Is your business struggling financially and you’re not sure where to turn? If your business is unable to keep up with debt repayments, you may consider filing for business Bankruptcy in Edmonton.
While filing for Bankruptcy may feel like a way out of corporate debt, it’s important to keep in mind that it isn’t the only way to settle your debts. Talking through your options with a Licensed Insolvency Trustee (LIT) can help to relieve anxiety and put things into perspective. Together, you can decide on the best debt settlement for you and your business.
LITs are specialists in corporate Bankruptcy in Alberta, as well as various types of debt support, from credit counselling to Bankruptcy. Here, we cover how business Bankruptcy works in Edmonton, and whether it’s the right option for you and your business.
What is corporate Bankruptcy?
Corporate Bankruptcy, also known as business Bankruptcy, is a form of debt settlement for a business or corporation that is unable to repay its debts.
If your business is a sole proprietorship or a partnership, the business’ assets are also your personal assets, which means a small business Bankruptcy is treated as a personal Bankruptcy.
If your business is incorporated, the process will differ to personal Bankruptcy and will be considered a separate legal entity, which gives you liability protection.
Whereas, if your business is an incorporated entity, you can choose to file for corporate Bankruptcy. Corporate Bankruptcy treats the corporation as a legal ‘person’, according to the Bankruptcy and Insolvency Act.
Filing for business Bankruptcy is a difficult decision to make, so working with an LIT that makes you feel understood and supported may help.
While filing for Bankruptcy is one way out of debt – it is important to remember that it’s not the only way. There are alternatives to Bankruptcy to consider, which you can discuss with your LIT. If you do choose to file for corporate Bankruptcy, your liability is limited to your corporation, as corporations are independent legal entities. This means as a business owner you are protected from liability, including debts faced by your business.
If you choose to declare Bankruptcy, you will surrender your businesses assets in exchange for the elimination of your debts. Your LIT will help take some weight off your shoulders during the Bankruptcy process, from selling your assets to dealing with your creditors on your behalf.
Do I qualify for business Bankruptcy in Edmonton?
If you’re considering filing for business Bankruptcy in Edmonton, you will need to assess if you’re eligible. Your LIT will discuss all your debt settlement options with you, and whether you’re eligible.
To qualify for corporate Bankruptcy in Edmonton, you need to reside or operate 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.
Remember to keep in mind that even if your business qualifies for Bankruptcy, filing for Bankruptcy is often seen as a last resort. There are alternatives that you can discuss with your LIT, to decide on the best option for you and business.
How to file for business Bankruptcy
Wondering how to file for Bankruptcy as a business or corporation? The only way you can file for Bankruptcy in Canada is through a Licensed Insolvency Trustee. Here are the steps we take to help you file for business Bankruptcy:
1. Debt assessment
You’ll start the process by contacting us for a free consultation. Here, we’ll review your financial situation before discussing all your debt settlement options. If Bankruptcy is an option based on your financial circumstances, a Licensed Insolvency Trustee will explain the process to you.
2. Paperwork
We will prepare the necessary paperwork you will need to sign, and file the signed documents with the Official Receiver to start your Bankruptcy. When filing for Bankruptcy, you will need to sign several forms:
- An ‘Assignment’ form, which states you are handing over all of your property or assets to your Trustee from your creditors.
- A ‘Statement of Affairs’ form which lists your or your businesses assets, liabilities, income and expenses.
3. Bankruptcy process starts
Your Licensed Insolvency Trustee will notify all of your creditors of the Bankruptcy and a stay of proceedings will protect you from any further legal or debt collection activity. This protection begins immediately once your Bankruptcy has been filed with the government.
Should I file for corporate Bankruptcy in Edmonton?
If your corporation is finding it difficult to pay off its debts, you may consider filing for corporate Bankruptcy. Before you make a decision, it’s best to discuss your options with an LIT, who can assess your situation, offer professional advice and explain your options.
While filing for Bankruptcy can feel overwhelming, fortunately your liability is limited in your corporation since corporations are independent legal entities – so owners are protected from liability. This includes debts and financial obligations faced by the corporation or business.
There will be consequences to consider if your corporation files for Bankruptcy, such as employees being likely to lose their jobs (although they may be able to recover severance) and the business will no longer continue. Discussing your situation with an LIT can help you feel prepared for any potential outcomes, and look into potential alternatives to Bankruptcy that your corporation may qualify for.
Alternatives to filing for corporate Bankruptcy
Division I Proposal
Put forward by a Licensed Insolvency Trustee, a Division I, also known as a commercial or Corporate Proposal, is a proposal to your creditors to negotiate how you will repay your debt. This is an option for both individuals and businesses, and there is no limit to how much money you owe.
You may have heard of a Consumer Proposal as an alternative to Bankruptcy, which is 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 both individuals or businesses. If your business is filing a Division I Proposal, the proposal can cover any amount of unsecured debt – it doesn’t need to be over $250,000. Unlike a Consumer Proposal, where the length of it must be up to five years, a Division I Proposal has no set time limit.
If you choose to file a Division I Proposal, your business won’t give up any assets to settle its debts, and the debts will be paid off at a percentage of their original value. But unfortunately, if your unsecured creditors decline your Division I Proposal, your corporation or business will automatically go into Bankruptcy.
Ready to say goodbye to your debts?
If your business is struggling to clear its debts, there is help available to get things back on track. Our Licensed Insolvency Trustees are experts in settling debt and can offer you the support you need to manage your finances and become debt free.
