Bankruptcy Law

Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.

Ask a Lawyer,
Get an Answer ASAP!

Bankruptcy Law

If I file chapter 7 personal bankruptcy, do I loose my LLC

Customer Question
If I file chapter 7...
If I file chapter 7 personal bankruptcy, do I loose my LLC too. Can the trustee liquidate my business, its my only source of income
Submitted: 7 years ago.Category: Bankruptcy Law
Show More
Show Less
Ask Your Own Bankruptcy Law Question
Answered in 13 minutes by:
12/27/2009
Bankruptcy Lawyer: socrateaser, Attorney replied 7 years ago
socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 39,381
Experience: Attorney and Real Estate Broker -- Retired (mostly)
Verified

If your LLC is truly a separate entity, because you don't commingle your personal assets and expenses, wiith your business, then there is little likelihood that the trustee would attempt to prove that the LLC is being used to keep property from the reach of your creditors. But, if you don't keep the LLC separate, or you have recently transferred substantial assets to the LLC as a means of defeating your creditor's claims, then you could be into a fight to prove the LLC's separate existence.

 

The botXXXXX XXXXXne is that typically the trustee has no power over the LLC. But, your conduct in operating the LLC could change that situation.

 

Hope this helps.

 

Terms and Conditions: By your continuing in this conversation with me, or by your clicking “Accept”, you are expressly agreeing to all of the following: (1) our communication is for entertainment purposes only; (2) you are not consulting me in my professional capacity as an attorney; (3) you do not seek to establish an attorney-client relationship with me, nor do I with you; (4) you will not rely on anything I say and you will obtain appropriate legal counsel via a traditional/office consultation with an attorney licensed to practice in the jurisdiction where your legal issue arises (and you may not use our communication to avoid taxpayer penalties imposed by the U.S. Dept. of Treasury); (5) by communicating with me in this public forum you are irrevocably waiving any right to privacy, confidentiality and attorney-client privilege concerning the matters discussed. You further separately declare that any payment made by you is not consideration for this contract, nor offered for any services rendered by me on your behalf, but rather is made in genuine admiration and respect for my desire to help others. If you do not agree with these terms and conditions, then you must advise me immediately.

Ask Your Own Bankruptcy Law Question
Customer reply replied 7 years ago

So since I have not transferred any assets to my LLC and I have not personally gtd any debts in my LLC. My LLC is safe???

 

Thank you ,

Bankruptcy Lawyer: socrateaser, Attorney replied 7 years ago
Based on everything I know about bankruptcy law: yes.

Edited by socrateaser on 12/27/2009 at 9:33 PM EST
Ask Your Own Bankruptcy Law Question
Customer reply replied 7 years ago

So do I have to list it on the bankruptcy paperwork? Or is it considered a totally separate entity

 

You have been really helpful

 

Promise last question

Bankruptcy Lawyer: socrateaser, Attorney replied 7 years ago

I think I need to clarify some things for you first. An LLC is a separate legal entity which is controlled by its operating agreement. Generally, the bankruptcy trustee is not permitted to assume management and control of the LLC, but it is entilted to the assets, profits and distributions.

 

This leaves you with some decisions to make, because if your LLC has a lot of valuable property, then should you ever decide to liquidate, the bankruptcy trustee will have the right to take those assets and distribute them to the creditors. Also, if you are paying yourself as an employee, then you are entitled to your wages. But, if you are taking distributions, based upon your ownership, rather than based on your personal efforts, then the trustee can demand the proceeds.

 

In short, you may be better off creating a new entity and starting from scratch, than to continue operating your existing LLC -- or, at a minimum, treating yourself as an employee and paying yourself a salary.

 

In answer to your direct question, you must list your ownership interest and its value, because that is an asset.

Ask Your Own Bankruptcy Law Question
Customer reply replied 7 years ago

sorry now I am confused

 

I own two tanning salons, which right now are not making a profit, they are in my LLC. The only assets of the salon are the computers, and the tanning beds. There is no real estate assets, and min money in the bank account. I am making enough to make payroll and pay the utilites because it is off season. We purchased these on an owner finance agreement so no cash was exchanged. I am making payments under the LLC to the prior owner.

