Area of Law: Credit, Debt and Bankruptcy
Answer Number: 0277
Voluntary business bankruptcyRegion: Ontario Answer Number: 0277
When can a business go bankrupt?
A business can choose to become bankrupt when it owes over $1,000 and is insolvent. A business is insolvent when it is unable to make payments on its debts as they become due, or if it would be unable to pay off its debts even if the business assets were sold.
How can a business go bankrupt?
A business can go bankrupt in one of three ways. First, a business can voluntarily declare bankruptcy. This is the most common event. Second, a business will become bankrupt if it makes a proposal to its creditors which is not accepted by them. Third, the creditors of a business can sometimes push the business into bankruptcy by filing a petition with the court. Petitions are very rare.
A business bankruptcy will be handled by a licensed trustee in bankruptcy who will handle the sale of the business assets and the distribution of proceeds to creditors. Usually, the assistance of a bankruptcy lawyer is required and the situation should be reviewed with a lawyer before the trustee is engaged.
Bankruptcy is a complicated procedure. Make sure you consult a lawyer or an accountant for specific legal and financial advice before choosing how to proceed with a business bankruptcy.
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