THE customer is 53. He’s married and owns a home. He was able to get a company, which was a DBA sole proprietorship. “DBA” signifies “doing business as.” Sole proprietorship signifies an person conducts a company in his private capacity, with no company, or other sort of business entity.
Other business entities utilized to run company comprise LLC, S corporation, C Corporation, registered venture etc. In a sole proprietorship, each the debts incurred by the company, are private debts of the person running the business enterprise. As an instance, customer was in import and wholesale distribution of electric components. The company includes a warehouse to get the stock. The customer signs the warehouse rental in his private capacity even when the rental is from the title of the company. The customer has a credit line in the bank for $100,000. Even if this credit is at the title of the organization, customer is liable on this line of charge such that the credit line is treated as a private loan to customer for him to run his company.
It seems that the Trump trade warfare has been producing pressures on client’s business. His overseas providers based in China are decreasing shipping flaws. Shipping delays have adverse effect on collections because customer can’t send an order, invoice and collect with no product. There’s additional pressure on the company when a factoring firm is utilized. A factoring company financing the receivables of the business enterprise. Delayed shipments wreak havoc on factoring arrangements because in the event the product isn’t timely sent, the clients may not cover or may offset this purchase.
The client’s company was operating smoothly for 10 years. Nevertheless, the current hiccups in shipping caused significant problems for customer. If client guessed that the customer had delivery issues, customer will cancel massive orders and provide the company to other people who don’t have delivery issues. So, the client’s company has suffered considerably and no more rewarding. Worse, customer must fend off banks and suppliers that are looking to get paid.
The customer then uses his credit cards to refinance his company debts, one by one. Why do I mean by refinance? By way of instance, he’s got an American Express card with a credit line of $20,000 . He pulls on it to pay off a portion of credit line in another bank. To put it differently, he’s borrowing from Peter to pay Paul. Soon enough, he’s maxed out each his credit cards. He informs me he maxed out at $150,000 of charge cards. He pays $4,500 per month of minimal monthly payments to maintain the $150,000 current. He did that for 6 weeks but couldn’t make the payments . Well, that’s obvious.
To have the ability to cover $4,500 monthly, client’s gross income must at least be 5 times that sum. To cover that with simplicity, his gross income must be at least $22,000. However, his gross income currently from employment is just $4,000 per month.
It’s clear he’s to eliminate the $150,000 charge card debt, right? There are only two effective methods for eliminating the $150,000 of credit card debt. The first is 7 bankruptcy. The second is Chapter 13 bankruptcy. The alternatives are pie in the sky: obtaining a 2nd trust deed to repay the $150,000 or, consolidating these using a settlement firm. The very first pie in the sky is sucking $150,000 of equity out of your home and using the proceeds to repay the $150,000 credit cards. Replacing credit card debt using a mortgage on your home is never a great idea. As a result, you raise your own mortgage payments. You set your home in danger. Need I say more? Rather than paying $1,700 to your home payment, you may now pay a second $800. That raises your home payment to $2,500. That’s a poor idea.
The next pie in the sky involves signing a contract using a debt settlement business. The so called settlement business will deal with your credit card companies and beg them to give you some sort of compensation deal. The issue is that this settlement organization is someplace in Timbuktu, it’s anyone’s guess which credit card may consent to whatever sort of compensation (that is the reason why debtors that opt for this particular pie in the sky still get sued by lenders regardless of the “arrangement”), payments are routed to the settlement firm, not the creditor. To put it differently, what really happens to the money you send to the settlement business again is anyone’s guess. Along with the settlement firm may possess its own cash flow difficulties placing your obligations in danger.
If you’re qualified for Chapter 7, that’s the easiest thing to do. Chapter 7 will wipe out client’s $150,000 along with the rest of the debts and provide him a new start in life with no amassed debt for a company that failed. Why should he pay the remainder of his life paying back a business loss? He must be given a new start with no debt, like Walt Disney who filed for Chapter 7 before his Disneyland company became wildly profitable. Obviously you’ve been to his Disneyland theme parks a couple times with your loved ones, haven’t you? He filed for Chapter 7 . Therefore don’t enter the “holier than thou” mindset. It’s counter-productive and you’ll never escape your own ever-deepening debt gap.
If customer doesn’t qualify for Chapter 7 since he’s too much equity in his home that’s past the homestead exemption, then he must file for Chapter 13 reorganization instead. In Chapter 13, he may pay only some of the $150,000. In the event the non-exempt equity of his home is $20,000, he need only pay $350 per month to get 60 months, and after that’s completed, the courtroom wipes out $130,000 and all his other debts. There’s not any danger to his residence. All his obligations are paid into the Chapter 13 trustee who is an officer of the court. All payments are guaranteed by Federal law and the Federal bankruptcy court to be paid to all creditors who timely file a proof of claim. Creditors who do not file a proof of claim need not get paid. Those debts just get wiped out. When the Chapter 13 is filed, a court order protects client’s house from liens and judgments, and all creditors are prohibited from calling or suing debtor. Peace of mind and order out of chaos.
If you want to become productive again without accumulated debt, you absolutely need to wipe out accumulated debt with 7 or Chapter 13 bankruptcy. If you want to straighten out your financial life once and for all, do Chapter 7 or Chapter 13. You will not regret it. It’s this best remedy to amassed short of winning the lottery.
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Disclaimer: None of the foregoing is deemed legal advice. Each circumstance differs.
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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has represented more than five million clients in California. Please call Angie, Barbara or Jess in (626) 284-1142 to a consultation at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Construction A-10 South Suite 10042, Alhambra, CA 91803.