HOW ARE IDENTITY THEFT AND CORPORATE BANKRUPTCY RELATED?

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Identity theft definition

Identity theft and fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain[1]. When we think of identity theft we have images of shady characters lurking in the shadows who perpetrate fraud upon us for the purposes of stealing our personal information.

Identity theft awareness

As a result we’re often remiss in really understanding who has access to our personal information and what an assumed trusted source can legally do with it. Did you know that when a company goes bankrupt, your personal information can be sold to the highest bidder, leaving you potentially exposed to identity theft?

Identity theft company bankruptcy

According to David Fraser, a privacy law expert at McInnes Cooper, when a company goes bankrupt, it is legally obligated to sell off its assets in order to pay off its creditors. Although information is not property like a computer or a printer, records are considered an asset of the business and can be sold. However, the conditions of the privacy policy usually still hold, and the data can only be used for the purposes for which it was originally collected. Although this sounds like your personal information would remain secure, that is not always the case.

Nicholas Johnson, a professor at Sheridan College, reviewed the privacy policies of about 30 websites and uncovered some startling information. He looked closely at what kinds of information companies were asking for and what protections they offered, if any, in the event of a reorganization. He then detailed how personal information can easily fall into the wrong hands.

  • Most companies have privacy policies that allow for customer data to be transferred to a third party in the case of bankruptcy or a restructuring
  • Almost every company requested email address, first name and last name from its customers
  • In about 10 cases, companies asked customers to opt-in to email notifications or for credit card information
  • Few companies actually detailed what would happen to this information if the company was sold

Identity theft is a real problem and the number of victims is growing at an alarming rate. We need to be more diligent about safeguarding our personal information. What, if anything, are you doing to protect your personal information?

Problem from identity theft

If you’ve been a victim of identity theft and are now experiencing serious financial problems or have serious debt issues for any reason, contact the Ira Smith team as soon as possible. We work with individuals and companies throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Don’t let debt ruin your life. Contact us today.

[1] United States Department of Justice website.

BACK TO SCHOOL: TEACH YOUR KIDS ABOUT MANAGING DEBT

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It’s commonly believed that all parents dread having the “sex” talk with their kids, but a recent study from BMO shows parents would rather talk to their kids about sex than their financial situation and managing debt. Imagine that! Canadians are stressed about money and probably feel ill-equipped to educate their kids about finances and managing debt.

Personal debt in Canada

According to a new national study conducted by Leger:

  • Canadians struggle with regret over financial decisions
  • Argue over spending
  • Feel pressure to keep up with friends or colleagues
  • Bend the truth to friends and family about their financial situation in order to save face

A Bank of Montreal study reports that:

  • More than 33% of all Canadians are ashamed of the debt that they have
  • Almost 40% say they stress over debt levels multiple times a day

There’s no doubt about it, money and managing debt is the top source of stress in our lives. Why are we so financially stressed? Why are Canadians stressed over debt and have so much trouble managing debt? Here are 10 of the most common reasons:

  1. Expenses are greater than your income
  2. You worry about job security
  3. You’re living paycheque to paycheque
  4. You’re fighting with your spouse/partner about money
  5. You’re paying bills late
  6. You use your home equity like an ATM machine
  7. You’re counting on an inheritance to solve your money problems
  8. You’re late on student loan payments
  9. You’re helping out your parents and your kids
  10. You don’t have a financial plan

Dealing with debt

It’s time to become financially literate and educate your kids, not just about the birds and the bees, but about finances and managing debt. Foresters recently offered 5 tips to get smarter about your finances:

  1. Learn everything you can about your finances, including your mortgage terms, bank interest rates and credit score 
  2. Start with the simple things like contributing to RRSPs, setting up RESPs for your kids and protecting your family’s financial future with life insurance
  3. Keep track of every penny you spend for a couple of months and look for ways to cut back and start saving. Even a small commitment to saving will make you feel better about your finances
  4. Look ahead 10, 20 and 30 years. Imagine the life you want and what it will take to make that happen
  5. Talk to your kids regularly about money, involve them in household budgeting, open bank accounts for them and encourage them to save for things they want

How to get help with debt

All of this is great advice to avoid financial problems, but if you are already in serious financial difficulty and don’t know where you will begin on how to manage your debt, you need professional help now. Contact Ira Smith Trustee & Receiver Inc. Don’t ignore your debt issues. Face them head on and with the help of the Ira Smith team you’ll be on your way to conquering debt Starting Over, Starting Now.

