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Erin Ellis
Sun

Paying down debt is an option for many consumers, but sometimes bankruptcy is the only real choice, says bankruptcy trustee Lana Gilbertson.

It’s often a life-changing event that triggers a financial crisis: Job loss, illness, a business deal gone wrong, divorce, or the birth of a child. Then the debt that someone was previously able to manage spins out of control. The car payment, house payment, and maybe the new furniture are all too much.

“I see people who have gotten in over their heads gradually. There are life changes, someone loses a job. People don’t come into this lightly. I see the feeling of failure,” says Gilbertson, who works with Meyers Norris Penny Ltd. in downtown Vancouver.

“The majority of the people I see are honest hard-working people. … They are able to recover from it.”

But there are consequences. A bankruptcy is permanently recorded with the federal Office of the Superintendent of Bankruptcy where records can be searched for a fee. It will also appear on the debtor’s credit record for six years after the bankruptcy is discharged.

It means losing assets to pay creditors, above a basic exemption. In B.C., a person who files for bankruptcy can keep their clothing, household goods, tools of their trade, a vehicle worth up to $5,000 and $12,000 in home equity in Metro Vancouver. RRSPs became exempt in 2008.

Declaring bankruptcy does not wipe out alimony and child support payments, student loans less than seven years old, court fines or debt that resulted from a fraud. It will, however, put a financial burden on anyone who has co-signed a loan to the debtor. Liability for repayment reverts to the cosigner during bankruptcy, usually a spouse or parents.

“They don’t feel like they got a get out of jail free card,” says Gilbertson. “I always say that bankruptcy is a last resort.”

That’s why Office of the Superintendent of Bankruptcy — which oversees the process in Canada–requires applicants to sit down with bankruptcy trustees to weigh their options. There are a series of steps (see box) that can be taken before filing for bankruptcy.

For people who have a steady income and an ability to make payments, a consumer proposal may make more sense, says Gilbertson. Changes to the federal regulations on consumer proposals that came into effect last fall increase the debt limit from $75,000 to $250,000, excluding mortgages.

Consumer proposals are designed to be palatable to creditors who get more money than they would if the debtor declared bankruptcy. The advantage for the debtor is to be able to keep assets– such as a home–provided they live up to the repayment deal.

Bankruptcies still outnumber the alternative, with the last available figures for B.C. showing 835 bankruptcies in October, compared to 254 consumer proposals.

And everyone pays their bankruptcy trustee for the service, either a percentage of assets sold or monthly fees that add up to about $1,800 during a nine-month period — the usual amount of time it takes to finish the process in a first-time bankruptcy.

—

The Office of the Superintendent of Bankruptcy offers plenty of advice to Canadians with money problems.

SEEING THE FACTS

You know you have a debt problem when you:

– Frequently pay bills after their due date.

– Regularly bounce cheques.

– Use an advance from one credit card to pay the minimum amount on another card.

– Receive a call from a collection agency.

– Regularly ask friends or family for loans.

– Have your utilities cut off.

– Have cut back on regular budget expenses such as clothing, recreation and sometimes even food.

– Are considering a second job in order to balance your budget.

TAKE ACTION

– Make a budget.

– Consolidate your debts.

– Contact creditors to make a proposal for repayment. You can also ask a trained credit counsellor to do this on your behalf.

– If you’re having trouble making mortgage payments, talk to you bank.

– Sell some assets.

TO AVOID BANKRUPTCY

– Make a consumer proposal in which you pay off a portion of the debt or negotiate more time to pay off the whole debt.

Source: Office of the Superintendent of Bankruptcy Canada

www.ic.gc.ca/eic/site/bsf-osb. nsf/eng/home

© Copyright (c) The Vancouver Sun

Erin Ellis
Sun

Paying down debt is an option for many consumers, but sometimes bankruptcy is the only real choice, says bankruptcy trustee Lana Gilbertson.

It’s often a life-changing event that triggers a financial crisis: Job loss, illness, a business deal gone wrong, divorce, or the birth of a child. Then the debt that someone was previously able to manage spins out of control. The car payment, house payment, and maybe the new furniture are all too much.

“I see people who have gotten in over their heads gradually. There are life changes, someone loses a job. People don’t come into this lightly. I see the feeling of failure,” says Gilbertson, who works with Meyers Norris Penny Ltd. in downtown Vancouver.

“The majority of the people I see are honest hard-working people. … They are able to recover from it.”

But there are consequences. A bankruptcy is permanently recorded with the federal Office of the Superintendent of Bankruptcy where records can be searched for a fee. It will also appear on the debtor’s credit record for six years after the bankruptcy is discharged.

