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CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10244
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I successfully sued a California LLC and got a judgement.

Customer Question

I successfully sued a California LLC and got a judgement. The LLC was noticed with the obligation by the court. The LLC manager dissolved the LLC paying all remaining funds to other creditors of the LLC. I understood that a judgement has the first priority for payment in California when an LLC is dissolved. Can you confirm (or deny) that a judgement must be paid prior to payment to other debtors and perhaps a section of the CA LLC law that deals with this question?
Submitted: 1 year ago.
Category: Business Law
Expert:  CalAttorney2 replied 1 year ago.

Hello, My name is ***** ***** I will assist you today. Please give me a few minutes to write a response and identify any additional resources for you.

Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

I am sorry to learn of this situation.

Unfortunately, civil judgments do not have any particular priority (other than their date of entry) over other unsecured debts.

If the LLC had real property and you recorded your judgment with the County Recorder's Office, your lien would be given a priority date of that recording (so prior recordings would be senior and would be paid first, then if there was still excess from the sale of that particular property, your lien would be paid).

If the debtor LLC chose to pay other creditors before you, that is their right (there is nothing wrong with paying your debts).

If the debtor LLC went through a formal dissolution (doesn't usually happen it is far too expensive), then there is a legal process that is somewhat akin to bankruptcy where all of the debtor LLC's debts that were not already paid are pooled by class and distributions are made on a "pro rata" share.

If the debtor LLC had made fraudulent transfers of its assets (so made transfers of assets to its owners (members), or to family, friends, or anyone else, for less than fair market value, you would have a cause of action against both the LLC, the individual doing the transfer, and the party receiving the funds under the "Uniform Fraudulent Transfer Act" (but again, the payment of legitimate debts is not illegal and is not a fraudulent transfer).

Customer: replied 1 year ago.
Thanks for your response.
Expert:  CalAttorney2 replied 1 year ago.

You are welcome, I do wish that I had a different answer for you on this issue. I wish you the best with this matter.

Thank you for using our forum, and please do not forget to rate my service (the series of 5 stars next to the chat window) so that I can receive credit for assisting you.

If you would like to direct future questions to me specifically, you can do so by starting your new question with "ForCustomerquot; and a moderator will notify me.

Thank you again, and again I wish you the best.