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cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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I hope this makes sense... :) A person by the name of BRUCE

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I hope this makes sense... :)

A person by the name of BRUCE is filing a personal chapter 11 bankruptcy reorganization in Washington State. As part of that reorganization, he is including a Limited Liability Company called the 1234 LLC. The 1234 LLC was for a failed development project. This LLC had three other members who were seperately able to reach a settlement agreement with the bank and were not forced to file BK. In the LLC Operating Agreement a clause exists that stated something to the effect that "each member has an equitable contribution to each other" or something like that. It basically says (according to an attorney we meet with) that each member is liable to the other based on thier ownership percentage in the LLC for any payment made.

Here is the question. The other three members, Bob, Rob, and Jim paid a total of $1,000,000 to the bank in the settlement. Thier attorney says that they can sue Bruce for his percent of that (about $500,000). To do this they would need to sue based on the section of the LLC Agreement that provides such language. However, Bruce has named the 1234 LLC in his Chapter 11 Bankruptcy. Even though he is unaware of the other members ability to sue, he has included the 1234 LLC in BK Ch. 11. Can the three member sue him OR because he filed Ch. 11 naming LLC is he protected?

THanks for your help.


cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy attorney here to assist you.

cfortunato :

The other members cannot sue Bruce because of the automatic stay that went into effect as soon as Bruce filed his Bankruptcy.

cfortunato :

This is so, even if Bruce did not know the other members could sue him.


Interesting. So at no point in time, now or in the future, can any of the other members sue him. He is protected since he filed BK, even though it was not a 7? Thanks for you help assistance.

cfortunato :

Yes - the automatic stay is equally applicable to each type of Bankruptcy. It does not matter which type was filed. However, if Bruce's Bankruptcy case is dismissed (for any reason), and is not discharged, then the members would be able to sue Bruce - as if he never filed a Bankruptcy.


You are great. THanks

cfortunato :

You're welcome!

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