Tag: licensed insolvency trustee

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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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CLAIM BANKRUPTCY IN ONTARIO CASE STUDY: SHE REALLY WANTED TO BUT WE STOPPED HER AND SOLVED HER PROBLEMS

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Claim bankruptcy in Ontario: Case study introduction

For today, and the next few weeks, I want to give you some interesting case studies direct from our files. I will not mention any real names of course. Hopefully from these case studies, you will see that we do a lot more than just allow people or companies to claim bankruptcy in Ontario.

Claim bankruptcy in Ontario: A variety of problems

Today’s case study deals with our client who is a specialist medical doctor and surgeon. We will call her Dr. X. She had an ongoing successful career and then opened up a specialty high-end clinic to offer services not paid for by OHIP, the provincial medical plan. Unfortunately, Dr. X did not get the best advice from her professional advisers when she established the new business venture.

She set up her clinic in a separate building that she purchased. Dr. X then had it renovated extensively to meet the business’ needs, leased or purchased equipment and hired staff.

This new venture was financed entirely by debt:

  • personal debt such as mortgage financing against the matrimonial home;

  • equipment loans or leases in her personal name; and

  • Equipment and mortgage debt in the new business venture corporation for which Dr. X personally guaranteed it.

Therefore one way or the other, her personal responsibility was for 100% of the debt to get the business started. Her husband was responsible jointly with her for the mortgage raised against the matrimonial home.

The cash flow of the business was insufficient to pay the operating costs and debt financing. She had to keep borrowing money personally to keep the new business alive. The stress this caused affected her previously stellar activities as a surgeon and hurt her marriage. By the time Dr. X was came to us, she and her husband were separated and divorce proceedings were underway.

Claim bankruptcy in Ontario: And then it got even worse

To make matters worse, she could not attempt to liquidate assets to pay down debt and ease the burden. Like most equipment, the clinic’s equipment was not worth more than its original cost. There was no excess equipment either.

The building could not be sold and leased back for a very bad reason. There was a large environmental problem associated with the building which was not discovered through due diligence prior to purchasing it. The issue arose when she tried to refinance.

The potential lender performed a Phase 1 Environmental Study, which indicated that a earlier use in the building produced contaminants which were buried in the ground. The contaminants were leaching into the neighbours’ respective properties. So now there was further personal liability exposure as the sole Director of the company that owned the real estate!

Claim bankruptcy in Ontario: Filing bankruptcy in Canada would give Dr. X more headaches

Dr. X came to us convinced that she had to go bankrupt. The stress of her failing business was taking a huge toll on her normal duties as a surgeon and her marriage was over. She had previously seen a different licensed insolvency trustee and was convinced from that meeting that bankruptcy was her only answer.

Dr. X considered herself a total failure, in spite of she was still a sought after as a brilliant medical doctor and surgeon. We considered her assets and liabilities, income and expenses and her overall situation.

Claim bankruptcy in Ontario: More complications

To further complicate matters:

  1. The matrimonial home was listed at the amount required to clear all mortgages which was well above market value.

  2. Once Dr. X inevitably stopped making the first mortgage payments on the matrimonial home, the Bank holding the mortgage would begin power of sale proceedings. The first mortgagee would probably suffer a shortfall on the sale and Dr. X and her estranged spouse would be responsible for the shortfall on the first mortgage and the entire balance of the second mortgage.

  3. Dr. X had a life insurance policy with a cash surrender value (“CSV”). The CSV was not exempt from seizure by a bankruptcy trustee because the beneficiary was her Estate. In a bankruptcy, the CSV would go to the Trustee for the benefit of her creditors.

  4. Dr. X did not know if she could get replacement insurance coverage at all and if so, at a reasonable cost.

  5. There were many creditors who currently had a contingent claim against Dr. X with a very high dollar volume. These claims would ultimately be crystallized. In a bankruptcy, we anticipated that a lot of angry ordinary unsecured creditors, many of whom were sophisticated, such as banks and equipment lenders/lessors, would oppose her discharge from bankruptcy.

  6. In a bankruptcy, Dr. X would have to pay about $82,000 in surplus income payments to us as her bankruptcy trustee over a 21 month period for a monthly payment of $3,905. Dr. X could not afford to pay that much each month and keep her normal medical practice afloat.

Bankruptcy was not a good answer for Dr. X. Notwithstanding she earned a high income, the irony was that she could not afford to claim bankruptcy in Ontario!

Claim bankruptcy in Ontario: Our assessment

We had to deal with two problems; one financial and one emotional. Dr. X was an emotional wreck as a result of the failed business venture with all of its problems. We actually had to deal with that first. It is normal for a licensed insolvency trustee to take a holistic approach. The debtor facing financial problems always needs two outcomes: (i) a solution that will allow them to shed their debts and get piece of mind; and (ii) become rehabilitated.

