Have Legal Questions? Ask a Lawyer Now.
If you transfer assets from the old to the new LLC, the bank will be able to follow those transferred assets into the new LLC. Only if you paid fair value from the new LLC to the old LLC for the assets transferred can you avoid this result.
This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.
Lets suppose you have a piece of equipment worth $10,000. If you transfer it to the new company without paying the old company anything the bank will be able to pursue the new company for the piece of equipment. However, if the new company pays the old company $10,000 for the piece of equipment, the bank cannot pursue the new company because the old company was paid the fair value of the asset.
The bank can follow the assets where ever they are or are transferred. The bank sued you without going to foreclosure if you personally guaranteed the loan. Whether the bank will agree to the foreclosure first rather than pursuing you personally is a matter of negotiation. You cannot force them to do so unless you guarantee requires them to pursue the assets first before you on your guarantee.
Let's recap. The bank sues the LLC for money owed. If the LLC tries to avoid paying the bank by transferring its assets to another LLC for no money that is called a fraudulent conveyance. If there is a fraudulent conveyance the creditor can recover the assets from the LLC to which they were transferred as well as all its costs including attorneys fees for having to find the transferred assets. You as the owner who did the fraudulent conveyance would be personally liable for the costs to the bank arising from the fraudulent conveyance.
If you guaranteed the bank debt under what is called a guaranty of payment, the bank could sue you at the same time as the LLC or even without suing the LLC. Only if you have a guarantee of collection is the bank first required to try to collect from the LLC. If the guaranty says you guarantee payment, then it is a guarantee of payment.
If this answer is responsive to your question, please accept it. That is how we are compensated. It would also be appreciated if you provided feed back on your view of the answer. Finally, if the answer was especially helpful you can provide a bonus. If I can be of further assistance or you have other questions in the future you can ask for me and reach me at this site.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).