Categories
Brandon Blog Post

CANADIAN BANKS ARE SERIOUSLY MAKING GOOD EFFORTS TO MINIMIZE BANKRUPTCIES

Canadian banks: Introduction

Canadian banks are recognized globally for their exceptional standards, which are maintained through proactive measures to safeguard as best as possible, the financial well-being of their clients. When we think of the Canadian Big 6 Banks, we do not normally think about how their methodologies are meant to reduce consumer insolvencies and business shutdowns. We only think about how the banks make demands on their customers and at times, shut down Canadian businesses and sue Canadian consumers.

A dynamic economic landscape demands that lenders adapt to the ever-changing scenario. Canadian banks have risen to the challenge by implementing comprehensive risk assessments, tailored financial solutions, and proactive measures to minimize dangers to their clients and bankruptcy cases. This is even the case for clients who are only depositors and brokerage clients.

Canadian financial institutions have emerged as a vital player in providing stability to individuals and businesses, to give their customers the tools for hopefully a secure financial future.

This Brandon’s Blog delves deeper into the strategies and practices employed by and the pressure on Canadian banks to prioritize the financial health of their clients, resulting in a reduction in bankruptcy cases.

Canadian banks know the importance of minimizing bankruptcy

Decreasing the number of individuals and businesses filing for bankruptcy holds an important place in sustaining a stable Canadian economy. Canadian financial institutions have recognized the value of preemptively recognizing prospective hazards and collaborating with their customers to try to avoid bigger financial problems.

With the use of bespoke financial solutions, careful evaluation of risks and patterns, active engagement with borrowers, promoting financial literacy, and use of the latest technologies, Canadian banks take full advantage of the opportunities for the seamless continuation of their clients’ personal and business finances.

Furthermore, Canadian banks have actually prioritized responsible lending and borrowing techniques, adhering to government regulations and proper moral standards. This has so far led to the impressive success of Canadian banks in reducing personal bankruptcy and corporate bankruptcy filings when many expected them to explode as a result of the COVID-19 pandemic.canadian banks

Overview of financial institutions’ efforts to minimize bankruptcy

Financial institutions in Canada have a vested stake in aiding borrowers during periods of financial difficulty, as bankruptcy can have negative consequences for both parties involved. This article briefly touches on this aspect, but this blog will delve deeper into how lenders actively contribute to minimizing bankruptcies. We will explore initiatives such as financial education, early intervention programs, and customized repayment plans that assist borrowers in managing their debts more effectively.

Canadian lenders are taking proactive steps to reduce bankruptcy cases in the country. Through a constantly updated and dynamic risk assessment process, lenders can identify potential financial vulnerabilities and provide tailored solutions to clients. Small business owners, particularly those most exposed to financial risks, have also benefited from the lenders’ focus on financial literacy programs.

By fostering collaborative relationships with borrowers, lenders have effectively instilled responsible lending practices that have proven crucial in strengthening the Canadian financial system against potential shocks. Achieving these results can be attributed, in part, to the integration of technological advancements that have revolutionized the lending landscape. This enables lenders to promptly provide borrowers with essential information and timely notifications.

The alignment of lending practices with government regulations has played a vital role in fostering stability within the financial sector and enhancing the resilience of the Canadian economy. Through the prioritization of responsible lending and borrowing practices, Canadian lenders have made significant progress in mitigating bankruptcies and promoting the enduring financial well-being of their clients.

Canadian banks embrace technology and understand the value of risk assessment

The major Canadian banks have wholeheartedly adopted cutting-edge technological innovations to augment their offerings and mitigate the possibility of insolvency. By leveraging automated underwriting procedures, digital documentation authentication, and online account management platforms, lenders are simplifying operations and empowering borrowers to adeptly oversee their finances.

Among the fundamental pillars of the major Canadian bank’s success in minimizing bankruptcies is its focus on aggressive risk evaluation. Lenders understand that determining the possible financial challenges of their customers early is critical for catching financial problems before they result in bankruptcy scenarios. By utilizing sophisticated risk assessment tools and also leveraging extensive information analytics, Canadian banks can evaluate the creditworthiness of their consumer and business customers properly.canadian banks

Advantages of Enhanced Credit Application Processes

Canadian financial institutions have implemented significant measures to decrease instances of insolvency and contribute to the financial well-being of both individuals and businesses. Their emphasis on thorough risk assessment, tailored financial solutions, and proactive methodologies has positioned them as key contributors to enhancing the prospects of their customers’ financial welfare.

Their approaches involve fostering collaboration with clients, leveraging technology, and upholding responsible lending practices. Furthermore, lenders have placed a strong emphasis on promoting financial literacy and adhering to government regulations to ensure customers have access to credit while minimizing the risk of default. Through the optimization of the credit application procedure, Canadian financial institutions can mitigate the likelihood of small Canadian businesses and individuals facing bankruptcy, thereby fostering increased stability within the financial landscape.

