When someone passes away in Canada, a final accounting of their assets and liabilities takes place. The purpose of this is twofold:

• To settle any debts outstanding from available assets
• To transfer any remaining assets to any beneficiary

Assuming the individual passed away with a last will and testament, then the above is a well followed process of probate (vetting the will and legally appointing the executor of the estate), followed by a sale of any assets and final distribution of value.

Often, the individual may pass away with more debt than available assets to settle those debts, and so a call to a Licensed Insolvency Trustee from the executors may follow for advice on how they should proceed. The common concern is that the beneficiaries (often close family members) and/or the executor of the estate are personally liable for the debts of the deceased. Beneficiaries of an estate are not personally liable for the debts of the deceased, unless they co-signed the debt or are joint borrowers. Executors can be held liable if they distribute assets to the beneficiaries without first settling any outstanding debts.

A common misconception is that “debt dies with the individual”. This is incorrect as the deceased’s estate becomes responsible for paying the debts. If there are insufficient assets available at the time of passing, then they are unlikely to be paid in full.

Here are some basic guidelines for executors:

• Sell all assets and hold all the proceeds in an estate bank account
• Ascertain all debts owed by the deceased (this can be difficult to do as information may be unavailable or difficult to locate)
• File outstanding tax returns and pay any taxes due
• Inform the creditors that the borrower has passed away and distribute any final payment.
• If there are insufficient assets to pay the debts in full then it may be prudent to use the services of a Licensed Insolvency Trustee. Once a Court order has been obtained, the Licensed Insolvency Trustee can file the deceased into bankruptcy. They will take care of all accounting of assets and liabilities, tax filings and stop any court proceedings. Moreover, the executors of the estate cannot be liable for any incorrect distributions since these will be carried out by the Licensed Insolvency Trustee.

Taylor Leibow Inc. are Licensed Insolvency Trustees and have been helping individuals and businesses with their financial and debt issues since 1947. If you would like to talk to Kathy Lenart or Jeff Lewis about the financial issues of a deceased person and how they can help, reach out to them at freshstartnow.ca

Only a Licensed Insolvency Trustee (“LIT”) can file an assignment in bankruptcy for an individual in Canada.   The steps to file an assignment in bankruptcy are as follows:

1. Reach out to a LIT to schedule an in-person or virtual consultation to review your assets, liabilities, income and expenses, co-signors of your debt, and any transfer of your assets.
2. The trustee explains solutions for debt relief, and you decide which solution is best for your circumstances.
3. Statutory documents are prepared by the trustee and signed under oath as being a true statement of your affairs.
4. Documents are filed with the Office of the Superintendent of Bankruptcy (“OSB”), which issues a Certificate of Appointment confirming your bankruptcy, and a stay of proceedings is implemented, which stops your unsecured creditors from taking legal action against you. The bankruptcy filing can stop a garnishment of your wages by an unsecured creditor.
5. Assets that have a realizable value vest in the trustee to realize for the benefit of your creditors. This means the trustee will collapse any non-exempt investments (TFSA, GIC, etc.), collect amounts owing to you from any other party, and realize on equity in your house or other assets.
6. Monthly Income and Expense forms must be submitted to determine if you are required to pay surplus income payments. If your income exceeds a threshold set by the OSB, 50% of any surplus must be paid to the trustee for the benefit of your creditors.
7. Tax returns for the year of bankruptcy will be prepared by the trustee, and any refund will go to your trustee.
8. Creditors could request a meeting of creditors to ask you questions on your financial situation and disposition of assets.
9. You must attend 2 counselling sessions on budgeting, money management and rebuilding credit.
10. A first time bankrupt will be discharged (relieved from their debt) in 9 months if you are not obligated to pay surplus income payments. The discharge is extended to 21 months if you are obligated to make surplus payments and 24 months if you were bankrupt before (36 months if you are obligated to make surplus income payments).
11. The bankruptcy will be reported on your credit rating for 7 years from your discharge (14 years for a second bankruptcy).
12. You will move forward free from your unsecured debt with financial tools to provide your future financial success.

