With the ongoing COVID-19 pandemic evolving rapidly and impacting most business owners across all industries, it’s clear that this is one of the most challenging times that any decision-maker has ever faced.
From drops in product demand to supply constraints, the list of difficulties that companies are facing as a result of the pandemic continues to grow at an endless pace. Among the various challenges that firms—big and small alike—are expected to face over time, one of the most prominent issues is the set of financial difficulties that have developed.
At this point, your business may be in the red because of new restrictions or guidelines imposed by the government, which may have led to a decrease in the ability to provide services and sales and also limit cash flow. If you’re at the point where resolving your financial difficulties and bouncing back seems like nothing short of impossible, then you’re most likely going to explore options that will help ensure a safe restructuring or exit in your industry.
Fortunately, individuals, sole proprietors and corporations operating in Canada have a few options under the Bankruptcy and Insolvency Act to help resolve their financial difficulties; These options include proposals; consumer proposals and bankruptcy.
Prominent Courses of Action in a Time of Crisis
When the option of seeking assistance through traditional methods are exhausted or unavailable, businesses have the option to turn to the Bankruptcy and Insolvency Act for help.
Within this legislation, individuals, sole proprietors and corporations can seek the help through formal insolvency proceedings like proposals, consumer proposals or bankruptcy when faced with the true extent of their financial difficulties. However, one of the main problems with these options is that individuals, business owners and decision-makers don’t know about them as well as they should—ultimately missing out on the opportunity to save themselves from financial ruin.
What’s the Difference?
Although the terms “bankruptcy”, “proposal” and “consumer proposal” can be found throughout the internet, most people are unaware of what these terms mean. If you’re unaware of what the terms in question stand for and what you can expect with them, here’s a basic introduction of each option:
- Consumer proposal: This option is the creation of a new legally binding agreement between an individual and its creditors and allows them to create new terms through restructuring. A corporation cannot file a consumer proposal but can file a regular proposal which is explained below. Usually this includes an extension of time and often only requires a percentage of the debt to be repaid during the course of the legal agreement. This option is often preferred when an individual or sole proprietor wants to maintain control of their assets and continue operations. Creditors are often excited to work with debtors because they are receiving a greater recovery than if a bankruptcy were to occur.
- Proposal: This option is also the creation of a new legally binding agreement between an individual, sole proprietor or a corporation and its creditors and allows them to create new terms through restructuring. Usually this includes an extension of time and often only requires a percentage of the debt to be repaid during the course of the legal agreement. This option is often preferred when an individual, sole proprietor or corporation wants to maintain control of their assets and continue operations. Creditors are often excited to work with debtors because they are receiving a greater recovery than if a bankruptcy were to occur.
- Bankruptcy: This option allows an individual or sole proprietorship to eliminate most of their debts and get a fresh start. For corporations, a bankruptcy would be used and initiated when the corporation no longer wants to continue operations but would like to distribute any remaining assets to creditors in a systematic and structured way.
Do They Have Anything in Common?
They can all help when you need it! Another common thread between proposals, consumer proposals and bankruptcy is that they are legally binding processes administered by a Licensed Insolvency Trustee (LIT). These options exist to help individuals, sole proprietors and corporations resolve their financial difficulties. This is precisely why either course of action must be carried out through the help of a restructuring and insolvency expert like Paul J. Pickering and Associates Limited, as they are the trusted professional to help you through this process.
During difficult times like these, where financial difficulties are evident and widespread for individuals, sole proprietors and businesses of all kinds, it’s crucial to seek professional advice to understand your various options and solutions for your specific situation. Options and solutions are available and will allow you to continue, or discontinue operations, depending on your specific situation and goals. Proposals, consumer proposals and bankruptcies exist to help honest and unfortunate debtors.
If you're looking for a professional that can help you with your bankruptcy, proposal or consumer proposal filing in London, ON, Paul J. Pickering and Associates Limited is here to help. Get in touch with us today!