Expert: Christine Janklow - 11/6/2008

Question
My husband and I have incurred a huge amount of business and personal credit card debt.  We have two small businesses and have filed for two new businesses that will have fictious names and new bank accounts so that we can start fresh with new EINs.  We were expecting a large inheritance that didn't happen and with the economy the way it is and the credit card companies charging "highway robbery" interest rates and fees, we feel that we can no longer afford to pay all of our credit cards.  We know that most, if not all of the credit cards are also guaranteed personally and at this point don't even care about ruining our credit as long as we can hang onto a card or two.  We have instructed our accountant to close the businesses and she said we need to close all of the accounts associated with the companies.  My question is: What will happen if we just close our businesses and then close only the cards we are defaulting on? We plan to pay the ones we can still afford, but right now we have about $6000 a month in payments and we want to bring that down to a more manageable $3000.

Answer
Jeannie:
Thank you for your inquiry. I am asked often about business closure and am unable to give specific advise that should be rendered by legal counsel. I do know that dissolution can leave you exposed to creditors and possibly employment or tax issues if not done correctly. As for the payment on the cards, you can't just walk away as in the case of a Ch7 Bankruptcy unless you file for one. Your creditors have a statue of limitations, often 5-7 years to collect debt. If they sue you and get a default judgment they will have 10 years. What this means is if you don't proactively address resolution you could have them come after your assets, bank accounts or even future income if you end up employed. I don't believe that is a risk worth taking. The better choice would be to enroll your debt in a commercial debt settlement plan (such as the one my company offers). This will offer a restructuring that will reduce your debt through settlement using the least amount of time and money possible. I don't know what you owe in total, but generally our program costs a fraction of what is being thrown into interest payments. If you default on some and then keep others the creditors will find out as they often check credit reports. This may cause a closure by the open accounts or an increase in the interest. Worse off, defaulting with no plan for even partial repayment may leave your bank accounts open to offset, etc. It is really easy to get into debt, much harder to get out and your attempt to come out of this by simply changing an EIN, is not enough to protect you in the long run. I would be pleased to provide a personal consultation regarding the settlement option if you want to explore it. Simply visit our website www.settlesource.net, go to contact us, then fill out a request for consultation and in the comments box write " All Experts ". I will get back to you to discuss.

Respectfully,

Christine Janklow