Tag: division 1 proposal

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THE CONTROVERSIAL QUEBEC PLAN TO REDUCE CREDIT CARD DEBT IN CANADA

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

Stay healthy, well balanced and safe and secure everyone.

Credit card debt in Canada introduction

Yesterday I received my current credit card statement in the mail. I scanned the pages and something on the page titled “Important Changes To Your Credit Card Agreement” caught my eye. The province of Quebec is trying to reduce credit card debt in Canada for its residents. I will explain it in this Brandon’s Blog.

Average Canadian household debt 2020

Credit rating agency Equifax Canada says typical consumer debt boosted 2.7% to get to $72,950 on average per household at the end of 2019. At the end of 2019, TransUnion reported that Canadians charged $100 billion in bank card financial obligations for the first time ever and they’re not done contributing to it. So credit card debt in Canada was certainly out of control then.

I won’t bother quoting what both the Equifax and TransUnion projected as to what would happen to average Canadian household debt in 2020, or about credit card debt in Canada. Suffice to say that in late 2019, an Ipsos poll carried out for Manulife Canada found that 45% of Canadians report spending more than they take home, and also 40% question if they will ever get rid of all of their debt. Nearly half of Canadians are afraid of being indebted for life, and 67% assume everyone is in the very same situation.

In the first quarter of 2020, unemployment was low and the Canadian economy felt like it was in decent shape. Then came the coronavirus pandemic. The fallout from COVID-19 and the shutdown of the Canadian economy have yet to be fully felt. My crystal ball is definitely broken because of it.

Average line of credit debt in Canada

Suffice to say from everything that I have read so far, average Canadian household debt is going up, due mainly to job losses and falling incomes. The Canadian government statistics about Canadians receiving the Canada Emergency Response Benefit (CERB) are staggering. As of June 4, 2020, the government has processed applications from 8.4 million Canadians. Overall as of that date, the federal government has paid out $43.5 billion of CERB benefits.

So with close to 9 million people getting CERB payments up until now, lots of Canadians are making a great deal less money than they did two months back. According to Statistics Canada, Canadians earned monthly, on average, $4,383; those on CERB make $2,000 a month. While it’s great to have some cash coming in, that gap (as well as it will certainly be a lot more for some) is likely to be a significant problem for out-of-work Canadians.

The Quebec plan to slow down credit card usage in Canada did not start out being controversial

To understand what additional pressure there will be on Quebeckers come August 1, 2020, we first have to understand the history of the issue. Quebec’s intentions started out being very good, especially for the time it was developed. But, that was then and now is now!

On November 15, 2017, Quebec’s Bill number 134, “An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs”, was enacted. On August 1, 2019, particular elements of this legislation, aimed at trying to suppress charge card financial obligations in Quebec, began. So everyone had advance warning to change their spending ways.

Starting then, new credit card accounts opened required the minimal monthly payment to be upped to 5% of the outstanding balance on those brand-new charge cards. For cards provided prior to August 1, 2019, cardholders could continue to pay a minimum of 2% of the monthly balance. They had until 2025 to start paying the brand-new minimum of 5%. Nonetheless, the minimum monthly payment was gradually being boosted by half a percentage point annually. This starts on August 1, 2020, up till it gets to the five percent level.

At the time, consumer advocates felt that other provinces will be watching carefully what Quebec is doing. The Quebec government certainly thought that credit card debt in Canada was a problem. It wanted to be proactive in dealing with this problem for Quebeckers. If you had to pay more every month on your old debt, hopefully, people would start feeling the pinch and adjust their budgets to spend less using credit cards. That was the theory.

So that was what was printed on my credit card statement. A reminder that if you lived in Quebec and were responsible for repaying the debt on the credit card, the minimum monthly payment was about to increase.

Given the current state of the Canadian economy and people’s personal financial affairs, this requirement in Quebec to pay more every month on your credit card debt cannot be good news.

Total credit card debt in Canada, not monthly payments, is the real problem

This leads to what or who is the real culprit. Quebeckers having to pay more each month as a minimum monthly payment is not the problem. I don’t mean to single out Quebec residents. I only mention them because it is Quebec that enacted the legislation. The real problem is that Canadians’ total credit card debt in Canada is too high and people cannot pay off the balance they charged each month on the due date. So, they are only making minimum monthly payments, while continuing to charge more, to stay alive until the next month.

Increasing minimum monthly payments is not making a plan to be debt-free

High charge card debt is clearly jamming a lot of people. Time will tell just how effective a technique it is to elevate the minimum monthly payment to 5% to tackle outstanding credit card debt. Due to the current situation, it is pointless to start looking at data for the rest of 2020. Hopefully, this year is not indicative of what future years will look like.

In my opinion, it would have been a lot more impressive for Quebec to at the very same time develop online financial education modules for its people. What is truly required is to show people that paying just the minimum monthly balance doesn’t solve their total debt problem.

As I have stated in many of my blogs, to create a real plan to be debt-free, people need to:

Unpaid credit card debt consequences Canada and how to avoid them

Right now, there is an unofficial moratorium on the banks and collection agencies calling people who are delinquent in their credit card payments. All the lenders are treading lightly, given the many problems currently in the Canadian economy. Given all the problems, now may be the best time to try to resolve long outstanding credit card debt issues.

Once things get back to whatever normal is going to look like, lenders and collection agencies will be calling everyone again. If a satisfactory payment plan is not entered into, lenders may sue once the courts open up again. Once a lender gets a judgment against you, they can garnishee your wages or your bank account.

Under the Ontario Wages Act, R.S.O. 1990, c. W.1, a financial institution that has a judgment against you (like a bank or bank card business) can garnishee up to 20% of your net wages (after statutory deductions for taxes, CPP, and EI). Try living with that kind of wage garnishee and/or your bank account frozen.

So anyone with debt problems needs to realistically look at the various solutions that may be available. I have already talked above about how to start tackling debt problems, especially credit card debt in Canada.

Once you have redone your budget, have family buy-in so everyone is onside helping the household and you are following it, there are extra actions that you can take in dealing with your creditors. These steps include:

Negotiating yourself with the credit card company – Right now is the perfect time to negotiate. Lenders are not receiving payments and many have deferral programs set up. If you have cash on hand, now is the perfect time to approach a lender and offer a discounted amount that you can afford to pay if they agree. Make sure you have properly budgeted so that if you pay that cash out now, you can still survive until your work and income returns back to what it was pre-pandemic.

Non-profit credit counselling agency help – If you don’t feel you can negotiate on your own, go to a community non-profit credit counselling agency. They can review your budget to make sure that it is realistic and give you additional help. They can also try to strike a deal with your creditors for you to either pay the full balance out over time without additional interest or penalties or, a reduced payout now.