 

SHADOW LENDING MARKET: WHY JEWELLERS MAKING MORTGAGE AND CAR LOANS ARE AFRAID OF THE TRUTH

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Picture courtesy of Huffington Post

Jewellers making mortgage and car loans in the shadow lending market are afraid of the truth

If you really knew who you were dealing with for that loan and what the real costs were, and how they felt about you, you certainly would question the wisdom of doing it.    Here is what one such jeweller famous for his television commercials said:

 He believes some of his customers probably shouldn’t be seeking refinancing to hold on to their homes, but added that if Canadians are going to be so addicted to home ownership, he might as well cash in.  “It doesn’t make sense to go to your jeweller for a mortgage or even for a car loan,” he said.”

The shadow lending market Canada and the shadow lending mortgage market Canada

How times have changed! Did you ever think you’d see the day when television commercials featured jewellers offering you mortgages? Yes, there are now a growing number of “alternative lenders” offering mortgages; of course at interest rates well above what traditional financial institutions are charging. One mortgage broker (who was not identified by name) said that although major Canadian lenders offer five-year fixed mortgage rates at about 2.5% to qualified borrowers, rates in the private market range from 7% – 15%. In addition to higher service fees, the market is also weakly regulated, allowing lenders to take advantage of the estimated 20% – 30% of Canadians with limited or no options at traditional financial institutions due to low income or a poor credit score.

The shadow lending market is growing fast

This shadow lending market is growing faster than it can be regulated and preying on the most indebted, vulnerable Canadians. A CIBC report from earlier this year noted that lending by non-commercial bank lenders has doubled since 2012. The Bank of Canada warned about the risks inherent in the shadow banking sector in its most recent Financial System Review last month. The shadow market is estimated at less than 10% of Canada’s mortgage market, much less than the 30% estimated for the pre-crash U.S. market. Low interest rates make it very attractive for people to continue borrowing and pile up debt, making it an ideal climate for the shadow lending market to continue to grow at an ever faster pace.

Why are Canadians falling prey to these shadow lenders?

  • They have multiple mortgages, taking equity out of their homes to cover other debts
  • When they get into financial difficulty, the homes have been used as ATM machines because of the increasing values

Then they fall behind on mortgage payments and are threatened with foreclosure. Mortgages in Canada are considered “full recourse” loans, which means the borrower is responsible for repaying a loan even in the case of the lender taking over and selling the home through power of sale proceedings because you could not keep up the mortgage payments. Canadians who don’t qualify for a bank loan have been forced to refinance in the shadow lending market to avoid losing their home.

I don’t buy jewellery from a trustee

Don’t take financial advice from a television commercial and don’t go to your jeweller for a mortgage or a car loan. Are you plagued by debt problems?  Do you have bankruptcy questions? Professional trustees are experts you can count on for sound financial advice regarding insolvency, bankruptcy and bankruptcy alternatives. If you’re having financial difficulties contact Ira Smith Trustee & Receiver Inc. as soon as possible. We’re a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.

ECONOMIC DOWNTURN CAUSES MORE PEOPLE TO CONSIDER BANKRUPTCY OR PERSONAL BANKRUPTCY ALTERNATIVES

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Personal bankruptcy alternatives are always sought after an economic downturn.  The economic downturn is causing more people to rely on credit to supplement their income and/or their lifestyle. This mountain of debt will ultimately result in bankruptcy or hopefully, an alternative to bankruptcy.