Tailored Financial Solutions for People

Canadian banks acknowledge the unique financial circumstances and requirements of each person. As a result, they have actually transitioned from employing a standard approach to providing tailored monetary solutions. By adapting lending frameworks, rates of interest, as well as repayment terms to refer to the needs of borrowers, lenders can dramatically lessen the possibility of insolvency and default.

Extensive Assistance for Small Enterprises

Small enterprises play a pivotal function in the Canadian economy, and guaranteeing their development and stability is very important. Canadian banks recognize this fact and supply varied assistance to small businesses. This includes flexible financing choices, rendering financial advisory services, as well as helping with access to resources that help companies in their financial management.

Collaborative Approach with Borrowers

Instead of taking on an adversarial stance, Canadian banks have welcomed a joint strategy in managing borrowers dealing with financial problems. They understand that things can change, as well as unforeseen problems can arise. Lenders now work very closely with customers to discover different remedies, such as adjusting financing terms, debt consolidation, or financial restructuring, to help them get back to financial stability and hopefully stay clear of bankruptcy.

The role of Canadian banks in offering longer repayment terms

Canadian banks have taken on a crucial role in the financial landscape by offering longer repayment terms to borrowers. The benefits can be summarized as follows:

Meeting the evolving needs of borrowers:

With changing economic conditions as well as developing consumer preferences, Canadian banks have acknowledged the relevance of supplying versatile payment choices. By supplying longer repayment terms, banks can suit the different scenarios and challenges faced by consumers. This strategy enables debtors to handle their cash flow more effectively and also lowers the economic burden connected with shorter repayment terms.

Enhanced affordability and reduced monthly payments:

Prolonged repayment periods have a positive impact on the affordability of Canadian borrowers. By extending the duration of loan repayments, financial institutions in Canada can significantly lower the number of monthly payments, thus facilitating the fulfillment of financial obligations for both individual customers and commercial entities. This strategy particularly benefits borrowers who encounter unexpected financial crises, provided they have leveraged the extended repayment terms to generate a financial safety net.

One of the ways Canadian banks have been helping people cope with their mortgage debt and mortgage payments is by providing longer repayment terms. Extended repayment terms, such as the 30-year amortization periods offered by some financial institutions, can improve the affordability of housing for buyers providing them with the necessary funds to pay for other household expenses. A shorter amortization period would result in a higher monthly mortgage payment taking cash away from other necessities.

Improved access to credit:

Improved access to credit for a broader spectrum of borrowers has been enhanced by the introduction of lengthier repayment terms. By accommodating extended periods for repayment, Canadian banks are able to extend credit to individuals and businesses who may have previously been excluded or encountered challenges in obtaining loans with shorter terms. This inclusivity promotes financial stability, fosters economic growth, and encourages the pursuit of entrepreneurial ventures.

Stimulating economic growth:

The role of Canadian banks in offering longer repayment terms goes beyond assisting borrowers; it also plays a vital role in stimulating economic growth. By facilitating access to credit, these extended terms encourage borrowing for investment, expansion, and innovation. This, in turn, promotes business development, job creation, and overall economic prosperity.

Mitigating default risks:

While longer repayment terms may raise concerns about increased default risks, Canadian banks have implemented robust risk assessment and mitigation strategies. By carefully evaluating borrowers’ financial positions, credit history, and repayment capacity, banks can mitigate the potential risks associated with longer loan durations. This cautious approach ensures that extended repayment terms do not compromise the stability and resilience of the banking sector.canadian banks

The connection between repayment terms and affordability

The provision of longer repayment terms by Canadian banks reflects a proactive response to changing market dynamics and borrower needs. By offering flexibility, affordability, and improved access to credit, banks are empowering individuals and businesses to achieve their financial goals. Additionally, the stimulatory effect on economic growth further solidifies the pivotal role played by Canadian banks in the nation’s financial landscape.

As the financial landscape continues to evolve, it is expected that the provision of longer repayment terms will remain a crucial aspect of the banking sector’s commitment to supporting the financial well-being of Canadians. But like with everything, there is a potential downside to weigh against all of the benefits, especially in the housing market.

While extended repayment terms may appear to make housing more affordable by reducing monthly mortgage payments, it’s crucial to consider the long-term financial implications. Lower monthly payments can entice buyers to enter the market, but they also extend the overall period for which individuals are indebted. This raises concerns about increased debt burdens and potential economic risks.

It is also important to examine this factor within the broader context of the Canadian housing market. Greater affordability may cause some Canadian consumers to stretch even more on higher-priced real estate, thereby eliminating the benefits of longer amortization.

Importance of financial education to Canadian banks

Canadian banks have shown in recent years that they recognize the significance of financial education amongst Canadians. Lenders are carefully concentrating on boosting financial literacy, passing on understanding about sensible lending, effective money-saving strategies, and making educated choices.

