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BEYOND BANKRUPTCY SERVICES: OUR BEST PERSONAL INSOLVENCY FAQ 2 JUMPSTART YOUR FINANCIAL LIFE

Bankruptcy services and FAQ information

Bankruptcy is a last resort for Canadian individuals, entrepreneurs and companies looking for a debt solution. However, bankruptcy services are just one of the available options we canvass with you to provide the opportunity to rebuild your financial affairs and your life.

I help people and senior company management understand bankruptcy and the other options available to rebuild their life. Frankly, bankruptcy is always the last option and hopefully in most cases, can be avoided.

In this Brandon’s Blog, I provide my best FAQ answers to common questions about personal bankruptcy services. The answers below will contain all the information you need to know. So here we go. In the future Brandon’s Blogs, I will talk about corporate bankruptcy services in addition to personal and corporate restructuring as alternatives to bankruptcy services.

Bankruptcy services: Who files for bankruptcy and why?

Many people who are considering looking into the need for the bankruptcy process may feel alone and lost. This is because they may not know anyone who has gone through the same thing, making them feel like they have no one to talk to about it. Bankruptcy can be very scary and intimidating, especially if you feel like you’re the only one experiencing financial difficulties.

Financial problems affect people from all walks of life and all income levels. It doesn’t discriminate, affecting married and single people alike, regardless of age. Seniors and those just starting out in life, consumers and companies are all susceptible to needing bankruptcy services.

The Office of the Superintendent of Bankruptcy Canada (OSB) keeps insolvency statistics. It used to be affiliated with a part of the federal government called Industry Canada. Now it is part of what is called Innovation, Science and Economic Development Canada. The OSB has not yet released the 2021 annual insolvency statistics. In 2020 99,244 insolvencies were filed in Canada. This was a 29.5% decrease in insolvencies filed with the OSB in 2020 compared to 2019. This is the largest annual decrease ever. The decrease can be largely attributed to the outbreak of COVID-19 and the various emergency response measures that followed.

The number of consumers filing for insolvency decreased from 137,178 to 96,458, while the number of businesses filing for insolvency decreased from 3,680 to 2,786. The proportion of proposals among consumer insolvency filings increased from 60.3% to 65.9%.

There are two things to remember from these statistics:

  1. You are not alone. Many people face financial difficulties.
  2. There are options available for avoiding bankruptcy services.

    bankruptcy services
    bankruptcy services

Bankruptcy services: Can bankruptcy clear debt in Canada?

Most outstanding debt owed to unsecured creditors is cleared not by a person filing for bankruptcy, but by that person receiving their absolute bankruptcy discharge.

Even after bankruptcy, some debts still need to be paid. This includes a student loan if it has been less than 7 years since you stopped being a student, alimony and child support, fines and penalties imposed by the court, and any debts due to fraud.

Also, any secured debts, such as a registered car loan or mortgage against real estate are not discharged by a bankruptcy – either personal bankruptcy or corporate bankruptcy.

What debts cannot be discharged through personal bankruptcy services in Canada?

See the section “Bankruptcy services: Can bankruptcy clear debt in Canada?” directly above.

Bankruptcy services: How much debt must you accumulate in order to file for bankruptcy in Canada?

The minimum amount of unsecured debt needed to file for bankruptcy in Canada is $1,000, as stipulated by the Bankruptcy and Insolvency Act (Canada) (BIA). In addition, the person, partnership or company must also be insolvent. Bankruptcy is a legal process. Insolvency is a bad financial situation.

Bankruptcy services: What debts are not erased in bankruptcy?

See the section “Bankruptcy services: Can bankruptcy clear debt in Canada?” directly above.

bankruptcy services
bankruptcy services

Bankruptcy services: What are the three types of bankruptcies?

There are several ways I could answer that question. For example, there are:

  1. Personal bankruptcy is also sometimes referred to as consumer bankruptcy.
  2. Small business bankruptcy. This would mainly be for a proprietorship or partnership.
  3. Corporate bankruptcy – small or large companies.

Another way of answering the same question would be:

  1. Voluntary bankruptcy – an assignment in bankruptcy being filed by the person or company.
  2. Involuntary bankruptcy – a bankruptcy happening because one or more creditors issued a bankruptcy application resulting in a bankruptcy order.
  3. Bankruptcy protection is not bankruptcy at all. It is a financial restructuring performed by a licensed insolvency trustee. The Office of the Superintendent of Bankruptcy Canada maintains a searchable list of individuals licensed to act as a licensed insolvency trustee in Canada.

