Central District Consumer Bankruptcy Attorney's Association

Thanks Dennis, but that's why I'm waiting to see the tax rtn and a current P&L. The lawsuit is about the lease/buy agreement for $225k
+ $70k to pay the seller's L/C and the PC's own L/C of $50k, so it might not have much in value.
Law Office of Vicki L. Temkin
mailing address:
15021 Ventura Blvd., Ste. 753
Sherman Oaks, Ca 91403
Ph:(818) 501-4658 /Fx:(818) 501-0903
www.vtemkinlaw.com
>________________________________
>To: "cdcbaa@yahoogroups.com"
>Sent: Monday, May 13, 2013 9:57 PM
>Subject: Re: [cdcbaa] Personal & corporate bk's
>
>
>
>
>Vicki:
>
>
>Question is what could the trustee get for the auto parts store inventory, or the whole store?
>
>
>You have not addressed the liquidation value of the store. Retail ops sell for 3 to 5 times yearly income. If w makes 3k/mo and h makes 1.5k/ month, that's 4.5k per month, or 52k/year. Could sell for $150K. What are the liabilities?
>
>
>If liabilities of store are more than 150K, no sale in prospect. If something small, could lose store in a 7?
>
>
>d
>
>Sent from my iPad
>
>On May 13, 2013, at 2:17 PM, vicki temkin wrote:
>
>
>
>>Dear listmates,
>>
>>I'm not really sure of the best way to do this and could use some guidance.
>>
>>
>>Married debtors, everything in W's name. Both H & W individually and W's
corporation (auto parts store) are being sued for breach of contract. W is sole shareholder and H works there with her.H claims the auto parts store pays the salaries and the expenses and that's about all.$1,500/mo. H claims it just about breaks even after expenses- corp owes a maxed out $50,000 L/C that W personally guaranteed. I am getting the tax
rtn for the corp. and a current P & L. I already have their
2011 and 2010 personal returns which showed $32,000 profit. H says 2012 and this year will be less.
>>
>>W sold a clothing store in late 2012
but the buyer can't pay the $40,000 in cash, so she took some money and
the balance in clothes. She's leased a small
space to sell the clothes, but that's not opened yet.
>>
>>Filing a personal ch 7 is not an issue. The pass the means test, most debt
being non-consumer. They own a house that's underwater, but has a
rental which pays $1,200/mo. They have some equity in their 2 cars but
not much. They want to file rather than defend the lawsuit in state ct. and I have told them very clearly it's possible the plaintiff will go after him in the bankruptcy or try for a RFS and continue in
state ct.
>>
>>He wants to keep the auto parts business going. I think the trustee would probably take the clothes from the wife but
would trustee likely close the auto parts store if it filed it's own 7?hen does a corporate bk close, not getting a discharge? Depos are scheduled in about 2 wks so no judgment to worry about and
they want to do this before then. Is filing a 7 for the corp. a goodidea and would it accomplish what they want - get rid of
the law suit and keep the business open?
>>Appreciate any help with this I can get. Thanks, Vicki
>>
>>
>>Law Office of Vicki L. Temkin
>>mailing address:
>>
>>15021 Ventura Blvd., Ste. 753
>>Sherman Oaks, Ca 91403
>>Ph:(818) 501-4658 /Fx:(818) 501-0903
>>www.vtemkinlaw.com
>>
>
>
>

The post was migrated from Yahoo.

