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#VIDEO – DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS?#

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We hope you enjoyed our video – DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS? If you would like a free copy of our eBook “Cost of Claiming Bankruptcy In Canada”, please subscribe, or confirm your existing subscription, to our blog by CLICKING HERE

The trend of debt into retirement

The biggest trend in debt into retirement among baby boomers is having a home mortgage in retirement. Financial advisers warn that this new trend could have serious lifestyle consequences for seniors. We have written on the topic of seniors in debt before:

Have seniors previously taken debt into retirement?

The baby boomers are the first generation carrying a mortgage into retirement; that’s never happened before. Think about it. Our parents typically bought one house they lived in their whole lives. They paid it off and it was a priority to pay off the house.

Today, because of low rates and the wish to use the home as much for financial gain as for shelter, people typically move up two or more times. The previous generation viewed their home as mainly shelter, and looked at paying off the mortgage as forced savings. With the mortgage gone, our parents then continued saving for a “rainy day”. Memories of the great depression were vivid and alive in their parents’ minds, who passed on the behaviour and mentality that saving was important.

Has the world changed causing seniors taking debt into retirement?

Today, the stock market crash of the late 1980’s is but a distant memory, let alone the feeling of depression. The post-World War II growth years, followed by boom and recession times of the 1970’s through the 1990’s, doesn’t really exist anymore. Rather, in our global economy, growth is slower, so a slowdown in the economy is also muted. The need to save as a philosophy has also taken a back seat, and given the price of homes and the size of the related mortgages, savings today in a growing family is also a near impossibility.

Risks from taking debt into retirement

Two of the risks of having debt into retirement are:

  1. Delayed retirement plans as the baby boomers must keep working to have enough income to service and repay that debt.
  2. If you become injured or sick and cannot work, there won’t be the income to service and repay the debt.

Solutions for taking debt into retirement

So, baby boomers much find ways to mitigate the cost of debt into retirement and being able to repay that debt in a reasonable time period. Some of the more common ways are:

  1. Prior to retirement and after spending the large costs of children and family, while you are still experiencing higher earning years, is to shorten the amortization period of mortgages so that more money goes towards principal.
  2. You can increase the frequency of your mortgage and other debt payments from once a month to once every two weeks, thereby reducing principal faster.
  3. Refinance debt with higher interest rates, such as credit card debt, with mortgage or line of credit financing and then use strategies such as the two listed above to repay that debt.
  4. Adjust your budget so that you are not spending more than you earn, and allow the necessary part of your after-tax income pay off your debt.

What to do if you fear taking too much debt into retirement

To have a free checkup on your debt in retirement, and to look at ways of solving it while avoiding bankruptcy, contact Ira Smith Trustee & Receiver Inc. today. Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.

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ARE YOU FACING PERSONAL FINANCIAL RUIN?

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Personal financial ruin: Introduction

Thousands of Canadians are facing personal financial ruin. We recently published a vlog #VIDEO-MORE CANADIAN WORKERS LIVING PAYCHEQUE TO PAYCHEQUE AGONY: SCARY NEW SURVEY RESULTS# based on the recent survey by the Canadian Payroll Association. You may not think that $200 sounds like a lot of money but the information shows that 56% of those polled would be close to negative cash flow if they took on another $200 in monthly debt payments.

This is alarming enough on its own, but just six months ago it was 48% who couldn’t take on more debt burden. What this also means is that if those same people had an emergency where they had to come up with another $200, they couldn’t.

The potential for personal financial ruin is increasing

That’s an 8% increase in six months. According to the Canadian Payroll Association, 48% of Canadians couldn’t make ends meets if they missed just one paycheque. And Statistics Canada reports that household debt as a ratio of disposable income rose to 167.6% in the second quarter from 165.2% in the first quarter. These are statistics that we just can’t ignore.

Interest rates will increase one day and will cause personal financial ruin

The number of Canadians teetering on the edge of insolvency is staggering. Credit rating agency TransUnion released the results of their latest survey.

  • 718,000 Canadians can’t even absorb a 25-basis point increase in interest rates without being in a negative cash flow situation
  • One percentage point would drive 917,000 over the edge

Canadians who believe that low-interest rates are here to stay are playing with fire. Historically interest rates have gone up and down, and they will at some point begin to rise. Using credit, even cheap credit, to cover monthly expenses is not a good financial plan; it’s a recipe for disaster. What’s going to happen if there’s a 1% increase? According to TransUnion that’s all it would take for 917,000 Canadians to be facing bankruptcy.

