Small Biz Failing, $150k+ in Unsecured Debt

[ready2puke]

To the OP why would have have someone you know pay your debt and then go BK..? Why not just get all the debt BK'd. Your friend or family member would be SOL and you would have to pay them back. If your going to do it just do it with all your debt. I know it feels uncomfortable, I felt the same way. That too shall pass....

[willbfree]

Sorry if I misunderstood the atty. I'll recheck this with her at the next meeting.

[lrprn]

Let me give you the same advice our bk atty gave us. Don't EVER repay anyone any money for a debt that was included in your bk. Not a single penny. If you do then all your debt that was discharged in the bk is now eligible to be collected.

Willbfree, you misunderstood your lawyer - this is absolutely not true.

A filer can pay back anyone they wish after their bankruptcy case is closed. Paying back one account after closing DOES NOTactivate the other debts. All debts listed in your bk remain discharged in full.

[willbfree]

If you wish to pay back some of the debts after BK is discharged you are free to do so

Let me give you the same advice our bk atty gave us. Don't EVER repay anyone any money for a debt that was included in your bk. Not a single penny. If you do then all your debt that was discharged in the bk is now eligible to be collected. No remorse post bk ever. What is in the past stays in the past or prepare to repay the entire amount.

[johnsmith11]

DebtEnder, thank you so much for your reply.

I haven't been sleeping much so it's given me lots of time to think of the best way to deal with this situation. As much as I want to borrow to restart my business that is probably a bad idea as it might jeopardize or really push back my potential filing. As hard as it is to admit the odds of me borrowing and earning enough to pay back the $150k+ in debt is pretty slim. Just as additional information the BT's I did are well over a year old and I have never missed a payment on any of them. I am also current on all of my personal CC's and student loans and have a credit score of 750+.

My biggest problem right now is that I'm in a bit of a jam as one of the personal loans needs to be paid off in the next couple weeks. My thought is if I had a third party pay them now (lucky to have people like that in my life) so the person with the personal loan can pay their bills then it wouldn't be preferential treatment as I wouldn't be making the payment. I could then deplete the remaining money in my accounts to pay the IRS (not borrowing any additional money) and then I could file for CH7. I presently have no real income as my business is dead in the water (actually huge losses YTD which will make my 6mo average income around -$50k/mo) so I don't presume I will have a problem qualifying for CH7. Once the CH7 goes through then I would begin a payment plan with the third party to pay back the debt. Does this sound like a better plan? Do you see any major issues with it? Thanks again for your help and to anyone else who might have some input on my situation.

-Edit: one other question that comes to mind. I have not lived in my current state for the last 2 years so the way I understand it I would be using the prior states exemptions or federal (both states are able to use the federal). Based on that am I still technically filing for bankruptcy in my present state or do I have to travel to my old state to proceed with the BK?

[DebtEnder]

Questions:

1. Would it look better for a BK if I had official promissory notes for the two personal loans and had payback in full dates close to now to show that I was trying to be responsible with my debt vs. the cc's which allow payment over time?

BK does not care about who you paid and how much. Responsibility is a non factor as all debt to you is personally discharged. If you wish to pay back some of the debts after BK is discharged you are free to do so

2. Since I made significant money ($100k+) last year but lost it all within a month of this year starting is there any chance to negotiate the large sum that the IRS is going to be looking for (since I won't have a dime to pay them with and if it happened any other time but dec/jan i would owe them nothing)? Yes I know this isn't exactly a BK question but its a factor in the BK situation.

Best I can tell you her is if you do a chapter 13 taxes can be rolled into the plan and paid over the term of the BK13. other then that make sure you file, you have to do this. Talk with the IRS work out some sort of payment plan, don't ignore them otherwise you'll get the 10% not filing penalty and then 10% for not paying it on time plus all the other crap they toss on. The IRS is not totally heartless they will work with you if you talk with them before they have to call you. I have a friend doing this with the IRS now

3. If there's nothing I can do about reducing the tax liability I do have enough credit on my cc's to pay the taxes in full. The upside is that I would be turning a non-dischargable debt into a potentially dischargable debt. The issue with this is that I am afraid that putting a new debt on the same card as a long standing, paid on time debt might jeopardize my chance at a dismissal of the overall debt (potential issue with claimed fraud bc of ability to pay the debt back/insolvency/etc). Would they view the charges separately such that even if they didn't like the new charges it wouldn't jeopardize the old ones getting dismissed? If I could put it on a different card (amex) would that be better/worse/indifferent? (I am a little scared of owing to amex, i feel like they might fight harder/smarter in BK court).

