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CAN YOU FILE PERSONAL AND CORPORATE BANKRUPTCY? SMALL BUSINESS OPTIONS

Can you file personal and corporate bankruptcy: Introduction

Can you file personal and corporate bankruptcy is a question all small business owners ask us when they come to our office for a free consultation. We discuss local business bankruptcy with entrepreneurs in our office. Their personal and business lives are intertwined. There’s very little distinction between the individual their small business.

This is especially true if their business in unincorporated and is being operated as a proprietorship. Our role is to first understand them as a person and as a business separately. This way we can give the best possible advice. If the business is a proprietorship, then we are only talking personal bankruptcy, or alternatives to avoid bankruptcy, such as a consumer proposal or restructuring proposal.

If their business legal form is that of a corporation, then we look at both the corporate and personal issues separately. The reason for this is because in the eyes of the law, the corporation and the individual are separate people. Many times it is not necessary for both the corporation and the individual to each file an insolvency process. Maybe only one has to.

Separating your business and personal assets and liabilities is a great reason for incorporating your business. When discussing bankrupting an incorporated company, we also need to consider if there are any Director liabilities. We must also consider the owner’s personal situation. This is so we can make sure they do not do themselves more personal harm than good. We also first look to see if there is a way to restructure and save the corporation.

Can you file personal and corporate bankruptcy: What is bankruptcy

Bankruptcy is a lawful method for the honest but unfortunate company or person to get a remedy from the burden of the financial debts that cannot be repaid. When an assignment in bankruptcy is submitted a “stay of proceedings” is invoked.

What the stay of proceedings means

The stay of proceedings results in stopping creditors from beginning or continuing with litigation against the company or person. The stay of proceedings also stops an unsecured creditor who has obtained a judgement. It stops them from garnishing funds from a bank account or part of the person’s wages.

For unsecured creditors, the stay of proceedings also calls a timeout to make sure that one unsecured creditor does not get a benefit over others in regards to the settlement of financial obligations. Keep in mind that the bankruptcy process could also be started by one or more unsecured creditors. They must be owed at least $1,000 in total.

can you file personal and corporate bankruptcy

Can creditors push you into bankruptcy?

The unsecured creditor(s) could file a motion with the Court requesting that a Bankruptcy Order be issued against the company or person. The method of bankrupting a corporation in Canada is the same as that of a person. In addition to being able to prove that the company or person owes this unsecured creditor or group at least $1,000, they also need to prove that at least one act of bankruptcy has been committed in the 6 months prior to the filing of the motion.

The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) identifies the various acts of bankruptcy. The most common one is “ceases to meet his liabilities generally as they become due”.

Secured creditors are generally not impacted by bankruptcy. They can realize upon the assets of the company or person covered by the security. In return for the original loan, the lender required that the borrower put up the security as a condition of the loan. The reason for this was so that if insolvency happens, the lender could sell the assets to try to repay the loan, interest and costs.

The secured creditor only really takes part in the bankruptcy process if after they have sold all the assets covered by their security, they are still owed money. The balance they are still owed is an unsecured debt.

Personal bankruptcy

If an individual’s business is a single proprietorship or a partnership, but not a corporation, legally, the person or people are also the business. So when they deal with the possibility of bankruptcy, all their assets are included, subject to provincial exemptions. Simply put, the assets of the business are not held different from their individual assets, so a small business bankruptcy of this kind is personal bankruptcy.

Where does Canada Revenue Agency fit in?

There are generally 3 types of claims that Canada Revenue Agency (CRA) has against a business. It does not matter if the business is incorporated or is a sole proprietorship.

The 3 kinds of CRA claims generally are:

  1. Unremitted source deductions from employee payroll
  2. Net HST owing
  3. Unpaid income tax from profitable years

Both the HST liability and income tax, in a bankruptcy, is an unsecured claim. However, the HST liability is also a personal claim against the Director(s) of a corporation. Unremitted source deductions are both a deemed trust claim against the bankrupt’s assets and in the case of a corporation, a personal claim against the Director(s) of the company.

When we do our first consultation with a business owner, when the business is run in a corporation, whenever unremitted source deductions or HST is involved, this always leads to a talk about the person’s situation in the event CRA would make a claim against the Director.

Some bankruptcy statistics

According to the Office of the Superintendent of Bankruptcy Canada, for the 12 months ending September 30, 2017, there were 125,912 insolvencies in Canada. This is a decrease of 3% over the same time period a year earlier. Consumer insolvency filings were 122,296 or 97.1% of total filings. The consumer filings were split into 59,192 bankruptcies and 63,104 consumer proposals – roughly half and half.

Business insolvency filings for the same time period in all of Canada totalled 3,616, a decrease of 8.1% from the 12 month period one year earlier. Business insolvency filings were split into 2,719 bankruptcies and 897 proposals. These statistics do not include filings by very large corporations under the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36).

As you can see, for a country the size of Canada, there were not a lot of business insolvencies during the first 9 months of 2017. The consumer filings were split roughly even between bankruptcy and a consumer proposal, the best consumer bankruptcy alternative.

