Financial advisors, avoiding BK(corp). Layin it out there, not pretty.

[Shaun @ Tru6]

BTW, one of my best friends is a very experienced, and excellent, bankruptcy attorney in MN. He clerked there under a Federal Bankruptcy Court Judge years ago and has been on both the law side and the client side (Wells Fargo), with major firms in NY always trying to recruit him. he's more for the quiet life in MN.

Nicest guy ever (nothing like me ) and loves to help guys like us, so if you even just want to discuss to get a qualified opinion on options and some ideas for moving forward, I can arrange a call. Let me know.

[Jim Bremner]

Does your state offer a "hpmestead Act" on your home

It might save you and your Fathers place.

[Hugh R]

Michigan advertises pretty heavily in Cali to relocate or grow your business in Michigan. Have you looked to the State? Here for example.

http://www.themedc.org/Products-Services/A-Z-Programs/Default.aspx

[lendaddy]

Originally Posted by Jim Bremner

Does your state offer a "hpmestead Act" on your home

It might save you and your Fathers place.

I don't know, what is that?

[lendaddy]

Originally Posted by Hugh R

Michigan advertises pretty heavily in Cali to relocate or grow your business in Michigan. Have you looked to the State? Here for example.

http://www.themedc.org/Products-Services/A-Z-Programs/Default.aspx

Yep, I've spoken and met with the MEDC and a couple of other state orgs. Not sure yet if anything will come of it but they seem oriented toward "new" businesses rather than saving old ones.

Lakeshore 504 is another.

We are working with the drill tooling mfg out of Texas and they are writing us a letter of intent which is the first step toward getting aid on that new project. To be honest I doubt it will go through as the equipment we need is about 400k. The project has massive potential but.....

[lendaddy]

Originally Posted by the

OK, here's some things I've seen done and issues I've seen considered. I'm not recommending them, but I've seen it done.

1. With everything guaranteed, a bky isn't going to bail you out. They will ignore the bky carcass and come after each of you individually on the guaranteed debt.

2. Therefore, before a bky is filed, many people find it beneficial if the corporate assets are used in a way that pays down the guaranteed debt. In some order of priority where the largest and/or most aggressive creditors are paid first. (Usually "largest" = "most aggressive"). In a bky, unsecured/unguaranteed creditors have almost no rights and usually just go away. In the event that certain creditors (i.e. those holding guarantees) are paid down before others in a bky, it is best if those payments are made at least 91 days before the bky is filed, as they are outside of the "preference" period. All payments made in the 90 days before the filing will be very carefully analyzed, and if they are not in the "ordinary course" and are large enough, the creditor may be sued by the bky trustee and have to give those payments back (of course, they will then seek recovery of those lost payments from the guarantors).

3. In the event a bky is filed, and the case is administered in any way (in other words, it isn't a simple no asset case - yours probably would be an asset case with a trustee appointed) payments to any company insiders are going to be very carefully analyzed, ESP. payments within a year of the filing of the bky. Payments made to insiders outside a year are outside the "preferential payment" period.

4. The biggest issue is going to be the lease. $70K per year is substantial, and the landlord is going to come after the company for it if you close down, and look to the guarantors if the co. files bky. That's a very difficult issue.

5. While the biz is operational, try not to let on to your creditors that you are having difficulties. That may make them nervous and make them seek legal advice. If they sense there is going to be a run on you, they will want to be the first creditor to strike, while assets are there to pay them. I've seen lots of biz's make this mistake, and it has hastened their demise. Some of your contracts may have "insecurity" provisions, where if they feel insecure because of your condition, they can make demands on you. Or, even if they don't have that in the contract, they can choose to strike fast on any minor default, if they are feeling insecure. Always remember, your creditor are going to look after their interests first, esp. if they talk to a lawyer.

6. If the biz goes down, and creditors start coming after the guarantors, one of the first things they are going to do is a collection analysis. That will determine how hard they come. For instance, if a person has no assets and moved to mexico, a creditor a lot of time would just write the debt off, or get a default judgment and stick it in a drawer. If a person has a $1 million house owned outright, the creditor is going to be on them like glue.

