Advice and Opinions Please

[AC12]

Hey guys,

I have been creeping on this forum for a while and have learned a many valuable things. I am Canadian, however, the BK laws up here are fairly similar to the US laws. I need some advice on what to do here.

So my situation:

I am 26, single, and self-employed. I run a franchise for a nameless franchise company that is doing 'ok' but not really turning a profit (thanks recession). I would estimate that on average after servicing debt, paying the rent, etc., I net somewhere around $1500 - $2000 from the business. I currently owe $12500 on an LOC @ 4% interest and about $12500 to the government for back taxes. I also owe $5000 to the franchisor for past due royalties (0% interest, payable whenever). The business owes it's suppliers close to $10,000. We currently have approximately $30K in cash on hand which is enough to cover 4 months of living and operating expenses.

I have been contemplating BK for the past few months as it seems like we never really get ahead of the game business wise / debt wise (every month there is another huge expense that prevents me from repaying the debts). We are current on all of our accounts and I have no CC debt.

Total I would estimate that we owe about $40K and are able to cover the minimums, but struggle to pay down any of the principle. I don't want to file, but also question the financial sanity of trying to hold on for too long.

Thoughts?

[walkthaplank]

I know very little about US BK law and even less when it comes to Canada.

But as to what you describe almost all of us know it well. You need to ask yourself if this business is about to turn a corner and start being very profitable. Will it start making enough money to not only make the minimums, but start making real headway into the debt principle? If you are struggling to make the minimums and the economy is continuing to go south you might want to decide to nip this blooming financial disaster in the bud.

IF (and that is a HUGE if) you are reasonable certain the business will pick up substantially and starts showing signs that it will, you might want to stick it out, but to keep stagnant or worse, going negative is just staving off the inevitable.

[AC12]

Thanks -- it's interesting we've only been open for about 16 months now so it is hard to tell if things are going to pick up. I should point out that earlier in the life of the business I was able to pay my LOC down from about 35K to where it is now and pay off another 8K in unrelated personal debt. Total repayments over the first six months were approximately 30K. However, we have hit a slow patch and I am struggling to determine if it is a combination of the recession and the seasonal nature of our business or if it is simply a semi-permanent slow down in the business.

The nature of the BK laws (Canada vs. The US) don't really matter as this would be an assetless BK -- basically just a discharge of the debt. All of the debt is business related, but we are a sole propietorship with personal guarantees on all of the debt, lease obligations and franchise obligations.

[lrprn]

Here are a few Canadian bankruptcy law websites -

http://www.bankruptcycanada.com/

http://en.wikipedia.org/wiki/Bankruptcy_in_Canada

http://www.hoyes.com/new-bankruptcy-law-canada.htm

I have no idea if these websites are reliable or not. We are familiar here with the US bankruptcy law, and from a quick look at what's on the Canadian sites, the two laws aren't that similar (For example, student loans can be discharged in Canadian bankruptcy after seven years. Here in the US, you practically have to be dead to get rid of them, have to pay on federal student loans up to 25 years, and can never get rid of private student loans.)

You really need to talk to someone in Canada who is familiar with the bankruptcy law there. Anything you are told here about what will happen to you in Canada isn't reliable.