What Bank of Montreal and Statistics Canada say about Canadian household debt

In BMO’s Annual Debt Report, the average household debt of those surveyed is $92,699, more than $4,000 higher than the four-year average dating back to 2012. And servicing that debt, which includes mortgages, lines of credit and credit card debt, is costing $1,165 a month.

According to Statistics Canada:

  • The debt-to-income ratio of Canadian households is 163.3% which means for every dollar Canadians earn, they owe $1.63 in debt
  • Canadian households now owe $1.841 trillion in various forms of debt
  • More than $1.1 trillion is from mortgages
  • $519 billion is consumer debt, like credit cards

Debt + More Debt = a Solution?

Adding debt to more debt is not a solution to the problem; it compounds the problem. If you are using credit cards to supplement your income or your lifestyle, you have a serious problem that needs professional help. Don’t wait until bankruptcy is your only option.  You should be learning about personal bankruptcy alternatives before it is too late.

Is there such a thing as bankruptcy solutions?

We are asked this question all the time.  Before even considering bankruptcy, I always want to discuss 3 formal alternatives to personal bankruptcy:

  1. Credit Counselling
    Credit counselling is in reality debt counselling. Professionals provide assistance with a host of issues related to debt including budgeting, finding debt solutions, working with your creditors and rebuilding credit.
  2. Debt Consolidation
    Debt consolidation is a single loan that allows you to repay your debts to several or all of your creditors at once, leaving you with only one outstanding loan.
  3. Consumer Proposals
    Consumer proposals are formal offers made to your creditors under the Bankruptcy and Insolvency Act (BIA) to modify your payments. e.g. paying a lesser amount each month for a longer period of time and paying a total lesser amount than you owe, all on an interest-free basis!

In addition there are informal personal bankruptcy alternatives including budget review, contacting your creditors (including your mortgage lender), selling an asset and contacting the Federal Government’s Repayment Assistance Plan (if you’re having difficulty repaying your student loan debt).

Just ask your Toronto bankruptcy trustee

A professional trustee can open up a world of possibilities for you. Contact Ira Smith Trustee & Receiver Inc. for help with your financial problems. With just one phone call you can be well on your way to a debt free life Starting Over, Starting Now.

 

10 WAYS A PAYDAY LOAN CHARGES ILLEGAL INTEREST

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There are 10 ways a payday loan charges an illegal interest rate.  Payday loan companies (also known as alternative lenders, fringe lenders and high risk lenders) are predators. Payday lenders prey upon the segment of the population that can least afford it – people in financial difficulty who don’t qualify for a loan from a traditional financial institution because they are deemed too high risk. Some of these predators don’t even have to pay for store fronts as many are payday loan lenders online and issue a payday loan online only.

There is no such thing as the best online payday loan companies

The legal limit for interest rates on a loan is 60% per annum according to the Criminal Code of Canada. So how do online payday loan companies get away with charging way over 60% for payday loans online?

The ten ways payday loan companies charge illegal interest

They get away with it by charging fees instead of calling it interest, however the Criminal Code of Canada considers the following interest, which are all charged on a payday loan:

  1. Interest
  2. Administration fees
  3. Setup fees
  4. Processing fees
  5. Convenience charges
  6. Verification fees
  7. Brokers’ fees
  8. Collection fees
  9. Loan repayment fees
  10. Renewal fees

What does this mean in dollars and cents? Service fees for high risk loans online usually cost $10 to $35 for every $100 borrowed, or 10% to 35% of the amount of the loan. A $300 payday loan, due in two weeks, may cost you between $30 and $105, depending on the fees that apply. This is the amount that you’ll owe in two weeks! Not a per annum interest rate! As you can see in almost all cases these charges by payday loan lenders only will push the true interest rate for payday loans way above the legal limit of 60% per annum.

 Are new payday loan companies regulated?

Payday loan companies online, or in store fronts, new or old, are privately owned and not regulated by the federal government; however, several provincial governments have taken payday lenders to court over the amount of interest and fees that they charge for payday loans. In the U.S. 25 states have passed laws against predatory lending, placing restrictions on high-cost loans.

