It is possible that while you are reading this book, some aspect of the law will be changed. So when we write about bankruptcy for small businesses, we will often have to cover some of the same information in several places in this book.
Sole Proprietorships
They often think their company is a corporation because they use the word company in the company name. The company's debts are considered personal debts of the entrepreneur, while the company's assets can be reached to pay off the individual's personal debts.
Partnerships
The most common misconception surrounding sole proprietorships is that once the business's assets are sold, the business's creditors cannot go after the individual's property. Because the sole trader and the entrepreneur are considered one and the same, a debt against one is treated as a debt against the other.
Corporations
It is very common for small business owners to insist that only the corporation is liable for a debt and not them personally, only to find out once they actually read the contract that they are in fact personally liable. The S corporation is simply a tax device to modify income tax payments; it has no effect on corporate debt.
Limited Liability Companies
This book is for small business owners and entrepreneurs who are facing money problems and are considering filing for bankruptcy. Small business owners include anyone who owns a business in which he or she is a key element.
Double-Sided Pressure
Reasons for Money Problems
In the late 1970s, credit card issuers and other creditors could raise the interest rates on their cards and loans. The reason high interest rates were traditionally not allowed before the late 1970s was that everyone knew that once a person or business fell behind on an 18% interest rate, or even on a 12% interest rate, it was almost impossible to be caught. on.
Downward Spiral
Effects of Financial Pressure
People often don't realize how much pressure they're under due to debt stress until it's released. People who have these kinds of financial problems don't realize how many other people have the same problems.
Business Creditors
Personal Creditors
Steps the Creditor Cannot Take
He or she cannot take any other actions that will serve to harass, oppress or abuse the consumer. The FDCPA states that the consumer can write the debt collector or creditor to say that he or she refuses to pay the debt or wants all further communication to cease.
Steps the Creditor Can Take
- Bankruptcy
- Bankruptcy
- Bankruptcy
- Bankruptcy
However, for reasons we will discuss, a Chapter 11 bankruptcy is often not suitable for a small business. This is very different from a Chapter 7 bankruptcy, where creditor approval is not required.
Comparing the Types of Bankruptcy
If the business doesn't generate enough to cover this, the owner will have to use personal resources to bail him or her out. And it is often the owner's personal financial health that forms the basis for the business cash reserve.
It Will Ruin My Credit
Notice of My Bankruptcy Will Be Put in the Newspaper and Become Public
This means that there will be a file at the bankruptcy court that can be examined by any member of the public. The layout of the web page is designed by the government and is not made for ease of use.
It Will Ruin My Spouse’s Credit
Therefore, assuming the spouse is not a co-debtor, an individual's bankruptcy should not affect his or her spouse's creditworthiness. Additionally, the creditor and the credit bureau could be taken to court if this error is not corrected.
I Will Lose My Home and Cars
This is almost always waived when the spouse objects to entry because there is no legal basis for such a claim. Of course, if the spouse (or other family member) is a co-debtor, then the debt and bankruptcy will affect the spouse (or other family member).
I Will Lose All of My Other Property
The protection is provided to people's main residence. You cannot therefore claim an exemption for holiday homes and rental properties. The protection is normally provided for one vehicle per person, so if you own multiple cars (including cars used by your children) you risk losing those extra cars unless there are loans against them for more than their value.
They Will Sell My Property at an Auction in Front of My Home
File Bankruptcy, My Spouse Will Have to File Also
My Spouse and I Will Lose Our Jobs
However, it must be said that there are some employers who do not look favorably on a bankruptcy filing. They are the ones who lose money due to bankruptcy and of course they do not look favorably on the process.
I Will Lose My License
I Will Not Be Able to Get Student Loans
One is government-guaranteed student loan pools and the other is private loans to be used to pay for schooling. Government-guaranteed student loans—the vast majority of loans used for schooling—are not affected by a bankruptcy.
I Will Not Be Able to Have a Bank Account
These loans, like any other loan, will remain in effect for a number of years until you rebuild your credit.
I Will Be Put in Jail if I Do Not Pay My Bills
The Debts Will Go Away in Time
If you were to acquire a house or land in the place where the judgment is documented, the judgment will attach itself to it. When you transfer the property, the buyer will normally require the judgment plus interest to be paid.
