Bankruptcy, business and spouses stuff.

[taylorjm]

What is the name of your state? Michigan

I currently own a business, which is an S-Corp. Of course, just about everything that has to do with the business has my personal guarantee on it. I am the only name on anything with the business, my wife is not on anything at all. All the credit cards with balances on them, due to the business are in my name, none of them are joint. Our home has just her name on the mortgage and title, she bought it before we were married and it stayed that way. We have one joint bank account with just a small balance in it, our major checking/savings/retirements/stocks are all in just her name. The only thing with my name on it is a mutual fund account, that actually has the name of my wife's trust on it, and I am a trustee of that account in case something happens to her. Basically, she has all the assets, and I have all the debt. We did it that way because of me starting a new business. Now, after a few years, I'm considering filing bankruptcy because the business just isn't performing well enough to keep up with the debt. I haven't decided for sure, and if it happens, it wouldn't be until next year. Now, the major question is: My wife and I put in some cash to start the business, about $70k, its on the company books as a loan. I'd like to pay that loan off instead of paying off a credit card. Obviously, it would look like I'm being preferential to that loan, for obvious reasons. Any idea how I would go about getting that money back prior to filing personal bankruptcy? If my wife isn't anywhere on the loans or credit cards, there isn't any way she can be liable can she? Since my name isn't on the house anywhere, that can't be in danger in any way can it?

Thanks.

 

[JETX]

Sorry, but I doubt that any responsible forum members will help you to commit possible creditor fraud by paying yourself before the owed creditors.

Hey, I have an idea.... how about paying the creditors INSTEAD of yourself??? Then, the person who took all the chances and spent all the money actually gets a LITTLE 'hit' on this.

 

[taylorjm]

Reply

I wasn't asking how to commit fraud, because I wasn't sure that there is a priority in which creditors should be paid. The loan from my wife made to the company is the first loan or debt the company even incurred, so I wondered if you had the right/ability to pay off the oldest debt first. As far as getting a "hit", how about not taking a salary for 3+ years?? How much of a "hit" would that be for you if you gave up 3+ years of work and didn't get a penny, and it actually cost you money?

I'd appreciate any other replys that might actually be useful.

 

[willingtocope]

You will find a couple of less than helpful people here....

But, I'd suggest you talk the whole thing over with a lawyer. There's the question of whether you do a BK 7 personnally, or on the business, or both. If none of the debt you have is secured, then you can probably take whatever money comes in and spend it however you like...like paying your wife back. You will certainly have to declare personal BK 7 to protect your assets from the unsecured creditors that you personally guranteed. But maybe you can just let the company die. The fact that you're an S Corp does confuse the situation however, since it does tie your personal assets to the corp a little more than a C Corp would. And, depending on the state you live in, it may not be possible for you to file alone...you wife's assets may have to be included.

Again, talk it over with a lawyer...

 

[taylorjm]

We are in Michigan.

Can I ask what you mean by the fact that I might not be able to file alone, and that my wife's assets might have to be included? Are there certain states where a married couple must both file bankruptcy? or something like that?

I do plan to talk to a local attorney at some point, I've been putting it off hoping the economy in our area would start to turn around.

Thanks.

 

[willingtocope]

Some states use federal law...most have their own variations. Michican does recognize "Property held as tenancy by the entirety may be exempt against debts owed by only one spouse"...which I think means, if the house is completely in your wife's name, the BK won't touch your house. However, talk to a lawyer...

You can also pick up a copy of "How to file for Chapter 7 Bankruptcy" by Nolo Press which does have a lot of answers in it. Note that it only deals with personal not corporate issues.