Ask any bankruptcy attorney and they will tell you that it is a common notion that bankruptcy means there is no future and no light at the end of the tunnel. Dismal as it sounds, that is not the case; it is up to the individual or the business if they want to shut down or continue.
When can you file for bankruptcy?
Doing business is not easy especially during economic turmoil. Often, businesses are unable to withstand the financial strain of running the business and reach a crossroad where they have to decide between bankruptcy and shutdown.
Bankruptcy does not mean shutdown. Once you declare bankruptcy, though your credit scores will be affected, it is not the end of the road. The type of bankruptcy you file decides the future of your business – http://mydebtadvisors.com/milwaukee-wi-office-locations.
When you file Chapter 7 bankruptcy your business ceases to exist as all your assets are sold to pay off your debtors. With all assets gone, the business becomes non-existent and any remaining debts are considered discharged and you are not bound legally to clear these debts.
When a business files Chapter 11 bankruptcy it basically gets a breather to get its act together and continue with its day-to-day transactions to clear all their debts. Under this protection you can devise a plan to pay off the debts by restructuring and reorganizing your business plan.
Advantages of bankruptcy
1. The trustee is in charge of liquidating assets and dealing with the various creditors while you can concentrate on improving the business and reorganizational schemes.
2. Suspension of debt payments for a temporary period is possible wherein the creditors are paid only a part of what they are owed. This will give the company finances to stay afloat.
3. You can avail bankruptcy exemptions and save your personal property for liquidation.
4. There is an automatic stay applied which protects you from aggressive creditors. The money thus saved can be used to clear taxes, employees and for other reorganization plans.
Shutdown without bankruptcy
You can also choose to shut down your business without filing for bankruptcy. Each and every state in the US is governed by a different set of rules with regards to the dissolution of business. You must file a notice of dissolution for any kind of legal protection that you hope to receive.
But the biggest advantage of shutting down with bankruptcy is that you will be no longer liable to your creditors once all your assets are sold but that is not the case when you shutdown without bankruptcy.
How to decide if you can continue your business
The following factors will help you decide the kind of bankruptcy you want to file.
1. Are you making Money? No; this question is not silly because you might not be making money when the overall economy is dull, but when things where better if your business was profitable, you should hold on to it.
2. Compare assets and liabilities: It is common sense that when your liabilities far exceed your assets, it’s time to close shop.
3. Personal liability: In a sole proprietorship you are responsible for all your liabilities and therefore it is essential that you continue your business and strike some deal with your creditors till you clear their debts. Or else you will lose all your personal belongings as well.
The Road ahead
There is no rule in the US constitution which can prevent you from starting a new business after a Chapter 7 bankruptcy. You can, in fact, use the same name or choose a new identity; with a new identity there will be no record of previous poor credit scores but in case your previous name is a brand by itself, then it is prudent to stick to it.
A few pointers on how to proceed:
• Invest little: The saying, “once bitten, twice shy,” is very apt here. You have learned your lessons and hence take care to invest the bare minimum required to start your business.
• Seek government Aid: With bankruptcy on your credit scores obtaining investment and building business credit is difficult. To start off you can seek help from the chamber of commerce in your region.
• Create a business plan: Do the necessary research for your product and build a tech savvy business plan that can reach out to the target audience.
• Legal Help: Seek legal advice before you start a business after a bankruptcy. There are several legal firms dedicated exclusively to bankruptcy in Milwaukee, WI; they can explain all the rules and regulations that govern businesses during and after bankruptcy.
A little effort, patience and business ethics will help you rebuild your business once again.