Alternatives to Declaring Bankruptcy

A consumer proposal entails paying back a part of your financial debts in return for your unsecured creditors forgiving the remaining balance owing. A consumer proposal provides a significant benefit for a proprietor or partner in an unincorporated business. Unlike in a bankruptcy, your assets are not available for seizure by the licensed insolvency trustee (LIT).

You can take up to 60 months to pay off your consumer proposal. How much you will have to offer your creditors depends on what the unsecured creditors could expect in your bankruptcy. Working with a LIT, you work out that amount through discussion and analysis. A LIT can explain the entire process to you.

From a financial viewpoint, a consumer proposal is better than your bankruptcy because it permits the unsecured creditors to recoup a larger part of the debt than they would receive in your bankruptcy.

What is best for you and your business?

If you find you or your business is in a financial danger zone, contact Ira Smith Trustee & Receiver Inc. We’re full-service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.

Your financial problems can be solved with immediate action and the right plan. Give us a call today.

can you file personal and corporate bankruptcy
can you file personal and corporate bankruptcy
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REVERSE MORTGAGE DEBT: THE SHOCKING DETAILS OF THE INCREASE IN CANADA REVERSE MORTGAGE DEBT MIGHT MAKE YOU SQUEAMISH

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reverse mortgage debt

Reverse mortgage debt: Introduction

The number of Canadians who aren’t able to retire comfortably is alarming. Let’s face it, Old Age Security (OAS) and Canada Pension Plan (CPP) is just not enough, and seniors are in search of ways to supplement the government programs. Some are going back to work full time, part-time, consulting, selling their homes or borrowing against their homes with reverse mortgage debt.

According to the Office of the Superintendent of Financial Institutions (OSFI), reverse mortgages experienced double-digit growth in October 2017. And, they’re gaining in popularity.

Reverse mortgage debt: What is a reverse mortgage?

Aptly named, a reverse mortgage is a mortgage in reverse. It allows you to borrow against the equity in your home and you don’t have to repay the debt until you sell or transfer your home. . For some people, a reverse mortgage to pay off debt, may be attractive.

Reverse mortgage debt: Is a reverse mortgage a good idea?

There are pros and cons to a reverse mortgage and every situation is different. We’ve written a blog explaining if a senior reverse mortgage is a good or bad idea to fund your retirement.

Reverse mortgage debt: How fast is reverse mortgage debt in Canada rising?

According to OSFI filings reverse mortgages held at banks:

  • Increased by 2.02% in just one month from September 2017 to October 2017
  • Increased 22.27% in one year from October 2016 to October 2017
  • Is estimated to be rising at $1.25/second

Reverse mortgage debt: Are you struggling with debt?

With more seniors struggling in retirement, using their homes for equity is gaining in popularity and as a result reverse mortgage debt could be the fastest growing segment of debt in the country. The keyword here is debt.

If you’re struggling with debt, let’s sit down and discuss other options before resorting to a reverse mortgage. A professional trustee is an expert in debt and is in the best position to give you sound advice on how to deal with your financial struggles.

Call Ira Smith Trustee & Receiver today to book a no cost, no obligation appointment and you can be on your way to conquering debt Starting Over, Starting Now.

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REDWATER ENERGY CORP. – SUPREME COURT TO DECIDE WHO PAYS CLEANUP COSTS

UPDATE: ON JANUARY 31, 2019 THE SUPREME COURT OF CANADA RELEASED ITS DECISION ON THE APPEAL BY THE PROVINCE OF ALBERTA ET AL. READ OUR UPDATE, REDWATER ENERGY SUPREME COURT DECIDES, PUBLISHED 9 PM ON MONDAY, FEBRUARY 4, 2019.

Redwater Energy Corp.: Introduction

By now you have no doubt read articles on the decision in the Redwater Energy Corp. (“Redwater”) case. In a 2-1 decision, the Alberta Court of Appeal has upheld the Redwater ruling of the lower Court. The lower Court decision protects, in a bankruptcy, a lender’s secured priority over provincial ecological clean-up requirements.

Redwater Energy Corp.: The Court decision heading to the Supreme Court of Canada

In their majority decision, the Alberta Court of Appeal judges discovered “no mistakes” in the Alberta Court of Queen’s Bench judgment. The May 2016 lower Court ruling was that provincial laws which are in conflict with the federal bankruptcy legislation, do not supersede the federal Bankruptcy and Insolvency Act (Canada).

The situation centred on a little energy firm which entered into receivership in 2015. It owed $5 million to ATB Financial. At the time of its bankruptcy, Redwater had some producing oil and gas wells. However, it had a lot more properties that were not so productive. The Trustee wanted to sell off the productive wells, and leave the others behind for The Orphan Well Association to deal with.

An appeal from the Alberta Court of Appeal decision will be heard by the Supreme Court of Canada. The Supreme Court of Canada will hear the case on February 15, 2018.

