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Should You File for Business Bankruptcy?

Posted by in Bankruptcy
May 2019

Contemplating commercial business bankruptcy is difficult and stressful. The majority of people have invested significant sums into and thousands of hours into their business and commercial business bankruptcy is on par with losing a loved one or facing a major illness when it comes to stress.

Should You File for Business Bankruptcy?

Options Before Commercial Bankruptcy

Even though the pressure feels as though it is enormous and there seems to be no way out, there are sometimes other options besides bankruptcy. It’s always good to discuss your situation and run through your options with a licensed trustee. It may turn out that you do not need to declare bankruptcy.

If you are having financial difficulties, and are considering filing for bankruptcy, first consider other options. For example, you ideally you should put forward a payment plan and explain to them in detail how you intend to repay them. If your creditors agree, you won’t need to declare commercial business bankruptcy and, with careful planning and preparation, you may be able to continue with your business.

You can also discuss with your creditors that you may want to look at selling your assets, re-do your budget, or sell some of your business’ assets to lighten the debt load.

Another more formal option is to file a Division 1 Proposal, sometimes called a business proposal. Such a proposal is an arrangement to repay what you owe to creditors without actually declaring bankruptcy. It is similar to a consumer proposal but allows you and your licensed insolvency trustee to deal with higher amounts of money.

A Division 1 Proposal means that you will be required to work with a licensed insolvency trustee and pay creditors a portion you can afford over a set period of time. A Division 1 Proposal is available to individuals with debt higher than $250,000, excluding what is owned on your main residence.

Try to Improve Your Finances First

At times there are small to medium-sized businesses that are profitable but have hit a hard patch. Again, a licensed insolvency trustee can help you resolve this kind of issue and help you get your business back on sound footing.

One of the biggest issues that affect a business is slow cash flow, mostly caused through late payments by clients who owe you money. You can insist that your invoices be paid on time, or hire a bookkeeper who sends out regular reminders and makes frequent calls to debtors.

Managing your business in an economic downturn is an important thing to learn. If your cash flow is good, your business can still be affected negatively if an economic downturn or uncertain plays out. Ways to prepare for this are keeping expenditures as lean as possible and being able to offer special offers or discounts during this time. An accountant and marketer can help you with these strategies.

Do you own a proprietorship or in a partnership?

If your business is a sole proprietorship or a partnership, your business assets cannot be held separately from your personal assets. It’s important to be aware of this fact because of the implications; small business bankruptcy in this situation is the same as personal bankruptcy.

By declaring bankruptcy, in effect, you surrender all your inventory and possessions to a licensed insolvency trustee. In return, you are legally free of your debts; they have been eliminated. You also get a chance to begin again. A key requirement of this is that you report your income to your licensed trustee on a monthly basis. However, despite your new start, your credit report will be affected so if in the future you want to take out a loan, this will not be easy.

Alternatively, you will have liability protection if your business is incorporated are by law, because it is viewed as an independent legal entity.

Commercial Business Bankruptcy

For some business, deciding to declare commercial business bankruptcy might be the only way forward. However, you must read about all your options and discuss your decision with a licensed business bankruptcy trustee. It’s unwise to make this decision all alone, especially if you are feeling stressed, anxious, or very tired.

Bankruptcy is the main option when your business fails and you are unable to pay bills. Once you have reached the decision with professional support. Acting quickly means that creditors cannot take your inventory or your assets to cover the debts you owe them. They will also be unable to take any of your wages. In a situation when bankruptcy has been declared, your licensed insolvency trustee will handle assets and sell them so that payments can be made to your creditors.

Starting Again After Commercial Bankruptcy

Once you have declared commercial business bankruptcy and have paid your creditors through your licensed insolvency trustee, you may decide that after a time you want to begin another business. If you do make this decision, it’s important to access advice and tools from the beginning, so that whatever problem pulled your business down in the past does not rise again. Or, if it does, you will be capable of dealing with it.

Most provinces and some larger municipalities have programs and courses to help you access the knowledge you need to begin running your own business again. You can also consider taking night classes are a local community college or seeking out a business advisor at your bank.

For more information about business bankruptcy, call Kevin Thatcher at 1-888-329-5198 or contact us here.

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Bankruptcy After Retirement

Posted by in Bankruptcy
May 2019

More and more seniors in Canada are filing for bankruptcy. A senior retirement bankruptcy proposal is an option many people over 60 are turning to in order to reorganize their finances and work out a realistic budget for the longer term.

After all, life expectancy in the Western world is growing, and Canada is no exception. With people living well into their 90s, age 60 is now classed as late mid-life and so retirement bankruptcy proposal Toronto becomes a realistic option.

Bankruptcy After Retirement

Stats Reveal Increase In Retirement Bankruptcy

Between 2006 and 2010, around 9 percent of the debtors serviced by bankruptcy insolvency trustees in Toronto were 60 years of age or over. In the two and a half years between January 2008 and May 2010, 33,516 Canadians age 60 or over filed for bankruptcy, according to Industry Canada. In the last few years, this number has continued to soar, with more and more men and women aged 60 or older declaring bankruptcy.

Why Are More Retirees Filing for Bankruptcy?

There’s no one answer to this question. For some people there has been a significant setback, such as illness, divorce, job loss, or poor performance of assets. Others are hit by inflation, such as rising property taxes, medical bills, and unexpected expenses.

Some may not have planned as well as they thought they had while they were working. Many Canadians do not have a decent work pension plan and have relied on CPP and RRSP contributions to build-up their pension income. Given that interest rates have been relatively low for some time, this accumulation of pension income will likely not support a retired individual. Others have invested with risk and lost money on the stock market or in other ventures.