We advised Dr. X that a personal bankruptcy was not the answer for her. We told her that she first had to shut down her clinic. She had to deal with the employees to make sure that they were paid up to the last date work their normal wages and vacation pay. They also needed to get their Record of Employment and T4 Statements as quickly as possible. Unfortunately there was no money for pay in lieu of notice.

Claim bankruptcy in Ontario: How to deal with the failed business venture

We then advised Dr. X that she should not bankrupt the corporation carrying on this new business. Rather, she should call up the first mortgagee and tell that she is abandoning the business premises and is sending the keys over. Then call up the equipment lessors and the lender that did some equipment financing to tell them the business has shut down and they should contact the first mortgagee to gain access to retrieve their property.

Next we advised Dr. X to safeguard the business books and records, so that she could have her accountant file final tax returns. She would also have the records for when Canada Revenue Agency wished to do an audit on the business activities.

The final piece of advice for Dr. X with respect to her new business venture was this. After performing the above steps, walk away. This would end the stress of operating a failing business.

Claim bankruptcy in Ontario: Our assessment and his personal financial fix

All of the contingent debts from the failed business venture had not yet crystallized. They were still contingent. We worked out a cash flow plan with Dr. X that she could keep current with, now that she had abandoned and stopped funding the debt incurred because of the failed business. She also stopped paying the first mortgage on the matrimonial home as the value of the home was now less than the total of the mortgage debt against it.. We worked with Dr. X on a plan to avoid bankruptcy, by filing a formal restructuring proposal under the Bankruptcy and Insolvency Act (Canada) (“BIA”).

Claim bankruptcy in Ontario: The advantages of our strategy

The advantages of this strategy, if the restructuring proposal could be fully performed, are:

  • Dr. X would not give up her assets to a bankruptcy trustee;

  • She would not lose her life insurance coverage or CSV;

  • All of her debts could be eliminated through the restructuring proposal;

  • Although the total of her restructuring proposal payments had to be more than her creditors would get in her bankruptcy, we could term those payments out to a maximum of 5 years;

  • Her estimated monthly payment would be less than the monthly surplus income payment in a bankruptcy; and

  • Dr. X would avoid bankruptcy and an opposed discharge process entirely.

    ISI 4
    claim bankruptcy in ontario

Claim bankruptcy in Ontario: The result

Dr. X followed our advice. Her restructuring proposal was accepted by her creditors qualified to vote at the meeting of creditors held 21 days after the filing of the restructuring proposal. The contingent claims had not yet crystallized. Although eventually those creditors were allowed to file their proper respective claims and take part in the dividends paid out to the unsecured creditors, we made it successfully through the voting process. The proposal was then approved by the Court.

Dr. X not only maintained her regular monthly proposal payments to us, she was able to pay off the proposal early. The reason for this was that now that she had a clear head and no longer felt she was a failure, she could focus on her medical practice and surgery, which once again flourished. Her income and savings rose. These are some of the benefits that financial rehabilitation brings. Dr. X also avoided going bankrupt.

Claim bankruptcy in Ontario: Does Dr. X’s financial problems sound familiar to you?

I present this case study to show how, as a licensed insolvency trustee in the GTA, 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 stopped Dr. X from going bankrupt and devised an alternate plan for her, allowed her to solve her financial problems and get her life back.

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 Team today.

Call us now for a free consultation. We will get you back on the road to a healthy stress free life and your recovery will be as pain-free as possible. We may be able to stop you to claim bankruptcy in Ontario!

claim bankruptcy in ontario 0
claim bankruptcy in ontario

 

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CREDIT CARD DEBT TRAP: OUR REVOLUTIONARY 4 STEP PLAN TO START BECOMING CREDIT CARD DEBT FREE IMMEDIATELY

Credit card debt trap: Introduction

Many people I help are caught in a credit card debt trap. It’s always good to repay your credit card debt, and now could be a better time compared to ever before to do so.

I have previously written about the Canadian household debt crisis as Canadians take on more debt and average canadian household debt levels increase. Rates of interest are beginning to increase so combining the two creates a mix that can place people in a bind.

Credit card debt trap: A storm is brewing

In December, Statistics Canada reported that the Canadian household debt ratio struck a brand-new high. The ratio of household credit-market debt to disposable income (the key gauge for measuring Canadians’ debt loads) rose to 171.1%.

“Everyone has this sense that there is a storm brewing,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling in the U.S.

“All indications that we’ve seen are that people are carrying higher balances from month-to-month and more are behind on their monthly payments. That’s not a healthy mix.”

Climbing debt levels could suggest people really feel better about the economy. Our concern is that people could be over-extending themselves. Both the US Federal Reserve and the Bank of Canada expect to raise rates later this year, so the cost of lugging credit card debt is most likely to increase.

What can you do try becoming credit card debt-free? Our revolutionary 4 step plan can help get you there.

Step 1. Credit card debt trap: Take control

It isn’t easy to take a difficult look at your financial position, but it is a necessary one. Analyze your financial obligations, and the rates of interest connected to each debt, as well as minimal repayments. Track your costs to get a feeling of what your credit card charges get you every month.

