Small Business Bankruptcy & Personal Guarantees
Recently, I filed a small business bankruptcy/personal bankruptcy for business members of an LLC who had leased a space in one of the newer commercial developments in the San Gabriel Valley. In such small business bankruptcy cases where personal guarantees were given to secure loans, leases, or other necessary business expenditures, understand that a personal guarantee holds that individual personal liable for the debt whether or not the business is otherwise incorporated.
When business owners find themselves in a tough situation regarding the commercial lease, contact the landlord or agent and see if a workout or negotiation of the lease terms is available. Oftentimes, savvy landlords will understand whether or not it is in their best interest to renegotiate the lease terms for the benefit of both sides.
If the landlord will not budge, and your options are limited, consider whether or not you are personally liable for debts related to the business. You may want to consult a bankruptcy attorney or a business law attorney to understand your options. Oftentimes, the original documents related to starting up your business will need to be closely reviewed so that the liabilities of the business and its business owners can be determined.
Careful consideration of your options must be considered both in and out of bankruptcy. Where there are no other workout remedies, or where a workout fails to make sense for financial reasons or otherwise, bankruptcy will likely be the best alternative where other options have been exhausted if there is personal liability. If the debt liability is limited to the incorporated business, bankruptcy may not be necessary for either the business or the business owner, but it takes time and effort to come to that conclusion.