Author: Brandon Smith

Brandon Smith is a licensed insolvency trustee and Senior Vice-President of Ira Smith Trustee & Receiver Inc. The firm deals with both individuals and companies facing financial challenges in restructuring, consumer proposals, proposals, receivership and bankruptcy.

They are known for not only their skills in dealing with practical solutions for individuals and companies facing financial challenges, but also for producing results for their clients with realistic choices for practical decision-making. The stress is removed and their clients feel back in control. They do get through their financial challenges and are able to start over, gaining back their former quality of life.

Brandon Blog Post

COURT ORDERED RECEIVERSHIP SALE: THE SHOCKING COURTROOM AUCTIONS THAT STUNNED EVERYONE

Post author By Brandon Smith
Post date November 10, 2025

Court ordered receivership sale

In October 2025, the Court of Appeal for Ontario delivered a landmark decision that fundamentally changes how a court ordered receivership sale works in Ontario. As further discussed below, this is not unique to Ontario. The case answered a critical question that haunts receivers, creditors, and buyers:

Can a judge reject a perfectly executed receivership sale simply because someone offers substantially more money at the last minute?

The answer, according to Ontario’s highest court, is a resounding yes. Section 243 of the Bankruptcy and Insolvency Act provides the authority in Canada for the court to appoint a receiver. Once the court is involved, it is the judge who ultimately drives the process through its court officer, the court-appointed receiver.

In Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc., 2025 ONCA 732(CanLII), the court ruled that even when a receiver runs a flawless eight-month sales process, the judge can—and should—reopen bidding if a late offer is substantially higher. In this case, that threshold was 37% more than the accepted bid, representing approximately $3.5 million in additional recovery for creditors.

This isn’t an isolated decision. Courts across Canada, particularly in British Columbia, have been moving in this same direction for years. Together, these cases signal a new era in Canadian insolvency law: maximizing creditor recovery now trumps process certainty.

If you’re involved in a —as a creditor, business owner, receiver, potential buyer or legal counsel for any of these parties—understanding this shift could mean the difference between losing millions and capturing every available dollar.

Court Ordered Receivership Sale: Why This Case Matters to You Right Now

Before we dive into the legal details, here’s why the Cameron Stephens decision demands your immediate attention:

If You’re a Creditor:

Courts will now aggressively intervene to protect your right to maximum recovery
Even “late” competing offers will be considered if they’re substantially higher
The 37% threshold provides clear guidance about when judges will reopen bidding

If You’re a Business Owner Facing Receivership:

Higher asset values mean less shortfall and reduced personal liability
The process isn’t over until the judge signs the approval order
You may have opportunities to challenge sales that seem too low

If You’re Buying Assets in Receivership:

Your accepted offer isn’t final until court approval
Courts may reopen competitive bidding even at the approval hearing
You need to bid your true maximum value from the start

If You’re a Receiver or Insolvency Professional:

Running a perfect process no longer insulates you from judicial intervention
Price gaps of 30%+ will trigger intense scrutiny
Courts expect aggressive value maximization strategies

The Cameron Stephens Court Ordered Receivership Case: A Deep Dive into Ontario’s Landmark Decision

The Background: A Textbook Receivership Process

The facts of Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc. began routinely enough. A Toronto property was subject to a court-appointed receivership, secured by a $15,600,000 mortgage held by Cameron Stephens Mortgage Capital Ltd.

The receiver did everything by the book:

Eight-Month Professional Marketing Campaign:

Comprehensive marketing materials prepared and distributed
Property is widely advertised to qualified buyers
Multiple showings conducted
Professional broker engaged
Extensive outreach to potential purchasers

Serious Negotiations:

Multiple offers received and evaluated
Good faith negotiations with qualified buyers
Financial due diligence conducted
Terms and conditions carefully reviewed

Agreement Reached:

The receiver negotiated an Agreement of Purchase and Sale (APS) with Arjun Anand
The only condition: court approval
Price and terms deemed fair and reasonable by the receiver
All standard protections included

The receiver brought this agreement to the Ontario Superior Court of Justice for approval, expecting a routine hearing. The receiver’s conduct throughout the entire process was later described by the motion judge as “unassailable”—meaning it was beyond criticism, flawless, and professionally executed at every stage.

Everything appeared ready for the judge to simply approve the sale and allow it to close.

The Bombshell: Three Escalating Late Offers

Then, just before the scheduled court approval hearing, something dramatic happened.

A company called 100 Inc.—which was actually a subsidiary of the property owner—submitted not one, but eventually three competing offers:

First Late Offer: 6.7% higher than Anand’s accepted price
Second Late Offer: 14.2% higher than Anand’s accepted price
Third Late Offer (after adjournment): 37% higher than Anand’s accepted price

That final 37% differential represented approximately $3.5 million in additional value that would flow to creditors if the higher offer was accepted instead of Anand’s deal.

The motion judge faced an agonizing dilemma that strikes at the heart of every court ordered receivership sale:

Option 1: Approve the Original Deal (Protect Process Integrity)

Arguments in favour:

The receiver ran a perfect eight-month process
Anand negotiated in good faith and had an accepted agreement
Accepting late bids undermines the integrity of receivership processes
Future buyers won’t participate seriously if deals can be overturned
The famous 1991 Court of Appeal for Ontario case Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA) (Soundair) warns against creating “chaos in the commercial world.”

Option 2: Reopen Bidding (Maximize Creditor Recovery)

Arguments in favour:

The 37% price gap is enormous—approximately $3.5 million
Creditors deserve the highest possible recovery
Approving the lower offer might be “improvident” (unwise)
The primary purpose of the Bankruptcy and Insolvency Act (BIA) is to maximize creditor recovery
The late offer appears genuine, not a manipulative tactic

The Motion Judge’s Controversial Decision

After considering extensive submissions from all parties, the motion judge made a bold choice that shocked many that day.

Even though he explicitly found:

The receiver’s conduct was “unassailable”
The sales process was “without flaws”
The receiver had acted properly at every stage

The judge refused to approve Anand’s deal.

His reasoning was straightforward:

The 37% price difference was so substantial that it qualified as “substantially higher.” Approving the lower offer in the face of such a large differential would risk being improvident—meaning unwise and harmful to creditors.

The judge couldn’t ignore $3.5 million that could flow to creditors simply to protect a process that, while perfect, had inadvertently missed the property’s true market value.

The Judge’s Creative Solution:

Rather than simply rejecting Anand’s deal and accepting the 100 Inc. offer (which would be grossly unfair to Anand), the motion judge crafted a balanced remedy:

Six-Day Bidding Extension: Reopened the bidding process for six additional days
All Prior Bidders Invited: Both Anand and 100 Inc. could submit new, higher bids
Level Playing Field: Both parties had equal information and opportunity
Cost Protection for Anand: If Anand wasn’t the successful bidder, the property owner would reimburse his reasonable legal costs incurred to date.

This solution aimed to:

Maximize value for creditors (the paramount goal)
Treat both bidders fairly (maintaining process integrity)
Compensate Anand for his good faith participation (preventing unfairness)

Critical Insight: This decision shows that even perfect receivership processes can be disrupted when significantly higher offers emerge. Process integrity, while important, takes a back seat to maximizing creditor recovery when millions are at stake. The judge essentially turned Anand’s APS into a stalking horse bid.

Court ordered receivership sale

Court Ordered Receivership Sale: The Appeal Tested the Limits of Judicial Discretion

Understandably, Arjun Anand was unhappy with this outcome. He had negotiated in good faith, secured an accepted agreement, and now faced having to re-bid against a competitor in a court-ordered auction.

He appealed to the Ontario Court of Appeal, raising important legal arguments that would determine how a court ordered receivership sale would function going forward.

Anand’s Main Arguments on Appeal

1. The Soundair Test Was Misapplied

Anand argued that the motion judge incorrectly interpreted the famous Soundair case. According to Anand, Soundair requires a court to find both:

A significantly higher price, AND
A compromised process integrity

He contended that because the receiver’s process was flawless (unassailable), the judge had no authority to reject the sale, regardless of the price differential.

2. Judicial Discretion Has Limits

Anand argued that allowing judges to reopen bidding whenever a higher offer appears—even after a proper process—would:

Create chaos in the commercial marketplace
Discourage serious buyers from participating
Turn every receivership sale into an unwanted courtroom auction
Undermine the authority and expertise of professional receivers

3. Good Faith Parties Must Be Protected

Anand emphasized that he negotiated in good faith with the receiver, spent considerable time and legal fees on due diligence, and reached an agreement. The Soundair case emphasizes protecting bona fide purchasers. Rejecting his deal, he argued, violated this fundamental principle.

The Court of Appeal for Ontario Groundbreaking Ruling

In the October 27, 2025, appellate court decision, the court dismissed Anand’s appeal and upheld the motion judge’s decision to reopen bidding.

The court’s reasons are crucially important for understanding how a court ordered receivership sale will work going forward:

Key Finding #1: The 37% Price Gap Alone Was Sufficient

The court ruled that the motion judge was correct to focus heavily on the magnitude of the price differential.

The court held:

A 37% higher offer (approximately $3.5 million more) was “substantially higher” and alone created a serious risk that approving the lower offer would be improvident.

Improvidence means approving a sale that is unwise and fails to adequately protect creditors’ interests. When the price gap is this large, it suggests the original offer doesn’t reflect true market value, even if the process was perfect.

The court emphasized: The receiver’s job is to obtain the highest price possible for creditors. When a substantially higher offer emerges—even late—the court must take it seriously to fulfill this mandate.

Practical Implication: The 37% threshold now provides concrete guidance. If you’re involved in a receivership and a late offer exceeds the accepted bid by 30%+, expect the court to seriously consider reopening the process.

Key Finding #2: Soundair Factors Are Flexible, Not Rigid

The Ontario Court of Appeal explicitly rejected Anand’s argument that courts must find both a significantly higher price and compromised process integrity to justify intervention.

The court stated:

The four Soundair factors are flexible and case-specific. They’re not a checklist where all boxes must be ticked. Courts must weigh all circumstances and exercise discretion based on the particular facts.

No single factor is determinative. Different cases will emphasize different factors depending on circumstances.

What this means:

A flawed process with a moderate price gap might justify rejection
A perfect process with a massive price gap might also justify rejection
Courts evaluate the totality of circumstances
Judicial discretion is broad and entitled to deference

For Receivers: You can’t rely on process perfection alone to guarantee approval. You must also be prepared to justify why your recommended price represents maximum market value.

Key Finding #3: Maximizing Recovery Is Paramount

The three-judge panel reaffirmed what has become increasingly clear across Canadian courts: the paramount objective of any court ordered receivership sale is to maximize recovery for creditors.

The court emphasized that the BIA exists primarily to:

Preserve and liquidate assets efficiently
Ensure liquidation results in maximum return
Benefit creditors who are owed money

When the goal of maximum recovery conflicts with other considerations (like protecting a negotiated agreement), maximum recovery takes priority if the circumstances warrant it.

The court noted that while protecting good faith purchasers is important, it cannot override the fundamental duty to creditors when the price differential is substantial.

For Creditors: This ruling provides powerful protection for your interests. Courts will actively intervene to prevent you from receiving less than maximum value.

Key Finding #4: Deference to the Motion Judge’s Discretion

Finally, the Court of Appeal for Ontario emphasized that the motion judge’s decision was discretionary and therefore entitled to substantial deference on appeal.

Appellate courts don’t second-guess discretionary decisions unless the judge made a clear error in law or reached an unreasonable conclusion.

Here, the appellate court found:

The motion judge properly considered all relevant factors
He balanced competing interests appropriately
His exercise of discretion was reasonable, given the 37% price gap
The creative solution (reopening bidding with cost protection) was a proper exercise of judicial authority

The bottom line: Judges have broad authority to craft creative solutions in a court ordered receivership sale when necessary to maximize creditor recovery.

Court Ordered Receivership Sale: What the Cameron Stephens Decision Means in Practice

The 37% Threshold: New Guidance for All Parties

Cameron Stephens establishes that a 37% price differential is substantial enough to justify judicial intervention, even when the receiver’s process is beyond criticism.

For a property whose value justified a mortgage loan of millions of dollars, the 37% difference is not a trivial amount. For many creditors, this additional recovery represents:

The difference between a substantial or full recovery and a significant shortfall
Avoiding deficiency claims against personal guarantors
Business survival versus bankruptcy
Personal financial security versus personal insolvency

Open Question: While 37% clearly justifies intervention, what about lower differentials?

Would 30% be enough? Probably.
Would 20% be enough? Maybe, depending on other factors.
Would 10% be enough? Perhaps, depending on all the circumstances of the particular case.

The Cameron Stephens decision doesn’t establish a bright-line rule, but it provides important guidance about the magnitude of price differential that triggers judicial scrutiny.

Process Perfection Is No Longer Sufficient Protection

For decades, receivers believed that if they ran a thorough, professional process following all best practices, courts would defer to their recommendations and approve their chosen deals.

Cameron Stephens fundamentally changes this assumption.

What This Means for Receivers:

Even when you:

Obtain a professional appraisal
Market extensively for many months
Engage professional brokers
Conduct comprehensive outreach
Receive and evaluate multiple offers
Negotiate terms professionally
Document everything meticulously

You can still face court intervention if:

A substantially higher offer emerges (30%+ above your accepted bid)
The court questions whether your accepted offer reflects true market value
The judge believes creditors would be better served by reopening competition

New Best Practices:

Obtain professional appraisals for significant assets to support your pricing
Document market testing thoroughly to demonstrate that the accepted offer reflects market reality
Consider stalking horse structures with break fees to encourage early, strong bids
Build flexibility into timelines to accommodate potential competing offers
Prepare for potential bidding reopening by having contingency procedures ready

At Ira Smith Trustee & Receiver Inc., we’ve administered receivership processes where both a late higher offer emerges or when there is opposition to a recommended sale but there was no competing offer. We always anticipate potential challenges and build in protections from the start.

Buyers Should Bid Their True Maximum Early

Cameron Stephens sends a clear message to potential purchasers in a court ordered receivership sale: don’t lowball and expect to have the last word.

The New Reality for Buyers:

Your accepted agreement with the receiver is not final until:

The court approval hearing occurs
No substantially higher offers emerge
The judge signs the approval order

What You Should Do:

Bid aggressively from the start,, realizing the maximum you are prepared to pay
Don’t negotiate down, expecting no competition
Budget for legal costs that might not be recoverable
Be prepared to re-bid if the court reopens the process
Understand timing risk because approval isn’t guaranteed

The Good News: If you submit a strong initial offer and someone submits a late, higher bid, you’ll have the opportunity to increase your bid through a reopened process. The highest bidder ultimately wins.

The Risk: If you lowball initially and someone else is prepared to offer closer to the property’s true value, you may end up losing the deal entirely or paying more than you would have if you’d bid fairly from the start.

Creditors Have Powerful New Tools

If you’re a creditor in a court ordered receivership sale, Cameron Stephens is excellent news.

Your New Rights:

Courts will actively protect your right to maximum recovery
You can challenge sales that appear improvident
Late offers that are substantially higher (30%+) will be seriously considered
Judges will use creative solutions to capture additional value

What You Should Do:

Monitor the receivership process closely from the beginning
Review the receiver’s reports and ask questions about pricing
Conduct your own market research to assess whether proposed prices seem reasonable
If you become aware of potentially higher offers, bring this to the receiver’s and court’s attention
Attend court hearings to voice concerns about inadequate pricing
Consider retaining your own advisor if significant money is at stake
Court ordered receivership sale

This Is Not an Isolated Case: B.C. Supreme Courts Have Been Leading the Way in Court Ordered Receivership Sale Process

The Cameron Stephens decision might seem revolutionary, but it’s actually part of a broader trend across Canadian courts. The British Columbia Court of Appeal has been issuing similar rulings for several years, establishing that courts will use creative interventions to maximize creditor recovery in court ordered receivership sales.

Ontario’s highest court has now aligned with this approach, confirming that this is the new Canadian standard, not a regional anomaly.

The BC Trend: Three Landmark Cases

Case #1: The Versante Hotel Live Courtroom Auction (2025)

What Happened:

I would like to express thanks to Eamonn Watson of Dentons Canada LLP in Vancouver, who provided us with information regarding the currently unreported Court ordered receivership sale in the Versante Hotel case.

In International Trade Center Properties Ltd. (the Versante Hotel case), a Richmond, BC receiver had negotiated a $48 million sale of a luxury hotel with Citation Properties. At the court approval hearing, a competing party (Silverport Properties) appeared with a sealed bid higher than $48 million.

The BC Supreme Court judge faced the same dilemma as the Cameron Stephens judge: approve the negotiated deal or pursue the higher offer?

The Court’s Creative Solution:

Justice Fitzpatrick ordered an unprecedented live auction in the courtroom the following day. Both Citation (the original buyer) and Silverport would compete on equal footing with transparent bidding.

The Result:

The bidding was “lively,” going back and forth multiple times. Citation ultimately won but had increased its offer to $51.5 million—a $3.5 million gain for creditors achieved in mere minutes.

Key Parallels to Cameron Stephens:

Both involved late competing offers
Both courts prioritized maximizing recovery over protecting negotiated deals
Both judges created creative solutions (live auction vs. reopened bidding)
Both resulted in approximately $3.5 million in additional creditor recovery
Both show courts will intervene dramatically when a substantially higher value is available

The Lesson: When immediate opportunities to capture significantly more value arise, courts have the power and willingness to create extraordinary processes to realize that value quickly and transparently.

Case #2: QRD (Willoughby) Holdings – When Process Flaws and Price Gaps Combine (2024)

What Happened:

In QRD (Willoughby) Holdings Inc. v. MCAP Financial Corporation, 2024 BCCA 318 (CanLII) (Willoughby), a receiver was selling a suspended real estate development in Langley, BC. The receiver marketed the property for less than 2.5 months (described as “markedly short”) and recommended accepting a $35 million offer.

However, a competing proposal from Foundation Residence Society offered $64 million—a staggering $29 million difference, though with significant conditions and a longer closing timeline.

The Court’s Findings:

The BC Court of Appeal found the chambers judge erred by:

Insufficient weight to the massive price gap: The $29 million differential suggested the receiver hadn’t adequately tested the market
No professional appraisal: The absence of a valuation undermined confidence that $35 million represented the best value
Markedly short marketing period: Less than 2.5 months was inadequate for a major development property

The Result:

While the Court of Appeal criticized the process and found it flawed, they still dismissed the appeal because by the time of the appeal, the higher bidder still hadn’t firmed up their conditional offer. Continuing delays would have cost even more in mounting debt.

Key Parallels to Cameron Stephens:

Price gap signals improvidence: Both courts held that large price differentials (37% in Cameron Stephens, 83% in Willoughby) raise serious concerns about whether the accepted offer represents market value
Court scrutiny is intense: Even though Willoughby involved process flaws while Cameron Stephens didn’t, both cases show that courts will heavily scrutinize pricing when competing offers differ substantially
Timing matters: Both cases emphasize the tension between capturing higher value and managing time/cost pressures

The Key Difference:

Cameron Stephens shows that process perfection doesn’t insulate you from intervention when the price gap is substantial. Willoughby shows that process deficiencies combined with price gaps will definitely attract court criticism.

The Lesson: Whether your process is perfect or flawed, substantial price gaps will trigger judicial intervention to prevent improvident sales that shortchange creditors.

Case #3: Peakhill Capital – Creative Structures to Maximize Recovery (2024)

What Happened:

In British Columbia v. Peakhill Capital Inc., 2024 BCCA 246 (CanLII) (Peakhill)the , a receiver was selling valuable real property in a court ordered receivership sale. Rather than a traditional sale, the receiver structured the transaction using a Reverse Vesting Order (RVO).

An RVO is a complex legal structure that:

Moves unwanted liabilities out of the debtor company
Leaves the core assets in place
Sells the company’s shares instead of transferring the land title

The Purpose:

This complicated structure had one clear goal: to avoid approximately $3.5 million in BC property transfer tax (PTT), thereby maximizing the net recovery for creditors.

The Province of BC challenged this, arguing courts don’t have jurisdiction to approve structures designed solely to avoid tax.

The Court’s Decision:

The BC Court of Appeal upheld the RVO, ruling that:

The of gives courts broad authority to approve creative solutions
Structuring commercial transactions to avoid unnecessary taxes is legitimate outside of insolvency
Therefore, using an RVO to achieve this in receivership is appropriate
Maximizing creditor recovery is a proper purpose under the BIA
Saving $3.5 million in tax means $3.5 million more for creditors

Key Parallels to Cameron Stephens:

Maximizing recovery is paramount: Both courts emphasized that the primary purpose of receivership is maximizing creditor returns
Creative solutions are acceptable: Just as Peakhill approved a novel legal structure, Cameron Stephens approved reopened bidding—both are creative judicial interventions
Courts have broad discretion: Both decisions emphasize the wide authority courts have under the BIA to achieve optimal outcomes
The $3.5 million parallel: Interestingly, both Peakhill and Cameron Stephens involved capturing approximately $3.5 million in additional value

The Lesson: Courts will approve unconventional approaches—whether creative deal structures or creative bidding processes—if the goal is to lawfully maximize what creditors receive.

The Emerging Court Ordered Receivership Sale Canadian Consensus: Maximizing Recovery Above All

When we look at Cameron Stephens alongside the BC Court of Appeal decisions, a clear pattern emerges:

Common Principles Across All Cases:

1. Creditor Recovery Is The Top Priority

Every case—Cameron Stephens, Versante, Willoughby, Peakhill—emphasizes that the paramount objective of any court ordered receivership sale is maximizing what creditors recover.

When this goal conflicts with other important values (process integrity, protecting negotiated deals, following traditional procedures), maximizing recovery wins if the circumstances warrant it.

2. Courts Will Intervene Creatively When Necessary

Canadian courts have shown remarkable willingness to create extraordinary solutions:

Live courtroom auctions (Versante)
Reopened competitive bidding (Cameron Stephens)
Novel legal structures (Peakhill)
Extensions of marketing time (Willoughby—though ultimately denied for other reasons)

The days of rigid, formalistic receivership processes are over. Judges will craft pragmatic solutions tailored to specific circumstances to achieve optimal outcomes.

3. Substantial Price Gaps Demand Judicial Attention

Whether it’s:

37% higher (Cameron Stephens – approximately $3.5M)
7.3% higher (Versante – $3.5M on $48M)
83% higher (Willoughby – $29M differential)

Courts treat significant price differentials as red flags suggesting the accepted offer may not reflect true market value and may be improvident.

4. Process Perfection Is Necessary But Not Sufficient

Cameron Stephens definitively establishes that running a flawless receivership process doesn’t guarantee approval if substantially higher offers emerge.

You need both:

A thorough, professional process (necessary)
Pricing that reflects maximum market value (also necessary)

One without the other isn’t enough.

5. Flexibility Over Rigidity

All these cases emphasize that the Soundair factors are flexible and case-specific, not a rigid checklist. Courts evaluate the totality of circumstances and exercise broad discretion to achieve outcomes that serve the BIA’s core purposes.

What This Means: A New Era for the Court Ordered Receivership Sale Process

Taken together, these cases signal that Canadian court ordered receivership sales have entered a new era characterized by:

✓ Greater judicial activism in protecting creditor interests
✓ Less deference to receivers when pricing seems questionable
✓ More creative interventions to maximize recovery
✓ Heightened scrutiny of price, even when the process is perfect
✓ Willingness to disrupt negotiated deals when a substantially higher value is available
✓ Emphasis on outcomes (maximum recovery) over process (following procedures)

For everyone involved in receiverships, this means:

Uncertainty until court approval is actually granted
Higher ultimate recoveries for creditors
More competitive pressure on buyers
Greater need for professional expertise to navigate complex proceedings
Increased importance of documentation to justify pricing recommendations

[Need expert guidance navigating these new realities? Contact us to schedule your free consultation.]

Court ordered receivership sale

Court Ordered Receivership Sale Practical Implications: What You Must Do Now

If You’re a Creditor in a Court Ordered Receivership Sale:

Your Rights Are Stronger Than Ever:

The Cameron Stephens decision, combined with the BC cases, provides powerful tools to protect your interests.

Action Steps:

Monitor the process actively from the beginning—don’t just wait for the receiver’s reports
Question pricing if you have doubts about whether the accepted offer reflects market value
Conduct independent research to assess comparable sales and market conditions
If you become aware of potentially higher offers, bring this immediately to the receiver’s and the court’s attention before the approval hearing
Attend court hearings and consider retaining counsel if significant money is at stake
Don’t assume the receiver’s recommendation is automatically optimal—you have the right to challenge it

What Cameron Stephens Confirms:

Courts will protect your right to maximum recovery, even if that means disrupting processes and negotiated deals. Don’t hesitate to advocate for your interests.

If You’re a Business Owner or Guarantor Facing Receivership:

There’s Both Risk and Opportunity:

Cameron Stephens shows that receivership sales can be unpredictable, but courts actively work to maximize asset values.

What This Means for You:

The Good News:

Courts will push for higher asset values, reducing deficiency amounts
Larger recoveries mean less personal liability under guarantees
You have grounds to challenge sales that seem improvident

The Challenges:

Process uncertainty can delay resolution
You have limited control once a receiver is appointed
Courts prioritize creditors’ interests over yours

Action Steps:

Get professional advice early—before receivership if possible
Understand your rights to participate in and observe the receivership process
Monitor asset sales and question pricing that seems low
Consider whether alternatives to receivership (proposals, refinancing, restructuring) might be available
Cooperate with the receiver—obstruction reduces values and increases costs

Critical Timing:

The earlier you engage an experienced licensed insolvency trustee, the more options you’ll have to protect your interests.

[Facing potential receivership? Contact us so that we may provide you with a free, confidential consultation before it’s too late.]

