Can I file for Chapter 11 Bankruptcy?

Chapter 11 is a Chapter of the U.S. Bankruptcy Code that generally provides for the reorganization of corporations, partnerships or proprietorships.

It allows you to propose a plan of reorganization and keep your business alive by paying creditors over time if your business is conducted primarily in the United States.

In order to file under Chapter 11 of the U.S. bankruptcy code, you must have a domicile, place of business or property in the United States. 

If you aren’t residing or conducting business in the U.S., chances are you heard about Chapter 11 bankruptcy through the media. If you believe this type of arrangement is necessary for your business, the good news is, Chapter 11 of the U.S. Bankruptcy code is comparable to the Canadian statute that deals with insolvent companies. This statute is called The Companies Creditors Arrangements Act (CCAA).

Like the U.S. Bankruptcy code, the CCAA allows you to propose a plan of reorganization and keep your business alive by paying creditors over time. The CCAA is primarily used in complicated proceedings.

In order to file a plan of arrangement under the CCAA, your corporation must have liabilities of greater than five million dollars. In addition, your company must have assets or do business in Canada.

Another option for Canadian insolvent companies is to file a proposal under Division I of the Bankruptcy and Insolvency Act (BIA).

Division I of the BIA would apply if your company’s situation is less complex. It provides a very structured environment to allow you to keep your business alive by paying creditors over time and is often less costly than a CCAA restructuring.

In very complex cases where your company has cross-border insolvency considerations, an application may be needed to have the foreign proceedings recognized in another jurisdiction.

These types of cross-border insolvencies can be very complex and require specialized knowledge. It is important you contact an insolvency professional that is licensed by the federal government in order to get the advice that you need.