Redwater Energy Corp.: Federal bankruptcy trumps provincial law

The Court addressed a fundamental public policy dilemma. Which has top priority: federal government bankruptcy legislation, or provincial energy law. The Alberta Court of Appeal sided with the lower Court in deciding that the federal Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) is the law that must be looked at. The Province has no ability to force the secured creditor in a bankruptcy scenario to follow the provincial rules. The lender does not need to incur the costs of remediating the unproductive wells when realizing upon the productive assets.

Redwater Energy Corp.: The Alberta Energy Regulator reaction

In response, on December 6, 2017, Alberta introduced more stringent regulations for giving business permits to oil and gas firms. The constraints intend to hold firms responsible for deserting wells as well as disregarding ecological clean-up. Permits that are currently issued can possibly be withdrawn.

It likewise enables the Alberta Energy Regulator (AER) to do continuous reviews of licensees to aid in taking care of the threat and costs of abandoned unproductive energy assets.

The Orphan Well Association‘s supply currently consists of greater than 1,800 wells needing improvement in Alberta, claimed organization chair Brad Herald. He is also vice-president of the Canadian Association of Petroleum Producers.

What the AER is going to be taking a look at is earlier history of the corporate operator, and its Directors. So if an operator has:

  • a history of previous issues; or
  • has solvency issues

the regulator is going to want to take a closer look. Presumably this will also apply to the Directors of the applicant. The limitations intend to hold firms answerable for deserting wells as well as overlooking ecological clean-up.

Redwater Energy Corp.: Current status

So currently, trustees can simply ensure that unproductive wells that need cleanup are just capped, leaving the Alberta taxpayer to pay for the cleanup bill. Previously, an oil and gas well permit called for a tiny deposit, an address and insurance coverage. The AER’s position is environmental cleanup costs must be paid by the cash from the sale of the producing wells.

Mr. Herald stated there have actually been various other situations since the Redwater decision where a receiver wishes to disclaim a financially troubled owner’s responsibilities.

The AER and the Orphan Well Association are hoping that the dissenting point of view could boost their chances of success at the Supreme Court of Canada. How will corporate bankruptcies affect the oil and gas markets after more than 2 years of reduced pricing?

Redwater Energy Corp.: How to restructure before your company goes bankrupt

Is your company experiencing cash flow problems? Does your business not have enough funds to meet all of its obligations? Do you know that your company has exposure to environmental cleanup costs and just like Redwater Energy, you know it cannot afford the costs from doing phase i environmental site assessments?

If so, then you need the help of a professional trustee immediately. Call Ira Smith Trustee & Receiver Inc. If we consult with you early, we could develop a restructuring and turnaround strategy. By doing this your business will once again thrive.

Our approach for every person is to develop an outcome where Starting Over, Starting Now takes place. You’re just one telephone call away from taking the important actions to return to leading a healthy, balanced, and stress free life.

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redwater energy corp
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RETIREMENT IN CANADA HOW MUCH DO I NEED: OUR FOUR REASONS RETIREMENT IS MORE EXPENSIVE FOR CANADIANS

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retirement in canada how much do i need

Retirement in Canada how much do I need: Introduction

When we think of things becoming more expensive, we naturally think of consumer goods. As a rule we don’t pay attention to the cost of retirement, even though it’s been getting more expensive for Canadians for quite some time. And, interestingly enough, the cost of living is not a significant factor. But there are four main factors which will answer the question “Retirement in Canada how much do I need?”.

Retirement in Canada how much do I need: Our 4 reasons why retirement is becoming more expensive for Canadians?

Increased life expectancy: Canadians’ life expectancy will increase by three years, placing many of us in the 90-plus age bracket. The Chief Actuary with the Office of the Superintendent of Financial Institutions Canada told this to a Florida symposium. “Over the next half century, Canadian life expectancy at age 65 will increase by 3 years to reach 25 years,” said Jean-Claude Ménard, Chief Actuary with OSFI. “It means that half of Canadian retirees expect to live past age 90. Retirement is expensive and will become even more expensive in the future with improved longevity.”

The cost of retirement homes: The average price for a small seniors’ retirement apartment in the Toronto area is close to $5,000 a month. This is according to a report published by the Toronto Star. Although most seniors would prefer to stay in their own homes, physical limitations often dictate the move to a retirement facility.

The Defined Benefit Pension Plan will disappear: Defined benefit pension plans have disappeared from the landscape. This is because of their cost and that they can be risky for employers if investments do poorly.

The cost of prescription medication and paramedical services: Although our Canadian universal healthcare system covers us for almost all medical expenses, there are prescription drugs that are not covered and can be very costly. So for middle-aged Canadians and some retirees, this is an issue. In addition, our healthcare system doesn’t cover much in the way of paramedical expenses.

So, if you need ongoing physiotherapy, see a chiropractor or an acupuncturist, you will be paying out-of-pocket.

Retirement in Canada how much do I need: What if you have too much debt to retire?

