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cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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I own a small beauty salon for 23 years i am closing my doors

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I own a small beauty salon for 23 years i am closing my doors this month forever the business can no longer survive this economy the only debt that is on the business which by the was is incorporated is a small business line or credit with a 30,000 balance all other bills are paid off. I have sold my house and will be a cosigner on another home all i have is a leased car no other possesions or debt i do have a great credit score. what will happen to the debt if i stop paying on it ? would the bank work with me to get the balance and payment down?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 7 years ago.
Hi anthipie,
Did you personally sign for this business line of credit?
Customer: replied 7 years ago.
yes i filled out the application about 10 years ago with an address that has been sold but the card has my name and the business name on it. the card does not come up on my credit report
Expert:  cfortunato replied 7 years ago.
Since you personally signed for this line of credit, you would remain personally liable for it, even though the business is closing.
If you stop paying, and after not paying for a month or two, banks often offer to take about 50 - 60% of the loan as payment in full, but they will not allow payments - you would have to pay the entire 50 - 60% at once. A bank will usually not work with you in this manner while the payments are current.
If this doesn't work out, and you are not making the payments, a bank will typically sell the debt to a collection agency, who can go to court to get a judgment, which can be used to garnish salaries, bank accounts, and place liens on property - unless you file for bankruptcy protection.

Edited by Christina Fortunato, Esq. on 6/4/2010 at 12:06 PM EST
Customer: replied 7 years ago.

How else could i have gotten a business line of credit without signing for it myself. I was under the assumption that when you are a corporation your personal and business are seperate? If this is personal why isnt it on my credit report? What if I own nothing what can they take from me?

Expert:  cfortunato replied 7 years ago.
Corporations often get loans without personal guarantees, by submitting financial statements. It is true that a corporation is separate from the individual(s) that own it, in all aspects of the business, except where one or more of the owners personally guarantees a loan. Personally signing a loan is the same as co-signing a loan - it is an enforceable promise to pay the loan in case the corporation does not pay.
It is not on your credit report because even though you personally guaranteed it, it is a business loan.
If you own nothing, the lender cannot take anything from you.
Customer: replied 7 years ago.
i have one more question the bank that gave me the line of credit was national city bank which in our area was just recently taken over by pnc. what if pnc cannot find my original application?
Expert:  cfortunato replied 7 years ago.
If PNC cannot find your original application, and if you deny having guaranteed it, they will not be able to prove that you guaranteed the loan, and would therefore not be able to hold you personally responsible for it.

Edited by Christina Fortunato, Esq. on 6/4/2010 at 10:46 PM EST
Customer: replied 7 years ago.
what are the chances of that happening?
Expert:  cfortunato replied 7 years ago.
It can happen, but I can't tell you how likely it is to happen.
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