Other individuals lost a lot of their income or investments with the Great Recession in 2007-2008. Those with grown children decided to help out their offspring but suffered as a result of this. While they began retirement in comfort, things have declined financially over the years.

Ia a retirement bankruptcy proposal right for you?

Declaring bankruptcy in your retirement is a realistic decision, but it’s one that you will need to think through thoroughly. After all, it’s unlikely that you will work again, although not impossible, so your opportunities to earn are very limited. But if you are declaring bankruptcy simply because you can’t make ends meet on your pension income, that is something quite different and it is really time to see a financial planner to help you figure out how you can live on your fixed income.

It wasn’t that long ago that most seniors could retire without debt. Some owned their own house outright, and when retired they were able to live reasonably with their savings and pensions.

Today, an increasing number of seniors are retiring with debt. This means that when their income drops at retirement it often becomes extremely difficult, if not impossible, to both service debt and pay ongoing living expenses, which will be subject to inflation. There are some seniors who retired with their finances in order, thinking that they had enough funds for retirement. But as the Great Recession worsened they ended up helping their grown children deal with their money problems, and that often depletes their retirement nest egg, and can even lead to new debt.

Your Retirement Bankruptcy Proposal

The main issue with being in debt at retirement is that you need to pay off debt bills with a fixed or lower income. And your income-earning years are limited. You may be able to get by if you contribute minimum monthly payments on credit cards, but given today’s credit card interest rates you will likely be in this situation for years or, worse still, find yourself falling into more debt.

Although an option, retirement bankruptcy proposal isn’t necessarily the first choice or even the most sensible choice for seniors. This is because many people who have retired may not need to seek out bankruptcy. They are not earning or at the very least do not have full-time wages, and so creditors cannot take wages. In addition, creditors cannot — for the most part — garnishee someone’s pension. So for many retired individuals, a consumer credit proposal may be recommended, as opposed to retirement bankruptcy proposal Toronto.

Can the CRA garnish my CPP payments?

There is one important fact that retirees must be aware of. If debt issues are with the Canada Revenue Agency (CRA), a debtors Canada Pension Plan, Old Age Security and other pension income could very well be taken by the CRA. In effect, the Canadian government has given itself additional powers and can give with one hand and take with the other.

Under Section 224.1 of the Income Tax Act, the CRA can garnishee all types of pensions both government and private. Having said this, it is unusual for the CRA to garnishee more than 20 per cent of a pensioners pension income.

Sometimes, retirees owe the CRA taxes because they have not filed a tax return. It’s important to attend to your tax returns, even if you are retired. If you owe taxes to the Canadian government and are a recipient of CPP and OAS, the CRA can withhold some or all of your monthly pension payments to recover the tax debt. If you are in this kind of situation, ideally you should reach out to a credit agency or bankruptcy insolvency trustee and seek advice.

It’s important to keep in mind then that bankruptcy is primarily filed to stop creditors taking assets and income. For pensioners, the best option may be to submit a consumer proposal. Be sure to seek out professional advice and talking to a licenced bankruptcy trustee to determine which option is best for you.

For more information about bankruptcy after retirement, call Kevin Thatcher at 1-888-329-5198 or contact us here.

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How to Deal with Tax Debt

Posted by in Tax
Apr 2019

Are you at the stage where you are ready to deal with tax debt? If so, you’re in a good place, even though it probably doesn’t feel like that. Some people take months to be prepared to face tax debt, while others bury their heads in the sand and refuse to deal with it. Now you are ready to understand how to deal with tax debt, this article will take you through the process and options.

How to Deal with Tax Debt

Tax Debt

What is tax debt? Tax debt is the amount of money that you owe in taxes, often called back taxes. It could be Federal and Provincial tax you owe from income, self-employment, director liability, investments, or capital gains. You will probably have to pay interest on the tax debt, which will increase the amount you owe. As you will see, dealing with the issue sooner  means that you can reduce the amount of interest being accumulated.

How much tax do you owe?

If your tax debt feels unmanageable it is wise to work with a Licensed Insolvency Trustee (LIT) to discuss your options. A big part of this is, obviously, understanding how much you owe, as well as the interest and penalties involved. Your LIT will help you explore your options and discuss all possible solutions. In paying back your tax debt you need to look at other factors such as; your income, other debt obligations, assets, your age, dependents you’re responsible for, and your health.

Back Tax Options

Obviously one of the best options is to pay an amount you can afford each month. This means you need to try to negotiate a payment schedule with CRA. However, it is important to consider if you can reasonably afford these payments without dipping into funds you may need for the following year’s taxes as this will just land you in a cycle of CRA debt. It is also important to look at the monthly interest vs your monthly payment to ensure the amount you have decided to pay will actually reduce your debt. If payment is an option consider displaying good faith by giving a series of post-dated cheques. If during the repayment period you cannot make a payment, you must contact the Canada Revenue Agency or your representative immediately and let them know. Note that the CRA will not normally accept a payment plan that is longer than 12 months. To explore this option, make contact your income tax collections officer and ask for a meeting or phone appointment.

Ahead of time, prepare notes with the points you want to make and figures you need to discuss. When you have explained your situation, they may suggest a payment option. Remain aware that what you owe in back tax will be subject to interest until your debt is paid in full. There is a chance that the CRA may not accept your plan and may decide to take action to collect your tax debt. It’s important that you have a plan B set aside such as discussing your options with a Licensed Insolvency Trustee.l.

