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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 12396
Experience:  JD, MBA
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The company is in ArizonaIf I am the original owner of an

Customer Question

The company is in Arizona
If I am the original owner of an LLC and I added a member to the LLC.
Then the company wasn't making enough money and I removed the other member from the LLC and everything they were attached to. This member is filing for Chapter 7 bankruptcy now for their personal finances.
Is the company's assets in any danger?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 2 years ago.
Hello and thank you for the opportunity to assist you. My name is ***** ***** I will do my very best to answer your legal questions. What are the circumstances of you removing the member from the LLC? Did you buy the member out?
Customer: replied 2 years ago.
There was not enough work being generated over the last few months. It was a mutual separation since I am the original owner.
Expert:  TJ, Esq. replied 2 years ago.
Hi again.
Most likely your LLC is safe. However, it's not guaranteed. The bankruptcy debtor was a member, and apparently gave up his ownership interest in the LLC for nothing in return. Accordingly, it's possible that the bankruptcy trustee could argue that giving up the LLC for nothing was considered a fraudulent transfer (i.e., a transfer of an asset right before filing for bankruptcy in an effort to avoid the asset from being used to repay creditors). The main issue is whether the LLC has any value, and whether there was some sort of agreement before the LLC membership was given which stated that his interest in the LLC was limited. Ultimately, if the bankruptcy trustee tries to make an argument that the LLC should be used to repay some of the debtot's creditors, then you'll need to retain a local bankruptcy attorney to argue otherwise. But you're not there yet. As I mentioned first, most likely you're okay. But you'll have to wait to see how this unfolds.
Does that answer your question? Please let me know if you need clarification, as I am happy to continue helping you until you are satisfied.