My final way of answering the same question is:

  1. Consumer proposal – This is a financial restructuring under the BIA to avoid bankruptcy for a person who owes $250,000 or less not including any debts secured against the person’s principal residence.
  2. Proposal – This is a financial restructuring under the BIA to avoid bankruptcy for a person who owes more than $250,000 (not including any debts secured against the person’s principal residence) or for a company with any amount of debt.
  3. Financial restructuring under the Companies’ Creditors Arrangement Act – This is what the media calls bankruptcy protection in order to restructure and avoid bankruptcy. To qualify to file under the Companies’ Creditors Arrangement Act statute, the company must have a debt load of $5 million or more.

All of the above bankruptcy services can only be administered by a licensed insolvency trustee (formerly called a bankruptcy trustee or trustee in bankruptcy), but they are not all bankruptcy.

I guess these are really 9 types!! It all depends on how you wish to look at it.

Bankruptcy services: What are the consequences for your assets when declaring bankruptcy?

A bankruptcy does not mean you have to give up all your assets. There are rules about bankruptcy exemptions in bankruptcy law. Also, every province/territory has laws that say what assets you can keep and how much equity you can have. These types of assets are called exempt assets. There are certain assets that you are allowed to keep that are not accessible to your creditors during a bankruptcy. These assets are exempt under federal law, provincial law or both.

In order to understand what exempt assets are in bankruptcy in Ontario, we must first look at the BIA. Section 67(1) of the BIA addresses the bankruptcy exemption issue specifically. It outlines what property of the bankrupt is available to creditors does and does not include.

Property that is not included is:

  • Property that is held in trust by the bankrupt for any third party.
  • Assets that are not subject to seizure under provincial law.
  • Payments to the bankrupt are made under a program that can be described as social assistance provided by the federal or provincial government.
  • Retirement Savings Plans – The bankrupt’s RRSP (other than for the total of payments made in the 12 months before bankruptcy) or RRIF cannot be touched even in bankruptcy.

As mentioned before, one type of asset that cannot be seized during bankruptcy is any property that is protected under provincial law. In Ontario, the amounts prescribed for exemptions are outlined in the Ontario Execution Act.

These exemptions include:

  • Household furnishings and household appliances – $14,180.
  • Tools and other personal property used to generate income:
  • Exemptions for farmers, being a debtor engaged exclusively in cultivating the soil or farming (and therefore it is that farmer’s principal source of primary income), $31,379 for livestock, fowl, bees, books, tools and implements, and other chattels ordinarily used by the debtor; $14,405 for any other case.
  • $7,117 for a motor vehicle.
  • $10, 783 for a principal residence.

Since these exemptions are provincial, you need to look at provincial/territorial laws for other jurisdictions in Canada.

bankruptcy services
bankruptcy services

Bankruptcy services: What are the implications of personal bankruptcy on retirement plans?

There are 4 main ways Canadians save to live comfortably in retirement. They are:

  1. The principal residence.
  2. RRSP..
  3. Investments.
  4. Private pension plan.

#1 – The principal residence and bankruptcy

For many Canadians, their house is the biggest investment they make and the majority of their savings are tied up in it. Owning a home makes people more confident about their financial future.

If the owner of a home becomes bankrupt, either through an assignment in bankruptcy or bankruptcy order, the debtor’s equity in the home is an asset for the licensed insolvency trustee to sell. The exception is if the home is fully encumbered so that there is only $10,783 or less of equity (in Ontario) in the home.

If the bankrupt is a joint owner, then the Trustee only has access to the bankrupt’s interest, which would be half the equity.

The loss of wealth from the sale of the house or the encumbrance of the house will make it take much longer to build back the equity by paying off the mortgage(s). In the case of joint ownership, the natural purchaser would be the non-bankrupt spouse or partner who owns the other half. The person would likely have to take on more debt to buy the equity from the Trustee.

The loss of wealth as a result of bankruptcy can mean having to work longer than originally planned. This is one way that bankruptcy can affect retirement.

#2 – Your RRSP and bankruptcy

It is the rare debtor that seeks an insolvency option and has a significant amount in their RRSP. This is notwithstanding that a creditor cannot seize your RRSP funds in Ontario.

If you think about it, if you have a 7-figure RRSP and a 6-figure total debt, then you are not insolvent. To be eligible to use the Canadian insolvency process, you must meet certain conditions, one of which is being insolvent.

The only amount of your RRSP that is affected by bankruptcy is any contributions made to the RRSP in the 12 months before the bankruptcy happened. That amount is subject to seizure by your Trustee. Rather than seizing that amount from your RRSP, the Trustee will require you to pay that amount to the Trustee for the benefit of your bankruptcy estate.

Not having a sizeable RRSP to start withdrawing at retirement obviously will affect your retirement plans.

#3 – Bankruptcy and investments

People who are able to save for retirement invest their money to make it grow in addition to an RRSP and principal residence. Investments such as stocks, bonds and mutual funds are very typical. There are two general ways these investments can be held: (i) investment in funds maintained by a life insurance company naming a designated beneficiary (either a spouse or blood relative); and (ii) investments held with your broker.

