Legal Question in Real Estate Law in California
What happens to an apartment that is held as a LLC where the administrative partners files BK. Can the Managing general partner be first in line to acquire ownership?
2 Answers from Attorneys
Assuming you mean "member" when you say "partner," the correct answer is perhaps, but try to understand the distinction between the members and the LLC itself. The LLC is not the members and the members aren't the LLC. The LLC will continue to own the apartment for the time being. The bankruptcy trustees will act on behalf of the bankrupt members, and it will be up to the trustee(s) to decide what will become of the assets of the bankrupt individuals, but unless the LLC itself is placed in bankruptcy, the individuals' bankruptcies will not affect the LLC's assets. An ownership interest in an LLC is an asset of the member owning it, and that ownership interest might end up in other hands due to the bankruptcy. Then, perhaps, the non-bankrupt member might be well positioned to step in and acquire the memberships of the bankrupt members from the trustee(s).