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Can I Start a Business After Bankruptcy?

Many people dream of becoming a business owner and entrepreneurship, but bankruptcy has often gotten in the way. Many people make the mistake of believing that if they’ve filed for bankruptcy, they can’t start a business. They may be afraid that their business will go into bankruptcy too and things will be worse the second time around. You can become a business owner after bankruptcy, but there are a few things you need to keep in mind.

You’ll Likely Have Difficulty Obtaining Credit

Most business models tend to require some sort of startup cash, which most people don’t have following a bankruptcy. Obtaining a traditional business loan or a credit card may prove difficult for individuals who have filed for a Chapter 13 or Chapter 7 bankruptcy, so it’s important to be prepared for alternative financing for your business. Perhaps you may be able to discuss your business with family and friends who may be able to finance you, or you can look into financing through committed investors.

Keep Business and Personal Separate

When you start a new business, you’ll likely what to keep the company separate from yourself. This is especially true if you’ve previously filed for bankruptcy as a sole proprietor and your personal assets were involved. Consider establishing your business as a corporation or a limited liability company/partnership in order to separate your business and personal debts. When your business is set up this way, you cannot be held personally liable for debts the business itself incurred.

Pay Your Business Taxes

The most important thing you need to do when starting a business after bankruptcy is to plan ahead for paying your business taxes. They may be higher than what you’re used to, however, if you do not keep them current, you could end up in significant financial distress again. In most cases, tax debt is non-dishargeable, meaning that you would owe the debt despite bankruptcy. Set up a business budget that ensures your tax debt is placed at highest priority.

Contact an Attorney

Understanding how bankruptcy and business can tie together is important for new business owners that have previously filed for bankruptcy, either personally or professionally. At the Law Office of Joel M. Aresty, P.A., we can help you navigate the complex area of business and bankruptcy law and help you best prepare yourself for successfully owning a business post-bankruptcy. Contact us today for more information by calling 1-855-DOC-LAWS or 1-855-362-5297.

Voluntary vs. Forced Bankruptcy for Businesses

Some businesses say they are “forced” to file bankruptcy or they “had no other choice.” However, in most cases, this is a voluntary bankruptcy filing. Learn more about voluntary bankruptcy and business bankruptcy forced by creditors.

Voluntary Bankruptcy

Even if a business does not want to file bankruptcy, the owner or the board of directors can decide that bankruptcy is the best or only financially sound decision. Yet, this is still a voluntary bankruptcy. Certainly it feels forced or like the business owner is backed into a corner with no way out. However, filing for bankruptcy in this way is technically voluntary.

Involuntary Bankruptcy

In very few cases, creditors can bring about bankruptcy for a business. While a voluntary bankruptcy puts a company directly into bankruptcy, an involuntary bankruptcy is like a “complaint” where creditors suggest to the court that the business should file. The business can continue its usual operations.

To achieve an involuntary bankruptcy, certain criteria must be met. This includes:

If a company has less than 12 creditors — only one creditor is needed to file the involuntary bankruptcy petition.

If a company has more than 12 creditors — three or more creditors are needed to file the petition

  • The creditors’ claims must not be subject to a bona fide dispute or contingent as to liability
  • Qualifying claims against the business must total at least $14,425 if unsecured
  • Secured claims must total $14,425 above and beyond the value of liens

If the company disputes the involuntary bankruptcy petition, further criteria must be met, including but not limited to:

  • Appointing a custodian to take control over company assets within the last 120 days
  • Consecutively not paying debts as they become due

When to Contact an Attorney

If your business is struggling financially, bankruptcy may be on the horizon for you. In most cases, bankruptcy can be helpful for a company. However, if your creditors are attempting to file an involuntary bankruptcy against your business, you’ll want to investigate their claim and make sure they have the grounds to do so.

At the Law Firm of Joel M. Aresty, P.A., we have the resources and skills to assist you with fighting an involuntary bankruptcy petition. Contact us today for a consultation at 1-855-DOC-LAWS.

