Bankruptcy Abuse?

[lisac77]

Some of you know our story, some don't, so I'll recap here:

Bought a business in 2004. My husband has been running it by himself since then. I work full time. The business made enough to pay for itself and stay in business, but we weren't making a dime as far as income. Then DH was shot in an armed robbery at the end of November. The effects of this have been far reaching... of course he had to take a few days off, reduce hours for safety, and so forth. This caused a significant drop in income to the point where we were unable to pay our bank loans. We started researching banruptcy the week after DH was shot (1st week in December).

Of course we were totally unprepared for this situation. I made several balance transfers in October or September of 2006 to get 0% interest rates. I've been paying my minimums on time.

Now the bank that holds our main business loan ($425K, payments are currently 2 months behind) is offering to recast the loan and bring us current on our payments. We have not worked out any agreements with the smaller loan holder (3 months behind), and we still have to pay the property taxes for 2006, which we don't have the money for.

We also had some money in the bank, several thousand dollars, that we've been scrambing to spend before we file for bankruptcy. We also have a tax refund (approx. $4000) and a small cash bonus (around $2000 or so) coming in in February that will have to be spent.

We are currently thinking that we will file in March 2007.

Obviously our case is very complicated and the intertwining of personal and business finances make it even more so.

Even if we accept the recast of the main business loan, we still have creditors that we cannot pay in full. Using more credit is out, since we're considering bankruptcy. Should we even accept the offer of a recast? If we do accept the recast then file bankruptcy wiill that look bad for us?

I can't remember exactly when I did the 0% shuffle on all my cards, but it may be less than 6 months ago. Even 5 months ago is looking at a different lifetime for us in terms of decision making. Is it possible that we won't be able to get those balance transfers discharged?

We are in a hurry to file because the business loan is a secured loan and we are likely to be hit with a judgement essentially any day now. Our second business loan is also secured, although they hold the 2nd lien on the business and associated property. In addition, I have an even bigger bonus coming in at the end of March. If we don't file before the end of March we'll have to wait a while before we can file to spend that extra money (probably pushing the BK out to September or so).

I'm worried that a trustee or a creditor will look at our case and automatically assume "BK abuse" even though we are not abusing the system, we're just in a really tough spot. I just don't think there is any way that our case is going to be one that "flies under the radar" so to speak.

I am so anxious about this that I can't sleep. Things just seem to be getting worse and worse for us.

[SamanthaJones]

I think you ought to try for that new loan.

BK is the last resort- anything you can think of to hold that off would seem logical, to me. Balance transfers to save interest, refinancing mortgage, etc- you never know if this stuff might all add up to a reprieve, unless you try them, eh? (My opinion only).

[lrprn]

Lisa, if there's one thing I've learned from being on this board almost a year, it's that borrowing more money to buy time almost never works. Usually it just delays the inevitable slide to complete financial failure plus can add a lot of complexity to filing that may make getting a discharge much more difficult. Bk lawyers say that the majority of their clients (both Ch 7 and 13) should have filed 12-24 months before they actually did. Debtors wipe out retirement accounts, take out second or third mortgages, sell personal property, etc....and in the end most end up having to file, but with higher amounts of recent debt to explain away to their trustee.

In the end, we all have had to make the decision to file or not to file and when. The indecision and weighing the many "what if's" are incredibly stressful. However, once you have a plan and put it in motion, the stress will ease. Hang in there, Lisa - we are all rooting for you!

[SinkingFast]

Lisa, if there's one thing I've learned from being on this board almost a year, it's that borrowing more money to buy time almost never works. Usually it just delays the inevitable slide to complete financial failure plus can add a lot of complexity to filing that may make getting a discharge much more difficult. Bk lawyers say that the majority of their clients (both Ch 7 and 13) should have filed 12-24 months before they actually did. Debtors wipe out retirement accounts, take out second or third mortgages, sell personal property, etc....and in the end most end up having to file, but with higher amounts of recent debt to explain away to their trustee.

In the end, we all have had to make the decision to file or not to file and when. The indecision and weighing the many "what if's" are incredibly stressful. However, once you have a plan and put it in motion, the stress will ease. Hang in there, Lisa - we are all rooting for you!