If you are struggling with debt and considering bankruptcy, reach out to our trustees for a free consultation.  We are ready to walk you through the above steps to a fresh start.

If you are struggling with your debt and asking the above question, you should seek the advice of a Licensed Insolvency Trustee (“LIT”) to review your financial situation in detail and explore all solutions.  Your RRSPs may be protected from your creditors and retained for your future retirement.

A couple of important items to consider:

• RRSPs that are held with a life insurance company and have a designated beneficiary of a parent, child, or spouse are exempt in a bankruptcy, and thus you would be able to keep them.
• All other RRSPs are exempt in a bankruptcy, other than contributions in the last 12 months. Thus, if you file an assignment in bankruptcy, the trustee will only be looking to realize on the contributions in the 12 months preceding your bankruptcy.
• On a withdrawal of an RRSP, the financial institution will withhold some tax at source. You will be obligated to report the income on your personal income tax return, and depending on your other income, you may owe more personal income tax.
• An insolvency is the filing of a bankruptcy or consumer proposal to deal with your unsecured debt.
• An insolvency will stop a garnishment of your wages and legal action by an unsecured creditor.

Free consultation and solutions analysis

A free consultation with a LIT will review your realizable assets, exempt assets, liabilities, income and expenses. The trustee will review your assets that must be realized in a bankruptcy, potential surplus income payments that may be required, and tax refunds that will be distributed to the trustee.  They will explain how much you could offer to your creditors to settle your debt with one monthly payment over a maximum 5-year time period in a consumer proposal. They will compare bankruptcy and consumer proposals to the do-it-yourself options of paying off your debt on your own or attempting to obtain a consolidation loan.

If you can cash in some of your RRSPs, afford to pay any tax liability that may arise, and pay down your debt in full, this may be a viable solution for you.  You will eliminate the future interest on the debt and hopefully be able to save to re-contribute to your RRSP in the future.

If you are cashing in exempt RRSPs to pay down some of your debt without a permanent solution to eliminate all of your debt, an insolvency may be a better solution for you.  A bankruptcy or consumer proposal will allow you to retain your RRSP for future retirement while having a plan for a debt-free future.

Seeking help when you are struggling with debt is a hard step to take.  The trustees at Taylor Leibow Inc. have been helping individuals find permanent debt relief solutions for over 35 years.  Reach out to us today for a free consultation to help you achieve your fresh start.

Unfortunate circumstances can impact anyone.  A separation of marriage, loss of income, helping children or lack of financial education can leave a middle-aged woman struggling with debt.  Being unable to handle your own finances can be overwhelming and impact your health.  Don’t struggle alone.  The Licensed Insolvency Trustees at Taylor Leibow Inc. will review your financial situation in a non-judgmental, compassionate manner and discuss the following solutions:

1. Budget to pay down your debt
   Are you aware of your monthly expenditures? Do you track all of your spending to analyze where you could cut back to put more money towards your debt payments?  Can you reduce your non-discretionary spending (entertainment, clothes) and concentrate on paying down your debt?  If you are able, pay down the highest interest-bearing loans first to minimize the interest cost.
2. Debt consolidation loan
   You may be finding it difficult to juggle numerous loan and credit card payments at very high interest rates. Talk to your bank to see if you qualify for a consolidation loan.  This will leave you with one monthly payment at a lower interest rate.
3. Consumer Proposal
   You can make an offer to settle your debts with one monthly payment over a maximum of 5 years. No further interest is charged and the trustee’s fees are included in the proposal payment.  A proposal stops a garnishment of wages and creditor phone calls.
4. Bankruptcy
   The purpose of a bankruptcy is to provide relief to an honest but unfortunate debtor. If none of the above solutions work for you, a bankruptcy will eliminate the majority of your unsecured debt and allow you to rebuild moving forward.

