Business Bankruptcy: Additional Tips
As you can see, business bankruptcy isnt always a death sentence. But thats no reason to take this decision lightly in any way. Business bankruptcy should only enter the discussion when you have no other possible options for repaying your debts.
Filing for bankruptcy can negatively affect numerous aspects of your life, not just your personal credit or financing eligibility.
For example, once you file bankruptcy forms to the court, your bankruptcy becomes public record. If you are considering filing, get ready to explain your decision to different people time and time again. Its relatively safe to assume that anyone who should know about your bankruptcy will eventually know. This includes competing businesses, employees, family members, and potential employers.
Depending on your desired field, having a bankruptcy on your record can make it very difficult to get a job. You should probably steer clear of the finance industry or any industry with comprehensive employee screening policies, like law enforcement. Rebuilding your reputation and sense of confidence after filing for bankruptcy could be one of the most stringent tests of your career.
Myth: You Can Go On A Shopping Spree Before Filing For Bankruptcy
When you file for bankruptcy, courts examine your financial situation closely, and any unusual behavior before you file could get you in trouble. For example, if you go on a shopping spree and spend more than $750 on luxury goods or services within 90 days of your filing date or take out cash advances of $1,000 or more within 70 days of your filing date, you could be charged with presumptive fraud.
Similarly, you cannot give any of your creditors preferential treatment before filing for bankruptcy. If you pay a friend or family member back for a loan, then file for bankruptcy, the court may question you or file charges against you.
In short, you can get a massage to relieve some of your stress, but you cannot go on a shopping spree before filing for bankruptcy. When it comes to your creditors, let the court figure it out.
How Long To Recover From Bankruptcy
That one is entirely up to you. Most people, once they file for bankruptcy, immediately begin to feel better. They are no longer dealing with phone calls from their creditors or struggling to balance monthly debt payments.
Having eliminated their current debt problems, most find they are able to build a stronger financial future. Unless you urgently need to purchase a home for the first time or buy a car, you may not even need to worry about qualifying for credit right away. Many find they are able to live without immediate credit and since they have a stronger cash flow than before bankruptcy, they are able to start saving for when they do.
Having said that, approximately 10% of all Canadians will declare bankruptcy at some point in their life. The critical period is the period you remain in bankruptcy and the first two or three years after you have completed the process. During this time access to credit will be restricted. You can slowly start rebuilding your credit during your bankruptcy using a secured credit card. Once you have completed your bankruptcy you will start to rebuild your credit. As you , traditional credit will become available again.
What about the I heard you cant have a bank account for ten years even if you file for bankruptcy? Of course you can have a bank account if you file for bankruptcy. In fact, one of the last things you do just before you file is .
What Is Chapter 7 Business Bankruptcy
Chapter 7 business bankruptcy is designed for businesses that cannot repay their debts because they can no longer maintain operations and earn revenue. The company shuts down so the court-appointed trustee can liquidate its assets and repay the creditors. All directors and employees are dismissed.
The liquidation process is pretty simple. Most Chapter 7 filers owe debts to multiple creditors. Thus, the trustee divides the businesss assets to compensate each creditor for the amount owed. Thanks to federal and state bankruptcy exemption laws, creditors cannot seize certain types of personal assets. For example, you probably wont have to give up full ownership of your home or vehicle under Chapter 7 bankruptcy.
Though all business entities can legally file Chapter 7, most filers are reportedly sole proprietors. This is because only sole proprietors are eligible to receive whats known as a debt discharge after filing Chapter 7. If you are discharged from a business debt, you will no longer be responsible for paying it back, even if the original agreement included a personal guarantee. Thus, the creditor cannot seize your personal assets.
Discharges are not available to corporations, LLCs, and partnerships. When owners of these business entities sign a personal guarantee on a loan, filing for Chapter 7 wont protect them from having their personal assets seized if they cant pay off the debt.
Who Can Be Made Bankrupt
A bankruptcy order can be made for one of three reasons:
- you cannot pay what you owe and want to declare yourself bankrupt
- your creditors apply to make you bankrupt because you owe them £5000 or more
- an insolvency practitioner makes you bankrupt because youve broken the terms of an individual voluntary arrangement
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So How Can A Bankruptcy Filing Possibly Help My Credit Rating
Think of your credit report like a timeline that dips down when negative information is reported and steadily goes up with every on-time payment you make. After a while, the bankruptcy filing will be nothing more than a blip in your timeline.
