Tag: licensed insolvency trustee

CANADIAN DEBTORS ASSOCIATION URGES ESSENTIAL CHANGES TO BANKRUPTCY AND INSOLVENCY ACT

Post author By Brandon Smith
Post date February 14, 2022

As the COVID-19 pandemic continues,ce hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

The Canadian Debtors Association was formed to fix this problem

Many people have faced a difficult time in their life and experienced many problems as a result. We all know that the human spirit can be tested, and it can be tested hard, whether they have lost their jobs, suffered serious injuries, or just needed to trim their spending. Financial hardships can lead to feelings of hopelessness, depression, and anxiety.

A national non-profit organization serving Canadians with debt problems is the Canadian Debtors Association. It was established a few years ago. They advocate exclusively on behalf of debtors who face economic hardship and insurmountable debt. Their belief is that debtors need someone they can call their own, someone who is willing to help them resolve their debt problems and support them unconditionally. A future where Debtors have the support of their own advocates is seen by the Canadian Debtors Association, which has created a Debtor Bill of Rights as a framework for the protocols that Debtors should be entitled to.

In this Brandon Blog, I describe the problem that the Canadian Debtors Association has identified and their preferred method of fixing it. I also provide my comments on their plan.

Canadian Debtors Association motto: Join us as we build a better Debtor experience

The mission of the Canadian Debtors Association is to reduce the number of financially vulnerable Canadians facing a financial crisis and overwhelming debt loads. This is a very good thing. Canadian Debtors Association has identified a real problem in credit reporting. That problem is that the Canadian credit reporting agencies do not really differentiate on someone’s credit report between them completing a successful consumer proposal or Division I Proposal and avoiding bankruptcy, and those who file an assignment in bankruptcy. It is true that those who avoid bankruptcy should be able to clear their record than someone who went into bankruptcy.

Thousands of Canadians file for bankruptcy or submit a consumer proposal to manage their debts every year. Over one million Canadians used the insolvency system from 2012 to July 2021. Regarding the accurate recording and reporting of bankruptcy and consumer proposal information on consumer credit reports, there are no specific references, standards, accountability, or provisions for insolvency reporting through Canadian credit bureaus.

Ms. Henrietta Ross, President, and CEO of the Canadian Debtors Association released through the CNW Group a statement asking all stakeholders in the credit, debt, and insolvency industries to work together on modernizing Canada’s Bankruptcy and Insolvency Act (BIA) in order to assist Canadians facing financial hardship.

canadian debtors association

Canadian Debtors Association agrees that everyone deserves a fresh start

The insolvency law and policy in Canada are based on the principle of providing a “fresh start” for people who are drowning in insurmountable debt and who suffer a financial breakdown. Legislators, stakeholder groups, academics, and insolvency experts all accept this principle. Debtors seek relief from existing debt in order to regain control of their finances.

The BIA intends to implement a fresh start, but debtors experience problems because, after undergoing a BIA debt relief solution, they encounter problems from the debt industry due to inaccurate insolvency-reporting information on their credit reports. By sabotaging the fresh start Canadians deserve and expect, inaccurate reporting undermines the very fundamental tenets of the Bankruptcy and Insolvency Act. The Canadian Debtors Association proposes that this dilemma can be resolved by amending federal legislation that stipulates the appropriate representation of insolvency-related information on consumer credit reports.

The use of consumer credit has had explosive growth over the past several years, so the utilization of credit reports and personal credit histories has also seen a massive expansion. Canadians’ daily lives are impacted by these monumental changes in the number and use of credit reports.

The responsibility for this information’s integrity and accuracy is not explicit. There is no regulated authority in credit reporting under the BIA. The Office of the Superintendent of Bankruptcy (OSB) oversees the administration of the insolvency system, including maintaining public records and statistics; however, the OSB does not specify how BIA debt relief options of bankruptcy and consumer proposals should be described or interpreted on credit reports. It simply is not their job!

Canadian Debtors Association explain this problem

A person who finds themselves facing economic hardship and in financial difficulty is allowed to use a BIA-subscribed debt relief solution to eliminate their debts through the fresh start process. When filing either for bankruptcy or a proposal is entitled to a stay of proceedings, which prevents creditors from initiating or continuing legal action against the debtor.

Providing inaccurate and misleading information for credit reports, sometimes through simple mistakes and sometimes because there are no differentiation codes for credit reports. So creditors doing a credit search may mistakenly believe that some debts remain delinquent and unaddressed. This undermines the legal stay. The Canadian Debtors Association feels this causes debtors who are otherwise discharged from their past debts, to continue to suffer within the Canadian credit system which is therefore not a total “fresh start”.

Canadians can also suffer the consequences of inaccurate insolvency information on their credit reports. The misapplication of delinquency ratings, the incorrect labeling of bankruptcy, and the mingling of insolvency terms constitute layers of misinformation that are misleading. Often, even third-party companies that obtain credit reports from a major credit bureau, such as TransUnion, erroneously list “bankruptcy” on reports of debtors who never declared bankruptcy.

The consumer is hurt badly and unnecessary suffering is caused, such as the loss of employment opportunities, refusal of a lease from a landlord, increase in costs Rejection of employment opportunities, refusal of a lease from a landlord, increase in costs services such as attempts by debtors to correct their credit reports are in vain. This unintended negative impact is not the debtor experience envisioned by the BIA. Such negative impact does not lead to a better quality of life for those relieved of their financial burden.

canadian debtors association

Canadian Debtors Association urges changes to Bankruptcy and Insolvency Act

Consumer credit reports wield enormous power, with significant implications for an individual’s livelihood and well-being, so accuracy is extremely important. It is also imperative to have accurate information since a bankruptcy or consumer proposal is a closely scrutinized part of a consumer’s credit history.

To solve this problem and the negative impact on Canadians otherwise freed from their past financial hardship, the Canadian Debtors Association says that the BIA must be updated to help Canadians have correct representation in credit reports. The BIA is the key piece of Canada’s debtor and creditor balanced legislative framework. It is the only personal insolvency legislation in Canada that provides a fresh start for those in debt. We must ensure its continued effectiveness by making it easier to use and by modernizing it to reflect current credit reporting realities.

Canadian Debtors Association has identified a real problem but the wrong solution IMO

Most provinces in Canada have enacted laws that outline the practices that credit reporting agencies and users of consumer credit information must follow in order to protect consumers’ rights. Federal regulations do not govern credit reporting agencies but provincial laws do. Canada’s insolvency legislation and the Canadian insolvency system are under the control of the federal government. So in my opinion, it would be unwise to try to fix a problem that falls under provincial jurisdiction with federal law.

Second, it is very difficult to pass a Member’s Bill to amend federal legislation through the House of Commons and the Senate. There is always a focus on matters of extreme federal importance or those that will win votes, rightly or wrongly. My view is that people having their insolvency process mislabeled, and therefore taking longer than they should to regain and take on additional credit, does not fit into the category of national significance or vote-getting.

Canadian Debtors Association states they are debtor industry advocate professionals and have honed their skills of debtor advocate work. They should take a more direct approach, in my opinion. Talk to the Canadian credit bureaus directly. In Canada, there are only two credit reporting agencies – Equifax Canada and TransUnion Canada.

Team up with insolvency industry players, such as the national association representing licensed insolvency trustees in Canada, the Canadian Association of Insolvency and Restructuring Professionals. Together, they can advocate directly on behalf of debtors with the credit reporting agencies to make that aspect of consumer credit reports more accurate and meaningful. If their advocacy is not heard, then lobby the provincial governments to enact further legislation, as it is their responsibility to do so.

That would seem a much better solution.

canadian debtors association

Canadian Debtors Association summary

The Canadian Debtors Association is calling on the federal government to modernize the BIA to better serve Canadians in financial difficulty. However, their only issue is that provincially supervised credit reporting agencies are not differentiating between successfully completed proposals and bankruptcy. Above I have suggested what I believe is a much easier route for them to go in their advocacy to accomplish the same thing.

I hope you found this Canadian Debtors Association Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you or your company to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Tags advocates for debtors, canadian debtors, canadian debtors association, credit counsellors, credit reports, debt review, debtor experience, Equifax Canada, financial difficulty, henrietta ross, insolvency industries, Ira Smith Trustee, licensed insolvency trustee, simple mistakes, transunion canada

Brandon Blog Post

RECEIVER APPOINTED BY COURT: 16 KEY INGREDIENTS TO ENSURE COURT APPROVAL OF A RECEIVER

Post author By Brandon Smith
Post date February 7, 2022

**A receiver appointed by court: What is a receiver in Canada?**

In the event that a company has financial difficulties, a Receiver may be appointed to take over its assets and manage them until its assets can be sold. The receivers are third parties appointed to supervise the liquidation process and remit the proceeds in accordance with legal priorities. A judge appoints a court-appointed receiver, and a secured creditor appoints a privately appointed receiver under a simple appointment letter. In Canada, for a court-appointed receivership, a receiver appointed by court must be a licensed insolvency trustee (formerly known as a bankruptcy trustee).

In this Brandon Blog, I focus on the factors to be considered by the Court when determining an application for a receiver appointed by court.

receiver appointed by court

**The receiver appointed by court: What happens when a receiver is appointed?**

The licensed trustee acting as receiver’s first duty is to take possession and control of the assets covered by the secured creditor’s security, or of all the assets identified in the court order in a court appointment. The receiver can decide if it can sell the assets for a higher price if it operates the business.

Senior management and the Board of Directors lose most of their decision-making authority when the company goes into receivership. Their advice and assistance are only needed if requested by the receiver.

The source of authority for the receiver appointed by court is appointed in Ontario under two statutes:

Section 101 of the provincial Ontario Courts of Justice Act; and
Section 243(1) of the federal Bankruptcy and Insolvency Act (Canada).

The receiver appointed privately has a duty of care to only the appointing secured creditor. Court-appointed receivers are responsible to all creditors.

receiver appointed by court

Receiver appointed by court: When can a court appoint a receiver?

