Chapter 7 - Filing Personal - Do I list my S-Corp's debts that I don't owe personally

[phoenyx]

I'm filing Chapter 7 bankruptcy within the next two weeks or so. It's been a long time coming, and it's almost here.

I own an S-Corporation which is the reason I'm filing Chapter 7 in the first place. So much debt that are personally guaranteed by myself.

I'm preparing a list of my creditors for my attorney, of personal debts, and my S-Corporation's debts that I personally guaranteed.

My attorney is saying that I should list debts that my S-Corporation owes that I don't owe as business debts -- even in the situation where creditors admit they don't have a personal guarantee from me, so I don't owe it personally. He's saying to list these as business debts on my Chapter 7 filing. I don't know the Chapter 7 paperwork well enough to know if these can be listed with a note that it's an S-Corp debt, not a debt by me.


This worries me for a few reasons, should I be worried?

I'm worried whether I could get in trouble for listing debts that I don't owe personally. Remember I'm filing Chapter 7, not the S-Corporation. (The S-Corp is just withdrawing its charter, not filing a BK.)

I'm worried whether this will just complicate my filing, if all those creditors start writing notices to the trustee that the debt shouldn't be bankrupted since I don't owe it personally in the first place.

I'm worried that these creditors might refuse to deal with me personally in the future if they have me marked down in their system as having alerted them to a bankruptcy -- whereas if I don't list them, they might work with me in the future on different accounts.

[millerc507]

I could be wrong. . . However, in my case, we my husband and I had a C-corp with much of the debt being personally guaranteed. We listed those debts. You cannot discharge business debt through a personal bankruptcy but what it does do is rid you of the liability. If you are closing your charter, then there is no business to go after and if you are rid of your liability, they cannot come after you personally to recover the debt. I hope that makes sense. I don't know the answer as to whether they would deal with you in the future or not.

[HHM]

To answer your 3 questions....you have nothing to worry about.

You BK will already be looked at a little more closely than others because there is a business involved, but usually all that means is turning over 2 years worth of business records.

As for future credit...trust me, YOU WILL be able to get credit again.

Bottom line, you want to include those business debts in your personal BK. Even without a personal guarantee, there are other ways to attach personal liability to those business debts.

[phoenyx]

millerc507 and HHM, thank you very much for your responses.

Both of you really cleared up why the debts should be listed, just to prevent problems from occurring in the future.

I just thought of a follow-up question, however. If I list the S-Corp's debts that I don't perceive as owing personally at the moment, the amount of debt that I'm listing will go up a lot. In the back of my mind, I'm almost remembering reading that there was a maximum debt amount for Chapter 7 bankruptcy -- which I might approach from listing these other debts.

In my research today, I'm finding lots of sites that say there is no maximum debt amount in a Chapter 7 bankruptcy. Is that right, am I remembering wrong?

[HHM]

There is no maximum debt limit for a chapter 7 (there is a debt limit for chapter 13, but not for 7)

Granted, if your debt is really high, your case will probably be looked at more closely, but unless you really did something fraudulent, there is nothing to worry about.

[Dollar Bill]

HHM: I'm glad I caught this post and am in a similiar situation. I have personally guaranteed debts for a c-corp. The debt id approx $700k. really high. The only thing I worry about is the fact that I had been less than honest on the income when receiving them. 3 years ago. This can become an issue but on a scale of 1-10. 10 being the high. What do think?

[millerc507]

We filed more than a year after our business closed and they never even asked for any business records. We had other issues and but the business records were not one of them. We were discharging $215K.

[seafresh]

same here, i also had s-corp business and reason I filed personal BK. YES, list all your debts from business... you never know if you sign the leases, contracts, etc. with personal guarantee....
i found out that if you paid state taxes or fed with cc, cc companies can still come after you(i had bad months in sales and i had to use the cc to pay sales tax). which had my lawyer settle for 50% of cost..

my work out fine.. i was discharged on 1/7th..
good luck....

seafresh