We have a customer who has a business account and personal loan. The loan was charged off and there are small cash deposits made into the business account. Are we able to take these cash deposits to make up for the charged off loan? To be clear, the business account is in the name of the business and the loan is in the name of the customer but classed as commercial.

Thank you.

No - there is a reason someone establishes a business entity. That is to shield the business assets for the personal assets and visa versa.

Just to be clear as I am dealing with a customer complaint on this issue...can we offset a sole proprietor account using the customer's SSN and apply funds to a charged-off LLC where the same customer is the member/manager using a federal tax ID #?

Absolutely not. The LCC is a totally separate entity than the individual, regardless of ownership or membership.

Thanks. I was afraid of that.

It would be the same as charging Randy's deposit account for a charged-off loan in my name. He'd be very displeased, and I would not blame him for trying to make things very uncomfortable for your bank.

How about this question:

We recently had a customer's widow close out her husband's Home Improvement Deposit Account and set up an Estate Account. A commercial term loan (business purpose) in her husband's name has matured and is 30 days past due. There is Right of Offset language contained within the Promissory Note. The Servicing Officer cannot get a response from the wife and is wondering if he has right of offset to the Estate Account Funds (as essentially these funds were from the husband's account). Any directions where I can find an answer would be appreciated.

Lisa

The right of offset is a matter of state law. It can be enhanced by contract terms. Your attorney can give you the specifics in Texas. However, I'll bet that the answer to your question is the same as the one before for the same reason.

In general, the right of offset requires a "unity" of ownership; i.e. the person who owes you money has to be the same person to whom you owe money. In short the debtor and the owner of the account must be one in the same. A decedent's estate is not the same person as the decedent. If you want to be paid, file a claim against the decedent's estate.

P.S. There are few cases that are easier for a plaintiff's attorney to win than those generated by a bank improperly exercising a right of offset. Against a widow when this much time has passed? If you mess this up you're toast.

I sure would like to know what this might be: Home Improvement Deposit Account.

But Ken is correct, your claim is against the estate.

My assumption was it was just a personal account with a "purpose" inserted on line 2. I did it once just to keep track of my expenses and stay within my budget when I remodeled my first home. (There was no Quicken at the time.)

Thanks Ken.

To continue this discussion on right of offset, the commercial loan (LLC) has an unconditional personal guaranty. The language appears to give us rights to personal assets (i.e. sole proprietor account?) Does this change anyone's opinion?

"has an unconditional personal guaranty"

Which died with the individual. It just gives you additional ammunition that you can reach the assets of the estate for satisfy the debt. You need to involve legal counsel in this if you continue to have these sorts of questions and you are unsure as to how to proceed.

Sorry, my scenario was different than Lisa's. My customer is alive and well and complaining.

From your first post:



If you have already done this and are looking for affirmation, you are not going to find it here. You need to involve your legal counsel. The guaranty may give you a claim against the individual. It's not going to give you a right of offset. There are few cases that are easier for a plaintiff's attorney to win than those generated by a bank improperly exercising a right of offset.

Thanks. I have a call in to legal counsel to clarify before formalizing my response to the complaint. I appreciate your help.