fireworks
02-11-2009, 08:25 AM
Hey there folks.
I've seen two attorneys to discuss my situation and gotten some conflicting advice. Maybe someone who has been there before can help me out?
I have an LLC that lists myself as the sole member (100%). Most of my debt is related to the LLC in some way and shows up on the business books for tax purposes, but as far as the CC companies are concerned it's in my name personally. We have a few small accounts with Home Depot, Office Depot etc. that are in the LLC name but have my personal guarantee. Those accounts total less than $2K of my total $130K in unsecured debt. Between my wife and myself we also have some student loans, a small car loan (about $4K left, will be paid in ~18 months) and a mortgage. We plan to keep the car and the house and of course the student loans aren't bankruptable.
Most of the LLC assets are inventory. I'm already in the middle of a store closing sale to get rid of all of my merchandise. By the end of the month we will have closed our storefront, ended our lease (landlord won't be happy) and moved out. We'll sell most of the fixtures, computers etc and keep only a small collection of specialty tools and probably a laptop each for myself and my wife.
The sticky part - as part of my business, customers can rent-to-own musical instruments. Part of the rental agreement is that we handle any maintenance issues with the instrument. The rental contracts could be anywhere from 6 months to 3 years. I would very much like to continue receiving that income, especially while I'm looking for my next job, and I don't want to leave my customers in the lurch if something goes wrong with their instrument. It would certainly be workable to operate that much of my business out of my house and tell customers we're only available by appointment. According to my books I have about 12.5K in rent that's owed to me over the next 24 months or so. I'm not certain how the BK court would value that. In a way it's "accounts receivable," but it's not money that's owed to me right now - it's money that's owed in a small trickle over time. As part of the rental agreement the customers have the right to bring the instrument back at any time and end their payments, so it's not by any means guaranteed money (not that anything is guaranteed). That number is dropping by about $500 monthly.
I discussed this with two bankruptcy lawyers in town and received two very different opinions.
Lawyer #1 advised me to file personal bankruptcy and leave the business alone. He told me that any collectors calling on business debt would continue to call and might even sue, but since I had filed bankruptcy personally they couldn't come after me personally for it. If they won a judgment against the business then the business would be liable for it, and I might be subpoenaed to testify at hearings or whatnot, but would have no personal liability. His opinion was that there's no reason really to spend the time and money on filing an extra bankruptcy case for my LLC if we're already filing personally.
Lawyer #2 advised me to file bankruptcy for the business and file separately for personal debts. He says that's the way to get everything cleaned up and have a complete fresh slate. Of course that's also a double fee for him. I assume that by filing bankruptcy for the LLC all of my accounts receivable, and probably my rental contracts, would then belong to the bankruptcy estate.
We'll be filing in the state of Texas which has some very generous exemptions. We're nowhere near the $60K limit, even if you include the expected rental income. We have about $5K equity in the house, about $200 equity in the wife's car ($4200 blue book, $4K loan balance), my paid-for car is worth about $2400 blue book. We did the lawyer's personal asset worksheet last weekend and came up with about $10K in household goods.
So the question is...what would you do? Based on my understanding of the law (which may not be correct):
If I file personally only:
-the LLC would be considered an asset - the court may seize it
-my business credit cards would still come after my business for what I owe - but once the personal debt is bankrupted I can pay them off quickly.
-assuming the court lets me keep the business and the rental contracts, I can still have some income and can still hold up my end of the deal on the rental contracts
-my business landlord might come after me - by contract I would still owe them $1600/month in rent until June 2010 or they lease the building to someone else. Maybe if we send him the notice of bankruptcy for the personal BK he'll drop it entirely. I've talked to him, he knows this is coming and I don't think he's likely to pursue us very far. The lease is in the business name only, no personal guarantee.
If I file both:
-twice the lawyer fees
-all CCs wiped out, including business
-rental contracts all go away, and my customers get a really good deal on a horn
My thought right now is to file personally and list the LLC as an asset. If a collector gets a judgment that wipes out my business assets or any other issues come up then I can file for the LLC later as needed.
Lawyer #2 has told me that he will still take our personal BK case if we elect not to file for the LLC. I like him better anyway, he's easier to deal with and comes very highly recommended from several local people (including Lawyer #1). I have an appointment with him this afternoon to discuss options and start the paperwork on the personal BK. At that time I will go into detail about why he advises what he advises before making any permanent decisions.
