Art Gallery in over its head wants to know what to do

[flash]

Hello,
I have a small art gallery in Florida. I am currently $100,000 in debt trying to keep it afloat and am not making nearly enough money to pay the minimum payments. I am considering bankruptcy, but a friend says that if I put up what few assets the gallery has as collateral in a secured loan, I could get away with not paying of the cards. Hey says the cards would have nothing to collect if they sued me. I make no profit, hardly enough to survive, definitely less than $3000, probably closer to $1200 a year, seriously. Everything we make goes back into maintaining, not improving, or expanding the business. I have no car and less than $1000 in possessions. I want to keep running the gallery and if I did not pay the cards back I would have a much greater chance of doing it.

I don't know if I should be in the chapter 7, chapter 11 or chapter 13 forum. I just need some advice. Is my friend correct? If I put up the few assets I have in as collateral for a secured loan, will it be safe from being taken in a suit as long as I keep up with that loan?

Any comments or suggestions would be appreciated.
Thanks!

[HHM]

Your friend is wrong!

I think you need to step back and be objective...if the business is that dismal...why keep operating it. (doing the same thing, but expecting different results is insanity).

You don't need to do chapter 11...to expensive and complex.

You don't have a steady cash flow to support a chapter 13 payment plan.

Thus, as far as BK goes, your only option would be chapter 7, which is the best option.

[pipedown]

""f I put up the few assets I have in as collateral for a secured loan, will it be safe from being taken in a suit as long as I keep up with that loan?"

Sure, as long as you keep up the payments the securities for the loan will not be taken. Thoise securities will not be protected if you do go BK. you will need to keep that loan going.

Being Taken? Loose What? The business? An Art gallery is what, A store front, a bunch or consigned art and a ficticious business name, maybe some storage cabnets for the art. The art is probably not yours, it goes back to the artist in most cases. You loose the lease and the FBN. After restructuring, you can always get a new FBN and a new business licence for your city. As long as you maintain your relationship with your artists, you will have product to sell, all you need is a better place to sell it from.

I'd guess you are trying to run a shop in some swanky beach town who has tourists only 1/3 the year but you lease all year. Or maybe its the snow birds who buy winter homes they need to decorate. Well, according to my Mom who does that in the Villages, the second hand furniture and art market is saturated due to the large number of retirees who move there and die only to have the reletives sell the stuff locally. She can find nice stuff at prices I can't even imagine in CA.

Perhaps another location or a web based business might be a better way to build your capital and reputation until you can afford a proper gallery location (shop or cart). Maybe a restructuring at your location. Coffee houses seem like a good synergy for a gallery and has more dependable income.

Not trying to trash your dream but sometimes dreams are distorted and need a reality check. Redo your business plan and run the numbers properly. If you project red for over 2 quarters, you should change something drastically before you do have to go BK. You may be better off working with a debit counselor for the near term rather than rushing into BK.

Or you can hope to hit the lottery and find that up and coming artist before anyone else and manage to be the primary outlet for his art. Its a tough biz, A friends dad moved his business 3 times, went through Ch11 2 years ago and still closed forever this year. (San Jose, CA).