My question involves business law in the state of: Wa. Started a muti (3) member llc a few years back, since the company was new it obviously had no credit and to get a line of credit all the members signed as personal guarantors. With money being tight we paid what we could out to each other when there was profit or hard times. One member was apparently borrowing from various personal lines/credit to make his ends meet, the magnitude of this was something to which we weren't aware of. This member is now looking into filing personal bankruptcy(chapter 7). Since he still wants to be part of the company he'll only be defaulting on the personal credit cards etc.
How will this affect the llc and or my personal credit? As it stands the loans for the llc do not show up on personal credit, so will the bank which holds the loans see his name on a different credit report and come after the business, or will they not know the two names are same?
I've been told (from a bank) that the bank will see his bankruptcy filed and look at it as though he's personally a risk to the business line of credit and they will then shut the business line of credit down. As for the business, we've never missed a payment or been late on anything, so it's in good standing.
My concern obviously is they shut our line of credit down and wrap it into a loan at a higher payment than our current one and write him out off the loan since he's a risk, therefore making the remaining members liable for the business debt.
Worst case scenario is: (1)The company no longer has a line of working capital,
(2) The payment is too high for the company to pay therefore forcing the company out of business,
(3) The remaining balance is then due on the other two owners.
Info is greatly appreciated