Canadian reverse mortgage information: Introduction
Funding one’s retirement has become increasingly difficult. Pension plans are quickly disappearing and Old Age Security (OAS) and Canada Pension Plan (CPP) don’t provide adequate funds to make ends meet. However, seniors have sought Canadian reverse mortgage information.
Canadian reverse mortgage information: What is a reverse mortgage?
Reverse mortgage is not a new-fangled concept or invention. In fact reverse mortgages have been around in Canada since 1983. But it’s only in recent years, as many seniors are desperate to find ways to fund their retirements, that reverse mortgages have really taken off. CHIP has the market cornered as they are the only providers in Canada of reverse mortgages.
A reverse mortgage is a loan. It’s designed for home owners who are 55+ so that they can get money without having to sell their house. The home owner receives the loan against the equity they’ve built in your property. No payments have to be made until the borrower moves out or dies. Sounds great! What could go wrong?
Canadian reverse mortgage information: What’s the catch?
You know there always has to be catch… Here is some Canadian reverse mortgage information that will shock you. If you miss a property tax payment, you go into default. It won’t be as simple as just making up the missed property tax payment and maybe paying a fee as a penalty to the lender. You will lose your home and you will have to pay your lender’s legal fees as well.
Canadian reverse mortgage information: CHIP Mortgage Corporation 5 Inc. v. Deep
It may not seem fair but it’s the law. A recent court case in Ontario, CHIP Mortgage Corporation 5 Inc. v. Deep, clearly demonstrates this law at work. The mortgage went into default because the property taxes weren’t paid and as a result this default entitled the lender to take possession of the property and sell it. In addition the borrower was required to pay the lender’s legal fees.
Canadian reverse mortgage information: Borrowing all the equity of your home may not be your answer for retirement
Before you get to the stage where you can’t make a property tax payment and risk losing your house please reach out to a professional trustee. In fact, if you realize that you can’t pay your debts heading into retirement, contact us.
We understand the pain and stress too much debt can cause. We can help you remove that pain and solve your financial problems given immediate action and the right plan. Make an appointment with Ira Smith Trustee & Receiver Inc. for a free, no obligation consultation and you can be on your way to enjoying a carefree retirement in your home Starting Over, Starting Now. Give us a call today.
A few weeks ago, my blog was aboutPARENTS HELPING CHILDREN BUY A HOUSE: THE SECRET TO KNOWING WHAT TO DO – ASSUMING YOU REALLY HAVE THE MONEY. In that blog I looked the factors parents should consider and possible ways they could help, if proper. I assumed in writing the blog that the adult children were being financially responsible. It reminded me about a recent consultation I performed on a 30ish year old woman who had no personal financial responsibility.
Personal financial responsibility: The referral
An accountant we know referred his client, the father of this woman, to us. I spoke with the father briefly on the telephone and invited his daughter to contact me. As we do with people referred to us, I provided the daughter with a free first consultation where I obtained information about her assets, liabilities, income and expenses.
Personal financial responsibility: The first free consultation
We discussed potential options. At the end of the consultation, my process is to provide the person with our standard intake sheet called theDebt Relief Worksheet (DRW). I asked her to fully complete it with supporting documentation where requested. I also told her that not making another trip to our office, she could scan and email it to me. That way she would not have to take time off work.
Personal financial responsibility: The issues
So far so good. However, things did not stay that way for long. The purpose of theDRW is to give me all the information I need to properly advise someone and to be able to create a solution as unique as that person. It is also designed to allow forfinancial rehabilitation, by creating abalanced budget for the person to be able to live within their means. There is no point putting someone through an insolvency process, if they don’t come out at the end having learned why financial responsibility is important.
When I received the more or less completedDRW, several things jumped out at me:
The woman graduated from university with a social work degree. However, instead of going into social work, she became a yoga instructor. I found out that yoga instructors, or at least this one, don’t make much money for all the hours worked.
She was one of those people living way beyond your means. On social media, she regularly posted weekend party pictures at bars and clubs.
She could barely pay the rent on her apartment.
She was supplementing her income with credit cards and only paying the minimum monthly payments.
She would soon not be able to borrow any more money from her credit cards and that is why she called for help from her father.
Personal financial responsibility: The father talk
To say the least, I was alarmed. This woman was out of control. Her father was looking to me to tell him if he should lend her (more) money. I called up her father to have a private discussion. I couldn’t disclose the details of the daughter’s financial mess, but I did want to send him a very strong message. The father was already aware of most of her debts, so there really wasn’t any information he was missing.
I told the father the following:
Under no circumstances should he ever lend her money. I doubted she would ever have the capacity to pay him back. This yoga instructor had credit card and income tax debt totalling about $82,000 so a few thousand was not going to cut it.
His daughter should undergo an insolvency proceeding. If he wanted to help, he could fund her consumer proposal as a lump sum, so that this would not be hanging over her head for a long time.
