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Ask Terry L. Your Own Question

Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2518
Experience:  Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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Hi , I have an unusual situation. I own a Sears Hometown

Customer Question

Hi ,

I have an unusual situation.

I own a Sears Hometown Store. The store is paid for but not profitable up to this point. I am one month late with my lease payment to the Landlord.

I am now in the process of attempting to sell 2 homes. One should sell for enough to pay the bank. The other will sell short.

I do not live in either house because I moved 150 miles away with the new business a year ago.

Right now I am living in a motel until everything clears up before I move forward.

I have some medical bills 1 year overdue about $2,500. Not a huge amount.

The only other debt I have is to the IRS for about $17,500 in taxes.

There was some dishonesty as to why the store so far has failed but my projection shows a profit of about $50,000 per year now that the learning curve is over.

I have a contract with Sears and a lease with my Landlord for the business through June of 2014.

I was told from Sears that if I can not afford my lease and the landlord closes me down that I can get sued for lost sales from Sears.

The questions are :

1. If the houses do not sell and the banks start the foreclosure process can I or would I be able to file for personal bankruptcy rather than go through foreclosure?

2. If I did file for personal bankruptcy , would it be beneficial to me (in some way) rather than foreclose even though my credit would take a hard hit? (I know my credit will take a lesser hit with a house that sells short or goes through foreclosure)

3. If I go through a personal bankruptcy , is my store in Jeopardy? I know some people file for personal bankruptcy but are then able to keep their business afloat.
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 11 months ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

Yes, you are correct that this is a bit unusual, but not too much!

Terry L. :

First, yes, you can file for personal bankruptcy, and discharge the debts owed on the homes.

Terry L. :

They will still foreclose to pay the banks if they are mortgaged out

Terry L. :

If there is equity, the chapter 7 trustee could liquidate them to pay your debts.

Terry L. :

The bigger issue though, is that you own a business.

Terry L. :

The value of the business is the asset in the bankruptcy case, and the chapter 7 trustee can sell your interest in the business to pay your creditors as well.

Terry L. :

If the business has no value, or negative value, then it wouldn't be affected.

Terry L. :

If you signed personal guarantees, those would need to be listed in the bankruptcy case as well.

Terry L. :

IRS debt might not be dischargeable.

Terry L. :

If the debt is income tax and less than 3 years old, it doesn't discharge in chapter 7.

Terry L. :

So, it sounds like a chapter 7 might not be the best option at this point for you.

Terry L. :

You may want to talk to the bank and discuss a deed in lieu of foreclosure for the one that would sell short.

Terry L. :

OTherwise, you can just work with the lender on the short sale.

Terry L. :

You can either tax a tax hit on the discount the bank gives to sell if they forgive the balance, or you can negotiate a repayment plan for the shortage.

Terry L. :

So, with these answers in mind, let me know what other questions you have.
Thanks

Terry L. :

Terry

Customer:

Thanks ,

Customer:

I have a first and second motgage on the house that will sell short. The first most likely will get paid in full but he second will not.

Terry L. :

h

Terry L. :

So, you will have to work with the 2nd mortgage if they will agree to the short sale.

Customer:

It seems it might be best to sell short or foreclose than go with bankrutcy. But the bank will have something to say about this at the end.

Terry L. :

I concur

Terry L. :

You risk losing the business in ch7

Customer:

That is what I originally thought but neede a professional opinion. If I go with bankrutcy, I receive no assets anyway.

Terry L. :

did you have any further questions ?

Customer:

not for now

Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2518
Experience: Better Business Bur 15yrs bankruptcy experience. Chicago Bar
Terry L. and 2 other Bankruptcy Law Specialists are ready to help you

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