Recovery From Bankruptcy

[Alissa]

When a person has recently been bankrupt, what are the risks of having financial dealings with them? Specifically are they allowed to go straight back into business or would they have to wait?

[Chelle]

What do you mean by "going straight back into business"? Would it be the same business that they declared bankruptcy against?

I would think if you declare bankruptcy, you wouldn't have enough cash to start the business back up. Plus, the people you did business with would probably view you as a high risk.

[linkjuice]

if your looking at going into business with this person do your due diligence, there is a reason why the person was bankrupt in the first place. My suggestion is to be careful.

Here in NZ you can start a business quiet easy and each business model has its pros and cons, the easiest to get established is a sole proprietorship this is where you start trading under your own name as one person, the pros is that it is real easy to get started, you can simply start trading under your own name.

the cons to this structure is your liable for all or any costs and stand to loose everything if your creditors decide to sue you. The second is known as a partnership this is where two people join forces and operate as partners, the pros to this is that the risk is shared between two people, the cons to it is that if your partner has no assets then your creditors can take yours, under a partnership agreement

the third type is a company, the pros to this is that the risk is limited, you trade under a company name, its easy to set up, you can do this on-line at the companies office, the pros to this is there is a requirement to keep annual returns, it pays to keep good financial records. And your assets are protected to a certain degree under this structure

Of the three if your looking at going into business with this person go for the company registration, the director does have to declare if they have been bankrupt, but personally if it was me in your situation depending on the skills of the person I wouldn't let them manage the purse strings, id let them manage the working operations and have no financial authority, after all if anything does go wrong your looking out for your best interest and as the relationship develops over time then you can start allocating more financial responsibility as trust develops.

But always do your due diligence and seek the advice of professionals like business lawyers and accountants first.

[greenback]

I think you also have to consider what caused a company to go bankrupt. Was it due to mismanagement of funds or perhaps economical conditions at the time? Are they going into the same business field or branching out into something new.

[carlo]

They're a high financial risk at that point. With all the other businesses out there that haven't declared bankruptcy, why would you deal with one that has?

[half dollar]

I have to agree with Carlos here. With all the good and thriving businesses available for investment you are better off doing some research and finding something more stable. If you are trying to help out a family member, remember more families have been torn apart by money issues than any other issue.

[Carrotsarebleh]

I don't think I would take the chance of going into business with them. You never know what the underlying reason was they went bankrupt in the first place. There are a lot of legitimate reasons that may have happened to them but until you go into business with someone, you don't really know them.

[Holly234]

Many years need to pass before bankruptcy is no longer an issue. I believe it takes 7 years for bankruptcy to be removed from your credit record, and perhaps longer for a customer to forget. If you can prove to a bank that your bankruptcy was not a result of mismanaged funds, you will have a much more likely chance of getting approved for a loan.
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Holly Carlay / Indianapolis, IN / Dental Insurance Plans / Insurance Guru

[Frank]

Lots of good information linkjuice! Thanks for all of that. I'm way past the age I would want to go into business but I like to know as much as I can anyway. My children do need guidance occasionally so I like to stay current on any type of financial information I can find.