selling assets after filing but prior to discharge

[girlblue]

I might have done something stupid, but I was desperate. I filed for personal chapter 7 and included debt from my LLC. The day after I filed the bank seized money from my business account to cover a business loan that I had personally guaranteed. This wiped out my business account. I had no money to pay my employee. I sold some of the business equipment to pay business bills. Am I in trouble?

[iv65536]

Did the LLC also file BK?

[girlblue]

No, my lawyer said we would list the debts of the LLC on my bankruptcy. He said not to worry about the LLC because no one would sue when there is no way to recver anything. But when we had another conversation, he said the business creditors will probably sue the llc. I am so confused. Whenever I ask him questions he tells me to just work my new job and not to worry. But can I expect my business creditors to sue me and will I have to spend money I don't have fighting this?

[iv65536]

OK so basically the net effect of the discharge as it relates to the LLC is to discharge any personal guarantees for the LLC's debt. It's your ownership interest in the LLC that is included in your assets, not the LLC's assets.

You still should talk to your attorney about it, though, and review the documents on the business loan.

[despritfreya]

Your mistake was banking where you (and/or the LLC) owe money. Don't make that mistake again. Never bank where you owe money.

You filed bk, not the LLC. A creditor of the LLC has every right to attempt to collect from the LLC. Normally you would not care unless the LLC had any real value. In your case, the creditor was the bank where the LLC had an account. Banks have the right to sweep an account if $$ is owed. It is called a right of setoff.

You disposed of LLC assets so that you could pay the employees of the LLC. Technically, on the day you filed bk your membership in the LLC transferred to the Trustee. Since control of the LLC is based upon the membership (I will assume you were the sole member), technically you had no right to sell anything. However, your Trustee is not going to care assuming the amount owed by the LLC far exceeds the value of the combined assets of the LLC. If the LLC owes more than the liquidation value of the assets then the membership has no value. If that is the case do not worry about it.

If you still want to continue to operate the LLC you should have your attorney ask the Trustee to quickly abandon the asset (membership). That way you won't have to worry about things like, "can I sell an LLC asset".

Des.

Des.

[AngelinaCatHub]

Thanks Des, I learned a bit too. 'Hub