Will Filing a Business Bankruptcy Get Rid of Personal Guarantees?
Under very rare circumstances will bankruptcy remove your obligation to honor your personal guarantees. Signing a personal makes you liable for company debt even when the business is not generating a profit. As such, filing a Chapter 11 bankruptcy does not make you immune from your personal guarantee.
Like wise, filing a business bankruptcy halt litigation against the company only. You can be sued in your personal capacity in you are a guarantor.
Fortunately, an exception exists for an owner who holds a business who has a sole proprietorship. Such owners are personally responsible for both individual and business debts. Consequently, filing a Chapter 7 bankruptcy will wipe out all liability including the personal guarantee. It’s important to note that if you file a Chapter 11 bankruptcy and you are able to negotiate debt, a signed personal guarantee can make that process very complicated. It is recommended to seek legal counsel should that be the case.
Why do business owners sign personal guarantees?
A personal guarantee is a tool used by creditor to ensure that the financial obligation will be repaid, particularly when dealing with small business owners because there is greater risk of failure.
How Do Personal Guarantees Work?
If you have found yourself in this unfortunate position, it is important to seek out legal counsel to assist you with a game plan.
Our attorneys at Shipkevich PLLC have helped many business owners with unsurmountable amounts of debt. During your free consultation we will explore every option available to you. We can also help with: