Question about unsecured and self employed

[getmeoutofhere]

I have a couple of questions if anyone knows and could chime in.... I have met with my attorney and we are filing a 13. I have a couple of questions that I thought of, but he is gone for the day so I thought I would ask here.

I have 150K in personal cc debt and $150K in business cc debt (personal guarantee). I am also stripping a $150K off my second mortgage, but will enter the bk as a secured and then file to remove. My question is, with the $339k limit on unsecured, would this not put me over the limit?

Also, I am self employeed and have been receiving "payments" from the company of $5500 per month. This is the last month that I will get a payment as the note payable will be paid in full. Thusly, I can "write my own paycheck" going forward. I would like to get in on a 36 month deal. Can I write my new paychecks so that I am under the medium? And, is there a minimum amount considered as "disposable income"?

[HHM]

If you are in control of your own paycheck, the trustee will typically require business income statements and your disposable income will be based on what is left over from the business income minus your living expenses, not what you write yourself checks for. A self-employed chapter 13's are highly scrutinized because of what yous are proposing.

It is not a settled question about how a striped mortgage affects the eligibility requirements once that 2nd mortgage becomes unsecured. The statute strictly reads the amount of non-contingent, liquidated debt at the time of filing determines eligibility for fling chapter 13 under BK Code section 109(e). However, there is case law that goes both ways, the cases in favor of allowing the debtor to continue chapter 13 tend to be very fact specific to that circumstance of the debtor (i.e. the debtor is in a 100% payment plan anyway, so there is no problem and therefore the trustee did not contest the issue). Many courts seem to hold that the unsecured debt that is created by the lien strip in the chapter 13 relates back to the filing date. You will need an attorney ready to fight for you on this one.

[justbroke]

I have read similar cases to what HHM has written about. There's actually an article on Bankruptcy Law Network which tells attorneys to be careful when stripping. This is because you can be over the $336K limit easily with a lien strip on a mortgage.

I just did this and I'm pushing 336K... literally. I am at the point where I'm hoping a couple of creditors file as secured... or not at all. This is because I'm stripping a $127K HELOC off my homestead.

(I'm at $302K now in claims filed. Not all are allowed yet, but still... I'm getting close!)

[getmeoutofhere]

If you are in control of your own paycheck, the trustee will typically require business income statements and your disposable income will be based on what is left over from the business income minus your living expenses, not what you write your checks for. A self-employed chapter 13's are highly scrutinized because of what you are proposing.

Interesting. When we spoke, his comment was that the LLC, which is owned by the corporation, stands alone and would NOT come in to play in the 13. It is simply my last 6 months of income which I would need to show and the note payable could become an issue since it was one of "my" assets. The note, however, is $0.00 now which he was unaware of. I will ask for more details tomorrow. I am not sure how a trustee could do anything with the business since it is a stand alone entity.

[getmeoutofhere]

another question

He mentioned that the business ccs, which are personally guaranteed, may not actually be personally guaranteed....??? There was wording he used for this, but I don't recall exactly we he called it...maybe the business ccs are not considered unsecured???

[HHM]

Basically, what you are proposing is a type of fraud, and trust me, the trustee will see right thru it.

It is not that the business gets put into the BK per se, but since its your source of income and you are in control of it, you will need to provide documentation to the trustee that you have a reliable source of income to fund the plan. The standard for chapter 13 is ALL sources of income, which you need to read as any source of money to which you are, or may be entitled.

[getmeoutofhere]

I was just reading some of the paperwork.... and here is the way he will do it. I have to provide info on ANY Corporation or LLC which "I" own stock in or I am a member in. The CORPORATION owns the LLC...not me. So the LLC will not come in to play, only the corporation which has nothing....

[HHM]

But you own the corporation and you get your paycheck through the LLC, correct?

You are confusing two issues.

You are correct, the LLC would NOT be an "asset" of the chapter 13 because it is owned by a different entity. However, any creditor or trustee can probably easily pierce that corporate veil, LLC's really don't provide protection, but that is another issue. The issue I am talking about is your "income", namely, your disposable income. The whole point of a chapter 13 is for the trustee to get the highest possible monthly payment from you to pay back your creditors. It is not going to be hard for the trustee to figure out that the LLC is owned by a corporation and that you own the corporation.

Look, if the sole member of the LLC is the corporation, thus, the corporation makes the decisions for the LLC, and you are in control of making decision for the Corp, and hence for the LLC, you are going to lose that fight with the trustee nine ways to Sunday. Remember, the issue is not whether the LLC is an "asset" of the bankruptcy, its how and to what extent you have income from the LLC.

[getmeoutofhere]

HHM...that makes sense.

[wooisme]

I am self employed, I work at home as an independent contractor on my computer and filed back in 2006 and I actually work for a company that pays me so i do have a 1099 at the end of the year plus I get paid monthly and do get the statement of income every month to prove I work there. Now they don't want a financial monthly statement from me, I never really know how much i spend however they have a list of some of the things I spend in a month... but what I have to do is every quarter I pay estimated taxes and I have to send a copy of the slip and check to my lawyer proving I sent it in to the IRS.

I don't do anything for my self employed independent business as a sole proprietor until tax time when I do my regular taxes and fill out form C for my home business which list all the deductions that I take for that which includes the advertising, supplies, and so on and so forth.

I don't want to jinx myself but my trustee has never asked for a copy of my tax return nor has he asked for my form C either and we ARE allowed to keep up to $3,000 in refunds ...

So even though perhaps some states frown and really look into the self employed, mine did not.