Chapter 13 vs. 7

[Stev]

I have met 4 attorneys. One of the lawyers I respect the most is
recommending a 13 vs. 7. He says "do not come back if you want 7, I will only do 13". I know 13 is higher fee , + payment plan from

Heres why he said: We sold a business(A) 4 yrs ago under corpx. but put the proceeds under personal savings. Then we used the credit line under Corpx's bank accounts to fund a sole propreitor store (60k) . This gives the creditor reason to sue.

Secondly we did some balance transfers 2-3 months ago. So unless we file 9 months later or so this gives those creditors a reason to sue (27k) . Doesnot matter how frugally and business purposedly they were used.

So even though our income is negligible or nothing, he says, the creditors have much less incentive to sue under 13 since we will be asking for a payment plan etc.

Please somebody advice on your experience.

[GWBcasualty]

I have met 4 attorneys. One of the lawyers I respect the most is
recommending a 13 vs. 7. He says "do not come back if you want 7, I will only do 13". I know 13 is higher fee , + payment plan from

Heres why he said: We sold a business(A) 4 yrs ago under corpx. but put the proceeds under personal savings. Then we used the credit line under Corpx's bank accounts to fund a sole propreitor store (60k) . This gives the creditor reason to sue.

Secondly we did some balance transfers 2-3 months ago. So unless we file 9 months later or so this gives those creditors a reason to sue (27k) . Doesnot matter how frugally and business purposedly they were used.

So even though our income is negligible or nothing, he says, the creditors have much less incentive to sue under 13 since we will be asking for a payment plan etc.

Please somebody advice on your experience.

As far as the first issue... I have no opinion, but I am sure someone will chip in.

For the BTs, if you wait only 2-3 months I guess they may challenge them. However, if your income if negligible and you are not hiding assets the most they can get out is a settlement for a portion of the $27K that you may be able to pay.

How can you go in Ch 13 if you don't make money?? Quite simply you cannot fund it!

[Stev]

As far as the first issue... I have no opinion, but I am sure someone will chip in.

For the BTs, if you wait only 2-3 months I guess they may challenge them. However, if your income if negligible and you are not hiding assets the most they can get out is a settlement for a portion of the $27K that you may be able to pay.

How van you go in Ch 13 if you don't make money?? Quite simply you cannot fund it!

I have very little income like $1500/month and the sell of the assets/business is counted as income.

I am seriously considering 13 instead of 7 due to the less likelyhood of lawsuits. and am interested in hearing from anybody who took that route.

[LuciluS]

I can't answer your questions, but have a suggestion.

Post your question, under Chapter 13 and maybe you will get some help.

Luci

[fltoo]

Heres why he said: We sold a business(A) 4 yrs ago under corpx. but put the proceeds under personal savings. Then we used the credit line under Corpx's bank accounts to fund a sole propreitor store (60k) . This gives the creditor reason to sue.
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This is confusing. You sold the corp and put the money in a savings account? Is the money still there?

You used the sold corp credit line to fund a different business?

[Stev]

Heres why he said: We sold a business(A) 4 yrs ago under corpx. but put the proceeds under personal savings. Then we used the credit line under Corpx's bank accounts to fund a sole propreitor store (60k) . This gives the creditor reason to sue.
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This is confusing. You sold the corp and put the money in a savings account? Is the money still there?

You used the sold corp credit line to fund a different business?

We used the proceeds (of the sale) for living expenses and half of it to fund the new business.
Also we used the credit line to fund the other business. Thats what the lawyer says is a potential point.

[CH33 Paralegal]

You took business income and converted it to your personal stash. You then ran up the credit in your BUSINESS to open another business.

The issue here is that you could have taken the proceeds from the business sale and then opened the new business up with them, rather than taking that money in for yourselves. I'm sure the intent wasn't to get a "free" business, but you are going to have to itemize and account for all that money if you want to plead your case.

The Balance transfers raise the faith question because what you did was generate a whole bunch of new debt with one creditor while you PREFERENTIALLY spent down the debt with another creditor. I'm sure this wasn't malicious intention, but it is what it is and the situation is just this. All this happened relatively closely to the conclusion to file BK, which begs the question about the faith of the filing.

Your attorney may not want to deal with all the potential AP's and such that would be associated with this type of case.

[Stev]

You took business income and converted it to your personal stash. You then ran up the credit in your BUSINESS to open another business.

The issue here is that you could have taken the proceeds from the business sale and then opened the new business up with them, rather than taking that money in for yourselves. I'm sure the intent wasn't to get a "free" business, but you are going to have to itemize and account for all that money if you want to plead your case.

The Balance transfers raise the faith question because what you did was generate a whole bunch of new debt with one creditor while you PREFERENTIALLY spent down the debt with another creditor. I'm sure this wasn't malicious intention, but it is what it is and the situation is just this. All this happened relatively closely to the conclusion to file BK, which begs the question about the faith of the filing.

Your attorney may not want to deal with all the potential AP's and such that would be associated with this type of case.

There was a 3 year gap between the sale and start of the new business. The sales proceeds was declared as income minus the SBA loan, owners contributions, write offs etc. Also talking to the CPA, the disbursement of cash to self can be seen as disbursement to shareholders. However running up the debt from the old corp (after its core business is sold) is an issue as I understand. As far as the balance transfer go. It is up in the air, it will be up to them. Its almost 6 months now and I will file maybe in 3-6 months unless there is a preemptive cause.

The question really is what is the solution. To share what I have learnt so far. In a case like this its best to file for 13 even if you qualify for 7. In a chapter 7 lawsuits from crediters are almost assured. Reason is that the potential for suits in a 13 is greatly reduced because they are looking at payment 3-5 years away. I havent heard any better options.

In the mean time I am making trickle payments to almost everybody.