Primarily Business Debt + Chapter 7 - Questions

[soleprop]

Hi, I'm new and thankful this forum exists. I am the sole proprietor for a failed small business and am quite sure that bankruptcy is my only way forward. I'm getting sued by the landlord for nearly $6k for the retail space for rent during the months between when I vacated and when he filled the space...so I'm definitely feeling the stress.

Known:

• My income is below my state median
• My debt is primarily business debt (80%) not consumer (20%)
• I have no assets (or very few) that will be considered nonexempt
• My current expenses allow for approximately $200/month extra
• I can't afford to get a lawyer so I'm filing Pro Se

Unknown, and I ask for your input:
By marking 1B, Declaration of non-consumer debts on Form22A (Means Test), I am instructed by the form not to complete any of the remaining parts of the statement.

Does this mean that it doesn't matter if I have means, however limited, to repay my business debts? I'm having a hard time finding much info regarding primarily business debt Chapter 7 cases.

I'm concerned that my case would be presumed abusive based on this 'availability' of funds and that I'd be forced to convert to Chapter 13.

I need some clarity on what this part of the form actually communicates to the court, and how the presumption of abuse works for small business in the event that expenses do not completely swallow income.

Thank you so much, in advance, for your input.

[lrprn]

I'm having a hard time finding much info regarding primarily business debt Chapter 7 cases.

Here are two excellent webpages that deal with businesses that are considering filing Ch 7 -

http://moranlaw.net/struggling.htm

http://www.************************/...ease/#more-690

We have several small business owner forum members who have filed recently - hopefully they will come along and post their insights here as well.

Good luck - hope everything works out in your favor.

[southernbelle]

I filed Chapter 7 on April 10th, over the Median by about $15k, and was also a sole prop. of the business that was closed it in July 07. Since most of my debts are non-consumer, I didn't have to take the Means test, but my schedules I and J only show about $150 disposable income. My atty. mostly handles business BK's and doesn't perceive any problems arising. I had initial concerns about my extra retirement contributions of $325 per month, and the possibility of being pushed into a chapter 13, but I get the feeling my trustee might not question it.

By the luck of the draw, I just happened to get one of the three trustees in my district that happens to be the most strict / thorough (story of my life). My atty. told me to expect specific and extensive questions about the business debt and not so much my personal expenses / debt. My percentages are about 70% business /30% personal.

I also have very few assets that are non-exempt, but that's because I have a little business equipment in storage that's been sitting there since the business closed. That will probably mean that I could be considered an asset case and will keep my case open longer, but as long as I get my discharge, I'm okay with that since I have no use for the equipment anyway and would prefer not paying the storage fees any longer.

I also have unpaid lease payments owed to my landlord for my commercial space of about $3500, but I didn't have any suits pending.

Unfortunately, after all of the dischargeable debt is eliminated in the Chapter 7, I still have unpaid Trust Fund Taxes to deal with thanks to my ex, so I have to consider alternatives after the discharge. Do you owe taxes (hopefully not)?

Some of other business BK folks on this forum are biotechsolution, phoenix and boscoe, but everyone here, especially the moderators are VERY helpful and will provide you with moral support since you are pro-se and will give you general info that will help you through this process. My 341 meeting is May 6th and I don't feel nearly as stressed as I did before I found these guys, they are great. I hope everything will go as planned for you. Good luck.

I'll updating you guys with how my case goes and maybe someone can learn something from my mistakes.

[soleprop]

lrprn and southernbelle, thank you so much for your replies! i can't tell you how relieved i was to wake up this morning and see activity on my thread - bankruptcy has a way of making a person feel all too conspicuous in some ways, and very invisible and insignificant in others. so relieved to know that small business people don't get swallowed by some big black hole after they file. i'll check those links out, lrprn!

as for your question re: taxes, southernbelle, i don't owe any income taxes, however the state of minnesota is one of my creditors i'm including in my bankruptcy as they've 'calculated' an amount of sales tax they believe i should owe them though i do not believe it to be a real number they can hold me to once i can show how much sales actually did (or did not) roll through my shop. c'est la vie though, if i cannot change their mind i will pay it ($320ish).

regarding assets, i would be relieved if they would take some of mine, though i quite comfortably fit within the exemptions provided by both fed and state; my feeling is that maybe this gives me a little bargaining power with the trustee...? i've read in the nolo book about those with nonexempt assets bargaining with trustees to exchange exempt assets instead so they can keep the nonexempt. i wouldn't need to do that, but i feel that to show my good will and desire to repay my creditors as much as i'm able, i could offer to the trustee some of my exempt belongings for liquidation. thoughts, anyone?

i'm working on Form 7 - Statement of Financial Affairs today, wish me luck!

