Can I declare bankruptcy for my previous business?

October 2nd, 2014 by Questions

Hi; We are considering the option of bankruptcy and I have read through your website but have two questions I was hoping that you could answer…

First; most of the monies owed are for taxes from a business I had that was not incorporate yet ceased operation in 1994 and have since started another company that is incorporated as a limited company here in BC, If I were to declare bankruptcy am I able to maintain ownership of this company? I am currently on record as a director however the company has yet to earn a profit and has limited assets… I don’t care either way

Second; I have +/- $3000.00 due in tax returns + eligible GST credit… can these funds be used to pay for the bankruptcy proceedings ?

Posted from: British Columbia

Questions

One Response to “Can I declare bankruptcy for my previous business?”


, Desmond West-Chow, CIRP said:

For your first question, your ownership in the company would need to be assessed for any potential value. We would need to consider information such as the value of the assets of your company and any potential liabilities. In terms of being the director, you are restricted from being the director of a limited company while in bankruptcy. As such, the directorship of your company would need to be transferred to another individual or the company would need to be closed down (and possibly continued as a sole-proprietorship).

For your tax refunds, these would come into the bankruptcy as an asset of the estate. This means that they wouldn’t be eligible to count as part of your monthly required payments, but would be considered as separate items that are required to go to the creditors. Your GST may come into the estate and your creditors as well, but only up to a certain limit as determined by the legislation.

One idea to avoid all of these consequences, is a consumer proposal. In a consumer proposal you would likely be able to free yourself of your debt for, typically, a fraction of the actual amount (based off of your cash flow) while being able to retain the directorship of your company as well as enjoying your tax refunds and GST credits you are entitled to receive. It is best to speak directly with a Trustee so they may go over some detailed information and come up with what a consumer proposal may look like for you.

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