If You’re Buying Assets in a Court Ordered Receivership Sale:

The Rules Have Changed:

Your accepted agreement isn’t final until court approval, and that approval is no longer a formality.

Key Realities:

Bid closer to your true maximum early—don’t expect to lowball and win
Budget for uncertainty—approval timelines are unpredictable
Prepare to re-bid—courts may reopen competitive processes
Understand cost risks—your legal fees might not be recoverable
Factor in delay—closing may take longer than anticipated

Strategic Considerations:

Early participation protects you—engage in the official process from the start
Due diligence matters—understand true market value before bidding
Financial readiness is crucial—be prepared to increase your bid quickly
Relationship with receiver helps—serious, professional buyers get respect

The Upside:

If you bid fairly based on true value, you’ll likely succeed. The Cameron Stephens approach actually rewards buyers who recognize and are willing to pay for true asset value.

If You’re a Receiver or Insolvency Trustee:

Your Job Just Got Harder:

Cameron Stephens raises the bar for what courts expect from receivers conducting court ordered receivership sales.

Requirements:

Professional Valuations: Obtain appraisals for significant assets to support pricing recommendations
Enhanced Documentation: Meticulously document marketing efforts, offer comparisons, and provide pricing justification
Market Testing: Ensure marketing periods are adequate (Willoughby warns against “markedly short” timelines)
Contingency Planning: Build flexibility into processes to handle late competing offers
Price Justification: Be prepared to explain why your recommended price represents maximum market value
Creative Solutions: Consider stalking horse structures, auction mechanisms, or other approaches that maximize competition

The Reality:

Even if you do everything perfectly, courts may still intervene if substantially higher offers emerge. Your role is to:

Run the best process possible
Document everything thoroughly
Recommend the highest supportable price
Be prepared to adapt to judicial intervention

At Ira Smith Trustee & Receiver Inc., we understand these lessons from our past receivership administrations. We understand what courts expect and how to structure processes that satisfy Cameron Stephens’ requirements.

Frequently Asked Questions (FAQ) About Cameron Stephens and The Court Ordered Receivership Sale Process

Q: Does the 37% threshold mean courts won’t intervene for smaller price gaps?

Not necessarily. Cameron Stephens establishes that 37% is clearly sufficient, but doesn’t set a floor. The Versante case shows courts may intervene for smaller differentials (around 7%) depending on circumstances. Each case is evaluated on its facts. Generally, price gaps of 30%+ will almost certainly trigger scrutiny, while gaps under 10% are less likely to justify intervention absent other issues.

Q: Can receivers prevent late bids from disrupting approved sales?

Not entirely. Courts have ultimate authority over sale approvals. However, receivers can use strategies to minimize disruption:

Stalking horse agreements with break fees (compensating the initial bidder if outbid)
Clear deadlines for competing offers
Auction mechanisms are built into the process from the start
Professional appraisals supporting the accepted offer

These don’t prevent courts from considering late bids, but they structure processes that make late challenges less likely to succeed.

Q: What if the late higher offer has conditions that might not be satisfied?

Courts will consider the reliability and certainty of competing offers. In Willoughby, the $64 million offer had extensive conditions, which was one reason for skepticism. However, if the conditions are reasonable and the price gap is substantial, courts may grant time extensions to allow the bidder to satisfy conditions. The judge will balance:

The magnitude of the price increase
The reasonableness of conditions
The likelihood conditions will be satisfied
The cost of delay to the estate

Q: As a creditor, how do I know if I should challenge a receiver’s recommended sale?

Key warning signs that a sale might be improvident:

The accepted offer is significantly lower than you expected based on market research
The marketing period was very short (under 3 months for a major sale of assets)
No professional appraisal was obtained
You’re aware of other potential buyers who weren’t contacted
The receiver’s report doesn’t adequately justify the pricing
A competing offer exists that’s substantially higher (30%+)

If you see these red flags, consult with an experienced licensed insolvency trustee or legal counsel before the court approval hearing.

Q: If I’m the original buyer and the court reopens bidding, am I protected?

Cameron Stephens shows courts will try to balance fairness. The motion judge ordered reimbursement of Anand’s legal costs if he wasn’t the successful bidder. However, this protection isn’t guaranteed in every case. You should:

Negotiate cost protection into your initial agreement if possible
Budget for the risk of non-recoverable costs
Be prepared to increase your bid to remain competitive
Understand that court approval is required and not automatic

Q: How long does a typical court ordered receivership sale take now?

It varies widely, but Cameron Stephens and the BC cases suggest timelines are becoming less predictable:

Marketing period: 2-6 months typically (though Willoughby warns against being “markedly short”)
Negotiation to court hearing: 4-8 weeks usually
Court approval: Previously routine, now potentially extended if challenges arise
Total process: 3-12 months, depending on complexity and whether issues arise

The key change is that court approval is no longer a formality—it’s now a substantive hearing where pricing will be scrutinized and competing offers may be entertained.

Q: Does Cameron Stephens apply outside of real estate receiverships?

Yes. While Cameron Stephens, Versante, and Willoughby all involved real property, the legal principles apply to all court ordered receivership sales regardless of asset type:

Business operations and equipment
Intellectual property
Shares and securities
Inventory and accounts receivable
Any other assets sold through court-supervised receivership

The Soundair principles, which Cameron Stephens interprets, were established in an airline sale case. The duty to maximize creditor recovery applies universally across all asset types.

[Have questions about your company’s specific financial situation? Contact us for expert answers.]

Court ordered receivership sale

Court Ordered Receivership Sale: Take Action Now

Don’t wait until you’re in the middle of a receivership crisis to seek professional help. Whether you’re:

A creditor is concerned about an ongoing receivership process
A business owner facing potential receivership
A buyer interested in distressed assets
A professional needing guidance on complex insolvency matters

The time to act is now.

Contact Ira Smith Trustee & Receiver Inc. today:

905,738.4167

Toronto line: 647.799.3312
brandon@irasmithinc.com or ira@irasmithinc.com
https://irasmithinc.com/

Disclaimer: This analysis is for educational purposes only and is based on the cited legal decisions (Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc., 2025 ONCA 732, and the other identified cases) and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances.

Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Court decisions are fact-specific and depend on the particular circumstances of each case.

Please contact Ira Smith Trustee & Receiver Inc. or consult with qualified legal or financial professionals regarding your specific matter before making any decisions.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court ordered receivership sales, corporate restructuring, and insolvency proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes.

Brandon stays current with landmark developments in Canadian insolvency law, including the recent Cameron Stephens decision and BC Court of Appeal cases that are reshaping receivership practice. He brings this cutting-edge legal knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.

Court ordered receivership sale

Brandon Blog Post

CRA TAX HELP DEBT RELIEF: THE COMPLETE STORY ON WHAT YOU MUST DO TO GET BEYOND PAYMENT PLANS TO REAL SOLUTIONS

Post author By Brandon Smith
Post date November 3, 2025

CRA tax help

Sarah owns a small café in Toronto. One Tuesday afternoon, she called the Canada Revenue Agency, hoping to get CRA tax help on her business taxes. After 45 minutes on hold, she gave up. Her tax return sat unfinished. What began as a simple question turned into a $12,000 tax debt problem!

Sarah’s story is far from unique. The 2025 Auditor General’s Report to Parliament on the CRA tax help centres reports shocking problems with CRA service in 2024-25:

The average wait time to speak with someone hit 33 minutes.
Over 8.6 million calls never reached an agent at all.
Only 18% of callers got through within the CRA’s 15-minute target.
In June 2025, that number dropped below 5%.

When you can’t get CRA tax help when you need it, small problems become big ones. Missed deadlines turn into penalties. Confusion about what you owe becomes a growing debt. For many Canadians and business owners, the question changes from “How do I reach the CRA?” to “How do I deal with tax debt I can no longer manage?”

That’s where my expertise as a Licensed Insolvency Trustee comes in. I’m Brandon Smith, Senior Vice-President at Ira Smith Trustee & Receiver Inc. Our firm has been serving the Greater Toronto Area for decades. We help Canadians and businesses in the GTA, including Vaughan, where our office is located, solve serious debt problems, including CRA tax debt that has spiralled out of control.

Why Getting CRA Tax Help Has Become So Difficult

The 2025 Auditor General’s Report to Parliament states that the numbers paint a clear picture. In 2024-25, the CRA received over 32 million calls. Only about 10 million people actually spoke to an agent. The rest either gave up or were turned away by the system.

Even when you get through, the help isn’t always helpful. The Auditor General found that CRA agents answered only 17% of general tax questions correctly. For business tax questions, the accuracy rate was 54%. The CRA’s chatbot, Charlie, got only one out of three basic questions right.

Customer complaints jumped 145% over three years. People aren’t just frustrated about long waits. They’re dealing with locked online accounts, incorrect information, and problems that never get resolved.

For someone trying to manage their tax obligations properly, this creates a perfect storm. You want to do the right thing, but you can’t get the information you need. Deadlines pass. Interest charges pile up. What started as a manageable situation becomes a serious debt problem.

CRA Tax Help: When CRA Problems Become Debt Problems

There’s a big difference between needing basic CRA tax help and facing a debt crisis. Here are the warning signs that your situation has moved beyond what the CRA can help you resolve:

You’re receiving CRA collection letters or calls. Once your file moves to CRA Collections, you’re dealing with a different part of the agency. They’re focused on getting payment, not answering questions about deductions or helping you file returns.

Your bank account has been frozen. The CRA has the legal power to freeze your bank account without going to court first. If this happens, you need immediate professional help, not a spot in a phone queue.

Your wages are being garnished. The CRA can take money directly from your paycheque to collect tax debt through a document sent to your employer called a “Requirement To Pay“. For many people, this makes it impossible to pay rent, buy groceries, or cover other basic expenses.

You owe multiple years of back taxes. If you’re behind on several tax returns and the total debt is growing, standard CRA payment arrangements may not be enough to solve the problem.

You have other debts, too. Many people with CRA tax debt also carry credit card balances, lines of credit, or business debts. When everything is added together, the monthly payments become impossible to maintain.

You’re borrowing to pay the CRA. Using credit cards or loans to cover tax bills just trades one debt for another. Often at higher interest rates.

Your business owes payroll source deductions. These are the income taxes, CPP, and EI that employers withhold from employee paycheques. The CRA treats unremitted source deductions very seriously. It is a deemed trust claim against the employer’s assets. That means CRA comes ahead of everyone, including secured creditors. Company directors can be held personally responsible for these debts.

If any of these situations sound familiar, you’ve moved beyond needing basic CRA tax help. You need a solution for serious tax debt.

CRA tax help

CRA Tax Help: Why CRA Payment Plans Aren’t Always the Answer

When people finally get through to the CRA, they often try to set up a payment arrangement. The CRA may agree to let you pay your tax debt over time. This can work for some people, but it’s important to understand the limitations.

Interest keeps adding up. CRA payment plans don’t stop the interest charges on your tax debt. Currently, the prescribed interest rate means your balance continues to grow even as you make payments.

One missed payment can cancel the arrangement. If you can’t make a payment, the CRA can cancel your arrangement and resume collection actions like garnishments or account freezes.

It doesn’t address other debts. If you’re putting all your available money toward the CRA but falling behind on rent, car payments, or other bills, you’re not solving your overall financial problem.

The CRA may reject your proposal. If the amount you can afford to pay seems too low, or if you’ve defaulted on previous arrangements, the CRA may not agree to a payment plan at all.

For many Canadians dealing with significant tax debt, there’s a better solution that actually eliminates the debt rather than just stretching out the payments.

How a Licensed Insolvency Trustee Provides Real CRA Tax Help

Licensed Insolvency Trustees are the only professionals in Canada who can legally file Consumer Proposals and Bankruptcies. We’re federally regulated and licensed by the Office of the Superintendent of Bankruptcy.

Here’s what makes us different from other debt help services:

We can stop CRA collection actions immediately. The moment you file a Consumer Proposal or Bankruptcy, all collection efforts must stop by law. This includes wage garnishments, bank account freezes, and collection calls. This legal protection is called a “stay of proceedings.”

We can reduce the amount you owe. Through a Consumer Proposal, you may be able to settle your CRA tax debt for much less than the full amount. The CRA votes on the proposal like any other creditor. We’ve helped many clients reduce their tax debts by 60%, 70%, or even more.

We stop the interest. Once you file, interest charges stop immediately. Your debt finally stops growing.

We deal with all your debts together. A Consumer Proposal or Bankruptcy addresses all your unsecured debts at once—credit cards, lines of credit, tax debt, and more. You get one affordable monthly payment instead of juggling multiple creditors.

We negotiate directly with the CRA. You don’t have to spend hours on hold or worry about explaining your situation to collection agents. We handle all communication with the CRA on your behalf.

Better yet, no time is wasted with the CRA bureaucrats. As your Trustee, we are not required to first complete the CRA Represent a Client form for them to process before being able to speak to us. We start talking right away. This is very important, especially when you need a garnishee or Requirement To Pay lifted.

We protect your assets. In a Consumer Proposal, you can keep your home, car, and other important assets while getting relief from your debts.

CRA tax help

CRA Tax Help: Real Solutions for CRA Tax Debt

Let me explain the two main options we use to provide CRA tax help to people with serious tax debt:

Consumer Proposals: Settle Your Tax Debt for Less

A Consumer Proposal is a legal agreement where you offer to pay your creditors a percentage of what you owe, or extend the time you have to pay, or both. You make one affordable monthly payment over up to five years, and when you complete the proposal, the rest of the debt is legally forgiven.

Here’s an example of how this works for CRA tax debt:

John ran a small contracting business as a sole proprietor. He fell behind on his HST payments and personal income taxes. He owed $45,000 to the CRA plus another $30,000 in credit card debt from trying to keep the business afloat.

The CRA had frozen his bank account. Now he couldn’t run his small business or pay rent on his apartment.

We filed a Consumer Proposal offering to pay what his budget showed he could afford, which was $275 per month for 60 months—a total of $16,500. The bank account freeze was lifted. The CRA and other creditors voted to accept the proposal. John kept his truck (which he needed for work) and got his financial life back on track.

When he finished the proposal five years later, the remaining $58,500 in debt was legally eliminated. He saved $58,500 and avoided bankruptcy.

Bankruptcy: A Fresh Start When You Need It

For some people, even a reduced payment through a Consumer Proposal isn’t affordable. Their monthly budget does not allow for it. That’s when bankruptcy may be the right choice.

Bankruptcy eliminates most debts, including CRA tax debt. Many people worry that bankruptcy means losing everything, but that’s not true. Federal and provincial laws protect essential assets up to certain dollar limits like:

Equity in your home
One vehicle
Household furniture and appliances
Tools needed for your work
RRSPs (except contributions made in the last 12 months)

People who file for bankruptcy may very well be able to keep the things that matter to them.

Here’s another example:

Maria was a single mother working two part-time jobs, providing her with a modest income. She got behind on her taxes during a period when she was sick and couldn’t work. The CRA debt grew to $28,000 with penalties and interest. She also had $15,000 in credit card debt. CRA tax help alone would not be enough.

Her income was barely enough to cover rent and food for her kids. There was nothing left over for debt payments. The CRA sent a Requirement To Pay to her employer, which meant she couldn’t access her full net paycheque and fell even further behind.

Maria filed for bankruptcy to give herself a fresh start. The CRA had to withdraw its wage garnishment. Her total cost for the bankruptcy was $2,400. It was her first bankruptcy, so nine months later, she received her discharge and all $43,000 in debt was eliminated.

Even before she was discharged, Maria began rebuilding her credit rating and took control of her financial situation again. Her kids don’t go without anymore and there is no longer any financial stress in her household.

CRA Tax Help: Special Considerations for Business Owners

If you’re a business owner in need of CRA tax help, there are some unique issues you need to understand:

Director’s Liability. If your corporation owes unremitted payroll source deductions (the taxes withheld from employee pay), or unremitted HST, you can be held personally responsible as a director. This means the CRA can come after your personal assets for the company’s debt.

GST/HST Debt. Just like unremitted payroll source deductions, Goods and Services Tax or Harmonized Sales Tax that you collected but didn’t remit is considered “trust money” that belongs to the government. The CRA treats this very seriously and is often unwilling to compromise on these debts.

Sole Proprietorships and Partnerships. If you operate as a sole proprietor or partner, business debts and personal debts are legally the same. You can’t separate them. A Consumer Proposal or Bankruptcy addresses both together.

Continuing Your Business. Many business owners worry that filing a proposal or bankruptcy means they have to close their business. That’s not always true. We can often structure solutions that allow you to keep operating while dealing with the debt. In the case of corporate bankruptcy, the business could continue, albeit in a new corporation. It all depends on the specific set of facts.

The key is getting professional advice before the situation becomes desperate. The earlier you talk to a Licensed Insolvency Trustee, the more options you have.

CRA tax help

Why Choose Ira Smith Trustee & Receiver Inc. for Debt Help, Including CRA Tax Help

At Ira Smith Trustee & Receiver Inc., we’ve been helping Canadians in Toronto, Vaughan, Markham, Mississauga, Richmond Hill, Newmarket and Aurora, and businesses in the GTA solve serious debt problems for decades. Here’s what you can expect when you work with us:

Free, confidential consultation. We’ll review your complete financial situation at no cost and with no obligation. You’ll get honest advice about all your options, not just a sales pitch for one solution.

Experience with CRA debt. We’ve negotiated with the CRA too many times to count. We understand how they think, what they’ll accept, and how to protect your interests.

Personal service. You’ll work directly with me or the other Licensed Insolvency Trustee in our office, Ira Smith. We won’t hand you off to junior staff or a call centre. You’ll have direct access to experienced professionals who care about solving your problem.

Transparent fees. We’ll explain exactly what our services cost before you make any decisions. No hidden charges or surprises.

Complete solutions. We look at your whole financial picture, not just one piece of it. If you need help with creditors beyond the CRA, we address everything together.

Proven results. We’ve helped individuals and businesses get relief from overwhelming debt and build a better financial future, Starting Over Starting Now.

CRA Tax Help FAQs

Q: Why is it so difficult to get help from the Canada Revenue Agency (CRA)?

A: The difficulty stems from high call volumes and poor service levels.

• In 2024–25, the CRA received over 32 million calls.
• Only about 10 million people actually spoke to an agent.
• The average wait time to speak with someone hit 33 minutes.
• Over 8.6 million calls never reached an agent at all.
• Even when callers got through, the help was often inaccurate; CRA agents answered only 17% of general tax questions correctly and 54% of business tax questions correctly.

Q: What happens when I can’t get CRA tax help?

A: When you cannot get help, small problems often become big ones.

Missed deadlines can result in penalties, and confusion about what you owe can lead to growing debt. Customer complaints also jumped 145% over three years due to frustration over long waits, incorrect information, and problems that remain unresolved.

Q: What are the warning signs that my CRA tax problem has become a serious debt crisis?

A: Your situation has moved beyond needing basic CRA tax help if you are experiencing the following:
• You are receiving CRA collection letters or calls; at this stage, the agency is focused on obtaining payment, not answering tax questions.
• Your bank account has been frozen, which the CRA can legally do without first going to court.
• Your wages are being garnished through a “Requirement To Pay” sent to your employer.

• You owe multiple years of back taxes and the total debt is increasing.
• You have other debts (e.g., credit cards, lines of credit) that make monthly payments impossible to maintain when combined with tax debt.
• You are borrowing (using credit cards or loans) just to cover tax bills, trading one debt for another, often at higher interest rates.
• Your business owes payroll source deductions (income taxes, CPP, and EI withheld from employee pay), which the CRA treats very seriously as a “deemed trust claim”.

Q: Why are CRA payment plans not always the right solution for severe tax debt?

A: While the CRA may agree to payment arrangements, they have significant limitations:
• Interest keeps adding up on your tax debt, meaning the balance continues to grow even while you make payments.
• One missed payment can cancel the arrangement, allowing the CRA to resume collection actions like garnishments or account freezes.
• A payment plan only addresses the tax debt and does not address your other debts (e.g., rent, car payments), failing to solve your overall financial problem.
• The CRA may reject your proposal if the amount you can afford seems too low or if you have defaulted previously.

Q: Who is a Licensed Insolvency Trustee, and how are they different from other debt help services?

A: A Licensed Insolvency Trustee is a professional who is federally regulated and licensed by the Office of the Superintendent of Bankruptcy. They are the only professionals in Canada legally permitted to file Consumer Proposals and Bankruptcies.

Q: How can an LIT provide real solutions for CRA tax debt?

A: LITs offer several key benefits that resolve serious tax debt:
• They can stop CRA collection actions immediately upon filing a Consumer Proposal or Bankruptcy through a legal protection called a “stay of proceedings”. This stops wage garnishments and bank account freezes.
• They can reduce the amount you owe. Through a Consumer Proposal, clients have settled tax debts for 60%, 70%, or even more than the original amount.

• They stop interest charges immediately once the proposal or bankruptcy is filed, preventing the debt from growing further.
• They deal with all your unsecured debts together (including credit cards, lines of credit, and tax debt), consolidating them into one affordable monthly payment.
• They negotiate directly with the CRA on your behalf, handling all communication. As a Trustee, they are not required to complete the CRA Represent a Client form before speaking to the CRA, which is crucial when needing a garnishee lifted quickly.

Q: What is a Consumer Proposal and how does it affect CRA debt?

A: A Consumer Proposal is a legal agreement where you offer your creditors a percentage of what you owe, or extend the time to pay, or both.
• It involves one affordable monthly payment over a period of up to five years.
• When the proposal is completed, the remaining debt is legally forgiven.
• The CRA votes on the proposal like any other creditor.
• Filing a Consumer Proposal allows you to keep essential assets such as your home and car while getting debt relief.

Q: Will I lose everything if I file for bankruptcy?

A: No, that is not true. Bankruptcy eliminates most debts, including CRA tax debt. Federal and provincial laws protect essential assets up to certain dollar limits, such as equity in your home, one vehicle, household furniture, tools needed for work, and most RRSPs (except contributions made in the last 12 months).

Q: As a business owner, what special tax debts should I be concerned about?

A: Business owners face unique issues related to “trust money”:
• Director’s Liability: If a corporation owes unremitted payroll source deductions or unremitted HST, the company’s directors can be held personally responsible for these debts, allowing the CRA to pursue personal assets.
• Trust Money: Unremitted payroll source deductions and GST/HST collected but not remitted are considered “trust money” belonging to the government. The CRA treats these debts very seriously and is often unwilling to compromise on them.

Q: If I file a Proposal or Bankruptcy, does that mean I have to close my business?

A: Not necessarily. Solutions can often be structured to allow you to keep operating the business while dealing with the debt. If the business is a sole proprietorship or partnership, the business and personal debts are legally the same and are addressed together. In the case of corporate bankruptcy, the business could potentially continue in a new corporation, depending on the specific facts.

CRA tax help

CRA Tax Help: Take Action Before Your CRA Tax Debt Gets Worse

If you’re struggling with CRA tax debt, waiting won’t make it better. The penalties and interest keep adding up in your CRA account. The CRA’s collection powers are extensive, and they will use them.

But there is a way forward. Whether through a Consumer Proposal that reduces what you owe, a corporate restructuring or bankruptcy that gives you a complete fresh start, you have options that can stop the collection actions and eliminate the debt.

The first step is simply reaching out for a free consultation. We’ll spend time understanding your situation, explain what’s possible, and help you make an informed decision about the best path forward.

You don’t have to spend hours waiting on hold with the CRA. You don’t have to face collection agents alone. You don’t have to keep losing sleep worrying about tax debt.

Contact Ira Smith Trustee & Receiver Inc. today for a free, confidential consultation. Call us or visit https://irasmithinc.com/ to find out how we can help you, Starting Over Starting Now.

Real CRA tax help isn’t just about getting your questions answered. It’s about getting real solutions that eliminate the debt and give you back control of your financial life. Let us show you how.

About the Author: Brandon Smith is Senior Vice-President at Ira Smith Trustee & Receiver Inc., a licensed insolvency trustee firm serving the Greater Toronto Area. With decades of experience helping Canadians and businesses resolve serious debt problems, Brandon specializes in providing practical solutions for tax debt, consumer debt, and business insolvency matters. Ira Smith Trustee & Receiver Inc. is licensed and regulated by the Office of the Superintendent of Bankruptcy Canada.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

CRA tax help

Brandon Blog Post

CONDITIONAL DISCHARGE BANKRUPTCY COMPLETE GUIDE: IRA SMITH TRUSTEE TORONTO

Post author By Brandon Smith
Post date October 27, 2025

conditional discharge

As a Licensed Insolvency Trustee at Ira Smith Trustee & Receiver Inc., I’ve guided many people through the bankruptcy process in the Greater Toronto Area. One of the most common questions I hear is: “What happens at my discharge hearing?” Recently, a significant Ontario court decision has shed new light on this crucial aspect of bankruptcy proceedings, particularly regarding conditional discharge orders.

This case is especially relevant when considering my recent blog posts. In my previous blog posts about the Toronto condo market and current issues in the Ontario mortgage default space, I’ve discussed how many people have found themselves in similar predicaments to the woman described in this recent decision.

Filing for bankruptcy may be a viable option for many people who are on the wrong end of a shortfall claim due to a failed real estate investment. Every person thinking about bankruptcy as a way to eliminate hundreds of thousands of dollars of debt must also consider the possibility that they may not get an absolute discharge from bankruptcy. This is what this case that I describe below highlights.

Today, I want to walk you through the detailed case of Re Xianglan Li, 2025 ONSC 5812. It illustrates what can happen when things go wrong in bankruptcy – and what you can learn from it to protect yourself.

Why Not All Discharges Are Absolute: Introducing Conditional Discharge

Before diving into the case details, let’s establish some fundamentals. When you file for bankruptcy in Canada under the Bankruptcy and Insolvency Act (Canada), the ultimate goal is to receive a discharge from bankruptcy – your legal release from most debts. However, not everyone receives an automatic discharge.