I Will Never Have Credit Again
The applicable time period on your credit report is not only seven years from the original debt, but seven years from the last major debt activity. They try to deal with debt collection by explaining their position to creditors and debt collectors and trying to work with creditors to arrange lower payments.
Budget
Borrowing and Debt Consolidation
It usually takes about a week or two after you enter your information for us to find out if you have received a loan or not. The real test is whether they gave you the loan within a reasonable time.
Warning
The bet is that you will have no more credit card debt after you refinance your home. If you spend your pension money, you won't be able to retire and you will have to work when you get older.
Dealing with Creditors
Even if you can get a debt consolidation loan while experiencing a financial crisis, you will likely be charged a high interest rate. Even if you're dealing with one creditor, your sincere attempts to explain yourself probably won't work.
Workout Program
The cost to you is very low and much of the financial support for CCC comes from the credit industry and the United Way. I could do that.” The mechanic said, “You're not paying for the replacement, you're paying for me to know which belt and switch to replace.
Workouts
On the other hand, a business creditor will try to secure a more protected position if your business fails and has to declare bankruptcy. Since the deal is not your lawyer's business, he or she can be more objective about its options.
Pension Plan Borrowing
Borrowing Against a Home to Pay Off Credit Cards
Here's where it might make sense to borrow against your home to pay off business and personal debt. As such, you will lose your home before foreclosure if you do not make your monthly payments.
Borrowing from Family Members and Giving a Vehicle or Home as Security
Whether it's called a second mortgage or a home loan, it still has your home as collateral. The trustee sets aside the lender's claim and the vehicle or home is treated as if nothing is owed on it.
Taking a Cash Advance on a Credit Card
If someone is going to lend you money along with a vehicle or home as security, take the time to formally confirm the transaction with the appropriate security documents. And remember, if the documents are not correct, your family member may have to repay the loan because this is considered an insider preference.
Living on Credit Cards
Transferring Balances from One Card to Another
Lying or Exaggerating on Loan Applications
Not Paying Income Taxes
Stopping Payment of Withholding
This means that if you made your wife or daughter a vice president or secretary, they will be personally liable, even if they had nothing to do with the company's operations.
Not Following Corporate Formalities
Maybe you started a corporation, but you let it die of neglect and after a while the corporation no longer existed—just you or your group running the business as a sole proprietorship or partnership. Credit cards or personal loans may have been used to start or continue a business.
Business Debts
The agreement signed with the credit card company should be checked to see if it was signed by you as an officer of the company or by you individually. Of course, all letters and memoranda between you and the seller should be reviewed to see what light they can shed on the parties to the loan extension.
Business Assets
Most people, when asked about the value of their business or personal property, will list what they paid for it or what it would cost to replace the item. The value of a vehicle is the value it would sell for at retail (from a car lot in the condition it is in).
Profit and Loss
Computing Your Debt Ratio
People with a Quick Ratio above .9 are very close to a financial crisis, if they are not already experiencing one. If your household income is cut in half, you can go from a safe Quick Relationship to a very bad one overnight.
Classifying Your Debts and Assets
The trade-off was: 'I will pay the debts so that I cannot pay spousal support.' The person would then file for bankruptcy and therefore be left without spousal support or debts. Home Sue Can Keep: There is $0 equity in the house, so the trustee will not use it to sell it for the benefit of creditors.
Observations
When a small business owner begins to realize that bankruptcy is a real possibility, he or she will start thinking about steps he or she can take to protect his or her hard-earned property for his or her family. Some of these steps will only cause problems when and if bankruptcy is filed, while others could amount to fraud and land the person in jail.
Paying Themselves a Bonus After Not Receiving a Salary
Taking Goods from the Business
Paying Off Loans to Family Members and Close Friends
Since repayments to parents can have such negative consequences, you should never borrow money from family members when it is money that they cannot simply afford to repay. However, in reality it is a terrible trap if they cannot afford to write off the money they have lent you and you are forced to declare bankruptcy within two years of receiving a loan from them.
