it in writing, a secured creditor may appoint a receiver when a debtor defaults on secured debt. Secured creditors and receivers are subject to certain requirements under the Canadian Bankruptcy and Insolvency Act.

Receivership relies both on provincial laws and federal legislation. The Bankruptcy Act specifies several main requirements for receivership, including:

    • It is not permissible to enforce a security interest on the business assets of an insolvent person unless the secured creditor has given 10 days prior notice in the prescribed form and manner.
    • Only a Licensed Insolvency Trustees (formerly called Trustees in Bankruptcy) can act as a receiver.

The secured creditor can appoint the receiver privately or with court approval.

A private receiver’s primary responsibility is to the secured creditor who appointed it. A court-appointed receiver is an officer of the court who protects the interests of all creditors of the debtor company.

Private receivers usually have from the security documents the power to run the debtor’s business and sell the debtor’s assets through auctions, tenders or private sales.

A court appointment is also preferred over a private appointment when there are significant claims against the debtor or its property as well as litigation or a threat of litigation. It is according to the provincial rules of court and s. 243 of the BIA (National Receiver) that a court may appoint a receiver.

The receivership order normally stays proceedings (discussed below in the next section) against the receiver, the debtor, and its property. In terms of its purpose, it gives the receiver authority to manage the assets of the debtor, to borrow money against the assets to repay a loan, to sell the assets of the debtor with the approval of the court, and to commence and defend litigation on behalf of the debtor. A privately-appointed receiver does not enjoy a stay of proceedings.

  • Bankruptcy

If a personal or commercial restructuring is not possible, then the insolvent person or company has no choice but to file for bankruptcy. The first step in dealing with insolvency is to consult an insolvency trustee. You can learn about the bankruptcy administration process and your legal rights from Trustees in Bankruptcy so you can make an informed decision. A candid discussion about how much you earn, what assets you own, and what types of debts you have can help you decide if bankruptcy is the best choice for you.

Here is what the Canadian bankruptcy procedure is all about. After the bankruptcy assignment has been completed, the Trustee submits it to the Office of the Superintendent of Bankruptcy Canada. All legal obligations will be handled by the Trustee once the assignment has been filed. Your credit­ors will no longer receive payments directly from you.

The Trustee administers your bankruptcy. No more lawsuits or wage garnishments for you. Depending on your province’s law, some of your assets will certainly be exempt. The bankruptcy vests your non-exempt assets in the Trustee. The Trustee will sell them. According to the Canadian Bankruptcy and Insolvency Act, the proceeds will be for the benefit of the bankrupt estate and there could be a scheme of distribution among your preferred creditors and ordinary unsecured creditors.

In the administration of bankruptcy, the Trustee will send your creditors a notice of bankruptcy. You must attend a creditors’ meeting if one is called. Additionally, you will need to attend two counselling sessions. Canadian insolvency legislation in Canada includes rehabilitation programs to help individuals regain financial stability.

Finally, you may need to make payments toward your debt. “Surplus income payments” ensure that people who declare bankruptcy and have sufficient income contribute to paying back a portion of their debt. Your debts will eventually be discharged, relieving you from the obligation of repaying most of the debt you had on the day you filed for bankruptcy.

Despite the fact that most debts can be discharged, some cannot, namely:

  • alimony and child support;
  • court fines and penalties;
  • debts related to fraud; and some
  • student loans.

You will suffer credit damage for several years after filing for bankruptcy. After your debt is discharged, you can start rebuilding your credit. Although it’s not ideal, it will lift the burden from your shoulders and solve the debt problems you couldn’t resolve on your own.

Canadian Bankruptcy and Insolvency Act: Can bankruptcy protect you from creditors?

In addition to bankruptcy, any filing listed above under the Canadian Bankruptcy and Insolvency Act will protect you from creditors. In fairness to all stakeholders, the filing calls for a “time out” after which no claims for money, lawsuits, or collection efforts are permitted. In legal jargon, we call this a stay of proceedings.

By virtue of the individual’s bankruptcy or insolvency, you may not terminate, amend, or accelerated pay, or claim the term of any agreement. When an insolvent person files a notice of intention or a proposal, a similar provision is made.

Just like in bankruptcy, if you file a notice of intention or a Division I proposal or Division II proposal, all proceedings automatically stay and no creditor is entitled to take any action against the debtor or to pursue any execution or other proceeding for the recovery of a claim provable.

Commercial proposals are normally worded so that Directors of insolvent companies who have filed notices of intention or proposals enjoy similar protection.

canadian bankruptcy and insolvency act
canadian bankruptcy and insolvency act

A word on cross-border insolvencies

Many of the large CCAA reorganization filings in recent times have been cross-border insolvencies. Canadian courts prefer that cross-border insolvencies proceed as a single process with one jurisdiction acting as the primary entity. The Canadian court examines whether the Canadian case should be considered the main proceeding in order to determine whether it is significant and connected to Canada.

