self-employed business and Ch7!

[tankist]

Is it any problems with filing Ch7 if most of credit card debts appear in 2007 and 2008 when I was self-employed and business did not make profit, only losses?

Credit card used for personal use and business transaction (for cash flow and pay some bills)
Thank you for advises!

[Dst1]

It's not a problem. It's most cases it's better that way.

[DeadManCrawling]

If more of your debt is from the business than from consumer debt, then it can make it much easier.

Has to be provable though, and you need more paperwork initially.

Further details?

What state?

What is your income during the past 6 months?

Was the business incorporated?

Were these cards business with personal guarantees?

Are there any remaining business assets such as inventory, accounts receivable, buildings, vehicles, or intellectual property?

[blockhead]

Is it any problems with filing Ch7 if most of credit card debts appear in 2007 and 2008 when I was self-employed and business did not make profit, only losses?

Credit card used for personal use and business transaction (for cash flow and pay some bills)
Thank you for advises!

In my case, with C-Corp and similar situation, and with 250K combined Business and Personal debt , US Trustee is auditing me. I hear this is common with a lot of debt to discharge.

[tankist]

State of Maryland. Business was sole (dba). Cards was regular (Chase, Citi).

2007: Business loss. $9,000. Plus 8,000 start-up. Some equipment was bought for business but late use for personal use (and not included in tax return)

2008: Business income only $71.

In 2007-2008 inventory was up to 1,000. In 2009 everything sold out. Assets was sold out in 2009 too.

That why almost 2 year I used my cards for pay bills and balance grow from $5K before start business till $62K on April 2009 when ALL credit card increase APR up to 25% and i stop pay them (and use). Plus my family increase, me and my wife got babe.

Now, I almost a year did not pay anything but balance grow (penalty and apr) up tp $80K.
After all in same April 2009 I start LLC (without assets) and now at least I can make some money for living.

2009: business income $17,000

Income is $2000-2500 average a month for last 6 month (family of 3). We do not have too much assets (only 1 car), all of them cover by MD exemption.

[Dst1]

In my case, with C-Corp and similar situation, and with 250K combined Business and Personal debt , US Trustee is auditing me. I hear this is common with a lot of debt to discharge.

I have heard that the "rule of thumb" is 100K so this fact doesn't surprise me.

[Dst1]

That why almost 2 year I used my cards for pay bills and balance grow from $5K before start business till $62K on April 2009 when ALL credit card increase APR up to 25% and i stop pay them (and use). Plus my family increase, me and my wife got babe.

You and many other small business people. It's a sobering fact that 80% of all business fail within the first three years. Under capitalization is a big cause of that.

With 80K in debt you might get a trustee to look twice but I doubt it.

[Mensa1]

In my case, with C-Corp and similar situation, and with 250K combined Business and Personal debt , US Trustee is auditing me. I hear this is common with a lot of debt to discharge.

Some Q's BH: Appreciate the feedback.

What does the audit consist of?
Are they looking at every transaction/transfer, etc. ?
How far back are they going?
Did you file on Corp too, or just personal?
So apparently you have had 341, do you have a 2nd 341 hearing scheduled yet?
What type of documentation did they request for the audit?

Thanks.

[tankist]

I'm intresting too! In Nolo books says thet every 1 of 250 is audit. But what does it mean?

[ryan]

Some of the comments here raise other questions:

what about this "$100K threshold"?...what must that be comprised of? ...ALL debt, or just credit card debt? ...is it meant to include MORTGAGE DEBT for instance?

If one is self-employed but the cc debt is all personal, $50K for instance, does that raise any unique problems?

[Dst1]

Some of the comments here raise other questions:

what about this "$100K threshold"?...what must that be comprised of? ...ALL debt, or just credit card debt? ...is it meant to include MORTGAGE DEBT for instance?

If one is self-employed but the cc debt is all personal, $50K for instance, does that raise any unique problems?

