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To file or not to file - WA State here

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  • To file or not to file - WA State here

    I am contemplating either a chapter 7 or 13, leaning 7 since I would just want it to be done and over with. This might be a rambling post but here it is.
    Live in Washington State and I believe there is an exemption of $12,000.
    I am 49 years old.
    Was married, double income no kids, got divorced 3 years ago and quit claimed off the house that my ex-wife kept.
    Lost my job 3 years ago making $80k per year, started my own services LLC that is growing but not fast enough and I have 2 employees.
    I will listen to any opinions,,,, thanks!

    My main questions:
    Will my LLC be closed? I would rather not close it since it my only source of income
    Will my LLC be affected, what if I needed to rent an office in a year or two, would my bankruptcy show up?
    Should I file? I am currently $8,500 at 90 days past due on my credit cards
    If I do file, should I do a chapter 7 or 13
    I am not trying to screw the system, over the past 2 years, I did hit my 401(k) for $ 72,000 most of which went to credit cards then I ran the credit cards back up trying to keep afloat but now that is gone and I have fallen $8,500 behind in past due credit card payments.
    I really liked my Bank of America Alaska Airlines card and that is probably why I tapped my 401(k) rather than filing 2 years ago. Could I ever get one again? (they are 30k of the debt). Could my LLC ever get one? Just for the miles and the companion ticket. Heck it could have a $500. Limit.
    In a chapter 7 if my income went up would it matter?
    In a chapter 13 if my income went up would it matter?
    How long does a chapter 7 take?
    How long does a chapter 13 take?


    Assets:
    No home, I rent an apartment – I am the co-signer on a lease, do they actually split the value of the lease 50/50 or how does that work?
    2005 BMW X5 4.4 with all the options, 142,000 miles – KBB tells it is worth $ 3,392-4827 – this has been paid off for several years and would like to keep it.
    Cash on hand and money in the bank, including my LLC $ 500.00
    66 Impala SS Convertible, when installing the air ride system, I cut the front spring pockets so may have destroyed the value of this car… no idea what it would sell for $15,000? I would like to keep this car as I have had it 20 years, but if it meant dragging on in a chapter 13 for a couple of years, I would probably be willing to just let it go in a chapter 7 if a 7 would just be done and over with.

    Liabilities:
    IRS Federal Tax Liability from 2014 - $ 6,000 on a payment plan $100.00 per month
    IRS Federal Tax Liability from 2015 - $ 7,500??? Not sure taxes not filed yet
    IRS Federal Tax Liability from 2016 - $ 7,500??? Not sure taxes not filed yet
    I know the IRS Federal Tax Liabilities would not go away in a banktruptcy
    Un-secured credit cards $ 82,000
    Un-secured elective surgery debt $9,000 – shared with my girlfriend
    No student loans
    LLC - Fundbox Debt thru my LLC $ 2,000 (can I pay this off thru my LLC or will it become part of the bankruptcy?)
    LLC – IRS Payroll Taxes $2,000



    I am the sole member of an LLC which generates 100% of my income, will the means test include that income? (I am guessing it will) and if so, will the means test include 100% of the income from the LLC or just the portion leftover to me after I pay expenses (employees, normal business expenses, etc)?
    My LLC is a services company
    Assets $1,500 in computers, desk and shelving
    The LLC is owed about 10k but getting clients to pay has been more difficult than it should be
    No rent since I run it out my apartment
    Bank assets change day to day, but will they be subject to my $12,000
    LLC liabilities
    Fundbox $2,000
    IRS Payroll Taxes $2,000 (I know this will not go away)
    Will I be forced to close the LLC?

    I have a shared liability with my girlfriend of $9,000 for elective surgery. What happens with this since it is shared. They will still go after her, correct? Going after her is not a problem. I am just curious about this.
    I have a USBank credit card that my ex-wife paid off, I had forgot it existed. She sent it to me and I have run up $10k on it. Will they chase her for it (I hope not since she paid her portion off).

    I am the co-signer of the lease for an apartment, will they want to see the lease and how would they divide up the rent/cable/power – can I claim 100% of the bills or do they make me split it up?

    Income – after LLC expenses $2,500-$4,000 per month this does go up and down
    Expenses
    Rent/Cable/Utilities – $ 1,200
    I have no medical insurance
    Food $ 500.00
    Cell Phone - $250
    Entertainment - ?
    Payments on credit cards to keep them current $ 2,000.00, but at the minimum it could take me a very long time to pay them all off.
    Last edited by wastateguy; 05-24-2017, 03:29 PM.

  • #2
    First, an (and "the") LLC is a separate legal entity. Whether or not any Trustee will be interested in your membership in the LLC is another story. is this a single-member LLC (simply an alter ego of yourself)? Did you elect to be treated as an S or C corporation? I don't personally know how those distinctions matter, but they may.

    Second, if most of your debt is non-consumer (e.g. business debt, tax debt, etc), then you may be able to file a personal Chapter 7 as a non-consumer and be done. A non-consumer Chapter 7 is not subject to Means Testing.

