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clients across Canada since 1987

Jul 10, 2017

Business bankruptcy -- a legal tool to keep a company afloat

While the rapid pace of technological development in all fields may benefit many Ontario businesses, it could bring about unanticipated challenges for some. If such development renders the primary product of a business obsolete, there may be a crisis looming.

Another problem may develop when a foreign manufacturer enters the market, offering the same products at much lower prices. Gaining information about business bankruptcy and other debt relief options may help a company that is struggling financially to make informed decisions for its own best interests.

There are several options to consider for eliminating business debt. As soon as a situation is identified that hurts a company's cash flow, it is typically helpful to analyze all money moving in and out of the business. Based on that study, a budget can be prepared that focuses on paying all essentials while researching remedies for remaining debts.

Debt consolidation is a process by which a financial institution can consolidate all business debts and provide a loan to pay lower interest installments. This could be a viable option for managing business debt. Creditors who are kept apprised of the debtor's situation may understand the situation and be more included to agree to better terms and payment schedules. Other formal alternatives that might help to the business afloat are available for consideration.

A Division I Proposal can be filed as part of a business bankruptcy proceeding, enabling the bankruptcy trustee to work with the business owner to pay creditors over an extended period while receiving protection against action by unsecured creditors. If the debt burden exceeds $5 million, the company may seek court protection under the Companies' Creditors Arrangement Act.

Such important decisions are best made with the guidance and support of experienced Ontario business bankruptcy lawyers who can assist with negotiations with creditors and, when appropriate, help a client take full advantage of available bankruptcy protections.