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FILING FOR BANKRUPTCY IN CANADA: INTENSE MENTAL HEALTH & DISCHARGED BANKRUPTCY

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Filing for bankruptcy in Canada: Introduction

With filing for bankruptcy in Canada, if a person’s discharge is opposed, there must be a court hearing. At the hearing, the court will decide if the discharge will occur. Once the discharge is granted, the person will be relieved of his or her debts as of the day he or she filed for bankruptcy (with certain exceptions) and will be free to start rebuilding his or her credit rating and financial future.

Filing for bankruptcy in Canada: Court of Appeal for Ontario decision

The purpose of my blog is to describe a March 2018 Court of Appeal for Ontario decision, Kuczera (Re), 2018 ONCA 322 (CanLII). This is an important decision in how mental health issues intersect with the bankruptcy discharge process.

Mr. Kuczera’s financial problems began with a costly and hotly contested divorce proceedings. With his debts mounting and the divorce proceedings continuing, Mr. Kuczera filed a consumer proposal. As a result of the ongoing family law battle, his mental health deteriorated and he became clinically depressed. He was no longer able to cope with life and was unable to work.

Filing for bankruptcy in Canada: Defaulting on the consumer proposal

Up to this point, he was making the consumer proposal payments. His default in the consumer proposal caused it to be annulled. The consumer proposal was his attempt to get out of bankruptcy, as he first used filing for bankruptcy in Canada with an assignment in bankruptcy first. So, Mr. Kuczera now remained an undischarged bankrupt.

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Filing for bankruptcy in Canada: The bankruptcy discharge hearing

Mr. Kuczera represented himself in Bankruptcy Court on his discharge hearing. He tried to show the Registrar in Bankruptcy that he tried his best to live up to all of his bankruptcy obligations to the licensed insolvency trustee, but due to his mental health issues, he could not. Unfortunately, his evidence was only a basic report from his psychiatrist.

The Registrar did not grant an absolute discharge. Rather, based on the evidence in front of her, she ordered that a discharge be granted only after payment of the outstanding balance under the consumer proposal, and one other minor condition. The Registrar went on to state that he was held responsible for his situation.

Filing for bankruptcy in Canada: Appeal of the Registrar’s decision

Mr. Kuczera was able to hire a lawyer to appeal the Registrar’s decision to a Judge sitting in Bankruptcy Court. The Judge refused to consider fresh evidence in the form of more descriptive psychiatric reports supporting the summary findings presented at the original discharge hearing. The Judge dismissed Mr. Kuczera’s appeal.

Filing for bankruptcy in Canada: Appeal of the Judge’s decision

He now had his lawyer appeal the Judge’s decision to the Court of Appeal for Ontario. The Court of Appeal disagreed with the approach of the appeal judge. The Court of Appeal could not understand why the appeal judge would not allow the more detailed reports from Mr. Kuczera’s treating psychiatrist. These new detailed reports were further to the summary report provided to the Registrar.

The Court of Appeal went on to say that neither the Registrar nor the appeal judge gave proper weight to the psychiatric evidence. It also went on to say that a discharge condition requiring Mr. Kuczera to pay the payments due under the consumer proposal would not be “difficult”, as described by the Registrar. Rather, the Court of Appeal said that it would be “crushing”.

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Filing for bankruptcy in Canada: What the Court of Appeal found

So the Court of Appeal found that:

  • the appeal judge erred by not considering the fresh psychiatric report evidence;
  • The need for the bankrupt to pay the balance of the consumer proposal payments would be crushing; and
  • The fresh psychiatric evidence was compelling.

Given the length of time that Mr. Kuczera remained in bankruptcy, and considering the above factors, the three-judge panel in the Court of Appeal for Ontario unanimously agreed that Mr. Kuczera gets his absolute discharge from bankruptcy.

Filing for bankruptcy in Canada: Mental health issues

Mental health issues are at the forefront of the news. Most recently, both Kate Spade and Anthony Bourdain committed suicide because of mental health issues. I believe that as society recognizes mental health issues as a legitimate illness or disability, you will see it influencing Bankruptcy Court decisions. That certainly was the case for Mr. Kuczera.

Filing for bankruptcy in Canada: Debt after your bankruptcy discharge

After receiving your bankruptcy discharge, NOBODY can try to collect this debt again. Discharged debt cannot appear on your credit report as anything other than a zero balance. Sometimes collection agencies report a discharged debt to the credit bureaus, hoping you will pay off the debt and not correct the information with the credit bureaus. The debt will still incorrectly appear on your credit report.

Filing for bankruptcy in Canada: Discharged debt and your credit report


When discharged debt re-appears on your credit reports, it affects your credit score and can result in higher interest rates or credit denials. Sometimes debt collectors buy discharged debt, knowing they can’t collect on it, but hoping you don’t know that.

These debt collectors may tell you that the discharge doesn’t apply to them because they are not the original creditor. Don’t be fooled. Creditors who attempt to collect a discharged debt are violating a court order. The court can stop them, and they may even have to pay damages.

Discharged debt should not show on your credit report except as a zero balance – Monitor your credit report and be proactive. A discharged debt is not valid and is not collectible.

Filing for bankruptcy in Canada: Do you have too much debt?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.

The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.

Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.filing for bankruptcy in canada

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CONSUMER PROPOSAL IN CANADA: CONSUMER PROPOSAL TORONTO ONTARIO REVIEW

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consumer proposal in canada

Consumer proposal in Canada: Introduction

In this vlog, I try to provide answers to the most asked questions about a consumer proposal in Canada (the Proposal, the Plan or CP). A Proposal is an official method controlled by the Bankruptcy and Insolvency Act (BIA) readily available to people.

Consumer proposal in Canada: Collaborating with the trustee

Collaborating with a licensed insolvency trustee (LIT) serving as administrator of your Plan you make an offer to:

  • pay your creditors part of the total you owe them over a specific duration;
  • expand the length of time you need to repay that part of your financial debts; and
  • stay clear of bankruptcy

Consumer proposal in Canada: The consumer proposal payments

Payments are made with the LIT. The LIT uses that cash to pay each of your creditors their in a proportionate share based on the proven claims filed by them with the LIT. The financial obligations need to be repaid through the CP within 5 years.

Consumer proposal in Canada: Who qualifies?

You need to be a person and not a corporation. Your overall financial debts need to not surpass $250,000. This limit doesn’t include debts from a home loan, mortgage or credit line supported by your primary house.

You need to likewise satisfy the insolvency requirements. This implies that:

  • your financial debts value is above the value of your possessions;
  • if you sold off your assets you wouldn’t adequate funds to repay your financial obligations completely;
  • you are having difficulty making a complete settlement on every one of your financial obligations monthly

Making just the minimal month-to-month payments as disclosed on your credit card or loan statements do not count as repaying your financial debts.

Consumer proposal in Canada: What is the price of a consumer proposal?

Your Plan payments also cover the fee for the Proposal. There are no different costs either for:

  • submitting a Plan; or
  • charges paid to the LIT to administer your CP


Consumer proposal in Canada: How long will my consumer proposal take?

