Why Setting Financial Goals is so Important

By Shelley Koehli


Here we are, a few weeks into the new year.  Are you succeeding with your New Year Resolutions this year?  Did your resolutions including setting and sticking to financial goals?

As a Licensed Insolvency Trustee (LIT) and Chartered Insolvency and Restructuring Professional (CIRP), I speak to many Canadians who are looking to get back on track with their finances. One of the most important things they can do is set financial goals.  Without goals, spending can be impulsive and unfocused. We tend to spend more frivolously without a particular goal in mind.

How do you go about setting financial goals?  First things first, consider three types of goals:

1.Short Term – Achievable within 1 year

Short term goals should include emergency savings.  We all need emergency savings for things like car repairs, sudden travel for a family emergency or short term wage loss.  A good rule of thumb is to have 3 months’ worth of household expenses saved for these types of expenses.  Other types of short term goals can include funds for gifts or savings for income tax that you know you will need to pay.

2. Medium Term – Achievable within 1 to 5 years

Medium term goals could be funds for a vacation, a home repair or renovation or a vehicle.

3. Long Term – Achievable within 5 to 10 years

Long term goals could be a down payment to purchase a home, paying extra on your mortgage or long term retirement savings.

In order to save for a particular goal, you need to know what that goal will cost.  For example, if you want to save 3 months’ worth of expenses, keep track of your household expenses for a month or two to get a good idea of how much that would be.  For example, let’s say your expenses are $3,000 per month.  That means a savings goal of $9,000.  To reach this over a one year period, you need to save $750 per month ($9,000/12).  If that amount is not realistic, then perhaps the goal needs to be adjusted to be saved over a longer period of time. This formula should be used for all goals.  Figure out the end cost amount and divide that by the time period you have to save = your target saving amount.  You’re much more likely to save if you have an end result to work towards.

The other benefit of setting financial goals, is your spending will be much more focused.  If you have an important goal you want to save for, you will naturally curb your spending to ensure you have enough for the goal as it is top of mind.

If you are experiencing financial difficulties and are unable to save because you are struggling with monthly minimum payments, consider obtaining information from a Chartered Insolvency and Restructuring Professional about your options.  Every situation is unique and requires a personal review to ensure you are given the best information possible. For a list of trusted professionals visit the Find a CIRP section on the CAIRP website


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New Year, New Mortgage Rules


By Chelsea Taylor, CIRP, LIT

The ball has dropped and 2018 is upon us, along with the The Office of the Superintendent of Financial Institutions Canada’s revised Guideline B-20 − Residential Mortgage Underwriting Practices and Procedures.

Here is a quick overview of the new rules:

  • The guideline applies to all federally regulated financial institutions (Institutions).
  • All residential purchasers will be put to a stress test and must now meet the minimum qualifying rate to be approved for a mortgage.
  • The minimum qualifying rate will be the greater of the five-year benchmark rate published by the Bank of Canada (currently 4.99%) or the approved mortgage rate plus 2%. This means that the purchaser may need to qualify at an interest rate higher than 4.99% in some circumstances.
  • Loan-to-value (LTV) ratio limits must be established and adhered to by Institutions. These ratio limits must also be reflective of risk and updated with changing housing markets.
  • Restrictions will be placed and certain lending arrangements that are designed, or appear designed to circumvent LTV limits established by the Institutions.
  • Mortgage renewals with your current Institution are exempt from the stress test.

Pre-2018, homebuyers putting 20% or more down on their residential purchase could avoid the stress test and generally qualified for a higher mortgage as a result.  Although 2018 has just begun, these new mortgage rules have already started to impact buyers by reducing their buying power by 20% in some circumstances.  That means that purchasers will either need to lower their home buying budgets or save more money to use as a down payment.  It has yet to be seen whether these new rules will affect the cost of housing in Canada, especially in urban centres where the cost of a home is almost out of reach for most buyers.

