Legal Question in Credit and Debt Law in Michigan
My husband was a small business owner for many years. He died Oct 2010. His business was an LLC and prior to his death he was the only member of the LLC. He had a number of loans for the LLC, signed by him alone as the sole member of the LLC. I became a member of the LLC after his death. I have been paying on these loans and all but a line of credit are current. I wanted to use the line of credit that my husband had through the LLC and was told by the lending bank that I was not a signer and would have to go through the application process. I did that and was denied a line of credit in my name. I was told I could have the remaining balance of the line of credit converted into a regular business loan at a much higher interest rate, but would not have access to any funds through the line of credit. I was informed by someone in the banking business that I could "walk away" from these loans.I feel it would be foolish to continue to pay on these loans, especially since they will not allow me to borrow any funds. My question is am I legally bound because I am now a member of the LLC to repay all of these loans?
1 Answer from Attorneys
A person is never personally or individually liable for the debts of a business unless they signed a personal guaranty. You should ensure that your husband did not sign any personal guaranties because even if you aren't liable, once you walk away, they may try to collect based on the "estate" or assets he left behind. It sounds like you're better off dissolving the LLC as it sounds legally insolvent, and opening a new entity if your situation permits. However, there are proper ways to do this, as you do not want to give the perception that you are doing this simply to avoid creditors and keep all the money. If you'd like to set up a consultation, please contact me. Don't take advice from the banks either - they aren't on your side and only want money, regardless of where it comes from.
Sorry about your situation - my condolences.
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