some say it's complicated...

[eagle86]

I met with two different attorneys this week and both say I just barely pass the means test for Chapter 7, but both are suggesting that a 13 will be best.

Here's where things get interesting....

I have an LLC with about $3,500 in equity assets (which is about $1,000 over the tools of the trade exemption in my state)

Also, I have a truck/vehicle 1 (paid in full) with a value of about $9,000,

and another vehicle/vehicle 2 (paid in full) worth about $20,000.

...more complications....

We have a "family loan" with a remaining balance of $28,000

Here are my questions:

1) Under a 7, would it be possible to have the family member who we owe $28K to put a lien on our vehicle 2 and then reaffirm that vehicle?

2)Under a 7, is it possible to settle with trustee / buy out the LLC equipment and truck/vehicle 1 for the price difference between the value & the exemptions?

Thank you for your opinion!

[despritfreya]

Here are my questions: 1) Under a 7, would it be possible to have the family member who we owe $28K to put a lien on our vehicle 2 and then reaffirm that vehicle? 2)Under a 7, is it possible to settle with trustee / buy out the LLC equipment and truck/vehicle 1 for the price difference between the value & the exemptions?

Here are some answers:

1. You certainly can turn an unsecured loan into a secured loan but, if you do not want the 7 Trustee to just undo the transition from unsecured to secured, you will have to wait at least 1 year to file bk. What you would be doing is creating a preference to an "insider". The Trustee has the right to set aside the preference. Further, if you cannot document that there truly was a loan you may face the issue of a fraudulent conveyance and the window to set aside such a conveyance can be as long as 4 years.

2. You certainly can offer to purchase back the non-exempt value from the Chapter 7 Trustee but the Trustee can do one of the following:

a. Use your "offer" as an opening bid to see if there are others out there willing to pay more. If you are the high bidder you will have to pay the amount almost immediately.
b. Accept your "offer" as a compromise/settlement and simply allow you to cash him out immediately.
c. Accept your "offer" as a compromise/settlement and allow you to make payments.

The choice belongs to the Trustee as you lose complete control over the non-exempt assets the moment you file the Chapter 7. If you do not want to lose control do not do a Chapter 7.

Des.

[debthelper]

I met with two different attorneys this week and both say I just barely pass the means test for Chapter 7, but both are suggesting that a 13 will be best.

Here's where things get interesting....

I have an LLC with about $3,500 in equity assets (which is about $1,000 over the tools of the trade exemption in my state)

Also, I have a truck/vehicle 1 (paid in full) with a value of about $9,000,

and another vehicle/vehicle 2 (paid in full) worth about $20,000.

...more complications....

We have a "family loan" with a remaining balance of $28,000

Here are my questions:

1) Under a 7, would it be possible to have the family member who we owe $28K to put a lien on our vehicle 2 and then reaffirm that vehicle?

2)Under a 7, is it possible to settle with trustee / buy out the LLC equipment and truck/vehicle 1 for the price difference between the value & the exemptions?

Thank you for your opinion!

That family member cannot do that unless it was part of the original contract with the family member that the loan they gave you was secured by those 2 cars. If that's not in the contract then it is an unsecured loan and they take the risk. If there is no contract or signed papers at all then technically they can't do anything legal to get the money from you even if you don't file bankruptcy.

Is the loan from the family member the reason you are filing bankruptcy or is it a business that is filing bankruptcy? If it is just because of what you owe the family member then I would say talk to a contract lawyer to see what that family member can legally do to get the money from you (do not talk about this to a bankruptcy lawyer because they will always suggest bankruptcy, bankruptcy lawyers are like car salesmen except they want to sell you a bankruptcy, that's how they make money) the contract lawyer can also help you right up a new contract with a lower payment and longer term that your family member might agree to.

I can't really answer your second questions cause I don't know the reasons why you are filing for bankruptcy.

If you can buy out the LLC equipment then why would you file for bankruptcy? bankruptcy should only be used if you are at risk of losing your business equipment. You probably do not have to file for bankruptcy right now, just ride through the rough times until you get things paid off.

[eagle86]

Debthelper, The whole point is to find a way to not hurt the family member. They know the situation and want to help us...in fact, the family member is cool with waiting to be paid back. This month I have stopped paying them and all other unsecured credit cards.
The thought here was to have the family member put the lien on the car as a way to take away the equity in the car. One other part of the story...the same family member bought the car for us less than 6 months ago. There is not a written contract to pay them back on the car, but there is on the original loan (the one with the 28K balance still owed)
The reason for filing is the 96K in unsecured debt that I cannot pay back. Some debt is from the business and some is personal. With an LLC all seems to be rolled together.
The business equipment is for a side business that has up to this point been used to help generate additional income to get the ends to meet. If I lose the equipment...I lose income. This is bad with either a 7 or 13. With exemptions (vehicle, tools of trade & wildcat I may only need to come up with $5K to redeem from trustee.
The bk lawyers suggest 13 to avoid all the mess with the LLC, truck, etc. It was suggested by one lawyer that the family member placing the lien on the vehicle would be a viable strategy to "take away" some equity from the ratio formula used to calculate the payment plan amount. We would have to wait 90 days after the lien to file. The unsecured family loan is now secured and becomes a "priority" payback in the 13 payback plan. The family member would receive monthly payments from the trustee instead of me.
Sound right?

[debthelper]

Oh, ok i think get it now, you WANT them to put a lien on your car, yeah that would work in a chapter 13 but I'm not sure if that will work in a chpt 7. One other thing you can do is have your family member loan you money to pay off the LLC equipment and then he can put a lean on that to. Then if you have no other assets and you barely make enough money to live off of, just stop paying the other creditors that you owe 96k to. They can't come after you if you are broke and they can't take your equipment or vehicles because they would already have a lien on them by someone else. I would talk to a lawyer though first before doing it that way because it might be considered fraud, I'm not sure.

Maybe just wait six months and see where things are then. If you stop paying creditors right now it will be 3 or 4 months before they start coming after you. Then you can get a lawyer that can help you offer them a payment plan or a payoff that is much lower then you owe and you can avoid bankruptcy all together. Bottom line is if worse comes to worse and they are going to garnish your bank account and take your house, then run to the bankruptcy lawyer and file for bankruptcy.

[helpmeout]

There is nothing stopping you from paying your family member back after your BK is discharged and closed.

[chrisdfw]

Perhaps the family member can refinance their debt with the vehicles as collateral. Offering you a lower interest rate or better terms in exchange for security for the loan.

If the creditor gets new value (security interest) and doesn't give you anything in return, then you have a preference. You can't just give an unsecured creditor a security interest that puts them ahead of other creditors, but if they offer you something of value (better terms) then it is not a preference. But you need an attorney and I am not one.

What you are suggesting may be possible, so consider it, but do not do anything without sound legal advice BEFORE you do anything. BEFORE.