A Plan could last for no more than 5 years. You could reduce the term either by boosting the amount of your month-to-month repayment or by providing a round figure repayment all at once. The one-time repayment makes sense if you can get an adequate loan from either a financial institution or family member.

Consumer proposal in Canada: What are the steps of a consumer proposal?

A CP permits you to pay all or part of your unsecured debt in regular monthly amounts over time. The maximum length of time is 5 years.

In drafting your Plan, the LIT must make sure that your consumer proposal provides a better result for your creditors than in your bankruptcy.

The normal steps are:

  • A LIT will consult with you and develop a Plan that you both think will work for both you as well as serve the needs of your financial institutions and others you owe money to
  • The LIT administering your CP will send the Proposal to the Office of the Superintendent of Bankruptcy
  • The LIT will mail out the CP to your creditors who then have 45 days to approve or deny it
  • The creditors can approve or deny your Plan at a meeting of creditors.

Typically, in a CP in Canada, there is no need to hold a meeting.

Consumer proposal in Canada: Can a consumer proposal eliminate debt collectors and avoid my income from being seized?

Yes, as soon as the filing of a Plan happens, all creditor seizure activities stop. However, it does not stop family law payments under a proper settlement agreement or court order.

Consumer proposal in Canada: In a consumer proposal will I hand over my home and my auto?

KEEP IN MIND: If you were to surrender your secured properties after declaring your Proposal, you will not be relieved from any type of financial debt shortfall since it happened after the declaring of your consumer proposal.

Make certain that if you are offering up secured assets, wait until they have started their enforcement and are claiming any shortfall against you BEFORE you give your CP.

Normally lenders who register a mortgage or other security for a loan are outside the Plan process. It is the equity you have in your residence or car that must be considered when you and the LIT first sit down to work out a budget. This will affect the type of offer you are going to make.

If you have enough income to keep paying the mortgage against your home and/or your auto loan and you wish to keep the assets, you can do so. Again, your equity must be considered in the offer you make to your creditors. Your income and expenses must be reviewed to make sure you can afford all these expenses plus the monthly payment under your Proposal.

Consumer proposal in Canada: Will I need to surrender my charge cards?

Generally, you should be ready to offer every one of your charge cards to the LIT and you will not be able to ask for a brand-new charge card until after your Plan is finished. You nevertheless can make use of a guaranteed/secured credit card throughout this CP process.

Consumer proposal in Canada: If I miss out on repayment will I automatically become bankrupt?

We highly recommend you to make your repayments consistently and on time. If you drop 3 behind, your consumer proposal will certainly finish. If that were to happen, you will no longer have protection from your creditors and their collection efforts. However, you will not automatically become bankrupt if you default on your Proposal.

Consumer proposal in Canada: What should I do if I have excessive financial debt?

If you’re thinking about a debt settlement program or are looking for ways to end your financial debt call Ira Smith Trustee & Receiver Inc. We understand the stress and pain your financial problems are causing you. We feel your pain and we can end it for you.

Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress-free life.

 

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

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Bankruptcy and insolvency act: Introduction

I want to describe to you a very interesting case that was recently decided in the Court of Appeal of British Columbia, Randen v. HPCB-Online Ltd., 2018 BCCA 123 (CanLII). 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.

The applicants, Shawn and Edvige Cody, were the principals of the bankrupt, Half Price Computer Books Ltd. (“Half Price”) and the applicant HPCB-Online Ltd. (“Online”). About ten days before Half Price was assigned into bankruptcy, Online bought roughly 10% of the book inventory of Half Price.

The application under s.100 was originally made by the bankruptcy trustee, and later transferred to creditors David Randen, The Innovative Alliance Inc., J.R. Trading Co. Inc. and Fairmount Books Inc. under section 38 of the BIA. The lower court judge found Online acquired property from Half Price at much less than reasonable market value. The lower court judge ordered Online and the Codys to pay back the difference which he established to be $287,000.

Bankruptcy and insolvency act: Section 100

Section 100 of the BIA. The section was repealed in 2009, but applies on transactions before then. The main purpose of that section was for reversing the effects of non-arm’s length transactions that reduced value from the estate of a bankrupt person or company.

Until 2009, s. 100 of the BIA provided:

“100 (1) Where a bankrupt sold, purchased, leased, hired, supplied or received property or services in a reviewable transaction within the period beginning on the day that is one year before the date of the bankruptcy event and ending on the date of the bankruptcy, both dates included, the court may, on the application of the trustee, inquire into whether the bankrupt gave or received, as the case may be, fair market value in consideration for the property or services concerned in the transaction.

(2) Where the court in proceedings under this section finds that the consideration given or received by the bankrupt in the reviewable transaction was conspicuously greater or less than the fair market value of the property or services concerned in the transaction, the court may give judgment to the trustee against the other party to the transaction, against any other person being privy to the transaction with the bankrupt or against all those persons for the difference between the actual consideration given or received by the bankrupt and the fair market value, as determined by the court, of the property or services concerned in the transaction.”

Bankruptcy and insolvency act: The questionable transaction

The brand-new company Online bought roughly 10% of Half Price’s stock, or 44,000 books. These books were clearly selected by Mr. Cody as the best-selling. Online paid $21,964.50 for these books, about $0.50 CDN for each publication. The books and records of Half Price, including an e-commerce website which Half Price created at its expense and was the property of Half Price, were copied and used by Online to aid in the sale of these publications at the instructions of Mr. Cody.

The Half Price sorting software and mailing software program that was later used to retail these books by Online, which software was the property of Half Price, was duplicated and taken or transferred to Online. Additionally, there was a claim that the goodwill of Half Price was made use by Online. There was no evidence that Online paid anything for the use of the software and goodwill.bankruptcy and insolvency act 1

Bankruptcy and insolvency act: The lower court’s first problem

The lower court found that Online paid conspicuously much less compared to fair market value. It must pay to the bankruptcy Estate for the benefit of the creditors which he determined to be $287,000. The lower court judge noted that this was not a case in which the trustee was driving the application. The trustee assigned the action to specific creditors.

Normally, the bankruptcy trustee would have to submit evidence to the court in a section 100 application as to the value of the property in question. Since the trustee had assigned its interest to specific creditors, there was no report from the trustee. The creditors said the value of the joint assets is close to $1.07 million. The lower court had to look at the trustee’s actions in determining what the trustee must have thought the value was.

The lower court acknowledged the need in s. 100 to accept the trustee’s viewpoint about the value, unless other values are confirmed. The court however discovered it could not depend on that viewpoint in this case. The first problem was that they were standing in the place of the trustee. The trustee had determined that the software and other assets was of no value. In addition, the trustee did not figure out that there was any kind of goodwill value to this.

Bankruptcy and insolvency act: The lower court’s second problem

The second problem was that Half Price could have moved the best publications to Online at the direction of the Codys. The remaining books, being 90% of the book inventory, sold for around the same value as the 10% of publications. Though this is not entirely determinative of worth, it shows that the inventory, software and goodwill was not as valuable as these creditors represented to the lower court..

The BIA required the lower court judge to accept the trustee‘s viewpoint as to the value, or in this situation the point of view of those creditors, unless other values can be confirmed. The lower court considered the trustee’s activity when the bankruptcy first happened, that those assets had no value. The lower court found that it could not rely on any trustee viewpoint on worth.

