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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Hi. I am starting a new small business in Texas where I now

Resolved Question:

Hi. I am starting a new small business in Texas where I now live. I have a business in Arizona where I moved from. It is unfortunately not doing well now and I may need to file bankruptcy on it. There is a C and S corp. I have a business partner. I would be filing personally, not just the business.

To help get my business going quickly in Texas (so possibly can avoid BK in AZ by covering loan payments), my dad is willing to invest part of the start up so I dont have to take the time to find a lender.

Questions:
If he loans me money and it is in my account to use while starting new business and I BK on the other in AZ, then would that money be frozen once accounts are frozen when filing?

I many need my dad's name as cosigner on new TX lease just secondary to debt. Could he get wrapped up in the AZ bk in any way?

Should I just put the entire TX business (LLC and lease) under him and just work for him?
Is that 'cleaner' provided there is no contact between us for a sale in the future.

So I guess botXXXXX XXXXXne is that while I would like to 1. own the business and have him as an investor or partner and 2. Have the corporation filed under my name or both our names, I don't want him to in any way possibly become liable for anything in AZ while he is helping me get business going here in TX.

Thanks.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

cfortunato :

Hi JACustomer,

cfortunato :

You have Bankruptcy Law questions here in addition to Business Law questions. I can only answer your Bankruptcy Law questions, and you can have your Business Law questions answered in the Business Law section.

cfortunato :

Is this acceptable to you?

Customer:

Yes....

cfortunato :

If you file a Bankruptcy, any assets that belong to you will be subject to the Bankruptcy court - including any money your father lends to you. This is so, even though the money is a loan.

cfortunato :

You would only have to file a personal Bankruptcy if you personally guaranteed any of the business debts.

cfortunato :

In most cases, filing a business Bankruptcy serves no useful purpose if the business is closed or will be closing.

cfortunato :

This is because business debt is not dischargable - only personal debt can be discharged.

cfortunato :

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

cfortunato :

Thank you.

Customer:

Hi....sorry for the delayed response.

cfortunato :

That is okay!

Customer:

My followup is that if I set up the corporation under my name and then the lease is under my name but he is just an investor in the sense of paying build out costs, equipment and other start up costs, but not per se loaning me money, is that an OK way to structure it that keeps is separate from AZ. I would like to set up the business as 'mine' on an official level but then again dont want something he invested in to end up garnished or frozen or taken as an asset or whatever.

cfortunato :

Are you asking what can be done if you do file a personal Bankruptcy or if you don't file a personal Bankruptcy?

Customer:

Other question that follows up that one is what if corporation and lease, bank account for corporation and all loans associated with the business, (equipment, etc) are under both our names

cfortunato :

The answer to that question would also depend on whether or not you are planning on filing a personal Bankruptcy.

Customer:

Do.... This is a long story so trying to ask I guess without giving you background. Long story short is had another business (chirpractic clinic) in AZ with same business partner that shut down and had loan payments remaining and we worked out payment plan (CIT and Wells Fargo) vs doing bankruptcy. Now, damn the luck, health insurance went to hell in AZ and this other clinic that was making enough to cover the agreed payback settlement is also having issues. There is 70K remaining to pay and I intend to pay it BUT there are the what-ifs so in the event I did have to personally bankrupt, I just dont want the business here in TX to be affected (well, acutally dont want my investor, my dad, to be affected).

Customer:

prob not as complicated as im making it but thaks for the help nonetheless.

cfortunato :

The only way the Texas business will not be affected by your Bankruptcy filing is to put the business in your father's name only.

cfortunato :

Otherwise, 1/2 of the assets owned by that business will be subject to the Bankruptcy court.

Customer:

Well that is the answer I didnt want to hear but figured I would! haha.

Customer:

Thanks for the help!

cfortunato and other Bankruptcy Law Specialists are ready to help you
Expert:  cfortunato replied 5 years ago.
You're welcome!