More importantly, whichever insolvency process was chosen, I would make sure that financial rehabilitation would be an outcome. She would learn how to budget, how to not spend more than she earns, net of income tax, and she would gain personal financial responsibility.
Her father was extremely appreciative.
personal financial responsibility
Personal financial responsibility: Consumer proposal vs. bankruptcy
I then met with the adult child again. I explained to her the process of both a consumer proposal andbankruptcy and how each differed. I also explained that her consumer proposal has to be a better offer to her creditors than they could expect in her bankruptcy. I also told her that I spoke with her father, and he was prepared to fund a consumer proposal. I assured her that through a consumer proposal, we could get full debt settlement and she couldavoid bankruptcy.
Personal financial responsibility: The yoga instructor had not yet fully grasped the concept of aparigraha
We then got to thebudget discussion. In that discussion, she quickly realized that in an insolvency proceeding, she would have to live on what she earned. Hercredit cards would be cut off by the lenders and she would not be able to supplement her income with credit card purchases and advances. She stared at me for what seemed to be the longest time. I didn’t know if it was her drishti or she was gearing up to lash out at me.
She then began her mantra “that is not fair, that is not fair, that is not fair”. I asked what isn’t fair? She said she would not have money to party every weekend! Together we each had our aha moment. I quickly learned that her parents never learned how to stop enabling this grown child. She quickly learned that she was not prepared to alter her behaviour and become financially responsible. She thanked me, got up and left. It was pleasant, but not exactly namaste.
A few days later she sent me an email to say that she would not be going through with aninsolvency process. I wished her shanti. My understanding is that she did has not filed with another licensed insolvency trustee. So, the only thing left is that Daddy is doing what he originally asked me about – lending or giving her money.
Personal financial responsibility: What to do about grown children who expect money
This is a very sad case. I know I could have helped this woman, but she didn’t want to be helped. She is very happy being one of those adults financially dependent on parents. She is one of those children who has never learnedpersonal financial responsibility.
When your grown child makes badfinancial decisions and comes to you for help, what will you do? If you can afford to, will you just enable them or will you seek out a real solution. I am always honoured when a professional believes that I can help someone, especially if it is their child or family member. That is the greatest compliment which has happened several times.
If your child or relative is experiencingfinancial problems, or if you are as a result of helping your kids, or for any reason, contact a professional trustee as soon as possible.Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.
Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.
Our thoughts and prayers are with the victims and their families of Monday’s horrific attack in the Yonge Finch Sheppard area. Thank you to our brave first responders, and to ordinary Torontonians who did extraordinary things today. Photo courtesy of the Toronto Sun.
TORONTO REAL ESTATE NEWS 2018 photo courtesy of the Toronto Sun
Toronto real estate news 2018: Introduction
There is an unfortunate situation brewing for those who bought a home off plans from a builder in 2017. The market has cooled significantly and the average price of a new construction home in the Toronto region in February 2018 was $1.22 million. A significant drop! So, the Toronto real estate news 2018 is now that buying a pre-construction Toronto area home can be risky.
Toronto real estate news 2018: It used to be burn baby burn!
Until recently, Toronto’s real estate market hasn’t been hot; it’s been an inferno. Houses were selling for way over the asking price and real estate agents in Toronto say bidding wars became the new normal. Buyers were so desperate to get into the market that they were making offers and waving a house inspection.
It wasn’t just the resale market that was on fire. According to building industry statistics, the Toronto region real estate values in February 2017 of a new construction home in the was about $1.5 million. Advertising for real estate investing workshops was everywhere.
Toronto real estate news 2018: What caused this drop in real estate prices?
Two main reasons. First, the Office of the Superintendent of Financial Institutions (OSFI) introduced new, tighter mortgage rules, requiring borrowers with uninsured mortgages to undergo a stress test. As of January 1, 2018, uninsured borrowers must qualify at a new minimum rate – the greater of the Bank of Canada’s five-year benchmark rate, currently at 4.99%, or 200 basis points higher than their mortgage rate.
This new mortgage stress test is for protecting homebuyers to ensure that they don’t buy more house than they can afford – even if the interests rates rise. There were only two real estate markets in Canada on fire; Toronto and Vancouver. So, in Ontario, this new test is also known as the Toronto real estate stress test
Second, the Ontario Liberals introduced its Fair Housing Plan which included a foreign buyers’ tax. Many believe that this plan contributed to the drop in real estate prices and adversely affected middle-class families in mid-transaction.
toronto real estate news 2018
Toronto real estate news 2018: Some buyers who purchased a pre-construction home at the height of the real estate frenzy are now facing financial ruin
These buyers are now contracted for homes that are no longer worth their purchase prices. They can’t resell the new home contracts because the builders are selling new construction homes for less than they’re asking – just to break even.