While these new rules may seem harsh, they were put in place with good intentions.  With rising home prices and consumer debt loads, many home owners are in a tough place financially.  The concern is that when current mortgage terms are renewed, an increase in interest rates could be the tipping point and some homeowners may find themselves in situations where they are no longer able to service their mortgage, living expenses and existing debt load.  These lending changes will also make refinancing more difficult for those who intended to use home equity to assist in paying-off consumer debt.

If you were planning to purchase a home in 2018, or looking to refinance to consolidate debt, now may be the right time to discuss your options with a mortgage broker or a Licensed Insolvency Trustee (LIT).

You can find a LIT near you by visiting CAIRP’s website: http://www.cairp.ca/find-a-cirp.

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I always had more than enough money so didn’t need to pay attention

By Mary Ann Marriott, LIT

I feel like there is a general misconception that it is those who have limited income that need to pay the closest attention to their finances. Although that statement certainly has truth, I would argue that it is those who have “ample” income that need to take a closer look at their finances and their spending.

I hear the above statement regularly in my line of work and there is so much wrong with that mentality. First, it creates an environment of complacency, a habit of mindless spending. Believing that you have enough income to live the life you want often causes you to live life beyond your means. “I can afford that brand new $50k truck”, “I can afford a vacation (or two) every year”, “I can afford to dine out regularly/go shopping/spoil my kids or grand kids”. If you are paying for all of those things with cash, then yes, you can afford it. If you are relying on credit to support your lifestyle, then you are living beyond your means. Which leads me to the final justification statement, “I can manage my credit payments just fine, thank you”. Ok, no one actually says that but we think it. Managing your credit payments is (absolutely) not living within your means. Having credit payments means that you are definitely living above your means and is a very BIG warning sign that you are setting yourself up for failure, or at least much financial discomfort in the future.

Which is the second issue with that statement…it sets the foundation for financial failure. Or at least keeps you from achieving all that you can financially. And that’s a really important point. Because, again, in that space of complacency, you can “feel” like life is good, like everything is ok, because you are living a “good” life, but underneath the surface, a storm of debt is building. At some point in your life, you will have to give up some of that standard of living to pay for the lifestyle you financed. And for most, that is a hard pill to swallow.

And the third reason I would tag that statement, and that mindset, as dangerous is that it sets you on a path of not acquiring the skill set that is crucial to financial wellness – management skills like planning, tracking expenses, learning to live, at the very least, within your means   something that is not a common trait in our North American society. Or, to accomplish great wealth, learning to live beneath your means. What a concept!!

It is the higher income earners that often crash the hardest. And that makes absolutely NO sense because they are the ones that should have the greatest safety net. But there is a belief that comes along with the mentality that you don’t have to worry because you make a good income that almost ensures financial doom. And that belief is “that I can have what I want, do what I want, because I make enough money” combined with a reliance on credit to make that a reality.

I’m not saying there isn’t truth in that belief. There is. Of course you should be able to enjoy the “good Life” and do the things you want to do, buy the things you want to buy. But you still need to keep an eye on what your spending and where. And you still need to make good choices about where that money goes. And, this is a big AND, you need a plan for when things change. No, I didn’t say “If” things change. I said “when”. Because if there is one thing certain in life, it is that Things. Always. Change!

I’m not saying “Don’t live life to the fullest”. I’m not saying “Don’t spend money on your desires”. I’m simply saying that you owe it to yourself to know where your money goes and to make decisions from THAT place. Because that’s where the best decisions are made!

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A bankrupt’s equity in real property and agreements with the trustee

By Geoffrey H. Dabbs, LL.B

A recent decision of a British Columbia Master, sitting as a Registrar in Bankruptcy has provided some much-needed guidance to bankrupts and trustees with respect to non-exempt equity in a bankrupt’s home where there is an agreement with the trustee.

In the case Gwizd (Re), 2017 BCSC 1975, the Court granted the bankrupt a discharge on the condition that he make a payment of approximately $27,000 to the trustee, enforcing an agreement that was entered between the bankrupt and the trustee almost two and a half years earlier at the outset of bankruptcy.

