Breaking Down BC’s Reliance on Real Estate

Headline: Breaking down the B.C. economy’s risky reliance on real estate: Experts say a market crash could have serious consequences and something needs to change.

Via: CBC News

How Money Affects Health

Headline: How money affects health — what you can do to stay in control.

Via: Global News

Home Sales Fall

Headline: Canada home resales fall in April, lowest in over 5 yrs-CREA

Via: Reuters

Will Bankruptcy Affect My Employment?

If I declare bankruptcy, will it affect my employment?  This is a fairly common question that a Licensed Insolvency Trustee (“LIT”) gets asked at the initial interview stage.

You may be wondering if your current or future employer will discover a bankruptcy filing and whether that impacts your ability to obtain work or keep your job.

In a typical bankruptcy, the LIT doesn’t need to notify your employer.  However, there may be situations when filing bankruptcy may affect your application to take on a new job.  Below we answered some of the most common questions around bankruptcy and employment issues.

Will My Current Employer Find out I’ve Filed for Bankruptcy?

As part of the usual bankruptcy process, your employer is not told that you’ve filed a bankruptcy.

The only time an LIT will notify your employer that you have filed a bankruptcy or consumer proposal is in cases where there may be a garnishee in place or where the LIT needs payroll information to determine surplus income or prepare tax returns.  In mots cases where the LIT requires information from the employer, we request the debtor to obtain it for us so we don’t have to contact bthe employer directly for it.

Can I Lose My Job if I File for Bankruptcy?

It is illegal in Canada for an employer to fire someone because they filed for bankruptcy.

Certain professional associations have professional conduct standards that require an individual to disclose if they are bankrupt.  Often these are professions that involve the handling of money and/or trust accounts.  Examples are insurance/investment broker, real estate agent, lawyer or accountant.

Professionals often file a consumer proposal as an alternative to bankruptcy.  Since someone who has entered into a repayment arrangement through a consumer proposal is not a bankrupt, they are generally excluded from these professional guidelines. However, any professional should first check any regulations with their professional association or society before filing.

In general, if the debts you owe are personal in nature and not the result of fraudulent or poor business practices, an insolvency filing shouldn’t impact you professionally.  However, if you are considering an insolvency filing, it’s still important to satisfy yourself of the disclosure requirements to your professional association.

If I File for Bankruptcy, Will I be Able to Get a Job?

You are not required to disclose that you have filed for bankruptcy or a consumer proposal when applying for a job. Potential employers may ask if you are currently bankrupt as part of the application process. They may also choose to conduct an insolvency search or credit check as part of hiring process. This is more common if you are applying for a position that involves significant financial trust.  If you think that an employer is going to ask or perform a background check, it is always better to be up front about it.

Some positions require employees to be bonded by the firm’s insurance company to protect against employee theft and dishonesty.  Bonding provides the firm with compensation in the case of a loss.  It’s a protective measure for the employer. In reality, a bankruptcy on your credit report is not necessarily a bad thing.  It shows that you have dealt with your debt.  If you are undischarged, then you only have one obligation and that is to your LIT.  Unfortunately, if you are unable to be bonded, an employer may choose not to hire you for these types of positions.

As an undischarged bankrupt, you can also be precluded from holding certain roles such as a director of a company until such time as you are discharged from bankruptcy.

Consider filing a Proposal

Many concerns regarding the impact of a bankruptcy on employment do not apply in the case of a proposal. A  proposal is a repayment arrangement made with your creditors, to repay a portion of what you owe.  While a proposal is still a legal process administered under Insolvency legislation and filed through a Licensed Insolvency Trustee, you’re not a bankrupt when you’re in a proposal.  As such, a proposal can often solve some of the situations that arise in terms of your employment and looking for debt relief solutions.

A Licensed Insolvency Trustee will carefully review your financial situation and provide you with the best course of action without unduly affecting your employment.

Boale, Wood & Company Ltd. has helped thousands of individuals and families overcome debt for more than 14 years.  

Call us.  It’s not too late. (604) 605-3335

Office of the Superintendent of Bankruptcy Issues Directive on Counselling

In previous newsletters, we addressed the issue of possible changes being proposed to the counselling directive by the Office of the Superintendent of Bankruptcy (“OSB”).  The OSB issued its draft directive in October 2017 and commenced its public consultations, inviting comments from stakeholders.

