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Category: Bankruptcy Law
Satisfied Customers: 17248
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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I own a company (S Corp in Indiana) which the bank is wanting

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I own a company (S Corp in Indiana) which the bank is wanting to forclose on and I have been told that I don't have a leg to stand on as far as filing chapter 11 because I am not personally guranteed on the notes. I filed personal BK a few years back and the bank was fine with that. Is this true? We have a viable company yet have been told we have no BK protection as far as reorg!?


Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on


That is not right,


if you have corporate debt, a chapter 11 could be filed for the corporate debt only, most chapter 11 cases are for corporations, and no personal guarantee is ever available, for example GM went bankrupt the ceo was not personally liable for anything,


Also, you can file a chapter 7 to liquidate the corporate debt.


The only issue is that since it is an S corp,


the personal assets of the shareholder could be attached if the trustee finds that the personal and corporate assets were co mingled.


If you have any further questions please do not hesitate to ask.


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Customer: replied 4 years ago.

Our atty says we need a yes vote to the "re-org plan" and will not be able to get that since I am not personally guarateed on the notes!? Does this sound logical?

If you have other partners who do not agree that is an issue, also in a chapter 11 the creditors have to confirm any reorganization, if you are not personally guaranteed, the creditors may reject the reorganization is the corporation has limited assets, and if they cannot come after your personal assets.
Customer: replied 4 years ago.

My atty says that the minute it goes before a judge the bank will argue immediately that our re-org plan has no merit because I am not personally guaranteed. I have offered to personally guarantee but they will not listen now. I need some course of action to take to save my company from them shutting it down??

That may be an issue about the lack of assets in the company, I would consider filing a chapter 11 on the corp as that will give you several months of protection from creditors, and work out an arrangement at that point, by filling you still obtain protection from lawsuits and collections.
Customer: replied 4 years ago.

Kind of what my atty now told me--just seems that those few months will only prolong the ineveitable...and that is the bank shutting us down! Is there nothing creative you can suggest outside the box?

I would file a chapter 11 to stop all current action, that will give you time to see if you can personally lend money to the company to make a plan.

Another option is to open a new corp, and start the business with the new corp and let the creditors go after the old corp assets
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Customer: replied 4 years ago.

How would it be that my atty would not have advised me to personally sign on the notes, if he knew that could come back to bite me if push came to shove? Shouldn't they have known that by me not personally guarateeing the notes I would be crippled as far as Chaper 11? Is this not building into a misrepresenation case?

He may not have been thinking about a chapter 11 possibility, typically attorneys try to avoid personal liability on corporate debts, in fact it is best practice only to secure debts of a corporation without exposing personal assets.
Customer: replied 4 years ago.

Than why am I being told that if we seek Chapter 11 the bank will quash it by telling the Judge that I am not personally guaranteed on the notes and therefore the Judge will deny confirmation of our plan? Do you have any strategy advice on what I can do?

I would seek an another local attorney to go over the case with, if your attorney is stating that you need to personally guarantee the corporate debt or should have to obtain a chapter 11, that is not common advice, and I would still file the chapter 11, and advise the trustee you will personally lend money to the corp if needed for confirmation
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