There are plenty of laws regulating bill collectors.  The trouble is, most people are completely unaware of these laws.

In California, state and federal law restricts what bill collectors can say and do.  Here are two good ways to stop bill collectors from calling you.

Ask Them to Stop – Really!!  This sounds too good to be true, right?  Let me explain.  The law gives bill collectors the right to contact you about a delinquent bill.  The apparent assumption is that you might have misplaced the bill or forgotten to send a check, and a quick call might straighten things out.  Of course professional bill collectors go to the extreme, often reminding people several times per day.  For consumers overwhelmed with debt endless “reminder” calls are no help.  The law acknowledges this reality and gives consumers the right to stop collection calls by making a simple written request.

Here is what federal law says:

“(c) Ceasing communication—If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communications with the consumer.” – 15 U.S.C. § 1692c(c).

Notice the law requires that the collector be notified in writing which means simply telling a bill collector, “stop calling me, you’re driving me crazy!,” does not work.  Once notified in writing they must cease all communication with you.  As a practical matter, the best method is to send a letter by certified mail and keep a copy so you have proof the collector was notified in writing.

Hire an Attorney – Once you hire an attorney the collector must communicate exclusively with the attorney.  Here’s what  federal law says:

“A debt collector may not communicate with a consumer in connection with the collection of any debt—

(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of…” – 15 U.S.C. 1692(c)(a)(2)

As a practical matter, the best method is to send a letter to the collector by certified mail and keep a copy so you have proof the collector was notified in writing.

All this sounds great but there must be a catch, and there is.  The bill collection industry is notorious for shady operations and unlawful practices.  If a bill collector violates the law you are required to sue in court to force the issue.  In most cases, the bill collector will comply with the law to avoid the risk of being sued, but not always.

Despite theses laws, the most common method used by consumers to deal with collector calls is to not answer the phone unless they recognize the name of the caller.  Most bill collectors will show on caller ID as “unavailable” or “blocked,” and consumers quickly learn not to answer those calls.  This time-honored method works for many consumers as long as delayed response to phone calls is acceptable.  Unfortunately, for many business owners phone calls are the lifeblood of the business, rendering this strategy counterproductive.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free consultation.

I am frequently asked, “Can I file bankruptcy for my business?” which is a simple question.  The answer, however, is more complicated than the question.

The first issue to look at is the form of the business.  The most common business forms are  corporations, limited liability companies (“LLCs”), and sole proprietorships.  A corporation or LLC is a separate legal entity distinct from the owner or owners.  A corporation or LLC is required to pay annual fees to the state, maintain records, and in most cases file tax returns.   As a separate legal entity, a corporation or LLC is entitled to file bankruptcy.  A sole proprietorship, on the other hand, is one and the same with the personal affairs of the owner or owners which means it has no ability to file bankruptcy separate from the owners.

A bankruptcy for a corporation or LLC offers the opportunity for the business to reorganize or liquidate.  A bankruptcy by a corporation or LLC will only resolve debts as to the business and will not be viewed as a bankruptcy by the owner, which means the owner’s credit report does not reflect a bankruptcy.  A bankruptcy for a sole proprietorship is a personal bankruptcy by the owner and will reflect on the owner’s credit reports.

All this makes a corporation or LLC seem like the best option for any business but, alas, that is not necessarily the case.  A personal guarantee is a contract where the individual promises to pay one or more debts if the corporation or LLC fails to pay.  Many lenders, suppliers and others will insist that the owner of a small corporation or LLC sign a personal guarantee as a condition to doing business with the corporation or LLC.  Additionally, many tax debts will be imposed on the owner of the corporation or LLC if the business fails to pay.

A common sense goal in forming a corporation or LLC is to ensure that if things go awry financially, the individual is able close the business without damaging his or her credit.  However, personal guarantees will undermine that goal.   Needless to say, understanding which debts are personally guaranteed is critical.  As important as it is, this is not easy to determine.  Reviewing the underlying contracts is the best way to determine whether or not a personal guarantee was signed in favor of a specific creditor, but in many cases the contracts involved are not readily available.  People often show me invoices or monthly statements assuming the name on the document accurately reflects who is liable for the debt.  Unfortunately, the name shown on an invoice or billing statement is, at most, an indication of who is likely responsible for the debt.  Credit reports are another indicator but are not a reliable way to know whether a personal guarantee was signed.  Simply asking the creditor if the debt is personally guaranteed is another indicator, but often customer service representatives will not have the answer and will not be willing to go to the trouble of getting the information.

Now, to answer the original question, “Can I file bankruptcy for my business but not personally?”  In the vast majority of cases the answer is no.  If your business is a sole proprietorship you will need to file a personal bankruptcy to address business debts.  If your business is a corporation or LLC you will need to determine to what extent you are personally responsible for corporate or LLC debts.  If the corporation or LLC files bankruptcy but you, as the owner, remain liable for substantial debts, then you are still forced to consider personal bankruptcy to deal with the problems.

At the Law Office of Michael Primus we have helped hundreds of business owners, and we can help you.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.