Filing Ch7 with an S-corp in the Picture

[MikeW]

One other note:
As far as I know Florida does NOT have a tools of the trade exemption. Unless the law has recently changed. That was one of my initial hopes when we were preparing to file, as well. But it may not matter.

It looks like you're right about this. Everything I've read says that Florida has no "tools of the trade" exemptions. It looks like Florida is just a really bad place to file a ch7, especially if you own a business. It's assumed that the business is insolvent and will not continue. I guess that's why they have ch13.

Most people seriously overvalue their property, by mistake and out of ignorance of what the true value of used goods really is. Even a newer computer, once plugged in and used, plummets in value immediately. Unless you have easily sold antiques, jewelry (most people overvalue this, too), or highly sought baseball cards, you can probably fit nearly everything you need into the 5k exemption. The key is what you NEED, not WANT. That is another common mistake, the idea that people must "save" as much as they can. The relief of BK is worth losing a few "things". Things can be replaced later with better, newer things.

But if you can get through this with your business and sanity intact, you will be way ahead, and able to get your life back together.

This is true. If I use garage sale value, most of my equipment is pretty worthless. Now my SUV. What a shame I can't use the tools of trade exemption on that, since I use it for delivering pizza. Now that I think about it though, the A/C did quit working. The estimate to fix was $1,200. At this point, without A/C in Florida, I should be able to get that value down close to the $1,000 auto exemption.

Maybe I really shouldn't worry about going a little bit over the exemption limits. So I owe a little bit when it's over. It's better than having to worry for 5 years about Greentree pursuing me.

[DeadManCrawling]

With regards to courts and their rulings on preferential payments to suppliers:

The reason the videos say "MIGHT NOT" be considered preferential, is that every district varies according case law decided in that specific district. Now that you know exactly what you are looking for, try searching for similar cases that have been resolved in your Florida District. Middle, if I recall correct. That will give you a much better idea on how it will occur there.

It will also, potentially, provide you with defenses to any challenge, as well as details on how to successfully pull your business and suppliers through this.

If your SUV is above the limit, but not by a large amount, the trustee may simply abandon the property, meaning you keep it and pay nothing extra. There is always some risk here, but it is worth considering. Consult KBB and take into account everything wrong with the vehicle. Perhaps take it to one of those Buy Here, Pay Here joints and ask them to write down on letterhead what they would give you for it, cash, right there on the spot, to justify a lower valuation.

It sounds like you are getting into the nuts and bolts of what you need, so good work on that.

Also, depending on your situation, you might benefit if you can delay filing. I do not know if you are facing imminent lawsuits from creditors, or not, but delaying can allow depreciation to increase on your truck. The GreenTree situation may require that you file sooner than you'd like. That is a double-edged sword. On the one hand, filing sooner gets you through this quicker, and you move on with life sooner. On the other hand, filing later has benefits.

You should weigh those things and perhaps consider filing a few days before GreenTree has their date for summary judgment. That can buy you a couple months if you need them.

Good luck, it sounds like you're figuring things out for your particular case.

[MikeW]

With regards to courts and their rulings on preferential payments to suppliers:

The reason the videos say "MIGHT NOT" be considered preferential, is that every district varies according case law decided in that specific district. Now that you know exactly what you are looking for, try searching for similar cases that have been resolved in your Florida District. Middle, if I recall correct. That will give you a much better idea on how it will occur there.

It will also, potentially, provide you with defenses to any challenge, as well as details on how to successfully pull your business and suppliers through this.

Thanks Deadman. That sounds like a good idea.

Also, depending on your situation, you might benefit if you can delay filing. I do not know if you are facing imminent lawsuits from creditors, or not, but delaying can allow depreciation to increase on your truck. The GreenTree situation may require that you file sooner than you'd like. That is a double-edged sword. On the one hand, filing sooner gets you through this quicker, and you move on with life sooner. On the other hand, filing later has benefits.

You should weigh those things and perhaps consider filing a few days before GreenTree has their date for summary judgment. That can buy you a couple months if you need them.

Well, I don't have any creditors on my back besides Greentree. I'm still current on all my credit card payments. I only owe about $20,000 on them. Not really enough to file ch7 over by itself. The only reason I'm considering ch7 is because I don't want Greentree pursuing me for a judgment. That's why I'm still undecided about filing. The attorney I spoke with said that it's rare these days for the bank to pursue judgments - less then 10% that he's seeing in FL. And those are judgments much larger than the 30k to 50k I'm underwater. If I do file ch7, now would be the time, before I save too much money. It's amazing how fast I'm saving money after two months of no mortgage payment. I don't want to go to ch7 with 10k in the bank. It could happen though. Then again, I can get myself in real trouble if I file quickly, with almost nothing to fall back on. It's nice having the money now. I think it would probably be smart to at least see what happens when I get around to filing for short sale. Who knows, maybe they actually approve it.

I almost forgot about one place to legally shelter some money. Estimated tax deposits. As a business owner, I have to make those deposits anyway. I didn't go nuts with this. But I did go a few hundred over what I would normally deposit. I just got that deposit in today in time for the posting deadline on Monday. Of course it's a good idea to backup your numbers on something like this. I always use spreadsheets to calculate my estimated taxes anyway. I was just a little more optimistic about my future earnings this year.

