Blog

The Basics of Small Business Bankruptcy

Nobody likes to think of a business bankruptcy because in their eyes it means that they have failed in their business endeavors. This may not necessarily be true as there are many business owners that have put their heart and soul into their company, and totally dedicated all of their time into their business and yet it still didn’t make it.

What is important to realize is when to pull the plug on the business and decide that it’s time to go into receivership for bankruptcy. When it gets to the point where you can no longer pay your debts and your creditors are threatening legal proceedings than it is time it to step forward and use this form of debt relief to help you get out of your business without any long-standing repercussions.

The courts may assign a independent third party to oversee the receivership. This can be done by a court order or it can be done by a secured creditor who has given a letter of appointment to a receiver to take control of the property. Who will then supervise the proceedings of liquidation and then take the proceeds from the liquidation and dole them out to the creditors in order of their priority that is established by the law.

There are two types of receivers one being a court-appointed receiver and another one being a privately appointed receiver who was engaged by a secured creditor. When your business goes into receivership you no longer have control over it but the receiver then takes the actions and necessary to deal with the debts.

Bankruptcy

Before your business even enters into a receivership you may decide that you want to go bankrupt and in this manner be able to discharge the majority of your debts. There are different choices when it comes to going bankruptcy. There is a voluntary assignment, Involuntary assignment and Deemed bankruptcy.

The voluntary assignment is when you assign all of your assets so that they will benefit the creditors.

An involuntary assignment is when the creditor will file a petition against you and your assets hoping to receive their payment.

A deemed bankruptcy is where you have started the insolvency process but this is based on your not being able to meet some of the requirements for filing a divisional proposal and bankruptcy.

Once your business has run into financial difficulty and you need to find a way to get out of it then you really need to speak to a few financial professionals. You need to speak to your accountant to find out exactly where you are at with your finances. You need to speak to a business bankruptcy trustee who will assist you in the proper steps to take in order to get this matter resolved.

 

Share Your Thoughts!

Contact

Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant

Email: sam@torontoaccountant.ca

Contact Sam today

The information provided here and throughout the site of TorontoAccountant.CA is intended for general tax information only, and should not be misconstrued as a legal source of information regarding your tax situation, or be used for any other purposes other than for general information.
Sam Seidman, Chartered Accountant - Copyright ©2013. All Rights Reserved.