The payment amount represented a fair assessment of the bankrupt’s non-exempt interest in his home at the time; 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.

In considering the appropriate terms for discharge, the Court considered and distinguished the 2015 Ontario Court of Appeal decision in the case Lepage (Re), 2016 ONCA 403, which suggested that even where a trustee in bankruptcy disclaims its interest in a bankrupt’s property, any increase in equity amounted to “after acquired property”, which thereby formed part of the bankrupt’s estate. The Court in Gwizd declined to follow this analysis, noting the comments of the Court of Appeal in Lepage were obiter and were not supported by the case law, suggesting increased equity is not after acquired property.

Ultimately, the Court found that the agreement between the bankrupt and trustee 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.

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Financial Literacy Month 2017: Are You a Senior Drowning in Debt? Take Charge of Your Finances!


By Caryl Newbery-Mitchell, MBA, CIRP, LIT & Mary Plahouras, CFE, LL.M.generic banner_overarching FLM them_506x506_EN

After a lifetime of hard work, seniors should now be at a stage in their lives where they can slowdown, retire and enjoy their golden years. Unfortunately for many seniors, this is not the case. Insufficient income from government pension plans and savings, combined the high cost of living, health issues, relationship breakdown and often providing financial assistance to adult children are some of the main reasons seniors find themselves in debt in their retirement years. As a result, Licensed Insolvency Trustees (“LIT”) are seeing a greater number of individuals in their retirement years looking to understand the options available to them under the Bankruptcy and Insolvency Act (“BIA”).

The primary purpose of the BIA is to allow an honest but unfortunate debtor to obtain a release from their debts and make a fresh start. Under the BIA, an individual debtor may be able to file an Assignment in Bankruptcy or a Consumer Proposal in order to obtain a release from their debts and start fresh again. But to many seniors, the thought of filing a bankruptcy, often after many years of successfully managing their finances and maintaining a good credit history, is devastating. On the other hand, many seniors are also at a stage in their lives where they will not require the use of credit going forward, such as for obtaining a mortgage or credit cards and are in a good position to use a proceeding under the BIA to get out of debt.

Usually the two most significant factors for seniors when considering filing a bankruptcy or a Consumer Proposal are:

  • Assets owned by the debtor; and,
  • If there is any excess cash available once all monthly expenses have been paid.

If the debtor owns assets that would be realizable in a bankruptcy (such as equity in real property), they may be able to sell that asset in order to pay off their debts and avoid a filing under the BIA. However, if they have no realizable assets and most don’t as they have already exhausted all of their sources of cash by the time they meet with a LIT, then a filing under the BIA may be their only option for dealing with their debt.

When choosing between filing a bankruptcy or Consumer Proposal, a Consumer Proposal will usually require there to be an excess of cash once all monthly expenses have been paid. If the individual’s income barely covers their monthly expenses, as is often the case with seniors living on a fixed income, there may be no alternative but to file an assignment in bankruptcy to deal with their debt.

LIT’s are also seeing more seniors with income tax debt owing to the Canada Revenue Agency (“CRA”). This often happens in circumstances where the individual has elected for income taxes not to be taken off their pension payments. This means that come tax filing time they will owe taxes. After one or two years of non-payment, the seemingly small amount of taxes owing can become an insurmountable debt. We also see this in circumstances where an individual is not earning enough income from pensions or savings and chooses to supplement their income by working on a self-employed basis after retirement, but do not deduct taxes at source.

The accrual of income tax debt can result in garnishments being placed on an individual’s pension payments, other income sources and bank accounts by the CRA. A garnishment almost always has the effect of further exacerbating an already difficult financial situation. Filing an assignment in bankruptcy or a Consumer Proposal will put in place a stay of proceedings which will allow the garnishment to be lifted and ordinary payments to resume. Going forward, the individual can request the government take taxes off of their pension payments in order to avoid future tax liability.

