Primarily Business Debt + Chapter 7 - Questions

[dallasgal]

Hubby and I just had our 341 hearing yesterday.We owned 3 rental properties and a Franchise buisness that failed.We had almost 800k we had to tell the trustee yesterday about.Hubby makes 150k for the company that we are closing and filing Bankruptcy for, ( LOL) I couldnt run the store and the three rental properties while he traveled all over the country.So I understand it is very scary.The trustee never asked me any questions about the buisness at all.In fact I was shocked she didnt.Of course we were in Dallas in a room with over 30 couples that had the same time as we did.I understand!

[southernbelle]

my story, for the curious ones:

i'm not worth much, don't own much. i drive a 20+ year old car (love my honda!!) and i rent an apartment. i have a dog and a parrot, no tv. i live pretty simply; i'd started a seamstress/alterations business, literally hung a shingle out in small downtown, usa.

i actually failed at that because it was far more successful than i had anticipated/planned for; there were too many customers and not enough time. i'm a terrible receptionist, marketer, shopkeep, and business planner -- but i can sew like crazy! i found that i didn't have any time to get enough sewing work done to pay the bills, and i didn't have any funds to hire anyone, and the good work i did manage to finish brought in more clientele every day -- to where i had a month long waiting list and anxiety problems. ultimately i folded. i didn't have health insurance and i hadn't had a weekend (or weekdays) off in 2 years.

it's been a year. i went back to the IT sector (thank you, college degree) but it's just a terrible market right now for getting a better wage in the minneapolis area, at least in my experience. i'm not getting anywhere with my debt, my credit is crap, the lawsuits and judgements are spiking my anxiety again, and i pretty much hide in my apartment when i'm not at work because i'm ashamed that i couldn't run my business.

i can't afford to move which i'd like to do so i could move to a better job market, and the only way i see out of the pit is bk.

I see a lot of similarities in our life stories soleprop. I started my business (bakery)from home, and was primarily doing everthing myself until it started to grow bigtime and I needed help and more space. That's when my ex-husband volunteered to help me since I am also not a good marketer or business planner either, but can bake like crazy. Unknowing to me, my ex wasn't taking care of the bills, and stole from me left and right so I had to close it down. I didn't have a weekend off in over 4 years and worked 12-14 hr. days everyday. I had to pay my own health ins. which was unbelieveably expensive and at the end of the day, I had nothing to show for it meaning I still couldn't pay my bills (business or personal) after working so hard. But, one day I woke up.

Like you, I thank God I had a degree to fall back on and now have the means to pay my mortgage and take care of myself, but with so much debt, it was impossible to pay everyone with my one paycheck and that's why I'm here. After my BK I will still have to fight with the IRS and local taxing authorities to pay non-dischargeable taxes, but at least my chapter 7 is a start. So, don't feel bad, you're not alone.

[soleprop]

you guys are wonderful, and really i know my case is mostly a simple one compared to most, but it doesn't make it any less stressful to contemplate -- though with every post i read here i feel a little better -- i'm going to make it through, i know it!

my story, for the curious ones:

i'm not worth much, don't own much. i drive a 20+ year old car (love my honda!!) and i rent an apartment. i have a dog and a parrot, no tv. i live pretty simply; i'd started a seamstress/alterations business, literally hung a shingle out in small downtown, usa.

i actually failed at that because it was far more successful than i had anticipated/planned for; there were too many customers and not enough time. i'm a terrible receptionist, marketer, shopkeep, and business planner -- but i can sew like crazy! i found that i didn't have any time to get enough sewing work done to pay the bills, and i didn't have any funds to hire anyone, and the good work i did manage to finish brought in more clientele every day -- to where i had a month long waiting list and anxiety problems. ultimately i folded. i didn't have health insurance and i hadn't had a weekend (or weekdays) off in 2 years.

it's been a year. i went back to the IT sector (thank you, college degree) but it's just a terrible market right now for getting a better wage in the minneapolis area, at least in my experience. i'm not getting anywhere with my debt, my credit is crap, the lawsuits and judgements are spiking my anxiety again, and i pretty much hide in my apartment when i'm not at work because i'm ashamed that i couldn't run my business.

i can't afford to move which i'd like to do so i could move to a better job market, and the only way i see out of the pit is bk.

