Single (S corp) business owner, 6yr old auto repair business. Overdue bills (now on cash-only), equipment debt (leases) and personal guarantees on the debt. Business=too slow/inconsistent to catch/keep up.
Q1. How do the personal guarantees effect finances outside the business; specifically, is my wife liable for the debt b/c we're married?
Q2. How do I determine if business bankrupcy is an option? I have a personal bankrupcy from about 4yrs ago.
1 Answer from Attorneys
Marriage is not a basis for your wife's liability only her signature.
Why file the business bankruptcy? The only purpose would be to make the bankruptcy attorney richer. (I say this because some attorneys do file it for that purpose) You already have a distinct legal entity whether it be a C or S corporation that incurred the debt. It owes the debt not you. Unless you cosigned or guaranteed the debt you don't owe the debt. Ordinarily there is no purpose behind filing its bankruptcy unless you want to reorganize it under a chapter 11 process which is very expensive. Just put out the lights, lock the doors and turn off the phone. Insulate yourself your cosignatures or guarantees by filing your own bankruptcy. There would have to be other compelling reasons to file its bankruptcy. I have only found them in a couple of cases.