On January 29, 2018, the OSB issued its Directive relating to the qualifications of Insolvency Counsellors, referral arrangements and debt advisors, along with the transition phases and its plan to revamp the entire counselling curriculum. The Directive can be found here.

The OSB has stated that the first phase of amendments will contribute to a level playing field for all LITs and reduce risks to the integrity of the consumer insolvency process related to:

  • LIT involvement in prohibited referral arrangements; and,
  • reliance on intermediaries whose activities are incompatible with an LIT’s legal and professional responsibilities.

It will also provide LITs with flexibility to accommodate debtor circumstances in the delivery of insolvency counselling, and by ensuring insolvent Canadians continue to benefit from:

  • Access to insolvency proceedings at regulated rates;
  • Open choice of an LIT; and,
  • Protection from unnecessary costs and predatory activities.

The second phase of the counselling amendments, including on line modules, will de developed in 2018 and beyond.  No timetable for the implementation has been set.

Improved protections

The aim of the Directive is to ensure that:

  • consumers are not charged more for the insolvency process than is allowed under the BIA. This will be accomplished by having the counsellor be registered against the LITs license and not be involved in any unregulated and unnecessary services or predatory activities.
  • consumer debtors and bankrupts are free to choose whatever LIT they want rather than able to make an open choice of an LIT, rather than being directed to a specific LIT chosen for them under an arrangement negotiated by the person who will then provide their BIA insolvency counselling.
  • consumer debtors and bankrupts receive clear and accurate information, regarding responsibility for insolvency counselling, related fees, and the roles and responsibilities of debtors, LITs and registered BIA Insolvency Counsellors.
  • consumer debtor’s or bankrupt’s informed consent to the LIT is now required prior to the sharing of that debtor’s insolvency information with a third-party BIA Insolvency Counsellor.

Additional delivery flexibility

  • Directive No. 1R4 provides flexibility to accommodate an insolvent person’s circumstances related to participation in insolvency counselling by video conference in order to avoid significant inconvenience; or at the third-party location of a registered BIA Insolvency.
  • Upcoming renewal of the BIA insolvency counselling curriculum will provide further delivery enhancements, such as the addition of on-line learning modules at no cost to the debtor.

LITs relying on third-party BIA Insolvency Counsellors

There is no restriction from LITs relying on third-party BIA Insolvency Counsellors.  However, these counsellors must meet registration requirements under the Directive and adhere to the same professional standards as LITs themselves are required to follow including adherence to all relevant provisions of the BIA, its Rules — including the LIT Code of Ethics – and Directives from the OSB.

The Directive applies only to LITs.  It does not restrict a third party to provide unregulated products and services to Canadians outside the scope and parameters of federal insolvency legislation.

Conclusion

It is our view that the changes to the Directive will enhance the counselling process for consumers and provide for delivery flexibility for LITs where the debtor is in a remote location or where there are other circumstances where a face to face meeting would be inconvenient. The Directive comes into force on October 1, 2018.  Until that time, the previous Directive applies. Details regarding this Directive can be found here.   http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03843.html

Boale, Wood & Company Ltd. has helped thousands of individuals and families overcome debt for more than 14 years.  

Call us.  It’s not too late. (604) 605-3335

Case Law Update Re: Gwidz

Recently, the BC Supreme Court provided some much needed clarification relating to the non-exempt equity in a bankrupt’s home at the date of bankruptcy and where the bankrupt and the Licensed Insolvency Trustee have reached an agreement on the amount.

In this case the bankrupt was granted a discharge on the condition that he pays into his estate approximately $27,000, enforcing an agreement entered into between the bankrupt and the LIT almost two and a half years earlier at the outset of bankruptcy.

The issues in this case are whether the increase in property value can be categorized as after-acquired property, subject to realization by the Trustee, and whether the Bankrupt can invoke the principle of promissory estoppel.

The Court concluded that payment amount represented a fair assessment of the bankrupt’s non-exempt interest in his home at the date of bankruptcy.  However, in the intervening years, the bankrupt’s share of the equity had substantially increased, attributable solely to the rising markets in the Lower Mainland of British Columbia.

Previously, the leading case on this issue was the 2016 Ontario Court of Appeal decision in Lepage (Re), (2016 ONCA 403). The ONCA ruled that even where an LIT disclaims its interest in a bankrupt’s property, or reaches an agreement at the date of bankruptcy for the non-exempt equity, any increase in equity amounted to “after acquired property” which then became part of the bankrupt’s estate.

