Posted on Wednesday, September 27, 2006What is the Bankruptcy and Insolvency Act?The Bankruptcy and Insolvency Act (the "Act") is a Federal Law, which therefore applies to all of Canada. The current Act came into force in 1950, amending older versions of the law. There have been several changes or amendments over the years and currently there are more changes being considered. These changes are required periodically as the economy and social values changes. The Act applies to both individual people and corporations. Below is a listing of the key underlying principles for the Act followed by an example:a) allow an honest but unfortunate debtor a fresh start financially - this is done by allowing individuals to start over after discharging their debts through a personal bankruptcy related process; b) provide an orderly and fair distribution of bankrupt estate proceeds - proceeds can be through assets or payments occurring during bankruptcy; c) allow for investigations of bankrupt's statement of affairs - there are investigative powers to a trustee for situations where information needs to be confirmed under oath; d) allow for rehabilitation of the bankrupt - as there is to be a fresh start, the rehabilitation is to assist with future plans and outlook; e) permit the review and set aside of preferences, settlements and other fraudulent transactions - there are certain types of transaction that can happen before bankruptcy is not considered "fair" to all creditors, so the Act allows a review of these type of transactions; and f) allows the creditors to be placed in a group and dealt with together on equitable and reasonable basis. These factors are found throughout the Act and upheld in various courts throughout Canada and the provinces. To discuss your situation and how the Act may assist you in obtaining a fresh start, contact Hoyes, Michalos & Associates Inc. by phone at 310-PLAN or by e-mail. Posted by Scott Schaefer, CA @ 10:34 AM
Posted on Tuesday, September 05, 2006Lump Sum Payments ReceivedI met with a lady the other day who just received a lump sum payment from her former employer as her severance package; her employer's business was closing down and she had to be let go. She is a single mother with 2 young children and was counting on using the severance money to get by for the next while until she found a new job. Her current debt situation is fairly large; it was obvious that she could not continue paying her creditors; she thought that she had to file for bankruptcy. The issue we had to deal with was what would happen to this large sum of money in her bank account which she needed to pay rent and groceries with?When you file for bankruptcy, the basic idea is that in exchange for walking away from your debts, you have to turn over your assets to your trustee, and then the trustee uses those assets to pay your creditors. There are certain assets you can keep, like your clothing and household items. What is not covered is this lump sum payment we are faced with here that the lady required to live off. Clearly, bankruptcy was not the right option in this case. The answer we turned to was a consumer proposal. A consumer proposal is basically an offer made to the creditors as an alternative to bankruptcy. In our situation, the lady was able to keep her severance package while at the same time paying her creditors a monthly amount over a longer period of time (36 months in this case) which in total was greater than the amount of the severance package. What we came up with was a “win, win” situation: she was able to use her severance money to live off and her mind was now at ease that there was enough money to go around to take care of her family while she found new employment; her creditors ended up being offered more than they would have received if she had filed for bankruptcy. If you would like some more information about this topic, feel free to call us at 310-PLAN, or contact one of our bankruptcy trustees. Posted by Benny Mendlowitz, CA CIRP, Trustee @ 5:28 PM
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