Expert: Christine Janklow - 3/17/2011

Question
Background:
- The 3 individuals co-founded a California LLC
- A California C-Corp was founded in 2004 where the LLC is majority shareholder
- Business debt was taken on for the C-Corp in the form of a bank line of credit
- The debt had to be personally guaranteed by the 3 founders
- Debt is approximately $90k
- Payments on debt have been on-time for entire life of the debt
- C-corp is now reaching the point of being defunct
- All founders are no longer actively involved in the business
- Founder 1: filed a personal Chapter 13 Dec '07, completed Mar '11
- upon the filing of the Chapter 13, the business line of credit was frozen, so interest renegotiation was denied by the bank
- Founder 2: Has assets and would be the primary target of the bank to recover debt
- Founder 3: Limited assets, secondary target

Questions:
- What options are available to settle the debt?
- Will the bank settle if Founder 2 has the assets to repay the debt?
- Is Founder 1 still responsible for the debt?

Your advice, insights, and suggestions are greatly appreciated.

Thank you.

Answer
Arthur:
Thank you for the inquiry. The scenario you have described is unfortunately all to typical.Please allow me to state that I am not an attorney therefore this should not be considered a substitute for legal advice. With respect to the guarantors, collection of the debt and success of possibly negotiating a settlement would largely depend on what assets are personally available ie. equity in real property or a large cash balance in a bank. If the creditor is defaulted upon, normal collections would ensue but at some point could be negotiated. If they endeavor in skip trace searches or other means of asset identification, it might slightly deter their desire to offer a settlement as the debt ages. The key to gaining concessions is pro-active negotiations done in a timely manner by professionals, who can objectively negotiate without becoming emotional regarding the outcome. Furthermore, in order for the bank to "recover" assets they need to pursue this through due process. Just an FYI, if you have any checking or savings accounts with this bank, it may be advisable to bring your business to another bank before attempting a workout. To summarize, Founder 1 likely has no tie to the debt as his has been discharged or repaid through the BK, removing him as a guarantor. Founder 2, may be the "focus" of collectors, but only until the debt were settled if that is your intention. Founder 3, still the focus and equally as responsible as #2, but in reality does not seem to have the means to provide full remedy on the account. If you intend to pursue settlement on this, I would be pleased to offer a confidential, no cost or obligation evaluation to enable you to gain further insight in utilize a commercial debt settlement company to negotiate this on your behalf. Feel free to contact me though our company website www.settlesource.com and mention "All Experts" in the comment portion. Lastly, if you found this answer helpful, please take a moment to provide a positive rating or comment so others may benefit as well.
Respectfully,
Christine Janklow