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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2830
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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Due to unfortunate circumstances (divorce and unemployment)

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Due to unfortunate circumstances (divorce and unemployment) I need to file personal bankruptcy. My parents and I have a rental property covered by a LLC. We each are listed as organizers. We don't have a LLC operating agreement. Last year taxes I claimed a third of the LLC but I don't receive any of the proceeds from rental payments. I basically management the property free of charge. What are bankruptcy consequences? Will the rental property be liquidated. Can I file Chapter 7 or must I file Chapter 13 because of the LLC?

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

The asset belongs to the LLC, but your share of the LLC is the asset in the bankruptcy case.

Terry L. :

So, when you value the LLC you get 1/3 of the value attributed to you.

Terry L. :

The bankruptcy trustee can sell that 1/3 interest, usually to the other 2/3 owners.

Terry L. :

So, if there is significant value, and you don't want that to happen, then you should look to chapter 13.

Terry L. :

Chapter13 is designed to protect the assets you have

Terry L. :

Under chapter 7, they are liquidated for the benefit of your creditors.

Terry L. :

IS the property paid for/

Terry L. :

?

Customer:

yes the property is paid for and being rented

Customer:

If I understand, I can sell my 1/3 interest

Terry L. :

Well, you can...but...

Customer:

and file chapter 7

Terry L. :

If you sell it before filing, you must get fair value in exchange for the shares of the LLC. and then the cash is an asset, so you would have to spend that down on necessities

Terry L. :

all before filing.

Terry L. :

So, most likely not a good options.

Terry L. :

You should look to chapter 13

Terry L. :

You can pay back a percentage of debt, based on the value of your assets and your disposable monthly income.

Terry L. :

If you don't get fair market value on the sale, the court could void that, then liquidate the LLC or force your parents to purchase your share.

Customer:

I understand

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