Now that Valentine’s Day is over, we need to not lose that loving feeling. Many Canadians are not crazy with their love one’s finances. They may wish to book a financial date evening. Many are keeping debt secrets from their partner, or fear they are hiding financial information from them. Perhaps now is the time to come clean with secret debt in marriage.
Secret debt in marriage: A recent survey
A brand-new survey identified that Canadians in a relationship (whether living separately, common law or wed) wish they can change a minimum of one of their partner’s financial behaviours. But their loved one could be oblivious. Many reported seldom or never ever talking money or budgeting with them.
Secret debt in marriage: We have previously written about this tender subject
Spouses or partners holding secret debt in marriage is nothing new. We have previously written on the topic, and others involving couples, including the following blogs:
When it concerns taking care of debt as a couple, I recommend complete and honest disclosure. Work together to check your debts and make a household budget. Plan together how your household income will allow you both to pay ordinary monthly expenses, pay off debt and hopefully, save for emergencies and retirement.. Budgeting discussions are not easy, but if you can prepare a realistic one and stick to it, your relationship will find a new level of love.
Secret debt in marriage: What if you find out that talking and budgeting is not enough?
Although we are not social workers or marriage counselors, we are expert in helping people work through their financial challenges.
That is why the Ira SmithTeam 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.
The great North American dream is still home-ownership. Unfortunately withsoaring house prices,increasing interest rates andstricter mortgage regulations, many Canadians may not be able to realize their dreams. As a result, a new trend is starting which I describe below. The issue is whether this new behaviour, causing a personal debt load increase, is reasonable or not.
Personal debt load increase: The current housing market trend according to Statistics Canada
These factors are making it increasingly difficult for young people to break into thehousing market. According to Statistics Canada, young adults today are:
More likely to live in apartments than their 1981 counterparts
Less likely to live in single-detached homes
More likely than ever to still be living at home
Personal debt load increase: Desperate times call for desperate measures
As parents you want to give your children every advantage in life, including helping them realize their dreams of home-ownership. But, what can you do? At the rate at which house prices are rising, if you wait until they reach adulthood and are ready to purchase their first home, will you be able to help them buy that house?
The old adage Desperate times call for desperate measures, seems to apply here. There is a growing number of parents who are buying houses for their children who are still school-aged; some as young as five years of age.
Personal debt load increase: The future value argument
Brad Lamb, president of Brad J. Lamb Realty & Lamb Development Corp. is one such parent. Mr. Lamb recently purchased a condo for his five-year old daughter. He purchased an 800 square foot condo in Toronto for about $450,000 which he estimates that he can rent for $2,500/month. Mr. Lamb calculates that in 15 years (when his daughter is 20) the condo will be worth in the $3 million range.
Personal debt load increase: Is it a good idea to buy a home for your school aged kids?
Clearly Mr. Lamb is in an income bracket that would allow him to purchase a $450,000 condo without putting himself into financial jeopardy. However, the same can’t be said for many parents who arebuying homes for their school aged kids. Some are making an enormous financial sacrifice in the quest of guaranteeing their children home-ownership. And it’s difficult to speculate on the real estate market 10 – 15 years in the future.
Over the time you hold the property until your child can live in it. There will be fluctuations in the real estate market. You can’t be the type of person that worries every time there is a temporary decline in the market. For example, will higher interest rates lower home prices? We have been in essentially a zero interest rate environment for 10 years. The Bank of Canada is now slowly increasing interest rates. Remember that the change in value of the home only counts if you have to sell it. Until then, increases or decreases are merely on paper only.
Personal debt load increase: A different viewpoint
Susan Latremoille, director of wealth management and wealth adviser at the Latremoille Group and Richardson Group GMP in Toronto, has very strongopinions on the subject. She says, “I think it’s a crazy idea. I would not recommend my clients to do it. If parents already own their own home, they will have to pay a capital-gains tax should they decide they need to sell the additional property, as they can’t put the children’s names on the property title unless they are adults”.
What if the property is a negative cash flow rental property? It isn’t just being able to afford purchasing the property. You are going to become a landlord for many years. If the costs of holding the property are greater than the income it generates annually? That makes it a negative cash flow investment property. Can you afford to pay out that extra cash year after year? Of course the expectation is that the value of the home will continue to increase. Negative cash flow from assets is still not a winning formula for the long-term.
