Withrawal from LLC ?

[holycowe]

My brother in law opened a llc 3 mos ago with 150k total (his money and some of his friends and we have all the copy checks they put together) just to buy a house shortsell. He decided to put my wife name on the llc and the bank as joint 50/50 so she can take care of the paperworks when he is not in town.
I didn't know we'll have to file bk back then (will file 13 in couple mos). Now the atty tells us my wife must get off that bank acct and llc asap and we'll go from there.

What questions the trustee might ask about that? We just wanna be prepared, the truth is the truth.

[lrprn]

If the LLC that she's currently a 50% owner of has assets that are worth going after (and that sounds like it could be the case), then your trustee is very likely to do just that. The time frame that will be required between your wife coming off as half owner and filing your 13 is definitely something to discuss with your lawyer. To be safe, you may need to wait at least a year to file. Your lawyer can tell you what to expect.

[holycowe]

Eventhough if she can prove the money wasn't from her?
I don't know if we can wait a year as creditors begin to sue us.
The lawyer said exactly what you said. Must wait at least a year basically. But he also said that just get off the LLC asap and we'll go from there.
Worst case scenerio, we can just dismiss the 13

[despritfreya]

There are numerous issues to consider here.

1. How much $$ is in the LLC account? Can that money be spent on paying LLC debt so that the account balance is much less when you file?
2. Does the LLC actually have any debt?
3. Taking your name off the LLC and/or the bank account if your name is on the account as a co-owner of the account IS a transfer of an interest in property that MUST be disclosed on question 10 of the Statement of Financial Affairs (SOFA). (I assume, however, that the bank account is in the LLC name and you are simply an authorized signer. Removing you as a signer is not, in my opinion, a “transfer” as you were not a titled owner.)
4. If it is deemed that taking your name off of the LLC and/or bank account, as a “transfer”, was done without consideration then you face a fraudulent conveyance issue which, under bk law has a TWO (not 1) year look back period. In addition a Trustee can utilize the State law which is typically a 4 year look back. Doing this on the eve of filing to me is worse than just doing as indicated below. . .

NOW, YOU ARE DOING A CHAPTER 13. . . as such, your Trustee's job DOES NOT include the liquidation of assets or the recovery of fraudulent conveyances. His job is to make sure you are paying enough into the Plan to cover the value of non-exempt assets and/or transfers that a Chapter 7 Trustee could recover. Further, you are asserting that you do not have an "economic" interest in the LLC and that you were made a member solely for the purpose of handling your brother's affairs should be become unable to do so on his own - when he is "out of town". You also state that you can trace that all of the $$ in the account came from someone other than you. This 50% interest was not a gift to you. The asset really belongs to your brother. Based upon this my suggestions are as follows. . .

1. List the 50% membership interest on Schedule B with a $0.00 value and a notation that you have "no equitable interest". Give an explanation as to why it does not belong to you.

2. List the LLC on question 18 of the SOFA indicating that you are involved in name only and for the purpose of handling your brother's affairs when he is unable to.

3. List your 50% interest on question 14 as property held by you that belongs to another.

Consistency in your Schedules is key.

Remember, you can document that the asset is not yours. Your Chapter 13 Trustee may want you to verify this and, if things get real bad, in 99% of the cases you can simply ask the Court to dismiss the case. You do not have this option if you were to file a Chapter 7. While it is a risk that a 13 Trustee would argue that a dismissal request is being done in bad faith and that the case should be converted, I have yet to see this happen.

Just some ideas.

EDIT AND IMPORTANT!!! I just had another thought. . . how is this LLC reported on your taxes? Do you share in the loss and/or profit? If so, then maybe you DO have an equitable interest in the entity. You need to look at this issue as well.

Des.

[despritfreya]

Another edit but too late to post to the above. . .

I missed that the LLC was opened only 3 months ago. This makes it easier as it relates to the argument that you have no "equitable interest". Further, what does the operating agreement state? Who really controls the entity?

Again, just food for thought.

Des.

[holycowe]

Again, as always. Thank you for your valuable opinions on this matter.
Basically, this LLC is not doing any business. They just found a good deal on a shortsell house and decided to open a LLC to purchase the house in cash and my Bro in law will live in there. The LLC will own the house. There will be no money left after they buy this house.
I swear to god, if I know we have to file bk, I would never let my wife anywhere close to this idea. Without this one, our case is just ez as anyone else