Some couldn’t get larger loans to cover the difference in price. If they walk away from their contracts they could lose upwards of $200,000 and risk being sued by the builder. To add insult to injury, they can’t afford the interest rates that alternative lenders are charging. This is a recipe for financial disaster.
This is what today the Toronto real estate news 2018 is.
Toronto real estate news 2018: Are you feeling the pain of possible financial ruin?
Are you facing financial ruin as a result of a cooled down market? Is the pain and stress of too much debt, regardless of the reason unbearable?
The Ira Smith Team can help you return to financial health with immediate action and the right plan. Don’t despair; there is a way out Starting Over, Starting Now. Make an appointment for a free, no obligation consultation. Financial peace of mind and pain-free living is just a call away.
A ruling in a proposed class action against a defunct Orlando Florida attorney firm, claimed a lawyer goes against government law “if he instructs a client to pay his bankruptcy related legal costs making use of a credit card.” That would also include using a credit card, either directly or through a third-party site, to pay bankruptcy fees online with a credit card.
Note to professionals encouraging clients considering bankruptcy: tell them to keep that plastic in their pocketbooks.
United States Court of Appeals for the Eleventh Circuit ruling
In a judgment likely to resonate with bankruptcy and debt settlement legal representatives, the United States Court of Appeals for the Eleventh Circuit ruled a lawyer violates government regulation “if he advises a customer to pay his bankruptcy-related legal charges using a credit card.” This of course would include an instruction to pay bankruptcy fees online.
Theopinion released March 30, 2018 reversed a lower courtdecision and renewed a Florida class action against shut downKaufman, Englett & Lynd filed by a previous client. TheOrlando Sentinel reported the firm dissolved in April 2016 after the suit was filed.
The panel found a lawyer who advised his client to “sustain more debt” by billing his lawful fees on a credit card contravenes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Yes, it is fraud
That individual would certainly be committing fraud, and so would the attorney. This is because they’re making a charge knowing they never ever plan to pay that credit card.
The problem was that Kaufman Englett violated the Bankruptcy Code that does not permit a debt relief firm– consisting of a law practice– to “advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.”
My Canadian view
I would suggest that the outcome in Canada would be as disastrous for both the bankrupt and the licensed insolvency trustee (bankruptcy trustee or trustee). However, that does not mean that a bankruptcy trustee cannot encourage online payments; just not those using a credit card. Before getting into my reasons why, let’s first explore the issue of online payments.
Online payment choices
I think it is important to first understand what the various online payment choices are. The report “Canadian Payment Methods and Trends: 2017” by Michael Tompkins, Research Lead, Research Unit, and Viktoria Galociova, Research Associate, Research Unit, Payments Canada. In their report, they review the various online payments:
online transfers include online e-wallet and electronic P2P transactions initiated through online services and providers, which are either prefunded or linked to deposit accounts at financial institutions (e.g., Interac e-Transfers, PayPal and Tilt); and
prepaid app store cards (or virtual cards)
Credit cards are the most used for online payments. But as you can see, there are ways of making online payments using cash.
You can but not by credit card
I submit that you can use an online payment method to pay for Canadian bankruptcy costs, just not by credit card. What this means is that you can transfer cash to your bankruptcy trustee (or consumer proposal administrator) using an online system.
Why not by credit card?
My view is that it would be unlawful to use a credit card for paying a bankruptcy fee in installments or in one payment. The more likely scenario would be paying it all at once just before filing.
My reasons are as follows:
Using a credit card to charge expenses or take cash advances against knowing that you are about to file for bankruptcy and will not repay it is fraud. Fraud of course is illegal. So the insolvent debtor, about to become a bankrupt, will be in trouble. Just like in the USA as cited by the Court that I mentioned at the start of this blog.
Likewise, any bankruptcy trustee who accepts payment by a credit card in the name of and from the insolvent debtor would be in trouble. The same trouble would befall the professional if he or she encouraged the insolvent debtor to take a cash advance against the credit card to pay bankruptcy fee online.
pay bankruptcy fees online
Here’s why:
It is against the rules of professional conduct of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). The rules need a member to maintain the good reputation of the profession and perform professional services with integrity.
The General Rules of the Bankruptcy and Insolvency Act (Canada) (BIA) requires that a bankruptcy trustee maintain the high standards of ethics that are central to the maintenance of public trust. It also requires that trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process.
What are the risks?
The risk for the trustee, of course, is serious – the loss of his or her license to practice. But what are the risks for the insolvent debtor?
For the undischarged bankrupt, in my view, the risks are twofold: (i) criminal; and (ii) civil. The criminal repercussions are obvious. The laying of one or more fraud charges would happen and the result would be a criminal conviction, jail time and a restitution order.
In the civil sense, I focus on the bankruptcy discharge process.
