I have several questions about a bankruptcy involving 2 LLCs with 2 members declaring

[jarrado]

Thanks for the help. The case isnt as back and forth as it looks, but I'll ask about what you said. I dont think they will ahve a problem though since there filing a non-consumer and its almost all business debt(the loan) as far as cars and such, them being personal they fall under exemption and wont be considered. LLC 1 will dissolve with the building, so no problem there.

LLC 2 will not have any debts, as the properties will be sold to pay debts. LLC 2 will also continue to stay open and pay myself and member 4 our salaries. Based on what you said, auditing may be an issue or the fact that we may need to borrow some to pay our bankruptcy fees. Basically this is my parents filling a personal non-consumer BK and they happen to be members in an LLC. I mean, they only owe like 200k on a building thats worth twice the loan amount. They haven't misappropriated any money.

If it werent for this economy we would be fine, we've been in business for more than 10 years and have used credit cards to pay bills, but we've paid them off. This is an exception, which happens to be a BK lol.

If you see a major issue please tell me exactly so I can pass it on to the lawyers. Thx.

[justbroke]

I don't think anything that you stated will stop a Trustee or the Office of the United States Trustee (OUST/UST) from hiring an attorney and forensic accountant and looking more carefully at the LLC and its organization. There's just too much there and too mujch back and forth. While you may ultimately win any move by the panel Trustee of the UST to otherwise seek to recover property or monies, I don't think there is any hiding from actually going through the motions.

Sure there are attorneys who will fight, and this is going to cost you. This will probably be one of the most expensive Chapter 7 cases I've ever read about. I think $7K is the highest so far.

[jarrado]

We already have several lawyers looking into it. Aside from the credit cards, most of them have said to file personally, switch over the vehicles into my and my brothers name, sell or keep the properties (as they cant be touched or taken, because of the way the LLC's are setup). Im just trying to bring out any other issues. As of now, as long as the credit cards are taken care of, no fraud should be present. Also the insider bit wont be an issue, or attorneys have worked around it so far.

Also, all of the cars, bikes, property were purchased with debt free money more than a year and a half ago. And all the major credit card debt came from this time frame as well. As far as in the last year or so, I dont believe we have any debt from that period. And today we closed all our credit cards. I was on here because they (parents) were waiting for a 30k transfer from a credit card so we could still eat, but this is no longer needed, so cancelling in effect nullified the pending transfer.

Ah, I forgot that all the cars/bikes are owned by my parents personally and that we will, evidently, not have to file on LLC 2. LLC 1 doesnt own anything except a large loan.

Basically, the last 3 attorneys we talked to all said about the same thing, with a few saying we needed to spend 9k (alot for us, considering the whole of debt we owe is only the building plus less than 40k-not much for a business) dollars and file on both LLCs and personal, which doesnt even make sense.

I'll edit my above post. Its a little too much to remember. lol

EDIT: we owe less than 40k on top of the building.

[justbroke]

I didn't read but 90% of that and I see all types of issues. Mostly around moving property around in an apparent attempt to shield the property from creditors. That is fraud, by definition. Now, as to the extent that the Trustee can get to the assets, remember, that a Trustee stands in the shoes of the LLC Member who is filing.

The Trustee can force the LLC to buy our the member and/or cause the LLC to liquidate in order to purchase the Member's "share". Since you're now talking about members of the various LLCs being family members, you have all sorts of other issues with "insider" preferences which are avoidable as well. I don't think you, personally, will avoid the "insider" preference either because you are all business partners and Member 1 and 2, are related, and then Members 3 and 4 are related. There are preference issues all throughout this.

If it smells like fraud, looks like fraud and quacks like fraud...

The Trustee would definitely (100%) hire an attorney and forensic accountant to rip the LLCs apart and to determine what's really going on. The worse case, is that the case is dismissed for fraud and you can never file again. The best case, the Trustee steps into the shows as the LLC Member and only forces the other members to buy the debtor-member's shares from the Trustee.

You need an attorney, not a forum. (But you knew that.) I would look to attorneys specializing in closely-held corporations, bankruptcy and asset protection. I don't see any way out except with the passage of time between these transactions (at least a year, maybe more).