This is the first step in understanding your expenses and cutting back on the ones that are not necessary. To understand where you are going, you should understand where you have actually been.

Step 2. Credit card debt trap: Minimize rates

The typical interest rate on a bank card is about 19 percent. That’s quite high, so you might wish to think about transferring your credit card debt to a card with a reduced or zero-interest first offer rate to help pay it off much faster.

A word of caution: you’ll most likely need to pay a transfer cost in doing so. Also, you will need to pay off the debt prior to that promo rate finishes. Otherwise, the balance at that time is charged a higher interest rate, probably the same or higher than the card you transferred the debt from.

Although I don’t hold out a lot of hope, you can ask your credit card firms if they will decrease your interest rate.

credit card debt trap
credit card debt trap

Step 3. Credit card debt trap: Plan choice

If you simply cannot earn enough to fund your repayments, think about a non-profit credit counselling service. Do not go to any of the debt settlement companies that advertise regularly on television or social media.

All they do is charge you a fee to take down basic information, and then send you to a licensed insolvency trustee. Going first to a licensed insolvency trustee will do more good for you in a first free consultation than the debt settlement company will.

There are 2 typical debt settlement approaches– avalanche as well as a snowball. The avalanche method of getting out of the credit card debt trap works by placing all your money towards your highest possible rate of interest debt. As soon as that’s settled, you begin repaying the following most costly debt till it’s all gone.

In some cases, the snowball approach offers much more inspiration. With this technique, you repay the tiniest debt initially, to increase your spirits. You make use of that energy to pay off what is not the smallest outstanding debt and so on. You are picking up steam like a snowball rolling downhill.

It does not matter which method you use. The important thing is that you start now and stick to it.

Step 4. Credit card debt trap: Adhere to it

Remember your single emphasis ought to be lowering debt, so do not plan any kind of elegant getaways or huge acquisitions in the meantime. You could backslide or strike some roadway bumps yet do not allow that to sap your inspiration.

Now for the tough part. When possible, save some money to aid with unforeseen expenditures that you would normally place on your credit card. This will lessen the amount you would have to charge by paying with cash.

Credit card debt trap: A lengthy and painful trip to get out of it

It’s an incredibly lengthy and painful trip to get out of the credit card debt trap. It also can be a very lonely one. People don’t get into the credit card debt trap overnight, so you can’t get out of it without some hard work.

The Ira Smith Team has helped many people stay the course and be stimulated by their successes. We have helped many people avoid bankruptcy.

Contact the Ira Smith Team today. Your first consultation is free. We will be there with you every step of the way to help you out of the credit card debt trap so you can begin living credit card debt-free. If it isn’t credit card debt you are worried about, but rather other kinds of debt trap you may be caught in, we can help free you from those too.

To deal with debt you need the help of a debt professional – a trustee. Dealing with debt is not something that you can put off any longer. Start the New Year off right by calling Ira Smith Trustee & Receiver Inc. today and make an appointment for a free, no-obligation consultation.

We can give you back peace of mind and put you on the road to debt free living Starting Over, Starting Now.

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credit card debt trap
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ONTARIO BANKRUPTCY DISCHARGE CERTIFICATE: CANADIAN BANKRUPTCY LAW

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Ontario bankruptcy discharge certificate: Introduction

I have written before on the more practical aspects of Ontario bankruptcy discharge certificate issues and process within Canadian bankruptcy and insolvency law. The most recent blogs are:

  1. BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION – September 13, 2017
  2. GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY? – January 31, 2018

I recently reviewed the Ontario Court of Appeal decision in Cole v. RBC Dominion Securities Inc., 2017 ONCA 1009. This case is very interesting as it highlights an issue that we often don’t talk enough about when advising a person on what they might expect at their hearing under Canadian bankruptcy and insolvency law.

The facts

Henry Cole, age 52, had a Bankruptcy Order made against him in 2011 upon motion by Royal Bank of Canada (“RBC”), after he misappropriated $5 million from clients while working as their investment advisor. While in bankruptcy, he had a net monthly income of $14,600, resulting in surplus monthly income of $12,500. He nevertheless failed to make any surplus income payments.

To understand what surplus income in a bankruptcy is, see my June 1, 2016 vlog titled WHY SURPLUS INCOME IS SO POPULAR UNTIL YOU ARE FORCED INTO BANKRUPTCY.

The Ontario Court of Appeal (“ONCA”) upheld the two lower Court decisions

As is the case in bankruptcy matters, Mr. Cole’s bankruptcy discharge hearing came before the Master in Bankruptcy Court who also sits as the registrar in bankruptcy. Mr. Cole appealed the Master’s decision (discussed below) unsuccessfully to a Judge of the Bankruptcy Court. The Judge dismissed Mr. Cole’s appeal, thereby upholding the Master’s decision. As indicated above, the ONCA agreed with the Judge (and the Master) in dismissing Mr. Cole’s appeal.

