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6 DISADVANTAGES OF CONSUMER PROPOSAL ARE NOT ENOUGH TO STOP A HEALTHY RETURN TO ENJOYING LIFE

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Disadvantages of consumer proposal: What is a consumer proposal?

As regular readers of Brandon Blog know, I have written many blogs about consumer proposals. I normally focus on the advantages of a consumer proposal. As I have never written about the disadvantages of consumer proposal, I thought I would do so now. There are many more advantages than there are disadvantages; however, there are a couple of points you should know. Some people may see them as drawbacks or disappointments. It depends on your unique situation.

Consumer proposals can be called an individual’s insolvency debt settlement agreement in Canada. It is a proposal to your unsecured creditors to pay off a portion of your frustrating unsecured debts over a set period of time. If you successfully complete the consumer proposal by making all the needed payments, the total amount of your unsecured financial obligations are forgiven at the end of the settlement period. Consumer proposals are created to get the debt freedom to consumers who cannot afford to pay off their total debt. It is a legally binding contract between the debtor and the unsecured creditors to eliminate debt carried out under the Bankruptcy and also Insolvency Act (Canada).

So consumer proposals are the best alternative to bankruptcy. To find out about all the advantages of consumer proposals, I recommend my recent blog post, CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS.

Disadvantages of consumer proposal: When is a consumer proposal appropriate?

Consumer proposals are appropriate for individuals that:

  • Have a secure income flow, such as from full-time employment.
  • Are insolvent.
  • Are serious about getting rid of all of their unsecured financial obligations by paying only a portion of the total owed.
  • Wish to stay clear of bankruptcy.

To discover if a consumer proposal is an appropriate selection for you, set up a no-cost conference with a licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) (LIT or Trustee) to discuss your personal scenario. The LIT will examine your monetary situation and see if you have the economic capacity to efficiently complete a consumer proposal. The Trustee will certainly describe the pros and cons of the various options that might assist you to resolve your financial troubles.

If you choose to submit a consumer proposal, the LIT will work with you to develop a proposal that benefits both you as well as your unsecured creditors. If you file a customer proposal, you have to:

  • give the LIT a complete list of your assets and liabilities;
  • attend the first meeting of creditors, if one is requested by your creditors;
  • participate in 2 counselling sessions;
  • keep the LIT updated of any change of address; and
  • help the LIT in administering the proposal.

Disadvantages of consumer proposal: When is a meeting of creditors held?

The first disadvantage to talk about is when is a meeting of creditors held? The only time a meeting of creditors is called in consumer proposals is if creditors representing 25% or more of the proven claims filed request it. This would mean that at that point, you do not have a great relationship with creditors. They do not like the original consumer proposal you have submitted for their consideration.

A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The Office of the Superintendent of Bankruptcy Canada (OSB) can also direct the LIT to call a meeting of creditors at any time within that same period.

The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal, or any amended proposal tabled at the meeting.

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors regardless of any objections received.

disadvantages of consumer proposal
disadvantages of consumer proposal

Disadvantages of consumer proposal: How will a consumer proposal affect my credit rating?

The disadvantages of consumer proposal include the fact that it will have a negative impact on your credit rating. Generally, a person who declares bankruptcy is assigned the lowest possible credit score. Normally, with proposals, you are assigned a rating of R7. With bankruptcies, it is a worse rating of R9, the lowest possible. With proposals, The record of your consumer proposal will show up on your credit report. It will certainly be there for possibly 3 years after you have actually fully finished making all the payments. This is less than how long it will stay on your credit report because of bankruptcy.

Your ability to obtain and make use of credit after a consumer proposal relies on encouraging lenders of your personal financial maturity as well as the capability to repay the credit you are requesting. There are no guarantees and nobody is required to extend credit to you.

Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance.” To make sure your credit record is updated, send a copy of that document to the major credit-reporting agencies, TransUnion Canada and Equifax Canada. Be sure to keep all of your proposal-related documents for reference by future lenders.

Disadvantages of consumer proposal: Why are consumer proposals rejected?