Remember, your credit history is â¦ well â¦ history. What you do to improve your personal finances today matters more than what you did last year! Letâs take a look at some of the things you can do to build good credit after a bankruptcy filing.
How Are Delinquent Accounts Reported On Credit Reports
People who file for either type of bankruptcy may have accounts which have been delinquent for several months or even longer. The individual delinquent accounts are deleted seven years from the original delinquency date.
The delinquency date is the date the account first became delinquent. Filing for either kind of bankruptcy does not alter the original delinquency date nor does it extend the time the account remains on the credit report.
In most instances, since the account was delinquent before it was included in the Chapter 7 or Chapter 13 bankruptcy, it is likely to be deleted before the bankruptcy public record.
How Long Do Bankruptcies Impact Your Credit Scores
Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years. However, the impact of both types of bankruptcies on your credit score will lessen over time. Plus, If you practice good credit habits, you could see your score recover faster.
Also, how much your credit score decreases depends on how high your score was before filing for bankruptcy. If you had a good to excellent score before filing, this likely means your credit score will drop more than someone who already had a bad credit score.
How Long Does Bankruptcy Affect Me
There sure is a lot of misinformation out there about bankruptcy, how long it lasts and what the long term effects are. Just when I think I have heard it all, someone comes up with a new one, I heard you cant have a bank account for 10 years when youre bankrupt A person said that to me just last week.
So, how long does a bankruptcy affect you? There are three answers to that question:
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Stay In Chapter 13 Protects Co Debtors
If the lawsuit involves a consumer debt, anyone who is jointly liable with the debtor is protected by the stay when the debtor chooses Chapter 13.
A consumer debt is defined as debt incurred by an individual primarily for a personal, family, or household purpose. § 101
Even though the co debtor didnt file bankruptcy themselves, they get this protection because its seen as protecting the debtor as well.
The co debtor stay can be lifted by a motion for relief from the stay if the Chapter 13 plan doesnt propose to pay the debt in full.
Review Your Credit Reports
Monitoring your credit report is a good practice because it can help you catch and fix credit reporting errors. After going through bankruptcy, you should review your credit reports from all three credit bureausExperian, Equifax and Transunion. Due to Covid-19, you can view your credit reports for free weekly through April 20, 2022 by visiting AnnualCreditReport.com.
While reviewing your reports, check to see if all accounts that were discharged after completing bankruptcy are listed on your account with a zero balance and indicate that theyve been discharged because of it. Also, make sure that each account listed belongs to you and shows the correct payment status and open and closed dates.
If you spot an error while reviewing your credit reports, dispute it with each credit bureau that includes it by sending a dispute letter by mail, filing an online dispute or contacting the reporting agency by phone.
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How Long Will A Bankruptcy Stay On My Credit History
After you complete bankruptcy proceedings, your credit history will continue to list your bankruptcy for a predetermined amount of time, depending on which type of bankruptcy you filed. For a Chapter 7, the bankruptcy will be visible on your credit report for ten years.
AChapter 13 will be visible for only seven years. In situations serious enough to warrant bankruptcy, repayment alternatives would likely affect your credit for a similar amount of time without the promise of a fresh start.
Can You Remove A Bankruptcy From Your Credit Report
Unfortunately, if a bankruptcy that’s appearing on your credit report is legitimate and is being reported accurately, it’s highly unlikely that a creditor or credit bureau would agree to remove it.
However, you’ll want to check your credit report to make sure that the right accounts were reported as being involved in the bankruptcy. You’ll also want to make sure that all the accounts that were part of the bankruptcy are showing a balance of zero.
If accounts that weren’t part of the bankruptcy are being reported as included, you can dispute the errors to have them removed. Or if included accounts are still showing an outstanding balance, you can dispute this as well.
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Review Your Reports Once The Time Is Up
Once your bankruptcy has been completed and the seven- or 10-year clock has expired, review your reports again to make sure the bankruptcy was removed.
A bankruptcy should fall off your credit reports automatically, but if it doesnt, notify the credit bureaus and ask to have the bankruptcy removed and your reports updated.
Do You Have To Disclose Your Bankruptcy To Your Employer
You don’t have a proactive duty to tell your current employer that you filed for bankruptcy in the past. However, because your bankruptcy filing is a public record, your employer can find out about it through a public record search or credit check. Also, if you are in a Chapter 13 bankruptcy and fail to make your monthly plan payments, in some states, the court or the bankruptcy trustee will send your employer a wage deduction order to withhold the payments directly from your paycheck.
