Personally guaranteed business debt

[Oh No]

I have some good news for the folks that are in the same shape as myself. I have about 200-225K that is past 90 days personally guaranteed business debt. I am currently with about an 800 cs and I really didn't want to lose it, but my partners poor spending habits are going to come to an end soon. I am well below my means as far as car and house payments. We have 4 or 5 credit cards, but have 0 balance on all of them. My lawyer said that I can file a 7 even though we are well above 100K per year income because the majority of my debt is personally guaranteed business debt. Actually all of my debt that will be filed on is business debt. He says we will walk in and hand the trustee the folder and tell the judge that there is only personally guaranteed business debt and walk out. He claims that it is the easiest to do no matter what you personal income is. He says the new laws were mostly designed to help the cc companies and with no cc debt, auto, or goofy stuff like cell phone, jewelry, etc. it is a cake walk.

My wife also gets to keep her 820cs because she is not on any of the business debt and will not file. I guess the new laws aren't all bad.

[hansky]

You say "all of my debt that will be filed on is business debt," and you also mention house and car payments, indicating you also have debt for those. How much debt do you have other than the business debt?

[Oh No]

You say "all of my debt that will be filed on is business debt," and you also mention house and car payments, indicating you also have debt for those. How much debt do you have other than the business debt?

House 420K and cars around 90K. Retirement funds are protected and half of the cash in the bank my wife will get to keep the rest will go to the lawyer and a few of the creditors. He's charging around 8K, which seems steep, but it's a deal if he can pull it off like he says. I do not need relief from anything but business debt. I guess we are lucky that my wife does not need to file. House is 8 months old and has almost no equity and the price i quoted on our cars/suvs is the amount to pay them off although they are leased and we will keep paying them.

[Oh No]

The lawyer keeps telling me the new laws were made mostly for the cc companies which he says account for a large majority of bankruptcy filings. Do you think he's b.s.ing me? The first lawyer I talked to said basically the same thing about not having to do the means test if the majority of the debt is personally guaranteed business debt. I believe I have also seen a few others on here who have filed a 7 on business debt.

[hansky]

House 420K and cars around 90K.

So, your business debt is 200-225K, and your non-business debt is about $510,000K (or $420k without the car leases)? OK.... that would seem to be a relevant ratio that I am sure your attorney has discussed... as well as the fact that the means test is but one hurdle in getting a Chapter 7 discharge.

[Oh No]

So, your business debt is 200-225K, and your non-business debt is about $510,000K (or $420k without the car leases)? OK.... that would seem to be a relevant ratio that I am sure your attorney has discussed... as well as the fact that the means test is but one hurdle in getting a Chapter 7 discharge.

He says that the cost of our home and cars which we can pay for being about double of what I will try to file a 7 on for the business has no bearing because my wife is not on any of the business debt and she makes a very good living (nurse practitioner). The lawyer says the the fact that no personal debt at all will be placed in BK and the fact that my wife will not file are fairly unique by themselves and very rare combined. He does admit that it could be very good or very bad for me that the case will stand out a bit. We are assured that no matter what it will stand out from the 100 cc cases that they see that day.

Almost forgot, he says the in our state, NE, that we/I are exempt from the means test due to the fact that it is all personally guaranteed business debt. Have you heard different?

[hansky]

He says that the cost of our home and cars which we can pay for being about double of what I will try to file a 7 on for the business has no bearing because my wife is not on any of the business debt and she makes a very good living (nurse practitioner). The lawyer says the the fact that no personal debt at all will be placed in BK and the fact that my wife will not file are fairly unique by themselves and very rare combined. He does admit that it could be very good or very bad for me that the case will stand out a bit. We are assured that no matter what it will stand out from the 100 cc cases that they see that day.

Almost forgot, he says the in our state, NE, that we/I are exempt from the means test due to the fact that it is all personally guaranteed business debt. Have you heard different?

No, I agree that there is a good argument that a person with mostly non-consumer debt may be exempt from the means test (which argument has nothing to do with what state you are in). I am merely pointing out that, according to you, your debt is mostly non-business debt. How that information is considered is between you and your lawyer.

