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cfortunato
cfortunato, Lawyer
Category: Consumer Protection Law
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Experience:  Areas of practice: Landlord/Tenant, Bankruptcy, Consumer Debt
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We own a small business in Texas. We have been in business

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We own a small business in Texas. We have been in business since 1982, and have in the past been able to borrow from our local bank for equipment, repairs, remodeling, etc. The bank that we use, was purchased by a much larger banking institution, and they are not loaning to anyone. We have had to use our own money to make repairs, replace a new roof, etc. We have also had to help family members who are unemployed. At this time, we have used our savings, and our credit card debt is close to 100K. We are still current with everything, but because cash flow is less than other years ,it is very difficult to make ends meet. My wife is 58 and I am 67. We have never had a negative entry on our credit report, of over 50 years of credit and the thought of bankruptcy is not one that we are fond of. We are just trying to figure out if we are going to be able to hold this ship together. We have a mortgage on the business with payments of 2760.00 per month for another 10 years, and we DO NOT want to lose our business. We are a sole proprietor, not an LLC, or corporation. Any advice would be appreciated. Also, we lost our home in 2008 from a hurricane so we currently lease a home. Thank you
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  cfortunato replied 1 year ago.

cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy and Consumer Protection attorney here to assist you.

cfortunato :

No one is fond of filing Bankruptcy.

cfortunato :

But sometimes a Bankruptcy is the only feasible solution when one's debts are overwhelming.

cfortunato :

If you file a Bankruptcy, you will be able to "start over".

cfortunato :

Do you have any questions about filing a Bankruptcy?

Customer:

Hi Chris, Thank you for your response. Yes, we have questions regarding bankruptcy. What type of BK do we file? We do not want to lose our business, so I guess an 11 or 13 would be the only way to go? Also, we must maintain at least one credit card in order to process orders for clients. How does this work. Also, how will this affect our ability to purchase/lease new equipment as needed for replacement? Thank you for your response.

Customer:

Hi Chris,

Customer:

Are you online? I think that this website is having issues. We really look forward to your response asap.

Expert:  cfortunato replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  cfortunato replied 1 year ago.
Thank you for your response.

If you do want to keep your home and business, the type of Bankruptcy you would have to file depends on how much how much equity each one has. To determine this, please answer the following:
1) What is the current market value of your home?
2) What is the balance of any mortgage(s) or for your home?
3) Can your business be sold?
4) If so, how much could your business be sold for?
Customer: replied 1 year ago.

Chris, As mentioned in my first posting, we lost our home in 2008 from a hurricane. Also, I mentioned that we DO NOT want to lose or sell our business, if at all possible. The mortgage balance is about 220,000 and it appraised for 345,000. a few years ago.

Expert:  cfortunato replied 1 year ago.

And does your business have equity?

In other words, can your business be sold and/or does your business have assets/property that can be sold?

If yes, how much could your business and/or business assets be sold for (after deducting any loan(s) that are secured by the business and/or business assets)?

 

Customer: replied 1 year ago.

Thanks Chris for your prompt reply. The property can be sold, but by the time the debt against assets are calculated we might be lucky to have 75,000 in assets, and that might be pushing it.

Expert:  cfortunato replied 1 year ago.
Thank you again for your response.

Since your loan is secured by your business, you would have to continue to pay that loan to keep your business.
However, you would be able to have your credit card debt discharged and you would be able to keep your business and home if you file a Chapter 13 Bankruptcy, and if you are able to pay around $400-500 per month (substantially less if you qualify as head of household*) to the Bankruptcy court for 5 years (in addition to the $2760 per month for the business loan) .
(*Head of household means you supply more than 1/2 of the support for one or more dependent child.)
Expert:  cfortunato replied 1 year ago.
I made a mistake.
Since you would be filing with your spouse, your total monthly payment to the Bankruptcy court would be only around $100 per month - not $400-$500.
Customer: replied 1 year ago.

Thanks Chris, well that is good news. It seems like a no brainer except that our credit will be trashed for quite a while. Since the banks are not loaning with good credit at this time anyway,, maybe it doesn't matter. I forgot to mention that we also have a truck payment of about 525.00. Do we have the option of keeping that if we can make the payment? Also, can you file if you are not behind on any payments just yet, or do you have to be in delinquent before filing? It is only a matter of time before we will be, as cash flow is less. One other concern, is that we do require at least one credit card to process orders for my wife's business? How would that work. I apologize for the lengthy questions, but we really appreciate your help.


 

Expert:  cfortunato replied 1 year ago.
1) What is the current market value (Kelly Blue Book private sale value) of your truck?
2) What is the balance owed for the loan for the truck?
Customer: replied 1 year ago.

Chris, we will look that up and get right back to you. Also, when you have a minute, could you address my other questions listed in the last posting regarding the need for a credit card for my wife's business, and the fact that at the moment at least, we are not delinquent on bills. Also, do you handle Texas BK? Thank you so much, you are appreciated!

