Unique Chapter 7 situation. Need input

[dinger34]

Hi all,

It is possible that I could be facing bankruptcy, most likely Ch 7. My personal finances are fine. But my once successful company (LLC taxed as a S Corp) has been hemorraging money since late 2008 and I am losing hope in turning it around. And business cash and assets are starting to get concerningly low.

I have a bit over $300,000 in business debt that I do have a personal guarantee on. What makes my situation unique is that I have a decent amount of personal liquid assets. I have about $100,000 in personal cash (~70,000 of it was recently received from a net-loss carryback refund of taxes paid in years 2004 and 2005 due to net losses in recent years). Yes, I could put this in the business to keep it going longer, but I dont see much future in it and dont see the point in putting good money after bad.

Is there any possible way to do a business 7 and protect these personal assets? I doubt due to the personal guarantee. If not, I need input on the best ways to position and save as much of this as possible.

Here are some of my personal details:

- I own a very modest home. It has approximate value of $30,000 and I owe $27,000 on it. Should I pay off my home?

- I do not own a car personally. My car is owned through my business. It has an approximate value of $7,000. Should I purchase this car from my company so I own it personally? Or should/could I purchase another car personally and what could be the limit of the value for it?

- I do not have much other personal assets. The items in my home would probably be no more than 5k to 6k.

- I have been wanting to do a couple health care related procedures (fix teeth and hair transplant surgery) that would run about 7k each. Can I use my cash for these procedures before filing personal or business 7 without causing any problems?

- Is it possible to prepay up to a year in advance or so for child support or any other similar expenses?

- It is possible that I can put off the bunkruptcy for another 6 months and I would be willing to dip into the personal funds to accomplish this if needed. If I can do the purchases/positioning with a majority of the personal funds now and then file BK 6 months after then would I be safe?

- Is it possible to purchase a pension and then cash it out after the discharge?

- The only other debts I have is about 5k in credit cards and 5k in student loans. I assume I should pay off the student loan since it is not dischargeable but not pay the credit card off?

Any ideas, thoughts and comments appreciated. I never imagined I would be in this position and I am very thankful this valuable forum and members exists.

[AngelinaCatHub]

Hi all,

It is possible that I could be facing bankruptcy, most likely Ch 7. My personal finances are fine. But my once successful company (LLC taxed as a S Corp) has been hemorraging money since late 2008 and I am losing hope in turning it around. And business cash and assets are starting to get concerningly low.

I have a bit over $300,000 in business debt that I do have a personal guarantee on. What makes my situation unique is that I have a decent amount of personal liquid assets. I have about $100,000 in personal cash (~70,000 of it was recently received from a net-loss carryback refund of taxes paid in years 2004 and 2005 due to net losses in recent years). Yes, I could put this in the business to keep it going longer, but I dont see much future in it and dont see the point in putting good money after bad.

Is there any possible way to do a business 7 and protect these personal assets? I doubt due to the personal guarantee. If not, I need input on the best ways to position and save as much of this as possible.

Here are some of my personal details: Looks like you are a candidate for bk7. However, since you are personally backing this loan, your funds are now mixed and are targets to make you an asset case.

- I own a very modest home. It has approximate value of $30,000 and I owe $27,000 on it. Should I pay off my home? Check your States exemptions. You have nill equity in that house. It won't be sold under you.

- I do not own a car personally. My car is owned through my business. It has an approximate value of $7,000. Should I purchase this car from my company so I own it personally? Or should/could I purchase another car personally and what could be the limit of the value for it? Check you States exemptions and that is the value of your car. Does not matter if you repeat a sale in your name only as you are a garanter.

- I do not have much other personal assets. The items in my home would probably be no more than 5k to 6k.

- I have been wanting to do a couple health care related procedures (fix teeth and hair transplant surgery) that would run about 7k each. Can I use my cash for these procedures before filing personal or business 7 without causing any problems?
Medical needs are exempt.

- Is it possible to prepay up to a year in advance or so for child support or any other similar expenses? Probably not as it would be considered hiding assets.

- It is possible that I can put off the bunkruptcy for another 6 months and I would be willing to dip into the personal funds to accomplish this if needed. If I can do the purchases/positioning with a majority of the personal funds now and then file BK 6 months after then would I be safe? Not necessarily. If fraud is suspected, they can look back years and see your spending habits. Anything over $600 is suspect.

- Is it possible to purchase a pension and then cash it out after the discharge? This would not fly unless you had been doing some sort for some time. Again, it can be construed as hiding assets. It could be reversed by a Judge even though pensions are exempted. There is a fine line you are walking in that your business is also you.

- The only other debts I have is about 5k in credit cards and 5k in student loans. I assume I should pay off the student loan since it is not dischargeable but not pay the credit card off? That would be a good idea, but again it is all about timing. It could be considered as preferential and the Judge could reclaim the funds to the bk estate.

Any ideas, thoughts and comments appreciated. I never imagined I would be in this position and I am very thankful this valuable forum and members exists.

Nobody ever thinks they would be in a fix like this. There are rare people who bk for profit, that is why they are real rough on self dealing a planned bk. Your best bet IMHO is let the business decline and live off the money you do have with NORMAL payments that would not red flag you. This could take some years to do and a lot of phone calls referencing your non payments or late payments. I know you are honest, but be careful not to look otherwise.

