Q: I ran my very own flooring enterprise for 11 years. After again accidents and with tariff uncertainty pushing up the price of supplies, I shut down the enterprise this spring. I nonetheless owe about $38,000 on a business line of credit and a credit card in my name , plus roughly $6,000 in GST/HST. I assumed the debts would finish when the enterprise closed, however the financial institution retains calling. Am I personally on the hook for all of it? Are these now money owed I’ve to declare bankruptcy on to cope with? — Dan
FP Solutions: Closing a enterprise after 11 years is tough sufficient with out the added stress of leftover debt. So, the brief reply is: Sure. As a sole proprietor you might be personally liable for these money owed, even when the accounts had been solely used for enterprise bills. That additionally means any missed funds seem in your private credit score report, not one for the enterprise. However the excellent news is that chapter is way out of your solely possibility.
Earlier than deciding what to do, get a transparent image of what you owe and what you’ll be able to afford to pay every month. Then contact the Canada Revenue Agency and your financial institution to check compensation choices. Taking these steps so as will aid you make a sensible determination somewhat than reacting to collection calls .
Make an entire record of your whole money owed, together with every lender, steadiness, rate of interest and minimal fee. Observe which accounts are secured, that are unsecured and that are behind. If in case you have gear you not want, promoting it and placing the proceeds towards your money owed, beginning with any mortgage the gear secures, will reduce the balance and curiosity fees.
Subsequent, shut your enterprise account with CRA and file your closing GST/HST return. Closing the account is not going to erase what you owe, so ask CRA for a fee association you’ll be able to realistically preserve. Contacting CRA earlier than the account strikes further into collections might offer you extra room to work out a manageable plan.
Then, contact your financial institution somewhat than ready for an additional name. Most strains of credit score are payable on demand, so the lender might ask for the total steadiness when a enterprise closes or funds fall behind. Clarify your scenario and ask whether or not the steadiness may be transformed to a fixed-term mortgage with set month-to-month funds. Consult with a current budget and don’t conform to funds you can’t afford.
If mortgage funds don’t suit your price range, communicate with a non-profit credit score counsellor. Unsecured enterprise money owed in your title, equivalent to a line of credit score or bank cards, could also be eligible for compensation by way of a Debt Management Program (DMP). A DMP consolidates unsecured debt funds into one inexpensive month-to-month quantity, and collaborating collectors usually cut back or cease ongoing curiosity. A counsellor can assessment your scenario, assist refine your price range and reply any questions.
If full compensation just isn’t real looking, chapter just isn’t the one various. A consumer proposal is a authorized association, administered by a licensed insolvency trustee, to repay a part of what you owe over a most of 5 years. A proposal stops curiosity and assortment calls, and GST/HST debt from a sole proprietorship can typically be included.
Creditors representing the vast majority of the debt should settle for the proposal. As a result of it affects your credit and turns into a public document, weigh the professionals and cons fastidiously. A credit score counsellor can clarify methods to put together to file a consumer proposal and aid you evaluate alternate options earlier than you determine.
Your small business could also be closed, however you continue to have choices. Appearing now provides you the most effective probability of discovering an answer that’s each manageable and sustainable.
Mary Castillo is a Saskatoon-based credit score counsellor at Credit Counselling Society, a non-profit group that has helped Canadians handle debt since 1996.
Do you may have a debt query for FP Solutions? Electronic mail wealth@postmedia.com.
