Here’s How to Handle Corporate Insolvency

Business owners pour so much of themselves into their companies to keep things running while chasing their dreams of growth. Despite someone’s best efforts there is always a chance of insolvency. The world of business comes with plenty of risks, including insolvency. In fact, financial stress is far from uncommon these days with 46 percent of Canadians living $200 or less away from financial insolvency and 31 percent admitting to not earning enough income to cover bills and debt payments.

Unlike personal bankruptcy, the reality of corporate bankruptcy usually affects a wide net of people involved with the business such as the owners, the business investors, the employees and their family members, and any suppliers, too.

The First Step in Relief

If your business is facing overwhelming debt and you don’t see any way out, it’s time to team up with a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) at David Sklar & Associates. They offer an empathetic and knowledgeable approach. They can inform you about debt relief services that can help while they assess your particular circumstance.

What Constitutes a Business?

These days businesses take many different shapes and forms. Are you unsure if you qualify as a business for your bankruptcy or Division 1 Proposal? Under the Bankruptcy and Insolvency Act, most corporations and partnerships can proceed as a business while sole proprietorships must apply for debt relief as an individual.

Division 1 Proposal

There are two types of insolvent debtors who can seek this method of debt relief. Under a Division 1 Proposal, insolvent individuals who owe more than $250,000 in debt (excluding their main residence’s mortgage) and insolvent businesses can pay back a portion of the debt to their creditors in regular payments over a fixed amount of time.

Without filing for bankruptcy, the debtor can stop all collections actions or wage garnishments and proceed under the terms of the proposal. It’s a great solution for those who want to avoid bankruptcy, and one that not many know is available.

Business Basics

As you seek help and advice from a bankruptcy trustee, you are likely thinking about what went wrong with your venture. Perhaps you’re wondering what’s next or how you’re going to continue to earn an income now that your business has gone bankrupt. Some of the reasons why businesses go down this path is because they simply forget about some of the basics for a company’s survival.

As you move past your corporate insolvency, keep these basics in mind:

  • Businesses must have enough liquid cash to cover emergency costs
  • Businesses must have enough assets to cover taxes or pay off loans
  • Businesses must continually generate profit (more income than revenue) to stay viable

With the basics of business in mind, a plan of action, and a bankruptcy trustee’s help, you don’t need to fear your corporate debt. It’s possible to find relief and carve a new path to financial freedom.