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How are Personal Assets Treated in a Corporate Bankruptcy?

How are personal assets treated in a corporate bankruptcy?

How are Personal Assets Treated in a Corporate Bankruptcy?

Assets held by a LLC (Limited Liability Corporation) are not personal assets for bankruptcy protection.

Classifications of assets have major financial impacts when filing bankruptcy.   

When filing Chapter 7 Bankruptcy,  in some instances, there is no bankruptcy protection.  Below is one example:

Residence Held by LLC – Bankruptcy – Pierce the Veil

Below is a particular example wherein a Debtor should not be shocked when he loses his residence.   An experienced board certified bankruptcy lawyer should point this out immediately.

Debtor holds several businesses that are limited liability corporations (LLC).   When the Debtor filed bankruptcy, the Debtor’s personal residence is owned by his LLC.  

As a result, the debtor’s personal residence is not the debtor’s asset,   In the Chapter 7 case, this asset has no bankruptcy protection.   The LLC owns the personal residence.   As a matter of fact, the debtor pays rent to the LLC.    

How are Personal Assets Treated in a Corporate Bankruptcy? 

Let’s see what happened to this Debtor:

  • Transfers his home between his LLC and himself many times over the past 14 years.   
  • Has several refinances. 
  • Holds residence as an LLC at the time of filing   
  • Wants to exempt his residence as being his personal asset. 
  • Has residential lease as month-to-month

Debtor does not want the Bankruptcy Court to Pierce the Corporate Veil.   He requests that his residence be considered a personal bankruptcy asset.  In this way, he could exempt the equity in his home.  

However, the Court found that the residence which the Debtor rents cannot be exempted in bankruptcy. 

No bankruptcy protection – this could happen to you.  Bankruptcy Protection | NJ Bankruptcy Law Firm

As a result, the Trustee takes the home.   The month-to-month lease is not renewed.   There is no bankruptcy protection.   The Debtor loses his personal residence.   

You cannot ask the Court to pierce your corporate veil.    You cannot move assets between personal and corporate at will.      

Hire an experienced bankruptcy lawyer who specializes in bankruptcy law.    I explain to clients both the benefits and risks before they decide to file bankruptcy.   You must be given expert bankruptcy related to personal asset treatment in corporate bankruptcy.

During my initial free bankruptcy consultation, I conduct a thorough review of the goals of my clients.    Many come to me wanting to file a Chapter 7.   I meet with them and go over their particular situations, I may recommend a Chapter 11 instead.

Don’t let piercing of your corporate veil happen.   

Call me to set up a free consultation.    I am here to protect client’s personal and business assets for their financial futures. 

Ralph A. Ferro, Jr., Esq. (201) 446-5904 Board Certified Bankruptcy Lawyer