Sorry to hear about the businesses' predicament. Not to split hairs, but FYI: Corporations cannot file Chapter 13, they must file either Chapter 7 or Chapter 11.
It is unlawful to give legal advice in this forum, we can only provide general information, so I will answer your questions the best I can under those constraints:
What are our options to avoid a very large personal liability? What is the implication of either of these actions (voluntary return vs repo) on the person that cosigned?
I hate to be the bearer of bad news, but generally there are very few options a person has when dealing with a corporate guarantee when the corporation defaults and when personal bankruptcy is not an option. The botXXXXX XXXXXne is the creditor will have to be paid by someone, and if the corporation does not have the funds to pay it, and sale of the collateral is insufficient to pay it, the guarantor usually has to deal with the debt.
By "deal with the debt," I do not necessarily mean pay it outright, but the guarantor will have to negotiate with the creditor to hopefully settle the debt for some amount the guarantor can afford, or else the corporation and the personal guarantor may face a lawsuit from the creditor.
The only minuscule silver lining is that often the amount paid to cover the corporate debt can be written off on personal taxes (see an accountant for details on this).
Is it better to voluntarily return the vehicle or get it repossessed?
Generally the difference is negligible. Either way, the creditor usually stores the car and then sells it at an auction. They tack on repo fees (sometimes even if it is voluntarily surrendered), storage fees, auction fees, and interest, and then sell the car for a fraction of its value and send a bill for the remaining balance (called the "deficiency balance"). The creditor may waive a repo fee if it is voluntarily surrendered, but I have not found that to matter much when the deficiency balance statement arrives.
How do we get out of this mess?
I can't really answer that since it calls for advice, and since the impact of any general information may vary on your specific information. But, I will tell you some generalities I have picked up over the years:
I have found that it is often better to sell a car rather than let it get repo'd since the amount cars bring at auction is ridiculously low, which plus all the repo fees usually results in a huge deficiency balance. If one can find a buyer for $x.xx, then contact the creditor and ask if they will release the lien for the $x.xx purchase price, and then turn the balance into an unsecured loan, or pay the difference from some other source of funds, this usually is much cheaper than paying a deficiency balance after the sale of a repo'd vehicle. I have seen people who owed $15,000 on a $10,000 car let it get repo'd, and they wound up owing close to $15,000 in a deficiency balance because the car sold for $4,000 and the bank tacked on over $3,000 in costs and interest. It really ruins one's day to pay as much for a car as they originally owed and not get the car. So, eating some now is better than eating it all later in many cases.
In the event that a vehicle is repossessed and sold and a deficiency balance results, many creditors will settle for much less than the total amount of the deficiency balance in return for a one-time lump sum settlement. Generally it is advisable to get the creditor's acceptance of some lower amount as settlement-in-full prior to sending money, be sure it can proven when the creditor received the settlement funds, and prepare for tax consequences since forgiven debt is considered income by the IRS.
If a corporation files Chapter 11 and reorganizes its debt, it may be able to schedule the guaranteed loans to be paid in full through the Chapter 11 Plan and thus protect the guarantors, but Chapter 11 is generally cost-prohibitive for most small corporations ($15,000 to $25,000 to walk in the door in many cases), so Chapter 7 is what many ailing corporations file, which leaves the guarantors holding the bag on the liability.
I'm sorry this isn't the best news but I thought you would appreciate honesty more than fluff. In any case, I hope this at least helps and a positive feedback is always appreciated if this was useful to you.
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