Apply for a Loan to Pay off Your Back Tax

If the CRA rejects your first proposal or if you want to pay off your back tax debt as quickly as possible, you can discuss the pros and cons of applying for a loan vs a proposal or a bankrupcy with your LIT. One of the benefits is that the term of the loan can be for more than a year and the repayment terms may better suit your financial circumstances or have a lowe interest rate. However, depending on the amount and the financer you could need a co-signer for the loan. The cons of a loan include job loss or some other event which prevents you from paying it back. Defaulting on a loan will mean that they could pursue the co-signer and the bank could also seek to repossess your assets or foreclose on your home’s mortgage if you have given collateral. Thus it you close a loan as your option you want to make sure it is something you can afford in the long term.

File a Consumer Proposal

A consumer proposal can stop any garnishing of wages from your bank account and also lift a freeze on your account if one has been placed on it by CRA. A consumer proposal can discharge unsecured personal income tax debts, GST obligations, and payroll deductions. The CRA may request that all your outstanding income tax returns are filed before they will accept your consumer proposal.

File for Personal Bankruptcy

It’s important that you don’t make a rushed decision about bankruptcy and discuss the pros and cons with your LIT. You should also compare the benefits of bankruptcy with the benefits of a consumer proposal, and your LIT will be able to guide on the best option for you.

When someone files for bankruptcy, their assets are assigned to a trustee for the benefit of their creditors.  However, there are many assets that the government deems exempt and your trustee can . Have a full and detailed discussion about the process and how you can pay back tax with your Licensed Insolvency Trustee. You need to understand how filing for bankruptcy will impact your own personal situation and what your solutions are.

Implications of Bankruptcy on Back Tax

If your personal income tax debt is in excess of $200,000 and that debt represents more than 75% of the proven unsecured claims in your bankruptcy estate, then a formal discharge hearing must be held before the Registrar in Bankruptcy. A Registrar has the powers of a judge in bankruptcy matters. The Registrar would determine appropriate terms of discharge, if any, for your bankruptcy.

There is the possibility that the CRA could oppose your discharge from bankruptcy. They could request that you pay additional funds to your creditors if they believe it is prudent. If this occurs, a formal hearing will be held before the Registrar in Bankruptcy who will review your situation and set appropriate terms of discharge. The Registrar will consider factors such as back tax payment history, your income and age, along with your family situation.

For more information about how to deal with your tax debt, call Kevin Thatcher at 1-866-719-8547 or contact us here.

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How to Talk to Your Kids About Bankruptcy

Posted by in Money
Apr 2019

Bankruptcy DiscussionBankruptcy, and many of the events leading up to it, is a tough scenario to endure no matter what your age.  Job loss, foreclosures and an absence of cash are everyday realities for millions of households in Canada — especially given the current economy.  But what’s particularly difficult is the task of explaining this reversal of fortunes to your children.  The concept of bankruptcy and a change in lifestyle are hard for even adults to fathom.  So how do parents go about explaining such a serious obstacle to youngsters?

Keep things simple

Many financial experts advise parents to keep things simple for their children.  Bankruptcy and the laws surrounding it are no doubt complex.  But kids can understand the general idea behind it and what “living with less money” might entail.  Explain to your little ones that sometimes parents will run into a situation where they can’t pay all the bills.  Or there will be times when dinner at your kids’ favourite restaurant is not possible because money needs to be allocated to necessities — like heating bills and groceries.  It’s also important that your child understands that bankruptcies happen to thousands of families each year.  It’s not punishment for mistakes anyone made, but rather a simple reality given the hard economic times.


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Things to Look for When You Need a Credit Counsellor

Posted by in Credit Counselor
Apr 2019

There are plenty of credit counsellors out there, and most of them have sharp-looking websites with lots of content. But how do you know which credit counselling company is right for you? If you’re struggling with debt and ready to work on resolving your financial problems, it can be tempting to pick up the phone and contact the nearest credit counselling business.

Things to Look for When You Need a Credit Counsellor


Don’t. Instead, Take a few moments to check out a few firms before making that first appointment. You need to explore some key things first before selecting the company that will work with you to solve your financial issues.

Check the Source of your Credit Counselling

You want to make sure that the counsellor you speak with is licensed and associated with the government or an agency designed to assist you impartially. You can do this by finding credit counselling companies through:

  • Office of the Superintendent of Bankruptcy

  • A Licensed Insolvency Trustee

  • Credit Counselling Canada or other Non-Profit Agency

Check the Counsellor’s Education

People who work as credit counsellors don’t have to have specialized training according to federal or provincial laws. However, any counsellor who works for a Licensed Insolvency Trustee must have the proper counselling certifications, relevant training, and yearly development hours. This is all monitored and upheld by both the Licensed Insolvency Trustee and the Federal Government so that the quality of counselling can be consistent and ever improving.

With proper training, a counsellor will acquire the vital skills necessary to help and support individuals with their personal finance, credit issues, or money management.

Beware of Quick Fixes

Research online and see if there are any complaints about the agency, such as false advertising or late payments to creditors. Looking at a credit counselling businesses’ advertising is important. If you see something about quick fixes or putting everything right, alarm bells should ring. You need to spot misleading claims that say things like the business can solve your debt problems quickly for only a fraction of your debt, they can quickly fix your credit score, or they are part of a government program. Your credit counselling service is there to present options, offer solutions, and work with you so that you develop money management skills and can move towards financial success. Unfortunately, there are no quick fixes.

Good Counsellors Review Options

The better credit counselling companies or individuals will not push a solution on you or pressure you to take a course of action. Instead, they will listen first and gather information about your situation. They will present options and explain how those options work and can be customized to suit your situation.

