Sooner or later...

[aspenjim]

I'll have to file bancrupcy on my business. I have a LLC doing business as a sub-s corp in colorado. I have the means to hang on for another year, but it is inevitably coming.

I really made the mistake of buying my kids cars using the cap 1 cards and then repaying the amount paid for the car via CC as soon as we could get bank loans. the kids vehicles bank loans are all paid off.

I did a credit report today and find all of the Cap 1 business cards are tied to our personal credit.

Would I be better off changing my business to a Corporation if I have to file BR ? If I do, I want to do it Jan. 1, 2011.

Would they try to repossess the kid's cars ?

At this point I have good credit, just in over my head with ~ $700/mo business CC payments.

All of this makes me sick. I have a govenment contract through my business that is renegotiated annually, but I fear will not get renewed as the current economy hits local governments hard. The contract amounts to $33k / year, which if I loose, will cause uncertain BR.

[HHM]

Time to sit down with an attorney and sort things out.

Changing to a corporation will do you NO GOOD at this point. Also, it may not be necessary for the business to file a bankruptcy, generally when you have personally guaranteed debt the strategy is to close the existing business entity (your LLC), and file a personal bankruptcy. Note, the process to do all this properly is more complex, so get help, but the idea is pretty straightforward.

The kids car issue is sticky, but by no means insurmountable. I don't think there is a risk of repossession since it doesn't appear any lender has a lien claim on title.

The larger issue in BK would be the underlying issue of what will happen with the cars in BK.

[johnnycakes]

So, If I understand correctly, you used a CC to buy the cars - then got bank loans to pay off the CC? If that's the case, as long as you paid off the bank loans you don't have a repo issue on that front. I don't know how the IRS might view the transaction - but that's a whole other issue.

However, you may have an issue with the vehicles being considered part of the bankruptcy estate. There are time frame and exemption issues that would impact that situation greatly. I'll give the default suggestion of contacting an attorney. "Gifts" of cars/real estate/high value items to family members is a red flag to the trustee, and you will need to tread carefully.

[aspenjim]

Yes... that is the case... I used the CC's to obtain points and give me a little bit of buying power, then within a month, paid the exact amount that I used to repay the "business" cards. Bookwise, it was a clean in and out, nothing used for depreciation. I do have 2 Audi's that I put on 5% cards that I know will have to be surrendered.

I sure don't want to file a personal BR, but it looks like the only choice when the time comes.

HHM, why do say a corp will do no good? (I thought that may be a way of seperating business from personal). I barely understand why I was encouraged by an accountant to become a LLC doing business as a sub S corp. I remember he said there would be only 1 income tax filed.