Forget about getting a discharge from bankruptcy
The credit card issuer would certainly oppose the bankrupt’s discharge. In the meantime, the credit card company would get a lifting of the stay of proceedings which protects an undischarged bankrupt from lawsuits, to start litigation to find that at least the debt incurred by the debtor to pay for the Canadian bankruptcy costs was a claim against the debtor for a debt not released by order of discharge. Sections178(1) (a) and (e) are the most likely section of the BIA that would be relied upon.
So the credit card issuer and the trustee (probably by now the substituted trustee!) must oppose the bankrupt’s discharge. I am certain that the oppositions would be successful. The most likely result would be that the Court would flat-out refuse to hear the bankrupt’s application. The result of this is complex and should be discussed in a separate blog. Suffice to say that the bankrupt will have a very hard time ever getting out of bankruptcy without making full restitution. Even then, I would expect the Court to only grant a discharge upon certain conditions being met.
In other words, it would be a disaster and a mess for both the trustee and the bankrupt. These are my reasons why I feel that to pay bankruptcy fee online using cash is fine, but not by a credit card.
Pay bankruptcy fees online: What about you?
Are you facing financial problems? TheIra Smith Team can develop a restructuring plan for you. Debt problems are stressful and confusing. But with our help, you can be just like Nikki Haley and say “I don’t get confused”!
The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.
Our debt settlement plan process can ease this stress. The Ira Smith Team has a great deal of experience in helping people avoid bankruptcy while resolving their debt problems. We understand your pain points.Call the Ira Smith Team today for your free consultation. We can end your pain and put you back on a healthy profitable path, Starting Over, Starting Now.
leveraging the gen x retirement market from overlooked to opportunity
Leveraging the gen x retirement market from overlooked to opportunity: Introduction
There is much written and discussed about retirement as it pertains to seniors and Baby Boomers, but the younger generations have for some reason been omitted from the conversation. They seem to have all the time in the world to prepare for retirement, but is that really the case? Hopefully by the end this Gen X retirement blog, you will see that there is room for leveraging the Gen X retirement market from overlooked to opportunity.
Leveraging the gen x retirement market from overlooked to opportunity: Gen X challenges for retirement saving
Hot on the heels of the Baby Boomers is Generation X or Gen X. The Harvard Center uses the years from 1965 to 1984 to define Gen X. In theory GenXers should be well on their way to preparing for retirement, considering it’s only 10 years until the oldest GenXer turns 65. The Insured Retirement Institute (IRI) recently released the findings from its fourth biennial report on Generation X and how well prepared for retirement they are.
Leveraging the gen x retirement market from overlooked to opportunity: Generation X retirement crisis
60% of GenXers have money saved for retirement. This is down from 65% two years ago
40% of GenXers have no retirement savings – an increase of 5% from the previous study and 66% have not attempted to calculate how much they would need to save to retire
60% of GenXers believe they will have enough money in retirement. They believe they will have enough money to cover their basic expenses. Also,they think they will be able to enjoy travel and leisure activities. This is despite their concerns about adequate savings and expenses. Most have either no savings or comparatively low retirement account balances,
Gen Xers working with advisors are better prepared for retirement, and far less concerned about the risk of falling short
Leveraging the gen x retirement market from overlooked to opportunity: Gen X challenges for retirement saving
What are the top 3 retirement risks GenXers are most concerned about?
Leveraging the gen x retirement market from overlooked to opportunity: An opportunity for everyone
Whether you’re well-prepared or ill-prepared for retirement, the one piece of advice that will serve you all well is to make sure that you don’t drag debt into retirement with you. If you’re struggling with debt, now is the time to seek professional help.
The Ira Smith Team can help free you from debt and get back to saving for retirement Starting Over, Starting Now. Give us a call today and make an appointment for a free, no obligation consultation. We can set you on a path to a worry-free retirement.
leveraging the gen x retirement market from overlooked to opportunity
Stalking horse credit bid: Our earlier case studies
Over the last few weeks, I have provided some case studies from our files for both personal and corporate insolvency matters. As a refresher, these case study vlogs are:
Stalking horse credit bid: Our stalking horse sales process case study
This is the last vlog along our case study theme. The purpose is to show the decision making that the Court goes through in being asked to approve a stalking horse credit bid and a stalking horse sales process in a corporate insolvency file.
We were Court-appointed as Receiver and Manager of a club operating a golf course, restaurant and party function business. The first secured creditor filed its motion to appoint us. We were appointed very close to Christmas that year. Obviously, the golf course was not operating at the time of our appointment. The food and beverage facilities only had one remaining Christmas party and the annual club New Year’s party. No parties were booked yet into the New Year.
We did the normal things a Receiver does such as:
taking physical possession of the premises and the books and records;
identifying if there were any assets located off premises; and
arranging for property and liability insurance.
We were able to use the time to understand the business and the nature and extent of the assets.
