Complex situation. I need help

[d0wn0t0ut]

Settle in - this is about to get hairy,

In 2004 I graduated from college in Virginia. I got a job in Ohio where I started to watch home values in my home state of Virginia sky rocket. Seeing this, and thinking (foolishly) that the same would be true in Ohio. I along with a friend began to aquire rental properties.

We decided to make it a side business. We created an LLC to hold the deeds to the properties we acquired. The mortgages would be in our names.

Not being experienced I purchased 5 (between June 2006 and June 2008) mostly run down rental homes that had been "rehabbed" by speculators in my area. My partner has 9 in his name and we have a land contract property under our LLC.

These homes were mostly rented out at the time. Being that the area was extremely poor the tenants were very unreliable with payments. We had federal assisted (section-8) tenants. These are good because they are guaranteed payment. The bad part comes in when on a yearly basis the federal housing inspector orders anywhere from $500-4000 in repairs done to the home to continue receiving our monthly rent.

This is aside from the fact that the health department send us a list of very expensive repairs that need to be done. I believe they were called by a disgruntled tenant.

Fast forward to today, we have spent well over 100k in repairs and unrented mortgage payments and are now at the end of the rope. We paid our mortgages for the multiunits in full and sent 200 dollar payments to the rest of the mortgages on our plate. So - I'll be 30 days late on those come February 1st.

We have contacted all of our lenders about payment moratoriums only to be hit by brick walls and staunch hard stances against reducing our payments, even for a short time.

We have 14,000 balance on our business line of credit which we both personally guaranteed.

So - personally I have

5 rental units with 1 mortgage each. The homes are now worth approximately half (or less) than what I originally paid. I owe, on average, 55-60k on each property with the average apr being 7-8%. Which works out to be about $2800/month for mortgages.

Two of the units are multi-units with at least 1500 per month in utility bills that must be paid to keep tenants in them. You can also figure and average of 175 for repairs per property per month. I am at approximately 50% occupancy. This is an income of 2500-3000 (or less 3 people havent paid this month due to job loss or just being MIA). Needless to say I'm falling way short.

Personal debt:

I got rid of my mercedes this summer when I saw the storm clouds brewing. I opted for a used car with a 280/month payment rather than my lease payment of 633/month. I still owe 1700 to MB financial for mileage overages.

I just purchased a personal residence in August. It is an FHA loan and I owe $240,000. The payment is $1829/month.

I also have about 7k and 4,500 on consumer credit cards.

My average utilities are around 300+ a month. Food is another 300.

I currently have my exemptions set high and I am saving 5% with my 401k.

I also have a back taxes I owe from a locality in Ohio of about 700. I am contesting it though.

I will be recieving a large tax refund because of business losses and the first time home buyer "credit."



In summary:

5 rental homes - mortgages in my name but deeded to LLC
-2800/month
crazy utilities and repair bills
-2000/month
-14k in business line of credit that I personally garanteed
* 250 minimum payment
-5k in my business checking - this would be split between my partner and I
- 3-400 in arrears on 3 mortgages (1200 total)
- 1829/month personal mortgage (paid as agreed)
- 280/month car loan (paid as agreed)
- 11k in CC debt
* 375 minimum payments
- 1700 owed to old lease company (i've been holding off from paying)
- 300/month in utilities
- 100/month for cell phone - does this count as a utility or a luxury?
- 100/month for cable/internet service - luxury I suppose.
- 600/month for misc expenses (food, household, car maint etc)
- I make 70,000 per year - after taxes and retirement savings and I make
aprox 4300/month (8 exemptions)
- I currently have 3000 in personal checking
- I expect to get almost all my fed taxes back
- My home and car have no equity
- I own a beat up old 92 civic that does not run (worth 3-400 or less)

Monthly:
Income = 7000
Outgoing = 8600

HELP! I want to keep my personal property and get rid of these homes that are KILLING me. Would I qualify for a chapter 7? How do I find out if I pass the means test? What would happen to my secured mortgages in a chapter 13? Would I be made to pay for part of the secured mortgages in a chapter 13?

as a side note - one could say that I didnt have to pay my utilities or repairs but that would make the tenants leave. so those numbers would be:

Income = 4300
Outgoing = 6500

[justbroke]

First, and the most obvious, is... do you intend to keep any of the rental properties?

I'm a landlord as well, and ended up surrendering my property in the BK process, although I was keeping it at first. To keep the properties, or any of the properties, you will need to at least break even. You cannot have a business with negative cash flow in a Chapter 13.

Since the mortgages are personally in your name, but the deeds in the LLC's name, this will make it interesting. If you file and discharge the mortgage, the lender will still have a lien on the properties... and could foreclose.

Will the LLC be filing Chapter 13? Chapter 7? Chapter 11?

Interesting position you're in, especially with the split between the debt owed by you individually and the LLC holding title (deed). If the LLC filed Bankruptcy, and owes no money for the property... sounds interesting...

You'll need a really good lawyer. Not your average BK lawyer, probably one familiar with business bankruptcies!

[d0wn0t0ut]

i only want to keep personal property. I've given up on keeping anything business related. I could always quit claim deed the stuff back to myself. Most likely the LLC will just be dissolved.