Tag: licensed insolvency trustee

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

restructuring of company

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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

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

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

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

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.

restructuring of company
restructuring of company
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THE LUCRATIVE RESP BANKRUPTCY PLAN TO DEBT RELIEF

resp bankruptcy
resp bankruptcy

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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
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
resp bankruptcy

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
resp bankruptcy

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.

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 and 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.

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.

resp bankruptcy

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

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
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:

  1. Reitmans
  2. Frank & Oak
  3. Aldo
  4. DavidsTea
  5. Cirque Du Soleil
  6. Mendocino
  7. Bow River Energy
  8. FlightHub
  9. Christian charity, Gospel for Asia
  10. Cequence Energy
  11. Delphi Energy
  12. 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
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
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

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.

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
bankruptcy protection
Categories
Brandon Blog Post

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

bad credit loans toronto
bad credit loans toronto

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 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

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

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:

  1. Financing furniture and appliances purchases.
  2. Paying rent and other expenses both before and while receiving federal government COVID-19 support payments.
  3. Supporting other family members while unemployed.
  4. 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

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

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.

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 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.

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

Call us now for a no-cost consultation.

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

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

Categories
Brandon Blog Post

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

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 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
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
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
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
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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
  6. 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.
  7. 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.
  8. 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.

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

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

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

Call us now for a no-cost consultation.

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

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

Categories
Brandon Blog Post

THE CANADIAN RECEIVERSHIP EASY BEGINNERS GUIDE

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.

receivership

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.receivership

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.receivership

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

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.

Categories
Brandon Blog Post

WHAT IS THE POWERFUL CRA LIEN ON PROPERTY TOOL?

cra lien on property
cra lien on property

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

CRA lien on property: Canada Revenue Agency’s collection powers

The CRA (formerly known as Revenue Canada) assigns “collection officers” to taxpayers who fail to make timely payments or who do not pay in full. For the CRA to agree to a payment arrangement (usually monthly payments), the taxpayer must provide financial disclosure on a monthly basis (details of their expenses, their income, and their assets).

Tax debts that cannot be settled through a payment plan may be registered in Federal Court. Once the debt is certified, the certificate is equivalent to a judgment entered in court. This is called a memorial. If you own property, the CRA can create a lien on your property based on your judgment. A CRA lien on property against your interest in your home is the most common CRA lien on property they register.

This Brandon Blog discusses a recent decision from the British Columbia Supreme Court that confirms that the CRA lien on property becomes secured once they are registered.

CRA lien on property: CRA Super Priority Liens

I previously wrote a Brandon Blog about the legal case of Canada v. Toronto-Dominion Bank. By mentioning this case, I hope that my comments about the recent British Columbia Court decision below will be clearer.

Federal statutes give CRA a creditor powerful tools to collect debts. They can access avenues of collection significantly quicker than other types of creditors. It was not known to Toronto-Dominion Bank (TD) that, as a sole proprietor operating a landscaping business, the borrower had collected GST in the amount of $67,854.

After selling his home, the borrower fully paid off his first mortgage with TD. TD did not lend to or deal with the proprietor’s business. Since there was no CRA lien on property against the house, TD was not aware of the outstanding GST.

The CRA has enhanced security, known as “super-priority”, over most of a tax debtor‘s real property and personal assets, by virtue of deemed trust provisions in the Income Tax Act and Excise Tax Act (ETA). CRA has priority over substantially all secured creditors under the deemed trust concept, which means that the proceeds of the sale from the property subject to the deemed trust will go to CRA. A deemed trust claim is a CRA lien on property and is obtained without any registration.

A demand letter was subsequently sent to TD demanding that a portion of the proceeds be used to satisfy the GST debt. TD refused to pay since they believed their mortgage security ranked higher than CRA’s claim for unremitted GST. Court action was taken against TD by the CRA. The Crown argued that under section 222 of the ETA, the proceeds received by TD on the repayment of the mortgage and line of credit were subject to a deemed trust in favour of the Crown.

