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Roger, Attorney
Category: Business Law
Satisfied Customers: 30903
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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If Im a member of a multiple member LLC and I pledge my distributions

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If I'm a member of a multiple member LLC and I pledge my distributions from the LLC, what happens if I later file for protection? What status does the Pledge take, i.e. secured, etc?
Hi - my name is XXXXX XXXXX I'm a Business litigation attorney. Thanks for your question.

Just to make clear, when you refer to filing for protection, are you referring to filing bankruptcy?
Customer: replied 3 years ago.

Yes. While I'm not currently doing that, I want to understand how a pledge would work in that circumstance.

If you are pledging the dividends as collateral for a loan, then the creditor would be secured as to your distributions in an amount up to the value of the debt owed.

Usually, when a member of an llc files bankruptcy, he/she ceases to be a member of the llc. In other words, filing bankruptcy automatically kicks you out of the company.

If that happens, your dividends would also stop. Your interest in the company would be liquidated and paid over to the bankruptcy trustee for payment to your secured creditor. .

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