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Roger
Roger, Lawyer
Category: Real Estate Law
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I have really bad credit. Short sales and in foreclosure and

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I have really bad credit. Short sales and in foreclosure and about $150K in judgements. I want to form an LLC with my friend to purchase a house but I don't want to be visible. Can we form an LLC with him as managing member but me as a member with equal rights and not have the IRS or creditors able to penalize the LLC?
Hi - my name is XXXXX XXXXX I'm a Real Estate litigation attorney. Thanks for your question.

Unfortunately, if you have any ownership interest in the company whatsoever, the IRS, your judgment creditors and other creditors can attach your ownership interest in the LLC and liquidate your interest to generate money to pay toward the debts that you have.

The LLC doesn't shield your personal creditors from being able to attach your ownership interest in the LLC. The only way you could do this and not be exposing the company is for you not to be named as a member, owner, etc, of the LLC. In other words, you'd have to be a silent partner AND you would need to trust your friend enough to share the profits with you even though you aren't named as an owner or member.

The only way to be a member/owner is to file bankruptcy and have all of your debts discharged through a chapter 7 case. Once you file bankruptcy, you can start up the new LLC and the creditors cannot touch it because it is started up post-petition.

Otherwise, being named as a member or an owner puts the company in danger because creditors can attach your ownership interest in the company.
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Hi

Please let me know if you have any additional questions related to this issue. Also, please positively rate our conversation so that I may receive credit for my research and response.

Thanks,

Kirk

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