In circumstances where an individual has little or no realizable assets and no excess income to be able to afford to pay the fee to file a bankruptcy, the Office of the Superintendent of Bankruptcy (“OSB”) offers the Bankruptcy Assistance Program (“BAP”). This program is available to any individual that cannot afford to pay the regular LIT’s fee. The BAP process works as follows:

  • The OSB keeps a list of LIT’s who participate in the BAP by offering their services at a reduced rate. Contact the Office of the OSB to request a BAP registration form and a list of LIT’s participating in the BAP in your locality.
  • Once you receive the BAP registration form, contact two LITs from the list and schedule an initial consultation meeting with each for an assessment and to obtain the LIT’s signature attesting to your inability to pay the LIT’s regular fees.
  • Submit the completed BAP registration form to the OSB. The OSB will review the information and if warranted, designate a LIT to administer your bankruptcy estate.

Taking the initiative to deal with a difficult financial situation is often the hardest part of the process for an individual, especially when they are finding themselves in financial difficulty at a later stage in their lives. A LIT is in the best position to discuss their financial situation and to review the options available, whether it is to make use of a proceeding under the BIA or another option that would avoid the use of a formal proceeding.

You can find an LIT near you who is a Certified Insolvency and Restructuring Professional (CIRP) on CAIRP’s website: http://www.cairp.ca/find-a-cirp.

Caryl Newbery-Mitchell is a Licensed Insolvency Trustee and Mary Plahouras is a Senior Estate Manager at MNP Ltd. in Markham, Ont.

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Securing a Better Financial Future


R__0010_François-NoëlBy François Noël, MBA, CIRP, LIT

Credit is a double-edged sword. You need to know how to use it carefully.

Credit is a practical means by which to purchase a house or car, help out in emergency situations, and purchase things online as well as everyday items without having to carry cash. But if your monthly payments get too high, you may end up having a hard time paying for basic things such as rent and groceries.

If you need to borrow money, limit yourself to what you really need, even if your financial institution offers you more at an attractive rate. When you have access to more credit than you need, it’s easy to get used to living above your means.

To convince financial institutions that you are willing and able to pay back your credit, you need to earn their trust. Financial institutions usually ask three questions before lending money:

  • Are you able to pay it back?
  • Do you have a steady job?
  • What is your credit rating?

Your credit rating is an indication of your willingness and ability to pay back borrowed money.

Your credit file contains information about previous credit requests, such as the amount requested and repayment terms. It also includes a credit rating that indicates whether or not you are good at repaying your credit.

This rating ranges from R1 (excellent) to R9 ( individuals in bankruptcy or collections process). The R7 rating is for individuals performing a consumer proposal. Clearly, you will have a hard time obtaining credit with an R7 or R9 rating.

A note will appear in your credit file for;

  • Three years after the end of your payments for consumer proposals.
  • Six years as of your discharge in the case of a first bankruptcy.
  • Fourteen years as of your discharge in the case of a second bankruptcy.

You can access your credit file by submitting a request through the mail or internet. When you receive your file, verify all of the information. If there are any mistakes, get them corrected by sending proof. A mistake in your file can mean you’ll always be refused credit, despite your best efforts.

There are two main credit agencies, Equifax Canada Inc. (www.equifax.ca) and TransUnion Canada (www.transunion.ca).

Rebuild your credit on solid ground.

Unfortunately, there is no miracle cure. Only time and good payment habits can improve your credit file. But if you make the required effort, you will likely find an institution willing to lend you money.

Here are few tips for rebuilding your credit file:

  • You must have a stable place of residence.
  • Have a stable employment.
  • Make a budget and stick to it.
  • Open a savings account and save regularly.
  • Once you are discharged, request a $500$ credit card by offering a $500$ But avoid requesting more than one credit card, as doing so will be an area of concern for future lenders
  • Never max out your credit card. You need to be able to pay your entire balance every month.
  • Borrow a small amount by pledging saved money as security

Make sure you understand what has happened, as that will help you start over on the right foot. Even with the keenest of financial advisors and best intentions in the world, if the root cause of your money problems is still there, it won’t be long before your issues resurface. Get to the bottom of these causes and deal with them; you’ll ensure a better financial – and personal – future for yourself.

