Court Permission

• Starting a business during bankruptcy may require special permission from the bankruptcy court. Generally, the court will not be in favor of you taking on significant debt. The two most popular forms of personal bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcies are completed in just months, and ideally you should wait until after the bankruptcy is completed before starting a business. Chapter 13 requires a payment plan of three to five years, during which time the bankruptcy court will monitor your finances to make sure as much money as possible is paid to your creditors.
  
  

Self Employment

• The bankruptcy court may allow you to spend small amounts of money on a new business, particularly if it amounts to little more than self-employment as a landscaper, taxi driver or something else. The trustee managing your bankruptcy petition will likely be supportive of your efforts to continue your livelihood. However, broader discussions are necessary if you are seeking to invest in a larger business with employees and other expenses. The court would want to know where the money for the business investment is coming from and likely would turn down a request to take on a loan.
  
  

Post Bankruptcy

• You'll face a different set of challenges after your bankruptcy. Although there's nothing legally stopping you from starting a business you will be hindered by your credit rating. Bankruptcy information remains on your credit report for a minimum of 10 years. The initial bankruptcy filing is reported for 10 years, with the discharge later added and also reported for 10 years. Most banks and credit unions will be reluctant to loan you money to go into business until you have clearly demonstrated that you have recovered from the bankruptcy.
  
  

Credit Repair

• Opening new credit accounts and making payments on time is the best way to rehabilitate your credit after bankruptcy. It is important to continue using credit to build your credit score --- but you should not accumulate debt. Making small charges and paying the balance in full each month will help restore your credit and increase your credit score.
  
  

Finding Investors

• Some entrepreneurs with credit problems go into business after bankruptcy by raising cash from investors or taking on partners with good credit. That could be an option for you as you rebuild your credit after completing a bankruptcy.