Can payday loan companies sue you?

The answer is yes, but it will be worth your while to challenge the fees charged by payday loans online (which are actually interest in disguise) and allow yourself to be taken to court. Otherwise the consequences can ruin you financially.  There are many cases where when people defend and show they are not intimidated, the payday loans companies do not pursue the lawsuit.

There was a recent case in the U.S, where a $1,000 loan ballooned into a $40,000 debt and the worst part was that it was legal. A woman in St. Louis borrowed $1,000 from a payday loan company and like many, she couldn’t pay it back in time. The payday loan company sued her and even though she agreed to pay it back in instalments, the loan continued to grow at 240% interest. Investigative journalists stepped in and the case was settled quietly. Had there been no settlement the $1,000 loan would have ballooned to $40,000.

For more information on the risks of payday loans online please review our blogs on the subject:

What should you do?

There is never a good reason to take out a high risk loans online.  There is also no such thing as safe payday loan companies.  Contact a professional trustee instead. The Ira Smith team can help. Starting Over, Starting Now you can take the first step towards financial health.

 

DAVID CASSIDY PARTRIDGE FAMILY TOUR BETTER START SOON

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Photo courtesy of the David Cassidy Facebook page.

Want to know what happened to David Cassidy?

Watch this short video for 70s Star David Cassidy News

What happened to David Cassidy?

This YouTube David Cassidy video says it all.  His bankruptcy, notwithstanding he refutes it, must be related in some small part to his alcoholism and the several David Cassidy DUI events.  The US Bankruptcy Court has ordered that he now must have his Florida home sold by auction.

For those of you too young to remember him, here is the link to the David Cassidy bio.  As you can see, he was a huge music and television star heartthrob. Whatever happened to him over the years, David Cassidy now must pull his life back together.  Like all of us, he must learn to live within his means and budget properly. Mr. Cassidy certainly isn’t the first, and won’t be the last celebrity having financial problems.

Next Steps

So who knows?  Maybe Mr. Cassidy will have to go back on tour with a Partridge Family revival tour, or at least a David Cassidy tour, to earn extra income!  Like all of us, he will have to learn to live within his means.  Dealing with his personal problems will also be a great new beginning for him.

And what if you were not famous but are struggling?

If you’re struggling to support a lifestyle you can no longer afford, take immediate action and contact a professional trustee and explore your alternatives to bankruptcy. There are alternatives to personal bankruptcycredit counselling, debt consolidation and consumer proposals. However, regardless of the choice that’s right for you, a balanced budget is always part of the equation. As we’ve stressed before, a balanced budget is to financial health what a balanced diet is to physical health. You’ll have to take a realistic look at your lifestyle and a serious look at your big ticket items – luxury home(s), exotic vacations, luxury cars, designer clothes and expensive entertaining and start living within your budget in order to benefit from one of the alternatives to bankruptcy .

The Ira Smith team approaches every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Contact us today and Starting Over, Starting Now you can be on the path to a debt free life.

 

ALTERNATIVES TO BANKRUPTCY IF YOUR INCOME DECLINES SUBSTANTIALLY

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Our insolvency clients, be they personal or corporate, usually want to start a consultation by asking us bankruptcy questions.  However, I first start by obtaining a full understanding of the person’s or company’s financial challenges, so that we may consider all of the realistic options before discussing the topic of bankruptcy.  I first wish to find the best alternative to bankruptcy.

I am finding now that many families, even high earners, are struggling in the “new economy”. We’ve spoken about their plight in our blogs:

There is yet another group that is now in great danger of bankruptcy – families whose previously very healthy income has taken a serious downturn and are now struggling to maintain a lifestyle they can no longer support. These families need to act fast and consider their alternatives to bankruptcy before it is too late to take remedial action.  The natural inclination is to tough it out and hope for better times, but serious financial times demand serious financial decisions, not a hope and a prayer. As these families wait for better times to come they are burning through whatever savings they have, going further into debt by living off credit and will eventually run out of both money and credit.

