After filing for bankruptcy and receiving a discharge, you may feel a wave of relief and then begin planning on how to start a business to get you back on track. Below are some tips on how to get a business going and keep it going after bankruptcy.
Timing is Important
While you may be eager to start a business while going through the bankruptcy process, it might be wiser to wait to open a business until after your bankruptcy has been completed and discharged. Chapter 7 bankruptcy is the simplest form of bankruptcy and can be completed in just months. Once the bankruptcy is over, you’re completely free of court supervision and can take on as much credit as creditors will give you. The same is true for Chapter 13, another popular form of personal bankruptcy. However, Chapter 13 is a much longer process, as it requires a payment plan of three to five years to complete the case. If you do decide to start a new business while your bankruptcy case is still open, it is important to discuss your plan with an experienced bankruptcy and business attorney.
Once you receive your bankruptcy discharge you can start a new business without the worry of your future earnings being seized by creditors. The problem is finding financing and suppliers for your business since you may have few assets of your own. Securing new credit, property, tools, and supplies may be difficult on a cash-only basis. Try to establish credit in the name of your new business if possible. You will have to pay higher interest rates, but you may be able to renegotiate the terms after some time has passed.
Consider Your Options
Consider involving a partner or other co-signer with established credit to help get your business off the ground. One of the most important things you need to remember is that you need to keep it simple when starting over after bankruptcy. The best method is starting small and strive to grow the business at a safe and steady rate over time. Applying for a $100,000 loan to start your business will most likely result in you being rejected. It is more advisable to apply for a $10,000 loan to get you started with the small things like a website or advertising. Once the business has moderate success in this way, you can seek an additional $30,000 to rent an office space.
Planning for the Future
Starting small and working your way up to more permanent financing solutions will help build your credit. It will also provide you with financial statements to show future borrowers so you can prove the viability of your business plan. A better way to get the asset base you need for collateral is to find investors. Some investors will not care about your credit if your business plan has a high likelihood for success. Once you have your loans or investors all set it is time to start operating your business. From then on it is important that you pay all your business debts on time so that you can begin to build a good credit rating. Also, when possible, keep your personal finances separate from your business finances. With these things in mind you will find a greater chance of success in your business after bankruptcy.
If you are starting a new business or just have question regarding bankruptcy, call us at 770-609-1247 to discuss your case with one of our experienced attorneys.