Still confused about what to do with S-Corp debt

[RuthCB]

Specifically a Line of Credit I have had with Bank of America since 1997 ( originally Boatman's) on my business.

Briefly:
Saw a bankruptcy lawyer and paid a retainer. She does not do business BK
I plan to file Chapter 7 personal BK in June.

1. The LOC with the bank is not personally guaranteed. The collateral is the assets of the business. This was very dumb on their part, but who was I to argue. I am a service business. When I close my assets will be 0. I have some beat up equipment worth about $300.00
The balance on the LOC is $31,000. The interest is 1.5% over prime, so I haven't paid anything but the interest for a few years. ( I know! such a deal)

2. My lawyer is planning on putting this in the personal BK to protect me and my husband as 100% shareholders and directors of the S-Corp.

SO... how does this work? After BoA gets the bankruptcy papers, what do I do? Should I send them a letter telling them I am closing and list my assets, which they say in the note papers belong to them. Should I send a balance sheet or P&L statement. Surely they won't come down and look at the rental space after I've left.

The more I think of it, the more I think they are SOL. They made a crappy loan in the first place. It was an aggressive time for this sort of thing...and I didn't even ask them for a loan. They recruited me!

I guess what I need to know is procedure.

[justbeach03]

Im in the same boat- and sinking fast. Hope the bank isn't one you use for personal banking! My attorney told me the same thing- list everything from biz on personal and walk away from biz. Let creditors fight over the "stuff".

[BKDefender]

RutyCB - I would suggest that you and/or your attorney review your state's statutes regarding the process to dissolve a company. In Nevada we have specific steps depending on the type of company (NRS 78,82,86, etc). Generally the steps are - use the money in the company's bank accounts to pay as many debts as it can. When the account is zero, you file a complaint in district court to dissolve the company.

Alternatively (and what most people do here) you can just let the company wither away and die since you listed any and all potential pass-through liability on your bankruptcy schedules.

--William

[RuthCB]

RutyCB - I would suggest that you and/or your attorney review your state's statutes regarding the process to dissolve a company. In Nevada we have specific steps depending on the type of company (NRS 78,82,86, etc). Generally the steps are - use the money in the company's bank accounts to pay as many debts as it can. When the account is zero, you file a complaint in district court to dissolve the company.

Alternatively (and what most people do here) you can just let the company wither away and die since you listed any and all potential pass-through liability on your bankruptcy schedules.

--William

Yes in my state, Oklahoma, you send in the dissolution papers to the SoS ( I think) They ask a few questions on the forms..very simple ones. Unlike other states it doesn't look like one of the requirements it to "pay all debts".

I plan to pay all bills and taxes, but I am worried about Bank of America as my car loan is with them and I want to reaffirm it, also my personal and business checking. I've already opened another personal account at another bank.

I've asked my lawyer so many questions already, I thought I'd ask here first before I do my weekly email... she is a good one though, she always answers back very promptly.

[RuthCB]

Found this .. sound good for my case:

Directors of a dissolved corporation are not personally liable to the claimants of the dissolved corporation.

A shareholder of a dissolved corporation the assets of which were distributed pursuant to the Oklahoma General Corporation Act are not liable for any claim against the corporation in an amount in excess of the shareholder’s pro rata share of the claim or the amount distributed to the shareholder, whichever is less.

The aggregate liability of any shareholder of a dissolved corporation for claims against the dissolved corporation cannot exceed the amount distributed to the shareholder in dissolution.