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Business Debt/Collection from owner & company, or just guarantor?
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Question
QUESTION: My mother opened up a credit card with my LLC (I am the owner) and spent $25,000 on it. She is not going to pay any of it. Now the bank sent me a letter saying that "Your company, its owners, and any guarantors will be subject to collection." My mother guaranteed the loan in her own name, but could my company or myself still be in danger of being responsible for the $25,000?
ANSWER: Unless your mother was listed as an authorized agent in your LLC she would not have been able to open any account in the LLC's name, did she sign and fill out the application? Is there a personal guarantee? If there is, who signed it?
You will want to check with the original contract and read that to see who is responsible, once you know who is responsible, then that is the person who should pay. As you know, who ever used the card and charged items should be paying the bill, is there a reason your mother is not going to pay it?
---------- FOLLOW-UP ----------
QUESTION: At the time, she was the managing member of the LLC, and now I am. She signed and filled out the application. She personally guaranteed it.
And yes, there is a reason she is not going to pay it. She is going to declare bankruptcy for herself because she simply cannot afford to pay her bills.
Stephanie,
If your mother was a managing member of the LLC and personally guaranteed the debt, the bank can go after her personally or the LLC or any other principals of the LLC. Once she declares bankruptcy they can no longer pursue her if she includes this debt in her bankruptcy filing, so they will go after the LLC or its principals.
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Answers by Expert:
Michelle Dunn
Expertise
As one of the Top 5 Women in Collections, one of the Top 50 Collection Professionals, and winner of the Business Excellence award, I can answer any questions about debt, debt collection, improving business credit, creating a credit policy, enforcing a credit policy and collecting on past due accounts. I can also answer questions in regards to starting a debt collection agency since I have been a bill collector for over 24 years, started and ran my own collection agency for 8 years, and maintain my 12 year old Credit & Collections Association for members of the credit & debt collection industry. I am also the author of the popular and award winning book "Starting a Collection Agency, how to make money collecting money" now on it's 3rd edition. This book has won a the Writers Digest self published award as well as the New York Book Festival Award. I am a repeat contributor to the Wall Street Journal, and have been featured on NPR, CNN, as well as many other national radio and television programs. I have also been featured in national publications such as the Wall Street Journal, Forbes, Smart Money, MSNBC and much more. I have 17 published books to my name and am an accomplished speaker and consultant. I currently write 9 columns for newspapers, magazines and online portals worldwide.
Experience
I have over 24 years experience in debt collection, I started and ran my own collection agency for 8 years and I am the founder & owner of my Credit & Collections Association that I founded in 1998. www.credit-and-collections.com
Organizations
My Credit & Collections Association, I was also a member of the American Collectors Association and Plymouth Chamber of Commerce for 11 years. I am a member of many writing groups as well as my local Women Inspiring Women chapter. I am a member of Know More Media as an expert for their blog on business credit.
Publications
Business NH Magazine, Smart Money Magazine, MSNBC, CNN, Forbes.com, The Wall Street Journal, Home Business Magazine, Entrepreneur Magazine and website, many books, newspapers and television programs as well.
Education/Credentials
I have written 17 books in my collecting money series and one for Entrepreneur Press called the Ultimate Credit and Collections Handbook. My newest book is being published by John Wiley & Sons in May titled, The Guide to Getting Paid, how to weed out bad paying customers, collect on past due balances and avoid bad debt. This book is also being sold to many colleges as a text book.
Awards and Honors
My book Starting a Collection Agency, how to make money collecting money won an award from Writers Digest and the 2007 New York Book Festival in the "How to" category. I have won 2 awards from Dun & Bradstreet and Governor Jean Shaheen. I was nominated as one of the Top 5 Women in Collections twice as well as having been selected as one of Collection Advisor's Top 50 Collection Professionals by my peers.
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