Saving a Fort Erie Planning Firm Meant Untangling an Old Guarantee First

The situation

Tomasz called our office on a Tuesday evening, the kind of call that opens with an apology for the hour and ends with a business on the edge of insolvency. He and his business partner Piotr ran an incorporated planning consultancy out of Fort Erie, doing environmental and land-use work for municipalities across the region, with annual revenue that had climbed past a million dollars in good years. Piotr had spent a decade as a municipal planner before the two of them went into private practice together. The firm looked solid from the outside, with a small permanent staff, steady referrals, and a reputation built over more than a decade. Inside, it was carrying debt from an expansion that had assumed a large multi-year municipal contract would renew on schedule.

The contract did not renew. A council changed hands, budgets tightened, and the work that had justified two new hires and a leased office upgrade disappeared within a single fiscal quarter. Tomasz and Piotr kept paying staff and suppliers out of savings for months, hoping a replacement contract would land before the debt caught up with them. It did not land in time, and by the spring the gap between what the firm owed and what it was billing had widened past the point either of them could cover personally.

By the time Tomasz called, the firm owed money to a handful of trade creditors for subcontracted survey and drafting work, a business line of credit that had been drawn close to its limit, and a private lender who had helped finance the office buildout three years earlier. Bankruptcy would have meant liquidating the practice, laying off the remaining staff, and losing municipal relationships that had taken a decade to build and were, in principle, still worth rebuilding once cash flow recovered. Tomasz wanted to know whether there was a way to keep operating while the firm worked its way out of the debt, rather than shutting the doors and starting over from nothing.

What made the file harder than a typical proposal was a document neither Tomasz nor Piotr had thought about in years: a personal guarantee attached to the private loan, originally negotiated with help from an accountant who had since retired from active practice. The accountant, Rizki, had spent years as a volunteer firefighter before training as an accountant later in life. He was not a creditor and had no financial stake in the outcome, but he was the only person who still had the original signed guarantee and the correspondence explaining how the private loan had been structured relative to the company's other debt. Without that document, nobody could say for certain what the lender was actually entitled to.

Where it went wrong

A proposal to creditors under the Bankruptcy and Insolvency Act lets a struggling but viable company offer creditors a structured, partial repayment instead of full liquidation, provided a majority in number and at least two-thirds in value of the creditors who vote agree to the terms. Getting there requires knowing exactly who is owed what, and on what footing, before a single dollar figure goes on paper. That is where the guarantee mattered more than anything else in the file. If the private loan was ordinary unsecured debt, it would be treated the same as every other trade creditor and share proportionally in whatever the proposal offered. If the guarantee gave the lender a personal claim against Tomasz separate from the company's obligations, the lender could, in theory, sit outside the proposal entirely and pursue Tomasz's personal assets directly, regardless of what the other creditors agreed to at the meeting.

Nobody currently at the firm had a clean copy of the guarantee. Tomasz remembered signing something years earlier but could not say whether it was a full guarantee, a limited one capped at a dollar amount, or a subordination arrangement that ranked the private loan behind other creditors rather than ahead of them. Piotr, who had handled the firm's books more than its legal paperwork, had no better memory of the details, and neither partner had kept a copy in the company's own filing system. The company's records had been reorganized twice since the loan was signed, once during a move to new premises and once when they switched accounting software, and the original document had not survived either transition.

Rizki, the retired accountant, had arranged the original loan and still had his files from that period in storage. He was cooperative once reached, but cautious. He had not spoken to Tomasz in three years, had no obligation to help, and was understandably wary of getting drawn into a dispute between a company and its creditors over a document he had merely helped negotiate on someone else's behalf long ago. Locating him, and then persuading him that producing the file served everyone's interest rather than exposing him to blame, became the first real obstacle in a restructuring that otherwise had a workable path forward on paper.

Until that document surfaced, the proposal could not be drafted with any confidence, because the classification of a single creditor changes the arithmetic for every other creditor in the room. A proposal that treats a secured or personally-guaranteed debt as ordinary trade debt can be challenged later by the lender who was shortchanged, and a challenge raised after creditors have already voted can unwind months of negotiation and cost the company the goodwill it spent the whole process trying to preserve.

