Betty The Restauranteur

[mhkohne]

It very much sounds like you are going to end up forclosing eventually, no matter what. Just choose now or later...

[Ghel]

Betty's husband finally came in yesterday to sign the extension document. I gave him a copy of the letter stating the things we'd need before January to renew the loan again: proof of insurance on the house and completed tax returns through 2013. He said insurance would be no problem, but that the tax returns won't show him having any income, anyway. I explained that would make it very difficult for us to support the loan. We need to show that they're able to actually repay the loan. He went over some things that he might be able to do to show some income (such as sell some of his cattle, which I didn't even know he had), but he's not going to do that because he doesn't want to show a profit.

I get that he wants to do that for tax purposes, but it makes it really difficult for us to support the loan. Being a balloon renewal, we're kind of stuck. We either renew the loan and have a headache for another five years, or we activate the acceleration clause and force them to get a loan with another bank - which they probably won't be able to do because they can't show any income. And when they can't get a loan elsewhere, we'll have to foreclose. So no matter how you look at it, the situation sucks.

I also talked to him about the past due real estate taxes on the restaurant. I explained (since most folks don't understand this) that personally-owned real estate is automatically owned by one's spouse in MN, so if the restaurant goes tax forfeit, it will affect him, too. And it will go tax forfeit next year, if $6,000 worth of real estate taxes aren't paid to the county. He expressed surprise and said he had no idea. He said he would talk with Betty that night about it. I expect that was quite an argument.

Anyway, Betty's husband signed the extension document and I was able to put it on the mainframe. Now we wait and see if they get the things done that we need before the middle of January.

[taxguykarl]

She has been avoiding paycheck bouncies by cashing them out of the till. As an eminent economist (Herbert Stein, but don't hold me to that) once quippped: Anything that can't go on, won't--sooner or later.

[notalwaysright]

Out of all the things Betty has done wrong, the employee checks bouncing makes me the crankiest. My parents have successfully run several small business for more than 25 years. When things were slow, they did whatever they had to in order to make sure their workers got paid. Not anything illegal, of course, but maybe they had to choose between paying the guys and paying a supplier. Well, they'd call the supplier and work something out to make a partial payment or push the date a little. Not a great solution, but they had good enough relationships with the suppliers so that nothing got send to collections, and the company stayed afloat. And when things got better they paid those suppliers early, as much as possible.

Anyway, I'm surprised Betty manages to keep a decent cook and staff. Most would cut and run when a paycheck bounces.

[taxguykarl]

While secured loans are above payroll, and payroll is technically lumped in with all other unsecured non-tax debt

Tax debts are, of course, expempt from bankruptcy. If the withheld taxes are, in fact, paid from whatever assets the BK estate has; then the employees are off the hook. As the restaurant is losing money (at least on paper) there would be no business income taxes--sales taxes due to MN, but no income tax.
IOW, this situation stinks!

[Seshat]

She only just finished making those payments a year or two ago, and now she's back in the same situation that forced her into bankruptcy before.

Those who cannot remember the past are condemned to repeat it. -- George Santayana

[mathnerd]

She really can't do too much-there's rules about account privacy and such. So until your check bounces, she probably can't tell you there's an issue.

Actually, the teller can't even disclose why the check can't be cashed. There's a number of reasons beyond NSF that could cause the teller software to decline to cash a given check. NSF might be the most common, but it's far from the only one.

This reminds me of a situation I handled when I worked at MajorBank. An irate customer wanted to cash her tenant's rent check and we declined to. Our teller software doesn't actually tell the teller why we're declining to cash a given check. Of course, if's it's an on-us check, the teller could just look up the account number, but that would be frowned upon. Anyway, this teller calls my department (why, I don't know, as we didn't normally deal with that sort of stuff), and given that it was a slow day, I try to explain to her that there are numerous reasons she could have been given the do not cash message. Out of curiosity, I looked up the account number. The check was being declined because it was written off an account that was not only closed, but had been charged off several years prior.

[Argus]

Surprisingly, I actually got a check in the mail... two years later!

My first employer took a while for everyone to get their final pay (which came from the bankruptcy attorney). I don't remember whether it was two years.

They were kind enough to call the unemployment office to give them a heads up when they told us all we were out of a job. And that office let us count our termination from the day we were supposed to get the final paycheck rather than the day we were told it wouldn't simply be late.

[Mondestrucken]

You're right, I didn't think about that.

[mhkohne]

She really can't do too much-there's rules about account privacy and such. So until your check bounces, she probably can't tell you there's an issue.

[Mondestrucken]

I saw an unpleasant experience at the bank one day. I had gone to pick up a change order, and there were 2 guys in front of me, cashing their paychecks from the same employer. Each gets a different teller, and teller #2 was faster than teller #1 (even though she started the transaction after #1 started).

So teller #1 looks over at #2 and asks, "How did you do that? The computer says the bank account is empty." Teller #2 points to her customer. "It's empty now. His paycheck just cleaned it out."

The 2 guys stare at each other in horror, one completely paid and the other screwed. I grab my change order and run. Since teller #2 knew exactly what was going down (she made a comment to the effect that the company had been doing slowly going under for a year), I thought it was a little mean of her not to warn everyone what was going on.

[winner every time]

I did some work at one point for a business whose owner was much like Betty. I was young and naive at the time, and eventually wrote off the idea of ever being paid after she "let me go" (I had been lied to and led to believe I had a secure full time position). Surprisingly, I actually got a check in the mail... two years later! Even more surprisingly is that the place is still up and running, and by rumors in the community, the same not-paying-people shenanigans are still going on.

[sirwired]

Crap. Let me guess, if they sue her for not paying their taxes, she will declare bankruptcy and they will not get a thing (because employees are on the bottom of the debt collection ladder, and of course she owes everyone money).

Well, then this has made me more grateful of my excellent employer.

While secured loans are above payroll, and payroll is technically lumped in with all other unsecured non-tax debt, on a practical basis, bankruptcy judges usually give employees a larger-than-proportional share of the crumbs left (if any) to help satisfy their back pay.

[Ghel]

Crap. Let me guess, if they sue her for not paying their taxes, she will declare bankruptcy and they will not get a thing (because employees are on the bottom of the debt collection ladder, and of course she owes everyone money).

She has declared bankruptcy in the past, but it was a chapter 13 (IIRC), which means her debts were not discharged. She made payments to the bankruptcy court for many years (I want to say 10 years, but I don't remember for sure). She only just finished making those payments a year or two ago, and now she's back in the same situation that forced her into bankruptcy before.

[Gilhelmi]

Sorry, but he's correct. The one earning the income, employees in the OP, are responsible for the taxes ultimately. Yes, they can set up an offer in compromise or even take the matter to a tax court.
FWIW, the "employer half" of which Eric speaks is, in fact, the social security and medicare taxes that match the amounts withheld.

Crap. Let me guess, if they sue her for not paying their taxes, she will declare bankruptcy and they will not get a thing (because employees are on the bottom of the debt collection ladder, and of course she owes everyone money).

Well, then this has made me more grateful of my excellent employer.