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Good morning. Florida, unfortunately, is a deficiency state...which means the lender can pursue the borrower for the deficiency...the amount owed over the amount of the foreclosure sale. Whether or not they will depends upon their assessment of the collectibility of a deficiency judgment. So, if you can convince them there is nothing for them to get, and that if they were to pursue a judgment, you would simply file for bankruptcy
protection and get the judgment discharged—and even if you have no intention of doing so, it is still good leverage with the bank because they do not know whether or not you would… then it is unlikely the lender will spend the time and money necessary to get a judgment they believe is uncollectible in the end.
If they do pursue this to a judgment, they can go after your assets, which would include your interest in the LLC. But, if the LLC has no market value, it's not likely they would do so. If you wanted to make it more unlikely, you might want to consider putting your LLC interest into a family limited partnership
. Carefully drafted, this converts assets that a creditor would find attractive to go after into a limited partnership interest with no control, no rights other than that of an assignment, no transferability, no marketability, and no right to distributions. The transfer is for fair market value…i.e., you are simply exchanging one asset for another of equal value to you. And, you maintain control through a general partnership
interest that you control. Yet, when complete it essentially is an asset no one wants and thus the creditor is less likely to pursue the debtor. Family limited partnerships must be carefully drafted and one would need an attorney experience in this area to do so, but they can be a very effective method of asset protection.
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