A salary is not a preference unless the salary was way over the going rate. Even an owner is entitled to be paid for the owner's labor. The bankruptcy code recognizes wages as a priority.
Look for a contract with the debtor for wages, look at the market rate. If payments were made at the same rate for a number of years, and the pay is at market, it won't be a preference.
If the opposite, wages over market, a raise just before bk, look for a preference suit.
d
Sent from my iPad
On May 13, 2013, at 3:25 PM, Catherine Christiansen wrote:
> It may be better to defend or settle the state ls than to file a ch 7 bk for the corp for a few reasons.
> I know a few good state court litigators that can meet with the Debtors to explain their options on the state ls.
>
> In a Ch 7 Corp BK:
> The Ch 7 Trustee may claim the salaries are a preference if they paid themselves and not other creditors. This means the debtors may have to return their salaries to the Ch 7 Trustee.
>
> The corp bk replaces the first stage in winding a corp down (dealing with the assets) but you still need to file the papers with the sec of state to formally dissolve the corp, or after the bk case is closed, the corp still exists and can be sued.
>
> The corp bk auto stay will postpone the state court ls, but once the case is closed then the plaintiff in the state court ls has the right to go ahead as long as there is still a corp to sue.
>
> The auto store, if they have any other employees will be closed by the Ch 7 Trustee, the assets seized and sold.
>
> The personal bk is a good idea:
>
> if selling the clothes is a low return on investment
> it will release personal liability on the business personal guarantee
> they are current on the mortgages for their properties,
> they are able to exempt the equity in the rental property or if the rental is the same as the residence you included the monthly income in the means test calculation
> the adversary in bankruptcy can only go forward if there is fraud OR if the plaintiff can prove the debtors were paying themselves and not other creditors because that is also fraud
> the assets of the auto store are exempt
> OR you file a ch 13 for them so they can keep their non-exempt assets
>
> Hope that helps.
>
>
>
>
> Law Office of Catherine Christiansen
> 17011 Beach Blvd. Ste 900, Huntington Beach, CA 92647
> Tel: (714) 375-6651 Fax: (562) 490-8572 Cell: (562) 608-8368
> attorneychristiansen@gmail.com
>
>
> To: cdcbaa
> Sent: Monday, May 13, 2013 2:17 PM
> Subject: [cdcbaa] Personal & corporate bk's
>
>
> Dear listmates,
>
> I'm not really sure of the best way to do this and could use some guidance.
>
> Married debtors, everything in W's name. Both H & W individually and W's corporation (auto parts store) are being sued for breach of contract. W is sole shareholder and H works there with her. H claims the auto parts store pays the salaries and the expenses and that's about all. W earns $3,000/mo salary, H earns $1,500/mo. H claims it just about breaks even after expenses- corp owes a maxed out $50,000 L/C that W personally guaranteed. I am getting the tax rtn for the corp. and a current P & L. I already have their 2011 and 2010 personal returns which showed $32,000 profit. H says 2012 and this year will be less.
>
> W sold a clothing store in late 2012 but the buyer can't pay the $40,000 in cash, so she took some money and the balance in clothes. She's leased a small space to sell the clothes, but that's not opened yet.
>
> Filing a personal ch 7 is not an issue. The pass the means test, most debt being non-consumer. They own a house that's underwater, but has a rental which pays $1,200/mo. They have some equity in their 2 cars but not much. They want to file rather than defend the lawsuit in state ct. and I have told them very clearly it's possible the plaintiff will go after him in the bankruptcy or try for a RFS and continue in state ct.
>
> He wants to keep the auto parts business going. I think the trustee would probably take the clothes from the wife but would trustee likely close the auto parts store if it filed it's own 7? I suppose if it was closed down, they could re-open after the bk, but when does a corporate bk close, not getting a discharge? Depos are scheduled in about 2 wks so no judgment to worry about and they want to do this before then. Is filing a 7 for the corp. a good idea and would it accomplish what they want - get rid of the law suit and keep the business open?
> Appreciate any help with this I can get. Thanks, Vicki
>
>
> Law Office of Vicki L. Temkin
> mailing address:
> 15021 Ventura Blvd., Ste. 753
> Sherman Oaks, Ca 91403
> Ph: (818) 501-4658 / Fx: (818) 501-0903
> www.vtemkinlaw.com
>
>
>

The post was migrated from Yahoo.

