Bankruptcy Indiana

Can money borrowed through a business line of credit be discharged in a bankruptcy in Indiana? one blog reader wants to know. A second blog reader is asking the same question about corporate sales tax debt - can that be forgiven through a bankruptcy? he/she wants to know.
 
Let's talk first about business lines of credit.  In fact, this very week two debtors visited two of the bankruptcy law offices of Mark Zuckerberg seeking Indiana bankruptcy information about debts pertaining to small business bankruptcy and business lines of credit. In one case, the line of credit was being "pulled" by the lender; in the second, the business owner was behind on repayments.

Along with the Anderson, Bloomington, Indianapolis, and Columbus bankruptcy lawyers who are my colleagues, I'm finding that, as I provide Indiana bankruptcy help, especially when business debt is involved, I need to keep stressing two facts about how the new bankruptcy laws in Indiana work, and you'll need to know these two facts in order to understand my answer to today's blog reader questions:

• If a business is structured as a corporation or as an LLC (limited liability company), the business is able to file bankruptcy without the owner him or herself filing bankruptcy as well.
• If the business owner was asked to personally guarantee the line of credit or other loan, (which is the case in 90%+ of small business loans in Indiana), then, even if the line of credit is forgiven in the bankruptcy, the lender can go after the owner to collect on the debt.

The second small business bankruptcy question, the one about Indiana sales tax debt, has a totally different answer, for a totally different reason. 

Sales tax money is not technically, and never was a loan.  The business owner collected that money from customers on behalf of the state of Indiana.  The business owner is, in a manner of speaking, a trustee for the government, holding the money just long enough to process it and then remit it to the tax authorities of Indiana.  In other words, the money was never "lent" to the business for its own use. There are no creditors in this picture; the bankruptcy process simply does not apply. What might apply are penalties for not remitting money to the state that belongs to, and only to, Indiana.

There are different types of bankruptcy - and different combination strategies that need to be considered for each small business situation, as Fred Daily explains in Using the Bankruptcy Code to Handle Tax Debts and Stop IRS Collections.

My advice to small business owners experiencing severe financial difficulties  is the same as I always tell individual debtors;  the earlier you consult with an experienced Indiana bankruptcy attorney, the more Indiana bankruptcy help options will remain available. These have been some pretty hard times for small businesses - getting the help and advice you need is your smartest strategy going forward.  In fact, you might way the whole purpose of small business bankruptcy in Indiana is just that - halting downslide and going forward again!