Adding to the disadvantages of consumer proposal is the possibility that the creditors will decline it. Consumer proposals are commonly the last option for creditors, other than for consumer bankruptcy. In most cases, creditors accept a well thought out debt settlement plan since they wish to recuperate some of the funds that would otherwise be lost forever. Consequently, LITs who prepare well-drafted and properly explained consumer proposals get them approved by creditors.

Nevertheless, creditors can reserve their right to reject them. When consumer proposals are rejected, it’s commonly a result of the belief of the creditor that the proposal is in reality, not a better realization than in a bankruptcy process. Conversely, creditors see that they may need to wait as much as 5 years to receive what they deem a paltry reward. They prefer to finish the pain now and get nothing in the individual’s bankruptcy than have to carry holding and administering the account for 5 years to get next to nothing, notwithstanding it is a better outcome than the borrower’s filing for bankruptcy.

Disadvantages of consumer proposal: What happens if you miss a consumer proposal payment?

As long as you are following the agreed terms of your proposal, your creditors cannot take any further action against you. If you fail to meet the agreed terms of your proposal and/or miss three months of payments, the proposal will be deemed annulled. If this happens, you are barred from filing another consumer proposal.

However, there is a temporary COVID-19 special accommodation now allowed for by the OSB. A Trustee can explain what the special rules are.

So, subject to certain temporary COVID-19 accommodation, one of the disadvantages of consumer proposal is that if you default by missing 3 months of payments, your proposal is deemed annulled. The only thing left would be a bankruptcy filing.

disadvantages of consumer proposal
disadvantages of consumer proposal

How long does it take to rebuild credit after a consumer proposal?

Another one of the disadvantages of consumer proposal is that you will need to rebuild your credit. Although it is difficult and takes time, it is not impossible. To begin rebuilding your credit after a consumer proposal, work with your Trustee to make sure that everything you do is reported to the credit bureaus. The more positive reports that you have on file with TransUnion and Equifax, the better your credit score will be.

I always advise clients that the first thing they should do is get a secured credit card. Not the kind you buy at the drug store. Rather, it is a credit card from one of the banks. You put up a sum of money that the bank will keep as a security deposit, They then issue you a credit card with a limit equal to the deposit you put up. Each month, when you pay the credit card off in full on time, the bank reports this to the credit bureaus. Every month they report favourably is another month that you are working on improving your credit score.

The next thing you can do is take out a small loan to invest the funds in an RRSP. Use your tax refund or the extra tax you did not have to pay, to pay down the loan. Make sure that you pay off the balance of the loan within 1 year. Make your monthly payments on time. Again, your proper use of this credit will be reported to the credit bureaus and will work in your favour.

It will take a few years, and initially you may pay a higher rate of interest than if you didn’t need to file a consumer proposal. After a few years of using credit properly, you will find that your credit is now rebuilt.

Disadvantages of consumer proposal: Are consumer proposals bad?

In my view, the disadvantages of a consumer proposal are not enough to ever stop anyone from entering into the only government-approved debt settlement plan. To summarize, I see the disadvantages as:

  • The possibility that it may take a lot longer and be more expensive than you hoped for to reach a deal with your creditors if 25% or more of the dollar value of the proven claims vote against your initial offer.
  • Negative impact on your credit rating.
  • Rejection by your creditors and no agreement on an amended proposal forcing you into bankruptcy.
  • You miss 3 payments causing you to default on your consumer proposal. Again, if this happens, your only real option is to file for personal bankruptcy, which is what you tried to avoid.
  • It will take you time to rebuild your credit.
  • It only allows you to wipe away your unsecured debt. If you have secured debt that you cannot afford to continue paying, your LIT will counsel you on the best way to deal with that secured debt BEFORE you file.

Disadvantages of consumer proposal summary

I hope you enjoyed the disadvantages of consumer proposal Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, Contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

disadvantages of consumer proposal
disadvantages of consumer proposal
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BANKRUPTCY ACT CANADA: ARE YOU REALLY PREPARED FOR IT?

Introduction

No person wishes to go make a filing under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (Bankruptcy Act Canada), however occasionally it is inevitable. You might think that people who file are just those that are careless with their finances. However, with most of the people I see, it is usually an event outside of their control that pushes them over the edge.

