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24 Jun
2017

Raul Harman

Innovative enterprise consultant
 

Bankruptcy is usually the last option for a business owner. It happens after you can no longer pay your debts. Prior to declaring, you have to go through a long and complicated court process as well.

All of this may make bankruptcy look like the end of the world. However, this is not the case. You can get back on your feet, you just need to work hard and learn from the experience no matter how hard it was.

Kinds of bankruptcies

Different kinds of bankruptcies apply for different businesses and each has its own ramifications on your legal status.

Chapter 7 bankruptcy is also known as liquidation, which means that your business no longer exists after you’re done. All you can do in this case is start a new one when you have the chance.

Chapter 11 is much more complex. Your business remains operational, but a trustee, who handles your obligations regarding debt payments, is appointed. This means that you’re no longer in control of your business, at least not until all the debt is resolved.

Chapter 13 is designed for personal bankruptcy which means that the debts will be repaid from your personal accounts. The biggest issue here is determining what assets you can keep and what has to be sold.

New vendors

Securing money from banks is going to be difficult for a couple of months. That’s why you need to keep a steady supply of cash coming in. Maintaining a good relationship with your former vendors should be your first priority – if they can supply you, you’re on the right track. Keep in mind that new vendors will probably ask for additional payments or higher rates because of your status and that’s just the fact of life.

Repairing your credit

Declaring personal bankruptcy will have a significant impact on your credit score. There’s no way around it, the only thing you can do is be honest about it when you’re applying for a loan. You could also contact the professionals at Bad Credit Loans, who have many options for people in your situation. The key to repairing your credit score is paying all the bills on time and in full. It can take a while, but it’s worth it once it’s done.

Savings

It’s important to start saving right away. Having a savings account with actual money in it shows the lenders that you can manage money again and therefore be trusted with it. What’s even more important is to do it on a regular basis. Leave some money aside every month regardless of how small the sum is. Open a savings account just for this purpose so it isn’t related to other financial issues you may have. This money isn’t just for show; even small savings could be useful if you’re in a pinch again.

A budget

In the end, make a detailed plan for dealing with your personal finance. You should have a budget for each month, where you list all of your income and expense. Remember to set aside money for debts and bills as soon as you have it and stick to the plan you have made. This builds discipline and helps you plan ahead after a hard time. Make a revision to the budget every three months so you know how your finance fluctuates and what can be improved.

It’s possible to get back on track after bankruptcy – you just need to keep track of your finances, pay the bills on time and try to get back the trust of the lenders.

 

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