Author Archive

09
Jul

Do you really need to form a corporation?

People that are starting a business often think they need to form a new corporation or LLC right away. Not so fast. What are the benefits of operating as a seperate entity? The principal advantage of doing business as a corporation is that there is limited liability. What this means is that the ownwers (shareholders) cannot be held to answer for the debts of the business. Sounds great, but as a practical matter the corporate entity gives very little protection to most small companies. Banks and other grantors of credit usually have the owners sign personally for any credit extended. At least it helps reduce liability or injuries caused by my business, right? It does, but it does not protect you from your own misdeeds, just those of other employees of the company. As the vast majority of businesses have no employees, the owner will always be on the hook for his actions. In addition, the owner is generally able to cover any potential liability claims through insurance. Forming a corporation may make sense, but make sure it does before you waste your valuable time and money.

07
Jan

Do I qualify for a Chapter 7 liquidation?

The Court has devised a complex analysis in order to determine your eligibility for a Chapter 7 liquidation; it is known as the means test. In general, if you earn less than the median income for your household you qualify. You may also qualify if you are above median income, if your income less your expenses (as limited by the means test) does not exceed $100 per month. Median income can be found on the United States Department of Justice Website. Even if you fail the Chapter 7 means test you may still qualify for a Chapter 7 liquidation. If your debts are primarily business related, you are exempt from the means test and may receive a Chapter 7 discharge despite having above median income or disposable income that exceeds $100 per month.

07
Jan

Eliminate your Second Mortgage

Do you have a second mortgage that you are unable to pay? You may be able to eliminate the payment and pay it off through a Chapter 13 Plan in as little as three years. It sounds too good to be true, but because of the declining value of real estate it is possible. If your First mortgage is equal to or greater than the current value of your house, you can treat the second mortgage the same as you treat ordinary credit card debt. This is called a cram-down because you are forcing the Bank to accept less than they are due under your original agreement. Through your plan you make a small monthly payment to the Bankruptcy Trustee. The Trustee will in turn pay a percentage of your debts. Upon successful completion of your plan, your second mortgage is discharged along with your credit card and other unsecured debt.

07
Jan

Should I save my house?

Filing a Chapter 13 Bankruptcy case is a great tool for saving your house if you have fallen behind on mortgage payments due to a temporary financial setback. It allows you to formulate a Plan that re-pays the missed mortgage payments over a period of up to five years and stops foreclosure proceedings. However, saving your house may not be in your best financial interest. If the value of your house is less than what you owe the Bank it may make sense to file a Chapter 7 liquidations case and let your house go. People are emotionally tied to their houses, but this emotional tie can break you financially. If you can rent a house for significantly less than your mortgage payment, taxes, insurance and maintenance, you will be able to pocket that money every month. These savings can be used for your children’s education, a vacation, an unexpected emergency or for investment to further increase your net worth.