Good Counsellors Put You First

Let’s face it, in a situation where someone may be stressed and worried about their financial future, the last thing they need is someone scheming to make a profit from them. That’s why the number one priority for all counsellors should be your best interests. A good counsellor will, as we said earlier, listen first, answer your questions, and then tailor their approach for you. The important thing is that you feel like your needs and concerns are their priority.

It is not difficult to find a credit counselling company or individual with these qualities. Trust your gut and you will know if you have found someone who has empathy, wants to listen and puts you first. There are lots of people out there who really like their work because they get a personal sense of reward from helping others.

They Explain Their Fees

Not all credit counselling agencies follow a reasonable fee structure. In fact, some of them are very expensive, meaning that the costs charged by credit counsellors can vary greatly. Good credit counselling companies will explain their services and the fees that they charge upfront. They will never take a commission or incentive-based fee. Remember, if you don’t understand any aspect of the fee structure or services, be sure to ask. Types of questions you should consider asking include. Is the initial consultation session free? What types of services do you offer? What is your fee structure? Will you give me a written consumer proposal? Can you help me with my money management skills? Do you provide statements each month documenting my payments?

Do you feel at ease with the counsellor?

Last but not least, look for a sense of fit or comfort. If your counsellor has a weakness, such as poor communication skills, abruptness, appears rushed, or doesn’t give you their full attention, it may not be a great match. If you do like the company, ask to see a different individual. If you feel comfortable with your credit counselling individual, your work will go smoothly and will be much less stressful. Finally, ensure you trust the credit counsellor’s guidance and judgment, and that you feel certain it is in your best interest.

For more information about finding the right counsellor for you, call Kevin Thatcher at 1-866-719-8547 or contact us here.

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Understanding Tax Debt Interest and Penalties

Posted by in Debt
Mar 2019

It’s an accepted part of life in Canada that if you live in this vast country you pay taxes, either as a business or as an individual. As Benjamin Franklin wrote, nothing is certain in life, except death and taxes. For the taxes we pay, Canadians enjoy education, a good healthcare system, transportation and infrastructure, and a large range of public services.

Understanding Tax Debt Interest and Penalties

However, not everyone who should pay taxes or pay the amount they should. No one really knows how many Canadians are evading taxes, but the CBC reported last year that Canada Revenue Agency’s (CRA) tax evasion snitch line received more than 32,000 leads in 2017. ( That number doesn’t sound too high, but of course, it doesn’t reveal how much those individuals owe the government in both income tax and GST.

Avoidance of your tax debt in Canada isn’t a good idea as generally the longer you avoid tax debt the worse it gets and the more difficult it is to get out of without assistance. In fact, owing the government tax dollars can bring on a whole new level of stress! The penalties and interest on tax debt—be it income tax, GST, or other taxes—can add up quickly. Interest charged by the CRA is compounded daily which can make it grow quickly.

What Are The Penalties For Tax Debt?

If you fail to file your income tax return on time, don’t make GST payments, or fail to make payments for tax debt to the CRA, the penalties are eye-watering! For a start, an unpaid balance is charged compound daily interest. Those in tax debt are also charged interest on the penalties charged. The interest rates charged by the CRA can change every three months, so we’re not going to quote the figures here. However, you can find them via this Government of Canada webpage.

However, here are some of the fees to which late taxpayers can be subject. If you do not file your income tax return on time and are owed money, don’t worry. There is no fee. But if you owe money to the Government of Canada, you will be charged a late-filing penalty. At the time of writing this post, the fee is 5% of your tax balance owed to the CRA. In addition, you will have to pay an additional one percent of the balance you owe for every month your return is late. This can run on for 12 months if you do not pay in that time, meaning that you could owe the government 17 percent on top of your tax owed!

Canadians who file late over and over again are classed as repeat late filers, and there is an additional penalty for such individuals. The late-filing fee can increase by up to 10 percent of your owed balance, with an extra two percent of your balance for each month your tax return is late. This can run on to a maximum of 20 months. So you can see how easy it is for tax debt, even for a regular tax payer with good intentions, to quickly get out of control. Often people will try and use money the need for the following year’s taxes to pay their current taxes owing with then puts them in a perpetual CRA debt with growing interest.

Tax Debt: What if I have Made False Statements or Omissions?

Every Canadian is required to provide truthful information to the CRA. The information you provide must be accurate and there can be no omissions. If the CRA discovers or comes to believe that you have knowingly made a false statement, have omitted information on your income tax return, or that you have been negligent, you could be charged a penalty of $100; or 50 percent of the non-reported tax, and/or the overstated credits related to the false statement. The CRA can apply different rates and these may depend on what you have not reported.

Tax Debt Penalties For Repeated Late Filers

If the CRA classes you as a repeated late filer and you fail to report an amount on your income tax return (either by mistake or deliberately) and you also failed to report an amount in any of the previous three years’ returns, you may have to pay a provincial/territorial and federal penalty to both jurisdictions of 10 percent of the amount that you failed to report on your most recent return.

Tax Debt Penalties For GST/HST Returns

If you own a business and are GST registered, you must file a GST/HST returns. If the return is late or there are overdue balances, the CRA can charge interest on an overdue balance owing on a return, insufficient installment payments, and any overdue GST/HST amounts that you are required to submit. You may face a penalty if you do not file your GST/HST return when it has a balance owing, failing to file after the CRA has issued you a ‘Demand to File’ notice, failing to file electronically, or not filing accurate information.

What Kind of Power Does the CRA Have?

