What is the difference between bankruptcy and insolvency Canada: Introduction
Encountering major money troubles is life-shattering, especially if you automatically think that bankruptcy is your only alternative. As a matter of fact, lots of people erroneously think that serious financial difficulties immediately suggest the only answer is bankruptcy. The most common question I am asked is, “what is the difference between bankruptcy and insolvency Canada”.
What is the difference between bankruptcy and insolvency Canada: Insolvency
If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are insolvent, not bankrupt. Insolvent is a cash flow problem; bankruptcy is a legal state. You can read a detailed discussion on the definition of being insolvent in my last week’s vlog INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE.
What is the difference between bankruptcy and insolvency Canada: Bankruptcy is a legal рrосеѕѕ
Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) that helps you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.
If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened, and the cost of the bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.
In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) (formerly known as a bankruptcy trustee) all уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and the proceeds will be used to рау for the bankruptcy administration and then make a distribution to уоur сrеdіtоrѕ.
What is the difference between bankruptcy and insolvency Canada: Assets exempt in a bankruptcy in Ontario
In Ontario, where my practice is, the following assets are exempt from seizure in a personal bankruptcy:
Your necessary clothing without any dollar restriction.
Family furnishings and appliances up to a value of $13,150.
Your tools and other personal property used to earn income from your occupation up to a value of $11,300.
One vehicle with equity of no more than $6,600.
Registered Retirement Savings Plan and Registered Retirement Income Fund savings, other than payments made within the 12 months immediately before the bankruptcy filing.
The equity in your house if up to the amount of $10,000. Note that the current thinking is that if your equity is more than $10,000, then your exemption is zero.
If you have very little property, all of it may be рrоtесtеd so that you will not lose it.
What is the difference between bankruptcy and insolvency Canada: Surplus income
How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be ѕоld fоr and whether you will be required to pay “surplus income” to your LIT. For a detailed discussion on surplus income, read my May 28, 2013 blog CAN YOU REALLY HAVE SURPLUS INCOME IF YOU’RE BANKRUPT?
Among all the things that seem to perplex many people when it involves the bankruptcy procedure is surplus income. It’s tough to get your head around the concept of surplus income when you are heading towards bankruptcy. Can that really be true if you are insolvent?
What is the difference between bankruptcy and insolvency Canada: What is surplus income
Surplus income in a bankruptcy describes the amount the bankrupt must pay to the Trustee monthly. The Canadian bankruptcy system attempts to balance your right to end your debt and start over with the rights of creditors to be paid.
To permit Canadians to keep a sensible right to make a living throughout the bankruptcy administration, the federal government has established limits or standards on revenue a person can keep (after tax obligations and certain limited deductions) throughout their bankruptcy. The Office of the Superintendent of Bankruptcy establishes the limit restriction every year tied into the cost of living.
How do you figure surplus income?
The Federal Government establishes the formula used to calculate surplus income payments. The same formula is used for all of Canada.
The limits for surplus income are based off across the country “poverty line”. Surplus income has absolutely nothing to do with what you have left over monthly. It is a federal government formula that considers your revenue, specific non-discretionary costs as well as your household size.
The calculation is to find if you will need to contribute from your earnings monthly to your Trustee, for the benefit of your creditors.
Bankruptcy discharge
The final step of your bankruptcy process will be to get your discharge. Your discharge from bankruptcy acts as the trigger to discharge you from all of your debts. This means that you will not have to рау them (with possibly certain exceptions depending on your circumstances).
Whether you get an absolute discharge from your bankruptcy will depend essentially on your conduct. Before your bankruptcy, did you treat all your creditors the same? Does anyone feel aggrieved by your actions? That will decide if any of your creditors will oppose your discharge.
Do you have extreme debt and have no concept of how to handle it? Are your debt woes keeping you up at night and causing you stress, pain and maybe even depression? We understand that pain and can cut it from your life.
Ira Smith Trustee & Receiver Inc. has helped many companies and people throughout the Greater Toronto Area (GTA) juggling too much debt in their lives that requires a blueprint for Starting Over, Starting Now. Do not delay. Help is 1 phone call away. You can fix your financial troubles while avoiding bankruptcy as long as you take swift action. Call the Ira Smith Team today for your free consultation.
In last week’s vlog, I reviewed why it is important to complete a form 31 proof of claim truthfully, and the penalties for filing a false claim. For both personal and corporateinsolvency files, creditors call asking how to complete the document. I discuss in this vlog why it needs to be completed properly. I also provide a link in this blog that you can click on to see how to properly complete the form step by step.
When properly completed and filed by each creditor, they are what a Trustee uses to compare the debt as listed on the debtor’s bankruptcy sworn Statement of Affairs. The amount claimed by a creditor is normally different than the amount of the debt listed on the bankruptcy schedules. The reason for this is normally because the creditor’s records are accurate to the penny, while the bankrupt’s records are usually not up to date.
The process is the same whether you are filing a secured claim, an ordinary unsecured claim or a priority claim, which is also unsecured, under s.138 of the BIA. What is important is that you need to have a provable claim.
If the Trustee determines that you have either an unliquidated claim or a contingent claim, there will be additional steps you will need to take for the Trustee to be able to ascribe a value and for you to have a properly proved claim.
the Trustee will supply to all creditors form 31 document. If the debtor who intends to restructure first files a Notice of Intention To Make a Proposal, a claim form is not sent out at that stage. It will be sent with the actual restructuring proposal and other related documents.
The same document contains both where you can make your claim as well as complete the proxy form, if applicable. Creditors may experience difficulty completing the document. So, the Trustee provides instructions on how to complete the claim form and proxy. That is also why I have provided a step-by-step instruction sheet from the link below so you can follow exactly how to complete the form.
form 31 proof of claim
Form 31 proof of claim: Acceptability of proof of claim
It is important to properly complete the document. It must be completed fully and properly. The claim must include all necessary details called for under the BIA. Below is a link to an example on how to properly complete the form 31 proof of claim. A Trustee is required to review all proofs of claim received.
The purpose of this is to know what claims are acceptable to be admitted for voting at the First Meeting of Creditors. Also, all proofs received either before or after the creditors’ meeting must also be reviewed carefully to make sure that they are acceptable if there is a dividend to be paid on the claims in the insolvency proceeding.
The Chair of the creditors meeting has the power to admit or disallow claims for the purpose of voting at the meeting. The Trustee has the same power for the proofs of claim for dividend purposes. Most times the Trustee will also be the Chair at the meeting of creditors.
It is incumbent on the Trustee to communicate with creditors whose claims the Trustee believes to be deficient. The purpose is to obtain additional information to make a final determination. The Trustee has to decide whether to admit or disallow a specific claim.
As you can see, completing the document properly is essential.
Does a creditor have to file a claim?