The Federal Court held that TD had an obligation to reimburse the CRA for the debt of $67,544, plus interest, owing by the Borrower to the CRA. Super-priority interests can be enforced by the CRA without notifying the secured creditor. TD was responsible for repaying CRA amounts received from a borrower with an outstanding GST/HST bill.

cra lien on property
cra lien on property

FCA confirms CRA super-priority over secured creditors on a GST/HST debtors’ property

TD appealed the decision of the Federal Court to the Federal Court of Appeal (FCA). According to the FCA ruling in Toronto-Dominion Bank v Canada, the FCA agreed with the lower Court that TD must pay the CRA proceeds of $67,854 for unremitted GST that it received from a borrower upon the discharge of its mortgage. CRA is considered to hold in trust amounts paid to a secured creditor from a debtor who owes Goods and Services Tax/Harmonized Sales Tax (GST/HST) liabilities.

FCA affirmed the Federal Court’s finding that no triggering event was required and that the deemed trust operates continuously once GST is collected but not remitted. Further, the FCA noted that case law has distinguished between secured creditors and bona fide purchasers of value, such that the two categories are mutually exclusive.

It is best for secured creditors to review their current risk management practices and revise them both at the time of due diligence when vetting new borrowers as well as throughout the term of any secured credit agreement.

If we were talking about unremitted employee source deductions, the result would be the same.

CRA lien on property: Personal income tax debt collection

CRA is a powerful creditor when it comes to personal income tax debt collection. Above I discussed how they can get a CRA lien on property just by way of the statute for unremitted source deductions or unremitted GST/HST. But what about personal income taxes? CRA does not have an automatic lien for unpaid income taxes.

However, they can go to Federal Court and obtain a memorial and then register that CRA lien on property of the tax debtor who fell behind in their payment of taxes. Once they place that lien, they now turned their unsecured claim for unpaid taxes into a secured claim. As I already mentioned, the most common type of property they register against is real property, like the tax debtor‘s home.

If the CRA lien on property goes on the real property before the person who owes unpaid income taxes files either a consumer proposal or bankruptcy, then the CRA lien on property stays on. CRA will not try to go power of sale or foreclosure to throw the taxpayer out of their home based on this tax lien. Rather, they will just wait until the taxpayer either sells the home or tries to renew or refinance a mortgage.

In the case of a sale, they will get their tax lien paid out of the sale proceeds. In the case of a mortgage renewal or refinancing, mortgage lenders will not do a new mortgage loan or a refinancing with the CRA lien on property. This is how they get their money.

Keep in mind that the lien is only against the taxpayer’s interest in the home. So if the tax debtor is the sole owner, it is against 100% of the home. If the taxpayer owns the home jointly with say, a spouse, then the lien is only against the 50% interest.

cra lien on property
cra lien on property

CRA lien on property: Can Canada Revenue Agency put a lien on my house?

You should now know that the answer to this question is yes. Licensed insolvency trustees know this. Nevertheless, in the British Columbia case I will describe now, the Trustee tried a novel, but an unsuccessful, approach to try to knock out CRA’s lien on property secured claim to collect taxes owed by the tax debtor. I am referring to Gidda (Re), 2021 BCSC 1460 (CanLII).

The licensed insolvency trustee appealed the decision of the Master as Bankruptcy Registrar dated February 3, 2020, reversing the Trustee’s rejection of a secured proof of claim filed by the federal Crown on behalf of the CRA in the bankruptcy. As well, the Trustee appealed the Master’s ruling that he is personally liable for the costs of the proceeding.

The CRA has taken out a memorial to attach a lien in favour of CRA to the taxpayer’s home due to unpaid income taxes. Then he filed for bankruptcy. So the lien against property holds as it came before the bankruptcy. A secured proof of claim for unpaid income tax was filed by the CRA in response to the memorial and registered tax lien. A secured claim was granted to CRA, which was not directly contested by the Trustee.

In my opinion, this claim, however, was handled by the Trustee in a novel way that wasn’t sustainable. It was so novel that the Judge took judicial notice of the submissions that such a case was never litigated before in Canada. There were also a number of judgments against the title of the property in addition to the memorial. There was no priority among the other judgments.

