What is the best path forward with a case that you know is headed for bankruptcy? In my current case there is a payroll debt out there for approx 200k about 60 of that is TFRP. Should we push it forward until the TFRP is assessed and get that into an installment? The client owes close to a million all in between tax and creditors. I don’t see how a 13 plan would work with that much debt and his income. Should we try to get TFRP into an installment and then hand off to a BK attorney? Is there anything else I should be looking out for? Any pitfalls?
Edited to add: I’m working now to get the LLC dissolved to take most of that payroll tax with it.
Well a Chapter 13 could work but it depends. Really if you even think it might work then sit down with a local bankruptcy attorney and lay out the situation. Together I am sure you can determine if this person is a good candidate or not for Chapter 13 (maybe even Chapter 11 – more expensive but could be the solution). I do practice bankruptcy law but I’d need to know a bunch more to have any idea on whether or not bankruptcy is an option.
Good luck. Sounds like an interesting case. I’d talk to the attorney sooner rather than later especially where you are liquidating the LLC. He or she might want to make sure nothing will impact any potential bankruptcy.
I’d like to add that debt limits in Chapter 13 are for non-contingent, liquidated debts so potential debts may be outside the debt amount. contingent debts are usually things like guarantees; unliquidated debts are normally pending lawsuits for things like a personal injury where the ultimate liability is unknown.
Additionally, the limit is around $400k for unsecured debts and $1m for secured debts. So you have to take that into account as well.
Usually once the bankruptcy is filed it will nullify all the other payment arrangements, so if bankruptcy is on the horizon maybe get the client going on that. Any IA you set up now would hold off collection temporarily but gets voided when the Bankruptcy is filed.