Posted On: July 6, 2018

In this video, Richard Killen, a Licensed Insolvency Trustee in bankruptcy with offices across Toronto answers the question.
I don’t know how many times I have been asked by somebody during the course of the free consultation we provide to consumers at the beginning. What do you think, should I go bankrupt?

My answer is always the same for people. Its not up to me to tell you to go bankrupt.
Bankruptcy is a personal decision. What might work for one person, might not work for another person. Although what you can get from a trustee is a good idea of what is going to happen if you do a bankruptcy opposed to a consumer proposal.

So to answer the question, should I go bankrupt? My answer is you need to decide that.

Posted On: July 3, 2018

In this video, Richard Killen, a Licensed Insolvency Trustee in Ontario with offices in Durham region (Pickering & Oshawa) talks about whether a person’s income tax debt can be included in a personal bankruptcy in Ontario.

Something that comes as a big surprise to a lot of people is when they find out an income tax debt, an ordinary income tax debt is something that is dischargeable in a bankruptcy or can be taken care of in a consumer proposal. The people of Durham or people from across the Greater Toronto Area ask me that question numerous times. It is not a strange thing as ordinary income tax debt is treated as a debt.

There is nothing special about the fact it is a debt owed to the government. A debt to the government is not anything special in a bankruptcy situation. Therefore, in a bankruptcy in Durham or anywhere in Ontario, a tax debt is dischargeable.

If you are behind on your taxes or are have other debt problems, consider talking to one of our trustees and debt experts. We can help you review all your options for debt relief.

Contact our Durham office us for a fresh start at (905) 420-6565

Posted On: February 19, 2018

In this video, Richard explains in simple language how consumer proposals in Toronto work as many people are not terribly familiar with them. First of all, a proposal is a proposal. There are two types, consumer proposals and regular proposals.

The regular one has been around since day one, I think, 1920 or so, however, it was designed mainly for corporate and commercial situations. Instead of the company folding, they made a proposal to their creditors, to stay alive, keep the jobs going, keep the business running. Maybe they turn a corner and eventually everybody is happy.

But, what about the ordinary person? Until 1992, there was no mechanism in place for a similar approach to the debt. So, in 1992, Parliament amended the Bankruptcy Act, as it was called then and introduced something called a Consumer Proposal.

The proposal was designed for an ordinary person, instead of going bankrupt, which is what they did in those days, they could say “no, I don’t want to go bankrupt, I think I will try to reach a deal with my unsecured creditors”.

And the process is simple, it is streamlined compared to the commercial proposal. And it is really designed to make it as easy as possible for a person to make that accommodation. It’s supposed to end up with a better result for everybody concerned. That is the whole idea what Parliament was trying to achieve.

Today consumer proposals from a Licensed Insolvency Trustee are more popular than personal bankruptcy in Toronto.

Posted On: February 13, 2018

And most often, one of the reasons why I was a little late today, I had to go to my Mississauga office to meet with a person doing a proposal, consumer proposal, and I signed the report before I left, and the main argument is quite simple, the proposal is offering a net dividend, money in your pocket kind of thing, which is going to be twice as much as anything we can foresee out of the bankruptcy, best case scenario. So whether you think that is sufficient reason to accept the terms offered, that is your business. My call is, if the proposal is offering twice as much as the bankruptcy, I see that as a better deal for you guys. Now, you may be using a very different criteria to determine what is a good deal for you. The Administrator’s opinion on that question is not anything other than an opinion. It’s the old thing, where that opinion and a dollar ninety will get me a large coffee at Tim Horton’s.

Posted On: November 7, 2017

In this video, Lucy Zilio talks with Richard Killen on Richard Killen & Associated 25th Anniversary.

Richard, a Licensed Insolvency Trustee (LIT) talks about more and more people with debt challenges choose a consumer proposal over bankruptcy in Toronto. Watch the video for more information.