It means losing assets to pay creditors, above a basic exemption. In B.C., a person who files for bankruptcy can keep their clothing, household goods, tools of their trade, a vehicle worth up to $5,000 and $12,000 in home equity in Metro Vancouver. RRSPs became exempt in 2008.

Declaring bankruptcy does not wipe out alimony and child support payments, student loans less than seven years old, court fines or debt that resulted from a fraud. It will, however, put a financial burden on anyone who has co-signed a loan to the debtor. Liability for repayment reverts to the cosigner during bankruptcy, usually a spouse or parents.

“They don’t feel like they got a get out of jail free card,” says Gilbertson. “I always say that bankruptcy is a last resort.”

That’s why Office of the Superintendent of Bankruptcy — which oversees the process in Canada–requires applicants to sit down with bankruptcy trustees to weigh their options. There are a series of steps (see box) that can be taken before filing for bankruptcy.

For people who have a steady income and an ability to make payments, a consumer proposal may make more sense, says Gilbertson. Changes to the federal regulations on consumer proposals that came into effect last fall increase the debt limit from $75,000 to $250,000, excluding mortgages.

Consumer proposals are designed to be palatable to creditors who get more money than they would if the debtor declared bankruptcy. The advantage for the debtor is to be able to keep assets– such as a home–provided they live up to the repayment deal.

Bankruptcies still outnumber the alternative, with the last available figures for B.C. showing 835 bankruptcies in October, compared to 254 consumer proposals.

And everyone pays their bankruptcy trustee for the service, either a percentage of assets sold or monthly fees that add up to about $1,800 during a nine-month period — the usual amount of time it takes to finish the process in a first-time bankruptcy.

—

The Office of the Superintendent of Bankruptcy offers plenty of advice to Canadians with money problems.

SEEING THE FACTS

You know you have a debt problem when you:

– Frequently pay bills after their due date.

– Regularly bounce cheques.

– Use an advance from one credit card to pay the minimum amount on another card.

– Receive a call from a collection agency.

– Regularly ask friends or family for loans.

– Have your utilities cut off.

– Have cut back on regular budget expenses such as clothing, recreation and sometimes even food.

– Are considering a second job in order to balance your budget.

TAKE ACTION

– Make a budget.

– Consolidate your debts.

– Contact creditors to make a proposal for repayment. You can also ask a trained credit counsellor to do this on your behalf.

– If you’re having trouble making mortgage payments, talk to you bank.

– Sell some assets.

TO AVOID BANKRUPTCY

– Make a consumer proposal in which you pay off a portion of the debt or negotiate more time to pay off the whole debt.

Source: Office of the Superintendent of Bankruptcy Canada

www.ic.gc.ca/eic/site/bsf-osb. nsf/eng/home

© Copyright (c) The Vancouver Sun

Property Act, privacy regulations must be observed

Tony Gioventu
Province

Dear Condo Smarts: Our strata council passed a rule that it would only receive correspondence through our management company. The rule states that any applications for rentals, hardship applications, requests for alterations, hearings of council, and any related strata business must be addressed only to the strata management company.

As owners, we have been fine with this, except council members themselves don’t abide by the rule, and routinely send out e-mails to owners in the complex regarding bylaw violations and official notices.

We heard that the changes to the Strata Act will permit e-mail as notice, but who does that have to be e-mailed to in order for the e-mail to be valid? What happens if the strata doesn’t provide an address, but the council members e-mail an owner? Can they officially reply back to the council member?

–Karen T, Vernon

Dear Karen: It is easy to understand why a strata corporation wants to maintain only one official address for receipt of notices and sending of notices. If everyone sends their correspondence to council, as well as the strata agent or president, you could end up with eight or more potential mailing addresses and e-mail addresses. It would make it extremely difficult to manage notices of meetings and requests of owners and tenants and agents.

However, the act does permit an owner to leave a notice or request for forms or documents required with a council member by mailing it to the recent address on file in Land Titles for the strata, by putting it through a mail slot or in the mail box used by the strata, by faxing or e-mailing it to a number or e-mail address provided by the strata corporation, or fax number or e-mail address provided by a council member for the purpose of receiving the notice.

An example of the complications of notice often arise when an owner gives a notice of a hardship application to a council member. Under the Strata Property Act, this is deemed to be proper notice, and if the council member ignores the notice and the council does not respond in writing after two weeks of the request, the exemption is automatically allowed.

E-mail is obviously going to become a common method of notice. The strata corporation and council members will only have to officially receive e-mails as notice if their e-mail address functions for the purpose of receiving notice. Likewise, the strata corporation can only send notice to an owner or tenant by e-mail if the owner or tenant has provided an e-mail address for that purpose.