Thankfully, you are not alone. Your advisor can guide you, with total confidentiality, towards resources that will help you get out of your financial troubles for once and for all.

If you think you’re worried that your credit has become too much too handle, consider talking to a Licensed Insolvency Trustee (LIT). They are Canada’s go-to professionals when you need help with debt problems. They’re licensed by the federal government and the first consultation with an LIT is always free.

You can find an LIT near you who is a Certified Insolvency and Restructuring Professional (CIRP) on CAIRP’s website: http://www.cairp.ca/find-a-cirp.

François Noel, MBA, CIRP, LIT , has over  35 years of professional experience at Raymond Chabot, counsellors in financial recovery.

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In a Bankruptcy, You Can’t Always Get What You Want (But You Generally Get What You are Entitled to)

Pamela Branton In bankruptcy matters, creditors sometimes believe that an aggressive stance is necessary to get the recovery they believe they are entitled to. However, that approach can carry its own risks.

In the recent Nova Scotia case of the bankruptcy of Randall Mullen, a judgment creditor asserted that the bankrupt had inappropriately benefited by taking advantage of the provisions of the Bankruptcy and Insolvency Act (BIA) and protecting his RRSP from creditors. The creditor pursued his claim against the RRSP, with the ultimate result that what might otherwise have been a net recovery of about $20,000 for that creditor turned into a net loss in excess of $5,000 (plus any legal fees incurred).

The creditor, Mr. Dykens, had obtained a judgment against Mr. Mullen. He sought to enforce it prior to bankruptcy, including a demand to release the debtor’s RRSP to satisfy the judgment. Before the administrator released any funds, however, Mr. Mullen made an assignment in bankruptcy. The Licensed Insolvency Trustee opined that upon the assignment being made, the RRSP became an exempt asset and not available to Mr. Mullen’s creditors, in accordance with the provisions of the BIA.

Mr. Dykens did not accept that opinion and pursued various lines of inquiry into Mr. Mullen’s affairs. The creditor corresponded extensively with the Trustee throughout the bankruptcy, required an examination by the OSB, and finally objected to Mr. Mullen’s discharge, arguing that the RRSP (or the value thereof) should be made available to creditors.

He unsuccessfully appealed the absolute discharge granted by the Registrar. He then applied, unsuccessfully, to lift the stay of proceedings to permit him to pursue the RRSP to satisfy the judgment. Throughout, the creditor failed to heed advice and comments from the Trustee, the OSB, the Registrar, and the Court, particularly as to the RRSP being an exempt asset and the lack of blameworthy conduct of the bankrupt.

The ultimate result was that the assets of the estate (approximately $42,000) were completely dissipated on Trustee’s fees and legal expenses incurred by the bankrupt estate in responding to the inquiries and court proceedings; the creditor’s actions did not result in any increase in estate assets. Mr. Dykens, holding nearly half of the unsecured debt, would have recovered approximately $20,000 from the estate, but instead received effectively nothing; in addition, he was ordered to pay costs to both the bankrupt estate and the bankrupt personally, at both levels of Court. Unfortunately, the other creditors also suffered, in that their portion of the potential recovery was also wiped out.

The lesson to be learned is to investigate (and seek the advice of experienced insolvency professionals) as to whether your claim has merit before exhausting the funds from which your recovery would be paid.

Pamela Branton is a Senior Solicitor with the Nova Scotia Department of Justice. She is currently Vice-Chair of the Bankruptcy Subsection of the Canadian Bar Association, Nova Scotia, has served as a Director of the Canadian Insolvency Foundation, and as the Co-Chair for the Canadian Bar Association’s Pan-Canadian Insolvency and Restructuring Conference held in Halifax in 2012.

