Divorce during bankruptcy Canada:  The conundrum

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 bankruptcy: 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 their unique facts. Though marital breakdown and personal bankruptcy, and bankruptcy and divorce, often go hand in hand, marital breakdown will not always lead to divorce if the marriage can be salvaged. However, personal bankruptcy and divorce are two separate legal processes which can be at odds with each other.

Divorce during bankruptcy Canada:  A few indisputable facts

In this article you will find 5 indisputable facts:

  1. The number one reason for marital breakdown and divorce is financial issues. Divorce. com
  2. In a recently available study one away of every seven people who declared bankruptcy in Canada listed separation, divorce or marital breakdown as a contributing factor to their financial problems.
  3. One-third of all people facing bankruptcy are there as they are also going through relationship breakdown and divorce in Ontario or {a splitting up. Gail Vaz-Oxlade
  4. Bankruptcy won’t end all divorce financial obligations. e. g. It does indeed not end alimony or child support.
  5. Declaring personal bankruptcy on joint debts, even debts in divorce, will impact the other debtor.

Divorce during bankruptcy Canada:  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 file for bankruptcy. 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.

Divorce during bankruptcy Canada:  What about joint debts?

One particular area comes up in this common question: “If my ex files for bankruptcy how will it affect joint liabilities? “. Family law rules are the one area of 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 bankruptcy, 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 contact Ira 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.

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I need financial help immediately

I need financial help immediately:  Introduction

“I need financial help immediately” is something we hear daily. With so many people struggling to make ends meet and living paycheque to paycheque, it’s not a surprise that they’re looking for ways to get ahead. Unfortunately it’s easy to get seduced by financial newsletters or websites that offer nothing more than get rich quick schemes disguised as financial advice. Please keep the old adage in mind when considering investment opportunities – if it’s too good to be true, it probably is.

I need financial help immediately:  3 things to watch out for

The Ira Smith Team has fully licensed, federally regulated financial professionals and we don’t have any get rich quick advice for you. However, we do have advice about how to protect yourself from get rich quick financial newsletters. Here are three things to watch for:

  1. Run, don’t walk from headlines like “beat the market”. There is no such thing as a get rich quick scheme that works. Remember Bernie Madoff? He paid unbelievably high returns to his investors and that ended up with Bernie in jail for life and many others in financial ruin. Even savvy investors got seduced.
  2. Watch out for newsletters with confusing terminology. They’re designed to confuse you so you won’t really understand that what they’re selling is all hype and no substance. Financial terminology is so confusing that we’re doing a series of blogs about it. So far we’ve covered Balloon Payments, APY – Annual Percentage Yield and Expense Ratios. Knowledge is power.
  3. Creating a sense of urgency is a classic ploy to suck you in before you’ve had the time to really scope things out. Beware of offers that are only open to the “first 100 that sign up” or “register within the next 48 hours or you’ll miss out”.

I need financial help immediately:  What to do if this is you

We know there are many people who feel “I need financial help immediately”.  Our most viewed blog ever is from May 2014 that people looking for cash find through a Google search because it is titled:  Bad Credit Loans Guaranteed Approval.

We’re certainly not saying that there are no legitimate financial opportunities out there, but you really have to be careful about where and who you take financial advice from. If you’re walking a financial tightrope, a get rich quick scheme is not the answer. Contact a licensed trustee. Ira Smith Trustee & Receiver Inc. will review your file, discuss your options and come up with a solid, financial plan that will put you on the road to debt-free living Starting Over, Starting Now.

#VIDEO-Division One Proposal Ontario Documents: corporate restructuring proposal


Division One Proposal Ontario Documents:  corporate restructuring proposal

I want to talk to you today about the required division one proposal ontario documents and division 1 proposal restructuring proceedings under the Bankruptcy and Insolvency Act (Canada) (BIA).  You may have heard about this section of the BIA also called Chapter 11 bankruptcy proceedings.  The reason is that the corporate restructuring provisions under the BIA is in Canada under Division I of Part III of the BIA, while the corporate restructuring provisions in the United States is under Chapter 11 of the US Bankruptcy Code. We are going to focus today on the restructuring provisions under Division 1 Proposal proceedings of the BIA.

Division One Proposal Ontario Documents:  first steps

The first thing the insolvent debtor must do is hire the services of a licensed insolvency trustee (formerly known as a trustee in bankruptcy). The division 1 proposal proceedings applies to corporate restructuring or the restructuring of debt of an individual with a complex debt situation and a debt level of $250,000 or more.  We are going to talk today about corporate restructuring and the Division One Proposal Ontario documents required for this process.

