What will happen to business partner?

[Naive-n-Texas]

Here's the story. Have always had OUTSTANDING credit. Spouse gets a vey long awaited promotion with salary under an appointed Sheriff. During this time I expanded our tanning salon in a small town. My partners name is only on the DBA, business bank, lease, and tax stuff. We used my personal credit cards for the expantion and at the time had the income to keep us way above water. Then politics stepped in and the apponted sheriff lost his bid in the election. The elected sheriff brought back those the appointed sheriff had fired for a long list of infractions. Spouse was demoted 3 ranks, with a $13k a year loss and unravelling of a 14 year career. (We do have a lawsuit pending ) So, you can see where this road is leading. We are now at the bottom of that body of water with cement blocks tied around our ankels!

The salon has NO debt. All the $70k+ debt is in personal credit card.
1.Why would we have to shut the doors if I file Chapter 7?
2.What would that do to my partner?
3.Can I turn around and "sell" my part of the business to her then file chapter 7 without it hurting her and "her" now business?

[bowlingmt]

Because we wanted to keep our business, we had to file a 13, and I had to spend a lot of time on research and proving the business had little to no cash value if sold outright (break even because of the business mortgage). We have no partners, just us. If we had no debt on our business, our 13 payback would be astronomical (of course, if we had no business debt, I could have paid off my credit cards in a year or 2!!)

You will really need to talk to an attorney to see where you stand.

[Spartan]

If the saloon is a partnership or an LLC, then it is immune from your personal bankruptcy.

Your share of the interest in the business, will most likely get a charging order.

The business (in the form of partnership or LLC), is separate entity, and will continue to operate unaffected. It wouldn't be seized nor liquidated.

You definitely need a lawyer experienced in this. You can't do this pro se.

[Naive-n-Texas]

Thank you. This is all very interesting. Well...as far as BK is concerned! Can anyone tell me if we come into any kind of lawsuit settlement before we file, will that settlement be affected? See my thoughts on all this is, we wouldn't be in this mess if it hadn't been for "the powers at be" and any kind of settlement is for my families future that disappeared from a 14 year career!

[lrprn]

Can anyone tell me if we come into any kind of lawsuit settlement before we file, will that settlement be affected? See my thoughts on all this is, we wouldn't be in this mess if it hadn't been for "the powers at be" and any kind of settlement is for my families future that disappeared from a 14 year career!

The bankruptcy courts don't care what caused the settlement, that your wife is entitlted to it, or that it's for your family's future. If your wife receives it in the six months before you both file bankruptcy, then the courts are likely to see it as income, pure and simple - income that needs to be added into your 'last six months' income calculation on the required Means Test.

Filing for bankruptcy within six months of receiving a large, one-time financial settlement doesn't make much sense. However, I'm not a lawyer and Texas is a debtor-friendly state. Be sure to ask a qualified, experienced Texas bankruptcy lawyer about this to ensure you know exactly where you stand with your wife's settlement if you file bankruptcy within six months of receiving it.

I'm curious....if your wife receives the settlement and if you put all of it towards your business debt, would you still have to file bankruptcy?

[Naive-n-Texas]

Actually, it's my husbands settlement. This lawsuit has been going on for 2 years as of Jan.5th, 2005. Since then we used every bit of money in savings, extra jobs and even hubby's IIB's to stay alive in hopes the County would settle before we went to trial. In that time we tried to sell the tanning salon to help with our personal debt.. Some of the CC have increased our intrest rate from 5.90 to 32.24. We no longer could the min. pmts and I've tried working with them. Gone as far as trying to use a Debt. Service, but hubby's income couldn't even support that. A week ago Friday, Bank America raised our set rate of 7.90 to 32.24 because I was consider a day late after sending in an elctronic pmt after 12noon their time. I called to work things out and they told me to contact Take Charge America. We could not quailify for that and when I called them back ( Bank Am) to request their Internal Hardship program, they had closed all (3 accts). One account had a -0- balance and the other account was currant with "no problems" at all. We had wished we could have sold the salon to pay off debt before it got as big as it has. There is also the threat of not getting anything close to what we owe. If a jury does give us anything close to an exceptable amount to help, the county can appeal it. So it just goes on for ever while we continue to sink further and further in the hole trying not to file BK. My fear is we settle for something less and still have debt staring us in the face. I try not to go hunting for witches, but I do. SO this is where we are today.

[poorme]

Back to your original question - about the business partner...with all you're facing it would seem 'right' to come clean with her and lay your cards on the table. Let her seek her own counsel and make the best decision for herself. Really, this is about you and hubs - not trying to be hard-hearted here, but you may need to focus on yourselves for a bit and let the partnership dissolve (hopefully amicably). It's very possible your business can be protected and the salon remain open. I presume that's your source of income? Would she hire you if she bought out your interest in the salon?

[lrprn]

You are in a tough situation for sure, Naive. (And thanks for clarifying that the settlement is your husband's - sorry I misunderstood that.)

What you are going through with your credit cards is very common. The same thing happened to us - frankly, the raising of one after another of our cc APRs to 30% and the refusal to negotiate was the last straw that forced us to abandon our debt management program and file Ch 13.

