It turns out that even lawyers sometimes have to pay their debts. In a recent Washington appellate case, a bank successfully sued an attorney to recover on a loan made to his law firm. Typically the owner of a law firm wouldn’t be held responsible for the corporate debts of a firm (except under a separate personal guaranty). But after the firm ceased operations, the lawyer continued to operate the firm in a manner that was determined to be a “mere continuation” of the prior business. As a result, he was held personally liable as a successor on the firm’s loan.
The result is particularly interesting because the lawyer, who had signed a personal guaranty of the law firm’s debts, declared bankruptcy on the day that he ceased operations of his law firm. The lawyer’s personal guaranty was ultimately discharged in the bankruptcy proceeding, and that ordinarily would have ended collection efforts against the lawyer individually. Continue Reading