Tag: licensed insolvency trustee

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3 RECENT DEBT HEADLINES

Debt headlines: Introduction

There have been three recent debt headlines that have attracted a lot of people’s attention. In this Brandon’s Blog, I discuss all three.

Debt headlines: Bankruptcy statistics

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. In my blog, BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?, I described the statistics. Many financial writers started to forecast doom and gloom. However, in my blog, I comment that I don’t see it that way. Insolvency filings in November 2018 were down from October 2018. The business writers quoted the statistic that there was a 5.2% increase in November 2018, compared to November 2017. However, insolvency filings have been unusually low for close to 10 years. So the increase really is not a big deal.

The actual problem is not these stats. Instead, it is the historically high degree of Canadian house debt collected when rates of interest went to near almost 0%. Since we stay in a slowly boosting rates of interest environment for the near future, not every person or business will be able to carry their high debt. This will lead to more insolvency filings.

Debt headlines: 46% of Canadians on the verge of bankruptcy as rates increase: Study

I have written before about Canadians and their debt load. Personal debt loads are of some worry. There’s brand-new information that casts a brand-new alarming light on the state of Canadians’ personal balance sheets.

A current study reveals that 46% of Canadians are on the verge of bankruptcy as interest rates increase. I begin by stating a word of caution. The survey size was a small pool so I don’t want to generalize. Canadians have a great deal of debt. What does that tell us about what these people are saying?

This really did not occur overnight. These are long-lasting financial obligations that have been gathered over a long time. The weight of them is actually having an influence. These are individuals that live paycheque to paycheque.

Well, these people are claiming that 46% who answered the survey would not have enough cash or are within $200 or much less to manage their debts and expenses at the end of the month. If something shows up that can interfere with that whether its rates of interest going higher, they might lose their job, or they might have unanticipated emergency costs. So what this informs us is that practically half of Canadians that were surveyed are truly living really near to the margin.

Numerous people do live in this way. Having debt repayments that stay in the mix since that is something that is non-negotiable, will certainly increase in time if you do not resolve it. Rates of interest will certainly increase. Do we understand what percentage of these individuals is facing that? I’m going say a fair number.

The reason I say this is due to the fact that if you return to the start of the monetary crisis in 2008, the Bank of Canada decreased rates of interest in an initiative to boost the economic climate. Ten years actually. I recognize rates of interest have actually begun to go higher however when you’re in this low-interest atmosphere you can carry a lot of debt.

People have. I’m not speaking about the tiny expenses placed on a charge card. I am speaking about paying an astronomically high price for a house in a rising real estate market, not having the ability to manage those home mortgage repayments, tackling that costly debt using your charge card.

43% of those surveyed stated they are sorry for some of the debt that they incurred. They would certainly enjoy a getaway today however if you cannot pay for it that vacation credit card debt is still there.

Just how concerned do you get when you hear that rates of interest are increasing? You are most likely to need to be getting ready to get your affairs in order.

Debt headlines: Canadian financial institutions might drop by ‘a minimum of’ 50% says a US Hedge Fund


Canadians following our markets look to see what’s happening with the Canadian financial institutions. There is one short seller following the Canadian banks. Denver-based Crest Capital believes the Canadian real estate market will lead Canada into an economic downturn. Nonetheless, the huge 6 financial institutions have actually taken care of proving the cynics incorrect in the past.

Kevin Smith is the founder and CEO of Crest Capital, a hedge fund with $53 million in assets under administration. Crest Capital also has an excellent track record. He is shorting the Canadian financial institutions and thinks now is the moment. He thinks it actually boils down to China.

Kevin Smith thinks that:

  • there is a real estate bubble in Canada;
  • housing debt to GDP has been blown up and been trouble for a time;
  • house prices have increased for a very long time; and
  • the cash streaming in from China that has actually pushed up housing prices and
  • compelled Canadians themselves to extend to purchase real estate.

He believes the China credit bubble is ultimately going to break. China has this credit bubble which has actually been taking place for years. The cash has actually been spilling around the globe yet he believes the funding streams currently from China are truly beginning to run out and perhaps also turn around. There has actually been a lot of cash leaving China right into Canada. This is what has aided the Canadian real estate market and the economic climate.

He said that we are 10 years right into a worldwide financial cycle. He thinks Canada’s personal high debt to GDP ratio will leave the financial institutions holding the bag on this debt trouble. I do not know if he is right, yet that is what he is banking on.

Debt headlines: Can you afford your debt payments with a higher interest rate?

Do you have too much debt? Are you worried that the future interest rate hikes will make presently affordable commitments entirely unmanageable? Is the discomfort, tension and anxiousness presently detrimentally affecting your health and wellness as well as health?

If so, speak to the Ira Smith Team today. We have decades and generations of helping people and companies looking for financial restructuring. As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only experts licensed and supervised by the Federal government to provide insolvency services.

Call the Ira Smith Team today for your free consultation and to make sure that we can begin assisting you to return right into a healthy, balanced, hassle-free life.debt headlines

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WHAT ARE THE BEST CORPORATE BANKRUPTCIES?

corporate bankruptcies

If you would prefer to listen to the podcast of this corporate bankruptcies Brandon’s Blog, please scroll to the bottom of the page and click on the audio file.

Best corporate bankruptcies: Introduction

Who would think that I could write a blog about the best business failures? Corporate bankruptcy is normally associated with job loss, creditors and investors or shareholders losing out and liquidation.

This is true. But once in a while, corporate insolvency can also be used to end the life of a very financially sick corporation so that a new company can rise from the ashes and offer jobs to the affected employees of the bankrupt company. The story of the ServiCom bankruptcy is an example of the best possible outcome. Here is its story.

Best corporate bankruptcies: The ServiCom shutdown

On Thursday, December 6, 2018, the bankruptcy of the parent company of the ServiCom phone call center in Cape Breton closed it down without warning. It made 600+ Cape Bretoners immediately unemployed less than three weeks before Christmas.

Numerous people were out of a job after layoffs at the Sydney, N.S. telephone call centres over that weekend. The staff members at ServiCom expected to begin their week like they would any other Monday. On Saturday, the news broke that the company had suddenly laid off their staff members. Instead of working, they located themselves applying for unemployment and trying to find jobs.

“We were told to log off and then suddenly we don’t have a job” claimed one former employee. That Saturday, the telephone call centre notified the employees of the information that they no longer had work.

There was no notice for the layoff of this real number of employees. Accordingly, social agencies were incapable to set up conferences or job fairs to aid displaced staff members.

Best corporate bankruptcies: It was tough

Employees like Jamie Barbara were trying to stay positive in light of the problem. “Relieved, relieved now,” she said. “I can go on about my life and look for a job even harder than I was before”.