If a strata is considering using e-mail for notices sent and received, it would be a prudent management decision for the councils and managers to create and maintain only one strata-identified e-mail address.

The strata corporation must ensure that the e-mail is checked daily as requests such as a payment or information certificate, or a hardship application, are all time-sensitive.

Council members, owners, tenants and strata agents all need to exercise caution when using e-mail.

Not only do the provisions of the Strata Property Act apply, but also the provisions of the Personal Information Protection Act. Always exercise caution in what you write in an e-mail. You cannot guarantee the security of sensitive or confidential information once you hit the send icon.

The updated changes to the Strata Property Act & Regulations are available on the Internet at bclaws.caor choa.bc.ca.

Tony Gioventu is executive director of the Condominium Home Owners’  Association. Send questions to him at [email protected].

© Copyright (c) The Province

Wendy Mclellan
Province

The B.C. government’s abrupt decision to cancel interest-free loans for owners of leaky condos has left thousands of people without the financing to fix their homes.

Housing Minister Rich Coleman announced the end of the reconstruction-loan program on Friday, just before the B.C. Day long weekend. The program was cancelled the same day.

“This is going to be a huge crisis for people who haven’t had their buildings repaired yet,” said Tony Gioventu, executive director of the Condominium Homeowners Association.

“We’re scrambling right now to find some kind of alternative funding for strata corporations, any option so people aren’t risking their homes.”

The government’s reconstruction program was set up in 1998 as part of a Homeowner Protection Office. The program provided interest-free loans to owners of poorly constructed strata units so they could have their homes repaired.

It was a loan of last resort — to qualify, condo owners had to have been turned down by a financial institution.

Owners repaid the loan based on their financial capability — seniors could defer principal payments until the property was sold.

The government paid for the program through a $750 fee charged on every new residential unit, and even though loans will no longer be granted, the fee will continue to be charged “for some time” to pay administration costs and loan interest on outstanding balances.

In the press release announcing the end of the loan program, Coleman said the slowdown in residential construction has reduced the amount collected for the reconstruction program. He said the province has approved more than $670 million in loans through the program and has helped more than 16,000 people repair their leaking homes.

But the province has thousands more strata units still to be fixed. The government program covers condos built between 1982 and 1999 and according to a 2007 report prepared for the Home Protection Office, about 42,000 strata apartment units with “major problems” remained unrepaired as of Sept. 30, 2007 — and that doesn’t include leaky townhouses and row houses.

About 160,000 strata units were built during this period and the report estimates about 20 per cent had been repaired.

The report also says the demand for the loans would grow as the cost of repairs continues to increase as more concrete buildings show signs of leaking.

Gioventu said homeowners will face foreclosure if they can’t pay the special levies required to repair leaking buildings.

“There was no warning about an end date — that’s what’s really difficult,” Gioventu said yesterday.

John Grasty, co-founder of the Consumer Advocacy and Support for Homeowners Society, said the government knows the leaky-condo problem isn’t over and cancelling the loan program will devastate people.

“They had the report two years ago and they didn’t put plans in place to make sure the program was sustainable — somebody dropped the ball,” Grasty said.

“The cost of repairs is three times what it was 10 years ago. I have no doubt there will be thousands of bankruptcies and foreclosures.”

Facing an $81,000 bill to repair her apartment in Sidney, Gwen Bell couldn’t contain her tears as she explained the disaster looming for her and the other homeowners in the building.

“We’ve all had many, many sleepless nights,” said Bell, 66. “If I can’t get the loan, I don’t know what I’ll do. You can’t sell it like this.”

Bell said the 14-unit apartment building was assessed more than a year ago, but the engineer’s report and cost estimate of about $1.3 million arrived just a couple of weeks ago. The strata council was waiting for some of the owners to return from holidays to pass the special assessment needed to pay for repairs. The paperwork that would allow owners to apply for the no-interest loans was to be mailed in the next few days.

Bell said only two unit owners still work and a couple of owners are in their 90s. Owners will each have to pay $80,000 to $100,000 to rebuild the outside walls of the wood-frame building.

Bell is hoping a protest rally outside the legislature Aug. 25 will bring attention to the plight of leaky-condo owners and convince the government to reinstate the loan program.

“This is so scary,” she said. “I paid off my apartment when I retired and I never dreamed this would happen. We’re like a family here.”

Coleman was unavailable yesterday, according to a ministry spokesman.