According to section 70(1) of the Bankruptcy and Insolvency Act (Canada) (BIA), bankruptcy takes precedence over judgments, garnishments, and any collection action. Furthermore, no judgment takes precedence over another.

A memorial is a judgment of the Federal Court, and since all judgments are treated equally as unsecured creditors, the Trustee disallowed CRA’s secured claim. Because the memorial and its registration against the title are secured claims under other federal statutes, it has powers not given to other simple money judgments. Therefore, I believe it is a losing argument. So did the Master.

In addition, the Master believed that the Trustee ought to have been aware of this when disallowing CRA’s secured claim and causing it to appeal the Trustee’s decision. Therefore, the Master awarded the Crown costs to be paid by the Trustee personally.

On both counts, the Trustee appealed the Master’s decision. The Judge who reviewed this found that the Master was correct in upholding the CRA secured claim and dismissed this portion of the Trustee’s appeal. The Judge did, however, let the Trustee off the hook by allowing the costs portion of the appeal. According to the Judge, the costs awarded by the Master will be paid by the bankruptcy estate and not by the Trustee personally.

CRA lien on property: Say goodbye to debt stress

I hope that you found this CRA lien on property Brandon Blog informative. Unpaid taxes and a heavy debt load do not mix well. If you have too much debt, you are considered insolvent. There are several insolvency processes available to you. It may not be necessary for you to file for bankruptcy.

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

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

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as 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.

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

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

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

Call us now for a no-cost consultation.

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

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

cra lien on property

Categories
Brandon Blog Post

A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON

bankruptcy discharged
bankruptcy discharged

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

Your Bankruptcy Discharged – But Wait

Well, that took no time at all. Last week I told you about a bankruptcy discharge hearing I attended where the bankrupt person had his bankruptcy discharged by the Master in the Ontario Superior Court of Justice In Bankruptcy and Insolvency.

The Master’s decision was released on August 13, 2021. On August 20, 2021, we received the Notice of Motion of the opposing creditor appealing the Master’s decision to give this person his discharge from bankruptcy. That is their right.

In this Brandon Blog, I want to discuss the reasons for the opposition to the fact that this bankrupt had his bankruptcy discharged and my thoughts on one scenario of how this may play out. First, I just want to refresh your memory about the bankruptcy process and specifically how the discharge under bankruptcy law in Canada process works. Then I will get into this real-life story.

Canada’s Bankruptcy and Insolvency Act (BIA) gives people the option of filing a debt management plan restructuring consumer proposal if they are unable to pay back all unsecured debt owing to their unsecured creditors. This option offers the consumer a way to maybe keep their home and car that is heavily financed, as long as they can maintain the payments to the secured creditors such as the financial institution who financed the purchase of the home by way of the mortgage, or the auto loan, and it makes sense in their budget.

A successful consumer proposal is also the way to avoid bankruptcy. Like bankruptcy, the process starts with a no-cost consultation for financial advice with a licensed insolvency trustee. A licensed trustee is the only party able to administer a consumer proposal in Canada (or a bankruptcy). The Trustee can help you lose your debt load.

A first-time bankrupt who fulfills all of their obligations, including attending 2 mandatory credit counselling sessions, is entitled to a discharge after 9 months from the date of bankruptcy.

bankruptcy discharged
bankruptcy discharged

A bankruptcy discharged: First and second bankruptcy (or more)

When an insolvent debtor files for bankruptcy for a second time, you cannot be discharged after a nine months bankruptcy period. When you don’t need to pay the Trustee any surplus income payments, a second bankruptcy lasts for a minimum of 24 months. A second-time bankruptcy filer with surplus income must make those payments for 36 months to qualify to get their bankruptcy discharged.

A third or subsequent bankruptcy follows the same timeline as a second bankruptcy. There is, however, a high probability that the Trustee or creditors will oppose the discharge. Where there is opposition, there must be a court bankruptcy discharge hearing and the court can impose any conditions it deems appropriate.

What does bankruptcy discharged mean in Canada?

It is a Canadian legal term used to describe the release of a consumer debtor or business proprietorship from their obligations, responsibilities, debts, and legal claims. “Bankruptcy” is a legal proceeding to protect the estate of a person or company. “Discharge” fulfills the requirement that a person is released from their obligations, responsibilities, debts, and legal claims through the bankruptcy process. There is no equivalent requirement for a company.

