If I have a single member LLC and I file for Chapter 13 Personal Bankruptcy are the assets in my LLC protected?

Asked about 4 years ago - West Palm Beach, FL

Due to the horrific real estate market in Florida my home is now only worth 1/3 of what I paid back in 2006. I stopped making the payments and I am in active foreclosure. I want to discharge the debt after the auction by filing Chapter 13. The only income I receive is thru my single member LLC formed in Maryland license to operate in FL. Is my out of state LLC protected/exempt if I file for bankruptcy in FL? I hear that the bankruptcy courts treat the single member LLCs differently than they would have been treated if the LLCs had multiple members. Is this true in FL? Do I need additional membership for protection? Does it make a difference that the LLC is domicile in Maryland?

Attorney answers (3)

  1. Michael Edward Atwater

    Contributor Level 15
    Best Answer
    chosen by asker

    Answered . 1. Your out-of-state LLC is not protected in bankruptcy court. Bankruptcy court is federal and their jurisdiction over your assets is nationwide. 2. The treatment of your LLC is very much factually driven and you have not given sufficient facts here for a fair answer. Although true that a single member LLC is often treated differently since there is an absence of other individual interests/ownership, the purpose of your LLC, type of your LLC, statutory regulation of your LLC (state law often contains provisions for the distribution of assets of an insolvent LLC), etc. are all factors which are taken into consideration by the bankruptcy judge. It is most likely that debts of your LLC are personally guaranteed by you. It is purely reckless to consider filing a bankruptcy under these consitions without consulting an attorney and apprising him/her of all of the facts. An attorney will be able to ask you questions which are completely unique to your personal situation. The more facts that are made available, the more questions you may need to answer before making a fully informed decision to file a bankruptcy.

    Have you asked the mortgage company to forgive any deficiency in return for a waiver of rights and surrendering the property without furhter legal process? An attorney may be able to help you with this pursuant to new laws which have been enacted recently and you could possibly avoid bankruptcy entirely.

    My comments are not intended to establish an attorney-client relationship, are not confidential, and are not intended to constitute legal advice. Proper legal advice can only be given by an attorney who agrees to represent you, who reviews the facts of your specific case, who does not have a conflict of interest preventing the representation, and who is licensed as an attorney in the state where the law applies.

  2. Jeffrey Scott Goethe

    Contributor Level 13

    Answered . Because Bankruptcy courts operate under federal law, they often rule differently than a state court judge might, even when they are interpreting state law. Therefore, you really need to talk with a bankruptcy attorney who practices before the district where you reside.

    There was a recent Florida Supreme Court decision that will probably have a substantial impact on single-member LLC's. However, it's not as simple as just adding new LLC members. The bankruptcy court doesn't just look at your sitaution on the day of filing, they can often look back to transactions prior to filing.

    You can't afford not to at least see an attorney for an intial consultation. If you don't get some good advice now based upon your particular circumstances, an attorney may not be able to help you later. What you don't know now could cost more than the cost of representation by someone who knows what their doing.

    My comments are not intended to establish an attorney-client relationship, are not confidential, and are not intended to constitute legal advice. Proper legal advice can only be given by an attorney who agrees to represent you, who reviews the facts of your specific case, who does not have a conflict of interest preventing the representation, and who is licensed as an attorney in the state where the law applies.

  3. Gust G Sarris

    Contributor Level 14

    Answered . You will need an attorney. Bankruptcy law is difficult when you combine business(es). It will also depend on what chapter you file. Chapter 7 vs. 13 may have different advantages and will certainly produce different results. Professional help is your best option.

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