© Copyright (c) The Province

Other

Tenancy in common –  

Disadvantage, also applicable to joint tenancy, is that one tenant in common can force a sale of the property even when the other co-owners do not want to sell.

Such a legal action is called a partition lawsuit in which the court orders the property sold and the proceeds divided among the tenants in common (or joint tenants). 

As a tenant holding a common interest in real property, the law affords you certain rights, obligations and remedies. Unless the parties otherwise agree to waive the right, each tenant has the right to partition the party.

Partition is similar to seeking a dissolution of a business partnership or marriage. 

Upon the filing of a petition by a tenant, the Court determines whether the right to partition exists, and if so whether the partition decree should order the property divided among the co-owners, usually impractical or unlawful, or, in the alternative, should the decree order that the property be sold and the proceeds divided among the co-owners.

As part of the partition, you may also want to address whether there are any financial obligations of one tenant owing to the other.

In most instances, with the assistance of counsel, the tenants usually come to an understanding to jointly market and sell the property. Because of the cost and delay involved in filing a partition lawsuit, cooperation between the tenants is the first choice.

Generally, a voluntary sale yields a higher selling price than a court ordered sale. An attorney will also want to review the amount invested by you to determine if you are entitled to recover any additional amounts contributed in excess of your percentage ownership in the property.

Civil investigations can turn into criminal

Vern Krishna
Sun

Some individuals who filed their tax returns by the April 30th deadline await the results of their assessments by Canada Revenue Agency with some trepidation.

Although the income tax system relies primarily upon self-assessment by taxpayers and “voluntary” reporting of tax liabilities, the CRA is always looking over its shoulder to ensure compliance.

The taxpayer initially determines his or her liability and submits the tax return. The CRA checks the mathematical accuracy of the return, reviews supporting documents, performs perfunctory cross checks, and issues a “quick assessment” within approximately eight weeks of filing.

Mercifully for most taxpayers — particularly employees who have income and payroll taxes withheld at source — that is the end of the tax ritual for another year. But it is only the beginning of the process for the tax collector.

The CRA has substantial audit and investigative powers. These powers are of two types: civil audits and criminal investigations.

However, the line between the two is not always clear and the taxman likes it that way. The blurred line allows the CRA to cross over from the civil to the criminal without alerting the taxpayer.

A civil audit is an examination to determine the accuracy of the taxpayer’s self-assessed income.

Such an audit under the CRA’s regulatory powers is a routine process for verifying the taxpayer’s financial information and examining relevant supporting documents.

The purpose of the audit is to ensure regulatory compliance and mathematical accuracy. If the CRA disagrees with the taxpayer’s self-assessed income, it will reassess him and charge interest on any deficiency in taxes paid. The CRA also has the power to impose civil penalties in circumstances where it can show egregious conduct by the taxpayer in preparing his or her return. Civil penalties can add up to an additional 50% (plus interest) of the tax deficiency to the final bill. The courts grant the tax authorities considerable latitude under the civil audit provisions and taxpayers have minimal constitutional rights.

In contrast, a tax investigation is essentially a criminal examination.

The courts vigilantly protect Charter rights in criminal matters.

In an investigation the state is pitted against the individual in an attempt to establish culpability. The adversarial relationship escalates because the liberty of the subject is at stake.

The CRA must look to s. 231.3 (the part of the tax code that deals with obtaining a warrant for search and seizure), which deals with serious offences under the act.

For example, for the purpose of investigating penal liability, s. 231.3 sets out an application process for an ex parte (without notice) search warrant similar to that found in s. 487 of the Criminal Code. The courts are always on high alert in criminal law.

The difficulty is an examination that starts out as a routine civil audit can turn into a criminal investigation. If this happens, the nature of the relationship between the CRA and the taxpayer changes from regulatory supervision to potential criminal prosecution and becomes subject to restrictions under the Canadian Charter of Rights and Freedoms. Nevertheless, the CRA may use any information that it procures during the proper exercise of its audit function in a subsequent penal investigation.

The use of such information for criminal purposes does not offend either s. 7 (the principles against self-incrimination) or section 8 (reasonable expectation of privacy) of the Charter.

Individuals have few privacy interests under section 8 of the Charter in materials and records that they are obliged to keep and produce for the purposes of the Income Tax Act. Once an auditor has inspected or compelled the production of a document or information, the taxpayer cannot be said to have a reasonable expectation that the auditor will guard its confidentiality.

Given the taxpayer’s diminished expectation of privacy, the government’s interest to intrude on the individual’s privacy in order to advance its goals of law enforcement outweighs the individual’s privacy interest in his materials and records.

The CRA may also conduct an audit and an investigation concurrently.