Nobody will force a creditor to file a claim in a bankruptcy estate. A creditor’s claim becomes valid when the creditor files it and the Trustee accepts it. . When a creditor files a claim against a bankruptcy estate, the creditor is making a claim that the Trustee should record and count their claim so that the creditor will be entitled to receive their pro-rata share of any dividend payments that may be made.
The Trustee will issue the maximum payment each creditor is entitled to when the bankruptcy estate is liquidated. When a creditor files a claim, the creditor also becomes an interested party in the bankruptcy case. An interested party is a person who has a vested interest in the bankruptcy case. If the claim is filed before the First Meeting of Creditors in bankruptcy, then the creditor has the right to participate in and vote at the meeting.
There are really only two important deadlines when it comes to filing a claim. The first is before the First Meeting of Creditors. As mentioned above, if you wish to participate in that meeting, then you need to have filed a properly completed valid claim before the start of the meeting. However, if you don’t file it by then, although you won’t be able to vote at the meeting, you have not lost out on anything else.
Once all the realization of assets of the bankrupt has been completed, being both the current assets, fixed assets, and possibly even intangible assets, if the Trustee has sufficient funds to issue a dividend payment, then the Trustee has to review all the claims filed. The Trustee also has to compare the claims register containing all of the creditor claims filed against the names and amounts listed in the bankrupt’s sworn Statement of Affairs.
If any creditors have not yet filed, and there will be a payment made to the unsecured creditors, the Trustee has to send a specific notice pursuant to the requirements of the BIA to each such creditor. The notice in writing says that a dividend will be paid, and if you don’t file your claim by a specific date, then you will be barred from receiving any payment.
How do I object to a form 31 proof of claim?
First, you have to be a creditor with a proven claim accepted by the Trustee. The BIA states that any creditor can inspect the claims filed. So if you have personal knowledge that a party listed on the sworn Statement of Affairs is really not a creditor, then you would be assisting the Trustee by reviewing the claims filed and pointing out any claims you believe are invalid, and why. However, it is very unusual for a creditor to take the time to do so.
The next opportunity and really the only time it matters, for a creditor to object to a claim filed by a creditor is if a dividend distribution is going to be made and the Trustee sends out the Final Dividend Sheet. If you think there are errors, then you can object to the approval of the Trustee’s Final Statement of Receipts and Disbursements and the Dividend Sheet.
Reasons that you may feel one or more claims are incorrect could be:
You do not believe that someone that has filed as a secured creditor can provide adequate proof of security with their claim.
You feel that the compromise of claims being proposed is improper.
There may be details of payments received by a creditor are missing and therefore their claim is overvalued.
The priority of claims listed is improper.
The priority of payment as listed in the Trustee’s Final Statement is incorrect.
Some of the more complicated claims, such as the claim of lessor, a claim by wage earner, claim by farmer or another claim for employees have been incorrectly calculated by the Trustee.
If you have any concern that there is an error with the amounts being claimed, or if you believe that there are circumstances where one or more claims are not valid, you should immediately communicate this to the Trustee.
Keep in mind that once the Trustee issues the Final Statement with Dividend Sheet and has the intention of making a payment to all creditors with valid claims, you have to file your own objection within 30 days of the date on which the notice was issued.
Form 31 proof of claim: Do you need help?
Do you or your company have too much debt? Is a financial restructuring or debt settlement plan necessary but you just don’t know where to start? If so, then you need the help of a professional trustee. The Ira Smith Team has years of experience of helping individuals and companies successfully complete their restructuring proposal debt settlement plans. Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our door.
form 31 proof of claim
You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, recover your money and move on to the next investment opportunity. Call us today for your free consultation.
After fully completing a consumer proposal or receiving a discharge frombankruptcy, it is important to start immediatelyrebuilding credit Canada. The purpose of this Brandon’s Blog is to provide you with our foolproof and painless 3 step plan to eliminate those negative credit checks and fix your credit trouble by rebuilding credit Canada.
Rebuilding credit Canada: Step 1 – Create good habits with a plan for discipline and self-control
After your discharge from bankruptcy or the full completion of a consumer proposal, you must create good habits of discipline and self-control. You won’t have any credit accounts and your goal is to show the credit bureaus that you can use credit responsibly and work your way back from bad credit score.
To do that, you need good new financial habits. You need to start creating a good payment history. A lack of these habits might have been partly responsible for your current situation, so working on changing bad habits, and creating new ones will lay the groundwork for a successful financial future.
Research has shown that on average, it takes more than 2 months before a new behaviour becomes automatic – 66 days in fact. So, while at the beginning, having to be disciplined and exert self-control over spending money mistakes might seem like hard work, stick with it for a couple of months, and very soon it will just become part of your daily routine.
Learn discipline through budgeting. You may be able to find a pretty good yet simple budget calculator spreadsheet. Aside from rebuilding your credit, learning how to create a realistic budget by looking at your essential expenses compared to your current level of everyday purchases. This will allow you to get a good handle on what your income requirements are and then sticking to it is the most important step of rebuilding credit Canada after bankruptcy or consumer proposal.
You’ll be looking closely at your money and personal income anyway, so use this time to get a real grasp on your entire financial situation. Take a look at credit cards and related statements. By only making the minimum monthly payment you are being charged interest. Look carefully at what the rate on purchases is that you are really paying.
Understand where your money comes from, and, more importantly, where you spend every penny. You’re going to need to make friends with spreadsheets and familiarize yourself with all your bank and bill statements. Create categories of all your expenses (e.g. rent, electrical bills, car insurance, groceries etc.) Using your past bank statements, look at your current spending plan in each category. You’ll probably be surprised at how much money you spend in some!
Set limits for how much you will spend per month in each category. This will likely mean making some sacrifices to ensure your budget balances (the total amount being spent does not exceed the total amount coming in). However, be realistic – don’t tell yourself you’re going to stop doing things you enjoy together. Instead, cut down on how often you do them. E.g. the budget spending plan for a meal out could be once a month rather than a couple of times a week.
Get in the habit of planning and recording every single expense, no matter how small. Keep receipts and go over where your money has gone every month. Plan rewards for different milestones along the way. It’s important to have things to look forward to and motivate you along the way.
Budgeting takes discipline and sacrifice but stays focused on the goal. You’re doing this to ensure you don’t fall back into the same bad habits as before. You are going to have to change some things – and what better time than while you’re starting over? You’re already doing the work, now the trick is to make this disciplined.
Practice self-control in your spending (and saving!) The golden rule of spending? Learn to live within your means – it sounds simple, but it can very hard to do. However, those who live within their means do not get into trouble with debt, and that’s what you’re working towards for the future! You’ve created a budget, you know exactly what you can spend in each category, now you need to execute on that. By following your
While in bankruptcy or a consumer proposal, any excess money you earn is going to go to your debtors. That may make it seem impossible to save. However, saving money should always be in your plan.
