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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Dear cfortunato, Heres another question: About 4 months ago

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Dear cfortunato,
Here's another question: About 4 months ago I took out a cash advance against my credit card sales (14% hold back for 1 year.) I'm trying to figure out if they are a secured or unsecured debt? One of the first lines in the contract says that I grant them a security interest in my business. And they did complete a UCC filing with my home address (I rent.) There is nothing specific in the contract about the funds use other than "purchase inventory" Any idea, if I file for CH.7 if they would actually be considered a secured debt?

Hi again,
The cash advance would be a secured loan to the extent of the value of your business, and unsecured for the balance.
In other words, if the loan was for $10,000, and your business was worth $6,000, the secured portion would be $6,000 and the unsecured portion would be $4,000.
Customer: replied 4 years ago.
To clarify, if I liquidate my business myself (before BK), and the loan was for $15K, and I only raise $7K in proceeds once the business is liquidated. They would have preference for the $7K, and then be unsecured like the rest of the creditors, when the trustee looks at my personal assets.
Yes - that is correct. The remaining $8K would be unsecured.
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