It was a tough several weeks for ServiCom employees. Many of the workers waited outside the Salvation Army to get a Christmas grocery order. Just before Christmas, that despair has transformed to delight. They obtained good news. Many people were thinking about bankruptcy.

Best corporate bankruptcies: A Christmas miracle

The workers were praying for a Christmas miracle and it arrived 13 days after ServiCom closed its doors.

An American business person, Anthony Marlowe, bought the assets of the bankrupt company for $1.5 million. The workers were thrilled that Mr. Marlowe was entering Sydney, N.S. and taking over. Mr. Marlowe started his career in outbound telemarketing as a call centre supervisor. Currently, he owns many call centre companies.

Todd Riley, the former manager of ServiCom in Sydney is now the Vice President of the new Sydney Call Centre. He claims they’ll be open for service and previous staff members are welcome. All of them will have their jobs back. There could be a couple of transfers from one program to another, however, everybody that was on the payroll will certainly be back.

Best business insolvencies: When jobs are saved

The telephone call centre now operates as the Sydney Call Centre and is owned by Mr. Marlowe’s company, MCI Canada. The excellent news is that he is seeking to expand the business.

Georgina Stuart is just one of many previous phone call center employees that were expecting to return to work in the New Year. “It’s just fantastic that we’ve got hope and work in the future, yes it absolutely does, so we’re looking forward to 2019.”.

There is now a feeling of relief. It was absolutely a roller coaster of feelings for the ServiCom employees. The Sydney Call Centre employees are thrilled to be back to continue their good work.

The building still had the ServiCom name on it when the employees returned. However, it absolutely is currently the Sydney Call Centre sustaining United States telecom AT&T as well as GM’s OnStar service, with much more business to hopefully come.

So, if anyone ever tells you that there is no such thing as best business insolvencies you can tell them this story.

Best business insolvencies: What about your company?

Does your company have excessive debt? Is the business viable but the corporate body is too sick to continue? Is your business in danger of shutting down? Will employees who have become like family be out of a job? Are the pain, stress, and anxiety currently adversely influencing your health and wellness?

If so, contact the Ira Smith Team today. We have years and generations of helping people and businesses seeking financial restructuring. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to offer financial restructuring solutions.

We provide a free consultation to assist you to solve your problems. We know the discomfort financial obligations causes. The Ira Smith Team can end it as soon as possible from your life. This will permit you to start a fresh start, Starting Over Starting Now.

Call the Ira Smith Team today so that we can start helping you get back into a healthy and balanced, stress-free life.

 

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FINANCIAL DISASTER PREPAREDNESS: 4 STEP PLAN TO STOP FINANCIAL DISASTER

Financial disaster preparedness: Introduction

The people drowning in debt are always scared of the thought of speaking to a licensed insolvency trustee (formerly known as a bankruptcy trustee (Trustee). The purpose of this Brandon’s Blog is to allow me, a Trustee, to give you some basic points on financial disaster preparedness in a non-scary way. Hopefully, it can help you avoid a financial disaster.

On the 27th day of the United States Federal government closure, many federal employees that are already under money stress and anxiety are not surprisingly asking whether an insolvency proceeding is the only alternative.

These people did not ask for this. Although they will eventually receive all their back pay, that doesn’t help their cash flow today.

Some personal bankruptcies are started by events beyond somebody’s control. The US government shutdown is such an example. Alternatively, unlike the shutdown, a number are completely within an individual’s control.

Here are four ideas on just how to maintain your finances from falling off the edge right into insolvency.

Financial disaster preparedness: #1 – Keep an eye on your credit cards

Try to pay your monthly credit card bill, and all your expenses, on or before their due date. If timely payments cannot happen, pay it back asap or arrange a repayment strategy to decrease late charges as well as interest charges.

Never ever carry over a credit card balance. Attempt to pay your balances, including all your expenses, promptly.

Similarly, be conscientious what your credit history is. Almost every person will certainly have a time in their lives when they’ll need to borrow cash for some major expenditure.

Your credit score will affect the borrowing rates you are offered. Knowing one’s credit history can aid people to make a better decision on when to jump, or hold back, on a choice to borrow.

Financial disaster preparedness: #2 – Know your monthly expenses (and savings too)

When I do credit counselling and speak to people about loan basics, I discuss spending behaviours and always talk about the difference between wants and needs. I always encourage people striving for economic self-reliance to begin with a straightforward exercise: document every single expense in a month.

By mapping out all the spending, people can rank where their cash should, as well as shouldn’t, be going. For example keep an eye out for the daily latte, which is a habit because, it builds up, A more expensive specialty coffee is a want, not a need. A less expensive plain coffee could suffice.

There is one routine I always urge. Make a routine that you will set aside a particular percentage of your income for an emergency fund. The same goes for socking away, at the very least a little, to an RRSP. Work these savings into your budget.

In my experience, all consumer insolvencies commonly entail inadequate financial savings to cover the unanticipated. This is a common problem among Canadians that I have previously written about in my blogs.

Credit cards are also a significant cause of personal insolvencies. Many of our personal insolvency clients use credit cards to supplement their income. Rather than budgeting, they use their credit cards for various expenditures that they really cannot afford and are unable to pay down their credit card balances.

Financial disaster preparedness: #3 – Boost your financial literacy

There are various ways to begin early in life to prevent financial disaster problems. If these guidelines sound familiar, that’s because they are. However, yet few individuals appreciate them. That’s partly because they’re not taught it in the schools.

Canadians have a financial literacy problem. Many people think that some people are born rich and others aren’t. The reality is that those who are well off just have a more realistic understanding about spending and saving within one’s earnings.

Financial literacy, like civics education, needs to be a requirement in all elementary school, high school and university educational programs.

Financial disaster preparedness: #4 – Preserve your financial self-reliance


Those who lived through the great depression understand how fragile funds can be. Clipping coupons and looking for the most affordable prices is just part of their normal behaviour.

Insolvency filings have been at their lowest point since 2007, and there are varying explanations for the decline.

During the last decade, Canadians have amassed debt. Now that interest rates are rising, it is expected that personal insolvency filings will rise. Personal insolvencies will be more a part of our world as a result of unexpected disasters and negative decisions.

Corporate bankruptcies will always be a part of the system as markets change and businesses experience threats they cannot survive.

We must all be financially vigilant. I hope these tips will help you in avoiding any form of financial distress.

Financial disaster preparedness: What about you?

Do you have excessive debt? Are you in need of financial disaster preparedness? Does your business have way too much financial debt and is in danger of shutting down? Are you concerned that the future rate of interest hikes will make currently workable financial obligations totally uncontrollable? Is the pain, stress and anxiety currently adversely influencing your health and wellness?

