Can a member put the LLC into bankruptcy to pay a self-serving debt?

This is a discussion on Can a member put the LLC into bankruptcy to pay a self-serving debt? within the Bankruptcy Law Questions forums, part of the Legal Questions & Answers Forum category; My LLC co-member is threatening to take the LLC to bankruptcy if I do not consent to handing over all my intellectual property contributions and sign away my rights. Right ...

Results 1 to 2 of 2
  1. #1
    CTK
    CTK is offline
    Junior Member
    Points: 27, Level: 1
    Level completed: 54%, Points required for next Level: 23
    Overall activity: 47.0%

    Can a member put the LLC into bankruptcy to pay a self-serving debt?

    My LLC co-member is threatening to take the LLC to bankruptcy if I do not consent to handing over all my intellectual property contributions and sign away my rights.

    Right now, my partner is refusing to provide me with expense and creditor information to support this threat but it is my strong suspicion that the only creditor the LLC could have right now is her own husband. Lately, her husband (a non-member) has gotten in on the strong-arming by threatening to take things to bankruptcy and thus sell off my intellectual property - presumably to him.

    Their assertions over the past couple days have been that I should give them full rights to all the products and intellectual property I brought to the company in order for them to "enjoy the possibility of recovering debts." In exchange, I would be given back the right to use my intellectual property in non-competing markets. So the ability of the company to move forward has been clearly stated and they seem to be relying on my fear of the sale of my products and intellectual property in bankruptcy to prompt my agreement to their "offer." I have offered in the past to attempt to repay my partner's expenses out-of-pocket in exchange for going our separate ways but this has been summarily dismissed, only to be replaced by a sob story about how they "have to" incur tens of thousands of dollars in costs to attempt to recoup these expenses in a considerably more risky way so their true intent to take my products and company for themselves is rather clear.

    That said, I guess my question is whether my partner could unilaterally pursue bankruptcy instead of the other existing options, for the thinly-veiled purpose of selling all assets to her own husband as repayment of a minimal token "debt."


  2. #2
    Senior Member
    Points: 557, Level: 11
    Level completed: 14%, Points required for next Level: 43
    Overall activity: 98.0%
    Achievements:
    Overdrive31 days registered500 Experience Points
    Awards:
    Frequent Poster

    Woooo! Slow down and let's take this one step at a time. If you have an LLC, you do NOT have a PARTNER. When you filed for an LLC, you had to list the officers with the State in which you filed. OK so far?

    An LLC means "LIMITED LIABILITY" but is a corporation as opposed to a partnership or sole proprietorship. ON the other hand one person may form an LLC and file with the IRS as a sole proprietorship. This is the advantage of an LLC as opposed to let's say a Sub S corporation.

    An LLC like any corporation involves regular meetings, who is responsible for what and generally ties down the each member's responsibility. In winding down an LLC, outside creditors must be paid first i.e. your partner's husband although I could bring up a great argument but that is not for this discussion. OK so far?

    Next, it is important for your attorney to discuss the Chapter of Bankruptcy you may file OR if it is necessary to file at all. If, you file under LLC and your name is on the filing, this will effect your personal credit tremendously. If you file as an LLC and your "partner" is also named AND your original State registration was listed as a corporation, your personal credit is NOT effected. I should mention that for instance a Chapter 7 is total liquidation. That is the LLC sells all assets, pays all debts then divides the remainder less personal loans to the corp. and so on. Gets too complicated for my to explain in a few sentences but think you get the idea.

    Next thing to think about. Filing a Chapter 11 falls under a RESTRUCTURING program which con be extremely complicated and can drag on for years - not a good thing.

    My Opinion? I think you can settle this stuff in small claims court unless you are a big entity.

    For lawyers and non lawyers: Bankruptcy court is a Federal court of EQUITY. Equity means that it has independent power to over rule even Federal Courts.

    I was on the line tonight with the 5 best insurance lawyers in the business (Insurance forum). The Ninth Circuit just ruled that Bankruptcy Court may over ride mandatory Arbitration.


 

Similar Threads

  1. Does an LLC member violate specific duties by...
    By CTK in forum Business and Financial Law Questions
    Replies: 1
    Last Post: 02-01-2012, 05:34 PM
  2. Can my LLC partner-member exclude me from vital information? No Op Agmt in place.
    By CTK in forum Business and Financial Law Questions
    Replies: 1
    Last Post: 02-01-2012, 02:55 PM
  3. Video: Reorganizing your debt under chapter 13 bankruptcy
    By Legal Help in forum Video Comments Forum
    Replies: 0
    Last Post: 08-14-2011, 10:30 PM
  4. Video: Debt Management Tips : How to File Bankruptcy
    By Legal Help in forum Video Comments Forum
    Replies: 0
    Last Post: 08-14-2011, 10:08 PM
  5. Video: Collection of Bankruptcy Discharged Debt
    By Legal Help in forum Video Comments Forum
    Replies: 0
    Last Post: 08-13-2011, 05:29 PM