Legal Question in Business Law in Illinois

Re: Liable for Half of Business Debts?

Leaving aside the difficult family issues, this can be a confusing situation.

When you say that your husband's brother did not declare bankruptcy on the business, do you mean that the brother did not list the business or your husband as potential creditors of the bankruptcy estate? If so, then your husband's rights against the brother may not in fact be cut off by the bankruptcy. However, to determine this would require an examination of the bankruptcy petition, the creditor matrix and the claims index (to make certain that the business and your husband were not listed as creditors in the bankruptcy). In addition to the bankruptcy, you would need to review the operating agreement for the business, to determine if there were any particular liability arrangements made between your husband and his brother. Depending upon the provisions of the operating agreement of the business, litigation may be your best option.

Also, I should note that even if your husband's claim is not cut off by the bankruptcy, he will not be able to begin collection efforts or litigation until after the bankruptcy has been discharged (when a bankruptcy is filed, there is an automatic stay imposed against all collection efforts against the debtor).

Your chances of getting a judgment against your husband's brother will depend the exact impact of the bankruptcy on your husband's claims, as well as the impact of the operating agreement (if there is one). Assuming neither the bankruptcy nor the agreement bars litigation, from the facts provided I would think that you would have a solid case for contribution, and a strong likelihood of success (although a more detailed review may alter this likelihood). Having said this, any judgment is only worth the available assets of the debtor. If your husband's brother has just gotten out of a bankruptcy, you may be able to do little more than garnish his wages.

All legal considerations aside, you need to carefully consider the impact that the legal actions contemplated could have on relations with your husband and his family. If you would like to discuss this further, please feel free to e-mail or call me.