In personal bankruptcy, things such as illness, divorce, job loss, unanticipated catastrophes, identity theft and fraud are many times the causes of insolvency. Of course, lack of proper budgeting, overspending and inappropriate uses of credit are also involved. In corporate insolvency, the #1 cause always seems to track back to management.

Insolvency filings happen every year. In 2018, a total amount of 128,846 insolvency filings were made with the Office of the Superintendent of Bankruptcy (OSB). This is 2.4% more from 2017. Consumer insolvency filings increased 2.5% (125,266 filings), while company filings dropped 0.8% to 3,580.

At the very same time, people choosing to avoid bankruptcy by filing a proposal continued increasing in 2018, bringing this number to a brand-new level. Proposals represented 52.6% of consumer filings in 2017. In 2018, they expanded by 6.6% to 56% of all personal filings.

Are you considering a Bankruptcy Act Canada filing, or at least speaking to a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) (Trustee)? In order to help you start your fact-finding, I want to tell you what will happen to your bank accounts, retirement accounts and your other important financial funds. Understanding what to anticipate can assist you to stay clear of some pricey blunders.

Bankruptcy or (consumer) proposal

Being insolvent is that you are not able to settle your financial debts. People with severe financial problems can make Bankruptcy Act Canada filing by filing either for bankruptcy, a consumer proposal or Division I proposal.

Proposals are official methods controlled by the Bankruptcy Act Canada for personal filings. Dealing with a Trustee you make a proposal to:

  • Pay your creditors a portion of what you owe them over a particular time period not going beyond 60 months
  • Extend the time you need to settle the debt
  • Or a mix of both

The Proposal is made via the Trustee, who uses the money in your proposal fund to pay the cost of administration and distribution to each of your creditors their pro-rata share. A consumer proposal needs to be finished within 5 years from the day of filing.

Proposal

People with severe financial problems can apply for bankruptcy. They can also try to avoid bankruptcy by using the Proposal provisions of the Bankruptcy Act Canada.

There are numerous advantages to avoiding bankruptcy. The main differences between proposals and bankruptcy are:

  • Unlike informal debt settlement, a Proposal produces a binding discussion forum where each of your unsecured creditors has to participate in for your debt restructuring.
  • You can keep your property, including your home, if you can afford to in your budget.
  • Lawsuits against you and enforcement proceedings, such as wage garnishments, cannot begin or continue.
  • In a successfully completed Proposal, you do not need to file for bankruptcy.

Keep in mind that financial institutions have “set-off” legal rights, implying that if you declare bankruptcy or file for bankruptcy when you’re behind in payments to them, they will take the funds in your accounts to try to cover all or some of what you owe them. This is notwithstanding that there is a stay of proceedings once a Bankruptcy Act Canada filing takes place and such an offset really should not take place.

So if you are thinking of filing either for bankruptcy or a proposal, I want you to be prepared for what might happen to your financial assets.

Your bank account

In a bankruptcy, the cash in your bank account is a property which must be paid over to the Trustee. Upon your filing, the Trustee will put all your banks on notice to provide the funds in any accounts maintained with them to the Trustee. As noted above, the bank may very well offset cash in your savings or chequing account against the money you may owe them, including credit card debt.

In a Proposal, you do not lose control of the money in your bank accounts. Rather, they are considered by the Trustee in formulating the type of Proposal you should offer your creditors. Remember, your Proposal must offer your creditors a better alternative than your bankruptcy would. However, even though there is a stay of proceedings invoked once you file your Proposal, it is not uncommon for a bank where you maintain an account and to whom you owe money, to take the money in your account and offset it against what you owe them.

So the moral of this story is that you are best to have bank accounts at financial institutions to whom you do not owe any money.

Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Deferred Profit Sharing Plan (DPSP)

In a bankruptcy, your RRSP, RRIF or DPSP are excluded from seizure. However, the Trustee is entitled under the Bankruptcy Act Canada to receive the equivalent to any amounts contributed to these accounts in the 12 months preceding your filing date. In a Proposal, this 12-month amount must be included by the Trustee in the calculation of what amount your Proposal should offer your creditors.

