Tag: licensed insolvency trustee

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DIFFERENCE BETWEEN CONSUMER PROPOSAL AND BANKRUPTCY: THE PROVEN CANADIAN WAY TO GET DEBT FREE

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

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.

Difference between consumer proposal and bankruptcy: Know your options

Regular readers of my Brandon Blog know that there are a lot of steps you need to go through to financially reorganize your life. I have written before different blogs on various aspects of both consumer proposals and bankruptcy. The purpose of this Brandon blog is to discuss in one place, the difference between consumer proposal and bankruptcy.

Many people opt for one of these options because life has thrown them a curveball, they no longer have the cash flow to pay off their debts and want to start fresh. There are some great benefits to filing bankruptcy. They include eliminating creditors and debts, getting control over your personal finances, and having a stress-free life, Starting Over, Starting Now. But if you’re considering a first-time bankruptcy, or the bankruptcy option even if you are familiar with the Canadian bankruptcy process from a prior time, you should consider the pros and cons of a consumer proposal, the only government-approved debt settlement plan in Canada. It will be good for you to know the options that I explain below.

Consolidation loans vs consumer proposals

What’s the distinction between a consumer proposal and a debt consolidation loan? The consumer proposal process is an insolvency procedure that allows you to resolve all the amounts you owe to your unsecured creditors via an arrangement with your creditors. It does this without needing you to file bankruptcy. A consumer proposal can only be carried out by a licensed insolvency trustee. A consumer proposal allows you to get rid of all the amount owed by repaying only a part of your financial obligations over time.

A consolidation loan means that you still have sufficient assets and income and a good enough credit score, in order to borrow the total amount you owe. The loan must carry an interest rate lower, and hopefully much lower, than the average interest rate of your combined total debt. You use the loan proceeds to repay 100% of your debts. You now have only one loan with a monthly payment you can afford. Taking out a consolidation loan is not an insolvency process.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

The main difference between consumer proposal and bankruptcy

The consumer proposal is a fundamental part of our personal insolvency system. It is an insolvency procedure controlled by the Bankruptcy and Insolvency Act (Canada) (BIA) that allows individuals who owe $250,000 or less (not including any financial debts secured against their principal home). It permits you to pay a portion of your financial debts with time, yet eliminate all of them if fully executed. It is an alternative to declaring bankruptcy. It is an alternative to bankruptcy.

Bankruptcy is also a fundamental part of our insolvency system under the BIA. However, rather than restructuring, in personal bankruptcy, the person surrenders all of their non-exempt assets to the licensed insolvency trustee for the benefit of the person’s creditors. Once the bankrupt person has fulfilled all of their duties, they are entitled to receive a discharge from bankruptcy, subject to the Trustee or a creditor opposing it.

Personal bankruptcy involves the liquidation of the bankrupt’s assets in return for the eventual elimination of their unsecured debts. It is not considered a restructuring like a consumer proposal is.

Difference between consumer proposal and bankruptcy: The process of filing a consumer proposal vs bankruptcy

You start by talking to a Trustee who will provide you basic guidance on both a consumer proposal and also bankruptcy. The Trustee will likewise inform you specifically just how each process functions. If at the end of that discussion you inform the licensed bankruptcy trustee that you really feel good in wanting to take the next steps with them, the Trustee will provide you with their intake form. When the form is completed, you send it to the Trustee, including supplying any kind of backup documents asked for, the Trustee can then provide you advice for your unique financial difficulties.

If you choose a consumer proposal, the licensed insolvency trustee will prepare the necessary filing documents for you to sign. This includes assisting you with preparing the best possible proposal that works for both you and your creditors. You then meet with the Trustee to sign the documents. The Trustee then files the documents electronically with the Office of the Superintendent of Bankruptcy (OSB). The OSB then issues the Certificate evidencing the filing and the formal process begins.

After seeing your completed intake sheet, the Trustee will advise on whether or not a consumer proposal would work for you, or if your best or only option is filing for bankruptcy. Similarly, in bankruptcy filings, the Trustee prepares all the required filing documents for your signature. The Trustee explains all of them to you, you sign them and the Trustee then electronically files the filing documents with the OSB. The OSB then issues its Certificate evidencing the bankruptcy and that formal process begins.

You initially meet with the licensed bankruptcy trustee, in-person, by video or phone, to share details of your personal situation, and working together, you determine whether a consumer proposal, an alternative to filing bankruptcy, or personal bankruptcy is the best option for you. With COVID-19, we have been holding all of our no-cost consultations and meetings by phone and video. We can do the sign-up process by video and email. We have found this is very convenient for our clients as they are not required to take the time to attend our office in person.

As you can see, the process of filing a consumer proposal vs bankruptcy is not that different. For filing, there is not really a difference between consumer proposal and bankruptcy.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Major difference between consumer proposal and bankruptcy

Is there a major difference between consumer proposals and bankruptcy? Yes. So far in this discussion, there have not really been major differences. But there really are as the consumer proposal is akin to filing for bankruptcy protection while the other is bankruptcy. Both provide legal protection from creditors. But a consumer proposal gives a person what the media calls filing for bankruptcy protection. When you file for bankruptcy, that calls for the liquidation of non-exempt assets.

Both bankruptcy and a consumer proposal can be excellent options for somebody who is experiencing a challenging financial position. A consumer proposal is an excellent choice for individuals who have the ability to make monthly payments to their creditors totalling less than the amount they owe, yet eliminating all their debts, while keeping the equity they have in assets they wish to keep. Bankruptcy is an excellent choice for those who are bewildered by their financial obligations, and who don’t have a consistent income, making it actually hard or impossible to manage making payments at any level to their creditors.

While both bankruptcy, as well as a consumer proposal, can supply a financial clean slate, there are a few vital distinctions.

In a consumer proposal, you normally get to keep all of your assets. In a bankruptcy, if you have equity in assets that you want to keep, you or someone friendly to you has to pay that equity to your Trustee for the benefit of your creditors. Otherwise, you need to surrender all non-exempt assets to the Trustee for the Trustee to sell them and then put the cash towards the claims of your creditors. The assets covered by your bankruptcy exemptions do not need to be surrendered.

In bankruptcy, you also have the issue of needing to obtain your bankruptcy discharge. If either the Trustee or one or more creditors object to your discharge, then you will not get your automatic bankruptcy discharge and you will have a discharge hearing in Court. You may also be subject to surplus income payments in a bankruptcy, which you will need to make to your Trustee (21 months for a first time bankrupt, 36 months for a second time or more bankruptcy).

The amount to offer your creditors in a consumer proposal has to be a better amount than they would receive from your bankruptcy. After doing the calculations I spoke about above, including any surplus income obligation, you will better understand what amount needs to be offered to your creditors.

Another difference between consumer proposal and bankruptcy is that there is a benefit of a consumer proposal in that you can spread the monthly payments for the amount determined over a term of up to 60 months, interest-free. In a bankruptcy, you are typically required to make any required payments over the term of your bankruptcy, which is much shorter than in a proposal. Therefore the consumer proposal allows you to term out a slightly higher settlement over a longer period of time. This makes the monthly repayment less complicated on your cash flow as well as your budget plan.

Once your consumer proposal is (deemed) accepted by the creditors and (deemed) approved by the Court, you just need to make your promised monthly payments to the Trustee. The Trustee handles making payments at regular intervals to your creditors. Once you have completed the payment promised under the consumer proposal, you receive your Certificate from the Trustee showing that you completed the consumer proposal. That is it. No discharge hearing can be opposed and no extra surplus income payments. It is already accounted for in the amount offered to your creditors in your consumer proposal.

The cost difference between consumer proposal and bankruptcy

When doing a consumer proposal, the fee of the licensed insolvency trustee is included in the payment you negotiate with your creditors. As I mentioned above, the calculation of what to offer in a consumer proposal does not include what the fee and costs are. Rather, it is compared to what the unsecured creditors can expect in bankruptcy.

However, if you were to file bankruptcy, the fee is based on the surplus income you may have to pay (based upon a criterion that includes income and family size) and also any assets that you are required to assign over to the Trustee. You might also have to make month-to-month contributions to cover the fee and costs if your income and non-exempt assets are insufficient to pay for the bankruptcy proceedings.

If there is no surplus income or assets, you, or someone on your behalf, will need to pay the bankruptcy fee which will be approximately $1,800 plus HST.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Difference between consumer proposal and bankruptcy: What’s worse? Credit rating impact of a bankruptcy vs consumer proposal

Both a consumer proposal and bankruptcy are insolvency proceedings under the BIA. Therefore both will negatively affect your credit rating. In a consumer proposal, your credit rating will show as an R9 on your credit report while you are making payments. Once you have completed your consumer proposal, your credit rating will be an R7 for 3 years after completion.

For a first-time bankrupt, if you were to file for bankruptcy, your credit report will show an R9 rating for 6-7 years after being discharged.

The difference between consumer proposal and bankruptcy summary

I hope that you found this difference between consumer proposal and bankruptcy Brandon Blog interesting. 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.

Categories
Brandon Blog Post

CREDIT CARDS MAXED OUT: THAT SCARY CRUSHING FEELING WHEN CANADIAN INSOLVENCY AT HIGHEST LEVEL

credit cards maxed out

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.

How do credit cards maxed out affect your credit score?

Your credit score is one of the most important things you have to offer anyone who is seeking to lend you money, whether it’s from a bank, a different credit card issuer, or even a landlord. Your credit score is a sort of credit health report that measures how much you owe, how much you owe on different kinds of credit, and how likely you are to default on payments.

Credit cards can be a convenient and effective way to manage your finances. However, the best use of a credit card may not be the best use when it comes to your credit score. Lenders consider one or more credit cards maxed out as a reason for your credit score to decline.

Right now we have a very unique situation when it comes to consumer debt. The average Canadian’s monthly credit card balance is lower today than it was 2 years ago. People’s credit card balance for months has declined. So it is not the case right now that credit cards maxed out. Yet, a recent poll shows that Canadians’ stress levels about their potential insolvency are the highest ever.

In this Brandon Blog, I look at the issues and provide some tips as to what positive things you can do if you are concerned about insolvency. Let’s look at the issues.

Changing habits as pandemic adds to debt load

There has actually been a surge in total Canadian consumer debt. It came mainly from financial debt growth in home mortgage debt and also automobile loans. Home mortgage balance increases originated from both refinancings of existing home loan debt and brand-new mortgage applications.

The thinking with vehicle financings is that it arose from Canadians acquiring vehicles that they had actually intended to purchase earlier. Concerning home loans, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a brand-new higher home mortgage amount, at greatly reduced rates of interest.

Throughout the last 18 months approximately of the COVID-19 pandemic, Canadians have actually partially paid for or totally repaid their high-interest-rate consumer debt by turning it into low-rate debt from bigger home mortgages along with residence equity credit lines. They have used their real estate to obtain a debt consolidation loan.

Now that the Canadians have in fact done that, the Ipsos survey discovered that 50% of Canadians are now more worried about not having the capability to repay their financial obligations than they used to. Yet one-third of respondents say they will spend more as the economy resumes.

As the economy slowly resumes, many Canadians are looking at a great amount of debt incurred during the pandemic and are stressed over making ends meet without taking on even more financial obligations. They have maxed out the possibility of getting even more cash from their homes.