Joint initiatives between lenders and borrowers are crucial, as they strive to create customized methods that promote sustaining financial wellness. To make certain that they are being accountable in their lending practices, Canadian banks are skillfully technology for risk assessment and credit approval and adhering to the regulations of the federal government. These proactive steps have generated successful results, and reduced business and consumer insolvencies.canadian banks

Federal government regulations and banking industry standards for Canadian banks

In the ever-evolving realm of the Canadian banking landscape, the welfare and interests of individuals are upheld through the robust framework of government regulations and industry standards. These pivotal guidelines and norms are meticulously crafted to ensure equitable treatment, unfettered access to transparent information, and effective channels for dispute resolution. The Canadian banking sector takes diverse measures to shield consumers and cultivate unwavering confidence in the financial fabric.

Responsible lending practices in the financial sector constitute a bedrock element of consumer protection. Financial institutions are entrusted with the task of diligently appraising the creditworthiness of borrowers and offering loans that align harmoniously with their financial capacities. This prudential approach safeguards Canadian consumers and business borrowers from being ensnared in the web of excessive debt and confronting arduous financial predicaments. Through the adoption of responsible lending practices, the banking industry endeavours to strike a delicate balance between extending credit and mitigating the perils of consumer insolvencies.

The imperative of disclosure requirements cannot be overstated in the realm of consumer protection. Financial entities bear the onus of furnishing consumers with lucid and comprehensive information pertaining to the intricacies, stipulations, and expenses associated with financial products and services. This empowers consumers with the discernment necessary to make judicious choices and shield themselves from concealed surprises or misleading practices.

In instances where disputes arise between consumers and the banking industry, a robust framework of consumer dispute resolution mechanisms comes into play. These mechanisms furnish an impartial and equitable platform for the resolution of conflicts, ensuring that consumers possess a powerful voice in addressing their grievances. Spearheading the supervision and enforcement of consumer protection regulations within the banking sector is the Financial Consumer Agency of Canada (FCAC). The FCAC diligently strives to enlighten consumers about their rights, diligently probes complaints, and aptly initiates remedial action against non-compliant institutions.

Through the implementation of these cogent consumer protection measures, the Canadian financial domain endeavours to cultivate trust, transparency, and unwavering accountability. These regulations not only serve as a bulwark for consumers but also bestow profound benefits upon the stability and integrity of the financial edifice at large.

Canadian banks: Conclusion

To conclude, Canadian banks continue to blaze a trail in promoting economic stability as well as safety for people and businesses. With their commitment to risk analysis, customized financial services, as well as proactive monitoring, lending institutions are making sure that clients have the ability to handle their financial obligations effectively.

The Canadian banking industry are enabling Canadians to improve their financial standing as well as ideally stay clear of all the negative consequences of bankruptcy. In these unique times, it is reassuring to recognize that Canadian banks are taking their responsibilities seriously as well as embracing a pre-emptive approach to address threats all to help Canadians to be more financially successful.

I hope you enjoyed this Canadian banks Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy proceedings. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.canadian banks

 

 

Categories
Brandon Blog Post

CANADA INSOLVENCIES EXPECTED TO JUMP SAYS EVERY AUTHORITATIVE PUNDIT AND INSOLVENCY INSIDER

canada insolvencies
canada insolvencies

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.

If you would prefer to listen to the audio version of the Canada insolvencies Brandon blog, please scroll to the bottom and click play on the podcast

Canada insolvencies introduction

Ideally, if the debt was free as well as limitless, most of us would certainly be able to spend for whatever we wanted with a couple of swipes on our credit card. Companies would be able to buy supplies and also pay salaries simply by borrowing a lot more from their lender. There would be no Canada insolvencies and I guess I would be out of work!

But when the credit crisis struck at the start of this century, it revealed simply how much complimentary and limitless credit there really was, and also the number of people who had been living beyond their means with massive huge debt loads for years.

In 2020, the coronavirus pandemic struck the globe. Every country’s health system has been exhausted to the max. Governments initiated widespread lockdowns and strove to maintain their respective economies afloat. Canadian workers lost their jobs or otherwise having their income considerably decreased because of stringent lockdown measures. This required the federal government to bring in several assistance programs for individuals as well as businesses under the banner of Canada’s COVID-19 Economic Response Plan. Household support measures were imperative.

Every pundit, economist and insolvency insider forecast that Canada insolvencies would jump in 2020. They didn’t. I discuss why and what it means.

What Canada insolvencies mean

As I have written many times in the past, the word insolvency refers to a financial condition in which a person or business is not able to pay its financial obligations. The sensation of being in debt can be an extremely frustrating scenario. The thought of being not able to settle your debts is impending darkness that can seem impossible to get rid of.

As I have promoted many times in my blogs about Canadian households and family budgets, your charge card must continue to be securely in your pocket most of the time. You only should utilize it to acquire things you’ve budgeted for. Nonetheless, if you find yourself not able to pay your credit card bill, you might run the risk of dealing with a scenario known as insolvency. If you have a large amount of debt or restricted earnings, the concern of insolvency needs to be a large motivator for you to do something about it. It causes strains in households.

Limited, lowered or no revenue, whether you are an individual or a company, has actually been the result for lots of Canadians due to the coronavirus pandemic. The provinces, including Ontario, implementing lockdowns of differing degrees has also been a cause. The federal government had no choice but to generate its economic response plan to make aid payments to individuals and companies. Pundits had actually been anticipating a rise in insolvency volumes since the 2nd quarter of 2020.