Bankruptcy and insolvency act: The Court of Appeal

The Court of Appeal confirmed that a trustee in bankruptcy is an officer of the court and has an obligation to offer all relevant facts to the court in a dispassionate, non-adversarial fashion. It went on to say that the creditors do not have the same responsibilities. They got the right to pursue the proceedings in their very own passionate way. The Court of Appeal went on to say that it was open to the court to decline the trustee’s opinion on the evaluation of a fair market price.

The Court of Appeal finally concluded that although the Court did not have to accept the trustee’s opinion of value, there was insufficient evidence for the lower court judge to place a value. So the Court of Appeal ordered a new trial in the lower court. Now both the creditors, and certainly the trustee, will have to submit evidence about what the fair market value was, in their respective opinion. That way, the lower court will be able to rely on experts, an officer of the court and real evidence.

Bankruptcy and insolvency act: The licensed insolvency trustee

Licensed insolvency trustee is the relatively new name for a bankruptcy trustee. Is your company experiencing financial problems? Are you, or somebody you care about, experiencing personal financial problems?

Bankruptcy is the last thing we try to do for a company or person in financial difficulty. If caught early enough, we can get involved in a turnaround situation for your company to keep jobs and value. We also carry out debt settlement plans for people.

If you’ve personally fallen victim to money mistakes and are in pain and stressed out, it’s time for professional help now too.

The Ira Smith Team knows that you are worried because you are facing significant financial challenges. Your business provides 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.

Contact the Ira Smith Team today. We know how to solve both corporate and personal financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your company, Starting Over Starting Now.

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BUSINESS DEBT ADVICE CANADA: TROUBLE SHOOTING DEBT STRAPPED COMPANIES

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Business debt advice Canada: Introduction

When it involves money, timing is everything. Your business is getting closer to the top of its banking line and your banker is asking for more information than usual. This is where your heart starts pounding faster and your stress level increases. This is the moment you can seize to right size your business or else it very well may fail. The purpose of my blog is to give you business debt advice Canada.

Business debt advice Canada: Relationships can become strained

Relationships can become strained with your lender and suppliers when business debts are mounting and your company is facing a cash crisis. However, there are actions a borrower can take to prevent calamity. Reassuringly, most of the time, lenders would rather support you if you have a viable business plan to correct the situation going forward, and not putting you out of business.

I hope the suggestions below shows you that you should look at this as an opportunity to fix your business. I have found that in trying times when a company has mounting debts and insufficient cash, there is no replacement for good management.

A solid business plan showing how the company will turn itself around is what your lender wants to see. Communication with your lender and your suppliers is key. Do not hide from the problem. Face it head on. If your business plan shows you can turn things around, you will feel like you are dealing from a sound platform and not just running scared.

Business debt advice Canada: Take emotion out of the equation

These situations generally become more tense before they become better. You, your lender and your unpaid suppliers all want the same thing. You all want the company to be successful and profitable, and to be able to pay all of its bills in full when due. Your lender and suppliers are not out to get you. However, if they do not: (i) know that you have solid business turnaround plan; and (ii) receive ongoing information to show what steps you are taking to fix the problems, they will have no choice but to turn off the tap.

I have unfortunately seen too many companies fail in their business restructuring efforts due to lack of communication. The turnaround plan may have been sound, but nobody knew. This only creates ill will among the stakeholders and a result that nobody wants.

Business debt advice Canada: Informal and formal turnaround options

I must preface this section by saying do not be afraid to consult with a licensed insolvency trustee (LIT) for business debt advisory services. Trustees’ training makes them expert in assessing troubled business situations and implementing turnaround steps. A LIT does a lot more than just bankruptcy.

You will find it helpful to have a professional trustee assist you in developing your turnaround business plan, implementing it and keeping management focussed and accountable. You will also find it very helpful to have a LIT go with you for meetings with your banker; there will be many of those!

Business debt advice Canada: Troubleshooting

Fully understanding the full current status of the company showing signs of financial trouble is key. Things that I focus on early on when looking at troubled companies are:

  • What are all the different assets of the company and where are they located?
  • Are all the assets properly insured?
  • What is the going-concern value and the estimated liquidation value of the assets?
  • What is the full extent of all liabilities and business debt levels? This includes amounts owing to the government for:
  • What is the status of premises lease(s) for both remaining term and cost?
  • Is the cost of the leased premises above or below current market value?
  • Has anyone personally guaranteed bank debt, the landlord or any other creditor that would affect turnaround decisions to be taken?
  • Has a current crisis cash-flow statement and turnaround business plan been developed and tested for reasonableness?
  • What are the causes of the company’s current financial problems and how likely are those causes to recur?

This list is not meant to be exhaustive. No doubt other questions will arise as answers are found for these first questions. However, this is the information I first want to get before embarking on developing a restructuring plan.

Business debt advice Canada: Informal restructuring and turnaround

If the business problems have been identified early and have not been allowed to fester, then an informal restructuring may very well work. Perhaps all that will be needed is some accommodation from the lender both in time and money. Banks are quite willing to enter into a forbearance agreement with their corporate client allowing the time (and sometimes more money) to see if the turnaround plan will work.

The bank would rather have a successful turnaround than shut you down. The bank needs to know that management has the bench strength to pull off the restructuring. If not, they will expect you to have a lawyer experienced in turnarounds and a LIT active on your team.

Companies that have relatively few trade suppliers may also be able to work out a restructuring of their unsecured debt. The fewer people you have to talk to and get onside, the higher the likelihood of success. Of course, the trust developed from earlier dealings is very important. If there is no trust, or if there are just too many suppliers, an informal restructuring will not work with them.

Business debt advice Canada: Formal restructuring

The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) and the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA) are the two primary Federal statutes that govern corporate restructuring in Canada. The requirements of each statute and the exact processes themselves are weighty enough to deserve their own blog. However, the takeaways from this blog on formal restructuring are:

  • In a formal restructuring, I still go through the checklist I have identified above of issues to look into.
  • Under the BIA, the restructuring section is Part I Division III of the BIA
  • If a restructuring under the BIA does not receive the necessary creditor AND court approval, the company will automatically be bankrupt
  • In a formal restructuring, the company stays in control of its assets and business operations
  • A formal restructuring invokes a stay of proceedings so no party can begin or continue litigation or enforcement action against the company
  • A company needs to have at least $5 million in debt to restructure under the CCAA
  • A BIA restructuring will be less costly than a CCAA restructuring because the company does not have to go to Court for approval every time it wishes to do something
  • The term “bankruptcy protection” in Canada, refers to a formal restructuring under either the BIA or CCAA.

Business debt advice Canada: What to do if your company has too much debt

Is your business facing financial problems? Perhaps your company is in need of a restructuring. The Ira Smith Team can develop a restructuring plan which may or may not include the need to file for bankruptcy protection.

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. The bankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.

The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.