There are four types of discharge orders under the Canadian Bankruptcy and Insolvency Act:

Absolute Discharge – You’re immediately released from your debts that can be discharged with no conditions
Conditional Discharge – You must fulfill certain conditions (usually payment obligations) before being released from your debts
Suspended Discharge – Your discharge is delayed for a specific period. A suspended discharge can be combined with conditions that also must be fulfilled, if appropriate. Otherwise, the person receives an absolute discharge after the suspension period expires.
Refused Discharge – The court denies your discharge entirely (rare and only used in extreme cases)

A conditional discharge typically requires the bankrupt person to pay a certain amount of money to the trustee before being released from bankruptcy. This payment goes toward creditors’ claims and demonstrates a good-faith effort to repay at least some portion of the outstanding debts.

The Real Estate Speculation Case: A Cautionary Tale

The recent Ontario Superior Court decision in Re Xianglan Li provides valuable insights into how courts determine what kind of discharge order to grant, and whether it should be a conditional discharge, what conditions to impose, or should it be a different form of discharge.

The Background Story

Ms. Li’s bankruptcy story began with a failed real estate transaction in Richmond Hill, Ontario. In July 2017, she signed an Agreement of Purchase and Sale (APS) to buy a property for $1,435,607.67 – a significant investment by any measure, but not unusual for a home in the GTA. She paid deposits totalling $179,810.67, including upgrades.

Here’s where things get interesting: Ms. Li signed this agreement while her husband had just purchased another property four months earlier for $955,472.87. The new property she was planning to purchase cost approximately $480,000 more than the one her husband had just bought.

The real problem? The combined total of Ms. Li’s reported taxable income and that of her husband in 2017 was less than $20,000 – yet they were trying to purchase properties for a combined cost of over two million dollars. So either they had a lot of unreported income or they could never afford what they were trying to accomplish in real estate, or both.

When the closing date arrived in November 2018, Ms. Li couldn’t complete the purchase. The developer, Arista Homes, terminated the agreement, kept all deposits, and sued for damages totalling $281,421.39.

In April 2020, before a judgment was issued, Ms. Li filed for bankruptcy. It turns out that Arista was her only creditor in the bankruptcy. That is the Reader’s Digest version of a long, sordid tale.

Why This Matters for Toronto Area Residents

If you’ve been following real estate trends in the Greater Toronto Area, this story might sound familiar. It is a similar story to my prior blogs on the Toronto condo market and current issues in the Ontario mortgage default space.

The combination of rising interest rates, cooling real estate prices, and overextended purchasers has created a perfect storm. Many individuals who signed pre-construction purchase agreements during the hot market now cannot close on their properties.

conditional discharge

What Happened at the Discharge Hearing Before the Registrar in Bankruptcy?

Ms. Li’s discharge hearing revealed several significant problems that led to a conditional discharge order rather than an absolute discharge.

Section 173(1) Facts: The Court’s Concerns

Under the Bankruptcy and Insolvency Act (Canada) (BIA), Section 173(1) lists specific “facts” that, if proven, prevent the court from granting an absolute discharge. This section of Canada’s bankruptcy legislation lists facts for which discharge may be refused, suspended or granted conditionally. In Ms. Li’s case, the court found three such facts proven:

1. Section 173(1)(a) – Assets Not Equal to 50 Cents on the Dollar

This provision requires the bankrupt person to prove that their financial collapse arose from circumstances they cannot “justly be held responsible” for. Ms. Li couldn’t meet this burden.

The court found that Ms. Li had engaged in conduct similar to what the judge called “rash and hazardous speculation.” She had signed a $1.4 million purchase agreement without:

Consulting her husband
Considering how to finance the purchase
Having a reasonable income to support a mortgage qualification
Securing any form of financing commitment

As the court noted, she was “impulsive, naive and irresponsible in committing for a home purchase without any financial planning.”

2. Section 173(1)(e) – Rash and Hazardous Speculation

The court determined that Ms. Li’s conduct constituted “rash and hazardous speculation” under the BIA. The judge emphasized that this assessment must be made relative to the person’s financial circumstances.

For someone with Ms. Li’s paltry reported income to commit to purchasing a $1.4 million property was objectively rash and hazardous. Even if the real estate market had cooperated, there was no realistic path to securing mortgage financing with her income level.

3. Section 173(1)(o) – Failure to Perform Duties

Perhaps most damaging to Ms. Li’s case was the court’s finding that she failed to fulfill her duties as a bankrupt person. Under Section 158 of the BIA, bankrupts have various duties, including:

Deliver all books, records, and documents to the trustee
Make full disclosure of all property dispositions
Submit to examinations under oath
Aid the trustee to the utmost of their power

Ms. Li failed to complete the undertakings from her examination, leaving crucial questions unanswered about:

Bank account statements from relevant periods
Details of family loans and their sources
Contributions to previous mortgage payments
Disposition of proceeds from other property sales
Repaying a loan to a family in China

The court emphasized that bankrupts must “actively aid” the trustee, not “remain passive and hope that the financial storm would blow over.”

Conditional Discharge: The Doctrine of Avoiding Judgment Through Bankruptcy

One particularly important principle emerged from this case: courts don’t look favourably on people who use bankruptcy primarily to avoid paying a judgment claim.

The Supreme Court of Canada established in Kozack v. Richter, 1973 CanLII 166 (SCC), that when someone files for bankruptcy mainly to escape a judgment arising from their wrongful conduct, courts should impose meaningful payment conditions if the person can pay.

In Ms. Li’s situation, even though Arista hadn’t obtained a formal judgment before she filed for bankruptcy, it was clear that the lawsuit was the primary reason for her assignment into bankruptcy. The court considered this factor heavily in determining the appropriate conditions.

conditional discharge

The Final Conditional Discharge Order: How the Court Decided

After reviewing all the evidence in this case, Associate Justice Ilchenko ordered a conditional discharge requiring Ms. Li to pay 10% of the proven claim, being $28,142.14, within 24 months.

This amounted to roughly 10 cents on the dollar of the total claim of $281,421.39. While this was significantly less than the 20-30% sought by Arista, it was also much more than the $5,000 recommended by the trustee.

The court balanced several competing considerations:

Factors Supporting a Lower Amount:

Ms. Li had already paid $179,810 in deposits that Arista kept
She earned a modest income as a bus driver ($64,974 in 2024)
She had some chronic medical conditions
She had tried to extend the closing date and complete the purchase

Factors Supporting a Higher Amount:

The proven Section 173((1) facts show poor judgment
The need to maintain the integrity of the bankruptcy system
Her failure to cooperate fully with the trustee
The public interest in commercial morality
Her age (51) and continued earning capacity

Conditional Discharge: Key Lessons for Anyone Considering Bankruptcy

This case offers several crucial lessons for anyone in the Greater Toronto Area or elsewhere in Ontario dealing with overwhelming debt:

1. Be Realistic About Real Estate Commitments

If you’re considering purchasing property – especially pre-construction condos or high-value homes – ensure you have:

Verified mortgage pre-approval from a qualified lender
Realistic assessment of your income and expenses
Contingency plans if market conditions change
Professional advice from mortgage brokers and real estate lawyers

Don’t rely on optimistic assumptions about future property value increases or income growth.

2. Cooperate Fully With Your Trustee

If you do file for bankruptcy, complete cooperation with your Licensed Insolvency Trustee is essential. This means:

Providing all requested documents promptly and completely
Answering all questions truthfully and thoroughly
Attending all required meetings and examinations
Disclosing all assets, income sources, and property dispositions
Responding to undertakings and follow-up requests
Attending the two mandatory bankruptcy and credit counselling sessions with the Licensed Insolvency Trustee under the Insolvency Counselling Program established by the Office of the Superintendent of Bankruptcy Canada

Failure to cooperate can transform what might have been an absolute discharge into a conditional discharge – or even a refused discharge.

3. Understand Your Duties as a Bankrupt

The BIA imposes significant duties on anyone who files for bankruptcy. You’re not just passively waiting for discharge – you have active obligations to:

Aid the trustee in realizing your assets
Submit to examinations under oath
File all required tax returns
Report material changes in your financial situation
Attend financial counselling sessions

These aren’t optional suggestions – they’re legal requirements that the court takes very seriously.

4. Consider Consumer Proposals as an Alternative

Many people in situations similar to Ms. Li’s might be better served by filing a consumer proposal rather than bankruptcy. A consumer proposal allows you to:

Negotiate a settlement with creditors for less than 100% of your debts
Keep control of your assets
Avoid some of the restrictions that apply to bankrupts
Make predictable monthly payments over up to five years

At Ira Smith Trustee & Receiver Inc., we often find that consumer proposals, or for those with debts greater than $250,000, not including any mortgages or lines of credit secured against your personal residence, a Division I Proposal under the BIA, provide better outcomes for clients, particularly those arising from failed real estate transactions.

5. Document Everything

If you’re involved in property transactions that later fail, maintain meticulous records of:

All agreements and amendments
Payment receipts and bank statements
Communications with developers or sellers
Financial advice you received
The efforts you made to complete transactions

This documentation becomes crucial if you later need to demonstrate that your financial difficulties arose from circumstances beyond your control.

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The Current Real Estate Reality in the GTA

As I discussed in my blog about mortgage default, we’re seeing increasing numbers of people facing similar challenges to Ms. Li’s situation.

The combination of:

Higher interest rates
Stricter mortgage qualification rules
Declining property values
Economic uncertainty
Job market volatility

…has created a situation where many pre-construction purchasers simply cannot close on their agreements.

If you signed a pre-construction purchase agreement during the hot market of 2020-2022, you may now be facing:

Inability to qualify for necessary mortgage financing
Property values below your purchase price
Difficulty selling your current home to fund the new purchase
Developer demands for additional deposits or price increases

These situations require professional guidance from a Licensed Insolvency Trustee who understands both insolvency law and real estate market realities.

Life After Conditional Discharge: Rebuilding Your Financial Future

If you receive a conditional discharge in bankruptcy, here’s what you need to know:

You Remain Bankrupt Until Conditions Are Met

A conditional discharge doesn’t release you from bankruptcy immediately. You remain an undischarged bankrupt with all associated restrictions and obligations until you fulfill the court-ordered conditions.

This means:

You cannot obtain credit over $1,000 without disclosing your bankruptcy
You cannot act as a director of a corporation
You may face professional restrictions depending on your occupation
You must continue reporting income and expenses to your trustee

Payment Terms Are Usually Flexible

Courts typically give reasonable time periods to fulfill payment conditions – often 12 to 24 months. Section 172(3) of the BIA does allow for modifying a conditional discharge order.

If you face genuine hardship preventing payment, you can apply to the court to vary the terms. However, you must demonstrate that you’ve made reasonable efforts and that circumstances beyond your control prevent compliance. Also, you cannot even apply for such relief until at least 1 year after the date the conditional discharge order was made.

Your Credit Report Is Affected

A conditional discharge appears on your credit report differently from an absolute discharge. The bankruptcy notation expiry time period cannot even begin until you satisfy the conditions and receive your discharge certificate.

This can affect:

Your ability to obtain credit
Employment opportunities in the financial sector
Professional licensing in certain fields
Your credit score and borrowing costs

You Can Rebuild Afterward

Once you fulfill the conditions and receive your discharge, you can begin rebuilding your financial life. While the bankruptcy remains on your credit report for six to seven years from discharge, many people successfully rebuild credit within two to three years through:

Secured credit cards
Small installment loans
Consistent bill payment history
Steady employment and income
Financial counselling and budgeting
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When to Seek Professional Help

If you’re facing financial difficulties related to real estate commitments or mounting debts for any other reason, and are considering a potential bankruptcy, don’t wait until the situation becomes critical.

Warning Signs You Need Help Now

Contact a Licensed Insolvency Trustee immediately if you’re experiencing:

Inability to make mortgage or rent payments
Collection calls from creditors or legal proceedings
Using credit cards or loans to pay basic living expenses
Considering withdrawing RRSP funds to pay debts
Losing sleep or experiencing stress-related health problems due to debt
Contemplating a consumer proposal or bankruptcy

What We Can Do for You

At Ira Smith Trustee & Receiver Inc., we provide comprehensive debt relief services for individuals and businesses throughout the Greater Toronto Area, including:

Free Initial Consultations – We’ll review your complete financial situation and explain all available options
Consumer Proposals – We’ll negotiate with creditors to reduce your debt and create affordable payment plans
Personal Bankruptcy Filings – We’ll guide you through the entire bankruptcy process professionally and compassionately
Credit Counselling – We’ll help you understand what went wrong and develop strategies to avoid future problems
Business Restructuring – For entrepreneurs, we offer financial restructuring through commercial proposal services to save your business and the jobs you create

Our team understands the unique challenges facing Greater Toronto Area residents dealing with high housing costs, challenging economic conditions, and complex debt situations.

The Importance of Choosing the Right Trustee

Choosing an experienced, knowledgeable Licensed Insolvency Trustee matters so much. The relationship between the trustee’s recommendations and the court’s final order can significantly impact your outcome.

When selecting a trustee, look for:

Experience with similar cases – Has the trustee handled situations like yours?
Clear communication – Do they explain complex legal concepts in understandable terms?
Comprehensive service – Do they offer alternatives to bankruptcy like consumer proposals?
Local knowledge – Do they understand the specific challenges in your community?
Professional reputation – What do other clients and legal professionals say about them, such as in Google reviews

conditional discharge

Moving Forward, Your Next Steps

If you’re dealing with overwhelming debt, potential mortgage default, or considering bankruptcy, here’s what to do next:

Step 1: Gather Your Financial Information

Collect documentation, including:

Recent pay stubs and tax returns
List of all debts with balances and payment terms
Monthly expense breakdown
Asset list with current values
Mortgage statements and property tax bills
Any legal documents, like demand letters or court papers
All of this information can be captured by completing our Debt Relief Worksheet

Step 2: Schedule a Free Consultation

Contact Ira Smith Trustee & Receiver Inc. for a confidential, no-obligation consultation. We offer both video and in-person meetings. We’ll review your situation and explain your options clearly, including:

Whether bankruptcy is necessary or if alternatives exist
What type of discharge might you expect
How to avoid a conditional discharge if possible
Timeline and costs for each option
Impact on your family, employment, and future

Step 3: Make an Informed Decision

After understanding all options, you can make the choice that’s right for your situation. We’ll never pressure you – our role is to provide expert advice and support whatever decision you make.

Step 4: Take Action

Once you’ve decided on a path forward, we’ll handle all the legal requirements, court filings, and creditor communications. You’ll have experienced professionals managing every aspect of your case.

Conditional Discharge Conclusion: Learning from Others’ Experiences and Embracing the Path to a Bright Financial Future

The case of Ms. Li’s conditional discharge offers important lessons for anyone struggling with debt in the Greater Toronto Area. While her situation involved failed real estate transactions, the principles apply broadly:

Be realistic about your financial capacity before making major commitments
Cooperate fully with professionals trying to help you
Understand your legal duties and responsibilities
Seek expert advice early, before problems become crises
Choose experienced professionals to guide you through difficult processes

A conditional discharge isn’t the end of the world – it’s a manageable step toward financial recovery. However, the best approach is avoiding situations that might lead to bankruptcy in the first place, or choosing alternatives like consumer proposals when appropriate.

At Ira Smith Trustee & Receiver Inc., we’ve helped many individuals and families in the Greater Toronto Area successfully navigate financial difficulties and emerge with a fresh start. Whether you’re facing mortgage default, overwhelming consumer debts, failed business ventures, or other financial challenges, we’re here to help. You can also visit our Google Business Profile to learn more about our services and read client testimonials.

Don’t let financial stress control your life. Contact Ira Smith Trustee & Receiver Inc. today for a free, confidential consultation. Call us at (647) 799-3312 to discuss your options with an experienced Licensed Insolvency Trustee who truly cares about your future, Starting Over Starting Now.

Remember: seeking help isn’t a sign of failure – it’s a smart step toward financial recovery and peace of mind. Let us help you find the right path forward.

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., serving individuals and businesses throughout the Greater Toronto Area. With years of experience in insolvency cases, including financial restructuring, Brandon helps clients navigate complex financial challenges and find sustainable solutions, Starting Over Starting Now.

conditional discharge

Brandon Blog Post

ONTARIO’S RISING MORTGAGE DEFAULT PROBLEM: THE ALARMING TRUTH YOU NEED TO KNOW

Post author By Brandon Smith
Post date October 20, 2025

A few months ago, I drove past something troubling. A house appeared to sit empty for weeks, then a realtor’s for-sale sign with the extra wording “Power of Sale” appeared on the lawn. As a Licensed Insolvency Trustee serving the Greater Toronto Area, I believed this wasn’t just a one-off situation. What I discovered when I looked into Ontario’s mortgage default numbers was far more concerning than I expected.

A few weeks ago, I wrote about the debt problems of normal GTA residents who invested in pre-construction Toronto condos, who cannot afford to complete the purchase when the condo was available to close on. This is a different problem – those who closed on the purchase of their GTA home but now cannot afford to pay the mortgage, creating a mortgage default in the GTA.

Understanding Mortgage Default in Ontario

A mortgage default happens when a homeowner can’t make their mortgage payments for roughly 3 months or more. Global News has reported that in Ontario, we’re seeing mortgage default rates climb faster than at any time in recent years. The numbers tell a story that many homeowners and professionals need to understand.

That is the most common type of default. But in Ontario, mortgage default doesn’t just mean missing payments. You can also default if you stop paying your property taxes, let your home insurance lapse, or fail to maintain your property in reasonable condition. When any of these things happen, your lender has the legal right to start a Power of Sale process to sell your home and recover their money.

Here’s what’s important: if you’re struggling to make payments, call your lender right away. Many lenders will work with you by extending your mortgage term, temporarily reducing payments, or waiving late fees. The key is reaching out before you miss multiple payments—the earlier you ask for help, the more options you’ll have.

According to its August 18, 2025, Newsroom publication, Equifax Canada reported that Ontario’s 90-day mortgage default rate in Q2 2025 was 0.27% representing a year-over-year increase of 11 basis points. Even more striking: reporting indicates that defaults are now 50% higher than before the pandemic. Over 11,000 Ontario homeowners missed mortgage payments in late 2024 alone.

Why the Real Numbers Are Higher Than You Think

Here’s what concerns me as someone who works directly with struggling homeowners: the official numbers don’t show the complete picture. When you see mortgage default statistics in the news, they’re missing a huge piece of the puzzle—private mortgage lending. The Financial Services Regulatory Authority of Ontario (FSRA) reports that private mortgage lending defaults are not included in the reported numbers. The reported numbers only include data from commercial banks and other financial institution mortgage lenders offering conventional mortgage financing.

Private mortgage lenders serve borrowers who can’t qualify with major banks. These include:

Real estate investors
People with credit challenges
People requiring bridge financing
Those who need quick financing

Private lenders don’t always report their defaults to Equifax or TransUnion Canada. This means the real mortgage default rate in Ontario could be significantly higher than what’s publicly reported.

I’ve seen this firsthand in my practice. Clients come to me after defaulting on private mortgages, normally second mortgages, often owing much more than their homes are worth. By the time they reach out, they’re facing Power of Sale proceedings and a judgment against them for the full loan amount, as the house has not been sold yet. When it does, it is certain to cause a shortfall to the lender. These people in financial distress have few options left.

What’s Driving Mortgage Defaults in Ontario?

Many people blame rising interest rates, and they’re partly right. The Bank of Canada has reported on the impact of higher mortgage rates. The Bank of Canada raised rates sharply after 2022, causing mortgage payments to jump for anyone who elected for a variable rate when pandemic interest rates made the money about as close to free as you can get. IG Wealth Management reports that mortgage variable interest rates saw a significant increase to a peak of around 5.95% in late 2024, from their lowest point of around 0.25% in March 2020. But that’s not the whole story.

The Real Causes Run Deeper

Unaffordable Housing: For years, home prices in Ontario climbed faster than incomes. Many families stretched their budgets for the home purchase, leaving no cushion for unexpected problems.

High Household Debt: TransUnion Canada reported that Canadians carry record levels of debt beyond their mortgages—credit cards, car loans, and lines of credit. When mortgage payments rise, these other debts become impossible to manage.

Risky Lending Practices: Before rates went up, some lenders approved mortgages for people who could barely afford them. They assumed home prices would keep rising forever.

Change in employment conditions: When someone loses their job or has their hours cut, their income either drops or is completely lost. A mortgage default can then happen quickly—especially if they were already living paycheque to paycheque.

Warning Signs of Mortgage Default

As a Licensed Insolvency Trustee, I’ve worked with real estate investors who own several residential homes (including condos), including their matrimonial home, facing mortgage default. Here are the early warning signs I see most often:

Juggling payments: Using credit cards to make normal food purchases, as all their cash is going to keep the properties propped up, or use a line of credit to make mortgage payments
Missing other bills: Skipping utility or credit card payments to cover the mortgage
Borrowing from family: Repeatedly asking relatives for money to stay afloat
Avoiding mail: Not opening letters from your lender because you’re scared of what they say
Losing sleep: Constant worry about money affecting your health and relationships

If you recognize these signs in your own life, you’re not alone—and there are options available to help.

What Happens During Mortgage Default

Understanding the mortgage default process can help you act before it’s too late.

The Timeline

Months 1-2: You miss one or two payments. Your lender will call and send letters asking you to catch up.

Month 3: After 90 days, you’re officially in mortgage default. Your lender may issue a demand letter requiring full payment within a specific timeframe.

Months 4-6: If you can’t pay, your lender will start Power of Sale proceedings (in Ontario). This legal process allows them to sell your home to recover their money. They will probably also sue you and get a judgment for the full mortgage debt. The amount of their claim will be reduced after they receive the net sale proceeds from the sale of your property. This final amount is called their shortfall claim. It will not only include their outstanding principal amount, but also their interest costs and legal fees.

In private mortgages, once the mortgage loan goes into default, under the mortgage agreement, the private lender can charge extra fees. There would also be additional fees incurred because of the default status. All these costs are added to the principal balance outstanding, which increases the shortfall.

Months 4-6+: Your home gets listed for sale. If it doesn’t sell, your lender may eventually take ownership.

The exact timeline varies based on your lender, your situation, and how quickly you respond to their communications.

Power of Sale vs. Foreclosure: Ontario’s System

Under Ontario real estate law, lenders use the Power of Sale process rather than foreclosure. This matters because it affects your options and timeline. Quebec, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia, and the three territories use a foreclosure process.

Power of Sale means your lender can sell your home without going through court (though they must follow strict legal procedures). You still own the home during this process, and you have rights—including the right to pay off the debt and stop the sale.

This is different from foreclosure, where the lender takes ownership of your property through the courts. Ontario’s system is generally faster, which means you have less time to find a solution.

What You Can Do If You’re Facing Mortgage Default

The worst thing you can do is ignore the problem. I’ve seen too many people wait until the Power of Sale notice arrives before seeking help. By then, their options are limited, and the stress is overwhelming.

Immediate Steps to Take

1. Contact Your Lender Right Away: Banks don’t want your house—they want their money. Many lenders will work with you on payment plans or temporary relief if you reach out early.

2. Review Your Budget Honestly: Look at every expense and see what you can cut. Even small changes can free up money for mortgage payments.

3. Consider All Your Options: Depending on your situation, you might be able to:

Refinance to a lower rate or longer term
Sell your at least list your home for sale, before the Power of Sale begins
Rent out part of your home for extra income
Work out a payment plan with your lender

4. Get Professional Help: Talk to a Licensed Insolvency Trustee. We can explain options like consumer proposals or bankruptcy, which might help you keep your home or exit your debt in an organized way.

When Keeping Your Home Isn’t Possible

Sometimes, despite your best efforts, keeping your home just isn’t realistic. If your mortgage is much larger than what your home is worth, or if your income has dropped permanently, selling might be your best option.

A Licensed Insolvency Trustee can help you understand:

Whether you can sell before the Power of Sale begins
How to handle any remaining debt after the sale
What bankruptcy or a consumer proposal might mean for you
How to protect any equity you have in your home

The Emotional Side of Mortgage Default

I want to address something that doesn’t show up in the statistics: the emotional toll of facing mortgage default.

Clients often tell me they feel ashamed, like they’ve failed their families. They lose sleep, avoid social situations, and feel overwhelmed by constant worry. Some have health problems from the stress.

Here’s what I tell everyone who walks through my door: Facing financial trouble doesn’t make you a failure. Economic forces beyond your control—rising rates, job losses, unexpected expenses—can push anyone to the breaking point. What matters is taking action to protect yourself and your family.

How Ontario’s Mortgage Default Crisis Affects Everyone

Even if you’re not personally facing mortgage default, this crisis matters. Here’s why:

Neighbourhood Property Values: When multiple homes in an area go into Power of Sale, it can drag down property values for everyone.

Community Stability: Families forced out of their homes disrupt schools, local businesses, and neighbourhood connections.

Economic Pressure: As more people struggle with mortgage payments, they cut spending elsewhere, affecting local economies.

Future Housing Affordability: If defaults lead to a crash in home prices, it could trigger broader economic problems that affect jobs and opportunities.

What Makes Ontario’s Situation Different

Working in the Greater Toronto Area, I see unique pressures that make Ontario’s mortgage default problem especially serious:

Extreme Housing Costs: Toronto and surrounding areas have some of the highest home prices in Canada. Even a small income disruption can trigger default.

Private Lending Concentration: The CBC reported that Ontario, particularly the GTA, has a large private lending market serving investors and those who can’t get traditional mortgages. These loans carry higher risk and aren’t fully tracked in official statistics.

Investor Activity: Many GTA properties are owned by investors who use leverage to buy multiple properties. When rental income drops or rates rise, these investors are often the first to default.

