Personal Bankruptcy Corporate bankruptcy

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joegreen

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My jurisdiction is: Illinois


My father-in-law owned 3 business which he incorporated making my husband vice-president. From time to time my husband would need to sign corporate papers but recently he unknowingly signed "guarantee to pay" papers. My father-in-law is now in the process of filing personal bankruptcy and the creditors are coming after us. My question is why can't he file corporate bankruptcy and what advice can we get in dealing with the creditors. They are threating to start filing liens against my husband and me.
 
What kind of "guarantee to pay" papers did your father sign?

Presumably your FIL's corporations could file for corporate bankruptcy if they qualify. Do they? This is a separate issue from your FIL's personal bankruptcy. It is not clear that this would assist your husband.

They can't file liens against you unless you are somehow also on the hook for some of the FIL's debts.

You and your husband should consult a bankruptcy attorney.
 
Thank your for your reply.

I didn't know there was different types of "guarantee to pay". I assumed it was like a co-signer with a bank. I don't know if the corporation qualifies for corporation bankruptcy. The corporation is what brought him down personally. I don't understand the bankruptcy laws and I don't understand why the corporation can't declare it. My FIL lead my husband to believe that it was just general corporate papers he was signing and my husband didn't bother to read what he was signing. His reasoning for not reading the papers was that his dad would never do anything to financially hurt him. The corporation just recently disssolved and he sold the 3 stores along with all the merchandise in them. So when the creditors started contacting and threatening us with liens against everything we have, we referred them back to my FIL and the company that now owns the merchandise now. We didn't know if we should contact a lawyer and if so what type of lawyer.
 
Yes, you absolutely should contact a bankruptcy attorney. What the creditors can execute against depends on how the property is owned (i.e. in your husband's name, jointly, etc.).

How were the corporations "dissolved" without declaring bankruptcy? Typically when a corporation is dissolved, it is required to file statements to the effect that all outstanding debts have been paid.

Your husband, if he is liable to repay the debts, may have a claim against his father for negligent or fraudulent misrepresentation as well.
 
Thanks!

Everything we have is joint property (ie auto's, land, home). My FIL has pretty well lost everything he worked 60+ years for including his home. Can you explain to me why the corporation could not declare bankruptcy, and why he would have to declare personal bankruptcy. The corporation is broke and that's what brought him down or is it too complicated to explain on here?
 
He probably didn't "have to" declare bankruptcy. Most bankruptcies are by choice - he was insolvent, so he threw in the towel.

I cannot explain to you why the corporation did not "have to" declare bankruptcy. If, as you say, it was broke, it could have voluntary declared bankruptcy or its creditors could have forced it into bankruptcy.

I would speculate that the business came to some arrangement with its creditors and dissolved. The business was your FIL's main personal asset or source of income and without it he was insolvent, so when it went out of business, he declared personal bankruptcy.
 
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