$5,000 Inventory?

[jenbow]

My husband owns a small company for glass / windows. We are claiming chapter 13 personally but writing off some business debt that we are personally liable for. We are really hoping that if we get rid of this debt and cut our expenses tremedously we can keep our doors open. However, we were told that we can keep $5,000 in the tools of the trade. What does that mean and who determines the values of our tools? Also, if the tools value over $5,000, can our creditor and just decide what he is going to take??

I am new and just beginning this painful process. We are wanting to make sure we do this process the right way too.

thanks

[StartingOver08]

It is more than just tools of trade you need to consider. In your personal bankruptcy, your husband's entire business is considered an asset. He will need to value the business.

How is the business formed (LLC, Corp, sole prop)? Read up on the Small Business section here in this forum.

Yes, it does not seem right that if you file personally that the business is included, but it is as the business belongs to your husband. Make sure your attorney is familiar with and has worked with small business owners that are filing BK. Do NOT go to a mill attorney - as your as automatically is a little more complex since you own a business.

Check out your A/R too. Anything that is due you as of the date of filing belongs to the Trustee. When you have a small business, timing for your filing is critical. Income earned after the filing date is yours.

Naturally, you will have lots of questions. The first place to start is read some of the other experiences by small business owners and apply to your situation. Then come back and ask as many questions here as you can. When you meet with your attorney you can get all the details. It will help you find the right attorney if you ask the right questions.

[jenbow]

thank you so much for your response. We have picked out an attorney and I am just now preparing our initial packet and gathering all my questions. I will include the ones you mention above for sure. thank you so much, apprecitate your feedback.

[frogger]

How is the business formed (LLC, Corp, sole prop)? Read up on the Small Business section here in this forum.

You still need to answer this question. Makes a huge difference on the answers.

[jenbow]

LOL! Oops.. it is a S Corp. Do you have experience with this?

[StartingOver08]

Yes. Mine was an S corp. I ended up having to close the S corp when I filed but continued in the same business as a sole prop. Please note, that the liabilities with the S corp are still there but my personal liability was discharged in my personal BK. The creditors can't collect against the corp, but they can get a judgment. Most did not bother to pursue that avenue.

I mention the above because part of the BK will be figuring out how you want to keep your business running or even if it is worth keeping the doors open.
Your BK plan needs to include not only what you are discharging in your personal BK, but what will you do with the business liabilities and assets.

Speak to your attorney to come up with your plan. Do you have liabilities just in the co name? Or are all of your co liabilities also personally guaranteed?

Here are some addtional thoughts for your plan: http://www.bankrate.com/finance/debt...ankruptcy.aspx

Some alternatives for you: Keep the business running and 'buy back' the business from the Trustee at a negotiated value. Or you might liquidate your inventory and pay off your business creditors and officially close the business prior to filing personal BK. Or you might consider changing the business from S corp A to S corp B - where you dump some debt but still have to buy out assets. This is something that takes specific knowledge of your debts and liabilities and the expertise of your attorney.

[frogger]

LOL! Oops.. it is a S Corp. Do you have experience with this?

You could say something like that.

Your S-Corp and everything that it owns will be an asset in your bk estate. There are no exemptions of any kind for your corporation. Any monies that are owed your corp are also part of the estate.

Your trustee is going to want to sell your corp to someone, even if it is you.

[jenbow]

Great input.. thanks

Our S-corp has expenses that are all personally guaranteed. Basically, trucks ($25,000) , a business line of credit ($100,000), and two business credit cards ($20,000). Plus we just found out that we owe $60,000 in payroll taxes (somehow our accountant missed 2007 - 2nd quarter).

Our business has no real assets or inventory except my husbands experience and tools. We are still getting business but we feel the company has been managed very poorly (shame on us). If we were to get a fresh start and eliminate our debt we might be able to continue..

My husband is 56 and really knows nothing else but how to install glass and windows. Companies such as his are not really hiring so his only way to earn a living is to try and restructure.

We basically are eliminating all expenses that we possibly can, filing BK personally and then saying alot of prayers.



We have had our initial consult with our attorney.. and now I have just submitted our packet. We are going to meet in about two weeks but before then I am trying to get an understanding of where we are at and also what questions to ask.

I am going to ask the attorney about the buy back and also the changing of the scopr to another type.

This forum has been great.

[StartingOver08]

I'm sure you are aware the payroll taxes are non-dischargable.
Figure out with your accountant and attorney the best way to handle those taxes. Even if you decide to close the business (Corp A) and open up corp B, the taxes need to be paid. This might impact what you are doing with your BK.

[jenbow]

we know that the payroll taxes are not going away this is the final straw that is putting us in BK as we are just going downhill.. i hope after we meet with attorney our situation will be more clear

[BigJohn]

we know that the payroll taxes are not going away this is the final straw that is putting us in BK as we are just going downhill.. i hope after we meet with attorney our situation will be more clear

Did your accountant sign any of your checks.