The feeling you are in a witch hunt before filing is a very common one, even without an employment lawsuit involved to stir things up even more. I can say from personal experience that when you know there's really no viable alternative to bankruptcy, there is considerable stress relief once the decision is made, you search for and retain a good Ch 13 lawyer to stop the harassing phone calls, and set the date to file. I hope it will be the same for you and your husband as well.

Hang in there - please keep us posted on what you decide, ok? We're always here for venting on the bad days as needed!

[bowlingmt]

I have to disagree on the LLC issue. Our business is an LLC. Yes, the business is a separate entity, but it is an asset and we had to show the value of our asset (would it be worth the trustee selling it in a Chapter 7). I would definitely consult a lawyer on this one.

[Spartan]

A couple of things here.

1. The trustee will want to see the financial statements. They want to see the books, b/c they want to see if you have been hiding money in it. Think fraudulent conveyance.

2. Yours may be a one person LLC. Thus they want to see the book so as to see if they can 'piece the weil', and seize the assets.

The asset in a properly structured LLC or partnership, is protected from creditors. That is one of the main reasons for the existence of such legal entities.

[Naive-n-Texas]

Thanks guys. Oh, my business partners, let's just tell you one gave me life and the other helped me make life...twice. My thoughts where to sell her our part of the partnership and walk away. No money would change hands because, say I owed her some money. This way we would no longer own the business and they could not freeze the non-existent assests. There is no income. I work for free. Any money we make/made went to rent and to the CC.
Thought if we could get around closing the doors, get some breathing room from BK, she could drop the price on the salon and at least get something for all our hard work. This is why I call myself Naive. Silly me thought we could finally make some money, start our retirement nest egg and start 2 college funds. Still, we would not be having this conversation if hubby's income had stayed the same. It's a bitter pill. I'm beginning to think my lesson in this life it to struggle with money! I must have really made someone mad in a past life!
I can tell you that 2004 was our family year! And what a great year it was. Hubby was no longer on night shift. He was finally involved with the kids and our lives. Baseball, sit down meals, camping trips, vacations, etc..............WE all got a long.........and now.........I'm sure I don't have to tell you all what is going on in the home now.

[Spartan]

Unfortunately, things are not that simple. You can't just extract yourself from the business with a wave of the hand. Moreover, your business partner are also family. IF you sell your interest to a her, it has to be at fair market value. (Well, the transaction has to be at fair value, regardless.) If it is going to be cashless transaction b/c you are just going to call it repayment of debt, that opens another big can of worms.... yike!

Is it a properly registered partnership? Or is it just an informal arrangement?

The trustee will want to look at the books.....whether you still own the business or have recently disposed off your interest in it....

<here comes the broken record> "You need a lawyer."

[Naive-n-Texas]

It is a registered DBA. I'm just crushed!

[Spartan]

A DBA is just a registration for the name you do business as. A corporation, a partnership, an LLC, or a sole proprietor can file as many DBA as needed or desired. The purpose of a DBA, is to enable those you do business with, to find out the identity of the real owner, and to locate the owner.

I have just checked. It seems that in Texas, "..there is no requirement that the agreement be in writing and no state-filing requirement" for general partnership.

Limited partnerships are required to file organizational documents with the Secretary of State. Thus, if you didn't do that, then what you have is basically a general partnership.

I know about the protection offered by LLC and limited partnership. General partnership is beyond the scope of my knowledge.



Now, you got to pull yourself together here. This isn't the end of the world. You still have your family, and you all still have a bright future. This is just a temporary set back. As long as you all pull together, you can make it through this. It is just a little road bump. You can reconstruct 2004 again. It is not beyond reach. Time for a heart to heart talk with your SO. As long as you stuck together, all these shall pass and a better future is only months away.


Even in the worst case where the business is included, it doesn't mean you will lose it all. There are still exemptions, such as tools of the trade etc. Now, I am entering area beyond the scope of my knowledge here. You definitely need to consult with attorneys ASAP. Free initial consultation. Since your case is not that straight forward, you may really want to put in the due dilligence in talking to several reputable attorneys.


Don't worry. It will work out. There are people in worse situations. And they have made it through. So shall you and your family. Just hold fast and don't get panic over it. It isn't anything you cannot overcome. It doesn't take a miracle. Only a lot of phone calls and meetings..

[Naive-n-Texas]

Thanks Spartan. It's only money, right? Know anything about dealing with Workerscomp? Hubby was hit by DWI driver on duty Oct.2003. Received 2 ruptured discs and the insurance carrier rufuses to get him surgrey or any more theropy..........another nightmare! That's another govm't system that is really messed up.

Really, the only thing of value are the 5 beds. And with depresation, won't make a dent. We also have 1year and 3mo. left on the lease. The slum lord does come after those that break leases, even if you went out of business because you go no longer afford to stay in business. Now she has 3 1200sqft vacant and no money. All she had to do was come down of the rent to help them out, but nooooooooo. Don't get me started...I know it's business.

I know it is in Gods hands and timing is the key. My theory, if you want things or need things, if it comes together smoothly, then it's right for you. If it's a stuggle or you have to put more energy in to it and you still get resistance, it's not for you.

I was just thinking, I could shut the doors, But what in the world am I going to do with an $8000, 12' x 4' SignTronix sign with our logo on it? Guess I could put in the front yard. The neighborhood does need more lighting at night!