Filing for Bankruptcy – Why Is It not a Good Idea?

Posted by on Jul 3, 2015 in Blogging | 0 comments

As a business owner, running your own business is definitely not a joke. And it is also not for the weak-willed. Time and again, I’ve seen a lot of people try and open their own business. And believe me when I tell you that getting one started is the easy part. Oh sure, you got papers to fill and bills to pay. Especially when it comes to permits and the stuff that you need to provide your customers with the service or product that you are going to market. However, there are only a few people that I know who can properly manage their business financial-wise.


Before I start preaching about the evils of filing for bankruptcy, I’d like to tell the story of a good friend of mine named John (not his real name). John and I have been buddies for years. He used to work for a third party company that installs PBX phones. I got to talk to him when he installed my PBX system. He told me that by the time he’s done with the installation, he’s going to start his own business. He loved cooking, so he thought of starting his own restaurant. He got it all figured it out; from the business venue down to the marketing plan. As a financial analyst, I realized that his starting budget might be too much for his current savings to handle. He then told me confidently that if things don’t work well, he’ll just file for bankruptcy.

Last I heard is that John had to hire an Anniston bankruptcy lawyer to help him out.

Skip three months later, I heard that his business was not doing too well. And he did file for bankruptcy. Unfortunately, he was not eligible to file for one because the bank found out that he has enough income to repay the money he owed to with a Chapter 13 bankruptcy plan. Of course, John wasn’t too happy with the decision because he was going to use the little money he had left for another business.

If you still think that filing for bankruptcy is one good idea to get away from the people you owed money to, then please think again. For starters, there are two types of bankruptcy; one is Chapter 7 while the other is Chapter 13. Chapter 7 bankruptcy is where many or even all of your debts are cancelled at once in a short three to six month process. Chapter 13, which is the one my dear friend John was eligible for, is where the bank finds out that you can actually pay your debts over the next 3 to 5 years. Both of them requires you to pay your debts, by the way. Chapter 7 removes your debt for 3 to 6 months so you can prepare the money to pay off your creditors.

Also, there are some debts that won’t be cancelled with any type of bankruptcy, like child support obligation. The thought of your neighbors knowing that you’ve gone bankrupt is also not a pleasant thing to think about. Therefore, make sure that you plan your business properly!