Global insolvency insider forecasts said there would be a rise in Canada insolvencies and elsewhere in 2020

Insolvencies in the UK were anticipated to leap to record levels by 27% in 2020. That was exposed in a financial study called the Atradius Insolvency Report. Atradius is a leading trade credit insurance firm. It also forecasted that every major economy in all countries, except for China, was anticipated to enter an economic downturn in 2020 with international GDP forecast to contract by 4.5%. This would make it a much more intense recession in magnitude than the Great Recession of 2009. Naturally, COVID-19 was the reason.

Euler Hermes, a trade insurance firm, reported that it predicted that governments around the globe are clambering to save companies battered by coronavirus lockdowns. They said the world is nonetheless encountering a huge rise in insolvencies by one-third in 2020 and also 2021.

In Canada, increased food prices, loss of income and a cost of living have many individuals struggling monetarily. Credit card debt is surging and that is what might push numerous people over the edge. Statistics Canada just released a preliminary estimate that 2020 GDP reduced by 5.1% over year-earlier levels which is the worst year in over 6 decades. The federal government will certainly be presenting a new budget to try to kickstart Canada into an economic recovery. Predictions for later in 2020 also had Canada insolvencies rising.

What really happened in 2020 Canada insolvencies

Nonetheless, as 2020 finished, Canada insolvencies including personal bankruptcies went to a 24-year low. The 2020 trend in insolvencies was a continuing descending pattern. There’s been no spike in personal and business bankruptcies notwithstanding lots of financial difficulty in our country. There was no surge in Canada insolvencies. The opposite was true.

I have previously written on the decrease in Canada insolvencies. In my view, the main factors for the record low Canadian personal insolvencies and corporate insolvencies, including bankruptcy filings in 2020 were:

  • federal and provincial government support measures including the Canada Emergency Response Benefit (CERB), Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Business Account (CEBA), which had an increase from $40,000 to $60,000
  • mortgage debt payment deferrals
  • the courts having been closed for many months so nobody could get sued

So the predictions for 2020 regarding the level of insolvencies did not come true as there was a continuing decline in insolvencies. So now, each economist and all the pundits have just kicked their signs of increases in insolvencies predictions down the road and claim that 2021 will be the year for the big jump in corporate and Canadian consumer insolvencies. The main reason cited for these 2021 insolvency forecasts is that as far as we know now, the COVID-19 relief programs will wind down. Canada, like most other nations, is not expected to return to a pre-pandemic level for some time.

canada insolvencies
canada insolvencies

How do you prove insolvency?

Canada’s insolvency laws are fairly straightforward. The two main options for an individual who cannot pay all their debts are also straightforward under the Bankruptcy and Insolvency Act (Canada) (BIA). You either file for an individual consumer proposal or personal bankruptcy.

For insolvent corporations, there are options for them under the BIA too. They can restructure and reduce their debts through a Division I Proposal. Alternatively, a company can file for bankruptcy. For companies with debts greater than $5 million, they could choose to restructure by filing under the Companies’ Creditors Arrangement Act (CCAA).

I have also written before about the tests for Canada insolvencies. They are:

  • the debtor has stopped paying debts as they generally become due
  • your liabilities are greater than your assets
  • if you liquidated all of your assets, there would not be enough money to pay off all your debts in full

Canada insolvencies: What happens during insolvency?

When a person or company finds themselves not able to pay their costs, they are insolvent. Insolvency is an economic problem. This typically indicates that they cannot pay their present expenses in a prompt way. There are a number of choices for dealing with your debt when you go into insolvency. What you need is the insolvency advice of a licensed insolvency trustee (Trustee). The Trustee will certainly examine your scenario, establish your insolvency level and discuss your sensible alternatives with you.

As an individual, you can try to use the proposal provisions of the BIA to keep your assets, while you negotiate with your creditors with the help of the Trustee. The objective is to come up with a plan to pay a portion of what you owe to eliminate all of your financial obligations. This allows you to attempt to reorganize your business or personal situation to avoid bankruptcy. It is important to understand your choices.

Lots of people are afraid of declaring bankruptcy or perhaps even owing money. Not many individuals understand what happens throughout insolvency. People assume bankruptcy is a quick fix to all of their financial problems. They think they will never ever need to fret about cash ever again. They are wrong. When you file for bankruptcy, you have simply taken a massive step in the direction of economic liberty.

Nonetheless, there are duties and responsibilities on the person that declares bankruptcy. The process is developed to work with you using counselling to ensure, as best as feasible, that your financial troubles will no longer rule your life. The ultimate objective is that when you have actually successfully completed your debt settlement proposal or have your bankruptcy discharge, you will not once more be tempted to have additional debt that is going to drag you back into insolvency.

It is very important to remember that just because you owe money does not imply that you ought to give up. Rather it suggests that you require to find among the realistic options that a Trustee can help you with to work you out of financial trouble.

Canada insolvencies: What happens when you file insolvency?

