Can I start a new business or keep a business after bankruptcy?

You should consult with a qualified bankruptcy attorney before you begin any new business after bankruptcy, particularly a Chapter 7 bankruptcy.

Once a Chapter 7 bankruptcy is filed you can start a new business without the worry of your future earnings being seized. The problem is finding financing and suppliers for your business since you will have very few remaining assets of your own. Securing new credit, property, tools, and supplies will be difficult on a cash-only basis.

Try to establish credit in the name of the new business if possible. You will have to pay higher interest rates, but you may be able to renegotiate the terms after some time has passed. Consider involving a partner or other co-signer with established credit to help get your business off the ground.

Keeping a business after bankruptcy depends on two things: the type of bankruptcy that you file and the type of the business you own. In Chapter 13 bankruptcy, any business that produces income is a reasonable option for making the Chapter 13 plan payments. It is unlikely that the business would be in jeopardy unless the business is the cause of the bankruptcy.

Chapter 7 bankruptcy, however, is a different matter. In Chapter 7 bankruptcy, any asset can be sold for debt repayment. Your business could be considered an asset, though it is possible that all or part of your business could be exempted from the Chapter 7 bankruptcy filing. Arizona allows for some exemption of tools and equipment related to a business, and some business inventory might fit within the other allowable exemptions of a Chapter 7 bankruptcy, but only if the business is a sole proprietorship or general partnership. There are no bankruptcy exemptions for corporations or LLCs.

When you own a business, filing for bankruptcy is more complicated. A knowledgeable bankruptcy attorney will review all of your options for business after bankruptcy before you make a decision.