Posted On: August 4, 2017

In this video, Richard Killen, a Licensed Insolvency Trustee in bankruptcy in Toronto talks about, Do I Have To Pay a Minimum Portion?.

Some people are under the impression that they go bankrupt or for that matter they do a consumer proposal, they are required to pay a certain percentage of what they owe, what their overall debts are. That’s not quite the way it works. In a bankruptcy, it’s not that at all. In a bankruptcy, there is a mechanism that will determine whether or not if you have to make any payments for your creditors into the bankruptcy. It’s based on what you earn, what your monthly salary is. There’s a formula for all that, and a Trustee explains that to you and a Trustee does the calculation and all that. In a proposal, it can be a little bit of a factor trying to determine how much you are going to offer the creditors and all that. But, there is no fixed idea that you have to pay 20% or 10% or 50% of whatever you owe. In a proposal, you offer the best you can, and you try to work out a deal with the creditors that they are willing to accept of what you are going to pay. In a bankruptcy, this formula is applied, if you earn enough money you will pay that money into the bankruptcy in order to obtain your discharge. It doesn’t matter what percentage it is.

If you are uneasy about bankruptcy you should definitely visit a licensed insolvency trustee so that you will be given an advice about your bankruptcy problems.

Posted On: July 14, 2017

In this video, Richard Killen, a Licensed Insolvency Trustee in bankruptcy in Ontario talks about if the boss can find out about the bankruptcy.

The only time that a person’s employer is officially told, that they have gone bankrupt or that they have done a consumer proposal, if they have been sued and garnished by somebody, and your employer is having to deduct money from your pay to send to the court because of the garnishee. The person going bankrupt is basically going bankrupt or doing a consumer proposal, that’s one of the big thing that they are trying to stop that garnishee. A bankruptcy and consumer proposal will do that but isn’t going to stop if we don’t tell the employer to stop it. Yes, the employer would get notified in that case. The other thing I can think of is offhand, and where we would have this kind of contact with an employer, is if we had to contact an employer to find out some information that is of important to the creditors. Like for instance, say you have a profit sharing plan at work, and your employer is the only one who has the details of it, the profit sharing might be money that belongs to the creditors in a bankruptcy, you see the trustee has to verify this information. Now, there are different ways of verifying it, we might be able to verify it by having you get the information and providing it to us so there is no direct contact with your employer. We prefer to do it that way as long as we can get the facts. Generally speaking, an employer is not, I can’t even remember the last time that we contacted an employer when there was no garnishee involved.

If you are uneasy about your bankruptcy you should definitely visit a licensed insolvency trustee so that you will be given an advice about consumer proposal and debt problems.

Posted On: June 1, 2017

In this video, Richard Killen, a Licensed Insolvency Trustee in bankruptcy Toronto answers the question most homeowners ask, which is “Will I lose my home if I go bankrupt or do a consumer proposal?”

Because you may have debt problems, you may be concerned with losing your home and most people figure that “if they go bankrupt they are never going to keep their house.”  And for most people, that is a very traumatic thought, however, it can be avoided.

I found that over the last 10 years, very few people who own a home with equity have to lose the home if they don’t want to. They can find a way to keep it. The only way to keep it is to deal with the matter of equity. The trustee is responsible for obtaining the equity from the property in order to pass the money along to the unsecured creditors. They have the right to their money.

Therefore, if a person or family wants to keep their home, they’re going to need to arrange for financing or to pay the creditors. Of course, it depends on how much equity there is in the home. If you really want to keep your home, generally you can. You can keep it whether it’s a bankruptcy or proposal. In fact, if it’s a consumer proposal your home equity is not up for grabs. This really only applies to a homeowner declaring personal bankruptcy.

If you are a homeowner and considering a debt solution, I encourage you to call our office. Why lose sleep wondering what will happen. Your initial meeting is free, and in that meeting, we will explain all of your options so you may make an educated decision on the best option to obtain debt relief.

