Bankruptcy Disruption to Business and Individuals

Life after bankruptcy can be challenging for both businesses and individuals. For a business owner, rebuilding after bankruptcy is very important to the financial future of their company. Once the bankruptcy filing is approved, the owner is able to start rebuilding their business. Most businesses file for chapter 13 bankruptcy, which enables them to negotiate repayment amounts and terms with their creditors. These payments are overseen by a court appointed trustee. In most cases when a business owner has filed for bankruptcy protection, it is usually a last resort. The owner has typically tried to manage their business with very limited funds and resources, but eventually realize that they can’t manage things like this forever.

Once all payments have been made on time and satisfied, the business will receive a bankruptcy discharge. For the owner of the business, the next step is to start rebuilding their vendor relationships and credit lines. This may or may not be challenging, depending on how the vendors responded to the bankruptcy filing. The majority probably had to settle for an amount much less then they were owed, so they may not to want to re-establish a business relationship afterwards. The vendors that are more likely to want to re-establish a relationship after the bankruptcy discharge, are the ones that have been associated with the owner for many years. Given the state of the current economy, most vendors will probably understand why a business would have to file bankruptcy.

In terms of re-establishing credit lines, the business owner may discover that some banks may not be as understanding or forgiving. However, this should not deter the owner from at least trying. If the owner has a long standing relationship with the bank and has made their bankruptcy payments on time, then they stand a better chance of getting their credit line re-established.

For an individual, life after bankruptcy can also be potentially challenging. This includes having a hard time securing credit and also challenges buying a home. The best place for an individual to start after bankruptcy, is try to rebuild their credit a little at a time. This might mean applying for a secured credit card. The average deposit for a secured credit card today is between two hundred and three hundred dollars. This amount may seem a little high, but remember that they credit card company is taking a risk by approving an application for someone who has filed bankruptcy. The bank looks at the deposit as a form of financial protection in case the individual defaults. Once the application has been approved, the individual needs to make sure that all payments are made on time.

When it comes to purchasing a home after bankruptcy, most banks require at least two years of good solid credit. Over time, the individual will be able to successfully rebuild their credit history.  

No comments:

Post a Comment

Copyright 2011 Privacy Policy