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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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I am In Texas. Myself and a pertner have been employeed by

Resolved Question:

I am In Texas. Myself and a pertner have been employeed by a company. We and the company wanted to open a 1st location but the company did not have the money to do so. My partner and I decided to secure funds under our personal names to fund building the location. The ground lease is and building itself are in the companys name but is signed by me as the guarantor. Approximately three payments were made to the loans by the company. A week after the location opened the owner said he cannot pay myself, my partner, the employees or any costs associated with the business as he is filing bankruptcy. That day, I formed a new LLC, am in the process of switching the name on the lease contracts and so forth. I basically kept the business open and changed the name and got a new Tax ID. Am I ok. Or is there any legal recourse for this person?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 8 years ago.
Hello,

Is the person still filing bankruptcy? For the business or him personally? What was the total equity in the assets that were changed into your LLC?
Customer: replied 8 years ago.
Yes. For the business I believe. Total equity is roughly $100,000.
Expert:  Ellen replied 8 years ago.

Hello,

Thank you for your question. I am happy to assist you.

You may have a problem if the person files a bankruptcy for his business. The trustee may try to avoid the transfers to your LLC under Section 547 or 548 of the Bankruptcy Code.


Let me explain.


A transfer of the debtor’s assets to a creditor that results in a creditor receiving more than the creditor would have in a Chapter 7 bankruptcy, is typically considered a “ 547 preference".

Bankruptcy Code §547 provides for the avoidance of preferential transfers within 90 days before the bankruptcy filing date for third parties. Transfers to insiders (including a relative) are subject to a longer avoidance reach back of one year.

A transfer of the debtor’s assets to a third party, with the "intent" to prevent creditors from reaching the assets to satisfy their claims, is called a “fraudulent conveyance”.

Bankruptcy Code §548 provides for the avoidance of fraudulent transfers within two years before the bankruptcy filing date. Transfers to self settled trusts and similar devices are subject to a 10 year avoidance reach back.

Accordingly, you may want to consider assisting the person to avoid a bankruptcy filing.

I hope that the information which I provided was helpful to you. I have to go off line for about one hour. If you have any questions, I will respond at that time.

Thank you,
FLAandNYLAWYER


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THIS IS FOR INFORMATION ONLY. NO ATTORNEY-CLIENT RELATIONSHIP EXISTS. PLEASE CONSULT A LAWYER IN YOUR STATE FOR LEGAL ADVICE

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