Small Business Filling Bankruptcy HELP PLEASE

[petey234]

I started a company a little over a year ago This company is a Limited Liability Company so I shouldn't have to worry about myself in this situation, on taxes I do file as a 1040, but was told by my attorneys when I filled this company over a year ago. That for tax purposes I could file as a 1040 but for company purposes I would be a corporation and not held liable for debt like a Sole P would be. Anyways I got some loans, and credit cards all in the business name. I filled no personal guarantee at all. Now 1 year later I am around $54,000 in debt all in unsecured credit cards and other loans. This $54,000 was used to buy something like start up computer, and to pay myself a salary while I was working (Just so that I would not need another job) anyways these credit cards have not been used in over 120 days, and my company has brought in NO MONEY in the last year.. I mean it brought in enough to pay some of these bills, but a lot of them I had to get a personal loan to cover (Which would obviously not be part of the Bankruptcy because that is my own loan and I would continue to pay it)

1. Once I file and get these people to stop harassing me, if and when it is discharged will I be able to continue to try to run the business in the future or does it shut it down?

I know that corporations are not given a discharge like a personal debtor I am just a little confused. If my company doesn't file and we have no assets what can the creditors do?? If we do file for chapter 7, and then get the liquidation thing that corporations do, then creditors would not bug us correct? so therefore it is kind of like a discharge..... Because right now I have told creditors that we have no assets and are about to close the doors, but they are still calling me all hours of the day and calling my wife. So if a chapter 7 for the business would get that to stop then it would be worth it.. Please give me any advise you can.

Any help would be greatly appreciated, if you have any advise even if it does not pertain to the questions listed above that would be very helpful.

[screwedupbyRE]

I don't think you can do chapter 7. You'll most likely end up doing chapter 11, which requires re-organization. You can read more here: http://www.uscourts.gov/bankruptcyco...chapter11.html

not to discourage, but it's very costly.

Pls consult an attorney for more appropriate answer.

Good luck.

[petey234]

I don't think you can do chapter 7. You'll most likely end up doing chapter 11, which requires re-organization. You can read more here: http://www.uscourts.gov/bankruptcyco...chapter11.html

not to discourage, but it's very costly.

Pls consult an attorney for more appropriate answer.

Good luck.

Could you please tell me where you figure that I would not be able to do Chapter 7? Under the same article you quoted the link is

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html

If you click on chapter 7, it does state that corporations can file for a Chapter 7. I am wanting to keep the business but if I can't then I will close up doors. I was just simply asking.

[screwedupbyRE]

My wife had business which was shutdown last year. We met with ~14 attornies and all of them recommended ch 11 at that time. So we waited for almost 1 yr to do 7.

80% of them still tells us that I can't do 7 since my income from employement is close to 175k (higher bracket) and we closed our (wife's) business last year.

Again, I'd advise to consult with attorney, unless someone on this forum has experieced ch 11...

[petey234]

My wife had business which was shutdown last year. We met with ~14 attornies and all of them recommended ch 11 at that time. So we waited for almost 1 yr to do 7.

80% of them still tells us that I can't do 7 since my income from employement is close to 175k (higher bracket) and we closed our (wife's) business last year.

Again, I'd advise to consult with attorney, unless someone on this forum has experieced ch 11...

I think your situation may be a little different then mine... I have no INCOME from this company... It is not 175K, last year my company made $2,300.. all the rest was used on credit cards. I have no assets or anything with the company. Does this sound similar to your situation? I have done a free consultation with an attorney and told them my situation and they never said I couldn't do a chapter 7, but maybe they didn't tell me everything. They only went over a couple things before asking for a payment that I don't have. There is no way I can do a Chapter 11, as I don't have any income to pay the monthly payments of a chapter 11...

Was your wifes situation a little different then mine?

[screwedupbyRE]

I believe my wife's situation was different. She had a revenue generating company for more than $4M a yr, but our losses were more than her income. And we volunteer to close the company, rather than a forced close. (btw, it was a real estate business), and I end up owning two homes, and stuck with them, as an investor.

BUT some of the credit I carried over on my shoulder from this company, even though I’m employed with another…

So yes, the situation is completely different as yours, but what I heard from many lawyers is a straight line comment, when it comes to business ownership, you’ll have to do chapter 11.

Again, consult as many lawyer as you can. This is a life changing event and you dont want to risk it with a naive like me or inexperienced attorney.

Get a lawyer with years of experience in this field.

[petey234]

I revised my question a little bit... Any help would be greatly appreciated.

[possumfat]

since the credit cards are in the company name and not guaranteed by you personally couldn't you just close the business. This is what is done with most S corps, LLC could be different.

Hard for collectors to collect from a closed business if nothing is personally guaranteed...........its a seperate entity. But consult with a lawyer to make sure.

[petey234]

since the credit cards are in the company name and not guaranteed by you personally couldn't you just close the business. This is what is done with most S corps, LLC could be different.

Hard for collectors to collect from a closed business if nothing is personally guaranteed...........its a seperate entity. But consult with a lawyer to make sure.