Under Section 101 of the Courts of Justice Act (Ontario), the court considers whether the appointment “is just or convenient” under the circumstances. When deciding the origin of authority on whether or not to appoint a receiver as the court-appointed officer, the court must consider a variety of factors. Among them leading to the authority for decision making when there is an application for authorization for the appointment of a receiver are:

in spite of not having to prove it, will there be irreparable harm if the court does not appoint a receiver?;
the risk to a secured creditor and the equity the company owns in the assets, while litigation continues;
types of assets that would be subject to possession with respect to the receiver’ acts in its appointment;
it is necessary to balance the interests of the parties and to consider their rights;the preservation and protection of the property through the receivership proceeding pending judicial determination;
under its security, the creditor has the right to appoint a receiver;
when a creditor expects that the debtor will resist the enforcement of its security agreement;
it is an extreme measure which should be authorized sparingly, but less so if the applicant is a secured creditor who has that right under its security document;
in order to allow the receiver to perform its duties more effectively, a court appointment is necessary;
effects of the receivership order on the various parties;
actions taken by the parties and the litigation against properties;
duration of the Court-Approved receivership;
the costs incurred by each party;
it is likely that the receiver appointed by the court will maximize the return to the parties when the assets are sold under a receivership asset purchase agreement with the purchaser of assets;
facilitating the receiver’s duties and activities for its asset plan by a court order; and
a secured creditor’s good faith, the commercial reasonableness of the proposed Court-Appointed receivership and any equity questions.

A decision will usually turn on whether it is necessary to incur the expense and formalities of naming the third party to exercise neutral, transparent, and accountable stewardship of the debtor’s assets, while interested parties argue about the merits of the dispute and the receiver, attempts to maximize the recovery under an asset purchase agreement.

The court will usually intervene if the parties’ dispute puts the business assets at risk or where realizing the debtor’s assets or indemnifying a private receiver could impair the secured creditor’s recovery options. Often, simple default on the secured debt will be sufficient to attract a receivership where the risk to the business is implicit in the nature of the business or the dispute between the creditor(s) and the debtor(s). However, as with all equitable remedies, context is everything and each case turns on its own facts.

receiver appointed by court

**A receiver appointed by court summary**

I hope you found this receiver appointed by court Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you or your company in a way to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Brandon Blog Post

4 MAIN REASONS FOR BUSINESS FAILURE: INSPIRING WAYS ENTREPRENEURS AND COMPANIES FIX THEIR BUSINESS PROBLEMS

Post author By Brandon Smith
Post date January 10, 2022

Main Reasons for Business Failure: Introduction to reasons for failure

There are many reasons why businesses fail. One of the things a company needs to continue operations well into the future is a strong management team. Business owners should be comfortable with how each manager understands the business’ operations, current and future employees, and products.

Entrepreneurship is inherently risky; it is not for the fainthearted. Before offering products or services to customers, a company’s business model and infrastructure should be formulated, and revenue streams should be realistically projected well in advance.

In this Brandon Blog, I discuss the 4 main reasons for business failure that I have seen over the years in my role as a licensed insolvency trustee dealing with corporate restructuring and corporate business failures.

Main Reasons for Business Failure: Why do most businesses fail?

What percentages of businesses fail? About 66 percent of new businesses survive for two years or more, half survive for four years or more, and only 40 percent survive for six years or more. Many of these issues are overlooked, ignored, or neglected, resulting in them becoming just another statistic. It does not matter how many times you failed before you had a huge success. Failure teaches you what to avoid.

Building a substantial business is no easy feat. Businesses are built on value. It is best to find a way to under-promise but over-deliver in order to add value to any business.

Among the most common reasons businesses fail are:

not having sufficient funding;
having a poor management team with a lack of experience;
a flawed business model; and
a flawed marketing plan and/or a failure to market effectively to existing and potential customers.
main reasons for business failure

Main Reasons for Business Failure: Financing Hurdles

Chances are if you’ve been in business for a few months or longer, you’re experiencing some financial challenges and a lack of business funds. Marketing, sales, and customer service may require more capital. Payroll, inventory, and other expenses may require additional working capital as well.

A business loan from a bank can solve financing issues. Before applying for a loan, make sure you know your company’s financial situation. If you can’t accurately estimate where your business will be after a loan, this poor financial management will probably make your business end up worse off than if you hadn’t taken the loan.

Despite the availability of angel investors, venture capitalists, and conventional bank loans for small businesses, not all companies have the revenue stream, positive cash flow or business growth trajectory to secure financing from them. This is the 1st of the main reasons for business failure.

Main Reasons for Business Failure: Inadequate management

The managers of a business will quickly lose credibility with their staff, their suppliers, their customers, and even the general public if they are incompetent. Even if a manager receives training, mentoring, coaching, etc., before he or she starts managing people and money, if he or she doesn’t master the trade, chances are the person won’t have a successful business.

A business can fail due to poor management. Business failures are primarily caused by inadequate management, in my opinion. Management is inadequate if it does not understand the needs of the business. A lack of passion within management is a sure business killer.

It is inevitable that there will be an error the first time management delegated a major task. One person cannot handle all the decisions. The tendency is to assume that others will take care of the details while we delegate responsibility. You can use this for simple tasks like making coffee, cleaning toilets, and filing taxes. Business planning, cash flow modelling, establishing business plans and marketing plans are ineffective with this program.

Failing businesses are frustrating. It takes a lot of time and effort to build a business from scratch. It can be devastating to suddenly lose everything. Even your dreams might be dashed.

You must learn how to manage yourself and your business if you want to avoid this 2nd of the main reasons for business failure. Many business owners don’t realize how crucial it is to understand all aspects of running a business.

Main Reasons for Business Failure: Ineffective Business Planning

Having come up with your business idea and have already started your business, you should focus on developing quality relationships with your clients and employees. Understanding each employee’s strengths and weaknesses and discovering what motivates them is key. You will then be able to create a work environment tailored to the specific skills of each member of your team.

In order to achieve success, a team must have individuals who share a common goal; however, you must determine if your employees possess the right mix of qualities. Creativity, analytical skills, interpersonal skills, motivation, and communication abilities are among them.

Do you know what makes your business unique? What makes your customers choose you over your competitors? A good business plan must take all of these factors into account.

It is common for businesses to attribute their failure to external factors, such as competitors, the economy, and regulations. Although these factors are important, they are not the only causes of business failure. This 3rd of the main reasons for business failure is internal.

Businesses fail for a variety of reasons. A poor business plan, or a total lack of planning, can easily lead to it, but it is harder to prevent it completely. Business failure comes in many shapes and sizes. You could lose money, customers, your business, your product, your market, or you could fail to launch. It can all be the result of misunderstanding your product and market, caused by poor business planning.

Main Reasons for Business Failure: Marketing Mishaps

The 4th reason of the main reasons for business failure that I wish to discuss is marketing mishaps. A business needs to plan ahead for marketing. A marketing budget and return on capital should be considered by marketers and form part of every marketing strategy and business plan. Any business should allocate a budget for marketing if they hope to succeed. Getting this wrong is the 4th of the main reasons for business failure.

The success of marketing campaigns is also dependent on realistic projections for target audience reach and sales conversion ratios. In the long run, businesses that fail to understand and implement these aspects of sound marketing strategies concerning their potential customer base will be less successful than those that do.

Your business will fail if you can’t connect with your target audience. Without the ability to connect with your demographic, you are not only unaware of your potential consumer’s wants and needs, but also oblivious to how to best help them. You want to know what they want, rather than just what they need. What are they really looking for? Are they looking to evoke an emotion? Are they looking to achieve a certain status? Do your products or services help them solve a problem?

If you’re not addressing their pain points, then you probably do not understand the consumer very well. You cannot sell until you truly understand what they need. Take advantage of focus groups, market surveys, email campaigns, and direct phone calls to understand and connect with your target audience. Discover them in every detail. By doing so, your marketing plan will succeed.

Main Reasons for Business Failure: Summary

I hope you found these main reasons for business failure Brandon Blog informative. Although nothing is guaranteed, guarding against these 4 main reasons for business failure will increase your chances for business success. It will also give you the best shot at having a sustainable business model.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Brandon Blog Post

BANKRUPTCY SEARCH ULTIMATE GUIDE: WHAT KIND OF BANKRUPTCY RECORDS DO YOU WANT TO SEARCH

Post author By Brandon Smith
Post date December 20, 2021

bankruptcy search

Bankruptcy search: What bankruptcy records exist in Canada?

Records of bankruptcy exist in Canada in four different forms. A party can use three of them to determine whether a specific company or person has filed for bankruptcy or some other form of insolvency.

There are, however, two methods to do a bankruptcy search that cost money, and one of those methods also requires the permission of the individual or company who is involved in the insolvency proceeding. It is not well known that there is another paid way. Only licensed insolvency trustees, attorneys, and credit grantors use it.

There is a 4th type of bankruptcy record that can only be accessed by a select few people. In this Brandon Blog, I will discuss the various ways to do a bankruptcy search, discuss each one and focus on an unreported court decision involving one of them.

Bankruptcy search type 1: Bankruptcy and insolvency records search

If you need to file for bankruptcy or to file a consumer proposal or a full restructuring proposal under the Bankruptcy and Insolvency Act (Canada) (BIA), you may be distressed. Their main concern is who will know about my bankruptcy and who can see my bankruptcy records? As I will explain, there is a very small probability that anyone who is not a creditor of yours will find out about an individual insolvency filing by the methods it is made public, notwithstanding they are public records.

There are 6 different kinds of official bankruptcy records that you might want to search. These include:

Personal bankruptcies
Business/corporate bankruptcies
Corporate/business receivership.
Consumer proposals
Full BIA proposals
Companies’ Creditors Arrangement Act (CCAA) bankruptcy protection filings

Personal bankruptcies are those which are filed by individuals. Business bankruptcies are those which involve businesses.