If you have investments through a contract of insurance and you name your spouse, child, parent, or grandchild as the beneficiary, then those investments are exempt from seizure in Ontario. If you file an assignment in bankruptcy will not have any effect on these investments, and you will be able to keep them. Therefore, this will not affect your retirement plans.

If your investments are through the brokerage arm of your bank, then your investments can be seized in Ontario. These investments will be lost in your bankruptcy and this will affect your retirement plans. If your spouse or partner purchases your interest in these investments from the Trustee, then whatever debt the purchaser had to take on to buy them may affect retirement plans.

#4 – Bankruptcy and a private pension plan

Not everyone in Canada has a private pension plan through their employer. Individuals who are self-employed certainly don’t have it. Having a private pension plan can relieve some of a person’s financial worries as they head toward retirement.

In Ontario, private pensions are protected from seizure and therefore not available for the Trustee. However, if you are already retired and are receiving the private pension income, that income is taken into account when calculating any surplus income payments you may have to make to your Trustee.

bankruptcy services
bankruptcy services

How bankruptcy services work in Ontario: What is the average length of time for a person to be discharged from bankruptcy in Canada?

To be discharged from bankruptcy in Canada can differ based on whether it is a first or second bankruptcy, and whether the bankrupt has any surplus income contributions to make. For a first-time bankrupt it can take 9 months (no surplus income) -21 months (with surplus income contributions). For a second time or more bankruptcy, it takes 24 months (no surplus income) to 36 months (surplus income).

Bankruptcy services: Surplus income

Surplus income is not an ideal term to describe the extra money an individual has. Many people would not feel they have surplus income, especially when they are dealing with debt. However, in the bankruptcy context, surplus income refers to a calculation that determines how much money a bankrupt individual must pay into their bankruptcy estate for the benefit of their creditors.

When you file an assignment in bankruptcy or have a bankruptcy order made against you in Canada, your monthly income is taken into consideration. To have what is supposed to be a practical standard of living during the bankruptcy period, the Office of the Superintendent of Bankruptcy Canada establishes a standard on an annual basis.

The earnings criteria are adjusted for inflation each year and based on information collected by Statistics Canada. Your licensed insolvency trustee decides how much you pay by making monthly payments into your bankruptcy estate each month based on these standards.

It is really the Canadian poverty line that is established by the Office of the Superintendent of Bankruptcy Canada. Regardless of where you reside in Canada, there is no difference between an expensive city as well as a remote area. Just the most fundamental demands of individuals in addition to members of the family are considered.

Bankruptcy services: Debt problems got you down? Feeling overwhelmed?

I hope this Brandon’s Blog on personal bankruptcy services was helpful to you in understanding more about the personal bankruptcy system in Canada.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life.

bankruptcy services
bankruptcy services

 

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LICENSED INSOLVENCY TRUSTEE VAUGHAN: THE COMPLETE GUIDE FOR YOUR HAPPY DEBT FREE L1FE

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

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. Through the use of video meetings, we can help you even if you do not live close to our office in the Jane Street Hwy. 7 area. It is just like we are coming to you!

The bankruptcy trustee in Vaughan: We transformed into a licensed insolvency trustee Vaughan

The bankruptcy trustee in Vaughan went through a metamorphosis similar to a caterpillar becoming a butterfly. The term “bankruptcy trustee” turned into a “licensed insolvency trustee“. The licensed insolvency trustee designation was mandated to all licensed trustees by the Industry Canada Office of the Superintendent of Bankruptcy (OSB). The OSB licenses and supervises the activities of all licensed insolvency trustees across Canada. This includes us as a licensed insolvency trustee Vaughan, Ontario.

The purpose of this Brandon blog is to offer an overview of our role in the Greater Toronto Area with our licensed insolvency trustee Vaughan insolvency trustee firm head office.

The purpose of this Brandon blog is to offer an overview of our role in the Greater Toronto Area with our licensed insolvency trustee Vaughan insolvency trustee firm head office.

Role of a Licensed Insolvency Trustee Vaughan (formerly called Trustee in Bankruptcy Vaughan)

A licensed insolvency trustee Vaughan can fulfill various roles. It all starts with providing a no-cost consultation for a person or company that finds themselves in a troubling financial situation that worries them about their prospects for a bright financial future.

Due to the various roles, a licensed insolvency trustee Vaughan can play, we are also known as “receivers”, “trustee in bankruptcy” or “financial restructuring professionals”. We are appointed when a company or person is financially distressed and either has no other options to get out of financial difficulty and is unable to pay its bills. A licensed insolvency trustee is the only party licensed by the Government of Canada to perform a federal government-approved debt settlement plan, being a consumer proposal consolidation.

