Question: We need to file bankruptcy as soon as we can. I just got served with a lawsuit. Someone came to my house with legal papers and we need to get out from under this debt. It’s an old debt that I got from my old business and that business didn’t work but I signed for a loan for my company and now the bank is coming after me personally and I need to know my options. That’s why I’m writing to a local Roswell bankruptcy lawyer for some advice.
The debt is from maybe four years ago when I started a business with a friend. We both thought it was a good idea so we leased some space, used our credit cards to buy office furniture and computers, hired a couple of people, and quit our jobs in Atlanta. But the business didn’t work and I think someone embezzled cash and we lost money, a lot of money.
I thought the business was the one borrowing money, like big companies do, and that I wouldn’t have to pay it back if the business didn’t make money, but I think that I signed for the debt to be personal as well. Now I think I’m on the hook for a loan that’s about $50,000.
I really can’t pay it off now because I’ve just started another job and don’t have the resources. Also, my wife doesn’t work and never has and we may get divorced and we have a special needs child in private school in Milton, GA. The school is King’s Ridge Christian School, and it’s not cheap. I mean he’s not retarded, he’s just special needs.
So now I want to file bankruptcy, and I want to know if I can file bankruptcy to get rid of personal debt that I used to start a business. I really don’t want to file but I think I have to so that I can get away from the debt and get a fresh start in life.
C.Z. in Roswell, GA
Answer: Many business owners take on personal debt for their business. They may use credit cards or take loans on behalf of their business.
As in your case, small business debt is almost always personally guaranteed. Many times, actually, the business owner may not realize that he or she is personally guaranteeing the loan. That is the business owner personally guarantees that the money will be paid back to the bank or other financial institution either by their business or by them personally. If that doesn’t happen, then the bank can personally sue the business owner. The lender, of course, just wants its money back and doesn’t care how it gets paid back.
The good news is that the debt can be eliminated by filing bankruptcy. It can be wiped away by filing either a chapter 7 or a chapter 13, depending on your specific situation. So the debt that you incurred to start the business can be eliminated by filing for bankruptcy. And once the bankruptcy is filed, then the lawsuit should go away. In fact, once you file, all collection efforts by debt collectors must fully stop.