I am in Florida and am planning on filing for Chapter 7 Bankruptcy. I've already taken the online means test found at http://www.legalconsumer.com/bankruptcy/nolo/ and passed the test. Apart from all my personal debt, I also have a Small Business Loan from an S-Corp that is solely owned by me. I do not wish to close the S-Corp but I have not made any money from the S-Corp either. Can I include the SBL in my Chapter 7 bankruptcy? And if I can, does that mean I need to close the S-Corp?
The S-Corp debt can be discharged as to you if you have personally guaranteed the debt but it will still be collectible against the corporation. Practically speaking, if there are no corporate assets then there will be nothing for them to collect.
Mr. Larkin is licensed to practice law in CA and is located in San Diego. His response here does not constitute legal advice and does not create an attorney/ client relationship. The response is in the form of legal education and is intended to provide general information about the matter in question. Many times the questioner may leave out details which would make the reply unsuitable. Mr. Larkin strongly advises the questioner to confer with an attorney in their own state to acquire more information about the specifics of their case.
Chapter 7 Bankruptcy Attorney
You say that you have a "Small Business Loan from an S-Corp." I am not sure what you mean. Do you mean to say that you have a Federal SBA loan TO your S-corp? Or did your S-corp lend YOU money? I will assume that you meant the former -- a loan to your S-corp.
Basically, the answer is no. Your S-corp is a separate legal person. Its debts are not yours. You cannot get its debts discharged in your bankruptcy. But fear not, there is hope. Did you co-sign the note personally, making yourself (together with your corporation) liable for the loan? If so, you can be discharged from YOUR personal liability on the note. But the corporation will still be liable. Then only the corporation could be successfully sued under the note and it would be liable only to the extent of its assets, which, from your description, I gather are not much. After a Chapter 7 bankruptcy you should not be liable at all (as long as you list the creditor.) Usually, debtors in your situation simply abandon the asset-less and indebted S-corp. You could alway begin a new corporation for a few hundred or less dollars.
Now your corporation may have special issues, like it owns equipment, property, has "goodwill" and you cannot just abandon it. Most bankruptcy attorney's will give you a free initial consultation. I suggest that you find one, make an appointment, and ask him/her these questions giving him all the details that are lacking in your question above.