The reasons are that either there is no more asset value to borrow from and/or their income cannot sustain any more financial obligations. So where is one of the most likely areas this brand-new financial debt is most likely to come from? Paid down credit cards are going to increase once more and many will sooner rather than later have credit cards maxed out from additional credit card debt.

credit cards maxed out
credit cards maxed out

Canada on verge of widespread insolvency and restructuring surge in COVID-19 new normal

Statistics Canada recently reported that overall household debt increased by 0.8% for the 2nd straight month to over $2.5 trillion. Mortgage debt and also home equity credit lines made up $1.98 trillion of that total amount. Over the initial 5 months of 2021, households had $57.5 billion in home mortgage financial obligations, compared to $34.3 billion over the exact same time period in 2020.

At the same time, non-mortgage debt climbed by 0.4% in May to $786.2 billion. Growth in credit card debt as well as other personal loans was the main driver. While charge card debt rose for the third month straight, it was still down by 3.3% from May 2020.

These statistics seem to bear out my thoughts that Canadian consumers now have no more room to borrow against their homes, so now, they will need to turn back to their credit cards and increase their credit card debt in order to fund their expenses. This will not turn out well in the long run. I foresee people having maxed out the amount they can borrow against their homes and then once again having their credit cards maxed out.

Lots of people do not understand how financial problems are created pushing individuals to seek out a remedy such as bankruptcy or a consumer proposal to restructure. The majority think that people get into financial trouble because they can’t properly handle their money. However, in most cases, it is because of an unforeseen trigger. Divorce, job loss, illness and the present pandemic are examples of triggers.

People in financial trouble feel shame and unfortunately, stop them from connecting with us early. Reaching out to a licensed insolvency trustee early is so important.

Credit cards maxed out Is a bad idea

By maxing out your credit cards you’re boosting your credit utilization ratio. This accounts for 30% of your credit score. As such, a maxed-out credit card can adversely impact your credit rating.

Theoretically, yes, you can pay off your credit card by just making the minimum payment. However, it can take you years to pay it off if you are only making the minimum payment. Your interest charges will be higher than your minimum monthly payments.

Your credit utilization ratio and therefore your credit score will suffer. Many people try to solve this problem by just applying to the credit card issuer for an increased credit limit. This may work once, but it does not make any sense. You cannot eliminate debt by increasing it!

Furthermore, you’ll be carrying that debt and paying for it at a very high rate of interest. On the other hand, if you make your repayment by the due date, or make big routine payments to pay it off, you will certainly pay no or extremely little in interest.

credit cards maxed out
credit cards maxed out

Are your credit cards maxed out? Here’s some personalized tips for paying off credit card debt

What can you do trying to be credit card debt-free? My 4 step strategy can help you get there.

1. Credit cards maxed out: Take control

It isn’t simple or comfortable to take a hard look at your finances, but it is essential. Analyze your household expenses, as well as the interest rates linked to every resulting financial obligation. Track your monthly expenses to really understand what your credit card purchases get you on a monthly basis.

This is the first step in understanding your expenditures and cutting down on the ones that are not needed. To recognize where you are going, you need to recognize where you have in fact been.

2. Credit cards maxed out: Minimize interest rates

The normal rate of interest on a bank card is about 19 percent. That’s rather high, so you may wish to think of doing a balance transfer by moving your credit card debt to a card with a minimized or zero-interest offer to assist in paying it off a lot faster.

A word of care: you’ll probably require to pay a transfer fee in doing so. Likewise, you will need to repay the debt in full before that promotion price finishes. Otherwise, the remaining balance on your new balance transfer card will again attract a greater rate of interest, possibly the very same or higher than the card you moved the debt from.

Although I do not hold out a lot of hope, you can ask your credit card firms if they will lower your rate of interest.

3. Credit cards maxed out: Credit counselling as well as debt paydown approaches

If you merely cannot make sufficient earnings to fund your debt repayments, consider a non-profit credit counselling service. At no charge to you, they can get you into a Debt Settlement Plan. Bear in mind that as soon as you are in such a strategy, your charge cards will certainly be cut off.

Do not go to any one of the financial debt settlement services that market often on television or social media. All they do is charge you a fee to take down basic information that a certified non-profit credit counselling agency or a licensed insolvency trustee would certainly do for no cost. After that, they run you through their “program” charging you a lot more fees until you can pay no more. After that, they send you to a qualified bankruptcy trustee.

There are 2 regular financial debt settlement strategies– avalanche method and also snowball method. The avalanche technique of getting out of the credit card financial debt is you initially put all your available cash to pay down your highest interest rate debt. As soon as that’s cleaned up, you start settling the following most costly debt. You keep repeating this up until all your consumer debts are gone.

Sometimes, the snowball technique offers a great deal of extra motivation. With this method, you settle the tiniest financial debt initially, to improve your mood. You use that power to resolve what is the next tiniest debt and so on. You are grabbing steam like a snowball rolling downhill.

It does not matter which strategy you utilize. The vital thing is that you start now and stick with it.

4. Credit cards maxed out: Adhere to it.

Remember your single focus should be reducing debt, not new non-essential spending. So do not prepare any kind of sort of travel getaways or big purchases in the meantime. You could backslide or strike some road bumps yet do not let that distract you or depress you.

Now for the challenging part. When possible, save some money to assist with unpredicted expenses that you would typically place on your credit card. This will certainly minimize the amount you would have to borrow by paying with real cash.

It’s an incredibly lengthy as well as agonizing trip to fully pay off your credit cards maxed out. It also can be an extremely lonely one. People don’t get into the bank card debt trap overnight, so you can’t leave it without some effort.

Credit cards maxed out summary

I hope that you found this credit cards maxed out Brandon Blog interesting. I wrote this now because I fear the trend I see from both the Ipsos survey and the Statscan report shows that now that Canadians have done their debt consolidation and credit card balances are low, the credit cards are now being run up again. The end result will be higher debt than the average Canadian started with.

Problems will arise when you are cash-starved and in debt, especially with a maxed-out credit card. 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 bankruptcy 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.

credit cards maxed out
credit cards maxed out
Categories
Brandon Blog Post

BANKRUPTCY LAWYER IN TORONTO VS. BANKRUPTCY TRUSTEE IN TORONTO: WE EXPLORE AND EXPLAIN COMPLETELY THE DIFFERENCES FOR YOU

bankruptcy lawyer in toronto
bankruptcy lawyer in 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 an audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Bankruptcy lawyer in Toronto introduction

Canada is recognized for its cultural diversity, but it can be a battle to locate trustworthy information on the nation’s laws. Bankruptcy is a difficult topic to learn about; both learning the technical side and dealing with the emotional one.

If you or your company are thinking about bankruptcy, you might think you need a bankruptcy lawyer in Toronto. However, you do not necessarily require one. A licensed insolvency trustee in Toronto (formerly called a bankruptcy trustee in Toronto) can help you pick the perfect insolvency process for you and make certain that you survive it as best as possible.

In this Brandon Blog, I discuss the roles of a bankruptcy lawyer in Toronto and a licensed insolvency trustee. Sometimes they can overlap and many times they do not. We will take a detailed look at a bankruptcy lawyer in Toronto vs a licensed insolvency trustee. We will discuss the differences between the two and exactly how they can each help you.

Bankruptcy lawyer in Toronto – Do you need one to file personal bankruptcy?

Whether it is personal bankruptcy proceedings, or one of the formal alternatives to bankruptcy such as a consumer proposal or a Division I Proposal that are being contemplated, a bankruptcy lawyer in Toronto or elsewhere is not involved in the actual bankruptcy filing. or the Canada – restructuring & insolvency filing. That is what trustees in bankruptcy do.

When a person or company is contemplating an insolvency process, they can get a no-cost consultation with any one of the bankruptcy trustees they choose to meet with. During the consultation, information is gathered by the Trustee, analyzed and possible solutions are discussed.

Trustees must always be careful to not tread into areas that could possibly give them a conflict in providing their financial services. People wanting advice on asset transfers, asset protection, or preferring one or more creditors over others are areas that Trustees should not wade into.

In situations like that, I always advise potential bankruptcy clients that as there is no privilege in our discussions and we should not talk about those things so that I will not be conflicted. Rather, the person should get advice from a bankruptcy lawyer in Toronto or elsewhere where the discussions and the legal advice are protected by solicitor-client privilege.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Do You Need a personal bankruptcy lawyer in Toronto to get your bankruptcy discharge?

As I have written before in several Brandon Blogs, there are 6 possible outcomes in a bankrupt’s application for discharge. This depends on whether the discharge is being opposed by either the Trustee and/or one or more creditors. The possible bankruptcy discharge outcomes are:

  • Automatic – This discharge is absolute and is given by the Trustee at the earliest possible time the bankrupt person is entitled to a discharge. It means that the bankruptcy has performed all of his or her duties, has fully cooperated with the Trustee and nobody has opposed the discharge.
  • Absolute – An absolute discharge is obtained when the Trustee issues the automatic discharge. it is also possible to obtain an absolute discharge when a creditor opposes the bankrupt’s discharge, the matter goes to court for a hearing, but the court does not believe the evidence presented by the opposing creditor is persuasive and the court orders an absolute discharge.
  • Conditional – In this type of discharge, there was opposition to the bankruptcy receiving an absolute discharge. The court considered the evidence and concluded that the bankrupt must fulfill one or more conditions before being entitled to a discharge from bankruptcy. More often than not, a conditional discharge includes a certain amount of money the bankrupt must pay to the Trustee for the general benefit of the creditors.
  • Suspended – A suspended discharge is given when there is opposition to the bankrupt’s discharge and the matter goes to court for a discharge hearing. Based on the evidence, the court believes that the bankrupt, either before or during the bankruptcy estate file administration, has conducted himself or herself in such a way that although a discharge will be given, it should be delayed. The suspension acts to delay the discharge and can be combined with conditions.
  • Refused – The bankrupt’s discharge is opposed probably by at least the Trustee and probably one or more creditors. There is sufficient evidence before the court that the bankrupt has not lived up to his or her duties and has probably failed to fully cooperate and provide full disclosure to the Trustee. The court, based on the evidence, refuses to consider the bankrupt’s application for discharge until such time as the bankrupt performs all duties and discloses all information.
  • No order – This is not an actual discharge type, but can be the outcome of a discharge hearing. The court can issue a “no order” instead of a refusal. The facts are probably similar to when the court can issue a refusal. However, in a “no order” situation, the bankrupt remains in bankruptcy but the Trustee is then free to pursue its discharge. Once the Trustee gets its discharge, the bankrupt lose the protection offered by the stay of proceedings. Creditors are then free to pursue all of their rights and remedies against the bankrupt in the enforcement of their trying to collect their respective debts.

When the time comes for the bankrupt to get his or her discharge from bankruptcy, if the Trustee or a creditor opposes, the bankrupt would be well advised to consult with a bankruptcy lawyer in Toronto or elsewhere. The Trustee cannot give an automatic discharge and the matter is going to court for a trial. The bankrupt should get the benefit of legal advice and probably will need to retain the lawyer to provide legal services in representing the bankrupt in court. That is not the job of the Trustee.

Corporate Bankruptcy in Canada – Corporate bankruptcy lawyer in Toronto, Canada – Do you need one to file corporate bankruptcy?

As I will explain, every Canadian corporate insolvency file requires probably several, not just one bankruptcy lawyer in Toronto or elsewhere. Insolvency law is complex and lawyers will help all the parties involved.

The current economic climate in Canada is going to be challenging for Canadian businesses and I expect there will be many financial difficulties. Government COVID-19 support programs are scheduled to end soon. Companies have been tapped out while shut down just trying to stay alive with little or no revenue being earned. Companies will need cash now that it is time to start everything up again. No doubt there will be business casualties.

