Should I close down my business if filing Chapter 7 personal?

[carlsbadmike]

I am considering filing Chapter 7 personal bankruptcy in the very near future.My bills will start becoming late withing the next week and he first house payment will be missed in the next month.This week a customer of mine took 95% of my business through no fault of my own.To keep the business open I need 25K to pay off my existing vendors which I am trying to come up with now.If I can come up with the $25K I am hoping to keep my business going and downsize my personal life so that it costs me less to survive.My sales will probably be less than $100K for the next 12 mos and the net income might be around $20K.I'm wondering if keeping my business open will cause me to not be able to file Chapter 7 and put me into a Chapter 13?

[StartingOver08]

What kind of business do you have? Does it have inventory? How is your business organized (sole prop, S-corp, LLC, C-corp)?

One of the things the Trustee looks at is your business income (gross, not net). The Trustee will look at your A/R too. Do you have outstanding business debt?

[carlsbadmike]

It's a transportation business done over the phone and internet. My only assets are a few computers and office machines-maybe worth $1500. Business is an S Corp. My A/R is $25K and my A/P is $48K. Thanks for replying.

[StartingOver08]

I had an S Corp and filed Ch 7. I had to provide all the business income, statements, debt etc on the S corp as well as myself. If you file personal Ch 7 your business is considered an asset of yours.

All outstanding A/R as of the filing date belong to the Trustee. By the time I filed, I had very little in outstanding A/R (I am a Realtor and contracts are considered A/R). I had to shut down the S-Corp because although the business debt was discharged against me personally, the creditor could get a judgement and sieze bank funds from the business account because the business did not file.

So you will want to address your particular situation with your attorney. You have a 'service' type business. Are you going to include the A/P in your Ch 7 filing? You will need to address the best way to continue your business without the Trustee stepping in to take over - look at this site http://www.moranlaw.net/struggling.htm

Unfortunately it is a little more complex when you own your business and you are filing BK. You will need additional documentation as to your business expenses and you probably will have to supply, for example, 4 yrs tax returns rather than 2 yrs. The lookback period is a little longer - and the process is a little more detailed. The attorney you hire to file your personal BK will need to be experienced in small businesses too so you don't end up losing your business.

[carlsbadmike]

Can I claim the A/P of my S Corp in my personal Chapter 7 filing? It sounds like you just shut down your business and did not file bankruptcy correct? My attorney said that shutting it down should suffice since the debts aren't going to be discharged anyway and that I shouldn't be held personally liable because of the S Corp structure. I've only seen one attorney so far for a consultation but i'm considering seeing others also.

[StartingOver08]

Can I claim the A/P of my S Corp in my personal Chapter 7 filing? It sounds like you just shut down your business and did not file bankruptcy correct? My attorney said that shutting it down should suffice since the debts aren't going to be discharged anyway and that I shouldn't be held personally liable because of the S Corp structure. I've only seen one attorney so far for a consultation but i'm considering seeing others also.

I filed a personal Ch 7 and just shut down the S Corp.

I still do business as a sole prop now.

I included all the A/P for the S Corp in my personal Ch 7 AND under the first page of the petition where it says alias my attorney listed my S Corp name. So I have discharged my personal liability for the S Corps debt. However it is my understanding that the debt against the S corp still exists. I shut down the S corp so it has no assets either.

The best investment I made was getting an excellent BK attorney

[carlsbadmike]

Personal BK and how it affects my S Corp

I saw another attorney and I'm glad I did. She was a whole lot more knowledgeable and taught me numerous things that I wasn't aware of. I haven't filed yet as she said we should try to get house sold so that my partner doesn't have to file and that I should wait until I have stopped paying my bills. I went into this intending to be proactive rather than wait until I'm harassed by my bill collectors but it sounds like that's not the way it's normally done. My business is still limping along and I don't know if I will be able to make enough money to pay my business bills and have enough to live on but I'm trying my best to make it work. Scary part is if it doesn't make it I don't have a job to go to and then my income will be $0. I don't have a degree but I've worked my way up the ladder into management 3 times in my life and even though my self confidence is in the toilet right now, I think I will be able to find employment again. Is anyone else in a similar situation? Does anyone else have these roller coaster emotions on a daily basis? Earlier today I was feeling pretty good and upbeat and right now I feel like I could cry. Last night I felt like I was worthless and when I don't have business I feel worthless. Sound familiar? I know that exercise would help but I'm afraid if I leave my desk I might lose some business. It's comforting to know that we're all in this same boat and can lean on each other and help each other. I hope to see some posts from you guys. Take care.

[carlsbadmike]

It's been 8 months since I last posted and lot of things have happened. I was able to sell my house for $235K less than my original asking price and took about a $110K loss just to get out from under the payment I could no longer afford. I filed CH 7 BK on April 30, 2010 after having to wait out some things, I have my 341 meeting in 2 weeks and expect to be discharged 4 months later. I am also winding down my failed business at the direction of my attorney since i have no way of making it work and a lot of my debt is due to this failure. To cap it off, my lifelong struggle with depression has overtaken my life at this point and I've had to go on disability. At his point I'm taking it one day at a time. Best wishes to all of you.

[blockhead]

It's a transportation business done over the phone and internet. My only assets are a few computers and office machines-maybe worth $1500. Business is an S Corp. My A/R is $25K and my A/P is $48K. Thanks for replying.

If it's anything like mine they'll want a P&L and Balance sheet, tax returns up to 2009.

[StartingOver08]

OP, you are doing the difficult part now: winding down the business and filing Ch 7. And you are getting things done! Once you get through this part, there is light at the end and you will feel better. It might be hard to visualize with everything you have on your plate, but look at how much you have accomplished since the last time you visited.