What Will Happen to My Business if I File a Consumer Proposal?

Impact of a Consumer Proposal on My Business Operations

If you’re an entrepreneur grappling with financial strain, you might be pondering, “What will happen to my business if I file a consumer proposal?” This is a legitimate concern. Let’s delve into the impact of a consumer proposal on your business operation.

Understanding Consumer Proposals

An understanding of what a consumer proposal entails is paramount. It’s a lawful procedure intended for individuals who are unable to settle their debts fully. A consumer proposal offers an alternative to bankruptcy by allowing a debtor to pay back a portion of their debts over a specific period.

Eligibility for a Consumer Proposal

Before delving into the impact on your business, let’s establish who qualifies for a consumer proposal. This financial remedy is reserved for individuals with debt exceeding $1,000 but not more than $250,000, excluding mortgage debts tied to a primary residence.

Effect on Sole Proprietorships and Partnerships

As a sole proprietor or partner, your personal and business finances intertwine. In this case, a consumer proposal will consider your business assets, debts, and cash flow. The goal is to devise a suitable proposal ensuring a fair deal for all creditors involved.

Effect on Incorporated Businesses

If your business is incorporated, a consumer proposal won’t directly impact your business. You retain ownership of the company shares and can continue running the business, provided it remains profitable. However, if the corporation is financially troubled, options may include a Division I proposal.

Impact on Business Assets

A significant advantage of a consumer proposal is the protection of your assets. Creditors are barred from seizing your assets when you file a consumer proposal. This protection stands in stark contrast to bankruptcy, which may require surrendering assets to repay creditors.

Considering the Future of Your Business

While there are no legal restrictions preventing self-employment after filing a consumer proposal, it’s crucial to evaluate the viability of your business. Can the business thrive without the burden of past debts?

Dealing with Inconsistent Cash Flow

For many entrepreneurs, cash flow inconsistency is a common challenge. To tackle this, a consumer proposal can help streamline your debts into a single monthly payment, simplifying your financial management.

The Role of a Licensed Insolvency Trustee (LIT)

A Licensed Insolvency Trustee (LIT) plays a critical role in navigating the consumer proposal process. They review your contracts and loan agreements, assess your financial exposure, and advise on the best course of action.

Debt to the Canada Revenue Agency

Consumer proposals can also address debt owed to the Canada Revenue Agency (CRA). However, winning the CRA’s approval for a consumer proposal can be challenging, especially if they are the largest creditor.

The Way Forward

If you’re grappling with the question, “What will happen to my business if I file a consumer proposal?”, it’s advisable to consult with a Licensed Insolvency Trustee (LIT). They can provide professional advice tailored to your unique situation.

Remember, seeking help early is beneficial. So, if you’re overwhelmed with debt stress, don’t hesitate to reach out for professional assistance.

In Conclusion

Filing a consumer proposal can provide a lifeline for struggling businesses. However, it’s crucial to understand the implications for your specific type of business and to seek professional advice. By doing so, you can make informed decisions to pave the way for a financially stable future.

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