Posted On: April 7, 2017

The role of a Licensed Insolvency Trustee in bankruptcy Mississauga is critical in helping consumers who choose to go through the process of filing for bankruptcy to solve their overwhelming debt problems. Not only do they play a very big part in helping to minimize confusion, but they are present from beginning to end to make sure that every step of the process gets done as quickly and efficiently as possible.

Licensed Insolvency Trustees (LITs) are the only professionals licensed by the Federal Government of Canada to provide debtor information and advice to individuals and businesses with debt problems to help them make informed choices to deal with their financial difficulties. In addition, they are the only ones permitted by law to provide and perform debt restructuring services under the Bankruptcy & insolvency Act (BIA).

Licensed Insolvency Trustees in bankruptcy Mississauga were previously called bankruptcy trustees, or trustees in bankruptcy. The Office of the Superintendent of Bankruptcy Canada has recently changed their designation from bankruptcy trustee to Licensed Insolvency Trustee (LIT) in order to clearly differentiate them from debt consultants who are not licensed by the federal government to provide debt services.

The new designation is important to help eliminate any confusion or doubt among consumers about the legitimacy of LIT’s to provide government programs to eliminate debt. When dealing with a Licensed Insolvency Trustee, consumers are protected in three ways:

The Canadian government regulates the insolvency profession and ensures that Trustees are efficient and effective in complying with the insolvency process.

The Code of Ethics for Trustees establishes a standard for services that they are required to provide to a business or individual who has filed for bankruptcy.

The laws regulating the insolvency process makes sure that both the debtor’s rights and the creditor’s rights are respected.

In Mississauga, a Licensed Insolvency Trustee can provide a wide range of debt management solutions, including consumer proposals, loan consolidations, and bankruptcies. Insolvency Trustees are the most highly trained and educated debt experts that you can talk to. In most cases, trustees have obtained a university degree and most of them hold an accounting designation. For licensing, all trustees are required to complete a three-year bankruptcy and law course, pass a comprehensive oral examination, and undergo background investigation by the federal and national police force of Canada (the Royal Canadian Mounted Police). Only trustees who are licensed by the Office of the Superintendent of Bankruptcy Canada (OSB) can hold the designation of Licensed Insolvency Trustees.

Their role as debt professionals include the following:

• Provide free initial consultation to review your financial situation
• Explain to you in detail all your debt relief options, not just bankruptcy
• Recommend the best debt management solution that is best to your situation, which may or may not include any type of insolvency solution provided by the Bankruptcy & Insolvency Act
• Administer consumer proposals and bankruptcies and manage assets held in trust
• Gather all vital information to file the necessary documents and start insolvency proceedings
• Notify your creditors, accept and review all claims and administer the rules of the process
• Apply for your discharge or completion certificate once you’ve completed all your duties
• Ensure that everyone complies with their duties and responsibilities under the law.

If you are deep in debt and are getting harassed by non-stop collection calls and wage garnishments, consulting with a trustee is the most risk-free and inexpensive option you can take towards the right direction. A Licensed Insolvency Trustee in Mississauga can help you determine which debt relief option is best for you and your family so you can be on the road towards a debt free life.

Posted On: October 29, 2016

In November 1992 the Bankruptcy Act received a broad overhaul for the first time since 1966. If you can imagine the changes that had taken place in Canadian society between those years you can understand that this was due; probably overdue. One of the main changes to the Act, other than re-naming it the Bankruptcy and Insolvency Act (BIA), was the introduction of something called a Consumer Proposal. It was a game changer.

A proposal of any kind is really an offer or a proposition, where one party extends that offer to another party in the hope that it will be accepted and both parties will mutually benefit from the new arrangement. Proposals had been around for 72 years, from the time the Bankruptcy Act was first made into law. But the proposals that were in use before 1992 were primarily intended for business and corporate use and were very difficult for the ordinary insolvent debtor, the ordinary non-business person, to use. There were many obstacles and speedbumps in the process which made it expensive and that alone drove people to use the bankruptcy itself as the only practical way they could resolve the debt problems.