At some point in life, you may find yourself in an economic scenario that you do not recognize exactly how to get yourself out of. You’ll be stuck in a situation where you owe more money than you can ever pay back. Remember that insolvency is a financial situation. You can become insolvent, but you cannot file insolvency.

What you can do is search for an option to settle your financial debts, leave them behind as well as move forward with confidence and no tension in your life. It is not your fault that you cannot do it yourself. You have only been taught the old ways. A Trustee can help you using new ways. That is what we are trained to do.

The options, in order of seriousness and urgency, within the Canadian insolvency framework are:

  1. Devise a realistic family household budget to see where you can divert the money you are currently spending away from certain items to unpaid debt until it is all paid off. Household finances must be studied to make sure that there is a balanced budget.
  2. Reaching an informal arrangement with your few creditors to get deferrals from creditors and/or pay them less than the total amount owing on each in order for them to write off the balance.
  3. Reaching a formal debt settlement plan through a Trustee in order to extend the time you have on an interest-free basis and agreements with creditors that you will pay less than the total owing in order to wipe away all of your unsecured debt. This process is called either a consumer proposal or a Division I Proposal, depending on whether you owe more or less than $250,000. To read more about consumer proposals, please click to read my consumer proposal faq blog.
  4. Filing for bankruptcy in order to eliminate your debt and start again fresh, Starting Over, Starting Now.

This is what the BIA is designed for. For corporations owing less than $5 million, they too can take advantage of either debt settlement or bankruptcy using the BIA. If a corporation owes more than $5 million, they can also consider a debt settlement plan under the Companies’ Creditors Arrangement Act (CCAA).

You can deal with your own form of insolvency through the BIA if you can’t pay your bills and you can’t find a way to get out of your situation. You can do one of the consumer insolvency filings available to avoid being harassed by debt collectors. Consumer filings are available to individuals to get a fresh start. Your car breaks down and you can’t afford to fix it. Your debt through mortgages payments are too high. You can’t pay your rent. Why would you not want a no-cost consultation with a Trustee? You literally have nothing to lose.

Canada insolvencies summary

I hope you enjoyed this Canada insolvencies Brandon Blog post. Will there be an increase in insolvencies around the globe in 2021? What will the insolvency figures end up being? I don’t know. But rather than worrying about the whole world, what about you?

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 Covid-19 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.

Categories
Brandon Blog Post

INSOLVENCIES IN CANADA: THE CALM BEFORE THE SCARY STORM?

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Insolvencies in Canada introduction

Insolvencies in Canada are at a record low. Is it the calm before the scary storm?

Consumer insolvencies in Canada have been driven to unusually reduced degrees in recent years because of sustained low-interest rates and strong property values.

In this Brandon’s Blog, I discuss what could very well happen in the 4th quarter of 2020 and into 2021.

Insolvencies in Canada – recent history

The lower number of insolvency filings is not a new phenomenon. Insolvencies in Canada have been at historically low levels for many years. It was not until last year that personal insolvency filings increased year over year.

In 2019, consumer insolvencies for the 12-month period finishing December 31, 2019, increased by 9.5% compared to the 12-months ending December 31, 2018. Personal bankruptcy decreased by 1.2%, while consumer proposals were 17.9% higher.

After many successive years of steady decline, business bankruptcies in Canada had reached a plateau level in 2019. Typically speaking, business bankruptcies in Canada have been stable.

During the 1st quarter of 2020, the Office of the Superintendent of Bankruptcy Canada (OSB) reports that between the 4th quarter of 2019 and the end of the 1st quarter of 2020, for insolvencies in Canada:

  • Total insolvency filings decreased by 5.4%.
  • Consumer filings were down by 5.5%.
  • Business insolvency filings were 2.6% lower.
  • In all cases, bankruptcy filings were drastically lower and restructuring proposals were essentially flat.
  • For personal filings, Alberta was basically flat while the other provinces and territory showed decreases.
  • In business filings, Ontario showed a slight increase (8.3%) and British Columbia showed a huge increase (43.5%). Again, it was restructuring proposals, not bankruptcy, making up the majority of business filings. All other provinces and territories showed a decrease.

Then the effects of the economic shutdown of the country started taking hold in April 2020.

April 2020 insolvencies in Canada and the United States

The total variety of insolvencies in Canada (both bankruptcy and proposal filings) decreased by 38.7% in April 2020 contrasted to March 2020. Personal bankruptcy decreased by 41.5% and proposals decreased by 37.2%.

The number of insolvencies filed in April 2020 was 43.5% less than the total in April 2019. Consumer bankruptcies decreased by 43.1%, while consumer proposals decreased by 54.8%.

The story in the United States is very similar. American Banker reports that presently in the US, personal bankruptcy filings are actually reduced year over year. It reports that according to information from the federal courts, there were 186,000 consumer bankruptcy cases in the first quarter of 2019. By comparison, there were 175,000 for the initial quarter of 2020.

A lot more noticeably, the rate of consumer insolvency cases for April of 2020 was 46% lower than in April of 2019.

