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TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?

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Trustee of parents estate: Introduction

I want to talk about an issue which is all too common. I am also going to give you two real-life examples. The issue is that of children being named as the estate trustee of parents estate.

I caution that I and my firm are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Why the children?

Many times in drafting a will, parents want their children to know that the parents trust and love them. So, they not only have their children as beneficiaries of their estate, they also make them the estate trustees (formerly known as executor or executrix). This is natural, but may not be the best choice.

The reason I say this is because the role of the estate trustee is a demanding one that requires a specific skill set. Children don’t always have the necessary skills. What if one or more of the children have great financial skills and have sound judgment, but others don’t. This can lead to differences of opinion and major arguments. In the most extreme case, it can lead to costly and lengthy litigation to dissipate estate assets. Executors must act in the best interests of all beneficiaries. If personal agendas get in the way, then everyone’s best interests can’t be met.

Adult children are probably married. Now you have daughters-in-law and sons-in-law involved in the background. This can lead to a whole host of issues that has nothing to do with the efficient administration of the parents’ estate and being even-handed with all beneficiaries.

What if some of the children have personal financial issues. There will be a temptation for self-dealing or self-enrichment. Again this can lead to major problems.

What if you have an even number of children? Two or four estate trustees can lead to many problems. With two, the estate trustees will always be deadlocked if they don’t see eye to eye. With four, not only can you have a deadlock, but too many cooks may spoil the broth!

Splitting the tasks

Sometimes parents split the tasks. One child will be the estate trustee because she has great financial acumen. The other child will be made responsible for health and living decisions if the parents first become incapacitated. Sounds great in theory. However, the way the health decider child wishes the parents to live may be at odds with the financial person seeing the estate shrinking away. Or, the health decider may make decisions for the parents to live in a way that does not shrink away from the estate, but is demeaning to the parents and does not give them a good quality of life in their final days.

So, as you can see, what started out as the parents wanting to “do right” by their children, can lead to many problems.

What an estate trustee should not do

In my last blog, TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I spoke about some basic elements of the role of an estate trustee. I described the process of becoming an estate trustee, and what the responsibilities are.

Now, I want to touch on some practical matters of what an estate trustee should not do.

The first is communicating with some beneficiaries and not others. As I have previously described, one of the roles and responsibilities of an estate trustee is to deal with all beneficiaries even-handedly. The estate trustee cannot tell certain details to some beneficiaries, and not others. So, all communications should be with all beneficiaries at the same time; either in writing or orally. Everyone should get the same information at the same time. The estate trustee does not wish to be accused of favouring some beneficiaries over others.

The second thing not to do is to rush to distribute smaller personal possessions of the deceased. The estate trustee may be pressured by family members to distribute certain items quickly. Possibly because the family member is the proper beneficiary of those small items and wants them as quickly as possible. Alternatively, perhaps they are not the rightful beneficiary of all the items they are claiming. However, they want to get their hands on certain items to stop other family members from getting them. Or perhaps there is a home involved that must be sold, so family members will pressure the estate trustee to clean out the home immediately so that the home can be put up for sale as soon as possible.

As tempting and easy as it might be, the estate trustee must first take steps to:

  • get a copy of the will and the deceased’s financial records
  • take possession and control of all assets
  • ensure that a proper inventory is made and that appraisals are obtained where necessary
  • make sure that all required insurance and bonding is in place

There is another reason. An estate trustee will be putting more pressure on themselves than they should bY making piecemeal distributions. Regardless of value, making a quick distribution to one of the beneficiaries will only give rise to all the other beneficiaries clamouring for their entitlements. The estate trustee may not be in a position for some time to be able to make a proper distribution to all other beneficiaries. This will only lead to headaches for the estate trustee.

Why some children may not want to be an estate trustee

There can be danger in being an estate trustee. In my last blog, I highlighted specific expertise and knowledge that an estate trustee must have. I also discussed how a licensed insolvency trustee (formerly called a bankruptcy trustee) also possesses the same skill set required of an estate trustee.

A trustee, including an estate trustee, acts in a fiduciary capacity. The estate trustee is fully accountable for all decisions made and steps were taken with respect to the assets. Not only is it important to have the necessary financial skills, but an estate trustee also has to be aware of the myriad of income tax issues. Final income tax returns must be filed. The estate trustee has a duty to ensure that all income tax legislation requirements are met, including the obtaining of clearance certificates. Any loss to the estate as a result of things an estate trustee either did or did not do, the estate trustee will be personally liable for.

The steps required in formulating an appropriate sales process for the different asset types not being directly distributed to beneficiaries is not totally scientific. There is some art to it as well. Making wrong decisions can expose the estate to loss of value, which will blow back right onto the estate trustee.

For these reasons, children may not wish to take on responsibility. The smart ones will understand that they do not have the required skill set. In other cases, the children may see the real possibility of creating family strife if they were to take on the role of an estate trustee. So what if children are named in the will as the estate trustees, but they don’t wish to take on the role. Must they anyway?

Renunciation of estate trustee Ontario

If you have not yet applied for probate or have otherwise not started to administer the estate, you do not have to be an estate trustee. There is a specific form to complete in order to renunciate your position as an estate trustee. Again, it must be done before you take any action as the estate trustee. If you have already applied for probate, or have started administering the estate and now find that you are in over your head, you cannot renunciate your position. You must make application to Court for an Order removing you as the estate trustee. I would suggest that if you are the sole estate trustee, you should have someone else lined up to succeed you. Otherwise, the Court may not allow you to be removed.

Two real-life examples

Example 1

In my blog, COURT APPOINTED ESTATE TRUSTEE CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, I described one of our case studies where we were appointed estate trustee to sell real estate. In that case, neither of the beneficiaries were capable of agreeing on anything. They were also incapable of carrying out the role of taking possession and control of the real property, Insuring it and selling it. Legal counsel for one of the beneficiaries made an application to Court seeking an Order appointing Ira Smith Trustee & Receiver Inc. as an estate trustee.

The Court made the Order. With the approval of the Court, we listed the property for sale, obtained approval to our actions and activities, including a sale of the property. We then proposed a distribution of funds which also was approved by the Court. We made the distribution and obtained our discharge. This is a perfect example of how our skill set as a licensed insolvency trustee was recognized by the Court and allowed us to carry out the mandate in an efficient way.

Example 2

Recently, one of Ira Smith’s cousins needed to update her will and name an estate trustee. This cousin has three children. None of the children believed that they had the necessary skills and knowledge to be an estate trustee. They also agreed that it was not a good idea for any of them to take on that role.

