filing ch 7 & having very small biz

[BROKENN]

yep... I think I am collateral damage....
I am having trouble finding data on business bankruptcy as I didn't know there was a difference, but think that is what I am learning. My DH had a substantial biz and my atty called me and I have to stop my biz though it is a service and no creditors, not just lose the name.

I have been so upset I can hardly think, and I think I was in denial.

Atty knows Trustee and my questions are going to be about the biz and our income after......

So I am glad that you guys are OK I just need to learn more about my case.

Wish there was a Business section in the forum!

[FloridaGuy]

Hey BROKENN,

I have the same issue. Although my company is a corporation (S-Chapter)... all the income the business makes also has to be counted as my income... it's a big cluster***!

The business does 500K a year, but it would cost approximately 30-50K to file a chapter 11 BK for the business. The only other option is a liquidation Chapter 7.

The other problem is I may be forced into a personal Chapter 13... because the business income gets included into the means test.... however after the business closes I will have NO income. We are also surrendering our house as we know we will never be able to make the payments. (We'ra already two behind)

Ugh.

[paintinrosesred]

We are both sole proprietors filing CH7. If we are forced to shut down both businesses (atty hasn't told us that yet) then we would have ZERO income.
That's like saying to someone with a paycheck job you have to quit your job if your filing a CH7. Doesn't make any sense.
It must tie into assets... if one business has a lot of assets I can see them taking the assets to pay back debt.. so in a way shutting your business down. But in my case I don't have a lot of assets so why would they shut me down?

Brokenn, did the atty tell you why you must shut down? AND did they tell you when you must shut down? At discharge?

[BROKENN]

Hey BROKENN,

I have the same issue. Although my company is a corporation (S-Chapter)... all the income the business makes also has to be counted as my income... it's a big cluster***!

The business does 500K a year, but it would cost approximately 30-50K to file a chapter 11 BK for the business. The only other option is a liquidation Chapter 7.

The other problem is I may be forced into a personal Chapter 13... because the business income gets included into the means test.... however after the business closes I will have NO income. We are also surrendering our house as we know we will never be able to make the payments. (We'ra already two behind)

Ugh.

OH FG, I am so sorry! yep, we both be ********....

Do you know for sure if your biz is closing? I too am surrendering my house and think that is a pretty good punishment..... maybe we can think through yours!

I have learned some too. But I have to say, it is the a big hole with no data out there on this subject....

[BROKENN]

We are both sole proprietors filing CH7. If we are forced to shut down both businesses (atty hasn't told us that yet) then we would have ZERO income.
That's like saying to someone with a paycheck job you have to quit your job if your filing a CH7. Doesn't make any sense.
It must tie into assets... if one business has a lot of assets I can see them taking the assets to pay back debt.. so in a way shutting your business down. But in my case I don't have a lot of assets so why would they shut me down?

Brokenn, did the atty tell you why you must shut down? AND did they tell you when you must shut down? At discharge?

Yes, the atty told us we both had to shut down and shut down soon, right after filing.

I understand that no income is an issue!! When I realized what he was saying I lost it and said "I have to keep food on the table during this time!!" So he said I could do a little "freelance" and he would explain that to the trustee.

But before you panic, I think my schedules are different. I have Business Debts instead of Consumer Debts checked. And as I told FloridaGuy, this area is lacking data for the regular person as far as I can see.

From Goggling, the closest I have come is that C7 Business is a term, as C7 Consumer or Non-Business is a term. You close the business, and here is the part I was missing, DURING BK you cannot continue your business. When I Google: Business After BK I get tons of hits. So I did the math..........

This is how bad it is on getting conflicting data:

http://www.avvo.com/legal-answers/are-small-business-assets-exempt-under-personal-ch-8451.html

ROSES, please call your atty, see if your Schedule is checked as Business Debt. I can see a moonlighting business when someone else is making money and filing Consumer could get by, but since you both are Soles, please check.

I am still learning, so I hesitate to advise too much. But we can all keep learning and stick together.

[BROKENN]

http://bankruptcy-law.freeadvice.com/business_bankruptcy/chapter_liquidation.htm

[paintinrosesred]

We are primarily consumer debt so that might make a difference (we are filing in a few months). I did ask the atty a few weeks back about the "changing name" and they were vague on that.. I hadn't asked if we would be forced to shut down. I'll check back with the atty and post the answer.