The other jurisdiction (most often the U.S.) usually recognizes the Canadian court’s authority when the court believes the insolvency action should be handled, for the most part, in Canada. Likewise, the opposite is also true.

Canadian Bankruptcy and Insolvency Act: Personal bankruptcy

canadian bankruptcy and insolvency act
canadian bankruptcy and insolvency act

Canadian Bankruptcy and Insolvency Act summary

I hope you found this Canadian Bankruptcy and Insolvency Act Brandon Blog informative. With too high household debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

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

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

It’s good that you’ve come to this site, where you’ll find answers to your questions, sort through your options, and discover that you can get help. You’re not alone, and the professionals at Ira Smith Trustee & Receiver Inc. are committed to helping you find a debt solution that’s best for you.

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

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

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

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

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

canadian bankruptcy and insolvency act
canadian bankruptcy and insolvency act

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

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

Categories
Brandon Blog Post

CANADA’S DEBT BURDEN: CANADIAN WEALTH SOARS RELATIVE TO DEBT

canada's debt burden
canada’s debt burden

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

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

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

Canada’s debt burden growing for Canadians: 2021 Edition

Canada’s fiscal policy faces many challenges, according to the Fraser Institute. The federal and many provincial governments face serious financial challenges due to budget deficits and increasing accumulation of debt. As interest payments increase, there will be less money left for tax cuts, education, and social services. In the aftermath of COVID, the federal and provincial governments must develop long-term plans to address Canada’s growing debt problem.

Canada’s debt burden continues to be the talk of the town in this age of global statism. It’s always cited by statists that Canada’s federal debt is 100+ percent of GDP compared with 80 percent in the early 1980s. It’s even considered a threat to Canada’s sovereignty, a moral hazard, and a burden on future generations by some. However, individuals’ personal share of Canada’s debt burden may not be growing. I will explain some interesting Statistics Canada reporting in this Brandon Blog post.

Canada’s debt burden: The coronavirus is why provinces need financial assistance now

In 2020, the Premier of Newfoundland and Labrador wrote to Justin Trudeau, saying that his province faced an “immediate and urgent financial crisis” and was unable to raise short- and long-term funds.

During the critical period, the letter explained, the government has no alternative methods of funding provincial government operations, including its health care system. The Bank of Canada offered to buy 40 percent of all new provincial bonds four days after the letter was sent.

The province has been hit with a public health crisis of unprecedented proportions, and their provincial peers, who have similar debt-to-GDP ratios, are not far behind. It is likely that the government can do the same for provinces and municipalities that have to shoulder heavy coronavirus-related costs if it can provide zero percent loans to small businesses.

By law, it can.

canada's debt burden
canada’s debt burden

Is Canada’s debt burden a cause for concern?

Following a federal budget deficit of $354.2 billion last year, the Trudeau government budget documents show that the Feds anticipate a deficit of $154.7 billion in 2021/22, and deficits of at least $30 billion for another four years thereafter. There has been a significant increase in debt accumulation. During the next two years, the country’s net debt-to-GDP ratio is expected to rise to 55.3 percent. In spite of low-interest rates, government program spending in 2021/22 is expected to increase by more than 40 percent over 2019/20. Despite the prime minister’s vague promise that a balanced budget will be achieved at some point, there is no timeline for that.

Can Canadians expect a bout of inflation to continue rising? Can we expect an increase in interest rates? Do you expect a depreciation of the exchange rate? Is it possible that the government will default at some point? Are there any limits on the size of the debt?

Over the years, various economists have noted that federal government debt is not the same as “debt” in the way that the term is commonly understood. Even if it means working harder or cutting back on our spending, we expect to have to pay back debt at some point.

Unlike a government, a household has a finite lifespan. The government, however, can, in principle, refinance (rollover) its debt indefinitely while a household must eventually pay off its debt. Governments do not have to worry about involuntary defaults when they finance themselves with convertible debt.

As a burst of inflation has already begun, we should prepare for possible temporary spikes. Governments borrow money because they don’t spend all of their income right away. Some of it is saved until later. Therefore, future tax revenues can be increased without increasing current taxes. Thus, as real incomes increase, consumer spending increases, which in turn generates additional tax revenue. Therefore, the economy grows more rapidly than it would ordinarily.

How does the government handle overspending? Governments need to reduce spending sooner than later when they run up a level of borrowing that is unsustainable. If it does not, then raising taxes is the only option left. Those who are old enough to recall the 1970s know that high taxes tend to slow down economic growth.

Although prices haven’t risen too much so far for Canadians, their rise is inevitable and the end does not seem too close right now. Inflation concerns seem to be making daily headline news. Nonetheless, many people fear that living costs will continue to rise forever.