As soon as you are discharged from bankruptcy or your consumer proposal, start saving money every month. Work a specific amount (we recommend 10%) into your budget so that you learn to live within that new budget spending plan. Setting up automatic payments and transfers into your savings account on payday will ensure your money goes where it needs to before you even have time to think about spending it.
So where should this money go? First, establish an emergency fund so that you can avoid facing bankruptcy again in the future. A good emergency fund should cover at least 3 months of living expenses. Once your emergency fund is built, continue to save by contributing to your RRSP or TFSA as much as you possibly can while still meeting your month-to-month expenses.
Forming good habits of discipline and self-control is key to your permanent financial rehabilitation. Once you do so, you’ll find that building your credit will be relatively easy!
Rebuilding credit Canada: Step 2 – Work to rebuild your credit after bankruptcy or consumer proposal
It is true that a record of your insolvency filing will stay on credit reports. This is so for both a consumer proposal (3 years!) or a bankruptcy (7!). However, you can actually start rebuilding credit Canada right away.
There’s an old saying that goes “The best time to plant a tree was 20 years ago. The second-best time is now.” We recommend that you don’t wait 20 years, or even 3.
Here’s what you need to know to start building credit and improving your credit reports today:
Secured Credit Card – A secured credit card looks and functions just like a regular unsecured credit card, with your lender reporting to the credit bureaus on a regular basis. The only difference is that you put up an initial deposit as a security deposit in the form of cash. The minimum deposit or the maximum deposit you can afford to make acts as collateral upfront makes it a secured credit card. The amount of cash you put up as a deposit dictates your credit limits.
rebuilding credit canada
This protects the lender from the possibility of you defaulting on what you owe because your security fund will be used to cover any outstanding amounts. When you use this type of card, as far as the vendor is concerned, it acts just like an unsecured credit card. Every month when you pay off the balance by making your payments on time, it is reported to the credit bureaus. Then each credit bureau can update their records showing you are paying it off on time. That is how it can rebuild credit Canada.
A Secured Line of Credit – Much like a secured card, a secured line of credit is a revolving credit that is secured by the money or other security, you offer up in the beginning. As you use your line of credit and you make your payments on time, you will establish a picture of good money reminders habits which will both boost your credit score. These lines of credit are available through most banks. Again, creditworthiness and collateral, if required, set the credit limits.
Create Your Own Credit Building Programs – Credit building programs are one of the most effective methods for rebuilding credit after bankruptcy or consumer proposal. Programs like borrowing a small amount to invest in your RRSP. Then repay the loan in full before the next RRSP year.
This is beneficial in 3 ways: You don’t have to come up with the funds, you are investing in your future and by repaying the loan, you are showing you can handle credit properly which improves your credit score. This should also be combined with a secured card or line of credit, do double up on your credit score building program. Paying your bills on time also improves your credit score.
You want to follow your budget carefully. Avoiding late payments, making the full payment each month on your monthly credit card balance, not just the minimum payment, and don’t have a missed utility payment. Having timely payments and no late payments on your Canadian credit history, will take a poor credit score and start improving your credit ratingby creating a new positive credit history.
An improved credit rating and improving credit reports will overturn the negative effects of your bad credit history, get your credit score ranges to improve, get you the credit score increase you deserve and catch the attention of the credit card company and improve your chances of access to credit products.
These new types of credit becoming available to you, and perhaps even existing credit card issuers giving you a credit limit increase, all go towards your rebuilding credit Canada. But you still need to stick to your spending plan. Just because you are getting access to credit again, does not mean you can abandon your proper budgeting. You don’t want to go back to the old habits that produced the poor credit history.
Whatever kind of credit loans you are looking to take out to help rebuild your credit, make sure you understand things properly. Read the credit applications carefully to see what you are really signing up for. If approved, read the credit agreement carefully so you will fully understand all the terms of the rebuilding credit Canada loan product.
As your credit reports improve, you will find new companies offering you new credit accounts and credit card providers either increasing your credit card limit or sending you applications for new credit cards lines. Again a word of caution. Don’t get carried away with all sort of credit products in your daily life. Keep it simple and stick to your budget. You really may only need one regular credit card from amongst the wide range of Canadian credit cards becoming available to you.
rebuilding credit canada
Rebuilding credit Canada: Step 3 – Maintain your spending plan good habits for the rest of your life
Rebuilding credit Canada is not a one-time event. Think of rebuilding your credit after bankruptcy like losing weight. In the beginning, dragging yourself to the gym and making kale smoothies is hard work. However, as you start to see the weight drop, it becomes easier and easier.
What happens when you reach your goal weight? Do you stop going to the gym and start eating pizza for breakfast? No! You just carry on as you are now – because it’s become a habit, and if you slip back into old habits, you’re quickly going to see all of your hard work come undone.
Regularly checking your full credit reports from both credit reporting agencies will help you see how your good habits are paying off. Kinda like weighing yourself to make sure you’re still where you want to be. If you start seeing negative results, take stock of what’s happening in your life that could be causing it and make changes to quickly get back on track. You want to keep seeing improvement in your credit reports.
Ultimately, whether you’re declaring bankruptcy or entering into a consumer proposal, it will be emotionally difficult. There is a light at the end of the tunnel though. Many people don’t realize that you can start building credit while going through both a bankruptcy or consumer proposal so that at the time of discharge, you’re already a few steps ahead. Follow these steps and you’ll find that rebuilding your credit after bankruptcy isn’t that difficult.
Rebuilding credit Canada: Do you know anyone who needs to get back on the road to financial recovery?
If you have too much debt, are unhappy with your debt situation and need someone to talk to about how a consumer proposal or even personal bankruptcy can fix your credit issues and improve your financial life, call the Ira Smith Team. We are professional credit counsellors and can help you learn good spending habits. Through consumer proposal payment arrangements you can make steady payments on prescribed payment dates. This will allow you to avoid bankruptcy by paying only a fraction of your total debt yet eliminate all of your debt. It will also get you credit repair.
We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a no-cost initial consultation. We will look at your debt utilization and make recommendations to you on how to fix it. So why not? All you have to lose is your stress while rebuilding credit Canada. Why not fix things now so that your credit checks improve.
We will advise you whether or not we think you are a candidate for either a consumer proposal or bankruptcy. If we feel you can solve your financial problems without an insolvency process, we will tell you straight. The Ira Smith Team understands the stress you are under and the pain it is causing you and your loved ones.