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PERSONAL BANKRUPTCY CANADA FAQ: VIDEO – PERSONAL BANKRUPTCY FAQ CANADA

Personal bankruptcy Canada FAQpersonal bankruptcy canada faq: Introduction

Last week I provided you with my infographic, video and blog to give you information on the Canadian corporate bankruptcy Canada process. I focussed on how an incorporated business files for a voluntary bankruptcy in Canada. This week, I want to describe how an individual files for voluntary bankruptcy. I also want to answer what I have found to be the personal bankruptcy Canada faq. So look at the infographic and watch the video below. Feel free to read in more detail below the video.

Personal bankruptcy Canada faq: Personal bankruptcy process in Canada

One of the most asked questions is “What is the bankruptcy process in Canada?”. Last week our infographic and video described the corporate bankruptcy process in Canada. This week’s video describes the personal bankruptcy process in Canada.

VIDEO – Personal bankruptcy Canada faq

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Personal bankruptcy Canada faq # 1 – How do I recognize if I am in financial trouble?

If you are having difficulty paying your debts or have actually quit paying them altogether then you are in financial difficulty. Call an expert, a government qualified trustee to check your choices for reducing your debt and eliminating your stress and pain.

Personal bankruptcy Canada faq # 2 – Is bankruptcy my only alternative to get relief from debt?

The short answer is no; there are other options. You should always start first with a free consultation with a licensed insolvency trustee (LIT or Trustee). A LIT is a private party licensed by Industry Canada to carry out the restructuring and liquidation rules under the Canadian Bankruptcy and Insolvency Act (BIA). The LIT will discuss options with you to first avoid bankruptcy. These options include:

  1. credit counselling;
  2. debt settlement;
  3. restructuring; and as a last resort
  4. bankruptcy

Bankruptcy does not deal with debts such as home mortgages, vehicle loan, spousal support or child support. Debt settlement firms try to bargain with your lenders to lower the amount owing. They also prepare a payment plan for you to settle the debt; they do not “erase your debt”.

The Canadian government is in the process of implementing new rules to curb the activities of some debt settlement companies. Some of them charge you for reviews that a licensed insolvency trustee performs for free. They also sell you products you don’t need, under the guise of helping you improve your credit score.

Personal bankruptcy Canada faq # 3 – I have actually seen advertisements from Debt Settlement firms stating they could erase my debt without making use of a Trustee in bankruptcy. Just how does that work?

They don’t and their ads are misleading. If you first have a free consultation with a LIT, you will learn that a number of choices available to you that include yet are not restricted to debt reduction including a consumer proposal.

Understand that these debt settlement firms are not licensed trustees. Eventually, they stop charging you for things a LIT would do for free. Then they ultimately hand you over to a LIT for either a consumer proposal or bankruptcy. You could have just gone to see a professionally licensed Trustee to start with!

Personal bankruptcy Canada faq # 4 – Do I get approved for bankruptcy?

You qualify for individual bankruptcy in Canada if you are financially troubled, insolvent and owe greater than $1,000.

Personal bankruptcy Canada faq # 5 – Should I file bankruptcy?

Without the detailed information of your unique circumstance, that decision cannot be made. Get In touch With Ira Smith Trustee & Receiver Inc. for a complimentary no commitment session so you will understand your options for ending your debt pains, Starting Over, Starting Now.

Personal bankruptcy Canada faq # 6 – If I declare bankruptcy, will I lose my house and car?

There are certain claims that are not released by your discharge from bankruptcy. Examples are home mortgages and car loans, if you choose to keep them. It comes down to what is your equity in those assets. The answer to that question and your ability to cash-flow those debts will be the determining factor. There is a list of items that are exempt from seizure. Call Ira Smith Trustee & Receiver Inc. to find out more.

Personal bankruptcy Canada faq # 7 – Once I file bankruptcy, exactly what occurs to the money I owe?

Once you declare bankruptcy you will be required to surrender certain non-exempt assets to the Trustee. These assets will then be sold and the money earned from the sale of the assets distributed among your creditors.

Personal bankruptcy Canada faq # 8 – Even though I have not located work in my field, I still owe on my student loans. Will my bankruptcy get rid of that debt?

Is your date of bankruptcy within 7 years of when you discontinued to be a full or part-time student? If so, your student loan debt will not be released by your discharge from bankruptcy. In particular instances, you could be able to apply to the court for a discharge of your student debt obligations under the “hardship provision”.

Personal bankruptcy Canada faq # 9 – What takes place to my salary or wages throughout a bankruptcy?

Salaries and wages are not influenced by bankruptcy. However you will need to complete an Income and Expense Form noting your household earnings as well as costs. This becomes part of your budgeting procedure. If your earnings goes beyond specific requirements developed by the Office of the Superintendent of Bankruptcy (OSB) (“surplus income”), you will be required to pay part of the surplus income into the bankruptcy estate through the trustee.

Personal bankruptcy Canada faq # 10 – Canada Revenue Agency has actually frozen my bank accounts and has a garnishee with my employer on my earnings. Just how can I stop all that?

If you have filed personal bankruptcy, personal income tax debt is an unsecured debt. As soon as you’ve declared bankruptcy or made a consumer proposal, Canada Revenue Agency (CRA) cannot start or continue taking any kind of enforcement activity versus you, consisting of wage garnishment or freezing your assets. Your Trustee will alert CRA once you file. The LIT will also advise both CRA and your bank and employer that any enforcement activity against you for your debt cannot continue.

Personal bankruptcy Canada faq # 11 – Will I still owe loan after I state bankruptcy?

Maybe, due to the fact that bankruptcy does not cover secured lenders – home mortgages, auto loan, student loans (if it is less than 7 years given that you discontinued to be a full or part-time student). It also does not cover certain other debts:

  • penalties or fines enforced by the court;
  • spousal support;
  • child support; or
  • debts arising from fraud.

Personal bankruptcy Canada faq # 12 – How long will I be bankrupt?

The time you spend in bankruptcy will depend on whether this is a first or 2nd bankruptcy and if you have surplus income. Get In touch with Ira Smith Trustee & Receiver Inc. to find out more.

Personal bankruptcy Canada faq # 13 – Who will know that I have declared bankruptcy?

As soon as you declare bankruptcy your Trustee will tell your creditors, CRA, and the Superintendent of Bankruptcy. The two Canadian credit bureaus, Equifax and TransUnion, obtain filing records from the Superintendent of Bankruptcy, so it will be on your credit report.

Bankruptcy filings are a public document. On top of that particular personal bankruptcies, those with non-exempt assets estimated to realize more than $15,000, need an ad in the “legal” section of a local newspaper.

Personal bankruptcy Canada faq # 14 – How will bankruptcy influence my credit score ranking?

An individual that files bankruptcy gets the lowest credit score ranking. Details of your bankruptcy that influences your credit report is inevitably eliminated many years after your discharge from bankruptcy.

Personal bankruptcy Canada faq # 15 – What does a LIT/Trustee do?

A Trustee is an individual or company licensed by the OSB to carry out mandates under the BIA such as bankruptcy, proposal, consumer proposal, summary administration bankruptcy and business reorganizations. A LIT is an officer of the Court. The Trustee has a duty of care for the rights of both the debtor and the creditors.

The LIT also makes certain that the legal rights of the insolvent/bankrupt are not abused.

