Your personal financial condition will effect your LLC as I'm sure most of your vendors/suppliers require personal guarantees. In that event, if you file bankruptcy, it's going to hinder your ability to maintain and open new credit - because a personal bankruptcy will show up on a credit check for the personal guarantee.
Also, if your company files a Ch. 7, it will have to shut down,and you'll have to start up a new one. However, if you work in the same circles over and over, this could hinder your operations.
My advice to all clients is that bankruptcy should be the last option because it totally changes your life and will effect you for a decade or longer! Thus, all other options should be exhausted before filing.
With regard to the personal filing, you should try to work out a payment plan with the creditors. Contrary to popular belief, most creditors are willing to work out payment plans interest deferred/interest free - they don't want to see you file bankruptcy either (it guarantees that they won't get paid much, if anything).
Also, if you believe you can get your LLC's debts under control, there is certainly no reason to file.
If things get worse, you could consider filing a Ch. 13, which is a reorgainzation of debt. You get to keep all of your possessions and property and your debts are paid back over 3-5 years interest free. Because you're paying your debts instead of discharging them as in a Ch. 7, creditors don't view a Ch. 13 filing as a terrible thing - like they do with a Ch. 7.
Thank you Mr. Kirk. I appreciate your quick response, but was looking for guidance more on the business aspect. (On the personal end, I understand that I will take a severe hit regardless of whether I do Ch. 7 or debt settlement. This is not a decision I've committed to, or am considering lightly - trust me, my stomach has been in knots for weeks. My ability to take care of myself and children is my primary concern).
That aside, assuming I do file personal Chapter 7, is the advice I received on letting the company die, having someone capitalize a new busines w/unrelated funds - of which I will be the owner -- and walking away from that debt reasonable?
Is there a chance there I could be held liable and have action taken against me that could be considered fraud which would affect either of my state licenses?
I've researched this topic extensively, and again have consulted (and paid $600 in deposits to) two attorneys, and really need to know where to head on the business side.
Letting the company die and restarting with a "front man"/ "money man" for a new venture is fairly common.
It's not fraud because the LLC is responsible for the debts, and the LLC will take responsibility via the bankruptcy. The result will be that the creditors won't get paid, but that's not illegal.
This may cause you some trouble with business relationships. The creditors you leave out in the cold won't likely do business with your new company.
Okay - almost there. I can tell by your thoughtful responses that you must truly take an interest in your clients' wellbeing. I intend to accept your response, so thank you for bearing w/me w/this one last clarification.
The attorneys have advised:
I file personal bankruptcy, the business debt cannot be included. The business will not file a separate bankruptcy, but rather I should walk away and let the business die.
Is it reasonable if the business does not file bankruptcy, and I walk away and start a new company, under my name w/someone elses funds?
I appreciate your help.
If bankruptcy is filed, it should be filed personally and for the business - in my opinion.
If the business does not file, you're going to eventually be sued by creditors for unpaid accounts, and any pending projects you're working on could sue you for walking away/breaching the contracts.
I would not suggest walking away from the business while it owes creditors because of the fallout that will eventually come. It is better to round up the company's business via a bankruptcy and get a fresh start.
You're going to have to deal with these creditors at spme point. I'd rather deal with them on my terms - via the bankruptcy - than on theirs - when you're sued all over the country by these creditors.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).