Filing Bankruptcy While Self Employed
There are provisions in bankruptcy law that allow you to file for personal bankruptcy and keep your business going. If you’re declaring bankruptcy because you cannot pay your bills and, at the same time, the bankruptcy requires that you shut down your business and sell off everything to pay assets, how would you be expected to survive? There are provisions for this.
If your company is set up as a separate entity, you should be fine as far as your investments in the business. You will need to talk to your financial counsellor about this so they can give you information on the best way to handle your situation.
There are many people in Canada, however, who operate their own businesses but who do not have their businesses incorporated in any way. These sole proprietorship businesses could make things a little bit trickier where declaring bankruptcy is concerned.
Personal Property and Debt
There are different laws in each province regarding which personal property is exempt from being seized in a bankruptcy. Among those items is included the equipment that you use to work. If you do run your own business and if you require your tools to work – you are a carpenter, for instance – it’s not likely that your tools and other supplies you need for your business are going to be seized.
If you have a partnership with someone else, they are not responsible for your bad debt. Unless they happen to cosign a loan for you at some point, they will be responsible for paying off any of your debt and they shouldn’t have anything taken from them as a result of you declaring bankruptcy.
The goal of bankruptcy law is not to punish you by making you absolutely destitute in exchange for being able to get rid of some debts that you cannot pay. In fact, the goal is to help you get back on your feet and to help you do so in a way that doesn’t make it so easy that people could run up bad debt and zero it out over and over again. Because of that, there will likely be some hardships involved, but losing access to your business and having your investments in a partnership taken away from you should not be an issue.
Talk to Your Counsellor
If you have questions about filing bankruptcy and your business, make absolutely certain that you ask your Trustee. They can give you the best possible information on your situation and help you to figure out how to stay afloat and keep the value of your investments as you go through your bankruptcy. There could be complexities involved with this, so it’s always best to speak with an expert.