The BC Court declined to follow this analysis, noting the comments of the ONCA in Lepage were not supported by the case law, calling it “one-off where the court determined the bankrupt needed to provide a healthy payment to CRA whom the debtor had defrauded”.

Ultimately, the BC Court found that the agreement between the bankrupt and the LIT ought to be enforced, and that in exercising its discretion and considering the rehabilitation of the bankrupt, the interests of creditors, and the integrity of the bankruptcy process, a payment in accordance with the agreement was the appropriate condition of discharge.

In Lepage, the Court found that the increase in the property values were after acquired property and that the valuation was done at the discharge hearing.  In Gwizd, the date of bankruptcy is used for valuation purposes.

What is lost in this issue is what happens when the property value drops to a point where there is no longer any equity and the bankrupt decides that he shouldn’t have to pay.  To our knowledge, this scenario has not played out in any reported decisions.

These cases put LITs and debtors alike in a potentially untenable position.  LITs have usually used the date of bankruptcy as the “date for which asset values are determined”.  Or the date in which the LIT determines that it has an interest or no interest in an asset.  But there is case law that supports that LITs should be diligent in their efforts to deal with assets and that they should not be speculators.  A debtor also relies on the LIT for advice and makes decisions based on that advice.

Time will tell if anything further comes of these decisions in future discharge applications either in BC or other jurisdictions.  It should also be noted that the LePage decision is the Ontario Court of Appeal which is distinct from the Gwizd decision that was decided by a Master.

The full text of the Gwizd case can be found here.

Boale, Wood & Company Ltd. has helped thousands of individuals and families overcome debt for more than 14 years.  

Call us.  It’s not too late. (604) 605-3335

A Closer Look at December 2017 Insolvency Stats

Consumer insolvencies in BC decreased in December 2017 overall by 15.0 percent from November 2017.  Consumer proposals decreased 13.6 percent while bankruptcies decreased 17.0 percent.

The proportion of proposals in consumer insolvencies in BC accounted for 61.28 percent during December 2017 while they accounted for 51.79 percent for all insolvencies across Canada for the same period.

Consumer insolvencies in BC for the 12-month period ending December, 2017, increased overall by 6.6 percent compared with the 12-month period ending December, 2016. Consumer bankruptcies decreased by 9.9 percent, while consumer proposals increased by 20.6 percent. Consumer insolvencies in all of Canada decreased 2.4 percent over the same period last year.  BC accounted for 8.78 percent of all insolvencies in Canada in December 2017.

The proportion of proposals in consumer insolvencies in BC was 61.28 percent during the 12-month period ending December, 2017, up from 54.18 percent during the 12-month period ending December 2016.  It indicates the popularity of consumer proposals as a way for consumers to deal with their debt and with dealing with a Licensed Insolvency Trustee over other unregulated service providers.

While insolvencies across Canada are down overall by 2.9 percent, bankruptcies are down 8.5 percent, but proposals are up by 2.8 percent.  Proposals also make up 52.57 of all insolvencies in Canada in 2017 up from 49.66 percent in the previous twelve months.

The insolvency statistics indicate the increasing benefits of the protections provided to consumers under the Bankruptcy and Insolvency Act over other non-legislated options, whether that is a consumer proposal or a bankruptcy.   It also indicates that consumers are seeing the benefits of seeking the professional advice of a Licensed Insolvency Trustee rather than those of other non regulated service providers.

If you would like to know exact details of how a consumer proposal or a bankruptcy would benefit you in dealing with debt, call us at (604) 605-3335 to schedule a free consultation. Call us.  It’s not too late.

For more on the all Canada stats, please see this article.

Canadian Insolvency Stats for December 2017

The latest numbers from the office of the Superintendent of Bankruptcy Canada shows a 19.8% percent decrease in the total number of insolvencies in Canada in December 2017 compared to the previous month.

Bankruptcies decreased by 13.7% percent and proposals decreased by 24.9% percent.

Compared to a year earlier, insolvencies decreased by 2.4%

Other stats: For the 12 month period ending December 31, 2017, the total number of insolvencies decreased by 3.0 percent compared with the 12-month period ending December 31, 2016.

You can read the summary and full report here.

Bankruptcy score

Headline:Bankruptcy scores: Why lenders may turn you down despite a good credit score

Via: Global News

 

Canadians Underwater Financially – where

Headline: Canadians underwater: Where, exactly, rising interest rates may leave Canadians in danger of losing their homes.

Via: Global News