This is not the best approach.  At the first sign of financial trouble, these families should seek the advice of their legal counsel or accountant.  These trusted professionals will be able to refer the families in financial trouble to a trustee in bankruptcy that they trust.  With the trust factor bridge now in place with the trustee, that trustee can review the situation and provide the families with their realistic alternatives to bankruptcy.

If you’re struggling to support a lifestyle you can no longer afford, take immediate action and contact a professional trustee and explore your alternatives to bankruptcy. There are alternatives to personal bankruptcycredit counselling, debt consolidation and consumer proposals. However, regardless of the choice that’s right for you, a balanced budget is always part of the equation. As we’ve stressed before, a balanced budget is to financial health what a balanced diet is to physical health. You’ll have to take a realistic look at your lifestyle and a serious look at your big ticket items – luxury home(s), exotic vacations, luxury cars, designer clothes and expensive entertaining and start living within your budget in order to benefit from one of the alternatives to bankruptcy .

The Ira Smith team approaches every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Contact us today and Starting Over, Starting Now you can be on the path to a debt free life.


pingler

 

STALKING HORSE BID: DO YOU REALLY WANT TO STALK YOUR HORSE ANYWAY?

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According to Wikipedia, “The term stalking horse originally derived from the practice of hunting, particularly of wildfowl. Hunters noticed that many birds would flee immediately on the approach of humans, but would tolerate the close presence of animals such as horses and cattle.  Hunters would therefore slowly approach their quarry by walking alongside their horses, keeping their upper bodies out of sight until the flock was within firing range. Animals trained for this purpose were called stalking horses.”

In the insolvency context, a stalking horse bid stands to test the market to see how the market values the assets for sale.  If the market values the assets less than the amount of the stalking horse bid, then no one will bid higher and the party who made the stalking horse bid will be successful in acquiring the assets.  If the market values the assets more than the amount of the stalking horse bid, then higher offers will be made for the assets and for the Court to consider for approval.  Presumably a higher offer will be approved, that purchaser will purchase the assets and the stalking horse bid will not prevail.

After the stalking horse bid is negotiated, it will be necessary for the Company, Receiver or Trustee to obtain Court approval of not only the stalking horse bid, but also for the entire sales process to be implemented.  If the Company is attempting to restructure, then those corporate proceedings would be either under the Companies’ Creditors Arrangement Act (“CCAA”) or the Proposal provisions of the Bankruptcy and Insolvency Act (Canada) (the “BIA”).  In that situation, it is the Company making application to the Court with the support and assistance of the monitor or proposal trustee.  If it is a corporate receivership or bankruptcy proceeding, then it is either the receiver or bankruptcy trustee making the application.

When applying to the Court, approval for an entire sales process is being sought, a component of which is the stalking horse bid. The Court has various considerations in determining if a stalking horse sales process should be approved.  An important case in Ontario to determine what the Court’s concerns will be is Brainhunter Inc. (Re), 2009 CanLII 72333.  In his decision, the Honourable Regional Senior Justice Morawetz stated:

“…the court should consider in the exercise of its general statutory discretion to determine whether to authorize a sale process:

(a) Is a sale transaction warranted at this time?

(b) Will the sale benefit the whole “economic community”?

(c) Do any of the debtors’ creditors have a bona fide reason to object to a sale of the business?

(d) Is there a better viable alternative?”

I must emphasize that at this point of the insolvency proceeding, the Court is only being asked to consider approving a sales process.  This is different than the parties coming back to Court after the sales process has been run for approval of an actual sale.  In an earlier blog, “PARK LANE CIRCLE-PEOPLE WHO LIVE IN GLASS HOUSES CAN’T CHANGE THE RULES”, we discussed the issues that a Court must consider when being requested to approve a particular sale.