However, not all businesses are created equal. Some will be able to restructure, some will file for bankruptcy and others will merely shut their doors and fade away.

Among the keystones of a restructuring proceeding under either the Companies’ Creditors Arrangement Act or the Bankruptcy and Insolvency Act is the debt workout. The restructuring is designed to maintain the debtor’s business and negotiate a financial debt repayment strategy with its creditors. The aim is to save jobs, allow the company to continue while avoiding bankruptcy liquidation.

Key components of a debt workout normally include debtor-in-possession lending (DIP lending) while the company is reorganizing, new capital for the company coming out of its restructuring and getting unsecured creditors, and possibly secured creditors, to agree to accept less than they are owed. In the very large corporate restructuring files, there are normally lending syndicates due to large and complex lending arrangements. They too will need lawyers to help them with the insolvency law.

If a restructuring proceeding is not possible or does not succeed, then either the company’s secured creditor will begin receivership enforcement proceedings or the company will file an assignment in bankruptcy or a creditor will launch a bankruptcy application to put the company into bankruptcy.

In every corporate insolvency file, legal services are required by all the stakeholders. Canadian counsel plays an important part in providing advice. In the larger files, a large team of lawyers will be needed for both the company and its main creditors. The Board of Directors will need their own independent legal team. The bankruptcy trustee in Toronto will also need a dedicated team of lawyers to help navigate through the formal restructuring in court or help in a court-appointed receivership, private receivership or bankruptcy.

As you can see, in pretty well every corporate file, a bankruptcy lawyer in Toronto or elsewhere is pretty well a must-have requirement. Lawyers will be able to help the company, its Board of Directors, its creditors and the insolvency professional create effective solutions. The best ones will also make sure that they are also practical solutions.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Other situations where you could need a bankruptcy lawyer in Toronto, Barrie, GTA, or elsewhere

When looking for a bankruptcy lawyer in Toronto, Barrie, GTA and elsewhere, you want to find one that has substantial experience. Depending on the situation you or your company are involved in, the experience could be in one or more of:

  • financial reorganizations;
  • debt reorganizations and debt restructurings;
  • debtor legal rights and creditor rights;
  • security enforcement;
  • forbearance/standstill arrangements;
  • lender liability suits;
  • receivership and related matters for banks or other secured lenders, court and privately appointed receivers;
  • insolvency and bankruptcy litigation or other complex matters; and
  • acting for receivers and Trustees, debtors, secured creditors, unsecured creditors or any other stakeholder in an insolvency process.

Take Your First Step Towards A Debt Free Life

I hope that you found this bankruptcy lawyer in Toronto Brandon Blog interesting and that you now have a better appreciation for when getting bankruptcy legal advice is necessary. 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 and businesses facing financial issues need a realistic lifeline and practical financial advice. 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.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Call us now for a no-cost bankruptcy 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 DOES THE BANKRUPTCY TRUSTEE INVESTIGATE? SIMPLE RULES EXPLAINED BY A TORONTO TRUSTEE

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.

What does the bankruptcy trustee investigate – What is a bankruptcy trustee?

The new name for a bankruptcy trustee is a licensed insolvency trustee. I will use the terms interchangeably in this Brandon Blog. In this blog, I discuss what does the bankruptcy trustee investigate? But first, I want to go through a few basics.

The process of a bankruptcy trustee’s role in the Canadian insolvency system is a delicate one. The licensed insolvency trustee starts out by reviewing the debtor’s financial information and advises the debtor on whether a restructuring is possible to avoid bankruptcy or if filing for bankruptcy is their only realistic option.

The Trustee’s job is to help a debtor restructure his or her financial affairs and to do that, he or she must know what the debtor’s assets and liabilities are, the bigger picture of the debtor’s life and what transactions the debtor may have recently entered into. It is not just what he or she claims his or her debts are.

The Trustee collects all this information in order to advise the debtor on whether a bankruptcy protection financial restructuring filing is possible or if bankruptcy is their best option and why. The debtor then must choose what sort of insolvency process they wish to enter. Once filed, the Trustee also acts for the creditors and is required to perform an investigation.

Today I discuss what does the bankruptcy trustee investigate? Anyone contemplating a bankruptcy filing should know what they are in for before it is too late.

What does the bankruptcy trustee investigate – Tell your bankruptcy trustee everything

I thought of writing this blog topic because just yesterday, a lawyer friend called up with a question. The lawyer is a family law lawyer, representing a spouse who completed a consumer proposal. The lawyer, on behalf of his client, is making a claim as having a trust claim over his spouse’s home.

The judge asked if the client declared this claim as a potential asset in his sworn statement of affairs in the consumer proposal bankruptcy paperwork? The answer is no. Now the judge says, correctly, that the client had a duty to disclose that information at the time. The judge is correct. The judge then went on to ask how he can rely on the credibility of the client’s assertions now? What a jackpot they are now in!

That is why I say tell your bankruptcy trustee everything. If there is full disclosure in the initial interview before the period of time the bankruptcy process begins, I can then consider any troublesome issues and advise on the best course of action. Then you don’t need to worry about what does the bankruptcy trustee investigate. Nobody wants to have a nasty surprise like my lawyer friend’s client.

what does the bankruptcy trustee investigate
what does the bankruptcy trustee investigate

What does the bankruptcy trustee investigate? What if I fail to remember to divulge something?

It is fairly possible that you will accidentally neglect to divulge something in your bankruptcy documents or inform your Trustee about it. You do not want anyone thinking you are conducting the concealment of assets.

What does the bankruptcy trustee investigate? What can I do?

As quickly as you learn of your error, call your trustee right away and correct this mistake. You want to make sure the Trustee understands it was a simple error and not a case of you making a false claim.

What does the bankruptcy trustee investigate? What if I have outstanding tax returns?

If as an example, you forget to inform your insolvency trustee that you have unfiled tax returns, CRA can oppose your discharge and request that all outstanding returns be filed before you get to a discharge hearing. This will extend the time you remain in bankruptcy and puts your discharge into a court hearing.

It may turn out that the amount owing from those unfiled returns is not that large, and if you had filed the returns before going bankrupt and declared that additional liability, there would not have been a problem at all. Your Trustee actually should have caught that before you filed and got you to bring your tax filings current.

What does the bankruptcy trustee investigate? What happens If I overreported income?

Reporting earnings greater than you actually earn might set off a surplus income payment requirement that is either higher than it should be or where there would not have been one at all if you had properly reported your monthly income. Make sure you have documents to back up everything you are advising your trustee about so that such an error is not made.

The same holds true for underreporting. You may have a surplus income obligation that will not be caught and finding out at the end will hold up your discharge. Again, your Trustee should have asked for backup during your initial meeting and should have caught your error before filing for bankruptcy.

What does the bankruptcy trustee investigate? Suppose I am not divulging certain information?

If you fail to divulge particular information about your assets or give information that at some point complicates your insolvency, it is certain that this will complicate your discharge at the very least. It may also open you up to having committed a bankruptcy offence which will create worse penalties and headaches for you.

Recall that I mentioned at the beginning of this Brandon Blog that the reason I wrote on this topic today was because of a phone call received from a divorce lawyer friend of ours. The lack of disclosure was not caught in the consumer proposal administration. However, it may totally ruin the client’s chances for any meaningful recovery in his family law proceedings.

If the client had divulged the asset, which at the time was contingent, to the bankruptcy trustee acting as an administrator in the consumer proposal, the Trustee could have worked that into a successful outcome for the client AND the client would not now have his legal problems which could very well cost him big time!

what does the bankruptcy trustee investigate
what does the bankruptcy trustee investigate

What does the bankruptcy trustee investigate? – Collection of information by bankruptcy trustee also allowed under PIPEDA

A person filed a complaint after a bank, where she as well as her husband had gotten a mortgage from, revealed her personal information, especially regarding her financial situation, to the Trustee of the Bankrupt Estate of her spouse. There was no disagreement that this disclosure happened without the complainant’s understanding or permission.

However, the federal government ruled that it was allowable under the Personal Information Protection and Electronic Documents Act (PIPEDA) given that the financial institution was required to provide the information under another law, namely, the Bankruptcy and Insolvency Act (BIA).

PIPEDA paragraph 7(3)(b) specifies that a party may disclose personal information without the knowledge or consent of that party if the disclosure is for the purpose of collecting on a financial obligation owed by the person to that party.

Paragraph 7(3)(i) of PIPEDA specifies that an organization might disclose personal information without the knowledge or permission of the person if the disclosure is required by law. Trustees are licensed by the Office of the Superintendent of Bankruptcy (Canada) (OSB) under the BIA and also are held to requirements of practices or solutions established by the BIA.

The designated Trustee for her hubby’s insolvent estate wrote to the financial institution, requesting the complete financial institution file connected to the mortgage on the residence jointly had by the complainant wife and the bankrupt husband be disclosed, according to the provisions of S. 164(2) of the BIA.

The bank stated that it revealed the wife’s personal details without her understanding or permission, based on the PIPEDA sections I referenced above. The complainant thought that the Trustee did not have the right to access her individual info from the financial institution without her understanding or consent. The Privacy Commission ruled against her.

As long as the Trustee is asking for information from a 3rd party that will assist in the bankruptcy administration, that 3rd party can provide the information without worrying about what does the bankruptcy trustee investigate or a PIPEDA violation.

On the flip side, for every insolvency administration we perform, as part of the initial sign-up documents, we provide a PIPEDA disclosure statement to the debtor or designated officer of the company. Our PIPEDA disclosure says that in performing our duties we collect and store personal information which we may have to divulge to 3rd parties in performing our duties under the BIA, to the court or in assisting the debtor in reaching arrangements with their creditors.

What does the bankruptcy trustee investigate? – Can I sell my stuff before filing bankruptcy?

Bankruptcy is a fair and well-balanced treatment that considers the interests of all stakeholders. I always tell potential clients that any sale or transfer of property has to be done as if your creditors are evaluating your every move while you do it.

In Ontario, the Execution Act provides for certain personal exemptions, which also apply to anyone who does a bankruptcy filing in Ontario, up to a stated value. The exempt property consists of:

  • household furnishings and appliances – $14,180;
  • tools and other personal property used to earn an income:
    • in the case of a debtor engaged solely in the tillage of the soil or farming, $31,379 for livestock, fowl, bees, books, tools and implements and other chattels ordinarily used by the debtor in the debtor’s occupation, or
    • in any other case, $14,405;
  • motor vehicle – $7,117; and
  • principal residence – $10,783.

You might be liquidating assets that you don’t need to because they would be exempt. If you are thinking about liquidating nonexempt property to make financial settlements with certain of your creditors, this will be problematic. You could end up preferring some over others which will cause both you and them problems in your bankruptcy.

This is another factor to think about. My best advice is that you raise these issues with a Trustee before you do anything if you are contemplating bankruptcy. The Trustee will explain to you the ramifications of what you are thinking of doing so that you will have the smoothest time possible in your bankruptcy estate. The Trustee will also explain what does the bankruptcy trustee investigate so you will be informed.

what does the bankruptcy trustee investigate
what does the bankruptcy trustee investigate

What does the bankruptcy trustee investigate and look for in bank statements?

The personal bankruptcy trustee uses bank statements and other documents to discover errors or irregularities in your pre-filing personal bankruptcy paperwork. To start, you’ll list your creditors and the amounts you owe each of them; your assets, their values, and whether you can keep any of them as exempt property; your earnings for the last 12 months; as well your regular monthly expenditures. Not only will you disclose your income in several spots in the bankruptcy documents, but you’ll also give confirmation in the form of paycheque stubs and income tax returns, as well

The Trustee then goes over these anomalies with you to permit you to give better paperwork in support of your list of assets and liabilities. You’ll likewise have to send duplicates of your bank statements and also other documents that the Trustee asks for after you file for bankruptcy. Your licensed insolvency trustee makes use of the bank statements to validate your reported info.