The CRA has a broad range of power it can use to investigate individuals and businesses suspected of cheating the tax system. The agency can review bank records, access business and payroll records, and examine land registries and other electronic data to see what assets an individual or business has in order to identify irregularities. The CRA can request any document that it deems necessary for an audit. In this age of electronic payments and transfer of information, it is difficult to hide information from the CRA, and not worth trying.

In addition to hefty fees in penalties and interest, the Canadian government can aggressively pursue tax dollars it is owed and will do so unless you make arrangements to pay your taxes or enter into a process such as a bankruptcy to relieve unpayable tax debt. You be pursued for the back tax money you owe both via your assets as well as your bank accounts, and also directly from your employer. Additionally, f you don’t make arrangements to pay or try to resolve your tax issues, you could, although it is rare, potentially face time in prison at a future date. A conviction for tax evasion can mean expensive fines and up to five years in prison. If you have committed fraud by either hiding income or making false claims, you could be facing a maximum of 14 years in prison under the Canadian Criminal Code. Prosecution under the Tax Act or the Excise Tax Act isn’t a pretty picture and one that most people want to avoid!

Tax Debt Solutions

If you’ve read this far and feel more anxious than ever, it’s important to know that in some circumstances the CRA will consider reducing penalties and fees if you are willing to work with them and/or develop a payment plan. However, if you think your tax issues may be beyond that point, at Kevin Thatcher & Associates, we offer free consultations where we equip you with the information you need to deal with this serious and pressing problem before it causes additional financial hardship. Reach out to us today on 1-888-329-5198 and we will help you address your back tax problems.

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What Is A Consumer Proposal and How Does It Work?

Posted by in Consumer Proposal
Mar 2019

If you are struggling with your finances and have racked up debt, you may think that bankruptcy is the only option you have. In fact, this could be the very reason that you have delayed seeking professional support. After all, no one wants to declare bankruptcy and the thought of it can be anxiety-inducing!

There are other options — such as a consumer proposal. It turns out that not many Canadians know what a consumer proposal is. And, if they have heard of it, they are not sure how it differs from bankruptcy. In this article, we are going to look at consumer proposals and explain what they are, how they can help individuals who are in debt and how they differ from bankruptcy.

What Is A Consumer Proposal and How Does It Work?

Consumer Proposal v Bankruptcy

The Bankruptcy and Insolvency Act governs bankruptcy and consumer proposals. The act is governed by directives issued to Licensed Insolvency trustees by the Office of the Superintendent of Bankruptcy. Although the rules are Federal, Provincial laws also play a role in shaping bankruptcy and insolvency regulations in Canada. These laws are in place with the intention of giving protection from the courts to people who are insolvent and unable to repay their debts in full.

Years ago, bankruptcy evolved to give people who were honest but had been hit by bad luck or planning a new start. It was, and is, an important process for people to follow when they were overwhelmed with debt and clearly had no ability to pay for it, now or in the future.

If someone files for bankruptcy it means that collection activity on the debts included in the bankruptcy ends. The bankrupt person follows a set of requirements overseen by the trustee and in return, the eligible debts are forgiven.

On the other hand, a consumer proposal is different from bankruptcy. When you meet with a trustee and discuss options, in a consumer proposal creditors are offered a certain amount of money, based on your situation, in order to settle your debts. At that point, your creditors will take a vote on the offer. If the creditors to whom you owe the majority of your debt accept your offer, then you repay the agreed-upon amount in your consumer proposal over an agreed-upon amount of time. The usual time period is within five years.

What Exactly Is A Consumer Proposal?

A Licensed Insolvency Trustee (LIT) administers a consumer proposal, which is a formal, legally binding process. When you begin working with a trustee, they will review your circumstances and help you decide which option is best for you. If you decide to opt for a consumer proposal, the LIT will continue working with you to assist with the creation of your consumer proposal. As noted above, this is an offer to pay your creditors a percentage of what you owe them to settle the debt. However, a consumer proposal cannot be longer than five years. The payments you make to your creditors are made to your trustee who then distributes them..

Talk To A Licensed Insolvency Trustee First

When you face financial problems it’s likely that you have been dealing with some stress for a while. It is common for people experiencing financial duress to put off dealing with the situation due to feelings of embarrassment, shame or an inability to move forward. Others think that a miracle will happen and that their money problems will vanish. While these feelings are understandable, It’s important to deal with your money problems as soon as possible. The longer you postpone it, the more stress you will have to endure because creditors will increase their demands for money by using collection agencies. The problem won’t simply go away.

The first step is to contact a Licensed Insolvency Trustee. Make sure you avoid one of the many ‘Debt Management’ companies that take advantage of unsuspecting customers and are not licensed by the government. A lot of debt relief companies say that they offer informal proposals as a way to get out of debt. However, only a Licensed Insolvency Trustee is allowed to file the paperwork for a consumer proposal. These other profit-making debt relief companies can charge significant amounts of money and then refer you to a LIT who has their own fees. Moreover, a LIT can help you determine if a consumer proposal is right for you without any additional fees.

What Will Happen When I File A Consumer Proposal?

When you file a consumer proposal you have some important responsibilities which you must follow through on. You are responsible for giving your trustee a full and complete list of your assets and debts, and for assisting the LIT in administering the proposal. You must attend the first meeting of your creditors but only if such a meeting is requested. You are also required to complete two financial counselling sessions. If any of your personal information changes, such as your address, you’re required to let your LIT know in writing.