In a collection analysis, the first thing they will do is a real property search. Real property is the easiest to collect on.

The other thing they will look at is the financials you submitted to them. But a lot of creditors find that when a business has been struggling for a couple of years, the owners have had to use up a lot of their assets, and the stuff that was on their financials is unfortunately gone.

If for some reason a guarantor were to transfer their real property to a relative, that is usually a mistake, esp. if it was done while a business was struggling. That is looked at as a fraudulent conveyance, and can be undone by the court. But, sometimes creditors are unlucky, and the guarantor sold the property to a legit third person (a bona fide purchaser) who has nothing to do with the guarantor. Nobody could ever take the property from that person. The only thing the creditor could do is try to track down and recover from the sale proceeds (i.e., the cash). Cash is very often difficult to track down. Most creditors usually find that the guarantor doesn't just have it sitting in a bank account waiting to be levied on. In fact, it is usually gone, used up in living expenses and the costs of running the business.

If the biz goes sideways, and creditors come after the guarantors, the matters are much easier to settle, and creditors pursue less, when there are no assets to come after. Keep in mind that a creditor, esp. one that gets a judgment or a provisional remedy, has a lot of rights, including the right to do debtor examination, which includes subpoening banks for account records, etc.

These are just some of the things I've seen in the past. There are a lot if issues involved, as I'm sure you can begin to see.

That's very detailed info, thank you. I loathe the idea of any of it, but I imagine it happens all the time. I appreciate your taking the time to post it.

[lendaddy]

Originally Posted by Shaun 84 Targa

BTW, one of my best friends is a very experienced, and excellent, bankruptcy attorney in MN. He clerked there under a Federal Bankruptcy Court Judge years ago and has been on both the law side and the client side (Wells Fargo), with major firms in NY always trying to recruit him. he's more for the quiet life in MN.

Nicest guy ever (nothing like me ) and loves to help guys like us, so if you even just want to discuss to get a qualified opinion on options and some ideas for moving forward, I can arrange a call. Let me know.

If he's a friend of yours just how nice could he possibly be?

Seriously though thanks again, it's an extremely generous offer.

[einreb]

You had any experience with the Michigan MEP center? http://www.mmtc.org/ NIST (the big government agency) funds these 'help centers' for small/midsized manufacturers.

The Illinois version is a client of mine. This program something relatively new and I've heard good things about it and Michigan offers it too.

http://www.mmtc.org/Eureka_Winning_Ways/Eureka_Winning_Ways.aspx

[Jim Bremner]

typo! that was to be homestead act

[lendaddy]

Originally Posted by einreb

You had any experience with the Michigan MEP center? http://www.mmtc.org/ NIST (the big government agency) funds these 'help centers' for small/midsized manufacturers.

The Illinois version is a client of mine. This program something relatively new and I've heard good things about it and Michigan offers it too.

http://www.mmtc.org/Eureka_Winning_Ways/Eureka_Winning_Ways.aspx

I haven't but my father may have. I'll look into it, thanks.

[VaSteve]

Originally Posted by MRM

If your company is large and is willing to pay $300-$500 an hour, call any of the Big 4 (are there still four of them) accounting firms - like Deloite Tousche, or the big consulting company - Accenture. If your company is smaller or would rather pay $250-$350 an hour, look for a reputable regional accounting firm with a consulting group, like McGladrey Pullen.

If you aren't willing to pay that much, look to 10 or 12 man CPA firms that have good reputations. Interview a bunch. Ask specifically for examples of their past work where they have helped people in your situation. There are lots of people who are expert in helping people in your situation. Call around, inteview accountants until you find a group that has a proven track record. Tell them your financial situation and agree on a budget in advance. They'll appreciate it and you will benefit from it.

I haven't read the whole thread, but be sure you do a REAL GOOD job of knowing who is going to be on the job under any of these situtations. You'd be better working with a small one man specialist than messing with any of these big firms. My understanding is that your biz isn't that big. Many of the bigger firms will stick you with the kids right out of school and charge you zillions of hours on it.

