We are selling our farm this summer and I need a little help sorting some things out. My husband is the sole member of an LLC. We owe a bank $230k mortgage and $5k line of credit. My husband's parents and brothers used to own the LLC together until we bought them out in 2006. The loan to them is something like $370k but we haven't paid a dime on it yet. My father in law is very closed lipped about everything so even though I handle the finances for the farm I have no clue what is going on with the loan to them. He has mentioned that they have written down the loan some, gifted us interest so we haven't had to make payments...?
So now we are selling the real estate for $350k and we have somewhere around $60k of other farm assets (equipment, etc.). The bank gets paid 1st, the family loan has 2nd on all property & equipment so they get paid next, but the max they will receive is somewhere near $150k.
We also have a handful of outstanding farm bills (maybe $3-5,000) and about $17,000 in credit card debt. The credit cards are in our personal names, not the LLC but I have kept detailed Quickbooks records to show that probably 90% of the credit card debt is legit business expenses.
Father in law has talked about the fact that we can't pay off the credit cards with proceeds of farm sale because the IRS will consider it personal expenses. We are going to leave this place with nothing but the shirts on our backs...are we really going to leave with $17k (or $20k if you include outstanding bills) of debt to pay off? It doesn't seem right or fair but I am in no position to question my father in law about this. (note to everyone reading: do NOT go into business with family members....
Any advice you can offer would be so helpful! Thank you!