California Llc Question: Managing Partners Filed Ch 13

[Kf6vci]

Two weeks ago, my partners filed in Riverside CA for bankruptcy under Chapter 13. We had formed a LLC in November of 2004 and they dissolved it in December 2006. Here are some facts: 1.) I was the only one who contributed to the LLC by paing in money and signing over land. 2.) I also paid 100% of the cost to form the LLC. 3.) For the tax years 2005 and 2006, I received Schedule K1 tax form showing a profit share of 40% amounting to $ 81,499 but no payments were received. 4.) No tax form was received for the tax year 2007. 5.) The builder and his realtor wife built spec homes which they sold, making huge profits. but then they failed to reimburse me for the land and the water meters I had paid. this alone is a 6-digit amount.

In the BK filing, neither our LLC nor my name appear.

A judge ordered them to produce documents and this BK filing might be a trick to avoid handing over bank statements etc.

********

Please excuse my ignorance. A LLC is entirely seperate from individuals. so why should the LLC be affected when 2 of its 3 members file for Ch. 13 BK? And if the directors embezzled funds, why would they be protected if they are not even telling the BK Court about this debt?

Even when someone files for BK, they stil can submid bank statements pertaining to a LLC.

BTW, the deadline to submit all assets and liabilities lapsed apparently - I think this BK filing was a trick to try and avoid compliance with a court order to produce records ("disvocery").

Anyone with information on Chapter 13 BK laws in Federal Court?

[zaphodbeeblebrox]

I am a California attorney, but I haven't done much BK or corporate work. First, you need to get to an attorney right away. Bankruptcy filing puts an automatic stay on all filed litigation and prevents any new litigation from being filed against the debtor. In this case, the debtors are your partners. You say the LLC was dissolved by your partners (I'm not sure how this would have been done without your authorization or a separate court action). In any event, your remedy is against your individual partners and not the LLC, which sounds like it is a sham.

You and the LLC were not given notice of the BK action, because you were not listed as creditors by your former partners. You need to file an adversary proceeding in the BK actions of your former partners. Essentially, the BK court should allow you to file any claims you may have against your former partners because they engaged in fraud, which deprives them of the protection of the bankruptcy filing. In proceeding further, you need to consider whether your former partners have any assets from which you can make a recovery, if you get a judgment against them. A judgment would put you in line behind claims of attorney fees, prior secured and recorded interests (i.e., collateral for loans), and prior recorded judgments.

Here's a referral for you: bainer

[PeaceBlondie]

I am not an attorney, but was formerly heavily involved in administering audits of TEFRA tax partnerships. The law was cleverly written so that any partner who declared full bankruptcy was automatically removed from the ongoing proceedings of the partnership. I asked an attorney the reason for this and he said that, in US business law, bankruptcy is effectively suicide. It kills the person, converting his business interests into a trust to be administered by bankruptcy court. Our attorneys then had to submit a tax deficiency to the bankruptcy court as a claim against the assets. As zapadedoodah says above, you need a bankruptcy specialist.

[Kf6vci]

I am not an attorney, but was formerly heavily involved in administering audits of TEFRA tax partnerships. The law was cleverly written so that any partner who declared full bankruptcy was automatically removed from the ongoing proceedings of the partnership. I asked an attorney the reason for this and he said that, in US business law, bankruptcy is effectively suicide. It kills the person, converting his business interests into a trust to be administered by bankruptcy court. Our attorneys then had to submit a tax deficiency to the bankruptcy court as a claim against the assets. As zapadedoodah says above, you need a bankruptcy specialist.

Thank you both very much!

All I know is:

• the court gave them 15 days to file the missing 8 Schedules, the Chapter 13 Plan and the Statement of Financial Affairs
  

• No motion to grant more time to file was filed either
  

• This looks like some half-baked attempt to stop discovery
  

• Thanks again!
  Chris
  
• Get BK protection without fessing up won't work