Fraud? Scare Tactic? Not Sure

[crh3675]

My wife and I started a small business in 2007. Things were great until Aug 08. Everything pretty much stopped. We haven't even made rent for Jan or Feb 2009. I have several delinquencies on unsecured CC and Personal Loan accounts. The total is upwards of $64,000.

Things have snowballed out of control financially and our accounts are at about 150 days past due. One company called me the other day and told me that they have some papers that were scheduled to go out regarding a judgment against myself and that I needed to provide them a check for $3,300 in order to stop this from occurring.

I informed him that we don't have the funds as our mortgage is also behind and that is our priority. He said that what I should do is, give him by bank account and routing information over the phone and issue a digital check for $3,300. But, post a stop payment on Monday as of course, there is no money there to cover the check. By the time the administrative department figures our what happened, they will request a new check and at that point, I must issue a "good" check for the same amount.

I did not give him any information, not even the bank I am with. I found this request bizarre and unethical. I did inform this gentleman that on Monday, I would be speaking with an attorney regarding BK options. He said to me, "Don't do that" "If you do that, since your loans are less than a year old, they will pursue litigation against you as intentional fraud as they will look at you filing BK to cover-up your activities"

That really floored me! There is no fraud here, just good people in a bad financial situation. I have all documentation, business license, receipts for our store and we pay our sales and use taxes. What fraud? Is there any truth to that statement?

[Flamingo]

When in doubt, don't do anything. You were given a scare tactic. Remember, this person is doing their job and their job is to get money out of you in any way, shape or form. By giving him your checking account number over the phone and routing info, they have direct access to your checking account. Would you give that information to anyone calling you on the phone asking? Of course not. They will tell you not to pursue BK so they can hopefully get something out of you. But if you can't pay and don't have the money, don't send them any checks or anything. Advise these creditors when they call that you are having financial difficulties at the moment and will send them a check shortly. Also make sure you consult with an attorney shortly.

[StartingOver08]

It sounds like you were engaged in a conversation with a really scummy collections agent. First, for him to even suggest that you issue a bad check is totally outlandish! Fortunately you did not fall for it and did not provide any account information.

As to the rest of his comments, consider the source. He obviously was trying to scare you enough to make a payment or make a mistake by giving him information he can use against you. Don't listen to him. In fact, don't talk to him anymore.

You did the right thing by coming here to check into your options. I assume you have stopped using your credit cards now. If not, you need to for at least 90 days before filing BK. Don't do any balance transfers or cash advances either. If you post your situation, maybe we can help a little with some specific info for you. The attorney that you speak with will give you some answers. Many people here, including me, suggest that you speak with several attorney's prior to selecting one that can handle your BK. As you read here, you will learn what to ask your attorney and what happens before, during and after the BK. There is no shame in having a business not pan out, it is just a fact of life. Relax, we have been right where you are now. You will get through it. Welcome to BK Forum!

[crh3675]

Thanks

It's gotten pretty bad lately. I make $80k per year and that barely supports my family (wife + 2 kids) as my mortgage with HELOC is $2500 per month. With childcare and oil heat for our house, there is no disposable income at this time.

I have tried to cut cost with cellphones and cable and such but some things can't be easily removed without more money output expectations. On top of it, my step daughter's dead beat father stopped paying child support last August. So, all of the living expenses are on me.

The only secured item I owe money on is our mortgage. The cars are paid off. I have no 401k (only 33 years old). The mortgage company despite the fact that they don't really negotiate, are the most flexible with us making late or partial payments. I just don't want to lose our home. Would they actually attach a lien to our home? I owe almost $400,000 on the home and the value is only at $400,000 or less. Would creditors benefit by putting a lien on my home with no value?

Obviously, my wife will have to go back to work but "good luck with that" in this economy. I'm trying to file our taxes rather quickly so they don't get garnished as I need those funds to get the mortage back on track.

[crh3675]

Our rent for our store is also 2 months past due which we signed a personal guarantee for. I have communicated with the landlord last month and he said "no worries, pay what you can when you can", which is still nothing at this time. He said they would try to lease the space but I have seen no attempt from them to do so. I am scared to death of what might happen in the coming months.

[StartingOver08]

The collectors are threatening a lien? If it is for unsecured debt, they can not lien your home.

They can get a judgment, but that takes a court action and time. Most of the collectors threaten you with whatever comes to mind to scare a payment out of you. Some of the collections actually take years before there is any legal action. It depends upon the actual collector and the amount you owe.

It does sound like you are a candidate for BK with $64k in unsecured debt.

One of the issues could be your cars - you said they are paid off. Depending where you are, the amount that can be exempt on vehicles varies widely. Where are you located? (State) You may have to do some pre BK planning because you could lose the vehicles. Glad you are here first.

[crh3675]

I live in Maryland. The cars are 5 years old and have 80-100k miles on them. No threat for liens, I just wasn't sure what they "could" do. The one good (or bad) thing is, all credit cards, mortgage and loans are on m credit alone, not my wife's.

[catleg]

It sounds to me like this collector was *desperate* to book some revenue for the month of January, regardless of whether it got rolled back in February. Probably because he is on commission, possibly because is trying to keep his job.

[Flamingo]

Take some deep breaths and relax. It's not the end of the world believe it or not. First, you need to figure out if you can actually afford to stay in the house you want to keep. There is where you have to get all your ducks in a row on paper and go get a BK consultation because once you find out what you need or have to do, you are in a much better place because you will be able to plan and not worry yourself to death. And there is a lot of support in this forum with filers and discharged folks under each Chapter.

As to the dead beat dad and child support for your step daughter - get proactive and get a support order after him. He would do the same if the child was with him and the support stopped from your end. Now is not the time to be nice.

[StartingOver08]

Our rent for our store is also 2 months past due which we signed a personal guarantee for. I have communicated with the landlord last month and he said "no worries, pay what you can when you can", which is still nothing at this time. He said they would try to lease the space but I have seen no attempt from them to do so. I am scared to death of what might happen in the coming months.

Your business lease is dischargable in a BK.
The unsecured debt is usually dischargable. There are some types of debt that are not discharable like school loans and income taxes incurred recently, but the majority of unsecured is dischargable.
Anything you have personally guaranteed can be included in the BK. In fact, all types of debt, leases, executory contracts etc is included in the BK.

If you have a small business and you have accounts receivable, then the business is an asset to you and you have to provide to the trustee all the business statements, leases etc as well as personal. If you have AR, the Trustee will want those funds AS OF THE DATE OF FILING. That is why pre-planning is so important to you.

[crh3675]

I really don't want to have to move my family as my step daughter is a junior in high school and my daughter has just started preschool.

[crh3675]

The small business is a sole proprietorship, does that matter?

[StartingOver08]

You need to prepare a budget to determine what you can afford both pre-BK and post BK. It does no good to BK the debt if you are still stuck with a house you can not afford. Plan the whole thing so you know if you need to modify the mortgage or give up the house.

BTW, you have to be current on your mortgage to file a CH 7 IF you are keeping the house.

[StartingOver08]

The small business is a sole proprietorship, does that matter?

It is considered an asset of yours. All the financial data (debt/income) for the business has to be provided to the Trustee as well as your personal debt/income. In fact, if your debt is primarily business debt, you do have an advantage in BK.

[crh3675]

I guess that's the sad reality. I can't afford the house by myself unless my wife goes back to work at a full time gig. But, that means our store must close (she ran the store). So, it sounds like we need to close the store, wife needs to go back to work, and I need to get the mortgage current. Then, I can look at BK?

Most of the debt is business, at least $38k