Suspended S Corp With 10k Debt With Bank Credit Line

[jpcapital]

My S corp is suspended and hasn't done business for 4 years. I have been paying off a Bank of America credit line for years, and now they are asking to call in the entire amount. I like to continue to pay down the debt, but if BOA wants to call it in then I have to look at BK. How difficult will it be to file at this point, and how much does something like this cost?

[despritfreya]

Did you personally guarantee this corporate debt? if not and the corp is "dead", why are you paying for someone else's obligation? If there is no personal exposure then maybe stop paying. The bank will sue the entity and get a judgment against the entity but. . . good luck collecting from something that is dead.

Now, if there is personal exposure and this is the only debt you have ($10k or less) you have to decide if filing a bk is worth it. Maybe try to settle for a cash amount (something less than what is owed) instead.

Please give a little more info.

Oh. . . and. . . welcome to the Forum.

Des.

[jpcapital]

Did you personally guarantee this corporate debt? if not and the corp is "dead", why are you paying for someone else's obligation? If there is no personal exposure then maybe stop paying. The bank will sue the entity and get a judgment against the entity but. . . good luck collecting from something that is dead.

Now, if there is personal exposure and this is the only debt you have ($10k or less) you have to decide if filing a bk is worth it. Maybe try to settle for a cash amount (something less than what is owed) instead.

Please give a little more info.

Oh. . . and. . . welcome to the Forum.

Des.

Thanks for your welcome!

I don't remember signing anything to guarantee it. The credit line was established from 1997 and transferred over when I changed the company name. I haven't missed a beat in paying for it. I don't want Bank of America to file a claim in Superior Court and include me on the complaint and then I have to fight it. I think bankruptcy would be cleaner, but that is why I am asking.

[LadyInTheRed]

You need to get a copy of the original credit line agreement. The guaranty may not have been a separate document. Ask Bank of America to send you a copy of the agreement. As Des says, if you are not personally liable for the loan, there is no point in paying the loan or filing BK. Keep in mind that eve if you did not guaranty the debt, BoA could try to pierce the corporate veil if you received corporate assets. But, if they do name you in a lawsuit and you are vulnerable, you can file BK at that point.

[jpcapital]

You need to get a copy of the original credit line agreement. The guaranty may not have been a separate document. Ask Bank of America to send you a copy of the agreement. As Des says, if you are not personally liable for the loan, there is no point in paying the loan or filing BK. Keep in mind that eve if you did not guaranty the debt, BoA could try to pierce the corporate veil if you received corporate assets. But, if they do name you in a lawsuit and you are vulnerable, you can file BK at that point.

I am going to write them. I understand the corporate veil aspect, and think they will try anyway. That is why if they don't let me continue to pay for the loan then I will file corporate BK.

[despritfreya]

I am going to write them. I understand the corporate veil aspect, and think they will try anyway. That is why if they don't let me continue to pay for the loan then I will file corporate BK.

Unless you did some bad act the lender is not piercing the corporate veil. If this is a corporate debt without a personal guarantee and you did not "raid the corporate coffers" you are not going to become a target. Also, there would be no reason to file a corporate bk since corporations do not get discharges in Chapter 7s.

Des.

[jpcapital]

I have been paying the debt despite the suspension of the corporation for nearly 5 years. It was a video company so it was a money loser.

If corporations do not get discharges then what is the protection offered by Chapter 7?

[despritfreya]

If corporations do not get discharges then what is the protection offered by Chapter 7?

None really. IMO there are two reasons to file a corporate 7. . . .

1. The principal(s) of the entity wish to start a new business doing exactly the same thing free from the fear of successor liability so they file a corporate 7 and then purchase the assets from the Chapter 7 estate "free and clear" of the claims of the entity creditors.

OR

2. The principal(s) simply want a 3rd party to liquidate the assets of the entity for the benefit of creditors so they don't have to.

There may be one or two other reasons but I think you get the picture.

Des.

[jpcapital]

Thanks for that explanation. I sent a letter to Bank of America asking for a copy of the credit agreement. I will update you guys when I get it back.

[ExplorerZ]

99.99% chance of personal guarantee

Personal guarantees are so pervasive on small business debt that I can't imagine there isn't one. Of course the agreement will be definitive on it, but I'd definitely operate on the assumption that there is one until proven otherwise. For others that may see this thread; they generally reserve the right to modify the agreement as they see fit, giving you a small window of time to close your account to decline their changes, so don't assume your original agreement is still the current agreement.

From what I've seen, you can start getting rid of the personal guarantee at around $1 million in annual revenue in a few cases and on most of the rest by $10 million in annual revenue. They usually start using words like "Corporate" or "Enterprise" etc. instead of "Business" at that level.

Bank of America goes a bit further and breaks it down into three tiers: Small Business, Mid-size Business ("revenue from $5 million to $2 billion") and Corporations & Institutions.

The small business division offers the Cash Rewards card, which states:

the Business entity and I, personally and in my individual capacity, will each be liable for all charges, fees, and finance charges on all of the cards and accounts

[jpcapital]

I got a letter from BOA with the copies of my agreement. There was a personal guarantee. I asked them to pay it of over 2 years, and haven't heard back from them. What is the best way to negotiate with banks on this?