Consolidation loan – If you are working from home and still have all your income, a decent credit rating and you can get a loan to consolidate your debts to pay them out, that has many benefits. The issue is that the annual interest rate charged on the consolidation loan must be significantly less than the average interest rate you are paying on your debts. Now you can pay off either your total debt, or the lower negotiated balance, and then just have the lower interest rate one loan to repay.

This can be done under either the self-negotiating method or if you are using a not for profit local credit counselling agency to help you. Either way, stay away from payday loan lenders.

Consult with a licensed insolvency trustee (formerly called a bankruptcy trustee) – Whether things are too far gone to use any of the above methods, or you just want to know what all of your options are, consult with a licensed insolvency trustee to determine how best to deal with your credit card debt in Canada.

Most licensed insolvency trustees, including my Firm, provide a no-cost initial consultation. I can go over with you all of your options. We will discuss all that I have already mentioned, plus the concepts of a consumer proposal, Division I Proposal and bankruptcy. I will give you the pros and cons of each, give you my best recommendation and then you will have all the information you need to decide.

Credit card debt in Canada summary

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.

I hope you have found this credit card debt in Canada Brandon’s Blog helpful. Quebec’s original plan for helping its residents reduce credit card debt in Canada did not start out to be controversial. It was designed to get Quebeckers to think about how they were getting into credit card debt and to force them to work into their budget a larger monthly minimum payment. The aim was to curb out of control spiralling credit card debt. The COVID-19 pandemic and the resulting economic shutdown combined with the upcoming August 1 changes will no doubt make things harder for Quebeckers only able to make minimum monthly payments on their credit card balances.

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, 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.

credit card debt in canada
credit card debt in canada

Stay healthy, well balanced and safe and secure everyone.

 

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Brandon Blog Post

CANADA DEBT HELP: ARE YOU MAKING THESE DEBT RELIEF MISTAKES?

Introduction

On Friday, November 22, 2019, Manulife Bank published its most recent Manulife Bank Canada debt help survey. Manulife Bank publishes its survey annually. The 2019 survey, compared to previous ones, shows that two in five Canadians have given up all hope of ever being debt-free.

In Brandon’s Blog, I review the main findings of the survey. The results show the debt relief mistakes being made. I will also discuss how you can get yourself out of debt so that you won’t be one of the 40% of Canadians that have given up all hope.

Manulife Bank Canadian customer debt relief reviews

The Manulife Bank Canada poll questioned 2,001 Canadians in all provinces between ages 20 and 69 with household revenue of more than $40,000. The survey was carried out on the internet by Ipsos between September 20 to September 26, 2019. National results were weighted by gender, age, area as well as education.

The 2019 survey results show:

  1. Two in 5 question will they ever be debt-free in their lifetime.
  2. Spending-to-income % is trending negatively in Canada.
  3. Ninety-four percent of Canadians say the ordinary home is in too much financial debt.
  4. The spending-to-income proportion is trending adversely as 45 percent record that their expenses are rising faster than their revenue.
  5. Sixty-seven percent of Canadians with too much debt presume everybody else does too.

“There is a financial wellness crisis, and it’s affecting Canadians of all demographics,” said Rick Lunny, President and CEO, Manulife Bank.

Canadians not really asking “How can I get out of debt in Canada?”

One of the saddest parts of the survey is what I did not read. Apparently, Canadians surveyed are not asking how they can get out of debt. Rather, they are just resigned to that being their normal reality.

The survey also shows differences by generation. Whether you are a Boomer, Generation X or Millennial makes a difference. This makes sense as the different generations are at different stages of life.

The generational differences are:

  1. Boomers – 38% of these survey participants say that their spending is greater than their income and 31% feel they will never be debt-free.
  2. Millennials – 46% of those surveyed say that their costs are greater than their earnings and 42% feel they don’t see themselves ever paying off debt.
  3. Generation X – 54% of these study participants state that their expenses are higher than their earnings and 49% feel they will certainly never ever get out of debt.

How can I get relief from debt?

So with these survey results as a backdrop, the question these Canadians need to ask is how to get debt relief. There are no free Canadian government grants to pay off debt. According to Manulife Bank Canada debt help is required by many Canadians.

People have to take matters into their own hands. It starts with a household budget. All members of the family have to be involved in preparing it and you need complete buy-in for it to be successful. The budgeting process begins with understanding what the family’s after-tax income is every month and what all of the household expenses are. Then, all the expenses have to be looked at critically to determine which are necessary and which represent “wants” not “needs”. You can also look at the income side and see if there are opportunities to also increase income.

The goal of the budgeting process is to end up with a household budget that is realistic, will be tracked and all family members will be accountable for. Monthly expenses cannot be greater than the monthly net after-tax income. The budget must also have room for making regular monthly payments to pay down debt, including credit card debt. The budget must also include regular monthly savings, in order to build up an emergency fund. The emergency fund is essential to meet unexpected expenses or income loss.

The 6 main benefits of a household budget

The 6 main benefits of a household budget are:

  1. A budget offers you the ability to have control over your cash: A budget plan is a list of all revenues and costs. It permits you to plan exactly how you intend to spend your money. Rather than money just flying out of your pocketbook, you make deliberate choices on where you desire your cash to go. You’ll never need to wonder each month where your money went.
  2. A budget keeps you concentrated on your economic goals: Budgeting will enable you to meet your money objectives – paying down debt, putting money away in a retirement savings plan, getting a home – as long as you follow it consistently. With a budget, you’ll know exactly what you can afford and you can separate your money appropriately. E.g. If your instant goal is to save for the deposit of a house, then you might need to pass up that holiday you wanted to take. Your spending plan will inform you specifically what you can or can’t manage.
  3. A budget plan will ensure that you do not spend what you do not have: Charge cards are a great convenience yet they also make it really easy to spend due to the fact that there is no cash exchanged in the transaction. Many Canadians rack up major credit card spending and land up deep in debt before they recognize what’s occurred. When you use and stay with your spending plan you need to record every little thing you spend, even if it’s a bank card purchase. You will not wake up deep in debt, ask yourself how you arrived there.
  4. A spending plan will prepare you for the unanticipated: Every budget plan must have a rainy day fund for those unanticipated costs. It’s recommended that you should budget for three months worth of costs for when there may be an unanticipated layoff or various other unplanned for a significant expense. Don’t be distressed; you do not need to save all the cash at once. Build your fund up slowly.
  5. A budget decreases tension: Lots of Canadians panic every month about where the money will come from to pay their bills. A budget will offer you satisfaction. It reveals to you just how much you earn and what your expenses are. If need be you can reduce unneeded expenditures or take on an extra gig to live within a well-balanced budget. No more panicking at the end of the month.
  6. A budget plan can assist you to pay for the retirement you’ve been desiring: Saving for your retirement is really essential and your spending plan can help you save for your future. Reserve part of your income every month for retirement savings. Beginning early as well as consistently stick to it. The money you conserve now will determine the type of retirement you can anticipate.

