If you buy 50% of a company that has filed for Chapter 7, do you assume 50% of company secured and unsecured loans?

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If you buy 50% of a company that has filed for Chapter 7, do you assume 50% of company secured and unsecured loans?

Asked on January 7, 2015 under Bankruptcy Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

A definitive answer depends on how the company was purchased and cannot be answered in the abstract. As general guidance:

1) If you buy 50% of the stock of a company, you are *not* liable for the company's loans--stock- or shareholders are not responsile for the debts of a corporation.

2) If you buy a 50% interest in an LLC, you again are not typically liable for the company's loans--members of an LLC are not responsible for the LLCs debts.

The exception to 1) and 2) would be if you executed some agreement(s) by which you agreed to guaranty or otherwise become liable for certain debts or loans; if you did, then that contractual agreement to accept or guaranty the debts is enforceable.

3) If you bought assets of the company, rather than the business entity, you would be liable for any debts attached to (secured by) those assets.

4) If you took assignment of any any contracts of the company, you would be liable any debts associated with those contracts.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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