Advice on BK or Debt Settlement please...

[bboy]

Hey all,

I have researched this quite extensively and have consulted with several people. I could definitely use more insight on my current situation and what to prepare for given my current situation.

I am self employed and have a C-corp so i file 2 sets of taxes.

Personal level
I owe about 110,000+ on unsecured debt (all havent been paid for 3-4 months)
car 9,000 with creditunion(current)

Business C-corp
Amex, 3,000, already past 90 days, so sad on this one
Bofa credit line - 20,000 (4 months no payments)

The BK attorney advised that i could qualify for Chapter 7. Although, I dont know if i should aim for the CH 7 and start clean or if I should aim for debt settlement. I hear these offers going around for 10-30cents on the dollar???

I am rebuilding my business and plan to remain self employed hopefully very successful after this year or two of restructuring and working hard.

Questions:

-CH.7 or Debt settlement?

-What should i do with my current ccorp? can i close it? will the business line of credit and amex just tag to me on the personal level? I am confused how to proceed on the business. Should i dump it and create another ccorp?

-How to stop all the calls, damnit they got my cell phone too!

-I owe 9k on a car thats worth only 4k... should i just default on that one and turn it in? I was considering that the credit union would be my best bet later on when i need another loan so i didn't want to screw them. But the car is a gonner.

[Trixie007]

If you qualify for a 7 I wonder where the benefit to doing settlements is... and if you have cash to do the settlements, are you an asset case? Also, if the car's a goner, I would let it go. There are other places that will finance a car, and 9k is a lot to throw away just to stay with the same lender.

[AngelinaCatHub]

If you qualify for a 7 I wonder where the benefit to doing settlements is... and if you have cash to do the settlements, are you an asset case? Also, if the car's a goner, I would let it go. There are other places that will finance a car, and 9k is a lot to throw away just to stay with the same lender.

[bboy]

thanks for the info and advice

Yea, my dad was telling me to let the car go. I was just thinking the credit union would be a good source later on for credit. I think i should listed to the advice.

As for the debts and CH 7. I guess lets figure if i hit 200k gross next year. Would i look back and wish i would have settled the debts rather than have the BK on my record? I have a new business in the works that looks quite promising. Should i still BK?

[Phillymanhere]

One thing to keep in mind: the money "forgiven" in your settlement has to be reported (will be reported by the cc company) as income.

So let's say you have what $110K. If you "settle" for 30K, then you will have to add 80K of income to your tax returns.

I researched settlement as well before I decided on bk, but I don't ever remember the settlement companies telling me this. I have a close friend who recently foreclosed on a house. Same thing. She will have to pay taxes on the amount "forgiven" in the foreclosure settlement.

Good luck.

[catleg]

Chapter 7 for sure if you qualify. Settlements only make sense when you can't do a chapter 7 for whatever reason (assets, income, unusual details about your life you don't want a court looking at, etc). Or, you don't want to "use up" your chapter 7 because then you'd be locked out for 8 years (potential medical bills, business failure, divorce, whatever). Or your case is so small it makes sense to just settle and be done with it, like a college kid owing 10k and settling for 2k.
All IMHO.

[bboy]

Thanks for all the advice...

All great advice guys, thank you.

I am leaning to pulling the trigger on the CH7.

Recap where i am at.

110k, 3-4 months back all tied to personal.
25k to business, 3-4 months back
9k car, current

I am still confused what to do with the business stuff? Close my bank accounts? dissolve the business? I checked my credit and the business credit line is not on there BUT i did get it with my personal credit i believe originally 2 years ago. Any particular steps on the business before i file or is it a separate thing to bk the business?

Is there any time frame I should file by? the attorney i met with was going to charge me $1,800 for the personal, she said there was no rush?

Thank you all.

B (age 29, Business was/is a call center in Philippines by the way and I still plan to ramp up again hopefully)

[StartingOver08]

You can BK the personal liability on the business debt. The business is actually considered one of your assets by the BK court so you have to list it anyway - and provide all the income statements, bank statements, cc statements etc of the business as well (I am assuming you own the business yourself). Make sure the attorney lists the business name as one of your aliaes.

Usually it is too expensive to file a separate business BK - unless your business is quite sizable. The filings are generally $10k or more rather than the normal $2-3k for a personal BK.

[Trixie007]

As for the debts and CH 7. I guess lets figure if i hit 200k gross next year. Would i look back and wish i would have settled the debts rather than have the BK on my record? I have a new business in the works that looks quite promising. Should i still BK?

Sounds like you're leaning toward filing now, but I just have to say- this is the kind of thinking that caused us to hold out way longer than we should have! Always thinking, next quarter, next year, when the house sells... better to BK that much debt, and if you do end up making the big bucks later, set yourself up for success in the future! You can always go back later and pay them if you want...

[bboy]

yes, have to come to the realization!

Yea, all great advice.

I have had this debt start from college credit card i got for a free t-shirt. From then on went up to 50k, down to 10k, then over 100k with the business.

I really need to get this done and move forward. I figure if i did make a killing in the future then i made the big bucks and should be fine with the credit anyhow.

Thanks for the info on the business, I was confused what to do with that.

Is $1,800 good for a BK filing in CA?

Great forum...

[rockyroad]

As far as your business line of credit....the tradeline will not show on your personal report until they charge the account off. At that time, they are writing the debt off their books and now holding you personally liable.
In my case, after 120 days, AMEX charged off my Biz line of credit and it appeared on my personal report and of course dropped my score significantly.
Different creditors have different timelines for charge offs.

[StartingOver08]

Advanta, one of my business cc's started showing my tradeline on my personal reports the minute I was late - I was with them for years and no tradeline showing. The first missed payment - and it landed on my personal reports (all 3). In fact, so far I can not get them to report correctly. Its my next project.

So each of the business LOC's or cc's report differently.

[HHM]

Advanta, one of my business cc's started showing my tradeline on my personal reports the minute I was late - I was with them for years and no tradeline showing. The first missed payment - and it landed on my personal reports (all 3). In fact, so far I can not get them to report correctly. Its my next project.

So each of the business LOC's or cc's report differently.

Well, they figured out a while ago that these "credit clean-up" schemes were taking advantage of them (so to speak). How you "instantly" raise your score is open an LLC, apply for an Advanta Business Credit Card (granted, there will be a personal guarantee), and transfer all your personal CC balances onto the business card, bam, instant 50+ jump in credit score. Financially, it usually doesn't make sense to do that because the interest rate is typically higher, and as you discovered, if you miss a payment, they CAN place the card on your personal credit report. Reason being, the "business" defaulted, triggering the personal guarantee.

As for BK v DS, I am not going to rehash my position here, I have posted plenty about it, but you definately sound like a BK candidate, not a DS candidate.

[bboy]

Sold!

Yea, I really appreciate all the great advice.

Hardtimes...

I'll get this thing going soon then.

B

[bboy]

forgot something,

I am current on my car with the credit union. How should i go about the car and turning it in?