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S-corp revenue stream great but buried in busines and personal CC debt, what do do?

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  • S-corp revenue stream great but buried in busines and personal CC debt, what do do?

    I have a S-Corp that was down and out for a while after getting stuck in a bad partner deal but it's back on it's feet again with a good paying client currently pulling $200k in solid annual revenue and could probably double this in the next two years pretty easily.

    Problem is, due to the partner problem I had to stop paying on the business and personal cards several months ago and now they are coming after me post charge-off as personal guarantor.

    Before this my credit score was 820 and now its in the toilet with total cc debt @ $150k-ish with roughly a 60% business / 40% personal split

    I own one house with very little equity, maybe $30k (my primary residence I want to keep) and a 2 unit apartment building with @ $100k in equity that I have no emotional attachment to. Keeping it would be a nice to have but it is what it is now I can easily rent the 2 units to show break even on the mortgage. No late payments ever on either.

    I've two leased vehicles one has @ 18 mos left the other is due up in 6 mos, No late payments ever on either.

    Business has no real assets but a laptop, printer and computer monitor, blackberry. It's a virtual company providing on-site consulting services.

    All taxes are current.

    I've never had a perm job in my life, 100% self driven and have no problems generating plenty of revenue through this business or creating a new one (easy to do in a day or two), just a partner deal gone bad.

    I need to get past this so I can get back to success and am wondering what my options are at this point before sitting with an attorney.

    Two Questions:

    1.) What is the common route generally taken for this to eliminate the cc debt, CH7 on the personal and nothing on the business?

    2.) I also have another venture I want to start right now with two other individuals but am curious to know how this may affect them and/or impacting the start of the new venture and how people typically handle this?

    I've got to dig in and get past this and back onto a path of success.

    Looking for any insight you may have.
    Last edited by enemabandit; 06-01-2010, 10:40 PM.

  • #2
    You've got a situation here and you need a GOOD bankruptcy attorney.

    Your business debt can not be discharged, you have a business that can generate a good amount of cash, so herein lies the problem.

    1. The trustee may want to sell the business (it is an asset). You will need a good bk attorney to help you figure out a plan of action for your business.

    2. You may need to start a new s-corp in order to be free of old business debt.

    3. If you are going to try to continue your old s-corp (if the trustee allows it), then you're going to need to pay off the corp debt. You will also need to buy back this business from the trustee, so you have to prove that it's pretty much worthless.

    Please, see a competent attorney in your area. Do not pro-se and do not go to a bk mill. Find an attorney that does business work.
    All information contained in this post is for informational and amusement purposes only.
    Bankruptcy is a process, not an event.......


    • #3
      Originally posted by frogger View Post
      You've got a situation here and you need a GOOD bankruptcy attorney.

      2. You may need to start a new s-corp in order to be free of old business debt.
      Someone suggested creating a new s-corp or LLC in a different state with a different name but having a DBA with the same name setup in my wife's name and then setup the bank accounts solely in my wife's name in order to continue doing business transparently with the same client.

      Ever heard of this? I am not interested in filing joint for either business or personal BK. I'm making the sacrifice and keeping the wife out of it, her credit is perfect.

      Meanwhile on the personal chapter 7, I would think this is a no brainer against the business guaranteed cc debt and personal debt isn't it?

      As for a good attorney, absolutely agreed not looking to run this through a mill, just want to get some insight about what questions I need to be asking when interviewing potential attorneys to take this on.

      I am on a fact finding mission.
      Last edited by enemabandit; 06-02-2010, 08:54 AM.


      • #4
        Before you start setting up new companies, before you start going out of state, before anything like that, you need to get with a competent bk attorney and plan this thing out.

        You may not need to start up anything until after you file. Corporations are quick and easy to set up. Don't give the appearance that you're trying to "hide" anything by moving out of state.

        Perhaps you just let this one die and start again. Find a good attorney and plan.
        All information contained in this post is for informational and amusement purposes only.
        Bankruptcy is a process, not an event.......


        • #5
          Originally posted by frogger View Post
          Corporations are quick and easy to set up.
          Perhaps you just let this one die and start again. Find a good attorney and plan.
          Agreed on the quick setup. Will start looking for an attorney today.


          • #6
            They are coming after you as a post charge off guarantor?

            So you are not in a position to work out a payment plan?

            Are you 100% they want all of the money now or will they take money over time?

            You may be able to term out the payments over 5 years ... which is what you would do in a Chapter 13 anyways ... and they will take it.

            Or negotiate time to sell your property, XXX $$ down and the rest termed out over a few years.

            Talking to a good biz attorney is also a good idea, but figure out what they really *want* = what they will really settle for BEFORE filing.

            The reason I say this is because I've been negotiating with a bank myself since January and it isn't moving. It's like they don't know what they really want ... and I've come to realize I am not making a move until they make a REAL offer that we counteroffer and get to some serious settlement ... and at the rate they are going, it could be another 6 months!

            So ... do you really know what you can negotiate with them? Try that route as well while you are searching for good attorney.


            • #7
              The short answer is, you do not appear to be bankrupt.

              I would have to agree with the previous poster. You have the ability to pay the debt, and it could (would?) be looked at as you simply trying to eliminate the debt, and keep any assets that you have.

              Sell the rental house, and apply the $100K in equity to the debt. Now, you have $50K in debt, and a good income stream. You should be able to knock that out.

              Yes, it is not the easiest solution, but it will be the easiest considering the alternatives. Opening corporations in another name in another state seems to just be a way to try to get out of paying what you owe.
              Filed 8/08 - Discharged 11/08! Not tracking FICO.
              Pre-Bankruptcy Net Worth: -$72,000... Today's net worth: $142,000.
              If your FICO score just went higher than your net worth, and you are happy about this, you might have a financial problem!


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