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    2 Replies Latest reply on Jan 13, 2008 8:02 AM by LUCKIEST

    Touch Decision / Getting ready to File Chapter 7

    GoingSouth Newbie
      Alright, I have a touch question. I have been trying to float my business on credit cards for the past couple of years. I have finally reached the end of my rope. Robbing Peter to pay Paul has now ended. I do not have enough income to cover my minimum payments. Chapter 7 Bankruptcy is my only answer. I do not have enough resources to file Chapter 13 or I would. I have done all the things that I have now found out I shouldn't have. I have cashed in my retirement funds and taken out a second mortgage/home equity loan.

      With all that said, I created a "C" corporation for the business when I began. I signed up for a couple of the credit cards under the corporation using my corporate information. I am the only principle in the company. When funds got tight, I started using my corporate cards for personal bills/needs. I know, I know - mingling is bad, but I had no choice.

      Here is my question. I am filing personal bankruptcy very soon. How do I handle the credit cards under the corporation? Do I have to file bankruptcy for both myself and separately for the corporation? Since the cards are also using my SSN (Social Security Number) would they be under my personal filing?

      I am hoping to schedule an appointment with an attorney this week and I am sure he/she will have the answer. I am just looking for some real life advice from the sages on this site.

      Thanks in advance,
      Going South
        • Re: Touch Decision / Getting ready to File Chapter 7
          Lighthouse24 Ranger

          I'm sorry for your financial difficulties. I don't have first hand experience with this, but I think the answer is straightforward -- provided that you are your corporation's only shareholder. You would be the guarantor on your corporate credit cards, so if the business had failed first, you would have been personally on the hook for the balances. If you file Chapter 7 as an individual first, that's basically a liquidation of your assets, and those assets would include all the shares of common stock issued by your company that you own -- so I don't think you'd have to file for corporate bankruptcy because the trustee would effectively liquidate the company and all its assets along with everything you own personally (except the items that qualify for exclusion). If there are other corporate shareholders, however, it could be more complicated.

          Meeting with an attorney is essential. Chapter 7 changed dramatically a couple of years ago, and a lot the information about it on-line is not longer correct. I think one big change was that the credit card purchases you make during the six months before you file are now subject to very strict limitations (both dollar amount and types of items purchased). Buying anything that's not within those limits is considered fraud. Since you used corporate card for personal purchases, you really want the expertise of a bankruptcy attorney.

          I hope you're able to get things back on track. Best wishes.
          • Re: Touch Decision / Getting ready to File Chapter 7
            LUCKIEST Guide
            Going South, I am a SCORE Counselor and we find that many new businesses try to float their business on
            credit cards It is great for the first 30 days or so. BUT as you said you are " Robbing Peter to pay Paul "
            unless sales take off or increase dramatically in a short time frame.
            This does not help you to succeed buy you are not alone. Do you have a Business and Marketing Plan??
            Sorry for your difficulties, any chance you can turn the business around??Good luck with your attorney.
            LUCKIEST