[jarrado]

Hello and thanks in advance for any help you can give me. Im an avid forumer and like to write. Hopefully I dont need write here that often, LOL, but I will stick around and let everyone knows what happened. Sorry for my sentence and paragraph structure and grammer, im tired from all the moving and preparation for bankruptcy.

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First, Im grateful that there are places like this for info. I also understand that the info may not be right for my situtation, so I am ultimately relying on my attorney. I also understand that this is far too complicated lol. That said, I would like some other opinions on this.

Currently I am a managing member of LLC 2 and I am no way in debt to anyone (I guess I will refer to my self as member "3"). There is also another member like myself who is not in debt either, who I will refer to as member "4".

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So these are the LLC's in question. We are trying figure out how to come up with operational and bankruptcy costs and trying to avoid fraud or even a hint of fraud.

LLC 1 owns the building and the land it sits on. It was formed in 06. The building was built in 08 and is tied by a "personal guarantee" to members 1 and 2. It is currently for sale. The building payments are currently behind by two months, as LLC 2 is unable to pay because there is not enough cash flow. The bank has already sent out a bank hired appraiser, but we have received no notice or contact at all from the bank.

The problem is that members 1 and 2 are tied personally to LLC 1's bank loan on the building and land (there are no other ties other than the loan). They have decided to file and, since myself and member 4 are relatives of member 1 and 2 (sons to be precise), they decided to place 4 vehicles(one car, one truck, two motorcycles which we purchased with our money and we pay the insurance) in our name-valuing right at 8k. They have a van(paid off) and a motorcycle(this was payed off using a cc and they still owe on the cc) in their name.

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LLC 2 owns the contents, such as machinery, supplies and materials. it also owns two HIGH value land plots in TN (we are actively trying to sell-to settle debts and pay our salaries, if we are still working-or exempt these). Business has been stalled for nearly a year and a half, with no real increase in capital. We would most likely have filed a year ago, but we recieved and offer to become part of a nationally circulated catalog-which has produced no capital to date.

There are also two lots in LLC 2's name which are to be quick claimed to members 1 and 2, they will then be placed under the homestead exception with their home (which was appraised at 183K and has 52K equity). We're not sure if this will raise a red flag?

The only money in LLC 2's bank account is the remainder of borrowed money from two of the four members, which I will refer to as member "1" and "2", they are the main managing members with majority share holdings. They used credit cards and transferred that money to LLC 2 for operational costs.

The problem with them filing personally, is that the credit cards in their name were used, and are still being used, as operational costs for LLC 2. Im worried that this particular instance would constitute fraud of some kind, but im unsure. We discussed LLC 2 paying it back to avoid any difficulties in filing, but we are currently discussing our options with our attorney.

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Yes, unfortunately, there is more. The managing members 1 and 2 had the business borrow money to even start the bankruptcy process. We are not sure how money borrowed on credit cards will be viewed. Also, we had borrowed other money 6 - 8 months ago to try to "ride out the storm" so to speak. I had considered LLC 2 keeping the "borrowed" money from members 1 and 2. but if they file BK, then would that constitute BK fraud? Myself and member 4 have about 46% share in the business, but we are related, so i need to know if and how this effects that transfer. If the money is allowed or not allowed to stay, or if it is in our best interest to dissolve LLC 2 aswell, then should LLC 2 pay myself and member 4 our loans out of the borrowed money that is tied personally to members 1 and 2?

I just had another thought. Their cards have their (my parents, mebers 1 and 2) names on the accounts, its a personal card with a business name on it. So it would not be like a microsoft company card with a personal name on it. So that if the company goes out the person named would be liable, it would instead be the bank account holder microsoft. So if they file the company would in no way be held liable. Meaning that LLC 2 would be dept free and if its land sold would then have 60K in operation expense to try and start over, correct? Of course microsoft is just an example. lol.

Now, if they file personally, can the creditors come after LLC 2 or its members? I would assume not as it an LLC

This last question is of the most concern for me, because I owe no man. haha. Also, sorry for the reallly long post. I thought it better to get all of it on the table at the same time.

Im aware that we need to consult an attorney, we consulting serveral... I'd just like a view of those here as best they can. Thanks for input.

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