Can You Start a New Business After Filing Bankruptcy?

There are no laws that will prevent you from starting a new business after you’ve filed bankruptcy. However, there are several things you need to keep in mind as you begin forming a company under the shadow of bankruptcy. Here’s what you should know.

Be Prepared to Face Challenges Getting Credit

Most new business owners need some form of credit to start their companies. However, you may run into some issues obtaining credit, especially if you are fresh out of a business bankruptcy. So, take heart and be vigilant — there are creditors who are willing to give business loans to entrepreneurs. You may just need to try a few different places.

Increase your chances of obtaining financing for your new business by:

  • Preparing a very well thought out and well put together business plan to show lenders
  • Partnering with someone who has good credit
  • Locating investors who are willing to invest in your business
  • Check out smaller community banks versus larger federal banks

Keep Your Business and Personal Identity Separate

When you form your business, you have the option to keep your business separate from yourself. After filing bankruptcy, this is likely going to be your best option. You don’t want creditors to have the ability to go after you personally for debts that your business owes. A corporation or a limited liability company will afford you the separation you need to ensure that your personal finances are protected should the new business suffer financial problems as well. Be wary of signing personal guaranties — regardless of whether you incorporate your business the right way, if you sign a personal guaranty, you will be personally responsible for the debts of the business.

Make Your Tax Debt a Priority

Taxes are perhaps the most important debt that you will owe as a business owner. Ensure that you meet your tax obligations first by paying estimated taxes quarterly. If you have difficulty with business taxes, consider working with an experienced accountant to help you keep your taxes paid.

Get Paid for All Your Work

Don’t extend business to customers who are unable to pay for the services or goods rendered. When customers don’t pay you, you aren’t able to pay your lenders, which can result in a tumultuous financial situation. Always require payment up front.

If you have questions about starting a business after you’ve filed bankruptcy, don’t hesitate to contact an experienced bankruptcy lawyer. Joel M. Aresty, P.A. can help. Call now at (305) 904-1903.

Business Bankruptcy FAQ

The universe of corporate bankruptcy law can be intimidating and complicated. Here are answers to some of your most pertinent questions about business bankruptcy.

Q. What is Business Bankruptcy?

A. When a business has monetary liabilities that exceed their assets or is unable to fulfill financial obligations, the company may need to file for bankruptcy protection. If not bankruptcy protection, then they need to come to an arrangement with their lenders regarding payment. Bankruptcy proceedings are initiated by the debtor or the lender (called an involuntary bankruptcy). For example, lenders possibly included in a bankruptcy are:

  • Guaranteed lenders (those with a lien on your property)
  • Unsecured lenders (sellers, credit card firms, and others with no security interest in your property)
  • Judgment lenders (lenders that sued and received a judgment against the debtor before the bankruptcy filing)
  • Lenders with priority claims (those with precedence over other lenders due to specific rules under bankruptcy law)
  • Lenders with administrative claims (lenders, including accountants or attorneys, with precedence due to their support in the bankruptcy filing).

Q. Can a Business Settle a Debt With a Lender Outside of the Court System?

A. Company workouts are resolutions between a business and its lenders that meet the companies’ debts, allowing it to continue operation. Also called bankruptcy prevention, these arrangements are made outside the court system before a bankruptcy is filed. Ultimately, if a workout unachievable, the business may need to move forward with a bankruptcy.

Q. How Will Bankruptcy Proceed?

A. Filing a bankruptcy petition only begins a legal proceeding with no promises regarding the results. So, there isn’t any guarantee that the court will accept the bankruptcy. If the courts allow your bankruptcy to go forward, then a resolution will be worked out with your lenders to meet part or all of your debts.