There was already a purchaser ready to give an offer to purchase the Receiver’s right, title and interest in the operating assets comprising the club’s businesses. We arranged for an appraisal of the assets and business. We received and reviewed the appraisal. The secured creditor told us the form of offer they would support.
Armed with the appraisal information and the secured creditor information, we entered into a conversation with the potential purchaser. The amount this purchaser told us it was willing to pay was far more than appraised value and above the minimum threshold for acceptance from the secured creditor.
We decided that a stalking horse bid process would be ideal. We doubted that any party would bid higher than the value this potential purchaser was discussing. It made sense to also have the court supervised sales process completed prior to April, so that it would be the purchaser opening up and preparing the course for play and running the food and beverage business, rather than the Court appointed Receiver.
The potential purchaser agreed to become a stalking horse bidder and to the timeline. We and our legal counsel worked with the potential purchaser and its legal counsel to prepare a draft stalking horse asset purchase agreement. The purchase price was the amount this now stalking horse purchaser was always discussing.
Stalking horse credit bid: We galloped off to Court
We filed our motion for approval of our activities to date, requested permission to enter into the proposed stalking horse agreement and sought approval for our proposed stalking horse sales process. The Court had no problem with our activities to date, or the stalking horse agreement, but did not like our truncated stalking horse sales process. We were not able to be in Court until February and we wished to complete the sale by March 31. The Court felt that was not enough time to run a sales process that was fair to all potential bidders. Our legal counsel attempted to persuade the Judge that comparing the appraisal (which the Court saw but our purchaser did not see) and the value of the stalking horse offer, we did not feel that there would be any other bidders.
We could not persuade the Court. The Judge approved everything, but he amended the timeline so that we would run a process that would last at least 5 weeks from the time we ran our advertisement for this business opportunity.
The Court considers various factors when asked to approve a receivership or bankruptcy sales transaction. The basis for this comes from a 1991 Court of Appeal for Ontario decision inRoyal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). In no particular order, the Court is concerned with:
Whether the Receiver has made enough effort to get the best price and has not acted improvidently.
Considering the interests of all parties.
The efficacy and integrity of the process used to get offers.
If there has been unfairness in the working out of the process.
In the Judge’s opinion, a 5 week sales process would ease any concerns he had.
stalking horse credit bid
Stalking horse credit bid: The outcome
We amended our sales process in accordance with the Judge’s instructions. We then:
set up our online data room of pertinent business and other information about the assets and business operations.
Anyone who wished to do due diligence signed our confidentiality agreement. Everyone who signed our confidentiality agreement was then provided with a unique password to enter the online data room.
The due diligence period ended and since everyone knows the amount of the stalking horse offer, no other potential bidders submitted an offer. Nobody wanted to bid more.
We went back to Court to tell of the results and obtained Court approval to complete the transaction of the stalking horse bidder whose asset purchase agreement was already approved by the Court.
In the meantime, spring had arrived. We hired the necessary golf course superintendent and other maintenance and operating staff and opened up the golf course. We ran the golf club until the sale was completed near the end of June that same year. In the eyes of the Court fairness was achieved, we operated the golf club and the secured creditor was happy with the result of the sale.
Stalking horse credit bid: Is your business facing financial problems?
This case study shows how we were able to satisfy all stakeholders in a Court supervised sales process, to transfer the assets to a new business, remit funds to the secured creditor on a basis acceptable to them and meet the requirements of the Court.
Is your business facing financial problems? Perhaps your company is in need of a restructuring. The Ira Smith Team can develop a restructuring plan which may or may not include the need to file for bankruptcy protection.
The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. Thebankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.
The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.
We’ve been sounding the alarm bells about payday loans long and loud, but it seems that many Canadians are still unaware of their dangers. According to the Financial Consumer Agency of Canada (FCAC), many loan users are unaware of the high costs of these loans compared to their alternatives. This includes all such loans around me and you. This just goes to confirm what we already knew – there’s a great need to continue to raise consumer awareness about the costs of, and alternatives to, payday loans.
What the FCAC survey shows
The FCAC recently conducted a survey on payday loans and the results were quite insightful and at times quite surprising:
They are an expensive way for consumers to borrow money. The annual percentage rate (APR) is typically 546%.
Fewer than 43% of respondents understood that this kind of loan is more expensive than available alternatives. This suggests that many do not have enough knowledge to consistently make the borrowing decisions that best serve their financial well-being.
The use of these loans has more than doubled in Canada recently to 4% of Canadian households.
45% of respondents reported typically using such loans for unexpected, necessary expenses.
41% used them for expected, necessary expenses.
Users are primarily those with low-to-moderate incomes (more than half lived in households with annual incomes under $55,000).
20% of respondents who used this kind of loans reported household incomes exceeding $80,000.
