Will I Ever Be Able To Start A New Business After Filing A Business Bankruptcy?
Yes, you can start a new business right away, but you might be accused of playing what’s called “shell game”. For example, I’ve had clients who filed a bankruptcy for Auto Service Center and immediately started a new business in the same location called Center for Auto Service or something like that. Creditors of your bankrupt company could go to court and file a lawsuit against your new company and say that you have retained all of your assets from that bankruptcy and started a new company doing the exact same thing, while still owing a debt for the same business. While I have had clients who have done it, I always advise against it, as it is a risky thing to do. If you start a new but unrelated business, there should be no problem.
How Will Filing A Business Bankruptcy Affect My Credit Score?
This depends on whether your debts are reported on your personal credit report. Most of the time, that would only happen if you signed for the debts personally. Businesses don’t usually have a credit score, unless it is reported to Dun & Bradstreet, which is very unusual for small businesses. Sometimes, filing for bankruptcy may even improve your score, as your debts will be removed from your report, and you will have a decreased debt-to-income ratio. However, this depends on the situation.
What Do Employees have to Know When Their Employing Business Is Filing Bankruptcy?
If you are filing bankruptcy, I recommend telling your employees about it. If you are planning on retaining them and bringing them into the new business, you should communicate that as well. However, you must prioritize paying the employee payroll.
How Public Is A Small Business Bankruptcy? Will Everybody in The Industry Know?
In an effort to keep things private, you should contact your creditors and vendors and attempt to work things out with them prior to filing a bankruptcy. During these talks, you should bring up that you are considering bankruptcy, as it may make them consider that they may not get paid at all if you follow through with the bankruptcy. This can help you negotiate your debts down, as most vendors and creditors prefer getting paid partially than not at all.
Do All Owners And Partners Need To Be Named In A Small Business Bankruptcy?
Not if it’s a corporation or an LLC. As I said, you must do a corporate resolution, which usually signifies that there’s been a corporate vote and the majority has agreed to the bankruptcy. However, in the Statement Of Financial Affairs (SOFA), there is often a question about officers and former shareholders. So, at that point, you might have to name people who have withdrawn from the company or who are participating in the company. It’s just something that tells the court who the other partners or owners are.
Additional Information For Small Business Bankruptcy In Virginia
The new Subchapter V bankruptcy was started on February 19th of 2020. The unique thing about it is that in a regular Chapter 11, the debtor-owner is the trustee of the bankruptcy. A trustee is not appointed, but rather the owner becomes the trustee and has all the responsibilities of a trustee, such as the fiduciary responsibility to the estate that’s created when it is filed. In Subchapter V, a Chapter 11 trustee is appointed by the court. Interestingly, about half of these trustees aren’t even attorneys. They are just people who are pretty adept financially and can be trusted with the Code to see to it that the debtor does all the things they are supposed to do.
For more information on Starting A New Business After Filing Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (540) 788-2273 today.
Please Call Us For A Free Strategy Session
(804) 417-4905 | (703) 664-1912 | (540) 788-2273