Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

What is Creditor-Proofing?

What is Creditor-Proofing?

By:

Posted July 30, 2018

Being an entrepreneur means, inherently, being an optimist – starting a business means it will be successful, right?  Well, maybe.

Lawyers are taught to be pessimists so that we can help protect you in a ‘worse-case’ situation.  Sadly, that means we assume, when we meet with you, that your business will fail – not because we want it to, but because we can help protect you against the possibility that it might.  In the course of that review we discuss with you, amongst other things, ‘creditor-proofing’ – how to protect your assets against the possibility that your business might fail.

There are people to whom you will go for credit, who will ask for a list of your assets and proof that you have the ability to pay the debt if the business fails – banks will often do this.  However, many creditors of your business who extend credit to you will not ask for this kind of evidence.  That means that, for them, you don’t need to have assets to back up payment of the debt if the business runs into trouble.  We can, therefore, have a discussion with you about transferring some of your assets to a spouse, relative, or other person close to you to protect that asset from potential creditors.  We can also discuss what assets you might own which are protected from your creditors.  The process of transferring assets, or changing assets into forms which are not sizable by creditors, is called ‘creditor-proofing’.

I should clarify that this is not a discussion that can happen when you already have creditors that are owed money – it is often at that point too late to carry out such transfers.  However, when a business is first starting out and there are as yet no creditors, that is a perfect time to consider transferring assets to protect them from creditors.

This blog post was written by Ted Mann, a Partner in the Wills and EstatesReal EstateBusiness and Bankruptcy teams.    He can be reached at 613-369-0368 or at ted.mann@mannlawyers.com.

More Resources

Blog |
Business Law
By: 

Posted September 25, 2023

This is the second blog addressing the new requirement for private Ontario corporations to maintain a register of individuals with significant control over the corporation[...]
Blog |
Estate Litigation
By: 

Posted September 11, 2023

Losing a loved one is never easy and dealing with the administration of their estate can be a challenging and complex process, no matter the[...]
Blog |
Construction Law
By: 

Posted September 7, 2023

As detailed in another post, Ontario’s Construction Act creates a scheme for the quick resolution of construction disputes via an “interim adjudication”. However, there has[...]
Blog |
Commercial Litigation
By: 

Posted August 29, 2023

Specific performance refers to the Court-ordered remedy that the parties must proceed with completing a real estate transaction. The recent Court of Appeal decision of[...]
Blog |
Estate Litigation
By: 

Posted August 22, 2023

A will is a legal document that outlines a testator’s wishes for the distribution of their property after they die. Section 4(2) of the Succession[...]
Blog |
Business Law
By: 

Posted August 15, 2023

Throughout their small business journey, sole proprietors need to wear a wide variety of hats. On any given day, they can be all at once[...]

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.