Many business owners who walk into my office wish that a course had been provided on operating a business before they started their own business.   They had a dream to be their own boss and provide a quality service or product to their customers but they didn’t have a clue on how to keep proper books and records, monitor accounts receivable and cash flow nor ensure HST was paid on time.  They now find themselves with significant amounts owing to trade suppliers, credit cards, banks, and Canada Revenue Agency and no ability to pay the debt over a reasonable period of time.  Filing a personal assignment in bankruptcy may be the solution to get a fresh start, relief from debt and potentially continue to operate their business.

Steps of a bankruptcy when you own a business:

  • Meet with a Licensed Insolvency Trustee to analyze your assets, liabilities, monthly income and expenses
  • The asset analysis will include the assets of the business (bank account, accounts receivable, inventory, machinery and equipment, vehicles, etc.) and your personal assets
  • Sign the bankruptcy documents which are filed with the Office of the Superintendent of Bankruptcy and triggers a stay of proceedings which protects you from unsecured creditors pursuing you for collection
  • Decide whether you will continue to operate the business (if it can be profitable) or whether you will walk away. It is an option to continue to operate the business and to return leased equipment or terminate a commercial lease in order to reduce your expenses.
  • Assets vest in the trustee to realize for your creditors. There are exemptions which allow you to keep certain business assets if you continue to operate:
    • Tools of the trade up to a liquidation value of $11,300. If the value of your equipment exceeds $11,300, you have to pay the trustee the difference in value in order to keep the equipment.  Alternatively, the trustee could sell the equipment.
    • Vehicle up to a liquidation value of $6,600
  • You will report to the trustee on your monthly business income and expenses and your other personal income and expenses. If your income exceeds a certain threshold, you may be required to make surplus income payments.
  • The trustee will file your personal income tax return for the year of bankruptcy and one year prior if it hasn’t been filed yet. All amounts owing to Canada Revenue Agency for personal income tax, HST and source deductions outstanding will be discharged in your bankruptcy (unless a lien has been registered against your property).
  • A first time bankrupt with no surplus income payments will receive a discharge after 9 months if all duties are complied with and no creditors oppose your discharge
  • The bankruptcy will remain on your credit report for 6-7 years from discharge

If you are struggling with debt and concerned about your business, make an appointment for a free initial assessment with one of our Fresh Start Now Licensed Insolvency Trustees at 1-888-287-2525.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)