The insolvent debtor filing for bankruptcy merely invokes the legal protection to the person and puts a bankruptcy trustee in place to realize upon any available assets in the bankruptcy estate for the benefit of the creditors. Bankruptcy filings do not relieve the person of their debts. It is when the person is bankruptcy discharged, that they are released from their debts (other than for a select list of exceptions).

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged: Types of bankruptcy discharge

The licensed insolvency trustee can usually issue an automatic discharge when there is no trustee in bankruptcy opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties during bankruptcy.

In case of opposition or if the bankrupt meets one of the criteria that prevents automatic discharge (for example, the bankruptcy process finds the bankrupt to have a high tax debt situation), a discharge hearing in court is held, which is conducted by the Master of the Bankruptcy Court. There are four types of the bankruptcy discharge and a fifth outcome is also possible. Here they are:

  1. Absolute discharge – An absolute discharge means that the bankrupt may obtain a discharge immediately. If the bankrupt has fulfilled all of their duties and there is no insolvency trustee or creditor opposition, this can be provided by the licensed insolvency trustee of the bankruptcy estate handling the bankruptcy administration;
  2. Conditional discharge – can get discharged if certain conditions are met. Typically, to get bankruptcy discharged this way, conditions include payment to the licensed insolvency trustee;
  3. Suspended – the bankruptcy discharge will be granted at a later date and may very well be combined with an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. Refused– because the debtor has not made full disclosure or done other bankruptcy duties; or
  5. “No order” – the insolvency trustee informs the court that the bankrupt has not fulfilled all of his or her obligations and has failed to respond to the Trustee’s demands for information despite the passing of time. The licensed insolvency trustee is at liberty to seek its discharge when the “no order” order is provided. When the bankrupt has actually complied with the court’s requirements, he or she may apply for a hearing for discharge. When the Trustee gets its discharge, the stay of proceedings preventing collection actions against the bankrupt disappears.

A bankruptcy discharged: The appeal just served upon us – a true story

To refresh your memory about the discharge hearing itself you can CLICK HERE. The appeal just served upon us seeks an Order setting aside the decision of the Master made on August 13, 2021. The grounds for the appeal can be described as throwing everything including the kitchen sink! The stated grounds are that the Learned Registrar erred:

  • by granting the bankrupt an absolute discharge from bankruptcy;
  • in holding that the Receiver’s interest in the discharge application is not firmly established and by not recognizing that should the Receiver be paid an amount in excess of the debt owed to the secured creditor, any surplus funds would be available for the other creditors of the
    corporate bankruptcy estate;
  • in holding that the discharge hearing is not the proper forum in which to make determinations as to the propriety of the various transactions that the Receiver has raised;
  • in finding that the bankrupt has generally cooperated with me as his Trustee;
  • in declining to consider the bankrupt’s conduct in the corporate bankruptcy because that the trustee in the corporate bankruptcy had remedies available to it;
  • in finding that the failure of the company’s business was due to the loss of its 1 customer and pricing related to that arrangement;
  • in relying on her finding that the corporate trustee may be the only truly interested party on the discharge or would benefit most from the conditional order sought if the secured debt is otherwise repaid;
  • in exercising her discretion in finding that an order of discharge requiring payment of the significant amount proposed by the Receiver is not reasonable;
  • in finding that the bankrupt has no ability to pay and that his future prospects to pay are unknown;
  • in finding that an order for a conditional discharge of the magnitude sought would be tantamount to a refusal;
  • by omitting to consider relevant evidence or the absence thereof, in relying on irrelevant considerations, and/or giving improper weight to the evidence before the Court; and
  • anything else the lawyers may want to say.

    bankruptcy discharged
    bankruptcy discharged

Standard of review to getting a personal bankruptcy discharged

Such an appeal from a bankruptcy discharge hearing has a standard of review. According to BIA S. 192(1), the bankruptcy registrar can, among other things, grant orders of discharge. S. 192(4) of the BIA permits a party dissatisfied with a registrar’s order or decision to appeal it to a judge.