As a licensed insolvency trustee Vaughan firm, there are different roles we can play.

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

Find the right option with the help of a Licensed Insolvency Trustee Vaughan

Personal situation insolvency

For individuals who are insolvent, we can provide and act in the following:

  • A no-cost initial consultation to provide advice about debt relief.
  • Credit counselling. to help with your household budget and determine if you really need one of the available debt relief options.
  • Consumer Proposal – Toronto and GTA – Act as Consumer Proposal Administrator to conduct a Consumer Proposal Process for people who owe $250,000 or less in unsecured debts (not including any debts registered against their home) who wish to eliminate their debt and wish an alternative to bankruptcy so that they can avoid filing bankruptcy. This is a government-approved interest-free debt settlement plan that can be paid over as much as five years.
  • Division I Proposal – Toronto and GTA – This process is not quite as streamlined as a consumer proposal, but it is for people who wish to eliminate their debt while avoiding personal bankruptcy.
  • These 2 proposal remedies are the only accredited government debt relief programs in Canada.
  • Personal bankruptcy – Toronto and GTA – As a licensed insolvency trustee Vaughan, we can of course assist anyone who wishes filing for bankruptcy. In your no-cost consultation with us, we first get to know you and your financial situation in order to determine if you qualify for one of the bankruptcy alternatives. If not, we will discuss the entire bankruptcy process with you, including the cost of bankruptcy. If you wish to proceed, we will accept your assignment in bankruptcy.

All collection activities against you cease when you make an assignment in bankruptcy, or file a debt settlement restructuring proposal. Legal action against you may include wage garnishment, collection calls, or a legal action against you. You get legal protection as a result of the stay of proceedings afforded by an insolvency filing.

The two most common types of debt we encounter in our personal insolvency practice are credit card debt and income tax debt. We have successfully handled for clients serious negotiations with Canada Revenue Agency in order to achieve debt settlement for people with a financial history of income tax debt.

Corporate insolvency

For companies, and especially entrepreneurial family businesses that are insolvent, we can provide and act in the following:

  • A no-cost initial consultation to provide advice about debt restructuring options.
  • Restructuring & Turnarounds.
  • Business analysis, business review and monitoring.
  • Receivership – Toronto and GTA – Only a licensed insolvency trustee can act as a receiver on behalf of a secured creditor. As a licensed insolvency trustee Vaughan, we act as a privately-appointed receiver on behalf of a secured creditor. We also act as a court-appointed receiver upon the application to a court by a secured creditor or other stakeholders.
  • Winding-Up and Liquidator – Toronto and GTA – For solvent companies that wish to wind up operations through a legal process, we act as either privately appointed or court-appointed Liquidator.

    licensed insolvency trustee vaughan
    licensed insolvency trustee vaughan

Selecting The Right Licensed Insolvency Trustee in Vaughan

Experience and professionalism

You might not find the expertise to solve your financial difficulties with someone just around the corner. You can start your search for the right Trustee by visiting the website of the Canadian Association of Insolvency and Restructuring Professionals. Both Ira Smith and Brandon Smith are members of the Canadian Insolvency and Restructuring Professional Association. It shows an individual’s commitment to staying up to date with all the latest industry advancements by belonging to this organization. Check the website of the OSB to ensure that the Trustees you are considering are not suspended or under file management by the regulator.

Interacting with them on many levels is essential

As a beginning, they must be able to quickly understand your needs and desires, as well as provide you with a realistic plan that can be followed. If you have issues or concerns, they also need to be available to you. Look for their interest in you. How enthusiastic are they about their industry? Do you really feel their compassion for you? Do you feel you are going to get along on an inter-personal basis with this person?

That’s exactly how you measure enthusiasm. The most effective solutions and suggestions will be offered by a knowledgeable insolvency trustee. You may not find this type of person within walking distance of your home or workplace.

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

Licensed insolvency trustee Vaughan: Are you able to agree on the same concepts?

It is not a totally free service to engage a professional trustee. The complexity of your situation could affect the bankruptcy cost. Your trust in a bankruptcy trustee is diminished if you feel they view you as just another dollar sign. Look for those who seem to have similar values to you. It may not be the closest to your home to find such a licensed insolvency trustee.

Websites for licensed insolvency trustee Vaughan

Searching for “bankruptcy trustee near me” or “licensed insolvency trustee Vaughan” on a search engine today will bring up various websites to visit. How does the website make you feel? What bankruptcy FAQs do they provide? Can you see pictures of the people you would deal with? From their blog, do they demonstrate that they have a deep knowledge base?

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

You can meet with more than one Trustee

Unless you sit across the table from him or her, you won’t know which one is the right fit for you. Comparing two bankruptcy trustees is a good idea. You want to be able to compare two or more for your own validation purposes. The one you feel best about is the one to go with. Trust your gut!

