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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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My partner and I formed an LLC back in October 2008 to buy

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My partner and I formed an LLC back in October 2008 to buy and rent real estate. We purchased one property and got a mortgage on it, then was able to get it rented. Since then, we've had nothing but troubles between keeping tenants, property managers ripping us off, and property damage and repairs, its literally depleted the company of all funds. As of Sept of 2010 we were unable to make the mortgage payment on the property because we had no tenant and despite working with a reputable property management firm to find a tenant we simply could not get the house rented. Its still vacant today. At this point we are being perused by the bank to pay the mortgage, which we can't. We are wondering how bankruptcy would affect us at this point, granted this is something we probably should have done last year. To date, we have never made a profit. What are the ramifications of bankruptcy for an LLC? How can/will it affect us personally?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.
Hi JACustomer,
Have you and/or your partner personally guaranteed the mortgage or any other debt(s) the LLC has?
Customer: replied 3 years ago.
Unfortunately yes, we signed as guarantors of the mortgage. This is the only debt and asset the LLC has.
Expert:  cfortunato replied 3 years ago.

Filing a business Bankrutpcy is unlikely to help you, as businesses cannot have their debt discharged - this can only be done for individuals.

In other words, if you file a business Bankrutpcy, you would still be personally liable for that debt, unless you file a personal Bankruptcy.

 

I think this is what you wanted to know. If not, please let me know.
Thank you!

 

 

 

 

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.
HelloCustomer

Sorry, I accepted your answer and closed this too quickly.

So with the banks pursuit of this debt, how far can they go into our personal assets? Can they take my house? We are where we are due to personal financial debts as well as the business failing. We both experienced person la financial hardships and are both working with credit reduction agencies to get things under control. I personally had my credit limits cut by over 50% and am living paycheck to paycheck. For a couple years we were making the monthly payments but simply can no longer afford to do so. Will the bank just take the rental house or take my personal house?
Expert:  cfortunato replied 3 years ago.

1) What is the current market value of your home? (How much could it be sold for?)

2) What is the balance on the home mortgage?

Customer: replied 3 years ago.
Hello cfortunato,

Not much. In 2008 it appraised for $75k. Last check it was around $55-60k but we owe around $55k. We've been trying to sell it with not offers.
Expert:  cfortunato replied 3 years ago.
Your home is safe, then, as your home would have to have at least $50,000 in equity for your creditors to be able to take it.
Customer: replied 3 years ago.
Im sorry, that information is for the rental property. I owe 199K on my home and its worth, according to Zillow.com, 203k. Still, there's not 50k anywhere in there. Are there any other assets they can attach?
Expert:  cfortunato replied 3 years ago.
If you work, they can garnish wages.
If you have more than $25,000 worth or personal property, in addition to a car with up to $15,000 equity, the personal property could be taken. The personal property is valued at its current value - what it could be sold for in a yard sale - not what it cost you to purchase.
Customer: replied 3 years ago.
OK, thanks. That helps my understanding. That is my concern, that they would come after my personal assets rather than taking the property. I don't have much at all, but what I do have I'd like to keep.

I'll contact the bank to see what they are willing to work out.

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