RSS FeedBecause I’m an Indiana business bankruptcy attorney in addition to being a an attorney for individual bankruptcy in Indiana, I’m always struck by the extent to which, for business owners, their businesses and their personal finances intertwine.
Just the other day, in a Reuters Business Report, Floyd Norris commented on “a dilemma in modifying mortgages”, explaining that he had been able to listen in on calls to the Jacksonville center of JPMorgan Chase bank. Modifications, he found, were offered to those who “came up with the right income number, neither too high to qualify at all nor too low to be unlikely to meet the modified payments.”
Reading this article, I was reminded that, under the government’s mortgage modification program, the standard practice is to alter the monthly mortgage payment so that the new payment, including escrow payments for tax and insurance, is no more than 31% of the borrower’s gross monthly income.
I thought of all the thousands of small business clients who’ve needed my Indiana bankruptcy help, realizing that in the case of business owners, it’s quite a task to pinpoint what the business income actually is. To help keep their business afloat, owners often use dollars from a spouse’s income from employment, and, conversely, to pay household and personal expenses, owners often use business dollars.
During the past year in particular, I’ve been offering mortgage modification help. The Columbus bankruptcy lawyers who work in my office there have done the same, as have the professionals in the Mark Zuckerberg Indiana bankruptcy law offices in Anderson and Bloomington. One of the common threads we’ve found is the fact that most small business owners have been at least partially lax about separating business and personal finances. Often one result is that, by the time those business owners come to meet with one of us, it can be too late to prevent individual bankruptcy from happening along with the business bankruptcy.
When it comes to mortgage modification, mixing business and personal finances can mean the numbers won’t add up for qualifying for mortgage modification. The Reuters article, in fact, tells about a woman who called Chase to request a modification. “She and her husband operated a business, which seemed to be teetering near collapse, and its finances were intertwined with theirs. They were behind in payments on their mortgage.”
That particular story did not have a happy ending, because the income figures the caller provided (which apparently included a mix of impossible-to-separate business and personal income) proved too high for the couple to qualify for modification.
It’s been more than two years from the time Fortune Small Business Magazine published the story of a Texas entrepreneur who said filing bankruptcy was the smartest thing he ever did, and since then, many small business owner clients of mine to whom I’ve offered Indiana small business bankruptcy help expressed the same sentiment.
However, in providing Indiana bankruptcy information, I need to keep reminding clients: The chances of a successful mortgage modification – and of a successful bankruptcy filing – are much, much better when the income numbers are very clear for the business and for the personal situation!
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