A multi-member limited liability company (MMLLC) can file for a personal bankruptcy say lawyers of Dallas based bankruptcy law firm Recovery Law Group. Moreover, you can also protect the assets of the MMLLC from bankruptcy trustee as they can use them to settle the personal debt. This can take place as assets of an MMLLC are not considered a part of the bankruptcy estate. This can be avoided by getting a charging order which assures that you receive any assets from MMLLC. Most creditors avoid a charging order as along with distributions, you get additional responsibility of income tax too.
A personal judgment creditor cannot use the personal judgment of a member’s interest in MMLLC and therefore take any assets belonging to them. With a charging order judgment, the creditor can collect distribution from MMLLC. As a result, changes have been made in the law to prevent MMLLC assets to become a part of the personal bankruptcy estate. However, there is provision for the bankruptcy trustee to collect any distribution that a member of MMLLC will get as a result of the charging order. This can have a negative effect on the bankruptcy trustee due to the income tax liability which accompanies the charging order. In case of a fraudulent transfer of assets to an MMLLC, the transaction can be undone, and the assets can be accessed directly by the trustee.
However, the situation is different when you file for personal bankruptcy while owning a single-member limited liability company (SMLLC). The assets, in this case, are not protected from becoming a part of your personal bankruptcy estate and can, therefore, be used to satisfy the debts. Though MMLLC assets cannot be made part of your personal bankruptcy estate, it does not mean that they are protected from personal bankruptcy. a bankruptcy lawyer knows how to tackle such situations adeptly. It is therefore important to consult with experienced bankruptcy lawyers at 888-297-6023.