Partnet buying me out before I go Chapter 7

[pstallone]

I have a serious issue that my attorney, stated he can make no guarantees what will happen.

My credit cards have been allowed to secure a judgement, so now are trying to clean out my home furnishings, I owe approximately 30,000 in cards and 40,000 back taxes.

I owe my brother 100,000, which I have been paying back, but we never actually recorded a lien against my business. He took a credit line on his house.


I own a house in the business name, with partner in the LLC. about 40,000 worth no liens.

Knowing I am planning Chapter 7, and I need the money, my partner wants to buy me out. The problem is my attorney feels although I owe my brother 100,000, he never filed an official lien!! So the BK will claim the debt is invalid against the business.

How can my partner buy me out legally, since the Trustee will claim I have equity in the home, about 20,000, and look to take that.

[pstallone]

No one??

[newbie2]

Pstallone, you're all over the place with your post and it is difficult to figure out what you are asking. From the gist of it I think this is what you are trying to say: You owe your brother $100,000 and it is unsecured. (No lien) You own a home 50/50 with someone else (a business partner) with about $20,000 in equity you can't protect. You want your business partner to purchase your equity and own the home fully. Your attorney tells you he can't guarantee something. (The something being you losing the $20,000?)

If I'm correct in my interpretation, what question do you have for us that you want answered?

[pstallone]

Ill try to clarify, after meeting with an attorney, the situation is thus.

I have no assets in my name, the only asset is a home I own in my business name with my partner, the business has been paying my brother, and all my personal debts. My attorney said you have already used up your equity in the company, by paying my bills with the company account.

I can verify this, so its a good argument that my equity position in the company is zero. The issue is we still own the house, the home is free and clear, which is the problem. The trustee could still fight my partner to take half the house or to force a sale, even if I can show I used up all the equity,

My attorney stated u never know what the trustee will try to do.

I was going to come off the LLC, and sign an equity agreement, giving up all my rights in the LLC, but theres still a risk the home is in jeopardy.

I wanted to go Chp 7, but I cant risk a sale being forced or the trustee going after the home?

[despritfreya]

The problem I have is your comment that you would argue your partner is entitled to a 100% equity position in the business. This problem needs clarification:

1. Who paid for the real estate that was placed in to the LLC's name? Was it 50/50; 60/40 or some other division?
2. Did the LLC also pay the expenses of the partner?
3. Does the LLC have any debt?

You cannot simply give away your interest in the LLC. You can sell your interest for "fair value" and if you are going to claim you no longer have an "equity position" you better be darn sure you can prove it. Very, very risky. Further, the argument necessarily creates a problem for your brother. If you allowed your equity position to be diluted by allowing the LLC to pay your brother (an insider) you have created a preference and, to the extent you brother received $$ over the 1 year prior to filing the Trustee is going after him for the return of that $$

Des.

[frogger]

By placing and running your life in a LLC, (and I hate to say this) you're pretty much screwed, blued and tattooed. In addition to that, the 100k that you owe your brother has no paper trail, was not recorded or perfected, so is out. The house belongs to the LLC, so that is an asset that can't be exempted.

Coming off of the LLC, signing an equity agreement, all of that is going to give the appearance of attempting to hide/conceal assets, so that won't fly either.

If you're going to file a 7, you need to find the best bk attorney around in your area that is familiar with corporate filings, and expect to pay dearly for that attorney.

You got all of the benefits of a corporation, now it appears that you're going to pay the price.

Good luck and keep us posted.

[pstallone]

The real estate was a 50\50. I dont want the home touched by the trustee, as the only equity left is my partners share.

We own the house worth 50,000, bank account about 20,000. I have drawn over 35,000 in the last 2 years from the company account. so I have drawn 50%.

The LLC has no other debt

No the LLC was only paying my expenses for the last 2 years, there were no expenses of the LLC, it was basically a dead company except for the home we own.

I can clearly document, the cash and checks I took out of the company for the last 2 years.

I have basically been living off the company account. my partner has not, I used up my equity.

[pstallone]

Im told my brother really has no claim, which is ok as he would be treated as a preferential creditor, by paying him, through the business instead of personally they cant collect payments I made to him, if I go CHP 7.

The equity agreement can be backed up by bank statements showing I have depleted my equity position in the company.

I have been essentially drawing off my equity for the last 2 years, my attorney feels its legitimate. although no one knows how the trustee will react.

My partner also wants to take in another partner to replace me to fix up the house.

[pstallone]

The problem I have is your comment that you would argue your partner is entitled to a 100% equity position in the business. This problem needs clarification:

1. Who paid for the real estate that was placed in to the LLC's name? Was it 50/50; 60/40 or some other division?
2. Did the LLC also pay the expenses of the partner?
3. Does the LLC have any debt?

You cannot simply give away your interest in the LLC. You can sell your interest for "fair value" and if you are going to claim you no longer have an "equity position" you better be darn sure you can prove it. Very, very risky. Further, the argument necessarily creates a problem for your brother. If you allowed your equity position to be diluted by allowing the LLC to pay your brother (an insider) you have created a preference and, to the extent you brother received $$ over the 1 year prior to filing the Trustee is going after him for the return of that $$

Des.

Im not looking to give away my equity, our point is that I have already used up my equity, by using the company account

[newbie2]

You absolutely positively need a good attorney. If you're not comfortable with the attorney you have consulted, get a couple of more opinions. It sounds though as if the attorney you consulted sees issues, and probably rightly so. At least the attorney is not promising anything and in fact giving you a heads up as to what could happen down the road once the trustee sees all of this. Good luck to you.

[tobee43]

correct me if i'm wrong, however if the house is both of your names, at some point the trustee will give your brother first shot at a bid on the house, if considered an asset. he will have to buy back your 50 percent at some point to retain the house if considered an asset.

the other point of your situation is it's longevitity....if this agreements been in place...i.e. 10 years or so, it may not as frown upon, although still very complex, and also the point is that the equity has been paying for the last two years, was it also paying your brothers.

froggers, correct, get yourself an excellent atty with a heavy business and finance background. hope the best for you!!

[newbie2]

correct me if i'm wrong, however if the house is both of your names, at some point the trustee will give your brother first shot at a bid on the house, if considered an asset. he will have to buy back your 50 percent at some point to retain the house if considered an asset.

The OPS brother is not his business partner. The business partner and the OP own the house in the name of their LLC. The brother is simply an unsecured creditor. (It's a bit convoluted reading it, but that's the gist :-)

[frogger]

Don't take offense at anything that has been posted here. It appears that you have it set in your mind that you have no value in the LLC, that you have no equity. All any of us are attempting to tell you is that the trustee may indeed see it very differently.

Find the best attorney that you can.

[pstallone]

The OPS brother is not his business partner. The business partner and the OP own the house in the name of their LLC. The brother is simply an unsecured creditor. (It's a bit convoluted reading it, but that's the gist :-)

Thank you, it is a confusing post I agree! You are correct.

[tobee43]

understood newbie2, however, if the house is under the LLC and the brother is listed on it, wouldn't you think there maybe an opportunity for a buy back opportunity, even as an unsecured creditor? if the brother had an interest in the house...and you're on point, it is a bit convoluted.