However, there was one thing that the mother and her three children could all agree on. That was that Ira had the necessary skills to be the estate trustee. They unanimously agreed that it would be a good idea for Ira to take on that role. Ira’s cousin asked him if he would. He told his cousin that he was honoured that they all thought so highly of him. He agreed to be named in her will as the estate trustee.

The children were smart. They knew what they didn’t know. They all agreed on the estate trustee being proposed. A huge weight was taken off of the mother’s shoulders.

Trustee of parents estate: Why not appoint a Toronto bankruptcy trustee?

I hope that you can see that the knowledge, experience, and expertise of a licensed insolvency trustee would stand him or her in good stead to act as executor, executrix or estate trustee of a deceased estate. Many times, it may be a smart move to allow an independent neutral third party act as the estate trustee. Especially one like a licensed insolvency trustee who is used to acting as the independent Court officer.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

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BANKRUPTCY BLOG REVIEW: A LOOK AT MY TOP 2018 BANKRUPTCY BLOGS

Bankruptcy blog review: Introduction

I hope that you are all enjoying quality family time together over the holidays. As 2018 is nearly over, I thought that it would be interesting to do a bankruptcy blog review on my Brandon’s Blog. So here is a review of the 7 most viewed blogs over the past year.

Bankruptcy blog review: The 7 most viewed blogs in 2018

BANKRUPTCY AND INSOLVENCY ACT: COURT MAY NOT LISTEN TO BANKRUPTCY TRUSTEE

This blog was about a very interesting case decided in the Court of Appeal of British Columbia. The bankrupt’s creditors applied to have the transactions reviewed under section I00 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”). One of the areas of contention was that the judge in the lower court found he could not rely on the bankruptcy trustee’s opinion of value in the circumstances.

MORTGAGE LENDING CRITERIA SELF EMPLOYED: BIGGEST MYTH MAY BE RIGHT

In this Brandon’s Blog, I wrote about mortgage lending criteria self-employed, I discussed a Court decision that shows when it comes to a self-employed person’s mortgage, if there is a deemed trust claim by Canada Revenue Agency (CRA), you cannot solely rely upon the registry system.


STALKING HORSE CREDIT BID: WE NEED COURT APPROVAL BEFORE STARTING A COURT SUPERVISED SALES PROCESS

This bankruptcy blog review post came from our corporate case files. I discussed the decision making process the Court goes through when being asked to approve a stalking horse sales process and the stalking horse credit bid being recommended by the licensed insolvency trustee (formerly called a bankruptcy trustee).


CREDIT KARMA CANADA REVIEW: IS IT REALLY FREE AND LEGITIMATE?

Since 2007, Credit Karma USA has attempted to simplify credit and finance for more than 60 million Credit Karma members. They advertise very heavily on US television to attract new members. Becoming a member is free, and it allows any member to get access to their free credit score and credit report, with the option to update every single week. Credit Karma also provides financial education to put credit into context.

Credit Karma Canada arrived this past year from the United States. Its website is creditkarma.ca. The purpose of this blog was to describe what Credit Karma Canada is and to let you decide if it would be helpful or not for you or someone you know.


IS GOODWILL A NON PROFIT ORGANIZATION? ARE YOU SCARED BECAUSE YOUR COMPANY HAS TURNED INTO ONE?

 

The Goodwill Toronto bankruptcy confused and astonished many people. After all, how can Goodwill, a non-profit organization, go bankrupt? Isn’t the very nature of a non-profit or not-for-profit that it doesn’t have to make a profit? This Brandon’s Blog discussed the issues.


FILING FOR BANKRUPTCY IN CANADA: MENTAL HEALTH & DISCHARGED BANKRUPTCY

 

This bankruptcy blogspot dealt with filing for bankruptcy in Canada and the bankruptcy discharge process when mental health issues are involved.


POOR CREDIT PERSONAL LOANS GUARANTEED APPROVAL CANADA: REDUCE AND DON’T INCREASE DEBT TO IMPROVE YOUR CREDIT SCORE

 

This Brandon’s Blog was a discussion about and a warning against being seduced by ads from companies for poor credit personal loans guaranteed approval. We pointed out the pitfalls of the products being offered. We also showed how people with poor credit can go about settling their debts and improving their credit score.

 

Bankruptcy blog review: Conclusion

 

These are my 7 top viewed Brandon’s Blogs in 2018. Four are about personal debt issues or personal bankruptcy blog items and three are about corporate insolvency issues. Three are about a review of a then-recent court case.

I hope that the year 2019 will be a happy, healthy and prosperous New Year for you and your families.

Have you taken on too much debt in 2018 or the years before? Is the pain and stress of too much debt now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also eliminate it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.bankruptcy blog review

 

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HOW BANKRUPTCIES WORK FOR BUSINESSES IN TORONTO AND VAUGHAN ONTARIO CANADA

How bankruptcies work for businesses: Introduction

how bankruptcies work for businesses

How bankruptcies work for businesses: Introduction

Recently I have written several blogs focussing on insolvency and specifically the topics of consumer proposal and personal bankruptcy. To round out the discussion, this Brandon’s Blog discusses how bankruptcies work for businesses in Canada.

To be clear, the goal for either personal bankruptcy or corporate bankruptcy is to avoid bankruptcy. We have many tools in our toolbox to help people and companies avoid bankruptcy through restructuring. It is only when the person has stewed over their personal or business problems for too long that they come to us when it is too late. When it is too late, our hands are tied for creative problem-solving.

How bankruptcies work for businesses: Where we start

When a business owner comes to our office for a free consultation, we start with some basics. The first thing we do is ask certain questions that will allow us to get a financial snapshot of the business. We need to know about the assets and liabilities of the business.

We need to understand who all the creditors are and what the assets are. Which creditors may have a deemed trust claim or a secured claim against the assets. What is the total and nature of the unsecured debts?

That information tells us what choices we may have in helping the business recover: is an informal debt settlement restructuring possible;

what do we think about the likelihood of a formal restructuring under either the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) or the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA); or is the business too far gone and therefore bankruptcy or just shutting down are the only options remaining.

How bankruptcies work for businesses: The proprietorship

If the business is unincorporated, then the person is carrying on their business in the form of a proprietorship. They are conducting business in their personal name. They may use a business style, but the legal reality of a proprietorship is that the individual, in their personal capacity, is carrying on business. So, the assets and liabilities that are created in the business, is owned by and is the responsibility of the person.

So, in this situation, it will be a personal insolvency discussion. The available remedies will be:

  • an informal restructuring;
  • (consumer) proposal debt settlement plan; or
  • personal bankruptcy

If you wish to find out more about personal insolvency, or how bankruptcies work for individuals, you can read some of my previous blogs. Good examples are WHAT IS THE DIFFERENCE BETWEEN BANKRUPTCY AND INSOLVENCY CANADA or CANADIAN DEBT SOLUTIONS: AVOIDING THE BANKRUPTCY PROCESS MIGHT BE THE RIGHT THING.

