Business Debt- Personal Guarantee

[betterdays]

I am self-employed. About 1/3 of my unsecured debt is actually business debt that is personally guaranteed (20k Amex and 25k Citibank). I am wondering if I file personal bk (ch 7) can these creditors still come after my business? It is an S-Corp. There are no assets except for two computers that are about 3 years old and 2 phones, but I do receive commissions each month in the business name. Do I need to incorporate in another name and have my commissions assigned to a new corp?

I have had 2 attorney consultations and they haven't mentioned anything, but I want to be sure before I move forward.

[Never_Again]

I think that you will find that if your are the only shareholder of your S-corp, then yes, the trustee can come after your business. The reason for this is because while the S-corp provides limitted liability against lawsuits (for tort), you have personally guarenteed the debts. If you are the only owner of the S-corp, you will have to declare your shares as assets, and the trustee will figure out really quick that you are essentially a sole proprietorship, and will sieze the business if it has any value.

That said, you may need a lawyer familiar with business filings. There may be a way to protect the business, but you may need to file a chapter 13 to protect it.

[paradiddle]

If you had a S-Corps with 2 shareholders (husband and wife) and only one shareholder had a business CC (with personal guarentee) and debt of $25k plus 45K personal CC debt.

Can the CC debt be removed with a S-corps bankruptcy or is it all lumped in with his personal situation?

[frogger]

Your attorney will give you the correct answers, however I think that you're going to need to start a new S-Corp, and file 7 on yourself. The current S-Corp will still owe the money, but you would be personally discharged from it. If the current S-Corp has no value and no income, you basically close the doors on it and don't worry about it anymore.

[StartingOver08]

If you file a Ch 7 you discharge your personal liability for the debt (you discharge the personal guarantee). However, the cc can get a judgement against the business and sieze the bank account to satisfy the debt - even after your discharge. Any commissions going into the account would be subject to being siezed this way. It is probably a good idea to start a new S corp to avoid losing the commissions to the creditors.