Business Debt/Closing S Corp

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Expert: - 9/9/2010


Question
3 years ago, our newly formed S Corporation purchased merchandise for resale.  A note of $30,000 was made with our bank to purchase this stock.  Though we have been required to carry insurance on the stock, each officer and co-owner (4 people) were required to sign personal guarantees for the loan.  Now with the economy tanking, we need to dissolve our S Corp.  In doing so, we wish to have the note changed or a new not issued, that would be 25% of the total or $7500.00 each, with no liability if one of the current officers should default on their part of the loan.  The bank, says that they cannot do this and that everyone will still be responsible for the loan, even though we are no longer in business and each is willing to make separate loans.  Also, the bank is requiring that we carry insurance on our stock, even though they consider our loan as an unsecured loan.  What can we do?  We are willing to pay our part of the debt, but we don't want to be responsible for our partners part of the debt since we are out of business.  Please help!

Thanks

Answer
Peggy:
Thanks for the inquiry. Sorry your business did not fare well. Based on your comments it appears that you may only have a few good choices;
1. You each take out a separate credit line or credit card with a separate institution to pay down your portion of the balance, then repay on separate terms over time.
2. You pool your monies together to pay down what you can to lower the balance and individual exposure risk in case of future defaults and trust each other to repay the rest.
3. You could negotiate with the bank for new payment/interest rate terms that might make this more affordable. (Hardship payment plan)
You mention insurance, so if this is required, does this insurance cover the bank if there is a default and to what degree? You should know that before you agree to anything. I hope you find this helpful, and if so, please take a moment to provide a positive rating so others may benefit from this advice.

Respectfully,

Christine Janklow

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Christine Janklow

Expertise

As President of SettleSource,Inc. a business debt settlement firm, I invite you to inquire about all aspects of business debt solutions to best determine which may be most appropriate. If you have questions such as: What is debt settlement and how process provide debt relief to my business? What options are available to deal with my business debts? Is it possible for a business owner to negotiate their own settlements? Why is debt settlement preferable to filing a bankruptcy or debt consolidation? Why are creditors willing to provide settlements to a business? How will settling debts affect credit scores? or How to rebuild a business after debt is eliminated. Please ask it now! For more information regarding how debt settlement can help your business, please visit www.SettleSource.com and place your inquiry. Mention All Experts to have a confidential no cost consultation with Christine. If this is your business situation time may play a very important factor in getting matters resolved proactively before they have negative affects on the business.

Experience

My expertise is specific to providing business solutions that will have profound positive impacts on the financial health of businesses. I have 25 years experience as an entrepreneur and have developed national sales programs; strategic alliances; product development; marketing programs; business and turnaround plans and debt settlement programs all providing methods to improve the financial outlook for large and small businesses. In the area of commercial debt settlement I have over 10 years experience working with large and medium corporations and closely held businesses to enable successful debt reduction and turnaround. I am a professional debt arbitrator and have negotiated with major banking institutions as well as vendors, suppliers and other trade creditors.

Organizations
Provisors;Turnaround Management Association; Los Angeles area

Publications
Accounting Today; Web CPA; National Restauarant Association;Los Angeles Daily News; Today Magazine Monthly series of business articles entitled "Brand News."

Education/Credentials
Bachelor of Business Administration; Associate of Arts Merchandising

Past/Present Clients
American Airlines, American Express, Safeway Inc., New York Life, consumer products manufacturers; retailers, food service industry and other small businesses and service providers.

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