Canada Pension Plan (CPP) and Old Age Security income (OAS)

Canada Revenue Agency (CRA) is the only one permitted to garnish your CPP earnings if you have an unpaid personal income tax. By filing either for bankruptcy or a Proposal, the stay of proceedings will be invoked and CRA will have to stop the garnishment of your CPP and you will get the CPP payments you are qualified for.

However, the earnings obtained from CPP and OAS will certainly be taken into account by the Trustee in determining if you have any surplus income payment obligation in bankruptcy. In a Proposal, that amount also has to be considered in developing your Proposal.

Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and other non-registered account investments

In a bankruptcy, just like any other non-exempt property, the amount held in your TFSA and any other non-registered investment account must be paid to the Trustee. In a Proposal, these amounts need to be taken into account in determining what type of Proposal to make. It may very well be that these accounts are collapsed in order to help fund a Proposal.

Similarly, RESPs are not excluded in personal bankruptcy. In a Proposal, the amount must be considered as an asset in calculating how much must be offered in your Proposal to stand a chance for success.

The reason that an RESP is not excluded from seizure in bankruptcy is relatively straightforward. Your child does not acquire ownership or other entitlement to the RESP funds as parents can take possession of the funds prior to the child becoming a post-secondary school student. For that reason, it is the parents who have ownership of the funds.

Consequently, the Trustee of an insolvent mother or father that has an RESP can collapse it. If the parent in bankruptcy wants the RESP to not collapse, adequate arrangements need to be made with the Trustee for the equal amount of funds in the RESP at the filing date be paid to the Trustee for the bankruptcy estate and the bankrupt’s creditors.

Annuity revenue in bankruptcy

Annuities are agreements where you pay a company (normally an insurance company) a specific amount, in order to get regular monthly payments for a specific period of time or for the remainder of your life.

If an annuity contract is properly set up with an insurance company, it will be exempt from seizure in bankruptcy. However, the income stream it produces will be considered by the Trustee in determining whether the bankrupt person has a surplus income obligation.

Your RRIF can also be considered as an annuity as it provides a legislated stream of payments. The RRIF is exempt from seizure in a bankruptcy, other than for any contributions in the 12 months immediately prior to filing. Like an annuity, the entitlement to payments will be considered by the Trustee in doing the surplus income calculation.

In a Proposal, you don’t give up ownership of an annuity contract or RRIF, but the income must be considered in preparing a suitable Proposal.

Bankruptcy Act Canada summary

Do you have financial problems? Do you not have enough money to pay your bills in full when due?

As a Trustee, we are the only professionals licensed, authorized and supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy Act Canada. A consumer proposal is a federal government licensed debt settlement plan to eliminate your debt. We will help you to select what is best for you to free you from your debt issues.

Call the Ira Smith Team today so we can eliminate the anxiousness, tension, discomfort and pain from your life that your cash problems have caused. With the unique roadmap, we develop just for you, we will promptly return you right into a healthy and balanced problem-free life.

Call the Ira Smith Team today. We have generations and decades of experience helping people and companies looking for debt restructuring and a debt settlement plan to AVOID bankruptcy.

You can have a no-cost consultation so we can work with you to fix your money troubles. Call the Ira Smith Team today. This will certainly allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

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#VIDEO-TOP CONSUMER SCAMS TO WATCH FOR IN 2017#

This video is courtesy of ABC News. References to IRS can be replaced with CRA. The top consumer scams to watch for in 2017 will know no geographical boundaries.

Top Consumer Scams To Watch For In 2017: Introduction

Consumer experts are already predicting the rip-offs and top consumer scams to watch for in 2017. Our video and blog shows you what new scams to watch out for this year or new twists put on some old scams tricking you out of your money.

Top Consumer Scams To Watch For In 2017: The IRS/CRA Scam

Polk county resident Sherry Gordy fell for the number one rip off in the United States. They said they were with the IRS and that I owed $2,773.00 dollars in back taxes. So far the IRS scheme cost Sherry and thousands of other Americans more than $30 million dollars.

