Question about money in our LLC's bank account?

[AllMyFault]

Okay, so I'm a little concerned about a few things. My wife and I are preparing to file for 7; we stopped paying creditors (unsecured debt only) as much as 90 days ago. I've just found about about this whole cross collateralization thing. Chase is one of the creditors we've stopped paying (3 credit card accounts) my wife and I are owners of an LLC here in CA, of course we are both signers on the bank account AT CHASE. Now, the LLC is it's own entitiy and has it's own identity but because we are signers can they, Chase, attempt to attach funds in the LLC account at some point? I know I need to speak with an attorney about this and a lot of other things but for know I'm hoping someone here can shed some light on this.

Thanks in advance!

[frogger]

The LLC is an asset of yours that will be up for grabs. The LLC has no exemptions, and any money in the LLC bank account will most likely be taken by the trustee.

Money, vehicles, computers, whatever.....

When it's in a corporation, you can not exempt.

[AllMyFault]

The LLC is an asset of yours that will be up for grabs. The LLC has no exemptions, and any money in the LLC bank account will most likely be taken by the trustee.

Money, vehicles, computers, whatever.....

When it's in a corporation, you can not exempt.

Hmmm....that seems strange. If your corp or LLC is generating 30k a month in business but it's paying out 30k a month in expenses is it an asset? What if you have partners in the LLC or corp? The business needs capital / cash flow to run and be able to continue to generate further business / income.

[frogger]

Hmmm....that seems strange. If your corp or LLC is generating 30k a month in business but it's paying out 30k a month in expenses is it an asset? What if you have partners in the LLC or corp? The business needs capital / cash flow to run and be able to continue to generate further business / income.

I can make a LLC pay out as much as it takes in too. That's rather easy.

Don't think that the trustee is going to be too concerned about you being able to generate further business & income. If it is a profitable business, then it's for sale.

Your partners may have to buy your stake of the business from the trustee.

[AllMyFault]

I can make a LLC pay out as much as it takes in too. That's rather easy.

Don't think that the trustee is going to be too concerned about you being able to generate further business & income. If it is a profitable business, then it's for sale.

Your partners may have to buy your stake of the business from the trustee.

Is this something you're sure about?
I don't mean to sound argumentative; it just seems strange to me. I get what you're saying, with regard to making a business appear unprofitable when it really may be profitable....but isn't a businesses worth determined by it's profitablity ON PAPER? Can someone, even a trustee just arbitrarily decide the worth of a business or asset?

[JustDamn]

I believe I've read here, and what an attorney told me that if a member of an LLC files bk, then that LLC is no longer a viable entity.

[AllMyFault]

I believe I've read here, and what an attorney told me that if a member of an LLC files bk, then that LLC is no longer a viable entity.

Interesting, I wonder if that's the case in CA too?

[JustDamn]

Not sure...but my fiance and I have had a 2 member LLC for a few years, and it looks like I'll be filing bk sometime next year and was told that would have to be the end of the LLC.

Definitely sounds like it's time to start meeting with attorneys...I'm guessing that question can be answered on the initial consult...mine was.

Good luck.

J

[AllMyFault]

Not sure...but my fiance and I have had a 2 member LLC for a few years, and it looks like I'll be filing bk sometime next year and was told that would have to be the end of the LLC.

Definitely sounds like it's time to start meeting with attorneys...I'm guessing that question can be answered on the initial consult...mine was.

Good luck.

J

Thanks for the info justdamn
My situation is as follows:
Wife and I have an LLC, formed in Aug 2009, yeilds about $3,500 in net profit per month. We rent a small office, have no autos, no inventory and no real office equipment or any other assets worth speaking of. I'm trying to figure out what would be worth taking by a trustee. Even with the $3,500 per month we still pass the means test. If we file and the LLC automatically disolves we lose $3,500 per month in income...seems counterproductive to the whole purpose in a Bankruptcy.