Contact us and prevent your personal financial ruin

The time to change your attitude about low-interest rates and using credit to pay your monthly expenses is NOW! Don’t risk losing it all and putting your family into personal financial ruin.

Contact a debt expert – a professional trustee – who can help get you off the credit merry-go-round and back on solid financial footing Starting Over, Starting Now. Ira Smith Trustee & Receiver Inc. can help keep you from financial ruin with immediate action and the right plan. Call us today for a free, no obligation consultation.

If you would like a free copy of our eBook “Cost of Claiming Bankruptcy In Canada”, please subscribe, or confirm your existing subscription, to our blog by CLICKING HERE

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NEW MORTGAGE RULES NOVEMBER 2016: HALLOWEEN GHOSTS AND GOBLINS FOR BORROWERS?

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New mortgage rules November 2016

New mortgage rules November 2016: Introduction

New mortgage rules November 2016 come into effect. We recently discussed Canada’s alarming consumer debt and the housing boom. The government stepped in to prevent Canadians from assuming bigger mortgages than they could afford. One of the measures recently put into effect was a mortgage rate stress test for approving high-ratio mortgages.

New mortgage rules November 2016: Mortgage rate stress test

This stress test is now applied to all insured mortgages to prevent defaults in the future should the mortgage rates rise. Buyers applying for an insured mortgage now have to show they can afford to pay it back at the Bank of Canada’s five-year fixed rate of 4.64%. This means that some Canadians who could have qualified for a mortgage before the stress test will no longer qualify.

New mortgage rules November 2016: Can Canadians avoid the mortgage rate stress test by borrowing in the shadow lending market?

Some mortgage brokers who are clearly disgruntled at the thought of the Canadian mortgage rules forcing them to lose business have worked out a way to bypass the stress test and beat the system by sending their clients to private lenders – also called the shadow lending market or subprime lenders. Buyers borrow money from private lenders so that they can make a 20% down payment which qualifies them to take out an uninsured mortgage, therefore there is no stress test required.

New mortgage rules November 2016: Is it a good idea to borrow from private lenders?

Typically, private second mortgages in Toronto charge a minimum interest rate of 7% – 10%. For people who really want to be home owners it may seem like a good idea, but they’re going to be left with a very high mortgage payment; perhaps higher than they can afford to pay in the long run.

The new mortgage rules November 2016 and programs like the mortgage rate stress test are enacted to protect Canadians, not punish them. Thinking that you can beat the system doesn’t make sound financial sense.

New mortgage rules November 2016: Do you have too much debt?

Have you assumed a mortgage that you can’t afford to pay? Are your mortgage payments stopping you from paying your other debts? Don’t let these ghosts and goblins scare you.

Contact Ira Smith Trustee & Receiver Inc. today. Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.

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# VIDEO-DIVORCE DURING BANKRUPTCY CANADA WHICH COMES FIRST?

The conundrum

Divorce during bankruptcy Canada is the same as the old conundrum, “which arrived first; the chicken or maybe the egg”, how would one answer, marital breakdown and insolvency: which comes first? Nobody has a definitive answer because excellent arguments can be produced for both. The same is true for “divorce and personal bankruptcy which comes first”?

Every case is decided based on its unique facts. Marital breakdown and insolvency, and bankruptcy and divorce, often go hand in hand. However, a marital breakdown will not always lead to divorce if the marriage can be salvaged. However, personal bankruptcy and divorce are two separate legal processes that can be at odds with each other.

A few indisputable facts

In this divorce during bankruptcy Canada Brandon’s Blog you will find 5 indisputable facts:

  1. The number one reason for marital breakdown and divorce is financial issues. Divorce.com
  2. In a recently available study one out of every seven people who made an insolvency filing in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
  3. One-third of all people facing insolvency problems are also going through relationship breakdown and divorce in Ontario or {a splitting up. Gail Vaz-Oxlade
  4. Bankruptcy won’t end all divorce financial obligations. e. g. It does indeed not end alimony or child support.
  5. Declaring personal bankruptcy on joint debts, even debts in a divorce will impact the other debtor.

Are you looking to reduce grief?

If creating minimal interruption on the children of the family during a marital breakdown and personal bankruptcy features prime importance to the spouse with the debts (and presumably that will be just like the spouse making the support payments), it makes sense to have at least the support terms of the divorce decided, including the making of the support order and then do an insolvency filing. The marital breakdown and bankruptcy process will not disturb any in good faith arrangements for support, but keep in mind it will affect property not already dealt with by the family law court.