Get Nolo press C7 book online in pdf form. It is excellent and can answer more questions. Also read ALL the stickies referencing your C7 and business C7.

Welcome to our Forum family.

[jst4f]

Sounds to me like you need to "plan" your BK and that is best done with the help of a local experienced BK attorney. Given your large infusion of cash, you have time to plan. Interview several and be sure to ask questions regarding their experience in non-consumer BK 7. Your BK will cost more in legal fees than the average BK7 but it will be worth it in the hands of an experienced attorney that the local trustees know and respect. Best of luck to you.

[mountanddo]

Hair transplants are considered medical and are exempt? I find that hard to believe.

[btbeme]

Some thoughts (but better ask an attorney):

- Indiana allows $17,600 exempt on a home. If you are married you can double that. So, if single you could pay about $14,000 on the home and be OK. You need to be accurate on the value, though, and make sure your attorney OKs that - don't want it to be a preference payment.

- Indiana has a $9350 wildcard, which you could use to cover personal items (I'll bet they are worth a lot less than you think), and/or a car, and/or a house, cash, etc.

- ...and that appears to be about it. Bummer of a state to file BK in...

...so, it would look like you could keep a roof over your head, a vehicle, and some or all of your personal property.

The cash is the biggie. You could likely pay down some of the house, make a contribution to your retirement account (only if you have been doing so in the past couple of years), get some medical work done, maybe pay off the student loan. What all of these payments require is time - time between the payments and the filing, especially the student loan payoff. You may be looking at a year before being able to file without consequence.

Prepaying anything is generally a no-no.

If you don't spend the cash on allowable expenses (like an attorney, food, utilities, etc) then you will certainly lose it. I am only half kidding when I say take it to Vegas - win or lose, you will be in a better position. But, if you can spend it down over time while keeping the lions at bay on the business debts, you will eventually get there. Unfortunately, you can't bury it in a coffee can.

Make sure your attorney is a darn good one, with a couple of decades of experience and a deep knowledge of non-consumer Ch 7. You will need to shape this one carefully to stay within the law. I can promise you the Trustee will be very interested in where the cash goes, so keep very good records of it (receipts, cancelled checks, etc).

Impossible? No. It will mostly be a matter of when to file and what to do in the interim.

[JackBondLove]

If you can go a year before filing BK, you could pay off and buy things now, an have no problem down the road. Paying off the student loans and home is a no brainer, as is buying the car from the business. Get the medical things done too. The way that you need to look at Chapter 7 BK is that you will only be able to keep non-exempt assets after that going forward. The fact that you may do it now with plenty of cash, of later with less cash is not really an issue. If you think you have enough to make it a year, I'd even recommend taking a nice vacation now.

[HHM]

With that sort of cash to burn through, to have any shot of having a successful bankruptcy (and avoiding jail for bankruptcy fraud), you need to hire an attorney NOW. And be prepared to pay $5K + since you need ongoing advice to help plan your case.

1. Sounds like you need help with exemptions so you know what you can and cannot pay.
2. Prepaying expenses is almost always a non-starter.
3. Hair transplants, not a good idea, (but, if you can wait a year, you may not have an issue).

[AngelinaCatHub]

Hair transplants are considered medical and are exempt? I find that hard to believe.

It could be or could be excluded. Consider in a man, (or woman) a psychological situation that medically bothers a person or his income needs about his appearance. Breast augmentation for instance can be exempt if it is reconstructive surgery. It may depend on the complications, reasons. Example Lasik surgery is not exempt, but perhaps if you are an airline pilot, it may be considered essential. All depends on the circumstances. 'Hub

[HHM]

It could be or could be excluded. Consider in a man, (or woman) a psychological situation that medically bothers a person or his income needs about his appearance. Breast augmentation for instance can be exempt if it is reconstructive surgery. It may depend on the complications, reasons. Example Lasik surgery is not exempt, but perhaps if you are an airline pilot, it may be considered essential. All depends on the circumstances. 'Hub

First, exempt is the wrong term in this context. The idea is simply whether the expense was reasonable and necessary (assuming the person was insolvent at the time).

Also, keep in mind, if push comes to shove, you do have to prove it; you don't just argue it. So someone would need to testify

[jst4f]

First, exempt is the wrong term in this context. The idea is simply whether the expense was reasonable and necessary (assuming the person was insolvent at the time).

Also, keep in mind, if push comes to shove, you do have to prove it; you don't just argue it. So someone would need to testify

I think it would be asset transfer from a non-exempt asset (cash) to and exempt one, medical procedure. (I don't see the trustee demanding the hair plugs.). This has to be done very carefully and with professional help as this is a long ways from filling up the kitchen pantry.

[mountanddo]

It could be or could be excluded. Consider in a man, (or woman) a psychological situation that medically bothers a person or his income needs about his appearance. Breast augmentation for instance can be exempt if it is reconstructive surgery. It may depend on the complications, reasons. Example Lasik surgery is not exempt, but perhaps if you are an airline pilot, it may be considered essential. All depends on the circumstances. 'Hub

I don't know. I think you are stretching it here. Not a lot of women augment their breasts after breast cancer..mostly just reconstruct to get back what they had. What you are talking about is cosmetic surgery *medical condition that psychologically bothers a person*. If Lasik surgery to correct vision isn't exempt I can't imagine that hair transplant surgery is. But hey, let us know if it is!