7% of respondents who used them reported household incomes over $120,000.
Many of the users surveyed indicated that they rarely sought financial advice even when they felt it was necessary.
Why not go to a bank or credit union?
Why didn’t respondents access credit from a bank or credit union?
90% said payday lending was the fastest or most convenient option.
74% said payday lending was the best option available to them.
55% said payday lending offered the best customer service.
27% said a bank or credit union would not lend them money.
15% said they did not have time to get a loan from a bank or credit union.
13% said they did not want to get money from a bank or credit union.
Can payday loans lead to bankruptcy?
Payday loans are a huge problem. In fact, the Canadian Payday Loan Association reports that nearly 2 million Canadians use payday loans each year. And many borrowers often find it very difficult to repay the full loan amount with the interest and fees. Now they’re trapped. They take out another payday loan to pay off the first payday loan and then take out another and another. It’s not difficult to imagine payday loans causing bankruptcy.
Are you caught in a payday loan trap?
If you’re caught in the payday loan trap, borrowing more money is not the answer – professional help is. Seek the advice of a professional trustee. ContactIra Smith Trustee & Receiver Inc. today. You need answers, options and realistic plan for recovery and you need help now.
Parents helping children buy a house: Introduction
Your kids are ready to buy their first house, but the financial realities of buying in cities like Toronto and Vancouver have all but dashed their hopes. Like the kind and caring parents you are, your first reaction is to jump in and save the day. You want to be one of those parents helping children buy a house.
This is not the same as sponsoring a child in need. You have provided for your kids throughout and you want to help your kids become home owners; but, is that really a good idea? I know that buying a house for a child to live in is an emotionally charged issue, but there is a practicality to financial matters that should not be ignored.
Parents helping children buy a house: New mortgage rules stress test
The Office of the Superintendent of Financial Institutions’ (OSFI) new mortgage rules include a tougher need for buyers to be stress tested to see whether they can handle higher interest rates. Some may not qualify for the mortgage amount they want and may not be able to buy a house without parental help. In addition, parents are often asked to help with a down-payment. According to a 2017 national survey conducted by Leger on behalf of the Financial Planning Standards Council, 37% of Canadian parents intend to help their children with the purchase of their first home. Whether or not they can or should help financially is another issue.
Parents helping children buy a house: The secret to knowing what to do
Some parents gift the money and others look at it as a loan. Either way, there are some important issues you should consider before helping your kids buy their first home. It really isn’t a secret – just 4 simple questions to answer:
Can you really afford to help your kids buy their first home? Some parents put themselves in financial jeopardy or risk their retirement savings. This is never a good idea. Will helping your kids buy a home impact your style of living? It shouldn’t. It doesn’t mean you love your kids less if you can’t help financially with the purchase of a home.
Establish limits. If you can afford to help, sit down with your financial advisor/planner and establish the amount of money that you can comfortably help out with and stick to that amount. Don’t allow yourselves to be pressured into giving more than you can afford.
Can your kids realistically afford to own a home? Home ownership is so much more than making a mortgage payment. There are property taxes, insurance, maintenance, utilities, unexpected repairs, etc. And what would happen if there was a health crisis or job loss? Can they afford to be home owners?
Are your kids responsible with money? Or are they living above their means with maxed out credit cards? Have you had to bail them out of a financial jam before?
Parents helping children buy a house: Don’t put yourself in financial jeopardy!
Whatever you do, don’t put yourself in financial jeopardy! If you’re now experiencing financial problems as a result of helping your kids buy their first house, or for any reason, contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.
Over the last two weeks, we have provided you with real case studies from our files. This week’s case study is about our involvement with acompany restructuring process so its business could continue to serve its clients and maintain most of the jobs.
Two weeks ago we described a personal insolvency case study,CLAIM BANKRUPTCY IN ONTARIO CASE STUDY: SHE REALLY WANTED TO BUT WE STOPPED HER AND SOLVED HER PROBLEMS, was about the surgeon who became insolvent because of a failed business venture and a divorce. The events leading up to the doctor’s insolvency convinced her that she had to go bankrupt. We then described the steps we took to restructure her affairs so she could avoid bankruptcy. She completed a successful Proposal under theBankruptcy and Insolvency Act (Canada). More importantly, she regained her confidence, we eliminated her pain points and she is once again thriving emotionally, physically and financially.
Last week, we described a situation where we used our skill set in a different way. In our case study,COURT APPOINTED ESTATE TRUSTEE CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, we described how we ended a war between the two beneficiaries under a Will and monetized the assets for their benefit. In that situation, the Court appointed us as the court appointed estate trustee.
Company restructuring process: The social media agency
The company was a social media agency. Their clients were some of the largest household names in North America. The company made sure that their clients’ websites were eye-catching, technologically advanced using leading search engine optimization (SEO) and search engine marketing (SEM) techniques. In short, their clients had to show up on page 1 of an online search and that their websites were eye-popping and functional. The company was a Canadian and North American leader.