my debts are 2600 personal, 15kish business. i've had terrible credit ever since i started the business because every penny i made went right to business bills and i had to put my personal bills on hold; and the reason i'm opting for bankruptcy is because i think it was designed for people like me that try, fail, and want to move forward with life having learned that lesson.

i can't carry this chance i took around my neck like a millstone for the next 10+ years while i try to pay it off/repair the credit damage. it's literally killing me, the stress eats me up. i just want to take the lessons i learned and move on. i figure with bankruptcy i can start building good credit again within the year, and yeah i'll have the bk on my record but the good credit health i plan to cultivate will help me prove to any future creditors that my bankruptcy woes were specifically caused by my attempt at a business, and are not indicative of my ability to function as a consumer.

i welcome any insights or thoughts, just wanted to kinda explain why i'm here, and why i have the outlook and questions that i do.

again, i'm soooo thankful bkforum is here.

[biotechsolution]

bio - are you in so cal?

Congrats on doing that pro se.

In the mid atlantic area. MD.

thanks. The thing is...once you can classify your bk has a business bk, it is actually much easier and less stressful.

You don't have to worry about all of those sections that deal with means testing, disposable income, etc.

Just imagine doing a Chapter 13 and not being told what you can spend on expenses. You can set your own expenses and ultimately set your own payment amount.

[biotechsolution]

Everyone has to remember...

The statue that can push you to a Chapter 13 if you have excess disposable income is only under section 707(b).

If you are a business bk. That entire section of the bankruptcy code will not apply to you. Meaning your BK cannot be dissmissed for 'abuse' under the bk code. For the trustee to dismiss your bk they will have to dismiss it under section 707(a) most likely. These dismissals are usually strictly procedural or 'blantant' fraud. Hiding assets, etc.

And courts are 'very' reluctant to dismiss or apply 707(a) to some sort of means test, in fact some districts have basically stated that 'ability to repay' is almost exclusively reserved for 707(b) agruments.

I wouldn't worry at all about any disposable income unless your talking $1000s. But to keep yourself safe just increase your expenses. Remember you don't have to follow guidelines for set expenses. Those set guidelines are reserved for debtors that have to follow 707(b).

[southernbelle]

Also, soleprop. I took biotech's advice and listed every expenditure I could think of. Those expenses added up so that even though I am over the Median, my schedules I and J showed about $168 disposable income, which I doubt will push me into a chapter 13. Before I started adding it up, I thought I had more disposable income than that.

Don't forget, you must take your total consumer debt (house/car, etc.) vs. your total non-consumer debt to get the percentage.

[Dollar Bill]

bio - are you in so cal?

Congrats on doing that pro se.

[biotechsolution]

this is the meat and potatoes of what i've been wanting to know - thank you! so further clarification -- can the trustee assigned to my case try to push me into CH13 if i am a) under the median income but b) have some small amount of disposable income which does prove the following emphasized text within the statement below true:



does that "and" protect me? only half of that statement is true for me. my english language skills tell me that if it was an "or" i'd need to worry more, but i'm worried enough!

and the bolded section in the 2nd paragraph - i wish it said something like "EXCEPT IN THE CASE OF PRIMARILY BUSINESS DEBT Chapter 7" because that would make this so much more clear...

soleprop.

remember that entire arguement is based on 707(b)

You can remover that entire section of the code for your bk if it's a non-consumer bk. Most of the language about being pushed into a chapter 13 comes from 707(b). 707(b) doesn't effect business bk's, chances of being pushed into a 13 has to come from a different section.

[biotechsolution]

soleprop. Have you added up your personal debt and business debt??? 18K in business debt is quite low. Do you have any cars financed?? do you own your home?? if you say yes to those I doubt if you business debts make up more than 50% of your total debt.

To be counted has an non-consumer debt bk your business debts have to be more than 50% of your 'total' debts. This includes secured property that you are keeping. Make sure this is true before you file. For you to qualify you must owe less that 36K in total debts. That's not much.

If you do that it should be easy to eat up that $200 dollars that you have left over.

Remember once you've been classified has a non-consumer bk those expense guidliness don't effect you. I discharged my business bk a little under 1M, 'pro se'. Annual income of 6 figures and still went chapter 7. Had a school tuition bill of 19K a year for an 8 year old but since she had been in the school since kindergarten no complaints from the trustee.