How bankruptcies work for businesses: Incorporated businesses

So now we have gone through the starting point I just described and we have determined that we are dealing with an incorporated business. We first focus on many issues before even discussing how bankruptcies work for companies.

First, we want to know how well does management understand its own business problems. If management does not have a good handle on their business problems, then they first need to get that deep understanding. They may know that monthly when looking at the numbers, they see that losses are continuing. Management, especially in an entrepreneurial or family-owned company, may feel ashamed because they don’t feel like they’ve made good decisions. Or they are aggravated and embarrassed because family members have told you the company is finished.

If you know in your heart that if you do not do something today, you may be risking the entire business.

How bankruptcies work for businesses: Know your numbers

To restructure companies for a successful turnaround, you first need to know your numbers and what they mean. The goal is to have the company producing sufficient cash levels and for everyone in the business to be earning a fair market-based income.

Management must look at the entire business and ask:

  • Where’s the profit?.
  • Do we have the money to actually run and scale the business?
  • What is getting in the way for the business to charge the revenue its products or services are worth?
  • Do we have the necessary cash and people resources will we need for a turnaround?
  • Are there lines of business or locations that need to be shed to increase profitability?
  • What expenses can we cut without harming our core business?
  • Which contracts do we need to cut to return to profitability and growth?
  • Do we have the proper reporting systems to give us the information we need to get prompt and accurate information?
  • Can we properly analyze the business issues and take the necessary corrective action?
  • Do we have the right people to carry on the business while implementing the turnaround?
  • Are we experienced enough to carry out our own turnaround or do we need outside professionals to help us with it?
  • Do we know what the impediments are to having a successful informal restructuring or do we need to look at a formal restructuring process?

How bankruptcies work for businesses: Now that we have the information…

These are the main questions that first must be answered for any business experiencing financial difficulties and facing insolvency. This is especially true for more complex companies. New systems or techniques may need to be implemented. If management can answer these questions for themselves, we want to hear those answers. If not, then a financial advisor may need to be retained. My Firm has been regularly retained, either by a company or its lender, to answer these questions and provide our recommendations. This kind of assignment is called a Business Viability Review.

After we provide our recommendations, we then work with the company to help them decide if they can carry out the recommendations and strategies themselves, or if they need our help to do so. If management can do it on their own, many times the lender will want us to stay involved by monitoring the company’s progress and reporting back to both the company and the lender.

How bankruptcies work for businesses: What if informal restructuring isn’t possible

The aim is always to avoid bankruptcy but it’s practical to recognize what it is and when it could be suitable. Companies are complex organisms. There may be the need to shed unprofitable contracts or long-term agreements that are just too expensive to continue with. It may be that disposing of such onerous contracts, leases or agreements is crucial to have a viable ongoing business. Many times a formal restructuring process is necessary to legally end those types of agreements.

It is the largest of company restructurings that we hear about in the news. From the United States, we read about Chapter 11 bankruptcy protection filings. In Canada, we read about restructurings under the CCAA. The largest of companies do not represent the size of the majority of Canadian companies.

For the biggest of companies, they can get relief and press back on creditors. There is an old adage which says: “If you owe the bank a bit of money, they own you. If you owe the bank a huge amount of money, you own them.”. In that way, in the largest company restructurings, the business can get a long time to either sell particular assets where the cash will help them rebound. They will also get the time they need to “rightsize” their employee numbers and shed unprofitable contracts. Loan changes with their secured lender or banking syndicate is also on the table and accomplished, more often than not. Their sheer size demands it and they get it.

How bankruptcies work for businesses: The reality for the majority of Canadian companies

Canadian business is full of entrepreneur-owned companies. So, that is what I will focus on in this Brandon’s Blog. If the business owner(s) come to us early enough, then we can decide if an informal restructuring will work or if not, what needs to be done in a formal restructuring. For any business that owes less than $5 million, it will normally be a BIA restructuring debt settlement proposal. We have done many successful company restructuring proposals under the BIA.

The answers to all the questions I posted above, will tell us what the restructuring needs to look like, how long it will take, and what our projections show about the profitability and viability of the business after a successful implementation of the restructuring plan.

How bankruptcies work for businesses: Company bankruptcy

In a company bankruptcy, the Licensed Insolvency Trustee (formerly called a bankruptcy trustee) (Trustee) takes possession of the assets, properties, and undertakings of the company. This assumes that there are not secured creditors who have all the assets of the company tied up. If there are, then the company may not need to go into bankruptcy. Rather, a secured creditor will take enforcement action by making a demand on the insolvent company. However, if the loan is not repaid in time, then the secured lender will appoint a receiver to take possession of the assets covered by the lender’s security. In Canada, this is normally a Chartered Bank and all the assets are secured.

Sometimes a company in receivership needs to also file for bankruptcy. The main reason would be to aid in maximizing the recovery on the assets. For example, the company is a retail chain. The only way to maximize the recovery is to run the business and sell off the assets from one or more stores. One way to guarantee quiet enjoyment of the stores the receiver needs to stay in is to have a bankruptcy. That is because, under Provincial commercial tenancy law, a trustee in bankruptcy has a certain time to stay in the premises, undisturbed, as long as the current rent is paid.

How bankruptcies work for businesses: Receivership or bankruptcy

Whether there is a receivership or bankruptcy, there are many steps that a receiver or trustee have in common. These include:

  • Determining whether or not the recovery on assets will be maximized if the business is operated by the receiver or Trustee.
  • What impediments are there in running the business?
  • What is the best way to sell off the assets? As an entire group or parcels of assets that make sense to keep together, or one by one?
  • Are there any third party assets not owned by the company on the premises or other locations?
  • Are there assets owned by the company in any other locations?
  • Is there proper insurance and physical security over the assets?
  • Once the assets are sold and the cash received, what claims are there against the funds and what is the priority of all the potential claimants?

How bankruptcies work for businesses: The entrepreneurial company reality

Most mid-size and small companies when they’re in difficulty, do not submit a formal restructuring plan or file for bankruptcy at all. They just shut down by closing the doors. The owner will get the company’s final income tax and other information returns completed and filed. They will make sure that employee wages are paid current. Hopefully, source deductions and HST are fully paid up.

Wages, source deductions and/or HST that are not fully paid, are a personal liability of the Directors of the company. In the entrepreneurial companies, the owner(s) have probably personally guaranteed bank loans, premises and equipment leases or have raised funds to start and invest in the business by taking out at a mortgage against their home.

