Topics in Bankruptcy: LLCs and Creditors’ Rights

Road DangerIn the business entity known as a limited liability company (LLC), the individual members of the LLC are not responsible for the company’s debts and financial obligations when money problems arise.

An LLC can have a single member or more than one member.  Depending on the circumstances, even though there is a single member, the LLC can be recognized as a separate entity, or it may not be treated as an entity separate from its individual members.  However, the extent of that protection may depend on the type of creditor seeking payment from the LLC, as well as the composition of the LLC itself.

When the company is liable.  A creditor may have a claim or receive a judgment against the LLC when the problem or nonpayment derives from the company as an entity, rather than from the actions of an employee or member of the LLC. Should that situation arise, members of the LLC are generally not liable for those claims.

When a member of the LLC is liable.  Another scenario involves obtaining a judgment against a member of the LLC rather than against the company itself.  In these cases, the member is responsible for the judgment.  The creditor may have an avenue for collection from any assets flowing from the LLC to the member.

When a member files for bankruptcy.  In Arizona, when a single member LLC files for bankruptcy, or if a single member LLC adds a member and subsequently files bankruptcy, the filing may raise certain legal issues.

Working with an experienced, knowledgeable Arizona creditor’s attorney can help tremendously when evaluating a bankruptcy filing.  If you would like more information about bankruptcy issues relating to LLCs, creditors’ rights, or if you need assistance from an attorney, contact Windtberg & Zdancewicz to schedule an initial consultation.

The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation in all collection matters.  We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases.  If you need assistance with your collection matters, please contact us at (480) 584-5660.

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