Insolvency filings in Canada are available through the Bankruptcy and Insolvency Records Search database of the Office of the Superintendent of Bankruptcy (OSB). In order to search by name, enter the search criteria information you know in any order and click “Search.” If you are not entitled to a search account like a licensed insolvency trustee is, a minimum fee of $8 will be assessed for each set of 10 (or fewer) records.

A lot of people don’t know about this database. Furthermore, nosy neighbours are not going to pay $8 to do a search of bankruptcy records and spend time in front of the search screen to find out whether a person or company has filed for bankruptcy, whether a consumer proposal has been filed, whether a full BIA proposal has been filed, whether a company has filed for bankruptcy protection under the CCAA, or whether a business is in receivership. It is really only licensed insolvency trustees who need to do frequent searches. There is no other internet search tool or online search service in Canada.

Bankruptcy search type 2: How long do credit bureaus report consumer bankruptcies?

Insolvency and bankruptcy records for all Canadians maintained by the OSB can be accessed by credit reporting agencies such as Equifax and TransUnion. Additionally, they have access to the names and addresses of individuals who have declared bankruptcy. Since it pertains to consumers, they call the information they collect about insolvency filings “consumer reports” or “credit bureau records”.

If you don’t consent in writing in advance, no one can pull your credit report. Most likely, when you apply for a credit card or a loan, you authorize the credit card company or financial institution to pull your credit report. You may also authorize a credit report to be obtained when you apply for insurance or rent an apartment.

If you don’t give written permission, that person won’t be able to get your credit report. An insolvency filing on your credit report is not visible to a friend, relative or neighbour. Depending on whether it is a personal bankruptcy or another type of personal insolvency filing, these companies keep a record of the past insolvency filing on file for varying amounts of time. In the case of consumer bankruptcy, the credit report will probably show the past bankruptcy for seven years after the discharge is granted. Upon completion of a consumer proposal, it takes slightly less time.

Bankruptcy search type 3: Will my bankruptcy be published in the newspaper?

In the past, I have written about the differences between a summary administration consumer bankruptcy and an ordinary administration personal bankruptcy. Under the streamlined summary administration rules, a bankrupt person’s assets cannot have an expected liquidation value greater than $15,000.

Notice of bankruptcy does not have to be published in a summary administration bankruptcy. The Trustee must publish a notice in the prescribed form in a local newspaper as soon as possible after the bankruptcy and no later than five days before the first meeting of creditors in any ordinary administration personal bankruptcy or corporate bankruptcy (which is, by definition, an ordinary administration).

Newspapers publish bankruptcy notices in the legal notice section. Lawyers, trustees, and bankers are the only people who regularly look in that section. To find your name, someone would have to read all the local newspapers every day for the bankruptcy notice of you or your company. The chances of someone you know seeing the notice of bankruptcy published in the newspaper are extremely slim, but not impossible.

Bankruptcy search type 4 is only available to a select few

In contrast to the previous three types of bankruptcy searches, this type is only available to a select few. Furthermore, it is the subject of this unreported Ontario court decision I am going to tell you about. I am talking about the bankruptcy search of records and files kept by licensed insolvency trustees who handle bankruptcy filings for individuals and corporations.

Under the BIA, the Trustee must allow the OSB, the bankrupt, or any creditor access to the bankruptcy administration’s books, records, and documents. Trustees’ books and records are available only to them.

Now for the unreported decision. You may recall that I previously wrote a Brandon Blog titled “TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION“. During a period of 13 years, Mr. Flight filed for bankruptcy 4 times! Over and over again, he filed the same type of bankruptcy. According to him, the defendant Trustee in bankruptcy is responsible for his financial situation. In a lawsuit filed against the trustee in bankruptcy, Mr. Flight claims negligence, fraud, breach of fiduciary duty, unjust enrichment, and conversion. Allegations are made that the accused failed to identify and correct a fraud perpetrated by a bookkeeper for Mr. Flight’s sole proprietorship business.

Recently, they appeared in court. M. Flight’s motion was decided by the Judge on December 7, 2021. The motion was for:

the delivery of all the records pertaining to all four bankruptcies involving Mr. Flight, including the records related to the action commenced by the Trustee against the bookkeeper; as well as
to examine Mr. Flight’s Trustee to investigate the administration of the 4 bankruptcies.

Mr. Flight’s counsel claims the Trustee has returned some but not all of the documents with respect to the last bankruptcy filing in 2016. That was the focus of the hearing. Other filings occurred in 2004, 2006, and 2011, all outside the statutory period of four years during which the Trustee is obligated to keep the records.

Counsel for the Trustee asserts that copies of the records have been produced and that the request for an examination is an improper fishing expedition with the collateral purpose of bolstering a separate lawsuit brought by Mr. Fight against the Trustee.

Bankruptcy search: The Judge’s analysis

As per the Judge, a Trustee must maintain proper books and records when administering estates under the BIA. It is directed that the Trustee allow the bankrupt as well as those I mentioned to inspect and copy those books, records, and documents. A Trustee is required to retain records related to estate administration for at least four years following discharge under Rule 68 of the Bankruptcy and Insolvency General Rules.

Moreover, the Judge noted that based on the Trustee’s evidence, no books or records from Mr. Flight’s first 3 bankruptcy cases are in the Trustee’s possession. The Judge found that the Trustee made an effort to provide copies of the documents sought. Due to the submissions by both sides leads to a discrepancy between the number of pages sent by the Trustee and those received by Mr. Flight, the only practical solution is to perform a review and reconciliation of what was sent by the Trustee and what is still in its possession, with those documents received by Mr. Flight.

Bankruptcy search: The Judge’s decision

Within 60 days of the court’s order, counsel for Mr. Flight or its representative may arrange and attend the Trustee’s office or as directed by Trustee’s counsel to examine the file as produced and do their bankruptcy search. The Trustee shall be permitted to designate a representative to facilitate and oversee the examination of documents.

At that time, Mr. Flight’s counsel or his representative may scan an electronic copy of the documents using a scanning device provided by Mr. Flight’s counsel or his representative. All the documents involved in the proceedings shall be made available as may be necessary to provide a complete account of the Trustee’s administration of the estate.

If the parties disagree over whether certain documents should be allowed to be viewed and copied, they can go back to court. According to the Judge, an examination of the Trustee was not appropriate at this time. A Trustee examination is premature until the final determination has been made as to whether all documentation has been provided.

As I have already stated, this kind of bankruptcy search is not one of the normal ones you think of.

Bankruptcy search: Summary

I hope you found this bankruptcy search Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags bankruptcy records, bankruptcy search, credit bureau records, credit card, frequent searches, insolvency records search database, internet search tool, Ira Smith Trustee, legal notice, licensed insolvency trustee, notice of bankruptcy, official bankruptcy records, online research service, public records, search criteria, search of bankruptcy, search screen

Brandon Blog Post

RESTRUCTURING OF COMPANY: SOMETIMES AN UNPOPULAR CORPORATE BANKRUPTCY IS NEEDED TO RESTRUCTURE YOUR COMPANY TO IMPROVE PROFITS

Post author By Brandon Smith
Post date November 19, 2021

restructuring of company

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

Restructuring of company introduction

Following its bankruptcy, Canadian retailer Le Château announced that it would relaunch online under new ownership. Although extreme, in certain unique circumstances, corporate bankruptcy could be used to restructure a company’s debt and operations.

Often, companies realize they need to restructure too late when fewer options remain and saving the company is more challenging. A restructuring process started on a voluntary basis can generate greater value than a company restructuring done under the imminent threat of bankruptcy.

A restructuring plan is more likely to succeed when managers understand the fundamental business/strategic challenges their company faces. In a corporate restructuring, creditors are often required to make significant concessions, which have significant implications for them as well as for the company.

Using the Le Château case as an example, this Brandon Blog discusses certain aspects of the restructuring of company debt, assets, and operations.

restructuring of company

Restructuring of company: Le Château relaunches online following bankruptcy

Following its filing for bankruptcy protection last year, Le Château, now run by Suzy’s Inc., announced its comeback from bankruptcy by launching an eveningwear collection online before the holidays. YM Inc., which owns many brands including Suzy Shier, acquired the intellectual property assets and certain merchandise and other assets.

Herschel Segal founded Le Château Inc. in 1959 as “Le Chateau Men’s Wear”, a menswear store in downtown Montreal’s Victoria Square. Le Château began selling imported clothes from Europe when it added women’s clothing in 1962. As time passed, Le Château sold more fashionable imports to young people instead of its original traditional clothing style. Since then, Le Château has designed, imported, and retailed apparel, accessories, and footwear for women and men.

Its 240 locations at its peak made the Canadian retailer a staple of nearly every mall and shopping district in the country. Le Château Inc. (and its US subsidiary Château Stores Inc.) filed for bankruptcy protection in October 2020 under the Companies’ Creditors Arrangement Act (“CCAA”). It also announced it would close all 123 stores in Canada. The Court granted the companies permission to run a liquidation process in November 2020. It used the CCAA to liquidate its assets rather than for the restructuring of company operations and finances.

To adapt to new retail industry trends, the company implemented efforts to right-sized its brick-and-mortar locations. 122 of its 243 stores were closed during the eight years prior to filing for bankruptcy. The Company’s right-sizing efforts and its important investment in its e-commerce platform helped mitigate the decline in brick-and-mortar revenue, but not enough to compensate. During the three fiscal years prior to its insolvency filing, the Company lost about $130 million in net income. As COVID-19 arrived in March 2020, the end of Le Château was sealed. Proms, weddings, galas, and parties were cancelled, decimating the retailer’s dress sales.

Le Château began liquidating its 121 stores in November 2020, as well as its transactional website. In December 2020, the licensed insolvency trustee acting as CCAA Monitor was also appointed Receiver because all assets were secured by loans to various financial institutions. A court granted the Company’s request to approve a sale transaction with Suzy’s Inc. in June 2021. Le Château’s intellectual property, merchandise, furniture, fixtures, equipment, and signage were purchased by Suzy’s. At that point, the inventory liquidation was completed. Before the Canadian company filed for bankruptcy, the companies changed their names to plain numbered companies as part of the sale of the intellectual property.