This brings us to the reality of most midsize and small businesses. The business failure leads to personal insolvency issues. Many times we advise entrepreneurs that their company filing an assignment in bankruptcy is not necessary. Rather, they should just shut down their business and then we will deal with their personal insolvency issues. This will allow the entrepreneur to get a fresh start.

Now what is required is getting a job in their field and earning a salary without the risk and challenges of running their own business. Once they get their fresh start, are back on their feet and saved up some money, they can decide if being an employee or starting a new business will be their future.

How bankruptcies work for businesses: Does your company have too much debt?

Is your company insolvent and needs to restructure? Is your business viable but can only continue if it can reorganize its debt? We know your pain and understand the stress you are living with. The Ira Smith Team has decades and generations of experience in company restructurings of all sizes.

Contact the Ira Smith Trustee & Receiver Team. If we can meet with you in our free first consultation early enough, we can create and help you start a restructuring and turnaround plan. This will allow your company to continue to do business, create jobs and be profitable for many years to come.

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INSOLVENT DEFINITION: A NEW FOCUS FOR TORONTO BANKRUPTCY TRUSTEE

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO

Insolvent definition: Introduction

The basis of the Canadian insolvency system is to assist the honest but unfortunate person or company shed their debt (with certain limitations) and start over fresh. There are many terms defined in the Canadian insolvency legislation. The most basic one is the insolvent definition.

Last week I reviewed a decision of the Ontario bankruptcy Court that really did give me a new focus. It doesn’t change the bottom line of the advice I would give an insolvent debtor, but it did change my focus. That is one of the things I love about being a licensed insolvency trustee (formerly called a bankruptcy trustee). I never stop learning.

Insolvent definition: Two examples

The Oxford dictionary definition is:

“insolvent

ADJECTIVE

Unable to pay debts owed.

‘the company became insolvent’”

Section 2 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) defines an insolvent person as:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

Insolvent definition: The concept of net worth

Insolvent person refers to both people and companies. The BIA definition incorporates the common English definition. The BIA definition also incorporates the accounting concept of net worth. Net worth = Assets – Liabilities. If the difference is positive, you have a positive net worth. If the difference is negative, you have negative or no net worth.

For those that want to read more about the concept of net worth, look at the Addendum I wrote which is at the bottom of this blog. Since many of you already have an advanced understanding of net, I don’t want to insert it in here.

When giving our free first consultation, my advice to anyone with lots of debt but positive net worth is that in bankruptcy, they will lose their non-exempt assets. If the major asset providing the positive net worth value is their home, I advise the person that they will lose their equity in their home which is not a good outcome. So, my first advice is always to see if the person can either refinance the home or sell it. Then they can use the funds to pay off their debts. In a sale, any balance can be used as a down payment on a smaller home or can set them up nicely to rent.

I normally don’t think of part (c) of the BIA insolvent definition as being mutually exclusive. However, after reading the Court decision and looking again at the BIA definition, I am reminded that it really is. Let me describe the Court’s decision to explain.

Insolvent definition: Kormos v. Fast, 2018 ONSC 6044 (CanLII)

Mr. and Mrs. Kormos got a judgment against their neighbours, Mr. and Mrs. Fast. The Small Claims Court at St. Catherines issued the judgment for $25,565.64. This judgment comes about from problems arising from flooding in their home which was triggered by the Fasts.

After the judgment was given, the Fasts were contacted by Mr. Kormos’ licensed insolvency trustee (Trustee). The Trustee advised that Mr. Fast had submitted a consumer proposal under the BIA many months previously, on August 24, 2016. Mr. Fast did not previously mention anything about his consumer proposal or his later filing of an assignment in bankruptcy.

Fifteen days after the Kormos plaintiffs started enforcement of the judgment by serving a notice of examination on Mrs. Fast, she made an assignment in bankruptcy under the BIA on April 25, 2017.

In their different bankruptcy filings, each of the Fasts attested in their respective sworn Statement of Affairs, that their home in Queenston, Ontario (Home) was worth $630,000.

Mr. and Mrs. Kormos provided evidence by way of an expert witness appraisal who also testified in Court, showing that the Home was considerably underestimated in the BIA filings by Mr. Fast on August 24, 2016, and Mrs. Fast on April 25, 2017, when she made an assignment in bankruptcy.

The Kormos’ lawyer stated that when a reasonable value is designated to the Home, neither Mr. Fast nor Mrs. Fast was insolvent when their corresponding filings were made under the BIA. They were obviously relying on the fact that each of Mr. and Mrs. Fast really had a positive net worth.

Mr. and Mrs. Kormos were looking for an Order under the BIA (i) annulling Mr. Fast’s consumer proposal as well as, if required, his 2014 bankruptcy; as well as (ii) annulling Mrs. Fast’s bankruptcy.

Insolvent definition: The Court’s analysis

Mr. and Mrs. Kormos wanted:

  1. An Order according to s. 66.3(1) of the BIA annulling the consumer proposal submitted by Mr. Fast.
  2. Since an outcome of such an annulment would be that Mr. Fast is considered to make an assignment in bankruptcy under s. 66.3(5) of the BIA, they also were looking for an annulment of his bankruptcy on the ground that Mr. Fast is not presently insolvent.
  3. An order according to ss. 181(1) as well as 187(5) of the BIA annulling the bankruptcy of Mrs. Fast.
  4. An Order according to Rule 60.07 of the Rules of Civil Procedure issuing a writ of seizure and sale of the Home.

The Fasts did not challenge the expert appraisal opinion. The Court accepted the expert’s appraisal as being the value of the Home on the relevant dates of Mr. and Mrs. Fast’s respective filings under the BIA.

The Court looked at the insolvent definition in the BIA, which again is:

“insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and

(a) who is for any reason unable to meet his obligations as they generally become due,

(b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due;”

In her bankruptcy filing, Mrs. Fast filed her statement of monthly income and expenses. According to the statement, her monthly expenses exceed her monthly income by $2,010. When looking at the definition of an insolvent, the Court concluded that Mrs. Fast was unable to meet her obligations and had stopped paying her current obligations. Notwithstanding that the Court found that Mrs. Fast probably understated the value of her interest in the Home, the Court was not persuaded to annul her bankruptcy as she met the definition of an insolvent person.

As for Mr. Fast, the Court decided it would not annul his consumer proposal. The Judge went on to say that even if he was persuaded to do so, Mr. Fast was still a bankrupt and the Judge had no evidence for the proposition that his bankruptcy should also be annulled.

So, the Judge did not grant the application, the Fasts are under their respective BIA proceedings and Mr. and Mrs. Kormos can file their claim with the Fasts’ Trustee.

