Quick Nosedive into Bankruptcy - worried it will go through

[sajecw]

HI all,
*** Note: I had a 750 credit score and I was current on all debt when I took the cash advances out and I had a functioning office and staff... ***

I was in the mortgage business up to December 2008. In September 2008, i traded in my car for a $400 lower payment and paid off some credit card debt to lower my monthly payments in anticipation of making a big move to get more business and build staff. Income was off in 2008 and I was borrowing money for over a year to keep the office going and to pay the mortgage. Image is very important in the business. No one wants to work for someone who is broke in the mortgage industry.

I decided to take out about $180,000 in credit card advances. I didn't use my business credit lines of $300k because the interest rate was about 8% and the credit cards were a max of 1.99%.

I used the money to pay back many people who referred business to me, pay back my ex-employee who I owed about 40k and to give back money to family members who I borrowed from over the last year.

I took about $20k to buy leads from companies going out of business. This was all done cash. I would have owed them much more if it was done by check.

I had about $30k left of it by the first week of November.

I got a call from my mortgage bank that they were not going to pay corporations anymore and all income had to be W2. That killed off about 90% of my referral business as they were paid as marketing companies to their corporations. How can I buy leads with my W2 income? I am 33% behind the ball to start then.

Then I was told I couldn't conduct business in states where I have been conducting business for over a year and built staff there.

Then I received a call at the end of Novemeber that they were shutting down my office and not submitting for a new license. (They closed 250 out of 265 offices)

I had 12 people working for me in October and zero in December.

I paid 2 months of credit card payments on the new debt and I am now 4 months late on my Mortgage. Have enough to pay December 2008 now.

I voluntarily handed my new car back to the dealer to be auctioned and I will get a bill for the difference owed.

I am making about $5k a month in my business, but that isnt enough to pay child support, mortgage, oil, food, gas, phone, car insurance, etc.

My fear is that I took out cash advances with no audit trail back in the end of October and first week of November.

I only have $3500 in my personal accounts and $3000 in my business accounts.

I stopped paying all credit cards and I am trying to get my mortgage modified under the new Afforable Home Program.

The question is this. If I wait until July 2009 to file for bankruptcy, is that enough time that has passed for the audit trail from November not to be required?

I met with 2 attorneys who said give it 8 to 9 months after the last credit card use, then file.

I spent all of my money trying to get even with my business partners and make a big move, now I am facing foreclosure and have 6k to my name.

I owe about $250,000 to credit cards, $15,000 to the dealer for handing the car back in early.

My monthly expenses are about $6800 and that is only basic payments. No credit cards. Mortgage, child support, food, oil, phone, insurance... I even stopped my own health insurance a year ago because it was too expensive.

I am making $5k month before any taxes right now.

The attorneys are saying that because I was in the mortgage banking industry it is a given for a discharge, but I am worried about cash advances.

I always had a 750 plus score and carried anywhere from 40k to 75k in credit card debt with 3 cars for years.

I could have taken out another $300,000 in cash from my business credit lines, but I closed those accounts once I got into trouble and realized I couldn't repay them.

In hindsight, I should have taken one advance and had one creditor to deal with instead of 14 of them. I could have borrowed money to settle.

Does any of this matter to a trustee?

I am physically ill over this situation. The calls are relentless from the creditors. Most are understanding, but some are nasty. Discover and WAMU.

Any thoughts or suggestions are must appreciated.

[JRScott]

You need to wait til at least a year after the last transfer of money to a family member. Otherwise the trustee can go after the insider for any monies paid to them if the amount is deemed sufficient to be worth his effort.

You might also consider seeing if you can get your child support modified if you are not making the same money you used to. I know its an uphill battle, but as you probably know child support cannot be cleansed in a bankruptcy, you'd have to go back to the court where it was issued and see if you could get the judge to modify it, probably would take a lawyer.

If you can't get your mortgage adjusted you probably need to look for another place to live that you can afford. I'm not sure what other expenses you could cut.

I do wish you luck.

[BK2008]

Forget about paying the difference on that car you turned in. That will get discharged in BK,

And other than cutting your household expenses as much as you can, getting your CS reduced, I'd just keep paying the lights, trash, gas, auto insurance, phone, and taxes through payroll ( am assuming you're W2'd and are still employed), food and other urgent necessities and start saving saving saving in the event you cannot keep your house and have to move.

Everything else can go to **** and feel free to shut off the phone to keep the calls down to a minimum.You;re really not obligated to talk to the collectors. Let them put it in writing.

Good luck.

[sajecw]

I wish I could get the child support reduced. But I am in NY, so it will probably go up. I made more money the last 2 years than when we agreed to the support.

I can afford everything after the BK goes through and just start over. Pretty much breaking even.

I am making money through my corporation and I have not received a W2 payroll since November when my office was closed down.

All of the money I took out of the cash advances were deposited into my bank accounts in late October 2008 and I just pulled the cash out I needed until it was gone over a 3 to 4 week period.

I paid back one person with a certified check in November for about $40k. It was an ex-girlfriend that I owed money too over the course of the last 2 years.

My office closed AFTER this all happened.

[JRScott]

Even though your office closed after it, they will probably scrutinize everything since you are seeking a high debt discharge. The UST will be involved. I'm not saying this to scare you. But you really need to look to filing it appears in December of this year or early 2010. An ex girlfriend would be considered an insider and paying her 40k in the year prior to filing is gonna raise a lot of flags and it is likely the trustee would go after her for the money that's why I say a minimum you need to wait a year.

I realize that you probably can't stave off foreclosure for a year, but if you get the adjustment that might help you. Otherwise I'd start looking for a place to rent.

Given the large transfers of money and other parts of your case you will need legal help. It would probably be wise to see 3-4 lawyers in your area. Talk to them about the whole situation including payments made. See what they say, I'm pretty sure any lawyer worth his salt will tell you to wait a year.

I'm sorry you don't think you can get the child support adjusted.

[Flamingo]

"My monthly expenses are about $6800 and that is only basic payments. No credit cards. Mortgage, child support, food, oil, phone, insurance... I even stopped my own health insurance a year ago because it was too expensive.

I am making $5k month before any taxes right now."

First, as to the above, you truly need to sit down and figure out if you can afford to keep your house and/or whatever else is taking up all your income because even filing bankruptcy is not going to take away the bad cash flow you indicate above. As suggested in a previous posting, I too highly suggest getting good legal representation cause you are going to need it with all you describe and make sure the attorney is experienced in business bankruptcies. Calling your state bar association for a referral in this situation is a good start for a good, reputable attorney in your state/area. Best of luck to you.

[OhioFiler]

It appears to me the OP is most concerned about the lack of an audit trail for the cash withdrawls. Apparently, much of his business was done on a cash basis (literally) and he's concerned as much about the consequences he faces on these "under the table" transactions as he is his insolvency.

I don't have an answer to those concerns but I do have a question. Does the US Bankruptcy Court ever refer cases to the IRS?

[StartingOver08]

OP, your business corp is considered an asset of yours. Yes, it is closed now, but it was open last year when you took the advances. The Trustee will scrutinize the bank statements of your business and your personal bank statements. You need to have a minimum of one year between your payments to friends, relatives or even corporate officers or directors of your corp.

For you time is extremely important, you do not want to file and find out that your case is dismissed or the $180k is not dischargable in your BK. The best thing you can do is put as much time as possible between your last cash advance and your actual filing date.