The first step in any corporate restructuring is for the board of directors to understand and resolve that the corporation is insolvent, that it needs to restructure under the Division 1 Proposal section of the BIA and that it needs to retain a licensed insolvency trustee to do that. The corporation working with the trustee then has a choice. It can either first file what is called a Notice of Intention To Make A Proposal, which is a notice to its creditors that it will be shortly making a restructuring proposal or it can just file the real restructuring proposal itself with the licensed insolvency trustee.

Division One Proposal Ontario Documents:  documents and process

The licensed insolvency trustee has to be satisfied that: (i) all the relevant information has been obtained; (ii) the company has a good chance of actually implementing this proposal; and (iii) the company’s cash flow is enough that it can run the business successfully and pay its ongoing debts in full through the ongoing restructuring proceedings, then the licensed insolvency trustee continues the restructuring process.

The licensed insolvency trustee will mail to all the known creditors a copy of:

  1. the proposal
  2. a statement of the company’s assets and liabilities
  3. a list of creditors
  4. a proof of claim form
  5. the voting letter

The meeting of creditors is then held and if the proposal is accepted by the required majority then the proposal trustee takes the proposal documentation to Court for approval.   Once the proposal is accepted by the creditors and approved by the court there is now a contract between the company and its creditors about how the company is going to restructure and what amount of money is ultimately going to be paid to the creditors through the licensed insolvency trustee.

Division One Proposal Ontario Documents:  implementation

The company then carries its proposal as it continues its operations.  It carries out its restructuring business plan and hopefully is successful in turning the corner and generating profits.  The company would then be saving a certain amount of its profits in cash and pays the amounts required under the Division One Proposal over to the licensed insolvency trustee to create the proposal fund.  The licensed insolvency trustee then makes the distribution to the creditors as called for in the proposal itself.  Once all the payments have been made, the company has successfully restructured and carries on its business free from the proposal proceedings.

Division One Proposal Ontario Documents:  what if your company has too much debt?

If your company has more debt than it can afford to pay contact a professional trustee immediately. We’re experts in debt management and corporate restructuring and with immediate action and the right plan we can help you get your company’s finances back on track Starting Over, Starting Now. Give Ira Smith Trustee & Receiver Inc. a call today.

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Auto insurance rule change:  What a difference 12 hours made

Who would have believed that a mere 12 hours could cost a family over $1.9M and put them on the verge of bankruptcy? Sadly this is exactly what happened to a Ontario family because of the auto insurance rule change that came into force 12 hours on the same day before Adam Bari’s motorcycle was T-boned. Although Mr. Bari was not at fault, it did not help his cause.

Auto insurance rule change:  What is this new auto insurance rule that has this family on the verge of bankruptcy?

This new auto insurance rule change affects the evaluation of injuries. It’s a miracle that Mr. Bari survived. He was in a coma for one month and survived with major injuries including significant brain trauma, multiple broken bones in his right arm, leg and hand, as well as internal organ damage. Although absolutely unbelievable, Mr. Bari’s injuries are no longer considered severe enough under new Ontario insurance guidelines to be deemed catastrophic.

It all boils down to defining catastrophic. Under the old guidelines, the Glasgow Coma Scale (GCS) was used to evaluate functionality. If a car crash victim had a GCS rating of nine or less, they were automatically considered catastrophically impaired and were eligible for increased benefits. At first Mr. Bari scored a three on the scale which is considered to be the most severe result with the patient being completely unresponsive. Later on his score rose to an eight, still leaving him catastrophically impaired. New insurance rules no longer use the scale, though it remains a common evaluator for trauma teams.

Auto insurance rule change:  What does this mean financially for the Bari family?

According to the personal injury lawyer representing the family, if the accident had happened 12 hours earlier, before the new guidelines came into effect, the family would have received $2M in compensation. Instead they received a pathetic $86K, which can’t even begin to cover the astronomical medical bills the family is facing. Mr. Bari may never recover sufficiently to return to work. His wife is working greatly reduced hours to care for him and there are twins to support. He’s going to require specialized equipment at home, extensive rehabilitation, a personal support worker, therapy and medication.

Auto insurance rule change:  What recourse does the Bari family have?

They have retained a personal injury lawyer and are planning to sue the driver of the vehicle that hit Mr. Bari to help recover damages for health care expenses. Careless driving charges have also been laid against the driver. Unfortunately nothing can be done about the new auto insurance rule change that has shamefully put the Bari family on the verge of bankruptcy.

Auto insurance rule change:  What should you do if you are hit with an emergency that ruins your family budget and finances?