Vicki:
Question is what could the trustee get for the auto parts store inventory, or the whole store?
You have not addressed the liquidation value of the store. Retail ops sell for 3 to 5 times yearly income. If w makes 3k/mo and h makes 1.5k/ month, that's 4.5k per month, or 52k/year. Could sell for $150K. What are the liabilities?
If liabilities of store are more than 150K, no sale in prospect. If something small, could lose store in a 7?
d
Sent from my iPad
On May 13, 2013, at 2:17 PM, vicki temkin wrote:
> Dear listmates,
>
> I'm not really sure of the best way to do this and could use some guidance.
>
> Married debtors, everything in W's name. Both H & W individually and W's corporation (auto parts store) are being sued for breach of contract. W is sole shareholder and H works there with her. H claims the auto parts store pays the salaries and the expenses and that's about all. W earns $3,000/mo salary, H earns $1,500/mo. H claims it just about breaks even after expenses- corp owes a maxed out $50,000 L/C that W personally guaranteed. I am getting the tax rtn for the corp. and a current P & L. I already have their 2011 and 2010 personal returns which showed $32,000 profit. H says 2012 and this year will be less.
>
> W sold a clothing store in late 2012 but the buyer can't pay the $40,000 in cash, so she took some money and the balance in clothes. She's leased a small space to sell the clothes, but that's not opened yet.
>
> Filing a personal ch 7 is not an issue. The pass the means test, most debt being non-consumer. They own a house that's underwater, but has a rental which pays $1,200/mo. They have some equity in their 2 cars but not much. They want to file rather than defend the lawsuit in state ct. and I have told them very clearly it's possible the plaintiff will go after him in the bankruptcy or try for a RFS and continue in state ct.
>
> He wants to keep the auto parts business going. I think the trustee would probably take the clothes from the wife but would trustee likely close the auto parts store if it filed it's own 7? I suppose if it was closed down, they could re-open after the bk, but when does a corporate bk close, not getting a discharge? Depos are scheduled in about 2 wks so no judgment to worry about and they want to do this before then. Is filing a 7 for the corp. a good idea and would it accomplish what they want - get rid of the law suit and keep the business open?
> Appreciate any help with this I can get. Thanks, Vicki
>
>
> Law Office of Vicki L. Temkin
> mailing address:
> 15021 Ventura Blvd., Ste. 753
> Sherman Oaks, Ca 91403
> Ph: (818) 501-4658 / Fx: (818) 501-0903
> www.vtemkinlaw.com
>

The post was migrated from Yahoo.

It may be better to defend or settle the state ls than to file a ch 7 bk for the corp for a few reasons.
I know a few good state court litigators that can meet with the Debtors to explain their options on the state ls.
In a Ch 7 Corp BK:
The Ch 7 Trustee may claim the salaries are a preference if they paid themselves and not other creditors. This means the debtors may have to return their salaries to the Ch 7 Trustee.
The corp bk replaces the first stage in winding a corp down (dealing with the assets) but you still need to file the papers with the sec of state to formally dissolve the corp, or after the bk case is closed, the corp still exists and can be sued.
The corp bk auto stay will postpone the state court ls, but once the case is closed then the plaintiff in the state court ls has the right to go ahead as long as there is still a corp to sue.
The auto store, if they have any other employees will be closed by the Ch 7 Trustee, the assets seized and sold.
The personal bk is a good idea:
if selling the clothes is a low return on investment
it will release personal liability on the business personal guarantee
they are current on the mortgages for their properties,
they are able to exempt the equity in the rental property or if the rental is the same as the residence you included the monthly income in the means test calculation
the adversary in bankruptcy can only go forward if there is fraud OR if the plaintiff can prove the debtors were paying themselves and not other creditors because that is also fraud
the assets of the auto store are exempt
OR you file a ch 13 for them so they can keep their non-exempt assets
Hope that helps.
Law Office of Catherine Christiansen
17011 Beach Blvd. Ste 900, Huntington Beach, CA 92647
Tel: (714) 375-6651 Fax: (562) 490-8572 Cell: (562) 608-8368
attorneychristiansen@gmail.com
________________________________
To: cdcbaa
Sent: Monday, May 13, 2013 2:17 PM
Subject: [cdcbaa] Personal & corporate bk's
Dear listmates,
I'm not really sure of the best way to do this and could use some guidance.
Married debtors, everything in W's name. Both H & W individually and W's
corporation (auto parts store) are being sued for breach of contract. W is sole shareholder and H works there with her.H claims the auto parts store pays the salaries and the expenses and that's about all.$1,500/mo. H claims it just about breaks even after expenses- corp owes a maxed out $50,000 L/C that W personally guaranteed. I am getting the tax
rtn for the corp. and a current P & L. I already have their
2011 and 2010 personal returns which showed $32,000 profit. H says 2012 and this year will be less.
W sold a clothing store in late 2012
but the buyer can't pay the $40,000 in cash, so she took some money and
the balance in clothes. She's leased a small
space to sell the clothes, but that's not opened yet.
Filing a personal ch 7 is not an issue. The pass the means test, most debt
being non-consumer. They own a house that's underwater, but has a
rental which pays $1,200/mo. They have some equity in their 2 cars but
not much. They want to file rather than defend the lawsuit in state ct. and I have told them very clearly it's possible the plaintiff will go after him in the bankruptcy or try for a RFS and continue in
state ct.
He wants to keep the auto parts business going. I think the trustee would probably take the clothes from the wife but
would trustee likely close the auto parts store if it filed it's own 7?hen does a corporate bk close, not getting a discharge? Depos are scheduled in about 2 wks so no judgment to worry about and
they want to do this before then. Is filing a 7 for the corp. a goodidea and would it accomplish what they want - get rid of
the law suit and keep the business open?
Appreciate any help with this I can get. Thanks, Vicki
Law Office of Vicki L. Temkin
mailing address:
15021 Ventura Blvd., Ste. 753
Sherman Oaks, Ca 91403
Ph:(818) 501-4658 /Fx:(818) 501-0903
www.vtemkinlaw.com

