Small business, incorporated partnership

If you take the business into bankruptcy, the trustee should demand of your co-owner (she is not a "partner" because this is a corporation, not a partnership) that she return all salary received during the past year. That will help pay off the corporation's debts in part. That reduces your liability,

Your co-owner has the right to walk away. All employees do, including you. But in order to minimize debt, it is important that the corporation be taken into bankruptcy. Otherwise, you both could become responsible for 100% of the corporation's debt.

Your sale of the salon might not be possible if the business is not solvent. The buyer might figure out that it is risky to buy assets from an insolvent company because the bankruptcy trustee might be able to demand return of the assets. The buyer would be smarter to buy the assets from the bankruptcy trustee.

The fact that your co-owner has taken $44,000 more than you out of the business is not going to reduce your debt for two reasons. First, if that money was salary, the the fact that you didn't take your salary was a gift or a loan to the corporation. You are entitled to payment by the corporation, not from the other employee. Second, the personal guarantees don't say you are each responsible for half. The guarantees say that the two of you are jointly and severally responsible. That means that the creditor may collect 100% from you if that is most convenient. If more than 50% is collected from you, then yes, you have the right to sue your co-owner for contribution.

So what to do? Get to a bankruptcy attorney as soon as possible.

This answer must not be relied on as legal advice for the reasons posted here: http://davidphipps.com/docs/Disclaimer.doc . And I am not your attorney.

David