 

So am I at risk of having the trustee take the tanning beds out of my salon and sell them to pay off creditors? that would virtually close down the business.

 

I am not getting a pay check, but I am also not taking any money at this time. In January I am planning to start to take a pay check bi weekly like the rest of the staff.

 

What do you recommend??? I cant loose my salons, or I will loose my only source of income

Bankruptcy Lawyer: socrateaser, Attorney replied 7 years ago

You may want to consider ensuring that your operating agreement separates ownership/economic interests from management powers. Then, as long as you don't authorize the distribution of any assets, the trustee cannot take them. And, the trustee cannot take your salary, if you are paying yourself wages.

 

Moreover, if your LLC is losing money, then that is not good for the trustee, so the trustee may "reject" rather than assume the operating agreement. If so, then you get the business, and that ends the issue permanently. Only if the trustee decides to assume the operating agreement, does the trustee retain the rights to the assets.

 

You may want to discuss this with local bankruptcy counsel. For a referral, see: http://www.abanet.org/legalservices/lris/directory/main.cfm?id=VA and www.martindale.com.

Ask Your Own Bankruptcy Law Question
Ask socrateaser Your Own Question
socrateaser
socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 39,381
39,381 Satisfied Customers
Experience: Attorney and Real Estate Broker -- Retired (mostly)

socrateaser is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Terry L.

Terry L.

Attorney

2,672 satisfied customers

Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.

cortrightlaw

cortrightlaw

Attorney

511 satisfied customers

Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

JoeLawyer

JoeLawyer

Attorney

376 satisfied customers

Attorney in the practice of Bankruptcy Law since 1996

A.J.

A.J.

Attorney

262 satisfied customers

Experienced consumer bankruptcy attorney.

Fritz

Fritz

Attorney

209 satisfied customers

Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases

Law Girl

Law Girl

Attorney

153 satisfied customers

I am an attorney.

Paul K, Esq.

Paul K, Esq.

Attorney

141 satisfied customers

10 years Exp., Great customer service, Prompt responses.