[No Gravy]

You guys are way overthinking this. Nobody wants magnets and brochures or a web domain for a business that is barely profitable.
And for darn sure you don't want any part of a Chapter 11. Just the monthly legal and accounting fees as you report your reorganization plan to the court on a timely basis will eat you alive. A Chapter 11 isn't practial for the vast majority of small businesses.

Agreed. Chances are the business assets will fit into the personal exemptions, anyway.

[No Gravy]

We are both sole proprietors filing CH7. If we are forced to shut down both businesses (atty hasn't told us that yet) then we would have ZERO income.
That's like saying to someone with a paycheck job you have to quit your job if your filing a CH7. Doesn't make any sense.
It must tie into assets... if one business has a lot of assets I can see them taking the assets to pay back debt.. so in a way shutting your business down. But in my case I don't have a lot of assets so why would they shut me down?

Brokenn, did the atty tell you why you must shut down? AND did they tell you when you must shut down? At discharge?

Some of the information/advice you're getting may be for situations different than yours. If a business is a Corp or LLC, the rules are different than for sole proprietors.

I realize my experience that I'm about to share directly conflicts with what others here are telling you about sole proprietors, so the best advice I can offer is to ask pointed questions of your attorney, pertinent to your specific situation.

I'm a sole proprietor, and though I've taken on a second job recently, my business is my main source of income. When I met with my attorney (over 10 years experience doing bankruptcies in California), he not only never mentioned CLOSING my business, nor even suspending it (not possible), but he asked me to make sure I gave his office my contact info, since he was going to be in need of my services, and have other business clients who are as well.

Didn't sound to me like he was suggesting I go out of business

It *may* depend on how the business is structured, and how the business debts are guaranteed (personal or otherwise). Don't panic yet!

I've have several clients who continued to operate the same business, but changed business names. I always got the feeling that was due to secured business loans, but it's just a guess. If that happens...it wouldn't be the end of the world.

[No Gravy]

We are primarily consumer debt so that might make a difference (we are filing in a few months). I did ask the atty a few weeks back about the "changing name" and they were vague on that.. I hadn't asked if we would be forced to shut down. I'll check back with the atty and post the answer.

Just food for thought: the first law firm I met with, they were vague on nearly every question I asked. Many times I was told they would have to "look that up then get back to me."

The next attorney I interviewed, gave me firm, concise answers to my direct questions, almost always based on real-life experience.

I'm hiring the second attorney

[paintinrosesred]

Thank you so much for your input. I asked if we would need to change our name's and the paralegal said that it "depends on a few things". I was also asking several other questions at that same time and I didn't follow up on that one again. We've been very happy on the response from our atty so I know we have a good one after speaking to several.
But I agree, if we are forced to shut down both sole prop's it won't be the end of the world in the big scheme of things. Thanks so much!

[RedLight]

My wife also has a small business and she filed paperwork to make it a non-profit business following her atty's recommendation. Our 341 meeting is on the 6th of October, so we will see how it goes.

[rockyroad]

what about web based businesses that don't actually have inventory? My business is considered a brokerage so to speak. I accept orders and fill the orders through a supplier. Don't want to change my domain name due to the fact I've spent countless hours working on optimizing the site in order to drive more traffic to it.
Got into big financial trouble in the first place with advertising expenses charged to an Amex. and now I've streamlined the biz, and finally making some profit. Not enough to pay AMEX in full mind you!
I guess my only business assets are some computers that are leased through Dell.

Do you think the Trustee would bother with it?

[No Gravy]

what about web based businesses that don't actually have inventory? My business is considered a brokerage so to speak. I accept orders and fill the orders through a supplier. Don't want to change my domain name due to the fact I've spent countless hours working on optimizing the site in order to drive more traffic to it.

Worst case scenario, if you DO need to change the business name (and I'm not saying you will), it really wouldn't be a big deal. The site stays as is, you register another domain name, and if the site's code is written well, inside a week you're on Google.

I would definitely be honest with your attorney and in filling out your paperwork, but it doesn't sound like you have anything to worry about.

I think this is one of those areas where there's no "one size fits all" answer, because there are different types of bankruptcies, different reasons for filing, and different business situations.

It's really best to met with a good attorney, give him all the facts on your situation, and see what he (or she) recommends.

[BROKENN]

Hi Guys, There is a big difference in how you file. Most C7 BKs are Consumer. You can exempt a lot of your equip etc. under this. If you fit the means test, you can still do this one.

A business C7 is a choice IF your debts are 51% or higher in business. And chances are higher you have to close the business.

So that's where it is NOT one size fits all like NG says. You have choices.

Search for the other threads and most definitely see a good atty if you have a business!!