[lrprn]

regarding assets, i would be relieved if they would take some of mine, though i quite comfortably fit within the exemptions provided by both fed and state; my feeling is that maybe this gives me a little bargaining power with the trustee...? ... i feel that to show my good will and desire to repay my creditors as much as i'm able, i could offer to the trustee some of my exempt belongings for liquidation. thoughts, anyone?

Frankly, you aren't going to get a blue ribbon from the court for volunteering to give up anything you don't have to give up when you file. This is a business decision to the court - nothing more - and it's best for you to see it as just a cold, emotionless business decision for yourself as well.

Since you are a business filer, even if you are trying to file without a lawyer (pro se), it will be very beneficial to meet with 3-4 experienced bankruptcy lawyers in your area for free or low-cost initial consultations. You can get a lot of your questions answered during those sessions and find out where any potential problem areas may be for you. It's well worth your time, especially since the Ch 7 NOLO book is skewed toward simple, straightforward consumer bankruptcies without a business involved.

With your failed business, I strongly encourage you to use a lawyer experienced with consumer Ch 7 business filings to file your case. Ch 7 bankruptcies with business debts intertwined with personal debts can get quite messy sometimes, so it's best to have a lawyer involved from the start rather than trying to find one after filing if things don't go as expected.

Keep posting questions here - we'll help you sort things out as best we can. Hang in there!

[southernbelle]

Frankly, you aren't going to get a blue ribbon from the court for volunteering to give up anything you don't have to give up when you file. This is a business decision to the court - nothing more - and it's best for you to see it as just a cold, emotionless business decision for yourself as well.

Since you are a business filer, even if you are trying to file without a lawyer (pro se), it will be very beneficial to meet with 3-4 experienced bankruptcy lawyers in your area for free or low-cost initial consultations. You can get a lot of your questions answered during those sessions and find out where any potential problem areas may be for you. It's well worth your time, especially since the Ch 7 NOLO book is skewed toward simple, straightforward consumer bankruptcies without a business involved.

With your failed business, I strongly encourage you to use a lawyer experienced with consumer Ch 7 business filings to file your case. Ch 7 bankruptcies with business debts intertwined with personal debts can get quite messy sometimes, so it's best to have a lawyer involved from the start rather than trying to find one after filing if things don't go as expected.

Keep posting questions here - we'll help you sort things out as best we can. Hang in there!

Ditto to what lrprn said. I doubt the Trustee will give you any credit for offering up assets. The trustee's job is to collect as much as possible from you to dispense to your creditors. Nothing more, nothing less. These are business decisions and I'm sure emotions don't really enter into it for the Trustee's, otherwise I don't think they would be able to do their jobs effectively.

I also agree with making appts with at least 3 or 4 BK atty's to get an idea of what would be involved in putting together your BK paperwork. Try to meet with one that handles chapter 11's or does business BK's often. It took me lots of free consults to finally find one or two that would even try a chapter 7 for me. Most just looked at my income and shrugged it off as a chapter 13 without even knowing the facts and when I suggested a chapter 7, they would usually either cut the consult short or say it was impossible.

There are a couple of posters here that have done it, so I know it's not impossible. I didn't have any real serious time to devote to putting the paperwork together and was too chicken to try, but I say go for it, if you think you can file pro-se. With the age of the internet, we have tons more info. available to us than in the past. I would just gather as much info. as possible and be thorough with the paperwork and you'll do just fine.

[soleprop]

you guys are awesome, thank you! you have great insight into the system. i'll try approaching it less emotionally. tough when the whole thing gives me a weak stomach!

[1.6Million]

Giving it all up.

Sole,
I am also a business in Ch7 and personal Ch7. Its been a lot of fun. This forum has been a great help to get the answers I need quicker that the lawyer can ever give. My Attorney isnt really into my case (1.6million). They just got some big 200M case and i have have to find my nervous questions answers elsewhere.

I cant even think what it would be like to do this with our a Lawyer. I would see if there are any charitable offices or help in your area.

Good luck, I am days away from filling so wish me luck.