New Construction Pressures: Buyers of pre-construction condos who relied on getting financing to complete purchases are particularly vulnerable as projects take years to be completed for the purchaser to take possession. Although they bought the condo unit years ago, they cannot apply for financing until around 90 days before they have to complete the purchase. If either their income or the real estate market, or both, take a negative turn and they cannot qualify for the amount of financing they require, big problems arise.

Mortgage Default: Questions to Ask Before Getting Help

If you’re considering reaching out to a Licensed Insolvency Trustee or financial advisor, here are good questions to ask:

What are all my options for dealing with a mortgage default?
Can I keep my home if I file a consumer proposal?
How long will each option take?
What will happen to my credit rating?
Are there any options I can pursue on my own first?
What documents should I bring to our first meeting?

At Ira Smith Trustee & Receiver Inc., we answer these questions clearly and honestly. There’s no cost for an initial consultation, and our job is to help you understand your choices—not to pressure you into any particular decision.

Mortgage Default: Taking Action Before It’s Too Late

Here’s the bottom line: if you’re struggling with your mortgage payments, the time to act is now—not when you receive a Power of Sale notice.

The earlier you seek help, the more options you’ll have. Whether that means working with your lender, selling your home on your terms, or exploring debt relief options, taking action puts you back in control.

Your Next Steps

If you’re facing a mortgage default in the Greater Toronto Area:

Don’t panic, but don’t wait: The situation won’t fix itself, but solutions exist.
Gather your information: Get copies of your mortgage documents, recent statements, and a list of all your debts and income.
Reach out for professional guidance: A Licensed Insolvency Trustee can review your situation confidentially and explain your options at no cost.
Keep communicating: Stay in touch with your lender, even if you don’t have good news. Silence makes everything worse.

Frequently Asked Questions About Mortgage Default in Ontario

Understanding Mortgage Default

Q: What exactly is mortgage default?

A: Mortgage default happens when you can’t make your mortgage payments for about three months (90 days) or more. Once you hit that 90-day mark, your lender considers your mortgage officially in default and can start taking legal action.

Q: How quickly are mortgage default rates rising in Ontario right now?

A: The numbers are climbing faster than we’ve seen in years. In Q2 2025, Ontario’s 90-day mortgage default rate hit 0.27%—that’s an 11 basis point jump from the year before. Even more concerning, defaults are now much higher than they were before the pandemic.

Q: Do the official statistics tell the whole story?

A: Unfortunately, no. The official numbers miss a huge part of the problem—private mortgage lending. The statistics you see reported only include commercial banks and traditional financial institutions. Private lenders don’t necessarily report their defaults to Equifax Canada or TransUnion Canada, which means the real mortgage default rate in Ontario is likely much higher than what gets published.

Q: Who typically uses private mortgage lenders?

A: Private lenders serve people who can’t get approved by the big banks. This includes:

Real estate investors buying multiple properties
People who need money quickly (bridge financing)
Those with credit problems or past bankruptcies
Self-employed individuals who can’t prove traditional income
Buyers of pre-construction properties

What Causes Mortgage Default?

Q: Why are so many people defaulting on their mortgages?

A: Everyone talks about rising interest rates, and yes, the Bank of Canada’s sharp rate hikes after 2022 made payments jump for people with variable-rate mortgages. But that’s only part of the story. The real causes include:

Unaffordable housing: Home prices in Ontario shot up way faster than wages, forcing families to stretch every dollar just to buy
Too much debt: Most Canadians are juggling mortgages plus credit cards, car loans, and lines of credit—when the mortgage payment goes up, something has to give
Risky lending: Before rates went up, some lenders approved mortgages for people who could barely afford them, betting that prices would keep climbing forever
Job loss: When someone loses their job or gets their hours cut, they can fall behind fast—especially if they were already living paycheque to paycheque

Q: What makes Ontario’s situation worse than other provinces?

A: Ontario, especially the Greater Toronto Area, faces unique pressures:

Sky-high housing costs: Toronto has some of Canada’s most expensive homes, so even a small income drop can push people into default
Heavy private lending: The GTA has a huge private lending market that serves risky borrowers, and these loans aren’t tracked properly
Investor problems: Many Toronto properties are owned by investors who borrowed heavily to buy multiple homes—they’re often the first to default when rents drop or rates rise
Pre-construction issues: Buyers of new condos can get stuck if their finances change before closing, leaving them unable to get the final mortgage they need

Q: What are the warning signs that I might be heading toward default?

A: From my years helping people in financial trouble, here are the red flags I see most often:

You’re using your line of credit or credit cards to make mortgage payments
You’re skipping other bills (utilities, credit cards) to keep up with your mortgage
You’re constantly borrowing money from family or friends
You’re afraid to open mail from your lender
You’re losing sleep and feeling stressed about money all the time

If you recognize yourself in any of these, please reach out for help now—don’t wait.

The Default Process

Q: What actually happens when my mortgage goes into default?

A: Here’s the typical timeline:

Months 1-2: You miss one or two payments. Your lender starts calling and sending letters asking you to catch up.

Month 3 (90 days): You’re now officially in default. Your lender may send a demand letter requiring you to pay the full amount owed within a specific timeframe.

Months 4-6: If you can’t pay, your lender starts Power of Sale proceedings. They can also sue you for the full mortgage debt.

Months 4-6+: Your home gets listed for sale by the lender.

Q: What’s the difference between Power of Sale and foreclosure?

A: Ontario uses the Power of Sale, which is different from the foreclosure process used in provinces like BC, Alberta, and Quebec.

Power of Sale (Ontario’s system):

Your lender can sell your home without going to court (though they must follow strict legal rules)
You still own the home during this process
You have the right to pay off the debt and stop the sale at any point before it’s sold
It’s generally faster than foreclosure, giving you less time to find a solution

Foreclosure (other provinces):

The lender actually takes ownership of your property through the courts
It’s usually a slower process

Q: Are there extra costs if I default on a private mortgage?

A: Yes, and this is important. Private lenders can charge significant extra fees once you go into default—it’s usually written into your mortgage agreement. These fees get added to what you owe, making the shortfall even bigger. This is one reason why private mortgage defaults can spiral out of control so quickly.

Getting Help

Q: What’s the worst mistake I can make if I’m struggling with my mortgage?

A: Ignoring the problem. Too many people stick their heads in the sand and wait until they get a Power of Sale notice before asking for help. By then, your options are much more limited, and your stress level is through the roof. The earlier you act, the more we can do to help.

Q: What should I do right now if I’m having trouble making payments?

A: Take these steps immediately:

Call your lender: I know it’s scary, but banks would rather work out a payment plan than take your house. The sooner you contact them, the more willing they are to help.
Look at your budget honestly: Go through every expense and see what you can cut. Even small savings add up.
Know your options: You might be able to refinance, sell before the Power of Sale starts, rent out a room, or work out a payment arrangement.
Talk to a Licensed Insolvency Trustee: We can explain all your options in a free, confidential meeting.

Q: How can a Licensed Insolvency Trustee help me?

A: As a Licensed Insolvency Trustee, I can help you:

Understand every option available for dealing with your default
Explain how a consumer proposal might let you keep your home while reducing your debt
Figure out if you can sell your home before the Power of Sale begins
Show you how to handle any money you still owe after your home is sold
Protect any equity you have in your property
Determine if bankruptcy might actually give you a fresh start

The initial consultation is always free and completely confidential. I’m here to explain your choices, not pressure you into anything.

Q: What should I bring to my first meeting with you?

A: Gather these documents before we meet:

Your mortgage documents and statements
Recent pay stubs or proof of income
A list of all your debts (credit cards, loans, lines of credit)
Your most recent property tax bill
Any letters from your lender

Don’t worry if you don’t have everything—we can still talk through your situation and figure out next steps.

Q: How much does it cost to talk to a Licensed Insolvency Trustee?

A: The initial consultation is free. There’s no charge to sit down with me, explain your situation, and learn about your options. If you decide to move forward with a consumer proposal or bankruptcy, we’ll explain all the costs upfront—there are never any hidden fees.

Q: Will contacting a Licensed Insolvency Trustee hurt my credit even more?

A: Simply meeting with me and discussing your options has no impact on your credit score. Only if you decide to file a consumer proposal or bankruptcy will it affect your credit—but if you’re already facing mortgage default, your credit is likely already damaged. The question is: what’s the best path forward to rebuild your financial life?

Final Thoughts on Ontario’s Mortgage Default Crisis

Ontario’s rising mortgage default rates represent more than just numbers on a page. Behind every statistic is a family facing tough decisions, sleepless nights, and an uncertain future.

What worries me most isn’t just the official numbers—it’s what those numbers don’t show. The private lending defaults, the stressed investors, the families barely hanging on—these aren’t all captured in the reports, but they’re very real.

If you’re one of those families, please know that help is available. As a Licensed Insolvency Trustee with years of experience serving the Greater Toronto Area, we’ve helped many people navigate mortgage default and find a path forward.

The situation might feel hopeless right now, but you have more options than you think. The first step is simply reaching out.

From our Vaughan office, we provide:

Free, confidential consultations
Expert guidance on bankruptcy alternatives
Consumer proposals that can reduce your debt
Corporate restructuring solutions
Court-supervised receiverships

Contact us today to discuss your situation. Let us help you understand your options and find the best solution for your financial future.

Brandon Smith, Licensed Insolvency Trustee
Senior Vice-President
Ira Smith Trustee & Receiver Inc.
167 Applewood Crescent, Suite 6
Vaughan, Ontario
Greater Toronto Area

905.738.4167

Toronto line: 647.799.3312

About the Author: Brandon Smith is a Licensed Insolvency Trustee with Ira Smith Trustee & Receiver Inc., serving the Greater Toronto Area. With years of experience helping individuals and families navigate debt challenges, Brandon provides clear, compassionate guidance for those facing mortgage default and other financial difficulties. If you’re struggling with mortgage payments, contact our office for a free, confidential consultation.

Brandon Blog Post

WHY DID ROYAL BANK CLOSE MY ACCOUNT SUDDENLY? OUR COMPLETE GUIDE FOR CANADIAN CONSUMERS & ENTREPRENEURS ON BECOMING UNBANKED

Post author By Brandon Smith
Post date October 13, 2025

royal bank close my account

The Shocking Reality: When Royal Bank Suddenly Closes Your Door

Picture this: You’ve banked with RBC Royal Bank of Canada (RBC) for decades. Your paycheque goes there. Your mortgage payments come out automatically. Your company’s business runs through its accounts. Then one day, you get a letter that changes everything. The last thing you asked for was for Royal Bank close my account.

Thomas Nisab lived this nightmare. After 30 years as a loyal RBC customer, he complained about poor customer service. Then they sent him a Royal Bank close my account letter, stating that he had thirty days before Royal Bank would close his account. All of them. His personal savings, chequing account, Visa cards, line of credit and investments. Take your business elsewhere, Thomas.

No clear explanation. No second chances. Just a cold letter saying they were ending the relationship.

This story went viral across Canada because it touched every person’s deepest banking fear. If it happened to Thomas after three decades, it could happen to anyone.

But here’s what most people don’t realize: Account closures often signal deeper financial problems. As a Licensed Insolvency Trustee serving the Greater Toronto Area, I’ve seen this pattern hundreds of times.

My name is Brandon Smith, and I’m a Licensed Insolvency Trustee with Ira Smith Trustee & Receiver Inc. We help Canadian consumers and business owners who face financial crisis – including those dealing with sudden account closures.

Can Royal Bank Close My Account: The Legal Reality

Every account client agreement – whether personal or business – gives banks the right to end relationships. It’s buried in the fine print you signed when you opened your account.

Royal Bank doesn’t need your permission. They don’t need to prove wrongdoing. They just need to give you notice (usually 30 days) and follow banking regulations.

But understanding why they close accounts helps you protect yourself.

The Core Reasons Royal Bank Closes Consumer Accounts

When Royal Bank closes an account for an individual like Mr. Nisab, the reasons usually fall into three main categories:

Suspicion of fraud or high-risk account activity. If your account shows unusual patterns like many small deposits or sudden international transfers, it can trigger alarms in RBC’s compliance systems, leading to a closure to mitigate risk.
Poor account management due to debt is a major factor. Frequent Non-Sufficient Funds (NSF) charges, constant overdrafts without having overdraft protection, or being in deep default on an RBC loan or credit card often signal high financial risk. The bank may decide you are too unstable to keep as a customer.
Abusive or disruptive behaviour can end your banking relationship. As the bank implied (but did not prove) in the viral story, if an individual is overly difficult or disrespectful toward staff, Royal Bank has the right to sever the relationship to protect its employees.

The Unique Dangers of RBC Closing a Business Account

For a company, having Royal Bank close its account can be fatal. The reasons are similar but carry much greater weight. Commercial policy violations occur when your business is deemed to be in a high-risk industry or if you violate specific commercial lending agreements – even minor ones. According to guidelines issued on September 30, 1993 by the Office of the Superintendent of Financial Institutions Canada, all banks, including RBC, can withdraw its support entirely.

Cash flow problems become immediately visible to banks through:

bounced business cheques
payroll failures
tax payment issues, and
supplier payment problems.

When these patterns emerge, banks often act swiftly to protect themselves.

Risk assessment changes happen when your industry faces downturns, your credit changes negatively, legal issues affect your business, or partnership disputes arise. Banks constantly reassess their risk exposure, and businesses can quickly find themselves on the wrong side of that assessment.

royal bank close my account

Royal Bank Close My Account: The 30-Day Countdown

Getting the closure notice starts a stressful countdown. The first week is crucial for securing your money. You need to transfer funds to a new account immediately rather than waiting until the last minute. Keep detailed records of all transactions and save account statements and transaction history for future reference.

During this first week, you must also notify key contacts, including your employer, for direct deposit changes, all companies with automatic payments, credit card companies, investment accounts, and insurance providers. Time is not on your side, so act quickly.

The second week focuses on handling automatic transactions. You’ll need to cancel automatic pre-authorized payments for your mortgage, utility bills, phone and internet bills, subscription services, and insurance premiums. Simultaneously, redirect direct deposits from employment income, government benefits, pension payments, and investment income to your new account.

In the final weeks, complete your transition by addressing outstanding cheques, pre-authorized debits, credit card payments, and loan payments. Gather all documentation, including final account statements, transaction records, letters of account closure, and credit history documentation.

Royal Bank Close My Account: Your Options For Finding a New Bank After RBC Account Closure

Traditional Big Banks Offer Familiar Services

TD Canada Trust provides similar services to RBC with strong online banking, an extensive ATM network, and solid business banking options. Many former RBC customers find the transition relatively smooth.

Bank of Montreal (BMO) offers competitive rates, good business services, a strong mobile app, and flexible account options. They’ve been particularly welcoming to customers switching from other major banks.

Scotiabank brings an international focus that’s especially valuable for businesses. They’re known for being small business-friendly.

Credit Unions and Alternative Banking Solutions

Credit unions often provide more personal service with a community focus. They’re frequently more flexible than big banks and typically charge lower fees. The trade-off is usually fewer locations and potentially less sophisticated online banking.

Online banks like Tangerine, Simplii Financial, and PC Financial operate with lower overhead costs, allowing them to offer better rates and lower fees. However, they lack physical branches if you prefer face-to-face banking. Online only banks are not for businesses, just consumers.

Specialized Business Banking Options

For entrepreneurs, consider banks that specialize in business accounts. National Bank is a good example of a non-Big Five bank and has a strong Quebec focus. Regional credit unions often understand local business needs better than national banks, and specialized business lenders can provide services that traditional banks won’t.

royal bank close my account

Protecting Yourself: Prevention Strategies That Protect Against Royal Bank Close My Account

Diversify Your Banking Relationships Strategically

The most important lesson from account closure stories is never to put all your accounts at one bank. Split your business between at least two banks, keep personal and business accounts separate, maintain relationships with multiple institutions, and have backup options ready.

This diversification strategy is especially crucial for businesses. If some of your business is at one bank and the balance is at another bank, you now have two banks that are familiar with you. If one goes the way of the RBC close my account route, you can immediately pivot to the other bank, where they already know you.

Maintain Excellent Account Health

Avoiding red flags means:

keeping accounts in good standing
avoiding frequent overdrafts
paying loans and credit cards on time, and
maintaining minimum balances

These seem like basic requirements, but they’re often overlooked during financial stress.

Monitor your accounts by chequing statements regularly, watching for unusual activity, reporting problems immediately, and keeping good financial records. This proactive approach helps you catch problems before they become account closure triggers.

Build Strong Banking Relationships Proactively

Communication is key to maintaining good banking relationships. Meet with your business banker annually, explain your business model clearly, provide updated financial statements, and address problems before they become crises.

Many account closures could be prevented with better communication. Banks are more likely to work with customers they understand and trust.

Royal Bank Close My Account: When Debt Is the Real Problem Behind Account Closure

In my experience as a Licensed Insolvency Trustee, account closures often reveal deeper financial issues. Banks close accounts when they see mounting debt loads, cash flow problems, payment defaults, and overall financial instability.

Recognizing the Warning Signs

Personal financial stress manifests through:

using credit to pay bills
only making minimum payments
borrowing to pay other debts, and
losing sleep over money.

These patterns are visible to banks through your transaction history.

Business financial crisis shows up as payroll difficulties, supplier payment delays, tax payment problems, and declining cash flow. Banks monitor these patterns closely, especially for business accounts.

Professional Solutions We Provide

As Licensed Insolvency Trustees, we offer legal protection and debt solutions that can prevent account closures or help you recover from them. Consumer proposals can reduce debt by up to 75%, stop interest charges, help you avoid bankruptcy, and allow you to keep your assets.

Corporate proposals help restructure business debt, continue operations, protect employees, and preserve business value. This option is particularly valuable when account closures threaten business continuity.

Bankruptcy protection provides a fresh start option, stops creditor actions, discharges most debts, and offers legal protection when other solutions aren’t viable.

royal bank close my account

Royal Bank Close My Account: Your Rights When RBC Royal Bank Closes Your Account

Banking Ombudsman Protection

If you believe RBC treated you unfairly, contact the Ombudsman for Banking Services and Investments (OBSI). This free service for Canadian consumers provides independent investigation and binding decisions on banks at no cost to you.

Privacy and Credit Reporting Rights

Even after closure, RBC must protect your personal information, provide account information and records when requested, follow privacy laws, and secure your financial data. Understanding these rights helps you navigate the post-closure period.

Regarding credit reporting, voluntary closures don’t hurt your credit score. Bank-initiated closures may be reported, but you can dispute incorrect information and should monitor your credit report regularly to ensure accuracy.

Royal Bank Close My Account: Building a Stronger Financial Future

Leveraging Technology for Better Financial Management

Use budgeting apps and digital tools to gain real control over your finances. Tools that track your spending and categorize your expenses can help prevent the constant overdrafts and NSF fees that signal instability to banks like RBC.

Financial planning tools for cash flow forecasting, debt payment calculations, investment tracking, and goal setting help you maintain the financial stability that banks want to see.

When to Seek Professional Financial Help

You should seek help when you are stressed out by your debt, you’re missing payments regularly, using credit for necessities, or considering bankruptcy. The earlier you address these issues, the more options you have.

Types of professional help include Licensed Insolvency Trustees, credit counsellors, financial planners, and accountants. Each serves different needs, but Licensed Insolvency Trustees offer a holistic and comprehensive approach.

royal bank close my account

Common Questions About RBC Account Closures

Outstanding Financial Obligations

What happens to outstanding cheques when your account closes? RBC will return them unpaid; you’re responsible for any NSF fees, so contact recipients immediately and arrange alternative payment methods before your cheques bounce.

Regarding getting your account back, this is rarely possible once closed. Focus on finding new banking relationships, address underlying issues first, and build new relationships with other financial institutions.

Credit and Payment Impacts

The credit impact depends on the closure reason. Payment defaults hurt your credit score, but the account closure itself may not. Monitor credit reports closely to understand the actual impact.

Automatic payments will be returned unpaid, potentially resulting in late fees. Update payment methods quickly and notify all service providers to avoid service interruptions.

Royal Bank Close My Account: Take Action Before It’s Too Late

I hope you found this Royal Bank close my account story of Thomas Nisab. It serves as a warning that financial stability isn’t guaranteed. Whether you’re an individual struggling with debt or a business owner facing cash flow problems, the threat of account closure is real.

Don’t wait for the letter. Take control now.

If you’re experiencing frequent overdrafts, mounting debt payments, cash flow problems, payment defaults, or financial stress, professional help is available.

Contact Brandon Smith and the team at Ira Smith Trustee & Receiver Inc. today. We’re federally licensed to provide debt solutions that protect your financial future.

Our services include consumer proposals, corporate restructuring, bankruptcy protection, financial counselling, and creditor negotiation. We serve the Greater Toronto Area from our office at 167 Applewood Crescent, Suite 6, Vaughan, ON L4K 4K7.

Call 647.799.3312 for your free, confidential consultation. Let’s eliminate your debt and secure your financial foundation before account closure becomes your reality. You can also visit our Google Business Profile to learn more about our services and read client testimonials.

royal bank close my account

Brandon Blog Post

INSOLVENCY TRUSTEE COURT ORDER: THE FULL POWER OF THE COURT IN ONTARIO REGULATORY PROCEEDINGS

Post author By Brandon Smith
Post date October 6, 2025

Insolvency Trustee Court Order: Introduction

As a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) at Ira Smith Trustee & Receiver Inc. in the Greater Toronto Area, I meet with people and business owners every day who feel overwhelmed by debt. Many believe we only handle bankruptcies. The truth is, our role goes much deeper. We act as a bridge between financial trouble and the Canadian legal system.

From our Vaughan office at 167 Applewood Crescent, Suite 6, we help clients find a secure path through their financial challenges. One of the most powerful tools in this process is the insolvency trustee court order.

These court orders form the backbone of fairness and legality in Canadian insolvency cases. Whether you’re a small business owner looking for a way to save or safely close your business, or dealing with a multi-million-dollar corporate restructuring, court orders protect everyone involved.

Let me share a very recent Ontario court decision. In 2025, the Ontario Securities Commission (OSC) took action against Cacoeli Asset Management and related entities (Cacoeli). This case shows exactly how an insolvency trustee court order can stop improper conduct and protect investors.

In this post, I’ll explain:

What happened in the Cacoeli case and why it matters
How the court decided to appoint a receiver
What a Licensed Insolvency Trustee does under a court order
When you need a court order in insolvency proceedings

Let’s start with the case that brought these issues to light.

The Superior Court’s Insolvency Trustee Court Order Appointing the Receiver

In the recent Ontario court case of, Ontario Securities Commission v. Cacoeli Asset Management, 2025 ONSC 3012, the OSC asked the Ontario Superior Court of Justice for urgent help. They wanted an insolvency trustee court order to take control of the Cacoeli assets before their investigation was even finished. This is a serious step that requires strong reasons.

The Problem: Misused Investor Money

The OSC found that Cacoeli had raised at least $13 million from about 53 investors. Each investor thought their money was going to buy and manage a specific property. Different limited partnerships were created for each unique property.

However, the investigation revealed something troubling. Money meant for one property was allegedly being moved to support completely different properties. This is called “fund diversion.”

Investors who thought their money was buying Property A discovered it might have been used for Properties B, C, or D instead.

What Standard of Proof Was Needed?

Cacoeli’s lawyers argued that appointing a receiver is extremely serious. It takes away the company’s control over its own business. They said the OSC needed to prove a “strong prima facie case” – meaning very strong evidence that laws were broken.

Justice Steele disagreed. She confirmed that for protective orders under Ontario’s Securities Act, the OSC only needs to show “serious concern that there have been possible breaches.”

Why does this matter? It means courts can act quickly to protect investors. They don’t have to wait months or years for a full trial when people’s money is at risk.

Reading the Partnership Agreements

Cacoeli argued that their partnership agreements allowed them to move money around. They pointed to clauses that gave the General Partner power to “invest funds” and “engage in any transaction with affiliates.”

Justice Steele carefully read the agreements. She found that the “Purpose” section was crystal clear. Each partnership existed for one specific reason: to acquire and manage that particular property only.

The broad powers mentioned elsewhere in the agreement could only be used to support that specific purpose. They couldn’t be used to break the fundamental promise made to investors.

This finding confirmed that the fund diversion was serious and possibly illegal.

Why Include All Properties Under One Receiver?

Certain secured creditors held mortgages on specific Cacoeli properties. Some of them asked the court to exclude their properties from the receivership. They wanted to seize and sell those properties themselves.

Justice Steele said no. She ordered the insolvency trustee court order to cover all Cacoeli properties and companies.

Why? Excluding properties would create chaos:

Different creditors would fight over different assets
Multiple court cases would overlap and contradict each other
Costs would skyrocket
Small creditors would get nothing

Appointing one Licensed Insolvency Trustee as the court-appointed receiver guaranteed central oversight, coordination, and fairness for everyone.

Insolvency Trustee Court Order: The Court of Appeal Upholds Investor Protection

Cacoeli appealed Justice Steele’s decision. The case went to the Court of Appeal for Ontario. A panel of three justices – Hourigan, Zarnett, and Pomerance – reviewed the lower court decision in Ontario Securities Commission v. Cacoeli Asset Management Inc., 2025 ONCA 654 (CanLII).

The Main Argument on Appeal

Cacoeli made the same argument again. They insisted that appointing a receiver was so powerful that courts should require the higher “strong prima facie case” standard of proof.

The Court of Appeal’s Strong Response

The Court of Appeal rejected this argument completely. Their reasoning matters for anyone dealing with financial regulation:

Public protection comes first: Requiring a high standard of proof would “impede the public protection mandate of the OSC”
Early action is essential: A high standard would make it “impossible for the OSC to obtain receivership at the early stages of an investigation when the facts are not fully known.”

This is a clear message from Ontario’s highest court: when protecting the public is the priority, courts will allow regulators to act fast using an insolvency trustee court order – even before every detail is fully investigated.

