Can I start a business after filing bankruptcy?

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Question:

Can I start a business after filing bankruptcy?

Answer:

It is possible to start a business after filing bankruptcy- there is no law or other rule in place that will prevent you from doing so. However, you may have issues as far as financing that business as a result of your bankruptcy and this could be the main hindrance to your being able to start a business after bankruptcy. 

If you have a bankruptcy on your record, this will adversely affect your credit score and you will generally have a hard time getting a bank or other lender to lend you the money you may need as start up capital for your new business venture. This, however, should not preclude you from starting a business if you really have a good idea. Instead of borrowing money, you can try to start a business on a small scale, using the cash you have on hand. You can also try to get investors- not lenders- to give you the start up capital for your business.  If you can raise the money in some other way, or if you can start your business on a small scale without needing to borrow, then you can certainly start the business post-bankruptcy.

One key, however, is making sure you don't get yourself in financial trouble again. To that end, you may want to start a business that is incorporated (as an S-corp, C-corp or limited liability corporation). This makes the business a separate legal entity that is distinct from you... thus, the business debts and credit will be separate from your own.

You also need to fulfill any obligations that are required for your bankruptcy, even if you are starting a business. For example, if you have filed a chapter 13 and you have a repayment plan in place, you will still need to repay your debts according to the terms of the repayment plan, even if you decide to start a business.

To get help understanding this process and understanding the impact your bankruptcy may have on your ability to start a business, you should strongly consider speaking with an attorney before starting your business. 

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