We can eliminate your pain. I guarantee that you will start feeling better right away after our free initial consultation. Taking action after that will put you on the right path, Starting Over Starting Now
On the west side of University Avenue and immediately north of Queen Street, lies 330 University Avenue, in Toronto’s core. This University Ave. building is known as the Canada Life Building. Work on the building began in 1929 for the brand-new head office of the Canada Life Assurance Company and it opened up in 1931. It was the 4th structure to act as the head office of Canada Life. Most noteworthy is that this company was Canada’s earliest, as well as the biggest insurance provider.
330 University Avenue: Brief building history
The development of this fifteen-floor Beaux Arts structure was by Sproatt & Rolph. It stands at 285 feet (87 m), 321 feet (97.8 m) including its famous weather beacon. This building was the very first of scheduled buildings along University Avenue, however, the Great Depression stopped those plans. When it finished, it was among the highest structures in Toronto. It stays one of the biggest office complexes in Toronto with windows that tenants can open. In 1997, Toronto City Council designated the building a heritage property.
330 University Avenue: The most noticeable part of the building The weather beacon was added in 1951. Its colour codes sum up the weather report at a look. Environment Canada out of Toronto Pearson International Airport revises the weather details 4 times each day.
The top light indicates: Consistent green = clear Stable red = overcast Blinking red = rainfall Blinking = snow
The white lights along the tower show:
Lights rising = warmer Lights running down = colder Solid = consistent temperature level/ No adjustment
During the day, the weather tower shows the weather for that day. The evening signals show the weather for the next day.
330 University Avenue: 330 university avenue 8th floor
But enough of the history lesson. Maybe you didn’t come to this vlog to learn about the building’s history; I will now change the focus. On the 8th floor are the courtrooms. These Courts are presided over by Judges of the Superior Court of Justice Toronto Region. All corporate insolvency matters, certainly not just corporate bankruptcy matters, are part of what is known as the Commercial List.
Personal bankruptcy in Toronto Ontario is normally first heard in a different Court up the street at 393 University Avenue before a Registrar in Bankruptcy. The Registrar is a Master of the Court hearing bankruptcy matters. Most importantly, a Commerical List Judge in 330 University Avenue, Toronto Ontario M5G 1R8 must hear any appeal of a Registrar’s decision. This is for the reason that is what the rules state.
330 University Avenue: The corporate insolvency matters overview
The Court at 330 University deals mainly with corporate insolvency matters. Examples are:
Corporate receivership – appointment of a receiver, motions by the receiver or a stakeholder requesting approval for specific relief, approval motions for sale of assets or fee and costs of the receivership administration, and above all, the receiver’s discharge application.
Corporate restructuring – all motions for bankruptcy protection and restructuring of a company under the Companies’ Creditors Arrangement Act (CCAA), motions by the Court-appointed monitor or a stakeholder requesting approvals, approval motions for the Restructuring Plan of Arrangement including voting rights of all stakeholders, approval of the implementation of the Plan of Arrangement, approval of the fee and costs of the CCAA administration, monitor’s discharge application.
Personal and Corporatebankruptcy matters – as indicated above, these would mostly be either an appeal from Registrar in Bankruptcy’s decision or an opposed matter that the Registrar was not allowed to hear under the bankruptcy rules.
330 University Avenue: Do I need a lawyer to appear at 330 University Avenue?
Corporations are not a human being, so they cannot show up in Court and speak. Therefore, a company requires a person to act on its behalf. Although a shareholder or officer and director authorized to speak on behalf of the company can represent the company in Court, it is not advisable.
I say this because the legal matters heard are most complex. As a result, an experienced insolvency lawyer is necessary to properly represent the position of either the company or a stakeholder.
The licensed insolvency trustee (formerly known as trustee in bankruptcy) who is acting as the receiver, monitor or trustee, similarly will have a competent insolvency or bankruptcy lawyer acting on its behalf. Motion filings always include very detailed reports.
Complex text, financial calculations and detailed exhibits will form part of the filed material. Most laypeople would need both an independent licensed insolvency trustee as a financial advisor, as well as an experienced corporate insolvency lawyer on their team. Therefore, the costs can mount quickly.
330 University Avenue: Is your company going to be in Court either for a restructuring or as a stakeholder?
Is your company dealing with severe economic problems and you aren’t sure what to do? There’s no embarrassment in looking for specialist, financial advice. As a licensed insolvency trustee, the Ira Smith Team can check your company’s circumstances and assist you to get to the most effective solution to solve your company’s financial issues. Several of our successful case studies can be found on our website.
Ira Smith Trustee & Receiver Inc. is here to assist. The government licenses and supervises us. Hence, to keep our license in good standing, we must adhere to a stringent code of ethics. We are well-known to the Judges at 330 University Avenue and all the Toronto insolvency lawyers.
I know the pain and discomfort you are in because of your corporate financial problems. You will certainly discover that we use a pleasant, non-judgmental technique in understanding you, your goals and in restructuring your company.
Can you file personal and corporate bankruptcy: Introduction
Can you file personal and corporatebankruptcy is a question all small business owners ask us when they come to our office for a free consultation. We discuss local business bankruptcy with entrepreneurs in our office. Their personal and business lives are intertwined. There’s very little distinction between the individual their small business.
This is especially true if their business in unincorporated and is being operated as a proprietorship. Our role is to first understand them as a person and as a business separately. This way we can give the best possible advice. If the business is a proprietorship, then we are only talking personal bankruptcy, or alternatives to avoid bankruptcy, such as a consumer proposal or restructuring proposal.
Can you file personal and corporate bankruptcy: Better to be separate legal entities
If their business legal form is that of a corporation, then we look at both the corporate and personal issues separately. The reason for this is because in the eyes of the law, the corporation and the individual are separate people. Many times it is not necessary for both the corporation and the individual to each file an insolvency process. Maybe only one has to.
Separating your business and personal assets and liabilities is a great reason for incorporating your business. When discussing bankrupting an incorporated company, we also need to consider if there are any Director liabilities. We must also consider the owner’s personal situation. This is so we can make sure they do not do themselves more personal harm than good. We also first look to see if there is a way to restructure and save the corporation.
Can you file personal and corporate bankruptcy: What is bankruptcy
Bankruptcy is a lawful method for the honest but unfortunate company or person to get a remedy from the burden of the financial debts that cannot be repaid. When an assignment in bankruptcy is submitted a “stay of proceedings” is invoked.
What the stay of proceedings means
The stay of proceedings results in stopping creditors from beginning or continuing with litigation against the company or person. The stay of proceedings also stops an unsecured creditor who has obtained a judgement. It stops them from garnishing funds from a bank account or part of the person’s wages. For unsecured creditors, the stay of proceedings also calls a timeout to make sure that one unsecured creditor does not get a benefit over others in regards to the settlement of financial obligations. Keep in mind that the bankruptcy process could also be started by one or more unsecured creditors. They must be owed at least $1,000 in total.
Can creditors push you into bankruptcy?