Hopefully you will never find yourself in the same place as the Bari family but should you feel that you’re on the verge of bankruptcy contact Ira Smith Trustee & Receiver Inc. Sadly we can’t change the auto insurance guidelines but we can help you deal with serious financial issues. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Contact us today so that Starting Over, Starting Now we can put you back on track to financial well-being.




Consumer proposals Ontario:  Make a federal case out of it!

Consumer proposals Ontario are governed by federal legislation;  the Bankruptcy and Insolvency Act (Canada) (BIA).  The proposal provisions used by companies and creatively used for people with extremely large debts is commonly referred to be “restructuring” or “reorganization”.  In the United States it is what is commonly called “Chapter 13 proceedings”.

Consumer proposals Ontario:  Debt solutions for the smaller debtor

However, there was no similar provision available to small individual debtors in the BIA. Parliament wished to find a way to offer these smaller consumer debtors to have a restructuring alternative.  So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990’s, the consumer proposal process legislation was enacted.  It benefits people who owe $250,000 or less (not including mortgages against your principal residence).  

Consumer proposals Ontario:  Avoiding personal bankruptcy in Canada

Now, the consumer proposal process provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA.  So Canadians are now avoiding personal bankruptcy more while still obtaining the help and counselling of a Licensed Insolvency Trustee.

The main use of the (consumer) proposal provisions of the BIA is to allow you as a debtor to keep your assets, if you can afford to in your budget, it is a great way for how to avoid bankruptcy in Canada, and give a better alternative to your creditors than a bankruptcy would.  In this way, you are allowed to be relieved of your debts, for an amount less than the total face value of all of your debts.

It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest!  The consumer proposal legislation allows you to pay back less than you owe, but what you can afford.  Interest and penalties stop and in most cases, you are able to settle your debt for less than 50 cents on the dollar.  

You can structure your repayment plan in monthly payments for up to 60 months.  Again, no interest or penalties.  So, it is very much like an interest-free loan for less than half of your debt to settle all of your debts.

Consumer proposals Ontario:  What should I do if I have too much debt?

So if you’rе ѕtіll dеtеrmіnеd to рау your debts in full but you can’t see a way to ассоmрlіѕh that goal, this may be just the ѕесrеt you need to know!   If you’re a Canadian with financial concerns seek the counsel of a professional trustee.

We can help you deal with how to solve your financial problems while you still have options available to you so that Starting Over, Starting Now you can be on your way to enjoying financial health.  Make an appointment with us for a free, no obligation with the Ira Smith Team today. You’ll be happy you did.

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Consumer debt Canada:  Introduction

Consumer debt Canada and household debt as a percentage of income remains a hot topic these days.  The high household debt as a percentage of income coupled with a Toronto housing boom and until recently a Vancouver housing boom, puts Canada’s economy at risk. Whenever we thought that Canada’s consumer debt burden had swelled to its limit, it’s reached a new high.

Consumer debt Canada:  Our previous blogs and vlogs

We have before blogged and vlogged about:

Consumer debt Canada:  How serious is Canada’s consumer debt burden?

Consumer debt Canada has achieved a new milestone; for the first time in history, the level of debt held by Canadians has surpassed the country’s gross domestic product to 100.5% of GDP, up from 98.7% during the previous three-month period. According to Statistics Canada:

  • The ratio of credit market debt to disposable household income climbed to 167.6% between April and June, from 165.2% in the first quarter of the year
  • Total credit market debt was $1.97 trillion at the end of the second quarter
  • Consumer credit alone reached $585.8 billion
  • Mortgage debt stood at $1.29 trillion
  • Net worth of households increased 1.9% in the second quarter to $9.84 trillion boosted by a gain in real estate

Consumer debt Canada:  What’s causing this?

Surprisingly, some feel that the debt isn’t actually the problem. Benjamin Tal, deputy chief economist at CIBC World Markets reports, “Given that interest rates are so low, this is an environment you’d expect consumer credit to rise to the sky — and it’s not. The debt-to-income ratio is not because of the debt accumulating very fast, but rather the income is not rising fast enough to compensate (borrowers).”

Consumer debt Canada:  How is Canada’s economy at risk?

According to the Bank of Canada and the International Monetary Fund, it was low-interest rates that stimulated a growth in household credit. As a result many Canadians are highly indebted. Should there be any adverse shock to the economy, the Canadians who will feel it the most are those who’ve borrowed above their ability to meet mortgage payments if a real-estate crash occurred.

Consumer debt Canada:  What’s being done to keep Canada’s economy stable?

