Buiness Files Ch 7 & Business Owner/Cosigner Files Ch 13 - Can Cosigner Cram Down?

[homebuilder]

Hello. I have not seen this question before:

I, personally, am the cosigner of loan taken out by my company on a truck. Now myself and the company are in default and both entities are filing bankruptcy. The company is filing Chapter 7 and I am personally filing Chapter 13. Can I, as the cosigner, keep the truck and cram down the loan on it in the Chapter 13? The title is in the company's name only. I signed the note as "president" of the company while underneath, on the line below, I also signed the note personally. The loan was made just over 910 days ago. Thank you.

[StartingOver08]

This is very complex - certainly above my knowlege. Hopefully HHM or one of the other moderators can see this question and answer.

[HHM]

Hold off...do you have an attorney representing you? I have a sense you may not have an attorney because most attorneys would not recommend the corporation to file Bankruptcy. (sometimes there are reasons to do so, but rare). What sort of business are we talking about?

First, it is probably not necessary for the company to actually file bankruptcy.

Here is your problem, the Truck is OWNED by the company, you, personally do not own it (as you said, you are not on the title), so there is nothing to cram down. If the company goes under or otherwise files a chapter 7, the truck goes back to the lender. You cannot cram it in a 13 because the truck is not an asset of yours. You merely guaranteed payment.

The only way for you to keep the truck is for "you" to BUY the truck from the company, which means PAYING OFF the current lender.

Bigger picture question: if your business is going under, how would you fund a chapter 13 (do you have another job, does your spouse work)?

[homebuilder]

My corporation builds homes. Our interest in arrears is huge.
We canot liquidate our assests as everthing we own, including the vehicle and real estate, is upside down in this market. Mechanics liens complicate the picture immensly. It takes only one bank not willing to cooperate to make a workout agreement imposible. Some are afraid that if a BK is filed, then any deals in the last 6 months can be undone. Even though this is not true as they would be arms length transaction (no preferental treatment). I am personally signed on the notes as well as an officer of the corp. Even if we had the thousands of dollars per month it would take to make interest payments (5 figures) why would we want to? There is no end in sight and after years of being in a very stressful business anyway, I am ready to move on with my life. Incidentially, the Corp. would go Ch. 7 and me personally would file Ch. 13.

[HHM]

Incidentially, the Corp. would go Ch. 7 and me personally would file Ch. 13.

I realize that. If the business dies (simply dissovles) and if the business has no meaningful assets, then any debt of the business dies with the business.

Usually in these types of scenarioes, the owner simply dissolves the business (sends notice to all creditors, liquidates any assets that can be liquidted, and files articles of dissolution with the secretary of state) and then the owner (you) file a personal Chapter 7 to unload all the personal guarantees, your unsecured debt, and any claims that could be made against you because of the business.

In your case, given the nature of the business (home building), it might make sense to file a Corporate Chapter 7 and let the BK trustee sort everything out. But really, I don't see the need to do so unless the business actually has some assets.

I am not clear why you think you need to do a chapter 13, unless you have some sort of income to make payments. A chapter 13 is a 60 month payment plan.

[homebuilder]

Hmmm. Good points. Let me think on them a bit. Thanks for the input.