Contact you state society of CPAs and get a recommendation tailored to the size of your business. PM me if you want additional insight.

Steve, CPA

[the]

Len,

A homestead exemption varies from state to state. In general, it is a law that "exempts" part (or all, in some states) of the value of your house from collection efforts from creditors. For example, if the exemption amount is $100,000, and your house is worth $100,000, creditors cannot touch it (at least until such time that the house rises in value and exceeds the exemption amount. They can usually then force a sale, keep the equity, and give you the exemption amount from the proceeds).

Some states historically have had an unlimited homestead exemption. TX and FL are the most popular examples. You could have a $10 million house, owned outright, and creditors can't touch it. That's why OJ lives in Florida now. (The rules in FL changed recently, though, for new people moving to the state).

You'd need to check MI law for the specifics. For example, the amount of the exemption. And in some states, it is automatic, in others you have to file a document with the state in order to claim it.

Homestead can be helpful, but from a creditor's perspective, it is much better to have a debtor with a house and homestead, then no house at all. And, from a creditor's perspective, if the debtor does own a house, what hurts the creditor's position is when the house has been mortgaged to the hilt (like by second and third loans and trust deeds), so there is no equity at all in the house.

So if you own real property and there is a homestead in your state, you should make sure you have it claimed (if a filing is necessary). But what creditors don't like to see, in order:

1. No real property owned by the debtor. That's the worst for the creditor.
2. Real property owned by the debtor, but it's mortgaged to the hilt, with no equity. Plus with a homestead on top.
3. Real property with equity, and homestead.
4. Real property with lots of equity and no homestead.

If Shaun's friend will talk to you, you should take him up on that. Just a couple of things to keep in mind, though (1) a lawyer who is talking to you for free is going to be very limited in what they say, (2) there are lots and lots of things that debtors do in the year (or more) before filing a bky that a bky lawyer could not advise them to do, but that make it difficult for creditors. A lawyer can explain the way the law works, or the effect that a certain action might have on creditors (particularly if you ask them the question directly), but not be permitted to suggest that course of action. My experience with lawyers in those kinds of situations is that you have to LISTEN very carefully to what they are saying, if you know what I mean.

[VaSteve]

I know some folks here have mentioned government contrcats. Have you looked into that? Sometimes, when doing a major project, the main "systems integrator" needs to find X% of small, 8A type companies. I saw one project where they had a piece of the project in nearly every state. They have a quota to maintain, no reason why you couldn't fill some of that.

[lendaddy]

Originally Posted by the

Len,

A homestead exemption varies from state to state. In general, it is a law that "exempts" part (or all, in some states) of the value of your house from collection efforts from creditors. For example, if the exemption amount is $100,000, and your house is worth $100,000, creditors cannot touch it (at least until such time that the house rises in value and exceeds the exemption amount. They can usually then force a sale, keep the equity, and give you the exemption amount from the proceeds).

Some states historically have had an unlimited homestead exemption. TX and FL are the most popular examples. You could have a $10 million house, owned outright, and creditors can't touch it. That's why OJ lives in Florida now. (The rules in FL changed recently, though, for new people moving to the state).

You'd need to check MI law for the specifics. For example, the amount of the exemption. And in some states, it is automatic, in others you have to file a document with the state in order to claim it.

Homestead can be helpful, but from a creditor's perspective, it is much better to have a debtor with a house and homestead, then no house at all. And, from a creditor's perspective, if the debtor does own a house, what hurts the creditor's position is when the house has been mortgaged to the hilt (like by second and third loans and trust deeds), so there is no equity at all in the house.

So if you own real property and there is a homestead in your state, you should make sure you have it claimed (if a filing is necessary). But what creditors don't like to see, in order:

1. No real property owned by the debtor. That's the worst for the creditor.
2. Real property owned by the debtor, but it's mortgaged to the hilt, with no equity. Plus with a homestead on top.
3. Real property with equity, and homestead.
4. Real property with lots of equity and no homestead.