[betterlife13]

Hoping to resurrect this thread, as there is some good info in here, and we have a sub-s in our picture too, and have some questions a bit more specific to our situation. I'm hoping that somebody here has better info than we have been provided by the attorneys (hmm, wouldn't that be a surprise!! LOL!).

We have had conflicting info as far as what to do with the sub-s. This sub-s and its operation as basically what seems to be a charitable non-profit, guaranteed loss business every year since the economy tanked and we wore the (very unlike me, particularly) veritable rose-tinted glasses, is the main reason we are here and why we filed last week. The sub-s is at a negative, retained earnings, profits, etc. and, in fact, owes us on the books for our 401k that we put into it to prop it up. My husband has only taken $1,200 in salary in the past year from it, mainly so we could buy groceries and keep the lights on after paying the attorney we finally chose... In the various conversations with our existing attorney, as well as another we interviewed, we have been told to open another company (before filing, huh??? - wouldn't any assets be our assets, subject to our measly GA allowed exemptions?). We have variously been told that we should go ahead and pay back the what is now about $4,000 the company owes to us (again, huh? another asset?), to prepare a legal document for forgiveness of the debt in lieu of transfer of the measly equipment assets the company has, as well as us enter into a small note for the difference, in which we or the new company would pay the old company for the remaining difference of the value over what the first company owes to us and the actual value of the assets my husband wishes to purchase to continue to do business in the same trade...

So, what is the right answer here? When do we do this -- again, conflicting reports, every attorney, every meeting. Since we have filed and our 341 will be upcoming, what in the heck is the right thing to do, to tell the trustee when he/she asks about the business, etc.? The business has quite a bit of credit card debt (personally guaranteed), an SBA loan (company and personal guarantee, as well as a lien against our home, which we are letting go), as well as some debt to suppliers with which we would hope to pay so that in the future we could continue doing business with them, and could mostly pay out of an upcoming job. As to that job -- the business is still operating, and the job is decent sized, payment will have been received by the time we have our 341, and we will owe for materials for that job, pay wages, etc., as well as hope to pay off some supplier bills for previous jobs.

I don't want to get in a mess at our 341 -- saw the list of typical questions and know that we will potentially be scrutinized for having a business. We really want to do everything right, fly under the radar and get on with our future, so I am wondering when is the proper time to cease the old business and begin the new one. Bottom line is that potentially in the future, we could earn a living off of the business my husband is in, albeit not the one we have had since the economy bit the big one, but that is not guaranteed -- after all, that is why we are here...

Should we take steps to cease business with the existing entity just before the 341, wait until afterwards, or at the 341 be in the process of dissolving the entity? I'm so confused, and again, we have received such conflicting info from the attys, even the one we finally went with, who is a trustee in our area? Shouldn't someone be able to tell us the proper way to deal with this sub-s so that we can do the right thing, go smoothly through our 341 and move on?

Any thoughts, ideas and advice are very much appreciated!

[LadyInTheRed]

betterlife13, you already filed a Chap 7 right? The corporation should have been listed on your petition as an asset. Until the trustee abandons the asset, you can't do anything with it other than continue to operate it as you have been. If the corporation's liabilities are higher than its debts, the trustee won't want it. But, you have to wait for the trustee to abandon it before you can shut it down. After you are discharged, you will have no personal liability for the corporate debt, but the corporation will. So, you will probably want to sell its assets (possibly to yourself), pay whatever debt can be paid with the proceeds and shut it down. You need to consult with a business attorney to make sure you shut it down properly so you cannot be held responsible for any of its debts. There may be certain debts (like taxes and payroll) that the corporation should pay first.

At your 341, just answer the trustee's questions honestly. Answer only the question asked without giving additional information. If you don't know an answer to a question, just say so.

[betterlife13]

betterlife13, you already filed a Chap 7 right? The corporation should have been listed on your petition as an asset. Until the trustee abandons the asset, you can't do anything with it other than continue to operate it as you have been. If the corporation's liabilities are higher than its debts, the trustee won't want it. But, you have to wait for the trustee to abandon it before you can shut it down. After you are discharged, you will have no personal liability for the corporate debt, but the corporation will. So, you will probably want to sell its assets (possibly to yourself), pay whatever debt can be paid with the proceeds and shut it down. You need to consult with a business attorney to make sure you shut it down properly so you cannot be held responsible for any of its debts. There may be certain debts (like taxes and payroll) that the corporation should pay first.

At your 341, just answer the trustee's questions honestly. Answer only the question asked without giving additional information. If you don't know an answer to a question, just say so.

Thank you, Lady in the Red. That is the first answer we have gotten that makes any sense to me. Yes, it was listed in our petition, but our attorney also stated different things at both of our pre-filing meetings (as did the attorney we did not hire) and was not clear as to when these things should happen - i.e., closing business, purchasing equipment partially w/funds owed to us as well as a secondary note or simply paying ourselves those funds...). Thanks again, as yours is the only answer we've received that sounds right. Maybe the attorney "meant" to tell us to do these things afterwards, but wasn't clear -- as the very least, he should have been more clear, as this was something important that could have messed us up if we had taken any of these actions before discharge. Thanks again!