Is there a government debt relief program?

There is a government-approved debt relief program. It is governed under the federal Bankruptcy and Insolvency Act (Canada) (BIA). There are 3 personal debt government approved debt relief programs. The only person authorized to administer any of these debt settlement programs is a licensed insolvency trustee (formerly called a trustee in bankruptcy).

I have written about them before, but I will summarize here what they are:

  1. Consumer proposal: A consumer proposal is a streamlined process. This process enables insolvent people to make a formal deal with their creditors. This federal government authorized financial debt settlement program allows you to repay only a portion of what you owe to eliminate all of your debts. You can take as long as 5 years of routine month-to-month payments to do so. To qualify, you have to be insolvent and owe $250,000 or less to all creditors, apart from for any kind of financial obligations secured by way of registration against your house. A successful consumer proposal allows you to keep your assets that you can afford to keep. It also allows you to avoid bankruptcy.
  2. Division I proposal: A Division I proposal offers the same protections as a consumer proposal. If successfully completed, it provides the same benefits as the consumer proposal, including avoiding bankruptcy. This kind of proposal is not as streamlined as a consumer proposal and is for people who owe more than $250,000, not including any mortgage or other loan registration against your home. The other major difference is that an unsuccessful Division I Proposal results in an automatic bankruptcy. A consumer proposal does not have this same automatic provision.
  3. Bankruptcy: Bankruptcy is a process whereby in exchange for giving up your assets to the Trustee (with certain provincial exemptions), the honest but unfortunate debtor will be able to discharge all of their debts (with certain exceptions). When I meet with insolvent people for their no-cost consultation to explore their options, I always try to find the option that allows them to avoid bankruptcy as long as it is feasible and realistic.

Canada debt help summary

I hope you enjoyed this Brandon’s Blog on Canada debt help. Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.canada debt help

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THE EASIEST WAY TO ACTUALLY LIKE WHAT IS A DIVISION i PROPOSAL ONTARIO

what is a division i proposal

If you would prefer to listen to an audio version of this what is a division i proposal Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

Over recent times, I have been receiving increased inquiries as to what is a division i proposal. The purpose of this Brandon’s Blog is to explain what it is. No person or company actually likes to enter a restructuring process to avoid bankruptcy, so hopefully, this discussion will be helpful to those that really need it to appreciate why if necessary, it is actually easy to like it; especially a successful one!

What is a division i proposal?

Division I is one of the two divisions of Part III of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3). Division I is a restructuring provision. It is available to people who owe more than $250,000 and companies with any level of debt, in need of financial restructuring.

At the beginning of any consultation with an insolvent person or for an insolvent company, is to determine if a successful restructuring can be accomplished. If not, the only other realistic alternative is bankruptcy. A successful restructuring of a person will allow that person to keep the assets they wish to keep and can afford to hold onto.

A company that successfully restructures will continue to provide employment. The jobs that will be preserved are not only those of the company that restructures. Its continuing to do business with suppliers who continue to do business with the restructured company will also avoid layoffs or terminations of their own staff. The reason for this is that their own volumes will not decrease, or decrease as much as if its customers went bankrupt and could no longer buy from them.

How do I start a restructuring plan for a person?

The first thing the insolvent person or company needs to do is hire a licensed insolvency trustee (LIT) (formerly called a trustee in bankruptcy). The reason why is because a LIT is the only one in Canada authorized to administer a restructuring proposal.

The LIT will discuss with the insolvent person about the nature of his or her assets and liabilities. Which assets are financed and which are owned free and clear. There will also be a frank analysis and discussion of the person’s income and expenses. The reason for this is to do preliminary credit counselling to help the person recognize how their historical household budget (whether they actually knew it or not) needs to change. Is there room in a new solvent budget to pay for an expensive asset, or does it need to be replaced by a less expensive one? A leased or financed auto is a prime example.

I want to make that determination upfront because a financed asset given up before the debt is fully repaid will create an acceleration of the full amount of that liability claim. I will want to make sure that it is done the right way, so the new accelerated liability will be caught as a debt being compromised, not a post-filing debt not caught in the financial restructuring.

Once the issues have been identified and the realistic options identified, I will then want to work with the person to put together a realistic post-filing cash flow budget. There are three main reasons for this, being:

  1. I want to make sure that there is a budget that shows the person’s monthly expenses will be no more than, and hopefully less than, their monthly after-tax income.
  2. We must be sure that the monthly cash flow shows the person can afford the monthly payments to the LIT required to have a successful restructuring.
  3. One step needed to have a successful restructuring is to have such a monthly cash flow budget signed off by both the insolvent person and the LIT showing the person can survive through and afford a successful restructuring. Any creditor can request to see a copy of that signed off cash flow budget.

How do I start a corporate restructuring plan for a company?

The initial step in any corporate restructuring is for the board of directors to recognize and also resolve that the company is insolvent, that it needs to reorganize under this part of the BIA and to approve the hiring of a LIT.

I described the consultation process I first go through with a person to determine if they can successfully complete a restructuring proposal and then to start developing it. Similarly, I go through a consultation process with the senior management of the company.

I first want to determine if we have the basic requirement for a successful corporate restructuring. That basic requirement is, the company’s business, or one or more portions of the business, must be viable, notwithstanding that it is insolvent. There must be a true demand for the business and that it will be able to operate successfully once its financial position is right-sized. It may be the whole business, or it may be the case that we need to use the restructuring process to cut away the dead business units, in order to allow the viable one to survive and ultimately flourish.

By its nature, corporate restructuring is more complex than a personal one. There are many more moving parts to a company. However, the basic analysis is similar. What are the assets and liabilities of the company? Which business units are capable of being operated profitably? Which assets that are financed are essential to the future of the restructured company. Which are redundant and must be jettisoned. How will all the answers to these questions affect the company’s labour force? How many jobs will be lost and how many will be saved?

Ultimately, all these answers must be compiled into a cash flow statement. We must know does the company have sufficient financing or funds available to it so that it can properly operate during the restructuring process. There is no point in starting a restructuring if the company cannot survive the restructuring period. What will the company’s post-restructuring cash flow look like? We want to know that answer also to make sure that there is a real business that can operate profitably after coming out of the restructuring process. Just like in a personal financial restructuring, the company and the LIT must sign off on a realistic cash flow budget to show that the company can operate and survive the restructuring process.