The unsecured creditor(s) could file a motion with the Court requesting that a Bankruptcy Order be issued against the company or person. The method of bankrupting a corporation in Canada is the same as that of a person. In addition to being able to prove that the company or person owes this unsecured creditor or group at least $1,000, they also need to prove that at least one act of bankruptcy has been committed in the 6 months prior to the filing of the motion.
Secured creditors are generally not impacted by bankruptcy. They can realize upon the assets of the company or person covered by the security. In return for the original loan, the lender required that the borrower put up the security as a condition of the loan. The reason for this was so that if insolvency happens, the lender could sell the assets to try to repay the loan, interest and costs.
The secured creditor only really takes part in the bankruptcy process if after they have sold all the assets covered by their security, they are still owed money. The balance they are still owed is an unsecured debt.
Personal bankruptcy
If an individual’s business is a single proprietorship or a partnership, but not a corporation, legally, the person or people are also the business. So when they deal with the possibility of bankruptcy, all their assets are included, subject to provincial exemptions. Simply put, the assets of the business are not held different from their individual assets, so a small business bankruptcy of this kind is personal bankruptcy. Where does Canada Revenue Agency fit in?
There are generally 3 types of claims that Canada Revenue Agency (CRA) has against a business. It does not matter if the business is incorporated or is a sole proprietorship.
Both the HST liability and income tax, in a bankruptcy, is an unsecured claim. However, the HST liability is also a personal claim against the Director(s) of a corporation. Unremitted source deductions are both a deemed trust claim against the bankrupt’s assets and in the case of a corporation, a personal claim against the Director(s) of the company.
When we do our first consultation with a business owner, when the business is run in a corporation, whenever unremitted source deductions or HST is involved, this always leads to a talk about the person’s situation in the event CRA would make a claim against the Director. Some bankruptcy statistics
According to the Office of the Superintendent of Bankruptcy Canada, for the 12 months ending September 30, 2017, there were 125,912 insolvencies in Canada. This is a decrease of 3% over the same time period a year earlier. Consumer insolvency filings were 122,296 or 97.1% of total filings. The consumer filings were split into 59,192 bankruptcies and 63,104 consumer proposals – roughly half and half.
Business insolvency filings for the same time period in all of Canada totalled 3,616, a decrease of 8.1% from the 12 month period one year earlier. Business insolvency filings were split into 2,719 bankruptcies and 897 proposals. These statistics do not include filings by very large corporations under the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36).
As you can see, for a country the size of Canada, there were not a lot of business insolvencies during the first 9 months of 2017. The consumer filings were split roughly even between bankruptcy and a consumer proposal, the best consumer bankruptcy alternative.
Alternatives to Declaring Bankruptcy
A consumer proposal entails paying back a part of your financial debts in return for your unsecured creditors forgiving the remaining balance owing. A consumer proposal provides a significant benefit for a proprietor or partner in an unincorporated business. Unlike in a bankruptcy, your assets are not available for seizure by the licensed insolvency trustee (LIT).
You can take up to 60 months to pay off your consumer proposal. How much you will have to offer your creditors depends on what the unsecured creditors could expect in your bankruptcy. Working with a LIT, you work out that amount through discussion and analysis. A LIT can explain the entire process to you. From a financial viewpoint, a consumer proposal is better than your bankruptcy because it permits the unsecured creditors to recoup a larger part of the debt than they would receive in your bankruptcy.
What is best for you and your business?
If you find you or your business is in a financial danger zone, contactIra Smith Trustee & Receiver Inc. We’re full-service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.
Your financial problems can be solved with immediate action and the right plan. Give us a call today.
Declaring personal bankruptcy in Ontario Canada: Introduction
Facing serious financial difficulties is devastating, especially if you believe that declaring personal bankruptcy in Ontario Canada is your only option. In fact, many people mistakenly believe that dire financial problems automatically mean personal bankruptcy.
If you are having problems meeting your financial obligations or have stopped meeting those financial obligations as they come due you are actually insolvent, not bankrupt. Insolvency is a financial condition; bankruptcy is a legal state.
Declaring personal bankruptcy in Ontario Canada: Bаnkruрtсу is a legal рrосеѕѕ
Bаnkruрtсу is a legal рrосеѕѕ under the Bankruptcy and Insolvency Act (Canada) (“BIA”) that help you to resolve уоur debts if they have become unmanageable. If you have relatively few assets and low іnсоmе and dесіdе to file for bаnkruрtсу, you will probably fіlе under the streamlined Summary Administration part of the BIA.
If you have realizable assets that will produce a value greater than $10,000, then your bankruptcy would be administered under the general administrative provisions. Don’t worry about these distinctions right now. For now, just know that the summary administration rules are shortened. The cost of this type of bankruptcy administration is fixed by a tariff set by the Superintendent of Bankruptcy.
Declaring personal bankruptcy in Ontario Canada: A summary of the bankruptcy steps
In either case, you will turn over to your Licensed Insolvency Trustee (“LIT”) all of уоur рrореrtу that is not exempt (protected) by law. The LIT will sell your property and use the proceeds to рау for the bankruptcy administration and then distribute to уоur сrеdіtоrѕ.
If you have very little property, all of it may be рrоtесtеd. In that case, you will not lose it. How much уоur сrеdіtоrѕ will get in this process dереndѕ on how much уоur unрrоtесtеd property can be sold fоr and whether you will be required to pay “surplus income” to your LIT (more on this later).
The final step of your bankruptcy process will be to get your discharge from your debts. This means that you will not have to рау them (with certain exceptions).
Declaring personal bankruptcy in Ontario Canada: Know the basic rules BEFORE filing for bankruptcy
Gеnеrаllу, going through bankruptcy helps реорlе with debts get a fresh start. Hоwеvеr, many реорlе have false ideas about how it can help them. Bеfоrе deciding you need to fіlе for bаnkruрtсу, you should know some of the bаѕіс rules. That way you will know what bankruptcy can and cannot do for you.
Declaring personal bankruptcy in Ontario Canada: What bаnkruрtсу may do for you, dереndіng on your sіtuаtіоn
Dіѕсhаrgе уоur unѕесurеd debts; depending on your assets and income, you may not рау or lose anything. If you do, you will рrоbаblу рау less than you owe.
Give you a short-term “аutоmаtіс stay” аgаіnѕt уоur сrеdіtоrѕ.
As opposed to bankruptcy, one of the bankruptcy alternatives under the BIA will help you work out a repayment plan that lets you take longer to рау your debt and/or рау less than you owe. If your budget allows for this approach, the (consumer) proposal, allows you to keep property that ѕесurеѕ a debt. Examples of such assets would be your home or car. It can also allow you to keep nоn-еxеmрt аѕѕеtѕ that you would рrоbаblу lоѕе in a bankruptcy filing. This is one bankruptcy alternative.