Most now know that the IRS and Canada Revenue Agency (CRA) will issue a statement showing the amount of tax owing, by year, but will never first contact a taxpayer by calling on the telephone. So this year, look for phony letters notifying people they owe taxes. I just can’t believe people still fall for this scam. It may be the biggest scams to watch for in 2017.

Top Consumer Scams To Watch For In 2017: The Computer Virus and Jury Duty Scams

Consumer experts predict that bogus notices involving a virus on your computer and missing jury duty will make the rounds this year.

The computer virus scam is not a new one, but people fall for it. This is how it works. You receive a phone call from someone pretending to be from your internet service provider, advising you that they have noticed irregular traffic, irregular internet connectivity and a potential virus from your computer. They ask you to go to your computer, put in certain keystrokes, and “test” your internet service by providing key details of your computer and its passwords. People who fall for this don’t realize that the scammers are asking you for your IP address, and then passwords, so that they can after the call hack your system and use your passwords for their criminal activities such as hacking bank accounts or stealing your identity.

The jury duty notice trick, sent mainly to business owners, will make the rounds in 2017. This is how this scam works. The business owner receives an official looking notice using a lot of legal terms. The warrant advises that you failed to show up for the jury duty selection. The scammers hope that the business owner thinks that they must have misplaced the original jury duty notice, which of course, was never sent.

The warrant goes on to say that the person can avoid further fines and prosecution, by paying a certain amount of money now. People are paying and of course it’s a scam.

Top Consumer Scams To Watch For In 2017: What Do Consumer Protection Experts Advise?

Consumer protection experts recommend that anytime you’re hit with an unsolicited call, email or letter, look up the real number for the agency they claim to be with. Then call the real agency to find if what you received was a real communication or a bogus one.

Consumer protection experts also recommend that if you are online checking your bank accounts, or other sites that contain your personal information or money, make sure you have plugged in the right web address. The bad guys have purchased domain names with common typos and have made them look like the real websites they are impersonating. They have done so with the hopes that you’ll accidentally put in your login information and they’ll gain access to your account.

Also be on the lookout for smarter phishing scams. The bogus emails that look like</font> they’re coming from your bank credit card or utility company. Instead of clicking on the link, open a new browser and go directly to the real website.

Top Consumer Scams To Watch For In 2017: Been Scammed and Now Can’t Pay Your Bills?

There are many scammers who think nothing of bilking innocent people out of their money. In extreme cases, you might be left without enough money to pay your bills. Your debts are now too much for you to handle, and you will never be able to recoup the money you have lost.

If you have too much debt, for whatever reason, contact the Ira Smith Team. We will give you a free consultation, where we will discuss your problems, treat you with the respect that you deserve, and create a plan for you, often to avoid bankruptcy, and regain a stress free life, Starting Over, Staring Now.

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#VIDEO-HISTORY OF BANKRUPTCY NEVER GETS ANCIENT#

HISTORY OF BANKRUPTCY NEVER GETS ANCIENT

History of bankruptcy: Introduction

A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.

History of bankruptcy: Helping the debtor

The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.

History of bankruptcy: Helping the creditors

The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:

  • Trust claimants who are outside of the bankruptcy scheme
  • Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
  • Unsecured creditors:
    • Preferred
    • Ordinary

History of Bankruptcy: bankruptcy alternatives

The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.

History of bankruptcy: The BIA

The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:

In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.

History of bankruptcy: Rehabilitation

It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.

The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.

History of bankruptcy: The Courts

The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.

History of bankruptcy: What to do if you have too much debt

I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.

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

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#VIDEO-HOW TO HANDLE EVERY CHAPTER 13 BANKRUPTCY CANADA CHALLENGE WITH EASE USING THESE TIPS#

Is there such a thing as chapter 13 bankruptcy Canada?

In Canada, we don’t have something called chapter 13 bankruptcy Canada. A chapter 13 bankruptcy is part of the United States Bankruptcy Code. It is also called a wage earner’s plan. It allows people with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

We don’t have chapter 13 bankruptcy Canada. The equal in Canada is a consumer proposal. It is a bankruptcy alternative used to avoid bankruptcy by a debtor who is an individual who in total (excluding any mortgages registered against his or her home) owes $250,000 or less.