    Originally posted by wastateguy View Post
    Will my LLC be closed? I would rather not close it since it my only source of income
    Will my LLC be affected, what if I needed to rent an office in a year or two, would my bankruptcy show up?
    Should I file? I am currently $8,500 at 90 days past due on my credit cards
    If I do file, should I do a chapter 7 or 13
    The LLC will not be closed because "it" did not file bankruptcy. The LLC would also not show a bankruptcy unless it, as a legal entity itself, files bankruptcy. Additionally, businesses that file Chapter 7 are businesses that are closing since it is a.) a liquidation and b.) a business never receives a discharge in a Chapter 7.

    Originally posted by wastateguy View Post
    I am not trying to screw the system, over the past 2 years, I did hit my 401(k) for $ 72,000 most of which went to credit cards then I ran the credit cards back up trying to keep afloat but now that is gone and I have fallen $8,500 behind in past due credit card payments. I really liked my Bank of America Alaska Airlines card and that is probably why I tapped my 401(k) rather than filing 2 years ago. Could I ever get one again? (they are 30k of the debt). Could my LLC ever get one? Just for the miles and the companion ticket. Heck it could have a $500. Limit.
    I can tell that you're not trying to game the system. You, like myself and many others here, hit our 401(k) to try to stay above water. We have collectively wasted money by doing this rather than filing. We have robbed our future to pay for our present and that is bad.

    As for LLC's obtaining cash credit, that can be difficult without a personal guarantee. Since you will likely file for bankruptcy, it will make it a little difficult for the LLC to get that guarantee. Unfortunately many entrepreneurs (such as you and I) end up using personal credit for business purposes and this is just bad. Co mingling money blurs the lines of whether the business is a standalone entity or just an alter ego. But I digress.

    Originally posted by wastateguy View Post
    In a chapter 7 if my income went up would it matter?
    In a chapter 13 if my income went up would it matter?
    How long does a chapter 7 take?
    How long does a chapter 13 take?
    Your income doesn't matter in a non-consumer Chapter 7. If you're able to use that distinction, as I did, you will not need to worry so much about that. (I had over $1,200,000 in investment property). As for a Chapter 13, your disposable monthly income (DMI) does matter. It's better for a Chapter 13 to have "regular" income so that the Trustee, and your attorney, can gauge your monthly payments. However, there are ways to deal with those who "operate" a business during a Chapter 13 by providing regular operating statements to the Trustee. Please don't ask me what the regular interval would be, but expect it to be at least quarterly.

    A Chapter 7 is about 90-120 days from filing to discharge (with 110 days being the median). A Chapter 13 is 36-60 months depending on the median income in your State and whether you exceed the median.

    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Originally posted by justbroke View Post
      First, an (and "the") LLC is a separate legal entity. Whether or not any Trustee will be interested in your membership in the LLC is another story. is this a single-member LLC (simply an alter ego of yourself)? Did you elect to be treated as an S or C corporation? I don't personally know how those distinctions matter, but they may.

      Second, if most of your debt is non-consumer (e.g. business debt, tax debt, etc), then you may be able to file a personal Chapter 7 as a non-consumer and be done. A non-consumer Chapter 7 is not subject to Means Testing.

      The LLC will not be closed because "it" did not file bankruptcy. The LLC would also not show a bankruptcy unless it, as a legal entity itself, files bankruptcy. Additionally, businesses that file Chapter 7 are businesses that are closing since it is a.) a liquidation and b.) a business never receives a discharge in a Chapter 7.

      I can tell that you're not trying to game the system. You, like myself and many others here, hit our 401(k) to try to stay above water. We have collectively wasted money by doing this rather than filing. We have robbed our future to pay for our present and that is bad.

      As for LLC's obtaining cash credit, that can be difficult without a personal guarantee. Since you will likely file for bankruptcy, it will make it a little difficult for the LLC to get that guarantee. Unfortunately many entrepreneurs (such as you and I) end up using personal credit for business purposes and this is just bad. Co mingling money blurs the lines of whether the business is a standalone entity or just an alter ego. But I digress.

      Your income doesn't matter in a non-consumer Chapter 7. If you're able to use that distinction, as I did, you will not need to worry so much about that. (I had over $1,200,000 in investment property). As for a Chapter 13, your disposable monthly income (DMI) does matter. It's better for a Chapter 13 to have "regular" income so that the Trustee, and your attorney, can gauge your monthly payments. However, there are ways to deal with those who "operate" a business during a Chapter 13 by providing regular operating statements to the Trustee. Please don't ask me what the regular interval would be, but expect it to be at least quarterly.

      A Chapter 7 is about 90-120 days from filing to discharge (with 110 days being the median). A Chapter 13 is 36-60 months depending on the median income in your State and whether you exceed the median.
      My debts are mainly 'consumer'. there are some that are 'non consumer' or business related. I am not sure the percentage of business related debt 30%? but will do some calculations to get an idea. it might be better for me to go the non-consumer route, but I need to do some calculations to see if I can pass the means test for a consumer chapter 7.

      As far as if the LLC is a S or C corp, that has not been determined yet since the business is just over 2 years old and I have not filed my income taxes in that time so that election has not been made.

      Comment

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