The first step is for your LIT to file your consumer proposal with the Office of the Superintendent of Bankruptcy (OSB). As soon as it is filed, you no longer have to pay your unsecured creditors directly. Further, if your wages are being garnished (money is being taken from your salary to pay off creditors), this is required to stop. Your consumer proposal will contain a detailed report about your situation and events which have caused your financial hardships. Your LIT will submit the proposal to creditors to whom you owe money. Upon receiving the report, creditors will have 45 days to vote to reject or accept your consumer proposal or if they want a meeting. Your creditors have the option of deciding if they reject or accept your proposal before a meeting of the creditors or at the meeting if such a meeting is set or request a change in the terms.

What If My Consumer Proposal Is Accepted?

When a consumer proposal is accepted by creditors, you’ll generally be required to pay either the agreed upon lump sum to your LIT or the agreed upon regular payments. You have to adhere to the terms of the proposal outlined in the proposal document. It’s important to remain aware that if you are making regular payments and miss payments, your consumer proposal can be annulled. In this case, the agreement would no longer apply and your creditors would be able to take action to collect the money you owe them. This is why it is important to meet with your trustee as soon as you start having problems with payment.

If My Consumer Proposal Is Rejected?

If your proposal is rejected, you can either make changes to it and then submit it again, or discuss other options for resolving our financial hardships with your trustee such as declaring bankruptcy.

If you are struggling financially and don’t know where to turn, we encourage you to contact Kevin Thatcher & Associates today at 1-888-329-5198. We are happy to give you a free consultation and discuss your options so that you can prepare to begin life with a clean financial slate. Call today!

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Things to Consider Before Choosing a Bankruptcy Trustee

Posted by in Bankruptcy
Feb 2019

Things to Consider Before Choosing a Bankruptcy Trustee

You might think that choosing a bankruptcy trustee begins with the first meeting at a trustee’s office, but when you are facing a choice of debt consolidation or bankruptcy, your selection process should begin before a meeting. All Trustees are required to follow the same set of Federal laws but your financial information is very personal, so the trustee you decide to work with needs to be someone you feel extremely comfortable with, and someone you feel you can trust.

So, how do you choose someone who can objectively discuss debt consolidation vs bankruptcy? When you seek out other professionals, such as an accountant, dentist, or lawyer, you may already have a process for making a final selection. Perhaps it’s word of mouth, coupled with reviews, accreditation, and education. All these attributes are important.

To select a bankruptcy trustee you can use these methods, and add one. You need to determine whether the trustee you decide to work with has empathy. It’s not a question you can ask directly, but reviews left by previous clients may give clues. And you can use your screening call or meeting to assess empathy and understanding. This quality is important because you may feel a range of emotions about the prospect of debt consolidation or bankruptcy. And you might feel stressed or emotional during the process. This is normal, and it takes a skilled and empathetic bankruptcy trustee to manage your account.

Find an Area you Know

Most trustees offer free consultations where you can set down with them and discuss you financial options and what any proceeding would entail so the first, and often hardest, step should be to set up an appointment. It does not cost anything and you can find out quickly if you and the trustee will be a good fit. It is often a good idea to pick a trustee in your area or in a familiar location that is accessible as you will be attending meetings and budgets sessions if you move forward.

If you have any family or friends you trust who may have had similar issues they may be able to point you in the right direction.
Research Potential Bankruptcy and Debt Consolidation Trustees

Select three or four trustees for consideration and research them carefully. Yelp and Google allow people to review pretty much everything, from car dealerships through to hair salons, surgeons, and architects. You’ll be able to see how well other clients rate them on things like customer service, knowledge, recommendation, and understanding.

Next, look at the bankruptcy trustee websites and read staff profiles and testimonials. Also look at profiles on LinkedIn, and take into account education and any recommendations from clients or other professionals.

From all this information, see if you can determine if a debt consolidation trustee is viewed as responsive and approachable. Is their knowledge comprehensive and up-to-date? For the two or three trustees who pass your initial screening, phone them and see if you can have an initial telephone consultation. If not, head to their office for a screening meeting.

Connecting With a Bankruptcy Trustee

When it comes to debt consolidation or bankruptcy, your initial phone call or introductory with a trustee will give you a good sense of what the trustee is to talk to, as well as their manner and communication skills. Look for someone who is competent. For example, did the individual respond within a day or two to your initial query, especially if you told them your situation was urgent? Were they friendly yet professional? Did they understand your issues and specific concerns?

Don’t forget that in a debt consolidation situation it’s really important for you to feel at ease with the trustee. They will be working with you through one of your most challenging – and sometimes stressful – times. So you need to feel assured that they won’t judge you and are respectful and empathetic.

Fundamentally, you need to feel sure that you’ll be comfortable working with the individual and trust that they will give you the best advice possible.

Debt Consolidation and Bankruptcy: Preparing For Your First Formal Meeting

Remember, whenever you receive advice and guidance from a professional, it is usually based on the information you give them. So try to be organized ahead of the meeting. Take all the necessary paperwork with you, and also have a notebook on-hand so that you can document any key points or requests.

Many debt consolidation or bankruptcy trustees will fill out an information form with you at the meeting so they can get an idea of the big picture and how best to help.

As the meeting gets underway, ask the trustee if they will give you a handout detailing key points and next steps. Most good trustees will do this, but if they don’t be sure to take detailed notes and request a follow-up email so you can ask any questions you may have forgotten.

Managing Your First Trustee Meeting

Some people understand financial regulations fairly easily, while others need greater detail. If something isn’t clear to you, don’t be afraid to ask for clarification. In a situation like that old adage definitely does apply – there’s no such thing as a stupid question. Bankruptcy and debt consolidation regulations can be complex and so it’s up to you to make sure you understand what’s being explained.