There are a variety of reasons in both countries. From my discussions with a couple of US bankruptcy lawyers, I am friendly with, it seems the reasons in both countries are generally the same.

In no particular order, the main reasons are:

  • Mortgage payment deferral programs masking what might otherwise be increased delinquencies.
  • Lower overall credit card spending while people are at home in self-quarantine.
  • Various government programs supplying much-needed cash to unemployed people and businesses.
  • Government programs deferring the timing for filing income tax returns and the payment of income tax.
  • Moral suasion so far stopping banks, credit card companies and collection agencies from aggressively making collection attempts during this time.
  • The closure of the courts making it impossible to sue anyone.

    insolvencies in canada
    insolvencies in canada

The economy is starting to reopen

In conjunction with the federal government, the provinces and territories are starting to reopen cities and businesses. No doubt there will be a lot of growing pains as the economy reopens. What should we expect? What will it mean for insolvencies in Canada?

In his first speech as Governor of the Bank of Canada, on June 22, 2020, Tiff Macklem stated that he expects there will be an initial boost to the Canadian economy as it reopens and activity resumes. He does not expect that good news to last very long. Rather, he expects there will be the 2nd stage of economic recovery that will certainly be long and slow, due to the remaining unpredictability around the coronavirus.

The federal government will need to wean Canadians off of the various support programs. When that happens, all the financial pain currently hiding under the radar will rise to the forefront. COVID-19 support programs, payment deferrals and other “time outs” will end and the courts will reopen. Creditors will get back to business as usual in chasing delinquent accounts. The federal, provincial and territorial governments will feel they have done enough to the tune of trillions of dollars. Their attitude will be, in so many words, it is now time for you to stand on your own two feet again.

In fact, some government attitudes are already changing.

Will temporary layoffs be a harbinger for business insolvencies in Canada?

Throughout the coronavirus pandemic, BC seemed to handle their lockdown and other COVID-19 things a bit differently than the other provinces and territories. As they now consider reopening, BC businesses are worried.

British Columbia businesses are discouraged by Labour Minister Harry Bains’s failure to recognize the seriousness of problems facing the mainly small and medium-sized businesses. Their issue is the possibility for thousands of companies to have to make an insolvency filing. Their main worry is that they will be compelled to make severance payments as a result of the unexpected scenarios brought by the COVID-19 pandemic.

The Minister has it within his power to supply a Ministerial Order to expand the temporary layoff time frame under the Employment Standards Act to provide companies with the breathing room” required to survive, recoup, and facilitate return-to-work for laid-off staff.

All provinces and territories face extraordinary difficulties as a result of the economic results from COVID-19. Few business owners can plan for or have the cash-on-hand to terminate all or a considerable part of their labour force at the same time throughout the very best of times.

BC companies will be faced with fears as the clock ticks to target dates beginning in very early July requiring several companies to either recall or permanently terminate laid-off staff members. They don’t have enough business or money to rehire everyone. They also don’t have the cash to make the severance payments. Without legislative support, this problem will face all Canadian businesses.

In the nick of time, the federal government has come to the rescue. On June 23, 2020, Prime Minister Justin Trudeau announced that the federal government has expanded the period for temporary layoffs by as much as 6 months. Employers now have more time to recall staff members who were laid off due to COVID-19.

Now, for employees who were laid off before March 31, the government has proposed that their employers have the earlier of 6 months or up until December 30 to recall their staff. For employees laid off between March 31 and September 30, their company will have up until December 30, unless a later recall day was given on their layoff notification.

I caution that this is a proposal floated by our PM right now and not actual legislation. Labour legislation is largely left up to the provinces and territories. It is interesting to note that the Feds seem to be stepping into this. As we all know, ultimately, businesses will either be able to survive or will have to restructure under our laws for insolvencies in Canada.

Will extending employee recalls be a harbinger for personal insolvencies in Canada?

So now that employees can expect to remain unemployed for longer, what is that going to mean? For several years now polls have shown that Canadians are on the brink of insolvency. As I already mentioned, rock-bottom interest rates and rising real estate values, leading to lots of home equity lines of credit room to borrow on. This has kept Canadians in debt and out of becoming one of the statistics for insolvencies in Canada.

So the question is, once the Canada Employment Response Benefit (CERB) runs out, what will the unemployed do? Seems to me there are a few options, none of them good:

  1. Cut back on spending as much as possible. In places like the Greater Toronto Area (GTA), you have to be a magician to be able to live on $2,000 per month (after putting away the amount you will have to pay eventually in CERB income tax).
  2. Burn through the rest of your savings until you have no cash.
  3. As a result of 1 or 2, go deeper into debt on your lines of credit and credit cards until you have no more borrowing room.

Once all of this has happened, the only thing left to do will be to consult with a licensed insolvency trustee (formerly called a bankruptcy trustee) to discuss your realistic options for eliminating debt.

