An Agriculture entity may include a corporation, a registered partnership, non-registered partnership or an individual whose business liabilities are more than 50% of the total of his debt load. These types of insolvencies may require some different applications and considerations when options are being reviewed. For example a corporation or registered partnership has no exemptions. A corporation generally cannot be discharged from bankruptcy and generally business insolvencies may file a commercial proposal rather than a consumer proposal which has some different rules and applications. In addition there may be other considerations such as personal guarantees, director liabilities, landlord/tenant issues, commercial liens legislation and other provincial and federal legislation that may have an impact on your situation.
The proposal process is administered under the provisions of the Bankruptcy & Insolvency Act. A proposal generally requires that you are offering your unsecured creditors more than the amount they would have received if you had declared bankruptcy. Under a proposal you are not required to give up your non-exempt assets as you do in a bankruptcy. Instead you might make an offer where you are going to pay a monthly amount to the trustee for the benefit of all your creditors. The trustee will take his fee from those payments and disburse the rest to the unsecured creditors on an annual or semi-annual basis.
Secured creditors are generally not included in this process. In order for the proposal to be successful, the unsecured creditors will vote on the proposal and if a majority of creditors (based on dollar value) accept the terms, then you will have a binding contract with all of the unsecured creditors. There is a Stay of Proceedings against all creditors from the time that the proposal is filed to prevent any one creditor from taking legal action until the proposal has been dealt with.
As with consumer proposals, there is a Stay of Proceedings against all creditors that stops any collection action after the date of filing. Bankruptcy is a last alternative if you cannot meet your payment obligations and a proposal is not viable for your financial situation. A bankruptcy will affect your credit rating for a number of years after you have been discharged from the bankruptcy process.
During bankruptcy you will be required to provide full financial disclosure to the trustee, attend for financial counseling sessions, provide monthly income and expense information and assist the trustee in realization of any assets that may not be exempt. You are allowed to keep certain assets (exempt assets) that are specified under the Enforcement of Money Judgments Act and the Saskatchewan Farm Security Act (if you are farming).
For more information concerning the applications of a personal bankruptcy, see also consumer insolvency.
Farm Debt Mediation
This process is available to farm business as defined under the Farm Debt Mediation Act which is federal legislation and administered separately by licensed mediators. Under this process, a debtor is able to propose a re-structuring plan to the creditors while under a Stay of Proceedings. It is important to note that this process is only binding on creditors who agree to the plan. Those creditors who do not agree to accept the plan will be able to exercise their normal collection remedies once the Stay is lifted.
These statements are not absolute as there can be exceptions depending on the circumstances. These may vary depending on the nature of a security agreement, values of assets, whether there are other co-borrowers or guarantors, exemptions rights, etc.
Therefore it is important to seek the assistance of a licensed insolvency practitioner before you make any decisions to ensure that you understand the relevance of the provincial and federal legislations to your situation. We will provide you with sufficient information to enable you to make informed decisions concerning your existing debt and allow you to plan your financial future with more certainty and knowledge.
Secured Creditors and Their Options:
You should also be aware of what remedies that creditors have in the collection of debts and enforcement of security agreements. While unsecured creditors remedies are required to obtain court approval (court judgement) prior to initiating any legal action, a secured creditor may be able to rely on the terms of their security agreement that you have signed. This means that they may seize assets that are subject to their security in the event that you are in default under the terms of your agreement with them. If you are not sure whether you are in default or not, you should first review your security agreement.
In many cases a secured creditor will be required to issue a “Notice of Intent To Realize” on their security. In the event that you receive such a notice you should immediately consult your legal counsel or contact a licensed insolvency Trustee for additional information and to review your options.
As a farmer you may also avail yourself of the provisions of the Farm Debt Mediation Act which provides interim relief and an opportunity to mediate your debt problems with one or more of your creditors.
In the event that you take no action during the Notice period, secured creditors may take steps to seize assets directly or to appoint a receiver who may have additional powers to operate your business and control your assets if directed by the court.
As the area of secured creditors and debt enforcement can be quite complex, we urge you to seek the advice of licensed qualified practitioners in order that you are able to make informed decisions in a timely manner.