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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Bankruptcy Attorney only please, My wife & I own a family

Resolved Question:

Bankruptcy Attorney only please,
My wife & I own a family business (30yrs) that is suffering with negative cash flow re- economy. We are rapidly losing the ability to pay business & home bills.
We both have excellent credit & scores - except we both have liens on 2 properties due to very large IRS debt that we will never be able to pay. We have a minimal monthly partial payment plan with 8 yrs left on statute.
We are 50+ yrs old with no savings. There is a significant inheritance (in a child's name) that will contribute to retirement..Also IRA's totaling 22k.
currently stable but holding on by a thread & don't see the economy getting better- fast enough.
Would bankruptcy be a reasonable consideration? What else would I need to consider to make this decision? What other options do I have?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 4 years ago.
Hi JACustomer,
Bankruptcy can be used to eliminate certain debts.
1) Which, if any, debts are you considering eliminating?
2) How long ago was the inheritance transferred to the child?

Edited by Christina Fortunato, Esq. on 6/7/2010 at 7:27 PM EST
Customer: replied 4 years ago.
The inheritance went directly to the adult child & was never transferred.
The primary debts - that are troublesome are credit card debt.
There is no other personal debt that we are behind on.
There is mounting business debt that is credit card/vendors primarily.
Expert:  cfortunato replied 4 years ago.
Bankruptcy is a certainly something to think about if the credit card debts are unmanageable.
Probably the main things to consider are 1) the credit score takes an initial large impact, but then starts to improve within about a year if no further negative activity is reported; 2) whether you have any assets that would have to be surrendered in order to file.
I can give you an idea of what assets you would be able to keep if you tell me the state you live in.
Expert:  cfortunato replied 4 years ago.
Bankruptcy is a certainly something to think about if the credit card debts are unmanageable.
Probably the main things to consider are 1) the credit score takes an initial large impact, but then starts to improve within about a year if no further negative activity is reported; 2) whether you have any assets that would have to be surrendered in order to file.
I can give you an idea of what assets you would be able to keep if you tell me the state you live in.

Customer: replied 4 years ago.
re- credit score -we have liens that won't clear for 8yrs & banks won't be lending to sm businesses for a while anyways.
The corporation has no assets & the residence has a 1st & equity line of credit with approx 150k equity.
I am in ma.
Expert:  cfortunato replied 4 years ago.
When you said 150K equity, do you mean that is the amount of the loan, or the equity in the home (difference between what the home is worth and the balance on mortgages)?
Do you have any equity in cars?
Customer: replied 4 years ago.
residence equity= net after mortgages
2nd property net equity after mortgage = approx 100k lien also
do the liens matter?
vehicles are leased.
Expert:  cfortunato replied 4 years ago.
The bankruptcy homestead exemption is $500,000 in Massachusetts, so your home should be safe. The liens won't make a difference. However, if the liens are more than the equity (100K), you may be able to have some of the liens discharged.
Also, IRA's are generally exempt (protected), and you are allowed to keep personal property with up to $3000 in value.
Customer: replied 4 years ago.
The liens are more than 100k. There is one in each of our names for one property & my name on the 2nd.
When you say discharged -you mean re- bankruptcy? These are IRS liens.
Homestead -would that apply to real estate grandfathered to commercial use?
What benefit does discharging the liens give us? is it related to credit score & future financing?
How long does it take to build up good credit?
any other issues on the downside?
cost to file?
do you have enough info to advise - your opinion?
Customer: replied 4 years ago.
I will not be available to correspond until 10am tomorrow. I would like to finish this matter & pay you then.
I do respect your time & will not prolong this.
Thankyou
Expert:  cfortunato replied 4 years ago.
Certain taxes can be discharged in bankruptcy - generally income taxes that are more than 3 years old - unless those taxes have already generated liens on actual property.
If the equity of the property is less than the value of the liens, the remainder may be dischargeable.
Homestead is the property that is the debtor's domicile (usually the one residence where he spends most of the time).
Discharging the portion of the liens that is dischargeable would relieve you from paying that portion - this would have no effect on the credit score.
However, I just noticed that you have 2 properties. Please describe both - what type, equity, etc.
Customer: replied 4 years ago.
First of all I will pay well- tip- for this extra time.
Not really too much to cover, but I do need to hash this out.

