If our business partner is talking about filing bankruptcy, what can we do to protect ourselves?

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If our business partner is talking about filing bankruptcy, what can we do to protect ourselves?

We have a business partner who is contemplating personal bankruptcy. He has co-signed all of our company notes and personal guarantees for notes as well (me too). We owe a lot of people a lot of money and alyhoughit will take a while I think we have enough going on to eventually bail us out. My husband and I are both beyond the age of obtaining viable income (59 and 68) and we don’t want to lose everything we’ve worked for all these years and/or have to start all over again.

Asked on May 20, 2011 under Bankruptcy Law, Colorado

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

There really isn't much you can do to protect yourself, unfortunately; since he is only a co-signor, whether or not he declares personal bankruptcy will not affect your personal obligation to pay. Creditors will be able to proceed against you for any late or unpaid debt. It is important to recognize that bankrutpcy "merely" extinguishes a person's personal liabilty for debt; that is, your co-signor can escape his obligations, but the debt itself is not touched, which means that your own liability will continue. His bankruptcy filing may delay or stay collections efforts against you, too, due to the mechanics of it, but will not ultimately effect your liability, which remains what you agreed to in taking out loans, debt, etc.


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