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Your Interview With The Official Receiver
If your bankruptcy is approved, youll have an interview with the official receiver. If youve presented your own bankruptcy petition, this might happen directly after the bankruptcy order is made. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person, if you prefer.
If youve been made bankrupt by one of your creditors the official receiver may also contact you by telephone to find out if there is anything that needs to be sorted out urgently.
You must attend the interview and cooperate with the official receiver. If you do not, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court. The more organised you are, the more straightforward the process will be.
Before the interview, telephone the official receiver to confirm or rearrange the appointment let them know if:
- you require special facilities
- there is anything that needs to be sorted out urgently
- you need more time to gather the paperwork for the meeting
If you have been sent a questionnaire, fill it in, and note down anything you do not understand. If youre having a telephone interview, return it by the date given.
Collect together all the paperwork youve been asked to take to the interview or have with you during the telephone call.
Face-to-face interviews may take 2 to 3 hours.
After you arrive:
The examiner will:
How Does Bankruptcy Affect My Partner
In most cases, you will file as an individual. In this instance, your partners credit rating will not be affected. However, any joint assets could be affected.
Although your bankruptcy wont directly impact your partner, it will have what is called satellite effects by placing restrictions or by simply being a hindrance.
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Myths About Bankruptcy And Your Credit Debunked
Filing for bankruptcy is devastating to your credit and can cause your credit score to plummet more than 200 points. But for people in dire straits, bankruptcy is a last resort that can help them liquidate assets, discard or pay off debts, and get some financial relief.
If youre considering bankruptcy, you need to understand how it will affect your credit. This involves clearing up some common misconceptions about how bankruptcy affects your credit.
If You Do Not Live In England Or Wales
You can declare yourself bankrupt in England or Wales if you live outside the UK, provided you lived in England or Wales or have had a business there at some point in the last three years. The Bankruptcy Order made in England and Wales may not be recognised in other countries outside the UK.
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Talk To A New York Bankruptcy Attorney Today
How long will bankruptcy stay on your credit report? Fortunately, not forever. With good credit habits and patience, you can have bankruptcy knocked off your record in 7 to 10 years. It will then have no impact on your future credit or loan eligibility.
Bankruptcy is a serious legal decision with far-reaching consequences. While it has its merits, you should consider other possible avenues before settling on it.
If you believe that you may have a need to file for bankruptcy, you shouldnt navigate the process alone. Contact Pierce McCoy Bankruptcy to set up a consultation with an expert New York Bankruptcy Attorney.
What Are The Alternative Solutions To Bankruptcy
While many people believe that bankruptcy is the only solution when you are drowning in debt, that is not the case. Bankruptcy is, in truth, your last resort. There are many alternative debt relief solutions available to you that may mean you can avoid declaring bankruptcy.
At Debt Negotiators, we work closely with you to find the best debt solution for you.
Even if you are falling badly behind on your repayments, we are often able to negotiate a debt solution that can help you get back in control of your finances such as:
- Help you secure a Debt Consolidation Loan that allows you to make one affordable monthly repayment.
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How Can You Rebuild Your Credit After Bankruptcy
While your credit score will take a hit after bankruptcy, there are steps that you can take to begin building a positive credit history again. First, if there are any credit accounts that weren’t included in your bankruptcy, make sure that you continue to make on-time payments on them each month.
Second, applying for a secured credit card can be one of your best options for rebuilding your score. Since these cards require a security deposit, which limits the issuer’s risk, they’re easier to qualify for with poor or damaged credit.
Payment history on secured cards is reported to the credit bureaus just like regular credit cards. So making consistent on-time payments on a secured card can improve your score over time which can open up more credit opportunities for you down the road.
Before you apply for a secured card, check to make sure that it reports cardholder payment activity to all three major credit bureaus. And to see the biggest positive impact on your score, try to keep the credit utilization rate on your secured card below 30%.
When Is Bankruptcy Removed From Your Credit Report
A Chapter 7 bankruptcy can stay on your credit report for up to 10 years from the date the bankruptcy was filed, while a Chapter 13 bankruptcy will fall off your report seven years after the filing date.
After the allotted seven or 10 years, the bankruptcy will automatically fall off your credit report.
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