Mark: Division 1 Proposal for a Small Business

‘Mark’ Division 1 Case History: A Fact of Life

At 45, Mark (not his real name) was doing very well professionally. As a successful Information Technology (IT) Manager at a major Canadian firm, he was well known and respected in his industry. His innovative and creative approach to problem solving had significantly improved his company’s competitive edge, and his forward thinking was highly valued.

Mark had been with his current employer for two years. Prior to that, he had run his own consulting company for several years. While Mark’s consulting company had flourished in terms of income, his weakness in all things accounting, had led him into severe trouble. He did not file his personal income tax for several years, and he fell behind in his GST payments.

Prior to setting up his consulting company, Mark’s marriage had ended. Based on an informal agreement, Mark’s ex-wife continued to live in the matrimonial home and both their names remained on the title and on the mortgage.

After his divorce, Mark purchased a condo. When he started his consulting business, he took out a large second mortgage on his condo to finance start-up costs. With the closure of his consulting company, Mark decided to turn the condo over to the bank and to default on his mortgages. The net result of this transaction was that Mark now owed the bank $72,000 in unsecured debt to cover the difference between his mortgages and the actual sale price of the condo.

When Mark returned to the workforce and began working as an IT Manager – Revenue Canada put a garnishee of $1,200/month on his salary. While this caused him some embarrassment within the company, Mark did not try to fix the problem – as he did not want to deal with all the ‘accounting stuff’ left behind from his consulting company.

Two years after returning to the workforce (and 18 months after the garnishee was put in place), Mark was at a company golf tournament, where a casual conversation with the company comptroller helped him to realize he needed to address his debt issue quickly. Following the advice of his comptroller, Mark booked a meeting with David Sklar & Associates Inc (DSAI).

~~ ~~

At his initial meeting, Mark met with Richard Sklar, Estate Administrator. Together they reviewed his existing situation. Before they could proceed further, it was necessary for Mark to bring his GST and his income tax filings up to date. While he was not able to make any payment on the GST and income tax, it was essential that the filings be done to determine exactly how much was owing.

Mark had his business GST and income tax fillings completed by an accountant. Using advice from DSAI’s Linda Fransky, he was able to successfully navigate his way through Revenue Canada to bring his fillings up to date and to get details on his penalties.

With all his financial records in place, Mark and Richard were then able to work out a doable budget and take a detailed look at his financial situation:

Income Tax/GST and Penalties Owing $93,000
Condo Mortgage Default Owing $72,000
3 Credit Cards Owing $26,800
Bank Overdraft Owing $5,100
Total Unsecured Owing $196,900

 

Because the $300,000 mortgage on what had been his matrimonial home, did not represent a mortgage on his current prime residence, it was added to his total debt. Note: although his was not the only name on the mortgage – he (and anyone who co-signs a loan) is responsible for the full amount.

This brought his total debt for evaluation to $496,900, which meant that if Mark decided to file a Proposal it would have to be a Division I Proposal, rather than a Consumer Proposal. While the two Proposals are very similar, there are significant differences in their processes.

Mark’s Options

After a detailed review, it was determined that:

    1. If Mark chose to file for a Division I Proposal, it was recommended that he offer to pay $1,000 per month for a period of 60 months for a total of $60,000.
    1. If Mark chose to file for Bankruptcy, he would be looking at a 21 month Bankruptcy period with monthly surplus income payments of $1279 (21 months x 1279 = $26,869).

The Ontario Execution Act, which covers assets protected from Bankruptcy, would have viewed Mark’s equity in his former matrimonial home (a half-share, valued at $22,000), as a recoverable asset. Under the Act, Mark had no other recoverable assets. This meant that through a Bankruptcy, Mark’s creditors would only be recovering $48,869.

Mark discussed his choices in detail with Richard and DSAI Trustee, Gloria Breen. He decided to file a Division I Proposal. DSAI filed his Proposal and presented it to his creditors.

Exercising their right, the Canada Revenue Agency (CRA) asked to have a creditor’s meeting with Mark and DSAI.

