Chapter 13 and leins or IOU's

[moose568]

My business is ready to go under and I borrowed money from family members to get started. what if they put leins on my house to ensure they got paid in the BK process or an IOU? Also what can one do to help himself out before filing?

[SinkingFast]

It probably won't help much. I don't mean to be negative, but we've already had a poster here go thru this same thing.

Amislander borrowed money from her mother. As security that Amis' Mom would be repaid, Mom put a lien on Amis' vehicle title. That was back in Jan of 2005. Amis wasn't even planning on filing BK at the time this all happened.

Later in the year, Amis filed BK. In October, 2005, just before the Law changed.

Recently, the Trustee in Amis' case has decided the Lien was invalid. Evidently the Trustee thinks this was an attempt to save the vehicle from BK Court. Now the Trustee has ordered Amis surrender the vehicle to the Court. Whether or not Amis' Mom will ever see a penny from the Court is really questionable.

Here's a couple of threads for you to read:

http://www.bankruptcyforum.com/showt...ght=amislander

Note the post HHM referenced the Section of New Law having to do with transfers of property to Insiders.

And here's the result to this point:

http://www.bankruptcyforum.com/showthread.php?t=10792

[HHM]

I am moving this to the chapter 13 thread.

The problem in Amislander's case is the equity in the vehicle minus the lien, would not have been exempt.

First question, were the liens recorded with the county recorder...if so, they may be valid, if not, they won't be valid.
The next problem is that the people taking the security interest are insiders, but that may or may not be a problem depending on when the liens were placed on the house.

[moose568]

the leins are legit but not filed with the county. I borrowed $35,000 to start a business and after two years it's failing. I was making payments out of my personal checking account but stopped several months ago. Family members have a signed contract with my wife and I signed two years ago. I still owe $17000 to family. I have $40000 equity in house and other normal assets.

[HHM]

Regarding the liens, this probably varies from state to state, but generally, a security interest in real property is not perfected unless it is publically recorded. I am sure the loans are legit, but if they are not recorded, the security interest in the real estate probably won't be upheld. Thus, in your case, my concern would be that the trustee would invalidate those liens; thus increasing the amount of equity you have in your home (and if that increase gets you outside the allowed exemption, then you have a problem.

From a legal standpoint, if the security interest is held invalid, then the notes to your family become unsecured debt, and is discharged in BK. (That doesn't mean you can't pay them back on your own AFTER the BK is complete).

What other debt do you have?

Also, I don't quite understand what your asking by "what can one do to help himself out before filing."

What you want to avoid is making big payments to certain creditors. Whatever you do, DO NOT pay back your family before filing, the trustee will just sue your family members to recover the money you paid (and the trustee will win).

[moose568]

My bills :
auto $7000 equity owe $19000
auto $7000 equity owe $0
Ohio house $40000 equity owe $124000
Florida land $5000 equity owe $50000

when I asked what one could do to help himself out before filing I was asking can I get rid of personal property IE:guns,jewelry,tools, electronics, or do they come in and search your house to see what kind of assets you have?

[HHM]

But what unsecured debts do you have. i.e. credit cards, lines of credit etc. What are you business liabilities?

At first blush, the land in FL is probably toast. From your post, I will assume you live in OH. I doubt OH provides any mechanism for exempting the land in FL, so you would lose that land if you filed for Chapter 7.

Based in the websites I have searched, OH only allows a $1,000 automobile exemption, so your autos (especially the one with $0 owed) are vulnerable to repo by the trustee in a chapter 7.

As a result, Chapter 7 may not be the best option for you; however, since you are self employed, you may not qualify for a chapter 13 as you may not be able to demonstrate regular monthly income in which to pay into a chapter 13 repayment plan.

[moose568]

My wife and I also both have other full time jobs. Other than the money owed to family members we have no unsecured debt. Business debt is $100,000. Was looking at chapter 13 .

[HHM]

My wife and I also both have other full time jobs. Other than the money owed to family members we have no unsecured debt. Business debt is $100,000. Was looking at chapter 13 .

Yeah, you are not a likely candidate for a Chapter 7, But you could do a chapter 13.

[aa06a47]

You can file a chapter 13, but you have a problem. OH only has a 5K homested exemption

http://www.totalbankruptcy.com/state_exemptions_ohio_summary.htm

Based upon your post, you'll have to pay at least 13k to keep your auto's, 5 more k to keep your Florida property, and 35K to keep your current home = 53K. So, for the trustee to approve your plan as giving to the creditors as much as they would receive in a chapter 7, the min payment would be 53K over 5 years = 883/month. I haven't included any of your personal property that would add further to this.

OH has a very low homested exemption, which hurts alot.