The Moneyist: COVID-19 wrecked my furniture business of 30 years, but I personally guaranteed it. How do I declare bankruptcy without losing my home?


Dear Quentin,

I am a single woman, age 67. My home is paid for, and I have owned a small furniture business for the past 30 years. 

During the past year, due to the COVID-19, things have gotten a little tough financially. I have been considering closing the store.

I still have a three-year lease on the building costing $6,000 a month, and I just found out that I am personally responsible for any other bills that the store owes.

I have an LLC, but I was informed that I would have to file personal bankruptcy for any debt the store has.

How can I keep from losing my house if I have to file bankruptcy? The value is approximately $380,000, and it’s really the only asset I have.

Business Owner Felled By COVID

You can email The Moneyist with any financial and ethical questions at [email protected].

Want to read more? Follow Quentin Fottrell on Twitter and read more of his columns here.

Dear Felled,

If the pandemic has taught us anything, it’s that the world can change in an instant, and our own fortunes with it. But that also works both ways.

It’s not over until it’s over, and you have not been knocked out of the game yet. I have seen people sell businesses, homes and stocks in a down market only to regret their decision months or a few short years later. If you love your business, do everything you can in your power to fight for it.

Harness the full potential of any stimulus programs, and seek help from your local chamber of commerce and business communities. Sometimes, the hardest thing in the world to do is to ask for help. But it’s often a privilege for other people to provide advice and assistance. Speaking of which, I sought additional legal advice for you from an attorney who specializes in bankruptcy.

‘Harness the full potential of any stimulus programs, and seek help from your local chamber of commerce and business communities.’

— The Moneyist

“When you sign a commercial lease, even for an LLC or a CORP, you will almost always be asked to sign a personal guarantee,” says David Waltzer, a New York-based lawyer. “In the bliss of getting a new space, it is easy to gloss over the hazard at hand. I recommend that my clients NEVER personally guarantee a commercial lease except with a ‘good-guy guarantee.’”  

“A good-guy guarantee basically says that the space is personally guaranteed for as long as it is occupied,” he adds. “So if business goes bad and you need to get out, you can vacate and surrender the space. Your business will still owe for the balance of the lease, but you personally will be off the hook. In this way, you benefit from the protections of the corporate entity.”

There may be hope. “In some parts of New York, you can protect $170,000 of equity in a primary residence per person on the title. So, if you and a spouse are both on title, and your house is worth $340,000 and has no mortgage, the house could be safe in personal bankruptcy,” Waltzer says. “You can even sometimes get consideration for the expected cost of sale.”

‘You have built this business up over 30 years. That’s longer than millions of small businesses, and most marriages.’

— The Moneyist

Please don’t give up. Once you have pulled the plug on your business, there will be no going back, and you have spent 30 years building your business up. There may be the opportunity to seek zero-interest loans in your state. In New York, there are zero-interest loans up to $75,000 for businesses that experienced a 25% decrease in revenue due to COVID-19, among other conditions.

One final thought. You have built this business up over 30 years. That’s longer than millions of small businesses, and most marriages. You have established client relationships, and a reputation in your industry. Don’t discount either of those two things. If you do close your business now, it does not mean it was a failure. Please know that every day that you hung an “Open” sign on your door counts.

These are extraordinary times, and running a small business for 30 years is even more extraordinary.

Hello there, MarketWatchers. Check out the Moneyist private Facebook  group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

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