Business debt question

[wilsonckc]

I filed a Chpt 7 pro se and I am about to be dismissed. Here is the problem in a nut shell. My wife had a business that failed. The business is now closed. I put my name on the lease. The lease has 5years remaining and $171,000 left. The debt in our home is about $235,000. There is about $30,000 in other misc debt. That means that less than 50% of our debt is business related and we have to file this as a consumer case. I have a job and make $100,000/year. Too much for the means test. If we were to sell our house, our business debt would be much more than 50% of our total debt load.

Does anybody know how a chapter 7 works when your business debt is greater than 50% of your debt load? I have heard that the means test no longer applies and the BK case is a business case. Any truth to that?

[CindyLou]

Why are you being dismissed?

I'm not sure the secured portion of the home goes toward the 50 percent???? I think its only unsecured debt....or am I crazy?

[CindyLou]

and yes if its greater than 50 percent related to business then you don't have to pass the means test to do a 7.

[biotechsolution]

you're right. If the total amount of your debts are more than 50% consumer then the means tests applies. You have to include your mortage and car loans you may have. I guess if you sell your house you would qualify for a chapter 7 but if you make money on it the trustee may wonder about the windfall.

[wilsonckc]

Update

I talked to my attorney. He told me that even if I sold my house, my case is now on the trustee's radar and most likely would still be denied. He said that while they wouldn't require a means test they would still look at my budget and see that I had excess funds and dismiss the case.

Does anybody have any insite on this?

[HHM]

The big assumption here is whether you really could sell your house in this market?

In any event...I think what your lawyer is getting at is "abuse of process". Generally speaking, if your debt is more than 50% business debt, your case CANNOT be dismissed for abuse based on having disposible income because the median income/means test requirements are not applicable. But since you have already filed a chapter 7, and presumably would have to refile after you sell your house, the US Trustee might file a motion to dismiss based on abuse of process.

[biotechsolution]

HHM is right. Even if you have disposable income if you have 50% or more of business debt you cannot fall under 707(b). You can also have more expenses and expenses that wouldn't be allowed under the means test. I had disposable income in my case and private school tution.

Sell the house and wait 6 months to file.

[wilsonckc]

I already filed a chapter 7 and I am on the verge of having it dismissed. Could I sell the house, wait 6 months and refile? If so, won't the trustee look back at my previous filing and raise the fraud flag?

[biotechsolution]

Here in lies the problem. You don't have an absolute right to dismiss a chapter 7 filing unlike a 13. So if a 7 is dimissed it usually for cause. What you should do is allow yourself to be put into a 13 set your payment amount. Barter back and forth with the trustee over the payment amounts and then dismiss your case either before you plan gets comfirmed or wait a few months after confirmation. You then have the absolute right to dismiss the case without cause. Then wait 6 months to file 7 after you've sold the house. Just my .02 cents.

[HHM]

Here in lies the problem. You don't have an absolute right to dismiss a chapter 7 filing unlike a 13. So if a 7 is dimissed it usually for cause. What you should do is allow yourself to be put into a 13 set your payment amount. Barter back and forth with the trustee over the payment amounts and then dismiss your case either before you plan gets comfirmed or wait a few months after confirmation. You then have the absolute right to dismiss the case without cause. Then wait 6 months to file 7 after you've sold the house. Just my .02 cents.

Actually, he can't do that, you cannot voluntarily dismiss a chapter 13 that was converted from a 7.

I think the OP's case is going to be dismissed by the court...so it's not a voluntary dismissal.

I don't recall the refilling rules off the top of my head, but one thing you would have to do is "prove" to the court that your second filing is not abusive. When you refile a chapter 7, the automatic stay only lasts for 30 days unless you can demonstrate that your case is not an abuse of process.

[biotechsolution]

Have you paid all the fees yet?? If you haven't paid the filing fees perhaps it could be then dismissed and that could be without prejudice?? Otherwise, just let the trustee dismiss it and wait out the 6-12 months then refile.

[uofaguy]

HHM & Biotechsolution (or others with knowledge),

Can you clarify for me your statements about being able to have disposable income under a Ch. 7 so long as your debt is primarily business debt (e.g. "You can also have more expenses and expenses that wouldn't be allowed under the means test. I had disposable income in my case and private school tution")?

I am in a similar situation as Wilsonckc. My wife & I make fairly good income (well above family median for our state) but the majority of our debt is business debt (investment properties soon going to foreclosure). We have met with 8 different BK attorneys. One said he is 95% confident we could get a Ch. 7, but every other attorney said no way - - even without the means test our income is too high and since we still have schedules I & J to deal with, it will never work.

Am I missing something here? Is there a chance we might actually qualify for a 7 (I was of the mindset that maybe the 1st attorney was just getting us excited about a 7 only to incur more fees with a 13 conversion)?

Thanks, Jon

[biotechsolution]

707(b) is the only way a trustee(panel) or UST can dismiss your case for substantial abuse using the means test. Only cases where more than 50% of the total debt is consumer debt are subject to the means test. What it means for the business/tax debtor is that you don't have to fill out from 22B regarding expenses. But you still have to fill out schedules I and J. If you by chance you show...say +500 or more on your schedule the trustee or judge cannot dismiss your case under 707(b). But I have heard of denial of discharge under section 727. You need to ask a attorney who just deals with business bankruptcy, not consumer bankruptcy attorneys. Find a corporate attorney.