Question Don't know what to do

[C0MMANDO]

I just started my restauraunt 3 months ago(1/1/12) (LLC). It's been 3 months now, I net profit so far is "0". I currently have a mortgage and 2 cars. I don't think i will have enough money to pay off my bills in about 4 months, if it continues at this rate. Currently I will need $80,000 more to pay off my mortgage. Is there any way I can transfer everything I own now ( or just my house) to my wife, or to one of my friends(trusted) before declaring bankruptcy?

EDIT: I live in Arizona and my wife and I have separated bank accounts
And my brother will help me pay off my mortgage in About 2 months(my wife has no job, so she has no credit)

[AngelinaCat]

Hi COMMANDO: Welcome to the forum.

Please give us some information first. When are you planning on declaring bankruptcy? Do NOT plan to transfer anything out of your name for the foreseeable future. Trustees can look back several month up to about three years, if they suspect what can be construed as a 'fraudulent transfer'. I am not suggesting that is what you are planning with your question, only how the trustee will likely view it.

[despritfreya]

I just started my restauraunt 3 months ago(1/1/12) (LLC). It's been 3 months now, I net profit so far is "0".

I assume you understand that, in general, it takes about 1 year for a start-up to make a profit, assuming there is a profit to be made.

I currently have a mortgage and 2 cars. I don't think I will have enough money to pay off my bills in about 4 months, if it continues at this rate. Currently I will need $80,000 more to pay off my mortgage.

You should have some savings so that you can pay your normal monthly living expenses. If you do not, you do have a problem. The only thing a bk can do is get rid of the second mortgage (through a Chapter 13 or 11), assuming there is no equity in the property after considering what is owed on the first. As to the vehicles, if you want to keep them you have to pay for them. In addition, why do you need to payoff your $80k mortgage - did a balloon payment come due?

Is there any way I can transfer everything I own now ( or just my house) to my wife, or to one of my friends(trusted) before declaring bankruptcy?

Of course you can do the transfer but, since you have to disclose it, the court is simply going to undo it so don’t do any transferring - not a smart move no matter how you slice it.

I live in Arizona and my wife and I have separated bank accounts And my brother will help me pay off my mortgage in About 2 months

Sorry, but your wife’s account is your account since you live in a community property state. If your brother is financially stable why don’t you just have him help you through the rough times until the business turns the corner - if turning the corner is in the cards?

Bottom line is that you have not given enough information for us to help you. From what you have given a bk is not going to solve the problem. You just started a business. It takes time to determine if the business is going to be profitable. You have not given it a chance and are speculating that it will fail without even trying to succeed.

Des.

[C0MMANDO]

Well first of all, apologies if I wasn't being clear.
The contract signed is 3 years, and my ultimate goal is to keep my house, so my family won't have to move out

[C0MMANDO]

I assume you understand that, in general, it takes about 1 year for a start-up to make a profit, assuming there is a profit to be made.



You should have some savings so that you can pay your normal monthly living expenses. If you do not, you do have a problem. The only thing a bk can do is get rid of the second mortgage (through a Chapter 13 or 11), assuming there is no equity in the property after considering what is owed on the first. As to the vehicles, if you want to keep them you have to pay for them. In addition, why do you need to payoff your $80k mortgage - did a balloon payment come due?



Of course you can do the transfer but, since you have to disclose it, the court is simply going to undo it so don’t do any transferring - not a smart move no matter how you slice it.



Sorry, but your wife’s account is your account since you live in a community property state. If your brother is financially stable why don’t you just have him help you through the rough times until the business turns the corner - if turning the corner is in the cards?

Bottom line is that you have not given enough information for us to help you. From what you have given a bk is not going to solve the problem. You just started a business. It takes time to determine if the business is going to be profitable. You have not given it a chance and are speculating that it will fail without even trying to succeed.

Des.

The business is partnership...we are having just way too many conflicts

And I did have savings... $50,000 from the start, but I'm afraid the economy here in this city will only get worse because summer is approaching and many people will move out to someplace cooler.

