Struggling to navigate closing out a business in heavy debt (much of it personally guaranteed), a C-corporation in Michigan. Consulted with attorney and accountant but best steps regarding handling the debt my wife is responsible for are still not very clear to us.

Some background: Business is owned equally by my wife and father-in-law. Father-in-law retired ~7 years ago and gave 50% ownership to wife at that time, who is now the only employee of the biz. At that time, the biz had ~$200K debt. As of now, there are 3 unsecured debt accounts (totaling about ~$200K) which are only personally guaranteed by Father-in-law (as these pre-dated my wife’s ownership stake in the business), one account (a $30K credit card) personally guaranteed by wife, and an EIDL ($75k) which we understood is not personally guaranteed by either.

As we are closing down the business, FIL and wife have agreed that they will each pay the debts they are personally guaranteed for. So my wife is apparently only on the hook for the $30k debt, as we understand it, and this is not disputed by FIL.

My primary question is how to logistically pay this personally guaranteed debt obligation. I have enough equity in my home to get a loan to easily help wife pay the $30K, so a bankruptcy seems unnecessary. Our accountant seems to indicate that we should loan the business the $30K, use that to pay & close the $30k account, then we forgive the debt to the business. I’m assuming that FIL will take a similar approach for his debts (he will sell house to pay, no bk) but he has different accountant/attorney. Our accountant also says this “loan approach” would give us a capital gains write off for our personal taxes, as we would be taking a 30k investment loss? Does this make any sense? What do people typically do for handling personally guaranteed business loans when they close their business?

What also concerns me is that all debts forgiven to the business in this way could generate income for the business. Does this mean that the business will end up with a larger tax burden (e.g. forgiving 230K debt means like maybe $40-$50K additional biz income taxes?). Could my wife and FIL, as owners, end up becoming personally responsible for this additional business income tax due to the business getting our debt forgiveness and closing? I would think not due to C-Corp status but I am not very sure and answers from the lawyer/acct were confusing to us.

Any advice would be appreciated, as this whole thing has nearly ripped us apart emotionally over the past few months, and we want to minimize further stress and impact. Thanks.