Can S-CORP continue business post discharge

[imran93]

I had a side business doing computer repair work with S-CORP and filed personal Chapter 7 bankruptcy. Corporation was listed as my asset. I had both business and personal loans that were discharged. Trustee took all the money as per date of filing in S-CORP and my bankruptcy was discharged and case closed.

My question is 1) Do I have to close the S-CORP after the case is closed or can continue business in the same corporation post discharge. I do still get some jobs through my S-CORP.

Thanks for the reply

[frogger]

Not enough information. Let's start with these questions:

1. What did the trustee tell you about the status of your corporation?
2. Did your corporation have any debts that you personally guaranteed?
3. Was corporation abandoned by trustee?

[imran93]

Answer To your questions

1. Trustee did not say anything specific about status of the Corp. Trustee just wanted all the cash in the Corp as of filing date
2. I did had some debts that were personal guaranty that was included in personal bankruptcy and discharged
3. Trustee did abandon the Corp in closing the case

[frogger]

Answer To your questions

2. I did had some debts that were personal guaranty that was included in personal bankruptcy and discharged

Here's a sticking point for you. The debts were discharged to you "personally", but the corporation still owes the money. Therefore, if you continue to operate the corporation, you always have that shadow hanging over your head of unpaid bills.

IMO, it would be best to start another corporation and get a true fresh start. Let this one die.......

[imran93]

Thanks for the reply. I am not sure about your suggestion that corporation still owes the money, as the business loans were discharged in the bankruptcy

I have some service contracts in the name of the corporation and do want to keep the coporation alive.

Maybe some other people can reply based on their experience

Thanks

[frogger]

Thanks for the reply. I am not sure about your suggestion that corporation still owes the money, as the business loans were discharged in the bankruptcy

No, they were not. While your personal liability was discharged, the corporation still owes the money.

Show me your discharge papers on the corporation........

[HHM]

Corporations CANNOT receive a discharge.

If the business has no assets, then the trustee probably won't care. But if the corporation is a joint debtor on the debts, the corporation still owes the money and can be pursued by the creditors.

[frogger]

Corporations CANNOT receive a discharge.

Come on HHM, I wanted to see the discharge papers......

[freeatlast09]

I am not sure about your suggestion that corporation still owes the money, as the business loans were discharged in the bankruptcy

Frogger is 100% correct.

You have to remember that a corporation is a separate legal entity that can enter into contracts, borrow money etc... However, most corporations can't borrow money without a personal guarantee from the people behind it which is what you did.

You are also correct in saying that you were personally discharged from the debt, but Frogger's point is that the corporation, as a separate legal entity, is technically still on the hook for the money as long as it continues to operate.

Your question is can the corporation still operate? The simple answer is yes, but the more important question is will the creditors pay attention to the fact that the corporation is still operating and try to get some of their money from it? If we're talking about a few thousand dollars here, the odds may be in your favor as it would be fairly expensive for them to come after it, but if this is tens of thousands in loans, then you do run a big risk of them trying to get some money and/or assets from your corporation.

I would second Frogger's advice - it's probably in your best interest to start a new corp or LLC. It's the only way to be sure you won't be haunted in the months and years to come. I understand that you have service contracts with customers and want to continue, but as long as the new company is still you, wouldn't the customers just sign a new service contract with your new company? You can even name your company something very similar to what you had before - just add a word or two to the name and answer the phone the same way.

Just my 2 cents - best of luck to you.

[imran93]

Thanks everyone for reply. I will certainly close the corporation as suggested but just to understand the matter more clearly. Some additional piece of information my bankruptcy was categorized as Individual Business Debt Bankruptcy and I also got 1099-C with bankruptcy box checked for this particular business credit card. Does it change anything? Can the bank still pursue after issuing 1099-C?

[justbroke]

Trust me... the corporation is definitely still liable. I get calls, once in a while, for a defunct corporation that I operated as an S-Corp. They call and I tell them that I personally discharged all my debt. They then like to tell me that they will see if the corporation still has assets to go after! They haven't called me back in 6 months, so I guess they gave up!

[imran93]

Justbroke, thanks for the input. Did you got a1099-c also for the debt they called you about. Does 1099-c changes anything

[justbroke]

Justbroke, thanks for the input. Did you got a1099-c also for the debt they called you about. Does 1099-c changes anything

They can't send "me" a 1099-C since it's not my debt. It was a debt of the defunct corporation. There was no personal guarantee.

[imran93]

Thanks just role for reply. I did get the 1099-c with bk box checked and saying business debt and person was liable for debt. I think I did had the personal guarantee on loan

[freeatlast09]

imran93: just an FYI - we also received a 1099C for a company credit card, but the 1099 was in our personal name only - not the company name. The company was still a potential target for collections so we dissolved our old corporation and started a new one. Best of luck to you.