7 Signs That It May Be Time To Close A Business

I recently wrote a 2-part series on strategies for California business owners to stay in business while filing for Chapter 7.  However, saving a business isn’t always possible.  Here are some of the signs that I look for when telling a client that it may be time to close their business.

1. The professionals say you should close.  Many business owners have an emotional attachment to their business and do not wish to be an employee of someone else again or perhaps they are afraid to admit that their business is failed.  Some businesses are like men that won’t stop and asked directions: advice from a trusted advisor such as a CPA or attorney that a business is in trouble is not given lightly.
2. You aren’t making as much money as you thought.  An important factor that business owners need to remember is the value of their time.  One way to measure how much money a business owner is making would be to calculate the net profit and divide it by the number of hours they work.  Many owners may find that they would make more money working as a cashier at the local 7-11.
3. You are always struggling to pay your quarterly taxes.  A common problem for business owners is the inability to make timely payments on their quarterly taxes.  A high gross income does not guarantee a profitable business.  If you are delaying payment of taxes for cash flow reasons, your business is in trouble.
4. Things will get better next month.  Some business owners insist that they only need a good month to make up for past loses.  Counting on increased business without a plan of action to grow revenues is not unlike playing the lottery:  anything is possible, but not very likely.
5. The future for the industry looks bleak.  In the past year or so, I have handled a number of bankruptcy cases for people in the printing business.  Businesses are advertising less, buying fewer business cards and printing their own letterhead.  If a particular industry is shrinking, it may be time to get out.
   
6. The business isn’t worth much.  Like the illusion of short sales in real estate, some business owners greatly over value their businesses.  An experienced business broker can give you a very realistic opinion on the value of the businesses.  Declining business values maybe a sign that it is time to get out.
7. You have no retirement plans.  If a business owner is too caught up in the day to day operations of the business to be able to plan for retirement, then a change may be necessary. 

If you recognize any of these warning signs, it may be time to schedule a consultation with a bankruptcy attorney and explore your options. If you are in Southern California, call me now at (619) 448-2129 for a free consultation. 

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Why Dave Ramsey is Wrong About Bankruptcy

"I didn't realize how much stress I was under until I filed with you.  I guess I had just gotten used to the feeling.  My resolution is to think of need versus want and to save money each month for the unexpected."  That is what a client recently told me after receiving a discharge in a Chapter 7 bankruptcy.

Dave Ramsey describes bankruptcy as a "gut-wrenching, life-changing event that causes lifelong damage."  He also goes on to claim that bankruptcy "can devastate your job, destroy your marriage and steal your peace of mind."  This type of Chicken Little mentality is unwarranted and may scare consumers away from becoming fully informed about all of their debt relief options.

Mr. Ramsey's message resonates particularly well with conservative and evangelical Christians.  In my practice, I've come across far to many Christians who feel like they have failed in the eyes of God if they do not repay their debts.  I devoted an entire blog entry to the topic to help those clients understand what the Bible really says about bankruptcy.

Mr. Ramsey's negative experience with bankruptcy is atypical.  In my entire career, I have not had a single client express regret about filing for bankruptcy.  I have seen marriages healed as a result of the stress relief achieved in bankruptcy.  I have seen some clients improve their credit scores by as much 150 points because the individual no longer has any debt and their bad payment history will disappear over time.

Mr. Ramsey is correct that bankruptcy is not to be taken lightly.  But for many people, it is the only away to get out from under crushing debt loads, lawsuits and creditor harassment.  That is not say say that bankruptcy is without consequences.  Yes, it will stay on your credit report for 10 years and it is only a temporary fix unless the debtor is willing to make the necessary life changes to avoid future debt problems.  But for the vast majority of people who contact me, bankruptcy is truly the only option available.

The reality for my practice is that most of the people who come to see me have already done away with the toys and the frivolous spending. I’ve seen too many clients suffering heart problems, insomnia, depression and other stress related health issues by trying to avoid the inevitable for too long.
 
Sure, you can get a second job if you are $40,000 in the hole and you might have that  debt paid off in a few years. But what do you have? You filled a $40,000 hole and several years of time spent at a second job, which means lost evenings with your family and weekends of kids events.
 
Or you might consider a Chapter 7, which would be over in about 4 months in most cases, learn to live without credit cards and get the fresh start now. For every Dave Ramsey who had a bad experience in bankruptcy, I can point you to dozens of satisfied clients who have benefited greatly from the fresh start provided by a bankruptcy discharge.

Dave Ramsey does offer value assistance in pointing people down a path of financial responsbility and I do not question those services.  In fact, debtors who wish to avoid bankruptcy in the future could learn a few things from Mr. Ramsey.  However, nobody should decide simply on my word or Mr. Ramsey's word alone.  Cut through the hype and scare tactics and explore for yourself what is the best option for you and your family.  After all, no decision feels better after you prayer, learn and investigate your options.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Phone Numbers Used By Phony Debt Collectors

In recent weeks, I have written about phony debt collectors using illegal and abusive threats to collect on payday loans.  Click here to read my first article and here to read my second article.  My friend Steve Rhode also dug a little deeper and and wrote this article that reveals some very interesting information about how these places operate.