So that is the government. What has happened to individuals and their contribution to Canada’s debt burden over the last 18 months?

Canada’s debt burden: Canadian Debt To Assets Falls To Nearly Two-Decade Low

According to Statistics Canada, family financial debt is at its lowest level in the last two decades as a percentage of the overall household assets. Throughout the last twenty years, the debt-to-assets proportion has actually never ever been below its long-term average as it is now.

Therefore, Canadians are less likely to file for bankruptcy than in the past. This is supported by statistics on bankruptcies over the past 18 months. David Madani, senior director at Capital Economics, called it rather remarkable.

According to CNBC, Canadian consumer credit rose 0.5%, but non-financial corporate borrowing of business loans declined 1%. Lending to consumers is up. Consumer lending annual growth is primarily fueled by a substantial increase in mortgages and home equity loans, as I mentioned in previous Brandon Blogs. Debt on credit cards has steadily reduced during the pandemic. Three billion dollars more than expected was borrowed by non-financial companies.

canada's debt burden
canada’s debt burden

Canadian Household Wealth Soars, Canadian’s Debt Burden Drops Amid Pandemic: Statistics Canada

I will now turn my attention to the household wealth side of the ratio now that I have discussed the debt side. What’s behind the rise of wealth? The rise in wealth can be attributed to a number of factors:

  • prices for stocks and houses soaring;
  • a generous income support program from the government for jobless individuals;
  • during lockdowns, there are fewer things to spend money on.

Households have saved an estimated $90 billion as a result.

Amid the worst economic downturn in decades, Canadian households are seeing wealth hit a record high while debt burdens shrink relative to income. That is really the entire rise in household wealth story.

Compared to debt, Canadian wealth soared, but the bank executive warned that this might only be a mirage

Debt-to-assets fell to their lowest level since the early 2000s. In response to this, a Bank Exec at the National Bank of Canada believes it produces a “wealth effect” whereby consumers feel wealthy and then spend more. Why not get a new expensive truck for your driveway if you live in a million-dollar house?

Although Canadian banks are warning about the inevitability of rising interest rates and slowing economic growth, some economists say Canadians may be feeling wealthier than ever before. This could mean consumers will start spending again after years of saving for retirement or paying off debt. Capital Economics senior economist David Madani stated, “We’re seeing an increase in wealth.” Consumption is likely to pick up.” He says higher-priced items like cars and houses have also taken over.

Statistics Canada data shows household assets have soared this year. The housing boom created significant equity with little actual financial contribution from owners. When it comes to Canada’s debt burden or a family’s household debt, it’s important to look at the right statistics. It’s also important to remember the most important point about debt is not the debt itself. It’s the ability to pay it back.

canada's debt burden
canada’s debt burden

Canada’s debt burden: Where the heck does my money go?

This is a common question we always hear from people who come to us with financial problems.

I hope this Canada’s debt burden Brandon Blog was informative. With too much household debt and not enough wealth, you are insolvent. You can choose from several insolvency processes. It may not be necessary for you to file for bankruptcy.

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

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

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

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

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

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

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

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

canada’s debt burden

Categories
Brandon Blog Post

WHAT IS THE POWERFUL CRA LIEN ON PROPERTY TOOL?

cra lien on property
cra lien on property

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

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

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

CRA lien on property: Canada Revenue Agency’s collection powers

The CRA (formerly known as Revenue Canada) assigns “collection officers” to taxpayers who fail to make timely payments or who do not pay in full. For the CRA to agree to a payment arrangement (usually monthly payments), the taxpayer must provide financial disclosure on a monthly basis (details of their expenses, their income, and their assets).

Tax debts that cannot be settled through a payment plan may be registered in Federal Court. Once the debt is certified, the certificate is equivalent to a judgment entered in court. This is called a memorial. If you own property, the CRA can create a lien on your property based on your judgment. A CRA lien on property against your interest in your home is the most common CRA lien on property they register.

This Brandon Blog discusses a recent decision from the British Columbia Supreme Court that confirms that the CRA lien on property becomes secured once they are registered.

What is a Super Priority Lien?

A super priority lien is a powerful legal tool that gives the Canada Revenue Agency (CRA) first claim on a debtor’s assets when taxes aren’t paid. This type of lien takes priority over almost all other creditors, including banks and mortgage companies. The super priority lien applies specifically to unpaid source deductions (payroll taxes) and GST/HST taxes.

How Super Priority Liens Work

When a business fails to pay certain taxes, the CRA automatically gets a super priority lien on the company’s assets. This happens because of something called a “deemed trust” in Canadian tax law. Here’s what this means:

The government considers payroll taxes and GST/HST as money held in trust for them. Even if a business owner spends this money on other things, the law still treats it as government property. This creates the super priority lien without any paperwork or registration.

