Starting a New Small Business After a Bankruptcy Filing
Whether you are considering a bankruptcy filing or you have recently filed for bankruptcy, you may be wondering about your options for starting a new business after filing for personal bankruptcy. Often, sole proprietors who also consider themselves entrepreneurs will test out a new business idea, and it may or may not earn the types of profits that the sole proprietor was envisioning when they first opened the business. Unlike other types of business structures, sole proprietorships that file for bankruptcy and the individual who opened the business are treated as one and the same for bankruptcy purposes — in other words, the bankruptcy filing will be an individual bankruptcy case filed by the sole proprietor (the sole proprietor and the sole proprietorship are not separate).
If you had a sole proprietorship lead to bankruptcy in the past, or if you are considering an individual bankruptcy filing as a result of your sole proprietorship’s debts or your own, you may be wondering if you will be able to start a new small business again in the future. The good news is that a bankruptcy filing is not nearly the kind of impediment that many people assume it is. Our West Palm Beach bankruptcy lawyers can tell you more.
Starting a Business After a Chapter 7 Bankruptcy Case
If you previously filed or are currently considering a Chapter 7 bankruptcy filing, the bankruptcy process will usually go relatively quickly for most parties. Cases typically take from four to six months from the date of filing to discharge. As soon as you receive a discharge, you will no longer be “in bankruptcy,” and you can immediately begin working to rebuild your credit. You can be eligible for credit again within a relatively short period of time, and after building up some credit, you can seek a new commercial lease for your business along with potential funding from creditors for a new sole proprietorship.
If you are planning to start a more complex business structure that will be a separate entity (such as a limited liability company (LLC) or a corporation), it will often be easier to distinguish your personal financial history from the plans for the business moving forward. You may need to rebuild your credit before you and the other owners can be eligible for an SBA small business loan, but other avenues of funding may still be available.
Starting a Business After a Chapter 13 Bankruptcy Case
When you are in the process of meeting the repayment plan terms in a Chapter 13 case, it will be more difficult to start a new company since your plan will likely last from three to five years. During that time, to take on new credit, you will need to get approval from the trustee. While this can be complicated, it is not impossible. A bankruptcy lawyer can discuss options with you.
Once the terms of a Chapter 13 repayment plan are completed and you have received a discharge, just like after a Chapter 7 case, you can immediately begin rebuilding your credit with an eye toward starting a new business venture.
Contact a West Palm Beach Bankruptcy Attorney for Assistance
Getting your credit back on track after a bankruptcy filing will require your attention and focus, but it is much easier to build your credit up after a bankruptcy discharge than most people in Florida expect. Given that there are many myths and misconceptions about bankruptcy in the world, Florida residents often assume that they will never have good credit again, or that they will need to wait decades after a bankruptcy to be eligible for credit again. Those are myths, and it is much quicker to rebuild your credit, including enough credit to start a new small business. An experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller can tell you more, and we can answer any questions you have. Contact us today for assistance.
Source:
law.cornell.edu/uscode/text/11
