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Lucy, Esq.
Lucy, Esq., Attorney
Category: Legal
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Experience:  Lawyer
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As an owner of an LLC in Il, if the LLC goes into

Customer Question

As an owner of an LLC in Il, if the LLC goes into bankruptcy, am I responsible for credit card debt the company has? Personal credit information was used to satisfy the credit limit.Can the credit be moved over to a personal account? If so, is it then no longer part of the bankruptcy? Can it be moved back?
Submitted: 1 year ago.
Category: Legal
Expert:  Lucy, Esq. replied 1 year ago.


I'm Lucy, and I'd be happy to answer your questions today.

The owner of an LLC is not personally liable for debts of the corporation unless you signed something agreeing to act as a personal guarantor. Go back through all the documents you signed to see if any of them say that and, if not, you may want to call the credit card company. Since you're not personally liable for debts on the LLC's card, it is probably not to your benefit to seek to roll them over to a personal card in your name only. Your personal debts are not part of the LLC's bankruptcy, so if you used your personal money or credit to take over LLC debts, you wouldn't be able to add them back to the bankruptcy later.

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Customer: replied 1 year ago.
I am not sure if that answer is correct. When I called the bank credit card department, I was informed that any credit allocated to the LLC was issued using one of the LLC owners individual credit history. If the LLC were to go into bankrutpcy that individual would also have to file bankruptcy in order to have the credit eliminated.What am I missing / not understanding?Thank you.
Expert:  Lucy, Esq. replied 1 year ago.

They're essentially saying that you personally guaranteed the card by giving your personal credit history. I'm saying, make them prove it. You're only personally liable for the LLC's debts if you signed something that explicitly says you agree to that.

Customer: replied 1 year ago.
This is a large bank. I would imagine they have standard docs that I signed. My question is : is there a difference if I allow a rollover to a personal card that grants 15 months of zero interest; and pay minimum balances throughout the time period by the LLC checking account. It would help our company to have zero interest for the year while we get on our feet.thank you.
Expert:  Lucy, Esq. replied 1 year ago.

Standard documents have different blanks for different things. You're not personally liable on the card unless you signed something saying that you are. There would have to be blanks filled in or boxes checked. They shouldn't have an application form that always makes the owner of an LLC personally liable on a business account. I worked in banking for many years, and that's not how it usually works.

Rolling LLC debt to your personal credit card, then paying it from the LLC, is one of the fastest ways people lose the protection of creating an LLC in the first place. But not keeping all business debts 100% separate from your personal debts, and vice versa, you're opening yourself up to the possibility that all of the LLC's creditors will sue you personally after you file for bankruptcy - and they'll win. LLC debts should never be paid with a personal card, and cards in your name should never be paid with an LLC's bank account.