Can a business that has filed a Chapter 7 bankruptcy start another business after liquidation?
UPDATED: January 29, 2020
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When a business files Chapter 7 bankruptcy liquidation, that business essentially exists no longer. The assets of the business are sold and the proceeds distributed among the creditors the business owed. The debts are forgiven, but the business doesn't really have anything left. However, this doesn't necessarily mean that a new business can't be started or that the existing business can't find a new lease on life after a Chapter 7 bankruptcy.
Starting a New Business After Chapter 7
There is no rule that a new business cannot be started after a Chapter 7 bankruptcy and liquidation. This business may operate under the same name, or the owner or owners of the old business may opt to start a new business with a new identity. Usually, starting afresh and creating a new name is a better idea than using the old, since you don't want any negative credit information to taint the new business if you can avoid it. However, if the old business has a significant amount of brand recognition, it might be advisable to keep the same name.
Business Challenges After Chapter 7 Bankruptcy
The biggest challenge that will come to a business who wishes to start anew after Chapter 7 bankruptcy is the challenge of financing. Most businesses need some money to function, and if you have a bankruptcy on the record, you may have some difficulty finding lenders who are willing to extend credit. As the owner of the business, you may decide to invest your own personal funds, however, this can put your personal assets at significant risk if the business doesn't work out the second time around.
It is best to start slow when trying to turn a business around or start a new business after Chapter 7 bankruptcy liquidation. Invest as little money as possible to get the business started and work on taking steps to build up business credit again and to secure a positive cash flow so the business can exist without debt.
If you are considering business bankruptcy or if your business has already declared bankruptcy, getting the advice of a lawyer is recommended. A lawyer is an invaluable resource in helping you to determine the rules regarding businesses and Chapter 7 bankruptcy.