In the event the stalking horse bid is not the successful winner, it is normal for the stalking horse purchaser to receive some form of compensation.  The compensation is for the time, cost and resources invested to perform its due diligence, to make its offer which was found to be reasonable in the circumstances and to expose that offer to the marketplace to stand as a stalking horse bid, and for that bidder to not end up as the successful purchaser.

Our Firm has been involved in situations where the stalking horse bid has been both the successful bid and the unsuccessful bid.  If the compensation, commonly known as a break fee, is fair and reasonable, it will not dissuade other purchasers from coming forward in the sales process, and it will also be fair to the stalking horse bidder if they are unsuccessful.  The Court in considering the approval of a stalking horse bid also considers if the break fee, and the entire stalking horse bid, has been negotiated between arms’-length parties and has the support of the stakeholders involved in the insolvency proceeding.

If your Company is experiencing financial difficulties, don’t waste your time stalking horses or any other animal. Seek the advice of your professional advisers.  The earlier you seek financial help the more options will be open to you. Contact Ira Smith Trustee & Receiver Inc. today. We’ll review your corporate issues and come up with a sound plan so that Starting Over, Starting Now you can enjoy financial peace of mind.

CANADA’S MIDDLE CLASS: DO YOU YOU QUALIFY?

Middle class, middle-class, middle class lifestyle, student debt, housing prices, trustee, living paycheque to paycheque, bankruptcy, starting over starting nowCanada’s middle class is a huge topic these days.  There’s been a lot of talk recently about the growing gap between Canada’s affluent and middle class. Before we can begin to understand what’s happening to Canada’s middle class, we must first be able to define it.

“One of the troubles with the term middle class is it’s so elastic and there’s not a clear-cut definition,” said Charles Beach, an economist and Queen’s University professor emeritus. Beach says surveys have shown most Canadians consider themselves part of the middle class without quite defining what it is. “There is no consensus definition of ‘middle class,’ nor is there an official government definition,” said the memo, obtained by The Canadian Press under the Access to Information Act.

The New York Times defines the middle class as families earning between $35,000 and $100,000 a year. This would seem to hold true in Canada as well. According to Employment and Social Development Canada:

  • The middle 60% of families earned an average of $53,500 after tax in 2011

According to Statistics Canada:

  • The total median 2012 income for families, defined in this case as all couples with or without kids, was $81,980

The problem is that it’s now difficult to achieve middle class. Paul Kershaw, policy professor at the University of British Columbia reports:

  • The typical 25 – 34 year old is now making wages that are 11% lower than they were for the same aged person in 1976, even though their education levels are higher
  • The typical older worker is making wages that are 3% – 7% higher than a similar person did 30 years ago
  • House prices have nearly doubled in that time, meaning more wealth for the older person and more debt for the younger person

“It takes much longer now to achieve anything that looks like a middle-class lifestyle,” says John Myles, professor emeritus of sociology at University of Toronto, as young people stay in school longer than in generations past, get more credentials, start careers later, get married later and buy homes later. And the gap between the affluent and the middle class is growing.

Canadian Centre for Policy Alternatives report finds most affluent families in their 20’s have net worth over $500,000, more than most middle-class families save over decades. Real estate is typically the reason the affluent are able to achieve such a high net worth at such a young age. Their parents buy a property for them, help purchase the property and/or provide the down payment. In addition the affluent are starting off life with no student debt as their families were able to fund their educations. Conversely, those striving to achieve middle class are frequently buried under a mountain of student debt. This in and of itself is problematic enough, but it also delays being able to purchase a house. And with the cost of housing rising exponentially (the average price of a detached house in Toronto is now over $1 million), the gap between the affluent and the middle class will continue to grow.

Many trying to achieve a middle class lifestyle are struggling financially, living paycheque to paycheque and need professional help. Trustees are experts in dealing with debt. The Ira Smith Team has a cumulative 50+ years helping individuals and companies facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Call today. Stop struggling and start enjoying life again.

FINANCIAL INFIDELITY: DON’T WAIT FOR YOUR SPOUSE TO CHEAT BEFORE DISCUSSING MARRIAGE FINANCES

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