A bankruptcy filing was made by the company formerly known as Le Château Inc. on September 2, 2021. Le Château, now run by Suzy’s Inc., has announced its comeback from bankruptcy with the launch of an eveningwear collection ahead of the holidays.

restructuring of company

Restructuring of company: Reasons for corporate restructuring

If the company is both insolvent and not viable in its existing form, the normal insolvency process would be receivership, bankruptcy or both. Instead of using the provisions of the CCAA to liquidate a major retailer, a Court-appointed receiver appointed under Quebec law as well as the Bankruptcy and Insolvency Act (Canada) would have accomplished the same thing as the CCAA process used.

In the example of Le Château, selling assets out of a financially sick corporation to a new owner who will operate the assets in a similar business is actually a form of restructuring of company operations. Because the old corporation has too much debt and too many operational problems, it cannot continue. However, as Suzy Shier has shown, there was a good business reason for them to buy certain assets, and they now plan to run a new Le Château business. A new owner was responsible for the restructuring of company operations and finances.

As a result of a financial crisis, a company may undergo restructuring to change the financial or operational aspects of its business. Restructuring can occur for several reasons, including:

deteriorating financial fundamentals;
a lack of profitability;
disappointing sales revenue;
debt that is too high; and
an industry with too much competition or the company is no longer competitive.

Under financial duress, a company engages in restructuring when it makes significant changes to its financial or operational structure. In reorganizing internally, a company’s operations, processes, departments, or ownership may change, enabling it to be more integrated and profitable. If shareholders and creditors reach an agreement on a reorganization of assets, issuance of equity to reduce debt, or bankruptcy as long as the business maintains operations, the company may sell its assets.

Restructuring a company usually involves cutting costs, such as payroll, or shrinking the company through asset sales. After restructuring is completed, the business operations should become smoother and more economically sound.

restructuring of company

Restructuring of Company: The company restructuring process

Restructuring a company has many benefits, as well as many reasons for a company to restructure. The benefits of corporate reorganization can be summarized in two words: survival and success. The right financial advisory firm can help business owners deal with these challenging issues, whether they are reorganizing for survival or strategic repositioning for the future.

Your company should select restructuring professionals who are experienced in your specific industry as well. As soon as major problems are discovered, the company should begin restructuring its operations and finances. Early diagnosis allows a company to fully evaluate its options and avoid being cornered.

Corporate business restructuring can be divided into several stages:

assessing the organizational restructuring needed;
implementing the organizational restructuring;
identification of weaknesses;
developing detailed plans to correct these weaknesses through restructuring;
calculating and securing funding;
raising private equity to help improve operations and balance sheet;
evaluating the impact of implemented strategies and amending them as necessary;
comparing actual financial results to the budget to ensure the restructuring remains on track; and
making necessary corrections.

Companies often do not allow enough time to plan and implement restructurings. A successful restructuring of a company’s finances and operations depends on how much upfront assessment work was done, how detailed the plan is, and how well the restructuring strategy is implemented.

Reorganizations can take a long time depending on whether they are reactive or proactive. An example of a reactionary restructuring is when bankruptcy proceedings force a company to make changes within a specified period. A corporate executive officer who recognizes a change in consumer preferences and positions their company to be a leader in tomorrow’s market is an example of being proactive.

In today’s economy, companies face many challenges, and company restructuring can be a short- and long-term answer to maintaining company viability. Company restructuring concerns vendors and consumers, stockholders and financial relationships, employees and inventory, quality control and environmental impact, equipment and technology, and management and marketing.

In addition to the reasons for restructuring, every major restructuring has some of these common elements:

an improved balance sheet;
reduced tax obligations;
divesting underproductive assets;
Outsourcing some functions that can be more cost-effectively done by outside suppliers rather than by company employees;
reducing debt loads;
relocating operations;
restructuring marketing, sales, and distribution;
renegotiating employment contracts;
refinancing debts; and
changing the company’s public image.

Restructuring company operations and finances are expected to result in long-term survival, profitability, and viability, regardless of the reasons and the specific steps taken.

restructuring of company

Restructuring of company summary

I hope this restructuring of company Brandon Blog post was helpful for you. Are you worried about your financial situation because you are dealing with substantial debt challenges as a business owner or as an individual? Call me if you have too much debt. It is not your fault. To deal with financial problems, you have actually only been shown the old ways. These old methods no longer work.

The Ira Smith Team employs new modern methods to get you out of debt while avoiding bankruptcy. Let us help you obtain the relief you deserve.

You are under a lot of pressure. We understand your discomfort. A new approach will be designed for you that is as unique as you and your issues, both financial and emotional. Your burden will be lifted and the dark cloud hanging over you will be blown away. We will design a debt settlement strategy for you. We are confident that we can assist you right away.

People and businesses facing financial troubles need a realistic lifeline. There is no one-size-fits-all approach with the Ira Smith Team. Even though we are licensed insolvency trustees, we have found that not everyone has to declare bankruptcy in Canada. Most of our clients never declare bankruptcy. We help people and companies avoid bankruptcy.

This is why we can create a new restructuring process for paying off debt that will be custom-built for you. You’ll have a unique experience, just like the economic difficulties and discomfort you are experiencing. If any of these describe you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation. Let us get you or your business back on track, driving to healthy and balanced trouble-free operations and eliminating the discomfort factors in your life, Starting Over, Starting Now.

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

Tags bankruptcy protection, company restructuring, corporate restructuring, executive officer, financial institutions, Le Château, licensed insolvency trustee, major restructuring, organizational restructuring, private equity, restructuring of company, restructuring plan, restructuring process, successful restructuring

Brandon Blog Post

THE LUCRATIVE RESP BANKRUPTCY PLAN TO DEBT RELIEF

Post author By Brandon Smith
Post date November 15, 2021

resp bankruptcy

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

RESP bankruptcy introduction

Parents contribute to their child’s Registered Education Savings Plan (RESP) in order to save for their children’s post-secondary education. In contrast to Registered Retirement Savings Plans (RRSPs), RESP contributions, or the total amount of all contributions made by the parent(s), is a property that is available for seizure in bankruptcy of the owner of the RESP.

In this Brandon Blog, I explain why an RRSP, unlike an RESP, is mostly exempt from seizure in bankruptcy. RRSPs and a Registered Retirement Income Fund (RRIF) are exempt from seizure based on a balancing act between federal and provincial laws. The RESP bankruptcy is not exempt. Since I practice in Ontario, I will only comment on the situation there.

Will I lose my RRSP in bankruptcy?

An RRSP’s exemption from seizure in bankruptcy was determined solely by provincial law before 2008. The bankruptcy treatment of RRSPs was not outlined in federal insolvency law. The Bankruptcy and Insolvency Act (Canada) (BIA), being the federal bankruptcy law in Canada, other than the exception described in the next section, exempted assets contained in either an RRSP or an RRIF from seizure as of July 2008.

Inequality among RRSPs was the reason for changing the BIA. If your RRSP was held at a financial institution, it would not be exempt from seizure if you filed for bankruptcy. But if you held it:

at an insurance company; AND
the beneficiary designation of your plan was irrevocable as your spouse, child, parent, or grandchild in the event of your death

under the Ontario Insurance Act, the entire RRSP or RRIF was exempt from seizure.

The reason for amending the BIA was twofold:

all RRSPs and RRIFs should be treated the same, regardless of which institution holds them; and
retirement income should not be lost as a result of financial problems for Canadians who have gone bankrupt, since their fresh start is made possible by the bankruptcy system.

In other words, before July 2008, people who were going to file for bankruptcy and who had a sizeable RRSP with a chartered bank would transfer the RRSP to an insurance company and designate one or more beneficiaries accordingly. In Canada, bankruptcy courts heard many cases about transactions designed to save an RRSP from seizure in bankruptcy.

An insolvency trustee or bankruptcy trustee could replace the named beneficiary of an insurance policy or retirement investment, including RRSPs or RRIFs, with the Estate and then collapse the plan so as to obtain the funds if the beneficiary designation of the policy was revocable. Trustees cannot collapse investments if the beneficiary is irrevocable; such plans constitute exempt assets. A Trustee would have to use it as one of the reasons for opposing a bankrupt’s discharge. Since the person, aware of their insolvency, transferred the asset for no value, the creditors are unable to pursue them. This was is known as a settlement.

The leading case on this issue, which was eventually followed by other jurisdictions, including Ontario, is Royal Bank of Canada v. North American Life Assurance Co., 1992 CanLII 4696 (SK CA), also known as the Ramgotra case. Dr. Ramgotra was bankrupt. A lower court decision regarding what should be done with the RRSP funds, turned into an RRIF, prior to his bankruptcy but when he knew he was in financial trouble, was appealed by the Royal Bank of Canada, having received Court approval to appeal the case instead of the Trustee appealing. The Court of Appeal found that the property had an irrevocable interest in Mrs. Ramgotra despite the transfer of the RRSP being a settlement.

So effective July 2008, the Canadian government amended the BIA so that regardless of which of the financial institutions an RRSP was held, only the contributions made within 12 months of the date of bankruptcy were subject to being lost to the licensed insolvency trustee in bankruptcy.

resp bankruptcy

Registered Education Savings Plans (RESP) and bankruptcy: RESP bankruptcy is not exempt

It is fairly simple to understand why RESP contribution funds are not exempt from seizure in bankruptcy. Since the parent can collapse the plan before maturity, the child does not receive a property interest in the RESP funds. There is therefore no trust or transfer of property to the child. In an RESP bankruptcy, the bankrupt parent’s Trustee can therefore collapse their RESP.

A Trustee must make satisfactory arrangements with the parent, or another relative, to have them pay the Trustee the equivalent amount of funds in the RESP at the date of bankruptcy. This way the Trustee will have recovered on the asset for the benefit of the bankruptcy estate and the bankrupt’s creditors. The bankrupt parent will have done what is necessary in order to avoid the RESP collapsing, losing the government contributions money and not having the plan value go forward for the child.