Now for the interesting stuff!

Now for the interesting stuff. The Master determined that there was enough evidence to show that Mr. Cole, as a bankrupt, committed various bankruptcy offenses. The Master determined facts for which discharge may be refused, suspended or granted conditionally, under Section 173(1) of the Canadian bankruptcy and insolvency law called the Bankruptcy and Insolvency Act (Canada) (“BIA”).

The Master determined that Mr. Cole had failed to provide information to enable the Licensed Insolvency Trustee to calculate surplus income. Mr. Cole also conceded to the following facts:

  1. his assets upon bankruptcy were not of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities. Mr. Cole gave no evidence why he should not be held responsible;
  2. he failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; and
  3. he brought on, or contributed to, his bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of his business affairs

With these findings, the Master, under Section 172(2) of the BIA, had to not grant an absolute discharge and to:

  1. refuse the discharge of a bankrupt;
  2. suspend the discharge for such period as the court thinks proper; or
  3. make the bankrupt, as a condition of his discharge, to do such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.

I must point out that the options available to the Master are not mutually exclusive. So, just like in Mr. Cole’s case, you could have the Court come up with a mixture of a suspension and a condition to pay moneys.

What the Master decided

The Master made several decisions. First, the Master dealt with the surplus income issue. The Master ordered Mr. Cole to pay $284,346 to the Trustee as surplus income, payable at a rate of $5,000 per month.

The Master also considered Mr. Cole’s criminal behaviour and that he had real income while not working any longer as an investment advisor. Given the amount of Mr. Cole’s liabilities, and for the integrity of the Canadian bankruptcy system, the Master ordered as further conditions that:

  1. Mr. Cole pay an extra $5,000 per month to the Trustee for a further six years for a total more payment of $360,000; and that
  2. his discharge from bankruptcy be suspended for two years.

The dismissed appeals

Mr. Cole argued before first the Judge, and then the ONCA, primarily that the Master’s treatment of surplus and other income was in error. He also argued that the Judge’s finding in dismissing his appeal was an error. The ONCA disagreed and dismissed his appeal.

ontario bankruptcy

So what is the lesson to be learned?

It is important for the Trustee, when sitting down with the person contemplating an insolvency proceeding, to understand all the facts. By properly understanding all the facts, we can provide proper professional advice and guidance.

Someone who had a facts situation like Mr. Cole, we would have strongly advised him or her to avoid bankruptcy and to contemplate performing a Division I Proposal to compromise his debts. The reasons we would have advised this are:

  1. the debtor has real income to successfully do a Proposal;
  2. Mr. Cole never would have qualified for an absolute discharge from bankruptcy given his facts situation and any discharge conditions would be onerous;
  3. avoiding the ongoing calculation of surplus income up to the time of his bankruptcy discharge hearing; and
  4. with the support of his major creditors, it is possible that the Proposal amount could have been somewhat less than $644,000 (subject to knowing the value of his assets at the date of bankruptcy).

he person needs our advice in plain English before making any decisions

We also would have advised the debtor the type of the rough ride they were in for if they chose to go ahead with the bankruptcy option. We would have explained in detail how we believed the Canadian bankruptcy and insolvency law system would treat him, so at least there would be no surprises during the bankruptcy administration.

Many times people we speak with do not like to hear the truth, and begin “Trustee shopping” until they find a Trustee that does not tell them all the bad news up front. People like this believe that if they aren’t told it, it can’t happen. This is a mistake. We believe everyone deserves to know the truth about their situation, to help them make the best decision possible.

In Mr. Cole’s case, not only did he find out the hard truth from the Court, he then spent money on his lawyers appealing the Master’s and Judge’s decisions. That obviously was extra money spent with no benefit received.

FULL DISCLOSURE: Our firm has never met with Mr. Cole and was not considered to be his Trustee.

What to do if you have too much debt

Declaring personal bаnkruрtсу in Canada is a big deal. So is getting your Ontario bankruptcy discharge certificate. While it can be a way out for the honest but unfortunate debtor who is deep in debt and looking for a new start, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?

Gambling debt bankruptcy: Introduction

Since there are various provincial run casinos, horse racing and lotteries, we are often asked if you can have a gambling debt bankruptcy. More importantly, what clients really want to know is, can gambling debt be discharged in bankruptcy?

Gambling debt bankruptcy: What is gambling debt in bankruptcy?

We first must go back to basics. There are two types of gambling debts:

  1. Debts for loans taken out, either direct loans or through credit cards; and
  2. Loans directly from a casino with “markers”.

In the first case, the loans or credit card debts could be direct – using the cash advance to gamble with, or indirect – used to make purchases for the necessities of life because the person gambles away their employment or other income. The use of markers at a casino is obviously a direct gambling debt.

In the context of this discussion, it does not matter if the gambling debts are direct or indirect. As discussed in this blog, the gambling debts are legally enforceable. As such, gambling debts in bankruptcy (or a proposal) are claims provable under the BIA.