Opinions? Thoughts? Questions?
I've seen two attorneys to discuss my situation and gotten some conflicting advice. Maybe someone who has been there before can help me out?
I have an LLC that lists myself as the sole member (100%). Most of my debt is related to the LLC in some way and shows up on the business books for tax purposes, but as far as the CC companies are concerned it's in my name personally. We have a few small accounts with Home Depot, Office Depot etc. that are in the LLC name but have my personal guarantee. Those accounts total less than $2K of my total $130K in unsecured debt. Between my wife and myself we also have some student loans, a small car loan (about $4K left, will be paid in ~18 months) and a mortgage. We plan to keep the car and the house and of course the student loans aren't bankruptable.
Most of the LLC assets are inventory. I'm already in the middle of a store closing sale to get rid of all of my merchandise. By the end of the month we will have closed our storefront, ended our lease (landlord won't be happy) and moved out. We'll sell most of the fixtures, computers etc and keep only a small collection of specialty tools and probably a laptop each for myself and my wife.
The sticky part - as part of my business, customers can rent-to-own musical instruments. Part of the rental agreement is that we handle any maintenance issues with the instrument. The rental contracts could be anywhere from 6 months to 3 years. I would very much like to continue receiving that income, especially while I'm looking for my next job, and I don't want to leave my customers in the lurch if something goes wrong with their instrument. It would certainly be workable to operate that much of my business out of my house and tell customers we're only available by appointment. According to my books I have about 12.5K in rent that's owed to me over the next 24 months or so. I'm not certain how the BK court would value that. In a way it's "accounts receivable," but it's not money that's owed to me right now - it's money that's owed in a small trickle over time. As part of the rental agreement the customers have the right to bring the instrument back at any time and end their payments, so it's not by any means guaranteed money (not that anything is guaranteed). That number is dropping by about $500 monthly.
I discussed this with two bankruptcy lawyers in town and received two very different opinions.
Lawyer #1 advised me to file personal bankruptcy and leave the business alone. He told me that any collectors calling on business debt would continue to call and might even sue, but since I had filed bankruptcy personally they couldn't come after me personally for it. If they won a judgment against the business then the business would be liable for it, and I might be subpoenaed to testify at hearings or whatnot, but would have no personal liability. His opinion was that there's no reason really to spend the time and money on filing an extra bankruptcy case for my LLC if we're already filing personally.
Lawyer #2 advised me to file bankruptcy for the business and file separately for personal debts. He says that's the way to get everything cleaned up and have a complete fresh slate. Of course that's also a double fee for him. I assume that by filing bankruptcy for the LLC all of my accounts receivable, and probably my rental contracts, would then belong to the bankruptcy estate.
We'll be filing in the state of Texas which has some very generous exemptions. We're nowhere near the $60K limit, even if you include the expected rental income. We have about $5K equity in the house, about $200 equity in the wife's car ($4200 blue book, $4K loan balance), my paid-for car is worth about $2400 blue book. We did the lawyer's personal asset worksheet last weekend and came up with about $10K in household goods.
So the question is...what would you do? Based on my understanding of the law (which may not be correct):
If I file personally only:
-the LLC would be considered an asset - the court may seize it
-my business credit cards would still come after my business for what I owe - but once the personal debt is bankrupted I can pay them off quickly.
-assuming the court lets me keep the business and the rental contracts, I can still have some income and can still hold up my end of the deal on the rental contracts
-my business landlord might come after me - by contract I would still owe them $1600/month in rent until June 2010 or they lease the building to someone else. Maybe if we send him the notice of bankruptcy for the personal BK he'll drop it entirely. I've talked to him, he knows this is coming and I don't think he's likely to pursue us very far. The lease is in the business name only, no personal guarantee.
If I file both:
-twice the lawyer fees
-all CCs wiped out, including business
-rental contracts all go away, and my customers get a really good deal on a horn
My thought right now is to file personally and list the LLC as an asset. If a collector gets a judgment that wipes out my business assets or any other issues come up then I can file for the LLC later as needed.
Lawyer #2 has told me that he will still take our personal BK case if we elect not to file for the LLC. I like him better anyway, he's easier to deal with and comes very highly recommended from several local people (including Lawyer #1). I have an appointment with him this afternoon to discuss options and start the paperwork on the personal BK. At that time I will go into detail about why he advises what he advises before making any permanent decisions.
Opinions? Thoughts? Questions?