Bankruptcy & Money Owed to Owner from the Corp

[meganlindsey]

What is the name of your state (only U.S. law)? Virginia

I have an accounting client that is considering bankruptcy (Chapter 7). He has loaned the corporation thousands of dollars to keep it afloat to this point, even used his home's equity line for cash. His corporation is slowing down on the bills they are paying (ex. paying bills 30-60-even 90 days late). So, there is some extra money in the corporation's checking account.

Is it illegal for him to start paying himself with some of the money that is in the corporation's checking account before bankruptcy occurs if that is what he chooses to do?? Because if bankruptcy happens, he does not get any of the money back he's loaned the company....is that correct?

I would appreciate some advice to give to him ASAP.

 

[bigun]

Your client is about to open himself up to all manner of insider and preference issues. He should make no transfers unless his lawyer says it's OK.
You can best help by getting him to a bk attorney who has some experience in business bk's.