S Corp Bankruptcy?

[waziggy]

This year our business is failing. I'm trying to understand my best options.
I visited a bankruptcy lawyer who said declare bankruptcy and tell no creditors anything. I had a little trouble with this and since I have notified all my suppliers and my retail business landlord. Almost everyone was very nice - even my landlord said they do a termination agreement after we have a going out of business sale. The information I'm receiving from the liquidation pros in retail is that suppliers will accept .30 to .50 on the dollar for unpaid invoices knowing it's better than nothing if the business declares bankruptcy. Here's the critical point. Through the last three years I used personal credit cards trying to shore up the business and have $40,000 on them. Now I myself am a creditor to my S Corp and wondered if I could just pay myself first as I was the first original creditor when I put the money in the business to start it. I hope to get around $40K out of the going out of business sale and could use that money to wipe out the credit cards and then submit a revocation of the business's S Corp with the IRS and let the lawyer then have the business declare bankruptcy - keeping my home, vehicles, and kids off the street. Any suggestions I would appreciate and welcome. I feel like the lawyer (who advertises) just says declare bankruptcy; then again I see many lawyers listed in the yellow pages under consumer credit counseling (and our lawyer's ad says they do consumer credit counseling but none was offered). Guess, I figure the lawyers only get paid if you declare bankruptcy so that's why they steer you there when other options are available. What's the best track for me to follow?

thanks,
Bill

[david scurlock]

hrmm, sounds fishy when you have to explain your using 40k to pay
back personal credit cards. you should have had all Business Card cards, then
you probably could declare them into the BK. I hate to say, but you should have
had all this figured out before putting $1 of your own money onto a personal
credit card.

[notinmyhouse]

If he is the sole shareholder

He can and should be paid back for all business expenses. I do it. Plus of he is sole shareholder in his s corp his social is used for all credit cards anyways.

[HHM]

It will really depend on how nasty your creditor's want to get. The problem you will encounter if you pay yourself and then put the business to a chapter 7 is that any payment to you is an "insider payment" and if you declare yourself a creditor to the business, you will have to show a legal reason why you showed preference to yourself over other creditors. Most of the creditors and the trustee will probably scream "fraudulent transfer" and/or "preferential transfer" and thereby try to "avoid" the transfer, thereby making you personally liable to payback the 40K into the BK estate.

You basically need to get an attorney who does business bankruptcy [many consumer bk's can usually handle simple business bk's, but when issues like this are created, you better off with a business bk lawyer, but it will be significantly more expensive].

The other people you discussed your issues with are right, you can usually attempt a business work-out with your creditors, but that assumes you want to keep the business in operation and try to save it, otherwise, your just better off declaring bk.