I am a sole proprietor of small graphic design business that I have owned for over 25 years. Unfortunately, I have acquired a line of credit and credit card debt of more than I can pay each month. I end up borrowing small amounts every other month to pay the monthly payments. My business has faltered in the last couple of years. I own a home that I share mortgage with my spouse. It will be paid off in 4 or 5 years. There is good deal of equity there. I do not want to use the equity as a means to pay off my business debt and start over with payments on the house. I have considered bankruptcy but am afraid the debtors would come after the equity in the house. I can I file for bankruptcy without the hose equity being used to pay debtors?
Would it help protect my home assets of equity if I put my business into LLC situation? Also, I was considering putting the house in just my spouses name, taking my name off the Deed of Title. Would that take the liability away from the equity of the house. Is there a time period involved? My credit rating has been in the mid 700. I haven’t checked in the last four months however. I continue to make payments on time to all debtors and other obligations. But my income to debt ratio is very bad.I would rather not file for bankruptcy or get involved in a consolidation payment situation, if I could just continue to pay down my debt. But I am very concerned of how long I can make these payments before my business improves. Any suggestions?
The first thing that I would do is meet with a bankruptcy attorney and discuss your situation. Ask about the equity in your house and whether or not it would be protected if you had to file for bankruptcy.
Putting your business into an LLC at this point would likely not remove your liability for the debt as you are potentially responsible for the debt if the company defaults. Further the LLC was not the entity that borrowed the money.
As far as putting your house in your wife’s name, that would not likely help much either. If you do file bankruptcy and your equity is not protected, they will do a look back, usually for up to two years and see that you transferred the asset. Of course be sure to verify everything with a licensed BK attorney in your state.
If the equity in your home is not protected, the attorney will likely start talking about a chapter 13 and you would need to explore that to see what the payments would likely be.
Short of bankruptcy we can look into some other possibilities to get this debt paid off or settled. It seems that regardless of the path you take, you are going to need to make some decisions soon. Continuing to borrow money, to make payments on a debt that you are not likely going to be able to pay is just digging you deeper into the hole.
If you would like to set up a phone consultation with me, so that I can get a much better understanding of your overall financial situation and provide you with much more specific advice, feel free to set up a call on my website.
Damon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at DamonDay.com
If you have a debt related question you’d like to ask, just use the online form.