If for some reason your historical financial institution deposits are dramatically different than your claimed earnings, you’ll need to be prepared to describe the disparity. If you approximated your bank accounts having a total of $100, yet it was, in fact, your deposit accounts had $1,500 on the day you filed, it will be nonexempt, and the Trustee will take it.

If you paid any type of huge expenses or transferred a large sum or an asset to someone right before you filed personal bankruptcy, the Trustee will have an obligation to report those transactions to your creditors, the OSB and the court and bring that cash back right into the personal bankruptcy estate for all creditors to share. If the cash is not recoverable from a third party, the Trustee will oppose your discharge and will look for payment of a minimum of that cash from YOU as a condition of your bankruptcy discharge.

If nevertheless, the Trustee thinks that you either lied or deliberately omitted details, the Trustee has to report that. The Trustee will certainly oppose your discharge and you will have a substantial issue on your hands needing you to retain a personal bankruptcy attorney.

What does the bankruptcy trustee investigate? All of that.

Red flags the bankruptcy trustee looks for at the meeting of creditors

Communicating with creditors and the meeting of creditors are very useful tools for the trustee in bankruptcy. The creditors have a much longer relationship with the bankrupt than the Trustee. They may very well have information that would be helpful to the Trustee in gaining a better understanding of the assets and liabilities of the bankrupt and of the bankrupt’s financial affairs not clear from the financial documents already reviewed by the Trustee.

At the First Meeting of Creditors in bankruptcy or the Meeting of Creditors in a Division I Proposal (or if required in a consumer proposal), the Trustee and creditor representatives can ask the debtor questions about their financial affairs. This is especially so for any type of discrepancies raised by your filing documents or financial records that indicates that you may be misstating assets or worse, the concealment of assets.

In any financial restructuring, including corporate reorganization plans, the value of the debtor’s nonexempt property really matters mainly because of the rule that entitles unsecured creditors to get a better outcome from such a repayment plan than would be the case in the debtor’s bankruptcy.

If your earnings don’t match your reported numbers, or if you improperly report side hustle business revenues, you can anticipate some sharp concerns and also possibly trouble getting your restructuring authorized or your discharge from bankruptcy.

what does the bankruptcy trustee investigate
what does the bankruptcy trustee investigate

What does the bankruptcy trustee investigate – When the bankruptcy trustee suspects fraud?

When allegations of bankruptcy fraud enter into bankruptcy administration, the next step normally includes obtaining information via an examination under oath. The BIA enables either the Trustee or the OSB to examine a bankrupt under oath. The BIA additionally permits the Trustee to put questions under oath to anyone that might have information, knowledge or documents concerning the affairs of the bankrupt. One of the key functions of the bankruptcy trustee is to protect the interests of unsecured creditors and to do so at every stage of the bankruptcy process.

As soon as the Trustee has gathered sufficient proof to support a case, the Trustee has 2 options, depending on the circumstances. If it is criminal activities or bankruptcy offences that the bankrupt person or the Directors of the bankrupt company have done, the Trustee can ask the OSB to review the proof. If they concur with the Trustee’s analysis, they can then call in the RCMP to check out.

If the RCMP has adequate evidence of a crime having been committed, or of bankruptcy offences, they will have the Crown lay bankruptcy fraud charges and then there will be a criminal trial. The result can be a fine, jail time or both. This will also give cause for the Trustee to have no choice but to oppose the person’s bankruptcy discharge.

If it is only about the recovery of money for creditors, the Trustee, if it has sufficient evidence and also funds, can launch a legal action against the appropriate party. The point of this kind of adversary case is to obtain cash for creditors (rather than prosecuting a criminal offence).

Such a proceeding resembles legal actions in various other courts yet generally, the matter in a bankruptcy administration will be heard in a shorter period of time in bankruptcy court than proceedings in various other courts. The obvious goal is for the Trustee to enter into settlement agreements with the offending parties. The goal of settlement agreements is to get cash for the creditors.

What does the bankruptcy trustee investigate summary

I hope that you found what does the bankruptcy trustee investigate Brandon Blog interesting and that you now have a better appreciation for the investigation aspect of an insolvency proceeding. 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 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 bankruptcy 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.

what does the bankruptcy trustee investigate
what does the bankruptcy trustee investigate
Categories
Brandon Blog Post

BANKRUPTCY DISCHARGE ORDER: OBSESSED CREDITOR LOSES APPEAL OF THE DISCHARGE ORDER

bankruptcy dischargeWe 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.

What does bankruptcy discharge mean in Canada?

A bankruptcy filing is a form of insolvency process under Canadian bankruptcy law available to individuals and businesses. Bankruptcy deals with a person’s or company’s debt load and assets. After performing a detailed initial assessment, the licensed insolvency trustee will be in a position to advise the debtor if they will be better serviced through a restructuring process as an alternative to bankruptcy (consumer proposal or Division I Proposal for individuals, Division I Proposal or Companies’ Creditors Arrangement Act bankruptcy protection for companies) with creditors, or whether the debtor will be better served filing for bankruptcy.

The final piece of any bankruptcy process for an individual is the bankruptcy discharge. Individuals who go bankrupt are entitled to a discharge from bankruptcy. Companies are only entitled to one if every bankruptcy claim filed is paid in full, with interest. Because this never happens, companies do not receive a bankruptcy discharge. It is not impossible, but for this reason, it really does not happen.

If you are thinking about filing an assignment in bankruptcy, then you may be wondering about the bankruptcy discharge process and how it will affect you. Many people think their debts are eliminated at the moment of their bankruptcy filing.

This is incorrect. It is the bankruptcy discharge that will remove all (with certain limited exceptions) of your unsecured debts from your life and will result in letting you move forward with a clean slate. In this Brandon Blog, I discuss the bankruptcy discharge process and a recent decision of the Supreme Court of British Columbia hearing an appeal to the decision of the Master sitting as bankruptcy registrar on a bankrupt’s application for discharge.bankruptcy discharge

Bankruptcy discharge and its consequences for the bankrupt

When you are granted a bankruptcy discharge, this means that those debts caught by your bankruptcy are no longer your responsibility. This means that every action from creditors or the collection agencies they have retained stops trying to collect the debt obligations.

As I previously mentioned, most almost all debts are wiped off your slate when you receive your discharge from bankruptcy. The kinds of debts that remain even after a bankruptcy discharge are:

  • spousal or child support payments;
  • fines or penalties mandated by the court;
  • claims arising from fraud or fraudulent breach of trust;
  • student loan debt if less than 7 years have passed since the bankrupt stopped being a part-time or full-time student.
  • any kind of financial debts that are secured against your assets, such as a home mortgage or automobile financing, are not discharged as a result of your bankruptcy discharge.

These sorts of financial debts endure after bankruptcy as they are not released. The individual will be required to continue paying those financial obligations according to their terms. All various other financial obligations are discharged and do not have to be paid.

What are the types of bankruptcy discharge?

If there is no Trustee opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties of a bankrupt, in most situations, the licensed insolvency trustee can issue an automatic discharge which provides the bankrupt with an absolute discharge from bankruptcy.

If there is an opposition or the bankrupt meets one of the criteria that does not allow for an automatic discharge (such as the bankruptcy process finding the bankrupt a high income tax debt situation), there must be a discharge hearing in court which is heard by a Master of the court sitting as the registrar in bankruptcy. There are 4 types of bankruptcy discharge and a 5th bankruptcy outcome is also possible. They are:

  1. absolute – an absolute discharge means the bankrupt is entitled to an immediate discharge. This can be given by the licensed insolvency trustee in the bankruptcy estate handling the bankruptcy administration if the bankrupt has fulfilled all of their duties and there is no trustee or creditor opposition;
  2. conditional discharge – can get a discharge after meeting one or more conditions. The most common type of condition of discharge involves paying a sum of money to the licensed insolvency trustee;
  3. suspended – the bankrupt’s discharge will take place at a later date and may very well be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. refused– the court refused to grant a bankruptcy discharge probably because the bankrupt has failed to provide full disclosure or perform other bankruptcy duties; or
  5. “no order”– the Trustee advises the court that regardless of the time period that has passed, the bankrupt has actually not satisfied every one of his or her obligations and the bankrupt has actually failed to reply to the Trustee’s demands for information. In this situation, when the “no order” order is provided, the licensed insolvency trustee is at liberty to seek its discharge. Once the bankrupt person has actually fulfilled the requirements set by the court, the bankrupt can re-apply for a discharge hearing by the court.bankruptcy discharge

For a first-time bankrupt with no surplus income who fulfills of their duties, including attending the 2 mandatory credit counselling sessions, they are entitled to their bankruptcy discharge after a bankruptcy period of 9 months from the date of bankruptcy.

If this is your second bankruptcy a discharge will not be available after 9 months. A 2nd bankruptcy lasts for a minimum of 24 months if you do not have any surplus income payments to make to the Trustee. If you have surplus income, a second-time bankrupt must make those monthly payments for 36 months before they are entitled to a bankruptcy discharge.

For a 3rd or subsequent bankruptcy, the timeline is the same as the 2nd time bankrupt. However, it is much more possible that there will certainly be resistance to the discharge by the Trustee or the creditors. The court can also impose whatever conditions it sees fit.

Creditor objects to the decision of the Master on bankrupt’s application for discharge

On July 9, 2021, the decision in Hanlon (Re), 2021 BCSC 1348 in the Supreme Court of British Columbia was released. This was an appeal from an order by the bankruptcy registrar of the Supreme Court of British Columbia dated April 28, 2021 in Hanlon (Re), 2021 BCSC 800, VA B190492. This is an appeal under s. 192(4) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA), from an order of a master of that Court, sitting as a registrar in bankruptcy, granting the bankrupt, Mr. Hanlon, a bankruptcy discharge that was made conditional on his paying $7,500 to the Trustee.

The appellant, Ms. Johnson, is one of Mr. Hanlon’s creditors. She states that the registrar erred in approving the discharge on those terms. If the appeal is allowed, she looks for an order refusing Mr. Hanlon’s application for a discharge, with leave to apply again in two years, or alternatively, giving a discharge conditional on his paying $50,000. The appeal is opposed by both Mr. Hanlon the bankrupt, and the Trustee. The appeal was heard by Judge Milman, Canada’s bankruptcy legislation, the BIA states that a person dissatisfied with an order or decision of a registrar can appeal that decision to a judge of that court who in that capacity is sitting as a bankruptcy judge.

The alleged errors made by the registrar in the making of the order of conditional discharge

Ms. Johnson argued that the registrar made certain errors in granting the conditional bankruptcy discharge order. Ms. Johnson says that in granting the bankruptcy discharge on those terms, the registrar erred as follows:

  • in concluding that Mr. Hanlon had complied with the injunction resulting from Ms. Johnson’s original successful litigation against Mr. Hanlon when he had not;
  • in falling short to take into account Mr. Hanlon’s refusal to agree with the accuracy of the trial judge; and
  • in failing to consider Mr. Hanlon’s real income earning potential.bankruptcy discharge

The standard of review on such an appeal

There is a standard of review on such an appeal from an order of a bankruptcy discharge hearing. S. 192(1) of the BIA gives the bankruptcy registrar the authority to, amongst other things, grant orders of discharge. S. 192(4) of the BIA allows a party dissatisfied with an order or decision of a
registrar may appeal it to a judge.

