Announcement

Collapse
No announcement yet.

Sale of LLC interest

Collapse

Unconfigured Ad Widget

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    Sale of LLC interest

    I am thinking of filing a Non Consumer CH7 due to a failed business. The creditor has served me the Deficiency suit this week. Here is the problem. I was a member in an LLC that owns a commercial office unit in Florida. I left that office in Oct 2008 and I have not made any payments towards the Mortgage on that office that was a liability of the LLC. My partners this month decided to return my initial capital investment as they are in the process of refinancing the loan and the bank is willing to release me from the Personal guaranty I had signed.
    Q1: Will this transaction be considered fraudulent, note other members of LLC are not family members.
    Q2: Does waiting for another 12 months to file BK have any benefits for this particular situation.
    By the way , My current Debt is 312000 on a Home mortgage but the Deficiency is for 416000 that is before interest and legal fees.

    Thank you all for this forum. I'd appreciate any advice/comments/empathy that I can get

    #2
    Keep in mind, to be non-consumer, the majority of ALL your debt must be non-consumer. Consumer debt includes your home mortgage, car loans, credit cards, etc. So make sure you really are non-consumer.

    I don't see anything fraudulent about the other LLC members returning your capital investment...note, that would mean they are "buying you out" of the LLC, so you should not be a member of the LLC anymore.

    Also, it would help, from a risk assessment standpoint to know, how much money are we talking about?

    Comment


      #3
      Thanks for the quick reply. The amount they paid me back was 15000, I literally have no other debt other than the mortgage that I mentioned. So I am hoping that the Non Consumer status is a given.

      Comment


        #4
        You just need to find a way to exempt or otherwise legitimately spend that $15K.

        Comment


          #5
          Oh Yeah I definitely have plans for the money. It did come out of the blue so I was concerned about my timeline for filing . Any ideas on what kind of paperwork the Trustee will require on this transaction. I was hoping not to involve my now ex LLC partners in my CH7.

          Comment


            #6
            The other major issue I am concerned with is will the TT look at this transaction as a fraudulent transfer. Note the LLC owns an office condo in FL, I personally have not contributed to the Mortgage since Oct 2008 and I am certain that it is under water in value. My concern is will the TT see it that way or will he need proof and if so How do I go about that?

            Comment


              #7
              I believe two relevant questions you want to have answers for are: What was the fair market value of your LLC interest on the date that you sold it?, and Did that fair market value match what you actually received as consideration for the sale?

              Comment


                #8
                Yes how do I determine the FMV, especially since my personal guaranty for the Mortgage was cancelled with the sale. The way I look at it if the Partners had not bought me out , I would have included that mortgage debt in my ultimate CH7 filing ???

                Comment


                  #9
                  If they refinance will there even be a deficiency? If you are released do you owe this?

                  I am not sure I understand the situation fully. The sale of the LLC interest should not be a problem.

                  Comment


                    #10
                    The LLC's only asset is an office condo in florida. The other 3 partners have refinanced it and the Bank is removing me as a Guaronter, the partners have paid me 15,000 which was my initial investment. I will likely need to do a Non consumer Ch7 in the next few months. My concern was whether the TT will look at that transaction as a Preferential or Fraudulent transfer. I was wondering what documentation I need to gather if that ever comes up.

                    Comment


                      #11
                      Originally posted by domplo View Post
                      The LLC's only asset is an office condo in florida. The other 3 partners have refinanced it and the Bank is removing me as a Guaronter, the partners have paid me 15,000 which was my initial investment. I will likely need to do a Non consumer Ch7 in the next few months. My concern was whether the TT will look at that transaction as a Preferential or Fraudulent transfer. I was wondering what documentation I need to gather if that ever comes up.
                      The answer to your question is not as simple as yes or no. Here would be my rule of thumb: if that LLC had other creditors that are of higher priority and security than your initial $15,000 investment, and those creditors are not being paid in full than your transaction could be deemed a fraudulent transfer of cash assets to an insider (you). If the refinance is taking care of the priority creditors of the LLC and your partners are simply buying out your interest, then I see no problem here.

                      I would draft an equity purchase agreement between you and your partners, keep a bill of sale, and include the $15,000 plus the assumption of your PG as consideration for the transaction. This should be enough to show the transaction is for adequate consideration and therefore is not fraudulent
                      I am NOT an attorney. Please take any advice given as advice from a consultant with experience in bankruptcy alternatives
                      [link removed by admin]

                      Comment


                        #12
                        Thanks for the info SWConsultant. The Refi is taking care of all creditors. So I will get a Bill of Sale for the transaction . Not sure how to document the assumption of my Personal Guarantee. Would a letter from the Bank stating that they have Released my PG linked to the previous mortgage suffice?

                        Comment


                          #13
                          I'm sorry I misspoke. This would not be a "Bill of Sale" but typically the sale of ownership interest in an LLC is done through a "Sale of Interest Agreement" and then there is an "Assignment of Interest" document rather than a "Bill of Sale" which typically refers to hard assets and transfers the interest from you to your other partners.

                          As to the personal guarantee, typically the bank will issue a "satisfaction of personal guarantee" or they will return the original promissory note to you with your guarantee marked "satisfied." A letter signed by a representative of the bank would usually work too, depends what level of comfort you and your attorney are seeking, but either of these work fine.

                          Good luck, I hope this helps you.
                          I am NOT an attorney. Please take any advice given as advice from a consultant with experience in bankruptcy alternatives
                          [link removed by admin]

                          Comment

                          Unconfigured Ad Widget

                          Collapse
                          Working...
                          X