When planning for your retirement, it’s important to realize that retirement is becoming more expensive for Canadians and will continue to rise. It’s important to get your financial house in order as early as possible.

If you’re having difficulties dealing with debt, now is the time for professional help. Ira Smith Trustee & Receiver Inc. has helped many people 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.

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PERSONAL BANKRUPTCY IN ONTARIO CANADA: THE SOLUTION TO YOUR NAGGING DEBT?

Declaring personal bankruptcy in Ontario Canada: Introduction

Facing serious financial difficulties is devastating, especially if you believe that declaring personal bankruptcy in Ontario Canada is your only option. In fact, many people mistakenly believe that dire financial problems automatically mean personal bankruptcy.

If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvency is a financial condition; bankruptcy is a legal state.

Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (Canada) (“BIA”) that help you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.

If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened. The cost of this type of bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.


Declaring personal bankruptcy in Ontario Canada: A summary of the bankruptcy steps

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

If you have very little property, all of it may be рrоtесtеd. In that case, you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be sold fоr and whether you will be required to pay “surplus income” to your LIT (more on
this later).

The final step of your bankruptcy process will be to get your discharge from your debts. This means that you will not have to рау them (with certain exceptions).

Declaring personal bankruptcy in Ontario Canada: Know the basic rules BEFORE filing for bankruptcy

Gеnеrаllу, going through bankruptcy helps реорlе with debts get a fresh start. Hоwеvеr, many реорlе have false ideas about how it can help them. Bеfоrе deciding you need to fіlе for bаnkruрtсу, you should know some of the bаѕіс rules. That way you will know what bankruptcy can and cannot do for you.

Declaring personal bankruptcy in Ontario Canada: What bаnkruрtсу may do for you, dереndіng on your sіtuаtіоn

  1. Dіѕсhаrgе уоur unѕесurеd debts; depending on your assets and income, you may not рау or lose anything. If you do, you will рrоbаblу рау less than you owe.
  2. Give you a short-term “аutоmаtіс stay” аgаіnѕt уоur сrеdіtоrѕ.
  3. As opposed to bankruptcy, one of the bankruptcy alternatives under the BIA will help you work out a repayment plan that lets you take longer to рау your debt and/or рау less than you owe. If your budget allows for this approach, the (consumer) proposal, allows you to keep property that ѕесurеѕ a debt. Examples of such assets would be your home or car. It can also allow you to keep nоn-еxеmрt аѕѕеtѕ that you would рrоbаblу lоѕе in a bankruptcy filing. This is one bankruptcy alternative.

Declaring personal bankruptcy in Ontario Canada: What bankruptcy does not do for you

Getting a dіѕсhаrgе of уоur debts through the bankruptcy process will not discharge:

  1. Any award of damages by a court in civil proceedings in respect of:
    1. i) bodily harm intentionally inflicted, or sexual assault, or
       ii) wrongful death resulting therefrom
  2. A debt or liability for alimony or alimentary pension.
  3. Any debt or liability arising under a judicial decision establishing affiliation or in connection with support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt.
  4. Debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others.
  5. Any debt or liability resulting from obtaining property or services by false pretenses or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
  6. Liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his claim.
  7. Any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred:i) before the date on which the bankrupt ceased to be a full or part-time student, as the case may be, under the applicable Act or enactment, or
    ii) within seven years after the date on which the bankrupt ceased to be a full or part-time student;
    iii) any debt or obligation in respect of a loan made under the Apprentice Loans Act where the date of bankruptcy of the bankrupt occurred: a. before the date on which the bankrupt ceased, under that Act, to be an eligible apprentice within the meaning of that Act, or

    b. within seven years after the date on which the bankrupt ceased to be an eligible apprentice; or
  1. Any debt for interest owed with an amount referred to in the above list.declaring personal bankruptcy in ontario canada

Declaring personal bankruptcy in Ontario Canada: More things bankruptcy does not do for you

  1. The bаnkruрtсу court can refuse to dіѕсhаrgе your debts if it finds that you are abusing the рrосеѕѕ. Thеrеfоrе, you cannot run up debt just before filing for bаnkruрtсу and automatically have it forgiven. The Court will look at what you ѕреnt the money on and can deny you a discharge if it finds that you have abused the ѕуѕtеm. You must be truthful and not try to hide аѕѕеtѕ.
  2. Will not help you with any debts you take on during and after you begin the bаnkruрtсу рrосеѕѕ.
  3. Will not give you a clean slate on уоur credit report (except to show what debts have been dіѕсhаrgеd). Bankruptcy reduces your credit rating to R9. This rating remains on your record for 6 years after your discharge for the first time bankrupt. These ratings are set by the relevant credit bureaus whose rules may vary.
  4. Will not protect some kinds of іnсоmе and рrореrtу you get during the соurѕе of the bankruptcy until you are discharged (such аѕ іnhеrіtаnсе, tax refund, gifts, lottery winnings).
  5. May not dіѕсhаrgе all of уоur debts without some ѕасrіfісеѕ. If you have very few аѕѕеtѕ and little іnсоmе, you may not lоѕе anything. Debtors with more assets and income above the poverty line can lose some of their assets and have to pay surplus income.
  6. Will not allow for your discharge after 9 months if you are required to pay surplus income. A first time bankrupt must pay surplus income for 21 months and a second or more time bankrupt will have to pay surplus income for 36 months. Whether or not a first time bankrupt will be entitled to an automatic and absolute discharge after paying the required surplus income depends on the specifics of your circumstances.
  7. A second or more time bankrupt is not entitled to an automatic absolute discharge and there must first be a Court hearing to decide what form of discharge is most appropriate given your circumstances.

