Thread: Personal dept to small business

My wife and I own a small wedding chapel in Texas and are going to file a chapter 7 in Dec 2008. We owe about 320,000 dollars in unsecured dept, about half of that is personal loans to the business. We have been advised to wait about six months before filing a chapter 13 but not to make any payments to any of the unsecured depts (we would not be able to pay all of them any way). The ironic twist is as of this time we have managed to stay up to date and are not late to anyone. My question is why not file both 7 and 13 at the same time, why wait to only have the creditors keep calling?

Thanks
b.bullit

Chapter 13, in a nutshell, lets you keep your land, house or any properties that are not exempt from bankruptcy. In turn, you get to pay your debtors in a system wherein your future income is already attributed as payment for your debt. This usually lasts for a specified number of years. The Chapter 13 plan is supervised by the Court, so it is a system that both protect the creditor and the debtor. It is the best option if you have property you do not want to give up.

Both plans are available in Pennsylvania, the only difference being that the list of exemptions, proceedings and mean income bar differ from state to state. These are very important differences to note, as it may mean the complexity or ease of your choices.

Bankruptcy in Pennsylvania, although an unthinkable option for some, is a well-tested and proven alternative. Always remember of course, that it is designed to help people have a fresh financial start.

With that amount of unsecured debt, I would think that chapter 7 is much better than a Chapter 13. With chapter 7 you will loathe accreditors nothing. Which Chapter 13 you will be set up on a payment plan that you will have to pay the debt off in 3 to 5 years. The question is, do you want to keep the business open? If it's doing bad and you want to close a Chapter 7 would be the best way to go.

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Can a creditor take money out of a business account I setup if I am a sole proprietor?I am not talking about business debt but a personal debt incurred before the business was setup.I know that my business debt would be my personal responsibility but I don't know if it works the other way too.I am not setting up this business to try and dodge my debts, which I plan on paying back, but I don't want them to empty my account when I start getting clients.

Thanks

the only distinction becoming that the listing of exemptions, proceedings and indicate earnings bar differ from state to state. These are quite essential variations to be aware, because it might imply the complexity or ease of the choices

It is not clear why you would chose a Chapter 13, unless you can make the payments comfortably (lawyers do not all agree on whether 13 is a good option). Filing both at the same time is not really possible and serves no purpose, though there may be good reason to file 13 and then switch to 7, depending on how it plays out. You can file a personal bankruptcy and include business debt. This is a common practice, but you need a competent lawyer. Don't do this on your own.

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I would suggest Chapter 7 is far better than Chapter 13 as applicable to your issues. Since Chapter 13 will set you on a payment plan in which you will have to pay the debt off in 3 to 5 years. So Chapter 7 is better option to go.

It sounds like you are considering filing chapter 7 for your business and then waiting 6 months before filing chapter 13. This is not an uncommon strategy, as it allows your business bankruptcy to clear up and you to possibly keep proceeds from the asset sale as a creditor.

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