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I am part of a limited partnership where each partner is stated

as having certain % of...
I am part of a limited partnership where each partner is stated as having certain % of liabilities. We started the llc aproximately 2.5 years ago.We bought some raw commercial land at the time with intention to flip. Bank now wants more collateral for a couple reasons and we are close to no longer keep paying on the note and looking to auction.This is in Tenn. and we need to sell asap,but want to know if there is anything we can do to protect ourselves since we may take a substaintial loss;such as put houses and or bank and brokerage accounts in spouses or childrens names to protect against creditors ?
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Answered in 11 minutes by:
3/9/2009
Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36,715
Experience: Bankruptcy Lawyer. Experienced.
Verified

Hello,

Thank you for your question. I am happy to assist you.


The transfers may not be helpful. TheTrustee in bankruptcy has the power to set aside certain transfers made prior to filing bankrupcy called "fraudulent conveyances".


A transfer of the debtor’s assets to a third party, with the intent to prevent creditors from reaching the assets to satisfy their claims, is called a “fraudulent conveyance”.

Bankruptcy Code §548 provides for the avoidance of fraudulent transfers within two years before the bankruptcy filing date. Transfers to self settled trusts and similar devices are subject to a longer avoidance reach back (10 years).

Bankruptcy Code §548 is attached in full to the end of this post.


Thank you,
FLAandNYLAWYER



Section 548. Fraudulent transfers and obligations
(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(B)
(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)
(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which—
(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or
(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.
(b) The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, to a general partner in the debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.
(c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.
(d)
(1) For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.
(2) In this section—
(A) “value” means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor;
(B) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency that receives a margin payment, as defined in section 101, 741, or 761 of this title, or settlement payment, as defined in section 101 or 741 of this title, takes for value to the extent of such payment;
(C) a repo participant or financial participant that receives a margin payment, as defined in section 741 or 761 of this title, or settlement payment, as defined in section 741 of this title, in connection with a repurchase agreement, takes for value to the extent of such payment;
(D) a swap participant or financial participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer; and
(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.
(3) In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution—
(A) is made by a natural person; and
(B) consists of—
(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or
(ii) cash.
(4) In this section, the term “qualified religious or charitable entity or organization” means—
(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or
(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.
(e)
(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.
(2) For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement, civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by—
(A) any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c (a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securities laws; or
(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o (d)) or under section 6 of the Securities Act of 1933 (15 U.S.C. 77f).
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Customer reply replied 8 years ago
my mother is the only one to have signed a personal financial note with regards XXXXX XXXXX bank loan so the bank will go after her first for whatever the difference is between what the original loan was for and what the land is sold for.In trying to figure if it gets down to the rest of us (family) in the partnership,was wanting to know if the bank can take her house,assuming she does not have enough assets outside her home to cover any losses.Worst case is they come after the rest of us but can they come after our homes as well ? Finally, someone brought up the idea of our mother selling her house in Tenn. and in turn buy a house in Florida since their is a homesteading law that would protect the home and in turn do a reverse mortgage so as to have some monies to live off of. Is this possible and if so does this all need to be done before the land sells,which is when we will know what exactly our losses would be ? Thanks
Hello,

In order to file a bankruptcy taking advantage of Florida's homestead protection, your mother would need to live in her FL house for two years prior to filing bankruptcy.

The house can be attached in Tennessee.

Thank you,
FLAandNYLAWYER


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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36,715
Experience: Bankruptcy Lawyer. Experienced.
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Customer reply replied 8 years ago
I am assuming the bank can and/or will go after her home if the rest of her assets do not cover the loss since we cannot wait 2 years ?
Hello,

That is correct.
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Customer reply replied 8 years ago
one last thing.At what point can or should you file bankruptcy here. Is it correct to assume our mother cannot file bankruptcy until the bank has exhausted all her assets (stocks,cars,houses,etc) to pay off the loan since she sign a persoanl guarantee for the bank loan ?
Hello,

Your mother can consider filing bankruptcy at any time. There are different types of bankruptcy available for an individual that could yield different results. She may want to sit down with a local bankruptcy attorney and confidentially discuss her options.
Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36,715
Experience: Bankruptcy Lawyer. Experienced.
Verified
Ellen and 87 other Bankruptcy Law Specialists are ready to help you
Ask your own question now
Customer reply replied 8 years ago

I was told by our accountant that we need to have our mother to avoid bankruptcy since she has many promisorry notes to each of the partners and others .These were meant to be gifts but since they were beyond the 12 grand per year her accountant had us sign promisorry notes;we were all told that we would never have to pay them back as they were only done for tax reasons. She has forgiven all she legally can and according to the accountant ,if this land deal turns out as sour as it seems it will and she files bankruptcy then those promisorry notes will have to be paid back.Unfortunately our spouses signed the promisorry notes as well. I am the only one in the group who has the means to pay most of my promisorry notes back as everyone has lost these monies.Is there anything I can do to protect myself assuming the land deal collapses and as far as overal,our mother does not want to burden us and does not want the promisorry notes repaid.She is 80 years old. With all this in mind should she do all in her power to avoid bankruptcy ?

Hello,

That question is far too complex for this forum. Consider meeting with local bankruptcy counsel.
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Ellen
Ellen
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