How does our chapter 13 bankruptcy Canada provisions work?

A consumer proposal is making a formal offer under the Bankruptcy and Insolvency Act (Canada) (“BIA”) to creditors to settle debts under conditions other than the original terms, for less than the face value of the debts. The maximum length of time that a debtor is given to make monthly payments under a consumer proposal is 60 months.

So rather than it being called chapter 13 bankruptcy Canada, we call it a consumer proposal. If you owe more than $250,000, then an individual can use the proposal provisions used by companies. Either way, it is a creative use for people with large debts to do what is commonly referred to a “restructuring” or “reorganization”, thereby avoiding bankruptcy.

There used to be no provision available to small individual debtors in the BIA. Parliament wished to find a way to offer for these smaller consumer debtors to have a restructuring alternative. So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990’s, the consumer proposal legislation was enacted. It was a way for Canada to get a chapter 13 bankruptcy Canada like provision.

Our chapter 13 bankruptcy Canada like provisions allow you to avoid bankruptcy

Now, the consumer proposal provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA. So Canadians are now AVOIDING bankruptcy more while still obtaining the help and counseling of a licensed insolvency trustee. So as you can see, our consumer proposal provisions are just like a chapter 13 bankruptcy Canada statute.

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

When is it best to use the chapter 13 bankruptcy Canada like provisions?

It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest!

What can I do if I have too much debt but wish to find out more about chapter 13 bankruptcy Canada?

We hope that knowing these tips will better equip you to navigate the chapter 13 bankruptcy Canada challenge. If you have too much debt, but after viewing this video wish to avoid bankruptcy but you are unable to pay your debts in full, this may be just the ѕесrеt you need to know!

We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living Starting Over, Starting Now. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make. Contact us today.

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

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#VIDEO-ALTERNATIVES TO BANKRUPTCY: DO NOT BE EMBARRASSED TO HAVE THE “B” CHAT#

Introduction of the alternatives to bankruptcy

There are alternatives to bankruptcy. Say the word bankruptcy and people immediately recoil. I don’t know if there is more stigma attached to another word in the English language. In reality bankruptcy is not something to be ashamed of. It should not be avoided at all costs and it’s not a deep dark hole; it can be the light at the end of the tunnel. As with other alternatives to bankruptcy, it is an option. Let’s explore why avoiding bankruptcy can do more harm than good.

Many реорlе аѕѕumе thеrе’ѕ only оnе tуре of bankruptcy. The one that еlіmіnаtеѕ all уоur debts. Thаt’ѕ a BIG rеаѕоn реорlе ѕау things like, “I wоuld never dесlаrе bаnkruрtсу! It just dоеѕn’t seem to be the responsible thing to do. Right?”

What mоѕt реорlе don’t know іѕ that there are TWO tуреѕ of BIA proceedings for іndіvіduаlѕ. One is bankruptcy and the other is an alternative to bankruptcy. The alternative is a (consumer) proposal. The reason you would pick the alternative is to AVOID bankruptcy.

Two tуреѕ of BIA proceedings

Thеѕе two types of BIA proceedings are іntеndеd to асhіеvе very dіffеrеnt goals. Bеfоrе taking асtіоn it is іmроrtаnt to undеrѕtаnd what уоu want to achieve. What you are trying to achieve will determine whісh tуре of BIA proceeding іѕ right fоr you.

Here is a quick ѕummаrу of еасh type of BIA proceeding. We also show how еасh one саn help уоu асhіеvе specific gоаlѕ in your fіnаnсіаl life.

What is bankruptcy?

Bankruptcy is most of the time misunderstood. According to the Office of the Superintendent of Bankruptcy Canada:

“Bankruptcy is a legal process designed to relieve honest but unfortunate debtors of their debts. At the end of the process, the bankrupt is released from the obligation to repay the debts they had when the bankruptcy was filed (with some exceptions)”.