Ditto's to Lrprn's comments. I know we did a couple of financial reorganizations, but we merely delayed the inevitable. And every attny said, "Do you realize how much money I could have saved you if you had come seen me sooner?"

Forget the balance transfers for a second,............

Chances are, being a small business owner, your BK is not gonna fly below the UST's radar anyway. Those filers tend to get looked at harder. Easy to drain off money from the biz. Siphon assets. That sort of thing. So anything you can do to make filing easier on yourself, you should plan that way now.

[Spartan]

Balance transfer that takes advantage of 0% interest rate, that is outside the 90-70 window, may have a logical explaination. You have a legitimate reason, ie to lower interest burden so you can repay more principle sooner. WHile large cash advance will raise the flag for presumption of abuse. Recent cash advance begs the question as to where the money went.

Hang in there. Don't worry too much. Things will get resolved. Look at it this way. Your family is in good health. You have a good income. You live in a state that has generous protection. Things are a pain in the neck at the moment. But you can rebuild. You are not faced with looking for a roof over your head. You don't worry over finding a job to put food on the table. You don worry over the health of anyone in the family. And you are actually worrying over how to spend all the money you have or have coming in!! Think about that!

[HHM]

If you are GOING to file BK, I'd be leary about doing balance transfers at this point.

You need to make a decision about the business...do you want it or not. If not, then who cares about the secured loans. The banks will take the assets, and you will discharge any personal gaurantee or deficiency balance that you would be liable to pay personally. I understand the emotional attachment, but you really are making this harder than it needs to be. The fact of the matter is, the business is toast, accept it, and move on. Get your BK put together, from where I am sitting, this seems like a no brainer. However, as I recall, your husband has been reluctant, has anything changed on that front?

[lisac77]

Lisa, if there's one thing I've learned from being on this board almost a year, it's that borrowing more money to buy time almost never works.

I agree. I think my husband is beginning to realize this as well.

Chances are, being a small business owner, your BK is not gonna fly below the UST's radar anyway.

This is really what worries me the most. We're going to be scrutinized more than your average filer, so we have to make sure everything is squeaky clean. Unfortunately my DH is less interested in cleanliness and more interested in lining his pockets.


I chose our lawyer carefully and he says he has a lot of experience with dealing with the "me first" attitude of most entrepreneurs. He was recommended to me by another BK forum user, who used him for his own business bankruptcy.

Balance transfer that takes advantage of 0% interest rate, that is outside the 90-70 window, may have a logical explaination. You have a legitimate reason, ie to lower interest burden so you can repay more principle sooner. WHile large cash advance will raise the flag for presumption of abuse. Recent cash advance begs the question as to where the money went.

I hope that this is the case with us! I have never taken a cash advance from a credit card in my life, so no worries there.

You don worry over the health of anyone in the family.

I am deeply worried about my husband's health. The only time he has taken off in the last 2 years was just a couple of months ago when he got shot. Otherwise he is overworked and constantly sick.

If you are GOING to file BK, I'd be leary about doing balance transfers at this point.

You need to make a decision about the business...do you want it or not. If not, then who cares about the secured loans. The banks will take the assets, and you will discharge any personal gaurantee or deficiency balance that you would be liable to pay personally. I understand the emotional attachment, but you really are making this harder than it needs to be. The fact of the matter is, the business is toast, accept it, and move on. Get your BK put together, from where I am sitting, this seems like a no brainer. However, as I recall, your husband has been reluctant, has anything changed on that front?

I'm not doing any balance transfers now... I did them a few months ago before the shooting. I'm worried that if it was less than 6 months ago, I might have a hard time discharging the debt.

It's my husband that has an emotional attachment to the investment money we put into the business. He thinks that he can get that money back. I think he's starting to realize that it's impossible, though. We looked into advertising the business (to sell it) and it's over $1000 a month just for the newspaper ad.

Both of us are willing to let the business go. He hates that place. It's the investment money, money that we worked for 5 years to set aside, that he is having a hard time releasing. I already consider that money gone, so it's easier for me.

Thanks for the kind words everyone! I hope we can do this thing SOON so I can stop flipping out.