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I didn't personally guarantee any business debt

Question: I started a business which I'm going to close; we're going out of business. The business is losing money and I can't afford to keep it open any longer. It just sucks money and I'm worried that I will lose everything, including my house. I opened two stores, one in Alpharetta and one in Sandy Springs. I thought it was a good idea, but it's just not working out and sales are way less than projected.

I quit my job to start the company and my wife also quit her job. We were making good money but we thought we'd make awesome money with the business. We have had the stores open for 2 years and we've only made a profit in 3 months. And that's over 24 months of operating the shops.

I don't know if I have to file personal bankruptcy because all of the debt is in the business. The bank never made us post a personal guarantee for the loans. The bank just used the business credit. We borrowed from a small bank and my parents are friends with the bank's president. So I got a sweet deal.

So I'm trying to find out if I need to file a personal bankruptcy when we close the stores because there will be a lot of outstanding money owed to suppliers, employees, contractors and other creditors.

B.B. in Alpharetta, GA

Answer: If no personal guarantees were made, then you should not have to file personal bankruptcy. If the bank did not require a personal guarantee for the debt and just required the debt to be paid back by the business, you would have no personal liability or obligation to repay the debt. Accordingly, the bank can only seek repayment form the company, not you or your wife personally.

You may want to consider a business bankruptcy. And a business can file a chapter 7.

If the loans were guaranteed personally, then you would need to explore bankruptcy protection through either a chapter 7 or a chapter 13 filing. That is how many people eliminate business debt that they personally guaranteed.

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