If she's right, BK is a joke

[I want out]

I'm self-employed, and right now only about 30% of my customers are paying their bills.

[I'm working on fixing this, but it's not going to happen overnight.]

I've got $60k in cc debt- nearly 100% business-related.

In addition, I'm paying $899/mo. on a $120k lien on my parents' house- it was a LOC tied to their home, which I had personally guaranteed. Unfortunately, when the balloon came due, the only alternative was to have them get a loan in their name, and I would make payments. Now, the attorney says that since my name's not on it- EVEN THOUGH I CAN SHOW THAT I HAD GUARANTEED THE DEBT IT REPLACED, that the court will not consider it my debt.

After going over my numbers, the attorney tells me that she would put me into a Ch 13 plan, with a payment of somewhere between 700-1000/month.

She claims I could sell my receivables "tomorrow" for 30%. [Huh? With the credit markets being where they are right now? I'm hearing 2-5 CENTS on the dollar.] My receivables are into the $160-180k range, but they're all HIGH risk... I really think that without a HUGE amount of money, expense, and court time, you may be collecting only 20-30%

We've lived VERY frugally the last 5 years. My wife and I are driving 13 year-old cars, and we have next to nothing, except some IRA's that we funded a decade ago. We scrimped, saved, and I worked very hard building a business.

And then, the rules changed, and the economy in this state went down the tubes so fast, it didn't hit the sides. 2006 was supposed to be the year to begin reaping, and instead it turned into a nightmare. The last two years have been a living hell, and I'm looking for a way out.

Even if I were able to discharge the cc's, I'm looking at a 12-year sentence of making double payments on that $120k loan.

I think once I go over the numbers more carefully, it'll turn out better than she claimed. The crux of the issue seems to be that we're currently living in a relative's property rent-free. I really haven't felt good about "freeloading," but that's the one thing that kept us afloat the last 12 months... maybe to our detriment. Frankly, I probably should've filed a year ago.

Anyway, I guess I'm wondering... if we begin paying rent, that will probably tip the scale, no?

Thanks.

[Knew_it_all]

What is your question?

[Bandit]

What is your question?

OMG- sorry but that just gave me good chuckle. I feel this is going to be a tough one and take a little time to figure out...

[jp2861]

Bankruptcy is not for everyone. If your lawyer crunched the numbers and came up with a number of 700 -1000 in disposable income, you have alot more leftover money than most of us. Your post wasn't very clear, but I suspect the disposable imcome is coming from not paying rent. If that's the case a decent lawyer should have picked up on it and advised you accordingly. If I was in your shoes I'd download the forms and do the means test myself. Then do the I & J and see where your monthly disposable income ends up. Renting may be the thing to do if that's what it takes to end up negative. Either way, I'd crunch the numbers on the forms and then get a few more consultations. You may have just walked into a consult with a greedy lawyer wanting you to go the 13 route.

PS...It wouldn't hurt to spend a few days reading posts here to learn the ins and outs before you go into another consult.

[I want out]

RE: If she's right, ...

My question is, if we start paying rent, will that get us home?

I'll do as suggested, and find the forms, do the means test.

[Thanks, JP]

There's no way in hell I've got $700+ in "disposable" income.

I quit paying my cards in the last 30 days and for the first time in a LONG time, I can *breathe.* I figure we've got about $500-600 left over, which I'm saving for fees, etc.

Again, that's with NO housing payment. That's not going to continue forever. ["Yeah, could you be a lamb and just let us stay here AND NOT PAY YOU FOR THE NEXT THREE YEARS? Great, thanks!"

What I also found peculiar is that she was counting legitimate business expenses as INCOME. One example was auto-related expenses. Another thing: we've got cable/internet/phone bundled. It costs ~$186/month, includes two phone lines, internet, cable.

She responds, "That's high."

Thanks, Sherlock!

I spend ~4 hours a day on the business phone, use the home phone as a backup to send faxes. 95% of our internet usage is ME, working. So yeah, you bundle two phones, internet and cable and yeah- it IS higher than normal.

Anyway, it felt like we weren't on the same page... at all.

Bottom line is this: I didn't want to go this route, and clearly, I've put it off for too long. I've scratched and scraped for this long, mainly to pay interest- my balances haven't changed much at all, which is not surprising.

To go through all this and be told that I'll be paying $25k plus her fees over the next three years, AND pay the additional mortgage debt??? It just seems like a raw deal. Furthermore, I can't see *how* I would be able to do that plan.

[Knew_it_all]

My question is, if we start paying rent, will that get us home?

I have absolutely no idea what that means....Why don't you try talking <normal>??? Whether you are paying rent or not makes no difference on the means test....you get a deduction and that is it....no more, no less.....BTW, throwing out numbers is meaningless without throwing out the big number, how much you make????

[danaf]

knew it all is right - without knowing how much you make or how many are in your family, it is hard for people here to know how to help you. Start with the means test and then from the results you get you can begin strategizing (if you've got the lattitude to strategize).

and are you living in your parent's home or are you just paying for them?

also, consult a few more attorneys. you may have to consult a few attorneys who have experience with business bk since you say most of your debt is business related.