What about joint debts?

One particular area that comes up in divorce during bankruptcy Canada is this common question: “If my ex files how will it affect joint liabilities? “. Family law rules are the one area of a provincial law that is left relatively unblemished by the Bankruptcy and Insolvency Act, which is a federal statute. Nevertheless, the Supreme Court of Canada has confirmed that in Provinces that are an equalization jurisdiction (as opposed to a split of property jurisdiction, in a unanimous decision, the court upheld defining equalization payments as debts that are a claim provable in an insolvency process, meaning they are wiped off a person’s slate by the bankruptcy process.

Divorce during bankruptcy Canada: What should you do if you have both marital breakdown and too much debt?

Marital breakdown and bankruptcy is an extremely complicated process, made even more complicated when put together with divorce and requires a qualified licensed Trustee to work with your family law legal professional to work with your individual situation and give practical alternatives and an action plan. If you have serious debt problems, are considering bankruptcy and divorce, or perhaps wish to know more about marital breakdown and bankruptcy, then contact Ira Smith Trustee & Receiver Inc. as soon as possible. Starting Over, Starting Now, we can help you get your life back again on track, even with marital breakdown and personal bankruptcy looming.

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I NEED FINANCIAL HELP IMMEDIATELY

I need financial help immediately: Introduction

“I need financial help immediately” is something we hear daily. With so many people struggling to make ends meet and living paycheque to paycheque, it’s not a surprise that they’re looking for ways to get ahead. Unfortunately it’s easy to get seduced by financial newsletters or websites that offer nothing more than get rich quick schemes disguised as financial advice. Please keep the old adage in mind when considering investment opportunities – if it’s too good to be true, it probably is.

I need financial help immediately: 3 things to watch out for

The Ira Smith Team has fully licensed, federally regulated financial professionals and we don’t have any get rich quick advice for you. However, we do have advice about how to protect yourself from get rich quick financial newsletters. Here are three things to watch for:

  1. Run, don’t walk from headlines like “beat the market”. There is no such thing as a get rich quick scheme that works. Remember Bernie Madoff? He paid unbelievably high returns to his investors and that ended up with Bernie in jail for life and many others in financial ruin. Even savvy investors got seduced.
  2. Watch out for newsletters with confusing terminology. They’re designed to confuse you so you won’t really understand that what they’re selling is all hype and no substance. Financial terminology is so confusing that we’re doing a series of blogs about it. So far we’ve covered Balloon Payments, APY – Annual Percentage Yield and Expense Ratios. Knowledge is power.
  3. Creating a sense of urgency is a classic ploy to suck you in before you’ve had the time to really scope things out. Beware of offers that are only open to the “first 100 that sign up” or “register within the next 48 hours or you’ll miss out”.

I need financial help immediately: What to do if this is you

We know there are many people who feel “I need financial help immediately”. Our most viewed blog ever is from May 2014 that people looking for cash find through a Google search because it is titled: Bad Credit Loans Guaranteed Approval.

We’re certainly not saying that there are no legitimate financial opportunities out there, but you really have to be careful about where and who you take financial advice from. If you’re walking a financial tightrope, a get rich quick scheme is not the answer. Contact a licensed trustee. Ira Smith Trustee & Receiver Inc. will review your file, discuss your options and come up with a solid, financial plan that will put you on the road to debt-free living Starting Over, Starting Now.

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Division One Proposal Ontario Documents: corporate restructuring proposal

Corporate restructuring proposal

I want to talk to you today about the required division one proposal Ontario documents and division 1 proposal restructuring proceedings under the Bankruptcy and Insolvency Act (Canada) (BIA). You may have heard about this section of the BIA also called Chapter 11 bankruptcy proceedings. The reason is that the corporate restructuring provisions under the BIA are in Canada under Division I of Part III of the BIA, while the corporate restructuring provisions in the United States is under Chapter 11 of the US Bankruptcy Code. We are going to focus today on the restructuring provisions under Division 1 Proposal proceedings of the BIA.

First steps

The first thing the insolvent debtor must do is hire the services of a licensed insolvency trustee (formerly known as a trustee in bankruptcy). The division 1 proposal proceedings apply to corporate restructuring or the restructuring of debt of an individual with a complex debt situation and a debt level of $250,000 or more. We are going to talk today about corporate restructuring and the Division One Proposal Ontario documents required for this process.

