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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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If a person, me for instance, a professional, files for bankruptcy

Resolved Question:

If a person, me for instance, a professional, files for bankruptcy in Texas and has assets held in a single member LLC, are those assets considered in his or her bankruptcy?

If those assets are held by a spouse in a single member LLC and the other spouse files for bankruptcy, are those assets considered?
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 6 years ago.
The assets of an LLC that are owned by a Bankruptcy filer are considered to be assets of the Bankruptcy filer. (If the LLC was owned by more than one person, a proportionate share of the assets would be attributed to the filer.)
Assets held in an LLC owned by a non-filing spouse are not part of the Bankruptcy estate of the filing spouse.
Customer: replied 6 years ago.

Does the latter apply to a community property state like Texas?

Expert:  cfortunato replied 6 years ago.
If the assets are

Edited by Christina Fortunato, Esq. on 8/3/2010 at 2:54 PM EST
Customer: replied 6 years ago.
Did not understand that answer.
Customer: replied 6 years ago.

My question was "Does the latter apply to a community property state like Texas?"

Your answer was "If the assets are", not sure what that means.

Expert:  cfortunato replied 6 years ago.
Sorry - my answer was cut off.
I should have been more specific. In any state, when a filer is married, and filing alone, you have to look at who really owns the property in the non-filer's name. I assumed that the "assets held by a spouse in a single member LLC" were assets of that spouse, meaning "separate property". If separate property, the Bankruptcy court cannot touch is, but if marital property, the court assumes that 1/2 belongs to each spouse. This is the same in Community Property states and non-Community Property states.
Basically separate property is property the spouse owned before the marriage, or some property (mainly gifts and inheritances) the spouse acquires during the marriage.
Customer: replied 6 years ago.
Can a professional in a community property state partition assets to his spouse for protection and even use an llc to this or is the llc necessary?
Expert:  cfortunato replied 6 years ago.
With a few exceptions, any assets your wife acquires during the marriage - whether partitioned or not, and whether held in an LLC or not - are marital assets.
Customer: replied 6 years ago.
so the only way to protect assets is to contribute them to a irrevocable trust?
Expert:  cfortunato replied 6 years ago.
That is one way, and there certainly may be other ways available for you to turn non-exempt assets into exempt assets), however, you should consult with an "Asset Protection" attorney, who would be able to help you further. You can find one by calling the Florida Bar Association at: 850-561-5600.
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