If I Declare Bankruptcy Can I Be A Director of My Church?

Is It Possible to Be a Director of My Church If I’ve Gone Bankrupt?

Bankruptcy is a legal process that can be complicated and stressful. One of the concerns that often arises is how it might affect your status as a director in a non-profit organization like a church. This article aims to provide a detailed understanding of this issue, particularly under the jurisdiction of the Ontario Business Corporations Act.

Introduction

When it comes to bankruptcy, a common question is whether one can retain their position as a director of their church. This question is particularly relevant for those who have declared bankruptcy and are also serving as a director in a not-for-profit organization like a church.

The Insolvency Law in Ontario

Under the Ontario Business Corporations Act, the law is crystal clear – You are not permitted to hold the office of a director in any corporation, profit or non-profit, during the period you are undergoing the bankruptcy process.

Impact of Bankruptcy on Directorship

From the moment you sign the initial bankruptcy documents to the day you are officially discharged from your bankruptcy, your role as a director in any corporation is prohibited. This rule is applicable even if your directorship is in a non-profit corporation such as a church.

The Role of Creditors

The moment you file an Assignment in Bankruptcy, be prepared that your creditors might conduct a computer search in their bank system. If you’re a director of your church, your creditor might send a letter to the church asking for clarification of your status.

In extreme scenarios, if your church has a bank loan, the bank might decrease the total loan available to the church or demand that the loan be paid off. This letter usually goes to the person in the church who normally handles banking matters.

Bankruptcy vs Consumer Proposal

It’s important to distinguish between bankruptcy and a consumer proposal. The prohibition on being a director only applies to bankruptcy. If you are filing a consumer proposal, you can still retain your directorship.

The Church and the Bankruptcy Law

If a person who has declared bankruptcy is a director at their church, it’s essential for the church to be made aware of the situation. The church might receive a letter from the creditor asking for clarification on the person’s status. In some cases, this could lead to financial complications for the church.

Resignation of Directorship

If you’re a director of a not-for-profit corporation like a church, it’s advisable to resign your position as soon as you sign the initial bankruptcy papers. Failing to do so can lead to complications later on.

Post-Bankruptcy Directorship

Once you are discharged from your bankruptcy, you are allowed to become a director again. This applies to all corporations, whether they are for profit or not.

Preventive Measures

To avoid any potential embarrassment or complications down the line, it’s crucial to discuss your situation with your trustee before filing the bankruptcy papers. They can guide you on the best course of action and help you navigate through the process.

Conclusion

Bankruptcy can be a challenging process, but understanding the implications can help you make informed decisions. If you are considering bankruptcy and are a director of your church, consult with professionals like Bankruptcy Canada. We can provide advice tailored to your situation and help you understand your options.

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