What if the person or company needs immediate protection but is not ready to file the real proposal yet?

Just like in a bankruptcy, the filing of a Proposal brings in an immediate stay of proceedings. What this means is that no creditor can either begin or continue any action against the person or company for the enforcement or collection of a debt. Sometimes the insolvent debtor is under attack from a creditor.

Examples of proceedings against a person or company need protection from are numerous. The more standard ones are:

  • They need to defend a lawsuit but can’t afford the cost and therefore a default judgment is about to be issued.
  • Attendance is required at a judgment debtor examination to disclose the nature and whereabouts of their assets.
  • The Sheriff may be seizing an asset that if successful, it will stop the person or company from conducting business.

The BIA provides a way for an insolvent debtor under such an attack to invoke a stay of proceedings before they are ready to file their formal restructuring plan. That option is to first file what is called a Notice of Intention To Make A Proposal (NOI). This is a BIA filing that serves as a notification to the creditors that the debtor will certainly be making a restructuring proposal but it needs to have the stay of proceedings start right now.

How the concept of NOI evolved is very interesting. Before the 1992 amendments to the BIA, there was no such thing as an NOI. However, people and companies needed to invoke an immediate stay of proceedings, but the BIA did not contain such provisions. So, what was done, is that the LIT would prepare what was called a holding proposal. All the proposal said was that I promise to file a real restructuring proposal as soon as possible. That holding proposal was then filed which brought on a stay of proceedings.

Paperwork and procedures

The LIT needs to be satisfied that: (i) all the relevant details have been gotten; (ii) the person or company has a likelihood of a successful proposal restructuring; as well as (iii) the person’s or company’s cash flow is enough that it can pay its ongoing post-filing debts through the restructuring process.

The LIT then assists the insolvent debtor in completing the necessary paperwork. The LIT also prepares its own report. The LIT then does a mailing to all known creditors to advise them of the filing of the Proposal, a means by which they can file their claim with the LIT and a description of what the process is and what it all means. The documents are:

  • the Proposal
  • a statement of the person’s or company’s assets and liabilities
  • a listing of creditors
  • the form 31 proof of claim
  • the voting letter
  • LIT’s report on the insolvent debtor, the Proposal and the LIT’s recommendation for voting in favour of (or against) acceptance of the Proposal

The meeting of creditors is then held to allow the creditors to vote on the Proposal. If the Proposal is accepted by the required majority of the creditors, then the LIT applies to Court for approval of the Proposal. Once approved by the Court, it forms a contract between the debtor and the creditors is formed. The person or company then needs to perform the promises it made in the Proposal to its creditors. This, of course, includes paying the necessary funding to the LIT for distribution to the creditors.

Executing on the Proposal promise

The Proposal of a person will require that insolvent debtor to make monthly payments to the LIT. The payments are made out of the person’s monthly cash flow, as indicated in its budget. The person can take up to 60 months to fulfill the promise of payments to the LIT for distribution to the creditors.

A company carries out its Proposal as it continues its operations. It hopefully succeeds in operating profitably. The firm would be conserving a particular amount of its earnings in money and paying to the LIT what is needed under the company’s restructuring strategy to create the Proposal fund it promised. The LIT after that makes the distribution to the creditors called for in the restructuring plan. When all the payments have actually been made, the company has effectively reorganized and continues its business having successfully completed its restructuring.

What happens if a Proposal is unsuccessful?

This is a very simple question to answer. What is a division i proposal if not successful? It is called bankruptcy. If a restructuring plan does not get either acceptance by the necessary majority of creditors or approval by the Court, then the person or company is automatically bankrupt. If the person or company fails to make all the payments called for, that also creates an unsuccessful restructuring. In any of those cases, It is as if the insolvent debtor filed an assignment in bankruptcy.

In that case, the LIT administering the restructuring program becomes the LIT administering a bankruptcy.

What is a division 1 consumer proposal?

I have been asked this question several times. Firstly, there is no such thing as a division 1 consumer proposal, but there is such a thing as a consumer proposal. A consumer proposal is found in Part III Division II of the BIA. So, it is called either a division 2 proposal or a consumer proposal.

Is consumer proposal worth it?

Before being able to decide if a consumer proposal is worth it, we need to understand what a consumer proposal is. The same way I described what is a division i proposal, I need to describe a consumer proposal. The consumer proposal process is a streamlined version of the personal division i proposal already described. It is only for people and not companies. Further, the person cannot owe more than $250,000, not including any loans registered against the person’s home, such as a mortgage or home equity line of credit.

I have written many times about different issues concerning consumer proposals. Rather than repeating it in Brandon’s Blog, I recommend you read my earlier blogs on the consumer proposal topic. Some of the blogs I have written for ease of reference are:

Summary

I hope that I have adequately answered the question of what is a division i proposal and how you can like it. The honest answer is that no one really does. However, if it is necessary for you or your company’s survival, it becomes very easy to like it.

Do you or your company have way too much debt? Before you reach the phase where you can’t stay afloat and where financial restructuring is no longer a viable alternative, contact the Ira Smith Team.

We know full well the discomfort and tension excessive debt can create. We can help you to eliminate that pain and address your financial issues supplying timely, realistic and easy to implement action steps in finding the optimal strategy created just for you.

Call Ira Smith Trustee & Receiver Inc. today. Make a free appointment to visit with one of the Ira Smith Team for a totally free, no-obligation assessment. You can be on your path to a carefree life Starting Over, Starting Now. Give us a call today so that we can help you return to an anxiety-free and pain-free life, Starting Over, Starting Now.

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Brandon Blog Post

BANKRUPTCY TRUSTEE IN ONTARIO: REMARKABLE CARE NEEDED TO TAKE OVER A CLAIM

bankruptcy trustee in ontario
bankruptcy trustee in ontario

If you would prefer to listen to an audio version of this bankruptcy trustee in Ontario Brandon’s Blog, please scroll to the bottom and click on the podcast.

Bankruptcy trustee in Ontario: Introduction

As a bankruptcy trustee in Ontario (now called a licensed insolvency trustee ), there are many times where our investigation indicates that the bankrupt (usually a bankrupt corporation) has a claim against another party. The claim may very well be a good one worthy of pursuing. However, like with any potential litigation, there could be not enough funds to pay for pursuing that claim in the Court, or it may be unwise for a bankruptcy trustee in Ontario (Trustee) to assume the litigation risk.

In cases like this, the licensed insolvency trustee can offer up the opportunity to the creditors to take on the action in their own name. One or more creditors can get an order under s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA) from the Registrar in Bankruptcy, authorizing the assignment to them by the licensed insolvency trustee of the bankrupt company‘s right to advance that claim and if necessary, sue.