Company restructuring process: Life got in the way
The sole shareholder and Director experienced some health issues with a family member; that required her attention. She was tending to that emergency and it took her away from the business for lengthy periods of time. Experienced senior staff ran the business in her absence. The entrepreneur felt she could deal with business matters by telephone. They established a process where she signed documents and cheques prepared by staff members using couriers.
Company restructuring process: Senior staff were not trustworthy
WRONG!! Although she trusted the senior staff, they turned out not to be trustworthy. They made mistakes and assured the owner that the documents and cheques they prepared were correct.
They also provided her status reports assuring her that all client activities and projects were all on schedule. The reality was that certain senior staff were plotting to establish their own agency, to steal clients. The sole Director felt something was not right, but she could not pinpoint from afar what the issues were. She returned to the office and discovered that her worst fears were her new reality.
Company restructuring process: How bad was it?
Things were very bad. Billings were way behind. Cash flow had dried up. As a result of the lack of cash flow, the company was now behind in rent and had collected but did not remit source deductions totalling over $300,000. Theunremitted source deductions formed a trust claim over all the company’s assets, ahead of the company’s bank. Learning all this information made the bank very uneasy and unwilling to lend any more money.
Company restructuring process: The short-term steps in financial restructuring
The sole Director and shareholder of the company contacted us. She was operating in panic mode. We assessed the situation. Our preliminary assessment was that catching up on the billings and the clients paying them in the normal course, good cash flow would return. There was also a good book of projects to start on; just not as many as normal. Thankfully, no clients had left yet.
The short-term plan we developed had 7 steps:
Fire the staff involved in the attempt to start-up their own firm and steal clients. Pay their normal wages and vacation pay, but not pay in lieu of notice.
File immediately a Notice of Intention To Make a Proposal (NOI) to invoke the stay of proceedings (Stay Period) so that no creditor could take action against the company.
Immediately bill all unbilled projects and begin collection efforts on any outstanding invoices.
Reach out to all major clients to reassure them that the entrepreneur was in control after returning from the family emergency and that she would personally be supervising all work performed.
Prepare a crisis cash flow model that thankfully showed that the company could cash flow itself since the amounts owing to the unsecured creditors was not caught in the restructuring.
The company required fresh capital. Luckily, the entrepreneur had enough funds to inject.
Meet with the company’s banker to explain the situation and share the emergency cash flow to show that the company did not need any new funds from the bank and that the principal was going to inject the temporary funds necessary. This gave the banker the assurance that the bank line would not be pressed any further, and that the entrepreneur was willing to put her money where her mouth was.
company restructuring process
Company restructuring process: The long-term plan
Now that the situation was stabilized, we worked with the company to look at longer term restructuring needs. It needed a business debt restructuring process. We determined that the company had too much space. As it did not need to immediately replace the terminated staff, it now did not need as much space. Certain space could be given up without affecting the main space and the business.
The landlord of course was not happy about this, but was willing to work with the company. If the landlord was not cooperative, the backup plan was to repudiate the unnecessary space through the formal restructuring plan.
The terminated employees retained legal counsel, who made himself known. Various issues arose from this. Were they going to seek leave of the bankruptcy court to launch litigation for damages against the company? What counterclaim could the company prove? Should we agree to attempt to value what claims they may have without litigation and include them in the restructuring plan?
Company restructuring process: The need for more time
Upon the filing of the NOI, the company obtained a first 30 day stay where its creditors could not pursue it and to file the real restructuring proposal. The company had to run for at least a few weeks to assess if the real performance was similar to the cash flow forecast developed on day 1.
Therefore, the company’s lawyers went to bankruptcy court to seek a 45 day extension for the company to file its bankruptcy protection restructuring plan. As Trustee, we had to prepare and file our report with the court to attest to the fact that:
an extension of the Stay Period is required to enable the company to continue to run in the ordinary course and complete its restructuring proposal;
the company continues to act in good faith and with due diligence; and
no creditor would be materially prejudiced by the extension of the Stay Period.
The Court granted the extension for this company restructuring process.
Company restructuring process: The corporate debt restructuring process
We could now finish the real corporate restructuring proposal through thisbankruptcy protection process. Given the unknown of the final valuation of the terminated employees’ claims, if any, we had to build in further protection for the company. We decided that the company’s bankruptcy protection plan would be what is known as a “basket proposal”. The amount of funds available for the unsecured creditors would be a fixed amount. So, whatever the claims ended up being, the size of the pot never changed.
Under thebankruptcy laws in Canada for a corporation undergoing a corporate restructuring, we had to ensure that there were sufficient funds for the unsecured creditors to share in “the pot”. The amount had to be realistic, to get the required majority of unsecured creditors voting in favour of the corporate restructuring plan. We also had to ensure that the bank was not being compromised in the proposal and that we communicated that clearly to the bank.