[soleprop]

oh man i *do* wish you luck; hope it goes well - so you're filing 1.6 million in debt you want to discharge? i don't blame you!!

i'm a verrrrrrrry small business, total debt is under $18k. but it's still impossible for me to make any headway on, and i'm facing years of terrible credit and judgements and garnishing and liens and...well yeah... it has to be bankruptcy, or life just doesn't feel livable.

i understand attorneys need to make a living but if i could scrape together $2k to get representation i could likely make a dent in my debts. it's obvious i can't do either..

thank goodness for bkforum ;)

[southernbelle]

Good luck 1.6million. You have a lot on your plate. My total debt is around $250k. I can relate to you when you said this forum is a great help and it is wonderful to get quick answers from knowledgeable people. Thank God my atty. seems to be one of the good ones because I've heard some horror stories.

In fact, this forum was where I first found out that I could file a chapter 7 due to mostly non-consumer debt. Apparently most of the atty's I met with in the very beginning like to see "cook book" filings and didn't want to try a chapter 7 for me. The great folks here helped me to understand how this process works and have taken a huge amount of stress away because not knowing about my chapter 7 option could have seriously hurt me.

[soleprop]

i'm still unclear on how primarily business debt filings for Chapter 7 are handled differently from primarily consumer debt filings. can you elaborate?

[HHM]

It has to do with the wording of the code regarding the means test. Basically, the means test is a requirement only for those that have "primarily" consumer debt. Otherwise the cases are handled pretty much the same.

The implication of not taking the means test is that, if you have primarily business debt, your case cannot be presumed abusive (and therefore dismissed) if the debtor is over the median income.

[soleprop]

The implication of not taking the means test is that, if you have primarily business debt, your case cannot be presumed abusive (and therefore dismissed) if the debtor is over the median income.

this is the meat and potatoes of what i've been wanting to know - thank you! so further clarification -- can the trustee assigned to my case try to push me into CH13 if i am a) under the median income but b) have some small amount of disposable income which does prove the following emphasized text within the statement below true:

Any creditor, the trustee or the court may force conversion of a Chapter 7 to Chapter 13 or 11 if the debtor's income is more than the median income in the state, and if the amount of the debtor's income left after deducting allowed expenses over 60 months is greater than $6,000. If the income less expenses for 60 months is more than $6,000 but less than $10,000, conversion is required only if it is more than 25% of the nonpriority unsecured claims.

A debtor can file Chapter 7 if his income less expenses times 60 is less than $6,000. A debtor cannot file Chapter 7 if his income less expenses times 60 is greater than $10,000. If the income less expenses times 60 is between $6,000 and $10,000, it must be less than 25% of the nonpriority unsecured claims.

does that "and" protect me? only half of that statement is true for me. my english language skills tell me that if it was an "or" i'd need to worry more, but i'm worried enough!

and the bolded section in the 2nd paragraph - i wish it said something like "EXCEPT IN THE CASE OF PRIMARILY BUSINESS DEBT Chapter 7" because that would make this so much more clear...

[HHM]

this is the meat and potatoes of what i've been wanting to know - thank you! so further clarification -- can the trustee assigned to my case try to push me into CH13 if i am a) under the median income but b) have some small amount of disposable income which does prove the following statement true:



does that "and" protect me? only half of that statement is true for me. my english language skills tell me that if it was an "or" i'd need to worry more, but i'm worried enough!

Yes, if you are a business debt chap. 7 and have disposible income, you can still be pushed into a chapter 13 (but you cannot be pushed into a chap. 13 or dismissed for being over median).

[keepmine]

oh man i *do* wish you luck; hope it goes well - so you're filing 1.6 million in debt you want to discharge? i don't blame you!!

i'm a verrrrrrrry small business, total debt is under $18k. but it's still impossible for me to make any headway on, and i'm facing years of terrible credit and judgements and garnishing and liens and...well yeah... it has to be bankruptcy, or life just doesn't feel livable.

i understand attorneys need to make a living but if i could scrape together $2k to get representation i could likely make a dent in my debts. it's obvious i can't do either..

thank goodness for bkforum ;)

Don't take the bk road over $18K. For this amount, your problem isn't debt-it's lack of income. You need to put on a full court press to find a better job or get a pt job and start trying to negoitate with your creditors.
Reality is, if you can't make headway on $18K worth of debt,your life post bk likely won't be much different -financiallt speaking.
I understand the lawsuit issue but, they can only garnish a percentage of your check and only one garnishment at a time. The $6K is your most pressing issue. The rest can wait. Very likely you could settle all of this for under $10K if you take the time and initiative. Start with some obviouse source of funds. Your tax rebate and your tax refund.