Without going into all the finer details and circumstances, any creditor or group of creditors who obtain that right can keep any amount collected under that claim up to the total of their claim against the bankrupt company plus the costs they spent in obtaining that award. Any surplus must be paid over to the bankruptcy trustee in Ontario.

A recent decision of the Court of Appeal for Ontario highlights an interesting issue regarding the interplay between advancing such a claim by a creditor and the limitation period in Ontario.

Bankruptcy trustee in Ontario case background information

The Ridel family used an investment and stock brokerage company called e3m Investments Inc. (e3m). In December 2006, the Ridels issued a Statement of Claim versus their account representative, as well as his employer, e3m. The action was for negligence, breach of contract and violation of fiduciary obligation in the monitoring of their financial investment accounts.

After a ten-day court hearing, judgment was issued against e3m as well as the account representative in Ridel v. Cassin, 2013 ONSC 2279. The judgment was especially scathing of both the account rep and e3m. The judgement, in the amount of $1,036,245.85, was upheld on appeal. As a result, the account representative needed to make an insolvency filing. My Firm administered the successfully completed Division I restructuring Proposal of the account representative. Given the judgement, he needed to do an insolvency filing and it was in his best interests to attempt to restructure to avoid bankruptcy. The Ridel family controlled the voting in his successful Proposal. e3m filed for bankruptcy on January 20, 2015.

The bankruptcy trustee in Ontario case before the Court of Appeal

On July 31, 2019, the Court of Appeal for Ontario released its decision in Ridel v. Goldberg, 2019 ONCA 636. The underlying claim was one the bankrupt company may have had against its Director and majority shareholder.

On October 25, 2016, the Ridels, as an unsecured creditor of e3m, got an order under s. 38 of the BIA. They obtained an assignment of the claim of e3m against its sole Director, a Mr. Goldberg. Since e3m was found liable under the Ridel judgement, e3m could have a claim and institute proceedings against its Director, Mr. Goldberg.

The s. 38 order supplied the Ridels with the legal authority to assert e3m’s claim against Mr. Goldberg “to recover the damages for which e3m became liable pursuant to [the 2013 Judgment, as amended] in their own name and at their own expense and risk, based on Mr. Goldberg’s failure to fulfil his obligations as a director and officer of e3m by abdicating his responsibility to supervise the Ridels’ accounts at e3m”.

The Ridels launched their lawsuit proceedings in the lower Court against Mr. Goldberg the day they obtained the s. 38 order, October 25, 2016. The Ridels were trying to get a summary judgement. Mr. Goldberg raised several defences, including, the Ridels’ claim was statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (Limitations Act).

The lower court judge dismissed the Ridels’ action on two fronts. First, the judge found that there were concerns about needing a trial. Second, the lower court judge agreed that the claim should be dismissed because of the expiration of a two-year limitation period The Ridels appealed the lower court’s decision to the Court of Appeal for Ontario.

bankruptcy trustee in ontario
bankruptcy trustee in ontario

The fascinating part (for me anyway) of the Court of Appeal’s decision

The unanimous Court of Appeal ruling agreed with the lower court judge’s decision that the action the Ridels took by way of an assignment document from e3m’s licensed insolvency trustee was statute-barred under the Limitations Act. However, the appeal court review of the lower court decision disagreed with the reasons given by the lower court. Upon agreeing that the Ridel’s action should be dismissed based on it being barred by the Limitations Act, the appeal court did not wade into whether or not the lower court judge’s decision was correct that summary judgement should not be granted as there was a triable issue.

The arguments given for the limitation period are somewhat complex. I will attempt to summarize them here so as not to be confusing. The lower court judge held that the Ridels as applicants knew of the existence of the potential claim of e3m against its Director as early as in July 2006. Since they did not launch the e3m claim in a court action until October 2016. Hence, the limitation period of 2 years made that claim statute-barred.

The Ridels state that the limitation period cannot have actually begun up until after e3m was bankrupt. Before then, they could not take an assignment of any claim from e3m’s licensed insolvency trustee, especially a potential claim by the company against its Director (and Officer).

They also stated it is impossible to get an s. 38 order before the company actually is bankrupt.

The lawyer for the Ridels did not argue the testing of the timing of their very own understanding of the Director’s misdeed in regard to e3m. Rather, he focussed on the fact that the Ridels were not in a place to do anything concerning it, at a minimum, until the bankruptcy of e3m.

The appeal court went through a detailed analysis of the relevant statutes and case law. The Court of Appeal confirmed that the action launched was not a claim by the Ridels personally, but rather the company’s claim of which they took a court-approved assignment. So the appeal court agreed substantially with the Ridels that they could not have started their action until they took the assignment from the e3m licensed insolvency trustee.

When was e3m’s knowledge of its claim?

So the appeal court said what is important, since it is e3m’s claim and not the claim of the Ridels, when did e3m first become aware of the potential claim against its Director? The appeal court stated it fully understood why the Director would not have had e3m sue him or otherwise enjoin him in the original claim against the account rep and e3m. However, when did e3m first become aware of the potential of its claim?

On the proof in this matter, regardless of the Ridels’ or Goldbergs’ understanding of the case or his aversion to act against himself in support of e3m, at the very least, by April 2013, every one of the other e3m investors/shareholders had received a copy of the Reasons for Decision and Judgment against the account rep and e3m. It included different referrals to the Director’s misbehaviour. Those investors had the capacity to make e3m file a claim against the Director.

The Court of Appeal for Ontario judges determined that e3m recognized that: 1. an injury had actually happened; 2. its loss was brought on by an act or omission; 3. the act or omission was purportedly that of the Director, and 4. an action against the Director was a proper way to treat it. Regardless of the Director’s control to protect against such a lawsuit, the investors might have taken control of e3m’s board of directors and cause e3m to make such a case versus Goldberg.

So the appeal court decided that e3m first recognized that it may have a claim against the Director in April 2013, but the action was not commenced until October 2016. Accordingly, it was outside of the 2 year limitation period and the action was statute-barred.

So what does this mean for a bankruptcy trustee in Ontario?

As the bankruptcy trustee in Ontario in either a corporate bankruptcy or personal bankruptcy, many times we find as a result of our investigation that the bankrupt may have a claim against another party. More often than not, we either do not have sufficient funds or are not prepared to risk the funds in the Estate to the litigation risk. So, what we do is communicate with all known creditors to advise of the potential claim and that the licensed insolvency trustee is either unwilling or unable to act upon it. Accordingly, we are giving the creditors a chance to apply to the Court to take an assignment of such action under s.38 of the BIA.