MP Dan Albas introduced his private member’s bill, An Act to amend the Bankruptcy and Insolvency Act (property of bankrupt registered education savings plans), on June 3, 2019. In this bill, the purpose was to amend section 67(1)(b.3) of the BIA, so that RESPs receive the same treatment as RRSPs and RRIFs. Like many other private member’s bills that die, this bill has not made any progress.

The thrust is obviously to make sure that other than for contributions made in the 12 months before the date of bankruptcy, a parent should not lose the RESP benefits for their child’s post-secondary school education because of their bankruptcy.

No matter how well-intentioned, one societal reason this Bill C-453 initiative will fail is that an elementary or high school student’s college tuition differs from that of a retiree whose earning years are behind him or her. So to date, there is no federal law that provides creditor protection for a Registered Education Savings Plan.

How to preserve an RESP bankruptcy

Your RESP’s liquidation cash value can be determined by contacting the financial institution holding the funds. The liquidation value does not include the government grant portion of the funds that are only available if the child attends a qualified educational institution.

You can instruct your Trustee to contact the financial institution holding the RESP funds to have the plan cashed out and remit the proceeds (net of government contributions) to the Trustee. This way the asset of the bankruptcy estate will go for the benefit of your creditors if you are not interested in keeping your RESP, which is unlikely in almost every case.

Preserving an RESP bankruptcy can be achieved in two ways. The first is to avoid bankruptcy. No, I don’t mean to tell you not to deal with your financial problems because like it or not, you are in an insolvency scenario. Just don’t use bankruptcy. If your debts not secured by your primary residence are $250,000 or less, you should consider a consumer proposal. You may use the large debtor proposal provisions of the BIA if the debts exceed this amount.

Second, the nonbankrupt spouse, or another relative, can buy the Trustee’s right, title, and interest in the RESP for an amount equal to its liquidation cash value. Thus, the purchaser becomes the owner of the RESP, and the child will continue to benefit from it. In acting in the best interests of unsecured creditors, the Trustee will have recovered the liquidation cash value.

RESP bankruptcy: A very recent divorce example

Having just dealt with this issue last week in one of our personal bankruptcy filings, I am writing about the RESP bankruptcy treatment today. I am the insolvency trustee in a bankruptcy filed by a divorced mother who is now on her own. The failure of her restaurant caused by the COVID-19 pandemic caused her to go bankrupt because of her high debt load.

Her ex-husband and she owned a registered education savings plan for their only child. As part of the no-cost session I provide to anyone contemplating insolvency, I discussed what might happen to an RESP bankruptcy if a bankruptcy is filed.

It was an upsetting experience for the mother. It was clear that she was upset at the prospect of losing half the liquidation proceeds if the plan collapsed. In addition, it was part of the divorce agreement that the jointly owned RESP would be continued for the benefit of the child. We had to create a plan to keep the RESP afloat in the event of RESP bankruptcy. I had no trouble coming up with the plan. What was tricky were the technical details.

This is what we came up with. First, we told her to contact the financial institution where the funds were held and obtain a written statement of the plan’s liquidation cash value. After receiving the written statement from the financial institution, we told her to pass it along to us. She did, and it turned out that the total liquidation value was approximately $26,000. She, therefore, had a half-interest valued at $13,000. We then got her permission to contact her ex-husband and explain the situation.

The ex-husband was informed that his ex-wife would be filing for bankruptcy by us. There would be an RESP bankruptcy. He knew that he had to maintain the RESP. When his ex-wife went bankrupt, we told him that if he purchased our right, title, and interest in the RESP, he would become the sole owner, and the fund would be preserved in an RESP bankruptcy and they could continue contributing to it. It was no problem for him, thankfully.

Because she had actually not yet filed for personal bankruptcy, we had not yet been designated as the licensed insolvency trustee. Our objective was to make sure there wouldn’t be a change of mind despite the divorce condition. Based on Canadian bankruptcy legislation, we scheduled the ex-husband to offer a $13,000 third-party cash guarantee to cover the costs of carrying out the personal bankruptcy.

Furthermore, we agreed that upon the bankruptcy, subject to the approval of the Inspectors, if any were appointed in this summary administration bankruptcy, we would then convert this third-party guarantee into the right, title, and interest as the licensed insolvency trustee of the RESP.

A bill of sale would be issued to him, and we would confirm jointly with the financial institution that he is now the sole owner of the RESP, and they would need to amend their records accordingly. This RESP bankruptcy would have been fully realized as we had gotten the full value of the mother’s half-interest in the RESP. It was a win-win situation for everyone involved.

RESP bankruptcy: What about you?

Hopefully, you see from this Brandon Blog, there are ways to deal with an RRSP both in bankruptcy and non-bankruptcy situations. I hope you found this RESP bankruptcy Brandon Blog informative. Are you in financial distress and a debt crisis? Are you worried about any RRSP or RESP contributions? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

resp bankruptcy

Brandon Blog Post

BANKRUPTCY PROTECTION: THE UNDENIABLE BEST THING YOU NEED TO KNOW TO CASH YOUR INSOLVENT CUSTOMER’S CHEQUE SAFELY

Post author By Brandon Smith
Post date November 12, 2021

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

Bankruptcy protection: What happens if a company gets into financial trouble?

A Canadian company seeking bankruptcy protection has two choices when it is financially troubled and wants to reorganize. By hiring insolvency legal counsel and a licensed insolvency trustee to get both insolvency and bankruptcy law advice and financial advice, they can protect themselves from their creditors, either by:

using the Companies’ Creditors Arrangement Act (CCAA) to file for bankruptcy protection; or
working with an insolvency trustee and filing a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (BIA) you can obtain bankruptcy protection.

In order to reorganize in Canada, an insolvent company files for bankruptcy protection. If you are insolvent in Canada, then you must file for bankruptcy protection, which is equivalent to Chapter 11 in the United States. The process is called financial restructuring or financial reorganization. By doing this, the company will try to restructure while it continues to operate to come up with a restructuring plan that allows the company to survive while satisfying the needs of the creditors to some degree.a

This Brandon Blog discusses a recent court decision that demonstrates that there is a risk to creditors who receive payments from the insolvent company under bankruptcy protection for goods or services supplied if the restructuring fails.

What happens to the company that files for bankruptcy protection?

An organization that files for bankruptcy protection, or as it is sometimes called, creditor protection, differs from an organization that files for bankruptcy. A pure bankruptcy procedure consists of a liquidation. The company ceases to operate unless the Trustee sees value in continuing to operate the company for a limited period of time.

The trustee in bankruptcy takes possession of all assets that are either not subject to valid claims by secured creditors (typically financial institutions) or that belong to third parties (for example, equipment under lease or goods undergoing repair that are in the company’s possession). A licensed insolvency trustee then formulates a plan for selling the unencumbered assets of the company to maximize the proceeds. Afterwards, the Trustee distributes the funds in accordance with the BIA.

In the case of a company filing for bankruptcy protection, this is one of the alternatives to bankruptcy. The intention is to continue operating while it tries to restructure. Most of the time, this entails downsizing. A plan will be devised to repay some of the remaining debt in exchange for the creditors writing off the balance that is owed. With success, the company can retain employees and continue to operate. Creditors will be able to earn money by supplying the reorganized company in the future.

The CCAA allows companies that owe at least $5 million to their creditors to file for bankruptcy protection. Either the business will be restructured and continue to exist on new financial terms or a wind-down will be supervised to pay back anyone owed money by selling assets. BIA restructuring provisions can be used by companies that owe less than $5 million.

In other words, a company that goes bankrupt will shut down. Those who file for bankruptcy protection want to keep operating. As disruptive as bankruptcy and restructuring are, they can be beneficial for businesses, individuals and the economy since they preserve value and prevent assets from being wasted.

As soon as the company enters bankruptcy protection (or bankruptcy), proceedings against it are stayed. As a result, all collection rights for creditors are suspended. A “time-out” gives the company a chance to restructure, or the Trustee can handle its duties in bankruptcy without interference from creditors. Additionally, it “freezes” all creditors at the time of the filing, so that one cannot gain an advantage over another.

bankruptcy protection

A record number of companies have sought creditor protection under COVID-19 and more are on the way?

The list of large Canadian companies with outstanding debts looking for bankruptcy protection from creditors got to a decade high in May and June 2020. Numerous financial commentators believed there would be a full-blown financial crisis and that a lot more would certainly file as a result of COVID-19 caused the economic downturn. Despite this, the number of corporate insolvency filings appears to have stabilized and also slowed down in 2021. One main reason is the number of government programs supporting Canadian business. In the same way as the virus itself, COVID-19 has actually taken a hefty financial toll on companies with pre-existing conditions.

Some familiar Canadian corporations in the list of companies that filed in that time due to their financial situation were:

Reitmans
Frank & Oak
Aldo
DavidsTea
Cirque Du Soleil
Mendocino
Bow River Energy
FlightHub
Christian charity, Gospel for Asia
Cequence Energy
Delphi Energy
Sail

Twenty-two major Canadian companies sought creditor protection in May and June 2020, almost four times the usual rate. The list obviously does not include major U.S. names such as Chesapeake Energy, J Crew, Neiman Marcus, Brooks Brothers, Pier 1 and Boy Scouts of America.

**The bankruptcy protection court case facts**

I want to tell you about Schendel Mechanical Contracting Ltd (Re), 2021 ABQB 893. On November 9, 2021, the Honourable Mr. Justice Douglas R. Mah released his decision.

Schendel Mechanical Contracting Ltd. (Schendel) was one of three associated companies that at one time collectively formed a major construction concern in Alberta under the Schendel name. As a result of financial difficulties, it was an insolvent entity and it filed a Notice of Intention to Make A Proposal under the BIA on March 22, 2019. Schendel continued operations as part of its restructuring effort. On various Schendel projects, Schendel bought HVAC equipment from the supplier between April 2018 and May 2019.

