Since the outbreak of the pandemic, thousands of renowned businesses were driven to bankruptcy. Some of the largest companies that were impacted by the coronavirus include world famous clothing brands, car rental companies and international manufacturers, just to name a few. The disastrous economic effect continues to impact businesses across the spectrum. With many companies incurring debt and not having any revenue as a result of the pandemic, bankruptcy is more commonplace than ever. Is there anything businesses can do to avoid bankruptcy?
There is an effective alternative that allows both debtors who are unable to pay their debts and creditors who are owed money to avoid bankruptcy and its financial implications. Under the Canadian law, both sides can negotiate an arrangement referred to as a Consumer Proposal. If a business is struggling to stay afloat and collection agencies are demanding payments, negotiating a proposal can allow protections to the debtor. At the same time, creditors who are unable to collect their debts can benefit from having the debtor promise to repay at least a portion of debt.
How are these proposals beneficial? There is a series of advantages they can offer. Once a Consumer Proposal is filed, there is an automatic stay (“stop”) to bankruptcy related proceedings, which provides immediate protection for the debtor from certain debt collectors. Collection companies and creditors can no longer demand payment from the debtor. Further, interest on some debt of the debtor stops accumulating. From the perspective of the creditor, uncertainty and inability to collect some debts can be avoided with help of a proposal. Creditors can collect at least a portion of the money they are owed and hold the debtor accountable to a legally binding arrangement. Please note that while a proposal can be an effective solution, certain qualifications are required for filing a Consumer Proposal and careful legal analysis is needed. If you wish to book your consultation with Buzaker Law Firm team, you can do so by calling at (905)-370-0484 or sending an email to info@vblegal.ca.