Registrars are exercising judicial discretion when granting discharges in bankruptcy cases. As long as the registrar acted reasonably, the judge should not set it aside or ignore it. Furthermore, if an appeal from a bankruptcy discharge order is based on alleged errors in factual findings, the court will not intervene if the findings of fact can be justified based on credible evidence. If the registrar has materially misinterpreted the law or made an error in respect of the facts underpinning his or her discretion, discretionary decisions can, of course, be overturned.

If the registrar decides that in order for the person to get their bankruptcy discharged, the court imposes conditions, those conditions must be realistic to allow the bankrupt to meet the requirements in a reasonable amount of time. If an amount ordered in order for the person to get their bankruptcy discharged is unrealistic and the discharge is conditional on making additional payments, the appellate court in such cases previously held that results in an error of law. The appellate judge can either substitute other conditions or refer the matter back to the registrar for reconsideration.

A bankruptcy discharged: What my gut is telling me

I normally am not in the prediction business. However, having been the insolvency trustee responsible for administering the consumer bankruptcy, having written the reports to the court on the bankrupt’s application for discharge, having attended the discharge hearing and having heard all the evidence, having read the Registrar’s decision and the Appeal documentation, I believe that the appeal should be dismissed.

You might recall that opposing the bankrupt getting bankruptcy discharged was the Receiver of the company previously operated by the bankrupt. As a result of complaints regarding the bankrupt and his family in relation to the company’s operations, the Receiver has filed lawsuits against several parties. The proceedings are still pending. According to previous court rulings, the court should not consider the issues raised in other proceedings when deciding whether to discharge the bankrupt. A discharge hearing is a summary proceeding. It is important to see how the debtor behaved during HIS bankruptcy.

As for the judge’s decision, only time will tell. I’ll keep you up to date as always.

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged summary

I hope that you found this bankruptcy discharged Brandon Blog helpful in telling this real-life story of an appeal to a person getting their bankruptcy discharged. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

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

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

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as 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.

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

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

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

Call us now for a no-cost consultation.

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

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

 

Categories
Brandon Blog Post

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

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

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

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

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

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

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

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

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

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

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

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

Personal situation insolvency

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

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

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

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

Corporate insolvency

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

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

    licensed insolvency trustee vaughan
    licensed insolvency trustee vaughan

Selecting The Right Licensed Insolvency Trustee in Vaughan

Experience and professionalism

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

Interacting with them on many levels is essential

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

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

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

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

Websites for licensed insolvency trustee Vaughan

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

You can meet with more than one Trustee

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

3 Best Licensed Insolvency Trustees in Vaughan, ON

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

Licensed insolvency trustee Vaughan summary

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

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

licensed insolvency trustee vaughan
licensed insolvency trustee vaughan

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TENANTS IN COMMON VS JOINT TENANCY IN ONTARIO: THE MODERN RULES OF A 1 CO-OWNER UNHAPPY BANKRUPTCY

tenants in common vs joint tenancy

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.

Tenants in common vs joint tenancy in Ontario: Shared ownership of property

There are two different types of property joint ownership: tenants in common vs joint tenancy. Whether you’re married or not, you still face the same problems. Having a co-owned home raises the issue of how the title should be held; tenants in common vs joint tenancy. Both are equally good. The answer really depends on the relationship between the co-owners and their estate planning needs.

A bankruptcy filing by one of the co-owners complicates matters further. A recent bankruptcy case decision in Ontario where only one of the joint owners filed for bankruptcy, highlights the problem, especially for non-bankrupt co-owner. This Brandon Blog discusses the recent bankruptcy case and what it means for both the bankrupt co-owner and the non-bankrupt co-owner regardless of the ownership choices between tenants in common vs joint tenancy.

Home ownership in Ontario: tenants in common vs joint tenants as co-owners

The word “tenants” is normally thought of with property rental. But both joint tenancy and tenants in common reference to a type of shared property ownership. As tenants in common, the ownership rights and all areas of an entire property are owned equally by all members of the group.