Gambling debt bankruptcy: Gambling debt and bankruptcy

You can declare bankruptcy on a gambling debt. So is it really as simple as declaring bankruptcy? The answer is no. There are various issues that you must first consider with the licensed insolvency trustee during your first free consultation. The major issues are:

  1. Your assets
  2. What is your annual income
  3. Have you ever been bankrupt before
  4. The nature and amount of your other debts because you lost cash in gambling
  5. Have you not been paying your taxes because of gambling losses and Canada Revenue Agency is also a major creditor
  6. Getting gambling addiction advice
  7. Getting a discharge from bankruptcy
  8. Is there another option available to you in order for you to avoid bankruptcy

Gambling debt bankruptcy: There are many issues in addition to just getting gambling addiction debt help

If you are insolvent and you choose the bankruptcy route, you will face the following issues:

  1. If you have non-exempt assets or equity in non-exempt assets, your interest in those assets will be taken over by your trustee. For example, your interest in the matrimonial home would come to the trustee and now your spouse, or other friend or relative, would have to purchase your interest back to the cash could go to your creditors. Go explain that to your spouse!
  2. Earning more than essentially a poverty line amount will cause you to have to pay surplus income to the trustee for the benefit of your creditors. If you are a first time bankrupt, with surplus income, you will have to pay the surplus income for 21 months. You can’t seek a discharge from bankruptcy until then.
  3. If you have been bankrupt before, the 21 months becomes 36 months.
  4. Once you show that your debts are due to gambling losses, you can expect your lenders and credit card companies to oppose your discharge from bankruptcy.

    gambling debt bankruptcy
    gambling debt bankruptcy

Gambling debt bankruptcy: Including your discharge from bankruptcy and your gambling addiction

  1. If you owe a large amount of unpaid income tax to Canada Revenue Agency, you can expect them to vigorously oppose your discharge from bankruptcy.
  2. Your trustee must oppose your discharge from bankruptcy when your bankruptcy is a result of gambling debt. The reason is under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”), there are various facts, if proven, it is impossible to get an absolute discharge from bankruptcy.
  3. Section 172 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3(“BIA”) allows the Court to make an order of discharge which is either absolute, conditional or suspended. Where a fact under s. 173 of the BIA is proven, an absolute discharge is precluded.
  4. Gambling which brings on or contributes to bankruptcy is a recognized s. 173 fact. (BIA, s. 173(e)). That is why your trustee would have to oppose your discharge from bankruptcy.
  5. In reaching any decision on your discharge, the Court and the trustee need to maintain the integrity of the Canadian insolvency system. You can assume that your discharge will at least be conditional upon you paying a certain sum of money to your trustee for the benefit of your creditors. A bankruptcy discharge suspension for a certain time after you fulfill the payment condition is also possible. If your behaviour was especially egregious, your discharge from bankruptcy may be outright refused.
  6. The bankruptcy discharge hearing is a full Court hearing. You will be well advised to retain experienced insolvency legal counsel to come with you to Court. This is an expense you may not even be able to afford.
  7. If you want to have a chance in obtaining a discharge from bankruptcy, you will also have to show that you are taking concrete steps to deal with your gambling addiction by getting gambling addiction advice. That will include proving in Court that you enrolled, attended and completed at least one recognized rehabilitation program for gambling addicts.

Gambling debt bankruptcy: Going bankrupt doesn’t seem to be an easy fix

You are right about that. As if the above 11 issues weren’t enough, depending on your specific circumstances, there could be more. Therefore, I always recommend to debtors that if there is hope for the person to be able to successfully restructure through either a consumer proposal or Division I BIA Proposal, that must be seriously looked at and considered preferable to going bankrupt.

Gambling debt bankruptcy: What must you do if you have gambling debts and are considering personal bankruptcy?

Do you have unmanageable debts from gambling, other addictions or for any other reason? Be proactive; it’s time to rehabilitate yourself and deal with your debt while you still have alternatives.

The Ira Smith Team has years of experience assisting Canadians like you, getting you back on track to debt free living. Call Ira Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.

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HANNAH BELL BEATS PEI NDP LEADER: WE EXPOSE HER SECRET TACTIC TO BEAT YOUR DEBT PROBLEMS

Hannah Bell beats PEI NDP Leader: Introduction

Hannah Bell beats PEI NDP leader was certainly a great headline. However, the one we want to focus on is “Hannah Bell Beats Her Debt Problems”. The purpose of this Brandon’s blog is to tell the story of the financial woes of Hannah Bell. She is a Prince Edward Island woman who recently won a by-election in Prince Edward Island. Hannah Bell, PEI Charlottetown-Parkdale, is the 2nd Green Party MLA sworn into the legislature. Ms. Bell is a very accomplished woman. Here is a link to the Hannah Bell PEI bio.

