Ugh. Just got back from attorney visit. Not what we hoped.

[FloridaGuy]

Hi All,

Just looking to see if anyone may have some input or have gone throough a similar situation. We have been researching the web, and following the forum here. After completing the means test we were sure we could go for a chapter 7 BK.

However after talking the the lawer, although not 100% sure it sounded as if we would have to do a chapter 13 instead. Here's the drill...

We have a S Corp that is failing which we intend to also file a BK for. 95% of our income comes from the business (Thats how I pay our house payment), basically repaying a loan to ourselves from when we started the biz. However the business has actually lost money the last 2 years. ($144K loss last year)

Basically he stated that the business income for the last 6 months is included in the means test... The business YTD shows a profit... but that's because I owe my landlord almost $80K, let alone the other $127K owed to vendors. (NOT counting the $125K in CC debt on business cards either!)

So I guess the question is has anyone who has their own business gone through a means test, and how about the outcome.

Any sugegstions or comments?

[JRScott]

Hey mate I'm not up on business bankruptcies but don't give up yet, I"d see 3-4 more bk attorneys. Some like to force folks into a ch 13 when they could get a ch 7. Not saying this guy is but its possible.

[soleprop]

mmm, i don't know a thing about s-corps, i was a sole proprietor....i've got to agree with JR; find a business attorney that has handled a few business bks - get a consult with him/her, this should help. i would not bite on this one just yet...i'm pretty surprised he's so quick to toss you into CH13. but again i am no expert

[BigJohn]

Do you plan on keeping your business?

I believe that is the key if it will be a 7 or a 13.

[HHM]

Yes, with an S-Corp, the business income is treated as "your" income. Did you explain to this lawyer why the business was showing a profit?

Technically, the business does not have to file BK (do a search on the forum, there are many posts that talk about whether a business actually needs to file).

[FloridaGuy]

More details

Hi everyone and thanks for the replies. Let me fill in some details.

First the lawers...
This is the 3rd lawer we consulted with, and the only one we were actually comfortable with. The first was slam/bam/thank you ma'am, very un-personal. The second was a phone consultation. This one was a referal from my actual business attorney. The original reason for consultation was to salvage the business, and keep the landlord from kicking me out. (5 months past due on rent... to the tune of about $80K) But he offered 4 possible options, bankruptcy being the last resort.

Now the business...
After trying to get financing for the business, and being turned down multiple times (Primarily for too much revolving debt, and not enough assets). We have taken every cost cutting measure for the business possible, actually reducing monthly expenses by almost $8K a month. However with the slowdown of the economy, and slowing sales (YTD we are down almost $50K from last year) we are now falling behind on other bills... not just the rent. We have $175K in accounts Payable ($125K over 90 days past due), and $130K in CC Debt as well.

Personal stuff....
Home is now break-even or upside down with a $4200 mnth payment (I was paying myself back from a loan we had given the business when we opened almost 4 years ago to pay the house payment) We have $95K in CC debt (Which was actually used for the business, not personal items), two older cars (one with a $800 balance on the loan) and your regular house/furniture stuff.

It has come to a point where I think closing the doors of the business is pretty much the only option. (or possibly selling, but that doesn't look to possible) Originally I had considered a new business, new location, etc. to try and keep going. But at this point it looks like we will have to walk away from the home, and/or close the business and re-start our lives from scratch. May even relocate to a new area, as we have been here almost 20 years, parents are getting older and the wife would love to be closer to family.

Everything I've worked for has come crumbling down around me, with not much hope left.

The first lawer just said liquidate the business and close down... he didn't mention anything about the almost $200K left over business debt after selling all the assets.

HHM... we did look at the business numbers, and he is aware. Basically had I paid everthing that was due, I'd have a huge loss YTD, but obviously you can only pay what you have the cash for.

Anyway, the lawyer has a software program (Which I assume is for the means test) which we will primarily plug in all our numbers into including the business income/debt, payments, etc. to determine the course of action.

From what I read, it seems that a Chapter 13 is for when you have steady income to reorganize debt & pay it off... however when the business closes (and when we file BK for it if needed) I will have no income. So I will have to get a "real" job again. (Not like to 75-80+ hours I work a week now) and the wife's income only brings in enough to pay current bills such as insurance, food, gas, etc. We don't have a penny to spare.

Well sorry for the long post, but once I started typing I had to vent a little.

[JRScott]

Hey mate thanks for explaining more, I'm not sure what to tell you, just finish what the lawyer gave you. Just remember it'll get better. In time you'll get another home and more stuff.

Good Luck mate

[lillaimof2kids]

Our business was an LLC. We were behind on everything, with no way out. Our attorney told us that as long as we signed out names, that means we are personally liable for the loans. (Every state may be different.) We closed the business down. DH found a job and I have always worked. There was no way we could afford a CH13. They can't push you into something you can't afford. You will probably be in the same vote. Now, we did have a bank loan who tried to come back and say that we were filing personally, not on the business. I just told them I signed personally and there's no business left. They finally quit bugging us.

Oh, our attorney had us print up everything the company pd. for, along with any income the company made for the last 6 months. When doing a profit/loss statement in some accounting programs it doesn't add in loan payments (depending on how things are set up). It took a lot of extra time and energy but it showed our true profit/loss.

Most important, find a good attorney who will fight for you! It's very easy for them to sit back and say "Oh, you make to much, you need to file 13." It all depends on where you might be working and how much you may bring in.

[BROKENN]

Dear FloridaGuy: I completely understand. I am in the same position but as a Sole Prop. When our lawyer saw our debts (though not being paid), he said we NEEDED a new start

Doing your P/Ls painstakingly is correct. How can you be over the Means if you can't even pay rent?

You may need to go a little longer before filing to make the numbers jive. Keeping a biz makes all the difference in a C7 because you can't.

We are giving up our house and closed the biz this month. I can't tell you the relief after 2 years of fighting it all off.

I think you need to see another lawyer