Filing Chap 7 Non Consumer Debt--does it take longer?

[LostNFound]

I don't know WHY I keep worrying so much about this. I am so scared to just "pull the trigger" and make the final decision to file. The lawyer we spoke with has suggested that we file Chap 7 non consumer bankruptcy. We have 5 rental properties that we will claim as our business. But the catch is that we have a $60K 2nd mortgage on our home that we used to pay off one of our rental houses and then use some of it for down payments on other rentals. The problem is that neither my husband, nor myself, can remember if we used ALL of that money on our business, or if we could have used it to pay off other personal debts?? I know it was intended to be used to start our rental business--just can't confirm it. In addition, we have $100K in credit card debt. We used a lot of that in the form of convenience checks to do repairs and help pay labor on rentals. But again, that's all so foggy, I can't honestly predict how much and where.

I guess I'm a little apprehensive to file as non consumer debt because I don't know how to prove all of that. I'm absolutely NOT trying to lie to anyone. In fact, I have a hard enough time trying to remember the truth! But I have this fear that the trustee is a HORRIBLE person and my inability to recall all the facts from 4-5 years ago is freaking me out!

Has anyone filed in this way (non consumer) and how difficult will this be? Do I need to search for some kind of receipt from years ago? I have no clue where to begin. And do I need to expect that our BK would take longer because there are 5 other houses involved that would be "assets".

I feel like I want to file for BK and then hide under my bed until it's over. I am so afraid that I've done something wrong and I'm going to get into trouble. When I think back to all the decisions we made and the assumptions we had that things would "work out". And yet, here we are....ugghhh

[Mensa1]

You'll be fine. Are all the rental homes owned by you and H personally or do you have an entity involved that owns the properties?

If personally, the fact that 2nd mtg on pers res went to do this or that and it was all 4-5 yrs ago is minutia. The TT would only have an interest in things in the past yr, in the even that transfers were made to family members, and maybe just the past 4 to 6 months for arms length transactions. Have you sold any assets in the past 4 months (12 months to insiders)?

The TT will look things over more thoroughly than if you were all W-2 income, but it isn't like the courts aren't seeing a lot of other folks in the same boat you are in currently. It also doesn't matter what (bad) assumptions or business decisions you made as long as they weren't in an effort to borrow funds you knew you couldn't pay back, which would be considered defrauding the lending source.

[LostNFound]

The 2nd mortgage paid off the rental house (about $25K) and I would have proof of the dates in my credit report (when one loan closed and another opened). But I don't know which of the other rental houses we paid money down. We bought 5 in ONE year--that should convince the TT that we had to have money from somewhere for the down payment.

So when you think the TT won't care about the transactions from 4+ years ago, do you mean that he isn't going to accept "business debt" as our reason for filing? Or just that he isn't going to expect us to look back that far back?

We haven't sold any assets, other then our camper (Jan 2009). The only reason we sold that was because we couldn't justify keeping it. My parents actually used it more then us and my youngest loved to spend time with them. The camper had a small water leak (we couldn't find at first) that eventually became bigger and wrecked the kitchen cabinet. We just couldn't afford to fix it so we sold it to my parents. However, the question will be if our sale price was fair. Honestly, it was probably on the low side to most people, so I do worry about what the TT will think of that. We justified our sale price due to the previous hail damage (we didn't fix) and the water leak repair.

Other then that, we had hard assets we could have sold had we "planned" to do this. 3 snowmobiles, motorcycle, additional car that is my son's.....We took out several convenience checks throughout 2008-2009. Most went to repair houses to sell, but they never sold. We always expected to pay it off...it just never happened. I'm fearful that we will appear fraudulent because of those checks.

Our lawyer is not allowing me to use any expenses for my daycare that I usually get to use. I have to claim all of my income with only food and actual items purchased for daycare. This pushes us over the income guidelines for a family of 5 by about $15,000. IF we don't qualify for non consumer BK, then I suppose that puts us into a Chapter 13. My husband DOES NOT want to consider that at this point. He would take the chance of trying to sell the rentals for yet another year! So, I'm really nervous and hoping and praying that this NON CONSUMER debt will be considered. In my heart, I know it's because of the rental business that we have so much debt on credit cards and loans...but the TT isn't going to accept my heartfelt sincerity, I'm sure!

[Mensa1]

LnF: You are concerned and fearful, as I can pick this up in your posts. I really dont think you have anything to be concerned about. The TT isn't going to scrutinize the you think, unless things were transferred fraudulently or other conversion; sounds like you have no concern there either. The camper transfer is over a yr ago, so forget all about that.

