You need a lawyer yesterday.
Not when you decide you’re ready to file bankruptcy. Not when you find the buyer. Now.
A good one will better explain your options by looking at the debt, collateral, and what assets that are to sell. They should give some brutally honest advice based on more info than you’re willing to share here.
You receiving some very bad legal advice that could make your situation worse.
Don’t start a company with the same name. That’s a breach of your fiduciary duty.
Don’t just lock him out. That’s probably not legal.
You didn’t indicate how much money you’ve put into this, or how much the business has earned, or even which state you’re in.
Find a business attorney in your state. You may have to pay for the hour, but without the size and location of the business, there’s only so much that can be offered.
A lawyer might not do all of those things, but you’re definitely going to need a lawyer. You should consult with a few and go with one that has recs.
Lots of good advice, but something I haven’t seen mentioned is your written return policy. Update it to mitigate this issue in the future.
If your return policy is 30 days, you can stick to your guns and dent the return or you could look like a hero and bend it a bit.