The post was migrated from Yahoo.

Dear Vicki,
The reason a business Chapter 7 is called a liquidation bankruptcy is because the business is liquidated. If the auto parts store files a Chapter 7, the trustee will liquidate the business and it will cease to exist. It is for this reason that businesses do not receive Chapter 7 discharges: they no longer exist to receive the discharge.
As for the lawsuit, the automatic stay would only apply to the debtor. Thus, if both the owners and the business are defendants, then since the business is a corporation the state court action would be stayed only as to the entity filing for bankruptcy protection.
Moreover, as you noted, the plaintiff will undoubtedly file a motion for relief from stay to resurrect the state court action, if for no other reason than to get a sum certain for the debt - especially if the business is the debtor and the plaintiff has to file a proof of claim to participate in the payout. And if the couple files for personal bankruptcy protection, then depending on the facts the creditor may also initiate an adversary proceeding to challenge the dischargeability of the debt under 523(c).
Finally, if the business is underwater, the personal Chapter 7 Trustee might abandon it as burdensome to the estate. Therefore, if the numbers are right a personal Chapter 7 might preserve the business, though if the business is a defendant in the state court action it would still have to deal with that lawsuit. How open is the plaintiff to negotiations?
Good luck,
Nick
Nicholas Gebelt, Ph.D., J.D.
Board Certified Bankruptcy Specialist
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Law Offices of Nicholas Gebelt
15150 Hornell Street
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Phone: 562.777.9159
FAX: 562.946.1365
Email: ngebelt@goodbye2debt.com; ngebelt@gebeltlaw.com
Web: www.goodbye2debt.com
Blog: www.southerncaliforniabankruptcylawblog.com/
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The post was migrated from Yahoo.

Dear listmates,
I'm not really sure of the best way to do this and could use some guidance.
Married debtors, everything in W's name. Both H & W individually and W's
corporation (auto parts store) are being sued for breach of contract. W is sole shareholder and H works there with her.H claims the auto parts store pays the salaries and the expenses and that's about all. W earns $3,000/mo salary, H earns
$1,500/mo. H claims it just about breaks even after expenses- corp owes a maxed out $50,000 L/C that W personally guaranteed. I am getting the tax
rtn for the corp. and a current P & L. I already have their
2011 and 2010 personal returns which showed $32,000 profit. H says 2012 and this year will be less.
W sold a clothing store in late 2012
but the buyer can't pay the $40,000 in cash, so she took some money and
the balance in clothes. She's leased a small
space to sell the clothes, but that's not opened yet.
Filing a personal ch 7 is not an issue. The pass the means test, most debt
being non-consumer. They own a house that's underwater, but has a
rental which pays $1,200/mo. They have some equity in their 2 cars but
not much. They want to file rather than defend the lawsuit in state ct. and I have told them very clearly it's possible the plaintiff will go after him in the bankruptcy or try for a RFS and continue in
state ct.
He wants to keep the auto parts business going. I think the trustee would probably take the clothes from the wife but
would trustee likely close the auto parts store if it filed it's own 7? I suppose if it was closed down, they could re-open after the bk, but when does a corporate bk close, not getting a discharge? Depos are scheduled in about 2 wks so no judgment to worry about and
they want to do this before then. Is filing a 7 for the corp. a good
idea and would it accomplish what they want - get rid of
the law suit and keep the business open?
Appreciate any help with this I can get. Thanks, Vicki
Law Office of Vicki L. Temkin
mailing address:
15021 Ventura Blvd., Ste. 753
Sherman Oaks, Ca 91403
Ph:(818) 501-4658 /Fx:(818) 501-0903
www.vtemkinlaw.com

The post was migrated from Yahoo.