Bankruptcy used to be the mоѕt common type of BIA proceeding fоr consumers. Its lіquіdаtіоn and discharge fеаturеs are dеѕіgnеd to end debts and give уоu a frеѕh ѕtаrt. In the United States it is referred to as “Chapter 7 proceedings”.

(Consumer) Proposal: One of the best alternatives to bankruptcy

The proposal provisions used by companies is “restructuring” or “reorganization”. Individuals with large debts can also use the restructuring provisions. Yet, there was no similar provisions available to small individual debtors in the BIA.

Parliament wished to find a way to provide for people with smaller debts to be able to restructure. A Parliamentary committee consulted with the stakeholders in the Canadian insolvency world. As a result, the consumer proposal legislation came into force in the 1990’s. Now, the consumer proposal provisions are used more than the consumer bankruptcy provisions. Canadians are now able to AVOID bankruptcy while still obtaining the help and counseling of a LIT.

The main use of the (consumer) proposal provisions of the BIA is to:

  1. allow you as a debtor to keep your assets, if you can afford to in your budget;
  2. AVOID bankruptcy, and provide a better alternative to your creditors than a bankruptcy would. You can relieve yourself of your debts, for an amount less than the total face value of all your debts;
  3. If the рауmеnt plan іѕ ѕtruсturеd well, make affordable monthly payments; and
  4. allow for the affordable monthly payments to cut ALL debts.

To meet all your debts in full but уоu can’t afford to ассоmрlіѕh that gоаl, this mау be just the ѕесrеt уоu need to know! In the United States it is called “Chapter 13 proceedings”.

Why avoiding bankruptcy can do more harm than good

There are alternatives to bankruptcy which merit review. But bankruptcy can often be a good thing. A recent report by the Federal Reserve Bank of New York states:

  • People who filed bankruptcy had access to more new lines of credit. Those who limped along in a poor financial state did not;
  • this puts to rest the misconception that filing bankruptcy closes the door to new credit;
  • those who didn’t file bankruptcy are just insolvent;
  • individuals who go bankrupt get a sharp boost in their credit score after bankruptcy;
  • the recovery in credit score is much lower for individuals who do not go bankrupt; and
  • insolvent individuals who do not go bankrupt exhibit more financial stress.

Where to go for information on alternatives to bankruptcy

Are you insolvent and looking for solutions? The Ira Smith Team is here to offer alternatives to bankruptcy and bankruptcy. We offer the help in Vaughan and throughout the GTA.

Our motto is Starting Over, Starting Now! Ira Smith Trustee & Receiver Inc. can help you overcome your financial difficulties. Contact us today.

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

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Brandon Blog Post

CONSUMER PROPOSALS: WHAT YOU NEED TO KNOW

CONSUMER PROPOSALS: WHAT YOU NEED TO KNOWBefore contemplating a bankruptcy, those who have too much debt should give strong consideration to consumer proposals, one of the alternatives to bankruptcy. As long as you owe less than $250,000, this is possible. This limitation excludes any mortgage you have for your home.

The advantage of consumer proposals

Consumer proposals gives individuals a chance to reorganize their finances and get back on their feet without having to go through a bankruptcy. By avoiding bankruptcy, a person’s credit rating is not seriously damaged. In addition, after all of the debts are dealt with, through consumer proposals, people have a strong feeling of accomplishment and self-worth.

Consulting with a bankruptcy trustee to find out more about consumer proposals

The first step in pursuing a consumer proposal is to meet with a bankruptcy trustee to evaluate your financial circumstances. The trustee will help draft a proposal for your creditors based upon your finances. If the proposal is accepted, you will then make your payments directly to the trustee. The exact form a proposal will take is dependent upon many variables.

In some circumstances, you may be paying only a partial amount of the debt you owe over time. In other circumstances, the debt will not be reduced, but reorganized in a way that gives you a chance to pay it all back. In consumer proposals, no further interest or fees can be charged. Sometimes it is just a longer period of time to pay back the debt. Either way, consumer proposals should be thought of as providing you with the equivalent of an interest-free loan. Whatever the final proposal is, it will help bring needed relief to your financial situation.

