Fraud? Scare Tactic? Not Sure

[StartingOver08]

That sounds like a plan. I don't know because we don't have all of your information, but it sounds like you have a handle on what needs to be done in your situation.

This is the link for Maryland:

http://www.legalconsumer.com/bankruptcy/state_bankruptcy_info.php?st_fullName=Maryland

You will want to check your exemptions and make sure to plan accordingly. The six months income and expenses leading to BK determines the type of BK you can file - CH 7 or 13.

[crh3675]

You've been a great help. What other information would be helpful for my situation?

[crh3675]

I ran the means test and it states that a family of 4 needs 99,854k and I only make 80k

[StartingOver08]

You are under the median income, so that is a good start. The Schedules I and J are important too to the Trustee. You might want to look at an actual BK petition. It is an extremely detailed packet that asks every financial (income, debt and asset) question. Once you begin to put your information together (for yourself) - you will have other specific questions to ask here and to ask your attorney.

I suggest you work on the packet prior to meeting with your attorney consults so you can make the most of your free attorney consultations. You can go to your Maryland BK Trustee site for some district info. See link:

http://www.mdb.uscourts.gov/

Believe me, the more research you do pre BK, the better the result.
We are happy to answer whatever we can based on our experiences and problems we encountered along the way. Of course, your attorney is a very valuable part of the entire process.

[BigJohn]

Do you want to keep the business?

[crh3675]

We really can't keep the business. We owe wholesalers money as well right now and are behind in the rent. We were only open a year so there is no profit or value. It's discouraging because the business was doing fairly well up until Aug-Sept last year. We paid for all of our fall/winter merchandise and then sales stopped.

[BigJohn]

If you didn't have to pay wholesalers, etc., would you want to keep the business?

[catleg]

As someone else said, your post-BK budget being sustainable is crucial.
You mentioned childcare, so presumably if you abandon the business you wife goes back to being a mom and eliminates childcare. Do you have any other nondischargeable debts? Seems to be 80k a year is 6500/month, and your housing is 2500 of that, almost exactly 38% which is the normal debt-to-income limit for housing, so in theory you ought to be able to make it.
Obviously there are cash flow issues if you get paid twice a month getting maybe 2000 take home, am I right? How much is your tax refund? You may be having too much tax withheld.

[PoorGrammyinBK7]

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

When you figure what percentage of debt is "business debt", you have to figure that based on TOTAL debt - including your home mortgage(s), cars, personal loans, etc. If over 50% of your TOTAL debt is business debt, then you do not have to pass the means test. But you may be like us and pass it anyway, plus have over 50% as business debt!

[rockyroad]

Grammy,
How does one figure Biz debt that is incurred on personal accounts? Being a SP biz, we had biz cards but we also tapped into personal accts. when the others ran dry. If you can prove charges were for biz purposes, can they be used to meet that 50%?
With our 2 cars and home debts, we are going to be very close to that 50% unless we can count those charges on our personal accts.
We actually have less than 5k in consumer debt on our personal cards but thousands upon thousands of biz charges on them. And unfortunately, we are over the median income.

CRH, sorry to butt in but you may have these questions as well being a SP biz operator. It's so easy to mix the biz and personal together!

[StartingOver08]

Being over median does not necessarily mean you have to file a CH 13. As I said earlier, your Sch I and J are important. If you are showing neg disposable income then you will be a CH 7 even if you have above median income for the 6 months prior to filing.

If you have more than 50% business debt, then you do not have to worry about the means test - and you can still file a CH 7.

[crh3675]

After I went through the accounts, the numbers show that $24k is personal debt. To BigJohn, if wholesalers were out of the picture, we would definitely not be in the hole for most of this money. It does go both ways though, when my personal finances were going through trouble, I had to "borrow" from business income and when the business finances were in trouble, I borrowed from personal funds.

Catleg, I manage my payroll to have the least amount withheld so my take home is around $2500 per pay check. Our return this year will probably be around $3-$5k. The cash flow issues are with the mortgage sucking an entire paycheck all at once. I have started splitting the payments every paycheck instead (even though the lender frowns against that). I have a family of 4 so there are additional expenses like a cellphone for my 16 yr old stepdaughter plus $$ for her to go out with friends. Yeah, she needs a job but for her to get a job where we live, she needs her driver license. With that, she will need a car and with that, comes jacked up insurance rates. The other killer is the fuel cost for oil heat. We burn through $400 oil per month during the winter months. I also have a $50k HELOC on the home which costs $200 per month.

The child care for my daughter runs about $480 per month plus $180 for preschool. The total budget leaves us with $400 per month for food and entertainment. Which is not a lot for a family of 4. I also live in Maryland, one the more expensive places to live in the US.