We Can’t Afford to File Bankruptcy. Our Business Fell Off a Cliff. – Lynn

“Dear Steve,

My husband and I both have our own businesses…5 and 6 years of growth..then…off of a cliff! We were keeping up with minimum payments…but now can just make basic mortgage and groceries, car no excess! We started filling out BK paperwork in Sept..haven’t paid credit cards…48 voice messages a day!

The atty wants $1650 just to file..and the counseling is another $150…where do we get THAT??? How bad is it when you can’t even afford bankruptcy???

It’s been two full months with not payments to CCs….I don’t answer calls…when will they’ve started sending letters…how long before they start litigation? What can we do???

Lynn”

The Answer:

 

Dear Lynn,

So if I read your situation correctly, even without paying any of the creditors you are just barely making it and can’t save any money towards bankruptcy.

It sounds like the bankruptcy attorney is going to file a Chapter 7 bankruptcy, just based on the price you quoted.

My concern is even if you do file a Chapter 7 bankruptcy it will leave you in the same position you are right now. Your debts would be discharged and you would not have to pay them, but you aren’t paying them now and struggling to get by.

The obvious moves here are to supplement your income, hand the house back in the bankruptcy, or drastically reduce your current living expenses in some way that will allow you some breathing room.

So, what changes can you make to either your income, expenses or both? Can you tell me more about your home and car expenses? Is there any equity? How much do your car(s) cost you each month in payments?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

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  • lynnann

    thanks for the response! I did get a job doing what I did before we moved up here…I’m working for an accountant but not making very much. My husband is doing his winter job (both of our sole proprietor businesses are seasonal) ..again not much income…but at least it’s something. The winters are another reason we got so far into the credit cards…

    Our house is mortgaged to the max and the credit cards are how we started and built our businesses when we were new up here and no bank would talk to us about business loans. I always thought I could consolidate them into an SBA loan…but then the bottom dropped out…and the banks, once again looked the other way. That’s when we talked to the atty.

    Here’s the clincher…both of our businesses are on the same property as the house. Two acres on a little lake up here… Perfect business exposure on two major roadways…doing very well (until this year) and I had planned on hiring a couple of folks to help me next season…but so much creating jobs. Now with my full time job, I will have to decide whether to even open this next season, I have a loyal following and it generates business for my husbands business as well.

    We are the pen-ultimate middle class story…not poor enough to get help, and not wealthy enough to be whining about how much we lost in the crash.

    We have no savings…that was supposed to start this year…

    Our mortgage is a little over $1400, equity line of credit of $49,000, one car payment $398 zero interest…over all our basic expenses are roughly $3200 and if you looked at our tax return, you’d ask what the problem is…and I’d say…first we were start up businesses…not making much profit in these first years…and then…when the credit card company’s saw the writing on the wall…they all jacked their interest and payments and we were done for.

    It would take $70,000 for our lives to be under control once again..and the $3800 in credit card payments could be serviced by $625 for 180 months at 7% and the rest could be savings every month.

    I thought a bank would loan it to me on the inventory of my store and value of the good will in my business…but this economy has them running scared with our tax dollars…so…you can imagine how angry I get when I hear about the millions in bonuses…We built two valuable businesses with credit card debt and a little bit of home equity…

    We were feeling pretty good last year at this time…but now…we’re just feeling pretty low. So…any other ideas? I’m still looking at the rest of the mountain of bk paperwork and feeling fairly disheartened. Is that the direction we should still go? And again..where do we get the $1800 to do it? thanks again…lynnann

    • http://GetOutOfDebt.org Steve Rhode

      Lynann,

      Thank you for the feedback and update.

      After reading the update I’m stuck on the same question, when you go bankrupt, how are you going to be able to hold on to what you’ve got now since you are already not paying those debts that will be forgiven?

      The typical way people accumulate the cash for bankruptcy is to stop paying their credit cards for a couple of months to gather the money together, but you are already not paying them, right? Yes, bankruptcy is the way to go but I sense it is going to be part of the overall solution, not the one shot magic bullet.

      Let’s assume you do gather the funds for bankruptcy. Let’s jump forward to the next step. Are you going to be able to make it month-to-month after bankruptcy if you stay in the house and property?

      Steve

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