In granting an order of discharge in the bankruptcy process, the registrar is exercising judicial discretion. If the registrar has acted reasonably, the judge should not set it aside or ignore it. Further, if an appeal from a bankruptcy discharge order is based on alleged errors in findings of fact, the court will not interfere if there is no overriding error in the findings of fact and there is evidence from which the findings of fact could be made. Discretionary decisions may, naturally, be overturned if the registrar has materially misinterpreted the law or made an error in respect of the facts underlying the use of that discretion.

When a registrar’s decision in a bankruptcy discharge hearing imposes conditions, those conditions must be realistic for the bankrupt to perform in a reasonable period of time. Where the amount ordered was unrealistic and the bankrupt’s discharge is conditional on making additional payments, the appeal court did hold that results in an error of law and the appellate judge can either substitute the conditions or refer the matter back to the registrar for reconsideration.

The judge’s decision on the appeal from the registrar’s bankruptcy discharge order

The judge dismissed the appeal finding there were no overriding errors made by the registrar. With respect to the amount of $7,500 ordered as a condition of discharge from bankruptcy, the judge found as follows:

Ms. Johnson says that the registrar did not consider Mr. Hanlon’s untapped earning capacity and instead concentrated practically completely on her arguments of his potential inheritance. She suggests that Mr. Hanlon could be earning more than he is. In her opinion, he could earn more to enable him to make a settlement of $50,000 rather than the $7,500 that was ordered.

Mr. Hanlon’s real historic earnings offered adequate assistance for the registrar’s verdict that he was incapable of paying any more than the $7,500 that she ordered for him, did not have the financial prospects himself to do so and without getting personal loans from family members to help him with that. That was properly decided by the registrar based on the evidence before her.

The judge found that there is no merit in this or any other of the grounds of appeal. He found no error in the registrar’s decision, and having found the discharge condition that she imposed to have been reasonable in the circumstances, he dismissed the appeal.

Bankruptcy discharge summary

I hope that you found this bankruptcy discharge Brandon Blog interesting and that you now have a good appreciation for the process at the end of the administration for a person who files for bankruptcy and the considerations of the court if someone appeals a bankruptcy discharge order. 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 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 bankruptcy consultation.bankruptcy discharge

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

GAMBLING DEBT HELP: OUR PLAN TO CONQUER YOUR DEBT AND YOUR GAMBLING ADDICTION RECOVERY

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.

gambling debt help

Gambling debt help: What is compulsive gambling?

There are various provincial-run casino games, horse racing and the sale of lottery tickets. Yesterday, the Canadian Senate passed Bill C-218, the Safe and Regulated Sports Betting Act, An Act to amend the Criminal Code (sports betting). Betting will now be allowed on single games in professional sports.

Gambling is certainly not going away. Some people will be able to control their gambling habits and do it in moderation. Others will not be able to and ultimately will need gambling debt help. The compulsive gambler will be the person who will truly be hurt.

The term “compulsive gambling” is often used to describe individuals with gambling disorders. Many compulsive gamblers have a history of severe gambling problems which began in childhood and have continued through adulthood with occasional periods of remission. Like many problems, compulsive gambling results from a combination of biological, genetic and environmental factors.

Today I explain how our program has helped many people in need of gambling debt help, to overcome both their gambling addiction and gambling debt.

Gambling debt help: What are the signs of gambling addiction?

For many people gambling can be just a form of entertainment—as long as they’re winning. But for some people, the thrill of winning can become an addiction. Gambling addiction is a powerful force that can have negative consequences for those who are afflicted.

Gambling behaviour that is symptoms and signs of gambling addiction that gambling addicts engage in include:

  • Pathological gambling. Always thinking about placing bets, including regularly scheming precisely how to get more cash for wagering.
  • Requiring to wager with boosted amounts of money to obtain the same thrill.
  • Attempting to manage, lower or stop wagering, without success.
  • Feeling flustered or cranky when attempting to reduce betting.
  • Betting to forget about difficulties or relieve feelings of vulnerability, regret, anxiety and anxiousness or anxiety.
  • Attempting to make up lost money by wagering even more (chasing losses).
  • Lying to family members or others to conceal the seriousness of the situation.
  • Preoccupation with gambling. Jeopardizing or giving up on crucial relationships, family life or work as a result of betting.
  • Resorting to stealing or other criminal activity to get money for gambling after access to credit has been exhausted.
  • Asking others to bail you out of the debt, including maxed-out credit cards, you have incurred as a result of gambling losses.
  • Unlike a lot of casual gamblers that really only engage in what one might call social gambling, which stops after a certain amount of losses or winnings, people with addiction to gambling are compelled to keep playing to recover their money, a pattern that ends up being significantly hazardous over time.

If you can relate to one or more of these symptoms, then you may have a gambling disorder.

gambling debt help
gambling debt help

Gambling debt help: Gambling and betting debts?

There are two types of wagering financial debts:

  1. Debts for loans obtained, either direct borrowing from personal loans, lines of credit or a cash advance resulting in credit card debt; and also
  2. Credit granted by a casino to higher net worth people through markers for casino gambling.

In the first case, the cash from personal loans or credit card debts can either be used for gambling or, for necessary living expenses because the money earned from work that could buy those things was lost betting. Making use of markers at a casino is clearly a straight betting debt.

In the context of this discussion, it does not matter how the debt from gambling was incurred. Betting debts in bankruptcy (or a debt settlement proposal/consumer proposal) are claims provable under the Bankruptcy and Insolvency Act (Canada) (BIA).

Gambling debt help: Gambling debt bankruptcy

Let’s assume that you are dealing with only personal loans, lines of credit and credit card debt. We won’t touch on the topic of whether or not loan sharks recognize Canadian insolvency law as a reason why you can’t repay and ultimately do not have to repay your debts in full.

You can file an assignment in bankruptcy on gambling debts. But it is not going to be that straightforward when gambling debts are involved. There are different concerns that people with gambling dependency and also financial obligations as a result of gambling must initially take into consideration with the bankruptcy trustee (now called a licensed insolvency trustee) (Trustee) during your initial no-cost consultation.

The significant issues are:

  1. Your assets.
  2. What is your annual revenue?
  3. Have you ever before been bankrupt?
  4. Full disclosure of all your liabilities, not just direct losses from gambling activities.
  5. Have you not been paying your tax obligations as a result of gambling money so that the Canada Revenue Agency is a creditor, and perhaps a major creditor?
  6. Getting compulsive gambling addiction advice and entering into long-term therapy for the gambling issue. Gamblers Anonymous is the most renowned program.
  7. Getting a discharge from bankruptcy. Rehabilitation is a vital part of the BIA. To obtain a discharge from bankruptcy, a bankrupt will need to reveal that they have constantly gone to therapy sessions as well as have actually stopped their addictive behaviour. They will have to prove that they are not continuing in the same behaviour as an addicted gambler.
  8. Is a consumer proposal available for you to avoid bankruptcy?

    gambling debt help
    gambling debt help

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

If you are insolvent and pick the bankruptcy route, you will encounter several issues:

  • If you have non-exempt assets or equity in non-exempt possessions, your share of those assets belongs to your Trustee. For instance, if you are a co-owner of your marital residence, that would come to the Trustee and now your partner, or a buddy or loved one would have to buy your interest back.
  • If your regular income is more than the poverty line you will have surplus income to pay to the Trustee. If you have never been bankrupt before, with surplus income, you will have to make a regular monthly payment for 21 months. You cannot look for bankruptcy discharge till after that. If you have been previously bankrupt, the 21 months stretches to 36 months.
  • When it is revealed that your financial obligations are because of your gambling issue, you can anticipate your creditors to oppose your discharge from bankruptcy. At the discharge hearing, you will not only have to show your financial rehabilitation, but also addiction rehab. It is irrelevant what types of gambling activities you engaged in: dice, horses, lotteries, cards, in person or online gambling. I have seen it all and the where, how and when is irrelevant.

Gambling debt help: Gambling debt bankruptcy, your discharge from bankruptcy and your gambling addiction

If you owe a huge amount of unpaid income tax to Canada Revenue Agency, you can expect them to strongly oppose your discharge from bankruptcy. Your Trustee needs to oppose your discharge from bankruptcy when your bankruptcy is an outcome of gambling. The reason is under the BIA, there are different facts, if shown, it is impossible to get an absolute discharge from bankruptcy.

Section 172 of the BIA allows the Court to make an order of discharge which is either absolute, conditional, suspended or even refused. Where a fact under s. 173 of the BIA is proven, an absolute discharge is precluded.

Gambling addiction which brings on or contributes to bankruptcy is an acknowledged s. 173 fact. (BIA, s. 173(e)). That is why your Trustee would certainly need to oppose your discharge from bankruptcy. Within any decision on your discharge, the Court and the Trustee demand to keep the integrity of the Canadian insolvency system. You can think that your discharge will certainly at the very least be conditional upon you paying a certain amount of cash to your Trustee. A bankruptcy discharge suspension for a certain time after you pay the condition is likewise feasible. If your behaviour was especially egregious, your discharge from bankruptcy might be straight-out refused.

At the discharge hearing, you will have to show that you are taking concrete steps to end your addiction and are receiving gambling addiction advice and therapy. You will also need to show that your financial situation is improving.

gambling debt help
gambling debt help

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

You are right about that. As if the above concerns weren’t enough, depending on certain scenarios, there could be more issues facing you in your quest for gambling debt help.

Therefore, I always recommend to debtors that if there is the possibility to get gambling debt help through a financial restructuring with a debt solution process of either a consumer proposal or Division I Proposal, they must seriously take a look at that with the Trustee to see if it is better to declaring bankruptcy.

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

I hope that you found this gambling debt help Brandon Blog interesting. Among the countless problems that can arise if you have gambling debts, you may also find yourself in a situation where you have gambling debts, need gambling debt help and are considering a gambling debt bankruptcy. The same is true for debts arising from any other type of addiction.

If you are concerned because you or your business are dealing with substantial debt challenges, whether you need gambling debt help or just plain old 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 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 bankruptcy 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.

gambling debt help
gambling debt help
Categories
Brandon Blog Post

4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA

NOTE: On January 13, 2022, three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. You can read all about the Settlement Administration Plan and how to file a claim by CLICKING HERE to read our latest 4 Pillars blog.

We hope that you and your family are safe, healthy and secure during this coronavirus 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.

4 pillars lawsuit
4 pillars lawsuit

The 4 Pillars lawsuit class-action

In my November 25, 2019, Brandon Blog titled “HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE“ I wrote about the litigation involving 4 Pillars Debt and Credit Restructuring Company, 4 Pillars Consulting Group Inc. and other entities (4 Pillars or the 4 Pillars lawsuit), Pearce v 4 Pillars Consulting Group Inc., 2019 BCSC 1851.

Mr. Pearce is suing for damages for the fees billed by 4 Pillars to all persons that paid fees to it in British Columbia in connection with: (i) a consumer proposal under the Bankruptcy and Insolvency Act (Canada) (BIA); or (ii) an informal debt settlement negotiation proposal with the individual’s creditors, all after April 1, 2016.

Mr. Pearce claims that it is appropriate for the refunding fees paid, damages for alleged losses stemming from breaches of the provincial Business Practices and Consumer Protection Act (BPCPA) and BIA, and damages based upon the claim that the fees billed were unscrupulous under section 8 of the BPCPA.

In this Brandon Blog, I describe what the 4 Pillars lawsuit is all about and why the Court of Appeal for British Columbia has allowed it to proceed as a class action proceeding, dismissing the 4 Pillars objections.

