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I'm being sued in another state to collect on a lease my former partner defaulted on. I cosigned but...

Asked almost 3 years ago - Philadelphia, PA

I was a partner in a business that I legally separated from in 2007. My former partner continued on with the business, but according to our separation agreement, he was responsible for any and all obligations associated with the business. He's now in Chapter 7, and the bank located across the country is threatening me with litigation to collect. I have no appreciable assets. House is in my wife's name. Little money in the bank. I own an 8 yo car. I cannot afford (nor do I want) to settle this claim. I can't afford to go to that state to defend myself. If I ignore this, what can I expect to happen? (I've so far signed three major contracts in my professional life. All three were breached!)

Additional information
I'm not so happy about the advice I received from the attorney that drafted this agreement for me -- or lack of it. The situation also left me with a crushing tax liability because I separated from the company while it was laden with debt, the specter of which was never brought to my attention.

The lease covered some industrial equipment. The original bill due was about $14K. The bank auctioned off the equipment (with no notice to me when or where this auction was to be held) leaving a balance of $5,200. I don't have this money since we're paying off the tax liability. It makes no sense to me to go out to the bank's state to defend myself. It'd cost me nearly that amount.

What's the worst that could happen to me?

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Attorney answers (1)

Stephen J. O'Brien

Reputation Level 14

Answered almost 3 years ago. Employee Benefits Lawyer in Pittsburgh, PA.

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The problem you face is based on the original lease agreement you signed for the equipment. Your separation agreement doesn't change your obligation on the lease unless the company allowed your name to be removed from the contract. It is unlikely that the company would have agreed to such. Now, the company can take a default judgement against your partner and you. They can try to collect the judgement from either or both of you in the amount needed to satisfy their judgement. He's in bankruptcy so they have to cease trying to collect the debt from him, except as permitted by the bankruptcy proceeding. If its a chapter 7 then its unlikely they'll get anything from him. You've stated that you don't have much, so its unlikely that they will get much from you even when they get the judgment. Two things to consider, first, you should discuss bankruptcy with an attorney, since the debt incurred was a business debt, this is still generally dischargeable, or two, talk with the creditor about a consent judgement, that may save you some added costs added on to the amount owed (again your original contract - which should be attached to the complaint - addresses your rights and obligations). If they take the default judgement then added fees (atttorney and litigation costs) will be added on to what you owe. Once they have a judgment then they may begin collection against you by filing for a writ of execution, which will allow a sheriff to come out and tag items for sale to satisfy the judgement, but you have the right to file objections to items tagged for sale that may be owned jointly with your spouse or that are in her name alone. This will not be effective if your spouse signed the lease. Also, if the spouse is included on the complaint then you need to answer the complaint to deny that she is liable, assuming she did not sign the lease agreement. You should talk with a local attorney to discuss your options in more detail and with the agreement and complaint for their review.

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