If so, contact the Ira Smith Team today. We have years and generations of helping people and businesses seeking financial restructuring. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to offer financial restructuring solutions.

We provide a free consultation to assist you to solve your problems. We know the discomfort financial obligations causes. We can end it as soon as possible from your life. This will permit you to start a fresh start, Starting Over Starting Now.

Call the Ira Smith Team today so that we can start helping you get back into a healthy and balanced, stress-free life.

financial disaster preparedness

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BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?

bankruptcy statistics

If you would rather listen to the Bankruptcy statistics Canada 2018 blog audio file, please scroll down to the end for the podcast.

Bankruptcy statistics: Introduction

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. Most of the headlines on this report quoted that Canadian insolvencies rose 5.2% in November 2018. While true, that headline alone could create the impression that we now have runaway bankruptcies in Canada. Nothing could be further from the truth. Let me explain.

Bankruptcy statistics: The latest numbers

Total insolvencies in November 2018 was 5.2% higher than total insolvencies in November 2017. That is what the press has quoted. However, that statistic by itself is meaningless. The complete number of insolvency filings (proposals and bankruptcies) in Canada lowered by 2.5% in November 2018 contrasted to the previous month.

For the 12-months ending November 30, 2018, total insolvencies boosted by 2.0% compared with the 12-month period ending November 30, 2017. This is a fairly modest total increase. Keep in mind that insolvencies in Canada have been at historically low levels for the last 9 years! A total annual increase of 2% from a historic low number is hardly an epidemic.

Consumer insolvencies for the 12-months ending November 30, 2018, increased by 2.0% compared to the 12-months ending November 30, 2017. Consumer personal bankruptcies were down by 5.0%, while consumer proposals were up by 8.4%. The percentage of proposals in consumer insolvencies increased to 55.7% during the 12-month period finishing November 30, 2018, up from 52.4% throughout the 12-months ending November 30, 2017. This means that over half of those Canadians who made an insolvency filing in this time period avoided bankruptcy. This is a good thing.

Business insolvencies for the 12-month period ending November 30, 2018, decreased by 0.6% compared to the 12-month period ending November 30, 2017. The industries with the largest decrease in insolvencies were mining and oil and gas. The industries with the largest increase in insolvencies were building and construction and retail.

Bankruptcy statistics: What is the real issue

The real issue is not these statistics. Rather, it is the historic high level of Canadian household debt amassed when interest rates were at near zero percent levels. Now that we are in a gradually increasing interest rate environment for the foreseeable future, not every person or company carrying high debt will be able to continue meeting their obligations and will have to resort to an insolvency proceeding.

I have written about the dangers of carrying too much debt for many years now. We are now entering the period where the rubber meets the road. Stephen Poloz, Governor of the Bank of Canada, feels the Canadian economy is doing sufficiently well to slowly boost rates of interest. Mr. Poloz believes to be tightening up that a bit. At the exact very same time, the latest insolvency statistics show that the marketplace now tells a story that there may be room for some actual pessimism about the Canadian economy.

Previous Bank of Canada Governor Mark Carney and the former Finance Minister, the late Jim Flaherty, warned the Canadian consumer to place the economy on their back and march it up a high hill. We did and it worked. This is now the outcome of it.

Bankruptcy statistics: Canadian household debt

There’s a good deal of conversation on what that suggests specifically for Canadians. It isn’t that the warnings have actually not been there for a while. The most recent statistics show that Canadian household debt is around 170 percent of disposable income. The regular Canadian owes $1.70 for every single buck of revenue made each year, after tax.

Twenty years ago, the proportion was 100%. So as you can see, there has been a stable climb in Canadians’ cravings for more financial debt. We have among the greatest financial obligation percentage of any of the Organisation for Economic Co-operation and Development participant nations. For those carrying high debt, it is now time to buckle your seat belts as interest rates will continue to rise.

There were indications that the Canadian consumer was thinking of their budgeting. Statistics Canada previously reported that retail sales were slowing down. Now in the latest insolvency statistics, we see that retail is one of the industry sectors that had an increase in corporate insolvency filings.

With rates of interest increasing, so does the cost of borrowing and the cost of maintaining variable rate loans. Fixed rate loans that mature will need to be refinanced at higher interest rates if the loan cannot be repaid in full.

Bankruptcy statistics: Debt in a rising interest rate environment

Do you have too much debt? Does your company have too much debt and is in danger of shutting down? Are you concerned that future interest rate hikes will make currently manageable debt totally unmanageable? Are the pain and stress now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.

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PRIVACY BREACH LAWSUIT AGAINST LICENSED INSOLVENCY TRUSTEE FAILS

privacy breach lawsuitPrivacy breach lawsuit: Introduction

A licensed insolvency trustee (formerly known as a bankruptcy trustee) and a Court appointed Receiver are both officers of the Court. As such, they have a duty of care to all stakeholders and parties. A decision of the Supreme Court of British Columbia released in late 2018 deals with an application to begin a class action privacy breach lawsuit against a licensed insolvency trustee (LIT or Trustee).

The case I am referring to is Netlink Computer System Inc. (re),2018 BCSC2309. Netlink Computer System Inc. (Netlink) was a British Columbia-based business that marketed computers and associated software solutions. In late 2017, Netlink went bankrupt.

Privacy breach lawsuit: The request to go ahead

As is required under the Bankruptcy and Insolvency Act (Canada) (BIA), any party wishing to initiate litigation against a bankruptcy trustee must first get the permission of the Court to do so.

In the Netlink case, a former Netlink customer wanted to start a class action lawsuit against the Trustee. The customer claimed that the Trustee breached the personal privacy of Netlink’s customers by permitting their personal details to be revealed. The unproven claim was that the Trustee sold to or, otherwise, allowed 3rd parties to get personal information of the Netlink customers.

This particular customer wished to start an action versus the Trustee for breach of privacy. If leave is approved, this customer would then seek certification of his case as a class action lawsuit.

Privacy breach lawsuit: The issue in requesting the leave of the Court

The Court’s task was to figure out whether to exercise its discretion to allow the claim to go ahead. The Court had to look at the nature and scope of the proposed claim taking into account the evidence. Leave is rarely given. If leave was granted in this case, it would be the first time in Canada a bankruptcy Trustee has been taken legal action against in a potential class action proceeding.

The BIA does not give any type of specific advice about the elements the Court ought to take into consideration in thinking about an application for leave to start an action against a LIT. These have just been developed through case-law analyzing and using s. 215 of the BIA.

For almost 150 years, Courts and legal scholars have been of the view that the bar for approving the commencement of litigation I versus a Court-appointed receiver or Trustee is not a high one. It is designed to protect the receiver or LIT against only frivolous or vexatious actions which have no basis.

The leading cases on the issue of leave to go ahead with litigation against either a Court-appointed receiver or LIT can be summarized as follows;

  • Leave to take such legal action should not be given if the action is frivolous or vexatious. Manifestly unmeritorious claims need to not be allowed to continue
  • Actions need to not be allowed to continue if the evidence submitted on behalf of the action, does not show a cause of action against the Trustee.
  • The court is not required to make a final evaluation of the benefits of the claim prior to granting leave.

This threshold tries to strike the ideal balance between the security of bankruptcy trustees and Court appointed receivers from the interruption of an insolvency administration from unimportant or simply tactical suits and preserving to the maximum degree possible the legal rights of creditors and other stakeholders.

In this privacy breach lawsuit case, the claimant states that his affidavit evidence provides proof reveals a real case against the Trustee. The Trustee says that the proposed claim and the evidence on its behalf does not satisfy the relatively reduced threshold called for to prove leave.

The claimant described in his materials, his potential claim. . He also discloses that he has already begun a claim against the auction company who sold the bankruptcy company’s assets, Netlink and Netlink’s landlord. (The action versus Netlink has remained stayed due to the fact that Netlink is in bankruptcy). The proposed claim against the LIT is exactly the same and consists of practically the same phrasing as the action already started. There is no separate accusation that the Trustee did anything different from the auctioneer, Netlink, or the landlord.

The proposed claimant’s main points were:

  1. He purchased a product from Netlink and provided personal information, including, his name, address and credit card details.
  2. The Trustee contracted with the auctioneer to sell the assets.
  3. During that process, the Trustee allowed customers’ private information, including addresses, credit card numbers, and various other sensitive information (the “Private Information”) to be exposed and offered to or otherwise acquired by 3rd parties, including criminals.
  4. The Trustee provided the auctioneer computers and Netlink servers and other records containing the Private Information.
  5. Criminals that obtained the Netlink servers offered the information to other criminals, consisting of cybercriminals and identity thieves.
  6. The trustee knew that customer details are often included in the property of such bankrupt’s estates and it took no steps to safeguard the information when taking guardianship of Netflix’s property.
  7. The Trustee’s choice to offer the Private Information, or at a minimum, the Netlink servers including the Private Information, was intended and deliberate and was made knowing that Netlink customers had not consented to their details being shared.
  8. Customers have suffered damages.

Privacy breach lawsuit: This evidence

The Court examined the claims and the evidence. Unfortunately, the claimant did not have first-hand knowledge of what the Trustee did or did not do. Rather, the claimant submitted two sworn affidavits of what he believed took place. The information contained in the two affidavits was derived mainly from blog posts and YouTube videos that the claimant believed to be true.

The Trustee submitted 2 sworn affidavits of the LIT responsible for the Netlink file. The Trustee’s evidence was mainly why the relatively low threshold for allowing a claim against a Trustee or Court appointed receiver were not met. It did not provide much information about what the Trustee actually did (or did not do).

The Court had no choice but to rule that the claimant’s evidence was mainly hearsay and not admissible. With no real evidence before the Court to support the accusations, the Court dismissed the application and leave to begin the action against the Trustee was denied.

Privacy breach lawsuit: My take

Based on my reading of this case, I believe the Trustee was very lucky that there was no real evidence against it. There is no information indicating what steps the Trustee took to make sure that all Private Information was protected prior to the assets being sold. It is imperative that privacy breaches do not take place. Once a Trustee or Court appointed receiver to take possession of assets that may contain private or sensitive information, steps must be taken to ensure that the information does not fall into the hands of 3rd parties who have no right to that information. It does not matter whether the information is stored on computer hard drives, in the cloud, or physically in books or on paper.

The claimant still has its action against the auctioneer and the landlord. My understanding is that the landlord is involved because once the auction sale was completed and the auctioneer left the premises, there were still books, records and papers that contained some or all the Private Information. The landlord disposed of such papers in a way that did not protect the Private Information.

My Firm’s standard practice is to remove hard drives that contain Private Information so that computers would be sold minus a hard drive. With respect to physical records, any documents not required that would contain Private Information, we have shredded. We do not just throw it into a dumpster intact for someone to find. These are minimum steps required to protect Private Information.

Unfortunately, in the Netlink case, the Court’s Reasons for Decision does not include any information indicating the Trustee took such steps.

Privacy breach lawsuit: What does it all mean?

What it all means is that in any insolvency assignment, the LIT needs to know what it is he or she has taken possession and control of. Decisions must be made that protect the interests of all stakeholders, as best possible. There are always competing interests. The LIT must balance them all carefully when making decisions.

Do you have too much debt because you are a victim of identity theft? Does your company have too much debt and is in danger of shutting down? Is the pain and stress of too much debt now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.privacy breach lawsuit

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FINANCIAL NEW YEAR’S RESOLUTIONS 2019: WILL YOU KEEP YOUR FINANCIAL NEW YEAR’S RESOLUTIONS 2019?

financial new year's resolutions 2019

If you would prefer to listen to the audio of this financial new year’s resolutions 2019 version of this Brandon’s Blog (with an introduction from a celebrity guest), please scroll to the bottom and click on the podcast.

Financial New Year’s resolutions 2019: Introduction

The New Year has arrived. I wish all of my readers a healthy, happy and prosperous New Year. By now, many people have made themselves promises on how they will improve in 2019. Many people make New Year’s resolutions, including financial new year’s resolutions 2019. In this Brandon’s Blog, I explore what are many of the common resolutions people make and what the chances are on people actually carrying them out.

Financial New Year’s resolutions 2019: The 8 most common resolutions

Other than the first one, in no particular order, the 8 most common New Year’s resolutions are:

Lose Weight. The Number 1 New Year’s Resolution is to drop weight. We’ve all seen it, or become aware of it. Many resolve to lose weight, but few truly complete it in the long-term. That is why January every year is when the weight loss programs, gyms and workout products advertise heavily.


Do Better Than Last Year. Often, life is simply hard. In between family members, good friends, your work, and all the various other stress and anxieties that life can toss at you, it simply appears sometimes that absolutely nothing can go right. And also some years are simply a plain draw. So, after a year of grinding via the days, weeks, and months, you’re prepared for a do-over. You’re prepared to do anything to make sure that the following year begins the very best way it can. So, this resolution is to merely attempt to have a better year than the last one.

Exercise. One of the most usual New Year’s resolutions has to do with ones very own health and wellness. Among the many health and wellness promises, is working out. When you consider it, it’s not just wishing to slim down (which is the number 1 resolution), it’s in fact about wishing to be more powerful, quicker and generally in better shape.

When your body is in peak condition, it does do far better. An in shape body functions far better, provides you with much more power, boosts your mind’s abilities and a lot more. DON’T try to push your body in the beginning to do more than it can handle. Any personal trainer will tell you to begin slowly and work yourself up from there. Set realistic goals for yourself.


Save More/Spend Less. Cash is what people need and the most common of all the financial New Year’s resolutions 2019 is to make sure that we have more of it in the New Year. This is especially true for most Canadians, who are living paycheque to paycheque.

The best way to start your financial plan for the New Year is to first look at what happened in the year that just ended. Reflect on your year. I’m certain you’ll realize some things about your immediate past financial behaviour. Some items that you wish you had not purchased or lost money on. Or, if you understood then what you currently know, you would certainly have done things in a different way and saved yourself a couple of bucks in the process.

In other words, look at your income and expenses carefully and budget properly for the New Year. Your proper budget must include saving a certain amount from each paycheque to put away in an emergency savings fund for when there is an unexpected, well, emergency. Your budget will also hopefully allow for other savings to be able to invest for the longer term.

Use the start of the brand-new year to begin preparing just how you could invest your new savings. In your personal financial plan or budget, concentrate on things you NEED versus the many things you WANT. By doing this one simple thing, you will find you will have more in your savings account. This is the best way to stay on track to meet your financial New Year’s resolutions 2019.


Get More Sleep. Depending upon the researcher you listen to, the body requires between 6-8 hours of rest. Our bodies can work on much less, yes, yet it’s not something that a lot of medical professionals advise. This is another one of the resolutions fitting into the health and wellness category.

Get A New Hobby/Skill. Whether we intend to confess or otherwise, most of us wish to be our best selves. We do not simply intend to be the individual that undergoes the movements, we intend to have something we can expect each week, and even take pride in.

So, with a brand-new year, comes a chance to learn new skills or do something different in our lives than just the “same old, same old”. For some, it, in fact, implies attempting to get new skills for getting a better paying job. For others, they see it as a possibility to handle a new pastime or discover something that they’ve always intended to do or learn.

Quit Smoking/Drinking. Humans are animals of routine, yet in some cases, those behaviours are actually, REALLY negative for you. Two of the ones that cover the “negative for you” checklist is alcohol consumption to such an excess that it is an addiction and smoking cigarettes. Like any addiction, this is very tough to do and many times requires the help of trained professionals.

Volunteer. While practically every one of these resolutions is created to aid oneself in one fashion or another, this one helps both the self and others. One of the best ways to help others is to volunteer your time. Volunteer to what? To help any place you can certainly. In some cases, it’s at a homeless shelter, or to assist a close friend in need. There are many opportunities to help the less fortunate. However the crucial point is that you place yourself 2nd, and the needs of others first. Spreading a little happiness can go a long way for a person. Therefore if you wish to assist others, do not hesitate to ask, “What do you need?”. You may be amazed by simply just how much you can help somebody.

Financial New Year’s resolutions 2019: Why do we do it?

We cannot forecast the future. In some cases, it’s tough to anticipate what will take place in the following couple of hours, not to mention the following 12 months. Why do we do it? Well, it’s mainly since we intend to think that we have some power over the future. If we can state to ourselves, “This year will certainly be different, this will certainly be the year I will make changes for me”, it’ll place us in the best attitude to get down to business and do things. The feeling that we have control over our lives is exceptional.

Financial New Year’s resolutions 2019: Will we keep our resolutions?

It begins straightforward. We look in the mirror, see what we don’t like and resolve to make the changes that probably should have been made a long time ago. We will establish worthy ventures to do simply that thing or things. However, most people will drop off the wagon within a short period of time. What? I’m not being mean, I’m being genuine. Making significant changes in your life is hard.


We are hyped for the New Year. We are. so tired of what occurred in the previous year that we are ready to make the changes we promised ourselves we would make. We may also have invested a lot of time informing other people what changes we will make in the New Year. But then life gets in the way and we fall short.

Financial New Year’s resolutions 2019: Falling short is OK

It does not matter that I fell short all my resolutions actually. I need to so that I can ensure that I can improve further! Of course, I should not try to fail them, but it is normal to fall short. No one is perfect. As long as you see that you have made improvements in the right direction, that is what really counts.

So, make sure that your goals are realistic. Even if you fall short, you have improved immensely and that will be your new starting point for the next New Year’s resolutions. I hope all of you improve your life in some area this year, and that will be your new starting point when 2019 comes to an end. This includes your financial New Year’s resolutions.

Do you need professional help to meet your financial goals?

As I stated above, sometimes professional help is required to meet a New Year’s resolution. We may not have all the skills required. Improving your financial situation may be one of those areas where professional help is required. Maybe you only need a coach to keep you focussed on performing your financial new year’s resolutions 2019. Perhaps on a personal level, you might require only some credit counselling or debt consolidation. On a more formal basis, you may need a debt restructuring plan in the form of a consumer proposal in order to eliminate your debts and get back on the right financial path. In some extreme cases, personal bankruptcy may be what is needed.

Perhaps your company is in need of financial restructuring. Perhaps your lender is threatening receivership or bankruptcy so you are in need of a financial advisor skilled in insolvency matters. A licensed insolvency trustee (formerly called a bankruptcy trustee) is the only professional licensed and supervised by the Canadian Federal government skilled in both personal and corporate insolvency matters If you or your company have too much debt, call the Ira Smith Team for your free consultation. We understand your pain, and we have the prescription to end your pain forever. Call the Ira Smith Team today, so that you can begin your improved life for this New Year 2019, Starting Over, Starting Now!

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BANKRUPTCY BLOG REVIEW: A LOOK AT MY TOP 2018 BANKRUPTCY BLOGS

Bankruptcy blog review: Introduction

I hope that you are all enjoying quality family time together over the holidays. As 2018 is nearly over, I thought that it would be interesting to do a bankruptcy blog review on my Brandon’s Blog. So here is a review of the 7 most viewed blogs over the past year.

Bankruptcy blog review: The 7 most viewed blogs in 2018

BANKRUPTCY AND INSOLVENCY ACT: COURT MAY NOT LISTEN TO BANKRUPTCY TRUSTEE

This blog was about a very interesting case decided in the Court of Appeal of British Columbia. The bankrupt’s creditors applied to have the transactions reviewed under section I00 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”). One of the areas of contention was that the judge in the lower court found he could not rely on the bankruptcy trustee’s opinion of value in the circumstances.

