I've got a HUGE mess! Which BK chapter? How to proceed?

[reluctant13]

please reference the question numberEXTRA $1,600/mo for 60 months in Ch 13). My father wanted his land back, this was not just to help me out. But I know what it looks like to a trustee, and I doubt she will let this go!
Questions, in no particular order:
1.2.3. I tried searching, but could not figure out what gets garnished. In Wisconsin, 20% of my after-tax wages will be garnished. But what about bank accounts? Tax refunds? Other? How much?
4. If my salary gets garnished and I start moonlighting with another company, would those wages go ungarnished? For how long (until I file 2010 taxes in 2011)? Am I supposed to report any new income, or do they have to find it out for themselves?
5. I assume stocks are not exempt in 13 or 7. Correct? But what about unexercised stock options?
6. If I move out of my home, will I avoid the potential, yet-to-be-filed 4th lien of up to $200,000?
7. If I stay, and the 4th lien sticks, do you think I can negotiate a much lower amount, since they would have no expectation of payment for a long time (or would they)?
8.9. What about windfall income if our parents were to die: will the trustee still take it if everything gets willed to our children instead of us?

Any other insights, advice, or other questions I should be asking?

Thank you very much!

[justbroke]

This is a lot of information for one thread, but I'll give it a go...

Questions, in no particular order:
1.

If your debts are primarily non-consumer -- meaning that the debts are more than 50% "business" debt -- then you get to skip the means test. Also, the "totality of circumstances" doesn't even apply! The only thing they can get you on in a non-consumer case is "substantial" abuse. This would mean ability to pay and bad faith. Yes, it would need to be both. Ability to pay is only one half of the "substantial" abuse standard.

2.

Who knows. This is up to the lender to get a deficiency judgment and then to record it. You should receive notice. When they'd actually start any garnishment or levying of accounts, is a total guess.

3. I tried searching, but could not figure out what gets garnished. In Wisconsin, 20% of my after-tax wages will be garnished. But what about bank accounts? Tax refunds? Other? How much?

Usually, bank accounts is the primary place to get things. Tax refunds are harder to garnish by non-governmental entities, so those are usually safe... at least from what I understand. A court judgment also may be able to get to it.

4. If my salary gets garnished and I start moonlighting with another company, would those wages go ungarnished? For how long (until I file 2010 taxes in 2011)? Am I supposed to report any new income, or do they have to find it out for themselves?

Probably until your creditor finds out. No one can tell you for how long. I would think it's up to the creditor to find out any new sources of income. However, if you get this job before the judgment is awarded, you would have to disclose this job.

5. I assume stocks are not exempt in 13 or 7. Correct? But what about unexercised stock options?

Stocks are not exempt. If these are NQSOs and they are "vested" but un-exercised, the Trustee could exercise and sell them or exercise to cover (and keep the resulting shares). Remember, the Trustee steps in your shoes. I would think that non-vested NQSOs are safe, but vested NQSOs are vulnerable.

6. If I move out of my home, will I avoid the potential, yet-to-be-filed 4th lien of up to $200,000?

If it's an IRS tax lien, you are never safe from those.

7. If I stay, and the 4th lien sticks, do you think I can negotiate a much lower amount, since they would have no expectation of payment for a long time (or would they)?

No telling at all. Most creditors get a lien to FORCE you to pay. They like attaching them to juicy property where you are more likely to pay than to not pay.

8.

The Trustee looks specifically for things like this. if you received $60K last year, or have really high refunds each year, the Trustee will certainly be salivating at the prospect of an asset case.

9. What about windfall income if our parents were to die: will the trustee still take it if everything gets willed to our children instead of us?

If it happens within 180 days of you filing.... OR... you become entitled to it within the 180 days after you filed... it belongs to the Estate. If it's willed to your children, then it's not yours by definition. Even if the children are minors and you are but an executor of the estate. So long as you're not a beneficiary, you would be clear of the Trustee's wrath.

However, if you're expecting a significant estate to be handed down from your parents, you REALLY REALLY need to be speaking with an Estate Planning Attorney because generation skipping taxes are NO JOKE. (I learned from experience!)

[Flamingo]

I 9. What about windfall income if our parents were to die: will the trustee still take it if everything gets willed to our children instead of us?

Any other insights, advice, or other questions I should be asking?

Thank you very much!

May I suggest you call your State Bar association and ask them for the names of BK attorney who handle complex personal and business bankruptcies. They can provide you with excellent references for your area.

First, realize both of your parents would have to die simultaneously for you to have anything to worry about during the course of a Chapter 13 (I am not going into a Chapter 7 because with your income and all you mention I don't think a 7 is a possibility but I am not an attorney - get yourself a good one). If one parent dies the day after you file, of course the estate will go to the surviving spouse. Now if both of your parents die at the same time or the suriving parent dies during your Chapter 13, yes your inheritance can be taken, in whole or in part as necessary, by the Trustee. If you are highly concerned about this, consult an estate planning attorney. The same goes for any land portions you now own. The land you own jointly with others is not that big of an issue. Those land sections are assets. Your stock is also an asset.

The more you try to run and hide things the worse it could get for you. Find a good attorney who handles complex cases. Remember, you get what you pay for.

[reluctant13]

1.

If your debts are primarily non-consumer -- meaning that the debts are more than 50% "business" debt -- then you get to skip the means test. Also, the "totality of circumstances" doesn't even apply! The only thing they can get you on in a non-consumer case is "substantial" abuse. This would mean ability to pay and bad faith. Yes, it would need to be both. Ability to pay is only one half of the "substantial" abuse standard.

