Filing Chapter 7 with 1/2 as business debt

[ckymky]

Has anyone had any success filing a chapter 7 because 1/2 of their debt was business related?

I had an attorney advise me that I could file chapter 7 even though I failed the means test due to income. Does that sound right?

I have 4 rental properties that are all negative equity and income for the last 3+ years

I gross $8600/mo income in a 3-person home.

I have approx. $100K in unsecured debt with about 40% of that in corporate credit cards (personally guaranteed).

I'm nervous to attempt to file chapter 7, but ultimately that would be much better than trying to pay everything back for the next 5 years.

[lrprn]

I had an attorney advise me that I could file chapter 7 even though I failed the means test due to income. Does that sound right?

Since half of your debt is business-related, you do not have to do the Means Test. This is what your lawyer is depending on.

I'm nervous to attempt to file chapter 7, but ultimately that would be much better than trying to pay everything back for the next 5 years.

Since you are an above-income filer and trying to file a 7 with multiple properties to boot, your case is going to get a *LOT* of scrutiny from your local trustee and the US trustee. If I were you, I would get at least 3-4 more opinions from other experienced bankruptcy-only lawyers in your area who have filed a fair number of business cases successfully.

And be sure to ask the lawyer you spoke to already to show you one Ch 7 case where a business filer with a high income and multiple properties has been successfully discharged in your local court before you go down that alley.

[ckymky]

Since half of your debt is business-related, you do not have to do the Means Test. This is what your lawyer is depending on.

Since you are an above-income filer and trying to file a 7 with multiple properties to boot, your case is going to get a *LOT* of scrutiny from your local trustee and the US trustee. If I were you, I would get at least 3-4 more opinions from other experienced bankruptcy-only lawyers in your area who have filed a fair number of business cases successfully.

And be sure to ask the lawyer you spoke to already to show you one Ch 7 case where a business filer with a high income and multiple properties has been successfully discharged in your local court before you go down that alley.

Thanks for your reply. We were planning on a 13, but were having second thoughts since the 7 was an easier way out.

If we file the 13 prior to the homes going into foreclosure will the 2nd mortgages become unsecured debts that we will have to pay back for 60 mos? Can they come after us after the fact if they miss the cut-off to be included in the bankruptcy?

We are just waiting for the attorney to provide us with our payback plan amount (different attorney than the guy who said we could file a 7).

[howtoplan]

i think you can do the chapter 7 successfully....

I just finished ours. It did take 4 mos + but we had close to 3 million in debt. Two businesses, 3 rental properties and our home. All had negative equity. We kept everything we wanted to and will ride through on the mortgages for the time being. Our debt was more than 51% and we had no means test and our income is above average. It was stressful but we had crazy people complicating our filing. This probably wouldn't happen to you. I agree, talk with several attorneys and ask about their business case experience. I don't want to scare you but our case cost about 15K for a chapter 7, but then again we crazy people in it. Good luck.

[lrprn]

If we file the 13 prior to the homes going into foreclosure will the 2nd mortgages become unsecured debts that we will have to pay back for 60 mos?

Second mortgages don't just become unsecured debt when you file a 13.

Every property that has a second mortgage has to have a current market value that is less than the first mortgage. Then you can have the second mortgage stripped as a part of your Ch 13. There are several excellent 'sticky' threads in the forums about lien stripping in Ch 13 - they will give you a better idea of exactly how this process is accomplished.

Keep in mind that second mortgages cannot be stripped in Ch 7.

Can they come after us after the fact if they miss the cut-off to be included in the bankruptcy?

Nope. The deadline to file claims in Ch 13 is 90 days (Uncle Sam gets 120). If a creditor wants an extension, they have to petition the court before the 90 days ends and provide an acceptable reason to the judge to get it.