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Questions & AnswersCan I declare personal bankruptcy without it affecting my business?
AvatarAnonymous asked 5 years ago

Can I declare personal bankruptcy without it affecting my business?

asked April 29, 2016 by Anonymous

Can I declare personal bankruptcy without it affecting my business? Would I still be able to retain my business credit card?

1 Answers
AvatarDebt.ca Staff answered 1 month ago

Let’s start with the first part of your question. The answer to your question is “it depends.”



If you’re operating as a sole proprietor, then there’s no issue with you being able to continue operating a business.



It gets trickier if you’re incorporated because you would own shares in the corporation. The shares would be an asset of yours that would need to be realized by a Licensed Insolvency Trustee for the benefit of your creditors. Hence, he or she would need to ascertain if your incorporated business has value.



For example:



1. Does it have assets that can be liquidated and used to pay off all the corporate debt and still have money left over to distribute to the shareholders?



2. Is the business profitable and will it continue generating profits in the future?



If the answer to one or both of these questions is “yes,” then your business has value. Upon filing bankruptcy, your Trustee would become the owner of your shares in your incorporated business. He’d be required to realize on the value of those shares by either selling the shares back to you at fair market value or selling the shares to a third party at fair market value. He’d ascertain the fair market value of the business by retaining a Chartered Business Valuator (CBV) to perform an analysis of the factors I described above.



On the other hand, if it turns out the business has no value, a Trustee will disclaim its interest in the shares of the corporation for a nominal amount, (say $100.00).



On to the second part of your question…

Assuming you’re operating as a sole proprietor, the Trustee would need to notify the credit card company if the credit card has a balance.



If your business is incorporated, and you’re the personal guarantor of the business credit card, the Trustee would need to notify the credit card company of your personal bankruptcy



In both cases, the credit card issuer will likely cancel your access to that card.



Victor Fong, of Fong and Partners, provided the expert answer to this question.


answered 1 month ago by Debt.ca

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