Can My Business Survive After Bankruptcy?

cf815For small business owners particularly, bankruptcy is one of the most frightening and distasteful words in the English language. When you or your business are staring down the barrel of bankruptcy, it can seem like the end of the world. But bankruptcy is not necessarily the end of your business, and it is certainly not the end of your career; it is a financial tool designed to help you get your business and your finances back on the right track.

Depending on the type of business you own, the type of bankruptcy you plan to file, and several other aspects, you may be able to turn things around and rebuild a successful company. In fact, a study conducted by the US Small Business Administration (SBA) found that many small businesses with fewer than 500 employees were able to rebound into thriving companies within seven years of filing bankruptcy.

Even though it may feel as though the situation is hopeless when you are initially faced with the possibility of bankruptcy, it is important to take a breath, take a step back, evaluate your options realistically, and understand that the world is not coming to an end. The following text relates different types of bankruptcy and what they can mean for the future of your business.

Chapter 7

If the debts of your company are so overwhelming that restructuring is not possible, or the company does not have significant assets left, Chapter 7– or liquidation— may be the only option. In this case, your business is unfortunately over.

However, while this venture may have failed, many entrepreneurs have successfully built new companies within a few years of Chapter 7. Finding financing and willing vendors will be more difficult after you have liquidated a company, but that does not mean it is impossible. Strong relationships with vendors and partners in the industry will be invaluable in these cases, and you may be able to find financing in alternative options.

Chapter 11

If your company still has a realistic future, you could file Chapter 11 and remain operational. While this is the most complex and expensive type of bankruptcy that a business may undergo, ensuring the future of your company may make it worth the trouble. Whereas Chapter 7 forces you to liquidate your company to pay off overwhelming debts, Chapter 11 is a plan that restructures your company so it can pay creditors and rebuild into a successful company eventually.

With this type of bankruptcy, the court allows a company to be reorganized under the control of a court-appointed trustee, and in some cases, the court may even allow the owner of the company to be the trustee. Chapter 11 bankruptcies consist of very complicated, intricate plans, and you should always consult closely with attorneys to decide if this is the right path.

Chapter 13

Chapter 13 bankruptcy is typically reserved for personal consumers, but it can be a helpful tool if you are the sole proprietor of your business. This is usually considered personal bankruptcy, but it may be the right option if your personal and business finances are closely intermingled. In these cases, you would build and submit a repayment plan through the bankruptcy court, detailing how your debts can be repaid.

If you file Chapter 13 bankruptcy, you may be able to avoid losing your personal assets, your home and your business if you are the sole proprietor. However, once you file Chapter 13, it is crucial that you stick to the repayment plan that is laid out. Failing to stick to these terms could lead to Chapter 13 dismissal which would void the entire process and make you again liable for all debts, possibly leading to the seizure of your assets. Do not confuse this with Chapter 13 discharge, which involves the successful completion of the bankruptcy process.

Not the End

No matter the type of bankruptcy you file, it is important to understand that your career can continue. Any type of bankruptcy can make things more difficult for your business in the future, but these lessons will only make you stronger going forward.

Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Leave a Comment


May the 4th Be with You: Star Wars Swag on Amazon

May the 4th Be With You: Star Wars Day Swag

It began as the punniest holiday ever but quickly grew into an earnest (if somewhat random) celebration of the long-running (and still... more →
People count the money to buy a house in future success.

Avoiding Mortgage Scams: Don’t Fall for Unreasonable Promises

If it sounds too good to be true, it probably is. That’s sound advice for almost all aspects of life, including the search for... more →
Eat for free for a whole month via the meal kit companies discounts for new customers.

How To Get a Month of Free Food: 9 Meal Kit Companies Offering Discounts to New Customers

Play your cards right and you might be able to line up a month’s worth of free meals if you were to try out all nine of the meal... more →
Generate extra cashflow -- here are 97 ways.

96 Awesome Ways to Generate Extra Cashflow

Who doesn’t want more money nowadays? We’ve got you covered on that front. Here comes a long list of different ideas on... more →
Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
Government Sponsored Retirement Account, myRA

Meet The Government Sponsored Retirement Account-MyRA

The Following is a guest post from Richard Dedor.  Richard is a national motivational speaker, personal coach and author, writing... more →