To file or not to file

[polina]

Got to love these forums! Thanks in advance to all who give a thoughtful response. :-)

My husband and I have 6 rental properties. They are not cashflowing and one of them is in pre-foreclosure (a florida condo (big surprise) which has lost 100K in value - we owe $286K and have a short-sale offer on it for 165K)

We also have another business, which is quite successful and allows us to live quite well. The business is a C-corp and we pay ourselves via payroll.

If the shortsale goes through it is likely that we'll be 1099'd for about 100K. We will not, likely, qualify for a reduction (form 982), We are barely hanging on with the other rentals, pulling $500-$1500 every month out of our own pocket to keep things afloat.

WE don't have any unsecured debt personally except for a car payment. And our Real Estate LLC has about 40K in unsecured debt.

What should we do? Should we attempt to pay the taxes on the 100K? Should we file a Ch. 13? How will our C-corp be affected if we file for BK?

The whole situation is very frustrating! We have always been good about paying our bills and our credit score has been in the mid-high 700s up until this point. Just trying to figure out how to make the best out of a crappy situation. Thank you!

[rrockinggramma]

your case will be complicated and I would be finding a really good bankruptcy attorney that knows how to handle real estate deals to answer your questions.

[BKParalegal]

You need a very sharp attorney to do your BK, so shop around. The red flags that rise, is what is the value of your C Corp. Assuming you and your husband are the shareholders,then it can be a non-exempt asset, and if there is any value in it, the trustee can step into your shoes as the owner and liquidate the companies assets. If it is a business, that I like to compare like a bicycle, meaning the business only succeeds if you are pedaling it, no pedaling then no movement. If that is the case, then you have a better chance of the trustee not wanting anything from the business. In regards to the properties, if you are shrewd, you may be able to cherry pick and keep 1 or 2 that are making money or may regain equity faster. You can then let the rest go. If your debts are more than 51% business related( and this needs to include the mortgage on your personal property) then you can file a Business Chapter 7, it is not much different then a Personal 7, but you get a free pass on the Means Test(which can be a lifesaver right there) and for the bonus round, you do not need to be upside down on Schedules I and J(Income and Expenses). If you are in the Middle District of Florida, I do some consulting work for attorneys out there, and there are a few idiots. When and if you find an attorney, let me know his/her name and I will at least tell you if I know if they are capabale. (privately send it, not on the public boards)

Good Luck

[AngelinaCat]

Hi Polina:

Welcome to the Forum. That said, I have been avoiding your post because I know almost nothing about buisnesses. However, I was listening to Consumer Advocate Clark Howard' radio talk show tonight on the way home from work. The caller had bought a business that failed. The business was an LLC. From what I understood, the buyer bought part of the business, not all--it is a restaurant. But the telephone bills came with it. At this point, my understanding of the exchange breaks down, but Clark told the caller to locate the 'new customer-we're so glad to have you' paperwork, and see if you have a clause in it wherin if the OWNER, not the LLC business has made one (1) PAYMENT to the phone company, then "you have PIERCED the shield of the LLC, and you, PERSONALLY becomes responsible".

At this point, my knowledge is exhausted, and I suggest you contact Clark at www.clarkhoward.com for more information.

He is not an attorney, and he advised the caller to contact a business attorney ASAP.

Good luck to you.!

[Flamingo]

Hello polina! Welcome Aboard! Get yourself a good business attorney in your area - the best way to find one, if you don't know of one personally or via friends/family, is to call your State Bar Association which is or should be listed under the "State" section in your phone book. Call them and tell them you are in need of a reputable business attorney for what could be a complicated business bankruptcy and you have no idea who to contact as you are unfamiliar with BK matters. They will provide you with some good choices. Call and make an appointment with a few - most give free initial consultations. Best of luck to you!

[polina]

Thank you everyone for your responses! We are in Indiana.
This coming Friday, I'm supposed to be hearing from the bank's loss mitigation department as far as their response to the offer on the florida condo. I've read elsewhere on the forum that we need to be sure to negotiate with the bank that the rest of the debt will be discharged and that they don't report the short sale to the credit bureaus as it will have the same effect as a foreclosure would. My question in that regard is whether that those conditions needed to go in with the offer. What if the bank accepts the offer, but still pursues the judgment? I know that in 95% of cases that doesn't happen, but you never know, right?