Legal Question in Business Law in California

Re: business debt

I cannot tell you whether you should or should not file bankruptcy. That's a personal decision. However, filing BK on the business would only encourage the creditor to later go after you as the personal guarantor. Thus, in theory at least, your Chapter 7 BK might eliminate that personal obligation, assuming you would qualify.

Re: business debt

A guarantee is a personal obligation, and I'm pretty sure it would survive either the dissolution and liquidation of the business (I assume it is a corporation) or a bankruptcy of the corporation. You would need a bankruptcy specialist to tell you for sure, but absent an unusual situation or some quirk in the law, a business bankruptcy isn't going to help.

In addition to Chapter 7, an individual should consider Chapter 13, if bankruptcy is necessary at all.

Since you once had a very good credit rating, and it is now still good, this suggests an alternative to bankruptcy. Perhaps you could negotiate a payoff of the line of credit over a period of time. This would approximate what the creditor would get an a Ch. 13 BK, but avoids the stigma and may preserve other assets.

An often-overlooked aspect about dissolving a business, even one that was of a liability-sheltering kind such as a corporation or LLC, is that its liabilities do not vanish with the cancellation of the charter. Guarantors remain on the hook; also, both the corporation (although dissolved) and its insiders can be sued, the latter to recover any preferences they got over the non-insider creditors in distribution of the remaining assets. If, for example, the corporation owned a computer and some office furniture, or maybe even patents, and the owners bring them home rather than selling them to pay the creditors, the owners can be sued for their value, despite the fact that the business used to be a personal-liability shelter LLC or corporation.