Legal Question in Business Law in California

Re: Partnership Bankruptcy

First, I should observe that you are in a very threatening situation and you need to act quickly, carefully and decisively to mimimize the possibility -- or consequences -- of a financial disaster.

California's Uniform Partnership Act of 1994 is probably the controlling law (in addition to case law not inconsistent with the statutes). See Corporations Code sections 16100 et seq., especially 16305-16307 re partner liability to third persons.

If this is a general partnership, despite the internal division of profits, losses, capital accounts, etc., 80-20, you are likely jointly and severally liable to outsiders for all of the partnership's contract-based debts. Further, withdrawing at this point would not have any effect on pre-existing obligations. See Corp. Code section 16703(a). So, forking over $15,000 in September would probably not have helped, so don't kick yourself for not taking the offer.

Creditors who are owed six-figure sums are unlikely to be deterred by purported buy-outs or partner withdrawals, and the deal might be considered fraudulent if its main purpose was to shelter you from creditor claims.

Your partner's promises with respect to taking 100% responsibility wouldn't be enforceable in a bankruptcy, or, for that matter, at all unless he has the money to satisfy the creditors.

There is no single strategy that is necessarily best for you at this point. Much more than is presented here would have to be considered, including your net worth, the nature of the creditor claims, their willingness to negotiate, the conditions surrounding the incurring of the debts, and the wording of your partnership agreement.

Again, this is a disaster waiting to happen and you need professional assistance rather than the home-brew solutions you've presented for comment. They might help some, but probably not, and there are probably better avenues to explore.