Filing fоr bаnkruрtсу is a big deal

Declaring personal bаnkruрtсу in Ontario Canada is a big deal. It can be a trеmеndоuѕ rеѕоurсе for the honest but unfortunate debtor who needs a new start. However, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ to соnѕіdеr before jumping in hеаdfіrѕt.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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CAN YOU RETIRE WITH DEBT? HOW MANY TIMES WILL YOU RETIRE?

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can you retire with debt

Can you retire with debt? Introduction

Can you retire with debt? Retirement used to be so simple. You worked until the age of 65 and then retired with your defined benefit pension plan and sailed off into the sunset. Those days are gone and retirement is now very different.

Firstly defined benefit pension plans are rapidly disappearing from the landscape. We’re living longer than ever before and in many cases now have to fund 30+ years of retirement. And many seniors are dragging a debt load with them into retirement. According to Statistics Canada among those 55 and over:

Can you retire with debt? Most people cannot

As a result, many Canadians are continuing to work beyond the age of 65, although they may retire several times before ultimately retiring from all income generating activity. It’s quite common these days for someone to retire and in short order, miss the income, miss the stimulation, miss the sense of accomplishment, miss the sense of identity that can be derived from being in the workforce or just wants to get out of the house.

Although they may not want to go back to the corporate rat race on a full time basis, consulting, contracting or part-time employment are all options. Some retired seniors even open their own businesses. It’s quite possible to retire three, four or five times before retirement becomes your full-time vocation. Can you retire with debt? Most people cannot.

Can you retire with debt? Delaying retirement makes economic sense

Considering how many seniors are still in debt, delaying retirement makes good economic sense.

  • Canada Pension Plan (CPP) creates great incentives for you to delay your retirement past the age of 65. As of 2016, if you delay receiving CPP until the age of 70 you’ll receive 42% more in your monthly benefits than if you’d retired at age 65. Conversely, if you start receiving the CPP at age 60 your monthly benefits will be 36% less than if you’d waited to start your benefits at age 65.
  • Old Age Security (OAS) also provides incentives to delay retirement past the age of 65. If you wait until the age of 70 to receive OAS benefits, you’ll receive 36% more in average monthly benefits than if you’d started at age 65.

So can you retire with debt? You can try, but delaying retirement makes good economic sense.

Can you retire with debt? Let us help you retire debt free

How many times will you retire? Will you be like many Canadians who go back to work fulltime or part-time? Regardless of how many times you retire or at what age, it’s important that you retire debt free to lead a more comfortable life. A professional trustee can help you solve your financial problems and give you peace of mind in retirement. Ira Smith Trustee & Receiver Inc. can help you get back to debt free living Starting Over, Starting Now. Give us a call today.

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CANADIAN BANKRUPTCY AND INSOLVENCY LAW: WHAT TO THINK ABOUT BANKRUPTCY

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Introduction

The holiday gift buying season is over. Next month the credit card bills will be arriving. Maybe you overspent on holiday gifts this year. Maybe you had too much debt to start with, and you know this new spending will put you over the top. Perhaps you already have questions about Canadian bankruptcy and insolvency law.

Perhaps you spent wisely but modestly because you were acutely aware of your financial problems. Maybe you never were an uncontrollable spender. Perhaps a specific damaging event outside of your control caused you to wind up deep in the red. So far you have worked hard to overcome the financial challenges, but for the first time you are thinking that you should read up on Canadian bankruptcy and insolvency law.

Either one unfortunate life issue or one foolish monetary choice is all it could take. Despite how you arrived, there is no simple escape, except perhaps winning the lottery or an unexpected inheritance.

Bankruptcy is one alternative

If you’ve fallen under just what seems like impossible financial debt and you have no chance to get out of it, bankruptcy is one alternative. It’s not constantly an excellent one– and never ever one to be taken gently.

Below is exactly what you should understand prior to making any kind of choices about filing personal bankruptcy.

Long-term results

Almost 63,372 people declared bankruptcy in 2016, an action that will certainly have an effect on them for a long time to come. They have certainly started learning about the Canada bankruptcy and insolvency law regime.

While declaring bankruptcy relieves debt pressures caused by decisions and/or issues of the past, it could adversely influence your future. The record of your filing for bankruptcy will certainly stay on your record for up to 10 years.

