Board Topic: Personal Liability Corporate vs Personal Liability
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Personal Liability

Posted by: John S. Feb 26 2004, 10:58 AM
I have recently left employment with a company I am still part owner in. I have signed loans and acquired credit cards in the companies name with my signature. Now that I am no longer an officer or director, is there a proper way to seperate myself from this debt?

Posted by: loanuniverse Feb 26 2004, 06:41 PM
John:

This is a legal question that I really know very little about. Nevertheless, I am going to ask a friend of mine that has worked in special assets when I get back to work tomorrow or monday. If I get an answer, I will post it here.

I think now is a good time to point to my disclaimer located at http://www.loanuniverse.com/disclaim.html since I am going to give you feedback in something legal and I do not want you to believe that I am in any way qualified to do so.

I am not an attorney.

I don't play one on TV.


Posted by: loanuniverse Feb 27 2004, 09:48 AM
Ok, I talked to someone that deals with “special assets”, which is bank talk for those loans that got into trouble and need ”special” attention.

I know that I already mentioned this, but I am not an attorney. I never guarantee my feedback, and I seriously encourage you to consult an attorney so that quality legal advice can be given to your situation. Having said that, here is what I gathered regarding your situation as you expressed it:

Regarding loans signed under the company name:
This gets a bit complicated because it could mean a couple of things…

First, you could have signed as an officer on behalf of the company. This would be the way that someone like Bill Gates signing on behalf of Microsoft to get a billion dollars line of credit. This does not mean that the lender will go after Bill Gates in case that Microsoft does not pay. It just means that the company is responsible and that an officer of the company signed on its behalf. If this is the case, you are in the clear.

However, it is far more likely that you not only signed on the company’s behalf, but also signed as a guarantor. While it would be rare that someone like Bill Gates would be required to guarantee a loan, it is common that owners of a private company are guarantors. Your first step would be to find out if there are any guarantees out there. The bad news about guarantees: They usually have words like ”irrevocable”, ”complete” and ”unconditional” on them. In addition, they have usually been combed over with a fine tooth comb to make sure that they stand up to legal challenge. You are now probably saying to yourself: “Heck! I am in a heap of trouble! There is nothing I can do!” Well, not exactly……..

While you can not revoke your guarantee, you can send a notice to the lender in writing that you want to stop your guarantee on that loan because you are no longer involved in the company. This would cap your exposure at the amount of money that was outstanding under the loan at the moment that the lender gets the notice. ”send the letter certified, return receipt and keep a copy”. Let me elaborate with an example:

1-There is a line of credit in the amount of $100,000
2-You send the letter and the bank receives it on March 4, 2004.
3-The balance on the loan is $40,000 on March 4, 2004.
4-If the bank decides to keep allowing the firm to draw on the line, your liability will be capped at $40,000.

”Take into consideration that the Bank would more than likely stop the firm from borrowing any more money under this scenario. Having a guarantor back out from their guarantee would pretty much cancel the loan”

Regarding the credit cards:
On this matter, I really know very little. In your position, I would contact them directly “using the phone number on the cards”. I would then request the cards on your name to be canceled and ask for an address where you could send something in writing to confirm. “I always recommend that you do everything in writing and send things certified for safety”

Hope this helps.
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