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Debra, Lawyer
Category: Canada Law
Satisfied Customers: 100452
Experience:  Lawyer
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Hello, I am the sole proprietor of a personal service business

Customer Question

Hello, I am the sole proprietor of a personal service business since 1996 in British Columbia. Within the last year, I have hit a financial hardship --divorce, etc. I have had to rely on credit cards to make a lot of my payments for supplies, etc. I do not own any real estate, any major appliances, etc. I do own a 1999 vehicle. I do not own my own home. I do not have any savings. I have approx. $7000 in RSPs. I am feeling like my only option is to declare bankrupcy. What does this exactly mean though??Will I be able to still have my business so that I can indeed work?? What is killing me is the debt and I can't keep up with the payments.
Submitted: 4 years ago.
Category: Canada Law
Expert:  Law.Hut replied 4 years ago.

If you go into bankruptcy, all of your assets, including the business, would come under the control of the trustee in bankruptcy. The Trustee would arrange for sale of certain assets to pay off debts. If certain debts are secured by interests in your property, such as a mortgage, then those assets can be sold to pay out the secured creditors fully. Other unsecured creditors may have to accept getting only so many cents on each dollar of debt. The Trustee will need to determine if it makes more sense to get more money in the hands of the creditors by liquidating your business, or allowing you to continue operating the business and setting up a payment schedule for how much money each month you will keep towards your personal expenses and how much will go towards creditors.

Once you apply for bankruptcy, any debts that are owed by you can no longer be enforced by the creditors other than working with the trustee. So you could not be sued or garnisheed on these debts. Once the creditors receive payment through the bankruptcy trustee, any remaining debt that remains owing by you to that creditor can be cancelled.

You will remain an undischarged bankrupt for a number of years which will impact on things such as ability to obtain any other credit.

There are alternatives to bankruptcy that should be discussed, such as a consumer proposal. This is basically where the trustee will suggest to the creditors a plan that will see them getting paid some amount, with the remainder being cancelled. There is no actual bankruptcy, but creditors may agree to such a proposal as it can allow them to be paid more than with an outright bankruptcy.

The first step should be to meet with a Trustee in Bankruptcy. There should be no fee to have some initial discussions to see what options are best in your particular circumstances and meeting does not commit you to a course of action. You can still decide against bankruptcy or a consumer proposal if you wish after such a meeting.
Customer: replied 4 years ago.

As I stated previously, I have no assets--no property, real estate, mortgage, savings,etc. all I have as an "asset" is my business which is me. I am the sole proprietor. I own an older vehicle. I have approx. 7000 in RRSPs. Can you answer me in regular english so I can understand what you are saying to me?? Who is this trustee?? where are they from?? what exactly is bankruptcy?? what does it mean?? will I be able to work?? can i still have my business??

Expert:  Debra replied 4 years ago.
The original expert's answer is correct and complete.

He opted out to give another expert a chance to answer, so I will try to further clarify what he said.

Essentially, when one declares bankruptcy one must retain the services of a Trustee in Bankruptcy.

That person ends up essentially owning your assets, which become part of what is known as the "Bankrupt's Estate".

So any assets that you have cease to be owned by you and become the property of the Trustee who will divide up whatever aspects are left, by dispersing them proportionally to the various creditors.

You will not lose assets such as tools of the trade, and if you car is not worth very much you will not lose the car.

In terms of your actual business, if there are assets that your business owns those assets will be seized by the Trustee.

However if you business consists essentially of you, perhaps your name and some tools of trade you would not lose your "business".

So your next step should be to consult with a Trustee in Bankruptcy, which you can do for free. This Trustee will hear your facts and consider in detail your financial situation, and then advise you as to your options and how best to proceed.

Please do not hesitate to reply back to me if you need further clarification.

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