Owning a business while in 13

[HOMEBLDR]

First a little background on my situation. I am going to be filing for 13 in the next few weeks. I filed once before in Aug. 2005 but had the case dissmissed in March of 2006. I own two home remodeling/building companies. I have very little as far as cc debt (about 4k) most of my problem is with my mortgage co. When I purchased my home in Oct 2004 there was a 18% default rate until mortgage is brought current. Unfortunately I jumped the gun in buying an expensive home (instant gratification). Over the winter after I bought the home I had a real slow period and could not keep up with my payments and went to the default rate. I did bring it current a few times but I let it slip away again. After so many months in arrears they filed for forclosure. I know I'm getting close to date of sale and I want to file and fix the problem. I take a standard weekly salary which more than covers my debts.

My question is this: I know that you have to ask permission of the trustee to incure any further debt. Both of my companies are Inc.'s. Do I still have to ask permission to purchase assets for my companies (i.e. trucks, tools and other necessary equipment to run the businesses)? Should I pay cash for these Items? Can I get in trouble for doing that?

[aa06a47]

You really must get a bankruptcy attorney to answer this type of question. First, your company becomes part of your "estate". It is an asset the same as if you owned stock in a company. A good attorney may be able to protect those assets.

If the only reason your needing to file bankruptcy is that your house payment is too high, you might want to decide if it is worth living in that house. I have a feeling your going to spend thousands in attorney fees to file bk. Your ownership in corporations will make your case complicated.

[HHM]

Although the business (or at least his interest in the business) becomes and asset of the estate, a chapter 13 BK is not about assets, its about disposable income.

I honestly don't think you will have anything to worry about and you can run your business as is, but you will at least want to talk with a BK attorney to cover your bases, and generally, with a chapter 13, you should hire an attorney, there are too many pitfalls for a person to do it pro se, and you have special issues.

[bkbiker]

Hi,

Yes, you are allowed to run you business probably the same way you always have, having your business Inc. helps because your Company can retain assets that would otherwise become part of the bankruptcy estate. However you will probably be on a 100% payback anyhow so there should not be many objections from your creditors.

You will be required to file a monthly report to the court about your company’s financial state. Every month.

As said; check with your lawyer also

Good luck,
bkbiker

[CATCHMEIFYOUCAN]

Chapter 11

I thought Chapter 11 is for businesses ???

Catchmeifyoucan

[aa06a47]

Although the business (or at least his interest in the business) becomes and asset of the estate, a chapter 13 BK is not about assets, its about disposable income.

.

A chapter 13 must provide the same payment to creditors as a Chapter 7 total liquidation. FOr example, you have a million is assets not covered by an exemption, your 13 payment would have to total at least a million (or 100% payback to creditors, whichever is less). Assets do play a role in a chapter 13, in that you have to give the creditors at least the value of the non-exempt assets or 100% payback.

[aa06a47]

While the business may be inc, the fact that the corporation is owned by the debtor I believe makes those assets a part of the estate. It is kinda like saing I own a bunch of google stock (I own a part of the company by holding the stock, but the trustee will get that stock).

[bkbiker]

Hi Homebldr,

In chapter 13, you are allowed to continue the running your business, if your business needs the trucks, tools, inventory to conduct the business at hand, then these assets are not part of your personal bankruptcy estate; that is the advantage of having your company title as a Corp. or LLC, the company being a separate entity from yourself. This is a legal term that is hard to understand sometimes, having a separate entity from yourself. The same concept applies when you create a living revocable trust, became the legal executor of someone estate and other situations.

The bankruptcy trustee oversees your business and may take control of this entity if he thought he could do a better job than you, The bankruptcy laws and operating a business with-in seem rather complex and are probably subjective to your local bankruptcy laws of the state you live in.


Also for you in voluntary chapter 13 without much unsecured debt to worry about, if thing became just too stressful, you can always request and received a dismissal.

My advice is from personal experience, I too have a LLC business in my chapter 13, I listed all the company assets including monies in the bank that the company had and needed to operate my business in a successfully way; the trustee never questioned these assets. With-out the necessary working capital and other assets needed to run my business; the business would become a failure and put my personal bankruptcy plan payments in jeopardy; this would not be in the best interest of the creditors for me to default on my plan payments.

Good luck,
bkbiker

[aa06a47]

Good information bkbiker, I didn't understand it that way, but that sounds logical.