Business Failure Scott's Story

Business Failure: Scott's Story

business failure and debt

Scott has been a self-employed flooring installer for over 20 years but was now on the verge of business failure. Last year he was subject to an audit by the Canada Revenue Agency (CRA) who disallowed numerous business expenses which resulted in additional Income Tax and HST amounts being owed.

Over the last year, Scott had two commercial clients that refused to pay him a total of $40,000 for completed work. Scott made several attempts to collect and has proceeded with legal action. One client subsequently went out of business while the other continues to refuse payment. Unfortunately, Scott also recently learned that the cost of legal action against the client who refuses to pay will be more than what he is owed. Scott is running low on funds and credit and is unable to afford his lawyer’s retainer to continue with the action.

Unfortunately for Scott, things keep getting worse. As a result of not being paid for the two jobs,  he has fallen behind on his Income Tax and HST payments to the CRA. Therefore, the CRA has now proceeded with legal action against him and subsequently seized his bank account.  This has caused his business to cease operations as he is unable to pay employees or purchase materials.

Scott, feeling stuck and not seeing any options, reached out to a Licensed Insolvency Trustee at Allan Marshall & Associates for a free consultation to review his financial issues and consider options available for his situation. Scott’s current debts are summed up as follows:

                                Income Tax                                         $20,000

                                HST                                                         $5,000

                                MasterCard                                         $11,500

                                Visa                                                        $1,200

                                Total                                                    $37,700

During the free consultation with the LIT, Scott was educated on how bankruptcy would work in his situation. Additionally, Scott was also informed of a Consumer Proposal and was able to understand both the Pros and Cons in comparison to a bankruptcy to determine which best suited his situation. After careful consideration Scott determined that a Consumer Proposal was better for his situation to avoid business failure, and there was no forfeiture of assets or other monthly administrative paperwork involved.

After filing the Consumer Proposal, the LIT immediately contacted the CRA to lift the seizure of Scott’s bank account which would allow him to resume business while the creditors considered his Consumer Proposal.

With much relief, Scott’s creditors accepted his Consumer Proposal which requires a monthly payment of $300 for a total of 60 months, and to Scott’s surprise, the $300 monthly payment was interest free and included all the LIT’s fees and expenses! His total debt of $37,700 has now been reduced to $18,000 (60 months at $300 / month), meaning that he would be debt free in 5 years!

If you are in a similar situation, facing business failure, or find yourself having to deal with CRA legal actions.  You are not alone. A Licensed Insolvency Trustee like Allan Marshall and Associates may be able to help. Your free, no obligation consultation can be booked online or call 1-888-371-8900 to speak to someone today.