Insolvent definition: The Trustee

Now the Trustee has an interesting situation. The Trustee is now aware of the expert valuation of the Home. The Trustee will have to use that information to decide if the Fasts have equity in their home. If yes, then as far as Mrs. Fast, her equity will have to be realized upon because she is bankrupt. Her equity in the Home devolves to the Trustee as an asset (if it is more than the minuscule provincial exemption).

Is Mr. Fast’s consumer proposal has already been (deemed) accepted by the creditors and (deemed) approved by the Court. If yes, then he will just have to keep making the agreed payments to fully complete his consumer proposal and get out of bankruptcy. If not, the Trustee will now have to take his real equity in the Home into account. The Trustee will have to decide if the consumer proposal can still be recommended to the creditors, or if it must be improved because of the increased total asset value.

Insolvent definition: Are you insolvent?

Are you unable to pay your debts as they come due? Are your bills past due and you don’t know how you are going to pay them? If so, then you are insolvent, and we can help end your pain.

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to know all your alternatives. The alternative you choose based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create a result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

Insolvent definition: NET WORTH ADDENDUM

Regularly monitoring your finances reveals invaluable lessons. A most important aspect of building wealth is to find it. People that constantly increase their net worth track it to direct it. So, the starting point is understanding what the net worth definition for a person is.

Seeing the measurable results of your spending and investing decisions is the first step to take control of them. Contrarily, people in the worst monetary shape have no concept where their money is spent and are too afraid to know what their net worth might be since it will not be pretty.

Which extreme more closely matches your mindset? You can’t handle what you don’t measure. Consider it: if you were seriously rich, you’d invest a long time weekly handling some element of your finances.

A beginner variation of a financial tracking approach is needed to begin improving your financial condition.. In addition, the more money you build up, the more financial assets and liabilities to keep an eye on. I ‘d wager that you won’t own them for long if you don’t have your financial tracking system set up before you acquire them. If you don’t see and feel the gains and losses of your monetary choices–you are playing the complex money-game of life without any scorecard.

This is how so many people with good income still find their way into financial trouble. You need to have navigation reference points to know if you are going toward developing wealth or ruining wealth. It is by monitoring your net worth that you’ll begin to discover the monetary impact and effects of your decisions.

The beginning point for financial measuring is a simple statement of net worth (or balance sheet). It is a list of the current market price of whatever you own and what you owe to others. Your net worth is the difference between these 2 numbers. This is the number that you want to measure and increase every month. As with a business, as soon as you start determining the monetary repercussions of your habits you can begin making your own individual financial guidance. Basic insights and rules like these will help increase your net worth. This will lead to bigger insights and develop into bigger gains.

If you find that you have a lot of debt that is reducing your net worth, or possibly a negative net worth, then what guidance about debt are you going to develop for yourself? Think about including a guideline to read a new personal finance book each year. Your money rules and net worth statements can be as advanced or as basic as you wish to make them.

When you have computed your calculation of net worth, you begin having the ability to plan for purchases and payments. As an easy example, if your auto insurance coverage costs get paid annually, you can calculate just how much cash that you must to set aside monthly to easily pay it when the bill arrives. Or if you are getting a new car, you’ll be a lot better prepared for the first costs before you get squeezed at the end of the month and wind up paying a couple of bills late.

After you get comfortable with a net worth statement, you can move on to an income & expense sheet. How much net worth will you need by when? The answer is based upon the financial routines, tools and education you will establish. However, it can all start with your very first net worth statement.

JUNE 17, 2019 UPDATE: The Court of Appeal for Ontario reversed this lower court decision. You can read all about it in our blog update – INSOLVENT DEFINITION RESTORED IN COURT OF APPEAL FOR ONTARIO insolvent definition

 

 

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MORTGAGES FOR SENIORS CANADA: APPARENTLY NOT A PROBLEM

mortgages for seniors canada

Mortgages for seniors Canada: Introduction

TransUnion Canada’s most recent TRANSUNION Q2 2018 INDUSTRY INSIGHTS REPORT found that borrowing for mortgages was reduced in Canada in 2018. A troubling statistic exists for mortgages for seniors Canada. In this Brandon’s Blog, I discuss this and certain other issues arising from the TransUnion Canada report.

Secured home loans for older folks Canada: Home mortgage borrowing decreases throughout Canada

Home mortgage lending has reduced throughout Canada in the first half of 2018. Generally, there was a 3.4% decline in the variety of brand-new home loans in Q1 2018 as compared to Q1 2017; this comes after an 8.8% year-over-year decrease in Q4 2017. This pattern seems to prove that the brand-new home loan guidelines might be affecting customers that are either not qualifying or are not able to obtain the level of home mortgage they want. It is unclear if this decrease in home mortgage demand means that there are fewer people looking for a home mortgage, or if there are more people sitting on the sidelines trying to figure out a way to qualify.

HELOCs for retirees Canada: Seniors bucking the trend

The exception to the decrease in home mortgage originations in Canada in 2018 is older generation Canadians. Canadians in the 73-93-year-old age group saw a substantial year-over-year boost (63%) in the number of home mortgages taken out. Baby Boomers in Canada, those in the 54-72-year-old age group saw an 18% increase. These statistics beg the question, why are Baby Boomers, and those in the Boomers’ parents’ age range, refinancing their mortgages or taking out new mortgages? Although not disclosed in the TransUnion Canada report, presumably a lot of the retirees are taking out reverse mortgages, as they too can’t qualify for a traditional mortgage on their retirement income.

Mortgages for seniors Canada: Seniors use of funds

The TransUnion report does not delve into the uses seniors are putting the new mortgage funds to. However, if I was to speculate, I would think that the funds were being used for:

Baby Boomers –

  1. Seniors debt consolidation
  2. Helping children pay for education.
  3. Giving or loaning their children sufficient funds for the house down payment so they could now qualify for a traditional home mortgage under the new stress test rules.

The 73-93-year-old age group –

  1. Helping children with paying off debts – Baby Boomer’s debt consolidation loans.
  2. .Their own debt consolidation.
  3. Gifts or loans to grandchildren – sufficient funds for the house down payment so they could now qualify for a traditional home mortgage under the new stress test rules.

Real estate loans for baby boomers Canada: Why I believe parents and grandparents are helping children buy their home

The TransUnion Canada report says that the greatest decreases in home mortgage applications were amongst the more youthful generations. There was a year-over-year decrease of greater than 22% amongst Gen Z as well as 19% amongst Millennials.

No doubt some of the decreases is a result of the younger generations’ changing lifestyle habits where homeownership may not be as important as it was to the generations before them. However, I would expect that Millennials as a group would by this point want home ownership, where Gen Z may not see it right now as being important.

