I incurred the following sequence of events…
July 2016 – I invested money into an LLC partnership whose operations included investing in real estate.
The general Subscription Agreement allowed investors to be paid back from the return of any LLC profits. Myself and 12 other investors had their Subscription Agreements modified to say that the specific purpose of our investment was to fund the purchase of a single tract of commercial land secured by a 1st lien note. We would be paid 11% annual return on a monthly payout. We would be paid off in May 2017. Those payouts ended November 2017. We never had our capital returned. We 13 investors were never promised nor placed on the original note or deed of trust.
The commercial land was foreclosed and a new $1.2M 2nd lien note was generated. The managing member has agreed to fractionalize the 2nd lien note by placing us individually on the note in return of our capital. The LLC has no other assets or funds available. The remaining LLC investors invested about $2M and will be left with nothing.
Question: If the managing member declares bankruptcy (probably Chapter 7) within 90 days of fractionalizing the note, could the bankruptcy trustee be granted the return of the note from all 13 investors…or the funds from the note if it is paid off before the 90 day period?
Are we protected and can appeal the return of the note by qualifying under 1) ordinary course of business defense, 2) contemporaneous exchange exception, or 3) new value defense of federal bankruptcy laws?
July 2016 – I invested money into an LLC partnership whose operations included investing in real estate.
The general Subscription Agreement allowed investors to be paid back from the return of any LLC profits. Myself and 12 other investors had their Subscription Agreements modified to say that the specific purpose of our investment was to fund the purchase of a single tract of commercial land secured by a 1st lien note. We would be paid 11% annual return on a monthly payout. We would be paid off in May 2017. Those payouts ended November 2017. We never had our capital returned. We 13 investors were never promised nor placed on the original note or deed of trust.
The commercial land was foreclosed and a new $1.2M 2nd lien note was generated. The managing member has agreed to fractionalize the 2nd lien note by placing us individually on the note in return of our capital. The LLC has no other assets or funds available. The remaining LLC investors invested about $2M and will be left with nothing.
Question: If the managing member declares bankruptcy (probably Chapter 7) within 90 days of fractionalizing the note, could the bankruptcy trustee be granted the return of the note from all 13 investors…or the funds from the note if it is paid off before the 90 day period?
Are we protected and can appeal the return of the note by qualifying under 1) ordinary course of business defense, 2) contemporaneous exchange exception, or 3) new value defense of federal bankruptcy laws?