By working with creditors so that the value of the company assets are paid over time instead of the judgment amount, does that mean that the current asset value ( say $10,000 at time of filing) would be all that creditors would be entitled to or would they also be entitled to future earning of the company so that the bankruptcy would only serve to buy time to pay the full amount ?
Both, with whichever of the two providing a greater dividend to the creditors being required (usually). So, if the companies' assets are worth $10,000 but the company could only afford to pay $5,000 over the life of a Plan, then the court may compel liquidation of the company so the creditors can enjoy $10,000 instead of only $5,000 by allowing the company to continue to operate. But, if the company has $10,000 worth of assets but can afford to repay $20,000 over the Plan life, the court will often let the company stay in business and pay the $20,000 to the creditors. This is called the Best Interest of Creditors Test, meaning whatever is in the best interest of the creditors can be compelled on the debtor.If that is the case, assuming the same 50K judgment and 10K assets, would chapter 7 seem more appropriate. Assuming everything is liquidated at auction, could personal assets be used to purchase back items that would be essential in starting fresh ??
Chapter 7 may well be more appropriate. In Chapter 7 the company is normally liquidated, then anyone can come in and buy the assets from the Trustee
. If that "anyone" is you, you could buy the assets for $10,000, dissolve the bankrupt company, and start a new one with the assets you bought back. But, keep in mind the bankruptcy trustee wants top dollar for the assets, so if someone else offers $15,000, you may have a bidding war to get back the company assets.The LLC has limited assets, but I have some amount of personal assets, how well would the llc protect my personal assets in the case of bankruptcy.
I am assuming that the judgment against the LLC is exclusively against the LLC and does not also list you as a defendant. If you were a guarantor and also listed as a defendant, then your personal assets are already in the mix. Even if you were not personally liable for the judgment, plaintiffs can attempt to "pierce the corporate
veil" to go after the human owners' assets, but this is not easy to do. To pierce the veil, the plaintiff has to show that corporate (incl. LLC's) formality was ignored, corporation and personal assets and liabilities were commingled, etc.
Obviously these are complex issues and the result could be completely different based on one simple fact. I strongly suggest you consult with an attorney who can review your case in detail and review documents, etc, to get some advice how to proceed.
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