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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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i formed an llc a few years ago. business has been very slow

Customer Question

i formed an llc a few years ago. business has been very slow and bad for while. barely getting by as most are now with this economy. i have been considering dissolving llc and filing business bankruptcy for some time now. no debt owed except for advertising with yellowbook from 2-3 years ago. i recently found out that an attempt was recently made to sue me and my llc by yellowbook for advertising for approximately 30k. i have not been served yet. i need to know if i should move forward with bankruptcy for business. thought i would have to do a personal one. my understanding is that my personal assets are protected by having llc formed unless i obligated myself to pay through contract. the advertising was for business. i have been prepared to file business bankruptcy. i also know that if i file there is an automatic stay for collecting on this account. But what about being sued for the business and personal? how should i handle that? thanks.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.

Hi JACustomer,

1) Was the Yellowbook debt - or any other business debt(s) - personally guaranteed by you?

2) Does your business have any assets that could be attached by a creditor?

 

Customer: replied 3 years ago.
this is the only debt. there are no assets at all. no property and only couple hundred dollars of office equipment. i have been working from home for while. i reviewed the back of the copies of advertising contracts they gave me and there is a line toward the end that says that "by his/her execution..the signer personally and individually undertakes and assumes, jointly and severally with the customer (my business)."
Customer: replied 3 years ago.
<p>also, i have pretty good credit and it has taken a while for me to get it. should i proceed to file the business bankruptcy, avoid their attempts to serve me with lawsuit papers. i am prepared to file if i have to personally but i really don't want to file personal bankruptcy. thanks. but i have a feeling that i might have to.</p>
Expert:  cfortunato replied 3 years ago.

Given the information you provided, filing a business Bankruptcy will not help you. This is because Bankruptcies can only discharge debts owed by individuals, not debts owed by businesses. (The main purpose for business Bankruptcies is "re-organization" - where business creditors agree to accept partial payment for debts.)

Additionally, since you personally signed for the advertising debt, you can be held personally liable for that debt, whether or not you file a business Bankruptcy. This means the creditor can - with a lawsuit - get a judgment against you, unless you file a personal Bankruptcy. The timing of the Bankruptcy filing is not crucial - it can be filed before, during, or after the lawsuit.

 

I think this is what you wanted to know. If not, please let me know.
Thank you!

 

 

Customer: replied 3 years ago.
could i move ahead with a business bankruptcy chp 7 anyway? it is my understanding that a chp 7 is available to llc's. do you think that the collection firm will still continue to pursue and sue me? or should i file a business chp 7 and hope that they stop their efforts or maybe notify them in writing after i file? need to know if i should move forward with dissolving business prior to filing business bankruptcy or should i wait till after it is filed? i really would like to try anything and everything to prevent this being reported on my personal credit for 7-10 years. I assume as long as i have not been served i am okay, for a little while anyway. should i notify them in writing or have a lawyer notify them in writing that a bankruptcy filing is evident and that it would be in their interest to accept a settlement for some money rather than face a discharge for that full amount?
Expert:  cfortunato replied 3 years ago.

If you want to file a business Bankruptcy, you have to do it before the business is closed. You cannot file a Bankruptcy for a business that is closed.

Yes - I do think the collection agency will continue to pursue a judgment against you personally, even if they cannot get a judgment against the business because of a business Bankruptcy.

You can send a notice that a Bankruptcy filing is imminent. However, whether or not you send such a notice, there is a very good possibility that the debt collector will settle for less than what is owed, as most generally do settle. You can expect a settlement of 40-60% of the outstanding balance.

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