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3 Things To Know About Bankruptcy & Your Business

No one ever wants to think about bankruptcy, but it happens frequently. Whether it’s business or personal, sometimes it feels like it’s unavoidable. There’s a stigma attached to it although, strangely enough, rich people don’t feel as often as the rest of us.

Still, it’s something that needs to be addressed because it’s not the “end all” that it sounds like it can be… at least not across the board. We’re going to talk about 3 things we feel you should know and understand so that you’re armed with at least a little bit of knowledge if you believe it’s something you should consider.

1. Everything doesn’t go away if you declare bankruptcy

Bankruptcy can be a quick fix to your money problems or give you time to make deals to pay down your debt over a longer period of time than your initial agreement with creditors. However, there are some things that you still have to deal with if you declare bankruptcy. Some of those things are:

* student loans
* most legal judgments against you including alimony and child support
* debts you forget to list
* loss of home and property (unless you file Chapter 13)
* most tax debts

2. It’s going to affect your credit record for 7 years… possibly longer

Federal guidelines say a bankruptcy can stay on your credit report for a certain period, but with there being so many reporting agencies out there you’d have to be checking consistently and writing some of them to remove some of the data. That doesn’t mean that after 7 years you’re totally in the clear with those offering credit but it’s possible some of them will still send you offers with high APRs.

If you’re really in a bind and have to go this route, it doesn’t make you a pariah. Many automobile dealers will still allow you to buy a car, though they may make you pay a healthy down payment and you’ll get a higher interest rate. If you have the ability you can always go back and pay some of those creditors off and often they’ll reinstate your credit rating with them… sometimes not even increasing the APR on you.

When it comes to your business, this might be a reason to incorporate the business because if bankruptcy is related to it then it’s the business that takes the hit instead of your personal account, even if you’re a sole proprietor. This helps in cases where your business might get sued or other related conditions.

3. Don’t go into bankruptcy recklessly

Before you get to the stage where you might decide on going the bankruptcy route, first take time to discuss your options with an accountant or a consumer credit agency to find out if that’s your only option. Sometimes all it takes is a good financial eye to help you figure out how to pay all your bills, tell you who to call and how to negotiate better payment terms, while still having enough money to live on.

It won’t be easy unless you actually have way more money than you thought you did and just need to have a better budget set up for your comfort. It’s always better to take care of yourself than having to go into bankruptcy.

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