Expert: Christine Janklow - 3/17/2009

Question
Good Evening,
I am in the process of filing Chapter 13(personally) I do have an attorney. However, I have a business of 8 years. and , of course the economy has, like most, taken a toll on it. If I dissolve the corp. will I be protected from the business debts after I dissolve? Does the chapter 13 protect me personally from business debts? I am the sole shareholder. I also have very few assets in the business. Most equipment is leased. I have just received a summons for one of the debts. Do I sent the articles of dissolution to the judge and the filing attorneys?
I would file chapter 11 for the company, however, by the time I pay the attorney's fees, If I could, I will be in further debt. I feel like my only option is to dissolve.
Kind Regards,
Linda

Answer
Dear Linda:
Thank you for your inquiry. I regret that you have found yourself unable to meet your obligations due to circumstance. As I am not an attorney I can not provide any legal advice regarding dissolution. I only have a peripheral knowledge of corporate benefits regarding debtor protection, however as you are a small business owner, it is likely that you may have placed personal guarantee on most or all of your business debt. Creditors would find that if the corp is insolvent, and you being a self employed person, have no means of repayment and filing BK yourself that the debt could become uncollectible. I strongly advise that you discuss this with your legal counsel as perhaps he could tie the debts to you the guarantor. As for the summons, most provide a window of time for you to answer them, usually 20-30 days from document inception. If you can ask your attorney if this can be dealt with under the BK, or if not than it might behoove you to have them file an answer so you have more time to deal with the lawsuit later. Lastly, you do still have the choice of settling the debt (over time) for your business which effectively is what you are doing personally through the Ch 13 - a repayment of partial debt (balances which have been discounted, through mediation), but without having to file and incur a huge legal fee.Your business has been your sole source of income, and dissolution will end that as well as any protection still left by the "corporate veil". If you want to better understand if you still qualify for the corporate debt settlement option, feel free to contact me again and I would be pleased to inform you about it.
I hope this helps.

Respectfully,

Christine Janklow