MORTGAGE LENDING CRITERIA SELF EMPLOYED: BIGGEST MYTH MAY BE RIGHT

In this Brandon’s Blog, I wrote about mortgage lending criteria self-employed, I discussed a Court decision that shows when it comes to a self-employed person’s mortgage, if there is a deemed trust claim by Canada Revenue Agency (CRA), you cannot solely rely upon the registry system.


STALKING HORSE CREDIT BID: WE NEED COURT APPROVAL BEFORE STARTING A COURT SUPERVISED SALES PROCESS

This bankruptcy blog review post came from our corporate case files. I discussed the decision making process the Court goes through when being asked to approve a stalking horse sales process and the stalking horse credit bid being recommended by the licensed insolvency trustee (formerly called a bankruptcy trustee).


CREDIT KARMA CANADA REVIEW: IS IT REALLY FREE AND LEGITIMATE?

Since 2007, Credit Karma USA has attempted to simplify credit and finance for more than 60 million Credit Karma members. They advertise very heavily on US television to attract new members. Becoming a member is free, and it allows any member to get access to their free credit score and credit report, with the option to update every single week. Credit Karma also provides financial education to put credit into context.

Credit Karma Canada arrived this past year from the United States. Its website is creditkarma.ca. The purpose of this blog was to describe what Credit Karma Canada is and to let you decide if it would be helpful or not for you or someone you know.


IS GOODWILL A NON PROFIT ORGANIZATION? ARE YOU SCARED BECAUSE YOUR COMPANY HAS TURNED INTO ONE?

 

The Goodwill Toronto bankruptcy confused and astonished many people. After all, how can Goodwill, a non-profit organization, go bankrupt? Isn’t the very nature of a non-profit or not-for-profit that it doesn’t have to make a profit? This Brandon’s Blog discussed the issues.


FILING FOR BANKRUPTCY IN CANADA: MENTAL HEALTH & DISCHARGED BANKRUPTCY

 

This bankruptcy blogspot dealt with filing for bankruptcy in Canada and the bankruptcy discharge process when mental health issues are involved.


POOR CREDIT PERSONAL LOANS GUARANTEED APPROVAL CANADA: REDUCE AND DON’T INCREASE DEBT TO IMPROVE YOUR CREDIT SCORE

 

This Brandon’s Blog was a discussion about and a warning against being seduced by ads from companies for poor credit personal loans guaranteed approval. We pointed out the pitfalls of the products being offered. We also showed how people with poor credit can go about settling their debts and improving their credit score.

 

Bankruptcy blog review: Conclusion

 

These are my 7 top viewed Brandon’s Blogs in 2018. Four are about personal debt issues or personal bankruptcy blog items and three are about corporate insolvency issues. Three are about a review of a then-recent court case.

I hope that the year 2019 will be a happy, healthy and prosperous New Year for you and your families.

Have you taken on too much debt in 2018 or the years before? Is the pain and stress of too much debt now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also eliminate it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.bankruptcy blog review

 

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WEPPA CALCULATION CANADA: EMPLOYEES’ WEPP MONEY INCREASES ON EMPLOYER BANKRUPTCY OR RECEIVERSHIP

weppa calculation canada

WEPPA calculation:  Introduction

As part of the Federal Budget 2018, the Wage Earner Protection Program Act calculation (WEPPA calculation) has increased the maximum payout.  We have written before about the Wage Earner Protection Program Act (WEPPA).  However, to understand the recent change, it would make sense for me to check again what the WEPPA is.

How did it arise?

A change to the Bankruptcy and Insolvency Act (Canada) (BIA) developed a device for employees of an employer that entered either bankruptcy or receivership to be paid for wages or benefit claims owed, built up in the 6 months before the company became bankrupt or was put into receivership.

The WEPPA became legislation because of the federal government’s previous worry that when you experienced “my firm owes me money and declared bankruptcy” there was seldom a possibility for workers to get any of the salaries owed.

WEPPA calculation:  Who can’t file?

.Nevertheless, you are normally not qualified if, throughout the duration for which qualified earnings are overdue, you:

  • were a director or officer of the company;
  • had a management position in the company; or
  • were management whose duties consisted of making financial decisions and/or making binding choices on the settlement or non-payment of amounts owing.

WEPPA calculation Canada: Who is qualified for the WEPP?

You might be if:

  • your previous company has actually entered bankruptcy or receivership; and
  • you have unpaid wages, salaries, vacation pay or reimburse expenses from the company during the 6 months prior to the date of bankruptcy or receivership.

WEPPA calculation:  Budget 2018 maximum payout increase

The WEPPA gives financial backing to Canadian employees, owed money when their company goes into either bankruptcy or receivership. The WEPPA offers a prompt settlement of qualified earnings.  The amount of qualified earnings is an amount equal to 4 weeks maximum insurable earnings under the Employment Insurance Act ($3,977 for 2018).

The Federal government in its Budget 2018 stated that the maximum payout would be increased by raising the maximum settlement from 4 weeks to 7 weeks of insurable revenues, which will amount to $6,960 in 2018.  This is a boost of nearly $3,000 for each former employee. The rise to the maximum payout received Royal Assent on December 13, 2018. This increased calculation is retroactive for bankruptcies or receiverships that happened on or after February 27, 2018, the day Budget 2018 was tabled.

Receivers and licensed insolvency trustees (LIT) (formerly called bankruptcy trustees) are obliged to tell employees of the Wage Earner Protection (WEPP) program and give employees details about amounts owing to them. From the day of bankruptcy or receivership, trustees and receivers have 45 days to send Trustee Information Forms showing the amounts owing to employees.  Employees have 56 days to send their Service Canada WEPP application to the WEPP. The present handling time for a WEPP settlement is within 35 days of receipt of a finished WEPP Canada application and Trustee Information Form.

WEPPA calculation:  Do you have way too much debt?


Have you lost your job because your employer went into bankruptcy or receivership?  Is the pain and stress of too much debt now negatively affecting your health?

If so, contact the Ira Smith Team today.  We have decades and generations of helping people and companies in need of financial restructuring and counselling.  As a licensed insolvency trustee, we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems.  We understand your pain that debt causes. We can also end it right away from your life.  This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.

To all my readers, I wish you and your family a very Merry Christmas and Happy Holidays.

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FINANCIAL LITERACY BOOKS ARE GREAT BUT MAY NOT BE YOUR BEST RESOURCE

Financial literacy books: Introduction


The power of today’s technology enables one to discover ways to learn without needing to look very hard for it. The Internet has changed the ways we learn and in general, approach life. To gain financial literacy, financial literacy books are now merely one of many ways we can use to improve our financial acumen.