3 Best Licensed Insolvency Trustees in Vaughan, ON

Throughout the years my firm has been inspected for 50 points, including reviews, ratings, reputation, history, complaints, satisfaction, trust, cost, and general excellence. The results have allowed us to rank consistently among the top 3 Best Licensed Insolvency Trustees in Vaughan, ON.

Licensed insolvency trustee Vaughan summary

I hope that you found this licensed insolvency trustee Vaughan Brandon Blog helpful in describing our role as debt professionals and my thoughts on how to go about choosing the one you think is the best fit for anyone in a financial crisis. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

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LICENSED INSOLVENCY TRUSTEE FOR BANKRUPTCY SIMPLE STEPS ON HOW TO AVOID BANKRUPTCY AND SAVE YOUR BUSINESS

licensed insolvency trustee for bankruptcy

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

Licensed Insolvency Trustee for bankruptcy on why businesses go bankrupt

In my last Brandon Blog, Business Bankruptcy In Canada: Discover The Causes Of Business Insolvency And Bankruptcy, I described the causes of business insolvency, the types of business entities normally found in Canada and tips on how to pull your business around back from insolvency.

Numerous businesses are battling to survive today, not to mention stay lucrative. They are scaling down or just closing their doors. They are accessing the available government support money for a business. Most entrepreneurs hesitate to seek the advice of a licensed insolvency trustee due to the fact that they are afraid all the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) wants to do is be a trustee for bankruptcy.

In this Brandon blog post, I want to continue from the suggestions from my last blog, to show you exactly how that the last point I push for is to be a trustee for bankruptcy. I first look to reorganize your business. If your business or company remains in danger because of the effect of the COVID-19 pandemic, it will certainly be advantageous for you and also your organization to do so.

I will also show how sometimes, a trustee for bankruptcy or receivership, can actually help save parts of your business. The only other alternative could be to let all the business parts fail, which is the worst possible outcome.

The role of a debtor in bankruptcy or insolvency

Remember, I previously defined insolvency as a financial condition, where bankruptcy is a legal condition and a legal process. You will also recall that in my last Brandon Blog, I described the three common types of business structures in Canada; proprietorship, partnership and corporation. Just as these three business structures are different in form, they are also treated differently in insolvency vs bankruptcy. Here is how I differentiate the role of each debtor.

Proprietorship – Sole proprietorships are a type of business structure in which one individual is the sole owner of the business, which gives that person control over everything related to the business. This includes the business’ name, structure, accounting, legal obligations and tax responsibilities.

As I described last week, in Canada, the person, the sole proprietor, is carrying on business in their personal name, operating as the business name. You can register a sole proprietorship with the provincial government by completing an application form.

A sole proprietorship is the simplest kind of business structure. It permits an individual to sell goods or run a service with complete control of it on their own. Nonetheless, a sole proprietorship is not considered a separate legal entity from the owner. This means that any liabilities incurred by the business are also personal financial obligations of the owner.

So in an insolvency situation, all of the sole proprietor’s assets come into play as do all of his or her debts. It is not just the business assets and business liabilities. It is everything. This is the worst-case scenario for an entrepreneur.

So if the business is viable, and the personal assets and liabilities lead to the sole proprietor being in the situation where they can do a debt settlement plan, they can choose one of two options to restructure their entire personal financial situation. This assumes they cannot resolve their financial issues informally to bring their financial situation back to being solvent.

Partnership – A terrific way to begin a new business is teaming up with one or more people. All of you should enhance the group’s abilities as well as energy. Nonetheless, you also wish to be with people that are trustworthy, industrious and have a certain expertise that will help the business grow. Just like the way a proprietorship is one person, a partnership is made up of two or more people.

A partnership agreement is crucial. This is an agreement between the partners, describing the rights as well as obligations of each partner in the business. The same way a sole proprietor is personally responsible for the debts of the business and is putting all of their personal and business assets at risk, the same is true for partners in a business partnership. The partners are each liable for 100% of the business debts in case of insolvency. The partners cannot limit their liability to only their partnership share of the business.

Corporation – When you incorporate a business, it is a corporation. The company is a different legal entity from its owner shareholders. Shareholders are not responsible for the unpaid debts owed to financial institutions (normally a secured creditor), suppliers to the firm (normally an unsecured creditor) or the government. There are only two exceptions: (i) certain government liabilities that are a personal liability of a Director; and (ii) if the entrepreneur directly guarantees a financial debt of the company, such as a company loan, then that individual will have a liability with respect to such debt.

