Expert: Christine Janklow - 10/20/2008

Question
Christine,

 My plans for my retirement in the military has gone from bad to worst.  I had a partner in my venture who was suppose to run the restaurant until I retire.  Well, he was also called up and for the last three years have gone back to the desert twice.  I've tried my best to run the business but it is no longer possible especially with everyone limiting their discretionary spending.  Someone is willing to buy the business but at a huge loss to us. But at least we get out of the lease.  We are a corporation.

 The problem is we have incurred so much debt.  We took an SBA loan which we are personally liable for.  I've spoken to the bank and they said they will work with us.  (We owe about $100K still).  But to keep the business running for the past few years I've also incurred credit card debts.  (Another $100K)  I think we are personally liable for some cards and not others.  Do you know how I can find out if I am liable or not?  And any other suggestion on what we can do would be appreciated.

Ed

Answer
Ed:
Thank you for your inquiry, and thank you for serving our country. I do regret that your retired life and endeavors have not lived up to the American dream. Let me first address the issue of your service and how you may qualify for some relief under the Soldiers and Sailors Civil Relief Act. This link below will provide you with some basic terms of the act and its relation to your debts -http://www.defenselink.mil/specials/Relief_Act_Revision/
Under the Act, you are entitled some protection and reduced interest rates, but you must be pro-active and intelligent when asking your creditors by stating your need for this to be effective. Your liability in relation to credit card debt likely exists. The banks that lend these products to small business owners mostly require a personal guarantee. That said, you have a few options, ask the creditors to enact the above entitlement to see if it will reduce your interest and payments, making debt repayment more affordable. Second, you can seek credit counseling from a licensed agency but most do not handle business related debt. You can seek to have the debts negotiated and discounted through a commercial debt settlement firm. Lastly, and I hope you do not have to seek this is filing for bankruptcy protection. You should not consider simply walking away as an option because you think the debt is under the business name and there is issue of insolvency. Getting the creditors to confirm your guarantee is difficult unless you kept a copy of the original application or contract that was signed. If you have any difficulty in getting the creditors compliance, you can call your states attorney general office or even your local military office to seek advice. I would be pleased to provide you more (confidential and non-obligatory) information on the debt settlement option if you care to e-mail me a follow up with your contact information. If you found this answer helpful, please take a moment to provide a positive rating. I wish you the best and again, thank you and your partner for your life dedicated to service that enables us all to live our dreams.

Respectfully,
Christine Janklow