Bankruptcy is a legal procedure that provides businesses with relief from creditors when a business has become insolvent or incapable of paying its debts and obligations. A Trustee is appointed after a business voluntarily makes an assignment of its property to creditors or by one or more creditors making an application to Court to have the business declared bankrupt.

If a business is unable to pay its debts to banks, creditors and others, it is insolvent. Insolvency means that a business does not have the money or assets needed to cover its obligations and debts. Once a company becomes insolvent, they may decide to file for bankruptcy or pursue other options including filing a formal or informal proposal with creditors.

Receivership is a legal method that secured creditors can use to recover money owed to them by a business. If a business defaults on a loan obligation, then a secured creditor can appoint a Receiver if their security documentation allows for it or they can apply to Court to have a Receiver appointed. A Receiver only acts on behalf of the creditor it was appointed for and will only realize on the assets or security that they were given by a business. A Receiver has the authority to take possession of any assets that were pledged under the security documentation and sell them to repay the outstanding debt.

A Trustee is appointed to manage the bankruptcy process including taking possession of the property or assets a business may have and selling them so that any money received is distributed to secured and unsecured creditors according to the relevant bankruptcy and insolvency laws.

A Receiver is appointed by a creditor or a Court to take possession of assets and sell them to satisfy a debt.

If you think your business is not going to succeed no matter what happens then you will want to consider small business bankruptcy. If you think your business may be able to succeed but your creditors have already taken legal action against you, then you may need to consider small business receivership. Bankrupting your small business may be inevitable but there is work you can do to find out whether or not working through a small business receivership would be a better option compared to working through a small business bankruptcy.

A Receiver will act in the interests of a particular secured creditor(s) whereas a Trustee acts to protect the interests of both secured and unsecured creditors. It is important to note that Receivers and Trustees may not be able to give advice on what your business needs to do to avoid or prevent a bankruptcy a receivership.

If you think your company might go into bankruptcy or receivership you have options you can explore. You can take steps to protect yourself and your business but you cannot afford to wait - the sooner you act the sooner you will be able to get your business back on track. Banks, lenders, investors and creditors are prepared to work with companies that have a reasonable plan for repaying them. You may need to adjust your expectations or make some difficult decisions but you have options.

When your business is experiencing a period of poor performance, a business turnaround is the plan for how it will recover. The turnaround is also referred to as a restructuring process where your business moves from loss to one of profitability and success while stabilizing its future. A business turnaround often involves a plan for how creditors and debts will be repaid.