Although bankruptcy has a bad reputation, it actually benefits the debtor along with lenders. This is because some or most of a company’s unsecured debt won’t be paid out under a bankruptcy proceeding. Tax debts and secured debt, however, will typically be paid back in full. For more information about how to file a business bankruptcy, or whether a business bankruptcy will benefit your company, don’t hesitate to contact Joel M. Aresty, P.A. Contact Attorney Aresty’s office today to schedule a consultation to discuss your company’s unique needs and what your next step should be. Call (305) 904-1903 or toll free at 1-855 DOC LAWS.

Is Your Business Headed for Bankruptcy?

The realization that your business may be going bankrupt is frightening. However, if you are seeing signs that your business is going under, it’s important to get the help you need as quickly as possible. Holding out hope that things will turn around or being in denial will only make it worse in the long run. If you recognize these signs that your business is struggling financially, you can work with an experienced business bankruptcy lawyer to help you minimize the damage and get back on stable financial footing.

1. Your Earnings Are Slowing Down

If you’re noticing that business is declining and your earnings are slowing down, you’ll soon not have enough to pay your business debts and obligations. This is often the first indicator that your business may be in financial trouble.

2. Increasing Interest Expenses

As your profits begin to slow down, you’ll notice that your interest rates rise as a percentage of your revenue. This means that your interest rates will prevent you from actually eating into your business debt, and whatever payments you’re making are only going toward interest. If you can’t pay all of the interest you owe, your debt will continue growing because your balance will rise and you will be charged interest on what you have accumulated. This has a snowball effect and can be difficult to get out from once the process has started.

3. Your Losses are Rising

If you’re finding that you are losing money on sales instead of making a profit or breaking even, this is another clear indicator that you will soon be in a situation where you’re not able to pay your business debt obligations. While some losses are expected with any business, even successful ones, if you begin to experience more and more losses, it’s time to take a hard look at where your business is really at.

When to Get Help

Depending on what type of business you own, you may or may not be held personally responsible for the debts of the business. If you see that your business is hurting financially, it’s critical to hire an experienced business bankruptcy lawyer. Joel M. Aresty, P.A. can help you find out where you’re at and what your next step should be, so you can overcome the challenges ahead. Call now for a consultation at 1-855 DOC LAWS.

Keys to Keeping Your Business Financially Stable

Running a business can be challenging, especially for individuals who aren’t great at accounting. However, keeping your business financially stable is arguably the most crucial thing you need to do for your business to grow and succeed. Many business owners focus on bringing in more and more new business, which is great, but if you aren’t managing the cash flow you currently have well, you’re still going to run into problems. Here are several ways you can help keep your business running smoothly financially.

Create a Separate Account for Your Debts

You likely already have a bank account specifically dedicated to your business. However, consider setting up another account just for your business’ debts. For example, if you take out a business loan, you may not want to deposit that money directly into your business checking account. Often, loans have fine print that say that if you’re missing payments, the lender can withdraw funds from your account without notice. By keeping your debts separate from your business bank account, you can avoid lenders draining all the money you have to operate your business.

Ensure Your Taxes Are Paid On Time

One of your major priorities as a business owner should be to pay your taxes on time. The IRS may be able to hold you personally accountable for your business’ back taxes and the penalties for non-payment or late payment can be extreme. Additionally, tax debts are rarely dischargeable under any type of bankruptcy, so you will still owe these debts even if you file for a business bankruptcy. Make your taxes a priority and pay these before anything else.

Cut Spending

If you’re experiencing financial problems within your business, first look at your spending. While most businesses have to spend money to make money, you can cut your spending if you carefully examine the cash flowing out and where you may be able to cut corners. Purchasing cheaper supplies, paring down to the minimum amount of employees, and other ways to cut spending can help you more easily meet the critical financial obligations of your business.

When to Contact an Attorney

If, despite your best efforts, your business is still floundering financially, it may be time to consider bankruptcy. Joel M. Aresty, P.A. is a seasoned bankruptcy lawyer and can help your business start out with a clean financial slate. Call now for a consultation at 1-855 DOC LAWS.