Main mortgage changes by location

The biggest downturn in mortgage originations remained in Toronto, with a decrease of 17.6% in Q1 2018 from the previous year. Vancouver stayed reasonably level with an increase of only 0.8% over the previous year. The biggest increase in the home mortgage business was in Ottawa, with a boost of 8.4% over the previous year. Montreal had a 5.2% boost over the previous year.

Mortgages for seniors Canada: Risk distribution

Mortgage originations in the super prime risk tier increased 4.4% year over year in Q1 2018. All other risk tiers combined registered an 8% decrease in originations. TransUnion Canada reported that the decrease has been most significant in the below-prime risk buckets.

It is interesting that the higher risk subprime market mortgages have increased. No doubt private lenders, including the shadow lenders, dominate this market as the borrowers could not qualify for a home mortgage loan from a traditional bank or mortgage lender.

The decrease of new mortgages in the lower risk categories tells me that the new stress test qualifying rules combined with successive increases in mortgage rates have contributed negatively to those who perhaps as recently as last year could have qualified for a traditional mortgage. However, now they can’t be based on affordability.

Do you, your children or your grandchildren have too much debt?

Are your children or grandchildren coming to you for financial help for debt consolidation? Is going into debt the best option for you? Can you afford to carry your new debt in retirement? Is giving away your home equity through a reverse mortgage the right move? Will you need the money you are about to give away for your healthcare?

If debt consolidation is the reason why your children or grandchildren need your financial help, look at other options first. They need the help of a professional trustee. Call the Ira Smith Team. We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a free initial consultation. So why not?

We will advise them whether or not we think they are a candidate for either a debt consolidation consumer proposal or bankruptcy. If we feel they can solve their financial problems without an insolvency process, we will tell them straight. Make sure that the money you give for debt consolidation will fix all of their problems. It is possible that with our help, you’ll need to provide just a fraction of what they are asking for.

The Ira Smith Team understands the stress they and you are under and the pain it is causing you and your loved ones. We can eliminate their pain. I guarantee that they and 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.what does a court appointed receiver do18

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BANKRUPTCY TRUSTEE IN TORONTO: BANKRUPTCY TRUSTEE EXPLAINS POVERTY LINE

angus reid

Bankruptcy trustee in Toronto: Introduction

As a bankruptcy trustee in Toronto (now called a licensed insolvency trustee), I took great interest in reading a recent poverty line Canada study. A new research project whose results were announced in July 2018, studied poverty in Canada. It finds higher than 25% of respondents feel they have stress over financial matters. Not just a part-time stress; it is a full time feeling. Instead of just analyzing income levels, the survey considers the daily realities of making ends meet and how that can take a toll on people.

Many are unable to spend on simple things like going to the movie theatre, but also on more serious needs, like warm clothes for winter time and dental care. Some are late paying bills or cannot pay them at all and many say they can’t afford better quality food at the grocery store.

Bankruptcy trustee in Toronto: People are struggling

Researchers also found of the people who struggle most, 20% make well above what’s considered low income. However, the study finds that doesn’t always go far particularly in major urban cities. You can be making what many would consider middle-class earnings and still feel stressed. The survey showed many feel on the edge with their ability to have a life with some level of comfort or relaxation.

Bankruptcy trustee in Toronto: 4 major groups

This ARI research identified four groups:

  1. the struggling (16%);
  2. on the edge (11%);
  3. recently comfortable (36%); and
  4. always comfortable (37%).

As expected from these labels, the struggling is dealing with economic difficulties that are adversely influencing their lifestyle. Those on the edge are a stone’s throw behind them.

Bankruptcy trustee in Toronto: The study’s other main findings

The study’s other main findings are:

  • nearly a third (31%) really feel extremely worried about money regularly– either usually or constantly;
  • about half (52%) think hardship has actually been rising;
  • almost ten percent (9%) feel that financial hardship has been decreasing;
  • thirty percent (30%) are downhearted concerning their individual finances over the near future;
  • more think their youngsters’ finances will be worse (43%) compared to those who think their children will be financially better (32%);
  • all 4 state financial anxiety exists, yet there is more for both lower groups; and
  • the anxiety felt by the always comfortable group is a fret about future troubles as opposed to their present life.

Bankruptcy trustee in Toronto: Canada Without Poverty

Canada Without Poverty charitable organization states that roughly 5 million Canadians, or 1 in 7, live in poverty. However, the ARI study shows that the participants in the study estimate that about one third live in poverty. As you can see, their views were shaped by their own feelings of money anxiety.

Bankruptcy trustee in Toronto: Are you are “on the edge”?

Do you feel you are in the “on the edge” or the “recently comfortable” groups? Are you always feeling financially stressed? Are you worried that you may not be able to absorb an unexpected expense of $1,000 or more? If so, why not get a free financial checkup?

Seek professional help immediately. Ira Smith Trustee & Receiver Inc. is a full-service practice serving people just like you and companies throughout the Greater Toronto Area (GTA) who need a plan for Starting Over, Starting Now.

We know your pain and the stress you feel because of your finances. Our Firm has helped many others restructure their debt and return to a financially healthy life. Give us a call today. We can give you peace of mind and set you on a path to debt free living. We are a bankruptcy trustee in Toronto.

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TORONTO REAL ESTATE: REAL ESTATE NEWS ON BUYER’S REMORSE

assignment in bankruptcyToToronto real estate: Introduction

This Brandon’s Blog is about Toronto real estate and what happens when the purchaser experiences buyer’s remorse. “When the residential real estate market is a rising market, most people – perhaps with the exception of first-time buyers, are happy homeowners and investors. When the market turns and drops, it is not for the faint of heart.” This is how Justice M.L. Edwards begins his Reasons for Decision in Gamoff v. Hu, 2018 ONSC 2172 (CanLII).

The realities of this situation show how one family came to be involved in a bidding process. Determined to get their dream house, they exhausted their ability to fund the acquisition of that residence. We will describe this case which is similar to several people my Firm has helped overcome their financial problems after being found liable for similar amounts the defendants, in this case, were found responsible for.

Toronto real estate: The Toronto real estate market news facts

Douglas and Sheila Gamoff (the “Gamoffs” or the “plaintiffs”) were the owners of a residential property. The home was in Stouffville, Ontario (the “Home”), part of the GTA. The plaintiffs listed the Home for sale on the multiple listing service on March 29, 2017. Within a fairly short amount of time (March 29, 2017, to April 2, 2017), there were 18 offers.

The defendants, Yixing Hu and David Lea, saw the Home with their real estate agent on April 1, 2017. They state that they told their real estate agent that they had an interest in acquiring the Home. They also didn’t want to be involved in a bidding price battle.

The defendants originally submitted their written offer on April 1, 2017, with an offer of $2,050,000. On April 2, 2017, the defendants were told by their real estate agent that there were several deals for the residential property. Their realtor also told them that their offer of $2,050,000 was not accepted. In spite of having informed their real estate agent that they did not intend to end up being in a bidding war, they inevitably submitted a new offer for $2,250,000. The vendors accepted the revised offer.

