Chapter 13 Eligibilty limits

[FloridaGuy]

[Flamingo]

Complicated cases require experienced business BK lawyers and not different opinions on a BK or financial forum. If you are not happy with yours and have questions about what he/she has told you or has done as to your matter, get some other consultations with experienced business BK lawyers (your State Bar Association can give you some excellent references for your area if you don't know where to look), unless you have already retained him/her.

[FloridaGuy]

Hi Flamingo,

Thanks for the reply. We have retained our lawyer (after three consultations with different ones) And will be filing next week. Unfortunately he is out of town and unavailable until next tuesday.

Since this is all I think about 23 hours a day (The other hour is about all I sleep now-a-days) I am doing a bunch of research trying to learn as much as I can. As you stated it is very complicated, and I keep coming up with more scenario's or what-if's every day.

I'm not looking for legal advice... just some opinions or thoughts or ideas. I know many posters here have been in the same or similar situation so I am just looking for some thoughts.

[BROKENN]

FG, I heard the same thing too... C13 has limits. Someone might chime in.
And since a corp can't file C13, are the debts in your name? Or the Corp?
Is the biz shutting down?
From what I have learned, you can file C7 as primarily business debt (no means), close the Corp and then be poor and pass the test for future.
If the debts are in your name, this might be very possible.

Anyone can correct me if I am wrong! I too am interested in this

[justbroke]

S-Corps are a special incantation. The income is basically as if an individual (sole-proprietor) business (d/b/a) or certain type of partnership was created. I had one of those beasts, and the reporting requirements weren't worth it -- to me -- for the liability benefits.

As Flamingo wrote, I would only trust this in the hands of an experienced business bankruptcy lawyer. It seems that the OP has done such a thing.

When the lawyer gets back, you'll have to review what's there. Maybe you treated some things as unsecured when they are secured (like store credit cards)? Who knows.

The key is, the lawyer will let you know what the correct Chapter you need to use. Chapter 11 is available, but it is much more complex and I wouldn't even venture to guess at all the requirements (including accounting and reporting requirements)!

Adding that if it's just an individual member of the S-Corp and not the corporation itself, I would assume the individual could file Bankruptcy... including on his liability to the Corporation. However, it is a Corporation and you'd have to file as a Corporation if you're liquidating or trying to protect that entity. At least that's my thoughts. I'm so glad I let my s-corporation dissolve years ago.

[FloridaGuy]

Hi Brokenn,

Where the debts fall, That's where it gets tricky! The business debts were created for the business... BUT all of my vendors had me sign personal guarantee's. Also, since I have just started missing CC payments I've gotten a couple letters for my business cards that state I am liable for the debt, and missed payments, etc. defaults will be shown on personal credit reports.

Basically, we have 90K personal CC debt (Incured for the business actually), and $130K Business CC Debt. (As well as about 160K in other business debt, too) We know we will be surrendering the house.

Yes... more than likely the business will be liquidated and closed down. What we came up with our attorney was a personal filing FIRST, then liquidate the business as much as possible then file a CP7 for it to let the trustee finish it off.

Until he plugs the numbers into our petition, and gets all the details he'll decide whether we can do a means test and try for a personal 7, or have to go with a 13. We have done an online means test, and passed... HOWEVER, since we had questions on some of the calculations for the business expense portion (and the att wasn't available to ask) we don't know how accurate our version was.

I wish I could time warp a few days and get to Tuesday... To get some answers from him!

[FloridaGuy]

Hey Justbroke...

The attorney immediately ruled out the Chapter 11 due to the huge cost & time involved. He estimated $30-50K for a chapter 11 case. I suspect he thinks we'll have to do a 13 due to most of the debt being business, as opposed to "consumer debt". But that's where legal definitions start coming into play.

Hence why I'm not a lawyer!

[justbroke]

Hey Justbroke...

The attorney immediately ruled out the Chapter 11 due to the huge cost & time involved. He estimated $30-50K for a chapter 11 case. I suspect he thinks we'll have to do a 13 due to most of the debt being business, as opposed to "consumer debt". But that's where legal definitions start coming into play.

Hence why I'm not a lawyer!

I hate Chapter 11s. I so wish that you don't have to even contemplate one. The reporting requirements (which is why they are so costly) are ridiculous when you're a small company.

[justbroke]

Yes... more than likely the business will be liquidated and closed down. What we came up with our attorney was a personal filing FIRST, then liquidate the business as much as possible then file a CP7 for it to let the trustee finish it off.

Aha, there's the strategy I didn't see before! Since the business is a Corporation, you can just file as an individual and get rid (actually may discharge), those personally guaranteed debts (that have actually come after you).

Then, 187 the business (under Chapter 7) after that. The interesting thing will be if after you 187 the business, will the creditors come after you as a personal guarantor? While there is the co-debtor stay and all that... I just wonder. I guess you can do a Chapter 27. (Okay... Chapter 13 for you, then Chapter 7 for business, then Chapter 7 for you when the business creditors come after you as guarantor since business debts aren't dischargeable. YES. I'm just making stuff up, but the scenario is very interesting and I'm interested in this particular incarnation.)

I'm not attorney, so I can just wonder all day!

BTW, nice strategy!

[FloridaGuy]

Some additional info to note...

The situation is very tricky for a number of reasons. If we do a 13 at this point we have no idea what the repayment amount or terms may be.

My wife wants to just relocate to a completely different area and start over. But, we have no way of knowing how much income or rent expenses may be. We don't yet know if we have to do a 13 how much of a hassle that would be, as basically all the numbers created to come up with a plan would be "out-the window" so to speak.

I actually have a completely seperate "C" corporation that has been sitting dormant. My attorney states I could begin using that company for income after the closure of the existing one, if I wanted to continue in this business. But my wife, wants no part of that idea! The real bummer is I know where the business went wrong, and the mistakes made to incur all the debt. Although we re-organized and made major changes to stop bleeding cash, it was too little to late. Then with the lenders tightening up.... no money available to consolidate debt when we tried.

All in all.... everything is up in the air until next week, and I guess I'm just trying to vent a little. So many questions and unknown answers.

[BROKENN]

Those business debts still come under your personal C7 because they are in your name.
And a personal C7 can still be marked Business Debts. But you pass the means so doesn't matter. We passed the means and still had business debts marked. Your business debts are still the majority in numbers.

Does this make sense?

[BROKENN]

My wife wants to just relocate to a completely different area and start over. But, we have no way of knowing how much income or rent expenses may be.

My atty used our current state expenses for our future budget. Regardless of where you go later.

http://www.legalconsumer.com/

All in all.... everything is up in the air until next week, and I guess I'm just trying to vent a little. So many questions and unknown answers.

Its OK, we all like to try and quiet the ramblings in our heads! I have found educating myself helps

[SiftedLikeWheat]

On 7/25/08, our attorney told us the the Ch 13 unsecured debt limit is $336,900.

On moving: we moved to PA from CA in Dec. 2007 and were required to file using CA exemptions because we have not been in PA for one year. CA is and "opt out" state, so we were not allowed to use Federal exemptions.