Discharging personal debt while ownimg an S Corp

[dwindle]

We are considering filing personal BK - Chapter 7 or 13 in Florida. We have an S Corp that we own that provides our sole income. We also have an RV that we purchased, (using our personal credit) in 2005. We used the RV at first for personal reasons but found that we ended up using it almost totally for business.

We want to discharge the RV on the personal side but I found out that our tax accountant has it listed on the S Corp depreciation schedule (do to the fact that we are writing off the business portion of its usage). Do I need to get it off of the SCorp depreciation schedule in order to discharge the RV (on the personal side) so as not have the finance company file suit on us on the corporate side?

Does it matter? the RV is not an asset as we are very upside down on the RV mortgage.

Thanks for your help

[StartingOver08]

You can discharge the debt against you personally if you file a personal BK.

However the Trustee will consider the S-Corp an asset of yours. The fact that the RV is depreciated on your business is not a factor in your BK filing.

Does the business have other assets?

[dwindle]

No, we have very little if anything of assets in the S Corp. The business is based on our skills and operates, (to use as an example), like a Real Estate Agency.

[StartingOver08]

Funny you should mention that (real estate agency). I had an S-Corp when I filed that I had to close (real estate) because the S corp debt is still valid. I only filed personal Ch 7 and was discharged. If I were to continue using the S corp name and therefore get funds into the S Corp, the creditors could file judgment against the S corp and sieze any deposits made into the S corp bank account. So my attorney suggested closing the S corp and operating as a sole prop until I open a new s corp. Have you discussed this senerio with your attorney (the s corp debt)?

[OhioFiler]

Your debt was incurred by you personally. I'm not sure how your accountant got the RV on the books of the corporation though.

One thing I would be concerned about is the trustee may not recognize the depreciation expense you've accumulated on the RV and make you redo your S-corp financial statements. This could create worth in the company that you weren't expecting.

Have you seen the corporation's balance sheet lately? Do you have negative owner's equity?

[dwindle]

Well, I'm not a tax professional, but from what I was told, the RV ended up on the corporate depreciation schedule because (as of the end of 2007), the RV was only used for business and not for personal reasons.

Startingover8

My business has little if any assets. Are you saying that the creditors you delt with on the personal side went after the personal debts by attacking your S Corp. Also are you saying that any monies you had in escrow could be taken from you?

[StartingOver08]

No, the escrow funds were kept (are kept) with a title company so they were (are) entirely safe.

All accounts receiveable (that is any contract that had not yet closed) as of the filing date belonged to the Trustee. Commission income earned after the filing date were mine to keep. The contract had to be written AFTER the filing date.

I had S-Corp debts that were personally guaranteed by me. When I filed a personal Ch 7 the personal guarantee was discharged. HOWEVER, since I did not file BK for the S-Corp the debt still existed. I had to close the S corp because any income that was earned after the filing date had to be put into the S-Corp bank account. Once it was there, it would be an easy thing for the S-Corp creditors to sieze (once they had a judgment for the debt).

[dwindle]

So if I do not have any S Corp debts that I personally guaranteed, I should be okay then I guess. I also am guessing that, once discharged on the personal side, the same company / creditor would not be able to seek a judgment on the same discharged item through the corporation...correct?

[dwindle]

One other thing

If my company received a $5000 deposit (from client) on 9/1/09 for a contract that is for Jan. 1 2010 that is for the independant contractor our company has contracted (with the client) on Jan. 1 2010...and I file personal BK on 11/09...are you saying that the trustee will take the $5000 even though it is sitting in my companies "Trust" account and is not our money. If so, then the client and the independant contractor will file suit against our company for the $5000 which would be destroy our business. Or, if I show trustee the contract explaining the transaction would they let us disburse the money to the independant contractor and come after us for the commission, only, once the date on the contract has played out?

Sorry for the grammer

[frogger]

One other thing

If my company received a $5000 deposit (from client) on 9/1/09 for a contract that is for Jan. 1 2010 that is for the independant contractor our company has contracted (with the client) on Jan. 1 2010...and I file personal BK on 11/09...are you saying that the trustee will take the $5000 even though it is sitting in my companies "Trust" account and is not our money. If so, then the client and the independant contractor will file suit against our company for the $5000 which would be destroy our business. Or, if I show trustee the contract explaining the transaction would they let us disburse the money to the independant contractor and come after us for the commission, only, once the date on the contract has played out?

Sorry for the grammer

Is this a true "trust" account, or just an account that you have labeled as Your Company, Inc. Trust Account?

And.... I doubt that your S-Corp has any debt that you did not personally guarantee. Probably need to get you a new S-Corp lined up.