If your business is struggling with debt, you may consider filing for business Bankruptcy in Calgary. Seeing your business struggle financially can feel overwhelming, but by talking through your options with a Licensed Insolvency Trustee (LIT), you can get the support you need.
It’s important to remember that while corporate Bankruptcy can feel like a solution to settling your business’ debts, it isn’t the only option. Whether you’re a small business or large corporation, any kind of corporate debt can affect your wellbeing – so it’s important to talk through your situation with an experienced LIT. With their help, you can go through your options and begin the process towards financial peace of mind.
LITs are experts in various types of debt support, from credit counselling to Bankruptcy. They cover how business Bankruptcy works in Calgary, to help you decide if this is the best route for you.
What is Business Bankruptcy?
Business Bankruptcy, otherwise known as corporate Bankruptcy, is a type of Bankruptcy for a business or corporation that is unable to pay back its debts. A legal process governed by the Bankruptcy and Insolvency Act, corporate Bankruptcy serves as a type of debt solution when the business’ debts are too much to manage. The business’ assets will be sold and distributed to help settle the money owed to creditors.
The only way to file for any type of Bankruptcy in Canada is through a Licensed Insolvency Trustee, formerly known as a Bankruptcy Trustee. They’re trained and licensed by the federal government to provide expert Bankruptcy services and advice. If you choose to file for corporate Bankruptcy, your Trustee can also deal with your creditors on your behalf to take some weight off your shoulders.
But it’s important to remember that while business Bankruptcy may seem like the only way out of debt, there are other options available. You can discuss your business’ debt settlement options with a Licensed Insolvency Trustee who can help you make the right decision for your business.
Types of Business Bankruptcy
There are two different types of Bankruptcy available to suit different types of businesses:
Small Business Bankruptcy
When a business is a sole proprietorship or partnership, its Bankruptcy is treated the same as if an individual is running the business. As the people are essentially the business, it isn’t the business that is declared bankrupt, but the person. So the structure of the business doesn’t legally separate business and personal assets. Any assets used to operate the business are seen as the owner’s personal assets which will be used to settle unpaid debts during the Bankruptcy process.
It’s important to note that the above only applies when a business is not incorporated. If your small business is incorporated, the process will differ to a personal Bankruptcy. You will still need a Licensed Insolvency Trustee with extensive experience to help you file for and navigate the Bankruptcy process. Often, incorporated businesses offer the owner liability protection so their assets are not put at risk.
When you file for small business bankruptcy, you will receive the same protection against creditors as any other Bankruptcy.
Business or Corporate Bankruptcy
A corporate Bankruptcy is a legal proceeding where an incorporated entity (rather than a sole proprietorship or partnership) is struggling to repay their debts and files for Bankruptcy. In this instance, the corporation is treated as a legal ‘person’, according to the Bankruptcy and Insolvency Act.
Choosing to file for Corporate Bankruptcy is a big decision, but it’s important to keep in mind that your liability is limited in your corporation. Since corporations are independent legal entities, as a business owner you are protected from liability including debts faced by the corporation.
If your business or corporation files for Bankruptcy, the business will no longer continue and your employees are likely to lose their jobs. With a lot to consider, it may be useful to discuss your options with a Licensed Insolvency Trustee, as you may be eligible for alternatives to Bankruptcy.
Do I qualify for Corporate Bankruptcy?
To qualify for corporate Bankruptcy, you need to reside or operate a business in Canada, have liabilities of at least $1,000 or more above the total amount of your assets, and:
- Be unable to meet your debt payments when they are due or;
- Have ceased making payment obligations in the ordinary course of business as they are due; or
- The total of all personal property sold at fair market value would not be enough to pay all debts.
It’s important to remember that even if your business is eligible for corporate Bankruptcy, this doesn’t mean Bankruptcy is the right option, or only route you should take. To decide on the best course of action for you and your business, you can discuss all your debt settlement options with an LIT.
Should I file for Corporate Bankruptcy in Calgary?
There are many businesses in Calgary struggling to stay afloat. If your corporation is having trouble paying its debts, you may consider filing for corporate Bankruptcy. Before you come to a decision, receiving professional advice from an LIT can help you to assess your situation and explain the options you have available to settle your debts.
Filing for Bankruptcy is often a last resort, and fortunately, your liability is limited in your corporation since corporations are independent legal entities. This means owners are protected from liability, including debts and financial obligations faced by the corporation.
If your corporation chooses to file for Bankruptcy, there will be consequences to consider such as the business no longer continuing, and employees being likely to lose their jobs (although they may be entitled to recover severance). With these outcomes in mind, seeking the support of a Licensed Insolvency Trustee can help you assess your situation and work out if your business qualifies for any alternatives to Bankruptcy.
Alternatives to filing for Corporate Bankruptcy
Division I Proposal
A Division I, otherwise known as a commercial or Corporate Proposal, is a proposal put forward to your creditors by an LIT, to negotiate how you will repay your debt. The proposal is an option for both individuals and businesses, and there is no limit to how much money you owe.
A Consumer Proposal is an alternative to Bankruptcy for individuals looking to negotiate debts less than $250,000. Whereas, a Division I Proposal can cover debts over $250,000 and can be filed by an individual or a business. If you’re a business filing a Division I Proposal, the proposal can cover any amount of unsecured debt – it doesn’t need to be over $250,000.
And while the length of a Consumer Proposal must be up to five years, a Division I Proposal has no set time limit.
Unlike Bankruptcy, with a Division I Proposal, your business won’t give up any assets to settle its debts and your debts will be paid off at a percentage of their original value. But it’s important to note that if your unsecured creditors vote against your Division I Proposal, then you will automatically go into Bankruptcy.
Ready to take control of your Business Debts?
If your business is struggling with debt, it’s never too late to seek support. At Allan Marshall & Associates Inc, we’ve been helping people manage their debt since 1979. Our Licensed Insolvency Trustees are experts in insolvency, including Bankruptcy, and can offer you the support and advice you need to settle your business debts, reduce your stress, and move towards a brighter future.
