Question about default on LLC loan

[beachdoc1]

My wife and I own a sizable rental property in the Destin area--however the carrying costs have gotten enormous..to the point that we'll either have to fire sale the property soon and take a huge loss, or default on the loan.

We established an LLC when we purchased the property, and the property is deeded to the LLC, the LLC has a sizeable loan to a national bank. If our LLC decides to default on the loan from our bank for this property what are the ramifications? Could this injury our personal credit too?

Thanks for any input.

Desperate Destin Property Owners

 

[SHELLY]

Contact your lawyer and accountant.

 

[Smiling JOe]

Contact your lawyer and accountant.

Best advice you will get on this board, though I would love to hear from the people in the lending business.

 

[Beachbummette]

An LLC is held under your social security number, so I am pretty sure it will go against your credit. Shelly gave you good advice, contact your attorney or accountant. Why don't you consider selling it at a fire sale price and getting out from under it without ruining your credit?

 

[SHELLY]

Found this on the web:

What happens with the mortgage that I am personally liable for?

It depends in large part on the lender holding the mortgage and the relationships with that bank. A lender may allow the LLC to assume the loan and mortgage, either with or without changes to the terms of the loan. Alternatively, a lender may require that the LLC obtain a new mortgage in the name of the LLC, and that the personal mortgage be repaid with the proceeds of that new mortgage. In either case, because the loan is being made to an entity and not to a private individual, the lender may request that the member(s) of the LLC provide a personal guarantee or additional collateral. The exact terms, conditions and loan options will vary depending on the lender and other circumstances.

Whether the LLC is permitted to assume the personal loan or the lender grants a new loan to the LLC, the bank will likely require that the deed to the property be transferred to the LLC and that the property be pledged as collateral for the loan.

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(Before you make the decision to default on your loan, you must have reputable lawyer go over the LLC document--especially if you formed an LLC through one of those ads like "Florida LLCs for $99." )

.

 

[Capricious]

Having borrowed money only once in my 48 years I have
little experience with debt, but my understanding was
that most banks would not loan to closely held corps etc.
without a personal guarantee on the note.

If you personally guaranteed the note, you are on the hook.

Yes you need to consult an attorney and fast

 

[Skerm]

LLC stands for Limited Liability Company....It is set up very similar to a corporation in that a liability does not extend to any single person beyond the corporate entity itself (unless the corporate veil is pierced due to proper corporate filings or procedures not being followed).

However, no bank in their right mind would lend to an LLC without requiring PG's (personal gurantees).

You are on the hook, do not consider defaulting unless you have no other option!

 

[Mango]

Having borrowed money only once in my 48 years I have
little experience with debt, but my understanding was
that most banks would not loan to closely held corps etc.
without a personal guarantee on the note.

If you personally guaranteed the note, you are on the hook.

Yes you need to consult an attorney and fast

This is correct. Most if not all Banks will not lend to an LLC, and if they did, it was personally guaranteed by the Borrower(s).

Try the fire sale if you can to preserve your credit and don't forget to consult an attorney.

 

[Smiling JOe]

Even during the Boom, when lenders had their doors wide open?

 

[Capricious]

Beyond the legal questions are the moral ones:

Do we take responsibility for our actions or do we look
to evade our obligations?