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Business Debt/Biz Debt Affecting Personal Credit Score
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Question
Dear Christine,
I am currently dealing with debt involved in a business I started with another partner. I have paid off my personal credit cards, but we have a business account for $5,000 that is unsettled. The debt has not been reported on my credit report and am wondering what affect it could have on me. I'm reluctant to pay the debt because I am in the process of relinquishing my ownership in the business. What are my best options concerning the debt? Can I make an agreement with the other partner to leave the debt with the business and not attach to me? How do I remove myself from the business as to not be associated with future debts? Thank you!
Carlos
Carlos,
Was the business forms as a legal partnership? If so, you can look at your states website or contact your attorney generals office to find out how being formed as a partnership protects you personally if at all.
How are you relinquishing your ownership? Selling, buy out, dissolving? Depending on your answer that will determine how much of the debt you have to pay, this is also depending on how the business was formed and licensed, if it is incorporated, a corporation or partnership etc.
You will need to legally dissolve or remove yourself, again depending on the formation of the company. If you are a partnership, contact your state offices and ask them what you need to fill out to remove yourself from the partnership. They may even have the forms on their website that you can download.
In civil law systems, a partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise; contribute to it by combining property, knowledge or activities; and share its profit. Partners may have a partnership agreement, or declaration of partnership and in some jurisdictions such agreements may be registered and available for public inspection. In many countries, a partnership is also considered to be a legal entity, although different legal systems reach different conclusions on this point.
If you are still unsure, contact a local attorney.
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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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