For more information, check out the resources on the Financial Consumer Affairs of Canada website at  https://www.canada.ca/en/services/finance/debt.html.

Take the first step to a financial fresh start today and reach out to me, Kathy Lenart, for a free consultation on the best solution for you.

The best solution for you will depend on your individual circumstances and personal morals.  Both a bankruptcy and a consumer proposal are formal filings pursuant to the Bankruptcy and Insolvency Act and both provide you protection from your unsecured creditors.  They both impact your credit rating and stop a garnishment of your wages by Canada Revenue Agency and other creditors.  You must attend two credit counselling sessions in either solution.  The similarities end there.

Bankruptcy

• Assets with a value that exceeds a secured loan and are not exempt from seizure (e.g. furniture, vehicle up to $7,117) must be realized by your trustee for the benefit of your creditors. You can offer to buy the assets back from your trustee, but they must be paid for over a shorter period of time.
• Income tax refunds, GST and some other benefits are assets the trustee will directly receive.
• Surplus income payments may have to be paid to your trustee if your income exceeds a threshold based on your family size.
• You will be required to submit monthly income and expense statements and your surplus income payment may increase if your income increases during your bankruptcy.
• The trustee has the right to realize on after acquired assets which consist of inheritances, lottery winnings, etc.

Consumer Proposal

• An offer is made to your creditors to compromise your debt over a maximum of 5 years.
• The proposal must offer more to your creditors more than they would receive in a bankruptcy but because you are extending the payments over 5 years, the monthly payment is lower and more affordable.
• Future increases in income will not impact your creditor and Court approved proposal.
• Receipt of a future asset (inheritance) will not impact your creditor and Court approved proposal.
• You can always pay the proposal off sooner which removes the reporting from your credit report sooner.

Based on my experience, individuals with significant assets, the potential to receive an inheritance from a sick family member, high surplus income payments or the potential for their income to increase significantly typically prefer a consumer proposal.  I have also filed consumer proposals for individuals who have no assets and minimal income because they felt “it was the right thing for them”.

Taylor Leibow Inc. will review your financial situation in detail at a free consultation to educate you on solutions so you can make the right decision for you.

For many people, being deep in debt can be overwhelming and can have serious consequences on your life. It can negatively affect your:

• Health – mood, lack of sleep, stress
• Relationships – spouse, family, friends
• Work – poor performance due to the above

Indeed, the feeling that there is “no way out” of your situation can make it difficult to take any positive action to improve your situation.

But what can you do to help yourself turn things around:

• Consider increasing your income by taking on an additional part-time job. There are many opportunities that allow you to work from home with a computer and use any spare hours you may have.
• Sell any assets that you no longer need and use the cash to reduce your debt. The internet is awash with auction websites that allow you to easily list and sell items at no cost.
• Review your budget and try and reduce unnecessary monthly expenditure. Do you really need all those streaming services you pay for monthly, or that gym subscription you never use?
• Look for ways to consolidate your individual debts into one payment with a lower interest rate. Your bank may be willing to assist you if you ask.
• If you are comfortable doing so, talk to your family and friends about your situation. They may be suffering also, and you will realize you are not alone.

If you have tried the above and still find yourself struggling with debt, then you need to seek professional help You can:

• File a debt management plan with a licensed credit counsellor. This is an informal arrangement with your creditors where you will repay all the debt, usually with a lower interest rate and an additional fee.
• Talk to a Licensed Insolvency Trustee. They are regulated by the Federal Government and are the only people in Canada who can file a consumer proposal with your creditors or an assignment in bankruptcy for you. They will reduce your debt according to your circumstances, and initial consultations are free.

Beware of businesses marketing themselves as “debt consultants.” They cannot provide any of the above services themselves and may charge substantial fees.

Taylor Leibow Inc. is a Licensed Insolvency Trustee and has been helping individuals and businesses with their financial and debt issues since 1947. If you would like to talk to Kathy Lenart or Jeff Lewis about your financial issues and how they can help you, reach out to them at freshstartnow.ca