Hannah Bell beats PEI NDP Leader: Hannah’s story is like so many others

Hannah’s story is like so many others who have filed for either bankruptcy or a consumer proposal, the best bankruptcy alternative. It is also like many who have consulted and filed with our firm; life got in the way. The only difference is that none of our clients hold public office like Hannah Bell PEI green party member Charlottetown-Parkdale.

Hannah Bell beats PEI NDP Leader: Hannah’s tax problem

A Federal memorial submitted versus her, the Green Party candidate that won the District 11 Charlottetown-Parkdale by-election in a surprise victory over the Liberals and Progressive Conservatives. The judgment, submitted in September 2016, reveals she owes $26,252 to the federal government in tax obligations.

She was reassessed a $26,000 tax obligation after the Canada Revenue Agency (CRA) carried out a review of her tax returns going back many years. She states she had gotten some bad tax recommendations when relocating her government pension plan into a private plan after leaving a federal government position. The outcome was this costly tax obligation.

Be proactive and proud like Hannah Bell

She says she is not embarrassed by this tale of her financial woes. She states that she has worked very hard through some difficult times to provide for herself and her child as a single mother. Her debt was such when– after a previous costly custody fight and living life as a single mom– that she determined the most effective means to manage this issue was to file a consumer proposal through a Licensed Insolvency Trustee.

Ms. Bell states it’s unfortunate her economic problems had to come to light as part of the other candidates’ political agenda. “Most of us don’t have emergency funds that go into the tens of thousands of dollars,” Bell said.

Ms. Bell is somewhat philosophical about her journey:

“It puts me a bit closer to everybody’s regular story, which is – I can tell you what it feels like to run out of money and wonder what you’re going to do and that you have to make really good decisions. So for that, there is no shame in this.”

She is not alone

Ms. Bell is by far not alone. In previous blogs, we have shown that even the rich and famous have run into financial problems and declared bankruptcy.

Family and Human Services Minister Tina Mundy’s individual economic debts ended up being front-page fodder in 2015. Premier Wade MacLauchlan had actually picked her for cabinet then, and one day after being sworn in, approved her resignation after it concerned him that Ms. Mundy had submitted a consumer proposal.

The financial woes of Hannah Bell could happen to anyone. From our experience, we agree with Ms. Bell’s assessment that her journey puts her a bit closer to many people’s regular story.

What to do if you have too much debt

This story shows that anything is possible. Against all odds, Hannah Bell won the election and her debt problems. With our help, you can beat your debt problems too.

Have you been reassessed by CRA and don’t have the money to pay them in a reasonable period? Do you have unmanageable debts from any other reason? Be proactive, just like Hannah Bell and Tina Mundy. It’s time to repair the cycle of debt while you still have alternatives.

The Ira Smith Team has years of experience assisting Canadians like you, getting you back on track to debt free living. Call Ira Smith Trustee & Receiver Inc. today so that we can help you regain control of your life and be stress-free, Starting Over, Starting Now.

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CAN YOU FILE PERSONAL AND CORPORATE BANKRUPTCY? SMALL BUSINESS OPTIONS

Can you file personal and corporate bankruptcy: Introduction

Can you file personal and corporate bankruptcy is a question all small business owners ask us when they come to our office for a free consultation. We discuss local business bankruptcy with entrepreneurs in our office. Their personal and business lives are intertwined. There’s very little distinction between the individual their small business.

This is especially true if their business in unincorporated and is being operated as a proprietorship. Our role is to first understand them as a person and as a business separately. This way we can give the best possible advice. If the business is a proprietorship, then we are only talking personal bankruptcy, or alternatives to avoid bankruptcy, such as a consumer proposal or restructuring proposal.

If their business legal form is that of a corporation, then we look at both the corporate and personal issues separately. The reason for this is because in the eyes of the law, the corporation and the individual are separate people. Many times it is not necessary for both the corporation and the individual to each file an insolvency process. Maybe only one has to.

Separating your business and personal assets and liabilities is a great reason for incorporating your business. When discussing bankrupting an incorporated company, we also need to consider if there are any Director liabilities. We must also consider the owner’s personal situation. This is so we can make sure they do not do themselves more personal harm than good. We also first look to see if there is a way to restructure and save the corporation.

Can you file personal and corporate bankruptcy: What is bankruptcy

Bankruptcy is a lawful method for the honest but unfortunate company or person to get a remedy from the burden of the financial debts that cannot be repaid. When an assignment in bankruptcy is submitted a “stay of proceedings” is invoked.

What the stay of proceedings means

The stay of proceedings results in stopping creditors from beginning or continuing with litigation against the company or person. The stay of proceedings also stops an unsecured creditor who has obtained a judgement. It stops them from garnishing funds from a bank account or part of the person’s wages.

For unsecured creditors, the stay of proceedings also calls a timeout to make sure that one unsecured creditor does not get a benefit over others in regards to the settlement of financial obligations. Keep in mind that the bankruptcy process could also be started by one or more unsecured creditors. They must be owed at least $1,000 in total.

can you file personal and corporate bankruptcy

Can creditors push you into bankruptcy?