Declaring personal bankruptcy in Ontario Canada: What bankruptcy does not do for you
Getting a dіѕсhаrgе of уоur debts through the bankruptcy process will not discharge:
Any award of damages by a court in civil proceedings in respect of:
i) bodily harm intentionally inflicted, or sexual assault, or ii) wrongful death resulting therefrom
A debt or liability for alimony or alimentary pension.
Any debt or liability arising under a judicial decision establishing affiliation or in connection with support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt.
Debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others.
Any debt or liability resulting from obtaining property or services by false pretenses or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
Liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his claim.
Any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred:i) before the date on which the bankrupt ceased to be a full or part-time student, as the case may be, under the applicable Act or enactment, or ii) within seven years after the date on which the bankrupt ceased to be a full or part-time student; iii) any debt or obligation in respect of a loan made under the Apprentice Loans Act where the date of bankruptcy of the bankrupt occurred: a. before the date on which the bankrupt ceased, under that Act, to be an eligible apprentice within the meaning of that Act, or b. within seven years after the date on which the bankrupt ceased to be an eligible apprentice; or
Any debt for interest owed with an amount referred to in the above list.
Declaring personal bankruptcy in Ontario Canada: More things bankruptcy does not do for you
The bаnkruрtсу court can refuse to dіѕсhаrgе your debts if it finds that you are abusing the рrосеѕѕ. Thеrеfоrе, you cannot run up debt just before filing for bаnkruрtсу and automatically have it forgiven. The Court will look at what you ѕреnt the money on and can deny you a discharge if it finds that you have abused the ѕуѕtеm. You must be truthful and not try to hide аѕѕеtѕ.
Will not help you with any debts you take on during and after you begin the bаnkruрtсу рrосеѕѕ.
Will not give you a clean slate on уоur credit report (except to show what debts have been dіѕсhаrgеd). Bankruptcy reduces your credit rating to R9. This rating remains on your record for 6 years after your discharge for the first time bankrupt. These ratings are set by the relevant credit bureaus whose rules may vary.
Will not protect some kinds of іnсоmе and рrореrtу you get during the соurѕе of the bankruptcy until you are discharged (such аѕ іnhеrіtаnсе, tax refund, gifts, lottery winnings).
May not dіѕсhаrgе all of уоur debts without some ѕасrіfісеѕ. If you have very few аѕѕеtѕ and little іnсоmе, you may not lоѕе anything. Debtors with more assets and income above the poverty line can lose some of their assets and have to pay surplus income.
Will not allow for your discharge after 9 months if you are required to pay surplus income. A first time bankrupt must pay surplus income for 21 months and a second or more time bankrupt will have to pay surplus income for 36 months. Whether or not a first time bankrupt will be entitled to an automatic and absolute discharge after paying the required surplus income depends on the specifics of your circumstances.
A second or more time bankrupt is not entitled to an automatic absolute discharge and there must first be a Court hearing to decide what form of discharge is most appropriate given your circumstances.
Filing fоr bаnkruрtсу is a big deal
Declaring personal bаnkruрtсу in Ontario Canada is a big deal. It can be a trеmеndоuѕ rеѕоurсе for the honest but unfortunate debtor who needs a new start. However, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ to соnѕіdеr before jumping in hеаdfіrѕt.
That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:
The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.
After writing and recording this blog, the Office of the Superintendent of Bankruptcy issued a position paper on measures to limit public disclosure of personal information while meeting legislative requirements to establish a public record. So watch next week for our video and blog titled “ONLINE BANKRUPTCY SEARCH: THIS CANADIAN INSOLVENCY RECORDS SEARCH RENEWAL (IRS) WON’T CHASE YOU FOR MONEY!” where we will describe what they have advised to date.
Bankruptcy filings free public records: Introduction
Ottawa’s planning to drop the $8 online search cost for personal bankruptcy records. The change to bankruptcy filings free public records may make it harder for some people. Especially those with earlier economic problems to get a job or a home. Bankruptcy filings free public records: No cost personal bankruptcy records search
Bankruptcy filings free public records: Why does a licensed insolvency trustee need to search for bankruptcy filings
A licensed insolvency trustee (LIT) maintains an account with the Superintendent of Bankruptcy. A LIT is allowed to do a bankruptcy search through its account for free. The bankruptcy system requires a LIT, prior to accepting either a personal bankruptcy or consumer proposal file, to do such a search.
The reason is that a LIT is required to find if the person considering filing has ever used the Canadian insolvency system before. If they have, what were the circumstances and what was the outcome?
This is important because one aim of the Canadian insolvency system is rehabilitating the honest but unfortunate debtor. For the person who is currently in financial trouble, the LIT must understand past problems, if any. The LIT must also find if the current problems are a result of the same behaviour and reasons as in the past or something different.
The LIT then has a duty to take all these factors into consideration when advising the person what their options are and the recommendations the LIT will make.
Bankruptcy filings free public records: Who else normally searches bankruptcy filings public records?
Right now, for $8 per search, employers, property owners, marketers or just meddlesome neighbors can conveniently access minimal information about an applicant’s, occupant’s or neighbour’s bankruptcy data. This will allow them to make assumptions about that person’s financial problems, credit worthiness or even trustworthiness.
The problem in doing so is that it is without proper context. If the federal government eliminates the $8 search fee, personal bankruptcy records can be searched for free.
Bankruptcy filings free public records: Reasons for personal bankruptcy
There can be many reasons why a person filed either a consumer proposal or for bankruptcy; divorce, illness, accident or plain overspending are just a few of the possibilities.
Bankruptcy filings free public records: What will personal bankruptcy case records search show us? A search only tells the:
date when the specific person filed for bankruptcy or the consumer proposal;
overall worth of their assets and obligations;
name of the LIT;
whether they successfully completed their consumer proposal or obtained their absolute discharge from bankruptcy; and
discharge date of the LIT.bankruptcy filings free public records
Bankruptcy filings free public records: Will this change to find personal bankruptcy records mean anything really?
The $8 cost likely limits random searches. A potential employer or landlord will not be deterred by this cost, but a nosy neighbour will be. This charge therefore provides some small security to personal information. I believe the federal government earns about $4 million a year in bankruptcy search fees. That $4 million annually is a rounding error in terms of the size of the federal government’s budget.
However, in times where our Prime Minister Trudeau and our Finance Minister Morneau are looking to increase revenue, why give away $4 million? The government could use some of that money to give financial education to Canadians. For the reasons I stated above, I doubt dropping the $8 search fee will increase the number of searches. You still have to know how to do the search. Nosy neighbours probably won’t spend the time to learn.
Equifax and TransUnion pay the Superintendent of Bankruptcy to get access to the bankruptcy search records. Therefore, the bankruptcy or consumer proposal information is available, if granted authorization, by obtaining a person’s credit report.