Insolvencies in Canada summary

I hope you have found the insolvencies in Canada Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

insolvencies in canada
insolvencies in canada
Categories
Brandon Blog Post

FINANCIAL DISASTER PREPAREDNESS: 4 STEP PLAN TO STOP FINANCIAL DISASTER

Financial disaster preparedness: Introduction

The people drowning in debt are always scared of the thought of speaking to a licensed insolvency trustee (formerly known as a bankruptcy trustee (Trustee). The purpose of this Brandon’s Blog is to allow me, a Trustee, to give you some basic points on financial disaster preparedness in a non-scary way. Hopefully, it can help you avoid a financial disaster.

On the 27th day of the United States Federal government closure, many federal employees that are already under money stress and anxiety are not surprisingly asking whether an insolvency proceeding is the only alternative.

These people did not ask for this. Although they will eventually receive all their back pay, that doesn’t help their cash flow today.

Some personal bankruptcies are started by events beyond somebody’s control. The US government shutdown is such an example. Alternatively, unlike the shutdown, a number are completely within an individual’s control.

Here are four ideas on just how to maintain your finances from falling off the edge right into insolvency.

Financial disaster preparedness: #1 – Keep an eye on your credit cards

Try to pay your monthly credit card bill, and all your expenses, on or before their due date. If timely payments cannot happen, pay it back asap or arrange a repayment strategy to decrease late charges as well as interest charges.

Never ever carry over a credit card balance. Attempt to pay your balances, including all your expenses, promptly.

Similarly, be conscientious what your credit history is. Almost every person will certainly have a time in their lives when they’ll need to borrow cash for some major expenditure.

Your credit score will affect the borrowing rates you are offered. Knowing one’s credit history can aid people to make a better decision on when to jump, or hold back, on a choice to borrow.

Financial disaster preparedness: #2 – Know your monthly expenses (and savings too)

When I do credit counselling and speak to people about loan basics, I discuss spending behaviours and always talk about the difference between wants and needs. I always encourage people striving for economic self-reliance to begin with a straightforward exercise: document every single expense in a month.

By mapping out all the spending, people can rank where their cash should, as well as shouldn’t, be going. For example keep an eye out for the daily latte, which is a habit because, it builds up, A more expensive specialty coffee is a want, not a need. A less expensive plain coffee could suffice.

There is one routine I always urge. Make a routine that you will set aside a particular percentage of your income for an emergency fund. The same goes for socking away, at the very least a little, to an RRSP. Work these savings into your budget.

In my experience, all consumer insolvencies commonly entail inadequate financial savings to cover the unanticipated. This is a common problem among Canadians that I have previously written about in my blogs.

Credit cards are also a significant cause of personal insolvencies. Many of our personal insolvency clients use credit cards to supplement their income. Rather than budgeting, they use their credit cards for various expenditures that they really cannot afford and are unable to pay down their credit card balances.

Financial disaster preparedness: #3 – Boost your financial literacy

There are various ways to begin early in life to prevent financial disaster problems. If these guidelines sound familiar, that’s because they are. However, yet few individuals appreciate them. That’s partly because they’re not taught it in the schools.

Canadians have a financial literacy problem. Many people think that some people are born rich and others aren’t. The reality is that those who are well off just have a more realistic understanding about spending and saving within one’s earnings.

Financial literacy, like civics education, needs to be a requirement in all elementary school, high school and university educational programs.

Financial disaster preparedness: #4 – Preserve your financial self-reliance


Those who lived through the great depression understand how fragile funds can be. Clipping coupons and looking for the most affordable prices is just part of their normal behaviour.

Insolvency filings have been at their lowest point since 2007, and there are varying explanations for the decline.

During the last decade, Canadians have amassed debt. Now that interest rates are rising, it is expected that personal insolvency filings will rise. Personal insolvencies will be more a part of our world as a result of unexpected disasters and negative decisions.

Corporate bankruptcies will always be a part of the system as markets change and businesses experience threats they cannot survive.

We must all be financially vigilant. I hope these tips will help you in avoiding any form of financial distress.

Financial disaster preparedness: What about you?

Do you have excessive debt? Are you in need of financial disaster preparedness? Does your business have way too much financial debt and is in danger of shutting down? Are you concerned that the future rate of interest hikes will make currently workable financial obligations totally uncontrollable? Is the pain, stress and anxiety currently adversely influencing your health and wellness?

If so, contact the Ira Smith Team today. We have years and generations of helping people and businesses seeking financial restructuring. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to offer financial restructuring solutions.

We provide a free consultation to assist you to solve your problems. We know the discomfort financial obligations causes. We can end it as soon as possible from your life. This will permit you to start a fresh start, Starting Over Starting Now.

Call the Ira Smith Team today so that we can start helping you get back into a healthy and balanced, stress-free life.

financial disaster preparedness

Categories
Brandon Blog Post

DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: REPORT SAYS CONSUMERS HARMED

debt settlement or consumer proposal canada

Debt settlement or consumer proposal Canada: Introduction

In this Brandon’s Blog on debt settlement or consumer proposal Canada, I want to tell you about a recent Government of Canada study. On April 28, 2017, the Office of the Superintendent of Bankruptcy (OSB), released its report of its investigation. The investigation began in May 2016, of Licensed Insolvency Trustee (LIT) business practices in administering consumer insolvencies. The report is titled: “Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies”. The OSB was becoming increasingly concerned about debt settlement vs consumer proposal Canada and the influence debt settlement companies may have had over certain LITs. I must say that after reviewing the report, I found it shocking.

