I Went Bankrupt and My Financial Situation Has Taken a Turn for the Better – Roger


“Dear Steve,

6 months ago I filed Chapter 7 and it was discharged. Since then my financial situation has taken a turn for the better with a higher paying job allowing me to save money on a monthly basis and in turn hopefully invest and I am no longer living paycheck to paycheck.

At this time I have the opportunity to become a owner of an S Corporation with 2 other individuals. Currently, it is the in start-up phase and we are completing all of the necessary paperwork and other core foundation work to form the business.

We have now begun speaking about which banks to use, how we will finance the startup, and other financial issues involved with the overall financial aspects of the business. As we speak about this I keep asking myself is it even possible that I can be an owner/share holder with my past bankruptcy being on my credit report?

Does my name have to be included in the financial aspects of the business articles of incorporation/bylaws? Can the 2 other partners open up a bank account to secure financing and leave my name off or can I even be included and not have a negative impact on the prospect of getting financed from the bank?

If I filed for Personal/Chapter 7 and the debt was discharged, is it possible to be a partner in a S Corporation without having a negative impact when it comes time to secure financing for the startup business?


Dear Roger,

First, let me ease your mind that your Chapter 7 bankruptcy history does not create any issue that I am aware of about being participating member of any corporation. Your name on the bylaws or founding documents does not pose a problem.

I was once in a similar situation after my bankruptcy. I latter started a business and because I had not tried to rebuild my credit yet I was left with a credit score and credit history that ended with my bankruptcy. Because of that I had to ask my partner for his credit card every time we had to buy something. It was grossly embarrassing for me but it did motivate me to start rebuilding my credit after bankruptcy.

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If you need help to rebuild your credit, just ask and I’ll explain how to do that.

Your recent bankruptcy is going to create a problem with getting you approved for bank financing. Banks are so tight now on funds that any loan will probably need to be personally qualified for and/or guaranteed by the applicants.

I think you should be honest about the situation with your partners and the three of you discuss the situation with the bank. The loan officer will tell you the best way to proceed to get approved, that his or her motivation. And yes, they can leave your name off.

Your hurdle here is not the fact that you went bankrupt, but that it is causing uncertainty and assumptions that you are afraid of. But I’m proud of you reaching out for answers. Good job.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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