Bankrupting your LLC

[bankruptsaluki]

Hey guys, hope all is as well to be expected.

Have a quick question. I have an LLC that isn't doing very well, maybe 40k in assets and probably 250k in debt. There is no bank debt, all services rendered. Now, I am sole owner of said LLC.

Is it possible to file bankruptcy on the LLC and not myself personally? Or will it automatically reach my personal credit report because I am the LLC owner.

Any advice would be great. Thanks.

TR

[justbroke]

The problem that I would see is "personal" guarantees. If you made any personal guarantees, this could come back to you. As you are probably aware, the business can either reorganize (under Chapter 11), or it could be liquidated under Chapter 7. An LLC would never receive a discharge of debts... so the creditors could look to the guarantor(s).

Now, I'm not sure of the ramifications to your credit report. If this is true business debt, it should not be on your credit report anyhow. The problem, again, is the personal guarantee and whether they then seek to collect against you personally. (Especially a single-member LLC which is nothing more than the alter-ego of the person.) Most people who file against for their single-member LLC, will also file personal bankruptcy to remove the obligation to pay (personal guarantee). Otherwise, it could be a mess.

About once a year now, it was more often previously, I have a company call me seeking to collect on one of my old S-Corp debts. i tell them that I personally filed. They mumble something about checking to see if the business has any assets. i tell them good luck. They don't call again (for a year). Hopefully, they have all gone away by now!

[frogger]

You can not bankrupt your LLC. You will need to file bankruptcy personally in order to remove the guarantees. Then, you dissolve the corporation.