The receivership order acts as a protective shield, not a final punishment.

The Final Decision

The Court of Appeal found “no question that the OSC has established a serious concern” about possible legal breaches.

The appeal was dismissed. The original insolvency trustee court order appointing the receiver remained in force.

Cacoeli was ordered to pay the OSC $15,000 for the costs of the appeal.

The Foundational Role of a Licensed Insolvency Trustee in Canada

Who Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is the only professional in Canada authorized to administer bankruptcies and consumer proposals. In addition, only LITs can act as a receiver, be it private or court-appointed under an insolvency trustee court order.

We are not lawyers. We are officers of the court.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in the field
Pass demanding written and oral examinations
Demonstrate expertise in financial assessment, accounting, and insolvency law

This high standard allows us to act as impartial administrators of insolvency estates. Think of us as neutral referees. Our job is to balance the rights of:

The debtor (the person or company owing money)
The creditors (the people or companies owed money)

The Law That Guides Everything We Do

The first piece of legislation that covers every action a Licensed Insolvency Trustee takes is the federal law: the Bankruptcy and Insolvency Act Canada (BIA).

The BIA is the ultimate authority for virtually all consumer and corporate insolvency proceedings in Canada. It:

Lays out the rules for debt relief
Sets the framework for proposals (which help restructure debt)
Defines the powers and duties of trustees

Very large corporate restructurings are usually done under a different federal law, the Companies’ Creditors Arrangement Act (CCAA).

The BIA and CCAA are our playbooks. The courts are the referees who make the final calls. Provincial laws also apply, but the federal BIA governs all Licensed Insolvency Trustees.

Federal Oversight: The Office of the Superintendent of Bankruptcy

Unlike most private professionals, Licensed Insolvency Trustees are constantly supervised by a federal regulator: the Office of the Superintendent of Bankruptcy Canada (OSB).

The OSB’s job is to ensure that Canada’s insolvency system is fair, efficient, and that trustees perform their duties with integrity.

This creates two layers of oversight:

The OSB (administrative supervision)
The Courts (judicial supervision)

This dual oversight gives the public and creditors confidence in the system. We must report all significant actions to the OSB. For many major decisions, we seek court approval through an insolvency trustee court order.

Our Core Responsibilities

Whether helping an individual consumer get a financial fresh start through a personal insolvency process or managing a complex corporate wind-down, our core responsibilities stay the same:

Secure Assets: Take possession and control of all assets belonging to the debtor (subject to provincial exemptions for individuals and the rights of trust claimants and secured creditors)

Investigate Financial Affairs: Examine the debtor’s finances, including transactions before the insolvency filing, to ensure fairness

Realize Value: Sell assets in a way that maximizes returns for creditors

Distribute Funds: Distribute money collected to creditors according to the priority rules in the BIA and/or as approved by the court through an insolvency trustee court order

Report: Provide detailed financial reports to creditors, the OSB, and the court

Understanding the Necessity of an Insolvency Trustee Court Order in Insolvency Proceedings

What Is an Insolvency Trustee Court Order?

A court order is a written ruling by a judge that must be followed. In insolvency, an insolvency trustee court order is an official directive that either:

Grants the Licensed Insolvency Trustee specific powers, or
Approves a significant decision or action

In the Cacoeli case, the Ontario Superior Court of Justice issued an insolvency trustee court order appointing a receiver. This order gave the receiver legal authority to seize control over all assets and properties of the Cacoeli companies.

Why Court Involvement Is Essential

Courts aren’t involved just to follow bureaucratic procedure. They serve two critical purposes:

Neutrality and Impartiality: Insolvency creates conflict. A judge provides a neutral, binding decision that everyone must respect. This ensures no single party unfairly benefits.

Legal Compliance: By reviewing the Trustee’s requests and issuing an order, the court confirms that proposed actions follow the BIA and other relevant laws strictly.

What Requires Court Approval?

Not every action a Licensed Insolvency Trustee takes requires a judge’s approval. The insolvency trustee court order appointing the receiver gives certain discretionary powers, such as handling routine matters, including administrative disbursements.

However, any major decision that impacts the fundamental rights of debtors or creditors must be sanctioned by an insolvency trustee court order. This creates a clear line between day-to-day administration and actions requiring judicial authority.

Key Scenarios Requiring a Licensed Insolvency Trustee to Obtain an Insolvency Trustee Court Order

Many actions taken by a Licensed Insolvency Trustee in a court-supervised receivership require court permission through an insolvency trustee court order. Here are the most common situations:

Approval of Trustee Fees and Administrative Costs

Our fees are strictly regulated through a process called “taxation.” The ultimate fees and costs must be approved by the court through an insolvency trustee court order.

This is a critical check to ensure the estate isn’t being overcharged. It protects creditors from excessive fees eating into their recovery.

Authorizing Unusual or Complex Transactions and Asset Sales

A key duty of a Licensed Insolvency Trustee is to liquidate (sell) assets. However, court approval is required when the transaction is:

Unusual: Selling a non-standard asset or unique piece of real estate

Complex: Selling an entire business as a “going concern” (a live business that continues operating)

Controversial: When one or more stakeholders object to the sale price or terms

In these cases, the Trustee must provide sufficient evidence to a judge for an insolvency trustee court order to approve the transaction.

Resolving Disputes Among Stakeholders

The Trustee may face disputes such as:

A party claiming ownership of an asset under the receiver’s control
A dispute over the validity or priority of different security interests
Creditors disagreeing about distribution

When these disputes can’t be settled through negotiation, the Trustee brings a motion to court. A judge issues an insolvency trustee court order that settles the matter legally and definitively.

In the Cacoeli case, secured creditors wanted their properties excluded from the receivership. Justice Steele rejected this request. She stated the receivership must cover all properties to prevent chaos among creditors. This is a prime example of the court resolving a major stakeholder dispute.

Approving Debtor Proposals and Restructuring Plans

The goal of a business proposal under a BIA Division I Proposal or major corporate restructuring under the CCAA is to financially restructure the company to save it and as many jobs as possible.

A significant insolvency trustee court order is always required for final approval of a Division I restructuring proposal or restructuring plan. The court confirms that the plan is fair, reasonable, viable and calculated for the general benefit of all creditors.

Modifying, Annulling, or Terminating Insolvency Proceedings

Sometimes a debtor’s situation changes. They may need to alter their original plan based on changed circumstances. Or the Trustee may discover an issue that warrants ending the insolvency proceeding entirely, as the original plan is no longer viable.

A judge must review the facts and issue an insolvency trustee court order to modify, annul, or terminate the proceeding.

Addressing Trustee Liability or Allegations of Misconduct

If any stakeholder alleges that a LIT has breached their duties or acted improperly, the matter goes before a judge.

The court must issue an order to investigate the claim. If necessary, the court can order compensation or disciplinary action against the Trustee. This ensures absolute accountability.

The Far-Reaching Significance of Judicial Oversight in Insolvency

Protecting the Interests of All Parties

Judicial oversight is about trust. By demanding an insolvency trustee court order for critical actions, the system provides comfort to all parties:

Debtors know the process is being handled legally

Creditors know assets can’t be sold cheaply or favour one creditor over another

The Public knows the integrity of capital markets is being enforced, as the Court of Appeal confirmed in the Cacoeli case

Ensuring Transparency, Accountability, and Due Process

Every court motion becomes part of a public record. This transparency ensures every stakeholder can review the trustee’s actions.

The process also provides due process – the right to be heard. Any party can attend a hearing and object to a proposed action.

Upholding Public Confidence in the Canadian Insolvency System

Canada’s entire economy relies on:

The ability of businesses to take risks
The ability of creditors to enforce their rights

According to Industry Canada’s publication “Fresh Start: A Review of Canada’s Insolvency Laws“:

Insolvency legislation is a key component of Canada’s marketplace framework legislation that governs commercial relationships for both consumers and businesses. Certain and reliable rules provide security for investors and lenders that, in turn, influences the cost and availability of credit in the Canadian marketplace.

When the system fails, the court restores order. They are the clear, final legal instrument that upholds the integrity of the process and ensures public faith in financial markets and debt restructuring.

The Ultimate Framework for All Decisions

Regardless of the unique facts of any case, every judicial decision is rooted in federal and provincial law. Judges interpret the law to deliver their orders, making it the ultimate framework for every action taken by a Licensed Insolvency Trustee.

Consequences of Acting Without a Necessary Insolvency Trustee Court Order

Potential Ramifications for the Licensed Insolvency Trustee

A trustee who ignores the need for an insolvency trustee court order faces serious consequences:

Personal Liability: The trustee could be held personally responsible for any financial loss to the estate caused by unauthorized action

Disciplinary Action: The court and the OSB could impose sanctions, fines, or, in severe cases, the OSB could revoke the LIT’s license

Voided Actions: The action itself (such as an asset sale) could be reversed or voided by a subsequent court decision, creating chaos and cost

Adverse Impacts on the Insolvency Estate and Stakeholders

When a Licensed Insolvency Trustee acts outside the BIA or without proper authorization, the entire estate suffers:

Increased Costs: The estate incurs significant costs fighting legal challenges and correcting unauthorized actions

Delayed Proceedings: Disputes and legal challenges drag out the process, delaying final distribution of funds to creditors

Loss of Confidence: Creditors and debtors lose faith in the insolvency administration, leading to an unnecessarily hostile environment

Section 37 of the BIA provides that any person aggrieved by any act or decision of a Licensed Insolvency Trustee can apply to court to reverse or alter that act or decision. The court also has the authority to sanction the trustee.

Frequently Asked Questions: Insolvency Trustee Court Order

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is the only professional in Canada who can legally administer receiverships, bankruptcies and consumer proposals. We used to be called trustee in bankruptcy, but the name changed to better reflect our broader role.

Think of us as a bridge between your financial troubles and the Canadian legal system. We’re officers of the court, which means we have a legal duty to be fair and impartial.

Only Licensed Insolvency Trustees can act as receivers, whether privately appointed or through an insolvency trustee court order.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in insolvency work
Pass demanding national examinations
Demonstrate expertise in insolvency law, accounting, and financial assessment

This ensures that every LIT has the knowledge and skills to handle complex financial situations fairly.

What does a Licensed Insolvency Trustee actually do?

Whether we’re helping someone with personal debt or managing a complex corporate restructuring or bankruptcy, our core responsibilities stay the same:

Secure Assets: We take control of all assets belonging to the debtor. This protects them from being hidden or sold improperly. (Some assets are exempt, and trust claimants and secured creditors keep their rights.)

Investigate Financial Affairs: We carefully examine the debtor’s financial transactions made before filing for insolvency.

Realize Value: We sell assets in a way that gets the best possible return for creditors. This might mean selling items individually or selling a business as a going concern.

Distribute Funds: We distribute the money we collect to creditors following the strict priority rules in the Bankruptcy and Insolvency Act. Sometimes, an insolvency trustee court order determines the distribution.

Report: We provide detailed financial reports to the court, creditors, and the Office of the Superintendent of Bankruptcy. Transparency is essential.

What law governs Licensed Insolvency Trustees in Canada?

The primary law that guides almost everything we do is the federal Bankruptcy and Insolvency Act. This is Canada’s main insolvency legislation.

The BIA covers:

Rules for debt relief and bankruptcy
The framework for consumer proposals and corporate proposals
The powers and duties of Licensed Insolvency Trustees
Priority rules for paying creditors
When court orders are required

For very large corporate restructurings (typically companies with debts over $5 million), the federal Companies’ Creditors Arrangement Act often applies instead. The CCAA allows for more flexible restructuring options.

Both laws work together with provincial legislation to create Canada’s comprehensive insolvency system.

Who oversees Licensed Insolvency Trustees?

Licensed Insolvency Trustees operate under two layers of oversight. This dual supervision ensures the system works fairly:

The Courts: Provide judicial supervision and make final decisions on major actions. Courts issue insolvency trustee court orders that authorize significant steps in the process.

The Office of the Superintendent of Bankruptcy Canada: This federal regulator provides administrative supervision. The OSB ensures:

Canada’s insolvency system remains fair and efficient
Trustees perform their duties with integrity
Trustees follow all rules and regulations
Any complaints against trustees are investigated

This two-level oversight gives the public, debtors, and creditors confidence that the process will be handled properly.

What is an insolvency trustee court order?

An insolvency trustee court order is a written ruling issued by a judge that must be followed. It’s a legally binding document.

In insolvency cases, these court orders serve two main purposes:

Grant the Licensed Insolvency Trustee specific legal powers
Approve a significant decision or action that the LIT plans to take

These orders form the backbone of fairness and legality in Canadian insolvency cases. They ensure that major decisions have judicial approval and oversight.

For example, when a receiver is appointed (like in the Cacoeli case discussed in our blog), the insolvency trustee court order gives that receiver the legal authority to take control of assets and manage the insolvency process.

Why do courts get involved in insolvency proceedings?

Courts aren’t just following bureaucratic procedure. They serve two critical purposes in insolvency:

Ensuring Neutrality and Impartiality: Insolvency creates conflict. Creditors want their money. Debtors need protection. The judge provides a neutral, binding decision that everyone must respect. This prevents any single party from benefiting unfairly at the expense of others.

Confirming Legal Compliance: Before issuing an insolvency trustee court order, the court reviews the Applicant’s request carefully. This confirms that the proposed actions strictly follow the BIA and other relevant laws. If something doesn’t comply with the law, the judge won’t approve it.

This judicial oversight protects everyone’s rights and maintains public confidence in Canada’s insolvency system.

When does a Licensed Insolvency Trustee need a court order?

Not every action requires an insolvency trustee court order. We have discretionary powers for routine administrative matters – like paying regular administrative expenses or communicating with creditors.

However, any major decision that impacts the fundamental rights of creditors or debtors must be sanctioned by a court order. Here are the most common scenarios:

Approval of Fees and Costs: Our fees and administrative costs must be approved by the court through a process called “taxation.” This protects creditors from excessive charges eating into their recovery.

Authorizing Complex Transactions: Court approval is required for asset sales that are:

Unusual (non-standard assets or unique properties)
Complex (selling an entire business as a going concern)
Controversial (stakeholders object to the sale price or terms)

Resolving Disputes: When disputes arise – such as someone claiming ownership of an asset, or secured creditors disagreeing about distribution priorities – we bring a motion to court. The judge issues an order that settles the matter legally and definitively.

Approving Restructuring Plans: Final approval of a BIA Division I restructuring proposal or a CCAA corporate restructuring plan always requires a significant insolvency trustee court order. The court must confirm that the plan is fair, reasonable, and has a realistic chance of success.

Modifying Proceedings: If circumstances change and the insolvency proceedings need to be modified, annulled, or otherwise terminated, a court order is required.

Addressing Trustee Issues: If anyone alleges the LIT has breached their duties, the matter goes before a judge who can investigate and order appropriate remedies.

What happens if a trustee acts without getting a required court order?

Ignoring the requirement for an insolvency trustee court order leads to serious consequences for the Licensed Insolvency Trustee:

Personal Liability: The LIT may be held personally responsible for any financial loss to the estate caused by the unauthorized action. This means paying out of their own pocket.

Disciplinary Action: The court or the OSB can impose:

Sanctions
Significant fines
Suspension from practice
In severe cases, complete revocation of the LIT’s license

Voided Actions: The unauthorized action itself – such as an improper asset sale – could be reversed or voided by a subsequent court decision. This creates chaos and additional costs.

Negative Impact on Everyone: Unauthorized actions harm the entire insolvency estate:

Increased legal costs
Delayed proceedings
Loss of creditor confidence
Potential loss of asset value

Section 37 of the BIA specifically allows any person who is aggrieved by an LIT’s decision to apply to court to reverse or alter that decision. The court has full authority to sanction the trustee.

What standard of proof is needed to appoint a receiver in regulatory cases?

This is one of the most important takeaways from the Cacoeli case about insolvency trustee court orders.

When a regulator like the Ontario Securities Commission asks the court for urgent protection, they only need to show “serious concern that there have been possible breaches.”

This is a lower standard than criminal cases or even most civil cases. The court doesn’t need:

Absolute proof of fraud
Complete evidence
A finished investigation

The Court of Appeal for Ontario specifically rejected the argument that regulators must meet a higher “strong prima facie case” standard.

Why does this matter?

This lower standard allows courts and regulators to act quickly through an insolvency trustee court order to:

Protect investors from ongoing harm
Freeze assets before they disappear
Stop improper conduct immediately
Preserve evidence

The insolvency trustee court order appointing a receiver acts as a protective shield, not a final punishment. Full investigations and trials can happen later, but the immediate protection comes first.

Why did the Cacoeli court order cover all properties, even those with secured creditors?

In the Cacoeli case, some secured creditors held mortgages on specific properties. They asked the court to exclude their properties from the receivership so they could seize and sell those properties themselves.

Justice Steele refused this request. The insolvency trustee court order covered all Cacoeli assets and properties without exception.

The Court of Appeal upheld this decision. Here’s why centralized control under one Licensed Insolvency Trustee as receiver was essential:

Prevents Creditor Chaos: If different creditors could seize different assets, they would fight over everything. The process would become a free-for-all with no coordination.

Avoids Multiple Court Cases: Excluding properties would lead to numerous separate legal proceedings, all overlapping and potentially contradicting each other.

Controls Costs: Multiple proceedings mean multiplied legal costs. A single insolvency trustee court order with one receiver keeps costs manageable.

Protects Small Creditors: When secured creditors grab assets first, unsecured creditors and small suppliers are not given a forum. Centralized control ensures everyone is treated fairly according to their legal priority.

Enables Efficient Administration: One receiver can see the whole picture, make coordinated decisions, and maximize value for all stakeholders.

This principle applies to most complex insolvency cases: centralized control through an insolvency trustee court order produces better outcomes than fragmented, competing proceedings.

Insolvency Trustee Court Order Final Thoughts: The Licensed Insolvency Trustee’s Role in a Regulatory Receivership

The insolvency trustee court order is an instrument of authority, protection, and fairness. As Licensed Insolvency Trustees, our job – whether in a standard bankruptcy, a financial restructuring or a specialized receivership like the Cacoeli case – is to impose order and protect stakeholders.

The Cacoeli decisions confirmed two critical points:

Lower Standard for Protection: Courts won’t wait for proof of fraud to a certainty. The “serious concern” standard is enough to appoint an LIT as a receiver quickly. This is essential to freeze assets and prevent further investor harm.

Centralized Control Is Key: The court agreed that the entire portfolio of assets must be placed under one receiver’s control – even properties secured by third parties. This centralized approach, ordered by the court, prevents a fragmented, costly, and unfair outcome for all stakeholders.

Need Help With Debt or Insolvency Issues?

If you’re facing financial challenges – whether personal or business-related – understanding the role of an insolvency trustee court order is just the beginning. At Ira Smith Trustee & Receiver Inc., we’ve helped many individuals and businesses in the Greater Toronto Area find their path to financial recovery.

From our Vaughan office, we provide:

Free, confidential consultations
Expert guidance on bankruptcy alternatives
Consumer proposals that can reduce your debt
Corporate restructuring solutions
Court-supervised receiverships

Contact us today to discuss your situation. Let us help you understand your options and find the best solution for your financial future.

Brandon Smith, Licensed Insolvency Trustee
Senior Vice-President
Ira Smith Trustee & Receiver Inc.
167 Applewood Crescent, Suite 6
Vaughan, Ontario
Greater Toronto Area

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., serving individuals and businesses throughout the Greater Toronto Area. With years of experience in insolvency cases, including financial restructuring, Brandon helps clients navigate complex financial challenges and find sustainable solutions, Starting Over Starting Now.

Tags administrative disbursements, Bankruptcy and Insolvency Act, Cacoeli Asset Management, Companies’ Creditors Arrangement Act, Consumer Proposal, court approval, Court of Appeal for Ontario, court orders, court permission, Division I restructuring proposal, insolvency law, insolvency trustee court order, licensed insolvency trustee, Office of the Superintendent of Bankruptcy Canada, Ontario court decision, Ontario Securities Commission, Ontario Superior Court of Justice, personal insolvency process, trustee in bankruptcy

Brandon Blog Post

TORONTO CONDO MARKET: FROM RETIREMENT DREAMS TO DISTRESS SALES – A COMPLETE 2025 LOOK AT THE DECLINE

Post author By Brandon Smith
Post date September 29, 2025

toronto condo market

The Toronto condo market in 2025 has become a harsh teacher for many investors. What once seemed like a sure path to retirement wealth has turned into financial stress for thousands of people across the Greater Toronto Area.

As a licensed insolvency trustee firm with decades of experience, we’ve seen firsthand how real estate investments can go wrong. The stories I hear every day show just how quickly the Toronto condo market can change lives – and not always for the better. In my practice at Ira Smith Trustee & Receiver Inc., I’ve helped families navigate the aftermath of failed real estate investments.

The current situation reminds me of other market crashes we’ve witnessed. But this one feels different. It’s not just about market cycles – it’s about people who made what seemed like smart financial decisions that have now turned into their worst nightmares.

Toronto Condo Market: The Reality Behind the Numbers

Let me share what’s really happening in Toronto’s condo market right now. The numbers tell a clear story of a market under serious pressure, but behind each statistic is a real person facing real financial stress.

In August 2025, condo prices in Toronto decreased by 7% compared to the same month the previous year. According to its Toronto Housing Market Outlook 2025, Nesto Mortgage Experts reported that the average condo now sells for $571,500 in the city. The Toronto Regional Real Estate Board (TRREB) reveals that July saw GTA’s condo prices hit a four-year low, with the average condo selling for $651,000. Across the entire Greater Toronto Area, the average condo price fell to $642,000, down 5% from 2024. While this might sound like good news for buyers, it’s creating serious problems for people who bought at higher prices.

Here’s what makes this situation unique: there are now over 9,100 active listings for condos for sale in the Toronto area. That’s the highest number ever recorded for August. When the market trend is too many condos and not enough buyers, prices fall. It’s basic supply and demand, but the human cost is enormous.

The sales numbers tell an even more troubling story. According to TRREB, in the first quarter of 2025, Toronto condo sales dropped by 21.7% compared to the same period in 2024. That’s not a small dip – it’s a market in serious decline.

What really concerns me about this real estate market as a financial professional is the “months of supply” number. Right now, there are over seven months of available condo inventory. In a healthy market, you’d see about three to four months of supply. Such oversupply inventory levels mean sellers are competing desperately for the few buyers who are still active.

Toronto Condo Market: Understanding the Human Impact

Every week, I meet with people whose lives have been turned upside down by the Toronto condo market crash. These aren’t reckless speculators – they’re teachers, nurses, small business owners, and retirees who thought they were making smart investments.

Take Maria (not her real name), a 52-year-old teacher who came to see me last month. She bought a pre-construction condo in Mississauga in 2021 for $750,000, putting down $75,000 of her savings. The building was supposed to be finished in 2024, but construction delays pushed the completion to 2025. When she finally got the keys, similar units in the building were selling for $600,000.

Maria reluctantly was able to put down the extra cash needed in order to complete the purchase when her mortgage lender reduced the amount they were prepared to lend, given the lower value. The condo is rented out, but she still can’t afford all the monthly payments the rent doesn’t cover on her teacher’s salary, and she can’t sell without taking a massive loss. The stress has affected her health, her relationships, and her ability to do her job effectively.

Or consider James and Patricia (not their real names), who bought three pre-construction condos as their retirement plan. They figured they’d rent them out for income or sell them for profit. Instead, they’re facing monthly carrying costs that, even with all the rental income, don’t come close to covering their expenses. They’re burning through their retirement savings just to keep the properties.

These stories repeat in my office almost daily. Good people who made what seemed like reasonable financial decisions are now facing bankruptcy, divorce, and depression.

toronto condo market

Toronto Condo Market: When Dreams Turn Into Debt – The Basios Story

Take the publicly reported story of Dmitri Basios and his wife. Their story shows how quickly things can change in real estate. In 2020, they put money down on a small Toronto condo for $884,000. They planned to use it for their retirement – either as rental income or by selling it for a profit.

The plan seemed solid. Toronto condos had been rising in value for years. Interest rates were low. The future looked bright. They put down their deposit and waited for the building to be completed.

But when it came time to complete the purchase in 2024, everything had changed. Interest rates had gone up from near zero to over 5%. They couldn’t get financing based on the full purchase price, and even if they could, the monthly payments would have been crushing.

They had no choice but to sell their contract, known as an assignment sale. But they weren’t alone. Many other buyers in similar situations were all trying to sell their contracts at the same time. This flooded the market with desperate sellers.

Their $884,000 condo sold for just $590,000. That’s a loss of almost $300,000. But it gets worse – they’re still legally responsible for the difference. The developer can come after them for the shortfall, plus legal costs and interest.

Basios said it best:

“It’s causing stress and distress and misery.”

This isn’t just one person’s story. I see similar cases every week in my practice. People who thought they were making smart investments now face serious debt problems that could take decades to resolve.

Toronto Condo Market: The Ripple Effect Through Families

What many people don’t realize is how real estate debt affects entire families. When parents face financial ruin from bad condo investments, it impacts their children’s education plans, their ability to help with grandchildren, and their family relationships.

I’ve counselled families where parents lost the family home due to real estate debt. I’ve seen marriages end because of the stress of owing hundreds of thousands of dollars on properties worth far less.

The psychological impact is just as real as the financial impact. People feel ashamed, embarrassed, and angry with themselves. They often isolate themselves from friends and family, making the problem worse.

But here’s what I always tell my clients: you’re not alone, and this isn’t entirely your fault. The real estate industry, the media, and even the government promoted the idea that property values only go up. Many smart, successful people believed this message and made decisions based on it.

toronto condo market

Toronto Condo Market: Why the Toronto Condo Market Crashed

Several things happened at once to create this crisis. Understanding these factors helps explain why so many people are now in financial trouble.