< Previous | Next >

Related Bankruptcy Law Questions
CAN A CHAPTER 7 BANKRUPTCY DISCHARGED ON 12/09 BE OVER
CAN A CHAPTER 7 BANKRUPTCY DISCHARGED ON 12/09 BE OVER TURNED BY A $15,000.00 BREACH OF CONTRACT THAT ACCURED ON 3/08 THROUGH A CIVIL SUIT?… read more
FiveStarLaw
FiveStarLaw
Attorney
Doctoral Degree
477 satisfied customers
I have filed a chapter 7 back in June of this year.. today I
I have filed a chapter 7 back in June of this year.. today I got into an accident to which the other party was at fault.. i has to go to the hospital... if I am … read more
Roger
Roger
Litigation Attorney
Doctoral Degree
26,811 satisfied customers
I have a lawyer who filed a chapter 7 for us and now wants
I have a lawyer who filed a chapter 7 for us and now wants us to ask for the 7 to be dismissed or converted to a 13. He's a nice guy but i have a bad feeling that he has made some mistakes. I need hel… read more
socrateaser
socrateaser
Attorney
39,381 satisfied customers
I filed for bankruptcy and qualified for Chapter 7. In the
I filed for bankruptcy and qualified for Chapter 7. In the process the Trustee found a date left off on my Deed of Trust. He filed for an Adversary Proceeding and I received a letter today stating he … read more
KUMI95
KUMI95
Attorney
Doctoral Degree
17 satisfied customers
I am considering filing a chapter 7 personal bankruptcy. I
I am considering filing a chapter 7 personal bankruptcy. I know some years ago there were some changes in the bankruptcy laws. What I need to know, first of all, is how much money can be retained in a… read more
LegalGems
LegalGems
Juris Doctorate
10,212 satisfied customers
I filed chapter 7 bankruptcy in December 2009, and left off
I filed chapter 7 bankruptcy in December 2009, and left off a creditor who is now seeking garnish wages. The creditor was left off. It's a friend that file through the sheriff dept in California. Am I… read more
FiveStarLaw
FiveStarLaw
Attorney
Doctoral Degree
477 satisfied customers
Have to file a chapter 7 bankruptcy, What about parrots as
Have to file a chapter 7 bankruptcy, What about parrots as pets...no breeding...no breeding involuled. Also have 4 vehicles Chev p/u 2009, Chev p/u 89, Ford p/up 85, Dodge 74 sedan. Need three vehicle… read more
FiveStarLaw
FiveStarLaw
Attorney
Doctoral Degree
477 satisfied customers
Chapter 7 Bankruptcy in Utah. Now that I have filed for
Chapter 7 Bankruptcy in Utah. Now that I have filed for Chapter 7 bankruptcy what happens to my house? I am upside down in my house and have vacated the property. Does my house still go into foreclosu… read more
Roger
Roger
Litigation Attorney
Doctoral Degree
26,811 satisfied customers
Interested in information concerning personal chapter 7
interested in information concerning personal chapter 7 bankruptcy as a member of a 50/50 LLC … read more
DrakeLAW
DrakeLAW
Juris Doctorate
843 satisfied customers
This is a bankruptcy question. Filed Chapter 7, made
This is a bankruptcy question. Filed Chapter 7, made payments to trustee, finished payments, scheduled this month for the discharge hearing. Problem: one creditor has a lien on our home. What if anyth… read more
FiveStarLaw
FiveStarLaw
Attorney
Doctoral Degree
477 satisfied customers
Regarding my chapter 7 ProSe on the Reaffirmation $2000
Regarding my chapter 7 ProSe on the Reaffirmation $2000 behind on payments, $6000 equity in car Obviously, we don't want to be Repo'd with all that equity.My husband went to the reaff hearing today an… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,672 satisfied customers
We filed chapter 7 bankruptcy in California with the intent
We filed chapter 7 bankruptcy in California with the intent on reaffirming the car.We are 90 days out with a report of no distribution and "awaiting discharge" on Pacer.We have $6000 equity in the car… read more
DrakeLAW
DrakeLAW
Juris Doctorate
843 satisfied customers
BANKRUPTCY: Debtor is filing Chapter 7 bankruptcy; and
BANKRUPTCY: Debtor is filing Chapter 7 bankruptcy; and elected to surrender their vehicle. Can the Creditor repossess the vehicle while the bankruptcy case is still open? Debtor has not received a dis… read more
LegalGems
LegalGems
Juris Doctorate
10,212 satisfied customers
BANKRUPTCY: A debtor wants to file a personal Chapter 7
BANKRUPTCY: A debtor wants to file a personal Chapter 7 bankruptcy and owns a small business. They are filing mostly consumer debts. Can the Debtor continue to run their small business and generate in… read more
LegalGems
LegalGems
Juris Doctorate
10,212 satisfied customers
This is a Chapter 7 question. The Debtor was unemployed for
This is a Chapter 7 question. The Debtor was unemployed for 4 of the last 6 months, having worked the last 2 months. Her currently monthly income amount is above the local median, but averaged over th… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,672 satisfied customers
My parents filed chapter 7 bankruptcy. They received a
My parents filed chapter 7 bankruptcy. They received a letter back from the attorney they hired and the letter stated, "they are over the limit on the allowable exemptions for a chapter 7".What does t… read more
Ray
Ray
Lawyer
Doctoral Degree
30,259 satisfied customers
I filed personal bankruptcy chapter 7 in 2011 and chapter 13
I filed personal bankruptcy chapter 7 in 2011 and chapter 13 in 2012. I receive a discharge for chapter 7 in 2012 and paid off my chapter 13 obligation in 2016. I did not not receive a discharge in th… read more
DrakeLAW
DrakeLAW
Juris Doctorate
843 satisfied customers
Personal Bankruptcy Chapter 7 in Florida, owner of a
Personal Bankruptcy Chapter 7 in Florida, owner of a one-person S-Corp services business. In filing Ch 7 (Personal) BK I understand I will relinquish all non-exempt personal assets. Question is on S-C… read more
DrakeLAW
DrakeLAW
Juris Doctorate
843 satisfied customers

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).

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).

Show MoreShow Less

Ask Your Question

x