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Family budgeting: It’s never too early to start the conversation

Steve ErwinBy Steve Erwin

Like many parents, I struggle with teaching my kids how to be responsible with money – maybe because it took me so long to figure it out for myself (and maybe I’m not all the way there yet, either).

I recall being on my weekend Toronto Star paper route as a kid and having to “collect” payments for delivery at each door, hoping I’d cobble together enough coins to waste at the local corner store on baseball cards and “Big League Chew” (I’m not even sure that bubble gum still exists.)

My parents were pretty cautious with what money they would give us in “allowances” – not too much, and not without something in return, so that it would be earned. Flash-forward to the present day and here I am trying to instill the same responsible thinking into a 7-year-old boy and an 8-year-old girl.

This isn’t as easy as I thought it would be. Daughter just has to flash those beautiful lashes and Daddy melts like butter. It’s been effective in her getting that extra something at the store … and if she gets something, Son does too (fair is fair, as they say).

What’s been interesting is watching how both treat money. Both were given piggy banks a while ago. Both receive cash here and there from grandparents and other relatives and we also have a “finders keepers!” rule whereby if they come across loose coins on the floor, a counter or a laundry basket, it’s theirs (which is why I’m careful not to drop any $20 bills).

Steve wastes money on kids

Jack and Sammy know the way to daddy’s heart – and his wallet.

On one hand we have Jack … he’s the “saver.” In six months he calculated all the loot from his piggy bank and found out he has more than $150! (He’s saving, he says, for a new video game console … he seems unconvinced Santa Claus will follow through on a future wish list).

On the other hand we have Sammy … she’s the “spender.” She will dig into her bank if we go shopping, put it in a little purse and this lets her make purchases that adults would refer to as “impulse buys.” After six months, she had less than $30 in her piggy bank.

Naturally Sammy was disappointed she hadn’t saved as much as her brother. This led us to quite the conversation about whether some of the things she purchased were worth the money she spent – like a $10 stuffed animal she played with once and still sits staring out forlornly above her dresser.

Either way, what’s nice is that regardless of whether it’s this method or some other recommended version by a parenting expert, the comparison of my kids’ two spending-and-saving styles generated really good conversation about the value of money, and why it’s important to save and also spend within limits. The conversation even extended to a broader discussion on how to use any excess funds we have this summer – are we buying a pool, or saving up for Disneyworld?

Either way, we’ll keep trying to have these important conversations as they get older, when their needs and wants will grow in demand and in value. I just hope the butterfly kisses never stop … and also don’t break my own budget.

Steve Erwin is a CAIRP director and public affairs professional living in Windsor, ON.

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Rebuilding Credit After an Insolvency – Lessons Learned in Iceland

IMG_0386daniel-2By Daniel Budd, CIRP, LIT

Over the course of a recent vacation, I came to understand just how true it is that economic recovery is completely dependent on the people or companies looking to re-establish themselves.

Recently, my wife and I went to Iceland, a beautiful country that has had to re-invent and rebuild itself after what some economists and historians are calling the worst financial crisis ever to hit an individual country.IMG_0040

While other countries may run larger deficits, or have significantly higher debt, Iceland – a small island nation in the North Atlantic, fell into a very particular set of circumstances.

At this point, I feel it is important to point out that this post contains no empirical research whatsoever, and is based solely on my anecdotal experience from five days of driving around this picturesque and interesting country.

Iceland’s near-bankruptcy was apparently driven by the collapse of its three central banks. The exposure of these three banks into international credit markets by 2008 far exceeded the National GDP of the country itself. Put very simply, the total economic output of Iceland was around 10% of the value of the total foreign debt held by the three main banks.

IMG_0345I am not going to go into the nitty gritty of the Icelandic crisis, as that is not the focus of this article, but rather the result for Icelanders. Needless to say, there was a complex economic plan put into place that involved not only Iceland’s financial class but also the international community.

The result has been that the Iceland was able to regain confidence from international lenders, the creditors who had lost the most as a result of Iceland not being able to honour its obligations.