Key Features of Super Priority Liens

Automatic Creation: Unlike other liens, a super priority lien doesn’t need to be registered or filed. It exists automatically when taxes aren’t paid.

Higher Priority: The super priority lien beats almost all other claims on assets, including mortgages and other secured loans.

Specific Tax Types: This special lien only applies to source deductions (like income tax, CPP, and EI taken from employee paychecks) and GST/HST taxes.

Why Super Priority Liens Matter for Lenders

Commercial lenders face real risks from super priority liens. When a business owes these special taxes, the CRA’s claim comes before the lender’s mortgage or loan. This means:

  • Lenders might not get paid back if the business fails
  • The super priority lien can exceed the property’s value
  • Even after a mortgage is paid off, the lender could still be responsible for the borrower’s tax debt

Protecting Against Super Priority Lien Risks

Smart lenders use several strategies to protect themselves:

Thorough Due Diligence: Check if the borrower owes source deductions or GST/HST before lending money.

Legal Review: Have a qualified tax lawyer review the loan documents and borrower’s tax situation.

Title Insurance: Buy title insurance with special endorsements that cover super priority lien risks.

Extended Coverage: Some insurance companies offer protection that continues even after the mortgage is paid off.

Limited Exceptions to Super Priority Liens

While super priority liens are very powerful, some exceptions exist. Certain types of security interests may have priority in specific situations. However, these exceptions are rare and very narrow. Most creditors, including mortgage lenders, will find their claims come after the CRA’s super priority lien.

The Bottom Line on Super Priority Liens

Super priority liens represent one of the strongest collection tools available to the Canadian government. For businesses, this means payroll taxes and GST/HST must be paid on time. For lenders, it means careful planning and proper insurance are essential to avoid significant losses.

Understanding how super priority liens work helps both borrowers and lenders make better financial decisions and avoid costly surprises, as we will see immediately below.

CRA lien on property: CRA Super Priority Liens

I previously wrote a Brandon Blog about the legal case of Canada v. Toronto-Dominion Bank. By mentioning this case, I hope that my comments about the recent British Columbia Court decision below will be clearer.

Federal statutes give CRA a creditor powerful tools to collect debts. They can access avenues of collection significantly quicker than other types of creditors. It was not known to Toronto-Dominion Bank (TD) that, as a sole proprietor operating a landscaping business, the borrower had collected GST in the amount of $67,854.

After selling his home, the borrower fully paid off his first mortgage with TD. TD did not lend to or deal with the proprietor’s business. Since there was no CRA lien on property against the house, TD was not aware of the outstanding GST.

The CRA has enhanced security, known as “super-priority”, over most of a tax debtor‘s real property and personal assets, by virtue of deemed trust provisions in the Income Tax Act and Excise Tax Act (ETA). CRA has priority over substantially all secured creditors under the deemed trust concept, which means that the proceeds of the sale from the property subject to the deemed trust will go to CRA. A deemed trust claim is a CRA lien on property and is obtained without any registration.

A demand letter was subsequently sent to TD demanding that a portion of the proceeds be used to satisfy the GST debt. TD refused to pay since they believed their mortgage security ranked higher than CRA’s claim for unremitted GST. Court action was taken against TD by the CRA. The Crown argued that under section 222 of the ETA, the proceeds received by TD on the repayment of the mortgage and line of credit were subject to a deemed trust in favour of the Crown.

The Federal Court held that TD had an obligation to reimburse the CRA for the debt of $67,544, plus interest, owing by the Borrower to the CRA. Super-priority interests can be enforced by the CRA without notifying the secured creditor. TD was responsible for repaying CRA amounts received from a borrower with an outstanding GST/HST bill.

cra lien on property
cra lien on property

FCA confirms CRA super-priority over secured creditors on a GST/HST debtors’ property

TD appealed the decision of the Federal Court to the Federal Court of Appeal (FCA). According to the FCA ruling in Toronto-Dominion Bank v Canada, the FCA agreed with the lower Court that TD must pay the CRA proceeds of $67,854 for unremitted GST that it received from a borrower upon the discharge of its mortgage. CRA is considered to hold in trust amounts paid to a secured creditor from a debtor who owes Goods and Services Tax/Harmonized Sales Tax (GST/HST) liabilities.

FCA affirmed the Federal Court’s finding that no triggering event was required and that the deemed trust operates continuously once GST is collected but not remitted. Further, the FCA noted that case law has distinguished between secured creditors and bona fide purchasers of value, such that the two categories are mutually exclusive.

It is best for secured creditors to review their current risk management practices and revise them both at the time of due diligence when vetting new borrowers as well as throughout the term of any secured credit agreement.

If we were talking about unremitted employee source deductions, the result would be the same.

CRA lien on property: Personal income tax debt collection

CRA is a powerful creditor when it comes to personal income tax debt collection. Above I discussed how they can get a CRA lien on property just by way of the statute for unremitted source deductions or unremitted GST/HST. But what about personal income taxes? CRA does not have an automatic lien for unpaid income taxes.