5 Financial Problems Businesses Can Face

Financial problems within a business can lead to bankruptcy. Although bankruptcy can often provide adequate relief for struggling companies, learning how to avoid it whenever possible is also a worthwhile endeavor. Here are 5 financial problems businesses can face, and what you can do if your company is facing overwhelming debt.

1. No Budget Plan

When starting a business, it’s important to have a basic idea of your operating costs and form a budget plan to rein in spending. Not having a budget plan can lead to excessive spending and more debt than you have the ability to pay.

2. Taking Unnecessary Risks

Beginning a business is risky in and of itself, but it’s critical that you don’t take unnecessary risks to grow your business. Taking out large loans for more than you need or engaging in other risky financial behavior can come back to haunt you.

3. Poor Management of Cash Flow

It’s easy to get excited about money coming into your business. However, if you’re not properly managing that cash flow, you may not be appropriating it to the right resources and you may end up in significant debt. Manage your cash flow accordingly and always take care of your business expenses first. Most businesses need to put their earnings back into the business for several years just to get out of the red.

4. Inadequate Financing

Securing financing can be challenging. When businesses don’t have enough financing for their business endeavors, they may find that running their business is difficult if not completely impossible. Be careful when obtaining financing though — whether you are being financed by a business lender or investors, you owe it to them to manage your business responsibly.

5. No Financial Strategy

Every business should have a business plan before starting. Generally, a large portion of the business plan is devoted to the company’s financial strategy and how earning profits and paying off business debts will be accomplished. Businesses without a financial strategy have no clear plan to follow and risk ending up in significant debt.

If your business is struggling financially, don’t hesitate to contact an experienced business bankruptcy attorney. Joel M. Aresty, P.A. can help you navigate the choppy waters of business debts. In the event that a bankruptcy is your best option, Attorney Aresty can assist you in the filing process. Call today for more information at (305) 904-1903.

Are You Liable for Your Business Debts?

If your business is struggling financially, you may be worried about whether or not you will be held personally liable for the debts of your business. The answer isn’t exactly clear — it largely depends on how you formed your business. Here’s what you need to know about owing business debt and how bankruptcy may be an option to help relieve you of that debt.

Are You a Sole Proprietor or in a Partnership?

If you are a sole proprietor and owe business debt, you are most likely going to be held personally responsible for the debts of your business if you file for business bankruptcy. The same applies if you are part of a partnership: you and your partner will be equally responsible for the debt your business accrued while it was in operation.

Did You Form an LLC or a Corporation?

If you formed an LLC or a corporation when you started your business, you cannot be held personally liable for the debt your business has accrued while in operation. Forming a corporation or an LLC legally separated you from your business; your business is considered its own legal entity. Therefore when you file for a business bankruptcy, the assets of your business may be liquidated to pay off your debts, but you cannot be personally pursued for any debt that remains after all of your business assets have been liquidated. The one exception is if you personally guaranteed business debts, in which case, you would be held liable for only those debts.

What to Do If You Are Personally Liable for Business Debts

If you are considered to be personally liable for debts that your business accrued during its operation, a Chapter 7 bankruptcy may provide you with a solution to have some or all of those debts discharged. A Chapter 7 bankruptcy involves the liquidation of your assets (business and/or personal) and any unsecured debts that are left over are generally discharged. Some secured debts and tax debt is generally not discharged, even in a Chapter 7 bankruptcy.

Contact Joel M. Aresty, P.A. Today

If your business has accrued significant debt and your profits aren’t enough to cover it, bankruptcy may be an option for you. Contact an experienced business bankruptcy lawyer to learn more about whether you can be held personally liable for the debts of your business. Call now at (305) 904-1903.

Can Your Business File a Chapter 13 Bankruptcy?

If your business is struggling with debt, can you file a Chapter 13 bankruptcy, or are you limited to other types of bankruptcy? Find out what your options are.

Is Your Business a Separate Legal Entity?

