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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17080
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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Im considering filing for chapter 11. I have a small business

Resolved Question:

I'm considering filing for chapter 11.

I have a small business formed as an LLC with about 50k worth of equipment. This was all purchased by a family loan that was verbally agreed to be secured by the equipment the loan purchased.

Will the courts sell off all of the business equipment because it wasn't secured by a written loan?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  WALLSTREETESQ replied 3 years ago.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on

WALLSTREETESQ :

Unless you can show some valid and enforceable agreement, it is possible the assets can be sold of to pay creditors, however the family would also be a creditor, if they can show they lent the money, and would be able to make a claim for the assets as well,

WALLSTREETESQ :

You would need them to show that the money given was a loan, and their testimony would be needed.

Customer: replied 3 years ago.
Am I assuming correctly that if something was documented at this point even though it was prior to filing for chapter 11 that it wouldn't be enforceable?
Expert:  WALLSTREETESQ replied 3 years ago.
You can draft a secured agreement, however it should state that the terms existed at the time of the loan, for example you may want an agreement signed stating that "this agreement states the existing terms of the loan given_______, at that time the loan was given with the following terms and a security interest in certain assets."

If you have ever paid the family back you should provide that as evidence that a loan existed.
Customer: replied 3 years ago.
Would that agreement stand up in court regarding wether or not the secured assets could be sold off?
Expert:  WALLSTREETESQ replied 3 years ago.
it is possible it would depend on if you ever made payments to the family to show that a loan was given, also their testimony is needed, you can also consider dismissing the chapter 11, and refile later, after you create a secured agreement with them.
Customer: replied 3 years ago.
Nothing at all has be done to file for chapter 11 yet.

So in that case

Formalize a secure agreement with them, then if I end up filing they should be able to take back the secured items and they should be touchable by liquidation if I'm understand correctly.

Thank you for all your help!
Expert:  WALLSTREETESQ replied 3 years ago.
Yes, that may be best, XXXXX XXXXX also file a security agreement on the assets to make it enforceable.
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