The Superintendent of Bankruptcy stated it will certainly protect the documents from trolling marketers. Exactly how they will do this has not been described. They also have not yet made public the date the searches will start to be free.
Bankruptcy filings free public records: Take our free consultation before your name appears in a Canadian bankruptcies search
If you have actually been declined for a loan through a normal lender, then that is a signal that you have debt concerns that have to be handled. ContactIra Smith Trustee & Receiver Inc. today. We are professional trustees. As such, the Canadian government licenses and supervises us. First, we will assess your situation and help you to come to the very best possible solution for your troubles. When you come to us for your free consultation, we first check and figure out with you if one of the bankruptcy alternative choices is best for you. These include credit counselling, debt consolidation or a consumer proposal. If none of those options are available to you, only then will we discuss the bankruptcy route. Starting Over, Starting Now we can help recover you to financial health.
After writing and recording this blog, the Office of the Superintendent of Bankruptcy issued a position paper on measures to limit public disclosure of personal information while meeting legislative requirements to establish a public record. So watch next week for our video and blog titled “ONLINE BANKRUPTCY SEARCH: THIS CANADIAN INSOLVENCY RECORDS SEARCH RENEWAL (IRS) WON’T CHASE YOU FOR MONEY!” where we will describe what they have advised to date.
Consumer proposal Ontario process: Livan Hernandez now
Livan Hernandez made a lot of money as a pitcher in major league baseball. Yet, according to court documents, in July 2017 he applied for Chapter 13 bankruptcy in Florida. He filed in federal court at Fort Lauderdale. The purpose of this blog is twofold: 1. to show that even if you have made millions in your career, you can still get into debt trouble; and 2. the consumer proposal Ontario process (Proposal, Plan or CP) which are similar to Chapter 13 US bankruptcy filings.
Hernandez, according to Baseball Reference, made more than $53 million in his job. He states that he owes up to 49 lenders between $500,000 and $1 million and he has $50,000 or less in assets.
The court documents show that most of the creditors he owes are banks and credit cards. He also owes the IRS.
Hernandez pitched for 17 years in the majors, on 9 teams. He played in 2 World Series, winning and making Series MVP honours with the Florida Marlins in 1997 and losing with the San Francisco Giants in 2002.
Mr. Hernandez would have attended at the Chapter 13 trustee office to file under the US Bankruptcy Code. A chapter 13 bankruptcy is also called a wage earner’s plan. It enables people with regular income to develop a plan to repay all or part of their debts. The Canadian equivalent is our CP.
Consumer proposal Ontario process: The rich and famous have problems too
We have written about the rich and famous having debt problems before. Our previous blogs on this topic include:
Consumer proposal Ontario process: Just what is a consumer proposal?
This vlog offers the answer to one of the most asked Plan questions. A CP is available to people under the Bankruptcy and Insolvency Act (BIA). Teaming up with a licensed insolvency trustee (LIT) offering to administer your Plan you make an offer to:
pay your creditors part of what you owe them over a period not greater than 60 months;
lengthen the time you have to pay back your debts; as well as
stay free from bankruptcy
Payments are made to the LIT. The LIT uses that cash to pay each of your creditors. The CP must be finished within 5 years.
Consumer proposal Ontario process: Who qualifies?
To meet the BIA requirements for a CP, you need to be an individual, not a company. Your overall financial debts need to not exceed $250,000 (not consisting of debts from a home mortgage, home equity line of credit or line of credit, secured by your principal residence).
You should also meet the insolvency requirements. This implies that:
your debts are greater than the value of your assets;
if you sold your assets you would not have appropriate funds to repay your monetary commitments totally;
you are unable to pay your debts as they come due
Making simply the minimum monthly payment as disclosed on your credit card statements do not count as repaying your debts.
Consumer proposal Ontario process: What is the cost of a consumer proposal?
Your Plan repayments cover the expense for the consumer proposal. There are no different prices either for doing a consumer proposal or fees paid to the LIT to administer your Plan. The fee the LIT earns is calculated per the BIA.
Consumer proposal Ontario process: How long will my consumer proposal take?
A CP can last for no more than 5 years. Nonetheless, you can reduce the term either by 1. increasing the amount of your month-to-month repayment agreed to with your creditors in your Plan or; 2. by giving a round figure settlement all at once (if you could get an adequate amount from either a financial institution or family).
Consumer proposal Ontario process: What are the actions involved in a consumer proposal?
A CP allows you to pay all or part of your unsecured debt in regular monthly payments over an established period (again, not exceeding 60 months).
In composing your Plan, the LIT has to make sure that your CP provides a better outcome for your creditors compared to what they could expect to receive in your personal bankruptcy.
The typical actions of a LIT assisting you in your CP are:
learn from you about your assets and liabilities;
work with you to create a strategy that you both believe will serve the requirements of both you and those you owe;
draft the Plan;
send the Plan to the Office of the Superintendent of Bankruptcy;
mail out the CP to your creditors who will have 45 days to accept or reject it.
The creditors can accept or reject your consumer proposal at a meeting of creditors if such a meeting was held. Usually, under a Plan, there is no need to hold a meeting.
Consumer proposal Ontario process: Can a consumer proposal stop debt collection agencies as well as prevent my wages from being seized?
Yes. As soon as the filing of a CP happens, all creditors must stop all legal action against you, including seizure activities (aside from any family law responsibilities under a proper settlement arrangement or court order).
Consumer proposal Ontario process: In a consumer proposal, will I turn over my residence as well as my auto?
Typically lending institutions who register a mortgage or various other security for financing are outside the CP procedure. It is the equity you have in your residence or auto that must be considered when you initially work out a budget and what type of Plan strategy you are going to make with your LIT.
If you have enough earnings to keep paying the mortgage against your home and/or your car loan as well as you wish to maintain the properties, you can do so. Again, your equity needs to be taken into consideration in the offer you make to your creditor. Also, your income, as well as costs, need to be evaluated to make certain you can pay for all these expenditures plus the regular monthly payment under your CP.
KEEP IN MIND: If you were to surrender your home or auto after declaring your Plan, you will not be spared the responsibility for any shortfall on your mortgage or auto loan given that the surrender took place after the filing of your CP.
Make certain that if you are giving back your home or auto to your lender, you await the bank to acknowledge that you have turned them over. Additionally, wait till they have begun their enforcement BEFORE you file your CP. That way any shortfall they experience will be a debt caught in your Plan
Consumer proposal Ontario process: Will I need to surrender my charge cards?
Typically, you must be prepared to give each of your charge cards to the LIT and you will not be able to ask for a brand-new credit card till after your Plan is completed. You can take advantage of a guaranteed/secured charge card.
If my creditors reject my CP or I fail to fully do it, will I automatically become bankrupt?
