After a bankruptcy case, the idea of returning to the business world can seem like a pipe dream or a near impossibility. While a bankruptcy case can certainly put a dent in an individual’s credit, it should not hinder that person from successfully starting a business or returning to an already-existing business.
The good news is succeeding in business after a bankruptcy can be and has been done. Many entrepreneurs have gone through personal bankruptcy and come back stronger and better. Several well-known companies, such as General Motors (GM) or Delta Airlines have filed for bankruptcy only to restructure their businesses and rebuild their brands successfully. The following tips can help an individual or business recover after filing bankruptcy.
Have a Financial Plan
Nothing can be done without some type of plan. Whether the business is starting from the ground up or is being rebuilt, it helps to create a comprehensive financial plan. The plan should first start with taking an inventory where the person is in terms of current assets and liabilities. He or she should not have significant debts after a bankruptcy discharge, but make sure to account for any debts that remain outstanding. After coming up with an inventory of where the person is now, the next step is to create a plan on where he or she wants to be in the future. How will that goal be accomplished? Create a plan that is workable and reasonable for getting that person from start to finish in terms of his or her goals.
Rebuild Credit
Bankruptcy cases can lead to a significant credit hit for the filer, but credit can be rebuilt over time. Generally, a Chapter 7 bankruptcy will stay on a person’s credit report for ten years, while a Chapter 13 bankruptcy case will stay on the person’s credit report for seven years.
One of the biggest misconceptions about filing for bankruptcy is that it will ruin your credit score and your financial future. To the contrary, after filing for bankruptcy you can begin restoring your credit right away.
One of the best ways to improve credit is by paying all bills on time, creating a positive payment history. As time goes by, the longer a consumer can show he or she is paying bills in a timely manner, the better this will reflect on his or her credit history. Consumers can check their progress by monitoring their credit scores every 30 to 45 days to see if improvement is occurring.
Keep Operating Costs Low
When getting back to business after completing a bankruptcy case, it is best to keep business operating costs minimal. The business owner should look at his or her expenses, tracking what costs are fixed and nonnegotiable and what costs are variable and can be eliminated. It can be tough to cut back on certain operating expenses, especially if this results in limiting the business’s growth potential. However, the businessowner should view this only as a temporary means to an end. As more income comes in and the company gets back on track, these expenses can always be modified to allow for better business growth.
Invest in Savings
By setting aside money in a savings account, the businessowner will be able to handle running operations during a time of difficulty. A good rule of thumb is to save anywhere from three to six months’ worth of expenses. Savings can be done automatically by setting up an automatic transfer every month to keep the owner on track.
Network as Much as Possible
Businesses are often built on relationships, which is why networking is key. If the owner has already worked with vendors and suppliers prior to filing for bankruptcy, it is important to rebuild those connections as these companies may be hesitant to work with that person again. Address any mistakes that were made in the past and present how the business will avoid making them in the future. Many times, actions speak better than words. Rather than simply promise to do better, show that it can be done by adhering to contracts and paying all bills on time. Over time, these companies will see that the business can be trusted again.
The fact that an individual or company has gone through bankruptcy should not discourage them from engaging in a new business venture or picking up where they left off. Bankruptcy is intended to give a fresh financial start, not handicap the filer from having a successful future.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.