Filing Bankruptcy For Small Business Debt
Do you own a small business in Canada?
If so, you may be experiencing some troubling times.
Perhaps you took out some loans to finance your business, but you’re unable to pay them back.
You’ve sat down with an accountant and figured out that you’re heavily in debt.
You owe too much money, and it’s impossible to repay all your debts.
What options do you have?
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If you’ve tried getting out of debt, but you can’t, you may be forced to file for small business bankruptcy in Canada.
This ensures that you clear your debts, giving you a chance to restructure your company and start afresh.
Does this interest you?
If so, contact us and we can help you with all your bankruptcy needs.
Below, you’ll find some important information on small business bankruptcy in Canada and how it works.
What is the difference between personal and small business bankruptcy?
In truth, there is almost no difference.
This is because the debts in your business are considered your personal debts.
It’s highly likely you have already tried to use your personal funds to recover from your troubling situation, but with no success.
Filing for personal bankruptcy can help rid you of both your personal and small business debts in this situation.
However, if your company is set up as an incorporated business, things are slightly different.
In this sense, your personal funds and business funds are two separate legal entities.
Therefore, you will need to file for small business bankruptcy to take care of your business debts.
The benefit of this is that your personal finances and personal credit score don’t get affected.
What happens when you file for small business bankruptcy in Canada?
If you file for bankruptcy, what happens next?
This varies depending on if you needed to file for personal or small business bankruptcy.
If you chose the first option, then both your consumer and corporate debts are dealt with.
It will be a process that looks at how much of your debts you can conceivably pay, using both your personal and business assets.
Creditors will get as much as you can give them, and you will officially be declared bankrupt.
As this is personal bankruptcy, you have to follow the relevant stages before getting discharged.
When this happens, both types of debt will be discharged.
With a small business bankruptcy, a similar process happens.
The difference is that your personal assets are left out of it.
Remember, they are not legally in the same category as your business assets.
Therefore, when you figure out how much money you can pay your creditors, it all comes from your business and all the assets you own as part of the company.
Since your personal finances aren’t included, you won’t have to sell your personal assets to fund your debts.
When you’re discharged from bankruptcy, all of your business debts are gone.
One thing to note is that you will need to file for both personal and corporate bankruptcy if your business is a corporation, and you’re also in debt as a consumer.
Can you still run your business after filing for small business bankruptcy?
Technically speaking, you can still keep your business afloat.
The reality is that you won’t have enough money to continue as normal.
There will likely be a down period as you go through bankruptcy and wait to be discharged.
During this time, you are free to carry on working on things in your business and restructuring it.
When you eventually get discharged, you can start looking for finance options and restarting your company.
Of course, you can always close your doors for good, if you feel like there’s no coming back for your business.
How do you file for small business bankruptcy in Canada?
If you believe this is your only option, then you need to work with a Licensed Insolvency Trustee.
In Canada, these people are the only ones who can legally help you file for bankruptcy.
As it happens, we are Licensed Insolvency Trustees offering services throughout Canada.
If you need help, don’t hesitate to give us a call.
Your LIT will survey your situation and see if bankruptcy is the only option for your business.
If so, they will kickstart proceedings for you.
This typically involves the following:
- Holding meetings with directors to announce your plans;
- Drawing up and dealing with the official paperwork;
- Setting up meetings with creditors to explain the situation;
- Liquidating assets to pass on to the creditors.
This is a very condensed overview of how the bankruptcy process works for small businesses in Canada.
Your LIT will handle all of the heavy lifting, you just have to follow their instructions.
It will also cost you a fee for this service, which you may have to pay as a deposit before proceedings are carried out.
Should you file for small business bankruptcy in Canada?
Does this make sense for your small business?
Obviously, if it’s a partnership or sole proprietorship, you will file for personal bankruptcy.
If you own a corporation, then this might be the only solution for you.
Many companies turn to bankruptcy when they have no options available.
It’s a chance to clear your debts, get creditors off your back, and look ahead to the future.
Make no mistake about it, this is not a desirable situation to be in!
Still, if all else has failed, bankruptcy could be your only solution.
Call today for help with small business bankruptcy in Canada
As Licensed Insolvency Trustees, we are more than happy to take your case.
We will provide all the support and guidance required to file for small business bankruptcy.
Alongside this, we offer debt-relief services for individuals and businesses.
With our help you might be able to avoid bankruptcy altogether.
Either way, call us or fill in one of our evaluation forms to book your consultation.