The first step in any corporate restructuring is for the board of directors to understand and resolve that the corporation is insolvent, that it needs to restructure under the Division 1 Proposal section of the BIA and that it needs to retain a licensed insolvency trustee to do that. The corporation working with the trustee then has a choice. It can first file what is called a Notice of Intention To Make A Proposal, which is a notice to its creditors that it will be shortly making a restructuring proposal. Or it can just file the real division one proposal itself with the licensed insolvency trustee.

Documents and process

The licensed insolvency trustee has to be satisfied that: (i) all the relevant information has been obtained; (ii) the company has a good chance of actually implementing this proposal; and (iii) the company’s cash flow is enough that it can run the business successfully and pay its ongoing debts in full through the ongoing restructuring proceedings, then the licensed insolvency trustee continues the restructuring process.

The licensed insolvency trustee will mail to all the known creditors a copy of:

  1. the proposal
  2. a statement of the company’s assets and liabilities
  3. a list of creditors
  4. a proof of claim form
  5. the voting letter

The meeting of creditors is then held and if the proposal is accepted by the required majority then the proposal trustee takes the proposal documentation to Court for approval. Once the proposal is accepted by the creditors and approved by the court there is now a contract between the company and its creditors about how the company is going to restructure and what amount of money is ultimately going to be paid to the creditors through the licensed insolvency trustee.

Implementation

The company then carries its proposal as it continues its operations. It carries out its restructuring business plan and hopefully is successful in turning the corner and generating profits. The company would then be saving a certain amount of its profits in cash and pays the amounts required under the corporate restructuring plan over to the licensed insolvency trustee to create the restructuring fund. The licensed insolvency trustee then makes the distribution to the creditors as called for in the proposal itself. Once all the payments have been made, the company has successfully restructured and carried on its business free from the proposal proceedings.

What if your company has too much debt – division one proposal?

If your company has more debt than it can afford to pay contact a professional trustee immediately. We’re experts in debt management and corporate restructuring and with immediate action and the right plan we can help you get your company’s finances back on track Starting Over, Starting Now. Give Ira Smith Trustee & Receiver Inc. a call today.

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AUTO INSURANCE IN ONTARIO CHANGE PUSHES FAMILY CLOSER TO BANKRUPTCY

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12 hours made

Who would have believed that a mere 12 hours could cost a family over $1.9M and put them on the verge of bankruptcy? Sadly this is exactly what happened to a family because of the auto insurance in Ontario rule change that came into force 12 hours on the same day before Adam Bari’s motorcycle was T-boned. Although Mr. Bari was not at fault, it did not help his cause.

What is this new auto insurance rule that has this family on the verge of bankruptcy?

When I tried to contact Go Skippy, they explained that this new auto insurance rule change affects the evaluation of injuries. It’s a miracle that Mr. Bari survived. He was in a coma for one month and survived with major injuries including significant brain trauma, multiple broken bones in his right arm, leg and hand, as well as internal organ damage. Although absolutely unbelievable, Mr. Bari’s injuries are no longer considered severe enough under new auto insurance in Ontario guidelines to be deemed catastrophic.

It all boils down to defining catastrophic. Under the old guidelines, the Glasgow Coma Scale (GCS) was used to evaluate functionality. If a car crash victim had a GCS rating of nine or less, they were automatically considered catastrophically impaired and were eligible for increased benefits. At first, Mr. Bari scored a three on the scale which is considered to be the most severe result with the patient being completely unresponsive. Later on, his score rose to an eight, still leaving him catastrophically impaired. New auto insurance in Ontario rules no longer use the scale, though it remains a common evaluator for trauma teams.

What does this mean financially for the Bari family?

According to the personal injury lawyer representing the family, if the accident had happened 12 hours earlier before the new guidelines came into effect, the family would have received $2M in compensation. Instead, they received a pathetic $86K, which can’t even begin to cover the astronomical medical bills the family is facing. Mr. Bari may never recover sufficiently to return to work. His wife is working greatly reduced hours to care for him and there are twins to support. He’s going to require specialized equipment at home, extensive rehabilitation, a personal support worker, therapy and medication.

What recourse does the Bari family have?

They have retained a personal injury lawyer and are planning to sue the driver of the vehicle that hit Mr. Bari to help recover damages for health care expenses. Careless driving charges have also been laid against the driver. Unfortunately, nothing can be done about the new auto insurance rule change that has shamefully put the Bari family on the verge of bankruptcy.