4 Pillars lawsuit: What is a class action proceeding?

As part of that litigation, Mr. Pearce applied to the BC Court to have his litigation turned into a class action proceeding. The Court ruled that there were enough grounds for his legal action to move forward as a class-action claim. As can be expected, 4 Pillars objected to that motion. They also unsuccessfully argued that certain sections of the claim should be stricken.

4 Pillars appealed that decision to the Court of Appeal for British Columbia. On May 17, 2021, the Court of Appeal for British Columbia released its decision. In this Brandon Blog, I discuss the appeal, what the appeal court had to say and what it decided in the 4 Pillars lawsuit appeal.

4 pillars lawsuit
4 pillars lawsuit

Debtor Warning – Debt Consultants Sometimes Not What They Appear

What 4 Pillars say their organization’s role is

4 Pillars states that they are professionals who provide a variety of services specific to individuals in debt. They say they outline the choices readily available and also walk people through the procedure. They say that your financial debt settlement will likely be one of the following, which they will manage on your behalf:

  • informal debt settlement
  • consumer proposals
  • bankruptcy

They also say they will work with the person on their aftercare. They also say that their role ranges from providing individual debt settlements on behalf of debtors with collection agencies and their creditors to negotiating with Licensed Insolvency Trustees (individually a Trustee, Bankruptcy Trustee or LIT) on behalf of a debtor in determining the terms of a consumer proposal.

What the Court of Appeal for British Columbia says about the role of 4 Pillars

The Court of Appeal described them this way:

  • 4 Pillars sell their debt restructuring services as debt advisors to individuals on the brink of insolvency who are seeking debt restructuring. They are unlicensed and charge fees above those professionals who are licensed and regulated.
  • Their debt consulting business is not licensed or registered, and they charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Their debt consulting services are:
    • to meet and work with consumers who are struggling with debt;
    • to help them draft a consumer proposal to present to a LIT:
    • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • All of these services are provided with the goal that the LIT will then present the consumer proposal to the debtor’s creditors.
  • 4 Pillars may then provide input, on the debtor’s behalf, on any response or request from the creditors.

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Just to remind you, this is what the lower BC Court and the Court of Appeal for British Columbia found the 4 Pillars services to be:

  • to meet and work with consumers who are struggling with debt;
  • to help them draft a consumer proposal to present to a LIT:
  • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • Provide input, on the debtor’s behalf, on any response or request from the creditors.
  • They charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Charge fees above those professionals who are licensed and regulated.

This is very common amongst all the debt restructuring businesses. It is questionable what value they provide if any at all. Their business model preys on people’s fears of getting advice straight from Licensed Insolvency Trustees.

The services described above a LIT provides at no additional cost above and beyond what the government-approved tariff fee is. The reality is that you do not need the 4 Pillars Consulting Group Inc.

As a LIT, I provide financial advice regarding your unmanageable debt and if you are a candidate for informal debt settlement, I will tell you exactly what to do in our no-cost initial consultation. If you have too much personal debt and are not a candidate for an informal settlement, I have many times prepared consumer proposals that work. As part of that process, I also act as a licensed credit counsellor.

4 pillars lawsuit
4 pillars lawsuit

Is Debt Settlement Really Worth It?

Debt settlement is really worth it. Going to one of these unscrupulous debt settlement companies, instead of a licensed insolvency trustee for debt settlement is NOT.

If you’ve been struggling with debt, it’s time to consider debt settlement through a consumer proposal with the services of a LIT. It likely won’t sound appealing at first, and you may feel that you are taking a gamble, but the process of debt settlement can be incredibly beneficial to you. Keep in mind that even 4 Pillars introduce you to a LIT in order for you to relieve yourself of your debts, hopefully through a consumer proposal process.

A consumer proposal is the only government-approved debt relief program. A LIT can get you a true debt settlement, without having to pay extra unnecessary fees to any of the debt relief companies.

Now let’s see what the Court of Appeal for British Columbia had to say about this 4 Pillars Consulting debt restructuring services business’s appeal from the lower court decision.

Class action waiver not effective to resist class action certification

The Court of Appeal of British Columbia believes the class action waiver clause is unenforceable as being contrary to public policy. The class action waiver significantly interferes with the administration of justice. It would have the effect of precluding class action lawsuits.

It has the impact of precluding Mr. Pearce, and class participants, from having access to justice and to a dispute resolution procedure in accordance with the law for claims developing from the connection between these parties. Therefore, the class action certification was upheld.

4 pillars lawsuitOther grounds of appeal in the 4 Pillars lawsuit

Having reviewed the evidence filed in respect of 4 Pillars’ applications for summary dismissal and after considering their arguments, the lower court judge was not satisfied that Mr. Pearce’s arguments in the 4 Pillars lawsuit, that 4 Pillars was acting for, or representing, a debtor in arrangements or negotiations with their creditors is bound to fail.

The evidence suggested that 4 Pillars had a role in the negotiations between a debtor and their creditors regarding a consumer proposal – even if they were not directly engaged with creditors.

The lower court’s view was there is a genuine issue to be decided at trial on a full evidentiary record. Accordingly, the judge dismissed the 4 Pillars attempt to strike the portions of the pleadings in respect of the Plaintiffs’ claims under the BPCPA.

The Court of Appeal for British Columbia agreed that it will be necessary to have a trial to figure out if claims can occur from offences of the BIA. Therefore, 4 Pillars was likewise unsuccessful in getting this issue stricken from the 4 Pillars lawsuit.

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

It will be very interesting to see how this class action 4 Pillars lawsuit winds its way through the BC court. Absent an appeal to the Supreme Court of Canada, it is now game on. Mr. Pearce and all members of the class have the green light to continue the litigation. If successful, it goes to the heart of the 4 Pillars business model. Every franchisee across Canada needs to worry.

I hope you found this 4 Pillars lawsuit Brandon Blog informative.

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.

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Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE FOR BANKRUPTCY SIMPLE STEPS ON HOW TO AVOID BANKRUPTCY AND SAVE YOUR BUSINESS

licensed insolvency trustee for bankruptcy

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 for bankruptcy on why businesses go bankrupt

In my last Brandon Blog, Business Bankruptcy In Canada: Discover The Causes Of Business Insolvency And Bankruptcy, I described the causes of business insolvency, the types of business entities normally found in Canada and tips on how to pull your business around back from insolvency.

Numerous businesses are battling to survive today, not to mention stay lucrative. They are scaling down or just closing their doors. They are accessing the available government support money for a business. Most entrepreneurs hesitate to seek the advice of a licensed insolvency trustee due to the fact that they are afraid all the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) wants to do is be a trustee for bankruptcy.

In this Brandon blog post, I want to continue from the suggestions from my last blog, to show you exactly how that the last point I push for is to be a trustee for bankruptcy. I first look to reorganize your business. If your business or company remains in danger because of the effect of the COVID-19 pandemic, it will certainly be advantageous for you and also your organization to do so.

I will also show how sometimes, a trustee for bankruptcy or receivership, can actually help save parts of your business. The only other alternative could be to let all the business parts fail, which is the worst possible outcome.

The role of a debtor in bankruptcy or insolvency

Remember, I previously defined insolvency as a financial condition, where bankruptcy is a legal condition and a legal process. You will also recall that in my last Brandon Blog, I described the three common types of business structures in Canada; proprietorship, partnership and corporation. Just as these three business structures are different in form, they are also treated differently in insolvency vs bankruptcy. Here is how I differentiate the role of each debtor.

Proprietorship – Sole proprietorships are a type of business structure in which one individual is the sole owner of the business, which gives that person control over everything related to the business. This includes the business’ name, structure, accounting, legal obligations and tax responsibilities.

As I described last week, in Canada, the person, the sole proprietor, is carrying on business in their personal name, operating as the business name. You can register a sole proprietorship with the provincial government by completing an application form.

A sole proprietorship is the simplest kind of business structure. It permits an individual to sell goods or run a service with complete control of it on their own. Nonetheless, a sole proprietorship is not considered a separate legal entity from the owner. This means that any liabilities incurred by the business are also personal financial obligations of the owner.

So in an insolvency situation, all of the sole proprietor’s assets come into play as do all of his or her debts. It is not just the business assets and business liabilities. It is everything. This is the worst-case scenario for an entrepreneur.

So if the business is viable, and the personal assets and liabilities lead to the sole proprietor being in the situation where they can do a debt settlement plan, they can choose one of two options to restructure their entire personal financial situation. This assumes they cannot resolve their financial issues informally to bring their financial situation back to being solvent.

Partnership – A terrific way to begin a new business is teaming up with one or more people. All of you should enhance the group’s abilities as well as energy. Nonetheless, you also wish to be with people that are trustworthy, industrious and have a certain expertise that will help the business grow. Just like the way a proprietorship is one person, a partnership is made up of two or more people.

A partnership agreement is crucial. This is an agreement between the partners, describing the rights as well as obligations of each partner in the business. The same way a sole proprietor is personally responsible for the debts of the business and is putting all of their personal and business assets at risk, the same is true for partners in a business partnership. The partners are each liable for 100% of the business debts in case of insolvency. The partners cannot limit their liability to only their partnership share of the business.

Corporation – When you incorporate a business, it is a corporation. The company is a different legal entity from its owner shareholders. Shareholders are not responsible for the unpaid debts owed to financial institutions (normally a secured creditor), suppliers to the firm (normally an unsecured creditor) or the government. There are only two exceptions: (i) certain government liabilities that are a personal liability of a Director; and (ii) if the entrepreneur directly guarantees a financial debt of the company, such as a company loan, then that individual will have a liability with respect to such debt.

If the company’s financial future becomes bleak because it is insolvent, there are options. In my last blog, I talked about self-help remedies senior management of a company whose business is viable can try to informally bring the company back to a healthy financial state. You can re-read that blog to see the options available. If the self-help remedies do not work yet then we must look at more formal proceedings.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed InsolvencyTrustee for bankruptcy: Settle with creditors and debt collectors without bankruptcy

In a proprietorship or partnership, if the underlying business is viable, then there are a variety of options to try to turn the business around yourself. You would use the self-help methods I described in my last blog. If the self-help options do not work, there are debt settlement options available to the individual(s) under the Bankruptcy and Insolvency Act (Canada) (BIA). They would be the only government-sanctioned debt settlement plan available in Canada. Either a consumer proposal or a Division I Proposal. You can read about how each one works by clicking on the following links:

In a successfully completed debt settlement program, the bankruptcy trustee would not be a trustee for bankruptcy. Rather, the trustee in bankruptcy would be an Administrator under a consumer proposal or a Proposal Trustee in the Division I Proposal.

If the business is not viable or the circumstances are such that a debt settlement plan is not feasible, then personal bankruptcy would be the only other option. You can read about how personal bankruptcy works by looking at our top 20 bankruptcy FAQs section. Upon the bankruptcy of the person, the sole proprietorship is automatically terminated.

Since a partnership is a way of carrying on business personally, then the same insolvency options available to the partners to the business debtor are also available. A restructuring is always preferred over a bankruptcy when the partnership is in financial difficulty.

For a debt settlement insolvency filing, the licensed trustee is not a trustee for bankruptcy. That is the case only if there is an actual bankruptcy assignment. Under provincial law, if a partner goes bankrupt, the partnership is automatically dissolved.

