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For many entrepreneurs, bankruptcy is a word loaded with shame. It can sound like failure, poor judgment, or the end of a dream that took years to build. So when Pinky Cole’s decision to file for Chapter 11 bankruptcy became a point of debate during the Real Housewives of Atlanta reunion, which just concluded, the conversation tapped into something bigger than reality television. Cole, founder of Slutty Vegan, defended bankruptcy as a business tool, while Phaedra Parks, a lawyer and fellow cast member, questioned that framing. For the many Black women business owners who watched, we were left without clarity.
Bankruptcy Is Not a Dirty Word
But there is no doubt: “Bankruptcy, indeed, is a financial strategy,” says Kimberly Sweeney, attorney and owner of the Law Office of Kimberly S. Sweeney PLLC.
Cole initially filed for Chapter 13 bankruptcy, which was dismissed, before later filing for Chapter 11. “Chapter 13 and Chapter 11 are very similar: Both are restructuring mechanisms that allow an individual and/or a business to keep their assets and pay creditors in a payment plan,” Sweeney explains.
Chapter 13 is generally used by individuals with regular income who need time to reorganize and repay their debts. It can help people catch up on obligations such as mortgage or car payments while potentially allowing some unsecured debt to be discharged at the end of the repayment period. But Chapter 13 comes with limits on the amount of debt an individual can have and still qualify.
Chapter 11, by contrast, is most commonly associated with businesses that need to reorganize their debts while continuing to operate. Rather than simply shutting its doors, a company can use Chapter 11 to restructure its financial obligations, continue running the business, and develop a plan for paying creditors.
“In Pinky’s case, filing a Chapter 11 suggests that she has a viable business,” Sweeney says. “She has the willingness and ability to pay her creditors, and Chapter 11 is used to prioritize the repayment of debts by reorganizing how her business operates.”
Do We Need to Rethink Our Relationship with Business Debt?
If bankruptcy can be a legitimate financial strategy, why are conversations around owing, borrowing, and business debt seemingly so complicated?
Part of it, Sweeney believes, is miseducation. “We have always been taught to work for others and consume what others sell. We work to pay everyone else first and pay ourselves last,” she says. “At least three out of four of my clients have picked up a second job and even a third job to pay off debt
—not to save money or invest in the future.”
Rhonesha Byng, founder of Her Agenda, a media platform dedicated to empowering Black women founders, sees a similar dynamic. “Our community is often so afraid of debt that even when we do get a loan, we’re not taking enough and then putting ourselves further behind versus taking what’s actually needed to get to the next level and having a strategic roadmap of growth to create returns to pay it back,” Byng says.
This lack of access to information isn’t completely our fault. “There are hidden deal-making rooms that are not typically accessible to women who look like us,” Byng says. “You could call them essentially the informal networks where deals actually get made, and information is shared.”
But Strategic Debt Is Still Debt—and It Carries Risk
Even with an understanding of strategic debt, taking on debt still carries risk—especially without those networks or significant personal wealth to fall back on. And sometimes life circumstances change in ways that no business plan can fully anticipate.
Before filing for Chapter 13 bankruptcy, Quanisha Green, a higher education administrator, taught women how to make money online through her business, Black Woman CEO. She had significant access to funding throughout the life of her business, including working capital, business credit cards, loans, and an SBA EIDL loan of more than $100,000.
“My business was able to repay financial obligations over the years successfully. So, for me, the issue wasn’t simply that I was a Black woman who couldn’t access capital or couldn’t successfully manage debt.”
Tragedy—not financial distress—forced Green to shutter her doors in 2023.
“After my brother died from COVID in 2021, I experienced complicated grief and an exacerbation of an existing mental health condition, “ Green recalls. “Over time, it became increasingly difficult for me to operate the business at the capacity necessary to maintain the level of revenue and profitability it had generated in previous years.”
Even though the revenue declined, the debt didn’t disappear.
Because Green operated as a single-member LLC and had personal liability for much of that debt, those financial obligations ultimately became her responsibility. “At the recommendation of my husband and therapist, I eventually transitioned back into traditional employment,” shares Green. “Now that I’m traditionally employed and the business is no longer operating, my W-2 income is funding my Chapter 13 repayment plan.”
Should We Question the Systems That Make It Easy for Us to Start—but Not Sustain—a Business?
Black women are starting businesses at remarkable rates. In 2024, Black women owned an estimated 2.02 million businesses, representing 14% of all women-owned businesses in the United States.
But starting a business is not the same as building one that survives and grows. A 2021 analysis by J.P. Morgan found that just 3% of Black women were running “mature” businesses, defined as businesses that had survived more than five years.
If we want more entrepreneurs to build businesses that thrive after the launch, we need to rethink not only how founders access capital but also what kind of capital they receive, how that capital is evaluated, and how much financial risk they are expected to carry personally. Sweeney, Byng, and Green suggest several places to start:
1. More capital that doesn’t put founders deeper into debt.
According to Byng, Black women-led businesses need more non-dilutive capital and revenue-based funding—not just debt that requires personal guarantees many founders cannot safely take on.
2. Underwriting that looks beyond collateral and credit scores.
A founder’s track record, business performance, and ability to execute should matter. “We need underwriting that actually looks at a founder’s track record and character, not just collateral and credit history that reflects generational wealth gaps more than it reflects whether someone can run a business,” notes Byng.
3. Protect your personal finances as you build your business.
As business owners, remember to build wealth outside of your businesses so your financial future isn’t entirely dependent on the company’s success. “Looking back at the amount of revenue that passed through my hands over the years, I wish I had more personal cash, retirement savings, and investments to show for it,” Green reflects.
4. Get creative when faced with limited funding.
“As a Black woman entrepreneur having my own law firm, I literally started out with just a laptop, meeting potential clients at coffee shops,” says Sweeney. “But there are other non-traditional resources that are available in the palm of your hand—your phone. Access to people has been proven to be the most effective and expedient way to tap into financial resources.”
Bankruptcy Is Neither a Flex Nor a Failure
When a business files for bankruptcy, we don’t know the whole picture. Bankruptcy doesn’t necessarily tell us that an entrepreneur failed; neither does filing for bankruptcy, by itself, make someone financially savvy. It is a tool that can be used along with other financial and legal tools to help business owners navigate and relieve financial distress.
And since it is a tool, we can release the shame that shrouds its use. Bankruptcy is not a measure of your worth, intelligence, or ability as an entrepreneur. As Green reminds us, “You can have built a real business, generated significant revenue, successfully paid your obligations for years, and still reach a point where circumstances change, and the numbers no longer work.”
Kara Stevens, EdM, is the founder of The Frugal Feminista and author of heal your relationship with money and Unmasking the Strong Black Woman. Connect with her on LinkedIn.
English (US) ·