If the company’s financial future becomes bleak because it is insolvent, there are options. In my last blog, I talked about self-help remedies senior management of a company whose business is viable can try to informally bring the company back to a healthy financial state. You can re-read that blog to see the options available. If the self-help remedies do not work yet then we must look at more formal proceedings.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed InsolvencyTrustee for bankruptcy: Settle with creditors and debt collectors without bankruptcy

In a proprietorship or partnership, if the underlying business is viable, then there are a variety of options to try to turn the business around yourself. You would use the self-help methods I described in my last blog. If the self-help options do not work, there are debt settlement options available to the individual(s) under the Bankruptcy and Insolvency Act (Canada) (BIA). They would be the only government-sanctioned debt settlement plan available in Canada. Either a consumer proposal or a Division I Proposal. You can read about how each one works by clicking on the following links:

In a successfully completed debt settlement program, the bankruptcy trustee would not be a trustee for bankruptcy. Rather, the trustee in bankruptcy would be an Administrator under a consumer proposal or a Proposal Trustee in the Division I Proposal.

If the business is not viable or the circumstances are such that a debt settlement plan is not feasible, then personal bankruptcy would be the only other option. You can read about how personal bankruptcy works by looking at our top 20 bankruptcy FAQs section. Upon the bankruptcy of the person, the sole proprietorship is automatically terminated.

Since a partnership is a way of carrying on business personally, then the same insolvency options available to the partners to the business debtor are also available. A restructuring is always preferred over a bankruptcy when the partnership is in financial difficulty.

For a debt settlement insolvency filing, the licensed trustee is not a trustee for bankruptcy. That is the case only if there is an actual bankruptcy assignment. Under provincial law, if a partner goes bankrupt, the partnership is automatically dissolved.

Licensed Insolvency Trustee for bankruptcy: Ask creditors to help you avoid bankruptcy of the corporation

Without wanting to sound like a broken record, you can review my prior blog to go over the self-help remedies for turning a business around, even if it is a corporation. A self-help remedy is always a great alternative to bankruptcy. If that isn’t appropriate, or just plain does not work, then you must get in touch with an insolvency trustee.

Again, if the company’s business is viable, then there are financial restructuring alternatives. these alternatives will be within a government-regulated insolvency proceeding. There are two formal restructuring statutes in Canada:

In both cases, a company should retain the services of both a licensed trustee for bankrutpcy and a bankruptcy lawyer. The lawyer acts as legal counsel to the company. The licensed trustee will be both a financial advisor and steer the company through the restructuring process. The CCAA option is for companies with $5 million or more of debt. A BIA Proposal is for a company with any amount of debt. The main difference between the two processes are:

  • In a failed BIA Proposal, the debtor is immediately deemed to have filed an assignment in bankruptcy. This is not the case in a failed CCAA Plan of Arrangement.
  • A CCAA proceeding is more costly as there are many more court appearances in that forum than in a BIA restructuring.

Using one of these two statutes to gain what is called in the media “bankruptcy protection” in order to work out a successful restructuring with your unsecured creditors is always preferable. The company will pay less than it owes while keeping its viable but insolvent business alive. Don’t underestimate the power of preserving jobs in the eyes of a court. A bankruptcy trustee can be very helpful in obtaining great results.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed Insolvency Trustee for bankruptcy: When to consider an Assignment for the Benefit of Creditors

If the business is not viable and is insolvent, then the only thing left to consider is an assignment in bankruptcy filing. It is definitely a last resort if everything I have already spoken about in this Brandon Blog just won’t work and you have run out of options. Trustees in bankruptcy always consider the alternatives to bankruptcy, but sometimes filing bankruptcy is the only option available.

In the case of a proprietorship or partnership, it is the individual sole proprietor and one or more of the partners who will be meeting with a trustee in bankruptcy and filing for a personal type of bankruptcy. the personal bankruptcy trustee will administer the personal bankruptcy estate. Again, you can read up on personal bankruptcy by looking at our top 20 personal bankruptcy FAQs section.

In personal bankruptcies, it will be either a streamlined system called a Summary Administration and if not, it is then an ordinary administration bankruptcy. Unlike a company, a person is ultimately entitled to a bankruptcy discharge.

When it comes to the administration of bankruptcy for a corporation, it is always an ordinary administration bankruptcy. The purpose of this Brandon Blog is not to run through all the steps in a personal or corporate bankruptcy process. Above I have provided some links to read up on debt settlement restructuring and personal bankruptcy. For corporate bankruptcy, I recommend that you read our corporate website page on corporate bankruptcy.

Alternatively, you can also read my previous Brandon Blog Bankrupting a Limited Company: Canadian Corporate Bankruptcy Process.

A trustee for bankruptcy administers the bankruptcy process for the benefit of unsecured creditors. Sometimes, it is a secured creditor who needs to enforce their security. They do not necessarily need the company to meet with a trustee for bankruptcy. Rather, the secured creditor needs the appointment of trustee to act not in a bankruptcy administration, but rather, to act as a receiver or receiver-manager to enforce the secured creditor’s position by taking control of the assets subject to the security and ultimately selling them. To read the receivership process, you can read the receivership section of our corporate website.

