Bankruptcy Series LLC

Asked over 2 years ago - Houston, TX

Series LLCs. They are new in Texas and I use them for Real Estate and OIl/Gas wells, but for nothing else. QUESTION. I was told that there is Bankruptcy Precident that the Bankruptcy court respeceted the cells of the series if the cells otherwise kept things seperate, but I can find a case citation? Got any view on this? I am looking for a citation so I can read the case

Attorney answers (2)

  1. Brian Edward Walters

    Contributor Level 4

    2

    Lawyers agree

    Answered . Excellent question and, unfortunately, one that is currently without an answer. Your question asks if the liability shield between series will be respected by a bankruptcy court such that the assets of the non-bankrupt series will not be dragged into the estate of a bankrupt series. The inability to answer this question lies within the definitions in the bankruptcy code.

    The real issue here is whether a bankruptcy court would consider a series within the SLLC to be a "person" as that term is defined in the bankruptcy code, thus enabling that series to file for bankruptcy relief. To date, that question has not been decided in Texas. Thus, the bankruptcy courts in Texas have not had the opportunity to respect (or disregard) the liability shield between series where one is in bankruptcy.

    Your question here is somewhat concerning because this issue should have been addressed by your attorney at the time you first discussed filing as a Texas Series LLC.

    Best of luck!

    The content provided in this post is for informational purposes only and shall not be construed as legal advice.... more
  2. Gary Alan Armstrong

    Pro

    Contributor Level 16

    Answered . There is a fair amount of academic material on this topic, but I am not aware of a case that has decided this issue. And, if the Series LLC has lots of different Series with assets, I would want to consider reorganizing the bankrupt series into it's own entity before filing a bankruptcy case for it. That would seem to be the safer course of affairs.

    I am licensed only in Texas. Offering information of a general nature in response to a question is not intended to... more

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