Seeing your business struggle financially can leave you feeling fearful for the future. If you are facing debt that feels impossible to repay, you may be considering filing for small business Bankruptcy in Red Deer. Allan Marshall & Associates does not handle corporate Bankruptcies, but we do offer advice.
Before you come to a decision on the best way forward for you and your business, discuss your situation with a Licensed Insolvency Trustee (LIT). LITs are professionals in all areas of debt support, from filing for Bankruptcy to restoring your financial situation through credit counselling. With their support, you can make a decision that is right for your wellbeing and your business.
While corporate Bankruptcy can be one way to eliminate your business’ debt, it isn’t your only option. You may find an alternative that suits your situation better, such as filing a Division I Proposal or filing for personal Bankruptcy. We can help determine which is best.
What is small business Bankruptcy?
Small business Bankruptcy is a type of corporate Bankruptcy for businesses that find their debt impossible to repay. Like all types of corporate Bankruptcy in Alberta, it is a legal process governed by the Bankruptcy and Insolvency Act. It’s a way for small businesses to eliminate their debt and repay their creditors by selling off assets.
Typically, once filed, the business operations will stop, and is often considered a last resort for struggling businesses. But if you’re looking for a way to eliminate your debt, it may be the right option for you and your business. Talking through your options with an LIT can help you to decide if it is the best route forward for your situation.
It’s important to note that if your small business is a sole proprietorship or a partnership, then the individuals who own the company are those who become bankrupt. There is no legal differentiation between business assets and personal assets for small businesses, so a small business Bankruptcy is essentially treated as a personal Bankruptcy.
If your business is incorporated, then it is considered a separate entity, meaning all assets and debts are owned by the business. Often, incorporated businesses offer the owner liability protection so their assets won’t be at risk.
When you file for small business Bankruptcy, you will receive the same protection against creditors as you would with any other type of Bankruptcy.
Filing for small business Bankruptcy
If Bankruptcy is the best option for your business, the first step is to consult with an LIT. LITs are the only federally regulated debt advisors in Red Deer and throughout Canada, licensed by the Office of the Superintendent of Bankruptcy. They can offer advice and support to help you decide on the best way to manage your business debt, and file your Bankruptcy if you choose to do so.
When you meet with a Trustee, they will review the financial situation of your small business and provide you with details of all your options to ensure that you make an informed decision.
Should you decide that Bankruptcy is your best option, your LIT will complete the required paperwork and inform your creditors that your business is filing for Bankruptcy. They will also handle your assets and make sure that they are sold or disposed of to ensure your creditors receive what is due. The specifics of this process will depend on your personal situation.
Is small business Bankruptcy the best option for me?
If you’re unsure whether filing for business Bankruptcy is the right option for you, here are some factors to consider:
- Assess business profitability: You’ll need to ask yourself if your business is consistently losing money and is being subsidized by personal funds or credit. If that is the case, it may be time to walk away. But if your business is profitable and is just facing hard times due to temporary factors like the economy, it may be worth you looking at other options to restructure the debt.
- Assess business assets: If your business has more assets than liabilities, it may be worth saving or selling your business. But if the liabilities are greater than the assets, it may be time to look at closing your business and/or file for Bankruptcy.
- Assess your personal liability: Filing for business Bankruptcy only deals with the company’s liability to pay the debt. If you have personally guaranteed the debts you need to consider your options carefully. If you close down your business or file for Bankruptcy, you will leave creditors with no other option but to target you personally for the debt you have guaranteed.
Division I Proposal – An alternative to a small business Bankruptcy
Otherwise known as a commercial or Corporate Proposal, a Division I Proposal is put forward to your creditors by an LIT to negotiate how you’ll repay your debt. It is an option for both businesses and individuals and there is no limit to how much money you owe.
Unlike a Consumer Proposal which is for individuals looking to negotiate debts less than $250,000, a Division I Proposal can cover debts over $250,000. It can be filed by an individual or a business. If you choose to file a Division I Proposal as a business, the proposal can cover any amount of unsecured debt – it doesn’t need to be over $250,000. And a Division I Proposal has no set time limit, unlike a Consumer Proposal which must be up to five years.
With a Division I Proposal, your business won’t need to give up its assets to settle its debts and your debts will be paid off at a percentage of their original value. But it’s important to keep in mind that if your unsecured creditors vote against your Division I Proposal, your business will automatically go into Bankruptcy.
Ready to say goodbye to your business debt?
If your small business debt feels impossible to manage, it’s never too late to get the help you need. Here at Allan Marshall & Associates Inc, we have decades of experience helping individuals and businesses become solvent once again. If you are a business owner, we will be able to determine if you need to speak to an LIT that handles corporate Bankruptcy or if we can help you with a personal Bankruptcy.
Our Licensed Insolvency Trustees are experts in all areas of debt support. With their help, you can put a plan of action together to manage your debt and improve your financial wellbeing.
Contact us today for a free consultation. We can help™.