$200 you'll be fine.

[keepmine]

oh man i *do* wish you luck; hope it goes well - so you're filing 1.6 million in debt you want to discharge? i don't blame you!!

i'm a verrrrrrrry small business, total debt is under $18k. but it's still impossible for me to make any headway on, and i'm facing years of terrible credit and judgements and garnishing and liens and...well yeah... it has to be bankruptcy, or life just doesn't feel livable.

i understand attorneys need to make a living but if i could scrape together $2k to get representation i could likely make a dent in my debts. it's obvious i can't do either..

thank goodness for bkforum ;)

Don't take the bk road over $18K. For this amount, your problem isn't debt-it's lack of income. You need to put on a full court press to find a better job or get a pt job and start trying to negoitate with your creditors.
Reality is, if you can't make headway on $18K worth of debt,your life post bk likely won't be much different -financiallt speaking.
I understand the lawsuit issue but, they can only garnish a percentage of your check and only one garnishment at a time. The $6K is your most pressing issue. The rest can wait. Very likely you could settle all of this for under $10K if you take the time and initiative. Start with some obviouse source of funds. Your tax rebate and your tax refund.

[HHM]

this is the meat and potatoes of what i've been wanting to know - thank you! so further clarification -- can the trustee assigned to my case try to push me into CH13 if i am a) under the median income but b) have some small amount of disposable income which does prove the following statement true:



does that "and" protect me? only half of that statement is true for me. my english language skills tell me that if it was an "or" i'd need to worry more, but i'm worried enough!

Yes, if you are a business debt chap. 7 and have disposible income, you can still be pushed into a chapter 13 (but you cannot be pushed into a chap. 13 or dismissed for being over median).

[soleprop]

The implication of not taking the means test is that, if you have primarily business debt, your case cannot be presumed abusive (and therefore dismissed) if the debtor is over the median income.

this is the meat and potatoes of what i've been wanting to know - thank you! so further clarification -- can the trustee assigned to my case try to push me into CH13 if i am a) under the median income but b) have some small amount of disposable income which does prove the following emphasized text within the statement below true:

Any creditor, the trustee or the court may force conversion of a Chapter 7 to Chapter 13 or 11 if the debtor's income is more than the median income in the state, and if the amount of the debtor's income left after deducting allowed expenses over 60 months is greater than $6,000. If the income less expenses for 60 months is more than $6,000 but less than $10,000, conversion is required only if it is more than 25% of the nonpriority unsecured claims.

A debtor can file Chapter 7 if his income less expenses times 60 is less than $6,000. A debtor cannot file Chapter 7 if his income less expenses times 60 is greater than $10,000. If the income less expenses times 60 is between $6,000 and $10,000, it must be less than 25% of the nonpriority unsecured claims.

does that "and" protect me? only half of that statement is true for me. my english language skills tell me that if it was an "or" i'd need to worry more, but i'm worried enough!

and the bolded section in the 2nd paragraph - i wish it said something like "EXCEPT IN THE CASE OF PRIMARILY BUSINESS DEBT Chapter 7" because that would make this so much more clear...

[HHM]

It has to do with the wording of the code regarding the means test. Basically, the means test is a requirement only for those that have "primarily" consumer debt. Otherwise the cases are handled pretty much the same.

The implication of not taking the means test is that, if you have primarily business debt, your case cannot be presumed abusive (and therefore dismissed) if the debtor is over the median income.

[soleprop]

i'm still unclear on how primarily business debt filings for Chapter 7 are handled differently from primarily consumer debt filings. can you elaborate?

[southernbelle]

Good luck 1.6million. You have a lot on your plate. My total debt is around $250k. I can relate to you when you said this forum is a great help and it is wonderful to get quick answers from knowledgeable people. Thank God my atty. seems to be one of the good ones because I've heard some horror stories.

In fact, this forum was where I first found out that I could file a chapter 7 due to mostly non-consumer debt. Apparently most of the atty's I met with in the very beginning like to see "cook book" filings and didn't want to try a chapter 7 for me. The great folks here helped me to understand how this process works and have taken a huge amount of stress away because not knowing about my chapter 7 option could have seriously hurt me.