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微博SOLE PROPRIETORS NEED CHAPTER 7 RELIEF FOR $280K CREDIT CARDS AND $80K COMMERCIAL LEASE; CORPORATION OWES $400K COMMERCIAL LEASE GUARANTEED BY STOCKHOLDER SPOUSE
時間:07/03/2020
瀏覽: 20351
Clients are husband and wife in their mid sixties. I asked them if they have started receiving social security benefits, and sadly they told me that they migrated less than ten years ago so have not yet contributed at least ten years to social security. They have contributed for 8 years and need 2 more years to go to qualify for social security benefits. From the time that they arrived in America, they have been self-employed with two retail based businesses. So their SS contribution is based on self-employed income. Unfortunately, their retail business has ground to a halt as of March, 2020 when the lockdown started taking place in CA. Prior to the pandemic, the business gross is about $10K a month. Since March, the gross receipts are zero. They don’t see any way at this time to complete two more years of self-employment contribution to social security to complete ten years. You need ten years of contribution to qualify for social security benefits. This is the minimum threshold. You have to be working or be self-employed with social security contributions for ten years; otherwise you don’t get any social security benefits when you reach 62. At 62, youonly get 70% of what you will be getting at 66 but you have the choice of getting social security early at 62.
ADULT CHILDREN TO THE RESCUE
Fortunately, clients have 4 adult children who are employed and who together contribute $1,200 for them. That’s great, but hopefully when the virus is destroyed by the vaccine which should be available maybe by the end of this year, clients can set up another business and start contributing to social security again to complete their ten years.
Their retail business has good demand from the public when things get back to normal.
In the meantime, since they have no business for the last 3 months and with future business still looking pretty bad since we are not able to control the virus at this time with total lack of leadership in that area and with civil unrest everywhere in the nation, millions of Americans losing their jobs and millions of small businesses that cannot recover even with PPP loans to tide them over for several months, the present and the future look dim. We are like a rudderless boat in a tempestuous sea being aimlessly tossed about by waves that we have no control over. The captain of our ship is nowhere to be found.
LAST 8 YEARS AS SOLE PROPRIETORS OF RETAIL BUSINESSES
In the last 8 years of doing business as self employed sole proprietors, clients have racked up $280K of credit card debt! That’s almost $9K a month of minimum credit card payment! I guess they have must used credit cards to keep their businesses afloat during lean months in the last 8 years. They have not paid the retail lease since March. They still can’t open their retail business now because their kind of business is not yet allowed to open. So with $280K of credit card debt, and another $60K of commercial lease that they can’t pay because there is no business due the pandemic, clients decided to start fresh without accumulated debt with a Chapter 7 petition. They will wipe out the $280K of credit cards and the $60K of unpaid commercial lease. With this decision to file for Chapter 7, they are on track to become productive citizens again when things get back to normal. Maybe by the end of the year, they can start another business and complete their social security contributions. Two more years, that’s not a long time and it’s certainly doable without $280K of credit cards weighing them down and choking them. Chapter 7 is the right decision. This is 100% correct.
LIKE GOLDEN CORRAL BUFFET
Next client is 58. Still young. Ask my other client who is 92. He says at 58, you’re just a baby. I quite agree, not a baby but still young. He has a lot of questions and I answer them one by one. He and 2 other persons own a corporation that operates a buffet restaurant. It’s obvious that buffet restaurants have a difficult time getting started again, notwithstanding the greetings from Golden Corral saying they have re-opened. You can go to Golden Corral now and eat there in the restaurant. I guess they serve their food now like dim sum on carts, maybe? And you know Souplantation decided to just close their business permanently after 40 years because of the virus. I really like their fresh food and soups and I’ve been going there once a week for the last 30 years. I was looking forward to their re-opening, which alas, is never to be.
Back to client’s problem with their buffet obviously has been hard hit by the virus. Nobody wants to be exposed to the risk of getting the virus by eating at a buffet where people “share” food by getting food from the same plates with the same service spoon. Certainly sometimes people cough or sneeze into the shared food plates, donating virus if they are asymptomatic. We are made to understand that lots of people are asymptomatic so there are a lot of virus carriers who have no symptoms of being sick but may spread the virus. So buffets are particularly open to this kind of virus spreading because the way food is served. Buffets were very popular before because we can all we can there. We gorge ourselves with all the good food at buffets. Now because of the virus, people shun buffets. A drastic change of fortune, sad to say for client.
Client’s business has not paid rent of $20K a month for the last 3 months since March. So that’s $60K owing. There’s two more years of unpaid rent so that’s another $480K. Well, why not just close the business permanently with a Chapter 7 filed by the company? Well, someone near and dear is on the hook on the commercial lease as well. Client’s husband signed a personal guarantee on the lease, so he’s liable for the $60K plus the $480K of unpaid lease if the company does not pay it. What did I tell you? I said never personally guarantee the lease of your business. I told you this years ago and I repeated this many times in different ways.
PPP TO THE RESCUE? CIRCUE DE SOLEIL HAS $1B DEBT & NO REVENUES SEEKS BK RELIEF
Well here comes the PPP, which is the pandemic SBA loan, which the business got recently. The business got $150K of PPP (whether or not that is personally guaranteed is another issue) for the purpose of paying rent. That pays 4 more months of rent. So maybe client can use that to negotiate a way out to settle the lease for good and have the husband’s personal guarantee cancelled? Sure, that’s worth a try. If that works, then let’s see what happens next. One issue would be the PPP is a loan so it has to be repaid, right? And the purpose of the PPP is to pay the rent to continue business, not to settle with the landlord for future rent, right? There are new and different issues involved obviously. So what happens if there is still no business after PPP? You can’t operate a business that has no revenues. No amount of PPP can solve the problem of no revenue. PPP just delays the inevitable. Cirque-de-Soleil just filed for bankruptcy in Canada, its home base. It has $1B of debt and no revenues. All shows worldwide have been cancelled.
DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.
“YOU ARE MY DEFENDER AND MY PROTECTOR. YOU ARE MY GOD; IN YOU I TRUST… SO NO DISASTER WILL STRIKE YOU…NO VIOLENCE WILL COME NEAR YOUR HOME.” PSALM 91 (written by Moses himself)
Lawrence B. Yang is a graduate of Georgetown University with a Master’s Degree in Law and specializes in Bankruptcy, Business, Real Estate and Civil Litigation. He speaks English, Mandarin and Fujian and has successfully represented thousands of clients in California, including companies overseas. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
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