And can can you explain which is the "second mortgage". Sry if I wasn't being clear, my 2 cars are paid off already.
My brother lives out of the country and even though he's kind of wealthly, $80,000 is a lot for him, And all I wanted is to keep my house so my family won't have to move out.
And at the moment I'm clueless on what I should do now...



btw I can confidently tell you this restauraunt is profitable, but my partner is unwillingly to do any marketing, and those stuff. I talked to him many times, we argued many times, I don't see how this restaurant will last very long.

[Mamalama]

Welcome Commando. I'm also from AZ, and we live in a community property state. If you would be allowed to file bk by yourself, creditors can still go after your wife for that debt. Unfortunately, your debt is also you wife's debt. Any chance of getting out of the partnership? Best of luck to you!

[Drazil65]

Can you suggest your partner buy your half of the partnership out? Can you find someone to sell your half of the partnership to? What about bringing in an investor to the partnership, maybe a silent partner that could inject some cash to get the restaurant going? I think I would try to sell my portion and move on or this will drain you! Good Luck!

[despritfreya]

Commando,

You still are not clear. What type of debt do you have? Credit cards, medical bills, personal guarantees from the business, taxes etc. - all of this along with an understanding of what assets you have determines, what, if any, bk you file.

For example, you state the vehicles are free and clear. Assuming you have lived in Arizona for the past two years, if you file bk, you are allowed a vehicle worth $5k and your wife is allowed a vehicle worth $5k or between the two of you, you are allowed one vehicle worth up to $10k. If the vehicles exceed the allowed exemption you have to address that issue before filing. (DO NOT TRANSFER ANYTHING.) Another consideration might be how much you owe on your home. Whether or not you have one or two mortgages and what is owed on the first versus what the home is worth.

The above issues and a bunch of others must be addressed before anyone can make suggestions as to whether or not your are a candidate for a bk.

Further, unfortunately, a partnership is like a marriage. If you cannot work out your differences, you need to get a divorce. If the partner is not willing to "buy you out" then this may mean you walking away, file a bk to eliminate any personal guarantees and other debt you may have and then move on. Just make sure that all payroll and sales taxes are paid since those items will flow through to you regardless of a bk or what you work out with your partner.

At this time you need to sit down with a well qualified bk attorney. Make sure it is one who understands how to handle the fact that you are in a business.

Des.

[C0MMANDO]

Currently I don't yet,but in the near future I will be
Here are the things to know
I need $90,000 each month for the restaurant( rent included)
And on top of that I will need to pay the $1,000 mortgage
My expenses will increase due to air conditionings and my profit will decrease once it's summer

[despritfreya]

Currently I don't yet,but in the near future I will be
Here are the things to know I need $90,000 each month for the restaurant( rent included)
And on top of that I will need to pay the $1,000 mortgage. My expenses will increase due to air conditionings and my profit will decrease once it's summer

So, is the business run as corporation or LLC? If so, then, which creditors have you personally guaranteed - I would assume the lease at least? What about suppliers and equipment leases (drink dispensers for example)? Is there an SBA or other type of loan that is secured by the assets of the business to which you signed a guarantee or gave an lien against your home as additional collateral? The devil is in the details.

Des.

[C0MMANDO]

It's an LLC and the lease is a personal guaranteed

[ValleYum]

Commando?

TRUST ME when I tell you that the more info you give to Des - the more he can/will help you. Just thought I'd let you know.

[despritfreya]

It's an LLC and the lease is a personal guaranteed

Then, if you default, the landlord 1) can terminate the lease and lock you out and 2) can sue you on the personal guarantee. However, under Arizona law, the landlord has a duty to attempt to mitigate damages - he must take steps to try to lease the space out. Unfortunately mitigation is a difficult thing to do in this economy.

It sounds like if you do not work it out with your partner eventually you will have to consider a bk. But, for now, this avenue is premature. If the only business debt you will be liable for is the lease then, if and when things fall apart and the landlord seeks payment from you personally, try to settle with him. Maybe your brother can help you with that.

You and your partner need to get on the same page and, if the two of you do not want to run the business try to sell it to someone who does and get the landlord to allow an assignment of the lease. Do what you can to mitigate your own exposure by finding someone to step into your shoes.

Hope this helps.

Des.