Does LLC debt personally guaranteed get wiped out in bankruptcy?

[lots of debt]

I was told by an Atty who is not experienced in Bankruptcy that a LLC loan personally guaranteed does not get discharged in a Ch.7? Is this true?

[FilingOnMyOwn]

We're not attorneys. Go consult with some more.

[Minnymouth]

LOTS OF DEBT,

Corporations are handled different when involved with a personal bankrutpcy...

You need to consult at least 3 attorneys and question them about the affect this will have on your personal BK and if they are discharged or not.

We are not attorneys, nor do we give advice as attorneys.... especially outside of the circle of personal bankruptcy....

Have your consultations (free) and let us know what they told you....

Minny

[Rover]

It is my understanding that a loan to a corporation or LLC that is personally guaranteed is discharged in a personal Ch 7 with respect to the personal guarantee but not with respect to the corporation or LLC.

That would make sense, and I swear that I recently saw someone on this forum indicate that was the case.

However, do check with more attornies. Let us know what you find.

[kcj]

In our Chapter 7, that is what happened. We had a personal guarantee on a business debt. The personal guarantee was discharged; the business (a corporation) still had to pay the debt.

[Rover]

The personal guarantee was discharged; the business (a corporation) still had to pay the debt.

If you don't mind my asking, how did you then handle the business debt?

[possumfat]

most attorneys will make you file personal chapter 7 if you have business debts that are personally guaranteed which eliminates the business debt also.

[Rover]

most attorneys will make you file personal chapter 7 if you have business debts that are personally guaranteed which eliminates the business debt also.

I do not believe that is the case unless the business is a sole-proprietorship.

If one files personal Ch 7, the business debt is is not eliminated if the business is a separate legal entity, such as a corporation or an LLC.

[kcj]

If you don't mind my asking, how did you then handle the business debt?

The business paid it. We would have paid it prior to filing because it was a legitimate business expense, but the attorney misunderstood and told us it would be considered a preferential payment.

[CanPayNoMore]

Reading this still makes me concerned about my company credit card debt.

Planning to personally file C7 about the third week in March. I have about 78K in unsecured CC debt, 10K of which is a company Visa card. The debt was incurred for business related purchases and expenses between 04/05 and 09/06 when I was operating as a sole proprietor (and at a loss), the last few hundred of it from 10/06 to 12/06 after I formed a sole member LLC. I am still running the small business, it barely breaks even now, but it's our slow season.

I say "us" because I have a couple of 1099 employees who contribute in some way, and I formed the LLC to better structure future payroll witholding (hopefully including my own) and opened a tax account too in addition to my business (LLC) checking, these people will probably make more than $600 in 2007 if this business makes it through my personal bankruptcy this year. They should be regular employees then, with payroll tax liability. I want to do it right, it looks like we may be past the worst and may make a small few dollars this year if all goes just slightly better than last year.

My BK lawyer who I have been paying per our agreement, tells me that "the business has no assets", that they are all mine and can be used in the course of the same type of profession (so he wants to try to put all of my business equipment in the Colorado $10,000 tools of the trade exemption, including my vehicle, which does not fit into the $3000 state vehicle exemption by about $1500). But the business CC debt is all personall in my SS# not under my company's Fed. EIN#, would the business card bank (USB) come after my business (which I'm told doesn't have anything to liquidate)? Comments?

I know this will be more complicated with a business, and I can hear some of the questions already, but what is the realistic likelyhood of my small business making it through all this, assuming that there is no more red ink before filing (and hopefully no more afterwards)? I have cut my business expenses to the bone, and my personal expenses as well. I make very little right now, but I'm not living on debt anymore, no card use since mid-December (one reason we are waiting 90 days, the other is most of my CC minimum payments were over the $600 aggregate in 90 days... I just rambled on.

Anyway, anyone have any first-hand experience with a sole-member LLC (preferably in Colorado) making it through a personal C7? I want to keep it if possible and it has become a "part-time" weekend and evening job, I am looking for another regular job (and I'm aware of the means test numbers).

Thanks,

CanPayNoMore

[lisac77]

Personally guaranteed business debt is discharged as personal debt. If we end up filing, this is how we will file. However, we are surrendering the business and all its assets back to the bank. I don't know how it would work if you want to keep the business.

[wrinkleigh]

We were an s corp. Have about $80,000.00 unsecured debt in business name. We listed all of it on our personal ch 7 because laywer said most cc's are persoanlly guaranteed. We were advised to file CH7, and our "personal" liability will be discharged.

Our business is closed, with no assets. Lawyer told us that legally they can still come after the corp, and we can be served because we are the owners. But since the business is closed with no assets, that we really dont have anything to worry about.

Question I would ask you -- is you business closed or still operating? If you are still operating and have assets, then you could still lose them even after filing ch7.

Make sense?? This is from my personal experience only. Talk to an attorney.

[BK'd-Betty]

We were also and "S" Corp - the same advice was given to us by our attorney as wrinkleigh's attorney.

We included all business debt that would have come back to us personally - and CLOSED our business. There were some company debts that were not paid (+/- $2k) which we've heard nothing about. Our attorney said there wasn't a whole lot the creditors could do since the company has/had no assets at the time we closed it.

But I still worry myself sick over it.

We were an s corp. Have about $80,000.00 unsecured debt in business name. We listed all of it on our personal ch 7 because laywer said most cc's are persoanlly guaranteed. We were advised to file CH7, and our "personal" liability will be discharged.

Our business is closed, with no assets. Lawyer told us that legally they can still come after the corp, and we can be served because we are the owners. But since the business is closed with no assets, that we really dont have anything to worry about.

Question I would ask you -- is you business closed or still operating? If you are still operating and have assets, then you could still lose them even after filing ch7.

Make sense?? This is from my personal experience only. Talk to an attorney.

[Brendon]

I was the Managing Partner of my LLC. The business loan was to the LLC and was discharged in my Ch 7.