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Ontario|Debt and BankruptcyDebt and Business Bankruptcy 252 Alternatives to bankruptcy: Proposals to creditors, receivership & buy back
Bankruptcy is only one of several available options for a business facing financial difficulties. Instead of bankruptcy, you may want to consider making an informal or a formal proposal to your creditors. Or you may wish to sell the business with or without the help of a secured creditor.
- Proposal to creditors
First, you may want to make a proposal or arrangement with your creditors to pay lower monthly payments over a longer period of time, or perhaps a reduced amount altogether. This is a good alternative for a business that has a steady income flow and some prospects for the future. If you have only a small number of creditors you may want to make an informal proposal by calling your creditors and explaining your situation. However, if you have a large number of creditors, you may have to call a trustee in bankruptcy and arrange to make a formal proposal under the Bankruptcy and Insolvency Act.
A proposal to creditors is a contract between the business and its creditors. The trustee will help you and the creditors negotiate terms that you both find reasonable. The proposal must be approved by the court, and accepted by two-thirds of your creditors at a meeting of creditors. If your proposal is not accepted, your business will automatically become bankrupt.
- Receivership & buy back
Instead of making a formal proposal to your creditors, you may decide to allow a secured creditor to place your business into receivership so that your secured creditor can sell it. A secured creditor is someone who loaned you money in return for your written promise to give them rights to specific property if you do not repay the loan. If you fail to make payments on your loan, the secured creditor may appoint a receiver to take control of and sell the property you promised them. A secured creditor must give you ten days notice of their intention to appoint a receiver. If you receive notice that business assets will be sold, you can immediately contact a lawyer for more information and advice. It may be possible for you to buy back your business assets but you will have to outbid any competition.
Filing for bankruptcy may or may not be a suitable choice for your business depending on your particular situation. Consult a lawyer, a trustee in bankruptcy, or an accountant for more specific information and advice.
CREDIT ISSUES
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