Auto insurance in Ontario: What should you do if you are hit with an emergency that ruins your family budget and finances?

Hopefully, you will never find yourself in the same place as the Bari family but should you feel that you’re on the verge of bankruptcy contact Ira Smith Trustee & Receiver Inc. Sadly we can’t change the auto insurance guidelines but we can help you deal with serious financial issues. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Contact us today so that Starting Over, Starting Now we can put you back on track to financial well-being.

Image Courtesy: CheapFullCoverageAutoInsurance.com

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CONSUMER PROPOSALS ONTARIO: THE SOLUTION TO YOUR TORONTO DEBT PROBLEMS

Consumer proposals Ontario: Make a federal case out of it!

Consumer proposals Ontario are governed by federal legislation; the Bankruptcy and Insolvency Act (Canada) (BIA). The proposal provisions used by companies and creatively used for people with extremely large debts is commonly referred to be “restructuring” or “reorganization”. In the United States, it is what is commonly called “Chapter 13 proceedings”.

Consumer proposals Ontario: Debt solutions for the smaller debtor

However, there was no similar provision available to small individual debtors in the BIA. Parliament wished to find a way to offer these smaller consumer debtors to have a restructuring alternative. So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990s, the consumer proposal process legislation was enacted. It benefits people who owe $250,000 or less (not including mortgages against your principal residence).

Consumer proposals Ontario: Avoiding personal bankruptcy in Canada

Now, the consumer proposal process provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA. So Canadians are now avoiding personal bankruptcy more while still obtaining the help and counselling of a Licensed Insolvency Trustee.

The main use of the (consumer) proposal provisions of the BIA is to allow you as a debtor to keep your assets if you can afford to in your budget, it is a great way for how to avoid bankruptcy in Canada, and give a better alternative to your creditors than a bankruptcy would. In this way, you are allowed to be relieved of your debts, for an amount less than the total face value of all of your debts.

It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest! The consumer proposal legislation allows you to pay back less than you owe, but what you can afford. Interest and penalties stop and in most cases, you are able to settle your debt for less than 50 cents on the dollar.

You can structure your repayment plan in monthly payments for up to 60 months. Again, no interest or penalties. So, it is very much like an interest-free loan for less than half of your debt to settle all of your debts.

Consumer proposals Ontario: What should I do if I have too much debt?

So if you’rе ѕtіll dеtеrmіnеd to рау your debts in full but you can’t see a way to ассоmрlіѕh that goal, this may be just the ѕесrеt you need to know! If you’re a Canadian with financial concerns seek the counsel of a professional trustee.

We can help you deal with how to solve your financial problems while you still have options available to you so that Starting Over, Starting Now you can be on your way to enjoying financial health. Make an appointment with us for a free, no obligation with the Ira Smith Team today. You’ll be happy you did.

consumer proposals ontario

 

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FULLY FUND YOUR RETIREMENT: ARE YOU ASKING YOUR HOUSE TO DO IT FOR YOU?

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Fully fund your retirement

Fully fund your retirement: Introduction

To fully fund your retirement, you need to start early. Canadians are just not facing that reality. According to HSBC Bank Canada almost half of working-age people in Canada are not currently saving for retirement. And, they’re twice as likely to consider selling their homes to fully fund their retirement compared to those who have been diligent about their retirement savings plans. Perhaps you are one of the smart and lucky ones who have including seeking the advice of one of the many retirement planning experts.

Fully fund your retirement: Are you counting on your house to?

A recent HSBC survey found that:

  • 20% of pre-retirees in Canada plan to downsize or sell their primary and secondary residence to fund their retirement.
  • Only 5% of current retirees will sell their house to fund their retirement.
  • At age 25-29, a group with low home ownership levels, only 12% expect their property will fund their retirement.
  • In their 40s, 20% expect their property will fund their retirement.
  • In their 50s, 26% expect their property will fund their retirement.
  • In their 60s, 31% expect their property will fund their retirement.

Fully fund your retirement: Needs are changing

There is certainly a dramatic shift in people’s views on pension funds, retirement funds needed, retirement strategy and certainly speaks to the lack of retirement planning, saving and the fully funded pension plan.

It seems that as Canadians approach retirement age, selling their house is the only retirement finance option available to them. The problem with this scenario is that it assumes that the house is sold and very sensibly the couple or individual will downsize their lifestyle and put their budget on a diet so that they can live off the proceeds of the sale of the house.