The Liberal government just announced four major changes to prevent Canadians from assuming bigger mortgages than they can afford. In addition the changes address concerns related to foreign buyers who buy and flip Canadian homes.

Consumer debt Canada:  What are the four major changes?

  1. A mortgage rate stress test implementation for approving high-ratio mortgages to all insured mortgages as of October 17, 2016 to prevent defaults in the future should the mortgage rates rise.
  2. The government will impose new restrictions on when it will offer insurance for low-ratio mortgages as of November 30, for lowering its exposure to residential mortgages for properties worth $1-million or more.
  3. As of this tax year new reporting rules for the primary residence capital gains exemption will come into effect. The capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.
  4. The government is launching consultations on lender risk sharing because the federal government wants to limit its financial obligations if widespread mortgage defaults begin.

Consumer debt Canada:  What to do if yours is so high it is stressing you out

If you find yourself with more debt than you can afford to pay contact a professional trustee immediately. We’re experts in debt management and with immediate action and the right plan we can help you get your finances back on track Starting Over, Starting Now. Give Ira Smith Trustee & Receiver Inc. a call today.



Average Canadian debt including mortgage

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track


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Fully fund your retirement

Fully fund your retirement:  Introduction

To fully fund your retirement, you need to start early.  Canadians are just not facing that reality. According to HSBC Bank Canada almost half of working-age people in Canada are not currently saving for retirement. And, they’re twice as likely to consider selling their homes to fully fund their retirement compared to those who have been diligent about their retirement savings plans.  Perhaps you are one of the smart and lucky ones who have including seeking the advice of one of the many retirement planning experts.

Fully fund your retirement: Are you counting on your house to?

A recent HSBC survey found that:

  • 20% of pre-retirees in Canada plan to downsize or sell their primary and secondary residence to fund their retirement.
  • Only 5% of current retirees will sell their house to fund their retirement.
  • At age 25-29, a group with low home ownership levels, only 12% expect their property will fund their retirement.
  • In their 40s, 20% expect their property will fund their retirement.
  • In their 50s, 26% expect their property will fund their retirement.
  • In their 60s, 31% expect their property will fund their retirement.

Fully fund your retirement:  Needs are changing

There is certainly a dramatic shift in people’s views on pension funds, retirement funds needed, retirement strategy and certainly speaks to the lack of retirement planning, saving and the fully funded pension plan.

It seems that as Canadians approach retirement age, selling their house is the only retirement finance option available to them. The problem with this scenario is that it assumes that the house is sold and very sensibly the couple or individual will downsize their lifestyle and put their budget on a diet so that they can live off the proceeds of the sale of the house.

The reality is that if they haven’t:

  • clearly calculated the retirement funds needed for the lifestyle they wish to have;
  • saved for retirement (including considering the impact of tax on retirement funds); and
  • have not already downsized their lifestyle in preparation for retirement

they may blow through the proceeds of the house and be worse off than they were before.

Fully fund your retirement:  What to do if your financial concerns prevent you from doing so

If you’re a pre-retiree with financial concerns seek the counsel of a professional trustee before retirement. We can help you deal with how to solve your financial problems while you still have options available to you so that Starting Over, Starting Now you can be on your way to enjoying financial health in retirement. Make an appointment with us for a free, no obligation with the Ira Smith Team today. You’ll be happy you did.



Insolvent estates Canada:  Introduction

We previously discussed the aspect of death and insolvency in two blog posts:

When it comes to insolvent estates Canada, among the various questions asked of us, these three questions are always asked:

  1. What are the duties of an executor/personal representative when the estate has more liabilities than assets?
  2. Can the executor(s) pay bills before the creditors actually file a claim?
  3. Do executors or beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?

We prepared the above video to answer these 3 questions.  Below is a more detailed discussion of the last 2 questions.

Insolvent estates Canada:  The loss of life of a debtor occurs; who’s responsible for the money owed?

Although some creditors may try to collect from the spouse or other relatives, money owed doesn’t transfer because of marriage or death.  If the debt is “joint”, the survivor has taken on the obligation directly and is liable on the account.

Debts are normally paid out of the assets of the property of the deceased before distributions to heirs (before paying heirs, the deceased’s debts must be paid).  If the estate is insolvent (the assets of the estate are not enough to pay the amounts owed), then the order of charge is commonly prescribed by way of provincial rules.

If warranted, the executors could apply to Court for an order letting them assign the deceased’s estate into bankruptcy.  In that situation, then the Bankruptcy and Insolvency Act (Canada) (“BIA”), the federal legislation, will prescribe the order of payment.