Here is a listing of standard steps taken by a Trustee:

  • Reviews and counsels debtors on available alternatives
  • Prepares official documentation that is both filed with the OSB and used to tell creditors
  • Ensures the validity of creditors’ claims
  • Ensures that debtors are provided with mandatory counselling and access to mediation services if there is a dispute about any income they are required to contribute
  • Sells the debtor’s assets, except those exempt from seizure by provincial and federal laws, and hold the proceeds in trust for distribution to creditors
  • Administers the bankrupt estate from beginning to end
  • Assesses the debtor’s conduct both before and during a bankruptcy, as well as the cause(s) of the bankruptcy; and
  • Arranges for (and if necessary reports all the above to the Court) for the bankrupt’s application for a discharge (in the case of personal debtors)

Personal bankruptcy Canada faq # 16 – How do I pick the ideal Trustee?

Make an appointment for your free consultation. Meet with the Trustee and ask any questions you might have about alternatives to bankruptcy, consumer proposal, debt settlement/restructuring, bankruptcy and/or the bankruptcy procedure. Get a feel for not only the answers you receive, but how interested does the Trustee seem in you as a person. Can you see yourself relating well to that person. Does the Trustee make you feel comfortable and the type of person you want to work with.

If not, consult with a different Trustee firm and repeat the procedure until you find a Trustee that you really feel comfy working with.

Personal bankruptcy Canada faq # 17 – Is my spouse/partner impacted by my bankruptcy?

Your partner/spouse will not be financially affected by your bankruptcy unless they have co-signed a debt or own assets jointly with you. A creditor could pursue your spouse/partner for any debt that they have co-signed for. This includes a mortgage on your jointly owned home.

Personal bankruptcy Canada faq # 18 – How will my bankruptcy impact my present divorce case?

In Canada, the bankruptcy process does not interfere with the majority of the divorce proceeding. The Trustee will stand in the shoes of the bankrupt spouse when it comes to the rights for either the equalization payment or the division of property. All issues about spouse and child support and child custody issues carry on as if there was no bankruptcy at all.

Personal bankruptcy Canada faq # 19 – What is Chapter 7?

Chapter 7 is not applicable in Canada. It is the liquidation section of the U.S. Bankruptcy Code, the federal law governing bankruptcy in America.

Personal bankruptcy Canada faq # 20 – What is Chapter 11?

Chapter 11 is not applicable in Canada. It is the corporate restructuring section of the U.S. Bankruptcy Code, the federal law governing bankruptcy protection in America.

Personal bankruptcy Canada faq – What Now?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.

The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.

Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.

personal bankruptcy canada faq
personal bankruptcy canada faq
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CANADA BANKRUPTCIES: GRAPHIC & VID – CANADIAN BANKRUPTCY AND INSOLVENCY LAW

Canada bankruptcies: Introduction

The purpose of this infographic, video and blog is to give you Canada bankruptcies information. I want to explain how Canadian bankruptcy and insolvency law works for companies and what the major steps corporate bankruptcy laws in Canada are. So watch the video below and feel free to read in more detail right below the video.

Canada bankruptcies: Video

 

Canada bankruptcies: The 10 standard steps in a voluntary corporate bankruptcy

The actions of a Licensed Insolvency Trustee (Trustee) takes with respect to the assets and the claims of creditors in a corporate bankruptcy may differ from case to case. However, there are 10 standard steps the Trustee takes in each corporate bankruptcy file. These steps are to understand and deal with the nature of the assets and the creditor claims.

Here are the 10 steps I take as a standard process with each corporate bankruptcy.

Step 1 – Initial meeting with Trustee

I meet with the Directors of the company by providing a free consultation. In this meeting, I learn the causes of the company’s insolvency and the nature and extent of the assets and the claims of various creditors. This includes potential trust claimants and secured creditors.

After obtaining the information I need to provide advice specific to that company’s situation, I decide if the company is a candidate for a restructuring, either informally or in a bankruptcy protection mode. If possible, this is preferable, as it will save jobs and allow the company to continue in business. If not, I advise about corporate bankruptcy and what is involved.

Step 2 – Directors meeting

If bankruptcy is the answer, the Directors formally meet and pass a resolution stating that the company is insolvent and must file an assignment in bankruptcy. The resolution also indicates which Director is authorized to sign all documents and be the Designated Officer in the bankruptcy proceedings. The Designated Officer is the person that will attend the First Meeting of Creditors and answer questions about the causes of the company’s insolvency and bankruptcy and how the company conducted business.

Step 3 – Signing all documents

With the signed Directors’ resolution in hand, I prepare all necessary bankruptcy documents. I then meet with the Designated Officer to explain the documents and have them all signed by him or her.

Step 4 – Filing with Official Receiver

The Official Receiver is the local representative and part of the Federal Office of the Superintendent of Bankruptcy. I electronically file the required documents and wait for the Official Receiver to issue the bankruptcy certificate. The company is not officially bankrupt until the day and time that the Official Receiver issues the bankruptcy certificate. Normally it gets issued on the same day or the next day. So, if the timing of the start of the bankruptcy is important, I need to take a time lag into consideration.

Step 5 – Bankruptcy certificate

The company is not officially bankrupt until the day and time that the Official Receiver issues the bankruptcy certificate. Normally the issuance is on the same day or the next day. So, if the timing of the start of the bankruptcy is important, I need to take a time lag into consideration.

Once the certificate is issued, my firm Ira Smith Trustee & Receiver Inc., is named as the Trustee. This appointment is valid until the First Meeting of Creditors. At the meeting, one of the things the creditors must vote on, is affirming the Trustee’s appointment.

Step 6 – Trustee takes possession

Now that I am the Trustee, I have a duty to take possession of the company’s books and records and the known assets. Taking possession of the assets is subject to the rights and wishes of any trust claimants or secured creditors.

Step 7 – Trustee notifies known creditors

Within 5 days of the date of bankruptcy, I must familiarize myself with the books and records as ot the names and addresses of the creditors. I must also in those same 5 days, set the time and place for the First Meeting of Creditors and mail out the notice to the creditors advising of the bankruptcy, the creditors meeting details and providing a proof of claim form. I must also arrange for a notice of the bankruptcy be placed in a local newspaper so that any unknown creditors are officially on notice.

Step 8 – Trustee safeguards assets

Again subject to the rights of any trust claimants or secured creditors, I must safeguard, insure and store the assets. I can begin formulating a plan for selling the assets if there is equity for the bankruptcy estate. However, I cannot sell any assets before the First Meeting of Creditors without a Court Order. At the creditors meeting is where I seek the approval of the creditors for the plan I have prepared to sell the assets. After obtaining that approval, sales can be completed by the Trustee.

Step 9 – Trustee prepares the report

I prepare my Trustee’s Report To The Creditors On Preliminary Administration. The report is handed out to the creditors present at the First Meeting of Creditors. It is also a public document, so any creditor who could not attend the meeting can receive a copy.