Some trustees, in Toronto primarily Murray Hahn of the firm Clark, Henning & Hahn, tried to be as creative as they could and use the proposal option to allow their customers to try to reach a deal with their creditors. Up to a point it worked OK, but in the long run there were simply too many administrative problems and the initiative turned into a major problem for the government and the courts. But at least the need for a proposal regime designed for the consumer debtor had been established.

So in 1992 Parliament made the necessary amendments to the Act and November 30^th of that year it became law. Interestingly the new Consumer Proposal system turned out to be pretty much what Murray had come up with on his own, only the law had now been tweaked to remove as many of the previous speedbumps and obstructions as possible. Anyway, we now had something called a Consumer Proposal for people to use.

At first very few people even considered the Consumer Proposal. All they thought about was Bankruptcy and, I guess, it took trustees a while to get use to the Consumer Proposal process themselves, so it was hard for them to explain it properly as a viable option to the tried and true bankruptcy process. So the first few years saw relatively few Consumer Proposals in use, but over time this began to change. Word got out. People, including trustees, got more familiar with it and therefore more comfortable with it, too. So today, 2016, roughly half the filings under the BIA are for Consumer Proposals, instead of the meagre number of the first few years.

So what exactly is a Consumer Proposal? Well, as they say, it isn’t rocket science. It is, however a very effective alternative to a Bankruptcy. Let’s start with what I said earlier: a proposal of any kind is an offer, a proposition. So that’s what a Consumer Proposal is, an offer. But really, it is a very specific and unusual offer.

A Consumer Proposal in Toronto or anywhere else in the world can only be made through a Licensed Insolvency Trustee (LIT) by an Insolvent Person. (I capitalized that term because it is legally defined under the BIA.) An Insolvent Person is someone who can demonstrate that he is unable to pay his debts as they generally come due. For most people that simply means they can’t meet their minimum monthly payments.

So, the Consumer Proposal is one of the options or solutions that the BIA provides for people who have run into serious debt trouble. The other main option, of course, is a Bankruptcy, but the Consumer Proposal is very different – on many levels.

The first noticeable thing about a Consumer Proposal, as opposed to a Bankruptcy, is that the debtor does not offer up all his property to the trustee for the general benefit of his creditors. As a matter of fact, his property, such as a house or investment, is not generally part of the negotiations. Instead, the debtor offers money to his creditors, in terms that he can actually perform. Since he couldn’t meet his minimum monthly payments the new terms will be something less that the regular monthly payment total. Sometimes a lot less.

For instance, let’s say the debtor’s debts amounted to $50,000.00, to 10 different creditors, 7 credit cards, 2 lines of credit and 1 personal loan. The minimum monthly payments total  $1,000.00. His circumstances have deteriorated over the past year and he no longer can come up with the $1,000.00 every month. So, he makes a Consumer Proposal offering $500.00 a month, all he can afford.

Since the BIA puts a maximum time limit of 5 years to the terms of a Consumer Proposal, our debtor’s Consumer Proposal offer can be 60 payments of $500.00, a total of $30,000.00.

The second thing about a Consumer Proposal is that it operates very much like a Consolidation Loan, except there is no loan. If the Consumer Proposal is accepted by the creditors and approved by the court it becomes legally binding on all the unsecured creditors. This makes it effectively the new amount that the debtor owes and once our debtor has paid the $30,000 he will be out of debt. But to whom does he pay this $500 a month? To the trustee, of course, though with a Consumer proposal the trustee is called the Administrator.