The unsecured creditor(s) could file a motion with the Court requesting that a Bankruptcy Order be issued against the company or person. The method of bankrupting a corporation in Canada is the same as that of a person. In addition to being able to prove that the company or person owes this unsecured creditor or group at least $1,000, they also need to prove that at least one act of bankruptcy has been committed in the 6 months prior to the filing of the motion.

The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) identifies the various acts of bankruptcy. The most common one is “ceases to meet his liabilities generally as they become due”.

Secured creditors are generally not impacted by bankruptcy. They can realize upon the assets of the company or person covered by the security. In return for the original loan, the lender required that the borrower put up the security as a condition of the loan. The reason for this was so that if insolvency happens, the lender could sell the assets to try to repay the loan, interest and costs.

The secured creditor only really takes part in the bankruptcy process if after they have sold all the assets covered by their security, they are still owed money. The balance they are still owed is an unsecured debt.

Personal bankruptcy

If an individual’s business is a single proprietorship or a partnership, but not a corporation, legally, the person or people are also the business. So when they deal with the possibility of bankruptcy, all their assets are included, subject to provincial exemptions. Simply put, the assets of the business are not held different from their individual assets, so a small business bankruptcy of this kind is personal bankruptcy.

Where does Canada Revenue Agency fit in?

There are generally 3 types of claims that Canada Revenue Agency (CRA) has against a business. It does not matter if the business is incorporated or is a sole proprietorship.

The 3 kinds of CRA claims generally are:

  1. Unremitted source deductions from employee payroll
  2. Net HST owing
  3. Unpaid income tax from profitable years

Both the HST liability and income tax, in a bankruptcy, is an unsecured claim. However, the HST liability is also a personal claim against the Director(s) of a corporation. Unremitted source deductions are both a deemed trust claim against the bankrupt’s assets and in the case of a corporation, a personal claim against the Director(s) of the company.

When we do our first consultation with a business owner, when the business is run in a corporation, whenever unremitted source deductions or HST is involved, this always leads to a talk about the person’s situation in the event CRA would make a claim against the Director.

Some bankruptcy statistics

According to the Office of the Superintendent of Bankruptcy Canada, for the 12 months ending September 30, 2017, there were 125,912 insolvencies in Canada. This is a decrease of 3% over the same time period a year earlier. Consumer insolvency filings were 122,296 or 97.1% of total filings. The consumer filings were split into 59,192 bankruptcies and 63,104 consumer proposals – roughly half and half.

Business insolvency filings for the same time period in all of Canada totalled 3,616, a decrease of 8.1% from the 12 month period one year earlier. Business insolvency filings were split into 2,719 bankruptcies and 897 proposals. These statistics do not include filings by very large corporations under the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36).

As you can see, for a country the size of Canada, there were not a lot of business insolvencies during the first 9 months of 2017. The consumer filings were split roughly even between bankruptcy and a consumer proposal, the best consumer bankruptcy alternative.

Alternatives to Declaring Bankruptcy

A consumer proposal entails paying back a part of your financial debts in return for your unsecured creditors forgiving the remaining balance owing. A consumer proposal provides a significant benefit for a proprietor or partner in an unincorporated business. Unlike in a bankruptcy, your assets are not available for seizure by the licensed insolvency trustee (LIT).

You can take up to 60 months to pay off your consumer proposal. How much you will have to offer your creditors depends on what the unsecured creditors could expect in your bankruptcy. Working with a LIT, you work out that amount through discussion and analysis. A LIT can explain the entire process to you.

From a financial viewpoint, a consumer proposal is better than your bankruptcy because it permits the unsecured creditors to recoup a larger part of the debt than they would receive in your bankruptcy.

What is best for you and your business?

If you find you or your business is in a financial danger zone, contact Ira Smith Trustee & Receiver Inc. We’re full-service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.

Your financial problems can be solved with immediate action and the right plan. Give us a call today.

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PERSONAL BANKRUPTCY IN ONTARIO CANADA: THE SOLUTION TO YOUR NAGGING DEBT?

Declaring personal bankruptcy in Ontario Canada: Introduction

Facing serious financial difficulties is devastating, especially if you believe that declaring personal bankruptcy in Ontario Canada is your only option. In fact, many people mistakenly believe that dire financial problems automatically mean personal bankruptcy.

If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvency is a financial condition; bankruptcy is a legal state.

Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (Canada) (“BIA”) that help you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.

If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened. The cost of this type of bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.


Declaring personal bankruptcy in Ontario Canada: A summary of the bankruptcy steps

In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) all of уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and use the proceeds to рау for the bankruptcy administration and then distribute to уоur сrеdіtоrѕ.

If you have very little property, all of it may be рrоtесtеd. In that case, you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be sold fоr and whether you will be required to pay “surplus income” to your LIT (more on
this later).