The report covers the following areas:

  • Background information
  • Causes of financial difficulty
  • Description and estimated value of the company’s assets
  • Any trust, secured or property claims against the assets
  • What conservatory and protective measures to safeguard the assets the Trustee has taken to date
  • Books and records of the company
  • What the Trustee’s review to date of the books and records has determined, if anything
  • Did the Trustee retain legal counsel yet and if so, for what reason? If there is a trust, secured or property claims that the Trustee knows about, it would be normal for the Trustee to get a legal opinion on the validity and extent of such claims prior to the creditors meeting. The Trustee would advise the creditors of what the legal opinion says and how it will affect the sale of assets, or if there is even anything for the Trustee to sell.
  • The claims of the creditors identified to date.
  • What the anticipated realization and distribution to the unsecured creditors may be
  • The Trustee’s fee
  • Any other matters

Step 10 – The First Meeting of Creditors

Within 21 days of the date of bankruptcy, I hold the creditors meeting. My report described above is distributed. The Trustee, the Designated Officer and possibly the lawyer hired by the Trustee, attend the creditors meeting. Also attending are any creditors who wish to take part.

The creditors meeting is the place where the creditors can ask questions and find out information about the causes of bankruptcy and the Trustee’s estimate of what the unsecured creditors may receive by way of a distribution.

As mentioned above, the creditors also must approve the actions and activities of the Trustee to date, and approve any steps the Trustee wishes to take in realizing upon assets and dealing with creditors’ claims. The creditors also appoint up to 5 Inspectors. The Inspectors are representatives of the creditors who supervise and assist the Trustee and ultimately must approve the Trustee’s actions.

canada bankruptcies
canada bankruptcies

 

These are the 10 standard steps I take in every voluntary corporate bankruptcy. The exact things I must do to realize upon the assets and deal with the claims of creditors will depend on the assets and claims themselves. When the bankruptcy administration is complete, including any distributions made, the Trustee then obtains a discharge.

Is your company experiencing financial difficulty?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a company in financial difficulty. If caught early enough, we can get involved in a turnaround situation for your company to keep jobs and value.

The Ira Smith Team knows that you are worried because your company is facing significant financial challenges. Your business provides 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.

Contact the Ira Smith Team today. We know how to solve your company’s financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your company, Starting Over Starting Now.

canada bankruptcies
canada bankruptcies

 

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PERSONAL FINANCIAL RESPONSIBILITY: WHAT TO DO ABOUT GROWN CHILDREN WHO EXPECT MONEY

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Personal financial responsibility: Introduction

A few weeks ago, my blog was about PARENTS HELPING CHILDREN BUY A HOUSE: THE SECRET TO KNOWING WHAT TO DO – ASSUMING YOU REALLY HAVE THE MONEY. In that blog I looked the factors parents should consider and possible ways they could help, if proper. I assumed in writing the blog that the adult children were being financially responsible. It reminded me about a recent consultation I performed on a 30ish year old woman who had no personal financial responsibility.

Personal financial responsibility: The referral

An accountant we know referred his client, the father of this woman, to us. I spoke with the father briefly on the telephone and invited his daughter to contact me. As we do with people referred to us, I provided the daughter with a free first consultation where I obtained information about her assets, liabilities, income and expenses.

Personal financial responsibility: The first free consultation

We discussed potential options. At the end of the consultation, my process is to provide the person with our standard intake sheet called the Debt Relief Worksheet (DRW). I asked her to fully complete it with supporting documentation where requested. I also told her that not making another trip to our office, she could scan and email it to me. That way she would not have to take time off work.

Personal financial responsibility: The issues

So far so good. However, things did not stay that way for long. The purpose of the DRW is to give me all the information I need to properly advise someone and to be able to create a solution as unique as that person. It is also designed to allow for financial rehabilitation, by creating a balanced budget for the person to be able to live within their means. There is no point putting someone through an insolvency process, if they don’t come out at the end having learned why financial responsibility is important.

When I received the more or less completed DRW, several things jumped out at me:

  1. The woman graduated from university with a social work degree. However, instead of going into social work, she became a yoga instructor. I found out that yoga instructors, or at least this one, don’t make much money for all the hours worked.
  2. She was one of those people living way beyond your means. On social media, she regularly posted weekend party pictures at bars and clubs.
  3. She could barely pay the rent on her apartment.
  4. She was supplementing her income with credit cards and only paying the minimum monthly payments.
  5. She would soon not be able to borrow any more money from her credit cards and that is why she called for help from her father.

Personal financial responsibility: The father talk

To say the least, I was alarmed. This woman was out of control. Her father was looking to me to tell him if he should lend her (more) money. I called up her father to have a private discussion. I couldn’t disclose the details of the daughter’s financial mess, but I did want to send him a very strong message. The father was already aware of most of her debts, so there really wasn’t any information he was missing.

I told the father the following:

  1. Under no circumstances should he ever lend her money. I doubted she would ever have the capacity to pay him back. This yoga instructor had credit card and income tax debt totalling about $82,000 so a few thousand was not going to cut it.
  2. His daughter should undergo an insolvency proceeding. If he wanted to help, he could fund her consumer proposal as a lump sum, so that this would not be hanging over her head for a long time.
  3. Either a consumer proposal or bankruptcy would create the required debt settlement.
  4. More importantly, whichever insolvency process was chosen, I would make sure that financial rehabilitation would be an outcome. She would learn how to budget, how to not spend more than she earns, net of income tax, and she would gain personal financial responsibility.

Her father was extremely appreciative.

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personal financial responsibility

Personal financial responsibility: Consumer proposal vs. bankruptcy

I then met with the adult child again. I explained to her the process of both a consumer proposal and bankruptcy and how each differed. I also explained that her consumer proposal has to be a better offer to her creditors than they could expect in her bankruptcy. I also told her that I spoke with her father, and he was prepared to fund a consumer proposal. I assured her that through a consumer proposal, we could get full debt settlement and she could avoid bankruptcy.

Personal financial responsibility: The yoga instructor had not yet fully grasped the concept of aparigraha

We then got to the budget discussion. In that discussion, she quickly realized that in an insolvency proceeding, she would have to live on what she earned. Her credit cards would be cut off by the lenders and she would not be able to supplement her income with credit card purchases and advances. She stared at me for what seemed to be the longest time. I didn’t know if it was her drishti or she was gearing up to lash out at me.

She then began her mantra “that is not fair, that is not fair, that is not fair”. I asked what isn’t fair? She said she would not have money to party every weekend! Together we each had our aha moment. I quickly learned that her parents never learned how to stop enabling this grown child. She quickly learned that she was not prepared to alter her behaviour and become financially responsible. She thanked me, got up and left. It was pleasant, but not exactly namaste.

A few days later she sent me an email to say that she would not be going through with an insolvency process. I wished her shanti. My understanding is that she did has not filed with another licensed insolvency trustee. So, the only thing left is that Daddy is doing what he originally asked me about – lending or giving her money.

Personal financial responsibility: What to do about grown children who expect money

This is a very sad case. I know I could have helped this woman, but she didn’t want to be helped. She is very happy being one of those adults financially dependent on parents. She is one of those children who has never learned personal financial responsibility.

When your grown child makes bad financial decisions and comes to you for help, what will you do? If you can afford to, will you just enable them or will you seek out a real solution. I am always honoured when a professional believes that I can help someone, especially if it is their child or family member. That is the greatest compliment which has happened several times.

If your child or relative is experiencing financial problems, or if you are as a result of helping your kids, or for any reason, contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.

Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.

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personal financial responsibility
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PAY BANKRUPTCY FEES ONLINE? BE LIKE NIKKI HALEY AND DON’T GET CONFUSED

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Introduction

A ruling in a proposed class action against a defunct Orlando Florida attorney firm, claimed a lawyer goes against government law “if he instructs a client to pay his bankruptcy related legal costs making use of a credit card.” That would also include using a credit card, either directly or through a third-party site, to pay bankruptcy fees online with a credit card.

Note to professionals encouraging clients considering bankruptcy: tell them to keep that plastic in their pocketbooks.

United States Court of Appeals for the Eleventh Circuit ruling

In a judgment likely to resonate with bankruptcy and debt settlement legal representatives, the United States Court of Appeals for the Eleventh Circuit ruled a lawyer violates government regulation “if he advises a customer to pay his bankruptcy-related legal charges using a credit card.” This of course would include an instruction to pay bankruptcy fees online.

The opinion released March 30, 2018 reversed a lower court decision and renewed a Florida class action against shut down Kaufman, Englett & Lynd filed by a previous client. The Orlando Sentinel reported the firm dissolved in April 2016 after the suit was filed.

The panel found a lawyer who advised his client to “sustain more debt” by billing his lawful fees on a credit card contravenes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Yes, it is fraud

That individual would certainly be committing fraud, and so would the attorney. This is because they’re making a charge knowing they never ever plan to pay that credit card.

The problem was that Kaufman Englett violated the Bankruptcy Code that does not permit a debt relief firm– consisting of a law practice– to “advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.”

My Canadian view

I would suggest that the outcome in Canada would be as disastrous for both the bankrupt and the licensed insolvency trustee (bankruptcy trustee or trustee). However, that does not mean that a bankruptcy trustee cannot encourage online payments; just not those using a credit card. Before getting into my reasons why, let’s first explore the issue of online payments.

Online payment choices

I think it is important to first understand what the various online payment choices are. The report “Canadian Payment Methods and Trends: 2017” by Michael Tompkins, Research Lead, Research Unit, and Viktoria Galociova, Research Associate, Research Unit, Payments Canada. In their report, they review the various online payments:

  • credit cards;
  • Interac® online debits;
  • online transfers include online e-wallet and electronic P2P transactions initiated through online services and providers, which are either prefunded or linked to deposit accounts at financial institutions (e.g., Interac e-Transfers, PayPal and Tilt); and
  • prepaid app store cards (or virtual cards)

Credit cards are the most used for online payments. But as you can see, there are ways of making online payments using cash.

You can but not by credit card

I submit that you can use an online payment method to pay for Canadian bankruptcy costs, just not by credit card. What this means is that you can transfer cash to your bankruptcy trustee (or consumer proposal administrator) using an online system.

Why not by credit card?

My view is that it would be unlawful to use a credit card for paying a bankruptcy fee in installments or in one payment. The more likely scenario would be paying it all at once just before filing.

My reasons are as follows:

  1. Using a credit card to charge expenses or take cash advances against knowing that you are about to file for bankruptcy and will not repay it is fraud. Fraud of course is illegal. So the insolvent debtor, about to become a bankrupt, will be in trouble. Just like in the USA as cited by the Court that I mentioned at the start of this blog.
  2. Likewise, any bankruptcy trustee who accepts payment by a credit card in the name of and from the insolvent debtor would be in trouble. The same trouble would befall the professional if he or she encouraged the insolvent debtor to take a cash advance against the credit card to pay bankruptcy fee online.

    pay bankruptcy fees online
    pay bankruptcy fees online

Here’s why:

  • It is against the rules of professional conduct of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). The rules need a member to maintain the good reputation of the profession and perform professional services with integrity.
  • The General Rules of the Bankruptcy and Insolvency Act (Canada) (BIA) requires that a bankruptcy trustee maintain the high standards of ethics that are central to the maintenance of public trust. It also requires that trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process.

What are the risks?

The risk for the trustee, of course, is serious – the loss of his or her license to practice. But what are the risks for the insolvent debtor?

For the undischarged bankrupt, in my view, the risks are twofold: (i) criminal; and (ii) civil. The criminal repercussions are obvious. The laying of one or more fraud charges would happen and the result would be a criminal conviction, jail time and a restitution order.

In the civil sense, I focus on the bankruptcy discharge process.

Forget about getting a discharge from bankruptcy

The credit card issuer would certainly oppose the bankrupt’s discharge. In the meantime, the credit card company would get a lifting of the stay of proceedings which protects an undischarged bankrupt from lawsuits, to start litigation to find that at least the debt incurred by the debtor to pay for the Canadian bankruptcy costs was a claim against the debtor for a debt not released by order of discharge. Sections 178(1) (a) and (e) are the most likely section of the BIA that would be relied upon.

So the credit card issuer and the trustee (probably by now the substituted trustee!) must oppose the bankrupt’s discharge. I am certain that the oppositions would be successful. The most likely result would be that the Court would flat-out refuse to hear the bankrupt’s application. The result of this is complex and should be discussed in a separate blog. Suffice to say that the bankrupt will have a very hard time ever getting out of bankruptcy without making full restitution. Even then, I would expect the Court to only grant a discharge upon certain conditions being met.

In other words, it would be a disaster and a mess for both the trustee and the bankrupt. These are my reasons why I feel that to pay bankruptcy fee online using cash is fine, but not by a credit card.

Pay bankruptcy fees online: What about you?

Are you facing financial problems? The Ira Smith Team can develop a restructuring plan for you. Debt problems are stressful and confusing. But with our help, you can be just like Nikki Haley and say “I don’t get confused”!

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to stay alive and trying to support yourself and your family. We understand the pain and stress you are feeling thinking that you may just soon hit the wall.

Our debt settlement plan process can ease this stress. The Ira Smith Team has a great deal of experience in helping people avoid bankruptcy while resolving their debt problems. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put you back on a healthy profitable path, Starting Over, Starting Now.

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PAYDAY LOANS AROUND ME: DO PAYDAY LOANS CAUSE A BANKRUPTCY?

payday loans

Introduction

We’ve been sounding the alarm bells about payday loans long and loud, but it seems that many Canadians are still unaware of their dangers. According to the Financial Consumer Agency of Canada (FCAC), many loan users are unaware of the high costs of these loans compared to their alternatives. This includes all such loans around me and you. This just goes to confirm what we already knew – there’s a great need to continue to raise consumer awareness about the costs of, and alternatives to, payday loans.

What the FCAC survey shows

The FCAC recently conducted a survey on payday loans and the results were quite insightful and at times quite surprising:

  • They are an expensive way for consumers to borrow money. The annual percentage rate (APR) is typically 546%.
  • Fewer than 43% of respondents understood that this kind of loan is more expensive than available alternatives. This suggests that many do not have enough knowledge to consistently make the borrowing decisions that best serve their financial well-being.
  • The use of these loans has more than doubled in Canada recently to 4% of Canadian households.
  • 45% of respondents reported typically using such loans for unexpected, necessary expenses.
  • 41% used them for expected, necessary expenses.
  • Users are primarily those with low-to-moderate incomes (more than half lived in households with annual incomes under $55,000).
  • 20% of respondents who used this kind of loans reported household incomes exceeding $80,000.
  • 7% of respondents who used them reported household incomes over $120,000.
  • Many of the users surveyed indicated that they rarely sought financial advice even when they felt it was necessary.