It’s essential that you don’t feel forced to agree to a trustee’s recommendations; and, in fact, a good debt consolidation or bankruptcy trustee should never pressure you into accepting advice. At the end of the day, you decide what action you will take to get out of debt.

Deal with Debt Consolidation or Bankruptcy Today

Now that you’re ready to begin searching for a trustee to manage debt consolidation or bankruptcy, start by contacting Kevin Thatcher & Associates at 1-866-702-9801 for an initial free consultation. We’re sure that you will be impressed with our professionalism, knowledge, and empathy. We’re ready to work with you immediately so that you can get your finances back into shape as soon as possible.

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Myths About Bankruptcy

Posted by in Bankruptcy
Feb 2019

Bankruptcy is stressful enough without the added weight of myths and unfounded beliefs to the experience. In fact, some people are so afraid of the myths around bankruptcy and debt consolidation that they put off dealing with their out-of-control finances for weeks or months on end.

It seems too that the situation is worsening in Ontario. The household debt-to-income ratio in Canada is around 170%, and that’s an increase of 23% from a decade ago. This means that a lot more people need to explore debt consolidation or face bankruptcy sooner than they realize.

Myths About Bankruptcy

Canadians are Awash With Debt

In fact, high levels of debt appear to be the new normal. The Bank of Canada says that almost half of all high-ratio mortgages in Toronto are to borrowers with loan-to-income ratios in excess of 450%.

Many individuals are at risk of debt consolidation or bankruptcy because they have embraced a middle-class lifestyle; they work, earn good salaries, own their own home, and enjoy good lifestyles. Problem is, behind this is a lot of debt and poor financial decision making.

Does this sound like you? Are you worried about accessing a debt consolidation loan or declaring bankruptcy because of myths you’ve heard? In this article, we are going to address the most popular myths, so that your course of action is clear and free of anxiety.

Myths About Debt Consolidation and Bankruptcy

In the past, bankruptcy many believed that regulations could be pretty strict allowing for no future recovery, so people put people off debt consolidation or declaring bankruptcy sooner. Over the years some of this stigma has been removed, although bankruptcy can still be a stressful experience.

Myth #1: You’ll Lose Your Home

Loss of a personal residence is one of the biggest fears most people face, and it shows how much we value our homes from an emotional perspective. The truth is that creditors are only interested in the equity you have in your property. If there is little or no equity in your home and can maintain your mortgage payments, you will not lose it. When there is equity in a property you can make an agreement to be able to repurchase the equity from your trustee so the value can go to yours creditors.

Myth #2: You’ll Go to Jail

The only way you could end up in jail after discussing debt consolidation or declaring bankruptcy would be if you submitted fraudulent statements, or transferred property or assets without disclosure. To anyone with any common sense, these are clearly illegal activities. If you’ve not done anything illegal, you won’t go to jail. You cannot go to jail for debt consolidation or being bankrupt.

Myth #3: You’ll Lose Your Job

An employer cannot end your employment because you are bankrupt. That would be illegal. In fact, they generally do not know about your debt consolidation or bankruptcy unless there is a wage garnishment and the trustee must send information to have it stopped.

Myth #4: Your Income Will be Restricted

This isn’t true. An individual who is bankrupt is not restricted in what they can earn. However, if a person’s income is over a certain amount they must pay more to creditors based on government rules. The Bankruptcy and Insolvency Act details rules around surplus income standards and the guidelines are adjusted yearly. These govern the portion of your income which must be paid to creditors. Also, it’s important to note that, depending on your income, you could be bankrupt for longer before discharge.

Myth #5: You Won’t be Able to Renew Your Mortgage

This is incorrect. Most insolvency experts and bankruptcy trustees agree that a mortgage will be renewed IF you maintain your payments and plan to stay with the same lender. Most mortgages are set up with an auto-renewal, so this shouldn’t be an issue if you seek a debt consolidation porposal or declare bankruptcy.

Myth #6: The Taxes You Owe Can’t Be Included in Bankruptcy

If yours is a case of fraud or tax evasion, then the Canada Revenue Agency may have already taken steps to recover what you owe it. However, if you have not broken the law then the taxes you owe are classed as unsecured debts which can be fully discharged by bankruptcy. Included here are personal taxes and, if you own a business, corporate taxes, payroll taxes, and GST/HST.

Myth #7: Everyone Will Know You’ve Filed for Bankruptcy

This fear is another myth and likely stems from the sense of embarrassment or shame that some people feel after seeking debt consolidation or bankruptcy. However, no one will know about your bankruptcy except your trustee – and they keep this information private -, the government, and your creditors. However, it’s important to note that businesses can see this information on your credit history, or one can pay to search the Office of The Superintendent of Bankruptcy Canada for the names of individuals who have declared bankruptcy, but this only happens if something has triggered some kind of suspicion and they decide to make the effort to do a search.

Myth #8: You’ll Never be Able to get a Line of Credit Again

This myth is probably based on the fear that a person’s life is ruined after asking for debt consolidation or declaring bankruptcy. This simply isn’t true. The Bankruptcy Act aims to be fair to creditors while at the same time rehabilitating your finances. After discharge from bankruptcy, the declaration stays on your credit history for six to seven years if this is the first time you have declared bankruptcy. After that, it’s gone from your credit records. Even when it is still on your credit history it does not mean you cannot get credit. However, it will be more difficult at the beginning as you build lender confidence. Once your credit has improved you will then be free to buy, for example, a house or a car – if you have a good income and/or can afford it.

