Biz Owner, Filed Chp 7, Can I convert to 13 or 11?

[KeepHopeAlive]

I am a new poster, so I apologize if I am asking questions already answered elsewhere on the site. I read the "Tactictal BK Manual", and I already did a search on the site for Chp 11...

I filed a Chp 7, and had my 341 Meeting of Creditors Friday 1/6/2006. Although my business (C-Corp and LLC) has not turned a profit, the BK Trustee seemed excited that my biz had "revenue" and "assets". She asked about how much money I had in biz accounts "right now" (NOT the date of filing), which my attorney said she would only care about how things looked as of the date of filing.

1. How late can I convert from my chp 7 to a chp 13 or chp 11?
2. Has anyone here done a chp 11?
3. Does anyone know of a similar forum/resources for chp 11 folks?
4. Has anyone with a business that had assets out there done a chp 7?

Thanks in advance...

[JimH]

It's hard to say what she is looking for. Be careful of the Tactical Bk Manual - it's a great resource but outdated under the new changes 10/17. A number of the options you read about in the manual can no longer be done.

The trustee has control of your c-corp and LLC in the bk. From my understanding (I have a similar situation), she cannot take assets from the corp / llc if there is also debt within the business entity. She must first pay off the debt - then she can distribute the assets. If she did otherwise, she would be potentially defrauding the business creditors whom would be first entitled to any potential benefit that the business assets have. If the business entity has enough net worth and the trustee believes she can liquidate, pay off all business debt, and distribute to the personal debtors, she will most likely do that.

A potential problem she may be looking for is if you are underpaying yourself. If the business is building equity / retaining earnings by not paying you enough, she will probably want to impute undistributed income into your means test calculation. That may force you into ch 13 and might be what she is looking to do. She may give you an option to dismiss or convert - who knows.

Ch 11 is more set up for large corps. You won't find much self-help in this area since these filings are almost exclusively larger corps that pay atty's to handle the details. Small businesses are much better off going ch 7 or not filing at all.

[KeepHopeAlive]

JimH:

Thanks so much for responding to my post. After reading some other posts you did today, it sounds like you and I may have some similar issues/concerns.

I put a call in to my attorney today, that has yet to be returned. I am now starting to think it may not behoove me to follow through with the chp 7. My objective was to get my massive credit card debt off of my back, so that I could focus on building my real estate investment business again.

Since my business is real estate investment, I have equity that the trustee and a little cash that the trustee seems interested in. She seems to care less that I can demonstrate with LEGITIMATE tax returns that I get paid little if anything, and the companies show no profit (actually losses).

The last thing I want the trustee doing is contacting my investors, letting them know that my properties are being liquidated due to BK. Most of my investors have no idea that I have filed BK. I'm sure that would not be good for investor confidence.

So now I'm thinking... What's the worst that could happen if I stop my chp 7 right now? I am thinking the following... My credit card companies can get judgments and attach my PERSONAL bank accounts which typically have very little cash anyway (since most money is in my biz accounts), and they can garnish my wages (which are non-existent). They can't attach my properties since none are in my own name...

At least that's what I'm thinking...?

[JimH]

If you are investing in single family and duplex rental properties, she may consider liquidating your companies. Commercial real estate is a little more complicated to appraise and liquidate so if your properties are commercial then she may pass on it. At the very least, she will want to include undistributed earnings into the calculations.

I'm not sure she would contact any of your investors. She can get pretty much everything she needs off of the business tax returns and the county recorders office.

Talk to your atty about all of this before you do anything hasty - you can always convert to a ch 13 and keep everything you have. You'll just be paying on the ch 13 for the next 3-5 years.