Considering Bankruptcy Sole proprietor/Employed

[SUB]

I'm considering Chapter 7. Meeting with an attorney this Wed.

I'm employed, and also run a small wholesale co that is now 14 years old.
Did pretty well for many years, but things turned south when Hurricane Katrina reduced a client comprising 1/3 of my sales to one of my smallest accounts.

Combined gross (not adjusted gross) is just slightly above median.
There is no equity in anything beyond a small boat owned outright. NADA guide places an ave. retail of 12,000. Biz equipment and inventory, maybe valued in the $1000 range.
Other equipment is 'owned by the bank' with no equity.

Reading some of these posts is giving me a distinctly different impression than I got from talking to others about what to expect.

Does the Sole proprietorship raise automatic red flags?

[HHM]

Does the Sole proprietorship raise automatic red flags?

Not necessarily. But cases where you are in control of your income (from a sol-prop) etc, the trustee and US trustee are going to make sure you are on the level with your BK filing. Most people on this forum who owned a business got through their BK just fine, but they had to do some extra work (i.e. supplying additional documents, business records, etc).

[SUB]

.... additional documents, business records, etc.

Like tax returns? That's about the only thing I have.

[HHM]

Like tax returns? That's about the only thing I have.

It depends on the type of business, but at a minimum, its will usually be tax returns and bank statements for both you personally and the business (if any) for two years. Plus, you have got to have your own records, you can't really do tax returns unless you have a way of tracking income and expenses, they may ask to see those files, whether they are quicken, excel files, or simply hand-written.

[SUB]

It's a sportswear company. T-shirts etc.

There's only one bank account.
And yes. I have a box of receipts, bills and duplicate invoices of each sent to the customer. Boxes going back to 1994's taxes.

They are really going to want to see all this crap?

[HHM]

It's a sportswear company. T-shirts etc.

There's only one bank account.
And yes. I have a box of receipts, bills and duplicate invoices of each sent to the customer. Boxes going back to 1994's taxes.

They are really going to want to see all this crap?

Probably not all that, but they will likely want bank statements and tax returns for at least 2 years. And since your personal and business income and expenses are commingled, you may by subject to a 2004 exam (basically a deposition) so that the US trustee can get an explanation on what in your bank transactions are personal and business.

But again, it really is not that big a deal and is certainly not a reason to not file BK, but you need to be prepared for a little extra time and effort to complete your BK.

[SUB]

Ok. Thanks. I'll see what this attorney says on wed.
Hopefully his take will jive with other opinions on the board.

Please stay tuned.

[SUB]

Had the meeting with the attorney.

I'm under the median with near $65k of unsecured debt. Looks like I qualify.
Owe 432k on the house roughly worth 434k. So the homestead exemption would convert to 10k wildcard.

Bad news is it wont cover what I had hoped to keep. A newer car owned outright and some new shop equipment purchased by loan from a relative. There's a boat that I figured would go either from sale or turning it over to a trustee. Also at risk, my tax refund.

Speaking "hypothetically" he pointed out, that I "could" wait till after tax season, sell the boat over the summer, stop using/paying the cards, then file December or January.

Looks like things are going to have to get much uglier before it gets better.