Interest Rates Rose Fast The Bank of Canada raised interest rates from 0.25% in early 2022 to 5% by 2023. That’s one of the fastest rate increases in Canadian history. This made it much harder and more expensive to get a mortgage.

For someone buying a $700,000 condo, the difference between a 2% mortgage rate and a 5% rate is significant in payments. Many buyers simply couldn’t afford the higher payments.

The rate increases also affected developers. Building costs went up dramatically as financing became more expensive. Many projects became financially unviable, leading to construction delays and cancellations.

Too Many Condos, Not Enough Buyers When times were good, developers started building everywhere. The number of new condo projects reached record levels. Everyone assumed the demand would continue forever.

But demand didn’t just slow down – it collapsed. By 2025, there were over 24,000 unsold new condos in the Greater Toronto Area. That’s enough supply to last for years at current sales rates.

Some developers have cancelled projects entirely. In 2024 and 2025 combined, at least 23 major condo projects were cancelled, affecting thousands of buyers and billions of dollars in investments.

Investors Disappeared Many condo buyers were investors, not people planning to live in the units. Some estimates suggest that investors made up 60% or more of pre-construction condo sales during the boom years.

When prices started falling, these investors stopped buying. Without investor money, the whole system broke down. Developers couldn’t get the pre-sales they needed to secure construction financing. The market went into a downward spiral.

The investors who were already committed to purchases found themselves in terrible positions. Many are now trying to get out of their contracts, flooding the assignment market and driving prices down even further.

Economic Uncertainty People are worried about their jobs and the economy. Unemployment has been rising, and many industries are struggling. Even with lower interest rates now, many potential buyers are waiting to see what happens next.

This creates a vicious cycle. The more people worry about the economy, the fewer people buy condos. The fewer people who buy, the lower the prices fall. The more prices fall, the more people worry.

Toronto Condo Market: The Pre-Construction Trap – How It Really Works

One of the biggest problems I see involves pre-construction condos. This is when you put down money for a condo that hasn’t been built yet. For many people, this seemed like a great way to get into the market, but it’s turned into a financial disaster.

Here’s how it used to work: You’d put down a deposit of 15-20% of the purchase price, spread over several payments during construction. You’d wait for the building to be finished, then either move in or sell for a profit. Many people treated this like a sure thing.

The appeal was obvious. You could control an $800,000 condo with just a $120,000 deposit. If the condo went up in value by 20% during construction, you’d make $160,000 on your $120,000 investment. That’s a great return if it works.

But now, many of these deals are falling apart. When the condo is finally built, it’s worth less than what buyers agreed to pay years earlier. Some buyers owe hundreds of thousands more than their condo is worth.

Let me give you a real example from my practice. A client bought a pre-construction condo in 2019 for $950,000. He put down $190,000 in deposits over two years. The building was finally completed in 2024, but similar units in the building were selling for $750,000.

He had a choice: complete the purchase and immediately lose $200,000, or walk away and lose his $190,000 deposit. Either way, he was facing a massive loss. The legal term for this is being “underwater” on your mortgage. It’s a serious financial problem that can lead to bankruptcy if not handled properly.

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Toronto Condo Market: Assignment Sales – The Last Resort

When people can’t complete their pre-construction purchases, they often try to sell their contract to someone else. This is called an assignment sale. The original buyer assigns their purchase contract to a new buyer, hopefully for more than they originally paid.

During the boom years, assignment sales were profitable. People would buy pre-construction, then sell their contract for a quick profit before the building was even finished. Some people made this their full-time business.

But now, assignment sales have become desperation sales. The market is flooded with people trying to get out of contracts they can’t afford to complete. Prices for assignment sales are often 20-30% below the original contract price.

This creates a terrible situation for the original buyers. They’re not only losing their deposits, but they are also responsible for the difference between their original contract price and what the assignment buyer pays.

The legal implications can be complex and expensive. Many buyers don’t understand their rights and obligations, leading to even bigger financial problems down the road.

Toronto Condo Market: Warning Signs You’re in Trouble

As a licensed insolvency trustee, I’ve learned to spot the warning signs early. The sooner you recognize these signs, the more options you’ll have to protect your financial future.

Here are red flags that your real estate investment might be causing financial problems:

Financial Warning Signs:

You can’t make your mortgage payments without borrowing money
You’re using credit cards or loans to cover property expenses
You’re borrowing from retirement savings to cover real estate costs
You’re considering taking money from your children’s education funds
You’re thinking about getting a second mortgage on your family home

Emotional and Physical Warning Signs:

You can’t sleep at night because of money worries
You’re avoiding calls from your lender or real estate lawyer
You’re fighting with your spouse about money
You’re feeling depressed or anxious about your financial situation
You’re avoiding friends and family because you’re embarrassed

Legal and Practical Warning Signs:

You’re thinking about walking away from a deposit or purchase
You’ve received legal notices about your real estate contracts
You’re considering bankruptcy as your only option
You’re being threatened with legal action by developers or lenders
You’re thinking about lying on mortgage applications to qualify for loans

If any of these sound familiar, it’s time to get professional help. Don’t wait until your options are limited.

toronto condo market

Toronto Condo Market: What This Means for Different People

The Toronto condo market crash affects different groups of people in different ways. Understanding where you fit can help you make better decisions about your next steps.

For Current Condo Owners If you own a condo and can afford the payments, you might be okay in the long run. Toronto’s population is still growing, and people need places to live. The city isn’t going anywhere, and neither is the long-term demand for housing.

But if you’re struggling with payments, don’t wait until it’s too late to get help. The sooner you act, the more options you’ll have. Consider speaking with a licensed insolvency trustee before you fall behind on payments.

Some current owners are in situations where they owe more than their condo is worth, but they can still afford the monthly payments. In these cases, it might make sense to stay put and wait for the market to recover, even if that takes several years.

For Potential Buyers This might actually be a good time to buy if you plan to live in the condo for many years and you have a stable income. Prices are lower, and there are more choices than we’ve seen in years.

But make sure you can truly afford the payments, even if interest rates go up again. Don’t stretch your finances just to get into the market. The recent crash shows that property values can fall as well as rise.

First-time buyers now have some advantages. The government has increased the insured mortgage cap to $1.5 million, allowing more people to buy with less than 20% down. But remember, a smaller down payment means higher monthly payments and mortgage insurance costs.

For Investors in Trouble If you’re facing losses on real estate investments, you have options, but time is crucial. Don’t let pride or shame stop you from getting professional advice. The sooner you act, the more options you’ll have.

Some investors are trying to “ride it out,” hoping the market will recover quickly. But this strategy can be dangerous if you’re using credit or depleting savings to cover carrying costs. Sometimes it’s better to cut your losses and protect your family’s financial future.

For Pre-Construction Buyers If you have money tied up in pre-construction projects, you need to understand your rights and obligations. Some contracts allow you to walk away with minimal penalties, while others hold you responsible for the full purchase price.

Don’t assume that a project cancellation is necessarily bad news. In some cases, getting your deposit back might be better than completing a purchase that will result in immediate losses.

Toronto Condo Market: The Broader Economic Impact

The Toronto condo market crash isn’t just affecting individual investors – it’s having broader economic consequences that will be felt for years.

Construction Industry Collapse New condo construction starts in Toronto fell to their lowest level since 2009 in the first half of 2025. This means thousands of construction workers, contractors, and suppliers are losing work.

The construction industry employs over 400,000 people in Ontario. When condo construction slows down, the effects ripple through the entire economy. Equipment suppliers, material manufacturers, and service providers all feel the impact.

Municipal Revenue Shortfalls Cities rely on development charges and property taxes from new condos to fund infrastructure and services. With fewer new projects and lower property values, municipal budgets are under pressure.

This could lead to higher taxes for all residents, reduced services, or delays in important infrastructure projects. The fiscal impact will be felt for years to come.

Banking Sector Stress Banks and other lenders have billions of dollars tied up in real estate loans. While Canadian banks are generally well-capitalized, the scale of the condo market problems is creating stress in the system.

Some smaller lenders and mortgage investment corporations are facing serious difficulties. This could lead to tighter lending standards and reduced credit availability, making it even harder for the market to recover.

toronto condo market

Toronto Condo Market: Government Response and Policy Changes

Various levels of government have implemented policies to try to address the housing crisis, with mixed results.

The federal government has made several changes to mortgage rules, including increasing the insured mortgage cap to $1.5 million and extending amortization periods for some buyers.

Federal Government Initiatives They’ve also implemented stress tests for mortgages, requiring buyers to qualify at higher interest rates than their actual mortgage rate. While this protects borrowers from getting in over their heads, it also reduces the number of qualified buyers.

Provincial Measures The Ontario government has tried to increase housing supply through zoning changes and streamlined approval processes. They’ve also implemented rent control measures and foreign buyer taxes.

However, many of these policies take years to have an effect, and some may have unintended consequences that actually reduce housing supply.

Municipal Actions Toronto and other GTA municipalities have been trying to speed up the approval process for new developments and reduce development charges. But municipal budgets are tight, and there are limits to what they can do.

The reality is that government policies alone can’t fix the fundamental supply and demand imbalances in the market.

Toronto Condo Market: Getting Help Before It’s Too Late

The most important thing to understand is that you don’t have to face financial problems alone. Many people wait too long to get help because they’re embarrassed or hope things will improve on their own.

As a licensed insolvency trustee with decades of experience, we work with people to find solutions before their situation becomes desperate. Sometimes this means negotiating with creditors. Other times it involves formal insolvency proceedings like consumer proposals or bankruptcy.

Consumer Proposals: An Alternative to Bankruptcy Many people do not know about consumer proposals. These can be a good alternative to bankruptcy for people with real estate debt problems.

A consumer proposal allows you to negotiate with your creditors to pay back a portion of what you owe, typically over five years. The rest of the debt is forgiven. This can be especially helpful for people facing large shortfalls on real estate investments.

For example, if you owe $300,000 more than your condo is worth, a consumer proposal might allow you to pay back $100,000 over five years and have the rest forgiven. Your credit will be affected, but much less than with bankruptcy.

Bankruptcy: Sometimes the Best Option While bankruptcy is never anyone’s first choice, sometimes it’s the best way to get a fresh start. If you’re facing overwhelming real estate debt with no realistic way to pay it back, bankruptcy might be the right choice.

The bankruptcy process typically takes nine months for first-time filers, and it eliminates most debts, including real estate shortfalls. While there are consequences, including impacts on your credit rating, it allows you to start rebuilding your financial life.

Early Intervention: The Key to More Options The earlier you seek help, the more options you’ll have. If you’re still current on your payments but struggling, we might be able to negotiate with lenders or restructure your debts.

If you’ve already fallen behind, there are still options, but they become more limited as time goes on. Don’t wait until you’re facing legal action or foreclosure proceedings.

toronto condo market

What Comes Next for the Toronto Condo Market

Looking ahead, the Toronto condo market faces some serious challenges that will affect its recovery timeline.

Supply Pipeline Concerns Builders have cancelled many projects, which means fewer new condos will be available in the coming years. While this might eventually help prices recover by reducing supply, it also means Toronto isn’t building enough housing to meet its growing population needs.

The city needs to add about 40,000 new housing units per year to keep up with population growth. In 2025, it’s on track to build fewer than 25,000 units. This supply shortage will eventually push prices up again, but it might take several years.

Interest Rate Environment The Bank of Canada has started cutting interest rates again. But rate cuts do not work well when people worry about job security and the economy.

Lower rates help with affordability, but they don’t address the fundamental problem of too much supply and too little demand. The market needs time to absorb the excess inventory before any meaningful recovery can begin.

Demographic Trends Toronto’s population keeps growing. Immigration and people moving from other provinces cause this growth. This creates long-term demand for housing, but it might take several years for this demand to absorb the current oversupply.

The federal government has announced plans to reduce immigration targets, which could further slow housing demand in the short term.

Toronto Condo Market: Taking Control of Your Financial Future

If you’re dealing with real estate debt or other financial problems, remember that taking action is always better than doing nothing. Every day you wait, your options become more limited and your problems often get worse.

At Ira Smith Trustee & Receiver Inc., we’ve helped thousands of people in the Greater Toronto Area deal with debt problems. We understand that behind every case is a person or family trying to build a better future.

The consultation process is confidential and free. We’ll review your situation, explain your options, and help you understand the consequences of different choices. There’s no pressure to proceed with any particular course of action – our job is to give you the information you need to make the best decision for your situation.

What to Bring to Your Consultation When you come for a consultation, bring:

Recent statements for all your debts
Information about your real estate contracts and current property values
Your most recent tax return
Documentation about your income and monthly expenses
Any legal notices you’ve received

The more information you can provide, the better we can assess your situation and recommend appropriate solutions.

Protecting Your Family One of the most important things to remember is that your financial problems don’t have to destroy your family’s future. With proper planning and professional help, you can often protect important assets like your family home while dealing with problem investments.

Many people are surprised to learn that bankruptcy doesn’t necessarily mean losing everything. There are provincial exemptions that protect basic assets, and in many cases, people can keep their primary residence while eliminating other debts.

toronto condo market

Toronto Condo Market: Learning from the Market – Lessons for the Future

The Toronto condo market troubles in 2025 offer important lessons for everyone, whether you’re currently dealing with real estate debt or thinking about future investments.

Diversification Matters Many people put too much of their wealth into one investment. While real property can be a good investment, putting all your eggs in one basket is risky, no matter what that basket is.

A balanced approach might include some real estate, but also stocks, bonds, and other investments. This helps protect you if any one investment category performs poorly.

Understand What You’re Buying Pre-construction condos are complex financial instruments, not simple real estate purchases. They involve development risk, market risk, and legal risks that many buyers don’t fully understand.

Before making any major investment, make sure you understand all the risks involved, not just the potential returns. If you can’t afford to lose the money, you probably shouldn’t invest.

Have an Exit Strategy Many investors I meet never planned for what would happen if their investments didn’t work out. They assumed prices would always go up and never considered how they would handle losses.

Before making any investment, think about what you’ll do if it doesn’t work out. How much can you afford to lose? What’s your backup plan? Having these conversations before you invest can save you from financial disaster later.

Get Professional Advice Real estate transactions involve complex legal and financial issues. The cost of professional advice from lawyers, accountants, and financial advisors is usually much less than the cost of making expensive mistakes.

Don’t rely on advice from real estate agents, developers, or other people who have a financial interest in your purchase. Get independent professional advice before making big financial decisions.

Frequently Asked Questions About Toronto Condo Market Problems

Q: I owe more on my condo than it’s worth. What are my options?

A: You have several choices, and the best one depends on your specific situation. If you can afford the monthly payments, you might choose to stay and wait for the market to recover. If you can’t afford the payments, options include selling at a loss, negotiating with your lender, filing a consumer proposal to cover any shortfall to the lender (and to deal with any other unsecured debts), or in extreme cases, bankruptcy. The key is to get professional advice before making any decisions.

Q: Can I just walk away from my pre-construction condo contract?

A: It’s not that simple. Walking away usually means losing your deposit, but you will also be legally responsible for the difference between your contract price and what the developer eventually sells the unit for. This could be hundreds of thousands of dollars. Before walking away, you need to understand your full legal obligations. Some contracts have escape clauses, while others hold you fully responsible.

Q: What’s an assignment sale, and should I try one?

A: An assignment sale is when you sell your pre-construction contract to someone else before the building is finished. Right now, most assignment sales are happening at big losses because there are so many desperate sellers. You might recover some of your deposit money, but you’ll likely still face a significant loss. It might offer a better result than completing the purchase at full price, but you need legal advice to understand the implications.

Q: Will filing bankruptcy get rid of my real estate debt?

A: Yes, bankruptcy will eliminate any shortfall on your real estate debt, including a shortfall from the condo sale. However, bankruptcy has serious consequences, including impacts on your credit rating and potential effects on your employment. Before considering bankruptcy, explore alternatives like consumer proposals, which might achieve similar debt relief with fewer long-term consequences.

Q: What’s a consumer proposal, and how does it work for real estate debt?

A: A consumer proposal lets you negotiate with creditors to pay back a portion of what you owe over up to five years. The rest is forgiven. For example, if you owe $200,000 more than your condo is worth, you might negotiate to pay back $60,000 over five years and have the remaining $140,000 forgiven. It’s often a better option than bankruptcy for people with real estate debt problems. A consumer proposal will only deal with your shortfall to the lender after the condo is sold. It cannot deal with valid mortgage security debt.

Q: My developer cancelled my project. Is that good or bad?

A: It depends on your situation. If you would have lost money by completing the purchase, a cancellation might actually save you from bigger losses. You’ll get your deposit back, though it might take time. However, if you were counting on the condo for housing or investment, you’ll need to find alternatives in a difficult market. The key is understanding what the cancellation means for your specific situation.

Q: Should I use my retirement savings to cover condo losses?

A: Generally, no. Your retirement savings are often protected in bankruptcy and insolvency proceedings, so using them to cover real estate losses could make your overall financial situation worse. Before touching retirement funds, speak with a licensed insolvency trustee about protecting these important assets while dealing with your real estate debt.

Q: Can my spouse be affected by my condo debt problems?

A: If your spouse co-signed the mortgage or pre-construction contract, they’re equally responsible for the debt. Even if they didn’t sign, your debt problems can affect household finances and credit applications. However, each situation is different, and there are strategies to protect innocent spouses from their partner’s real estate debt problems.

Q: How long does the consumer proposal process take?

A: Once filed, a consumer proposal typically takes up to 45 days for creditors to vote on it. If accepted, you’ll make payments for up to five years. The entire process, from initial consultation to completion, usually takes about five to six years. During this time, you’re protected from creditor actions, and interest on your debts stops accumulating.

Q: Will I lose my family home if I file bankruptcy or a consumer proposal?

A: Not necessarily. There are provincial exemptions that often protect your primary residence, especially if there’s little equity in the property. The goal is usually to help you keep essential assets while dealing with problem debts. Each province has different rules, so you need advice specific to Ontario law and your particular situation.

Q: What happens to my credit rating after real estate debt problems?

A: Your credit will be affected, but the impact varies depending on what you choose to do. Missing mortgage payments hurts your credit. Consumer proposals appear on your credit report for three years after completion. Bankruptcy appears for six years after discharge. However, many people are surprised to find they can start rebuilding credit sooner than they expected, especially with professional guidance.

Q: Is it better to try to work things out with the developer or lender on my own?

A: While it’s always worth trying to communicate with creditors, real estate debt problems are complex legal and financial matters. Developers and lenders have teams of lawyers and financial experts working for them. You need professional representation to make sure your rights are protected and you’re getting the best possible outcome.

Q: Can I buy another property after dealing with real estate debt problems?

A: Yes, but it will take time to rebuild your credit and financial capacity. People who file consumer proposals often qualify for mortgages within 2-3 years of completion. Those who file bankruptcy might wait 2-4 years after discharge. The key is working with professionals who can help you rebuild your financial life properly.

Q: What should I do if I’m getting legal notices about my condo debt?

A: Don’t ignore legal notices – they have strict deadlines that could affect your rights. Bring any legal documents to your lawyer immediately. They can help you understand what the notices mean and what options you have to respond appropriately.

Q: Is there any way to predict when the Toronto condo market will recover?

A: Nobody can predict market timing with certainty, but recovery will likely take several years. The market needs to absorb the current oversupply, and economic conditions need to improve. More importantly for people in financial trouble, you can’t wait for market recovery if you’re facing immediate debt problems. Focus on protecting your financial future now rather than hoping for market improvements.

toronto condo market

Conclusion: Hope After the Toronto Condo Market Storm

The Toronto condo market troubles in 2025 have caused real pain for many people, but there’s also hope in these stories. Markets are cyclical, and Toronto remains one of the world’s most desirable places to live and work.

People who get professional help early often find ways to protect their financial future and move forward with their lives. The key is recognizing when you need help and being brave enough to ask for it.

If you’re struggling with real estate debt or other financial problems, don’t wait. The sooner you act, the more options you’ll have. There’s no shame in asking for help – in fact, it’s one of the smartest things you can do.

Your current financial problems don’t define you or your future. What matters is how you respond to them. With the right help and the right plan, you can get through this crisis and build a stronger financial foundation for the future.

Remember, you’re not alone in this struggle. Thousands of people across the Greater Toronto Area are facing similar challenges. The difference between those who recover and those who don’t is often simply reaching out for professional help when they need it most.

At Ira Smith Trustee & Receiver Inc., we’re here to help you navigate these difficult times and find a path forward. Contact us today for a free, confidential consultation. Your future self will thank you for taking action now.

Brandon Smith is a Licensed Insolvency Trustee with Ira Smith Trustee & Receiver Inc., helping individuals and businesses overcome financial challenges. Brandon is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. He serves the Greater Toronto Area. He gives kind and professional help to people with debt problems. He has helped many families navigate financial crises and build stronger financial futures. If you’re struggling with real estate debt or other financial issues, contact our office at (647) 799-3312 for a complimentary consultation.

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Tags assignment sales, bank of canada, bankruptcy alternative, Condo market 2025, Consumer Proposal, Financial problems Toronto, Greater Toronto Area, housing market, interest rates, licensed insolvency trustee, Pre-construction condos, project cancellations, Real estate debt, Real estate investment losses, toronto condo market, Toronto real estate crash, Toronto Regional Real Estate Board

Brandon Blog Post

EX PARTE MOTION BEST PRACTICES: WHY PROPER PROCEDURE MATTERS IN INSOLVENCY CASES

Post author By Brandon Smith
Post date September 22, 2025

ex parte motion

When a company faces financial distress, the path forward often depends on more than just the numbers on a balance sheet. The recent Canadoil Forge Ltd. case from Quebec’s Superior Court demonstrates how procedural fairness and judicial scrutiny can dramatically impact the outcome of receivership applications – even when the underlying financial issues remain largely unchanged. This is especially true when a party applies to the court with an ex parte motion.

As described below, there are two very different court decisions in this one case:

Séquestre de Royal Bank of Canada, 2025 QCCS 2906 (CanLII)

Séquestre de Canadoil Forge Ltd., 2025 QCCS 3066 (CanLII)

As a Licensed Insolvency Trustee who has handled countless corporate insolvency matters, I find this court case particularly instructive. It shows how the manner in which creditors approach the court can be just as important as the strength of their legal position. Let me walk you through what happened and why it matters for any business facing financial difficulties.

Ex Parte Motion Background: A Company in Crisis

Canadoil Forge Ltd. and CFC Canadoil Inc. were companies operating on both sides of the Canada-U.S. border for over four decades. Their main operation was a production facility in Bécancour, Quebec, generating approximately $30 million in annual revenue and employing over 100 people. This wasn’t a small startup – it was an established business with significant economic impact.

The company had two main lenders. The Royal Bank of Canada (RBC) held security over the moveable assets (inventory, accounts receivable, equipment), while Fiera Private Debt Funds (Fiera) held security over the immovable assets (real estate). This dual-lender structure is common in larger commercial financing arrangements, but it can create complications during financial distress.

The Financial Problems Surface

By 2025, several red flags had emerged:

Borrowing base issues: The companies allegedly misrepresented their financial position in calculations used to determine how much they could borrow
Hidden tax debts: Management failed to disclose a payment plan with the Canada Revenue Agency for over $4 million in unpaid payroll deductions
Questionable transactions: A recent payment of over $7 million to Giacomo Sozzi, a director and officer of the companies
Lack of cooperation: Management became uncooperative with the financial advisor, which RBC had appointed in June 2025 to review the company’s finances
Failed refinancing: Expected refinancing fell through, leaving the company without a financial lifeline

When RBC made a demand for repayment of its entire loan – approximately $12.5 million – giving the companies just over 30 days to repay, the stage was set for a receivership battle.

The First Ex Parte Motion Application: August 19, 2025 – A Procedural Ex Parte Order Disaster

RBC’s first attempt to obtain an interim receivership ex parte order was a textbook example of how not to approach the court. Here’s what went wrong in the case of Séquestre de Royal Bank of Canada, 2025 QCCS 2906 (CanLII:

Ex Parte Motion Applications: High Risk, High Reward

An “ex parte” application means only one party, the one who filed the Notice of Motion, making the emergency motion before the judge – the Applicant, is before the court. In this case, it was RBC as Applicant through its lawyers. Fiera’s lawyers were also in attendance. The debtor companies, which were the Respondents, weren’t notified or given a chance to present their side of the story. While such applications are permitted in urgent situations, they come with strict requirements.

Justice Morin of Quebec’s Superior Court was clearly uncomfortable with this approach from the outset. As he noted:

“Although an application for interim receivership may proceed on such a basis, the Court should be mindful that unless it is presented with strong evidence suggesting that the mere service of the application may severely further the depreciation of the creditors’ position, it should be wary of deciding such a proceeding based solely on a one-sided version of a complicated storyline.”

Inadequate Preparation and Disclosure

The procedural problems were glaring:

The court received the application materials in the “wee hours of the night” before a 2:00 PM hearing
The proposed interim receiver’s report was provided only three hours before the hearing
An amended version of the report arrived just one hour before the hearing began
Both bankruptcy rules and local court directives require materials to be filed at least one day before the hearing

This rushed approach violated basic procedural requirements and left the judge without adequate time to review complex materials involving a company with over 100 employees and $30 million in annual revenue.

The Duty of Full and Frank Disclosure

When applying ex parte, lawyers have what courts call a “super-added duty” to present not just their client’s case, but also any facts that might favour the other side. Justice Morin found this obligation wasn’t met. Most notably, RBC’s lawyers failed to notify the debtors’ insolvency counsel, even though they knew experienced practitioners represented the companies.

The court cited a Quebec Court of Appeal’s prior decision, emphasizing that an ex parte motion should be “taken sparingly, and only then on full disclosure and in circumstances where it is demonstrated that notice to other parties would undermine the purpose of the proceeding.”