Numerous companies run a credit check on job applicants. The record of your bankruptcy will come up. Potential employers have either their own bias or unique interpretation about this. Perhaps the job you are applying for requires you to be bonded. Faced with many qualified applicants, a potential employer may very well choose the person who does not have a bankruptcy on their record. As I have previously written, it can likewise have an influence on insurance coverage costs.

The Canadian bankruptcy and insolvency law system is designed to financially rehabilitate the honest but unfortunate debtor. As a licensed insolvency trustee, I certainly believe in our system. However, it is also my role to point out to anyone considering personal bankruptcy, there are many issues to consider before taking this choice.

Evaluating your alternatives

For some people bankruptcy many not be the only option. Just how do you recognize its the right one for you? What are the options under Canadian bankruptcy and insolvency law?

Prior to making any type of choice about filing for bankruptcy, you should first contact a licensed insolvency trustee (LIT) in your area for a free consultation. The LIT will review with you your current financial situation and ask you various questions. The purpose is for the LIT to gain an understanding of your current financial position and how you got there. Based on this information, the LIT will be able to give you a preliminary opinion about what your realistic options are.

In general, the options available to someone experiencing difficulty in paying their debts on time include: (i) credit counselling; (ii) debt consolidation; (iii) (consumer) proposal; and (iv) personal bankruptcy.

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canadian bankruptcy and insolvency law

The proposal option used for half of all personal insolvency filings in 2016

I am using brackets around the word “consumer” when talking about the proposal option. A consumer proposal is available to anyone who owes the amount of $250,000 or less, not including the amount you owe on loans registered against your home. If you owe more than this $250,000 threshold, a proposal may still be the most viable option for you. That proposal process just falls under a different section of the Bankruptcy and Insolvency Act (Canada) (BIA). It is not called a consumer proposal, but rather a Division I proposal. The BIA governs Canadian bankruptcy and insolvency law.

As I mentioned above, in 2016, 63,372 Canadians filed personal bankruptcy. However the total number of people who filed an insolvency proceeding in 2016 in Canada was 126,843. So what did the other 63,471 people do? They filed a proposal. So roughly half of the people who filed an insolvency proceeding in Canada in 2016 to solve their debt problems, were able to avoid bankruptcy.

In 2016, 63,471 individuals filed a (consumer) proposal. This bankruptcy alternative is an organized settlement of your financial debts for an amount less than the total you owe. You can take up to 60 months of regular monthly payments to complete your (consumer) proposal.

The proposal provisions of Canadian bankruptcy and insolvency law allow those people “in the red” to keep their assets they can afford to continue paying for, including their home. At the same time, they made a monthly payment to the LIT to be distributed to their creditors for their past debts that they could not afford to repay.

Canadian bankruptcy and insolvency law: Beginning the insolvency filing process

If you believe that bankruptcy may be for you, your first action is to speak with a LIT. Remember, you are not only looking to them for solutions. The LIT is not only interviewing you. You are also interviewing the LIT to decide if this is someone you feel you can work with.

If you don’t feel comfortable after speaking to that first LIT, there is nothing wrong with you getting a second opinion from a different LIT. Not only is that not anything wrong with that, I urge it. You are going to be working with your LIT for quite some time. Make sure that you believe it will be a comfortable relationship for you.

The bottom line is if you got in over your head with money, you do have alternatives. Get an expert viewpoint on just what your options might be under Canadian bankruptcy and insolvency law. If you can’t make your monthly payments, you need professional help; and you need it now. Contact a professional Toronto bankruptcy trustee.

The Ira Smith Team has a cumulative 50+ years of experience helping people who are facing a financial crisis and we deliver the highest quality of professional service. Make an appointment for a free, no obligation appointment today and Starting Over, Starting Now you’ll take your first steps towards financial freedom.

We wish all of our readers and subscribers a healthy, happy and prosperous New Year 2018.

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BUILDING AN EMERGENCY SAVINGS FUND: WE ALL NEED AN EMERGENCY FUND TO PROTECT OUR RETIREMENT

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building an emergency savings fund

Building an emergency savings fund: Introduction

Many of us go about living our lives without giving any thought to building an emergency savings fund. After all, we live in the land of socialized medicine, so unlike our American neighbours, we won’t be ruined by medical expenses. If we need to come up with some cash for the plumber or car mechanic or roofer, there’s always a credit card, payday loan or retirement savings.

Building an emergency savings fund: Surviving a major life event

But what would happen if you lost your job, became disabled or got divorced? A credit card or payday loan can’t fix this kind of catastrophic situation. And, potentially, you could wipe out all of your retirement savings just trying to stay above water. How many ex-employees of Sears (and other companies like Sears) do you think are now living off their retirement savings?

Building an emergency savings fund: Canadians are not saving

Canadians are not saving. According to a Canadian Payroll Association survey:

  • Almost 50% Canadians are living paycheque to paycheque
  • 48% rely on payday to make ends meet
  • 25% couldn’t pay $2,000 bill if it popped up within the next 30 days

And a CIBC poll by Harris/Decima found that 45% of Canadians did not have an emergency savings fund at all.