In June 2011, Iceland was able to raise $1 billion in a bond offering, which would not have been possible had the country not taken steps to regain potential creditors’ trust. Very recently, the capital controls placed on Iceland’s economy have been lifted, essentially removing the last restriction placed on it as a result of the 2008 bankruptcy.

In short, the Icelandic economy recovered to functionality and even grew substantially in one important area – tourism. The days following the financial crisis saw an influx of tourists taking advantage of the devaluation of the Icelandic Krona.

More recently, the Icelandic tourist economy has been driven by Iceland’s unique and beautiful geography, topography, and the like, as well as the emergence of a new and internationally acclaimed foodie culture.IMG_0373

It is still very expensive for food travel and lodging within Iceland, however, with the emergence of new low-cost airlines it has become increasingly common as a tourist destination, which has only helped the country continue its economic rebound.

All that being said, when this traveler asked different locals how the crisis had affected them, most spoke positively, explaining that it had in fact exposed a serious problem and forced the nation to rectify it, leaving the country financially stronger than before.

The most common negative response was that imported goods were still extremely expensive to native Icelanders. One of our hosts explained that it was still cheaper to go to the United States every few years and buy clothes, athletic equipment, alcohol, and other commercial goods either not widely available or too expensive to buy at home.

As a Canadian, I can sympathize.

In the end, my (albeit limited and touristically biased) understanding was that an honest but unfortunate debtor country, under certain restrictions,  was able to effect a financial fresh start.

IMG_0050Daniel Budd, CIRP, LIT received his Trustee licence in 2014 and has been practicing with M. Diamond & Associates Inc. in Montreal ever since. Daniel is currently one of Canada’s youngest Licensed Insolvency Trustees and sits on the New Members’ Committee of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

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Insolvency Law in Nova Scotia – Limitations of Actions

NS law
Pamela BrantonBy Pamela Branton

How long can a potential claimant wait before pursuing their claim in Court? Or, at what point has a claim “expired” due to failure to bring a Court action?

The Nova Scotia Limitation of Actions Act has recently been amended to provide for a single across-the-board limitation period to bring a Court action to recover a debt (or any other type of claim). The amendments also removed the various factors that a claimant could use if they did file their claim after the limitation period had expired.

The basic time period in which to start a legal action is two years from the date of discovery of the claim; there are some nuances during the transition period for introduction of the new rules.  Where the claim was not discovered within 15 years after it occurs, the right to start a court action for the claim ceases after the 15 years. This gives closure to claims where they are historical but undiscovered.

There are some exceptions. For example, if another piece of legislation sets out a limitation period, then that specific limitation period overrides the one in the Limitation of Actions Act. Also, for a claim that is based on a demand obligation, the limitation period does not start to run until the demand has been made.

It is important to note that if a debtor acknowledges the debt, the limitation period runs from the time of the acknowledgement. The acknowledgment basically “restarts the clock” and may, in practice, extend the limitation period in some instances. The acknowledgement may be given to a Licensed Insolvency Trustee in the bankruptcy of the claimant as well as to the claimant itself.

The previous Limitations of Actions Act provided that if the claimant brought the Court action after the expiry of the limitation period, the Court might still hear the claim, if the claimant met certain conditions. These were mainly to promote fairness to the claimant, but they also brought a great deal of uncertainty and in some cases unfairness to the defendant.

Those conditions have been removed from the new legislation (other than in claims for personal injury), so that the limitation period is now more “absolute”; if the claimant does not bring the claim to Court within the limitation period, then they will not be able to pursue the claim in Court.

Pamela Branton is a Senior Solicitor with the Nova Scotia Department of Justice. She is currently Vice-Chair of the Bankruptcy Subsection of the Canadian Bar Association, Nova Scotia, has served as a Director of the Canadian Insolvency Foundation, and as the Co-Chair for the Canadian Bar Association’s Pan-Canadian Insolvency and Restructuring Conference held in Halifax in 2012.

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