Personal Ch13 and Small Biz Money

[Stephanie]

Personal Ch13 and Small Biz Money
First if this isn't the proper place for this post could you direct me to a more appropriate place?

State: Ohio

My husband and I filed for ch 13 under the old laws. We already had our 341, all went well. The final hearing is Jan 10. We do not have to attend.

I also have a small business (2 actually) I run from my home. At the time of filing (Oct '05) my income for the year was around $2,000. I told my attorney about what I do and how much I've made. I told him to do whatever he thought was necessary as far as the filing and business money is concerned. There was nothing noted about it on the papers filed. I was listed as a "homemaker" only (I'm a stay at home mom (3 monkeys :-).

Anyway the trustee requires that I file for "permission" to make any purchases over $500. I called my attorneys office and they said it didn't matter if it was for business or for personal.

So here is my question. I was curious as to how I could further separate my small businesses from my personal bankruptcy. To make my business financially independent of my personal bankruptcy. If I make my business an LLC will that make it a separate enough entity to allow me to make that $500+ purchase without consulting the trustee?

BTW I want to purchase software for my Website Design/Development Business. So it's legit, I'm not trying to pull a fast one.

[Genenco]

Personal Ch13 and Small Biz Money
First if this isn't the proper place for this post could you direct me to a more appropriate place?

State: Ohio

My husband and I filed for ch 13 under the old laws. We already had our 341, all went well. The final hearing is Jan 10. We do not have to attend.

I also have a small business (2 actually) I run from my home. At the time of filing (Oct '05) my income for the year was around $2,000. I told my attorney about what I do and how much I've made. I told him to do whatever he thought was necessary as far as the filing and business money is concerned. There was nothing noted about it on the papers filed. I was listed as a "homemaker" only (I'm a stay at home mom (3 monkeys :-).

Anyway the trustee requires that I file for "permission" to make any purchases over $500. I called my attorneys office and they said it didn't matter if it was for business or for personal.

So here is my question. I was curious as to how I could further separate my small businesses from my personal bankruptcy. To make my business financially independent of my personal bankruptcy. If I make my business an LLC will that make it a separate enough entity to allow me to make that $500+ purchase without consulting the trustee?

BTW I want to purchase software for my Website Design/Development Business. So it's legit, I'm not trying to pull a fast one.

Well, I'd consult with your attorney about just that...Or find another if you feel yours is less then compentent....

[Minnymouth]

When you filed for Chapter 13, you included your small business as part of your bankruptcy. Thus is why the Trustee has to be notified of any large purchases.....

Separating it all now could be a problem. You need to check with your attorney on this, but I believe he will tell you to leave it alone at the present time.

By including it in your bankruptcy, the Trustee has access to monitor your business also..... looking for any assets you might acquire...

Minny

[AAAArt]

When you filed for Chapter 13, you included your small business as part of your bankruptcy. Thus is why the Trustee has to be notified of any large purchases.....

Separating it all now could be a problem. You need to check with your attorney on this, but I believe he will tell you to leave it alone at the present time.

By including it in your bankruptcy, the Trustee has access to monitor your business also..... looking for any assets you might acquire...

Minny

Minny, Her problem is that her small business was NOT included in her Bk. Now she has the problem of explaining to the Trustee why she needs the money for something that "didn't exist" according to the petition and her atty. tole her "not to worry about" and didn't list the income.
It seems to me that the atty really dropped the ball here. Perhaps thought that it wasn't worth mentioning (even thought this is technically illegal) and so didn't include it.
Stephanie, I think that you really need to go back to your atty and raise this question. Perhaps he will suggest that you either treat it with the Trustee as a new business or just spend the money out of your business income (which hopefully, you at least have in a separate checking acct.) Either way, you are "flirting with fraud"
Seeking permission from your Trustee could cause your chap 13 to have to be re-worked and raise your payments.
I do not think that there is a way to legally protect your business "after" you file and very few if any things which you could have done before.
Your prob is that your atty advised you to do something illegal. In his/her hubris and professional opinion, your business was prob. just a hobby and she/he thought it would fail like most do.
In fact, that is prob. the path that I would take re: if I have to go to the Trustee to seek permission.
It sounds to me like your atty. is of the opinion and might even tell you, "What the Trustee doesn't know, doesn't hurt them or you." but unfortunately, in my opinion, it is illegal. Remember, I am not an atty and this is just my opinion on the situation. Best wishes, Art

[StaciMM]

I agree w/ Art that this attorney has created trouble for the OP. $200/mo income isn't huge but it would require more paid into the plan. The OP now has an issue that they signed a petition that had wrong information-and under old law the person filing BK is responsible, not the attorney.

Its a sticky situation. My best recourse would be to try to find another BK attorney to consult with. Odds of doing that may not be great.

[Minnymouth]

Sorry - you guys are RIGHT....... I was thinking (yeah) that she included it in her BK, making the income part of her BK income....

But yeah, she does HAVE A BIG PROBLEM NOW.......
Trustee will want to know WHY it wasn't listed on her petition - since it is income - no matter how small each month...... It may even be sporatic income - but it should have been noted.

Possibly if her attorney tells the Trustee that it is sporatic income (not every month) he might be able to work something out with the Trustee that IF INCOME DOES COME IN from the parttime job - it is applied to the plan.....

Yes, her attorney is at fault for this........ creating her a very bad problem in a Chapter 13..... It's like hiding an asset - then the Trustee finding out about it....

Also, the trustee is going to want to know if its noted on her income taxes also...... as extra income.....

Cash under the table can come back to bite you......

She needs to discuss this with her lawyer - he helped make the mess - let him help figure a way to clean it up---
Under the new laws HE would be held responsible.... but under the old laws SHE signed papers saying everything was correct.....(thus leaving her at fault).

Hopefully she can straighten this out without too much serious damage or getting it thrown out or dismissed.....

Talk to your lawyer, tell us what he says and how he proposes to handle it...... he filed the papers for you and told you to just pretty much ignore the issue.

Keep us posted,

[Stephanie]

Wow you guys really raised a bunch of good issues.

I wanted to let everyone know that I spoke with my attorney and he said that I can buy whatever I want for however much I want as long as it is with cash and the trustee is not taking part or all of my income tax refund. (He is not) and I do not have to get approval from the trustee.

I will only have to petition the trustee only if I want to incur a debt of $500 or more. I spoke in detail about my businesses because I had concerns about how thing would look come tax time and they said it's a non-issue. The trustee will not review or even have a concern about my case as long as he gets his payments on time.