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Debtor in Maryland wants to file chapter 7 for his LLC. All

Customer Question
debts owed by LLC are...
Debtor in Maryland wants to file chapter 7 for his LLC. All debts owed by LLC are solely in name of LLC, and debtor did not sign any personal guarantees. Can chapter 7 be filed for the LLC without exposing any of debtors "personal assets"(or those of his wife)? Also, is it necessary to list on the Bankruptcy Petition debtor's personal income and to file a Means Test if only the LLC files a Chapter 7?
Submitted: 7 years ago.Category: Bankruptcy Law
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12/1/2010
Bankruptcy Lawyer: Maverick, Attorney replied 7 years ago
Maverick
Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 6,426
Experience: 20 years of professional experience
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Welcome to Just Answer! My name isXXXXX very much enjoy what I do and I hope that you will benefit from this information.

 

Except in a certain few limited situations, it does not make sense for an LLC to file a chapter 7. This is because a LLC is ineligible for a chapter 7 discharge. See the Bankruptcy Code section is 727(a)(1): "The Court shall grant the debtor a discharge, unless-the debtor is not an individual."

 

But, to answer your question, yes the LLC (debtor) can file for chapter 7 without its members' (you and your wife) personal assets being exposed since the LLC is considered a separate legal entity. In the petition, you would list the LLC's assets and income, not yours.

 

 

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Customer reply replied 7 years ago

When and why does it make sense for an LLC to file chapter 7? Also, would the Chapter 7 filing stop creditors from calling the LLC debtor?

 

Thank you.

Bankruptcy Lawyer: Maverick, Attorney replied 7 years ago
Please click "Accept" for th answers to your first set of questions. I would be happy to assist you at no charge for the follow ups after that. Thank you.
Maverick
Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 6,426
Experience: 20 years of professional experience
Verified
Maverick and 87 other Bankruptcy Law Specialists are ready to help you
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Customer reply replied 7 years ago

As a follow up to your comment and answer, when and why would it make sense for the LLC to file Chapter 7? Would it stop Creditors of the LLC from calliing the Debtor about paying the LLC debts?

 

Thank you.

Bankruptcy Lawyer: Maverick, Attorney replied 7 years ago

If you are an officer and member of the LLC(debtor), then the creditors can call him about the LLC's debts. If you are just a member, then the creditors have no right to call you about the LLC's debts.

 

Situations where the LLC should file chapter 7 is if the LLC owes taxes because the government can go after the individual owners or directors of the business as a "responsible person". By liquidating the business in a chapter 7 instead of just letting creditors grab what they can, the owners can make sure that the IRS and state taxing authorities get paid first, thus reducing the personal obligation.

 

 

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