Sole Prop going under

[nodin]

Hi everyone. I am new here and this is my first post. It's almost 4am and I've been up for hours stressing out so bear with me!

I am a sole prop owner in Minnesota who, with a lot of bad advise, started my business (retail sports) with credit cards...both business and personal. We are at the three year mark of brick and mortar and 6 year mark of internet business. I am now the proud owner of around $250,000 of debt - mostly unsecured.
I quit my other job when I made the jump to brick and mortar as it was costing more to staff the shop than to work it myself. I have since been living on a draw but the business has lost money for the past couple years.
I have never been good at keeping business and personal finances separate but my family has not lived extravagantly by any means (we are on medicaid, etc).
It's clear now that the business is not going to succeed...i can no longer dump cash advances into it to keep it affloat. I have spoken to a lawyer once or twice and am working on a basic pre-filing form. What is my best option? I had considerd Ch. 11 a year ago and maybe should have at that point but now, with there being no way to keep the shop viable, is Ch. 7 or Ch. 13 a better option? I am pretty sure I can find one or more jobs to cover my family's living expenses.
I do have a second mortgage on my house for the business but othet than that and some savings, all money that went into startup came from credit. One card that was used ($12000) also has my wife's name attached to it but otherwise the debt is all in my name. Do we both have to file? Is all of my personal property (mostly aquired well before the business started) seizable along with the inventory and shop equipment/fixtures?
Any other input?
Sorry if this is incoherant in any way...it's now 4am and my screen is looking fuzzy
Thanks for being here...

[ansky0007]

If your business in not profittable and you can not pay your living expenses its time to throw in the towel and get a fresh start and look towards a chapter 7. I have done the same thing recently and had many online businesses and many were not profittable. We went chapter 7 with over $340k in unsecured debt.

Since as a sole prop you are financially responsible for the business debt anything you currently own can be taken from the court to help pay the creditors something back. Yes, Fixtures, Inventory, Cars, Houses Etc. are all in play.

Alot of information is needed to get your full situation such as does the wife work? How much income? Is there equity in your home or cars? Monthly expenses, current monthly income? What cash advances were taken in the past year, etc. I am sure if you are getting ready for a consult after your first you will have a much better understanding.

Your allowed to exempt some items with your state bankruptcy exemptions, Look these up by your state. In many cases your wife might need to file bankruptcy as well if you need the added exemptions.

If all credit cards are under your name and your wife is just an authorized user it would be a good time to remove her from the account if there is a chance she might be able to not file.

Get your free consults and get plan your bankruptcy and dont just jump into it.

[StartingOver08]

Ansky0007 has pretty much summed up what he can by what you have posted. The good thing is you can file a personal Ch 7 and can discharge the personal and sole prop debt. You will definately want to stop using the cards 'cold turkey' - you need to put some time between the last usage, especially cash advances or balance transfers, and your filing date.

At a miniumum you need at least 70/90 days from the last cash advance and usually you would want a few more months. Make sure you have made some payments to the cards that you have taken your last cash advances at least 2 or 3 payments. This is so you show intent to repay. Actually the amount of time to wait depends upon your specific situation. When you have a business the Trustee will review not only your personal accounts (bank, credit cards, LOC's etc) but also your business accounts (bank, credit cards etc). The Trustee is looking for assets for the creditors - also looking to make sure that you are not abusing the system (there are certain triggers for the abuse - run a search on this forum for 707 (b) presumption of abuse). In a family business, the trustee will be looking for 'insider payments' - and the lookback period is one year.

The best thing to do is to interview several BK attorney's - make sure they have experience with small business filings. You may have to pay a little more, but in the end it is well worth it. Without your specific numbers, we don't know which chapter best fits for you and the attorney will need your specific information too. The good thing is, if you are more than 50% business debt, you can file a Ch 7 without having to go through the means test. Remember this, in this situation, your best friend is time - take you time to plan an effective Ch 7 for your small business.

Oh, one more thing. One of the options you have is to liquidate your business prior to filing. There is a good article on that very subject. I will post the link here.

http://www.moranlaw.net/business-bankruptcy-FAQs.htm

I am not saying that it is the only way - just that it is an option that should be considered prior to filing. You do have to make sure the proceeds go to creditors - equally.