Personal debt load increase: You can’t put yourself at financial risk today for someone else’s future – even if that someone else is your child
Putting yourselfat risk financially to buy a house for your kids is never a good idea. The best thing that you can do is get your own financial house in order. That may allow you to make an investment in your children’s’ educations and perhaps even allow you to help them buy, or at least be able to help with, that first house.
If you need help getting your financial house in order, contactIra Smith Trustee & Receiver Inc. The results for our clients are financial peace of mind and debt free living. With onephone call you can get rid of the financial stress and feel like you’re in control againStarting Over, Starting Now.
I have written before on the more practical aspects of Ontario bankruptcy discharge certificate issues and process within Canadian bankruptcy and insolvency law. The most recent blogs are:
I recently reviewed the Ontario Court of Appeal decision in Cole v. RBC Dominion Securities Inc., 2017 ONCA 1009. This case is very interesting as it highlights an issue that we often don’t talk enough about when advising a person on what they might expect at their hearing under Canadian bankruptcy and insolvency law.
The facts
Henry Cole, age 52, had a Bankruptcy Order made against him in 2011 upon motion by Royal Bank of Canada (“RBC”), after he misappropriated $5 million from clients while working as their investment advisor. While in bankruptcy, he had a net monthly income of $14,600, resulting in surplus monthly income of $12,500. He nevertheless failed to make any surplus income payments.
The Ontario Court of Appeal (“ONCA”) upheld the two lower Court decisions
As is the case in bankruptcy matters, Mr. Cole’s bankruptcy discharge hearing came before the Master in Bankruptcy Court who also sits as the registrar in bankruptcy. Mr. Cole appealed the Master’s decision (discussed below) unsuccessfully to a Judge of the Bankruptcy Court. The Judge dismissed Mr. Cole’s appeal, thereby upholding the Master’s decision. As indicated above, the ONCA agreed with the Judge (and the Master) in dismissing Mr. Cole’s appeal.
Now for the interesting stuff!
Now for the interesting stuff. The Master determined that there was enough evidence to show that Mr. Cole, as a bankrupt, committed various bankruptcy offenses. The Master determined facts for which discharge may be refused, suspended or granted conditionally, under Section 173(1) of the Canadian bankruptcy and insolvency law called the Bankruptcy and Insolvency Act (Canada) (“BIA”).
The Master determined that Mr. Cole had failed to provide information to enable the Licensed Insolvency Trustee to calculate surplus income. Mr. Cole also conceded to the following facts:
his assets upon bankruptcy were not of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities. Mr. Cole gave no evidence why he should not be held responsible;
he failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; and
he brought on, or contributed to, his bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of his business affairs
With these findings, the Master, under Section 172(2) of the BIA, had to not grant an absolute discharge and to:
refuse the discharge of a bankrupt;
suspend the discharge for such period as the court thinks proper; or
make the bankrupt, as a condition of his discharge, to do such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.
I must point out that the options available to the Master are not mutually exclusive. So, just like in Mr. Cole’s case, you could have the Court come up with a mixture of a suspension and a condition to pay moneys.
What the Master decided
The Master made several decisions. First, the Master dealt with the surplus income issue. The Master ordered Mr. Cole to pay $284,346 to the Trustee as surplus income, payable at a rate of $5,000 per month.
The Master also considered Mr. Cole’s criminal behaviour and that he had real income while not working any longer as an investment advisor. Given the amount of Mr. Cole’s liabilities, and for the integrity of the Canadian bankruptcy system, the Master ordered as further conditions that:
Mr. Cole pay an extra $5,000 per month to the Trustee for a further six years for a total more payment of $360,000; and that
Mr. Cole argued before first the Judge, and then the ONCA, primarily that the Master’s treatment of surplus and other income was in error. He also argued that the Judge’s finding in dismissing his appeal was an error. The ONCA disagreed and dismissed his appeal.
So what is the lesson to be learned?
It is important for the Trustee, when sitting down with the person contemplating an insolvency proceeding, to understand all the facts. By properly understanding all the facts, we can provide proper professional advice and guidance.