At the creditor meeting, the CRA was the only creditor to attend. There were three CRA officials as well as Mark, Richard Sklar and Gloria Breen in attendance. During the meeting, Mark was able to reassure CRA that he was an honest, but unfortunate debtor, who would be taking steps to ensure that the situation with past due income tax and GST never reoccurred. CRA agreed to the Proposal, with the understanding that they would be keeping a very close watch on the process.

Once the Proposal was accepted by his creditors, Mark began his monthly payments to DSAI for disbursal to his creditors, the garnishee was removed and Mark began to work on getting his life back on track.

Several months into his Proposal, Mark remains diligent about making his payments, attending the mandatory credit counselling sessions, and keeping all his financial dealings accurate and current. While Mark will never be fond of ‘accounting stuff’, he has accepted it as a necessary ‘fact of life’.

To protect our client’s privacy, details of this case have been altered.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

Share This!

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on pinterest

Ready to live debt free?

Jerry is a very patient person, he answered all my questions and made this experience so smooth and easy for me. I was not sure what to expect but dealing with him made me feel so much better. He sure knows what he is doing and how to put people at ease for sure (should have done this long ago). I recommend him to anyone I am so glad I had him on my side and now to do my part. Thanks Jerry ur greatPattie
Patty Murphy
21:34 18 May 22
Rhoda Lewis helped me achieve a fresh start two and half years ago! She was very professional with a very warm, caring personality! I emailed her today with a question and she responded quickly. She's great at her chosen profession!!
Debbie Livingston
01:24 11 May 22
Nothing but good things to say about Jackie. She was so nice and so understand and everything was so quick and easy. In a matter of a week, there was the solution that I never thought was possible. Thank you so very much for everything that you have done. ❤️❤️❤️
Cassandra Keenan
21:05 10 May 22
I was in a lot of debt and stress, Jackie Stanley with David Sklar & Associates was very professional, and extremely helpful with getting out of debt. I should of did this sooner, they take the all the weight and stress of a persons shoulders, amazing team at David Sklar & Associates!!
Hubert Z
03:08 10 May 22
Jackie helped me out during a really tough time and she made the entire process very easy and painless. I highly recommend reaching out to her if you find yourself in any financial trouble. You won’t be disappointed!
prettylush 13
02:42 10 May 22
I had a good experience with Jackie. Making appointment to see her was easy and follow up was great. I appreciated the detailed information she gave and the clear explanation of the options I had. While I landed on this company without anyone's recommendation, I will be happy to recommend their services to those who need them.
Kipyego arap Serem
19:00 09 May 22
Jackie has been really helpful with my issues. She is approachable and friendly and I recommend her to anyone trying to access her services.
Ankita Sisodia
18:51 09 May 22
The service that was provided to me from Trina at David Sklar and Associates was nothing but superb! I was referred to them through family, and Trina was nothing but understanding and so so so helpful! Every part of the process was smooth and efficient and she explained everything to me so I would be able to understand the process. Can’t believe the weight that has been lifted off my shoulders. Thank you so so much Trina!
Christina Ivany
15:52 07 May 22
I’m so glad that I spoke to Rhoda. I was nervous having to claim bankruptcy, but Rhoda is very resourceful and has a wonderful way of putting you at ease. I felt like I was speaking to my best friend. Rhoda from the bottom of my heart thank you for your help and kindness it goes along way. Linda Bennett
Linda Bennett
15:29 06 May 22
I was absolutely terrified of admitting I needed help and was in a tough position where my best option was to file for bankruptcy. As someone with severe anxiety it was one of the hardest calls I had to make but once I spoke with Trina at David Sklar she immediately made me feel at ease and like I was in good hands. I mostly dealt with Trina and Eva who were so kind and communicative throughout the whole process and made it as painless as possible.I did briefly speak with a couple of other associates from time to time and they were also equally as lovely. The reviews for this company obviously say a lot about these guys and it rings true. I’m not someone who usually writes lengthy reviews but I am happy to recommend David Sklar and associates for anything. Thank you guys for always treating your clients like human beings and always being available for questions or concerns.
Emma Higgins
19:14 02 May 22
js_loader