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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33880
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Hello I have personal debts of approx $40,000 (No CC debt)

Customer Question

Hello I have personal debts of approx $40,000 (No CC debt) many DRs bills and a verizon bill Tried to dispute it.. no go there. We also have a small company based in CA (selling perfumes) turning over approx $190,000 a year. We have company debt over $380,000
weve tried doing payments to many suppliers but all the small payments are too hard to stay on top of. I take only $500 a week as personal from business and biz pays my rent phone and car payment. I dont own any property. Inventory is worth approx $18,000.
I heard that I could go BK personally and wipe out also Business debt- Were a C corp.
Also that I could keep the business going after that. Is that correct?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 3 years ago.
Are you personally obligated for any of the corporation debt?
Customer: replied 3 years ago.
Hello yes for two of them Over $150,000 and one 20,000.. thats aprt of the over $380,000 of the business the others not theyre debts of business.. Theyre personal ones
Expert:  socrateaser replied 3 years ago.
Okay, a personal bankruptcy (Chapter 7) would wipe out your personal obligation on the corporate debt -- in addition to your personal debts. However, unless you actually bankrupted the corporation, too, your creditors could continue to try to reach the corporate assets and income to satisfy the debt.

In order to completely avoid the debt, you would have to file a Chapter 11 on the corporation. However, as part of your personal bankruptcy, the bankruptcy trustee would have the authority to sell your stock to anyone who wanted to purchase. So, there is a risk that you could lose the entire corporation to an investor. Since the corporation is so far in debt, I don't view this as a likely outcome -- but, it's legally possible, so I'm mentioning to be thorough.

Of course, once you file personal bankruptcy, you can simply close the doors on the corporation, and start a new business. None of your creditors would be very happy, but there wouldn't be anything they could do to stop you, as long as you didn't transfer assets from your old corporation to your new one.

Hope this helps.
Customer: replied 3 years ago.
Ok so glad I checked into this as I sat with a BK adviser today they did not tell me any of this information.
As were an up and coming company there could be someone out there awaiting to buy us from BK court.
If I go BK personally.. and I also include all the debt in the corp it does not wipe out that debt is that correct? Can the judge actually wipe out those debts in the business as well or do they sometimes do that and sometimes not? as most smaller debts in the c corp are between $3,000-$10,000 (totalling 180,000+are not personally guaranteed by me. ) the biz goes BK what then.. Chapter 11 is the one where we re negotiate debts or is that 13? we dont have $20,000 to do a renegotiation chapter..
The lawyer today told me theres approx $22,000 that cannot be touched (which would mean some inventory) if I did it personally and included the biz debts that we could continue to do business in the same name (even ones not personally signed for) is that completly incorrect?
Customer: replied 3 years ago.
Ok so glad I checked into this as I sat with a BK adviser today they did not tell me any of this information.
As were an up and coming company there could be someone out there awaiting to buy us from BK court.
If I go BK personally.. and I also include all the debt in the corp it does not wipe out that debt is that correct? Can the judge actually wipe out those debts in the business as well or do they sometimes do that and sometimes not? as most smaller debts in the c corp are between $3,000-$10,000 (totaling 180,000+are not personally guaranteed by me. ) the biz goes BK what then.. Chapter 11 is the one where we re negotiate debts or is that 13? we don't have $20,000 to do a renegotiation chapter..
The lawyer today told me theres approx $22,000 that cannot be touched (which would mean some inventory) if I did it personally and included the biz debts that we could continue to do business in the same name (even ones not personally signed for) is that completely incorrect?
Expert:  socrateaser replied 3 years ago.
Ok so glad I checked into this as I sat with a BK adviser today they did not tell me any of this information. As were an up and coming company there could be someone out there awaiting to buy us from BK court. If I go BK personally.. and I also include all the debt in the corp it does not wipe out that debt is that correct?

A: Yes.

Can the judge actually wipe out those debts in the business as well or do they sometimes do that and sometimes not?

A: The court has no jurisdiction to deal with the corporate assets or debts. It can order your stock sold and it can discharge your obligation for the corporate debt, but that is the limit of the court's jurisdiction, unless the corporation files for bankruptcy.


as most smaller debts in the c corp are between $3,000-$10,000 (totaling 180,000+are not personally guaranteed by me. ) the biz goes BK what then.. Chapter 11 is the one where we re negotiate debts or is that 13?

A: A natural person can file Chapter 7 (liquidation) Chapter 13 (payment plan) or Chapter 11 (reorganizaiton). A corporation can file only Chapter 7 or 11.

we don't have $20,000 to do a renegotiation chapter.. The lawyer today told me theres approx $22,000 that cannot be touched (which would mean some inventory) if I did it personally and included the biz debts that we could continue to do business in the same name (even ones not personally signed for) is that completely incorrect?

A: All I can say is that I can't think of any way that you could wipe out the corporation's debts by only you filing personal bankruptcy. Though I suppose that the corporation could assign all of its debt to you personally, and that unless a creditor sued to stop it, then you could walk away with the corporation debt free. But, legally, that's called a fraudulent transfer, and a creditor could stop you if it wanted to spend the money to do so.

Ask the attorney you talked to to explain the concept, because I haven't a clue what he's up to here. Then come back and tell me and we'll both know.
Customer: replied 3 years ago.
Relist: Incomplete answer.
Please read my questions/ posts and get back to me asap Thank you
Expert:  socrateaser replied 3 years ago.
I apologize, but I don't know what I've missed. Please clarify.

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