Why not go to a bank or credit union?

Why didn’t respondents access credit from a bank or credit union?

  • 90% said payday lending was the fastest or most convenient option.
  • 74% said payday lending was the best option available to them.
  • 55% said payday lending offered the best customer service.
  • 27% said a bank or credit union would not lend them money.
  • 15% said they did not have time to get a loan from a bank or credit union.
  • 13% said they did not want to get money from a bank or credit union.

Can payday loans lead to bankruptcy?

Payday loans are a huge problem. In fact, the Canadian Payday Loan Association reports that nearly 2 million Canadians use payday loans each year. And many borrowers often find it very difficult to repay the full loan amount with the interest and fees. Now they’re trapped. They take out another payday loan to pay off the first payday loan and then take out another and another. It’s not difficult to imagine payday loans causing bankruptcy.

Are you caught in a payday loan trap?

If you’re caught in the payday loan trap, borrowing more money is not the answer – professional help is. Seek the advice of a professional trustee. Contact Ira Smith Trustee & Receiver Inc. today. You need answers, options and realistic plan for recovery and you need help now.

We’ll evaluate your situation and help you to arrive at the best possible solution for your problems, whether that solution is a bankruptcy alternative like credit counselling, debt consolidation or a consumer proposal or bankruptcy. Starting Over, Starting Now we can help you become debt-free.

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COURT APPOINTED ESTATE TRUSTEE FROM OUR CASE FILES

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Court appointed estate trustee: Introduction

In last week’s vlog, CLAIM BANKRUPTCY IN ONTARIO CASE STUDY: SHE REALLY WANTED TO BUT WE STOPPED HER AND SOLVED HER PROBLEMS, our video provided a case study about a doctor we helped solve her pain and get her life back on track. This week, I want to tell you about another one of our cases where we acted as the court appointed estate trustee. It was a bit unusual, however, it did call on me to use my skill sets as a licensed insolvency trustee.

It seems straightforward so what do you need us for?

An estates lawyer we know contacted us to help him solve a problem for his client. His client was a single man. His mother, whose husband predeceased her, passed away. Her only assets were two pieces of real estate; one a commercial property and the other the family home. The fully leased commercial property was producing income.

On the surface, it appeared to be a very simple situation. Two pieces of real estate and the only beneficiaries were the single man and his single sister. There were no spouses or grandchildren involved. So I asked our lawyer friend the obvious question: “It seems straightforward so what do you need us for?”.

The facts

The lawyer told me that:

  1. his client and his sister cannot agree on anything;
  2. the sister’s lawyer is making unreasonable requests;
  3. the sister is a hoarder, which is a mental health issue;
  4. nobody lives in the home and the utilities turned off services a long time ago; and
  5. the sister has hoarded so much personal property in the home you cannot get past the front door!

The lawyer went on to say that the situation cries out for an expert to intervene to get things done so that the properties can be sold and the funds distributed. Neither sibling is capable of agreeing with the other and then doing what needs to be done. The receivership fees to solve their problems would be less than the legal fees spent fighting and not solving anything.

Please don’t call me the receiver

After a thorough discussion with the lawyer, I said it sounds like what you need is a for the Court to appoint a receiver. The lawyer responded that he felt he could get the other side to agree to the appointment of a custodian, but not to any proceedings called anything remotely close to a receiver or licensed insolvency trustee.

I said to my lawyer friend, that problem is easy to solve. How about we call ourselves either an estate trustee or asset manager? He loved the asset manager title.

The agreement

We took part in a conference call with our lawyer friend and the lawyer for the sister. Everyone discussed all the issues and we pointed out our firm’s wealth of experience in acting as a receiver in complex real estate matters.

Each lawyer agreed that assuming the finer points could be worked out, the brother’s lawyer would go ahead with a motion, on consent, to have our Firm act as the court appointed asset manager.

We provided our lawyer friend with a copy of the Ontario Superior Court of Justice Commercial List model receivership order. He then amended it to fit the particulars of this situation and to do a global change from receiver to the title asset manager.

The appointment

Of course, the finer points could not be agreed to. Rather than the matter proceeding on a consent basis, the motion was argued. After hearing all arguments and considering all the evidence, the Court appointed our firm as the asset manager. The commercial property did not have any problems associated with it, so other than to tell you that the property sold, the rest of this story will concentrate on the residence.

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Selling the house was the easiest part

The house was not just a house. It was the entire reason for the sister’s existence. Given the mental health issues, we quickly realized that from her perspective, we were about to take away her only joy in life; being able to enter the home and see her loot. It did not matter to her that nobody could enjoy the home and that it was mold infested. This was her baby and we were about to take her baby away from her.

Given these issues, our role was as much like that of a guardian for adults as much as it was about the property in Ontario.

We first obtained quotes for the removal of all of her personal property from the home. I realized that removing the property from the house would only give us another problem as hoarders are not willing to let go of anything. We had to devise a method where the sister would choose what was garbage and what would go to storage. However, even the storage could not go on forever.

The removal plan

We presented our plan to both lawyers. All the items would be removed in front of the sister. If the brother wished to attend he could, but it was not a need. We would also prepay from the proceeds of the sale of the home for six months of storage. That way we capped the brother’s liability for expenses. As items left the house, the sister had to say “garbage” or “storage”. Both sides agreed.

The removal began. What should have taken two weeks took six! The reason was due to mental health issues getting in the way of progress. We understood this and just had to work with it. Eventually, we completed the removal of personal property. We could finally see the entire inside of the house.

We entered with a firm we use to investigate and if necessary do environmental damage remediation work; Hazmat suits and all! Surprisingly, although there was mold, we obtained a verbal report that for our purposes, the home was safe for our purposes to enter for brief periods of time for a realtor and potential purchaser to view. Therefore, we did not need to do any remediation work.

Appraise and sell

The rest of the case could now go ahead. We obtained two appraisals of the house. The house was on a great lot in Toronto in a hot housing market. We listed the house for sale. Due to the house’s condition, it would attract a developer/renovator type of buyer.

After one week on the market, we received four offers to purchase. We rejected all of them and asked for everyone’s best and final offer. The final offer we accepted, subject to Court approval, was above market value. Working with our independent legal counsel, we put our motion material together, obtained the consent of both sides and then obtained Court approval for the sale.

We completed the sale, developed our distribution plan, obtained Court approval for that, distributed the funds and got our discharge.

Court appointed estate trustee: Do you have a financial problem that needs someone else to help you solve?

I present this case study to show how, as a licensed insolvency trustee in the GTA, we can use our skills set in a way that may not seem obvious at first. We look at the entire story of each person or company that comes to us for help.

We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we dealt with this problem and devised an alternate plan for the siblings, allowed them to monetize the assets they were incapable of doing on their own and letting them get on with their lives.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you back on the road to a healthy stress-free life and recover from the pain points in your life.

court appointed estate trustee
court appointed estate trustee
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