Company restructuring process: The government trust claim
As stated above, theunremitted source deductions were a trust claim. The restructuring bankruptcy laws in Canada state that such a claim has to be repaid in full within 6 months of Court approval of the restructuring proposal. We revisited the company’s cash flow. Although the company was on track, over the next year, money was needed to reinvest in the business.
The entrepreneur had no more money from her own resources. Therefore, after allowing for operations and the payment of the past unremitted source deduction amount of about $300,000, we could only offer the unsecured creditors roughly 5 cents on the dollar of the proven claims from future operations. The company promised to pay that amount within 6 months of retiring the government trust claim amount. So, within 1 year of Court approval, the unsecured creditors would get their money from the corporate restructuring plan.
Company restructuring process: Solving the terminated employee claims
Seeing this, theterminated employee group did not wish to spend funds on litigation, only to receive 5% of whatever claim they may have from the restructuring plan. We ended up agreeing to a very modest amount to represent their claims in the proposal.
The meeting of creditors was held and we obtained the required majority of creditors voting in favour of the business restructuring proposal. The creditors realized it was a better outcome than if they voted the company into bankruptcy. They voted in favour of the company restructuring process. We then obtained the necessary Court approval.
Company restructuring process: The result
The company turned its operations around. It survived the coup by the terminated employees. The company produced enough cash profits to retire the government trust claim debt within 6 months of court approval. It also paid the proposal fund amount to us as Trustee on time, to be distributed to the unsecured creditors.
The company successfully restructured and operated profitably afterwards. The entrepreneur was able to sell her company several years later and retire.
Company restructuring process: The financial restructuring process
Thefinancial restructuring process is complex. TheIra Smith Team understands how to do a complexcorporate restructuring. However, more importantly, we understand the needs of the entrepreneur. You are worried because your company is facing significant financial challenges. Your business provides income not only for your family. Many other families rely on you and your company for their well-being.
The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your company’s problems; financial and emotional. The way we dealt with this problem and devised a corporate restructuring plan, we know that we can help you and your company too.
We know that companies facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with theIra Smith Team. That is why we can develop a company restructuring process as unique as the financial problems and pain it is facing. If any of this sounds familiar to you and you are serious in finding a solution, contact theIra Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation. We will get yourcompany back on the road to healthy stress free operations and recover from the pain points in your life, Starting Over, Starting Now.
Banks keep raising their fees and blaming it on inflation andrising costs. The reality is that bank charges are too high because bank fees are an easy cash grab. In fact, according to Statistics Canada, Canadians paid an average of $216 in bank service fees in 2015.
The Big Banks currently charge monthly chequing fees ranging anywhere from $3.95 to $30 per month. Shocking, isn’t it? This is great news for the banks who strive to make the highest possible profit for their shareholders, and some of those profits are coming at your expense.
Bank charges are too high: Want to save money?
Want tosave money? Start reading your bank statement carefully! What fees are you currently paying?
Paper billing
Cheque book fees
Chequing account fees
Debit fees
ATM fees
Overdraft fees
Foreign transaction fees
Non-Sufficient Funds (NSF) fees
Cheque certification fees
Bank charges are too high: It wasn’t always this way
Outrageous bank fees weren’t always the case. “It used to be that people did not pay a monthly fee for banking because funding came from the spread between what banks made on loans and what they paid out in interest on deposits,” writes Kate Payne, spokesperson for the Canadian Bankers Association. This of course makes perfect sense but then the banks realized how much greater their profits could be by charging additional fees for every type of transaction. Fees have now become an important part of a bank’s revenue model.
Bank charges are too high: Canadians are loyal to a fault
Although there are lower cost alternatives like online banks and credit unions, Canadians are loyal to a fault to the Big Banks. According to the Financial Consumer Agency of Canada (FCAC), regardless of what we’re being charged in fees:
68% of Canadians and 96% of Ontarians still bank with one of the Big Five Banks
8% bank with a branchless bank
3.5% solely bank with a branchless bank
Bank charges are too high: Some ideas to fight back
What can you do if you’re paying too much in bank fees?
Review your current account package and see if it’s still right for you
Use theAccount Comparison Tool from the FCAC website to shop around – see what’s available and how your account compares
Ask for youth or student accounts if applicable
Ask for senior’s discounts if applicable
Use your own bank’s ATM and avoid convenience fees
Take advantage of cash back to avoid additional transaction fees
Bank charges are too high: What if you have too many expenses?
There are many ways to save money and paying attention to how much you’re paying in bank fees can be an excellent cost saving measure. If you’re having serious financial problems cutting back on any unnecessary expenses is vital to your recovery. But, you can’t do it alone.
Canadian reverse mortgage information: Introduction