Ultimately, Schendel’s debt restructuring plan failed. Schendel was deemed to have filed for bankruptcy when it failed to implement a successful BIA Proposal restructuring. Schendel went bankrupt immediately. Its secured creditor applied to the Court for the appointment of a Receiver, which was granted.

As a result of reviewing the company’s books and records, the Receiver found and disputed the legality of a $40,000 payment from Schendel, an insolvent company, to one of its suppliers. According to the Applicant Receiver, the payment was prohibited for a number of reasons and the funds should be returned. The recipient supplier asserted that the payment was both innocent and validly received and that it was entitled to retain it.

In this case, a cheque dated July 8, 2019, to make the payment. Due to an unknown reason, the supplier did not negotiate the cheque until 11:48 AM on July 19, 2019. Schendel was also deemed to have filed for bankruptcy and the Court made the Receivership Appointment Order all on the same day, July 19, 2019. The Court had, however, no evidence regarding the exact moment the receivership and bankruptcy decision was made on that same day.

bankruptcy protection

**The bankruptcy protection case: The Receiver’s position**

It is noteworthy that the action to recover the $40,000 was brought by the Court-appointed Receiver and not the insolvency trustee of the bankruptcy estate. According to the Receiver, the funds should be returned on the following grounds:

the automatic stay under section 69(1) of the BIA was in effect at the time of filing and throughout the extension of the proposal period, so the supplier was without recourse against Schendel;
the Court-ordered stay contained in the Receivership Appointment Order of July 19, 2019, as well as the concurrent stay imposed by a deemed bankruptcy under the BIA, deprived the supplier of all collection remedies as of that date;
as an alternative, the payment may be prohibited under the Fraudulent Preferences Act; or
it may be in violation of the Statute of Elizabeth (see note below).

NOTE: The English Parliament passed this statute in 1571 with the purpose of prohibiting transfers that would defraud creditors or hinder their collection efforts. As a result of widespread fraudulent transactions designed to defraud creditors, the 13 Elizabeth Statute was passed. It is still in effect in Alberta today.

**The bankruptcy protection case: The supplier’s position**

The recipient supplier said that it received the payment both innocently and legally and that it is entitled to retain it. In addition, the recipient supplier said:

besides some routine questions about payment, the supplier had not engaged in any activity to try to collect the debt;
the relationship with Schendel was arm’s-length;
both of the last two extension orders for the NOI define a process by which Schendel may pay, and the Receiver has fallen short to prove that the procedure was not followed when it comes to the subject payment; and
for either the Fraudulent Preferences Act or the Statute of Elizabeth, the required intent cannot be shown.

Since the bankruptcy trustee was not involved in this case, nobody was claiming that the payment was a preference or transfer under value under the BIA.

bankruptcy protection

**The bankruptcy protection case: The Judge’s decision**

The Court was not presented with evidence on whether the $40,000 payment in question was approved within the proposal extension process or whether it was not approved. There was evidence to support Schendel’s compliance with approved procedures. In the post-NOI period, the supplier was found to have provided goods to various Schendel projects worth $34,476.75.

There was evidence that the payment was not just a payment on account of a pre-filing debt without further transactions post-filing. According to the Judge, the stay would not apply to indebtedness arising from goods or services supplied to Schendel after the filing of the NOI. This is because such indebtedness would not be a claim that could be a proven claim in the bankruptcy.

The Judge further stated that it is the Receiver’s responsibility to prove that the payment violated the stay. Schendel and the supplier did continue to do business together after the NOI was filed, according to the evidence. During the hearing, the Judge said that he should not simply assume facts in the Receiver’s favour. Additionally, the evidence indicated that some of the $40,000 payment was applied to the post-NOI supply of goods. A total of $34,476.75 worth of product was supplied to Schendel after the NOI was filed.

As a result, the Judge rejected all of the Receiver’s arguments and dismissed his Application in its entirety. Consequently, the supplier kept the $40,000.

Bankruptcy protection: How to cash your insolvent customer’s cheque safely

Companies filing for bankruptcy protection, whether under the CCAA or BIA, are reorganizing to stay in business. Businesses require purchasing goods and services and paying for them. It’s possible that some pre-filing debts will be paid after the filing date even though the debts are frozen from a collection perspective.

The stay does not necessarily prohibit every post-NOI payment by an insolvent company to a creditor. Such payments are valid when they are necessary to enable the company to move forward with restructuring. For example, a creditor may require payment of all or a portion of its pre-filing debt in order to supply post-filing.

Parties can agree to repay past debts in order to secure future supplies. First and foremost, the BIA process aims to encourage a debtor to reorganize as a going concern. Both creditors and debtors benefit from the debtor’s continued operation during this critical time. The BIA’s stay provisions and preference provisions give debtors breathing room to reorganize their finances. Setting up legitimate agreements with key suppliers is an integral part of that process.

In the end, it is critical to determine whether the payment of past indebtedness is a valid condition of post-NOI supply, which is required for restructuring to proceed. In that case, the post-filing payment of the pre-filing amount will be valid. If not, the insolvency trustee can recover it from the supplier.

Creditors seeking to recover pre-filing debts must make the payment as a condition of a post-filing supply arrangement. Additionally, because all of this is playing out in real-time in higher-risk settings, a supplier is free to amend the pricing post-filing. Similarly, if the supplier can secure it, there is no reason for them to not try to go from an unsecured creditor to a secured creditor on the post-filing supply by taking security or requesting a letter of credit. This would all be done out of an abundance of caution because as stated above, unpaid post-filing debts are not a claim provable in the company’s bankruptcy if the restructuring is unsuccessful.

bankruptcy protection

Bankruptcy protection summary

I hope you found this bankruptcy protection Brandon Blog post informative. Are you worried because you personally or as business owners are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

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

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

Call us now for a no-cost consultation. We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Brandon Blog Post

BAD CREDIT LOANS TORONTO: DO YOU NEED TO BORROW WITH ALARMING HIGH-INTEREST INSTALMENT LOANS?

Post author By Brandon Smith
Post date November 1, 2021

bad credit loans toronto

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Bad credit loans Toronto: How Canadians are dealing with higher rates

Low- and moderate-income people make up the membership of the Association of Community Organizations for Reform Now (ACORN) Canada. A report about high-interest loans was published by the organization in February 2021. The study found that instalment loans and high-interest online loans are becoming more popular. This loan type differs from payday loans in the category of bad credit loans Toronto.

According to the study:

Loans with high-interest rates are growing in popularity.
We need to protect consumers from unfair and deceptive practices.
To stop unfair lending practices, the Federal Government needs to act.

Since the publication of the study, nothing has changed. The COVID-19 pandemic, the vaccination program, and the continuing stimulus to the Canadian economy have certainly taken the spotlight. I discuss these new high-interest loans in this Brandon Blog, which are akin to long-term payday loans for bad credit loans Toronto.

bad credit loans toronto

Bad credit loans Toronto: Forget payday loans, this is Canada’s new generation of high-interest loans

Provincial laws regulate payday loans, which usually have to be repaid within two weeks. These loans have very high-interest rates and are for relatively small amounts – enough to tide the person over until the next regular payday. In the event that a borrower cannot repay the loan on time, the payday lender rolls the amount owed, with more fees, into a new loan.

Typically, this results in annualized rates of interest between 400 percent and 500 percent. Canadians are struggling at a time when this form of legalized loan-sharking continues. Anti-poverty groups like ACORN have long targeted the industry, but it is being increasingly targeted by legislation.

In the midst of government efforts to rein in the payday loan industry, payday lenders as well as new online lenders offering an alternative to payday lenders are extending lines of credit and instalment loans to cash-strapped borrowers. At 47% annual interest, these lines of credit and instalment loans create debt traps.

Lack of regulation of high-interest personal loans has contributed to the growth of lenders offering bad credit Toronto instalment loans. According to ACORN’s report, nine out of 13 provinces have specific rules to regulate payday loans, but far fewer have rules to address other forms of high-cost lending, such as instalment loans.

bad credit loans toronto

Bad credit loans Toronto: Why Canadian borrowers are still taking on the high-interest loans steep commitment

Due to a lack of regulation, these high-interest instalment loan lenders have grown at a rapid rate. Why do Canadian borrowers continue to take on debt when interest rates are so high? It is because they cannot avoid it. People who borrow this way often have no other option.

It was brought to light by the pandemic that there are essentially two classes in Canada: those with solid credit scores, savings, an emergency fund and collateral, and those without. The major banks and credit unions can lend to the former at a competitive interest rate but won’t to the latter. So many Canadians need this type of alternative lender.

Payday lenders are not the only players in the high-interest instalment loan industry in Canada. Equitable Bank and easyfinancial are also major players. The most common uses of the funds borrowed on these high-interest installment loans since the pandemic began are:

Financing furniture and appliances purchases.
Paying rent and other expenses both before and while receiving federal government COVID-19 support payments.
Supporting other family members while unemployed.
Buying Christmas presents.

Let’s learn how installment loans work. Suppose you want to purchase a $1,500 piece of furniture for your apartment and the store offers you the option of an instalment loan financing. It costs almost $2,000 to borrow to pay for the furniture and the additional charges and administration fees. A 29.99 percent annual interest rate applies. In this example, the cost of borrowing is just over 39 percent annual percentage rate (APR), which includes interest and other charges.

The loan term will ultimately come to an end. The loan does not amortize so that there is nothing owed at the end of the term. They may refinance the loan for you if you are unable to repay the outstanding balance of the loan on time at the end of the term. If they do, it is at a higher interest rate than the original loan (with more fees and charges of course.) It becomes a never-ending circle debt trap. This is how high-interest instalment loans work.

bad credit loans toronto

Bad credit loans Toronto: Budget 2021 sets up a fight over high-interest loans

In order not to be guilty of charging a criminal rate of interest on those long-term loans, they need to adhere to the maximum annual interest limit of 60 percent. This rate, however, has been in effect for almost four decades already. Despite the fact that annual interest rates on these high-interest rate instalment loans are less than 60 percent, critics contend that they charge a criminal rate practically, if not legally. There are faint rumblings of some political will to try to rein in what many call predatory lending.

bad credit loans toronto

Bad credit loans Toronto summary

I hope you found this bad credit loans Toronto Brandon Blog post both informative and eye-opening. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

Call us now for a no-cost consultation.

