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LawyerDavid, Attorney
Category: Business Law
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My business (LLC) has a loan that was also personally

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My business (LLC) has a loan that was also personally guaranteed by the original four members. Two members have since been forced out due to breaches in company codes of conduct and bylaws. Are they still responsible for half the loan that was taken out to start up the company or does the entire loan now fall on the members left? When signing over their portion of the business, it was only stated that their interests in the business were being signed over - nothing was stated about debts
JA: Can you tell me what state the LLC is registered in?
Customer: MO
JA: Has anything been officially filed? If so, what?
Customer: What do you mean?
JA: Anything else you want the lawyer to know before I connect you?
Customer: No

Hello - my name is ***** ***** I am happy to assist you today. What is stated in the personal guarantee documentation is what will control in this instance so I would need to see what it says with regard to the guarantee going away with any change in ownership. If the documentation does not discuss the issue, the law would be such that all individuals that provide a personal guarantee for a loan will be responsible for the debt whether they lose their interest in the LLC or not. I hope this helps, please feel free to ask any follow up questions you may have and I will get right back to you. Thanks, David

LawyerDavid and 2 other Business Law Specialists are ready to help you
Customer: replied 1 month ago.
The documentation does not discuss change of ownership, just that we four and the business are liable for the loan. My next question is since we are all on the loan, does that mean we are each responsible for 25% or we are all responsible for 100% of it? I ask because two of us have paid off half of the loan (and we have documentation of it) while the two partners who are no longer a part of the business haven't paid anything. The loan is due in full October 1, 2019. What happens if they don't pay and we are taken to court? If they file bankruptcy, will the business and the rest of us have to file as well?

Thank you for the additional information. Each of the guarantors can be held responsible for the full amount of the loan. In this instance, if two guarantors file for bankruptcy the lending entity will look to the other two guarantors for full payment.

Customer: replied 1 month ago.
That's what I was afraid of. Can we still be taken to court if we are still paying on the loan? We do not have half the loan sitting around to pay it off or we would but we will continue to make payments until it is paid off. I personally wouldn't see the benefit it taking us to court when the remainder of the loan would be paid off in a year but I'm not sure on the legal standing if they could even if we were still making our monthly payments. Or if they could send it to collections? Also, if we are taken to court and they file bankruptcy but we find a way to pay off the loan - do we and the business still have to file bankruptcy or are we in the clear since that loan is the only thing tying us all together?

If the terms of the loan state it is due in full October 1, 2019, if it is not paid in full at that time the entity that gave the loan could take you to court. If you are planning to continue making payments until it is fully paid off then I would make contact with the entity that made the loan and state what you are wanting to do and see if they will agree. The alternative for them is to go to court and end up getting a payment plan anyway so they have every motivation to let you pay the loan out over time. However, if you continue to make monthly payments and don't get them to agree to this instead of full payoff on October 1st, they could take you to court but it would be foolish to do so if they are receiving ongoing payments. If the ex LLC members file for bankruptcy that does not mean you or the business have to file for bankruptcy. From what you have stated the loan is the only thing legally tying the four original LLC members together and bankruptcy of one of the group does not necessitate bankruptcy for the rest of the group. Here, if you are not going to pay off the loan on October 1st, I would suggest contacting the company that loaned the money and work out an alternative to the full payout before you go into default.

Customer: replied 1 month ago.
Ok. I think that answers all the questions I have for the moment. Can I return to this conversation if I have any additional questions?
Great, let us know if anything else comes up. The site requires you to open a new question if you need anything else. Thanks, David