However, they can go to Federal Court and obtain a memorial and then register that CRA lien on property of the tax debtor who fell behind in their payment of taxes. Once they place that lien, they now turned their unsecured claim for unpaid taxes into a secured claim. As I already mentioned, the most common type of property they register against is real property, like the tax debtor‘s home.

If the CRA lien on property goes on the real property before the person who owes unpaid income taxes files either a consumer proposal or bankruptcy, then the CRA lien on property stays on. CRA will not try to go power of sale or foreclosure to throw the taxpayer out of their home based on this tax lien. Rather, they will just wait until the taxpayer either sells the home or tries to renew or refinance a mortgage.

In the case of a sale, they will get their tax lien paid out of the sale proceeds. In the case of a mortgage renewal or refinancing, mortgage lenders will not do a new mortgage loan or a refinancing with the CRA lien on property. This is how they get their money.

Keep in mind that the lien is only against the taxpayer’s interest in the home. So if the tax debtor is the sole owner, it is against 100% of the home. If the taxpayer owns the home jointly with say, a spouse, then the lien is only against the 50% interest.

cra lien on property
cra lien on property

CRA lien on property: Can Canada Revenue Agency put a lien on my house?

You should now know that the answer to this question is yes. Licensed insolvency trustees know this. Nevertheless, in the British Columbia case I will describe now, the Trustee tried a novel, but an unsuccessful, approach to try to knock out CRA’s lien on property secured claim to collect taxes owed by the tax debtor. I am referring to Gidda (Re), 2021 BCSC 1460 (CanLII).

The licensed insolvency trustee appealed the decision of the Master as Bankruptcy Registrar dated February 3, 2020, reversing the Trustee’s rejection of a secured proof of claim filed by the federal Crown on behalf of the CRA in the bankruptcy. As well, the Trustee appealed the Master’s ruling that he is personally liable for the costs of the proceeding.

The CRA has taken out a memorial to attach a lien in favour of CRA to the taxpayer’s home due to unpaid income taxes. Then he filed for bankruptcy. So the lien against property holds as it came before the bankruptcy. A secured proof of claim for unpaid income tax was filed by the CRA in response to the memorial and registered tax lien. A secured claim was granted to CRA, which was not directly contested by the Trustee.

In my opinion, this claim, however, was handled by the Trustee in a novel way that wasn’t sustainable. It was so novel that the Judge took judicial notice of the submissions that such a case was never litigated before in Canada. There were also a number of judgments against the title of the property in addition to the memorial. There was no priority among the other judgments.

According to section 70(1) of the Bankruptcy and Insolvency Act (Canada) (BIA), bankruptcy takes precedence over judgments, garnishments, and any collection action. Furthermore, no judgment takes precedence over another.

A memorial is a judgment of the Federal Court, and since all judgments are treated equally as unsecured creditors, the Trustee disallowed CRA’s secured claim. Because the memorial and its registration against the title are secured claims under other federal statutes, it has powers not given to other simple money judgments. Therefore, I believe it is a losing argument. So did the Master.

In addition, the Master believed that the Trustee ought to have been aware of this when disallowing CRA’s secured claim and causing it to appeal the Trustee’s decision. Therefore, the Master awarded the Crown costs to be paid by the Trustee personally.

On both counts, the Trustee appealed the Master’s decision. The Judge who reviewed this found that the Master was correct in upholding the CRA secured claim and dismissed this portion of the Trustee’s appeal. The Judge did, however, let the Trustee off the hook by allowing the costs portion of the appeal. According to the Judge, the costs awarded by the Master will be paid by the bankruptcy estate and not by the Trustee personally.

CRA lien on property: Say goodbye to debt stress

I hope that you found this CRA lien on property Brandon Blog informative. Unpaid taxes and a heavy debt load do not mix well. If you have too much debt, you are considered insolvent. There are several insolvency processes available to you. It may not be necessary for you to file for bankruptcy.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

cra lien on property

Categories
Brandon Blog Post

SAVING FOR AN EMERGENCY FUND: HEALTHY SIMPLE STEPS TO MAKE SURE YOU HAVE MONEY TO DEAL W1TH AN EMERGENCY EXPENSE

saving for an emergency fund
saving for an emergency fund

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

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

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

Do I really need to be saving for an emergency fund?

Saving for an emergency fund is important for safeguarding your family’s financial future. When an emergency occurs, what happens if you haven’t saved some money in advance? Should you use all your money to pay down debts or should something be set aside for a rainy day? With the COVID-19 pandemic, we have learned that you never know when and how you might be affected by a health issue.

