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Pixlamarque
Posts: 5
Registered: ‎05-29-2013
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Can BD from LLC be placed on personal credit?

If you have an LLC and have bad debit, should that debt be reported on the LLC or on the owner of the LLC's personal credit? My husband had excellent personal credit, but he had an LLC (a franchise) and when he got out of the franchise the company reported debts on his personal credit, not under the business LLC. We dispute the amount of the debt and were never able to come to an agreement with the company. That is neither here nor there and we are not trying to get rid of anything that may be valid, we are just of the opinion that it should not be on his personal credit, but it should have been put on the LLC. Are we right or wrong or somewhere in between? Is this something we can take care of ourselves or would it help us to hire a lawyer? Any assistance would be helpful. I appologize, I am new to these forums and don't know all the abbreviations.

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scenery_guy
Posts: 958
Registered: ‎07-24-2012
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Re: Can BD from LLC be placed on personal credit?

It depends. 

 

If the holder of the now debt had him sign a personal guarantee (PG is the term we use here) then yes, it should report that way. Most credit cards and loans require the principals of the LLC to sign one of these just in case the LLC defaults. 

 

Welcome to the forums by the way! Hopefully more people will jump in and offer opinion or advice. 

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myjourney
Posts: 26,254
Registered: ‎02-07-2013
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Re: Can BD from LLC be placed on personal credit?

If the debt was as a result of an lender having it as personal guarantor when it was applied for then yes it would definitely be placed in your personal credit file..

 

Anything after and I might have the year wrong but 2009 card act banks used this to make sure one way or the other you would be responsible.. Any late payments, defaults all go on personal CR's as well as business credit:smileysad:

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Pixlamarque
Posts: 5
Registered: ‎05-29-2013
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Re: Can BD from LLC be placed on personal credit?

[ Edited ]

Thank you for the replies. While I haven't read through the contract yet, I am pretty sure that the company he purchased the contract from would have had a PG stipulated and so the listing on his personal credit would be valid. We'll pull out the contracts this weekend. The only thing he may be able to do is to go through the lawyer to negotiate the amount owed, since there is approximately a $30,000 difference between our number and theirs. I'm just glad all that happened before we got married and my credit is still nice and shiney. :smileytongue:

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scenery_guy
Posts: 958
Registered: ‎07-24-2012
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Re: Can BD from LLC be placed on personal credit?

Best of luck working it out!

 

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Creditaddict
Posts: 20,129
Registered: ‎10-23-2007
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Re: Can BD from LLC be placed on personal credit?


Pixlamarque wrote:

If you have an LLC and have bad debit, should that debt be reported on the LLC or on the owner of the LLC's personal credit? My husband had excellent personal credit, but he had an LLC (a franchise) and when he got out of the franchise the company reported debts on his personal credit, not under the business LLC. We dispute the amount of the debt and were never able to come to an agreement with the company. That is neither here nor there and we are not trying to get rid of anything that may be valid, we are just of the opinion that it should not be on his personal credit, but it should have been put on the LLC. Are we right or wrong or somewhere in between? Is this something we can take care of ourselves or would it help us to hire a lawyer? Any assistance would be helpful. I appologize, I am new to these forums and don't know all the abbreviations.


Got out, Did he sell or just flat out close?

Who is the debt to? Credit Card, Loan for the business??

How old is it? when did it hit his personal credit?

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Pixlamarque
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Registered: ‎05-29-2013
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Re: Can BD from LLC be placed on personal credit?

It was approximately 2 years ago. It was a Snap On franchise. The money owed is to the Snap On corporation. When he started out he put in a large sum of money and Snap On loaned the rest of the start up costs. During the time that he had the franchise, he paid back loan payments on the amount borrowed. The arguement with them about the total owed is due to the types of accounts. There were credit accounts that his customers had through the Snap On corporation where the parent company extended credit accounts to customers. Even though those accounts were through the parent company, they are including some of what those customers owed in the amount they claim my husband needs to repay. It is very complicated and there are multiple issues with different types of accounts. The company would never sit down and go over the accounts with him, though he asked repeatedly. Everything that was part of the company was returned to Snap On for credit against the debt (the truck, all inventory, etc). None of this is credit card debt, it is the Snap On corporation that is listing the debt on his credit. Several other franchise owners in our area got out of the business within about a 6 month period and all of them are having the same issues with not being able to sort out accounts or even get someone to go over it with them. At this point, we have to weigh what it would cost to have a lawyer sort it out versus just taking the hit on his credit and waiting it out. We would love to be able to clear up his credit, but are at a stalemate because he refuses to pay them until they will work out the amount owed. We have his house up for sale (purchased by him before we married) and plan to move to Florida soon. I have very good credit and enough income that I can finance our next home on my own, luckily. 

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Creditaddict
Posts: 20,129
Registered: ‎10-23-2007
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Re: Can BD from LLC be placed on personal credit?


Pixlamarque wrote:

It was approximately 2 years ago. It was a Snap On franchise. The money owed is to the Snap On corporation. When he started out he put in a large sum of money and Snap On loaned the rest of the start up costs. During the time that he had the franchise, he paid back loan payments on the amount borrowed. The arguement with them about the total owed is due to the types of accounts. There were credit accounts that his customers had through the Snap On corporation where the parent company extended credit accounts to customers. Even though those accounts were through the parent company, they are including some of what those customers owed in the amount they claim my husband needs to repay. It is very complicated and there are multiple issues with different types of accounts. The company would never sit down and go over the accounts with him, though he asked repeatedly. Everything that was part of the company was returned to Snap On for credit against the debt (the truck, all inventory, etc). None of this is credit card debt, it is the Snap On corporation that is listing the debt on his credit. Several other franchise owners in our area got out of the business within about a 6 month period and all of them are having the same issues with not being able to sort out accounts or even get someone to go over it with them. At this point, we have to weigh what it would cost to have a lawyer sort it out versus just taking the hit on his credit and waiting it out. We would love to be able to clear up his credit, but are at a stalemate because he refuses to pay them until they will work out the amount owed. We have his house up for sale (purchased by him before we married) and plan to move to Florida soon. I have very good credit and enough income that I can finance our next home on my own, luckily. 


Send certified letters to snap on verification of this debt... With no response he should be able to submit said letter to all the credit reporting agengies for removal.  He can try for disputing direct with credit reporting agency for same reason... but if they won't respond to you or prove this then they shouldn't be able to keep reporting such things.

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New Member
Pixlamarque
Posts: 5
Registered: ‎05-29-2013
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Re: Can BD from LLC be placed on personal credit?

Thanks Addict. I told him to dispute through the credit agency, but I didn't think about sending the letters to Snap On. I want to try every low cost option we can before we consult a lawyer. 

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scenery_guy
Posts: 958
Registered: ‎07-24-2012
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Re: Can BD from LLC be placed on personal credit?

I sent you a PM with one link. Check this out as well. Good video and the site seems to offer guidance and help. You need a franchise attorney. Get legal help now before you move on disputing the credit reports. Those can be fixed once an attorney gets involved. Trust me when I say from experience let an attorney lay out the path to recovery and repair first. If you make a move and it fails prior to legal help you might not be able to go back and try again. I screwed up with a $46,000 issue many years ago and by the time I found a lawyer it was too late to fix or try again. 


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