You can also read my Brandon Blog titled What Is A Receivership? Our Complete Guide To Receivership Solutions.

Licensed Insolvency Trustee for bankruptcy: How to avoid bankruptcy and save your business from closing

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

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve. As you can see from this blog, we are not just a trustee for bankruptcy. We believe every person and business should first explore debt settlement to avoid bankruptcy.

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

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

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

Call us now for a no-cost consultation.

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

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

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WHAT IS RECEIVERSHIP – CAN YOU UNDO A PROVEN RECEIVERSHIP ORDER?

what is receivership
what is receivership

If you would prefer to listen to an audio version of this what is receivership Brandon’s Blog, please scroll down to the bottom of this page and click on the podcast.

What is receivership: Introduction

Last spring I wrote about a Court of Appeal For Ontario decision. That decision confirmed that the time allowed to appeal a receivership Court order is 10 days under the Bankruptcy and Insolvency Act (Canada) (BIA).

This Brandon’s Blog on what is receivership discusses a decision of the Court of Appeal of Manitoba which further sets out a framework for anyone wishing to appeal an order made in this court-appointed receivership legal process. Prior to discussing this Manitoba case, I ought to go over some receiver 101 facts.

What is receivership?

What is receivership? A receivership is a solution for secured lenders, such as a chartered bank. The bank loans the company money and the company agrees in the loan agreement to pledge the business assets as security for the loan. If the business defaults on its lending arrangement, generally by non-payment, the secured lender can enforce its security against the assets in receivership.

This is the lender using its enforcement rights to recover its secured debt. Other than for a government trust claim, the secured creditor’s debt ranks on a priority basis above all other creditor claims. Enforcement action is definitely a form of legal action. So receivership is a remedy for secured creditors.

There are 2 types of receivers in Canada; 1) a privately appointed receiver or; 2) a court-appointed receivership. A receiver gets its authority and powers from either the security documents in a private appointment or the Court Order in a court appointment. Once appointed, regardless of the type of appointment, the receiver has the power to take possession of all the assets of the company, including sending notices to all customers to advise that the receiver is now collecting the accounts receivable.

The BIA specifies that only a licensed insolvency trustee (previously called a bankruptcy trustee or also can be called a licensed insolvency practitioner) (LIT) can serve as a receiver. A receiver in a private appointment acts on behalf of the appointing secured creditor. A court-appointed receivership creates a responsibility to all creditors upon the court’s receiver, not just the applicant in the court process. This would include any unsecured creditor also. The BIA also requires the receiver to do file notice of its appointment with the Official Receiver at the Office of the Superintendent of Bankruptcy and to send the required statutory notice to all known creditors.

What is a company receivership?

Normally, the procedure starts with the secured creditor, who lent money to a company under a security agreement, talking to the insolvency trustee. The security document tends to secure all company assets, including accounts receivable.

When it is decided that there ought to be a receiver designated, the secured lender needs to decide if it will be a private appointment, or if the assistance of the Court is required. Each situation will dictate what is the best method for receivership. They can either appoint the receiver under an appointment letter (private appointed) or apply to the Court for an Order selecting the receiver (court-appointed receivership). So when considering what is receivership, you must look at all the circumstances and decide what kind of appointment is needed.

what is receivership
what is receivership

As a former employee, what am I entitled to? The Wage Earner Protection Program

Upon a company going into receivership (or bankruptcy), the LIT is obliged to inform workers of the Wage Earner Protection Program (WEPP) as well as offer former employees information about amounts owing to them. From the day of bankruptcy or receivership, trustees and also receivers have 45 days to send out Trustee Information Forms showing the amounts owing to workers. WEPP is administered by Service Canada.

Employees have 56 days to send their Service Canada WEPP application to the WEPP. The Service Canada handling time for a WEPP payment is within 35 days of receipt of a completed WEPP Canada application and Trustee Information Form.

The WEPP gives funds to Canadian former staff members owed money when their employer becomes either bankrupt or goes into receivership. The amount of employee earnings covered is an amount equivalent to 7 times maximum regular insurable earnings under the Employment Insurance Act.

As of January 1, 2020, the max yearly insurable earnings amount is $54,200. This means that the max amount a previous worker can assert under WEPP is $7,296.17 in 2020. A certain portion is a trust claim and the balance is an ordinary claim. Normally, the receiver makes at least the trust claim payment to the former employees. Service Canada will pay the balance.

So in what is receivership, if the receiver does not pay the trust claim, Service Canada will and bill it back to the receiver. This all takes time and will increase the cost of administration. That is why the receiver normally pays the trust portion directly.

