Keeping Business, Personal BK, or...wait. Meeting Friday - FYI

[getmeoutofhere]

I finally bit the bullet and will be meeting with my first attorney on Friday. As some of you know, from my previous posts, I have a fairly complicated situation. I will summarize as best I can and will try to update this post for those that may find the information useful:

I have multiple businesses
1 S-Corp
4 LLC
1 Sole Prop
1 Partnership

Most of the issue I have is unsecured CC debt -
~152K Personal CC
~123K Business CC (personally guaranteed) spread accross various companies

$2500 per month in business auto loans
$5200 per month in business leases

Owe approximately $525K on first, $150K on second. House is worth $400k now.

Without the CC debt, and the second, the businesses are viable. The questions I will have for my attorney on Friday-
1. Can I dump the CC debt on a personal BK7 and still keep the companies operational as they are the only source of income, are viable, and employ numerous individuals.
2. If I can do a BK7, can I have my second mortgage stripped?
3. Would it be better to let the personal cc's go to charge off (most have already and are in CA's) and delay and fight and concentrate on reorganizing the business debts?
4. Would it make sense to close some of the companies and move everything to one of the LLC's and dump the business debt and also file person BK7?
5. BK7 or BK13?
6. What effect if any is there with my landlord, who is a personal friend, on the existing building lease?

If anyone has any thoughts or ideas or can think of any questions I might be missing, let me know.

[HHM]

1. Yes and no. Yes, you can dump your personal guarantees and CC's, but the businesses will still be liable for the business debt if the entities keep operating.
2. No, you can only lien strip in a chapter 13. (at least for now).
3. Probably not, what would be the end game. Delay for the sake of delay is usually never a good plan.
4. Probably, why do you have all the different entities anyway.
5. Depends on your income, in your case, your income is (Gross Revenue from ALL businesses - business expenses - allowed living expenses).
6. None, so long as you keep paying it

[FloridaGuy]

Hi getmeoutofhere,

You REALLY have a complicated situation. I would suggest getting appointments with several lawyers. We saw three, and all three had different suggestions, and plans. We actually only felt comfortable with one... which is who we went with. See what plan of action most would suggest. Many offer free consulatations, other charge a minimal fee (Up to $100) which for a complicated case I had no problem paying to get advice.

My situation is only an S-Corp and personal debt because of the business. We have a meeting this week also to get the ball rolling. Even with that there are several unanswered issues we hope to get resolved in the meeting.

[getmeoutofhere]

2. No, you can only lien strip in a chapter 13. (at least for now).

But I think I read on here that if I stop paying on the second, they probably won't forclose, but may enter a deficiancy judgement....

5. Depends on your income, in your case, your income is (Gross Revenue from ALL businesses - business expenses - allowed living expenses).

This is where it will get convuluted

Right now, the business is negative. It was paying ALL of the bills including the personal credit cards which were used to start up the business. Therein may be the problem. The way I structured it, I took out a second on my house back in 2006. I used the money to pay off all of my credit cards, both personal and business and used the rest for TI for my business. This became a loan to the company in which I am receiving monthly payments as a payback to the loan (which coincedentaly is the same as my house payment). I then used the CC's, both personal and business, to finish opening the business after a partner ran off with my money.

Like I said, meeting Friday with my atty....will be interesting to see what is take is.

[HHM]

But I think I read on here that if I stop paying on the second, they probably won't foreclose, but may enter a deficiency judgement....

I wouldn't count on it. We have a foreclosure crisis because lenders ARE STILL foreclosing on properties. I think you are misinterpreting what happens, in an ASSET case where the property is going to be SURRENDERED, the second mortgage will file 2 proofs of claim, 1 for any secured amount (if any), and a 2nd for the unsecured amount (the deficiency). But if you are keeping the house and stop paying the 2nd, they will almost certainly foreclose.

Your second issue is not complicated at all, you only get to claim actual operating expenses, start up expenses don't count and obvioualy credit card payments on accounts that are going to be discharged don't count. The loan payments to yourself are considered income to you.

You still haven't answered the question, why so many entities?

[getmeoutofhere]

You still haven't answered the question, why so many entities?