So our debtor has made a $30,000 Consumer Proposal offer to his unsecured creditors. Now the ball goes over to the creditors’ court. Will they accept it or will they want more money. On the surface of it one might assume that the creditors probably would reject it. They not only would be losing $20,000 in capital, they also lose all the interest they would make over that 5 year span, because the moment the Consumer Proposal is filed all interest charges cease, and it stays that way for the duration of the Consumer Proposal. Depending on the interest rates, the creditors might be losing another 20,000 or more in lost interest.

However, there are some other factors that come into play which act as an inducement to the creditors to look more favourably on some kind of compromise.

The first of these is that if they simply ignore the Consumer Proposal after 45 days from the date of filing they will be stuck with those terms. The BIA makes approval a default unless the creditors get involved and at least voice an opinion on the terms offered.

The second thing is the alternative. It is usually quite evident to the creditors that the debtor is insolvent (otherwise he wouldn’t have been allowed to file the Consumer Proposal in the first place) and that the trustee has reviewed with debtor all the options available to him to resolve the debt trouble. Those other options include bankruptcy, so the debtor’s decision to make a Consumer Proposal instead of a Bankruptcy was a choice, not an obligation. It will likely be that if he has to do the Bankruptcy his creditors will receive a lot less than they would from the Consumer Proposal. In fact it is practically guaranteed that the creditors get more out of a proposal than they would out of a corresponding Bankruptcy. Otherwise why would they accept the Consumer Proposal?

If the Consumer Proposal terms he offered his creditors are not accepted the debtor may, probably will, go bankrupt. The creditors may be sufficiently un-enamoured with our debtor’s offer to want more money, but this can only be negotiated if they request a meeting to discuss it. If there is no request for a meeting at the 45 point the Consumer Proposal is deemed accepted as offered.

If the creditors do demand a meeting there can be some back and forth negotiating – through the trustee/administrator – until a deal is reached, or the creditors finally decide they are not interested in making a deal. In this latter case, the debtor will usually end up filing a Bankruptcy. Fortunately, the vast majority of Consumer Proposals are accepted.

After the creditors have said yes, the Consumer Proposal must be approved by the court. Fortunately this seldom, very seldom, requires an actual court hearing. 99.9% of the time the court approval of the Consumer Proposal is automatic, after a 15 day wait from the time the creditors said yes.

Once the court approval is obtained the rest is up to our debtor. The monthly payments start and must be kept up, with very little margin of error. If the Consumer Proposal falls 3 full monthly payments in arrears at any time over the next 5 years it will be deemed annulled. In other words, our debtor has a two month cushion to work with. He can enlarge this cushion by pre-paying the proposal if he has the means. For instance, let’s say 6 months after the court approved the Consumer Proposal our debtor gets a new job, making more money. The terms of the Consumer Proposal don’t change, so perhaps now instead of only paying the minimum $500 he can afford to $700 a month. It’s an open contract, so he he’s free to do that. If he does, after 5 such payments he will have added another 2 months to his cushion. That cushion can save the Consumer Proposal a year or two later if he runs into temporary trouble and can’t make even the $500 for a few months, so it’s a great idea to put as much as possible into the Consumer Proposal if he has the means.

When our debtor has paid the full $30,000 he will be officially out of debt to those 10 creditors he had at the beginning.

The effect of a Consumer Proposal on a person’s future credit prospects, as well as the speed with which he recovers his “good name” will depend on a lot of factors, like every credit granting decision. But one point always present in the process of determining whether to do a Bankruptcy or a Consumer Proposal is the reality of the current situation. An Insolvent Person can’t pay his debts the way the creditors have the right to demand. Unless that problem is resolved our debtor will never recover his “good name”. So the most practical and effective way to approach these decisions is to take a realistic look at the circumstances and determine what the priorities should be. It’s not much good gazing at the horizon if you’re going to trip over something at your feet.

As a final bit of information on Consumer Proposals I’d like to point out that our experience shows a large majority of Consumer Proposals in Toronto are successfully performed and they are fully paid in an average of 50 month – 10 months early. A win for everyone.