Legal Question in Bankruptcy in Michigan

Sublease/bankruptcy

Situation: I signed a 5 year lease on a commercial office. After a year or so I decided to sell the business. I sold the business and subleased the office to the new owners. I was a sole proprietor and the new compnay is a LLC. It has been a couple years now and I just found out that the new owners were closing their business and filing bankruptcy. I am now being sued for the remaining amount left on the lease. A couple questions:

1)Is it really that easy to default on a lease if you are a LLC? You can just file bankruptcy and face no personal consequences whatsoever?

2)What are the legal requirments for proper communication to me about the situation? I was not notified that rent was behind or that the company had closed until I received court documents stating I was being sued.

3)If regardless of the previous questions I am still found to be liable and cannot afford to pay the amount I am being sued for, does personal bankruptcy aleviate me from the debt?

Thanks for any help/advice you can provide!


Asked on 6/09/08, 4:08 pm

1 Answer from Attorneys
Audra Arndt Audra A. Arndt & Associates, PLLC

Re: Sublease/bankruptcy

I would have to review your lease and sublease to provide a thorough analysis. Based on the information you posted, unless the sublessess signed a personal guaranty, then yes, it is "easy" for an LLC that is defunct/bankrupt to get out of a lease that easily.

The "legal requirements" for communication depend on the terms of your lease - did it contain a provision whereby the sublessee had to notify you of a bankruptcy, and/or was automatically considered in default of your agreement if he filed bankruptcy?

Your liability also depends on whether you signed personally or on behalf of your entity.

Whether you need a personal bankruptcy or a corporate bankruptcy to alleviate the debt, if it cannot otherwise be resolved, depends on who signed the lease, etc., but yes, either bankruptcy would like discharge a debt like this, assuming you qualified for the type of bankruptcy where everything is wiped out.

As you can see, there are many variables here that cannot be fully answered without reviewing all the pertinent agreements.

If you'd like to retain me to review all the lease/contracts in question, and discuss with the attorney that is representing the landlord, please contact me to make an appointment.

Thank you.

Audra

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Answered on 6/09/08, 4:22 pm


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