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Business Debt/business credit card - personal liability
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Question
Myself and two relatives started a retail business in 2005. We incorporated the business from the very beginning. We opened a credit card through a local bank and the name on the card is Elements of Style, Inc - with all three of us as signers on the credit card. A couple of years ago, my two relatives wanted out of the business so I paid them off for their shares and now am the only one still involved. We are behind on our credit card payments due to very slow business over the past six months. The bank where the credit card was issued has sent a letter to myself and two relatives saying just because the business was restructured that doesn't alleviate them of personal liability to pay the debt. Since the name on the card is "Elements of Style, Inc." and we are a legal corporation, can the truly claim we are each personally responsible and liable for the debt of the business?
Wendy,
Look at the paperwork you all filled out and signed when you opened the card. Did any of you agree to be personally responsible? Was the business Incorporated at that time?
Have the relatives been helping you make the monthly payments up until now? Or is this something you bought out with them and are paying off yourself?
When you restructured, what was decided on how to handle any debts or A/R?
The most important element will be the original paperwork and if anyone applied for this card personally AND was anyone's personal credit checked in order to obtain the card?
Sincerely,
Michelle Dunn
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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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