Heading Down The Path

[kevin1]

Hello all,

I am brand new here, and just started looking around. Here is my situation:

I have 2 homes, one of which is rented out. Due to the market, I am way upside down on both mortgages. I have been making the payments the last couple of months just before they are 30 days late, so they don't hurt my credit yet.

I had less than a year left for paying off my truck, but the engine went so just last week I was forced to go buy another one. Managed to keep the payments pretty much the same though, but for 5 more years......Been making them late as well, but not 30 days late.

Now the real problem, my credit card debt. I have approx $70K worth of it. I co own a company and the business has been way down so we have not been taking paychecks about 1/3 of the time going back over a year. The credit cards have paid for groceries, etc, and most recently last week I took cash on one to pay the mortgage. I have been making the payments, just barely because I know the late charges and jacked up interest will kill me if I am even 1 day late on these. But last week I had no choice but to miss a couple of payments. One card wasted no time in dropping the credit line so I have zero left. My wife thinks I should call each one and try to see if they will work with me. My problem is even if they give me a month or two amnesty I will still have $70K CC debt and just do not see a way out of it.

So in summary, I have a boatload of debt and very irregular paychecks. My credit shows no late payments, but I am sinking quickly. I am stuck in my business because I have a partner and we are tied together with some business debt so we need to try to make it work. If I can get out from under the CC debt I can pay the rest of my bills and want to keep my house and car. I don't know if doing that is an option in a BK though.

Any thoughts are appreciated.

[kevin1]

No responses? LOL, I guess I did not really ask any questions...

here's one - Since I am in business with someone and that business has bank accounts, credit cards, a loan, etc. Do I have to disclose to my partner that I am going to file BK, if I file? Or is all that separate? It is an S Corp.

[angles]

The fact that you have a business partner with assets will make things complicated. You would not be a typical filer, which is why you have not seen a rush of responses. I am not sure about the S corp thing but I would assume that if you filed all of your assets are considered as part of the BK estate. You probably already know this, but start interviewing BK attorneys to see what they say. Post back what you find out, I am interested in how it will most likely play out for you.

[mtngirl47]

When you file bankruptcy all of your assets will be assigned a value. Depending on your allowed exemptions some of your assets may have to be sold to pay your creditors. Your ownership in the corporation is one of your assets.

Most of your corporate assets probably don't have that much value...furniture, computers, equipment...and all have probably been depreciated when you file your taxes each year. Depending on the company's debt you may be able to assign a low value. When it came down to the bottom line, our company wasn't worth much...and our trustee left the company alone because it was how we make our living and he knew we wouldn't be able to get jobs easily.

Interview several attorneys and be sure to find one who is experienced with complicated self-employment situations. Read through these forums--and start planning.

Your partner is going to have to know--if neither of you have been taking salaries he/she may be in the same boat. Plus, probably most of the business debt is personally guaranteed by one or both of you...you will have to file on all of your debt. You may find that the company could benefit from eliminating debt also. You'll need a current P&L when you meet with your attorney.

We were in a similar situation--we struggled to keep our credit lines open, until we couldn't. Then when we didn't have credit we negotiated hardship payments. We sold equipment, treasures and toys to keep going, until we couldn't. Then in order to save our property we filed Chapter 13.

We found that all of our "corporate" debt was showing up on our personal credit reports. We filed on all of it. Only one creditor is still trying to collect-- Discover. Even though they have made a claim against me in the bankruptcy they can still continue to go after the company.

Start planning. Decide if you can or want to keep your properties. Move your money to a bank that you don't owe anything to. Stop paying your credit cards so you can eat, pay for necessities like phone, power, mortgage, etc. Your phone will start ringing with collection calls--read the collection forum about how to handle that. And remember the mantra of the bkforum: This is a business decision for you and your family.