Expert: Mark J. Markus- California Bankruptcy Attorney - 3/13/2009

Question
QUESTION: Hello,
 I own two franchise businesses under two separate S- Corporations. I have two separate SBA Loans on them and am the personal guarantor for both. Can I file bankruptcy only on one business and be able to keep the other without having anyone come after me for the other???

ANSWER: Corporations are separate legal entities, assuming you have maintained proper corporate formalities under your state's laws.  If you file a bankruptcy for one corporation, it will not affect any other corporation unless it owns an interest in the other corporation.

Your personal liability is another story altogether, but you didn't ask about that.

You may want to visit http://www.bklaw.com/business_bankruptcy.html for more information on business vs. personal bankruptcy cases.

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QUESTION: I am the personal guarantor for both SBA Loans and Leases. How will filing BK on one business affect my personal liability?

ANSWER: It will affect your personal liability to the extent that if a demand is made on the personal guarantee, then what was previously a contingent liability for you on the personal guarantee could become a non-contingent one (meaning that they will come after you personally).  Of course, this can occur whether or not the corporation files a bankruptcy case.

---------- FOLLOW-UP ----------

QUESTION: So will they be able to come after my other store even if I file BK on one business and file personal?

Answer
Who is "they"?   The creditors of one corporation cannot sue a different corporation unless they are creditors of both.  If you don't file bankruptcy, your personal creditors can seek to attach any assets you have and part of your assets is your ownership interest in the corporations, so to the extent your shares have value, they can take those, but you're really getting into state law issues here.  That's not really a bankruptcy matter.  If you do file a personal bankruptcy, the Trustee can liquidate any assets you have which are not exempt under applicable law (see http://www.bklaw.com/exemptions.html for more information).  You need to have a bankruptcy attorney fully evaluate your situation.