What we did

1. Mapped the full debt picture before drafting anything. We asked Tomasz and Piotr for every loan agreement, credit facility, and supplier account on the books, then cross-checked that list against the company's bank records and accounting software, because a proposal built on an incomplete creditor list is vulnerable from the start and can be challenged by anyone left off it.
2. Identified the guarantee as the file's central risk early. Rather than treating the missing document as a minor gap, we flagged it in our first working session as the issue that would determine whether the whole proposal could be structured on realistic terms, since guessing at its classification risked drafting a proposal that unravelled later once a creditor produced the real document and objected to how it had been treated.
3. Located Rizki through the private lender's own records. The lender still had the accountant's old contact information on file from the original transaction, which let us reach him directly rather than relying on Tomasz's outdated memory of where he had moved after retiring, or on a general search that might have taken weeks the file did not have.
4. Explained to Rizki, plainly, why his file mattered. We were direct that he was not a party to the dispute and had no obligation to help, but that his records would let everyone, including the lender he had once represented, resolve the question fairly rather than by assumption. That framing, not pressure, is what got him to send the file within a week.
5. Reviewed the guarantee once it arrived and confirmed its actual terms. The document turned out to be a limited personal guarantee capped at a fixed amount, tied specifically to the office buildout financing three years earlier, not a blanket guarantee over all company debt, which meant the lender's claim could be classified with more precision than anyone had assumed and confirmed Tomasz's exposure was narrower than he had feared.
6. Worked with a licensed insolvency trustee to build the proposal around that classification. Restructuring proposals are administered by a trustee, not by a law firm, so our role was to make sure the guarantee terms were reflected accurately in the creditor classes the trustee prepared, protecting Tomasz from a claim broader than what he had actually signed and giving the trustee a defensible basis for the numbers filed with creditors.
7. Negotiated directly with the private lender on the guarantee portion. Because the guarantee was real, if limited, the lender had leverage the ordinary trade creditors did not. We negotiated a schedule that gave the lender faster, fuller repayment on the guaranteed portion in exchange for accepting the same reduced terms as everyone else on the unguaranteed balance still owed by the company.
8. Prepared Tomasz and Piotr for the creditors' meeting. We walked them through likely questions from the trade creditors about why the private lender was getting different treatment, so they could explain the guarantee openly, with the document itself available if anyone asked to see it, rather than have it look like preferential treatment decided behind closed doors without explanation to the people being asked to accept less.

The outcome

The creditors approved the proposal, with the private lender voting in favour once the guaranteed portion was addressed on its own terms. Trade creditors and the operating line received a repayment plan stretched over roughly two years, at a fraction of the original balances, while the guaranteed portion of the private loan was repaid closer to its full value on an accelerated schedule. The firm kept operating throughout the negotiation and the vote, which was the outcome Tomasz had called about in the first place, and the staff who had stayed through the lean months kept their jobs.

This was not a clean win, and we told Tomasz that plainly before the creditors' meeting rather than after. The private lender walked away with materially better terms than the unsecured trade creditors, purely because a document from years earlier happened to still exist and happened to be enforceable in the amount it was. Had Rizki been unreachable, or had he simply declined to help once found, the firm would have had to draft the proposal on a worst-case assumption that the guarantee covered the full loan balance, which would have made the numbers far harder to sell to the trade creditors who were already being asked to accept cents on the dollar. Drafting instead on an unverified best-case assumption carried its own risk, since a lender who later produced the real guarantee could have challenged the proposal after the vote and unwound the whole arrangement.

Piotr and Tomasz kept the firm and, within a year, had rebuilt enough of their municipal relationships to bid competitively on new work. The trade creditors, while accepting less than they were owed, avoided the larger loss a full liquidation would have handed them, since a wound-down consulting practice with no ongoing contracts would have recovered far less for everyone. The file is a reminder that a restructuring is only as reliable as the documents underneath it, and that the people who can locate those documents are not always the people sitting at the negotiating table.

What you can learn from this