You are 100% correct that they can't collect from a closed business, but from what some people tell me collection agencys tend to still try to contact the business owner... They are already calling my house. I have even asked them if I was a personal guaranteed? and they replied no but you are the contact for the business. I have informed them that I don't have the funds anymore, and they said that is fine even if you are closed we can still sue the company and you... Then I will have to go to court to defend myself, and though the case would eventually be drooped sense I am not personally liable, it would still cause a lot of headaches, and if for some reason I did not know about a court date and wasn't there to defend myself the judge might grants them the judgment. So I am trying to find out if that is accurate? If not then I don't see a need to file, but if it is accurate then I would need to file... I just don't understand what the purpose of filling for a chapter 7 BK is, if all you have to do is close the doors.

Correct me if I am wrong?

[jktrading]

How can you do an 11 when you have no money to pay that? Wouldn't it be treated like a 13 would if you don't meet the means test? I have a "business" if you can call it that. I actually lost money last year. All my cc's are in both mine and my DH's name, not a business name, which is perhaps a bit different than the OP.

However, if you can't pay an 11, how on Earth can they expect to get blood out of a stone?

[petey234]

How can you do an 11 when you have no money to pay that? Wouldn't it be treated like a 13 would if you don't meet the means test? I have a "business" if you can call it that. I actually lost money last year. All my cc's are in both mine and my DH's name, not a business name, which is perhaps a bit different than the OP.

However, if you can't pay an 11, how on Earth can they expect to get blood out of a stone?

your right I can't do a chapter 11, that is just what someone said above. A chapter 11 is the same thing almost as a chapter 13. It is just for business.

[rfassett]

I think you first need to identify positively that none of the mentioned debt is personally guaranteed. I would be totally surprised if you could get credit card debt of any significant amount in a new business without personally guaranteeing the debt. If you have a copy of an application that you submitted pull it out and see if you put your social security number on it and then read the fine print. My bet is that you are on the hook personally. Your options as I see it: personal Chapter 7, corporate Chapter 7, new entity different name and government numbers to operate the "new" business.

LLC's for the most part are not set up to shelter members from debt incurred to operate the business as much as they are set up for liability protection for things such as non-creditor oriented lawsuits.

So either check your documents to confirm that you are not on the hook, or have the collection company(ies) submit proof to you that you owe the debt (personally). You might be surprised.

Now let me understand the rest of this. Your company has no assets and no income (almost enough to pay the bills), you used credit card debt to pay yourself a salary over the last year and a half, and you want to keep this business going why? You mentioned you had an attorney set up the LLC, let me suggest you find a GOOD accountant that can help you understand the numbers side of it.

Hope this helps!

[petey234]

I think you first need to identify positively that none of the mentioned debt is personally guaranteed. I would be totally surprised if you could get credit card debt of any significant amount in a new business without personally guaranteeing the debt. If you have a copy of an application that you submitted pull it out and see if you put your social security number on it and then read the fine print. My bet is that you are on the hook personally. Your options as I see it: personal Chapter 7, corporate Chapter 7, new entity different name and government numbers to operate the "new" business.

LLC's for the most part are not set up to shelter members from debt incurred to operate the business as much as they are set up for liability protection for things such as non-creditor oriented lawsuits.

So either check your documents to confirm that you are not on the hook, or have the collection company(ies) submit proof to you that you owe the debt (personally). You might be surprised.

Now let me understand the rest of this. Your company has no assets and no income (almost enough to pay the bills), you used credit card debt to pay yourself a salary over the last year and a half, and you want to keep this business going why? You mentioned you had an attorney set up the LLC, let me suggest you find a GOOD accountant that can help you understand the numbers side of it.

Hope this helps!

It actually is not hard to get credit in the business name and only, people just think it is... The Credit card is a Home Depot Master Card put on by Citicards, they give any new business a small amount to start off with. My first amount was $5,000 then they up it $10,000 every 4 months. Once it got to $30,000 they would not increase it unless I personally guaranteed the debt which I did not. I know for 100% sure that I did not on any of them. That was my main point.

As for LLC, I know for a fact you are wrong on that. LLC are to help keep debt away from the owners not just law suits. As for the reason keeping the business open, that is just more for if the economy ever comes out, I don't want to run the business now.... Just like maybe 5 years down the road.

I don't know if you meant the accountant thing as a slam on me, but that was not needed. An accountant will not help me with a BK.

[rfassett]

I don't slam anybody. Reread my post. If what you state is true about the nature of the business, you need an accountant to help you decide if your business is a viable business. BK not withstanding, the accountant will be able to tell you based on the numbers if what you are doing makes sense. My point was, you bought professional advice to form the company, buy professional advice to keep it going. There was no slam intended whatsoever. Again, I do not slam.

I understand what you are saying about the LLC protecting the members from creditors if there is secured debt. But I stand on my comment that very few (apparently Home Depot is an exception, although they don't think so or they would not be calling you to the extent that you feel harrassed) creditors will extend credit to a new company without security and often times that security takes the form of a personal guarantee. If you are beyond a shadow of a doubt certain that there is no personal guarantee write them a letter and tell them that you are not responsible and that under the creditor harrassment laws you are invoking your right to not be contacted about this debt any further. Search this forum and/or the internet for such sample letters.

And please don't tell me I am wrong about LLC's. I have more than a few years of dealing with them on a professional level.

[petey234]

.