So your business has run up the, Credit Problems or Credit card bills, you haven’t been thinking twice before spending. And now you have creditors at your doorstep, hounding you for the money you owe them. Your Bankruptcy for Business may go to happen. And you are thinking to go for Consumer Proposal for Filing for Bankruptcy or Bankruptcy for Business. Just don’t go to Canadian Bankruptcy bureau and asks How to file for bankruptcy or how to Stop Garnishment. If you want to go for Consumer Proposal in Alberta or Edmonton, this is the right article for you.
You might have money stashed away in your bank and you need to know that creditors can go after it, if you are not careful. If the creditor takes you to court and wins, he could end up emptying your bank account. The court can order the bank to freeze your account and any money that is recovered goes towards payment to your creditors.
However there are ways and means to protect your money.
Arrange for payments to creditors. When the case goes to court and the creditor wins, make sure you call the creditor or the creditor’s attorney and make payment arrangements. Agree to only the payments that you can afford to make. Ensure that you spread this payment over a few months and that this payment is something that you can comfortably afford. Or you can go for Consumer Proposal in Alberta or Edmonton area for Filing Bankruptcy for Business.
Find out if the money in your account is exempt or not from a bank garnishment. And you want to Stop Garnishment. You should be aware that some sources of income are exempt from bank levies. For example, if you receive income in form of unemployment benefits, welfare, social security, workers comp, disability benefits, Veterans Administration benefits and child support etc, these payments are exempt from a bank levy.
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Most creditors look for financial statements that can give them an insight into the business financials. They look at information about income, existing debt obligations, expenses, salaries, profit and cash flow etc which give them an idea of the overall financial profile.
This information lets creditors know whether the business represents a credit risk, and also the ability to repay debts.
Let us look at some of the parameters they examine.
Current Ratio: This is the current business assets divided by the current business liabilities. In this case, current is defined as a period of 12 months. So what do the assets include? The assets included are- cash, receivables, inventory and prepaid expenses. The liabilities include accounts payable, credit cards and accrued expense.
A current ratio of more than 1.2 is considered a good ratio. Creditors use this ratio to determine the ability of a business to repay its debt over the next year.
The debt-to-equity ratio is used to ascertain the relative proportion of shareholders’ equity and debt used to finance a company’s assets. This ratio helps creditors understand how the business uses debt and its ability to repay additional debt. Total business liabilities divided by shareholder’s equity determines the debt to equity ratio.
Source of Loan Repayment: Creditors need to understand, how the business plans to repay loans or how it will deal with additional debt, with cash flow considered the primary source of debt repayment. Often times, the existing cash flow is insufficient to cover additional debt. Hence creditors need to look at growth trends, one-time expenses that affected cash flow, debt elimination, discretionary spending and expiring obligations to estimate future cash flow. To avoid Filing for Bankruptcy, Consumer Proposal, Bankruptcy for Business and Stop Garnishment.
Secondary Source of Loan Repayment: Cash flow is the primary source of repayment of loans to avoid Bankruptcy for Business or Filing for Bankruptcy. However this cannot be the only source since it may not even be sufficient to cover operating expenses and additional debt repayment. In case of fledgling businesses or in case of businesses that are expanding, it becomes difficult to estimate cash flows. Creditors use financial statements to ascertain collaterals i.e. secondary sources of loan repayment, for example, business-owned real estate, equipment, receivables or inventory. In case a business is unable to repay its debt, creditors may liquidate these items and close the debt.