There are times when people need to tap into their rainy day fund because of a financial emergency. There are always unexpected expenses. The idea of “emergency savings” is easy to understand. Rainy day funds: what are they and how do they work? In this Brandon Blog, I explain the importance of having an emergency fund and how you should go about saving for an emergency fund.

What are examples of emergency expenses?

Emergency savings are intended for emergencies, as its name implies. Life is full of unexpected events:

  • breakdown of the car or repairs because of that fender bender;
  • there’s a problem with the fridge;
  • in a recession or when the economy shuts down you lose your job, with the resulting loss of income, as we have seen;
  • emergency medical expenses.

In the absence of emergency fund money to cover such expenses, you could end up paying your bills with a credit card, relying on payday loans, or heavily utilizing your secured or unsecured line of credit. These are very expensive ways to meet your urgent expenses. Saving for an emergency fund so that you have funds on hand is a much better strategy.

How do I start saving for an emergency fund?

Planning your personal finances begins with a monthly budget to be able to track monthly income and monthly expenses. It can be as simple as looking at your bank accounts and credit card statements to get a handle on what your monthly income and expenses are and writing it down on a piece of paper. Or, you can get fancier and use electronic budgeting worksheets, budget apps or an online budget calculator.

You should follow three main steps when building an emergency fund.

  • Keep a daily record of your household expenses and categorize them as discretionary or non-discretionary.
  • Take an average of all your expenses over several months to get a feel for a true average monthly amount.
  • In addition to taking stock of your expenses, this exercise should be used to weed out all unnecessary expenditures. You can begin to save money by redirecting those unnecessary expenses into savings.

An emergency can last for any number of months, so plan ahead by setting aside enough money to last at least six months. Individuals, couples, or families have different requirements. Is it a single-income family or a double-income family? The length of time it takes to save an emergency fund, as well as the amount needed, will be determined by this.

saving for an emergency fund
saving for an emergency fund

How much savings should I have when saving for an emergency fund?

There are some rules of thumb that a financial expert would recommend when deciding how to go about creating financial plans and saving for an emergency fund. You can use the 6 months of expenses calculated in your current budget as a general rule of thumb to set up a six-month emergency fund.

A six-month benchmark for emergency funds is a good place to start, but it’s not foolproof. COVID-19 has shown that even a six-months emergency fund cannot cover your household expenses if your income is dropped for an extended period of time. Depending on your financial goals, this can be extended. Harvard University found that 46% of households in the United States that lost their jobs as a result of the pandemic spent all or most of their emergency savings.

If you are saving for an emergency fund, consider things like:

  • your household’s number of people;
  • income of the household members;
  • the minimum amount needed to cover your monthly household expenses; and
  • How stable is each income source is and is there any additional income source that can be created or you may have just not thought about, such as a side gig to create business income or income tax refunds.

Ideally, your emergency fund should be proportionate to your earning potential and reflect how much you can save. It should also represent an amount that feels comfortable for you. A very important thing not to overlook is that you need to consider your income on an after-tax basis, not gross so that you have accounted for paying your income tax on time.

5 normal questions about saving for an emergency fund during the COVID-19 pandemic

Two of the five questions we have already dealt with: (i) how do I start saving for an emergency fund?; and (ii) how much savings should I have when saving for an emergency fund?

The next 3 standard questions and answers, I list below.

Where is the best place to put your emergency fund?

An emergency fund serves as a safeguard when you are faced with a true emergency. You will feel more at ease if you can fund your expenses from your emergency account in case of unforeseen circumstances. Make sure the emergency fund is separate from the other accounts. Keeping your emergency fund liquid is essential. Avoid investments that require a long-term commitment.

I recommend that you keep a certain portion liquid in an interest-bearing savings account (is there such a thing anymore as a high-yield savings account?). Right now interest rates are low, but something is better than nothing. As I already stated, keep it separate from your other funds.

To be able to automatically save without thinking about it, set up an automatic payment each pay period from your chequing account into this saving for an emergency fund savings account. Finally, put the balance of your emergency funds into a short-term GIC that can be cashable on demand. That way, it will earn something but is also liquid if needed.

saving for an emergency fund
saving for an emergency fund

I have a line of credit – should I still be saving for an emergency fund?

Keeping an emergency fund is always a good idea, as mentioned above. It’s good to have a line of credit, especially if it has a low-interest rate. However, I wouldn’t use it as my first line of defence. If you don’t have enough money in your emergency fund to cover the immediate needs, you can always use your line of credit to supplement your emergency fund. In the event that you borrow to meet those expenses, you should aim to repay the borrowed funds as soon as possible.

Should I use my emergency fund to pay off debt? Should I pay down debt before saving for an emergency fund?

Yes, it is true for some people. You might want to start paying down debt before saving for an emergency fund if you have a large amount of debt and no way to repay it. When an emergency comes up, however, you will have less money on hand if you do that.