Licensed Insolvency Trustee for bankruptcy: Ask creditors to help you avoid bankruptcy of the corporation

Without wanting to sound like a broken record, you can review my prior blog to go over the self-help remedies for turning a business around, even if it is a corporation. A self-help remedy is always a great alternative to bankruptcy. If that isn’t appropriate, or just plain does not work, then you must get in touch with an insolvency trustee.

Again, if the company’s business is viable, then there are financial restructuring alternatives. these alternatives will be within a government-regulated insolvency proceeding. There are two formal restructuring statutes in Canada:

In both cases, a company should retain the services of both a licensed trustee for bankrutpcy and a bankruptcy lawyer. The lawyer acts as legal counsel to the company. The licensed trustee will be both a financial advisor and steer the company through the restructuring process. The CCAA option is for companies with $5 million or more of debt. A BIA Proposal is for a company with any amount of debt. The main difference between the two processes are:

  • In a failed BIA Proposal, the debtor is immediately deemed to have filed an assignment in bankruptcy. This is not the case in a failed CCAA Plan of Arrangement.
  • A CCAA proceeding is more costly as there are many more court appearances in that forum than in a BIA restructuring.

Using one of these two statutes to gain what is called in the media “bankruptcy protection” in order to work out a successful restructuring with your unsecured creditors is always preferable. The company will pay less than it owes while keeping its viable but insolvent business alive. Don’t underestimate the power of preserving jobs in the eyes of a court. A bankruptcy trustee can be very helpful in obtaining great results.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed Insolvency Trustee for bankruptcy: When to consider an Assignment for the Benefit of Creditors

If the business is not viable and is insolvent, then the only thing left to consider is an assignment in bankruptcy filing. It is definitely a last resort if everything I have already spoken about in this Brandon Blog just won’t work and you have run out of options. Trustees in bankruptcy always consider the alternatives to bankruptcy, but sometimes filing bankruptcy is the only option available.

In the case of a proprietorship or partnership, it is the individual sole proprietor and one or more of the partners who will be meeting with a trustee in bankruptcy and filing for a personal type of bankruptcy. the personal bankruptcy trustee will administer the personal bankruptcy estate. Again, you can read up on personal bankruptcy by looking at our top 20 personal bankruptcy FAQs section.

In personal bankruptcies, it will be either a streamlined system called a Summary Administration and if not, it is then an ordinary administration bankruptcy. Unlike a company, a person is ultimately entitled to a bankruptcy discharge.

When it comes to the administration of bankruptcy for a corporation, it is always an ordinary administration bankruptcy. The purpose of this Brandon Blog is not to run through all the steps in a personal or corporate bankruptcy process. Above I have provided some links to read up on debt settlement restructuring and personal bankruptcy. For corporate bankruptcy, I recommend that you read our corporate website page on corporate bankruptcy.

Alternatively, you can also read my previous Brandon Blog Bankrupting a Limited Company: Canadian Corporate Bankruptcy Process.

A trustee for bankruptcy administers the bankruptcy process for the benefit of unsecured creditors. Sometimes, it is a secured creditor who needs to enforce their security. They do not necessarily need the company to meet with a trustee for bankruptcy. Rather, the secured creditor needs the appointment of trustee to act not in a bankruptcy administration, but rather, to act as a receiver or receiver-manager to enforce the secured creditor’s position by taking control of the assets subject to the security and ultimately selling them. To read the receivership process, you can read the receivership section of our corporate website.

You can also read my Brandon Blog titled What Is A Receivership? Our Complete Guide To Receivership Solutions.

Licensed Insolvency Trustee for bankruptcy: How to avoid bankruptcy and save your business from closing

I hope you enjoyed the licensed insolvency trustee for bankruptcy 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. As you can see from this blog, we are not just a trustee for bankruptcy. We believe every person and business should first explore debt settlement to avoid bankruptcy.

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.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy
Categories
Brandon Blog Post

EQUALIZATION PAYMENT DIVORCE ONTARIO: THE BASIC RULE FOR MARITAL PROPERTY AND BANKRUPTCY

equalization payment
equalization payment

We hope that you and your family are safe, healthy and secure during this coronavirus 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 on the podcast.

Bankruptcy and divorce: Equalization payment introduction

The pandemic has taken a toll on couples both financially and psychologically, which has actually triggered many to consider going for separation and maybe even filing for bankruptcy. This is not to say that every bankruptcy causes a subsequent divorce, or that every separation will certainly necessitate the declaring of bankruptcy.

In my Brandon Blog dated March 2, 2020, titled “DIVORCE DEBT: NOT ALL EQUALIZATION ISSUES ARE EQUAL IN BANKRUPTCY” I described a decision of the Ontario Superior Court of Justice (Commercial List) where the court decided that the claim for an equalization payment is “personal as between the spouses” and cannot be started by the licensed insolvency trustee. However, if the claim was already started by the spouse prior to his or her bankruptcy assignment, then it is a claim for property that the Trustee can continue to advance.

I thought that was the end of the matter, but apparently not. The bankruptcy trustee, who could have left well enough alone, did not. The trustee in bankruptcy appealed the court’s decision to the Court of Appeal for Ontario. Recently, the three-judge panel released their decision of the appeal that was heard last November.

In this Brandon Blog, I discuss this recent Court of Appeal for Ontario decision dealing with an equalization payment, marital property, divorce and bankruptcy in Ontario.

Bankruptcy and property: Insolvency 101 on what happens to property in a personal bankruptcy

It is a fact that when someone files for personal bankruptcy, the bankruptcy provisions states that all of their property vests in the licensed insolvency trustee administering the file. There is a discrete list of assets set by every province in Canada that is exempt from seizure and therefore cannot be sold by the Trustee. Technically, the licensed insolvency trustee gives back to the bankrupt that property. In practical terms, the Trustee never seizes it. But whenever the topic of bankruptcy under federal bankruptcy laws gets mixed in with the Ontario Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), the discussion on matters about bankruptcy always starts to get murky.

A claim for an equalization payment by one spouse against the other in Ontario family law proceedings meets the definition of property. So if the spouse entitled to the equalization payment files an assignment in bankruptcy, that entitlement is their property which now vests in their licensed insolvency trustee. When collected upon, it is available to the bankruptcy estate and its creditors. However, what if that spouse has yet to make the equalization payment claim and goes bankrupt? Does the Trustee have the right to assert that claim?

What are equalization payments in divorce?

In Canada, each province sets their own family law statutes. When it comes to family property and divorce, there are two different possibilities in Canada. The province can elect for those divorcing spouses to have to split their property equally. This would make them a division of property province under family law.

Alternatively, rather than looking for a division of assets, the province can mandate that each spouse calculate their respective net family property. Then the spouse with the higher net family property value has to either pay money or transfer property to the other spouse so that they end up being equal. Hence the money that would be paid over from one spouse to another is called the equalization payment. This is what happens in Ontario. Ontario is not a property division province but rather is an equalization jurisdiction.

The application for equalization and the equalization payment is totally separate from the claim for and determination of spousal support and child support to the other. The equalization claim falls into the category of non-support-related spousal claims.

equalization payment
equalization payment

Rusinek & Associates v. Arachchilage & Baliah, 2020 ONSC 1090 (CanLII)

In my March 2020 blog referred to above, I described this Ontario family law case combined with the insolvency situation of bankruptcy. You can certainly read it if you want all the details. However, the bottom line of that decision is that under the FLA, the post-separation equalization claim is “personal as between the spouses”.

This means that if a spouse who subsequently becomes bankrupt had not yet made that claim, his or her Trustee cannot start the claim for the determination of equalization on the basis that the claim is a property that vests in the Trustee. However, if the claim had already been made and the equalization process litigation has already begun, and then that spouse becomes bankrupt, the Trustee does take over the right to advance that litigation against the non-bankrupt spouse for the equalization payment which stands in lieu of property rights. Whatever payment comes from it goes to the Trustee for the general benefit of the creditors.

Bankruptcy and equalization payments: Court of Appeal for Ontario says the timing of the bankruptcy matters

From what I have told you so far, you can see that the timing of the person’s voluntary assignment into bankruptcy or the Bankruptcy Order being made (from the filing of a Bankruptcy Application) does matter. For the trustee in bankruptcy to be able to assert that equalization payment claim, the bankrupt spouse had to have already made that claim prior to becoming bankrupt.

The Court of Appeal for Ontario considered the Trustee’s appeal of this lower court decision. It considered the laws around bankruptcy and the FLA and dismissed the appeal. I will now tell you why.

The Court of Appeal stated that a spouse’s claim for equalization becomes property of the bankrupt if that same spouse then declares bankruptcy. The action vests in the trustee in bankruptcy and the Trustee has control over the claim together with the right to get any unpaid equalization payment.

There is no restriction in the Bankruptcy and Insolvency Act (BIA), under the FLA or in the common law, preventing the trustee in bankruptcy from going after it after the now-bankrupt spouse had already started that part of the Family Law litigation.

[NOTE: This bracketed portion is not part of the case heard by the Appeal Court, but this is the appropriate place to share this information with you. I think it is obvious that the bankrupt spouse would not start the equalization claim litigation while being an undischarged bankrupt. Otherwise, the Trustee would be entitled to the proceeds.

Also, presumably, the bankrupt spouse might do better if the non-bankrupt spouse only paid support instead of both support and equalization. I would advise the bankrupt’s family law lawyer to not make an equalization claim, and in return, negotiate for a larger support claim, in lieu of both.

A Trustee cannot directly attach to a support claim. The Trustee would just have to assess that information, along with whatever other income the bankrupt spouse has, to determine if there is any surplus income obligation.]

The Court then went through a thoughtful analysis of whether the entitlement to equalization can be initiated by the licensed insolvency trustee. The Court of Appeal concluded that because the action for equalization is “personal as between the spouses”, only spouses can bring claims for equalization. The Trustee cannot.

It is for these reasons that the Court of Appeal for Ontario confirmed the lower court decision, dismissed the Trustee’s appeal and awarded costs of $10,000 against the Trustee in favour of the non-bankrupt spouse respondent.

I will now go on to provide you with some extra information about divorce proceedings and bankruptcy.

equalization payment
equalization payment

How does an unpaid equalization payment intersect with bankruptcy?

In a bankruptcy, if the non-bankrupt spouse still owes the bankrupt spouse an unpaid equalization payment, the bankruptcy plays no part. That spouse still has to make the payment. Only now, it has to be made to the Trustee.

However, if the spouse who files for bankruptcy owes the non-bankrupt spouse an unpaid equalization payment, that liability is caught in the bankruptcy. The non-bankrupt spouse has a provable ordinary unsecured claim in the bankruptcy of the spouse. As stated above, the bankrupt spouse no longer has to make the equalization payment because it is an unsecured debt and will be discharged from that person’s discharge from bankruptcy.

What happens to spousal and child support payments during bankruptcy? Nothing. Any liability for support, either spousal support or child support, is not eliminated by filing bankruptcy. The bankrupt spouse still has to make those payments. Just like any other spouse, if the bankrupt spouse does not make the support payments, the spouse that is entitled to receive support can obtain collection assistance from the Ontario Family Responsibility Office.

What happens to joint debt if you file for bankruptcy?

Joint debt in a divorce is hard enough to sort out. Layer a bankruptcy on top of that and things may become much clearer, but also potentially unfair. When you file for bankruptcy and have joint debt, it is important to know what happens to the debt. The most common type of joint debt couples share is from joint credit cards. Next would be if one spouse co-signed for or otherwise guaranteed the debts of the other spouse. Other common examples are joint mortgages and joint lines of credit.

A creditor can collect the debt from both you and your co-signer, but in your bankruptcy, the law does not protect your non-bankrupt co-signer from your joint debt. If you file for bankruptcy, your creditors can still come after your co-signer for the debt.