Someone who had a facts situation like Mr. Cole, we would have strongly advised him or her to avoid bankruptcy and to contemplate performing a Division I Proposal to compromise his debts. The reasons we would have advised this are:
the debtor has real income to successfully do a Proposal;
Mr. Cole never would have qualified for an absolute discharge from bankruptcy given his facts situation and any discharge conditions would be onerous;
avoiding the ongoing calculation of surplus income up to the time of his bankruptcy discharge hearing; and
with the support of his major creditors, it is possible that the Proposal amount could have been somewhat less than $644,000 (subject to knowing the value of his assets at the date of bankruptcy).
he person needs our advice in plain English before making any decisions
We also would have advised the debtor the type of the rough ride they were in for if they chose to go ahead with the bankruptcy option. We would have explained in detail how we believed the Canadian bankruptcy and insolvency law system would treat him, so at least there would be no surprises during the bankruptcy administration.
Many times people we speak with do not like to hear the truth, and begin “Trustee shopping” until they find a Trustee that does not tell them all the bad news up front. People like this believe that if they aren’t told it, it can’t happen. This is a mistake. We believe everyone deserves to know the truth about their situation, to help them make the best decision possible.
In Mr. Cole’s case, not only did he find out the hard truth from the Court, he then spent money on his lawyers appealing the Master’s and Judge’s decisions. That obviously was extra money spent with no benefit received.
FULL DISCLOSURE: Our firm has never met with Mr. Cole and was not considered to be his Trustee.
What to do if you have too much debt
Declaring personal bаnkruрtсу in Canada is a big deal. So is getting your Ontario bankruptcy discharge certificate. While it can be a way out for the honest but unfortunate debtor who is deep in debt and looking for a new start, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ.
That is why the Ira SmithTeam 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.
charities in toronto and york region looking for volunteers
Charities in Toronto and York region looking for volunteers: Introduction
You work hard for your money. If you’re like many Canadians, you generously share your good fortune with those in need. Charities in Toronto and York Region looking for volunteers need your help also. Volunteering is an excellent way to give back to your community. For those with high debt levels, volunteering will reduce the tension between wanting to contribute to your favourite charity, but not being able to afford it.
Corporations also support the volunteer efforts of their employees. At Ira Smith Trustee & Receiver Inc., part of our firm values is that each staff member must volunteer some of their time to the community, not just make donations.
Charities in Toronto and York region looking for volunteers: Canadians are generous
According to Statistics Canada, a large majority of Canadians make monetary donations to charitable or non-profit organizations. In fact, the most recent statistics shows that just over 24 million Canadians aged 15 years and older donated. This means 82% of the population, had made a monetary donation.
Charities in Toronto and York region looking for volunteers: How much goes to charitable good works vs. administration
It’s important that you know how much of your money is used for charitable good works. How much is going to administration? It may change your mind about which charities ultimately benefit from your donations, time, or how much you decide to give.
Charities in Toronto and York region looking for volunteers: The Charity 100
MoneySense has produced something they call the Charity 100 for the last eight years. This list, composed of the leading charities in Canada, measures them by the following four criteria:
Charity Efficiency – how much of your money actually goes towards supporting the organization’s mission
Fundraising Costs – how much money it takes to raise the money
Governance & Transparency – whether the charity adheres to standard non-profit governance models and whether it lets donors know exactly how their money is being used
Cash Reserves – does the organization have an adequate reserve fund
Charities in Toronto and York region looking for volunteers: How to fix your debt level so that you can give to one day
Some of you reading this blog would love to concern yourselves with researching organizations deserving of your donations, but right now you’re struggling to pay the bills and are looking for a way out of debt. You may feel like you’re in a dark tunnel but The Ira Smith Team is here to shine a light on your financial situation.
We have a cumulative 50+ years helping people just like you get back on track financially. Give us a call today and take your first step towards debt free living Starting Over, Starting Now.
charities in toronto and york region looking for volunteers
Since there are various provincial run casinos, horse racing and lotteries, we are often asked if you can have a gambling debt bankruptcy. More importantly, what clients really want to know is, can gambling debt be discharged in bankruptcy?
Gambling debt bankruptcy: What is gambling debt in bankruptcy?
We first must go back to basics. There are two types of gambling debts:
Debts for loans taken out, either direct loans or through credit cards; and
Loans directly from a casino with “markers”.