Isn’t it better to repay your debt before you start an emergency fund if you’re in debt? Yes, the answer is yes! It does not have to be done at once. It is important to pay off the smallest balance first so that you can spend more on essentials and cut back on unnecessary expenses. This strategy only works if you are disciplined enough to stick with it.

It also depends on what kind of debt. High-interest credit card or payday loan debt should definitely be paid down first. As I previously wrote in a recent Brandon Blog, those with a poor credit score have been able to pay down massive amounts of their credit card debt. However, in order to not run that credit card statement back up, the next step should be saving for an emergency fund.

saving for an emergency fund
saving for an emergency fund

Saving for an emergency fund summary

I hope that you found this saving for an emergency fund Brandon Blog informative. Unexpected emergencies, by their very nature, are not pleasant and could have the effect of adding significantly to your debt load. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

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

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Brandon Blog Post

A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON

bankruptcy discharged
bankruptcy discharged

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

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

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

Your Bankruptcy Discharged – But Wait

Well, that took no time at all. Last week I told you about a bankruptcy discharge hearing I attended where the bankrupt person had his bankruptcy discharged by the Master in the Ontario Superior Court of Justice In Bankruptcy and Insolvency.

The Master’s decision was released on August 13, 2021. On August 20, 2021, we received the Notice of Motion of the opposing creditor appealing the Master’s decision to give this person his discharge from bankruptcy. That is their right.

In this Brandon Blog, I want to discuss the reasons for the opposition to the fact that this bankrupt had his bankruptcy discharged and my thoughts on one scenario of how this may play out. First, I just want to refresh your memory about the bankruptcy process and specifically how the discharge under bankruptcy law in Canada process works. Then I will get into this real-life story.

Canada’s Bankruptcy and Insolvency Act (BIA) gives people the option of filing a debt management plan restructuring consumer proposal if they are unable to pay back all unsecured debt owing to their unsecured creditors. This option offers the consumer a way to maybe keep their home and car that is heavily financed, as long as they can maintain the payments to the secured creditors such as the financial institution who financed the purchase of the home by way of the mortgage, or the auto loan, and it makes sense in their budget.

A successful consumer proposal is also the way to avoid bankruptcy. Like bankruptcy, the process starts with a no-cost consultation for financial advice with a licensed insolvency trustee. A licensed trustee is the only party able to administer a consumer proposal in Canada (or a bankruptcy). The Trustee can help you lose your debt load.

A first-time bankrupt who fulfills all of their obligations, including attending 2 mandatory credit counselling sessions, is entitled to a discharge after 9 months from the date of bankruptcy.

bankruptcy discharged
bankruptcy discharged

A bankruptcy discharged: First and second bankruptcy (or more)

When an insolvent debtor files for bankruptcy for a second time, you cannot be discharged after a nine months bankruptcy period. When you don’t need to pay the Trustee any surplus income payments, a second bankruptcy lasts for a minimum of 24 months. A second-time bankruptcy filer with surplus income must make those payments for 36 months to qualify to get their bankruptcy discharged.

A third or subsequent bankruptcy follows the same timeline as a second bankruptcy. There is, however, a high probability that the Trustee or creditors will oppose the discharge. Where there is opposition, there must be a court bankruptcy discharge hearing and the court can impose any conditions it deems appropriate.

What does bankruptcy discharged mean in Canada?

It is a Canadian legal term used to describe the release of a consumer debtor or business proprietorship from their obligations, responsibilities, debts, and legal claims. “Bankruptcy” is a legal proceeding to protect the estate of a person or company. “Discharge” fulfills the requirement that a person is released from their obligations, responsibilities, debts, and legal claims through the bankruptcy process. There is no equivalent requirement for a company.

The insolvent debtor filing for bankruptcy merely invokes the legal protection to the person and puts a bankruptcy trustee in place to realize upon any available assets in the bankruptcy estate for the benefit of the creditors. Bankruptcy filings do not relieve the person of their debts. It is when the person is bankruptcy discharged, that they are released from their debts (other than for a select list of exceptions).

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged: Types of bankruptcy discharge

The licensed insolvency trustee can usually issue an automatic discharge when there is no trustee in bankruptcy opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties during bankruptcy.