We highly recommend you to put your best foot forward when submitting your CP. We also recommend that you make your payments constantly on time. If your Plan is rejected by your creditors or you drop 3 payments behind, your CP will go into default. If that were to happen, you will no more have protection from your creditors and their collection initiatives.
Consumer proposal Ontario process: What should I do if I have too much debt?
If you’re thinking of a debt settlement program or are seeking methods to solve your debt problems and avoid bankruptcy, call Ira Smith Trustee & Receiver Inc. Our method is for every single person is to create an outcome where Starting Over, Starting Now comes true, starting the minute you walk in the door. You’re simply one call away from getting back on the road to leading a healthy, balanced and tension free life.
Divorce during bankruptcy Canada is the same as the old conundrum, “which arrived first; the chicken or maybe the egg”, how would one answer, marital breakdown and insolvency: which comes first? Nobody has a definitive answer because excellent arguments can be produced for both. The same is true for “divorce and personal bankruptcy which comes first”?
Every case is decided based on its unique facts. Marital breakdown and insolvency, and bankruptcy and divorce, often go hand in hand. However, a marital breakdown will not always lead to divorce if the marriage can be salvaged. However, personal bankruptcy and divorce are two separate legal processes that can be at odds with each other.
A few indisputable facts
In this divorce during bankruptcy Canada Brandon’s Blog you will find 5 indisputable facts:
The number one reason for marital breakdown and divorce is financial issues. Divorce.com
In a recently available study one out of every seven people who made an insolvency filing in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
One-third of all people facing insolvency problems are also going through relationship breakdown and divorce in Ontario or {a splitting up. Gail Vaz-Oxlade
Declaring personal bankruptcy on joint debts, even debts in a divorce will impact the other debtor.
Are you looking to reduce grief?
If creating minimal interruption on the children of the family during a marital breakdown and personal bankruptcy features prime importance to the spouse with the debts (and presumably that will be just like the spouse making the support payments), it makes sense to have at least the support terms of the divorce decided, including the making of the support order and then do an insolvency filing. The marital breakdown and bankruptcy process will not disturb any in good faith arrangements for support, but keep in mind it will affect property not already dealt with by the family law court.
What about joint debts?
One particular area that comes up in divorce during bankruptcy Canada is this common question: “If my ex files how will it affect joint liabilities? “. Family law rules are the one area of a provincial law that is left relatively unblemished by the Bankruptcy and Insolvency Act, which is a federal statute. Nevertheless, the Supreme Court of Canada has confirmed that in Provinces that are an equalization jurisdiction (as opposed to a split of property jurisdiction, in a unanimous decision, the court upheld defining equalization payments as debts that are a claim provable in an insolvency process, meaning they are wiped off a person’s slate by the bankruptcy process.
Divorce during bankruptcy Canada: What should you do if you have both marital breakdown and too much debt?
Marital breakdown and bankruptcy is an extremely complicated process, made even more complicated when put together with divorce and requires a qualified licensed Trustee to work with your family law legal professional to work with your individual situation and give practical alternatives and an action plan. If you have serious debt problems, are considering bankruptcy and divorce, or perhaps wish to know more about marital breakdown and bankruptcy, then contactIra Smith Trustee & Receiver Inc. as soon as possible. Starting Over, Starting Now, we can help you get your life back again on track, even with marital breakdown and personal bankruptcy looming.
Every Monday and Wednesday night Brandon posts to Brandon’s Blog. Monday night is a blog and Wednesday night is a vlog. Just to remind you what this means, here are dictionary definitions:
blog Pronunciation: /blɒɡ/noun
A regularly updated website or web page, typically one run by a person or small group, written in an informal or conversational style: you can add personal bankruptcy blog to the growing list of insolvency-related material popping up on the Web
vlog Pronunciation: /vlɒɡ/ noun
A blog in which the postings are primarily in video form: you can add personal bankruptcy vlog to the growing list of insolvency-related material popping up on the Web
Differences between US and Canadian insolvency statutes
In the United States, people filing for bankruptcy have many “chapters” from which to choose. Similarly, Canada has one chief insolvency law, the Bankruptcy and Insolvency Act, or BIA, and several supporting pieces of legislation. In perusing a personal bankruptcy blog, the potential filer can find the information he or she seeks.
In the United States, Chapter 11 bankruptcy is the most complex because it applies to large businesses and usually involves gigantic sums of money. In Canada, the equivalent is the Division I proposal. In such a proposal, the debtor’s business can keep assets necessary for its role so that it can generate streams of income from other places to repay its debts. Management also stays in control of the company and business operations.
What are the Choices in Canada?
The BIA sets out the ground rules, and several smaller pieces of legislation fill in the details. Although we Canadians don’t call them various chapters, our legislation is like that of the U.S. Here are the options for filing bankruptcy in Canada:
Personal bankruptcy in Canada is most similar to Chapter 7 in the U.S. By filing bankruptcy, the debtor seeks to deal with his or her entire debt load at once. The debtor does not believe that he or she has the means to attempt a restructuring. There are certain assets that are exempt for any one of a number of reasons, so anyone filing bankruptcy should consult a Trustee to find out more.
If a debtor decides to file a consumer proposal (because his or her debt load is $250,000 or less, not including any mortgages against the principal residence) or a Division I Proposal (for unsecured debts $250,000 or greater) instead, he or she is seeking a restructuring of debt so for repayment over a five years or less. Many times, debtors can negotiate with their creditors for part of the amount owed and work out deals on monthly payments, rates of interest, and other such considerations. A proposal is most similar to Chapter 13 in the U.S. and used by people who wish to AVOID bankruptcy.
Basically, the business operates as usual while making an offer to its creditors of payments over time, totalling an amount greater than the creditors would receive if everything was sold off in liquidation in bankruptcy. The largest businesses might even have several layers of debt that would need restructuring as part of a Division I proposal, and each layer might have different guidelines and restrictions based on the proposal.
For companies with greater than $5 million in debt, they could also make use of a different Federal restructuring statute called the Companies’ Creditors Arrangement Act (CCAA). Both the Proposal under the BIA and restructuring under the CCAA are for large complex corporate reorganizations.
Is a Lawyer Required?
Unlike citizens of the United States, Canadians don’t need a lawyer to file for bankruptcy. A Licensed Insolvency Trustee acts as the “referee” between debtor and creditors. In this way, people file and handle bankruptcy proceedings on their own in Canada. If the debtor has various complex issues or is a defendant in litigation where the plaintiff wishes to continue the litigation perhaps to attempt to prove that their claim is one not released by the person’s discharge from bankruptcy, then they may very well need a lawyer for those issues.
What to do if you have too much debt and want to read a personal bankruptcy blog?
To find out more, check out our Brandon’s Blog entries for the topic of personal bankruptcy blog. If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.
