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Bankruptcy Law/Dissolving a small bussines in debt
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Question
I am the sole owner of a business incorporated in NM. The business has no assets but does have debt in the form of two CC which I personally guaranteed. Due to the failure of this business I will also need to file personal bankruptcy as well.
I was told that the best way to deal with this situation is to dissolve the corporation and then file for personal BK. But when I looked into dissolving the corporation the official forms require that I affirm that the business has no debt or that the debts have been adequately provide for.
I'd rather not have to file both a personal BK and a business BK because it would be more time consuming and costly. (In NM a business must be represented by a lawyer.) At the same time, I don't want to file a personal BK without legally resolving the issues with the corporation because the last thing I want is to file the personal BK and then find myself in debt again from the business because of the personal guarantees.
What's the best way to deal with this situation? Can I simply inform my creditors when I dissolve the corporation that they can invoke the personal guarantee and then list them in my personal BK filing. Is that adequately providing for the corporation's debt. Or must I file a business BK.
You should be guided by what your own BK attorney in NM advises you to do. If you don't have a lawyer, please retain someone good. This is not a "do it yourselfer," even if you don't file for the corp.
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That said, in my own law practice I frequently advise clients to dissolve a no asset corp prior to the client's personal BK filing. In California where I practice, the owner of the corp becomes personally liable for any any debts of the dissolved corp, (but I do not know how this would be under the law of your state). In California if the owner of the corp is going to file a personal case anyway, this generally works fine and saves the expense of filing two BK's, especially where the only liabilities of the corp are debts that were personally guarantied by the owner. However, sometimes it is not a good idea, such as where there is a certain tax liability or some other non dischargeable debt owed by the corp will swing over onto the owner, or if it will cause the owner to suffer any type of a tax problem.
I hope everything goes smoothly for you.
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Answers by Expert:
Los Angeles Bankruptcy Lawyer Leon D. Bayer
Expertise
Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/
Experience
Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.
Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.
Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
Education/Credentials
B.A., J.D.
Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000
MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.
Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.
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