If your estranged spouse is considering bankruptcy as a last-ditch effort to eliminate their overwhelming unsecured debt, it could spell trouble for you if they file for bankruptcy. When they file for bankruptcy, they are trying to erase their unsecured debt. Unfortunately, you will be saddled with the sole responsibility to repay those joint debts. You will have to try as best you can to be protected financially through the divorce process.

You need to decide how you will deal with these debts that your spouse won’t have to pay because of their bankruptcy. If you cannot afford to pay them on your own, in addition to your other living expenses, you may have to consider either bankruptcy or a consumer proposal as an option to save you from this catastrophe.

Are the bankruptcy rules fair, especially given the discussion above about the equalization payment? The BIA is the set of regulations and rules that govern a bankruptcy or insolvency in Canada. The BIA governs both people and companies that have come to be incapable to pay their financial debts. It handles the regulations for the time duration both leading up to insolvency and the declaring of bankruptcy.

The policies established by the BIA have a substantial impact on the lives of debtors and creditors. They are extremely crucial for the survival of the business or person. The rules are fair for everyone. But the effect they have on different stakeholders in an insolvency file may not be very fair.

equalization payment
equalization payment

Equalization payment and Ontario divorce and bankruptcy summary

I hope you enjoyed the equalization payment Brandon Blog post. You may be very frustrated and angry over your marital and financial situations. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due.

There may be sufficient value to take care of the secured creditor, but nothing for anyone else, including the unsecured creditors. There may be some business units that should not survive, but if cut out, the business will be viable. A receivership might very well accomplish the goals for the entrepreneur also. I have many times structured a receivership process, in order to meet the goals of the entrepreneur, while satisfying the requirements of the secured creditor.

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 coronavirus 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.

equalization payment

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Brandon Blog Post

FALSE PRETENCES: OUR STEP-BY-STEP NEW APPROACH CREDITORS MUST TAKE FOR THEIR CLAIM TO SURVIVE A BANKRUPTCY

false pretences
false pretences

We hope that you and your family are safe, healthy and secure during this coronavirus 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 this Brandon Blog’s audio version, please scroll to the very bottom and click play on the podcast.

False pretences and bankruptcy introduction

Just because you have filed for bankruptcy, doesn’t mean you are free and clear of your debts. In fact, some debts, such as those obtained with the use of false pretences, may not be discharged through bankruptcy at all.

A creditor can file a form 31 proof of claim for a debt incurred by false pretences. However, it takes more than just stating it in a proof of claim. A court must have made that determination. If not, the debt can be ruled as dischargeable through bankruptcy. But if the court has made that determination and it is the basis of the claim, that debt will not be discharged upon the bankrupt receiving his or her bankruptcy discharge.

I have discussed the topic of false pretences and bankruptcy before, but based on a recent Ontario court decision, I need to break down the basics of this type of debt and how it relates to a person’s bankruptcy.

What is a false pretence?

A false pretence is a false claim or statement made to induce a person to part with property or to give some valuable thing or advantage. It is a criminal offence in Canada. False pretences are the main element of the crime. The essence of this common law offence is that a person knowingly makes a false statement of fact, intending to induce the victim to act on it to his/her detriment. The reason why the false pretence is punished is that it is a fraud on the public.

Some people choose to give false information when they apply for credit or an extension of credit to make their financial situation look better. This is often done by people who have no intention of repaying the debt and therefore use certain fake information with the intent of deliberately misleading the creditor. They are hoping that the potential creditor will not verify all the information. They can get away with this when they are not required to prove false information with the creditor.

Crimes of Dishonesty: What is the criminal offence of false pretences?

The offence of false pretences is a criminal offence that occurs when a person obtains property from another person by deceiving or defrauding the other person. This can be done either by a false representation of existing facts or by a false promise. The person must intend to defraud and in doing so possess the intent to commit an offence. This is a fairly complex offence under paragraph 362(1) of the Canadian Criminal Code and includes a wide variety of possible scenarios. More often than not, it involves obtaining personal property under false pretences.

Section 362(1) of the Criminal Code of Canada states:

“Every one commits an offence who

(a) by a false pretence, whether directly or through the medium of a contract obtained by a false pretence, obtains anything in respect of which the offence of theft may be committed or causes it to be delivered to another person;…”

If you have been charged with a criminal offence under subsection 362(1)(a) of false pretence in Canada, you need to ensure you have a good defence. Sometimes, it is a difficult offence to prove beyond a reasonable doubt. The only thing the Crown really needs to prove is that you made a false representation to obtain the property of another and that the other person believed you (and was therefore defrauded). It is up to you to ensure that you have a good defence.

But I am not writing this Brandon Blog to focus on criminal behaviour. Rather, I want to discuss this concept from the perspective of someone who might file an assignment into bankruptcy.

false pretences
false pretences

Debt arising from false pretences not released by the bankrupt’s discharge

Section 178 (1)(e) of the Bankruptcy and Insolvency Act (Canada) (BIA) states that an order of discharge does not release the bankrupt from any type of financial obligation or liability arising from obtaining property or services by false pretences or fraudulent misrepresentation other than a debt or liability that arises from an equity claim.

In the past, it was quite customary for a creditor seeking judgment for recovery of a debt who is alleging that the debt arises from circumstances caught by section 178(1)(e) of the BIA to also seek both the civil judgment for the money and also a declaration in the judgment that the debt is one of the debts that falls into the category of not being released just because the bankrupt received his or her bankruptcy discharge. This relief was sought even though the defendant was not involved in any bankruptcy proceeding.

In the past, the courts have provided such relief where the evidence before the court substantiated it, notwithstanding the defendant was not an undischarged bankrupt. There are now two cases in Ontario that say such a dual judgment, both the civil award of money plus the BIA debt declaration will not be made anymore where there is not an actual bankruptcy proceeding.

The most recent false pretences released decision in Ontario – Bank of Montreal v. Mathivannan, 2021 ONSC 2538

On April 6, 2021, the Honourable Justice Kurz of the Ontario Superior Court of Justice released his decision in this case. The Bank of Montreal (BMO) was attempting to get a summary judgment against a defendant for $35,723.71 plus pre as well as post-judgment interest as a result of an unpaid conditional sales contract.

BMO alleged in its statement of claim that the claim arose because the defendant had fraudulent intent by purposely misrepresenting her employment and employment income in her application for credit, being a statement in writing, under a conditional sales agreement for an automobile. The false document application was made to the dealership for financing to purchase a vehicle from it. The conditional sales agreement was then assigned to BMO as a normal financing business practice that is used.

The defendant was noted in default. Under the rules, when noted in default, it is as if the defendant admitted the allegations of fact contained in the statement of claim. However, the opposite is not true. The plaintiff is not necessarily entitled to a judgment merely because the allegations of fact are deemed to have been admitted. They actually must be proven.

The deemed admissions of fact that come from the statement of claim are that:

  • Defendant made certain representations as to her employment and her employment income.
  • BMO relied on those representations and provided the defendant credit.
  • Those details supplied by the defendant were false.
  • That false information was created solely for the objective of defrauding BMO to advance credit for the purchase of the vehicle.
  • BMO gave the credit based on those representations.

The court’s decision regarding the false statements in the credit application document

The court determined that BMO’s statement of claim:

  • Falls short to state how the false statements meet the test for false pretences or fraudulent misrepresentation.
  • It did not say whether they were significant or not.
  • The affidavit evidence used to support the statement of the claim simply offers the verdict that they were false and illegal.
  • With those non-inclusions, the pleadings in the claim do not support a finding of fraudulent misrepresentation or false pretences.

The court had no problem in giving BMO judgment for the civil claim for money, being the $35K plus pre and post-judgment interest. Where the court had a problem was in the evidence of the fraud. Therefore, the request for the additional relief of stating that the debt is one not released by the defendant’s discharge when she obtains her discharge from bankruptcy has not yet taken place.

The court did not grant the additional relief to protect this claim in the event the defendant ever declared bankruptcy. But there is another, and in my view, deeper reason, which all plaintiffs finding themselves in the position of BMO and seeking the same kind of two-phase relief must keep in mind.

false pretences
false pretences

The court should not issue hypothetical decisions even with deceitful conduct

The court did not doubt that the defendant made the false statement. What the court said, following the decision of the trial judge in Royal Bank of Canada v. Elsioufi, the Honourable Mr. Justice Dunphy, that there was not an essential legal basis to determine fraud to approve the civil monetary judgment requested. Justice Kurz followed the thinking of Justice Dunphy by stating that even if a positive finding of fraud were called for to release a judgment, he would certainly refrain from doing so.

That is because it would stand for a theoretical declaration applicable to a bankruptcy case before that proceeding beginning. Justice Kurz also concurred with Justice Dunphy that courts ought to make decisions based on examined evidence and not only based on admissions or even on consent.

So the old-fashioned method in Ontario of bringing to court the request for not only a civil monetary judgment, but also a declaration that the debt falls under s.178(1) of the BIA and therefore not discharged upon the discharge of the bankrupt is over. In the words of Justice Dunphy:

“I am moved to issue this brief endorsement for publication purposes as I have noticed a growing practice of some to request such declarations on a routine basis. I may even have signed one or two before giving the matter further thought and research and I have concluded that the practice is to be discouraged.”

Justice Kurz refused to grant BMO any sort of special costs in its motion, as it did not need to make that kind of motion merely to get the civil monetary claim in a judgment.

False pretences: A new creditor blueprint is needed

Now that at least in Ontario, if the old way will not work anymore, what is a creditor to do now? It is not only for a claim falling under false pretenses or fraudulent misrepresentation but potentially many other of the classes of debts falling under section 178(1) of the BIA including false pretences or fraudulent misrepresentation.

The above-noted court decisions can be instructive. First, if a plaintiff believes that the debt was incurred because of a type of fraud, including false pretences or fraudulent misrepresentation, hard evidence should be provided to the court. Proof using genuine documents, a copy of original documents proving breach of trust, is evidence that should be included.

It should not merely be a deponent’s or plaintiff’s conclusion given the known facts being deposed. It should support a finding of the fraud, even though the court may refrain from making a finding of fraud to deliver a civil monetary judgment in favour of the plaintiff. Providing this evidence will be important later on.

Next, there must be an actual bankruptcy. Either the person must have recognized their financial condition of insolvency and filed an assignment in bankruptcy or a creditor have the court issue a Bankruptcy Order against the person. It could even be the judgment creditor able to prove that the person ought to be adjudged bankrupt.

Third, once bankrupt, the judgment creditor should file a proof of claim with the licensed insolvency trustee administering the bankruptcy estate. Proof of the debt would be the judgment which would be attached to the proof of claim and marked as “Schedule A”.

Fourth, does the plaintiff continue to believe that the claim falls under one of section 178(1) of the BIA exclusions and would survive the person’s discharge from bankruptcy, such as false pretences? If so, then the creditor can make an application to the bankruptcy court to lift the stay of proceedings against the bankrupt, for the creditor to attempt to obtain a judgment from the court that the claim of that creditor is not released by the discharge of the bankrupt.

Fifth and final, the creditor having obtained such leave, can then make a new application to the court for the specific finding that the court refused to make in both of the cases I discussed above. The original evidence supplied by the creditor in its original application will now become very important for the court to review. That is why I said it should be pleaded, with evidence when the civil monetary judgment was sought so that it could be relied upon now.

False pretences summary

I hope you enjoyed the false pretences 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 coronavirus 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.

Call a Trustee Now!