What constitutes bad faith and/or substantial abuse? Are you saying that as long as I'm honest with the court, and they get a nice big chunk from me, that a Chapter 7 is a good possibility?

6.

If it's an IRS tax lien, you are never safe from those.

Not an IRS lien. The lender required me to put up collateral to get construction financing for our rehab. The lien has not yet been recorded, and the loan has since been sold, twice. I cannot find a copy of it in my closing documents, but I have a feeling they have not lost the original... that would be great if they did!

8.

The Trustee looks specifically for things like this. if you received $60K last year, or have really high refunds each year, the Trustee will certainly be salivating at the prospect of an asset case.

We usually get about $3,000 back each year. Next year's refund is a one time event. But I'm sure if they review my tax returns properly they will see what's coming...

[reluctant13]

May I suggest you call your State Bar association and ask them for the names of BK attorney who handle complex personal and business bankruptcies. They can provide you with excellent references for your area.

First, realize both of your parents would have to die simultaneously for you to have anything to worry about during the course of a Chapter 13 (I am not going into a Chapter 7 because with your income and all you mention I don't think a 7 is a possibility but I am not an attorney - get yourself a good one). If one parent dies the day after you file, of course the estate will go to the surviving spouse. Now if both of your parents die at the same time or the suriving parent dies during your Chapter 13, yes your inheritance can be taken, in whole or in part as necessary, by the Trustee. If you are highly concerned about this, consult an estate planning attorney. The same goes for any land portions you now own. The land you own jointly with others is not that big of an issue. Those land sections are assets. Your stock is also an asset.

My wife is an only child of divorced parents. I'm sure her father is willing everything to her. Hopefully he has a long life ahead of him. Her grandmother, however, has been making lots of after-death preparations lately. I don't expect her to be leaving much to her grandchildren, but I'd be suprised if she did not give us something. Maybe we should tell her to give our share to my father-in-law. My parents are older. Maybe they should give my share to my siblings, and we can divide it up later, on good faith...?

The more you try to run and hide things the worse it could get for you. Find a good attorney who handles complex cases. Remember, you get what you pay for.

The attorney I met with today, pushing Chapter 7, charged $200 for the initial one hour consult. To retain him would be $5,000 plus $305/hr. I have two more free consultations lined up for next week. If I end up going with the expensive guy, I sure hope he is worth it! Almost every dime I've spent since starting this real estate adventure has just gone in a black hole.

[justbroke]

1. What constitutes bad faith and/or substantial abuse? Are you saying that as long as I'm honest with the court, and they get a nice big chunk from me, that a Chapter 7 is a good possibility?

Bad faith means that you lied on the forms, are otherwise using the system (playing games with the automatic stay), or outright lied on your petition. So long as you're honest, a non-consumer case doesn't get much trouble from the UST because the threshold to dismiss a non-consumer Chapter 7 is much much much much much much higher than a consumer Chapter 7.

6. Not an IRS lien. The lender required me to put up collateral to get construction financing for our rehab. The lien has not yet been recorded, and the loan has since been sold, twice. I cannot find a copy of it in my closing documents, but I have a feeling they have not lost the original... that would be great if they did!

Did you sign some sort of mortgage and promissory note? Reads as though they have both an unperfected and unenforceable lien.

8.We usually get about $3,000 back each year. Next year's refund is a one time event. But I'm sure if they review my tax returns properly they will see what's coming...

If you received $3K back last year and didn't factor it as income in the current bankruptcy, then the Trustee will probably be looking for some portion (or all) of the 2010 refund. This is Trustee and District specific. They may just leave you alone. You just never know.

[reluctant13]

Did you sign some sort of mortgage and promissory note? Reads as though they have both an unperfected and unenforceable lien.

Could you please explain what an "unperfected and unenforceable lien" means? I'm still ignorant about a lot of this stuff. In my own terms, what I signed was separate from the mortgage. I recall it being a "personal guarantee" backed by my primary residence. Upon a recent title search, nothing shows up. But I suppose they would wait until the foreclosure is final before deciding the dollar amount of the lien. It probably can't be for an undetermined amount when it is recorded.

[justbroke]

Could you please explain what an "unperfected and unenforceable lien" means?

Unperfected means that they never recorded it. Unenforceable would mean that there are material defects in the "instrument" that pledges your property as collateral. If it has been sold several times, it may inherently have this issue. Trust me, if you file, the Trustee will be probing at it. Especially if s/he thinks there is money to be had.

Also, I don't know why anyone would not record a lien against real property. I don't know what the implication is, but perhaps, it's not even a recordable lien. I don't know what you signed. I think you're saying that you "pledged" your property. If so, you may also want to check the UCC-1 Registrations to see if it's recorded there.

I'm just wondering what's up with that lien.

[reluctant13]

Non-consumer Chapter 7
This must be what the attorney was talking about, today. According to the link, I would still need to show zero or negative monthly cashflow, but there is less scrutiny about the expenses claimed. Would this include the mortgages, insurance and condo dues that I no longer pay? If so, I am all set. If not, I would need to add a couple grand in monthly bills to get under the limit (hmmmm). I am no longer running the business, per se, so I don't really have any more business related expenses... except hiring a BK attorney .

[justbroke]

Actually, the showing negative cash flow doesn't "technically" matter. The only way they can dismiss a non-consumer Chapter 7 is to be both bad faith and have the ability to pay. That's why it's called "substantial" abuse. That is a different threshold than consumer chapter 7 cases.

However, you would want to make sure that your disposable income is as low as possible, but it really doesn't matter from all the cases that I've read for Florida. As in the article, there doesn't seem to be consistency amongst all the different Districts. So, that means this will vary based on District.