Chapter-13 / 7 as an indivdual with an S-CORPS ???

[Oliver]

I was reading this forum and hopes someone could lend some advice in a similar situation, however, I did not see any posts that addressed my situation. Any advice or guidance you can provide would be most appreciated

Here is my case: my wife and I own a Horse Stable which started out as just a part time hobby, but has grown into a family business over the years. Back in 1999 we incorporated the business as an S-CORP with my wife and I as the shareholders. Up until last year, this business has never been a substantial source of income, though we managed to earn a modest positive cash flow over time. We have continually reinvested most of those earning back into the business to grow it over time. Then, last year, I was layed-off from a company I had worked for the previous six years and earning 60k+ . Unable to find work in my field, I began to working on the farm and helping to build our family business, which has since become our sole source of income. Today the business is doing well and growing, and within a year we may even be able to surpass my income from my corporate job. - This is our American Dream!!!!

Unfortunately, in the interim I had amassed nearly 50K in personal debt. Most of this debt was accumulated via unsecured credit cards - which we were using to live on and pay our bills. However, I have also had a few thousand in medical bills too. Up to now my credit had been perfect (close to the highest Credit score possible). Even now, I have not missed a single payment but, as I quickly approach my credit limit and my monthly minimum payments are becoming difficult to manage, I am considering my options. Filing for Ch-13 seems like the best option to get back on track

Now that our S-CORP is our family's sole source of income, I need to do everything I can to protect that business. We've worked incredibly hard to build this business over the years and I don't want to do anything that could possible jeopardize that. Since virtually all the debt is mine, I would consider filing as an gingival.

Here are some questions I have:

Q1? Once I make the decision to file, should I continue making all the minimum payments to all my creditors?

Q2? I regularly use my existing credit to purchase items for the business. Most of these expenses go to facility maintenance and Horse Care (Feed etc.) I also use my credit to purchase regular living expenses for my family (groceries, doctor bills) Will these areas be an issue?

Q3? Is Chapter-7 a viable option or does this overly complex with a personal Bankruptcy and joint S-Corp.

Any other advice or guidance appreciated!

http://www.bankruptcyforum.com/newthread.php#

Smilie

[tinroofrusted]

Have you thought about trying to settle some of this debt with creditors before considering filing? I would do that first.....

[HHM]

Its sounds like you're experiencing a temporary set back so BK may not be the best option right now.

What are the prospects of a new job?

As with any business, when your revenue is cut, you need to cut expenses. As a general matter, you should not be using personal credit cards to pay for business expenses since the business is an S-Corp, the business should have its own credit card (Granted, you will personally gaurantee that card, but still, you need to seperate the business from yourself).

Try temporarily cutting expenses however you can, both in your business and personal life to weather the set-back. Ways to cut expenses is to get payment defferals on your various loans and credit cards.

[Oliver]

I have considered other options including contacting some of my creditors to work out a plan. One of my creditors will allow me to pay off my medical bill, over the couse of twelve months, without any interest payments or negative credit report filings. The others - namely credit card issuers would not even give me the coutesy of consideration.

[Oliver]

In reply to HHHH -

I am barely able to make regular minimum payments on the eight credit cards I still have. Most of this debt was accrued over time though I had taken advantage of several 0% interest offers on balance transfers to help finance my debt. Now I have reached a point where banks are no longer willing to offer additional credit, and my options are limited. To make matters more compounded, Interest rates on my regular credit cards have nearly doubled in some cases - which reduces the overall amount of pricipal I am able to pay down each month. In addition to that, some of my creditors are increasing the minimum repayment each month from 2% to 4% (notably Bank of America to whom I owe nearly 18k alone.)

[Oliver]

I would rather not file Chapter-7 if at all possible. Chapter 13 looks like a really favorable option since it would allow me to put my finances in line over a period of time. I am however concerned with the new BK Reform Law that has just been signed into by President Bush and the ramifications it might have for filing.