The court proceedings will be stopped by the automatic stay.
The creditor would need to then come into the bankruptcy court and file a motion for relief from stay if they want to proceed in the state court action.
Under what conditions might the creditor be successful in having the stay lifted?
They would have to show that they are in danger of losing assets that the corporation currently has under its control.
And if you are filing a chapter 7 that should mean that the corporation does not have any assets as they would all be surrendered in a chapter 7.
If the LLC has no assets, how would the creditor prove (or try to prove) otherwise?
Just by doing discovery into the assets of the LLC
If you have no assets though you should not be concerned about the discovery of assets that they want to conduct now?
What if it was a Chapter 11 filing rather than a Chapter 7? Reason being, if an investor can be secured, I would hope the LLC could continue in operation and exit bankruptcy asap.
Chapter 11 is an option but a costly one, retainers range from $15,000-$50,000 as they are allot of work.
I'm not concerned by the discovery of assets process as there are none but are you suggesting the LLC needs to complete the current citation of discovery process with or without a bankruptcy filing? Or will the court compel it to do so post-filing only if the creditor continues pursuit of asset discovery?
No if there is a bankruptcy proceeding then most likely the asset discovery will never happen, unless they just do not believe you.
I suppose once the creditor realizes they can't get anything in settlement due to a lack of LLC assets...if they're just trying to make me spend money in legal fees defending or proving this and that...they could also try and pierce the veil of the Single Member LLC? I'm not concerned about them succeeding with that either, I'm trying to think of various options that could keep trying.
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