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

Brandon Blog Post

BANKRUPTCY AND INSOLVENCY ACT OF CANADA TR1ES TO GIVE EVERYONE UNDENIABLE EQUITABLE TREATMENT

Post author By Brandon Smith
Post date October 18, 2021

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

bankruptcy and insolvency act of canada

What is the purpose of the Bankruptcy & Insolvency Act of Canada?

With all the talk of the economy, supply chain problems and the uncertainty of the future these days, it’s no wonder that many people aren’t sure how they will end up when things become “normal” again.

For Canadian people and businesses with too much debt, an insolvency proceeding under the Bankruptcy and Insolvency Act of Canada might just be the answer to getting back to a healthy stress-free life. Notwithstanding that using this federal statute can be a very effective strategy for managing financial difficulties, it is a very scary one that people do not like to talk about.

The Bankruptcy and Insolvency Act of Canada is based on the principle of balancing fairness, equity and a fresh start. A recent court decision in Saskatchewan exemplifies these principles. In this Brandon Blog, I describe a little bit about the Bankruptcy and Insolvency Act of Canada, explain the court decision and how the court used these principles in reaching its decision.

What is in the Bankruptcy and Insolvency Act of Canada?

Canadian citizens, businesses, and companies who run into financial difficulties can turn to the Bankruptcy and Insolvency Act of Canada for assistance. This federal legislation contains the laws, rules, and guidelines that all involved parties must abide by. It details how different financial options work legally, and defines the roles of the various stakeholders – the Office of the Superintendent of Bankruptcy, the Licensed Insolvency Trustees, the debtor, and the secured creditors and unsecured creditors (both preferred and ordinary).

Despite the fact that provincial legislation in Canada may overlap or affect stakeholder rights, federal bankruptcy legislation has priority over provincial legislation in insolvency matters. Therefore, provincial governments cannot do indirectly what is prohibited directly. However, there are cases where provincial laws will still apply. The laws surrounding property exemptions and enforcement of court orders differ from province to province and territory to territory. These provincial and territorial regulations continue to apply even under bankruptcy laws.

It is the Bankruptcy and Insolvency Act of Canada that governs all bankruptcies and proposals (either Division I or consumer proposals) in Canada. Receiverships are also governed by the Bankruptcy and Insolvency Act of Canada. The Laws of Canada – Bankruptcy and Insolvency, are meant to give the honest but unfortunate debtor, be it a person, business or company, a fresh start in life.

bankruptcy and insolvency act of canada

Growth in consumer proposals and business proposals

A person who files for the personal bankruptcy process submits an assignment in bankruptcy and related documents to a Licensed Insolvency Trustee. These documents outline the person’s assets, liabilities, income, and expenses. An insolvent person’s reason for insolvency must also be included in the documents. Individuals typically give the reason for not being able to pay their bills in a timely manner. Consumer proposals require very similar documentation as bankruptcy, except for the assignment in bankruptcy document.

In order to file a Division I Proposal under the Bankruptcy and Insolvency Act of Canada, insolvent companies must describe their assets and liabilities and provide a realistic cash flow statement documenting how they intend to operate under the proposed insolvency process. They must also explain how they became insolvent. Personal insolvency is less complex than corporate insolvency.

Despite a long-term decline in individual bankruptcy filings, consumer proposals have gained in popularity among individuals. The decrease in bankruptcy filings and the increase in proposals can be attributed to several different reasons. Under a proposal, a financial reorganization or restructuring is what is done. Bankruptcy is simply a liquidation.

Regardless of whether it is a consumer proposal, a Division I proposal, or bankruptcy, the Bankruptcy and Insolvency Act of Canada governs these proceedings. The Companies’ Creditors Arrangement Act, another federal government statute, governs reorganizations of very large corporations. This is especially true if there are separate insolvent corporations under the corporate umbrella in different countries, requiring foreign proceedings.

Why does one choose a consumer proposal instead of filing for bankruptcy?

A consumer proposal has many advantages over bankruptcy proceedings. By filing a consumer proposal, you’re able to retain the property you own such as your home, car, boat, etc. and extinguish all of your debts while only paying back a portion. A consumer proposal doesn’t require any of those items to be sold, as long as you can afford them with the monthly payment made under the proposal and your other living expenses.

Changing your lifestyle can help you get out of debt more quickly with a consumer proposal. Bankruptcy means losing everything, except for some assets that are exempt under provincial laws. You have equity if you do not fully encumber your assets by way of secured loans from financial institutions, your house, car, boat, furniture, clothing, jewelry, or anything else of value. You can keep this equity in a consumer proposal, but you will lose it in bankruptcy.

The main reason why people should attempt to perform a successful consumer proposal instead of going straight into bankruptcy under the Bankruptcy and Insolvency Act of Canada is because of this. As you will see in the recent court case I am about to describe, if you don’t pay close attention to how you conduct your affairs once you declare bankruptcy, you might be exposed to another minefield even after receiving your discharge.

bankruptcy and insolvency act of canada

**The Bankruptcy and Insolvency Act of Canada case**

This judgment of the Registrar in Bankruptcy of the Queen’s Bench for Saskatchewan was released on October 6, 2021. It is a relatively simple case, but it described so well the equitable nature of the Bankruptcy and Insolvency Act of Canada.

In this legal process case, there are two unsecured creditors who are the Applicants. They jointly loaned money to an individual debtor, who is now an insolvent debtor and a bankrupt individual on an unsecured basis. They also filed their proof of claim for this debt with the insolvency trustee. They then applied for an order pursuant to s. 69.4 of the Bankruptcy and Insolvency Act of Canada lifting the bankruptcy stay that is in effect with regard to the bankrupt.

The purpose of section 69.3 is to prevent bankruptcy creditors from initiating or continuing enforcement proceedings against a bankrupt debtor. In bankruptcy, a creditor has no recourse against the debtor or the debtor’s property, and may not commence, continue, or seek any action for the recovery of money for a claim that is provable in the bankruptcy.

Nevertheless, Section 69.4 allows a court to lift the stay if it decides that the applicant has established that the continued operation of the stay is likely to cause material harm to him or her, or if there are other equitable grounds for lifting the stay.

**The case: How the Bankruptcy and Insolvency Act of Canada works for fairness and equity**

The bankruptcy process generally compromises the debt obligation of the bankrupt, resulting in creditor claims run through the bankruptcy claims process. Generally, unsecured creditors lose their right to enforce their types of debts and, as a result, realize less than 100% of their debt. Some creditors do not receive anything from an estate in bankruptcy.

There are two major objectives of bankruptcy (and consumer proposal or commercial proposal) proceedings under the Bankruptcy and Insolvency Act of Canada. For one thing, it provides an equitable system for distributing the proceeds from the estate in bankruptcy among the bankrupt’s unsecured creditors. According to the laws Of Canada – bankruptcy and insolvency, unsecured creditors are expected to be treated predictably and fairly. However, it does not guarantee that creditors will receive a dividend in all cases.

Secondly, it is intended to give an honest but unfortunate bankrupt an opportunity to be freed from the crushing burden of debt and receive financial rehabilitation to become a contributing member of society. That is one reason why every person who does an insolvency filing must attend two financial counselling sessions.

In bankruptcy, an automatic stay allows the bankrupt to re-establish himself or herself financially and restart his or her financial affairs so that he or she can meet his or her credit obligations moving forward without being hampered by debt enforcement proceedings.

bankruptcy and insolvency act of canada

**The case: Role of unsecured creditors trying to lift the stay of proceedings**

The Registrar, in this case, followed the reasoning of a 2001 decision from the Court of Appeal for Ontario. It is far from routine to lift the stay, and therefore the court has to make sure that the reasons for lifting the stay are sound and consistent with the objectives of the Bankruptcy and Insolvency Act of Canada.

In the case of Mcculloch (Re), 2021 SKQB 259 (CanLII), the two creditors were alleging that Ms. Mcculloch induced them to loan her the money on a fraudulent basis. It was their argument that they should be allowed to continue legal action against the bankrupt so that they could prove in a separate court action that the debt was a result of fraud and that, therefore, their claim would survive the bankruptcy and her discharge. In addition, they stated that they would be more severely affected than the commercial creditors if the bankruptcy stay bars them from taking action against McCulloch.

According to the Registrar:

Bankruptcy often disproportionately affects individual creditors over commercial creditors. Generally, creditor relationships are based more on trust than on cost-benefit analysis. When advancing a loan, the commercial creditor such as a credit card company, unpaid suppliers, or a sophisticated secured creditor, generally assesses the risk and determines whether it can absorb the loss in the event of default. Individual lenders do not usually do this.
If this form of prejudice is sufficient to support lifting the stay, other individual creditors may be able to apply to lift the stay merely on the basis of relative disadvantage to individual creditors. Lifting the stay on this basis is inappropriate.
The Trustee objects to this application on the grounds that it will significantly increase the costs of bankruptcy administration at the expense of other creditors. In this case, the Registrar sided with the Trustee.
According to the lawyer representing the bankrupt, the creditors have not established any material prejudice or other equitable grounds for lifting the stay. The Registrar agreed.
Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
However, these 2 creditors still have rights in the bankruptcy. The court still has the right to hear their submissions at the discharge hearing. Additionally, they continue to have the right to pursue Ms. McCulloch once the bankruptcy proceedings are over.
At this time, lifting the stay would not benefit the applicants or their creditor claims since during the bankruptcy, Ms. McCulloch’s either the bankruptcy vests her assets in the Trustee for the benefit of the creditors or remain exempt from execution under Saskatchewan law. This disposition of property makes it simply impossible for these creditors to realize much from this stage, prior to the bankrupt’s discharge.
In this case, the equity does not support the court’s exercise of its authority to declare that the bankruptcy stay, established under section 69.3 of the Bankruptcy and Insolvency Act of Canada, does not apply to this litigation.

