Does bankrupcy protect my house, wages and retirement from civil suit, do I wait for judgement to file BK?

Asked over 1 year ago - Los Angeles, CA

MY BUSINESS IS BEING SUED BY LARGE BANK FOR BREACH OF CONTRACT ON LINE OF CREDIT. WE MADE REGULAR PAYMENTS (INTEREST ONLY I ASSUME) FOR 15+ YEARS AND LOAN WAS CALLED. WE CANNOT PAY,BANK DOES NOT SEEM TO WANT REASONABLE (IN OUR EYES) SETTLEMENT. I AM LISTED AS ONE OF THE GUARANTORS (ALONG WITH MY WIFE WHO HAD ZERO TO DO WITH THE BUSINESS) WILL BK PROTECT MY LIMITED ASSETS, EQUITY UNDERWATER HOME, WAGES FROM 2 JOBS AND RETIREMENT SAVINGS FROM OTHER JOB? WE HAVE CASE MANAGEMENT HEARING COMING UP, WHEN DO I FILE BK ? DO I WAIT FOR JUDGEMENT AGAINST ME OR PREEMPT WITH EARLY FILING ON PERCIEVED DEBTS?

Attorney answers (6)

  1. Stuart Gregory Steingraber

    Contributor Level 18

    7

    Lawyers agree

    Answered . The timing of your BK filing and the selection of the chapter are important and more facts about your financial situation are needed to give you useful advice. However, a BK will trump any lawsuits against you, (but not against your business if it is a corporation). Since you and your wife are personal guarantors, you both will need to file a joint petition to neutralize the expected lawsuit. If the LOC is secured by your personal residence which you say is underwater, you may be eligible for a lien-strip in a Chapter 13 which can eliminate the debt and lien on your home. There are lots of qualifiers, but it can be done. If you need/want more specifics, click on the "contact this lawyer" tab next to my response and I will discuss your case with you personally. In any case, navigating the BK without a lawyer is not a good idea.

  2. Michael Avanesian

    Pro

    Contributor Level 16

    6

    Lawyers agree

    Answered . It's hard to tell what needs to be done.

    If you're ok with closing up shop, then close up shop, wind down the business. Then consider whether a Chapter 7, 13, or 11 is right for you.

    If you want to keep your business open you have two options. The first is to file for Chapter 11 for the business. The second is to "merge" your business into you as individuals then file for individual Chapter 11 protection.

    There may be some other things that you should do, but realize this, if you want to keep your business open, and if you want to force the bank to accept terms that you can deal with, it will cost you money in the form of attorneys's fees.

    So what do I recommend? I recommend that you consult with a few attorneys in the area. You'll see that some of us charge consultation fees, others do not. Go with the one you trust the most (not the one who promises you the most).

    Be sure to designate "best answer." If you live in S. California, you may call my firm for a consultation 818-507-... more
  3. Brian Crozier Whitaker

    Contributor Level 17

    6

    Lawyers agree

    Answered . I agree with my colleagues.
    Your underwater house, your retirement savings, and your "wages" are protected by your personal BK; but any assets of the business itself (assuming it's a separate legal entity, like a corporation) are not (unless, of course, you go the Ch11 route). I suspect that the bank does NOT have a Trust Deed on your house ... but if they do, that could be another problem which might require you to file Ch13. If you file now, the lawsuit against you personally (assuming you were named as defendants) must stop, but can proceed against your separate business.

  4. Edward Thomas Weber

    Contributor Level 7

    2

    Lawyers agree

    Answered . I agree with my astute colleagues above.

  5. Brad Francis Weil

    Contributor Level 11

    2

    Lawyers agree

    Answered . First, stop yelling (take your caps lock off). Second, yes the timing of your bankruptcy does matter. Make sure you file your bankruptcy before they obtain a judgment. Third make sure you file jointly as a married couple so that both of you are protected from this lawsuit. Make sure you list all of your assets and all of your liabilities (debts). It sounds like you are a Chapter 7 but I would confirm that with a free consult with a bankruptcy attorney in your area

  6. Christine B. Adams

    Pro

    Contributor Level 20

    2

    Lawyers agree

    Answered . You should call a attorney right away to prevent the judgment being entered. It sounds like your assets will be okay, but if they obtain a judgment, your wages (if allowed in your state) may be garnished. Why wait? Why go to court? You should want to resolve this before any adverse action is taken against you or your wife. Good luck!

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