Client 1: Garment Factory

Client presents himself as a businessperson, who has been in the garment business since 2002. He has a factory with ten employees where he pays his sewers a little over the minimum wage. When business was good, his factory was humming along. Orders for his garments were pouring in. He never did have enough capital to operate his business so at first he relied on credit cards. When that was not enough, he was able to get several small business loans from commercial banks. When that was not enough, he got a hard money high interest loan of $200K. Unfortunately, he also personally guaranteed each and every loan that the company got. Lately, the business has not been able to pay the debts on time, and he’s been getting a lot of collection letters and phone calls. Several letters threatened lawsuits. 

I asked him if the business was still profitable. He said no. It’s been losing 4 to 5K a month. He said just to continue operating and meet payroll, he had to get a HELOC against his residence for $80K last month. It looks like his back is against the wall. To make matters worse, two material suppliers have filed lawsuits abroad against him and the business to collect $60K each of invoices that have not been paid for six months. I then proposed a Chapter 11 only if he thought that the business could later on turn a profit if reorganized. He said he didn’t want to do the business anymore and wanted a peaceful life now that he was 65. He wanted to close the business. 

The problem of course is that he had personally guaranteed all the debts of the business. This means that pretty soon, all of the creditors of the business will be suing him to collect on his personal guaranty. We added up the business debts that he guaranteed and came out with a total of $500K! Client was personally on the hook for half a million for the debts of business.

After analyzing his financials and assets, fortunately for client, I told him that he could do a Chapter 7 to wipe out the $500K without any risk of losing his house and all of his personal assets. Since he was 65, his homestead exemption is $175K. With the $80K HELOC he got last month, his equity in the house was $150K, which is well within the exemption amount. But he can’t get rid of the $80K of HELOC since that’s a voluntary mortgage on his house.

He asked if he could go into business again after the bankruptcy? I said “Yes, certainly.” He would be debt free once the discharge is entered, and his credit score will increase every year.

Client 2: Coffee Shop

Client presents himself as a relatively new businessperson. He bought a retail outlet in a mall serving “Boba drinks” and other desserts. He started only two years ago. He got a 2nd mortgage from his house of $40K to buy the improvements and equipment from the previous owner. He also signed a new lease with landlord for 5 years at $3K a month. Unfortunately, gross receipts were just a little over $3K a month. Therefore, buying the business was a very bad decision. To continue operating for 2 years, he borrowed $80K of credit card debt.

He hasn’t paid the rent for two months and has just received a letter from the landlord saying that if he does not update the rent by Oct. 30, landlord will file a lawsuit for eviction and demand the entire balance of the rent of $108K. He asks if landlord can do this? Of course he can. Since client breached the contract, landlord can accelerate the rent for the next 3 years and demand payment of the entire balance of $108K! So, with the lease balance of $108K, plus credit card debt of $80K, client needs to wipe out $188K of unsecured debt to get his fresh start in life without accumulated debt. He decides that Chapter 7 will provide him the relief from the consequences of a bad business decision. I assured him that it was the right thing to do. After all, Walt Disney filed for Chapter 7 bankruptcy when his first business venture failed. So, I said, you’re in good company because Disney is so successful now worldwide and does billions of $ of business yearly despite the fact that Mr. Disney also filed for Chapter 7 relief at the start of his business career. It gave him the fresh start that he needed and it will give client the fresh start without accumulated debt that he needs.

Client 3: Health Care Facility

Client presents herself as the owner-operator of 3 health care facilities with 12 employees. The make a long story short, the business has been losing patients. In addition, Medicare demands a reimbursement for overpayment of $150K. She’s also borrowed last resort high interest loans for $100K for payroll, and has been looking for investors for new money to continue operating. I suggested a Chapter 11 reorganization because the facilities had equity of about $300K altogether and they do have some interested investors who have the funds to put in but need a little more time and convincing. Chapter 11 is the ideal solution.

Even if you don’t have a business, you may have racked up credit card and other debt over the years. If you’re stuck in the minimum monthly payment mode, you will never pay them off. So, now is the time to seriously consider a Chapter 7 or Chapter 13 to give you a fresh start without accumulated debt. You owe it to yourself and your family to put yourself in firm financial footing now for future prosperity by getting rid of accumulated debt now. Call my office for an appointment and I will interview you personally.

 “BE STRONG AND COURAGEOUS. DO NOT BE AFRAID OR TERRIFIED BECAUSE OF THEM, FOR THE LORD YOUR GOD GOES WITH YOU; HE WILL NEVER LEAVE YOU NOR FORSAKE YOU.” DEUTERONOMY 31:6

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in Law practice for thirty years.  He specializes in Bankruptcy, Business and Civil Litigation and has handled more than five thousand successful Bankruptcy cases in California.  He speaks Mandarin and Fujian and looks forward to discussing your case with you personally.  Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave, MAILSTOP 58, Building A-1 SUITE 1125, Alhambra, CA 91803 OR at 20274 Carrey Road, Walnut, CA 91789.