Overreaching Relief Sought

RBC wasn’t just seeking to preserve assets – they wanted sweeping powers that went far beyond typical interim receivership temporary orders:

Full control over business operations
Power to suspend operations and lay off employees
Authority to issue subpoenas and examine company officers
A broad stay of proceedings
A $300,000 administrative charge ranking ahead of other creditors

As Justice Morin observed:

“This is far beyond the typical conservatory measures of an interim receivership order aimed at securing the property of the Debtors subject to the Bank’s collateral.”

The Business Was Still Viable

Critically, the evidence showed the business remained profitable. Draft audited financial statements indicated the company earned almost $4 million in profit for the year ending January 31, 2025, recovering from a $136,000 loss the previous year (caused by a strike and plant fire). The company was projecting operational profitability on a 13-week rolling basis.

This viability made the court especially reluctant to grant intrusive relief that could jeopardize ongoing operations and the livelihoods of over 100 employees. The court was not prepared, based on this ex parte motion, to make an ex parte order that would cause irreparable harm.

ex parte motion

Reasons Justice Morin Dismissed RBC’s First Ex Parte Motion Application

Justice Morin dismissed RBC’s application for several interconnected reasons:

Procedural unfairness: The ex parte motion approach wasn’t justified given the circumstances
Inadequate evidence of urgency: No showing that immediate action was necessary to prevent asset dissipation. The professionals involved did not take the additional steps necessary in this ex parte motion to make it clear to the court that this was an urgent motion deserving of not giving the other party notice.
Overreaching relief: The powers sought exceeded what was appropriate for interim receivership
Viable business operations: The company remained profitable and operational
Impact on stakeholders: Over 100 employees and numerous trade partners would be affected

The judge emphasized that interim receivership is meant to be “a short-lived band-aid, an interim measure, a safeguard ex parte order aimed at preserving the secured creditor’s rights and interests.” It’s not a tool for taking over a functioning business without proper justification and process.

The Second Ex Parte Motion Application: August 29, 2025 – A Different Story

Just 10 days later, RBC and Fiera returned to court with a joint application in Séquestre de Canadoil Forge Ltd., 2025 QCCS 3066 (CanLII). This time, the outcome was dramatically different. Justice Morin granted the interim receivership temporary order, noting:

“Whereas the first act was precipitated, this second act is far more convincing.”

Key Factors Distinguishing the Second Application

Several key factors distinguished the second application:

Proper Notice and Process The Applicants’ Notice of Motion was served in advance, the debtors were notified of the motion and had an opportunity to respond through experienced insolvency counsel. While they didn’t consent to the receivership, they didn’t actively oppose it either.
Management Resignation All directors and officers of the Canadian entity had resigned by the time of the second hearing, effectively leaving the company without leadership.
Acknowledgment of Financial Reality The debtors’ counsel confirmed they had attempted to find a commercial solution but couldn’t secure the funds needed to continue operations.
Joint Creditor Action Fiera joined as a co-applicant, presenting a united front from the major secured creditors rather than RBC acting alone.
Inadequate Response from Debtors The sworn declaration filed by the debtors failed to address key concerns raised in the applications. As Justice Morin noted, it offered “nothing in this document offers a structured explanation” regarding:

The company’s insolvency
Alleged misrepresentations to lenders
Next steps for addressing creditor concerns
A potential restructuring path
The purpose of the $7 million payment to Mr. Sozzi
Why were tax debts misrepresented

The Judge’s Ongoing Concerns

Even though the second ex parte motion application succeeded, Justice Morin highlighted several troubling aspects that insolvency professionals should note:

Court Concerns Over Employee Treatment

The court expressed serious concern about how employees were handled:

“100 employees are currently working at the Bécancour Plant, having no idea of what is going on in this Courtroom and the impact any Judgment of this Court will inevitably have on their livelihood as early as next week.”

The judge was particularly critical of management informing employees “à la dépêche” (hastily) that they wouldn’t need to come to work the following week, calling this approach inappropriate for an insolvency situation.

Dual Receiver Inefficiency

Initially, both RBC and Fiera wanted to appoint separate receivers for different asset classes. Justice Morin rejected this approach, emphasizing proportionality principles now embedded in Quebec’s Civil Code of Procedure. He noted that in a case where operations would likely be stayed pending a sale process, “the appointment of two receivers would add an unnecessary layer of complexity” and would cost more despite professional assurances to the contrary.

Need for Clear Direction

The court demanded clarity on several operational questions that the creditors hadn’t adequately addressed:

Would operations continue, or would there be mass layoffs?
Was the business viable with available receipts and cash?
What kind of sale and investment solicitation process was planned?
What were the timeline milestones?

These questions highlight the importance of having a clear post-appointment plan, not just a strategy for obtaining the receivership ex parte order.

Fiduciary Duties to All Stakeholders

Justice Morin reminded all parties that receivers are court officers owing fiduciary duties to all stakeholders, not just the secured creditors who initiated their appointment. This reflects modern insolvency practice, where value maximization for the entire stakeholder group is prioritized over narrow creditor interests.

ex parte motion

Key Ex Parte Motion Lessons for Businesses and Professionals

This case offers several important lessons for companies facing financial distress and the professionals who advise them:

For Distressed Companies:

Transparency is crucial: Attempting to hide problems from lenders typically backfires. The misrepresentations and lack of disclosure cited in this case became central to the creditors’ loss of confidence.
Professional help matters: Engaging experienced insolvency counsel early can help navigate complex situations and maintain creditor relationships.
Response quality counts: When facing serious allegations, a comprehensive, structured response addressing each concern is essential. Generic blame-shifting rarely persuades courts.
Employee communication: If insolvency proceedings become likely, having a proper communication strategy for employees is both ethically important and legally relevant.

For Lenders and Creditors:

Process matters: Even with strong substantive grounds, procedural shortcuts can derail applications and damage credibility with the court.
Proportionality is key: Courts increasingly scrutinize whether the relief sought matches the actual risks and circumstances.
Stakeholder impact: Modern insolvency law requires consideration of all affected parties, not just secured creditor interests.
Full disclosure obligations: Ex parte motion applications require complete candour, including facts that might favour the other side.

For Insolvency Professionals:

Preparation is essential: Last-minute filings and inadequate documentation create unnecessary risks and court skepticism.
Clear post-appointment plans: Courts want to see specific strategies for value preservation and maximization, not vague intentions.
Cost efficiency: Multiple professionals should be justified by clear benefits, not just creditor convenience.
Communication protocols: Establishing proper channels between professionals and stakeholders prevents confusion and builds confidence.

The Broader Context: Modern Insolvency Practice

The Canadoil case reflects broader trends in Canadian insolvency law. Courts are increasingly sophisticated about commercial realities and expect high standards from insolvency professionals. The emphasis on proportionality, stakeholder protection, and procedural fairness has grown significantly.

This evolution benefits the overall system by:

Encouraging early intervention and negotiated solutions
Protecting employment and business relationships where possible
Ensuring professional accountability
Maintaining public confidence in insolvency processes

However, it also means that creditors and professionals must be more diligent in their approach. The days of routine ex parte orders and creditor-focused solutions are largely over.

ex parte motion

Practical Implications for Your Business

If your company is experiencing financial difficulties, the Canadoil case highlights the importance of:

Early Professional Engagement: Don’t wait until a crisis hits to engage qualified insolvency professionals. Early intervention provides more options and better outcomes.

Transparent Communication: Maintaining open dialogue with lenders, even when delivering bad news, is generally preferable to surprises discovered through investigation.

Comprehensive Planning: Whether pursuing informal workouts, formal proposals, or liquidation, having detailed plans with clear timelines and stakeholder consideration is essential.

Employee Considerations: Your workforce is both a key asset and a significant stakeholder. Proper communication and treatment during distress can preserve value and goodwill.

Frequently Asked Questions About Ex Parte Motion in Business Insolvency

1. What is an ‘ex parte’ motion, and why is it considered a high-risk legal tool in insolvency?

For any director or creditor involved in a corporate restructuring, understanding the high-stakes nature of an ex parte motion isn’t just strategic—it’s essential for survival. An ex parte motion is a legal procedure where only one party, the Applicant seeking relief, appears before a judge. The other party, the Respondent, is not notified of the hearing and is therefore not present to provide their side of the story.

Courts are inherently wary of these motions precisely because of this one-sided nature. As Justice Morin noted in the Canadoil case, a court should be cautious about “deciding such a proceeding based solely on a one-sided version of a complicated storyline.” The risk of making a significant ruling based on incomplete information is substantial. Given this risk, courts impose exceptionally strict requirements on any party bringing an ex parte application, particularly concerning the duty of full and frank disclosure.

2. What is the “duty of full and frank disclosure” required in an ex parte motion?

This duty is the primary safeguard against the inherent procedural unfairness of a one-sided hearing. In an ex parte application, lawyers have what is known as a “super-added duty” of disclosure. This means they are obligated to present not only the facts that support their client’s case but also any material facts that might favour the absent party. This is one of the highest ethical bars in law, and as the Canadoil case shows, failing to clear it has immediate and severe consequences for an applicant’s credibility.

The first Canadoil application serves as a clear example of a failure to meet this high standard. RBC’s lawyers were aware that the debtor companies were represented by experienced insolvency counsel, yet they failed to notify them of the hearing. Citing the Quebec Court of Appeal, the court reiterated that an ex parte motion should be “taken sparingly, and only then on full disclosure.” Failing to meet this critical obligation was a central reason the bank’s first attempt to secure a receiver was rejected.

3. Why did the court initially reject the bank’s request for an interim receiver in the Canadoil case?

The failure of RBC’s first application provides a powerful lesson in the importance of procedural diligence and proportionality. Justice Morin dismissed the motion based on a combination of procedural errors and substantive overreach, which can be summarized as follows:

• Procedural Unfairness: The motion was fundamentally unfair due to its rushed nature. The proposed interim receiver’s report was provided only three hours before the hearing, with an amended version arriving just one hour before it began. This violated court rules requiring materials to be filed at least one day in advance and left the judge with inadequate time to review a complex file.

• Inadequate Evidence of Urgency: The bank failed to provide strong evidence that notifying the debtors would cause further depreciation of assets. The court was not convinced that the situation was so urgent that it justified sidestepping the normal court process and denying the other party a chance to be heard.

• Overreaching Relief Sought: The powers RBC requested went far beyond the typical purpose of an interim receiver, which is meant to be a “short-lived band-aid” to preserve assets. RBC sought sweeping control, including the authority to suspend operations, lay off employees, and issue subpoenas, which the court deemed disproportionate.

• Ongoing Business Viability: Evidence showed that the company was not defunct but was, in fact, profitable. Audited financial statements indicated a profit of nearly $4 million for the year ending January 31, 2025, and the company was projecting continued operational profitability.

• Impact on Stakeholders: The court explicitly considered the significant negative impact the requested order would have on the company’s more than 100 employees and its various trade partners, who would be blindsided by such a drastic measure.

The combination of these procedural missteps and the excessive nature of the relief sought doomed the first application, demonstrating that even a creditor with legitimate concerns must approach the court with fairness and respect for process.

4. What key factors led to the success of the second receivership application just ten days later?

The success of the second application, filed jointly by RBC and Fiera, illustrates how correcting procedural flaws and responding to new developments can completely change a legal outcome. The underlying financial issues remained, but the context and process were fundamentally different.

Proper Notice and Process: The second time, the debtors were properly served with the motion and were represented by their own experienced insolvency counsel. While the debtors did not consent, they also did not actively oppose the motion, addressing the primary procedural defect of the first hearing.
Change in Management: A critical new development had occurred: all directors and officers of the Canadian company had resigned. This left the business without any leadership, creating a genuine urgency to appoint a receiver to take control and preserve assets.
Acknowledgment of Financial Reality: The debtors’ own counsel acknowledged in court that they had been unable to find a commercial solution or secure the necessary funds to continue operations, effectively conceding the company’s financial predicament.
United Creditor Front: The second application was brought jointly by RBC and Fiera, the two primary secured lenders. This presented a united front and demonstrated to the court that the key financial stakeholders were aligned on the necessary course of action.
Inadequate Debtor Response: Justice Morin was highly critical of the sworn declaration filed by the debtors. He noted that it failed to provide a “structured explanation” for a number of critical issues, including: the company’s insolvency, the alleged misrepresentations to lenders, the company’s next steps, a potential restructuring path, the purpose of the $7 million payment to Mr. Sozzi, and why tax debts were misrepresented. This lack of a substantive defence critically weakened their position.

While this second application was successful, the judge still raised significant concerns about the handling of the matter, particularly regarding the treatment of key stakeholders like employees.

5. How do courts in modern insolvency cases view the impact on employees?

The court’s focus on the employees in the Canadoil case reflects a broader and important trend in Canadian insolvency law: a growing emphasis on considering the interests of all stakeholders, not just secured creditors. The judge’s perspective shows that the human impact of an insolvency proceeding is a relevant and material factor in the court’s decision-making process.

Justice Morin expressed direct concern, stating: “100 employees are currently working at the Bécancour Plant, having no idea of what is going on in this Courtroom and the impact any Judgment of this Court will inevitably have on their livelihood as early as next week.” He was particularly critical of how management informed the workforce “à la dépêche” (hastily) about a work stoppage, calling the approach inappropriate. This judicial scrutiny makes it clear that the manner in which a company’s workforce is treated during a period of financial distress is not a private matter but a factor that can influence a court’s evaluation of an insolvency application. This stakeholder-focused approach provides important lessons for any business owner navigating financial challenges.

6. For a distressed business owner, what are the most critical takeaways from the Canadoil case?

The Canadoil saga offers a clear roadmap of what to do—and what not to do—when a business is facing significant financial challenges. For any director or owner, this case highlights several critical lessons for navigating a crisis effectively.

• Prioritize Transparency: Attempting to hide problems, such as the undisclosed payroll tax debts in this case, inevitably erodes lender confidence and ultimately backfires in court. In my experience, what lenders fear most isn’t bad news; it’s surprises. This case is a perfect illustration of that principle.

• Engage Professionals Early: The involvement of experienced insolvency counsel is not a sign of failure but a strategic necessity. These professionals can help navigate complex creditor relationships, ensure procedural fairness, and prevent costly missteps that can jeopardize the company.

• Provide Substantive Responses: When faced with serious allegations from creditors, generic denials or attempts to shift blame are unpersuasive to a court. A comprehensive, structured, and evidence-based response that directly addresses each concern is required to be taken seriously.

• Develop an Employee Communication Strategy: The proper and ethical treatment of employees is more than just a moral duty; it is a legally relevant factor that courts consider. A well-planned communication strategy for your workforce is critical for preserving value and demonstrating responsible leadership.

Ultimately, the most effective strategy for preserving a company’s value and achieving the best possible outcome is to engage with financial problems proactively, transparently, and with the guidance of qualified professionals.

ex parte motion

Conclusion: Why Process and Substance Both Matter in an Ex Parte Motion

The Canadoil case demonstrates that in modern insolvency practice, how you seek relief through an ex parte motion can be as important as what you’re trying to achieve. RBC had legitimate concerns about the companies’ financial condition and management conduct in both applications. The underlying facts didn’t change significantly between August 19 and August 29, 2025.

What changed was the process. The failed ex parte motion highlighted the importance of proper procedures, adequate disclosure, and genuine urgency. The second application succeeded by following proper notice requirements and addressing the court’s concerns about stakeholder impact and proportionality. Even with these improvements, Justice Morin identified significant issues with how the situation was handled.

For businesses facing financial distress, this case underscores the value of engaging experienced professionals early and maintaining transparent relationships with stakeholders. For creditors considering an ex parte order, it demonstrates that even strong legal positions require proper presentation, complete disclosure, and consideration of broader impacts.

The insolvency system works best when all parties approach it with professionalism, transparency, and respect for established procedures. The Canadoil case shows both what can go wrong when these standards aren’t met in ex parte motions and what becomes possible when they are.

Final Ex Parte Motion Thoughts

Running a company in the GTA isn’t easy. The key is recognizing problems early and getting professional help when you need it.

As a Licensed Insolvency Trustee with extensive experience helping GTA companies, I’ve seen them recover from seemingly impossible situations. With the right approach, your business can not only survive current challenges but also emerge stronger and more profitable.

Remember, seeking help isn’t a sign of failure – it’s a smart business decision that can save your company, protect your employees’ jobs, and preserve your investment in your business.

If you’re ready to take the next step, contact a Licensed Insolvency Trustee today. Your business and your peace of mind are worth the phone call.

If your business is facing financial challenges, don’t wait until it’s too late. Early intervention provides more options and better outcomes. Contact Ira Smith Trustee & Receiver Inc. today to discuss your situation confidentially and explore your options.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with an overwhelming debt crisis, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your options.

Licensed Insolvency Trustee Services in GTA

Free consultation available:

No obligation to proceed
Complete review of your Canadian business debt and credit situation
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both a debt crisis and credit score problems.

As a licensed insolvency trustee in the Greater Toronto Area, I tell consumers and business owners to see financial problems not as failures but as challenges. Proper guidance can solve them. By knowing the warning signs of insolvency and getting professional advice early, many people and businesses find a way forward. They can restructure, make strategic changes, or wind down in an orderly way that protects future chances.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help Canadian entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of a debt crisis. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

Personalized Debt Relief Solutions

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your Canadian company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President of Ira Smith Trustee & Receiver Inc. With extensive experience in corporate insolvency and restructuring matters, Brandon assists businesses and individuals in navigating financial distress throughout the GTA and Ontario. For confidential consultation regarding your business’s financial situation, contact Ira Smith Trustee & Receiver Inc.

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Brandon Blog Post

A CANADA TRUSTEE’S COMPLETE VIEW OF CANADA’S ‘TWO-SPEED’ ECONOMY: WHY CONSUMER INSOLVENCIES ARE SOARING WHILE CORPORATIONS AREN’T

Post author By Brandon Smith
Post date September 15, 2025

Canada trustee

The economy, much like a highway during rush hour, can move at different speeds. For some, it’s a smooth, open road. For others, it’s a gridlock of financial stress and mounting debt. As a Canada Trustee, I just read the new 2024-25 Annual Report from the Office of the Superintendent of Bankruptcy (OSB). It shows that Canada’s economy is looking more and more like this “two-speed” highway.

On one side, we have everyday Canadians and small businesses facing a significant increase in financial trouble requiring help with debt solutions. On the other hand, large corporations appear to be cruising along, handling economic bumps with ease. This striking difference is at the heart of the OSB’s 2024-25 Annual Report. It tells a powerful story about why more people are struggling and what the country’s official insolvency watchdog is doing about it.

This blog post will explore the key findings of the report, dive into the reasons behind this two-speed economy, and explain the important role of a Canada Trustee in helping people navigate these challenging times.

The Numbers Tell the Story: A Tale of Two Economies

The most surprising and important finding in the OSB’s report is the clear split between consumer and corporate financial health. The numbers don’t lie.

First, let’s look at the side of the road where most people are stuck: the world of consumer debt.

The OSB accepted 143,864 insolvency filings in the 2024-25 fiscal year.
This represents a notable increase of 7.6% from the year before.

To put this into perspective, an insolvency filing is when an individual or a small business officially asks for help with their debts, usually through a bankruptcy or a consumer proposal. Both these administrations occur under the Canadian Bankruptcy and Insolvency Act (BIA). A 7.6% jump in one year is a significant red flag. It points to a growing number of Canadians who are feeling the squeeze and can no longer keep up with their financial commitments.

Now, let’s look at the other side of the highway, where the big companies are. The OSB also tracks filings under the Companies’ Creditors Arrangement Act (CCAA). The CCAA is a law used by large corporations that need to restructure and reorganize their business when they are in serious financial trouble.

There were only 70 CCAA filings in 2024-25.
This is actually a decline of 2.8% from the previous year.

This is the core of the “two-speed” economy. The number of everyday people needing help is climbing fast, while the number of big companies in distress is going down. This trend suggests a Canada where financial stability depends heavily on your size. If you are a large, well-established company, you have been able to navigate recent economic challenges. But if you’re an individual, a family, or a small business, the ride has been much bumpier.

Why Are More Canadians Drowning in Debt?

The OSB report doesn’t go into a deep analysis of the “why” behind these numbers, but it points to some key factors that are widely recognized as the main drivers of financial stress. These are not new headlines, but their combined effect has been felt more deeply this year.

Inflation and the Rising Cost of Living: We’ve all felt it at the grocery store, the gas pump, and in our monthly bills. Inflation means that our money doesn’t go as far as it used to. For many families, this has made it harder and harder to afford the necessities of life. When prices for food, housing, and transportation keep climbing, it leaves less money for everything else, making it difficult to pay off existing debts.
High Interest Rates: Over the past couple of years, central banks have raised interest rates to try and control inflation. While this is a necessary step for the economy, it has a direct and painful effect on anyone with a mortgage, car loan, or credit card debt. Higher interest rates mean that more of your money goes toward interest payments and less goes toward paying down the actual debt. This can turn a manageable debt load into an impossible one very quickly. A higher interest rate on a mortgage can add hundreds, or even thousands, of dollars to a person’s monthly expenses, putting immense pressure on their budget.

When you combine these two factors, you get the perfect storm for consumer financial distress. A family might be earning the same income, but their expenses are higher, and the cost of servicing their debt is higher. Something has to give, and for many, that “something” is their ability to stay on top of their financial obligations. It’s a situation where hard work and careful budgeting are simply not enough to keep up with the rising costs. This is often the point where people begin to look for solutions and seek the help of a Canada Trustee.

Why Are Big Companies Staying Afloat?

The other half of the story is why large corporations seem to be faring so much better. While the OSB report does not provide a detailed explanation for this, we can draw some logical conclusions based on the nature of a large business.

Large companies are often more resilient to economic headwinds than small businesses or individuals. They have some advantages that help them ride out the storm:

Financial Resources: Large corporations typically have significant cash reserves and better access to credit. This means they can absorb higher costs and interest rates more easily. They can borrow money at lower rates and for longer terms than an individual.
Diversification: Many big companies operate in multiple industries or regions. If one part of their business is struggling, another part might be thriving, helping to balance things out.
Ability to Absorb Costs: Large companies have more power to pass along increased costs to their customers without losing them. They also have the resources to find ways to cut costs in their own operations, such as by streamlining processes or using new technology.

This creates a clear imbalance. While a single person might be overwhelmed by a credit card payment jump of $50, a large corporation can absorb an increase of millions of dollars in interest payments without having to file for protection. The system is designed to allow large corporations to handle big economic swings, but it leaves individuals and small businesses much more exposed. This is why the role of a Canada Trustee becomes so crucial.

Introduction: Understanding the Role of a Trustee in Canada

The OSB’s report mentions that a Canada Trustee is a key figure in the country’s insolvency system. But what exactly are licensed insolvency trustees, and what do they do? The term “trustee” is used to describe a professional who holds property and acts on behalf of others. This role is a foundation of Canada’s legal and financial system.

What is a Canada Trustee? Defining the Core Concept

Licensed Insolvency Trustees are federally regulated professionals. They help people and businesses with serious debt problems. They are the only professionals allowed to handle insolvencies in Canada. The OSB report shows they play a key role during financial hardship. They act as a link between a person in debt and their creditors. The person who gives the property to the trustee is called in this case, a bankrupt.

The Foundation of Trust: Legal Framework and Fiduciary Duty

The most important part of being a Canada Trustee is the “fiduciary duty.” The word “fiduciary” comes from a Latin word that means “trust,” and this is the core of the relationship. A trustee has a legal and moral obligation to always act with honesty, loyalty, diligence, and prudence. They must put the interests of the beneficiaries or creditors ahead of their own. This means they must avoid any personal conflicts of interest and not try to profit from their role. The trustee must also be ready to account for everything they do, keeping accurate records of all financial transactions concerning the trust property.

Why Canada Trustees are Essential in the Canadian Landscape

Trustees are an essential part of the Canadian legal landscape because they provide a way for someone to manage important assets or affairs for another person, especially if that person is unable to do so themselves. A trustee can be appointed in a will, chosen through a separate trust document, or appointed by a court. For instance, a trustee can be appointed to manage an inheritance for a minor or to handle the finances of an adult who is no longer capable of making their own decisions and handling their financial situation on their own.

Canada trustee

The Diverse Landscape of Trusteeship in Canada

While the blog focuses on the Licensed Insolvency Trustee, it’s important to know that the term “trustee” covers a wide range of roles in Canada.

Licensed Insolvency Trustees (LITs): Navigating Financial Hardship

This is the specific type of Canada Trustee that the OSB report focuses on. A Licensed Trustee is a professional who specializes in helping individuals and businesses with serious debt problems. They are the only professionals legally authorized to administer insolvencies in Canada. As the OSB report shows, they play a critical role in times of financial hardship, acting as a link between a person in debt and their creditors.

Estate Trustees (Executors): Stewarding Legacies

An Estate Trustee, often called an executor, is a person named in a will to manage and settle the affairs of someone who has died. Their duties are numerous, including making funeral arrangements, locating all of the deceased’s assets, paying off any debts and taxes, and finally, distributing what is left to the beneficiaries as directed by the will.[8, 9] It is a legally demanding role that requires careful attention to detail.

The Public Guardian and Trustee (PGT): Protecting Vulnerable Interests

Each province has a Public Guardian and Trustee, a government office created to protect the legal and financial interests of the most vulnerable people in society.[10, 11, 12, 13] The PGT acts as a trustee of last resort when there is no trusted family or friend available to do so.[10, 13] This includes protecting the interests of mentally incapable adults, children under a certain age, and deceased or missing persons when no one else can administer their estate.

Professional Trustees and Trust Companies: Specialized Asset Management

For those with large or complex estates, or when family conflicts are a concern, a professional trustee or trust company can be appointed to handle the trust property. These are professional fiduciaries—often a trust department of a bank or a private trust company—that are fully staffed with experts in law, taxes, and finance. They offer expertise and impartiality and can take on the day-to-day work of managing a trust.