I know it is impossible to do for you right now but if you could, try to focus on NOT offering any apology or excuse for anything that has happened. You really don't even need a reason as Bk is based all on facts and the facts are you have more debt than you can handle. Convenience checks over a yr ago aren't going to be an issue either. You'll be fine.

[LostNFound]

Thanks for the comforting words, Mensa1! I am definitely a little uptight about this situation. My attorney said they will go back 2 years for title transfers. So that has me a little worried. I don't care if we have to pay the TT for whatever he feels we cheated by selling to my parents (even though it's not technically right in my opinion). But I really hate the idea of getting into trouble over this or have my mother brought into our BK.

As for the convenience checks, I'm mostly worried that the TT will not allow us to claim that as business income because it is credit cards. All but 20K were in our personal names, not business.

[biotechsolution]

All you have to be able to do to file a 'non-consumer' bk is to add up all your debt and if 51% of it is the rental properties then you're fine.

Add up all your rental mortgages= your business debt.
Your 1st and 2nd mortgage= your personal debt.

Most likely if your credit card debt is not on a business card it's going to be classified has 'consumer debt'. It's pretty hard to claim business debt
on a personal card. Especially if you have mixed transactions on it.

But if you have any equity in the rental properties the trustee in a Chapter 7 is going to sell them for your creditors. THe only rental properties you can keep would be ones that either are underwater or at a 0 equity point.
Which begs the question of why would you keep them.

[LostNFound]

IF I claimed ALL of my credit cards and my 2nd mortgage as personal debt, we will be over by $42K. However, ONE of the credit cards is a BUSINESS credit card so I'm hoping that they will at least allow that one, if nothing else. IN addition, I think I can show that our 2nd mortgage paid off the balance of one of our rental houses. The timing will be exact so I'm sure they will be able to see this if I put the paperwork in front of them. I'm just hoping it's enough.

The other thing is that we've shown a $25K loss on our business for 3 yrs in a row. I'm hoping that may show that we would have needed to get the money from SOMEWHERE to continue to get by. But I don't know.

And we definitely want OUT from under all the rental properties. There is equity in 2 of them that could bring in about 20K. Thats IF they can sell them. So far, we've not had any luck in over a year.

My biggest fear is wondering what happens if we file for a Chapter 7 Non consumer and the TT hates the idea?? Then we are reduced to a Chapter 13 (I'm guessing) and that would be horrible. I don't want someone watching over me for the next 5 years.

[Mensa1]

THe only rental properties you can keep would be ones that either are underwater or at a 0 equity point.
Which begs the question of why would you keep them.

They can be under h2o and still have pos c/f. That would be a reason to keep them as long as the tenant sticks around. I have some of those, nearly breakeven as to equity but pos 300 per mo or more. Wonder how those will turn out?

[keptdigging]

I'm not a lawyer but whether a card is a "business" card or not isn't the issue. It's whether the actual charges were business or personal. Me, I never mix the two as interest on business charges is a deductible business expense.

I have also read somewhere that it is a debt-by-debt thing, not a charge by charge thing. So if you used "most" of your 2nd for business expenses, it is business debt (though this could be one of those district-by-district things.)

The one piece of advice I always offer to anyone who is a contractor or operating as some sort of business is this: If you use any credit cards, put personal and business charges on separate cards, and pay off the personal charges first. Interest on business expenses is tax deductible!

Unfortunately I did this way too well...which is why I'm here... and why I say IF you use any credit cards.

[jonance]

Hi,

I think you, much like i did for a LONG time, are worrying way too much. I went through every scenario in my head...down to the questions the trustee would ask, how i would answer, etc. I filed non-consumer a bit over a month ago, for the same reason...rental properties and associated debt. I actually didn't have one cent of personal debt.

I was terrified of many things, from being forced into a chapter 13 due to my high income, to the TT questioning all of my exemptions, to them wanting a large check for the non-exempt personal property. Ends up i worried, made myself sick, and didn't eat well for NOTHING. Went to my meeting last Thursday, my trustee wasn't even there, he was a fill-in, which was lucky i think....but still he just asked me a couple follow up questions. Their ONLY interest is to find something that is worth something they can sell that isn't exempt. That's it. They don't really care where that money went unless you just spent all of it right pre-BK. They probably won't even ask you, and if they do just be honest and say what you "think" or what you "know" and that you aren't sure about the rest.

A few months ago i thought i'd never be here, in the 60-day club, with a "report of no distrubution" from the TT. I had prepared myself to write a big check to the TT, or for even worse. Just BE SURE that you are accurate on your schedules, and most importantly that you find a way to exempt everything if possible, that you want to keep. I had WAY overvalued my house initially, but researching it i was able to get a large amount of unused home equity to protect everything else. Now I'm 55 days and counting. Can't wait!