Your looking at it from the wrong perspective. The rule of thumb if a rule that reflect a cost-benefit analysis on the part of the government. What they care about is fraud. Why is there a difference between small claims court and federal court? Because it a waste or resources for the system to make a federal case out of the $400 you owe your landlord. Why is it unlikely that a creditor is going to file an AP over a thousand dollar debt? Because it takes more money to pursue the AP than the money the creditor would get back. The same way with the rule of thumb about BK fraud. Neither the US trustee or the judge wants to tie up the system pursing the possibility that within you 50K bankruptcy there is $5K of fraud. It's not worth it. Do you really think that someone's puny little fraud can compete with the big boys ripping off million? The local DA is tied up with murders and drug dealers and the jails are bursting at the seam and the UST come in with a 35K BK fraud case where there are no recoverable assets and they will be laughed right out of the office. Seriously.

Of course, a rule of thumb is a rule of thumb. There are no promises. Even a small BK fraud is still fraud. I am not condoning it. I'm just pointing out there is a practical side to this that many people overlook.

[fireworks]

Our small business (LLC, not C-corp) was the biggest factor in our filing. We operated at a loss for several years, finally turned a profit in 2007, then everything crashed in 2008. Due to lack of capital we were not ready to weather the storm of the economic collapse. We closed in February of 09, filed both personal and business bankruptcy in 2010 with debts well over 100K (not including the home mortgage). Documenting everything was a pain (which is why it took so long to file) but the 341 went very smoothly. The trustee asked a few questions and abandoned all assets back to me, including some long-term contracts that I had assumed we would lose. The meeting was last Friday (the 5th) and I see now on PACER that the trustee filed a "report of no distribution" on the 10th.

[Mensa1]

Our small business (LLC, not C-corp) was the biggest factor in our filing. We operated at a loss for several years, finally turned a profit in 2007, then everything crashed in 2008. Due to lack of capital we were not ready to weather the storm of the economic collapse. We closed in February of 09, filed both personal and business bankruptcy in 2010 with debts well over 100K (not including the home mortgage). Documenting everything was a pain (which is why it took so long to file) but the 341 went very smoothly. The trustee asked a few questions and abandoned all assets back to me, including some long-term contracts that I had assumed we would lose. The meeting was last Friday (the 5th) and I see now on PACER that the trustee filed a "report of no distribution" on the 10th.

Sweet........... fireworks. That is great news. Yes it is a huge burden getting all the documentation together just to illustrate where you are financially when a business is involved. How hard to TT look at the LLC books and assets? Were there any liquid assets that TT could have pulled out and sold, leaving he debt behind?

Having a handful of entities with some assets with small equity and others with no equity and lots of unsecured debt, just wondering how that was viewed.? Where did you file? Appreciate any feedback. Thanks and congrats again, you are well on your way to discharge.

PS. I'm sure I will be looking at two 341 hearings, due to the complexity; best guess.

[blockhead]

Some Q's BH: Appreciate the feedback.

What does the audit consist of?
Are they looking at every transaction/transfer, etc. ?
How far back are they going?
Did you file on Corp too, or just personal?
So apparently you have had 341, do you have a 2nd 341 hearing scheduled yet?
What type of documentation did they request for the audit?

Thanks.

Just roughly, this audit came a week after the 341. Just personal ch7, a year of all bank stmts,cancelled checks for all accts (bus and pers), plus just about everything you could think of - how much they'll actually go thru who knows.. it's a boxload

[Mensa1]

Just roughly, this audit came a week after the 341. Just personal ch7, a year of all bank stmts,cancelled checks for all accts (bus and pers), plus just about everything you could think of - how much they'll actually go thru who knows.. it's a boxload

Thanks. Hopefully it turns out well, and either way hope you will report back the results. My guess is this is the way that I might be heading too; just too much data to process, and even I can't hardly process it all and I have been involved with these numbers for years. We shall see.