Creditors seriously considering taking over the bankrupt’s claim must seriously consider the issue of whether or not launching a court action will be met with a defence that the claim is statute-barred, amongst other defences that may be available to the defendant(s). The Court of Appeal for Ontario has clearly communicated that the creditor taking an assignment of the bankrupt’s claim, cannot be in a better position than the bankrupt itself. The first knowledge that a claim exists will be when the bankrupt first had the knowledge, not the date that the creditor obtained the right to sue or any other date.

Bankruptcy trustee in Ontario Canada conclusion

The business world contains normal daily risks. This case clearly shows that. Are your company’s viability and solvency being threatened by claims against it, or for any other reason?

Is your company experiencing financial problems and requires debt relief? Are you on the brink of filing for bankruptcy just like e3m was because of your debts? Or are you an individual that has too much debt and you are looking at personal bankruptcy as your solution? Don’t wait until it is too late to properly restructure your company’s financial affairs. You don’t have to be another one filing bankruptcy in Canada. We can show you the various alternatives to bankruptcy.

As a licensed insolvency trustee, we are the only professionals who have met the requirements of the Office of the Superintendent of Bankruptcy Canada to obtain a trustee licence. One of those requirements to be trustees in bankruptcy is to pass an oral board of examination.

Insolvency trustee’s operations are licensed, authorized and their duties supervised by the federal government to offer insolvency advice and to implement solutions under the Bankruptcy and Insolvency Act (Canada). We are a licensed insolvency trustee operating in Ontario Canada and we will help you to select what is best for you to free you from your debt issues.

Contact the Ira Smith Team today so we can use our qualifications to get you or your company the debt relief that you deserve. We will eliminate the anxiousness, tension, discomfort and pain from your life that your bills and your cash problems have caused. With the unique roadmap, we develop just for you, you can eliminate your debts and we will promptly return you right into a healthy and balanced problem-free life.

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BANKRUPTCY TRUSTEE IN VAUGHAN BECOMES LICENSED INSOLVENCY TRUSTEE

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The bankruptcy trustee in Vaughan: Why did we transform into a licensed insolvency trustee?

Similar to caterpillars turning into butterflies, this bankruptcy trustee in Vaughan went through a metamorphosis. The Office of the Superintendent of Bankruptcy officially changed the name “bankruptcy trustee” to “licensed insolvency trustee” (LIT). As of April 1, 2017, all licensed trustees must have fully transitioned to the use of the LIT designation.

The purpose of this blog is to offer an overview of the Canadian insolvency process. Think of it as a bankruptcy and insolvency lesson 101.

What is the purpose of the Bankruptcy and Insolvency Act

Among the primary functions of this insolvency process, it is to release the individual from specific financial debts. It is to give a straightforward honest but unfortunate debtor a “new beginning.”. The debtor has no responsibility for discharged financial obligations.

A discharge is available to personal bankrupts, not to corporations. Although a personal case typically causes a discharge of financial debts, the right to a discharge is not absolute. Some sorts of debts may not be released. Section 178(1) of the Bankruptcy and Insolvency Act (Canada) (“BIA”) sets out the types of debts that are not released by the discharge of the bankrupt. The kinds of debts that are not released are:

1. child support and alimony;

2. fraud or near fraud;

3. debts arising from Court orders.

Where can I do some of my research?

You must initially do some of your own research to get an idea of exactly what your choices are. One place to start is our website to learn about:

  1. Personal Services
    1. Credit Counselling
    2. Consumer Proposals
    3. Bankruptcy Alternatives
    4. The Bankruptcy Process
    5. Why use a Licensed Insolvency Trustee?
    6. Rebuilding Credit
    7. Personal Bankruptcy
    8. TOP 20 PERSONAL BANKRUPTCY FAQs
  1. Corporate Services
  2. Creditor Services
  3. Our Blog titled Brandon’s Blog

Once you have a good handle on what to expect, speak to a LIT to begin discussing what actions you have to take next.

bankruptcy trustee in vaughan
bankruptcy trustee in vaughan

The BIA

The BIA allows for a procedure that permits people and companies to be released from all of their financial debts through either:

  1. a restructuring (Consumer Proposal, Division I Proposal or the Companies’ Creditors Arrangement Act) under secure arrangements of the federal insolvency statute; or
  2. through bankruptcy by turning over their property to a licensed insolvency trustee to realize upon it for the general benefit of creditors.

Either way, the funds available for distribution to the creditors are paid out by the licensed insolvency trustee. It is according to the scheme of priority laid out in the BIA.

The Court will consider approving a repayment plan that will repay the approved part of the financial obligations in no more than 5 years. When you use the restructuring provisions of the BIA (Consumer Proposal or Division I Proposal), you need to have a payback strategy to show your creditors just how you are going to pay back your debts. A successful restructuring plan is an alternative to bankruptcy and will allow a person or company to avoid bankruptcy.

There are various rules and ways that must be followed. Your licensed insolvency trustee can go over all the issues with you and is there to aid you through the process.

How does it all work?

Canada’s insolvency legislation is designed for debtors experiencing financial problems who cannot pay their present financial obligations and don’t have enough cash flow to offer a restructuring plan to avoid bankruptcy. The aim is to get a release from their existing debts.

The premise of the BIA is that the individual must deliver all of his or her non-exempt assets to the licensed insolvency trustee. The trustee will sell them for distribution to the creditors. In return, other than for either secured debts or the class of debts not released by a discharge from bankruptcy discussed above, the person’s debts will be erased. The person will be able to maintain any type of property that is categorized as exempt under provincial regulations. In this way, a discharge allows the individual to return to society as discharged bankrupt. This allows the person to start all over again.

Your credit score

Filing in an insolvency process could impact your financial resources and credit score for years. You should very carefully weigh all your options before choosing the bankruptcy option. That is a discussion a licensed insolvency trustee will be happy to have with you and will help you in first trying to find one of the possible bankruptcy alternatives. Hopefully, together you can see which one is best for you. Only if there is not an available alternative, will the trustee recommend bankruptcy?

A current bankruptcy filing may prevent you from acquiring a mortgage or other financing for years. Credit card businesses will instantly end your charge cards when you file for bankruptcy. Likewise, if you are trying to find a job or rent a place to live, some employers or property owners might look unfavourably on a current bankruptcy filing. If other applicants are as qualified as you and don’t have a bankruptcy on their record, you probably won’t be chosen.

Fresh start

Bankruptcy permits people or companies that are unable to pay their debts to settle their monetary difficulties and start restoring their credit. Declaring bankruptcy will trigger the “stay of proceedings”, preventing creditors from starting or continuing any legal action to collect their debts.