What is receivership: Receivers and receiverships

In a private receivership, the receiver needs to get the approval of the party that made the secured loan and appointed the receiver prior to implementing its recommended action steps. In a court-appointed receivership, the receiver needs the authorization of the court for its activities and actions.

The receiver’s very first responsibility is to take possession and control of the assets, properties and undertaking of the company in receivership. In a private appointment, the receiver takes possession of the assets covered by the secured creditor’s security agreement. In a court-appointed receivership, the receiver takes possession of whatever assets it has authority over from the Court Order.

The receiver has to make a decision whether it can obtain a better value for the business asses if it runs the business. Conversely, the receiver might determine that the danger of running the business negates any potential upside in value. In that case, the receiver would not operate the business and merely liquidate the assets.

The receiver after that establishes a strategy for the sale of assets. The receiver also has to make sure that the assets are physically secured and insured. The what is receivership process is fairly complex and all-encompassing.

The receiver, whether in a private appointment or a court appointment, has wide powers to perform its duties.

What is receivership: Challenging a receivership appointment Court Order

On September 19, 2019, the Court of Appeal of Manitoba released its decision in 7451190 Manitoba Ltd v CWB Maxium Financial Inc et al, 2019 MBCA 95. On December 20, 2018, the Court made an Order appointing a receiver (Receivership Order) over the assets of 7451190 Manitoba Ltd. (Company). The Order was made upon the application to Court by the lender who made the secured loan.

On January 14, 2019, the Company launched an appeal to the Receivership Order. The secured lender opposed the appeal on 2 main grounds, being:

  • the company did not have an appeal as of right, rather, it requires to seek leave to appeal first (which should be declined); and
  • the appeal was statute-barred as it was not submitted within 10 days of the Appointment Order appealed from.

The issues the Appeal Court needed to consider were::

  • whether the nature of the Company’s appeal of the Appointment Order in what is receivership requires an application for leave or if it is a right under Section 193 of the BIA;
  • if the leave to appeal is necessary, should such leave be provided;
  • whether the Company should be given more time to submit its notice of appeal.

    what is receivership
    what is receivership

What is receivership: Appealing a business receivership Court Order

So the first issue the Court had to consider in what is receivership was whether or not the Company had an appeal of the receivership Order as a right, or if it needed to first apply to the Court with leave to appeal motion. The Court determined that the Company’s appeal of the receivership Appointment Order is not of right. Rather, leave to appeal needed to be made.

The things that the Appeal Court considered in making its determination included that:

  • The security documents entered into by the Company clearly outlined the lender’s remedy to appoint a receiver when there was an event of default.
  • The company was represented and made submissions against the appointment of a receiver at the initial hearing where the Appointment Order was made.
  • The Appointment Order contained the necessary “comeback clause”. No party made an application under this clause to amend the powers of the receiver under the Appointment Order.
  • Since appointed, the receiver has actually filed two reports with the Court. The reports notified all stakeholders and the Court of the decisions taken and choices made. The receiver also sought approval of different activities. The Company has actually not filed any type of motion challenging the actions taken by the receiver.

Should leave to appeal the appointment of the receiver-manager be granted?

Section 193 of the BIA allows that an appeal lies to the Court of Appeal from any kind of order of a judge of the court in certain situations. The Court confirmed that the criteria to think about in making a decision whether to give leave to appeal under section 193(e) of the BIA are:

  • The suggested appeal raises an issue of general importance to the practice of bankruptcy/insolvency matters or to the administration of justice as a whole.
  • The issue raised is of relevance to the action itself.
  • The proposed appeal is prima facie meritorious.
  • Whether the suggested appeal will unduly hinder the progression of the bankruptcy/insolvency case.

The Court went on to say that, regardless of these criteria, the Court retains a residual discretion to grant leave to appeal in what is receivership where the refusal to do so would result in oppression.

When the Court considered these requirements, taking into consideration the whole context, the Court was not persuaded to grant the Company leave to appeal the receivership order.

The Court determined that in this case, the Company’s appeal should be denied. This Court of Appeal of Manitoba is consistent with the Court of Appeal for Ontario case that I mentioned at the top of this Brandon’s Blog and previously wrote about. It also provided additional detail and reasons as to why appealing a receivership order is not a right, but leave to appeal needs to be granted.

What is receivership: Summary

I hope you enjoyed this what is receivership Brandon’s Blog. Is your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex corporate restructuring. However, more importantly, we understand the needs of the business owner entrepreneur. You are worried because your company is facing significant financial challenges. Your business provides an income not only for your family. Many other families rely on you and your company for their well-being.

The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your company’s problems; financial and emotional. The way we dealt with this problem and devised a corporate restructuring plan, we know that we can help you and your company too.

We know that companies facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a company restructuring process as unique as the financial problems and pain it is facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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