Trustees work with their clients who have applied for a debt consolidation loan or who have declared bankruptcy and teach them about budgeting and how to remain debt-free. From this point of view, you can see how an individual who was once bankrupt and who is now debt-free will look like a good bet when it comes to lending money!

In fact, some individuals who work hard with their trustees are fortunate enough to get a mortgage even though bankruptcy is still on a credit report when applying for the mortgage.

If you have been putting off seeking a debt consolidation proposal or applying for bankruptcy because of fear about what may or may not happen, contact Kevin Thatcher & Associates for the facts about bankruptcy today. It’s not an easy step to make, and the experience can be stressful, but we will support you all the way.

Kevin Thatcher & Associates deals with facts and we’re here to work with you in a non-judgemental and supportive environment. Call us at 1-866-702-9801 and let’s begin getting your finances off on the right start today.

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What Happens to Debt Resulting from Fraud in Bankruptcy?

Posted by in Bankruptcy
Aug 2018

The Details Concerning Filing a Fraudulent Bankruptcy in Canada

There are numerous reasons a consumer ends up in bankruptcy. Despite this, the results remain the same for everyone that files. Once the requirements for the process have been completed successfully, any unsecured debts are eliminated and the individual is assured a clean financial future.

Business man pointing the text

There are some debts that will remain despite a successful filing. This includes any secured debts such as a car loan or a mortgage. There may additionally be a variety of judgements and legal fines. Certain assets are relinquished for a personal filing to enable some debts to be eliminated. This means the individual will not have to pay their unsecured debts.

In certain instances, secured debts do not have to be repaid because the asset securing the debt has been reclaimed by the lending institution. A good example is if the bank has repossessed the individual’s car, they will not be required to pay the car loan.

It is important to understand what happens to the debt prior to deciding to file. This enables the individual to understand the cost for Canadian residents while making an informed decision regarding their finances. Once the process is completely understood, many individuals choose to continue to provide debt relief.

Although some people choose a debt consolidation loan, a debt settlement program, or consumer credit counseling, these options are not generally anywhere near as effective. The majority of unsecured debts are forgiven despite the period of time required for the debts to be discharged.

This process can take anywhere from nine months to a little over three years once the filing has been completed. If the individual does not possess any real assets, the creditors will most likely walk away. If there are any assets, the creditors will want at least a portion of what is owed. They will not receive the full amount of the loan.

Once the filing has been discharged, the individual will not owe anything on certain debts. This includes personal loans, credit cards, specific lines of credit, and unsecured loans such as payday loans, past due insurance premiums, and medical bills. Certain past due utility bills are also included such as gas, water, electricity, and telephone services.

If a minimum of seven years has passed since the individual was a student, their student loans will be forgiven. There are some fines and debts that will not be forgiven. These debts are categorized in two major ways. These are legal judgements and fines and secured debts.

The legal system and the government will not forgive debts even if the individual has filed for relief. Certain judgements are still applicable including child support payments, alimony, payments due to a fraud conviction, fines for restitution and government overpayments from income tax. These charges must be paid.

The difference between a consumer proposal and a bankruptcy is when the conditions pertaining to the consumer proposal have been fulfilled, the creditors are unable to come after the assets of the individual. Other than specific exemptions, the individual will have to let go of their secured assets for their secured debts to be released.

A good example is a consumer with a mortgage line of credit against their home. The banks will not forgive this type of debt and enable the individual to keep their home. The home will be repossessed by the bank. It is also important to note if a student loan is less than seven years old, it must still be paid.

The majority of Canadians who file are honest and simply experiencing severe financial difficulties. Some of the most common reasons for filing include unemployment, divorce, and health issues. Unfortunately, there are certain individuals who purchase expensive items they know they are unable to afford or obtain credit they have no intention of repaying. This is a crime.

Fraud in Bankruptcy

There are several different types of fraud but they all involve the same premise. The consumer is purchasing either services or items with no intention of paying for them. This includes living an extravagant lifestyle or a lifestyle the individual is unable to afford, severely mismanaging their finances, trading or borrowing while aware there is no way to repay the debts, telling a lie to obtain something valuable, creating or using fraudulent documents to receive something of value or a loan, obtaining unaffordable loans while showing preference to a specific creditor, and writing bad checks to juggle payments.

There are specific checks built into the filing process to prevent fraud. Sworn statements must be provided to licensed insolvency trustees regarding the expenses, income, and windfalls such as receiving cash for a gift or winning the lottery. Previous spending and the current financial status will additionally be discussed.

A good example is an individual that purchases several thousand dollars worth of items shortly before filing. In this case, the trustee will suspect fraudulent activity. A red flag will be raised if the home is sold right before or after filing. Fraudulent behaviour can also be reported by family and neighbours when observed.

Regular reports are made regarding this type of activity to the authorities by casinos, banks, and creditors. The OSB maintains a website where suspected fraudulent activities can be reported. The Royal Canadian Mounted Police will investigate all reports. If evidence is recovered, the result is usually an arrest.

Committing fraudulent activities is a serious crime and there are a variety of penalties involved. Recent purchases are generally not included when the individual files. The individual must pay for any profits resulting from fraudulent activities. In the event of a conviction, the filing will be reviewed and the individual will be denied an automatic discharge.

A consumer proposal or another filing may be impossible or difficult to obtain in the future. The penalty involves several different fines and the individual can be sent to jail. A lot of individuals believe they can get away with fraudulent activities but the licensed insolvency trustees and the OSB perform their jobs extremely well.

For more information, please call Kevin Thatcher & Associates LTD at 1-866-719-8547 or contact us here.

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