[StartingOver08]

Please read this article from the American Bankruptcy Institute regarding the treatment of members of LLC's in bankruptcy. It might help you sort through enough to ask specific questions of your attorney regarding the treatment of your LLC in your BK. My Trustee was very interested in my S Corp during my BK and usually just having a small business will get you a little extra attention by the Trustee and the UST.

http://www.abiworld.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=36081

One last point, your goal in the BK is a different goal then your Trustee has for your BK. The Trustee's goal is to maximize assets of the BK estate to pay the creditors.

Here is a link to Search the Opinions of the Supreme Court in Bankruptcy decisions if you want to look up cases to get a feel for what may happen. Use at your own risk! http://www.law.cornell.edu/supct/sea...ery=bankruptcy

[AllMyFault]

My Trustee was very interested in my S Corp during my BK and usually just having a small business will get you a little extra attention by the Trustee and the UST.

Thanks for the info, but does this mean the corp was automatically assumed or disolved?
If the court has extra interest in the LLC that's one thing but if it's "automatically" disolved or assumed....well that's another for me.

[StartingOver08]

The Trustee, of course, was entitled to all the A/R as of the filing date. Because I am a Realtor, that means every contract commission not closed as of the filing date became property of the BK Estate. Note, contracts entered after filing did not belong to the estate, but I had to close the corp anyway. The reason I had to close the corp is I had business debt (cc's) personally guaranteed by me. The Ch 7 discharges the personal responsibility for repayment, but not the corp responsibility. So the creditors can get a judgement in the corp name and sieze the assets of the corp to satisfy the corp debt. If I earned any income in the corp name and deposited the same in the corp account, then the funds could be seized to satisfy the judgment. So I stopped doing business under the corp name and closed the business to put an end to that debt as well as my personal debt. Once I removed the lic from the corp, the corp had no value to the Trustee.

Check with your attorney as to how to handle your specific situation. BK's where the filer has a small business complicates the BK situation.

[frogger]

One last point, your goal in the BK is a different goal then your Trustee has for your BK. The Trustee's goal is to maximize assets of the BK estate to pay the creditors.

Never forget this. Your goal is very different from that of the Trustee.

[AllMyFault]

The Trustee, of course, was entitled to all the A/R as of the filing date. Because I am a Realtor, that means every contract commission not closed as of the filing date became property of the BK Estate. Note, contracts entered after filing did not belong to the estate, but I had to close the corp anyway. The reason I had to close the corp is I had business debt (cc's) personally guaranteed by me. The Ch 7 discharges the personal responsibility for repayment, but not the corp responsibility. So the creditors can get a judgement in the corp name and sieze the assets of the corp to satisfy the corp debt. If I earned any income in the corp name and deposited the same in the corp account, then the funds could be seized to satisfy the judgment. So I stopped doing business under the corp name and closed the business to put an end to that debt as well as my personal debt. Once I removed the lic from the corp, the corp had no value to the Trustee.

Check with your attorney as to how to handle your specific situation. BK's where the filer has a small business complicates the BK situation.

Okay, our LLC is pretty small time and the income is very seasonal. It makes money from October through about February. So what is the time frame the trustee could 'take control' of my interest in the LLC? Because if I filed in late February and the trustee poked around at the value of the LLC; at that time they would quickly see no value in it. Keep in mind....the tangible assets wouldn't be worth collecting.

[StartingOver08]

The Trustee required 4 yrs of corp tax returns from me as well as personal returns even though I only filed Ch 7 personally.

I think that it is SOP for the Trustee to require multiple years to determine the historical income and trends of your LLC/S-corp. My S Corp did not have much in tangible assets either (computers/printers/software etc). But the Trustee did question at length the reduction in income yr over yr at the 341. I also had to provide a detailed P&L YTD.

If your business can not run without you and has nothing to sell, then the Trustee will probably leave it alone. Your seasonal income could distort your schedules especially if you file in Feb and your seasonal income is Oct to Feb. What is your attorney saying about the business income aspect?