Judicial Trustees: Court-Appointed Oversight

In some cases, a court may appoint a judicial trustee.] This happens when a person with mental or physical challenges needs help with their finances, and there is no one else to step in. A judicial trustee is authorized by the court to manage a person’s money and property, ensuring their bills are paid and their needs are met.

Core Responsibilities and Fiduciary Duties of a Trustee

Regardless of the type, every Canada Trustee is held to a high standard of conduct and has specific duties that are legally binding.

The Paramount Fiduciary Duty: Acting in the Best Interest of Beneficiaries/Creditors

An Estate Trustee, also called an executor, is named in a will to manage and settle a deceased person’s affairs. Their duties include making funeral arrangements, finding all assets, paying debts and taxes, and distributing what is left to beneficiaries as the will directs. This role requires careful attention to detail. The licensed trustee firm, Ira Smith Trustee & Receiver Inc., also acts as a court-appointed independent Estate Trustee.

Prudent Management of Trust Property and Assets

A Canada Trustee has a duty to manage and invest the assets they control responsibly and prudently. This means they must make informed decisions and act as a careful person would in similar circumstances. They must avoid risky or speculative investments and must treat all beneficiaries fairly.

Legal Compliance and Regulatory Adherence

A trustee must always follow the law. This can be complex, as a Canada Trustee must comply with a range of federal and provincial laws, as well as the terms of any will or trust document. For example, an Estate Trustee must ensure that all debts and taxes are paid before distributing assets, or they could face personal liability. In Ontario, the Trustee Act comes into play.

Reporting, Disclosure, and Accountability

A trustee must keep detailed and accurate records of all transactions and be ready to show these to the beneficiaries at any time. This “duty to account” is a crucial part of their role, ensuring that they are transparent and accountable for their actions. If a trustee fails in their duties, they can be removed by the court and ordered to pay for any losses.

Trustee Remuneration: Compensation for Services Rendered

Trustees are entitled to be paid for their services.] How much they are paid is usually determined by the will or trust document, or if not specified, it is decided by provincial law or the court. For example, the Public Guardian and Trustee of British Columbia charges prescribed fees for their services, typically ranging from 3% to 5% of the estate’s value.

Canada trustee

Navigating Financial Challenges: How Trustees Provide Debt Relief

As the OSB report highlights, the need for debt relief is growing. This is where the Licensed Insolvency Trustee becomes the most relevant kind of Canada Trustee for many people.

Understanding Financial Difficulties and Debt Problems

The first step in seeking help is acknowledging the problem. The OSB report shows that more Canadians are facing a financial gridlock due to factors like high interest rates and the rising cost of living. When you find yourself unable to pay your bills, a Licensed Insolvency Trustee is the professional to consult.

Options for Individuals: Consumer Proposals and Personal Bankruptcy

While consumer credit counselling can help many Canadians manage their debts, sometimes your financial situation requires more powerful legal solutions. When your debt load exceeds what you can realistically repay through traditional methods, consumer proposals and personal bankruptcy offer legal protection and genuine fresh starts.

As a Licensed Insolvency Trustee serving the Greater Toronto Area, I help people understand when these formal insolvency options become necessary alternatives to credit counselling. These government-regulated processes can eliminate or significantly reduce your debts while protecting you from creditor actions – something that consumer credit counselling services cannot legally provide.

If you’re facing overwhelming debt that exceeds 40% of your annual income, dealing with aggressive collection actions, or finding that minimum payments aren’t making a real dent in your balances, it may be time to explore these more comprehensive debt relief solutions that only Licensed Insolvency Trustees can administer:

Consumer Proposals: A consumer proposal is a legally binding offer to your creditors to pay back a portion of what you owe over a set period (up to five years).
Personal Bankruptcy: This is a legal process that allows you to be released from your debts and get a fresh financial start.

A Licensed Insolvency Trustee ensures that your rights are protected throughout these processes.

Corporate Insolvency and Restructuring

Beyond personal debt, a Licensed Insolvency Trustee also plays a key role in helping businesses that are in financial trouble. They can help companies reorganize and restructure their debt, which can save the business and its jobs. The OSB report’s mention of a decline in corporate filings suggests that this part of the economy is holding steady, but the service remains critical for businesses in distress.

Choosing the Right Canada Trustee for Your Specific Needs

The type of Canada Trustee you need depends entirely on your situation. Knowing who to turn to is the first step toward finding a solution.

When to Consult a Licensed Insolvency Trustee

You should consult a Licensed Insolvency Trustee when you are facing debt problems that you cannot solve on your own. They are the only ones who can legally help you with options like a consumer proposal or bankruptcy. A consultation with an LIT is free and will help you understand your situation and your legal options without any obligation.

When to Plan for an Estate Trustee/Executor

This is a step you should take when you are planning your will. Naming a trustworthy and competent person or company as your Estate Trustee is crucial for ensuring that your wishes are carried out and your beneficiaries are protected.

When the Public Guardian and Trustee May Be Involved

The PGT is an office of last resort. This means you should only expect them to be involved if there is no other suitable person to act as a trustee for a vulnerable individual or an estate. If you are worried about a family member who needs help, but no one is available to act, you can contact the PGT’s office.

When to Engage a Professional Trustee or Trust Company

A professional trustee is a good choice if you have a large and complex estate, or if you anticipate conflicts between family members after your death. They can provide professional expertise and impartiality, which can save a lot of stress and family disputes in the long run.

Key Factors in Trustee Selection

When choosing any type of Canada Trustee, remember to consider factors beyond just a personal relationship. Trustworthiness is a given, but you should also look for someone with the right skills, knowledge of tax and legal requirements, and the ability to act prudently and impartially.

Canada trustee

Regulatory Oversight and Professional Standards for Canadian Trustees

The different types of trustees in Canada are held accountable by various regulatory bodies and legal frameworks, ensuring they maintain high professional standards.

Licensed Insolvency Trustees (LITs): As the OSB report makes clear, LITs are strictly regulated by the Office of the Superintendent of Bankruptcy. The OSB conducts office visits, initiates compliance actions, and launches professional conduct investigations to ensure that LITs are following all the rules.
Estate Trustees: The duties of an Estate Trustee are regulated by provincial laws and overseen by the courts. If a trustee fails in their duties or mismanages an estate, the courts can remove them and hold them personally responsible for any losses.
Public Guardian and Trustee (PGT): These are government-appointed roles, and their authority and duties are set out in provincial laws.] They are held to the highest ethical and legal standards.
Trust Companies: Trust companies, which are often a part of a bank, are highly regulated entities.[16] They are regulated at the federal level by organizations like the Financial Consumer Agency of Canada (FCAC) and the Office of the Superintendent of Financial Institutions (OSFI).

Canada Trustee Conclusion

The OSB’s 2024-25 Annual Report shows that Canada’s economic reality is difficult for a growing number of people. In this “two-speed” economy, the role of a trusted professional like a Canada Trustee is more important than ever. Whether you need help with debt, are planning your will, or are a family member of a vulnerable person, knowing who these professionals are and how they can help is the first step toward securing your financial future.

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost-of-living and debt challenges and move towards a more secure and hopeful financial future.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your debt relief options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt relief options affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

As a licensed insolvency trustee serving the Greater Toronto Area, I encourage consumers and business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of insolvency and seeking professional advice early, many people and businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

Canada trustee

Brandon Blog Post

CONSUMER CREDIT COUNSELING CANADA: OUR COMPLETE GUIDE ON COSTS, BENEFITS & ALTERNATIVES

Post author By Brandon Smith
Post date September 8, 2025

consumer credit counseling

Are you struggling with debt and feeling overwhelmed by financial stress? Consumer credit counseling might seem like the answer, but recent government investigations reveal that some debt advisory services may cost you more than they save.

As a Licensed Insolvency Trustee serving Toronto, Mississauga, Brampton, and Markham for decades, I’ve helped many people in the Greater Toronto Area navigate their debt challenges. In this comprehensive guide, I’ll explain what consumer credit counselling really offers, how to find legitimate help, and what alternatives might be better suited to your situation.

Navigating Financial Stress: Understanding Consumer Credit Counseling

Financial difficulties affect millions of Canadians every year. The stress of mounting bills, collection calls, and uncertain futures can feel overwhelming. Consumer credit counseling presents itself as a solution, but understanding what it truly offers is crucial for making informed decisions about your financial future.

What is Consumer Credit Counseling?

Consumer credit counseling involves working with a certified credit counselor to address your debt problems. These services typically include:

Reviewing your complete financial situation
Creating personalized budgets and payment plans
Providing financial education and money management skills
Negotiating with creditors on your behalf
Offering ongoing support throughout your debt repayment journey

The goal is to help you regain control of your finances while avoiding more drastic measures like bankruptcy.

Who Can Benefit from Consumer Credit Counseling?

Consumer credit counseling can be helpful for people who:

Have steady income but struggle to manage multiple debts
Want to learn better budgeting and money management skills
Feel overwhelmed by financial decisions
Need help negotiating with creditors
Want to avoid bankruptcy or consumer proposals

However, consumer credit counseling isn’t right for everyone. If your debt is too high relative to your income, or if you’re facing immediate legal action from creditors, other debt relief options might be more appropriate.

The Empathetic Approach to Debt Relief and Financial Wellness

Legitimate consumer credit counseling recognizes that financial problems often involve more than just money. Good credit counselors understand the emotional stress of debt and provide compassionate, judgment-free support.

What empathetic counseling includes:

Active listening without blame or shame
Personalized solutions that fit your unique situation
Emotional support during difficult financial decisions
Education that empowers rather than overwhelms
Realistic timelines that consider your circumstances

The Foundation of Financial Recovery: What is Consumer Credit Counseling?

Understanding the fundamentals of consumer credit counseling helps you make informed decisions about whether it’s right for your situation.

Defining Consumer Credit Counseling

Consumer credit counseling is a service that helps people manage debt through education, budgeting assistance, and debt management plans. Legitimate consumer credit counseling agencies are typically non-profit organizations that charge minimal fees or offer free services.

Core components include:

Financial assessment and budget analysis
Debt management plan creation
Creditor communication and negotiation
Financial education and skill building
Ongoing support and monitoring

The Role of a Credit Counsellor: Your Trusted Financial Advisor

A qualified credit counsellor serves as your advocate and educator. They should:

Assess your situation objectively without pushing specific solutions
Educate you about all available options, not just their services
Communicate clearly in language you understand
Respect your decisions and provide unbiased advice
Maintain confidentiality about your financial information

Red flag: Be cautious of counselors who immediately push expensive services or demand upfront payments.

Emphasizing Non-Profit Credit Counseling Organizations

Non-profit consumer credit counseling agencies often provide the most trustworthy services because they:

Focus on education rather than profit
Charge minimal fees (often $20-50 for services)
Receive funding from creditors and donations
Must meet strict accreditation standards
Provide transparent fee structures

Examples of reputable non-profit agencies in Canada:

Credit Canada Debt Solutions
Non-Profit Credit Counselling Service
Provincial consumer credit counseling services

Initial Debt Evaluation: A Holistic Review of Your Financial Situation

The first step in consumer credit counseling involves a comprehensive review of your finances. This should include:

Complete debt inventory: All credit cards, loans, and other obligations
Income analysis: All sources of regular income
Expense review: Fixed and variable monthly expenses
Asset assessment: Property, investments, and valuable possessions
Credit report review: Understanding your credit history and score

This evaluation helps determine whether credit counseling is appropriate or if other debt relief options would work better.

consumer credit counseling

Why Choose Consumer Credit Counseling? Beyond Just Paying Off Debt

Credit counseling offers benefits that extend beyond simple debt repayment, addressing the root causes of financial stress.

Alleviating Financial Stress and Improving Mental Health

Financial problems create significant stress that affects your entire life. Quality credit counseling helps by:

Providing clarity about your financial situation
Creating realistic plans that reduce anxiety about the future
Offering emotional support during difficult times
Teaching coping strategies for financial stress
Restoring hope that your situation can improve

Studies show that people who complete credit counseling programs report significant improvements in their mental health and overall well-being.

Gaining Control Over Your Finances and Achieving Financial Freedom

Credit counseling helps you develop skills and habits that lead to long-term financial stability:

Better budgeting skills that prevent future debt problems
Improved money management through practical tools and techniques
Understanding of credit and how to use it responsibly
Emergency planning to handle unexpected expenses
Goal setting for future financial objectives

Receiving Personalized Financial Education and Budgeting Guidance

One of the most valuable aspects of consumer credit counseling is the education component. You’ll learn:

How to create and stick to realistic budgets
Strategies for reducing expenses without sacrificing quality of life
How to prioritize debt payments for maximum impact
Ways to increase income through career development
Long-term financial planning techniques

Stopping Collection Calls and Protecting Your Consumer Rights

When you enter a debt management plan through consumer credit counseling, creditors typically agree to stop collection activities. This provides immediate relief from:

Constant phone calls and letters
Threats of legal action
Stress and anxiety from creditor harassment
Confusion about your rights as a debtor

However, it’s important to understand that this protection isn’t automatic and depends on creditor cooperation.

Your Path to Financial Stability: The Step-by-Step Credit Counseling Process

Understanding what to expect from consumer credit counseling helps you prepare for success and identify quality services.

Step 1: The Confidential Debt Evaluation and Budget Counseling Session

Your first meeting with a credit counselor should be comprehensive and confidential. During this session:

Complete financial review: Every debt, income source, and expense
Credit report analysis: Understanding your current credit standing
Budget creation: Realistic monthly spending plan
Option exploration: All available debt relief strategies
Initial recommendations: Preliminary advice based on your situation

Important: This initial consultation should be free or very low cost (under $50).

Step 2: Crafting Your Personalized Debt Management Plan (DMP)

If a debt management plan is appropriate for your situation, your counselor will:

Calculate affordable payments based on your budget
Contact creditors to negotiate terms and interest rates
Consolidate payments into one monthly amount
Set realistic timelines for becoming debt-free
Explain all terms clearly before you commit

Key point: You should never feel pressured to sign up immediately. Take time to review and understand all terms.

Step 3: Communication and Advocacy with Creditors

Your credit counselor will serve as your advocate with creditors, working to:

Negotiate lower interest rates (often 0-10% instead of 18-25%)
Waive late fees and penalties that have accumulated
Stop collection activities during plan participation
Establish reasonable payment terms you can actually afford
Provide regular updates on your progress

Step 4: Ongoing Support, Financial Education, and Achieving Debt Free Status

Throughout your debt management plan, quality credit counseling includes:

Regular check-ins to monitor progress and address challenges
Continued education through workshops and resources
Budget adjustments when your circumstances change
Credit rebuilding guidance as you approach debt freedom
Graduation planning for maintaining financial health after completion

Most debt management plans take 3-5 years to complete, with many people becoming debt-free faster through improved financial habits.

consumer credit counseling

Debt Management Plans (DMPs) Explained: Key Benefits and Considerations

Debt management plans are the primary tool used in credit counseling, but they’re not right for everyone.

What Types of Debts are Included in a DMP?

Debt management plans typically include all unsecured debt:

Credit cards (all major issuers usually participate)
Store credit cards and retail financing
Personal loans from banks and credit unions
Medical debt and professional service bills
Some collection accounts (depending on the creditor)

Debts usually NOT included:

Secured debts (mortgages, car loans)
Government debts (taxes, student loans)
Court judgments and garnishments
Debt to family and friends

How DMPs Can Offer Interest Relief and Lower Monthly Payments

The primary benefits of debt management plans include:

Reduced interest rates: Often lowered to 0-10%
Waived fees: Late charges and over-limit fees eliminated
Single payment: One monthly payment instead of multiple bills
Fixed timeline: Clear end date for becoming debt-free
Creditor cooperation: Reduced collection activities

Example: Sarah owed $25,000 on five credit cards with an average interest rate of 22%. Through a DMP, her rate dropped to 8%, reducing her monthly payment from $890 to $520 and cutting three years off her repayment time.

The Impact of a DMP on Your Credit Score: Myth vs. Reality

There are many misconceptions about how debt management plans affect credit scores:

Myths:

“DMPs destroy your credit score”
“It’s as bad as bankruptcy on your credit report”
“You can’t get credit while on a DMP”

Reality:

DMPs may initially lower your score by 50-100 points
Your score typically recovers within 12-18 months
The impact is much less severe than bankruptcy or debt settlement
Many people see improved scores as they pay down debt
You can often qualify for new credit after 12 months of on-time payments

Comparing Your Options: Credit Counseling vs. Other Debt Relief Solutions

Understanding all your options helps you make the best choice for your specific situation.

Credit Counseling vs. Debt Consolidation Loans

Credit Counseling:

No new loan required
Works with existing creditors
Provides education and support
Minimal fees (usually under $100)
Available even with poor credit

Debt Consolidation Loans:

Requires qualifying for a new loan
May offer lower interest rates
No ongoing support or education
Higher fees (origination fees, interest)
Difficult to qualify with damaged credit

Best for: Credit counseling works better if you can’t qualify for a low-interest consolidation loan or need ongoing support.

Credit Counseling vs. Debt Settlement

Credit Counseling:

Pays creditors in full (with reduced interest)
Minimal impact on credit score
Creditors cooperate with the process
Non-profit options available
Educational focus

Debt Settlement:

Attempts to pay less than full balance
Severely damages credit score
Creditors may not cooperate
High fees (15-25% of debt)
No guarantee of success

Warning: Debt settlement companies often charge high fees with poor results and significant credit damage.

Credit Counseling vs. Bankruptcy and Consumer Proposal

Credit Counseling:

No court involvement
Pay debts in full (with concessions)
Less severe credit impact
Keep all assets
No public record

Bankruptcy/Consumer Proposal:

Legal court process
Debt is eliminated or significantly reduced
More severe credit impact (6-7 years)
May lose some assets
Public record of filing

When bankruptcy/proposals are better:

Debt is too high relative to income
Facing immediate legal action
Need immediate creditor protection
Assets at risk of seizure

As a Licensed Insolvency Trustee, I can help you understand when these legal options might be more appropriate than credit counseling.

The DIY Approach: Self-Managed Debt Repayment

Some people successfully manage debt repayment on their own using strategies like:

Debt snowball: Paying minimum on all debts, extra on smallest balance
Debt avalanche: Paying minimum on all debts, extra on highest interest rate
Balance transfers: Moving debt to lower-interest credit cards
Direct creditor negotiation: Working with creditors yourself

DIY works best when:

You have strong self-discipline
Your debt load is manageable
You understand financial principles
You don’t need emotional support

Credit counseling is better when:

You need structure and accountability
You want professional creditor negotiation
You need financial education
You benefit from ongoing support
consumer credit counseling

Warning Signs: Avoiding Problematic Consumer Credit Counseling Services

Unfortunately, not all debt advisory services have your best interests in mind. Recent government investigations have revealed serious problems in Canada’s debt advisory marketplace.

Government Investigation Reveals Serious Issues

In December 2023, Canada’s Office of the Superintendent of Bankruptcy (OSB) released a position paper on The Adverse Effects of the Debt Advisory Marketplace on the Insolvency System. This position paper detailed the environment of problematic debt advisory practices. Since then, over 100 complaints have been filed against debt advisors.

Major problems identified:

Charging fees for services that should be free
Misrepresenting themselves as government officials
Requiring upfront payments before providing help
Threatening to cancel debt solutions if clients stop paying

The Hidden Costs of Questionable Debt Advisors

The financial impact has been significant. Between December 2023 and April 2025:

Debt advisor involvement in bankruptcy cases dropped 59%
Monthly fees paid to advisors fell from $2.1 million to $1.2 million
This represents nearly $1 million monthly in unnecessary fees paid by struggling Canadians

Real example: One client was instructed to put debt advisor fees on credit cards, then include that new debt in their bankruptcy filing – a practice that may violate Canadian criminal law.

Red Flags to Watch For

Immediate warning signs:

Demands for large upfront payments
Claims they work “with the government”
Promises to “eliminate your debt” quickly
High-pressure sales tactics
Won’t provide clear fee information
Prevents direct communication with Licensed Insolvency Trustees

Common misleading tactics:

“You must pay us first” – False. You can contact Licensed Insolvency Trustees directly.
“We can get better deals than trustees” – Trustees have legal authority that debt advisors don’t have.
“Pay us or your proposal will fail” – Often a scare tactic without legal basis.

Finding Legitimate Consumer Credit Counseling Help

How to Identify Quality Credit Counseling Services

Look for these characteristics:

Non-profit status or transparent fee structure
Accreditation from recognized organizations
Free or low-cost initial consultations
Educational focus, not just debt management
Clear explanations of all options, not just their services
Willingness to refer you elsewhere if appropriate

Questions to Ask Any Credit Counseling Agency

Before committing to any service, ask:

“What are all your fees, and when do I pay them?”
“Are you accredited, and by whom?”
“What happens if I can’t make my payments?”
“How will this affect my credit score?”
“Can you provide references from past clients?”
“What other debt relief options should I consider?”

Better Alternatives: Licensed Insolvency Trustees

As a Licensed Insolvency Trustee, I’m legally required to:

Provide free initial consultations
Explain all debt relief options objectively
Offer services at government-regulated rates
Maintain strict professional and ethical standards
Provide legal protection through bankruptcy and consumer proposal processes

Full Disclosure: Ira Smith Trustee & Receiver Inc. operates independently and has no relationships with unregulated debt advisory services.

consumer credit counseling

My Professional Experience and Qualifications

As a Licensed Insolvency Trustee serving the Greater Toronto Area for decades, I’ve helped thousands of individuals and families overcome financial challenges. My approach combines legal expertise with a genuine understanding of the emotional stress that debt creates.

My credentials include:

Licensed by the Office of the Superintendent of Bankruptcy
Certified Insolvency and Restructuring Professional (CIRP) by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
Former senior banker with extensive credit and lending experience
Regular community education contributor on financial topics
Maintaining my continuing education in debt advisory and financial restructuring matters

My commitment: Every client receives honest, transparent advice tailored to their unique situation. I believe in empowering people with knowledge and supporting them through the recovery process.

Frequently Asked Questions About Consumer Credit Counseling

Q: Will consumer credit counseling hurt my credit score?

A: Quality credit counseling may initially lower your score by 50-100 points, but this recovers within 12-18 months as you pay down debt. The impact is much less severe than bankruptcy, debt settlement, or continuing to miss payments.

Q: How much does legitimate consumer credit counseling cost?

A: Non-profit credit counseling typically charges $20-50 for initial setup and $20-40 monthly for debt management plans. Be very wary of services charging hundreds or thousands of dollars upfront.

Q: Can I get out of a debt management plan if my situation changes?

A: Yes, you can exit a DMP at any time. However, creditors may reinstate original interest rates and fees. Discuss exit strategies with your counsellor, before starting.

Q: Will my creditors definitely agree to a debt management plan?

A: Most major credit card companies participate in DMPs, but participation is voluntary. Your counselor should be upfront about which creditors typically cooperate.

Q: Is consumer credit counseling better than bankruptcy?

A: It depends on your situation. Credit counseling works well if you have steady income and manageable debt levels. Bankruptcy might be better if your debt is too high relative to income or you’re facing immediate legal action.

consumer credit counseling

Taking Action: Your Next Steps Toward Financial Recovery

If You’re Considering Consumer Credit Counseling

Research thoroughly – Look for accredited, non-profit agencies
Get multiple consultations – Compare approaches and fees
Ask detailed questions – Understand exactly what you’re paying for
Review alternatives – Make sure counsellingcounsellor is your best option
Start with free resources – Many educational materials are available at no cost

If You Think You Need More Comprehensive Help

Sometimes consumer credit counseling isn’t enough. You might benefit from legal debt relief options like consumer proposals or bankruptcy if:

Your debt exceeds 40% of your gross annual income
You’re only making minimum payments with no progress
Creditors are threatening legal action
You’re using credit to pay for necessities
Financial stress is severely impacting your health or relationships

Free Consultation Available

If you’re dealing with overwhelming debt in the Greater Toronto Area, I invite you to book a free, no-obligation consultation with me. During our meeting, we’ll:

Complete review of your debt and financial situation
Explanation of how different solutions might affect your credit
Discussion of immediate steps you can take
Honest assessment of whether consumer credit counseling or other options are best for you
Clear answers to all your questions in a counselling language you understand

What makes my approach different:

We have years of experience with Canadian debt relief
Legal authority to implement solutions that debt advisors cannot
Regulated fees with no hidden costs
Genuine commitment to your long-term financial health
Comprehensive support throughout your recovery process

Conclusion: Making Informed Decisions About Consumer Credit Counseling

Consumer credit counseling can be a valuable tool for debt relief, but only when you choose the right service provider and understand all your options. The key is distinguishing between legitimate, educational counselling services and expensive programs that duplicate services available elsewhere for free.

Remember these crucial points:

Quality consumer credit counseling focuses on education and empowerment
Non-profit agencies typically offer the most trustworthy services
Be extremely cautious of high upfront fees or pressure tactics
Licensed Insolvency Trustees can provide legal solutions that counselors cannot
Your current financial situation doesn’t define your future possibilities

Whether you choose credit counseling, work with a Licensed Insolvency Trustee, or pursue other debt relief options, the most important step is taking action. Financial problems rarely improve on their own, but with the right guidance and commitment, you can overcome debt challenges and build lasting financial stability.

The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost of living and debt challenges and move towards a more secure and hopeful financial future.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Vaughan, Markham, and surrounding areas, I’m here to help you understand your options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. Ira Smith Trustee & Receiver Inc. is a Licensed Insolvency Trustee serving Toronto, Vaughan, Mississauga, Brampton, Markham, and the entire Greater Toronto Area. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

consumer credit counseling