Update and questions

[GWBcasualty]

About two years have passed since I stopped paying my CCs.

Have not filed yet as I own a small business (sole prop) and there is always something that causes me to wait a little more.

Situation in a nutshell.
CCs
- I have one CC lawsuit that I am still fighting
- Settled one account at 6%
- Nobody else calls anymore. Some are now 10 months from SOL.

Mortgage
- Home value at $400k
- First balance $370 and 2nd balance $150 - both current

Income
- We are under/close to median if we file before September
- We are above median but pass the means test after September

Business
- Sole prop
- Inventory less than $10k
- Debt with vendors more than $30k
- Sales around $120k/year - At this level only makes $1k/month... clearly used to make much more.
- worthless without me.

Reasons not to file now.
None, except to buy more time for biz - home.

I have some questions for the great forum contributors.

1) I am planning to stop paying the mtge to see how BofA will approach things w/regards to a loan mod.
Q: If I need to file (due to the lawsuit) while I am behind payments, will it affects the means test? I receive conflicting opinions on this, it seem to depend on how many months one is behind, if there is a active loan mod negotiation, etc...

2) In order to minimize the effect of bankruptcy on the business (vendors), I have been entertaining the idea to incorporate the business.
I would TRANSPARENTLY transfer all assets (inventory, materials, goodwill, etc...) and liabilities (vendors balances) to the Corporation.
There would be no tax effect.
There would be no change to the estate worth.
The vendors would not know about the BK filing.
I would exempt the biz worth (shares) instead of the inventory as a WC under CA System 2.
Q: Anyone sees a problem with this?

TIA

[GWBcasualty]

I found this on http://www.moranlaw.net/business-bankruptcy-FAQs.htm
That's what I thought was common sense... anyone here know the judicial attitudes on the subject in Southern California?

The trustee may ask for blue sky value for the shares above the exemption limit... well, he could do the same with my inventory... just that this way I would keep the vendors out of it and show a clearer picture to the trustee.

What if I incorporate before I file?

Incorporating a proprietorship creates a legal entity separate from the debtor. Most trustees will not interfere in the business operations of a corporation that is owned by a debtor. If the corporation has value that is greater than any exemption claimed in the stock, the trustee may insist that the debtor either buy the stock back from the estate or that the corporation be dissolved and any value distributed to the bankruptcy estate.

In our opinion, incorporation of a sole proprietorship does not constitute a fraudulent transfer but merely a change in form of the asset held by the debtor: before incorporation, the debtor owned the business while after incorporation, the debtor owns the stock of the corporation that owns the business. Check the laws and judicial attitudes where you live.