The final step of your bankruptcy process will be to get your discharge from your debts. This means that you will not have to рау them (with certain exceptions).

Declaring personal bankruptcy in Ontario Canada: Know the basic rules BEFORE filing for bankruptcy

Gеnеrаllу, going through bankruptcy helps реорlе with debts get a fresh start. Hоwеvеr, many реорlе have false ideas about how it can help them. Bеfоrе deciding you need to fіlе for bаnkruрtсу, you should know some of the bаѕіс rules. That way you will know what bankruptcy can and cannot do for you.

Declaring personal bankruptcy in Ontario Canada: What bаnkruрtсу may do for you, dереndіng on your sіtuаtіоn

  1. Dіѕсhаrgе уоur unѕесurеd debts; depending on your assets and income, you may not рау or lose anything. If you do, you will рrоbаblу рау less than you owe.
  2. Give you a short-term “аutоmаtіс stay” аgаіnѕt уоur сrеdіtоrѕ.
  3. As opposed to bankruptcy, one of the bankruptcy alternatives under the BIA will help you work out a repayment plan that lets you take longer to рау your debt and/or рау less than you owe. If your budget allows for this approach, the (consumer) proposal, allows you to keep property that ѕесurеѕ a debt. Examples of such assets would be your home or car. It can also allow you to keep nоn-еxеmрt аѕѕеtѕ that you would рrоbаblу lоѕе in a bankruptcy filing. This is one bankruptcy alternative.

Declaring personal bankruptcy in Ontario Canada: What bankruptcy does not do for you

Getting a dіѕсhаrgе of уоur debts through the bankruptcy process will not discharge:

  1. Any award of damages by a court in civil proceedings in respect of:
    1. i) bodily harm intentionally inflicted, or sexual assault, or
       ii) wrongful death resulting therefrom
  2. A debt or liability for alimony or alimentary pension.
  3. Any debt or liability arising under a judicial decision establishing affiliation or in connection with support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt.
  4. Debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others.
  5. Any debt or liability resulting from obtaining property or services by false pretenses or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
  6. Liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his claim.
  7. Any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred:i) before the date on which the bankrupt ceased to be a full or part-time student, as the case may be, under the applicable Act or enactment, or
    ii) within seven years after the date on which the bankrupt ceased to be a full or part-time student;
    iii) any debt or obligation in respect of a loan made under the Apprentice Loans Act where the date of bankruptcy of the bankrupt occurred: a. before the date on which the bankrupt ceased, under that Act, to be an eligible apprentice within the meaning of that Act, or

    b. within seven years after the date on which the bankrupt ceased to be an eligible apprentice; or
  1. Any debt for interest owed with an amount referred to in the above list.declaring personal bankruptcy in ontario canada

Declaring personal bankruptcy in Ontario Canada: More things bankruptcy does not do for you

  1. The bаnkruрtсу court can refuse to dіѕсhаrgе your debts if it finds that you are abusing the рrосеѕѕ. Thеrеfоrе, you cannot run up debt just before filing for bаnkruрtсу and automatically have it forgiven. The Court will look at what you ѕреnt the money on and can deny you a discharge if it finds that you have abused the ѕуѕtеm. You must be truthful and not try to hide аѕѕеtѕ.
  2. Will not help you with any debts you take on during and after you begin the bаnkruрtсу рrосеѕѕ.
  3. Will not give you a clean slate on уоur credit report (except to show what debts have been dіѕсhаrgеd). Bankruptcy reduces your credit rating to R9. This rating remains on your record for 6 years after your discharge for the first time bankrupt. These ratings are set by the relevant credit bureaus whose rules may vary.
  4. Will not protect some kinds of іnсоmе and рrореrtу you get during the соurѕе of the bankruptcy until you are discharged (such аѕ іnhеrіtаnсе, tax refund, gifts, lottery winnings).
  5. May not dіѕсhаrgе all of уоur debts without some ѕасrіfісеѕ. If you have very few аѕѕеtѕ and little іnсоmе, you may not lоѕе anything. Debtors with more assets and income above the poverty line can lose some of their assets and have to pay surplus income.
  6. Will not allow for your discharge after 9 months if you are required to pay surplus income. A first time bankrupt must pay surplus income for 21 months and a second or more time bankrupt will have to pay surplus income for 36 months. Whether or not a first time bankrupt will be entitled to an automatic and absolute discharge after paying the required surplus income depends on the specifics of your circumstances.
  7. A second or more time bankrupt is not entitled to an automatic absolute discharge and there must first be a Court hearing to decide what form of discharge is most appropriate given your circumstances.

Filing fоr bаnkruрtсу is a big deal

Declaring personal bаnkruрtсу in Ontario Canada is a big deal. It can be a trеmеndоuѕ rеѕоurсе for the honest but unfortunate debtor who needs a new start. However, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ to соnѕіdеr before jumping in hеаdfіrѕt.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

declaring personal bankruptcy in ontario canada

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