In the first case, the loans or credit card debts could be direct – using the cash advance to gamble with, or indirect – used to make purchases for the necessities of life because the person gambles away their employment or other income. The use of markers at a casino is obviously a direct gambling debt.
In the context of this discussion, it does not matter if the gambling debts are direct or indirect. As discussed in this blog, the gambling debts are legally enforceable. As such, gambling debts in bankruptcy (or a proposal) are claims provable under the BIA.
Gambling debt bankruptcy: Gambling debt and bankruptcy
You can declare bankruptcy on a gambling debt. So is it really as simple as declaring bankruptcy? The answer is no. There are various issues that you must first consider with the licensed insolvency trustee during your first free consultation. The major issues are:
The nature and amount of your other debts because you lost cash in gambling
Have you not been paying your taxes because of gambling losses and Canada Revenue Agency is also a major creditor
Getting gambling addiction advice
Getting a discharge from bankruptcy
Is there another option available to you in order for you to avoid bankruptcy
Gambling debt bankruptcy: There are many issues in addition to just getting gambling addiction debt help
If you are insolvent and you choose the bankruptcy route, you will face the following issues:
If you have non-exempt assets or equity in non-exempt assets, your interest in those assets will be taken over by your trustee. For example, your interest in the matrimonial home would come to the trustee and now your spouse, or other friend or relative, would have to purchase your interest back to the cash could go to your creditors. Go explain that to your spouse!
Earning more than essentially a poverty line amount will cause you to have to pay surplus income to the trustee for the benefit of your creditors. If you are a first time bankrupt, with surplus income, you will have to pay the surplus income for 21 months. You can’t seek a discharge from bankruptcy until then.
If you have been bankrupt before, the 21 months becomes 36 months.
Once you show that your debts are due to gambling losses, you can expect your lenders and credit card companies to oppose your discharge from bankruptcy.
gambling debt bankruptcy
Gambling debt bankruptcy: Including your discharge from bankruptcy and your gambling addiction
If you owe a large amount of unpaid income tax to Canada Revenue Agency, you can expect them to vigorously oppose your discharge from bankruptcy.
Your trustee must oppose your discharge from bankruptcy when your bankruptcy is a result of gambling debt. The reason is under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”), there are various facts, if proven, it is impossible to get an absolute discharge from bankruptcy.
Section 172 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”) allows the Court to make an order of discharge which is either absolute, conditional or suspended. Where a fact under s. 173 of the BIA is proven, an absolute discharge is precluded.
Gambling which brings on or contributes to bankruptcy is a recognized s. 173 fact. (BIA, s. 173(e)). That is why your trustee would have to oppose your discharge from bankruptcy.
In reaching any decision on your discharge, the Court and the trustee need to maintain the integrity of the Canadian insolvency system. You can assume that your discharge will at least be conditional upon you paying a certain sum of money to your trustee for the benefit of your creditors. A bankruptcy discharge suspension for a certain time after you fulfill the payment condition is also possible. If your behaviour was especially egregious, your discharge from bankruptcy may be outright refused.
The bankruptcy discharge hearing is a full Court hearing. You will be well advised to retain experienced insolvency legal counsel to come with you to Court. This is an expense you may not even be able to afford.
If you want to have a chance in obtaining a discharge from bankruptcy, you will also have to show that you are taking concrete steps to deal with your gambling addiction by getting gambling addiction advice. That will include proving in Court that you enrolled, attended and completed at least one recognized rehabilitation program for gambling addicts.
Gambling debt bankruptcy: Going bankrupt doesn’t seem to be an easy fix
You are right about that. As if the above 11 issues weren’t enough, depending on your specific circumstances, there could be more. Therefore, I always recommend to debtors that if there is hope for the person to be able to successfully restructure through either a consumer proposal or Division I BIA Proposal, that must be seriously looked at and considered preferable to going bankrupt.
Gambling debt bankruptcy: What must you do if you have gambling debts and are considering personal bankruptcy?
Do you have unmanageable debts from gambling, other addictions or for any other reason? Be proactive; it’s time to rehabilitate yourself and deal with your debt while you still have alternatives.