Putting large charges on credit within 90 days of filing is a big no-no. The question you are going to have to answer to any attorney is have you added new debt within 90 days of filing. If you KNOW you are going to have to file BK sooner or later doing any sort of charging could be risky regardless of time frame unless it's maybe a year or more. I'll say this small charges for gas and food are not going to have the hammer fall on you. A $10,000+ advance might

4. Beyond paying the above taxes I can presently borrow directly to my bank account about $35k on those same cards which would allow me to definitively pay my 2 personal loans and have some working capital to try and keep my business afloat and turn things around (one last chance). My argument would be that I was making $20k+ a month last year and I thought if I borrowed for a fresh start I could make it happen again and pay back my debts. If I can't turn it around and have to file for CH7 would four months be long enough to give me decent odds of a dismissal, how about six?

The larger the charges the more likely a creditor might look at your case. The longer the time between new debt and filing, the better. 90 days is the absolute MINIMUM you can push it for any charges beyond a few hundred dollars. There are some exact numbers, info is on this forum. Be aware paying off one creditor in full and incurring debt to another is not really a great idea imo. Also paying the creditor in full may be considered preferential payment in lieu of all others and the Trustee may try to collect that payment from the creditor. Not an issue for you unless it's family and then it could be insider pref payment and things get a bit sticky

5. Being that the amounts with each issuer are so large but the charges are so old are the cc's likely to try to fight me or let it go bc they wouldn't have grounds to fight it?

I think this I answered in prior part of the post. In general I would say no they will not fight on old debt, even more so if you have made payments on them for some time

6. Since I hopefully have some time before the BK (if it has to happen), is there any company that you can do a sale leaseback type arrangement with a car, mine is presently worth over $10k and is paid in full. The goal would be to free up some capital and to get the equity down to the federal minimum of $3k or so.

Check you state exemption before assuming you have a 3k level exemption for your car. Bk is a federal event, but the states make up alot of the rules regarding assets. Other then that I have no opinion or other info to offer you. I'm sure you could maybe do a title loan, but that's again making up new debt just to protect an asset


I probably have more questions but its early in the AM and I've been reading posts on here for 6 hours straight and I can't think right anymore.

Thank you in advance for any help, it is much appreciated.


JS

In general if you have not had at least one free consult with a BK lawyer do so now. Get as many as you can Plan your BK if at all possible don't do something now that could jeopardize you down the road. Good Luck

[johnsmith11]

I'm a little paranoid so I'm going to keep descriptions a little vague for my own sanity but I have a few questions that I need some assistance with. I started a business about a year and a half ago. I had $100k of my own start up capital. I got unsecured credit card lines with 3 major issuers for about $300k of which I borrowed about $250k using their ridiculously easy balance transfer to a checking account systems. I have made all of my payments over the last year and a half (minimum plus a little) and have paid the debt down to about $150k. Unfortunately my business which was successful last year has fallen off a cliff this year. I have given up all of my earnings from last year plus lost the cc money and almost all of my personal start up capital. I have 2 personal loans out (could be promissory notes if it would help) which I absolutely have to pay back before I could possibly file for BK.

Questions:

1. Would it look better for a BK if I had official promissory notes for the two personal loans and had payback in full dates close to now to show that I was trying to be responsible with my debt vs. the cc's which allow payment over time?

2. Since I made significant money ($100k+) last year but lost it all within a month of this year starting is there any chance to negotiate the large sum that the IRS is going to be looking for (since I won't have a dime to pay them with and if it happened any other time but dec/jan i would owe them nothing)? Yes I know this isn't exactly a BK question but its a factor in the BK situation.

3. If there's nothing I can do about reducing the tax liability I do have enough credit on my cc's to pay the taxes in full. The upside is that I would be turning a non-dischargable debt into a potentially dischargable debt. The issue with this is that I am afraid that putting a new debt on the same card as a long standing, paid on time debt might jeopardize my chance at a dismissal of the overall debt (potential issue with claimed fraud bc of ability to pay the debt back/insolvency/etc). Would they view the charges separately such that even if they didn't like the new charges it wouldn't jeopardize the old ones getting dismissed? If I could put it on a different card (amex) would that be better/worse/indifferent? (I am a little scared of owing to amex, i feel like they might fight harder/smarter in BK court).

4. Beyond paying the above taxes I can presently borrow directly to my bank account about $35k on those same cards which would allow me to definitively pay my 2 personal loans and have some working capital to try and keep my business afloat and turn things around (one last chance). My argument would be that I was making $20k+ a month last year and I thought if I borrowed for a fresh start I could make it happen again and pay back my debts. If I can't turn it around and have to file for CH7 would four months be long enough to give me decent odds of a dismissal, how about six?

5. Being that the amounts with each issuer are so large but the charges are so old are the cc's likely to try to fight me or let it go bc they wouldn't have grounds to fight it?

6. Since I hopefully have some time before the BK (if it has to happen), is there any company that you can do a sale leaseback type arrangement with a car, mine is presently worth over $10k and is paid in full. The goal would be to free up some capital and to get the equity down to the federal minimum of $3k or so.


I probably have more questions but its early in the AM and I've been reading posts on here for 6 hours straight and I can't think right anymore.

Thank you in advance for any help, it is much appreciated.

JS