The academic system, for the most part, still uses classical teaching methods. As a standard, literacy is defined as the ability to write and read. Financial literacy is the ability of people to learn and understand basic financial concepts, strategies and information.

Unfortunately, financial literacy is not so common after all. With 21st century education, financial reading and financial writing can be used to make financial liberty. Financial literacy ought to not be a far-flung idea for people, starting at a very young age.

Financial literacy books: Think differently

In his best-selling book “What I Didn’t Learn in School however I Wish I Had“, author Jamie McIntyre talks about the relevance of financial literacy and 21st-century education. From the title of his book, he freely tells us that we are not discovering what could have been general information for success. The standard view forces the most people to be and follow a structure in a system before all the modern tools available to us today.

As a self-made millionaire, Jamie McIntyre advocates that to be a financial success, people need to be doing the opposite of what others have actually been doing for so long. By being financially literate, we can find reasons why people fail and discover ways to avoid these factors.

Financial literacy transcends the standard read-write approach. By having a different method or viewpoint to one’s life, financial literacy can be used to establish various monetary strategies with the hope of accomplishing financial flexibility.

Financial literacy books: There are many methods to increase financial literacy

To become financially literate, there are many ways people historically have learned about finance, with some new ones. I think some people would say that we can take financial courses or try to get the best financial advice from the best financial advisor. Others may suggest to read the best financial advice books of all time or go to the most popular money advice websites.

However, a research paper released in September 2018, may just give us a glimpse into a different way of gaining financial literacy.

Financial literacy books: What is financial literacy?

Financial literacy is the ability of people to get an understanding when it comes to standard monetary strategies and information. With 21st century education, financial reading and monetary writing can be used to obtain monetary flexibility. Financial literacy needs to not be a far-flung idea for individuals of any age.

Financial literacy books: A new research study

A brand-new research study discovered that people with reduced financial knowledge have a tendency to find out more and make far better choices about money if they are helped by peers that have comparable degrees of financial expertise. This is the case more than if they read financial literacy books or got financial advice from people with much more financial experience and knowledge.

The study, Peer Advice on Financial Decisions: A case of the blind leading the blind?, was released in September 2018. The research showed that the majority of university undergrads with little financial acumen learned better after looking for help from a peer that was in a similar way unenlightened and not somebody having a lot more financial savviness.

While this may strike you as being strange, the study described why it makes good sense. Learning was better between people who can understand and had the patience for each other’s learning gaps stated Professor Sandro Ambuehl, a co-author of the research and an assistant prof at the University of Toronto’s Rotman School of Management. His fellow researchers are B. Douglas Bernheim of Stanford University, Fulya Ersoy of Loyola Marymount University and Donna Harris of the University of Oxford.

Financial literacy books: A new way of learning

What this suggests to me is that one of the best ways to teach financial literacy is to start in the elementary schools and continue it throughout high school. Let groups of students interact with their peers to learn together on age proper financial and investment definitions, terms, subjects and strategies. The study suggests that and not leaving it up to people to try to learn it for themselves, promoting learning in peer groups, may be the easiest and most efficient way for learning financial literacy.

Our provincial governments should be taking the lead in encouraging our teachers to start teaching financial literacy to children at a very young age. The study indicates that by having peers work in groups to learn about financial matters, may just be the way for us to have more financially literate adults and a society that has great financial literacy. Peer groups working together to increase their financial knowledge may just be the best resource.

Financial literacy books: Do you have too much debt?

Do you feel that you don’t have sufficient financial literacy? Do you believe that the lack of knowledge has led to you making financial mistakes? Have these mistakes caused you to now have too much debt? Is the pain and stress of too much debt now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.financial literacy books

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HOW BANKRUPTCIES WORK FOR BUSINESSES IN TORONTO AND VAUGHAN ONTARIO CANADA

How bankruptcies work for businesses: Introduction

how bankruptcies work for businesses

How bankruptcies work for businesses: Introduction

Recently I have written several blogs focussing on insolvency and specifically the topics of consumer proposal and personal bankruptcy. To round out the discussion, this Brandon’s Blog discusses how bankruptcies work for businesses in Canada.

To be clear, the goal for either personal bankruptcy or corporate bankruptcy is to avoid bankruptcy. We have many tools in our toolbox to help people and companies avoid bankruptcy through restructuring. It is only when the person has stewed over their personal or business problems for too long that they come to us when it is too late. When it is too late, our hands are tied for creative problem-solving.

How bankruptcies work for businesses: Where we start

When a business owner comes to our office for a free consultation, we start with some basics. The first thing we do is ask certain questions that will allow us to get a financial snapshot of the business. We need to know about the assets and liabilities of the business.

We need to understand who all the creditors are and what the assets are. Which creditors may have a deemed trust claim or a secured claim against the assets. What is the total and nature of the unsecured debts?

That information tells us what choices we may have in helping the business recover: is an informal debt settlement restructuring possible;

what do we think about the likelihood of a formal restructuring under either the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) or the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA); or is the business too far gone and therefore bankruptcy or just shutting down are the only options remaining.

How bankruptcies work for businesses: The proprietorship

If the business is unincorporated, then the person is carrying on their business in the form of a proprietorship. They are conducting business in their personal name. They may use a business style, but the legal reality of a proprietorship is that the individual, in their personal capacity, is carrying on business. So, the assets and liabilities that are created in the business, is owned by and is the responsibility of the person.

So, in this situation, it will be a personal insolvency discussion. The available remedies will be:

  • an informal restructuring;
  • (consumer) proposal debt settlement plan; or
  • personal bankruptcy

If you wish to find out more about personal insolvency, or how bankruptcies work for individuals, you can read some of my previous blogs. Good examples are WHAT IS THE DIFFERENCE BETWEEN BANKRUPTCY AND INSOLVENCY CANADA or CANADIAN DEBT SOLUTIONS: AVOIDING THE BANKRUPTCY PROCESS MIGHT BE THE RIGHT THING.

How bankruptcies work for businesses: Incorporated businesses

So now we have gone through the starting point I just described and we have determined that we are dealing with an incorporated business. We first focus on many issues before even discussing how bankruptcies work for companies.

First, we want to know how well does management understand its own business problems. If management does not have a good handle on their business problems, then they first need to get that deep understanding. They may know that monthly when looking at the numbers, they see that losses are continuing. Management, especially in an entrepreneurial or family-owned company, may feel ashamed because they don’t feel like they’ve made good decisions. Or they are aggravated and embarrassed because family members have told you the company is finished.

If you know in your heart that if you do not do something today, you may be risking the entire business.

How bankruptcies work for businesses: Know your numbers

To restructure companies for a successful turnaround, you first need to know your numbers and what they mean. The goal is to have the company producing sufficient cash levels and for everyone in the business to be earning a fair market-based income.