The Ira Smith Team has years of experience assisting Canadians like you, getting you back on track to debt free living. CallIra Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.
canadian household debt ratio hits high toronto star reports
Canadian household debt ratio hits high Toronto Star reports: Introduction
In a recent blog we spoke about what Canadians feared the most financially. This week we’re going to discuss the number one financial priority for Canadians in 2018. We explain the issues because of the Canadian household debt ratio hits high Toronto Star reports, specifically in a December 14, 2017 article.
Canadian household debt ratio hits high Toronto Star reports: What Statistics Canada reported
Just when we think that Canadian household debt levels have gone as high as they possibly can, we reached yet another new high in the third quarter of 2017. According to Statistics Canada:
The ratio of household credit-market debt to disposable income (the key gauge for measuring Canadians’ debt loads) rose to 171.1% in the third quarter, up from 170.1% in the second quarter
Total household credit-market debt (mortgages, consumer credit such as credit cards and lines of credit and non-mortgage loans) increased 1.4% in the third quarter to $2.11-trillion, which is also a record
ira smith trustee
Canadian household debt ratio hits high Toronto Star reports: What the CIBC opinion poll reports as Canadians’ financial priorities for 2018
CIBC did their annual opinion poll in December asking Canadians what their priorities were for 2018:
25% say that paying down debt is their top financial priority. This is the eighth straight year that paying down debt has landed in the number 1 position
15% say that they’re focused on keeping up with bills
Canadian household debt ratio hits high Toronto Star reports: What Canadians have said and what they really have done
Although when surveyed Canadians have said for the last eight years they are focused on paying down debt, only 16% in this year’s poll said that they were able to meet their goal. Knowing that you have to pay down debt and actually doing it are two very different things. In addition to not paying down debt, 26% of respondents said they took on new debt this year to pay the bills and to cover unexpected expenses.
Canadian household debt ratio hits high Toronto Star reports: We can help you keep your 2018 financial resolutions
Setting your priorities or making resolutions without a solid financial plan to back it up is going to keep you in debt. Instead of listing paying down debt as your top priority again next year, contact a trustee for professional help. We can help you solve your financial problems with immediate action and the right plan. With just one phone call to Ira Smith Trustee & Receiver Inc. you can take the first step to paying down debt and having financial peace of mind. Give us a call today and you can be Starting Over, Starting Now.
Unfortunately for many Canadians, their fears are about to be realized. On Wednesday, January 17th the Bank of Canada interest rate hike began. The Bank of Canada raised its key lending rate by a quarter percentage point to 1.25%. This is the third time it’s moved its benchmark rate from once-record lows last summer.
Bank of Canada interest rate hike: How will changes in the prime lending rate affect Canadians?
Changes in the prime lending rate affect variable-rate mortgages, lines of credit and other lending linked to the benchmark rate, and this means that borrowers will be paying more. And the Bank of Canada interest rate hike has a ripple effect.
The Royal Bank of Canada raised its prime lending rate by a quarter of a percentage point, to 3.45%, effective Thursday, January 18th. Canadians expect that Canada’s other big banks will do the same. Already all of Canada’s Big Six banks raised their listed five-year mortgage rates by 15 basis points to 5.14%.
It’s now going to be more difficult for home buyers to qualify for mortgages, particularly with the new stricter guidelines. As you can see, a rise in interest rates can have far-reaching effects.
Bank of Canada interest rate hike: Reasons Canadians are concerned
With so many Canadians walking a financial tightrope, the last thing they wanted to see was an increase in interest rates. A recent survey by Ipsos showed that:
48% of Canadians are within $200 of not being able to meet their financial obligations
40% of Canadians worry that they’ll be in financial trouble if interest rates keep rising
33% of Canadians can’t keep up with their monthly bills and make their debt repayments
30% of Canadians are concerned that rising interest rates could push them close to bankruptcy
Bank of Canada interest rate hike: Are you worried about the interest rate hike?
If you’re like many Canadians who worry that the rise in interest rates will push you over a cliff financially, now is the time to seek professional help. A licensed trustee can give you answers, options and a realistic plan for recovery.
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.
Can you file personal and corporate bankruptcy: Better to be separate legal entities
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 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:
Unremitted source deductions from employee payroll
Net HST owing
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, contactIra 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.
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?
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.
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.
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