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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
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Experience:  Run my own successful business/contract law practice.
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I have approximately $100,000 in business debt that I owe for

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I have approximately $100,000 in business debt that I owe for a failed business. $10,000 of this is on a credit card secured by me. $90,000 is on a credit line secured by myself and my former partner. The company has few assets (it was a software company) that I am trying to find buyers for. At best these may net $10,000 or so; perhaps zero.

I'm employed now by another company. I can manage to service this debt (at over $1000/month) but that won't put a dent in the principal.

What are my options? I would of course prefer to not have this hanging over me but I don't know if a settlement is possible. I am also concerned that my partner will not pay and will leave me holding the bag.

If I were to let this debt lapse (not pay on it), how bad would that be for my and his personal credit ratings?
Submitted: 5 years ago.
Category: Business Law
Expert:  Dimitry K., Esq. replied 5 years ago.
Thank you for your question.

If I may ask, was there a formal judgment set against you for this debt? Did you formally guarantee this debt via your signature?
Customer: replied 5 years ago.
My partner and I formally guaranteed the credit line in writing with Wells Fargo. I opened the credit card as a "business" credit card with Capitol One, but my understanding is that it is secured ultimately by me personally.

There is no judgment against us at this point: I've managed to keep all the accounts paid up until now.

I was told by Wells Fargo that if we are not able to pay the credit line, that their settlements "start at" 85% (not sure if it means they go up or down from there), and that if it remains unpaid after 5 months it would be considered an unpaid debt and would affect my and my partner's credit ratings. I'm not clear whether that means we would not have to pay it and only suffer the credit hit, or whether we'd suffer the credit hit and still have to try to repay it. (FWIW, I would much prefer to repay the loan, but I may simply not be able to, especially if I am not able to count on my former partner.)
Expert:  Dimitry K., Esq. replied 5 years ago.
Thank you for your follow-up.

To answer your concerns, if the debt remains unpaid, it affects both your credit AND you remain liable for the debt--simply letting it go into default does not take away your duty and obligation to pay down the debt. If you default that would also permit the lender to pursue you via the courts, and only their lack of pursuit or your filing for bankruptcy if you are eligible would discharge this debt against you. Your credit would likely drop anywhere from 100-150 points if this defaults, and of course it will drop significantly more if you choose to pursue bankruptcy.

Good luck.

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