Business Bankruptcy: will a personal bankruptcy need to follow?

[millerc507]

Yeah. . . from my limited research--out of curiousity--it looks like if you don't file personally, the creditors can still come after you. Good luck. It stinks having one of the complicated cases.

[Brendon]

My business was an LLC, which I was the sole managing member. I personally guaranteed the SBA loan and AMEX credit card. The business was dissolved (actually purchased by the franchisor for outstanding royalties) and I filed a personal ch 7. Probably the best thing I ever did.

I am 18 mos out of the bk and my credit scores are already at 740. I am back in the corporate world earning good money, have purchased a house, and have multiple credit cards again. My total debt in bk was about $110k with it 95+ percent being business related. Just remember, there is life after bankruptcy.

[Dollar Bill]

Brendon,

I like to hear that. Can you tell me if anyone showed up @ your 341? Creditors, UST???

[HHM]

Generally, there is little reason for a business to voluntarily file a chapter 7, main reason being, as you found out, business entities do not receive a discharge in chapter 7 (and for most smaller businesses, the majority of debt is personally guaranteed by the owner anyway). In reality, business chapter 7's are actually used by creditors to force a business into BK to liquidate assets (there is a mechanism for Involuntary Bankruptcy). Note, involuntary BK's are not too common because of the cost and uncertainty to the creditor.

[Brendon]

Brendon,

I like to hear that. Can you tell me if anyone showed up @ your 341? Creditors, UST???

No one showed up. I expected the bank which held the SBA loan to show up, but no one did. It was a quick and easy process, which my lawyer walked me through prior to meeting the trustee. After the 341 it was just a matter of waiting, and I had creditors object.

The amount of stress I was going through prior to filing was overwhelming. So much so, that I actually took a job in another city and moved my family as a fresh start. I now know that was unnecessary, but we are doing fantastic. I got a good rate on my new home, I have approx $13,000 in credit card limits (although I've never carried a balance over $500). My only regret was that I waited so long to file. I pulled money out of my 401k to keep the business afloat, which in the end was just money lost. You live and you learn.

[Dollar Bill]

Brendon,

I really appreciate the response. I don't want to get too personal...but what did some of the creditors object too? How many objected? I ask because I am in a similiar situation?

[joymal]

My lawyer said about the same thing. The real issue will be when all of the personal guarantees start getting "invoked". At that point, I think I'll have 30 days to respond to any requests for me to personally repay the debts of the business and we'll file the personal chapter 7 at that point.

[Brendon]

Brendon,

I really appreciate the response. I don't want to get too personal...but what did some of the creditors object too? How many objected? I ask because I am in a similiar situation?

No one objected at all. I never heard a word from a a single creditor. Before I filed, when the creditors called, I sent to my lawyer and never again heard from them.

[lifes2short]

This is so helpful!

We own a small business and are now at a point we need to make a decision. We were about to extend ourselves even more to try to save the business, but I'm afraid it would just prolong the inevitable, while digging a deeper hole for us. We also have an SBA loan, with personal guarantees, as well as some other credit we guaranteed personally. After reading some of these posts, I feel it is in our best interest to just file and be done with it all and not prolong the agony. It's nothing but sleepless nights, every day stress and anxiety and it just isn't worth it. I'm going to meet with an attorney this week. Life goes on.

[HHM]

We own a small business and are now at a point we need to make a decision. We were about to extend ourselves even more to try to save the business, but I'm afraid it would just prolong the inevitable, while digging a deeper hole for us. We also have an SBA loan, with personal guarantees, as well as some other credit we guaranteed personally. After reading some of these posts, I feel it is in our best interest to just file and be done with it all and not prolong the agony. It's nothing but sleepless nights, every day stress and anxiety and it just isn't worth it. I'm going to meet with an attorney this week. Life goes on.

Sounds like a plan. The toughest part is making the decision TO FILE, after that, things get easier.

[gophermn]

Make sure the business is noted on the petition! I filed CH7 and included a S Corp and LLC I had only because part of the debt included both. Obviously I can never start another business using the same registered names, but I made sure they were listed on the petition.
Good luck!

[lifes2short]

Okay... Now I am really confused. After consulting with the attorney, we are preparing to file business, as well as personal Ch 7. But you guys are saying that when business debts are personally guaranteed, it is sufficient to only file personal Ch 7?? This would be much easier. I just can't imagine the atty would convince us to file both only to get more $$!!!! NO WAY!!!!!!??????

[badandy]

[PoorGrammyinBK7]

I will say this:

If you can file, go ahead and do it!!!

We, trying to do the right thing, did all the wrong things (at least for ourselves). We continued in a business, paying down the CC's, sometimes transferring balances to get lower rates (at the suggestion of a lady at our bank). We did get lucky and were able to sell our business(no profit - just enough to pay off most of that business's debts). We paid the rest with our HELOC and just kept paying off loans, etc. Then we got sued (personal guaranty former inactive business from years ago- long story). Since we had depleted our funds paying off debt, we had no money to defend and he got the judgment. Now he is constantly threatening - even tho he knows we have nothing to give - and to try and have some kind of sanity, we HAVE to file and are kinda wishing we had just bitten the bullet and done it a long time ago...

[sick of debt]

So, let me get this straight. you can file a personal 7 and that will wipe away the business as well? I am asking because we are filing a personal 7 on 6/26 and have all of the business debts included. I believ that most if not all are tied to us personally. My attorney wasn't sure when we met with her in May, but said she would have the answer when we meet again.