Expert: Terry Leeders - 1/5/2008

Question
My husband and I are considering the option of filing for bankruptcy.  Our situation is a bit complicated, or so we think.  
We have 2 homes. One is our primary home which we are current on the payments and always have been.  THe second home is currently being rented as we speak.  We are behind on this house payment by 1 month. We are also in the process of getting an approval for a short sale on the property because we will loose it if we cant short sale.  However, after doing the math and figuring that we would have to pay taxes on the negative amount ($135K) this figure would potentially be around $30K at least.  THis amount, plus our $43K in credit debt would put us in a worse position then we would be before we considered a shortsale.
Our income is roughly around 165K a year.(with $55K of that being moneys paid to my employees & cost of running my business, I am a sole proprieter) Actual income is around $110K.  But our outstanding debts are around $908K.  (including 2 homes, consumer debt,auto & boat)  Do we make too much money to file for chapter 7?  We want to keep our house we are in, the car & the boat.  We are debating if it would be more financially wise of us to file bankruptcy to let the other home go, along with credit debt.  
Also, I have a car that has $12000 in equity in it.  If I filed for bankruptcy, would they take my truck?  It is a business truck, but, its in mine & my husbands name.  Should I incorprate my business and sign my truck over to the business?
Another hump, is, can the tenant sue me if she is booted out of the house due to bankruptcy?  She has 1.3 years left on her lease (but pays less then the mortgage & pays late every month).
Thanks in advance for your suggestions


Answer
This is pretty complex. I would recommend speaking to a local bankruptcy attorney.  You most likely do make too much income to qualify for the chapter 7.  The court will look at the last 6mo of income from all sources and your month to month expenses.  Chapter 13 is the next step, whereby you would pay back a % of the debt to protect your assets.  This is based on the means test calculation of disposable income, and your month to month budget.  You may want to incorporate anyways, as you get many protections being a corporation.  Transferring assets doesn't do anything for the bankruptcy, as those transfers could be set aside when you file.  Speak to your accountant as to benefits of incorporating and such.  Good Luck.