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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 12206
Experience:  JD, MBA
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I owe about $400,000 (with two partners) S corporation. Our

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I owe about $400,000 (with two partners) "S" corporation. Our market has dried up.
We are considering Bankruptcy (probably Chapter 7) but are not sure about my personal obligations (family home, automobiles, etc.)....Does chapter 7 seem to be the right vehicle?
Is there any advantage to having these items in my spouses name.
She is about to be laid off from her position.
I have not taken a "salary" check this year.
Can you clarify whether you are personally liable for the debt, or whether only your corporation is liable? Also, is your home held as a tenancy by the entireties? Last, what State does this take place in?

Thank you.
Customer: replied 8 years ago.
North Carolina.
It is all business debt, owed by all equally, I would believe.
The home is currently owned jointly by my wife and myself. No connection to the corporation.
Hmmm, I think I need to clarify my questions. Please bear with me ...

Are the debts only in the name of the corporation, or are they in your name? It makes a huge difference. For example, as you're probably aware, GM has serious financial troubles right now. But that doesn't mean I'll need to repay any of GM's creditors just because I own GM stock. The same goes for your corporation. Therefore, you would only be liable for your corporation's debt if you specifically agreed to be liable ... for example, your corporation's bank may have required you to personally guarantee the debt. Do you know if that's true?

With regard to the house, married couples usually (but not always) own property as a "tenancy by the entireties." It's possible that you could own it as "joint tenants," but it's less likely and it would probably be a bad idea. Again, it makes a huge difference as to whether the house can be reached by creditors. So, you may want to double check your deed to see what it says.
Customer: replied 8 years ago.
The company is incorporated in Delaware.
to answer your questions.... the short answer is yes i am one of the personal guarantor's on our companies line of credit and credit cards which in total equals 129K in outstanding debt.

Not sure what the answer is on the second question (Tenancy by the entireties, or Joint tenants... Can you help me understand any further the difference.. Thanks

Okay, since you personally guaranteed the debt, then you are personally liable for it. I was hoping you were going to tell me that it's all in the corporation's name. Assuming you all personally guaranteed it, then you're probably jointly and severally liable for it. That means that you each owe 100% of the debt (although the creditor can only collect once). So, for example, if you have many assets, and your partners have none, then it's possible the creditor would sue you for the entire amount owed. You could then demand that the others reimburse you for 1/3rd each, but in this example collecting may be a hassle (which is why the creditor went after you rather than them). If the corporation files for Chapter 7, it won't relieve your liability. You may want to file for bankruptcy yourself. Of course, that depends on your financial situation as well (part of which we're discussing with regard to the house).

For unmarried people, there are generally two ways to own property together: (1) a tenancy in common, and (2) a joint tenancy. They are very similar … in both cases the two people own an undivided 50% interest in the property. The difference is seen when one person dies. With a tenancy in common, if one owner dies, his share goes to his heirs, and then those heirs own the property along with the other original (and still living) owner. With a joint tenancy, each owner has a right to survivorship. This means that when one owner dies, the other owner gets the entire property automatically. It does not pass to the deceased’s heirs. Now, a married couple may own property in either of those two ways, or they may own property a third way: a tenancy by the entireties. This is similar to a joint tenancy with regard to the right of survivorship. It’s different in that neither of you owns an undivided 50% interest … instead, you as a couple are viewed as one person that owns 100%. This difference is important so far as creditors are concerned. If you own the property as a joint tenancy, then one of your creditors may put a lien on your 50% share of the property. However, if you own the property as a tenancy by the entireties, then your creditor cannot put a lien on your 50% share because you don’t have a 50% share … your interest in the property is glued to your wife’s interest. So, unless your wife is also obligated to the creditor, the creditor can’t go after your house.

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