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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33779
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My problem is complex, overwhelming and terrifying. I own

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My problem is complex, overwhelming and terrifying. I own a video production business (sole member LLC) which is in my home. I also have a part-time job. Prior to 2008 I was worth $2 million. I was wiped out in the crash due in part to broker misconduct; that was litigated and settled for a tiny amount. I was left with debts of $250,000, a very small remaining financial cushion, and not enough income. $70,000 of the $250,000 debt is a business line of credit with a UCC lien against my company's assets (though nothing is itemized). I now have $20,000 left, a monthly nut of $10,000 and in July I injured my back on the part-time job. Very shortly I will run COMPLETELY out of money. I have two personal credit cards and two business credit cards, each with between $15,000 and $25,000 balances. I still make about $60,000 in video and about $30,000 from the part-time job but it's less than my outflow and the video income is sporadic - I can go months without a job and then make $20,000 all of a sudden. Having lost ALL my net worth in 2008 and not being able to keep my head above water, I'm at a loss.
Submitted: 10 months ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 10 months ago.
Hello,

I don't see a specific question concerning your circumstances. .I would prefer not to guess, so if you would kindly pose a question, I'll be happy to try to assist.

Thanks in advance.
Customer: replied 10 months ago.

That's part of the problem: I'm not sure what or who to ask or where to turn. I would like to not lose my home; to not lose my home I need to not lose my ability to make a living. Once I run out of money, if I default on the line of credit, because of the UCC lien I presume that means the bank can sell my production equipment at auction. If that happens I will lose my home. If I default on credit cards I won't be able to travel and travel is a significant part of my business (I've shot projects in London, Copenhagen, Victoria, etc.). Because of the complex mess of company and personal debt, some of it credit card debt, some of it the business line of credit, some of it my mortgage, I don't even know what kind of professional can help me. I don't know whether I have to file bankruptcy or what impact it would have if I did (can I keep the tools of my trade such as a video camera, computer, etc.) or because of the UCC lien does the bank get it if I file bankruptcy? What is the correct action for me to take NOW, while I still have enough money to cover the next two months of bills, and with what kind of professional do I take that action? Credit counseling services are for personal debt but the mix of that and the LLC puts this beyond what they deal with.

Expert:  socrateaser replied 10 months ago.

What is the net equity of your home (fair market value minus all loans, or other liens secured by the property)?

 

Is the production equipment all owned by the LLC?

 

Is the business credit card personally guaranteed?

Customer: replied 10 months ago.

Current mortgage balance is $267,000. House is worth roughly $350,000.

Customer: replied 10 months ago.
Sorry - didn't see you had more questions.

The production equipment is all owned by the LLC. ALL credit including the business credit cards are personally guaranteed.
Expert:  socrateaser replied 10 months ago.
Okay,

Re the home, the bankruptcy exemption for a single person is $75,000 equity ($150,000 if married and your spouse also files bankruptcy). So, that covers $342,000 in equity. Considering the cost of sale commissions, the trustee won't sell the house, because creditors will get nothing. You will almost certainly keep it, as long as you can make the mortgage payments.

Your income may be too great for a personal Chapter 7. So, you could file personal Chapter 13, make payments on your credit card debt for the next 5 years, and discharge the remainder. During that time, you will probably be able to reestablish credit for new credit cards after about two years. In the interim, you may have some borrowing power issues -- no doubt about it.

You can try to get a secured credit card using your home equity. Then you will have borrowing power. But, the botXXXXX XXXXXne is that you cannot continue to generate bills that exceed your income, because that means you're not really earning anything.

In fact, you may actually be a candidate for Chapter 7, which would end all of your debt problems overnight, and leave you with the house and perhaps all of the video equipment as "tools of the trade." This could require a simultaneous Chapter 7 for yourself and a Chapter 11 for the LLC. Chapter 11 is generally expensive, but it may be worth it, because if you handle this right you could pretty much keep all of your assets and get rid of all your debt.

Find a local bankruptcy attorney who has small business experience (most bankruptcy attorneys have no competency in this area, so be careful who you pick -- make them prove that they've handled your type of circumstances in the past). Put your financial cards on the table, and see if the attorney can put together a plan to get you out of this mess.

I don't have enough info here, but I think it's doable, based on the info I have.

Please let me know if I can be of further assistance. And, thanks for using justanswer.com.
Customer: replied 10 months ago.
When you say Chapter 11 is expensive - can you put a ROUGH range to it so I have a sense of whether it is feasible?
Expert:  socrateaser replied 10 months ago.
Depends on how long it takes to get a confirmed plan to save your assets. I'm thinking you'll probably have $10,000 in legal expenses -- but you can spread them out over the five years of the bankruptcy plan.

If Chapter 11 isn't feasible, or the costs turn out to be greater than I estimate, then you may have to just let the bankruptcy trustee sell your interest in the LLC. If your video equipment is all subject to the UCC1 lien, then that can't be sold -- and it probably means that the LLC has no real asset value -- in which case, the trustee won't have anything to sell, and you'll keep all of your assets intact, as long as you can continue making payments against them after your bankruptcy is done.

If that scenario plays out, and your income is actually less than the state median for your family size after deducting your annual expenses, then you may be able to just file a Chapter 7 on both the LLC and yourself, and after the dust settles, you keep everything but your debt and walk away with a fresh start after maybe 120 days.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33779
Experience: Attorney and Real Estate Broker -- Retired (mostly)
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