The phony debt collectors often claim to be attorneys and begin by threatening debtors with jail time for nonpayment of payday loans.  The scam artists presumably have some level of success with their scare tactics based on the number of calls that I receive about this scam.  Below is a list of phone numbers known to be used by the scam artists:

• 201-221-3060
  
• 213-221-1002
• 213-286-0210
• 213-286-2016
• 213-550-4189
• 213-995-3046
• 310-362-4305
• 310-362-4319
• 310-362-9386
• 313-332-1091
• 343-729-0397
• 407-506-0424
• 408-317-0831
• 408-355-9951
• 415-223-4108
• 415-880-5599
• 496-900-0000
• 619-342-0094
• 714-333-2945
• 714-333-2951
• 714-400-0563
• 714-409-0208
• 714-409-0250
• 714-845-0766 (FAX)
• 760-300-4000
  
• 718-831-7157
• 818-936-4699
• 904-425-9141
• 941-961-8518
• 949-743-1049
• 951-707-4047
• 973-200-6686

If you are contacted by one of these scam artists, please leave comment below with the phone number they used so I can keep this list up to date. 

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Will Congress Resurrect Judicial Loan Modification?

In January 2009, I was in the unusual position of asking my fellow Republicans to support legislation sponsored by the Democrats that would have given bankruptcy judges the capability of modifying mortgages in a Chapter 13 bankruptcy.  Click here to read my original article.  Unfortunately, this legislation failed to pass in the Senate.  I have now received word that the concept of judicial loan modification in Bankruptcy Court could be resurrected.

Congress will soon be considering amendments to H.R. 4173, the Wall Street Reform and Consumer Protection Act, that would give consumers a powerful negotiating tool to use when trying to negotiate loan modifications with intransigent lenders.  I am once again urging my fellow Republicans to set aside outdated perceptions of irresponsible borrowers and support this legislation.
 

President Obama's loan modification program, commonly known as Home Affordable Modification Program or HAMP, has been a dismal failure.  As of September 2009, only about 1700 homeowners had received "permanent" loan modifications under the HAMP program.  As any bankruptcy attorney can tell you, experience has shown that lenders have very little motivation to modify loans.  Consumers have seen their 90-day "trial payment periods"  under HAMP drag on for months with no sign of a permanent loan modification offer in sight.
 

The threat of an involuntary loan modification in bankruptcy court may be the only way to force lenders and loan servicers to take loan modifications seriously and to stop dragging their collective heals in offering reasonable solutions.
 

I am urging all of my readers, colleagues and clients to contact their representatives in Congress by going to http://clerk.house.gov/member_info/mcapdir.html and urging them to support amendments to this bill that would give bankruptcy judges the power to modify residential  mortgage loans.
 

With 3 million new foreclosures expected in 2010, the ongoing foreclosure crisis will continue to cause a rise in bankruptcy filings and undermine any hope of an economic recovery.

Unlike the expensive bailouts provided to the big lenders, this change to the Bankruptcy Code will not cost taxpayers one penny and will help stabilize the economy.  The voluntary loan modification programs simply are not working.

So if the Republican Party wants to stop looking like it is out of touch with reality, supporting this legislation might be a good first step in fixing the public's perception of the party.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

No, CashNet Cannot Throw You In Jail for Defaulting on a Loan

After I wrote a recent article about phony debt collectors pretending to be attorneys, I started receiving phone calls from people around the country that a collection agency for CashNetUSA was impersonating me and trying to collect debts.  I am receiving disturbing reports that this collection agency is illegally threatening borrowers with jail time for not repaying loans.

I filed a complaint with the Better Business Bureau and CashNetUSA has not responded to my request for assistance.  I also contacted the El Cajon Police and the San Diego officer of the F.B.I., but they do not feel that any crimes have been committed.

The Federal Fair Debt Collection Practices Act specifically prohibits debt collectors of consumer debts from threatening a debtor with jail time for failing to repay debts.  Debt collectors also may not falsely claim that they are attorneys or government representatives.

If any collection agency for CashNetUSA contacts you and pretends to be an attorney collecting a debt, I recommend taking the following steps:

• Go to www.annualcreditreport.com and get a copy of your credit report.  Dispute any inaccurate information.
• Put a preliminary fraud alert on your credit report.  The collection agency for CashNetUSA seems to have loads of personal information about people and you could be at risk for identity theft.
• Contact your local police.  A debt collector impersonating and attorney might be committing a crime.
• Consult an attorney.  You may have a claim for damages against the collection agency under the Fair Debt Collection Practices Act and you may also have a claim for damages against CashNetUSA under the laws of your state.

If you live in Southern California and a collection agency for CashNetUSA or any other collection agency has been has been harassing you, please call us today for assistance at (619) 448-2129.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.