Question Business Chapter 11 and personal debt?

[CaliCreditor]

Two individuals are the members of a LLC which operates a business. The individuals take out loans for the business, but the loans are in their individual names (the LLC is not mentioned anywhere in the notes or deeds of trust) and are secured by deeds of trust on their homes rather than the business property. Payments on the loans are made by personal check. The individuals stop making payments and the LLC files for Chapter 11 bankruptcy.

Does the Chapter 11 filing by the LLC have any impact on efforts to collect on the loans from the individuals? Are the loans covered by the automatic stay because they were made for the benefit of the business?

[StartingOver08]

The short answer is: NO, there is no protection by the CH 11 of the LLC.

The loans are in the individuals' names, secured by the individuals' homes and paid by the individuals' personal checks. The LLC in fact, is an asset of each of the individuals' in the percentage originally determined in the LLC (50% etc). In order for the individuals to be protected from the debt of the LLC - each of the individuals would have to file BK on the LLC debt PERSONALLY (to discharge the debt personally) and close the LLC.