After filing a consumer proposal

From the time your consumer proposal is filed, you will no longer be making any payments directly to your creditors provided that the debt is unsecured. Any wage garnishment that is in place is suspended while the proposal is examined by your creditors. Lawsuits over debt recovery are also placed on hold. The proposal and the accompanying trustee’s report will provide details on your personal finances and will include an explanation of how your debts became such a problem that it has led to a need to reorganize the debt structure. Your creditors will have up to 45 days to decide to accept the offer or not. If one or more of your creditors is owed more than a fourth of the total debt, they have the right to request a meeting with you and the trustee. This request for a meeting must be done in the same 45 day time limit.

If you are in a situation where you are overwhelmed by debt with no hope of paying it back under the current circumstances, there is not much of a downside to pursuing a consumer proposal. The worst thing that can happen is that creditors do not agree to the proposal, and in this situation, bankruptcy is still an option. If it does work then you save yourself the grief of having a bankruptcy on your credit history.

If you wish to compare this information about consumer proposlas to a bankruptcy, start by reviewing our bankruptcy faqs. Contact Ira Smith Trustee & Receiver Inc. as soon as possible regarding your debt problems, to find out more about consumer proposals and Starting Over, Starting Now you’ll be on your way to living a debt free life.

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Brandon Blog Post

WHY ARE CANADIANS NOT AVOIDING BANKRUPTCY?

bankruptcy, personal bankruptcies, consumer proposals, bankruptcy alternative, insolvency, avoiding bankruptcy

There are many reasons why Canadians are struggling with debt and ultimately not avoiding bankruptcy. However it is widely agreed upon that lower interest rates have encouraged us to purchase big ticket items like cars and houses. The good news is that according to a CIBC report, personal bankruptcies have returned to pre-recession levels, to four insolvencies per 1,000 adults, from an all-time high reached during the recession of six per 1,000. However, that doesn’t really tell the story because the number of Canadians striking consumer proposals has grown to 40% of total insolvency cases, from about 15% in 2006 – an increase that underscores a major shift in how consumers are avoiding the full bankruptcy route. In fact consumer proposals now make up 50% of total insolvencies in Ontario.

According to the Office of the Superintendent of Bankruptcy (OSB) here are the top 10 reasons that Canadians go bankrupt:

  1. Overextension of Credit: 22%
  2. Seasonal Employment: 15%
  3. Job Loss: 12.8%
  4. Medical Problems: 11.3%
  5. Relationship Breakdown: 10.3%
  6. Money Mismanagement: 9.2%
  7. Failed Business: 9.1%
  8. Failure to Pay Taxes: 3.6%
  9. Gambling Addiction: 2%
  10. Inadequate Pension: 1.4%

The Bank of Canada’s Review of Household Insolvency in Canada (Winter 2011 – 2012) reports that the largest unsecured liabilities are credit card debt and bank loans.

 

LIABILITY TYPE – BANKRUPTCY/ RENTER

PERCENTAGE

Individuals/Doctors/Lawyers/Gov.

24.71

Credit Cards (bank/trust co. issuers)

18.99

Bank Loans (except mortgages)

17.26

Taxes

16.59

Credit Cards (other issuers)

8.19

Finance Co. Loans

7.92

Real Property Mortgages

3.28

Student Loans

2.83

Payday Loans

0.23

LIABILITY TYPE – BANKRUPTCY OWNER

PERCENTAGE

Real Property Mortgages

56.55

Individuals/Doctors/Lawyers/Gov.

13.52

Bank Loans (except mortgages)

11.26

Credit Cards (bank/trust co. issuers)

6.29

Finance Co. Loans

4.52

Taxes

4.34

Credit Cards (other issuers)

3.10

Student Loans

0.31

Payday Loans

0.11

Many Canadians are dealing with serious debt issues. Whether you decide to declare bankruptcy or opt for a bankruptcy alternative – Credit Counselling, Debt Consolidation, Consumer Proposals – you need the help of a professional trustee. Contact Ira Smith Trustee & Receiver Inc. as soon as possible for advice and a plan to tackle your financial difficulties. Starting Over, Starting Now you can live a debt free life.

Call a Trustee Now!