How Can I Start a Business After Bankruptcy in Texas?

 Posted on November 27, 2024 in Bankruptcy for Small Business Owners

Filing bankruptcy is a legal solution that can help reset your financial life. However, this fresh start comes with certain trade-offs. Bankruptcy affects the filer’s credit score and can temporarily impact his or her ability to obtain lines of credit. Chapter 13 bankruptcy appears on a filer’s credit for seven years, and Chapter 7 for 10 years.

Therefore, some aspiring entrepreneurs who are overwhelmed with debt and are considering bankruptcy wonder whether it will affect their ability to start a business. The good news is that bankruptcy does not stop you from being able to start a new venture, though it may present unique challenges to bankruptcy filers. The best way to plan how to launch a business after bankruptcy is to consult a Texas bankruptcy attorney who can help you understand how Chapter 7 or Chapter 13 can affect your entrepreneurial goals.

What Steps Should I Take to Start a Business After Bankruptcy?

Starting a business post-bankruptcy requires careful planning. Entrepreneurs who have discharged their debts through the bankruptcy process should consider taking the following steps:

• Rebuild your credit: Your credit score is low after bankruptcy, but improving it can widen your financing options by making it easier to obtain business loans. Start working on rebuilding your credit by applying for a secured credit card, accessing secured loans, and making timely repayments on all your financial obligations. 

• Make a financial plan: Review your funding options and create a financial plan. Entrepreneurs sometimes secure financing through crowdfunding, venture capitalists, friends and family, small business loans, and bootstrapping by investing personal savings. Entrepreneurs who have filed for bankruptcy may not have enough liquidity for bootstrapping and might want to avoid taking out loans as much as possible. Crowdfunding and venture capitalism, therefore, may be your best options.

• Create an entity: Decide how you want to incorporate your entity. An LLC can help protect your personal assets from business debts, but a corporation might give you more credibility with creditors. 

• Start small and scale slowly: Being both an entrepreneur and a bankruptcy filer means you are launching a business while trying to rebuild your financial life. Start small so you do not overextend yourself and plunge into more debt. Scale slowly by taking your time to make careful decisions at each stage.

What Legal Factors Should Entrepreneurs Consider Post-Bankruptcy?

Bankruptcy filers who want to start a business should take the following legal factors into consideration:

• If you have filed for Chapter 13, you generally cannot take on more debt while you are still repaying creditors. This may affect certain business activities.

• Keep your personal and business bank accounts separate so that funds do not commingle. That can create legal complications and place your personal assets in jeopardy.

• Although you may be focused on your business, make sure to keep up your repayments if you have filed Chapter 13.

Contact a Kerrville, TX Bankruptcy Lawyer

Filing for bankruptcy can bring certain challenges for entrepreneurs, but they do not have to be a barrier to launching a business. Consult a Schertz, TX bankruptcy attorney about how you can start a business post-bankruptcy. At the Law Offices of Chance M. McGhee, we excel at helping entrepreneurs navigate the bankruptcy process and build a financial future after discharging their debts. Call 210-342-3400 now to get a free consultation today.