Building an emergency savings fund: Protecting your retirement income

The lack of emergency savings can cause financial problems far beyond a short-term cash crunch, new research shows. Some people without cash reserves end up drawing on their retirement accounts, putting them at risk of shortfalls later in life, according to an analysis by the Pew Charitable Trusts.

Don’t think of an emergency fund as just a way to tap into some cash for an unexpected expense; think of it as a way to protect your retirement income.

Building an emergency savings fund: Some simple saving tips

Many people have said that they just can’t afford to save but saving doesn’t have to be large sums of money. Put away whatever you can afford, but do it regularly and diligently. If you still think you can’t afford to save, then drop an expense and save that money.

  • Bring your lunch to work
  • Stop buying designer coffee
  • Use public transit instead of your car
  • Put a limit on how much to spend on Christmas gifts or only buy for the children
  • If you smoke, stop now
  • Go out less to bars and restaurants

Building an emergency savings fund: Do you have more immediate financial problems?

Your retirement savings are not your emergency fund. Set up an emergency fund (if you don’t already have one) and commit to save. If you’re living paycheque to paycheque or already dipping into your retirement savings to make ends meet, give us a call today.

The Ira Smith Team has a successful track record of helping people just like you solve their financial problems and get back on track Starting Over, Starting Now.

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HOLIDAY SPENDING MISTAKES IN CANADA: 12 SECRETS TO SOLVE THEM

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Holiday spending mistakes in Canada: Introduction

Other than for some last-minute small items, your holiday spending is complete. The credit card bills will arrive next month. You will soon find out if you made any holiday spending mistakes in Canada.

Maybe you overspent and will now have too much debt you won’t be able to repay. Perhaps you spent wisely, but it will put you over the top given your current debt level. Regardless, you now need to know how to help yourself financially from holiday spending mistakes in Canada.

Holiday spending mistakes in Canada: You are not alone being in debt

Are you fighting financial threats daily? Do you wish you could unlock how to help yourself financially? If so, you are not alone. Lots of Canadians have fought the good fight to barely survive. There have been many articles in the media of the dangers of living with way too much debt. Many Canadians are living paycheque to paycheque.

The Bank of Canada has warned Canadians for years now. With the rate of interest having been so reduced, Canadians have taken on much debt. Now interest rates are beginning to rise. You have to know how to help yourself financially, so that you will not only be able to make your minimum payments, but you will also be able to start reducing your debt. Your holiday spending mistakes has now increased the pressure on you. I do not want to see anyone living this way.

Holiday spending mistakes in Canada: Who this information will help

You know you have debt troubles and this information will help if you:

  • often pay expenses after the date they are due;
  • on a regular basis write cheques that don’t clear your bank;
  • use room from one charge card to get a cash advance to pay the minimum due on a different card;
  • get telephone calls from a debt collector;
  • routinely ask pals or relatives for money;
  • utilities are threatening to cut you off;
  • cannot live to a balanced budget based on your current family income;
  • need to take a second job just to meet normal daily living expenses;

Holiday spending mistakes in Canada: Statistics Canada reporting

Statistics Canada reported that on average, at the end of 2016, Canadian families have a debt-to-income ratio of $1.67 for each dollar of after-tax revenue. At the end of the second quarter of 2017, they report that the ratio has risen to $1.68. Although Canadians’ net worth is also rising, primarily due to rising housing prices. So now housing prices have dropped, yet the debt remains.

If this sounds like how you have lived, then you need to take corrective action now from your holiday spending mistakes before it is too late. Bankruptcy should not be your first option. There are bankruptcy alternatives which include credit counselling, debt consolidation and a consumer proposal.

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Holiday spending mistakes in Canada: Our 12 secrets on how to help yourself financially

If you are living in a debt threatening zone, it is currently the time to act to turn things around. Consider the following 12 secrets to stop your debt from spiralling out of control.

