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Debt from Failed Business

By M. Stan Herring

The BKBlog has posted an article that discusses if you are responsible for debt incurred by the failure of your business, and if personal bankruptcy can help.

Jonathan Ginsberg, author of the blog, is based in Georgia and thusly "can only speak to how Georgia law works" but he still offers good insight. He says that the owner of the business can be held personally responsible, in spite of bankruptcy, if:

-the lease was in his name and not in a corporate name .
-he personally guaranteed a corporate obligation.
-he engaged in fraudulent conduct that would permit the plaintiff lessor to "pierce the corporate veil."

In most of these cases, commercial landlords do require the individual business owner to personally guarantee the lease. Assuming that is the case here, a personal bankruptcy would create an automatic stay that would prevent the plaintiff landlord from garnishing wages or bank accounts.

Settlement negotiation is also a possibility. The landlord may be approached with a settlement offer and is likely to accept it because if bankruptcy is filed the landlord will get very little or nothing.

If you are considering or dealing with bankruptcy, feel free to contact us.

Full post as published by Alabama Consumer Blog on April 16, 2009 (boomark / email).