If insurance was bought to pay off a specific debt such as a bank issued mortgage or loan, then upon the death of the individual the insurance company will repay the bank and the debt will not exist in the deceased’s estate.

Insolvent estates Canada:  What are your alternatives and your responsibilities, as an executor upon the death of a debtor?

If the estate is insolvent, before or after paying the testamentary costs, you have alternatives:

  1. Pay the money owed out of your personal resources.
  2. Allow the estate go bankrupt.

Emotionally you may wish to pay the money owed because you believe in your heart that it is the proper thing to do and you don’t wish to dishonour the memory of your loved one with a string of bad debts and bankruptcy. But before you decide, you need to know that there is no liability for an executor or heir to take on the debts of the deceased.

Even though there may be a stigma connected to bankruptcy, the reality is that you are not responsible for the money owed, so why should you assume this burden and in all likelihood put your family in financial jeopardy?

Bankrupting the estate makes economic sense. An executor can sidestep the minefield of issues involved in administering the deceased’s insolvent estate by bankrupting it.

Insolvent estates Canada:  What should executors and heirs be aware of?

If you and/or another family member is the executor, be aware:

  1. The executors have a legal responsibility for all acts completed, and for all acts not accomplished that they should have.
  2. Notwithstanding everyone’s best efforts, they may unknowingly be inviting proceedings from lenders or heirs for difficult issues. This happens when family members, who are well-intentioned but not skilled at monetary, insolvency or legal issues, are executors because she or he is named, however actually has no know-how in this region.
  3. By putting the property into bankruptcy, which requires previous approval of the bankruptcy court, the executors are relieving themselves of personal legal responsibility because the estate will now be administered under the BIA and all creditors by the Licensed Insolvency Trustee.
  4. The executor will relieve him or herself of coping with collection calls.
  5. As long as there are sufficient funds in the estate to pay the funeral costs, that can be paid out first in the case of a bankruptcy of the deceased’s estate because S.136. (1)(a) of the BIA states:

Priority of claims

“136 (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:

(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;”

It is the first debt with preferred status that can be paid.

Insolvent estates Canada:  What should I do if I  am an executor and I find that the liabilities are greater than the assets?

If you are an executor of a will and you find out that the estate is insolvent, after speaking with the estate lawyer, contact Ira Smith Trustee & Receiver Inc. as soon as possible. We will evaluate the situation and give you sound financial advice on how best protect yourself as executor and the heirs, so that you will be able to go ahead Starting Over, Starting Now.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track


Grey divorce Canada

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Grey divorce or silver separation, whatever you choose to call it, is a sad fact of life in our society today there is a grey divorce boom. According to Statistics Canada, the grey divorce Canada statistics shows that the rate of divorce has been steadily growing among those 55 and over and it’s expected to increase as more people age. Therefore, the grey divorce on the rise trend will not expected to stop anytime soon.

Grey divorce Canada:   there is no grey divorce Canada border

This is not just a Canadian issue; it’s some world-wide phenomena. In the United States the divorce rate among baby boomers has doubled. The statistics in the U.K. and Europe mirror those in the U.S. In Japan couples married 30 years or more have seen their divorce rate quadruple in the last 20 years.

Grey divorce Canada:   what is grey divorce?

We have written on the subject before in:

Grey divorce Canada:   grey divorce problems

Sadly, divorce isn’t just an emotional issue; it’s financial, and the ramifications of the grey divorce in Canada procedure can be devastating. Do you know all about your finances – assets, liabilities, insurance, pensions, retirement savings plans, real estate holdings, expenses and cash flow? Are you financially ready to be single in retirement? Or will you have to put off retirement? Do you have any idea what you’d require to maintain your current lifestyle and if you’ll be able to maintain it?

Grey divorce Canada:   grey divorce retirement

Unfortunately, many Canadians in the throes of a grey divorce Canada procedure are not ready financially and may start accumulating high interest debt to cover expenses. Your senior years are not the best time to be caught in a debt trap. We’re not suggesting that you stay in an unhappy marriage because of financial considerations, but you can get yourself on solid financial footing before divorce.  At the best of times grey divorce in Canada is not fun; why put yourself in added stress and adding to your grey divorce problems by not thinking things through properly financially first?

Grey divorce Canada:   a possible grey divorce Canada procedure

Don’t let grey divorce put you into a state of financial ruin. Reach out to Ira Smith Trustee & Receiver Inc. We’re experts in debt. Meet with us for a free, no obligation consultation. We’ll evaluate your situation and come up with a solid financial plan so that you can have peace of mind and move forward with your life Starting Over, Starting Now.