A bankruptcy filing will stay on your credit report for about 7 years. Since many financial debts can be discharged in bankruptcy with certain exceptions, people can take certain steps to begin boosting their credit rating after filing for bankruptcy and for sure after obtaining their discharge.

What to do if you are experiencing financial hardship

I hope this bankruptcy trustee in Vaughan Brandon’s Blog was helpful to you. People experience financial hardship for many reasons. If you’re experiencing financial hardship and are looking for a way out, contact Ira Smith Trustee & Receiver Inc. With immediate action and the right plan for moving forward, we can set you on a path to debt-free living Starting Over, Starting Now. All it takes is one phone call.

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CONSUMER PROPOSAL VS BANKRUPTCY: THE GREATEST INFO YOU REALLY NEED TO KNOW

 

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Consumer proposal vs bankruptcy: Introduction

The holiday shopping season is upon us and the first sign that you are in financial trouble is if you truly need to learn about consumer proposal vs bankruptcy BEFORE you begin your holiday shopping! If you have already recognized that you need to know your options in dealing with your debt before you start putting holiday gift purchases on your credit card, I suspect that the New Year will become the time when you begin taking positive action to reduce your debt and gain back control over your life.

A consumer proposal is an alternative to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to people only whose total debts do not exceed $250,000, not including debts secured by their principal residence. Division 1 proposals are available to both businesses and people whose debts exceed $250,000 (excluding the mortgage on their principal residence). The focus of this vlog is on the differences between a consumer proposal vs bankruptcy.

Consumer proposal vs. bankruptcy: What are consumer proposals?

Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee (Trustee) acting as the consumer proposal administrator, you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific period not exceeding 60 months
  • Extend the time you have to pay off the debt
  • Or a mix of both

Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.

Below I will highlight more differences between a consumer proposal vs. bankruptcy.

Consumer proposal vs bankruptcy: What are the advantages of a consumer proposal?

The advantages of a consumer proposal vs. bankruptcy are:

  • You keep all of your assets
  • Actions against you by unsecured creditors, such as wage garnishments will stop.
  • Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
  • You don’t have to declare the “B” word

What are the differences in credit history score?

The individual that declares bankruptcy will certainly get R9 status. This is the lowest credit score as well as it will continue to be on their report for 7 to 14 years. A person that submits a consumer proposal will have an R7 ranking which is less extreme. It will certainly continue to be on their record for approximately 8 years in total, from the moment of declaring.

For the most part, you will certainly pay less than you owe with a consumer proposal. Often as much as 70% less. Your several financial obligations will also be consolidated right into a simple regular monthly settlement. This number will be based upon what you can pay for.

Your ability to improve your credit score later is much different in a consumer proposal vs bankruptcy

What are the costs and fees of a consumer proposal versus filing for bankruptcy?

When doing a consumer proposal, the Trustee’s charges are included in the payment you bargain with your creditors. For instance, if your consumer proposal has you paying $400 monthly for 60 months, the Trustee’s fee and disbursements are taken from those funds.

Nevertheless, if you were to file for bankruptcy, the cost is established by any kind of excess earnings you could have (based on the criterion that includes earnings as well as family size), any assets that you may intend to try to keep, and also the monthly contribution for surplus income if any.

If there is no excess earnings or assets, the insolvency cost will be around $2,000. This is another difference between a consumer proposal vs bankruptcy.

Are assets treated differently between a consumer proposal vs bankruptcy?

If you do a consumer proposal, you can retain your assets whereas in bankruptcy your properties might be impacted. This consists of the equity in your home if higher than $10,000, a car or truck worth more than $6,000 (with no liens against it), financial investments, tax refunds, and also RRSP payments made in the last 1 year. In bankruptcy, you transfer your possessions (except those that are exempt by regulation) to the Trustee, and they are then sold or transferred to repay your creditors.

This difference between a consumer proposal vs bankruptcy is huge.

What if I default on my consumer proposal vs bankruptcy payments?

If you do not maintain your payments on a consumer proposal, it defaults and is void. You also are unable to submit an additional one. Collection action by your credits will begin again. If you do not complete all your duties in bankruptcy, you will certainly not be discharged and eventually, your creditors will resume collection activities as well.

This is another consumer proposal vs bankruptcy difference.

When is a meeting of creditors held in a consumer proposal?

A meeting of creditors in a consumer proposal is held if one is requested by one or more creditors who are owed at least 25% of the total value of the proven claims.

A request for a meeting has to be made by the creditors within 45 days of the filing of the consumer proposal. The OSB can also request the Trustee to call a meeting of creditors any time within that exact same duration.

The meeting of creditors should be held within 21 days after being called. At the meeting of creditors, they vote to either approve or decline the proposal.

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

How long does it take to complete a consumer proposal vs bankruptcy?

A consumer proposal is finished once the individual has actually made the required payments for the needed period of time. In a bankruptcy, the discharge depends on a variety of different aspects, consisting of whether it was the first time the debtor filed for bankruptcy and if they need to make surplus income payments.

If the debtor has actually never ever declared bankruptcy before and they do not have to make surplus income payments, most bankrupts are discharged 9 months after declaring bankruptcy. However, if the bankrupt has surplus income, they will need to make payments for 21 months prior to when they can be released.

This is another difference between a consumer proposal vs bankruptcy.

What do consumer proposals and bankruptcy have in common?

Both a consumer proposal and filing for bankruptcy are lawfully binding procedures that are provided by a Trustee. If you are thinking about bankruptcy, it is essential that you consult with a Trustee so that you can totally understand the procedure, what’s involved, and also any charges. You can speak with friends or family that may have filed for one or the other before, yet it is necessary that you get professional recommendations concerning your unique situation.

Filing for bankruptcy or doing a consumer proposal are both matters of public record. That means there will certainly be an irreversible public document regarding your insolvency that can be accessed by anyone. If the debts are joint or co-signed, the other individual is accountable for the financial debt in both a consumer proposal and personal bankruptcy as well, unless it is a joint filing.

Even these similarities still point out differences between a consumer proposal vs bankruptcy.

Consumer proposal vs bankruptcy: How to Figure Out Which Option is Best for You?

As you can see, when you look at a consumer proposal vs bankruptcy, there are definitely differences between the two, but they also have a lot in common too. What’s most important, though, is that you find the best way to get your finances back on track in a way that will help you achieve your long-term goals.

Consumer proposals and bankruptcy aren’t the only ways of obtaining debt relief and consolidating debt. There are also other ways of resolving debt problems that don’t involve an official program or paying anyone. If you honestly want to carefully and objectively look at all your options, contact a local Trustee, and speak to him or her. They’ll listen to your situation and issues and advise you on what will work best for you even if you do not need to file for either a consumer proposal or bankruptcy.