If your business was formed as a separate legal entity, you will not be able to file a Chapter 13 bankruptcy. Chapter 13 bankruptcy allows for the restructuring and reorganization of debt under a repayment plan, but is typically only available for individuals. However, there are some circumstances in which you may be able to file a Chapter 13 if you own a business.

Is Your Business a Sole Proprietorship?

If you created your business as a sole proprietorship and it is not a separate legal entity, you may be able to file a Chapter 13 bankruptcy. As long as your business is not considered its own legal entity that is distinct and separate from you, a Chapter 13 bankruptcy should be available to you. Similarly, if you are filing a Chapter 13 bankruptcy for yourself and are personally liable for some of your business debts, you may be able to include them in the bankruptcy filing.

What Are the Benefits of a Chapter 13 Bankruptcy?

A primary benefit of a Chapter 13 bankruptcy is that it does not require the liquidation of assets. This is important for individuals who have significant assets that they do not want to lose and that would not be considered exempt under a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, however, you will still owe all of your debt — you will simply have a more structured payment plan and will pay what you owe to a bankruptcy trustee. The trustee will distribute your payment among your creditors in the order of their importance.

When to Contact a Business Bankruptcy Attorney

If you are considering filing bankruptcy for your Florida business, or even if you are just having some trouble meeting your financial obligations, it’s a good idea to consult with a bankruptcy attorney to find out your legal options. In some cases, you may be able to get ahead of your debt without filing for bankruptcy. In other cases, it may be more beneficial to you to file for bankruptcy, be it a Chapter 7, Chapter 11, or Chapter 13 bankruptcy.

At the Law Firm of Joel M. Aresty, P.A., we can help. Call today for a consultation to discuss your needs in detail at 1-855 DOC LAWS.

How Changes to the Bankruptcy Code May Affect Your Business

As of April 1, 2016, changes to the U.S. Bankruptcy Code, announced by the Judicial Conference of the United States in February, became active. Cases filed after this date are subject to the updated bankruptcy code. While the changes are minute overall, businesses who are planning to file bankruptcy may find themselves more affected by these changes than they anticipated. Here’s what you need to know.

Consumer Deposit Priority

The consumer deposit priority under Section 507(a)(7) was raised from $2,775 to $2,850.

Preference Claims

Filing a preference claim in a non-consumer debtor case under Section 547(c)(9) was raised from $6,225 to $6,425.

Employee Compensation & Benefit Contributions

Sections 507(a)(4) and 507(a)(5), both the employee compensation and employee benefit contributions were increased from $12,475 to $12,850.

Bankruptcy Venue Provision

28 U.S.C. Section 1409(b) states that actions to recover for non-insider, non-consumer debt be brought against defendants in their own residential district. The dollar amount has increased from $12,475 to$12,850. 

Involuntary Petitions 

In order to file an involuntary petition, total claims can no longer be under $15,325 and must be $15,775 or more. 

Debt Definition 

The definition of small business debtor in Section 101(51D) has been raised to a total amount of $2,566,050. 

Across the board, this is only about a 3% increase. However, businesses who intend to file bankruptcy may find that these changes significantly impact how their bankruptcy unfolds. Although there are some additional small changes to the U.S. Bankruptcy Code that also were enacted on April 1, 2016, they are less likely to affect businesses and more likely to have an impact on individuals.

When to Contact an Experienced Bankruptcy Attorney

Business bankruptcy can be exceedingly complex, and determining what you qualify for and what would be the best type of bankruptcy to file in your particular case is not always easy. If your business is struggling financially, especially in light of the new changes to the Bankruptcy Code, it is more important than ever to contact an experienced business bankruptcy attorney who can help guide you through the process of filing for bankruptcy.

Contact the Law Firm of Joel M. Aresty today to learn more about bankruptcy law and how these changes to the Code may affect your business. We are available now to assist you and can provide you the legal representation and support you need to move through each stage of bankruptcy. Call now for a consultation to discuss your specific case at (305) 904-1903 or toll free at 1-855 DOC LAWS.

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