Don’t feel like reading. This article is also in podcast form:
The more I hear it, the more upsetting it is. About once a week I get a call from someone who says they talked to another firm who told them that the way to get out of a personal guarantee is to do one of two things: 1) Start a new corporation and then sell the assets to yourself or 2) Sell your assets to your friend. No matter how you spin it, the bottom line is that such strategies are based in misrepresentation and fraud.
I’m not saying that losing a business is easy. I’m not trying to tell you that settling your debt will be a breeze. It’s times like this that true character is revealed. Are you going to play it straight and take your medicine, or are you going to try to talk yourself into the misguided theory that it’s not about right and wrong because “it’s business” and “the bank would screw me if they had the chance, so I’ll screw them too”?
Let’s put aside the ethical side of my objection to this scam. Ask yourself these questions:
– Are the people who are advocating this strategy signing any of the documents that are being submitted? (My guess is probably not.)
– If this strategy is legitimate, why not tell your bank and the SBA what you are doing? (Because it’s NOT legit, that’s why.)
– If this were an acceptable strategy to your lender and the SBA, they would just lower your loan amount and let you keep operating.
I know despite my pleadings there are some people who will still go ahead with this “strategy”. If that’s the case, just remember: it’s a rare case that you’d go to jail for not paying your bills, but white collar crimes like fraud result in people go to jail all the time.