Question About Business Assets

[Broke2011]

The business that my wife and I own consists of hundreds of websites that we own and operate on our own web servers. When the economy crashed in late 2008, our income dropped in half overnight. Since then, we have avoided bankruptcy by the skin our our teeth.

One of our websites generates around $6,500.00 per month, which is the majority of our income. I make another $4,000.00 per month selling my web development services on eBay. However, after all the business expenses, the resulting income could possibly be under the ceiling for Chapter 7.

Our worry is that the courts might take our websites and domain names into consideration during the asset discovery phase. I am concerned that the discovery phase might get drawn out and protracted, with the end result us getting denied by the bankruptcy court.

We are also trying to stay in a $330,000.00 home that we owe $290,000.00 on, along with a 2008 Chrysler Aspen that we would like to reaffirm on.

We have sold tens of thousands of dollars in assets since the economy crashed in late 2008, which has helped us avoid foreclosure thus far. My business income has been gradually increasing since June of 2010, but we are still 5-6 months behind on our $2,800.00/month mortgage.

Please take into consideration that we run our web server / hosting business out of our home that houses our servers and has a backup generator to keep them online for our clients. If we sold the home, we would need to be able to move our business into the next home, which would require a backup generator and a T1 connection.

Here is our debt:

(2) SBA Loans / Chase Bank: $67,000.00 (Secured with our business assets)

(4) Unsecured VISA Cards / U.S. Bank $49,000.00

(3) Unsecured Merchant Credit Cards $23,000.00

My wife's 2008 Jeep Commander already got repossessed in 2010.

Do you think we should:

1. Try for Chapter 7 and keep the house/car.

2. Go for Chapter 13 and reorganize our debt.

3. Just wing it and don't file at all, but work deals with creditors.

My income has been slowly increasing, so we may not even qualify for Chapter 7 now. However, we are about to be forced out of our home for being 5-6 months behind on our mortgage and everything else is behind 2-3 months (we stopped paying on the SBA loans and the unsecured credit cards about a year ago). The mortgage company did say that they would reaffirm if we decide to file bankruptcy.

We have been telling creditors who call on the phone that we are going to file bankruptcy for over a year now. For a while they quit calling, but they found our new phone number, and several have been harrassing us night and day even when we tell them we are filing bankruptcy and give them the attorneys name.

Also, does anyone know the answer to this question: Will the courts take into consideration the hundreds of websites and domain names that I own as caluable assets?

Thanks! My wife and I have been reading the forums... they are much less-biased than a lawyer!

[Broke2011]

I think I found the answer to one of my questions:

On April 21, 2000, the Virginia Supreme Court found domain names do not qualify as property of the bankruptcy estate. In explaining the verdict, the court contended that allowing garnishment of domain names could lead to garnishment of other services, such as a prepaid balance on a satellite television customer's subscription.

Now I just need to figure out what I should do.

What would happened to my web servers that are secured with my Chase SBA loan?

[frogger]

What is your business structure? Corp. or Sole P?

[Broke2011]

What is your business structure? Corp. or Sole P?

Sole proprietorship.

[frogger]

Good. That places you in a much better position for a chapter 7. You have a pretty decent income coming in, so you might be able to work something out with your creditors.

As to a 7 or 13, run the numbers and see what works for you. If you can handle it, 7 is a much better number than 13...

[Broke2011]

The bolded part of this article below is what worries me:

The most hotly litigated of these assumption-and-assignment situations? When a dot-com debtor attempts to assume a promising software license and then assign it for a fee to a third party against the wishes of the initial licensor. Many of these licensors challenge the right of a debtor to assign the executory contract. However, many courts are giving the debtor this ability due to specific provisions in the U.S. Code. Nonetheless, this issue can be expensive, as well as time-consuming, to litigate.

Not much can be sold. Most of a Web-based business's salable assets are small, inexpensive items � furniture, computer equipment, and the like. Vehicles might figure in the equation, but often they've been modified for a company-specific purpose.

Numerous and space-consuming, these items aren't likely to fetch a good price.

However, a cottage industry has developed for liquidating the assets of online businesses. Bid4Assets and NABT are online auction houses specializing in Chapter 7 bankruptcy sales. Without these unlikely angels, a bankrupt dot-com would find it difficult to liquidate its assets.

[justbroke]

On April 21, 2000, the Virginia Supreme Court found domain names do not qualify as property of the bankruptcy estate. In explaining the verdict, the court contended that allowing garnishment of domain names could lead to garnishment of other services, such as a prepaid balance on a satellite television customer's subscription.

You live in Illinois so you should NOT be paying attention to things out of the Virginia Supreme Court. It would need to come from an Illinois Federal (District) Court, Illinois Bankruptcy Appeals Panel (BAP), the Supreme Court or the United States 7th Circuit Court of Appeals!

If your servers are secure debt, then they would remain secure debt and you would need to continue to pay them.

You have issues with the home since you are behind in payments! A chapter 7 will not stop foreclosure, it will only delay it for a couple of months. You are behind in payments, so you should be trying for a modification! You are ripe for foreclosure since there is minimum equity... and even though the bank would lose all that equity in a foreclosure... they are much better off than the property being underwater and foreclosing! (This does not take into account any private mortgage insurance or other products, such as FHA or other GSA backed loans.)

I highly recommend that you get some consultations with some really good asset protection attorneys who specialize in bankruptcy and business! You may want to do a Reorganization under Chapter 13 (if you qualify for Chapter 13) over a Chapter 7 if you are trying to save the home. These are financial planning decisions that only a qualified person can help guide you through!