Advice for Accountants and Lawyers with Clients Facing Insolvency

Advice for Accountants and Lawyers with Clients Facing Insolvency

Many accountants and lawyers encounter clients who, despite their best efforts to make a business thrive and be successful, take on too much debt and must consider insolvency proceedings.  At times the biggest challenge when facing these scenarios is determining the best initial steps to take in order to maximize Canadian regulations that can protect clients from “worst case scenarios”.  It is with this in mind that I have chosen to focus this week’s blog on the first steps that lawyers or accountants can recommend to their client in order to best prepare for insolvency proceedings.

It’s a Process…

The first piece of advice I offer all professionals is to advise their clients that insolvency is a process.  As part of the process, facts will be obtained, options will be discussed (as there is normally more than one), and the right solution will ultimately become obvious.  People and business owners need to be mindful that getting a head start on the fact finding and option analysis typically results in a well thought out process, with little by way of surprises, and often leads to a much better outcome that had been originally anticipated.

Prepare a Budget and Avoid More Credit

Stopping the bleeding needs to happen quickly so that your clients are able to minimize the number of creditors who are going to be looking for payment.  One way to stop the bleeding is for clients to prepare a budget so that they know how much money they have coming in and where it’s being spent.  This is critical for both personal and corporate clients.  It’s impossible to fix the problem if you don’t first find out what it is.  Once your clients have their budget under control, they can start to understand options on how to reduce expenses and formulate a restructuring plan with a Licensed Insolvency Trustee.

Remind People They Are Not Alone

In 2015 there were 125,716 insolvencies in Canada (66,495 bankruptcies, and 59,221 proposals).  These proceedings range from personal through to corporate insolvencies.  Sadly, the process of insolvency happens all the time in Canada and is part of life because unexpected challenges come up: a health crisis, unexpected home expense, urgent travel emergencies, or an unexpected write-off of a customer invoice.  Encountering these issues is nothing to be ashamed about and often people need to be reminded of this.  If you encounter a client going down this road it is helpful to point out that they are not alone, and there is help available to guide them through the process.

Talk To A Licensed Insolvency Trustee

Licensed Insolvency Trustees are licensed by Industry Canada and are trained to support consumer and corporate insolvency proceedings.  We understand all the options available and in many cases are in an excellent position to negotiate with creditors immediately following the first meeting. Through a proposal process, personal or corporate, we can immediately stop creditors calls, stop litigation at almost all levels, and allow clients a period of time to consider options that involve making creditors better off when compared to bankruptcy.  In the case of a business, the proposal process allows the business to continue operate while a plan is being developed.

Don’t Delay – It Creates More Problems  

Delaying a meeting with a Trustee can often make a bad situation worse: debts can continue to climb while cash-flow continues to diminish.  Don’t allow your clients to bury their heads in the sand as their scenario worsens over time, connect them with a Licensed Insolvency Trustee who can assist your client in achieving their goal of a fresh start.

Sometimes the best help is simply about offerings some sage advice to who people that their situation is not as bad as they believe; let your clients know that insolvency is a process and not a singular event, remind them they are not alone, and have them get in touch with a Licensed Insolvency Trustee who can get the process started for them right away.  If you can offer those 5 tips clients will be better off.

For more tips and ideas click here to access my calendar and set up a meeting for us to discuss this, or any other insolvency questions you might have.