The reality is that if they haven’t:

  • clearly calculated the retirement funds needed for the lifestyle they wish to have;
  • saved for retirement (including considering the impact of tax on retirement funds); and
  • have not already downsized their lifestyle in preparation for retirement

they may blow through the proceeds of the house and be worse off than they were before.

Fully fund your retirement: What to do if your financial concerns prevent you from doing so

If you’re a pre-retiree with financial concerns seek the counsel of a professional trustee before retirement. We can help you deal with how to solve your financial problems while you still have options available to you so that Starting Over, Starting Now you can be on your way to enjoying financial health in retirement. Make an appointment with us for a free, no obligation with the Ira Smith Team today. You’ll be happy you did.

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INSOLVENT ESTATES CANADA 3 QUESTIONS WE ALWAYS ARE ASKED

INSOLVENT ESTATES CANADA

Insolvent estates Canada: Introduction

We previously discussed the aspect of death and insolvency in two blog posts:

When it comes to insolvent estates Canada, among the various questions asked of us, these three questions are always asked:

  1. What are the duties of an executor/personal representative when the estate has more liabilities than assets?
  2. Can the executor(s) pay bills before the creditors actually file a claim?
  3. Do executors or beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?

We prepared the above video to answer these 3 questions. Below is a more detailed discussion of the last 2 questions.

Insolvent estates Canada: The loss of life of a debtor occurs; who’s responsible for the money owed?

Although some creditors may try to collect from the spouse or other relatives, money owed doesn’t transfer because of marriage or death. If the debt is “joint”, the survivor has taken on the obligation directly and is liable on the account.

Debts are normally paid out of the assets of the property of the deceased before distributions to heirs (before paying heirs, the deceased’s debts must be paid). If the estate is insolvent (the assets of the estate are not enough to pay the amounts owed), then the order of charge is commonly prescribed by way of provincial rules.

If warranted, the executors could apply to Court for an order letting them assign the deceased’s estate into bankruptcy. In that situation, then the Bankruptcy and Insolvency Act (Canada) (“BIA”), the federal legislation, will prescribe the order of payment.

If insurance was bought to pay off a specific debt such as a bank issued mortgage or loan, then upon the death of the individual the insurance company will repay the bank and the debt will not exist in the deceased’s estate.

What are your alternatives and your responsibilities, as an executor upon the death of a debtor?

If the estate is insolvent, before or after paying the testamentary costs, you have alternatives:

  1. Pay the money owed out of your personal resources.
  2. Allow the estate to go bankrupt.

Emotionally you may wish to pay the money owed because you believe in your heart that it is the proper thing to do and you don’t wish to dishonour the memory of your loved one with a string of bad debts and bankruptcy. But before you decide, you need to know that there is no liability for an executor or heir to take on the debts of the deceased.

Even though there may be a stigma connected to bankruptcy, the reality is that you are not responsible for the money owed, so why should you assume this burden and in all likelihood put your family in financial jeopardy?

Bankrupting the estate makes economic sense. An executor can sidestep the minefield of issues involved in administering the deceased’s insolvent estate by bankrupting it.

What should executors and heirs be aware of?

If you and/or another family member is the executor, be aware:

  1. The executors have a legal responsibility for all acts completed, and for all acts not accomplished that they should have.
  2. Notwithstanding everyone’s best efforts, they may unknowingly be inviting proceedings from lenders or heirs for difficult issues. This happens when family members, who are well-intentioned but not skilled at monetary, insolvency or legal issues, are executors because she or he is named, however actually has no know-how in this region.
  3. By putting the property into bankruptcy, which requires the previous approval of the bankruptcy court, the executors are relieving themselves of personal legal responsibility because the estate will now be administered under the BIA and all creditors by the Licensed Insolvency Trustee.
  4. The executor will relieve him or herself of coping with collection calls.
  5. As long as there are sufficient funds in the estate to pay the funeral costs, that can be paid out first in the case of a bankruptcy of the deceased’s estate because of S.136. (1)(a) of the BIA states:

Priority of claims

“136 (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:

(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;”

It is the first debt with a preferred status that can be paid.

What should I do if I am an executor and I find that the liabilities are greater than the assets?

If you are an executor of a will and you find out that the estate is insolvent, after speaking with the estate lawyer, contact Ira Smith Trustee & Receiver Inc. as soon as possible. We will evaluate the situation and give you sound financial advice on how best protect yourself as executor and the heirs, so that you will be able to go ahead Starting Over, Starting Now.

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

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