[Bandit]

Bottom line is this: I didn't want to go this route, and clearly, I've put it off for too long. I've scratched and scraped for this long, mainly to pay interest- my balances haven't changed much at all, which is not surprising.

What I am seeing, and I could be wrong, you will have to organize the whole thing better. It sounds like you are scrambling and jumbling everything together trying to make sense of it all at the same time, but you need to divide things up more according to the law.

Do a brief look at the FAQ section. It is awesome and that will help put things more into perspective. Then ask your questions one by one according to each law...then it will start to make more sense and more people with experience will be able to guide you into the right direction.
For example, one minute you are talking about rent, then you switch to credit cards, then you switch to utilities, then you go to your attorney...
Your situation sounds complicated but it may not be so bad if you do one thing at a time THEN pull it all together into one big BK.

You already have an attorney? Just make sure they know what they are doing & the only way to know for sure is to know the law yourself.

And of course, this is an awesome place to just vent and scream & complain when you need to.

My question is, if we start paying rent, will that get us home?

That question is just not BK language I have ever heard but in a round about way, I kind of know what you mean.

Hopefully a mod will jump in soon & get ya all tucked in nice & cozy

[krielly]

I have absolutely no idea what that means....Why don't you try talking <normal>???

Sorry, but that's just plain rude.............
Wish people wouldn't feel the need to post such stuff.

To the original poster, I hope you get some postive feedback to point you in the right direction. There are a lot of really knowledgeable folks here who will help you out, I'm sure.

K

[woeisme]

If I understand your post correctly, you took out a loan and your parents used their house as collateral, correct? (I know I'm oversimplifying, not using the correct loan terms, but basically that is what happened if I understand you.) You couldn't pay the loan when it came due, so your parents took out a loan in their name to pay it off. You are paying that loan, but it is not in your name. So the attorney is right, you can't include that in your filing because it is now in your parent's name, and is not your debt (at least not yours from a legal standpoint, even if you feel morally obligated to pay it.) The BK process is a legal process, if the debt does not legally belong to you, you cannot use it in your means test anywhere, and the disposable income that is calculated is so high because that $899/month payment is not "counted". Nothing you can do about that since the loan is not in your name, regardless of whether the debt was taken out in your behalf or not, and that the debt was originally guarenteed by you, since the debt that you guarenteed was paid off by your parents loan, so now is not your debt, but theirs, so there's no way to unring that bell.

If the lawyer runs the numbers and says between $700-1000 for your disposable income (i.e., your CH 13 payment) your rent would have to be that high for you to come out negative on your schedules. Look at the IRS tables to find out what is allowed for housing in your area. You may be able to claim that much, you may not, it's hard to say not knowing where you live, or what your trustee's standard practices are, etc. But if you are making above the median income, be prepared for a lot of scrutiny of a Chapter 7 filing, regardless of what your schedules say.

As someone else here mentioned, you might have one out, and that is that you can make above the median and file CH 7 if your debt is more than 50% business debt, which you siad yours was. In that case, you need to get an attorney that has expertise in business BK filings, not just some run of the mill lawyer. Especially since it sounds like you are co-mingling your finances (you talk about your cable/internet bills, which are obviously used for both personal and business activities). You need to be able to clearly demonstrate which debts are for business and which are personal (just like you'd have to be able to prove deductions are for business use when filing tax returns.)

You have a complicated case, both personal and business debt, money owed to you that you may not be able to collect but that a BK judge would want to investigate, paying for debts out of moral obligation but are not legally yours, etc. You need a specialized BK attorney to help you figure it out, your situation is so different from most that it's doubtful you are going to get answers here, probably just moral support. I admire that you are so concerned with paying the loan on your parent's house, but am afraid that could really hamstring you and prevent you from ever being able to file a workable CH 13 plan because no trustee is going to give you enough wiggle room to make that $899 payment above and beyond your CH 13 payment. And you are going to need a very savvy lawyer to help you make a CH 7 fly, but I think it can be done give your high amount of business debt. Good luck.

[I want out]

I admire that you are so concerned with paying the loan on your parent's house, but am afraid that could really hamstring you and prevent you from ever being able to file a workable CH 13 plan because no trustee is going to give you enough wiggle room to make that $899 payment above and beyond your CH 13 payment. And you are going to need a very savvy lawyer to help you make a CH 7 fly, but I think it can be done give your high amount of business debt. Good luck.

Thanks... yeah, the loan was taken out to replace a loan that had a balloon coming due. Unfortunately, the local bank that held the loan had been acquired, and they were getting out of that type of lending, through attrition... basically, not re-newing. So, it had to be replaced.

Didn't think I'd be in this position, and since the loan was tied to ST rates, at the time it was a good switch, because it brought the payments down.

You're right... I need someone who specifically understands business issues, thanks for suggesting that.

[and are you living in your parent's home or are you just paying for them?]

Nope, we live a few hours away.

[Whether you are paying rent or not makes no difference on the means test....you get a deduction and that is it....no more, no less.]

Hey, thanks... even though I don't talk "normal," you still were able to answer the question... see how talented you are?