Due to insurance and liability of each line of business, we needed to set up separate LLC's. This would help off set any potential lawsuits or claims in the opinions of our CPA and Lawyer

[jessegirl]

Could you get a discharge for a 2nd mortgage and then do a 13 after that to strip the lien? And if so, how soon can a 13 be done. I was told that the 2nd would be included in the 7 and then stop paying my first mortgage after the 7 is discharged and then i will go into the 13 right after that to strip the lein and repay the 1st mortgage back. Does that make sense to anyone. Or is my attorney blowing smoke up my A**.

[paintinrosesred]

jessegirl,
Wouldn't your first mortgage also be discharged in C7? So not sure how the C13 would renegotiate your balance on the first mortgage? Would love to hear your atty's idea though.

[HHM]

Jessegirl, you must have read some bad info recently, or misunderstood it, because some of your recent posts on the subject of Mortgages in chapter 7 are way off (no offense).

As to the multiple entities, it depends on the nature of the business, but most of the time, its a waste of time and money to set up different enterprises. The only time it makes sense if you really are high risk for litigation (i.e. large scale construction projects).

In any event, the so called chapter 20 (which is file chapter 7, then chapter 13) is only viable when there is priority debt, IRS, child support, etc. You cannot fully discharge mortgages in a chapter 7. You discharge your personally liability, but the lien survives, intact. Thus, if you file chapter 7 and stop making a mortgage payment (regardless if your reaffirm), the banks can foreclose. For now, you can only lien strip in a chapter 13. There would be no need to file chapter 7 first, because the deficiency balance gets discharged when the chapter 13 gets discharged.

[FloridaGuy]

Hey HHM,

Is a BK 7 case considered an asset case if surrendering home? or were you using that as an example in a few posts above?

The reason I ask, is we should be a no asset case, except we ARE surrendering the home.

Final meeting with lawyer prior to filing is tomorrow.

[HHM]

Hey HHM,

Is a BK 7 case considered an asset case if surrendering home? or were you using that as an example in a few posts above?

The reason I ask, is we should be a no asset case, except we ARE surrendering the home.

Final meeting with lawyer prior to filing is tomorrow.

Just an example.

[getmeoutofhere]

As to the multiple entities, it depends on the nature of the business, but most of the time, its a waste of time and money to set up different enterprises. The only time it makes sense if you really are high risk for litigation (i.e. large scale construction projects).

Exactly!

I had a thought last night. All of my business debt and risk is in the name of the S-Corp. One of the LLC's is the real "bread winner" if you will. My thought is to let the S-Corp die a slow death and keep the LLC. A simple restructuring and some possible lease renegotiations are in order!

[getmeoutofhere]

For those of you following my dilema...
Today...WAS A GREAT DAY!!!!
Whoo Hooo!

I met with my attorney and all is going to be just fine.

Here are the major findings:
1. I am going to file a personal bk13.
2. The second mortgage will become unsecured and will be stripped. This allows me to keep the house!
3. The S-Corp will close...Bye Bye to all the debt! I will not BK the S-Corp, just let it die.
4. All of the personal guarantees of the S-Corp will diie with the 13.
5. Removes all unsecured debt of about $330K
6. The primary LLC will continue to operate as normal. Perfect solution to a perfect mess.

Of course this is just a rough outline. If anyone has specific questions or needs clarification, just let me know and I will be happy to answer.

[micky]

sounds familiar

I cannot tell you how similar my situation sounds....except my main buss doing well is an S corp not an llc...not quite to bk yet but it is knocking on the door....keep posting I am anxious to hear if things work as well as the last posts sounds...also any advice as to what you would do diff will be very much appreciated...

[casper11]

A similar situation with a question

I also operate a couple small businesses and have about the same amount of unsecured CCs and LOCs debt both personal and corporate. Over $300k.

1. Is that a fact that a 2nd Mortgage cannot be stripped on a ch. 7 ??
2. Is there an unsecured credit limit? I read somewhere it is about $320k. Is that correct?
3. My attorney told me today that she might be able to "get my second declared unsecured"... Is she misinformed concerning the ability to do that on a ch. 7 ??