Legal Question in Credit and Debt Law in North Carolina

John,

How did you and your sign the promissory note? As personal guarantors of the LLC or on behalf of the LLC? It makes a difference.

If you signed the note only on behalf of the LLC, then the lender can go against the LLC only. If the LLC has no assets, that is it.

If you and your son signed as personal guarantors of the LLC (as you seem to indicate), that means that you and your son agreed to be personally liable in the event that the LLC defaulted. In such case, the lender can come after the LLC as well as you and your son. The lender does not have to sue the LLC and they may not if the LLC has no assets.

I would assume that the loans are secured by the property although I would have to see the documents. If the property does secure the loans, can the lender come after you for a default if the property is worth less than you borrowed? Some states use the word recourse v. non-recourse. A non-recourse loan is where the bank looks only to the property; a recourse loan means they can sue you as well.

Assuming in an absolute worst case scenario that the bank can come after you and your son, I would do nothing until they do. First, it may be that any deficiency can be negotiated so that you and/or your son could do something manageable like agree to settle any debt for 15% of the balance owed. If nothing can be negotiated then and only then would I wait until the bank sues. If they do, then would I contemplate bankruptcy, depending on your situation at that time. Someone who is 93 and in a nursing home and on Medicare/Medicaid and who has no assetes should not file bankruptcy whereas someone who is 45, will need credit again and who has assets probably should. I know that you are in the middle so it will just depend on your circumstances at the time.

Depending on your assets and debts, it may be that only you need to file a chapter 7 bankruptcy in which case your wife does not need to join in. If your wife's son and your wife own the home in NC then your wife's assets cannot be touched for your debts.