If Shaun's friend will talk to you, you should take him up on that. Just a couple of things to keep in mind, though (1) a lawyer who is talking to you for free is going to be very limited in what they say, (2) there are lots and lots of things that debtors do in the year (or more) before filing a bky that a bky lawyer could not advise them to do, but that make it difficult for creditors. A lawyer can explain the way the law works, or the effect that a certain action might have on creditors (particularly if you ask them the question directly), but not be permitted to suggest that course of action. My experience with lawyers in those kinds of situations is that you have to LISTEN very carefully to what they are saying, if you know what I mean.

Thanks, you've been extremely helpful. I'm learning quite a bit here.

[the]

BTW, Len, I don't mean to freak you out more than necessary, but you do have a very, very serious situation at hand.

Bottom line: You guys need to do everything you can to keep this business going as long as possible to at least get to the end of the real property lease and hopefully reduce as much of the personally guaranteed obligations as possible. Outside of that, and being realistic, be prepared for creditors coming after you and your personal assets.

[lendaddy]

Originally Posted by VaSteve

I know some folks here have mentioned government contrcats. Have you looked into that? Sometimes, when doing a major project, the main "systems integrator" needs to find X% of small, 8A type companies. I saw one project where they had a piece of the project in nearly every state. They have a quota to maintain, no reason why you couldn't fill some of that.

I called my father earlier today and told him to bring it up with his government contacts. I should know more next week.

[lendaddy]

Originally Posted by the

BTW, Len, I don't mean to freak you out more than necessary, but you do have a very, very serious situation at hand.

Bottom line: You guys need to do everything you can to keep this business going as long as possible to at least get to the end of the real property lease and hopefully reduce as much of the personally guaranteed obligations as possible. Outside of that, and being realistic, be prepared for creditors coming after you and your personal assets.

I get what you're saying and it makes sense. I have only PG'd maybe 30k and I have no assets to speak of so I'm not worried about myself. My dad is the one on the hot-seat so to speak but I'm starting to see the situation more clearly and hopefully we'll get something rolling that will keep the doors open. Just knowing that shutting the doors voluntarily(short term) isn't a real option helps, certainly with focus anyway.

oh and don't worry about sugar coating anything, I don't freak out.

[VaSteve]

Originally Posted by lendaddy

I called my father earlier today and told him to bring it up with his government contacts. I should know more next week.

Talking to government people isn't the answer. He probably needs to head to a trade show where the systems integrators are displaying their wares. I went to one of these once in Baltimore. The basically show off their wares, capabilities to drum up interest. While there gotta network with the big guys, guys that need stuff built.

Look at this site on how to get an 8A status.
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

Read all this stuff, see if it applies. Or can apply. I work for a big CPA firm and we use 8a's all the time sometimes to fill the quota, sometimes to prime the contract. We do all the work and they "lead".

Here's a site where you can find out about government contracts and compete on them. It will take you a while to read through all this but you need to figure out what code pertains to your specialty and see if you can find opportunities that match your expertise.

http://www.fedbizopps.gov/


PM me if I can help walk you through any of this.

[lendaddy]

Originally Posted by VaSteve

Talking to government people isn't the answer. He probably needs to head to a trade show where the systems integrators are displaying their wares. I went to one of these once in Baltimore. The basically show off their wares, capabilities to drum up interest. While there gotta network with the big guys, guys that need stuff built.

Look at this site on how to get an 8A status.
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

Read all this stuff, see if it applies. Or can apply. I work for a big CPA firm and we use 8a's all the time sometimes to fill the quota, sometimes to prime the contract. We do all the work and they "lead".

Here's a site where you can find out about government contracts and compete on them. It will take you a while to read through all this but you need to figure out what code pertains to your specialty and see if you can find opportunities that match your expertise.

http://www.fedbizopps.gov/


PM me if I can help walk you through any of this.

Thanks, I'll go over those sites tomorrow. I'm a little exhausted right now and it all looks like jibberish

[Rot 911]

Is the business incorporated? If so in what way? Corp.?, L.L.C.?