When one of the joint tenants dies, the deceased owner‘s share of the property passes to the surviving owner without going through the probate process. With tenants in common, in the event of death, this is not the case.. For asset protection and estate planning purposes, many married couples who want to hold title to the real property in a co-ownership structure, do so as joint tenants to avoid the probate process. Each joint tenant owns a 50% share ownership stake in the property.

Tenants in common may freely decide what ownership percentage of the property each owns. Each tenant in common does not need to own an equal percentage of the property; unequal ownership is fine as long as all co-owners agree on the ownership arrangements of unequal shares. The tenants in common can also transfer their share of the property through a Will, a real estate transfer, or even an arm’s length sale. Tenants in common are well advised to have a signed co-ownership agreement that spells everything out.

This is the primary difference between tenants in common vs joint tenancy in Ontario for the joint ownership of real property.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

Property ownership part 2: tenants in common vs joint tenants in Ontario and the bankruptcy of 1 co-owner

When a co-owner becomes bankrupt, what happens? The Brandon Blog faithful knows that I have previously explained that upon bankruptcy of a person, the non-exempt assets of the bankrupt should be vested in the licensed insolvency trustee, subject to secured creditors‘ rights. For real estate ownership, the answer does not change whether title is held in tenants in common vs joint tenancy.

There is an exemption in Ontario for equity in one’s home of not more than $10,783. It is not an exemption for the first $10K, but rather if the total equity is below that amount. Therefore, we can consider the equity in a bankrupt person’s ownership interest in their home to belong to the Trustee for all practical purposes.

If the bankrupt has a 50% ownership stake due to a joint tenancy agreement, then it is the bankrupt’s equity in half the home. If the bankrupt’s ownership stake is under a tenants in common co-ownership agreement, then it is the equity in only the bankrupt’s co-ownership share. In either scenario, the ownership interest of the non-bankrupt owners are not directly affected. However, the other co-owners’ are affected one way or the other by the bankruptcy of a co-owner. The legal case I am about to tell you about is no exception.

Land Owner Transparency Registry: A Public Database

Upon the person’s bankruptcy, the bankrupt must disclose all assets to the Trustee. With computerization and the internet, it is easy for a Trustee to determine if the bankrupt has an ownership interest in the real estate where they reside. This is whether or not the bankrupt has disclosed such ownership interest.

The decision of the Honourable Justice Pattillo of the Ontario Superior Court of Justice in Bankruptcy and Insolvency dated July 28, 2021, in Re Johansen Bankruptcy, 2021 ONSC 5241 (CanLII) highlights the issues in the bankruptcy of a co-owner of real estate. In December 2016, Mr. Johansen filed a voluntary bankruptcy assignment. In his sworn statement of affairs, he listed no realizable assets and liabilities of $73,968 (unsecured) and $14,950 (secured). No mention is made of any ownership in real estate.

The Trustee learned of the bankrupt’s interest in the home he lived in with his mother in March 2017. In the period from April 2017 to October 2020, the Trustee wrote to the bankrupt and Mrs. Johansen as well as spoke to the bankrupt several times about his interest in the home and why it hadn’t been disclosed. The bankrupt did not provide any information other than denying interest in the property, and his mother did not respond.

A FedEx courier envelope containing a one-page statutory declaration purportedly signed by Mrs. Johansen on October 18, 2018, arrived at the Trustee on October 16, 2020. Her declaration stated, in part, that putting the 20% in the bankrupt’s name was intended to provide her son with an interest in her Estate over and above any other entitlements under her Will. According to her, the 20% was a gift to be realized only after her death.

In the Trustee’s view, the bankrupt and his mother are playing games with each other. The Trustee applied to the court for a declaration that the bankrupt held a 20% interest in the home at the time of bankruptcy, and that he could partition and sell it. Despite the Trustee having a lawyer, the bankrupt represented himself. It would have been better if he had gotten legal advice and been represented in court.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

Tenants In Common vs Joint Tenancy: Can your 90-year-old mother be thrown out of her house?

The Judge determined that the bankrupt owned a 20% interest in the property based on the legal title, and hence, that 20% interest vested in the Trustee pursuant to s. 71 of the Bankruptcy and Insolvency Act (Canada) (BIA).