Expert:  cfortunato replied 1 year ago.
1) You do not have to be behind on your credit card payments to be able to file a Bankruptcy, but it is recommended that one stop paying them as soon as one decides to file.
2) You will not be able to keep a credit card if you file a Bankruptcy. Consider using a debit card instead.
3) I can answer your question about your truck without knowing the value and truck loan balance:
You will be able to keep your truck if you file a Bankruptcy.
However, if your truck has any equity (equity = market value of your truck minus the balance on the truck loan), then you will have to add the equity divided by 60 to your $100 monthly payment.
For instance, if the difference between the market value and the truck loan is $6,000, you would have to pay an additional $100 ($200 total) per month to the Bankruptcy court.
4) I do not practice in Texas. I always recommend calling the Texas Bar Association to find a recommended attorney in your state. The number is 800-204-2222.
Customer: replied 1 year ago.

Chris, oh I wish you did practice in Texas! May I ask how you know that the total fee is only 100.00 (or 200.00) if we keep the truck? I am not questioning you, please understand, just trying to figure out how we arrive at that number. Also, are you allowed to keep at least one credit card if you don't include that account in the BK? Thank you again.

Expert:  cfortunato replied 1 year ago.

When you file a Chapter 13, you must give the Bankruptcy court - over a period of 5 years (60 months) - the total amount of the value of your non-exempt assets.
If your business can be sold for $75,000, the non-exempt portion would be around $10,000 (after subtracting an available $60,000 exemption, and $5,000 cost to sell the business).
This means you would have to pay $10,000 over a period of 5 years.
As $60,000 is the total exemption available for personal property (since your business is a sole proprietorship, its assets are considered to be personal), you would also have to pay the value of the truck's equity over a period of 5 years.
By the way, if you are wrong about how much your business could sell for, and if it could only sell for around $60,000 after subtracting the business loan, and if your truck has little or no equity, then you may be able to file a Chapter 7 instead.
With a Chapter 7, you would not have to pay anything (no monthly payments) to have your credit card debt discharged.
Your Bankruptcy will be able to arrange to have your business professionally appraised to determine whether you should file a Chapter 13 or a Chapter 7.

Customer: replied 1 year ago.

Thank you Chris for taking the time to type this lengthy answer. In a Chapter 7 don't you lose the business period? I guess I am confused. I again apologize for taking so much of your time. FYI, the truck has about 9800.00 equity.

Expert:  cfortunato replied 1 year ago.

You would be able to keep the business and the truck if you file a Chapter 7 if the total equity for both is less than $60,000.
If the total value of the equity for both is a little more than $60,000, you should be able to pay the difference to the Bankruptcy court over a period of around 4-6 months (the average length of a Chapter 7) - to be able to keep both.
Since you already know how much equity your truck has, I think the most important thing for you to do is to find out how much your business can be sold for.

Customer: replied 1 year ago.

That is very interesting information. What is the best way to determine how much the business could be sold for? I feel sure that if you contact a real estate agent, they are going to go for top dollar. Also, can the court force you to sell you business? Thank you Chris, you can be sure that I am going to give you an "Excellent" rating and a tip!

Expert:  cfortunato replied 1 year ago.
A business broker will be able to give you an idea of what your business could sell for. They provide this service (for a fee) for a number of purposes besides actually wanting to sell the business. There is no reason to believe that a business broker will inflate the sales amount - as doing so will impact their reputation.
If you file a Chapter 7 Bankruptcy, the court can force the sale of your business - if it can be sold for more than $50,000 (since your truck is worth around $10,000). ($50,000 + $10,000 = $60,000, which is the total amount of personal property you are allowed to keep if you file a Bankruptcy.)
It does not matter to the Bankruptcy court that you need the business to survive.
Customer: replied 1 year ago.

Thanks Chris, Ok, then can they force you to sell under a chapter 13?

Expert:  cfortunato replied 1 year ago.
You cannot be forced to sell your business if you file a Chapter 13, and if you are able to pay the $200 per month (in addition to the business loan).
Customer: replied 1 year ago.

Ok, again that is good news. Chris, did you see my question about keeping one credit card if we did not include it in the BK? Is that possible? I promise I am almost through asking questions!Smile

Expert:  cfortunato replied 1 year ago.

You are not allowed to exclude any credit card from your Bankruptcy filing. You must include all credit cards in your Bankruptcy.
However, even if you "forgot" to include one credit card, you would still not be able to keep that card, as all credit card companies are able to find out that their customers have filed a Bankruptcy - even if their card was not included - and they immediately cancel the card as soon as they find out.
Credit card companies are able to get this information from the credit bureaus, who are able to get Bankruptcy filing information directly from the Bankruptcy courts.

This is why I suggested that you use consider using a debit card (or perhaps you know someone who will allow you to be an authorized user on their card).

Expert:  cfortunato replied 1 year ago.
However, you will still be allowed to be an authorized user on someone else's card. Perhaps you know someone who will allow you to be an authorized user on their credit card.
Customer: replied 1 year ago.

Ok Chris, I really appreciate all of your help. If I have any further questions, is it possible to get back in touch with you?

Expert:  cfortunato replied 1 year ago.
Yes - I am here almost every day. To reach me, you just have to start your question with my name (cfortunato).
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