Do I have any options?

[rdiienno1]

I hope you can guide me in the right direction. I operate a small online business and have done so since about 2010. Early on we had someone get into our bank accounts and we lost a lot of money. That really set us back on our customers orders and we have been playing catch up ever since. We have never been able to get caught up and even borrowed money to try and do so. Still I find that we have about $20,000 in unfulfilled orders and have simply run out of options. We filed personal Chapter 7 in 2009 so I am sure that is not an option. Can you tell me what you think the best option would be? Besides the unfulfilled orders, we have about $10,000 in other debts that we incurred trying to get caught up. I am disabled and my monthly income is $1,860. I would appreciate any advice as I am concerned about what I will do if the unfulfilled orders all end up as chargebacks. I want to do the right thing for my customers too, but the stress has begun taking a toll on my health now. I have Systemic Lupus and I have been having flare ups due to the stress and anxiety. It has gotten so bad that I nearly died recently when a flare up caused my temperature to reach 107. Thank you for any advice you can provide.

[justbroke]

There are so many questions that you should, eventually, speak with a local attorney.

Having wrote that, here's my take. First, it really depends on the organization of the business. If this is your alter ego, such as a Sole Proprietorship, then you can personally file bankruptcy, but it would need to be a Chapter 13 Plan of Reorganization. Since you are on disability, it is quite possible that you would not be in a 100% plan, and that you would be in a 36-month plan (rather than a 60-month plan). There really is no way I could or would even venture to guess at what your payment, to the Chapter 13 Trustee and plan, would be. There are so many factors including housing costs, non-housing costs, vehicle, food and clothing, medical as well as other costs that could put you in a plan where you don't really need to pay that much into the plan.

So, if your company is incorporated or otherwise a separate entity, you would need to shut the business down and then may need to file Chapter 7 to liquidate the business. A business bankruptcy never really discharges anything, but attempts to make creditors whole through liquidation under Chapter 7. I would not recommend you try to rehabilitate the business under Chapter 11 because that cost would probably exceed $10,000 over the life of such a Plan... if not more!

I'm not sure you can help the customers if you have no money, no assets, and, quite frankly, no inventory to fulfill the orders.

[rdiienno1]

Thanks for your response. It is a sole proprietorship website on Shopify. I would prefer to file Chapter 7, but I assume that I am not eligible since I filed Chapter 7 personal bankruptcy in 2009.

[justbroke]

You are not eligible until 8 years since you filed your other Chapter 7. If you can wait until sometime in 2017, you could do the Chapter 7 having waited 8 years since the filing of the prior case. Otherwise, I think you are on that downward spiral that almost every single bankrupt person/debtor will travel. We think we can fix it by just borrowing more money. We think that if we only had a few more months to stay afloat. We think that if we can keep creditors/customers at bay for x number of days, all will be fine. Until that one day when you suddenly realize you can't even feed yourself or the lawsuits have reached judgment and they are now going after your assets and pay/pension.

Been there, done that. Not doing it tomorrow.

[despritfreya]

A couple of comments to add to JB's

1. If your sole source of income is SS disability and you own only exempt assets under state law, you are probably judgment proof - immune to any effort to collect. If you are judgment proof there probably is no reason to file bk.

2. I think JB meant you needed to wait to 2017 if you want to file Chapter 7.

Des.

[rdiienno1]

Des, can you give me some examples of what exempt assets would be?

[despritfreya]

Des, can you give me some examples of what exempt assets would be?

See Code of Alabama, Title 6 (Civil Practice) Chapter 10 (Exemptions). Here is a link if it works. . .

http://alisondb.legislature.state.al.us/alison/codeofalabama/1975/coatoc.htm

Des.

[justbroke]

Thank you Des. For some reason my math was just not working 12AM.

[rdiienno1]

Thank you Des. I hadn't even considered the idea of being judgment proof. It's going to be a tough decision

[despritfreya]

It's going to be a tough decision

As are all important decisions we make in life.

Des.

[rdiienno1]

If I opt to go the route of being judgment proof, what do I do, just tell my customers they should file a chargeback to get their money back?

[justbroke]

If I opt to go the route of being judgment proof, what do I do, just tell my customers they should file a chargeback to get their money back?

I sense that you're an ethical person and don't want your customers to be left holding the bag. Personally, if I'm ready to call it quits, I would let them know through a letter. You will need to understand what flood gates will be opened upon sending the letter or otherwise informing customers of the inability to fulfill paid orders (and unpaid orders). While you may be collection proof, which I like to call it, you may still be inundated with lawsuits depending on the breadth, depth and amount of money that the customers will lose.

Hence, I must repeat again that you need to speak with bankruptcy counsel. You really need to determine what you are able to exempt and whether you would be "collection proof" should you NOT file bankruptcy.

A sample apology letter that *I* might have sent given these conditions [AFTER SPEAKING WITH AN ATTORNEY AND PERHAPS HAVING THEM REVIEW THE LETTER]. (The cautionary tale is whether you get bombarded with fraud complaints. This is why I strongly recommend that you seek legal counsel before doing anything at this point. You are insolvent. You need to find your legal path through this.)

Dearest Customer,

Due to market conditions we are no longer able to process orders placed with our company. Orders which were already placed, and for which payment was made, will also not be fulfilled. We have lived by our reputation and this is certainly not the service for which we are known and service you deserve. We really regret this inconvenience and certainly understand any frustration and annoyance this has caused. If we have already charged your credit, debit card, or PayPal account, please contact your bank (card issuer) to file a dispute and have the charges reversed. ...

[rdiienno1]

Justbroke, you are right that I don't want my customers to be left holding the bag. However, sometimes in life things get to a point where you have no other option. I will seek legal counsel first before doing anything. One thing you mentioned really hit home. You mentioned about being inundated with lawsuits, etc. I don't think I want that hanging over my head or sitting in the back of my mind...just always wondering if or when they might happen. Excellent post, thank you.