How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask cortrightlaw Your Own Question
cortrightlaw
cortrightlaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 513
Experience:  Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.
63110502
Type Your Bankruptcy Law Question Here...
cortrightlaw is online now
A new question is answered every 9 seconds

I own a single member LLC. The LLC has a judgement against

This answer was rated:

I own a single member LLC. The LLC has a judgement against it which can't be paid but is still being negotiated with the creditors attorney in hopes of reaching a lower settlement amount. In the interim, a citation notice to discover assets has been received from the creditor. If the LLC files for bankruptcy protection prior to the "discovery of assets" hearing, what effect will that have on the court proceeding?

cortrightlaw : Give me a minute to review your question and respond.
cortrightlaw :

The court proceedings will be stopped by the automatic stay.


 

cortrightlaw :

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.


 

Customer:

Under what conditions might the creditor be successful in having the stay lifted?

cortrightlaw :

They would have to show that they are in danger of losing assets that the corporation currently has under its control.


 

cortrightlaw :

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.


 

Customer:

If the LLC has no assets, how would the creditor prove (or try to prove) otherwise?

cortrightlaw :

Just by doing discovery into the assets of the LLC

cortrightlaw :

If you have no assets though you should not be concerned about the discovery of assets that they want to conduct now?


 

Customer:

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.

cortrightlaw :

Chapter 11 is an option but a costly one, retainers range from $15,000-$50,000 as they are allot of work.

Customer:

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?

cortrightlaw :

No if there is a bankruptcy proceeding then most likely the asset discovery will never happen, unless they just do not believe you.

Customer:

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.

cortrightlaw : The best approach would be to continue to work with them towards a resolution tha works for you both and allows your LLC to keep operating.
cortrightlaw and 2 other Bankruptcy Law Specialists are ready to help you

Related Bankruptcy Law Questions