The deal had no conditions. The agreement of purchase and sale read that the purchasers provided a deposit in the amount of $30,000 upon acceptance of the offer. It further read that a second down payment tranche of $90,000 would be made on April 6, 2017. The date for the second deposit payment was then amended to April 10, 2017. The closing day for the acquisition of the Home was August 30, 2017.

Toronto real estate: It did not take long for buyer’s remorse to arise

On the same day, the defendants called their real estate agent. They suggested to him that they thought that they had actually paid way too much for the Home. Their issue here was no doubt created by the fact that they had just found out that, a mix of their mortgage loan funding and the value of their house yet to be sold, would not be enough for them to get the essential funding to close on their purchase.

David Lea emailed his real estate agent stating to him that he and Ms. Hu had actually slipped up aiming to acquire the Home. Mr. Lea went on to say in this email that he is begging, please contact the vendor’s agent with a new firm offer.

As I previously stated, the agreement of purchase and sale did not have any conditions in it to allow them to end the agreement and get back their first tranche deposit. The agreement certainly was not conditional either on their obtaining satisfactory mortgage financing or the sale of their existing home. That is enough stress to cause anyone to panic which no doubt led to their buyer’s remorse.

Toronto real estate: The purchaser’s default

On April 10, 2017, the purchaser failed to pay the 2nd payment needed by the change to the agreement of purchase and sale. On the following day, the defendants visited the property. They informed the plaintiffs face to face that they did not actually have the funding needed to complete the purchase.

Toronto real estate: The vendors’ mitigation

The Gamoffs first consulted with their lawyer. Then on May 1, 2017, they listed the Home for sale again on the multiple listing service for $2,250,000. From May 1 to May 16, 2017, the plaintiffs got no offers on the Home.

The Gamoffs lowered the listing price of the Home to $1,998,000 on May 17, 2017. This was because of a recommendation from their real estate agent. In between May 17, 2017, and June 6, 2017, they obtained no deals on the Home.

On July 28, 2017, the Gamoffs, based on the further advice of their realtor, lowered the price of the Home again to $1,798,000.

In between June 6 and July 26, 2017, the Gamoffs got no offers on the Home. On July 31, 2017, they got an offer to purchase the Home for $1,700,000. After some back and forth, on August 9, 2017, the Gamoffs accepted a brand new agreement of purchase and sale. It was with an arm’s length buyer for $1,770,000. That deal closed on October 3, 2017.

Toronto real estate: The Court’s decision

The plaintiffs sought a summary judgment for the difference between the defendants’ offer of $2,250,000 and what the Home eventually sold for, $1,770,000. The defendants opposed this on several grounds, including, that there was an issue that required a full trial.

Based on the evidence, the judge disagreed. He awarded the plaintiffs the difference between the defendants’ offer of $2,250,000 and what the Home eventually sold for. The judge also awarded costs to the plaintiffs. The judgment was for $470,000 plus costs. Add that to the $30,000 down payment the defendants lost, this aborted deal cost them half a million bucks!

Toronto real estate: Our own case studies

My Firm has been involved in several matters helping people who have had judgments like the one described above made against them from failed real estate deals. We have been involved as a result of failed real estate deal judgments in:

  1. a bankruptcy caused by the plaintiffs (the vendors) who could not yet collect on their judgment filing a Bankruptcy Application with the Court and obtaining a Bankruptcy Order be made against the defendants;
  2. a consumer proposal for a defendant which was successfully completed;
  3. the successful proposal of the defendant who had a large amount awarded against him by the judgment; and
  4. an assignment in bankruptcy filed by the defendant who did not have the ability to attempt a proposal to get relief from the judgment against them.

In each case, the only way that the defendants could get relief, voluntarily or involuntarily, was through an insolvency process. In the one case caused by the Bankruptcy Order, it was the plaintiff who took action. The plaintiff was able to get a payment for all the unsecured creditors. The insolvency process requires that the distribution is shared among all creditors. That result was better than the plaintiff not being able to collect on its judgment without the insolvency process.

In that specific case, it was a combination of the Trustee’s powers and the plaintiff’s judgment and specific knowledge, that joined to produce the recovery for all creditors. The Trustee’s powers were required to get enough leverage resulting in the recovery.

Toronto real estate: A tough lesson to learn


The effect of this Court’s decision will definitely have a significant result on the defendants. The judge said that he had every compassion for them.

With the adjustments in the realty market in the Greater Toronto Area, I have every reason to believe that there will be extra instances where buyers discover that they have not protected themselves and will not be able to complete their real estate transaction.

Buyers would certainly be well advised to think about making their deals to acquire real estate subject to satisfactory funding, as well as for the sale of their existing residence if they have one. The cost of entering a bidding war and getting the property unconditionally could turn out to be a very expensive one just like in this case.

Toronto real estate: What to do if you have too much debt

If you have too much debt because of a judgment against you, either because you have made the real estate in Toronto news from a failed real estate deal or for any other reason, there is no shame in looking for a professional to help you out of your financial jam. A licensed insolvency trustee (formerly called a trustee in bankruptcy) will look at your circumstances and assist you to get to the very best option for your issues. The Ira Smith Team will give you a free consultation.

Ira Smith Trustee & Receiver Inc. is right here to help. We’re government supervised and adhere to a rigorous code of ethics. Our experienced team provides a high-quality service which will create a unique and an affordable solution made just for you. I feel your pain and know how to end it.

Don’t wait until we read about you in the real estate in Toronto news Canada. Call us today to end your stress and experience our pleasant, non-judgmental technique to solve your financial problems and get you back on the right track to stress-free living, Starting Over, Starting Now.toronto real estate

 

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TORONTO CONDO MARKET REPORT: SUBPRIME LENDERS DODGING CANADA’S MORTGAGE RULES?

toronto condo marketToronto condo market report: Introduction

The subprime lending industry is alive and well in Canada; that is the subject of this Toronto condo market report. In fact, subprime lenders hold almost 8% of Canadian mortgages, which is a hefty 37.8% increase compared to the same quarter last year. And, this is the sixth consecutive quarter we saw the subprime lending industry grow. It’s now at its highest level in 10 years. Although many pundits blame the spike in prime lending to the new mortgage stress tests, it’s clear that this trend began years before stress testing was introduced.

Toronto condo market report: What are subprime loans and how do you get one?

  • Any loans that are for borrowers that do not have a good credit score
  • They’re done through private lenders, typically accessed through a mortgage broker
  • Private lenders are not federally regulated like the banking industry
  • Private lenders charge steep prices

Toronto condo market report: Why do people take subprime loans?