Management must look at the entire business and ask:

  • Where’s the profit?.
  • Do we have the money to actually run and scale the business?
  • What is getting in the way for the business to charge the revenue its products or services are worth?
  • Do we have the necessary cash and people resources will we need for a turnaround?
  • Are there lines of business or locations that need to be shed to increase profitability?
  • What expenses can we cut without harming our core business?
  • Which contracts do we need to cut to return to profitability and growth?
  • Do we have the proper reporting systems to give us the information we need to get prompt and accurate information?
  • Can we properly analyze the business issues and take the necessary corrective action?
  • Do we have the right people to carry on the business while implementing the turnaround?
  • Are we experienced enough to carry out our own turnaround or do we need outside professionals to help us with it?
  • Do we know what the impediments are to having a successful informal restructuring or do we need to look at a formal restructuring process?

How bankruptcies work for businesses: Now that we have the information…

These are the main questions that first must be answered for any business experiencing financial difficulties and facing insolvency. This is especially true for more complex companies. New systems or techniques may need to be implemented. If management can answer these questions for themselves, we want to hear those answers. If not, then a financial advisor may need to be retained. My Firm has been regularly retained, either by a company or its lender, to answer these questions and provide our recommendations. This kind of assignment is called a Business Viability Review.

After we provide our recommendations, we then work with the company to help them decide if they can carry out the recommendations and strategies themselves, or if they need our help to do so. If management can do it on their own, many times the lender will want us to stay involved by monitoring the company’s progress and reporting back to both the company and the lender.

How bankruptcies work for businesses: What if informal restructuring isn’t possible

The aim is always to avoid bankruptcy but it’s practical to recognize what it is and when it could be suitable. Companies are complex organisms. There may be the need to shed unprofitable contracts or long-term agreements that are just too expensive to continue with. It may be that disposing of such onerous contracts, leases or agreements is crucial to have a viable ongoing business. Many times a formal restructuring process is necessary to legally end those types of agreements.

It is the largest of company restructurings that we hear about in the news. From the United States, we read about Chapter 11 bankruptcy protection filings. In Canada, we read about restructurings under the CCAA. The largest of companies do not represent the size of the majority of Canadian companies.

For the biggest of companies, they can get relief and press back on creditors. There is an old adage which says: “If you owe the bank a bit of money, they own you. If you owe the bank a huge amount of money, you own them.”. In that way, in the largest company restructurings, the business can get a long time to either sell particular assets where the cash will help them rebound. They will also get the time they need to “rightsize” their employee numbers and shed unprofitable contracts. Loan changes with their secured lender or banking syndicate is also on the table and accomplished, more often than not. Their sheer size demands it and they get it.

How bankruptcies work for businesses: The reality for the majority of Canadian companies

Canadian business is full of entrepreneur-owned companies. So, that is what I will focus on in this Brandon’s Blog. If the business owner(s) come to us early enough, then we can decide if an informal restructuring will work or if not, what needs to be done in a formal restructuring. For any business that owes less than $5 million, it will normally be a BIA restructuring debt settlement proposal. We have done many successful company restructuring proposals under the BIA.

The answers to all the questions I posted above, will tell us what the restructuring needs to look like, how long it will take, and what our projections show about the profitability and viability of the business after a successful implementation of the restructuring plan.

How bankruptcies work for businesses: Company bankruptcy

In a company bankruptcy, the Licensed Insolvency Trustee (formerly called a bankruptcy trustee) (Trustee) takes possession of the assets, properties, and undertakings of the company. This assumes that there are not secured creditors who have all the assets of the company tied up. If there are, then the company may not need to go into bankruptcy. Rather, a secured creditor will take enforcement action by making a demand on the insolvent company. However, if the loan is not repaid in time, then the secured lender will appoint a receiver to take possession of the assets covered by the lender’s security. In Canada, this is normally a Chartered Bank and all the assets are secured.

Sometimes a company in receivership needs to also file for bankruptcy. The main reason would be to aid in maximizing the recovery on the assets. For example, the company is a retail chain. The only way to maximize the recovery is to run the business and sell off the assets from one or more stores. One way to guarantee quiet enjoyment of the stores the receiver needs to stay in is to have a bankruptcy. That is because, under Provincial commercial tenancy law, a trustee in bankruptcy has a certain time to stay in the premises, undisturbed, as long as the current rent is paid.

How bankruptcies work for businesses: Receivership or bankruptcy

Whether there is a receivership or bankruptcy, there are many steps that a receiver or trustee have in common. These include:

  • Determining whether or not the recovery on assets will be maximized if the business is operated by the receiver or Trustee.
  • What impediments are there in running the business?
  • What is the best way to sell off the assets? As an entire group or parcels of assets that make sense to keep together, or one by one?
  • Are there any third party assets not owned by the company on the premises or other locations?
  • Are there assets owned by the company in any other locations?
  • Is there proper insurance and physical security over the assets?
  • Once the assets are sold and the cash received, what claims are there against the funds and what is the priority of all the potential claimants?

How bankruptcies work for businesses: The entrepreneurial company reality

Most mid-size and small companies when they’re in difficulty, do not submit a formal restructuring plan or file for bankruptcy at all. They just shut down by closing the doors. The owner will get the company’s final income tax and other information returns completed and filed. They will make sure that employee wages are paid current. Hopefully, source deductions and HST are fully paid up.

Wages, source deductions and/or HST that are not fully paid, are a personal liability of the Directors of the company. In the entrepreneurial companies, the owner(s) have probably personally guaranteed bank loans, premises and equipment leases or have raised funds to start and invest in the business by taking out at a mortgage against their home.

This brings us to the reality of most midsize and small businesses. The business failure leads to personal insolvency issues. Many times we advise entrepreneurs that their company filing an assignment in bankruptcy is not necessary. Rather, they should just shut down their business and then we will deal with their personal insolvency issues. This will allow the entrepreneur to get a fresh start.

Now what is required is getting a job in their field and earning a salary without the risk and challenges of running their own business. Once they get their fresh start, are back on their feet and saved up some money, they can decide if being an employee or starting a new business will be their future.

How bankruptcies work for businesses: Does your company have too much debt?

Is your company insolvent and needs to restructure? Is your business viable but can only continue if it can reorganize its debt? We know your pain and understand the stress you are living with. The Ira Smith Team has decades and generations of experience in company restructurings of all sizes.

Contact the Ira Smith Trustee & Receiver Team. If we can meet with you in our free first consultation early enough, we can create and help you start a restructuring and turnaround plan. This will allow your company to continue to do business, create jobs and be profitable for many years to come.

Call a Trustee Now!