  1. Safeguard Your Health – Make sure that you are taking good care of yourself and your health, both physical and mental. You won’t be any good to yourself or your family if you are ill.
  2. Don’t Talk Yourself Out of What You’re Worth – Don’t put up with the things as they are of your job without seeking out new opportunities. Don’t sell yourself short. Make sure you understand if there are opportunities awaiting you that will pay you more than you are currently earning. Stay current on your marketable skills.
  3. Keep It Simple – Don’t over-complicate things. Don’t get involved with difficult payment plans. Put yourself in a position where if you need an essential item, you can pay for it. Don’t get sucked in by sexy advertisements for things that have long-term payment plans.
  4. Give to Your Future Before Giving to Others – There are many worthwhile causes that clamour for our money. Make sure your own house is in financial order before you give to others. Volunteer your time and not your money. You will find it very rewarding and you will be helping both yourself and others at the same time. Just say no to relatives and friends who ask you for money, until you have no debt yourself.
  5. Make Savings Automatic – Otherwise known as pay yourself first. Set up a special bank account and have the same percentage hived off of your paycheque every payday. Do not touch the funds in that special bank account, until you have enough money to invest in a safe investment. Have this money work for you over and over.
  6. Control Your Impulse Spending – Make sure that you have a monthly budget and follow it. Your budget should account for all your necessary living expenses for you and your family AND allow the percentage you are hiving off each pay period for your investment savings account. If there is anything left over, this balance should be used for debt reduction. Don’t buy on impulse as you will regret it.
  7. Evaluate Your Expenses, and live frugally – We can all get by on less than we think. This ties back into your budget. Make sure that your necessities of life and your regular payday savings are all accounted for. By cutting out expensive daily coffee drinks and other non-essential items, you will be surprised how much you will have leftover for debt reduction.
  8. Invest In Your Future – Upgrade your skillset. Take a course that will make you more marketable. Make room in your budget for this type of expense, as it will generate more income for you for the long-term future.
  9. Keep Your Family Secure – Involve your entire family in the family budget process. Everyone needs to be on the same page and working towards the same goals. Meet regularly to go over your real performance as compared to budget. When everyone knows the plan is working, they will all feel secure and try even harder.
  10. Eliminate And Avoid Debt – Make sure that you are not taking on any new debt. Use budgeting to make sure that you allow a certain amount out of your monthly budget for paying down debt. Even small amounts add up over time. You will see and feel the difference it makes in your life.
  11. Use The Envelope System – Set up a separate envelope for each of your weekly necessities, based on your budget. Only take out enough cash for those amounts and place the right amount of cash in each envelope. Do not use credit cards to pay for the necessities; just use the cash in each envelope. Make the cash in your envelopes last the entire week, then rinse and repeat.
  12. Pay Bills Immediately And Automatically – If you don’t like the envelope system, here is another idea. Pay as much as you can online from your bank account. Set up regular automatic monthly payments so that the bills are paid. You can also use this method for your regular payday savings account. Make sure you budget properly so that you realize what money is coming out of your account in a month automatically so that you don’t overdraw your bank account.

Holiday spending mistakes in Canada: Will you need immediate help from your holiday spending mistakes?

These 12 steps will ensure that you get back on the road to financial health as soon as possible. You can recover from your holiday spending mistakes.

If you find that you have too much holiday or other debt, debt collectors are harassing you and you can’t keep them all happy, then you need to take more action. I say more action because it will be in ADDITION to the above 12 steps. What you will need to do is to immediately speak to a professional trustee.

The Ira Smith Team has a cumulative 50+ years of experience helping people who are facing a financial crisis and we deliver the highest quality of professional service. Make an appointment for a free, no-obligation appointment today and Starting Over, Starting Now you’ll take your first steps towards financial freedom. We can devise a plan so you can come back from your holiday spending mistakes in Canada.

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RETIREMENT AGE IN CANADA: OUR INSIDER’S LOOK INTO WHY 70 BECAME THE NEW 65 FOR RETIREMENT

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retirement age in canada

Retirement age in Canada: Introduction

We’re now a nation of long-livers, and as a result we need to reconsider the way we look at retirement age in Canada. The great news is that we’re living longer than earlier generations. The bad news is that we haven’t planned for a retirement that could last for 30 years. As a result, our longer lifespans are having a profound effect on our personal finances.

Retirement age in Canada: Time to adjust your mindset

Unless you’re one of the few who can retire early and fund a 30 year retirement, it’s time to adjust your mindset. Think of 70 as the new 65. Many Canadians are already trending in this direction:

  • Older Canadians are already increasing their participation in the labour force. Retirements are being postponed (2014 survey by Philip Cross at the Fraser Institute)
  • “Longevity and the changing workplace have put in place a trend towards a more transitional retirement” (Retirement expert and certified financial planner Tom Feigs)

Retirement age in Canada: Will retiring at 70 help you live longer?

Personal finance expert, Suze Orman, says that resetting your retirement age to 70 will help you live well, into your nineties. She suggests:

  • Delay tapping retirement benefits until age 70
  • Lay the foundation to work longer: Talk to your employer before retirement about how you could continue to contribute on what could be a part-time basis
  • Take the long view: Working longer will give you more confidence that you’re financially set for retirement

Retirement age in Canada: Delaying retirement reduces stress about retirement

The reality is that most Canadians still count on CPP, OAS and Guaranteed Income Supplement (GIS) for their retirement income. Instead of worrying if you’ve saved enough for retirement at 65, think of 70 as the new 65. Continue working, earning, contributing and enjoying life.

Retirement age in Canada: Do you have too much debt and getting close to retirement?

Whether you’re planning to retire at 65 or the new 65, the best piece of advice we can give you is to make sure you’re debt free going into retirement. If you’re still struggling with a debt load that you can’t get rid of, give Ira Smith Trustee & Receiver Inc. a call. We can help you deal with debt and give you back peace of mind so that debt is one thing you won’t have to worry about in retirement Starting Over, Starting Now.

Call a Trustee Now!