Bankruptcies within Canadian companies are becoming more commonplace every year. According to a recent report from CTV News, it has been concluded that Canadians are filing the highest number of insolvencies over the last decade.

In fact, as highlighted by the Office of the Superintendent of Bankruptcy, Canadian consumers filed 13,200 insolvencies and proposals in October, which was a 13% increase since last year. The last time this number was as high as this was in September 2009, where there were 15,465 cases filed for bankruptcy.

If you’re in a position where bankruptcy is a reality for your company, the process can seem quite daunting. However, there are still ways you can recover. Here are some things you can expect when your company goes bankrupt:

What is bankruptcy?

Bankruptcy is a procedure that is used to provide companies with financial relief. It works by stopping the legal actions of creditors, which is also known as a stay of proceedings. That way, a bankrupt company won’t experience unfair advantages of one creditor over another. You incorporated a company to create a legal difference between you and the company.You bankrupt the company as it helps keep the separation in place.

Is bankruptcy right for your company?

Bankruptcy is necessary when it’s discovered that the debtor’s operations are not sustainable or cannot be restructured in order to provide greater value to the stakeholders.

When your corporation becomes bankrupt, it can do so in the following three ways:

• By voluntary assignment
• Initiation by a creditor
• Failure to comply with a Division I Proposal

Most commonly, corporations or businesses go bankrupt through a voluntary assignment. During this process, you will assign your company’s assets by your own accord to the creditors for their benefit. To do so, your company must be insolvent.

A Division I Proposal is the compromise that a commercial debtor and the creditors agree on. If it’s approved by the Court, this process is legally binding.

This proposal can benefit the financial challenges of a business while also providing creditors with more than they will obtain during bankruptcy. This type of proposal has the ability to restore the business, provide a continuing source of business while giving creditors an ideal return. However, if a company cannot comply with this proposal, then it will lead to bankruptcy.

Bankruptcy is the right solution for your company when other options aren’t available. A Consumer Proposal, for instance, is a negotiation of a partial payment of your debts in return for your creditors being more lenient for the rest of the amount.

These proposals are advantageous because your personal assets are not able to be seized. A Consumer Proposal also allows a company or individual to recover a percentage of their outstanding debt; however, with bankruptcy, you may lose it all.

If bankruptcy is the only option for your company, here are some basics of the process. If you are looking for a more extensive outline for steps during bankruptcy, you’ll want to speak to a qualified debt management team, like the one at Charles Advisory Services.

Steps that Take Place During a Bankruptcy

Once your bankruptcy paperwork is signed, then the trustee will transmit the information electronically to the Office of the Superintendent of Bankruptcy. When the next monthly report from the Superintendent of Bankruptcy is generated and sent to the credit bureaus, they will then be informed of your bankruptcy.

Within the first five days of the starting of your bankruptcy, your trustee will send a copy of the bankruptcy paperwork to all of your creditors. They will each individually file a claim with the trustee.

When bankruptcy is filed, there will be a stay of proceedings, meaning that unsecured creditors won’t be able to begin or continue lawsuits, or contact you for a payment request. The only creditors that could potentially seize assets from you if you don’t keep up the payments are mortgage companies or banks.

Your trustee will then file your outstanding tax returns up until the bankruptcy date, including any outstanding amounts to the Canada Revenue Agency. If you receive any tax refunds or GST credit during this time, then it will go to the trustee.

Bankruptcy doesn’t have to negatively impact your life if you go about the process correctly and take steps to rebuild your future financial goals. Even though bankruptcies continue to increase every year, there are many ways to repair your credit and manage your debts.

To start,tell us your company legal name, give us a list of the company’s creditors,and a list of assets the company owns.

We will schedule a no charge meeting and discuss the process and cost.

If you’re looking to rebuild your credit after bankruptcy, the team at Charles Advisory Services can help. We assist in both Corporate and Consumer bankruptcy and will navigate the bankruptcy process with you while taking your long-term financial goals into account.

To learn more about bankruptcy and how it works, call Charles Advisory at 416-486-9660 or contact us here.