Their help is usually free and non-judgmental.

At our Firm, declaring bankruptcy is only encouraged until all other settlement solutions have been exhausted. A consumer proposal in Ontario is shaping up to be one of the better bankruptcy alternatives, primarily because of the reasons I describe in this Brandon’s Blog.

Consumer proposal vs bankruptcy: Who qualifies for a consumer proposal?

A consumer proposal is available to people whose total debts do not exceed $250,000, not including debts secured by their principal residence.

Consumer proposal vs bankruptcy: The bankruptcy process

Before you decide what to declare, contact a professional to discuss all of your options. A trustee is a highly-skilled, professionally licensed by the federal government that can evaluate your situation and presents all the options available to you. Whatever process ends up being the best and the most helpful for your particular circumstance, we can administer the insolvency process.

Consumer proposal vs bankruptcy: How to file for bankruptcy?

In order to file, you must engage a Trustee. This is an individual or company licensed by Industry Canada to administer the insolvency process. The 10 steps below are a guide to the bankruptcy process.

Consumer proposal vs bankruptcy: The 10 steps of the bankruptcy process

  1. Contact a licensed insolvency trustee and attend a meeting with him or her to talk about your personal situation and your options including if it is possible for you to avoid bankruptcy.
  2. Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
  3. The trustee notifies your creditors of the bankruptcy.
  4. You attend a meeting of creditors if one is called.
  5. You attend two counselling sessions.
  6. Subject to your provincial exemptions, the trustee sells your assets; you may also have to make surplus income payments to the trustee.
  7. In certain circumstances, you may have to attend an examination by an officer at the OSB.
  8. The Trustee prepares a report to the OSB describing your actions during the bankruptcy.
  9. You attend the discharge hearing if required.
  10. You get your discharge from your bankruptcy and then the trustee completes the administration, including paying a dividend to your creditors, if available.

Consumer proposal vs bankruptcy: Move on with your life

I hope you have enjoyed this consumer proposal vs bankruptcy Brandon’s Blog. Both a successfully completed consumer proposal or obtaining your discharge from bankruptcy lets you get back on the road to financial health, relieve the stress you face and bring you:

  • Relief from harassing calls from debt collectors;
  • Freedom by getting out from under garnishments;
  • The ability to live better than just hanging on one payday to the next;
  • Improved credit ratings; and
  • Improved health and well-being.

Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.

Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations. Contact Ira Smith Trustee & Receiver Inc. today. All you have to lose is your debt!

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Division One Proposal Ontario Documents: corporate restructuring proposal

Corporate restructuring proposal

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

First steps

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

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

Documents and process

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

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

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

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

Implementation

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

What if your company has too much debt – division one proposal?

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

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COMMERCIAL PROPOSAL – CORPORATE RESTRUCTURING PART 3

bankrupt, commercial proposal, corporate restructuring, division 1 proposal, liquidator, proposal, restructure, trustee, Company bankruptcyIn last week’s blog we discussed the stakeholders and key players and their roles in a corporate restructuring. This week we’ll be addressing the Division 1 Proposal, commonly referred to as a Commercial Proposal or the Proposal.

What is a Division 1 Proposal? The Division 1 Proposal is a legal document typically drawn up by either the Trustee or the company’s lawyer. It is essentially a compromise between a commercial debtor and his/her creditors that, if approved by the creditors and the Court, becomes legally binding. Proposals help resolve the financial difficulties of a business and offer creditors more than they could expect to receive in a bankruptcy. The agreed upon Proposal is a part of the overall restructuring plan, which is a business plan.

When is a Commercial Proposal, otherwise known as a Division 1 Proposal used? A Division 1 Proposal can be used if a business is viable but financially unsound. The general principal we use in determining if a business is a good candidate for a Proposal is that they have to have a core business that is viable and once they shed themselves of most of their debt and develop a business plan and model that will be profitable they can use a Proposal as a tool to continue operations and settle their unsecured debt for less than the full amount of the unsecured debt.

What are the advantages of a Division 1 Proposal? After a debtor files a Division 1 Proposal or a notice of intention to file a Proposal, creditors may not begin or continue any legal action. The debtor remains in possession and control of their assets and company management continues to make all business decisions. Restoring the financial condition of a business with a Proposal may save the business, preserve jobs, give creditors the best return, provide a continuing source of business for existing and new creditors, and enable the owners and/or shareholders to retain an interest in the business.

If your company is experiencing severe financial difficulties, avoid a Company bankruptcy. Contact Ira Smith Trustee & Receiver Inc. to discuss whether a Division 1 Proposal is the right strategy for you. Starting Over, Starting Now we can help to restructure and turnaround your company, restoring it to financial health.

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FINANCIAL VIABILITY ASSESSMENTS – CORPORATE RESTRUCTURING PART 2

financial viability assessments, bankruptcy alternatives, consumer proposals, corporate restructuring, division 1 proposal, proposal, restructuring, toronto bankruptcy, trustee, turnaround management, Vaughan, company bankruptcyLast week we discussed the process of corporate restructuring. This week we’ll be addressing the stakeholders and key players and roles in a corporate restructuring, as well as the issue of financial viability assessments.

Serious financial difficulties cause a great deal of distress; the very viability of your company is in question. You need professional help and you need it now. The cause of the financial difficulties must be identified, financial and viability assessments must be done, and an organization and restructuring plan must be implemented. There are stakeholders and key players that are involved, but who are they and what role do they play?

Who are the stakeholders: Depending on the size and structure of your company stakeholders may include corporate management, financial institutions, suppliers, shareholders, governments, regulatory bodies and employees.

Who are the key players and what are their roles: The key players in a corporate restructuring are the:

Company’s Accountant: The role of the accountant may include payroll, cash collections, disbursements, procurement and property accounting, tax preparation, financial planning, business consulting and payroll services.

Company’s Lawyer: The role of the lawyer may include drafting contracts, taxes, facilitating mergers, and handling human resources issues.

Trustee: The trustee is a restructuring professional. We work with all of the stakeholders and key players, creating realistic strategies and solutions for your company. The problems that caused and contributed to the financial distress must be identified and addressed after which a plan must be put into place to restructure the company and affect the turnaround. We perform a financial viability assessment in order to begin the planning process of a corporate restructuring.

Contact Ira Smith Trustee & Receiver Inc. With our expertise and skills in restructuring and turnaround management we will work with you to find and implement the right financial and business strategies that address your particular issues. We will assist you to avoid your company bankruptcy. Starting Over, Starting Now we can begin to rehabilitate your financially troubled company. Watch for our next blog – Corporate Restructuring Part 3 – when we’ll be addressing the Division 1 Proposal.

Call a Trustee Now!