Transferring or Selling Property to Family or Friends at a Low Price
The bankruptcy forms ask about such transactions and you will be faced with the decision to tell about them or to lie. It is much better to work your way through bankruptcy with the facts as you had them when you started having money problems.
Paying Off Car Loans
If you lie, you have committed bankruptcy fraud and expose yourself to a criminal conviction for a federal crime. It is much better to work your way through bankruptcy with the facts as you have them when you start having money problems. maybe within your state's vehicle protection zone and you won't have to pay anything to the administrator.
Buying a New Car
Hiding Assets
The means test is a little more complicated for a person running their own business. To file a Chapter 7 bankruptcy, one must show through the means test that he or she has very little money left over.
The Automatic Stay
Trustee
The first is designed to have you declare under oath that you have placed a proper value on all listed property, that you have listed all of your property, and that you have not improperly transferred money or property to a third person.
Section 341 Meeting
In both of these cases, the trustee can force the recipient of the property or money to surrender (give up) what he or she has received. The trustee usually does not interfere with property you choose to turn over to a creditor.
After the 341 Meeting
People always ask if there will be other people at the meeting as they fear having their personal affairs shown in public. The creditor meetings are too boring and out of the way to attract spectators.
Problems That Can Arise
The disclosure statement provides an overview of the reorganization plan and how the different types of creditors will be treated. It is used to work out the size and term (three to five years) of the plan.
After the Plan is Filed
Second, the debtor must devote all or substantially all of his or her disposable income to the repayment plan. Often the creditor will refuse to allow any substitution on collateral and the debtor must seek help from the court.
Inheritances
What you own is accessible to the bankruptcy trustee, and to protect it you must use the exemptions allowed by applicable state and federal law.
Tax Refunds
Gifts from Family or Friends
Deceiving the Trustee
Income Increases
The increase in income may come to the attention of the Chapter 13 trustee in a different way in the case of a business owner or a regular wage earner. In some cases, people are turned down for the house or car and are required to pay more into the Chapter 13 plan because of their higher disposable income.
Audits
Much trust is placed in the person completing the bankruptcy petition, but the system provides opportunities to test the filer's veracity. The petitioner will be asked to provide deeds and car titles to see what type of car the petitioner actually owns and who owns the land and vehicle, and bank records to see how much money is actually flowing through the business and into its hands of the individual. .
Challenges by the Creditors
To prevent this process from being abused, the law now provides that if the creditor files a challenge without a reasonable basis, the creditor must pay the debtor's attorney fees. If a lot of money and assets are missing, creditors will want to know what happened to them.
Challenges by Third Parties
If they can threaten enough people and persuade enough people to settle, the creditors can collect a lot of money. Creditors will also ask why the assets and their values listed on loan applications differ from what appears on the bankruptcy petition.
Criminal Sanctions
Others want to continue running the business and look for ways to do so after bankruptcy. Whether they will be able to do this will depend on the nature of the business.
Keeping a Business Alive
The phone number has absolutely no value to the trustee and he or she will likely sell it to you for a normal price or simply allow you to get it back. Normally, the curator will quite casually relinquish his or her right to the space.
Reasons to Have Credit
Obtaining Credit After Bankruptcy
It is difficult to give a hard rule on how long it will take to get the loan back. Within two to five years, you should be able to qualify for mainstream credit cards.
Reaffirming Credit Cards
Once the card is revoked, you don't get it back just by reconfirming the debt. You will need to make monthly payments that are much higher than the minimum payment in order to use the card.
Scorekeeping
Isaac's Honest Scores are used by approximately 75% of the nation's mortgage lenders and all three major credit bureaus. Fair Isaac once stated that even a simple credit scoring system is likely to have many different possible combinations.
Rebuilding Your Credit
A type of bankruptcy filed by either a corporation or an individual
It allows for the cancellation of certain unsecured debts without a repayment plan and may require the sale of some of the filer's assets.
A type of bankruptcy filed by either a corporation or an individual (but normally by a corporation). It provides for the reorganization of the filer’s
A type of bankruptcy for family farms
A person or business that has no assets a creditor can reach to collect judgments given by the court. A promise by a person or business to pay a debt that is not backed by a security interest.