Mrs. Johansen’s statutory declaration to the effect that the bankrupt did not own the real estate and that the 20% was a gift that only passes to him on her death was not accepted by the Judge. The declaration was signed some two years after the bankruptcy when the Trustee’s ownership interest was well known. Despite repeated requests from the Trustee for information, it was not produced for another two years. In addition to what was noted by the Judge, his main concern was the way she characterized the bankrupt’s interest, given the evidence concerning the property they owned before this home, which Mrs. Johansen failed to mention.

Mrs. Johansen and the former marriage of the bankrupt’s wife, as well as the bankrupt, were the three parties on title to the home they purchased on January 30, 2007. They obtained a mortgage from TD Bank on January 30, 2007, which was discharged on February 21, 2007. Due to a marital split, the bankrupt’s wife was removed from the legal title on October 17, 2008, leaving just his mother Mrs. Johansen and himself as parties on the legal title. The bankrupt admitted that his ex-wife was paid for her interest in that home. On June 28, 2012, the bankrupt and his mother sold that home for $567,000, and the same day purchased the current home for $450,000.

The home was purchased in 2012. The title documents recorded at the time, its ownership is divided between 20% owned by the bankrupt and 80% owned by Mrs. Johansen. Mrs. Johansen and the bankrupt both signed the Land Transfer Tax affidavit showing as between tenants in common vs joint tenancy they chose to own the home as tenants in common. There are no mortgages recorded on the title.

All title searches, including a current title search, did not reveal the nature of the interests of each of Mrs. Johansen, the bankrupt or his ex-wife held in that previous home. However, it did show that each of them had an interest in it. The Judge determined that when Mrs. Johansen and the bankrupt bought the current home, it is a reasonable conclusion that the bankrupt had a 20% ownership interest in it. It was not intended to only pass on Mrs. Johansen’s death.

Justice Pattillo did not accept the bankrupt’s evidence that he has no interest in the property and had no knowledge that he was one of the parties on title. Given the history and the fact that he signed the affidavit of Land Transfer Tax at the time of purchase, Justice Pattillo held that the bankrupt was aware he had an interest in the legal title in the property.

Justice Pattillo found that the Trustee had the standing to bring the application for partition or sale of the property since he is a person with an interest in it. The Judge noted that Mrs. Johansen is 90 years old and does not wish to sell her home. Based on the evidence, however, he did not consider that to be of sufficient hardship to warrant refusing the requested remedy.

Tenants in common vs joint tenancy: The bankruptcy of 1 co-owner will affect the others

The Judge stayed his order for three months. He encouraged the bankrupt and through him his mother to seek professional advice so that this issue can be resolved with the Trustee before the sale process begins. The order will take effect if a resolution is not reached within that timeframe.

Now that the prospect of the sale of the entire home, not just the bankrupt’s co-ownership interest, was a reality, the bankrupt and his mother needed professional guidance. Their professional advice would be that the Trustee is only entitled to 20% of the bankrupt’s equity interest. So, if the mother from her own funds, or by getting a mortgage, can come up with the value of the 20% interest and pay it to the Trustee, then the house will not get sold. She will have bought the bankrupt son’s 20% interest, and the Trustee will have all the money he is entitled to.

If one co-owner goes bankrupt, the other co-owners are affected as well. It is the Trustee’s responsibility to convert the bankrupt’s equity into cash. One or more of the remaining co-owners are the natural buyers of the bankrupt co-owner’s interest. Sometimes non-bankrupt co-owners must sell, as is the case for Johansen if the mother cannot purchase the son’s equity from the Trustee, but most often someone will purchase the Trustee’s equity to maintain the status quo.

Had the choice of ownership interest as between tenants in common vs joint tenancy, this would not have changed the outcome of this case.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

A lawyer can help you understand tenants in common vs joint tenancy in Ontario

I hope that you found the tenants in common vs joint tenancy Brandon Blog interesting. Problems will arise when you or your company are in financial distress, cash-starved and cannot repay debts. There are several insolvency processes available to a company or a person with too much debt.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

tenants in common vs joint tenancy
tenants in common vs joint tenancy
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