Help! Advice needed , complicated situation.

[lostindebt]

Hello everyone,

I need some advice, and frankly I am terrified to be here.

The basics: my husband and have approx 30k in cc debt. 65k in a defaulted HE Line, 333k home in final forclosure, owe back taxes to IRS in the amount of 20k.

We make approx 150k a year.

We live in CA.

We had NO intention of filing bk, until the Shit hit the fan in our life. We owned a small business, and were defrauded by a business partner. This caused us to loose approx 100k in savings. Then we re-fid the house to get more money to keep the business afloat - it didnt work. Then we ended our business arrangment and walked away from the business loosing all our investment to avoid staying in business with dishonest business partner. THEN the business partner 1 year after we terminated our business relationship broke a lease, resulting in BOTH of us being sued for 400k.

The legal fees trying to defend ourselves have destroyed what little money we have left - Because of these circumstances we have lost our home.

My question - with a 400k judgement do I qualify for a chapter 7? If not and I qualify for a chapter 13 - what can I expect is going to be a monthly payment?

To be clear - we drive old cars ( early 90's), we dont own lavish items or go on expensive trips - we simply got into a bad business situation and now I feel like a looser

Advice?

[DebtEnder]

It's my understanding if over 50% of your debt is a result of non-consumer, ie business debt, then you can do a chapter 7 regardless of income as the means test does not apply. However all debt has to be considered secured and unsecured. In your case based on the 1st part of your post you only had 115k that was business debt but then you mentioned being sued for a broken business lease for 400k and that alone puts you well over 50% business vs consumer debt.

Who knew getting sued could be a good thing

On a side note if you did a chapter 13 for whatever reason the payment would be based on your disposable mean income or DMI. You allowances for certain things are based on IRS schedules or your own (proven with a paper trail) expenses. Any money left over all that is taken out would for the most part be taken as a ch13 payment. However in your case I don;t think it applies. The only reason to do a ch13 in your case would be if you want to keep your house.

If you just want a breather but otherwise are fine with losing the house a ch7 will at the min buy you a few months as it will reset the foreclosure clock assuming the bank files with the court to lift the BK automatic stay.

[lostindebt]

Thank you, that gives me some small amount of hope that I might qualify for a chapter 7.

Another question - the finality of the lawsuit against us has not yet been determined, however our lawyer has told us that we will loose. So we are decieding now to cease defending ourselves as legal fee's could be another 30k.

Can we list this lawsuit , without the final judgement against us or do we have to wait until the verdict has been decieded?

[DebtEnder]

You have a suit listing a debt they say you owe for 400k, if you don't defend yourselves a court of law will agree with them. I'd say that qualifies. But I would not wait until the judgment comes as it takes some extra legwork to vacate the judgment after your discharge.

Just take the lawsuit paperwork to a BK attorney and file a ch7 and tell your ex-partner where to stick it.

[jribe]

kind of a side note- but if you didn't sign the lease and had terminated your business agreement with the prior partner; why did you get a 400k judgement against you? It would seem that you could just prove you didn't sign anything for a lease, why does your lawyer say you'll lose?
Sounds like there are more details than you're sharing...

BTW- with 150k in income for CA- you're double the median income. So even if you qualify for a 7 because of the business debt; you could get kicked into a 13 because of disposable income.

You don't own a house, don't have car payments, etc. All that, and with the high income amount to disposable income for the trustee to take.

If you want more specific advice you need to post more detail in that regard.

[lostindebt]

More details ...

I DID sign a lease with the former business partner back in 2005. When we terminated our business agreement we sent an estoppel to the current landlord showing that I was no longer an owner. Then a year after I ended my business partnership, the landlord sold the building to a new landlord. THEN my ex business partner defaulted on the lease. The new landlord refused to accept the estoppel showing our terminated agreement, and will only go off the originial lease - which had my personal gaurentee on it.

I realize it is possible we could be in a ch13 because of our income. My issue is that although we make alot of money - between the CC's (with 29 % intrest rates due to poor credit if forclosure) and our other normal living expenses we have approx $600 left each month.

I also want to add that in fear of not being able to rent due to our bad credit we actually moved out of our house a year ago ( it has been sitting there empty this entire time, still in forclosure) and found a home to rent so we could stay in the same school district. We signed a 5 year lease and our rent is $2100 a month.

Does anyone need any more details? Any advice is appreciated!

[lostindebt]

I should also add ... we both drive very far to get to our jobs so our bill each month for gas is around $600 - $700.

We make a lot , but we have a lot going out so I am concerned that if we end up in a ch 13 the trustee wont approve our living expenses ......

[lostindebt]

oh and we do have a car payment , $250 a mo for our 1997 honda.

[DebtEnder]

With over 50% business, non-consumer debt there is no means test so there is no DMI to fund a ch13 plan, so no chapter 13.

Regarding the rent issue you could always move back into your old house rent free of it has no foreclosed on yet. You rental agreement at your current residence would be null and void due to BK and the mortgage on the old house would be stayed during BK. You would get at least a few months rent free before the bank could restart the foreclosure process.

Worry about rent due to bk issues is not much of an issue anymore. If you have a stable job and can put down a bigger deposit then normal most landlords will happily ignore that little note on your credit file.