However, once the CRA begins its investigation, it can use further information that it obtains under its concurrent audit powers only for the purposes of the audit and not for the purposes of the investigation.

It is not easy in practice, however, to distinguish the divergence in powers and obligations related to civil audits and investigations.

An inquiry becomes an investigation when its predominant purpose is to determine penal liability.

There is no “bright-line” test for determining the predominant purpose of an inquiry or when it changes.

Apart from a clear decision to pursue a criminal investigation, no single factor governs in every circumstance. Hence, a court has considerable latitude in its decision to admit evidence resulting from an investigation. In arriving at its decision, however, the court will consider the totality of the circumstances to determine whether the inquiry sufficiently engages the adversarial relationship between the State and the taxpayer to warrant Charter protection.

– Prof. Vern Krishna, CM, QC, FCGA, is tax counsel and a mediator and arbitrator at Borden Ladner Gervais and is executive director of the CGA Tax Research Centre at the University of Ottawa.

© Copyright (c) The Vancouver Sun

 

Tax credits and low interest offer the best breaks

Wendy Mclellan
Province

The recession may have made it a little easier to hire a handyman, but don’t expect your home-improvement project to cost much less.

“Renovations are really popular in this region — people want to stay where they are,” said Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association.

“Some people may expect that the prices should be lower because of the bad economy, but the cost of products and services hasn’t really diminished significantly.”

Simpson said low interest rates and the federal government’s new home-renovation tax credit are providing extra incentives for people who are considering renos, and that’s keeping contractors busy.

“Contractors are still very busy and many of them are still booking jobs into next year,” he said.

“Renovators are not slowing down — we’re a year into this economic downturn and we still haven’t seen much change.”

One thing that has eased in the past year is the shortage of skilled tradespeople.

With so many job losses in the construction industry and the slowing of new-home building, renovators are able to find tradespeople more readily, which means jobs are getting finished faster, he said.

But some of those out-of-work construction workers may be setting up their own home-renovation business without the right kind of experience to get the job done, Simpson said.

“The caution here for homeowners is, if it sounds too good to be true, it probably is. You may get a lowball quote, but you get what you pay for.”

Before getting excited about the prospect of a quick turnaround on their project, homeowners should check references and do some research into what your home reno requires, he said.

Graeme Huguet, owner of My House Design/Build Team Ltd., said there are some good deals for home-improvement projects.

For example, kitchen-cabinet manufacturers who have seen their orders slow with the cancellation of condo projects may add extra features and deliver the products earlier.

Similar deals are also out there for products such as plumbing fixtures and hardwood flooring.

As well, various incentives for energy-efficient upgrades are available for people who want a greener home, he said.

But the biggest saving for homeowners is time, Huguet said. With more tradespeople available, contractors can schedule the work more efficiently.

“When you can get the renovation done faster, it’s less costly. You have less time out of your kitchen, or out of your house.”

Surrey resident Lorne Armstrong thought renovators might be slower this year, but he quickly found they’re as busy as they have been for years.

“We thought it might be a good time because of the economy, but that wasn’t the case,” said Armstrong, whose home is getting a facelift with Huguet’s company.

“We didn’t make the decision to renovate expecting a lower price. We’ll get the tax credit, which is great, but we had the money to do the work and we were prepared to wait for a break in the contractor’s schedule.”

John Friswell, owner of North Vancouver‘s CCI Renovations, said some prices have come down for home-renovation work, but homeowners won’t notice much difference.

With more skilled tradespeople available, he said, the cost of some work, such as drywalling and painting, is down 10 to 15 per cent. But on a kitchen or bathroom renovation, the price difference would hardly be noticeable.

“There has been an expectation of lower prices by homeowners, but it hasn’t happened,” Friswell said. “The reno business has been really good through this whole mess.”

At BC Brick Supplies, Rick Miller said he is selling products for more small landscaping projects.

“Last year, it was hard to get people out to do a small paving-stone project, but it’s more competitive this year,” said Miller, who owns the landscape supply company with his two brothers.

Miller suspects the federal tax credit is encouraging people to continue with home-improvement projects.

“It’s a little easier to find people to do the work, but it’s not like they’re trying to buy a job.”

Kent Houston, owner of Houston Landscapes, said more companies are bidding on the larger commercial and condominium projects than in past years, which is making the business more competitive. Large projects are also reducing their landscaping budgets.

“A year ago, it would have been hard to find three companies to bid on a job and now there’s no problem finding 10,” Houston said.

“We haven’t see a real drop in price yet, but we may see it happen.”

© Copyright (c) The Province