properties
1. residence owned by husband & wife (both have 100k+ tax liens on this property)
approx 175k equity after 1st & 2nd mortgage
2.2 other parcels under 1 mortgage owned only by me (with lien) - approx 175k equity

the taxes have already been generated on these properties
the equity of the property is significantly less than the value of the liens.
Please clarify "dischargeable". The due taxes are almost one million dollars.
can we eliminate just the credit card debt?
Expert:  cfortunato replied 4 years ago.
What state are you in?
What type of taxes are owed?
Customer: replied 4 years ago.
Mass.
IRS taxes
Expert:  cfortunato replied 4 years ago.
Are they your personal income taxes, or something else (eg. employee's withholding taxes, capital gains taxes, etc.)?
Customer: replied 4 years ago.
a combination of personal & withholding taxes
Expert:  cfortunato replied 4 years ago.
You cannot get rid of the withholding taxes. However, you may get be able to get rid of some of the personal income taxes, and you should be able to get rid of all of the credit card debt.
("Discharge" means get rid of.)
As I already said, you should be able to keep your home, because of the $500,000 homestead exemption. However, the bankruptcy court may (and probably will) take the other properties in 8 years once the liens are lifted.
Customer: replied 4 years ago.
Is there a statute on the bankruptcy? I can never sell residence / earn money again?
re- the taxes - it does not matter if some of it is discharged as we are likely "locked" into a partial payment plan for the 8yrs on statute.
Is there any way to get rid of the credit card debt & not "expose" the other 2 properties?
Also- 100k credit card debt that is devastating our business vs. whatever equity earned on the 2 additional properties. I need to consider the trade off.
can the corporation declare bankruptcy separate from us? If so does co-mingling of funds matter- paying business bills via personal credit cards
Is there anything else to consider here?
Can you give an opinion?
Expert:  cfortunato replied 4 years ago.
There is no "Statute of Limitations" for property that is owned at the time of filing the bankruptcy. However, in about 6 months after filing, you can start to accumulate assets. No way to get rid of the credit card debt and not expose the 2 properties.
Corporate bankruptcy is an entirely different realm from personal bankruptcy - the main purpose is to keep the corporation alive, not to eliminate debt.
Opinion - since the creditors can take the 2 properties if the credit card bills are not paid, you have to decide how much you will lose by losing these properties versus how much you will lose by paying off the credit cards. If you cannot pay off the credit cards, you may not have a choice.
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 3 other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.
I don't want to drag this on any longer -you have been excellent.
just these last questions.
If I open up another can of worms you can give me the price for the next "conversation"

1. the scenario for the loss of the 2 properties is excellent until we come to this - where -location would we work - we don't have the answer to that right now.
2. based on what I have told you- has this conversation been about Corp. bankruptcy?
If not- would that be a better option? to discharge just the business credit card debt or does that put the properties at risk. The corporation does not own any property.
Expert:  cfortunato replied 4 years ago.
This conversation has been about personal bankruptcy.
Are your debts primarily personal, corporate with no personal guarantee, or corporate with a personal guarantee?
If a combination, about how much for each?
Customer: replied 4 years ago.
both
personal = credit card debt = approx 50k
corporate credit card & to vendors w/o personal guarantee. approx 20k credit card & approx 30 k to vendors.
Expert:  cfortunato replied 4 years ago.
How much personal credit card debt do you have?
Customer: replied 4 years ago.
50k
Expert:  cfortunato replied 4 years ago.
As I so not know much about corporate bankruptcy, I can't help you with that part.
If you need information about corporate bankruptcy, you can ask a new question so that someone who does know about corporate bankruptcy can help you.
Customer: replied 4 years ago.
ok - thanks

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