Also, ALL of one's debts is "included" in a bankruptcy. There is no picking and choosing what will or will not be included. Contrary to common perception, there is no filing for bankruptcy "on" certain debts, or "including" only certain debts in the bankruptcy. A person, natural or otherwise, files for bankrutcy -- and with them goes everything.

Of course, nothing here is as good as real live legal advice.

[lrprn]

The lawyer keeps telling me the new laws were made mostly for the cc companies which he says account for a large majority of bankruptcy filings. Do you think he's b.s.ing me? The first lawyer I talked to said basically the same thing about not having to do the means test if the majority of the debt is personally guaranteed business debt. I believe I have also seen a few others on here who have filed a 7 on business debt.

I don't think I would describe the Ch 7 situation you are in as a "cake walk". Since the debt you are filing on is exclusively personally guaranteed business debt, I would be willing to bet the US Trustee is going to be very interested your case. Hope you have air-tight documentation for your business going back for at least five years - you are very likely going to be asked for it.

Also with a case this much outside the norm, I would most definitely be asking for multiple lawyer opinions. The very fact yours is asking you for $8,000 (which is about three times the norm for a straightforward Ch 7) tells me he's expecting to spend lots of hours defending your position. This is not a time to put all your eggs in one basket. Get several more opinions from well-qualified and well-experienced bankruptcy attorneys in your area before going ahead with this. Once you file, if your case isn't a "cake walk", then you could be stuck in limbo for quite a long time - possibly years - without resolution.

[Oh No]

This is lawyer #2. I just realized how funny that actually sounds. As Hansky said I realize that all debt has to be claimed not just the business debt. The cost was a minimum of 8K. The first lawyer said it could be more due to the fact that we are trying to keep my wife 100% out of it. This means we may have to do some things with the house, etc. The fee also includes a debtors rights attorney who will work in conjunction with the BK attorney. This is needed to try and shift the houe, cash or other asstets into the wifes name without causing any type of fraud in the eyes of the BK trustee or judge. We have the ability to fight the debt in court long enough to legally transfer some things into my wifes name only.

No cake walk, but both attorneys said the courts are tired of cc abusers. As opposed to business debt abusers I guess.

[hansky]

This is lawyer #2. I just realized how funny that actually sounds. As Hansky said I realize that all debt has to be claimed not just the business debt. The cost was a minimum of 8K. The first lawyer said it could be more due to the fact that we are trying to keep my wife 100% out of it. This means we may have to do some things with the house, etc. The fee also includes a debtors rights attorney who will work in conjunction with the BK attorney. This is needed to try and shift the houe, cash or other asstets into the wifes name without causing any type of fraud in the eyes of the BK trustee or judge. We have the ability to fight the debt in court long enough to legally transfer some things into my wifes name only.

A very interesting description.

[Oh No]

Anyone else ever use a debtors rights attorney?

[HHM]

Anyone else ever use a debtors rights attorney?

Probably not, it is not a common practice. But if you are talking about transfering significant assets, your talking about a 1 to 2 year long process. Avoiding BK fraud in transfering assets, more than anything else, is about time. The problem is, that intentionally tranfering assets to avoid creditors, "AFTER THE DEBT HAS RISEN" will bring to bear common law fraud claims regardless of the BK remifications if there is already disputes and defualts on your part.

[Spartan]

What I don't understand is, the poster has "...House is 8 months old and has almost no equity and the price i quoted on our cars/suvs is the amount to pay them off although they are leased ..."... So what asset is the poster trying to transfer or shield or protect?

[lisac77]

Hmmm... we were told that because our business debt (525K) exceeded our personal debt (130K - mortgage + credit cards) by more than 50%, we were not going to be held to the means test. We will be listing some minor personal debts in the bankruptcy (17K in credit card debt), the overwhelming majority of the debt is business debt.

That doesn't seem to be the case in your situation. It sounds like the business debt is about half of your personal debt.

We were quoted prices between 3K-4K because of the business debt. I would check with a few more lawyers and try to clarify your position.

[BK'd-Betty]

I don't mean to hijack this thread, but I do have one quick question................ if one lists and discharges business debt that has a P/G - the debt itself isn't cancelled for the business is it? Does filing personal bk on business debt only protect the debtor personally? Creditors can still sue the business (if it were still solvent), correct?