The purpose of the investigation arose out of concerns over the relationship between debt settlement companies and certain LITs. The OSB wished to decide if LITs were practising per the Bankruptcy and Insolvency Act (BIA), associated policies and OSB Directives. In 2016 they made up over half of all consumer insolvency cases filed.

The aim of the OSB’s evaluation was to recognize as well as analyze possible threats related to the honesty of some elements of the consumer bankruptcy procedure. Specifically in situations where LITs have become part of companies’ connections (or, other inappropriate business relationships) with fee-charging debt management companies.

Prior blogs

We have warned you for years about the dangers of using these types of companies, including:

We, however, had no idea the harm caused to those most vulnerable consumers by a debt management company.

debt settlement or consumer proposal canada

What relationships did the OSB investigation find?

The OSB report indicates that in 2016:

  1. 17 % (9,660) of all consumer proposal filings, the borrower reported having spent first for liability counselling advice from a debt settlement company before being guided to a LIT.
  1. 57 % (5,500 of 9,660) of the consumer proposal filings for which earlier settlement advice was obtained from LITs that had connections with 2 large-volume debt management companies. These 2 companies represented 64 % of the overall LIT fees reported in 2016 consumer insolvencies filings for debt settlement advice before filing an insolvency proceeding with a LIT.
  1. Thirteen LIT companies, which included one national-level company, were discovered to have several LITs running in a constant and continual partnership with large-volume liability management companies.
  1. For roughly 50 individual LITs within these 13 companies, greater than 40% of their consumer proposal filings were sourced from these settlement companies. For roughly 20 of those LITs, greater than 90% of their consumer proposal work comes from with these 2 companies.

Insolvent debtors sourced through these third parties

Insolvent debtors sourced via these settlement companies had the tendency to go after consumer proposals instead of bankruptcy. On the surface, this is a good thing. As you will read further and in next week’s vlog, you will see the reason was so that these companies could charge in many ways the unwary consumers more money than they should be paying.

The OSB’s investigation showed that the debt settlement companies wrote up the necessary documents. The LITs never met the debtors beforehand.

The OSB investigation determined that:

  1. Before the LIT meeting, consumer borrowers connected and had 2 to 4 conferences with the management companies.
  1. The LIT relied upon the settlement companies’ staff to do all the work relative to the gathering, evaluating as well as confirming the borrower’s information and reviewing and recommending on the bankruptcy alternatives.
  1. In situations where the LIT had a regular relationship with the settlement companies, all facets of the procedure before declaring were normally executed at the offices of the management companies.
  1. Information needed for the filing was typically sent straight from the settlement companies’ management team to the LIT’s management team, usually soon before the meeting at which the consumer proposal filing was to occur.
  1. Debtor conferences with the LIT (a variety of which included the settlement company) varied in the period from 5 to 30 minutes. In some circumstances, the meeting took place just after submitting the proposal with the OSB.
  1. LITs normally met the borrower to file at the settlement companies’ premises.
  1. Sometimes, the authorizing of legal papers likewise happened in many casual areas as well as cities where the LIT did not have an authorized workplace.
  1. Interaction with borrowers on legal obligations, creditor meetings, evaluations by an Official Receiver, proposal changes and voting by creditors, was practically solely performed by the settlement companies’ management staff, that communicate with the debtor.
  1. The debtors reported that succeeding interaction throughout the management of their consumer proposal was additionally with the debt settlement company as opposed to with the LIT.

It appears that these LITs who had these close relationships with the debt settlement companies may have shirked some of their responsibilities under the BIA. These LITs had to sign off confirming to the OSB that they had done the necessary work. By relying upon the work done by unlicensed debt settlement companies, did the LIT really do the work that they are signing off for?

Debt settlement or consumer proposal Canada: So what does this mean?

In next week’s vlog, we will go into detail about what the effect was of all this. For now, you should know that a summary of the results for the consumer included:

  1. Consumers paid thousands of dollars more than they needed to.
  1. Unscrupulous debt management companies (and their cooperating LIT firms) talked consumers into high rate loans under the guise of shortening the time they were under an insolvency administration and improving their credit score.
  1. The debt settlement companies had no certification or experience to give the type of insolvency guidance they were providing.
  1. Legal documents contained countless errors and false attestations.
  1. Creditors received less than they were otherwise entitled to.
  1. Debtors had no idea of either their responsibilities under the process they were undertaking. They were not given the opportunity to experience one of the most important aspects of the Canadian insolvency system, financial rehabilitation.

Debt settlement or consumer proposal Canada: What should you do if you have too much debt?

Consult a LIT first and don’t go to one of the debt settlement companies. There is no federal government approved debt settlement companies. The only government approved debt settlement program is a consumer proposal.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. A consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.

You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

Call a Trustee Now!