If you go bankrupt on an LLC cn your creditors involved with the LLC come in an take personal property

i have a trucking company that is a registered LLC and the bills have began to pile up with no way to make money if i was to declare bankruptcy an the buisiness will the credit card company or the credit union were i have the truck loans be able to get my personal property to repay the debt
Answer this question Add to list

Answers (2)

David Austin Boucher

David Austin Boucher

Contributor Level 2
Generally, unless you have personally guaranteed the debt, you will not be responsible for credit card or other unsecured debt. Unfortunately, many bank loans require the LLC to have an officer/owner sign personal guarantees.
1 0
Paul J. Schoff

Paul J. Schoff

Contributor Level 3
Mr. Boucher is correct in that in the event you need to file a bankruptcy proceeding for your business, you will not be personally responsible for the debts with certain exceptions:
1. Any debts which you personally guaranteed or acted as a "surety" for, which most banks usually require when they loan money to businesses;
2. Any unpaid "trust fund" taxes. These are taxes collected from employee paychecks such as withholding or sales taxes--basically any taxes where you are acting as an agent for a taxing authority (e.g., the IRS, the state Department of Revenue) and then have an obligation to turn over those taxes to that authority. When you fail to turn these taxes over not only will you be personally responsible but anyone who had the ability to turn them over and failed to do so, would also be personally liable. Thus, if the President of a company told his controller to pay the electric bill instead of paying the trust fund tax obligation, if the controller had the ability to write checks, i.e., "check signing authority", he will be personally liable for these taxes and these trust fund taxes are NOT dischargeable in your own personal bankruptcy. They will stay with you until the day you die.
3. Any trade debt which personally guaranteed. Although you may not recall giving a personal guaranty to a particular trade creditor, check the bottom of all those equipment leases you signed for photocopiers and telephone systems--many of them have a box at the end which contains a personal guaranty.
4. In the event you did not maintain proper corporate formalities such as failing to keep corporate minutes, commingling of personal and business funds, paying personal debts with company checks and vice versa, all of these things would support a claim by one or more of your creditors that you have ignored the corporate form therefore the court should "pierce the corporate veil" and hold you personally responsible. Basically, the argument is that since you failed to observe the formalities of maintaining a corporation or an LLC, you should not benefit by the limited liability protection afforded by the use of these entities. The burden of proof which the creditor must show in order to succeed on this theory is high and each case is fact specific but the more things you can clean up prior to filing for bankruptcy, such as getting your corporate minutes up to date, extinguish any intercompany/personal debt or at least document such debt with proper promissory notes which bear interest and make sure that interest has been paid, etc., the better off you are.
Hope this helps.
0 0
Back to Search Results

Ask a Question

Get free answers from real lawyers.

Top Bankruptcy Contributors

1.
Shawn B Alexander
Contributor Level 8
114 answers, 0 legal guides
2.
Jeffrey Daniel Larkin
Contributor Level 7
62 answers, 0 legal guides
3.
Robert W. Kovacs Jr.
Contributor Level 7
20 answers, 0 legal guides
View all Bankruptcy Lawyers on the Contribution Leaderboard