Joint Business Debt Questions

[isabella19]

My husband & I are getting ready to file chapter 7 for business & personal debt. All lines of credit & cc's. He sells replacement windows (no inventory) & our residential business has stopped & our commercial business is barely getting us by. We will also put our house in the bk & move into an apt. after 10 years here. Heartbroken, to say the least!
My question is during the early 2002-2003 time, husband appled for several lines of credit & to keep busness flowing. Some are in his name but some are in his mom's name. He couldnt get a certain type of loan so the bankers suggested to put his mom as the owner (he's an LLC) & took out low interest loans in his moms name. (she was fine with it all). Then after he got the loans, he oput the business baxk in his name.
And yes the bankers suggested he do this. I always thought it was a scam.
"We cant lend you any more money but get your mom to co-sign, or put her name on the business & we'll give you the money in her name". All his fault but if they suggest it, I doubt it would of happened.
Anyway, what can we do with his moms debt that is in our business name? Can they come after her?? She's 82 & on a fixed income & tells us not to worry about it. She doesnt care. Well I feel awful & have to take care of it. How do I get rid of the debt in her name but used by our busness??
We paid all the loans until very recently when our business took a dive.
Thanks for any suggestions. I start to interview lawyers next week.

[HHM]

She is liable for the debt. If she signed for the loans, and you file BK, she is next in line for the bank to collect.

Now, whether she is really at risk is another question. If she only has Social security and no assets of value, then it really doesn't matter, there is not much the bank to do (But it will be a hassle). However, if she has assets and signicant retirement income for non-social security sources, she may want to consider BK.

[isabella19]

Her only income is her SSI. She told us dont worry about it. What can they do to her. BUT... I have to do something. I cant sit back & let her get hassled. Maybe I will talk to her about a bankruptcy. I can pay for it & do all the leg work/paperwork for her. This is horrible. Where was his head at, getting his mom involved. At the time we were making quite a bit of money & had no problem paying all our bills & actually giving her money each month. What a difference a year makes.
Thanks for the advise.
My only thoughts are that since the business is an LLC, can they come after her. How does a LLC protect you? That was the reason he went from a sole prop to a LLC.

[BigJohn]

Don't knock your husband too bad. The bank knew better, and the bank got him to do what they wanted. If anybody is to blame, it would be the bank.

[HHM]

My only thoughts are that since the business is an LLC, can they come after her. How does a LLC protect you? That was the reason he went from a sole prop to a LLC

That is the big misconception, corporate entities don't protect you from your creditors. The reasons you do corporate entities is for tax purposes and for liability to third parties (think of creditors as 2nd parties). And even to 3rd parties, an LLC or Corp only provides a defense (or a layer of protection). For example, if you are a contractor, you may wan't to have an LLC to protect your personal assets from exposure to Construction Defect lawsuits. But for the most part, LLC and Corp's for small business are pointless but for some tax advantages.

[isabella19]

Thanks for all the advise. I am finding out that making the business an LLC, isnt what I thought. Big misconceptions.