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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37871
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My husband and I operate an single-member LLC (his name) in

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My husband and I operate an single-member LLC (his name) in Texas. Due to high credit card debt (not business but in his personal name/SSN) we are looking to declare Chapter 13 )personal. we have been advised that our business will not be affected and will continue to operate business as usual and that only our personal credit card will go through bankruptcy. We both fear that our business WILL be affected in some way or another. We certainly don't want to put our business in jeopardy because of our personal filing. Is the advice we received correct? Can we rest assured our business won't be affected. Thank you.
Lori Herrera
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

If your business records show that it is run as a separate entity, and you are not transferring assets back and forth (e.g., to possibly avoid payment of your personal debts), then your business will not be affected. But, if the bankruptcy trustee thinks that you are hiding assets in the business, then the trustee will ask the court to force the turnover of those assets to the bankruptcy estate. This could cause your case to be dismissed entirely -- which would leave you exposed to your creditors.


Hope this helps.


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Customer: replied 7 years ago.

There are no transfers of any kind of funds, no monies are ever intertwined--what kind of records would you be referring to? Bank records? Also, our business is new so there is no real "profit" to be had yet, so anyone looking in can see there is no hiding--we would then be fine right? And if everything went as planned, I could pay our monthly payment with business checks or would they have to be personal checks? Does it matter?


Expert:  socrateaser replied 7 years ago.

Seems pretty clean to me. But, you cannot make personal payments from your business accounts. You have to draw money as distributions in accordance with your operating agreement (which, if you don't have one, then you may want to consider drafting one, and then acting in accordance with its terms).

Customer: replied 7 years ago.
So then the attorney who advised I could pay the monthly payment with a business check is incorrect? I know they should not mix and this is why I posed the question. These credit cards have been used for business but taken out in his personal name, so then a personal payment would have to be in order? Again, as long as our business is treated as seperate (no mixing of money) -- then it is possible that it will be fine and continue to operate like normal? Thank You!
Expert:  socrateaser replied 7 years ago.

I'm not going to say that another attorney who advised you is incorrect. I will respectfully XXXXX XXXXX his/her opinion.


You are describing credit cards used for business but taken out in a personal name. That could be a problem, unless you're accounting for the purchases and reimbursing for them, just like any employee would be reimbursed for expenses.


Legally, at the time of filing the bankruptcy trustee owns all of the debtor's property, and that would include the LLC. But, the trustee doesn't want to run that business, and if the debtor is earning a living from it, then taking it over would destroy the entire Chapter 13 plan -- so that won't happen. And, as long as you make sure that the plan "vests the property of the estate back in the debtor" at the time of plan confirmation, then you will be able to continue to run your business, without interference.



Customer: replied 7 years ago.
That makes do I make sure that my attorney will do these things necessary to ensure all is protected? Is there is a way to make sure of this or just assume that he/she is doing what is best in our interest? This is new and quite scary for us--as you can imagine.
Expert:  socrateaser replied 7 years ago.

I can't really tell you how to find the right attorney. You may want to consider finding a Board Certified Specialist in Bankruptcy Law.

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