As a result, the Registrar denied the applicant’s request for what they thought was their legal rights in lifting the stay. Clearly, the Registrar was guided by the Bankruptcy and Insolvency Act of Canada‘s aims of fairness and equity to all stakeholders.

Bankruptcy and Insolvency Act of Canada summary

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

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

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

Call us now for a no-cost consultation.

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

Brandon Blog Post

THE CANADIAN RECEIVERSHIP EASY BEGINNERS GUIDE

Post author By Brandon Smith
Post date September 27, 2021

receivership

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

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

If you wish to listen to an audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

**What is Receivership?**

Last week I wrote an easy beginner’s guide on bankruptcy. This Brandon Blog is for anybody interested in finding out what type of insolvency process receivership is and how it differs from some other insolvency processes. I will explain the receivership process, provide an overview of what happens in a receivership, explaining what is sought to achieve, and the consequences of receivership.

Receiverships occur when a secured lender enforces its security to recover loans that have been defaulted on by a borrower. Secured creditors appoint an insolvency trustee to serve as receiver or receiver-manager depending on the terms of their security documents when the corporate debtor defaults.

Receivers and secured lenders can enter into a private contract appointing a receiver. Alternatively, the secured lender may seek an order from the court appointing a receiver. I’ll talk more about that shortly.

**What Does Going into Receivership Mean?**

If the corporate debtor defaults on a secured loan, the creditor may be entitled to appoint a receiver to collect their money. In Canada, “Section 244” notices are specific forms of notification that secured creditors must send to defaulting companies.

The notice specifies the assets covered by the security, the amount owed by the company in default, and that the secured creditor has the right to enforce the security after 10 days. The debtor company in default can consent to the appointment of the receiver before the expiration of the 10 day notice period.

A Section 244 notice is prescribed under the Bankruptcy and Insolvency Act (Canada) (BIA), and it is usually the last notice a creditor receives before the receiver takes possession of the debtor’s assets, properties, and undertakings.

Receivers then liquidate the assets of a business in order to pay secured creditors.

**How Receivership Works**

Parliament amended the BIA insolvency legislation in 1992 by enacting Part XI. BIA sections 243 through 252 to deal with secured creditors and receivers. Prior to that time, there was no federal statute insolvency legislation dealing with receivership matters. These provisions provide information about the court that hears bankruptcy and insolvency cases control over receivership matters that involve all or substantially all of the inventory, the accounts receivable, or the other property of a debtor. There are also restrictions imposed on the duties of secured creditors and receivers. It also stipulates that only a licensed insolvency trustee can act as a receiver. Part XI applies to both privately-appointed and court-appointed receivers.

These sections do not confer any powers available to a trustee of a bankrupt estate on secured creditors or receivers. Only those powers conferred upon the receiver in the appointment letter are granted to private receivers, and those are the powers specified in the security instrument. However, the receiver may also exercise certain statutory powers. If certain powers are required to administer the estate but are omitted under the security instrument, a receiver cannot act. Receivers are generally appointed by the secured creditor pursuant to security that at least states:

the collateral secured under the security; and
the receiver has the right to dispose of the collateral, including operating the insolvent debtor‘s business.

In a court-appointed receivership, the powers of the receiver come from the receivership appointment court order appointing the court-appointed receiver.

Receivership: Notice and Statement of the Receiver

From the 1992 amendments to the BIA, a receiver is required to provide notice to all known creditors of an insolvent debtor in receivership. Previously, creditors were not required to be notified.

When the receiver has become the receiver of an insolvent debtor‘s property, the receiver must provide notice of receivership as soon as reasonably possible but within 10 days of its appointment. Notice of the receivership must be sent to all creditors, the Office of the Superintendent of Bankruptcy and the insolvent debtor.

If the debtor is also bankrupt, rather than sending the notice to all creditors, the receiver sends the notice to the bankruptcy trustee. Since the creditors are already represented in corporate bankruptcy by the Trustee, the bankruptcy process will deal with them.

A receivership notice states, among other things, that the receiver has been appointed, whether it is a private appointment or a court appointment, and what the receiver’s plan of action is. Additionally, it contains a list of all known creditors.

As part of the receivership process, the receiver must provide interim reports every six months as well as a final report when the receivership is concluded. A copy of the receiver’s final receipts and disbursements statement must also be included in the final notice.

**What’s The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver?**

A court-appointed receiver vs. a privately appointed receiver is something people always want to know the answer to. I will explain the difference to you. It is pretty simple. Based on what I have already written, you have probably guessed it by now.

In a Court-appointed receivership, when the Court appoints a receiver, it does so through an Order on the application of the secured creditor. As between a secured creditor and a debtor, a privately appointed receiver is a receiver who is appointed by the secured creditor as provided in the Security Agreement. The Court-appointed receiver’s administration is supervised by the Court.

How is Receivership Different from Bankruptcy? Bankruptcy / receivership

Bankruptcy vs. receivership is also something people want to know. Many times, people confuse the two and use the terms receivership and bankruptcy, mistakenly, interchangeably. Often, receiverships and bankruptcy are confused, but the differences between the two are fairly straightforward. Whether it is a private appointment or a Court-appointed receivership, it is still different.

There are several main differences between bankruptcy and receivership. A receivership is a remedy available to secured creditors, as stated above. In order to enforce the secured creditor’s security rights against a defaulting debtor, a receiver is appointed.

Bankruptcy is a separate legal process. Trustees do not represent secured creditors in bankruptcy. Instead, they represent unsecured creditors. Corporate bankruptcy can occur simultaneously with a receivership of the same corporate debtor. The process of a corporate bankruptcy would be the subject of another Brandon Blog. To find other Brandon Blogs about corporate bankruptcy, use the search function at the top of this page.

What’s the Difference Between Receivership and Liquidation?

By now you know what the definition of receivership is. So I won’t repeat it because I do not want to sound like a broken record (younger people may not catch that reference!)!

Liquidation is not governed by the federal BIA. Rather, it is done under the provincial Business Corporations Act or Wind-Up Act. A liquidation is for a solvent company where the shareholders, Officers and Directors decide to cease business operations by running off any existing contracts and selling off the assets. The cash obtained is then used first to pay off the creditors. Any funds leftover is then distributed to the shareholders.

Just like a receiver, a liquidator can be appointed either privately by resolution of the Directors or by Court order. Liquidation is not a receivership or bankruptcy.

Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership

A device was created by the BIA for employees of a company that went bankrupt or into receivership. It does not apply to employees of a company trying to rightsize itself through reorganization; either a BIA Proposal or a Plan of Arrangement under the CCAA. The Wage Earner Protection Program Act (WEPPA) protects wages or benefits, including termination and severance pay, accumulated in the 6 months prior to a business going bankrupt or going into receivership.

The WEPPA ended up being enacted due to the federal government’s concern that when a company went bankrupt and employees were not paid their wages, there was rarely an opportunity for them to recoup any of their income. There are limits or caps on what employees can receive.

In the period in which amounts are past due to you, you will not qualify for WEPPA if:

you are a Director or Officer of the business;
or you have worked as a manager for the company
you are part of the management responsible for negotiating or refusing to pay amounts owed.

You may qualify if:

the previous employer has gone bankrupt or into receivership.
The firm owes you wages, salaries, vacation pay, or unreimbursed costs throughout the six months prior to the date of bankruptcy or receivership.

When an employer enters bankruptcy or receivership, the WEPPA provides funds to employees owed money. Those employees who qualify are paid as soon as possible. An employee’s qualifying earnings are equal to seven times their maximum regular insurance earnings under the Employment Insurance Act. According to Service Canada, the maximum amount of $56,300 a year is the limit for insurable earnings as of January 1, 2021. Thus, in 2021 the maximum amount a former employee can claim under WEPPA is $7,578.83.

Trustees and receivers are required to inform employees about the WEPPA program and provide information about amounts due. In the event of bankruptcy or receivership, trustees, as well as receivers, have 45 days to submit to Service Canada the Trustee Information Forms showing the amounts owed to each employee.

In other words, WEPPA‘s payment for former employees is something, but it may not be enough to fully compensate each. As a result of the amount paid by Service Canada, which administers the employment insurance system, $2,000 per employee is a super-priority against the company’s current assets. All remaining amounts paid to each employee, up to the maximum, are unsecured claims.

Receivership summary

I hope you found this receivership Brandon Blog informative and that the differences between receivership, bankruptcy, restructuring and liquidation legal proceedings are now clearer. Because it all has to do with corporate insolvency, the provincial Bankruptcy Courts also deal with receivership matters to adjudicate under the applicable insolvency law.

With too high debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

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

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

It’s good that you’ve come to this site, where you’ll find answers to your questions, sort through your options, and discover that you can get help. You’re not alone, and the professionals at Ira Smith Trustee & Receiver Inc. are committed to helping you find a debt solution that’s best for you.

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

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

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

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

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

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

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

Tags bankrupt estate, Bankruptcy, Bankruptcy / receivership, bankruptcy and insolvency, bankruptcy and insolvency act canada, bankruptcy process, Bankruptcy vs. receivership, BIA, corporate debtor, corporate debtor defaults, court appointed receiver, court-appointed receiver vs. a privately appointed receiver, Court-appointed receivership, creditor pursuant, creditors, debtor company, debtor defaults, Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership, How is Receivership Different from Bankruptcy, How Receivership Works, insolvency legislation, insolvency trustee, insolvent debtor, licensed insolvency trustee, Notice and Statement of the Receiver, Office of the Superintendent of Bankruptcy, private receiver, Privately-appointed receivers, receiver, receiver manager, receivers, receivership, receivership process, section 244 notice, secured creditors, secured lender, secured lenders, secured loan, trustee, unsecured creditors, Wage Earner Protection Program Act, WEPPA, What Does Going into Receivership Mean, what is receivership, What's The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver, What's the Difference Between Receivership and Liquidation