You may be asking why anyone would take a subprime loan and pay considerably more money than they would at a bank.

  • Transunion estimates that 11.9% of the 28.4 million Canadian consumers with credit profiles are subprime which means that they wouldn’t qualify for a mortgage from the bank
  • A borrower with excellent credit might resort to a subprime loan because the bank won’t lend them as much money as they need
  • Even a person with bad credit or no credit, there is a private lender willing to give a subprime loan

Toronto condo market report: How is subprime lending affecting Toronto’s condo market?

For some reason known only to the government, they don’t track subprime lending. CIBC Economics show that over:

  • 1 in 10 Toronto condos registered in 2017 was attached to astronomically high mortgage rates
  • 17.4% of owner-occupied condos registered in 2017 had a mortgage rate above 9%
  • 16.2% of condo investors with units that registered last year were paying more than 9%

Toronto condo market report: What’s going to happen if the market starts to soften?

The problem with paying astronomically high-interest rates is what’s going to happen if the market starts to soften? How will these condo owners with subprime loans get their money out, let alone make a profit?

The mortgage stress tests are in place for a very good reason. To ensure that Canadians don’t buy houses or condos that they can’t afford. Trying to avoid the system by going to private lenders and paying high-interest rates can put you in a financial danger zone.

Toronto condo market report: Are you in a financial bind?

If you’re in a financial bind because you’re living in a property that you can’t afford, or for any reason, you need professional help now. With a cumulative 50+ years of experience, the Ira Smith Team has helped people just like you who are facing a financial crisis. Give us a call today. We can help you overcome your financial difficulties Starting Over, Starting Now.

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THE COST OF LIVING IN CANADA: 6 REASONS THE COST OF LIVING IN TORONTO CAUSES DOWNSIZING

the cost of living in canadaThe cost of living in Canada: Introduction

If you’re a Toronto resident then you’ve seen the cost of living in Canada continuously rise. However, the cost of living in Toronto has risen over 20% faster than in the rest of Canada. And, the cost of living is now 36% higher than it was in 2002.

The cost of living in Canada: What StatsCan says

According to Statistics Canada, a few categories were responsible for most of the gains – gasoline, food from restaurants, passenger vehicles, homeowner replacement costs and mortgage interest costs.

The cost of living in Canada: 6 Reasons The Cost Of Living In Toronto Causes Many To Downsize Their Life

In the last 10 years, the cost of living has skyrocketed. In 2008, Toronto’s living wage – the minimum amount necessary for an individual to meet their basic needs – was $16.60 per hour or an annual income of $34,000.

Since then:

  1. The cost of childcare in Toronto has risen by roughly 30%
  2. Rent has gone up an average of 13%
  3. Public transit cost has increased by 36%
  4. The average price for a 1 bedroom condominium downtown is about $400,000
  5. An average price for a single detached home $1.2 million
  6. The average price for a litre of gasoline is $1.37/litre (with predictions that it could soon reach $1.50/litre)

The cost of living in Canada: How much do you need to live comfortably in Toronto?

According to a report by the Toronto based think-tank, the Wellesley Institute, a single person between the ages of 25-40 would need to make between $46,186 and $55,432 – after tax – to live the good life in the Greater Toronto Area.

They arrived at that figure by first accounting for the basic costs of survival, like food and shelter, and then considering the costs associated with quality of life categories like social participation, which includes things like hobbies, travel and socializing.

“This figure indicates the total cost of supporting an individual’s ability to thrive, which is defined as meeting their basic material needs, enabling connections to community and family, supporting educational and professional advancement, and ensuring long-term financial security,” the report states.

The cost of living in Canada: Is the cost of living forcing you to change your lifestyle?

For many, the answer is yes. You can’t cut down or out on necessities like housing, food, transit, and daycare. But, you can:

The cost of living in Canada: Change your lifestyle before too much debt ruins your life

Changing your lifestyle to live within your means is the smart thing to do, or you could end in a debt spiral. If you’re already there, the Ira Smith Team can help.

We can’t lower the cost of living or find you a fantastic, cheap place to live, but we can help you solve your financial problems. Give us a call today because with immediate action and the right plan you can be back on your feet financially Starting Over, Starting Now.

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ADVANTAGES AND DISADVANTAGES OF CONSUMER PROPOSALS TORONTO ON CANADA

Advantages and disadvantages of consumer proposals: Introduction

In this vlog, we answer the question “What are the advantages and disadvantages of consumer proposals?”.

Advantages and disadvantages of consumer proposals: Who is it for?

A Consumer proposal is a part of the Bankruptcy and Insolvency Act (BIA) found in Part III Division 2 of the BIA. It is available for people who do not owe more than $250,000 to their creditors, NOT including any mortgages or other loans registered against a principal residence.

The first test is being insolvent? What I mean by that is:

  1. are your financial obligations greater than the worth of your property?
  2. if you sold your assets you would not have enough funds to settle your financial commitments totally
  3. you are having problems making the total required payments to pay off in full each of your financial commitments monthly

advantages and disadvantages of consumer proposals

Advantages and disadvantages of consumer proposals: The Advantages

If so, then teaming up with a licensed insolvency trustee (LIT) acting as your consumer proposal administrator, the advantages are:

  1. Pay your creditors part of what you owe them over a period not greater than 60 months.
  2. Broaden the time you can use to pay off your financial debts.
  3. Stop the interest clock.
  4. Make monthly payments to the LIT for the benefit of your creditors that you can afford within your budget.
  5. If successful, you get to keep your assets.
  6. If successful, the cost of your consumer proposal can be thought of as being free. The BIA sets the fee of the LIT. The amount of payments you must promise to make to get your creditors to vote in favour ignores the fee of the LIT in performing that calculation.
  7. Remain free from bankruptcy.

You should think of a consumer proposal as obtaining an interest-free loan to combine your debts, pay only a part to get rid of them all. Your interest-free loan can have a term of no longer than 5 years.

Advantages and disadvantages of consumer proposals: The Disadvantages

There are not many disadvantages to a consumer proposal. The only one I can think of is that it is an insolvency proceeding under the BIA, so it will be and stay on your credit record for some time. But if you have so much debt you don’t know where to turn and you can’t pay it off, then your credit score has probably already taken a hit.

Get started now to gain back control of your life

If you’re thinking of a consumer proposal as an option to deal with your financial debts, telephone Ira Smith Trustee & Receiver Inc. now.

Our method is to set up an outcome for you where Starting Over, Starting Now becomes a reality, beginning the minute you walk through our door. You’re simply one telephone call away from leading a healthy, balanced and stress-free life again.

advantages and disadvantages of consumer proposals

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