In case of opposition or if the bankrupt meets one of the criteria that prevents automatic discharge (for example, the bankruptcy process finds the bankrupt to have a high tax debt situation), a discharge hearing in court is held, which is conducted by the Master of the Bankruptcy Court. There are four types of the bankruptcy discharge and a fifth outcome is also possible. Here they are:

  1. Absolute discharge – An absolute discharge means that the bankrupt may obtain a discharge immediately. If the bankrupt has fulfilled all of their duties and there is no insolvency trustee or creditor opposition, this can be provided by the licensed insolvency trustee of the bankruptcy estate handling the bankruptcy administration;
  2. Conditional discharge – can get discharged if certain conditions are met. Typically, to get bankruptcy discharged this way, conditions include payment to the licensed insolvency trustee;
  3. Suspended – the bankruptcy discharge will be granted at a later date and may very well be combined with an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. Refused– because the debtor has not made full disclosure or done other bankruptcy duties; or
  5. “No order” – the insolvency trustee informs the court that the bankrupt has not fulfilled all of his or her obligations and has failed to respond to the Trustee’s demands for information despite the passing of time. The licensed insolvency trustee is at liberty to seek its discharge when the “no order” order is provided. When the bankrupt has actually complied with the court’s requirements, he or she may apply for a hearing for discharge. When the Trustee gets its discharge, the stay of proceedings preventing collection actions against the bankrupt disappears.

A bankruptcy discharged: The appeal just served upon us – a true story

To refresh your memory about the discharge hearing itself you can CLICK HERE. The appeal just served upon us seeks an Order setting aside the decision of the Master made on August 13, 2021. The grounds for the appeal can be described as throwing everything including the kitchen sink! The stated grounds are that the Learned Registrar erred:

  • by granting the bankrupt an absolute discharge from bankruptcy;
  • in holding that the Receiver’s interest in the discharge application is not firmly established and by not recognizing that should the Receiver be paid an amount in excess of the debt owed to the secured creditor, any surplus funds would be available for the other creditors of the
    corporate bankruptcy estate;
  • in holding that the discharge hearing is not the proper forum in which to make determinations as to the propriety of the various transactions that the Receiver has raised;
  • in finding that the bankrupt has generally cooperated with me as his Trustee;
  • in declining to consider the bankrupt’s conduct in the corporate bankruptcy because that the trustee in the corporate bankruptcy had remedies available to it;
  • in finding that the failure of the company’s business was due to the loss of its 1 customer and pricing related to that arrangement;
  • in relying on her finding that the corporate trustee may be the only truly interested party on the discharge or would benefit most from the conditional order sought if the secured debt is otherwise repaid;
  • in exercising her discretion in finding that an order of discharge requiring payment of the significant amount proposed by the Receiver is not reasonable;
  • in finding that the bankrupt has no ability to pay and that his future prospects to pay are unknown;
  • in finding that an order for a conditional discharge of the magnitude sought would be tantamount to a refusal;
  • by omitting to consider relevant evidence or the absence thereof, in relying on irrelevant considerations, and/or giving improper weight to the evidence before the Court; and
  • anything else the lawyers may want to say.

    bankruptcy discharged
    bankruptcy discharged

Standard of review to getting a personal bankruptcy discharged

Such an appeal from a bankruptcy discharge hearing has a standard of review. According to BIA S. 192(1), the bankruptcy registrar can, among other things, grant orders of discharge. S. 192(4) of the BIA permits a party dissatisfied with a registrar’s order or decision to appeal it to a judge.

Registrars are exercising judicial discretion when granting discharges in bankruptcy cases. As long as the registrar acted reasonably, the judge should not set it aside or ignore it. Furthermore, if an appeal from a bankruptcy discharge order is based on alleged errors in factual findings, the court will not intervene if the findings of fact can be justified based on credible evidence. If the registrar has materially misinterpreted the law or made an error in respect of the facts underpinning his or her discretion, discretionary decisions can, of course, be overturned.

If the registrar decides that in order for the person to get their bankruptcy discharged, the court imposes conditions, those conditions must be realistic to allow the bankrupt to meet the requirements in a reasonable amount of time. If an amount ordered in order for the person to get their bankruptcy discharged is unrealistic and the discharge is conditional on making additional payments, the appellate court in such cases previously held that results in an error of law. The appellate judge can either substitute other conditions or refer the matter back to the registrar for reconsideration.

A bankruptcy discharged: What my gut is telling me

I normally am not in the prediction business. However, having been the insolvency trustee responsible for administering the consumer bankruptcy, having written the reports to the court on the bankrupt’s application for discharge, having attended the discharge hearing and having heard all the evidence, having read the Registrar’s decision and the Appeal documentation, I believe that the appeal should be dismissed.

You might recall that opposing the bankrupt getting bankruptcy discharged was the Receiver of the company previously operated by the bankrupt. As a result of complaints regarding the bankrupt and his family in relation to the company’s operations, the Receiver has filed lawsuits against several parties. The proceedings are still pending. According to previous court rulings, the court should not consider the issues raised in other proceedings when deciding whether to discharge the bankrupt. A discharge hearing is a summary proceeding. It is important to see how the debtor behaved during HIS bankruptcy.

As for the judge’s decision, only time will tell. I’ll keep you up to date as always.

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged summary

I hope that you found this bankruptcy discharged Brandon Blog helpful in telling this real-life story of an appeal to a person getting their bankruptcy discharged. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

 

Call a Trustee Now!