Legal Question in Bankruptcy in Pennsylvania

are memberships (members) now creditors in a chapter 11?


Asked on 3/07/12, 8:36 am

1 Answer from Attorneys

Michael Duffy Duffy Law, LLC

Hi there,

I assume you mean members of an LLC. In a sense, as they do have a claim to a possible distribution, but they are at the bottom of the list as to who gets paid. The company would usually reorganize its ownership under the chapter 11 powers, and grant the first shares of equity to secured creditors, then to unsecured creditors, then to stakeholders such as shareholders or members. Very often the equity of the company is exhausted after the creditors are paid off (by design of the bankruptcy plan), leaving the company in their hands and the original stakeholders with little or nothing. However, strategic use of Chapter 11 (rather than as a final option) can, at times, be used to preserve owner value instead of wipe it out. It all depends on the circumstances of the company.

If you would like to discuss your matter further over a free and confidential phone consult, please contact me at your convenience.

Regards,

Michael J. Duffy

Duffy Law, LLC

1-888-414-5773

www.mduffylaw.com

[email protected]

Please note: The information provided here is for general informational purposes only and should not be construed as legal advice or legal opinion on specific facts or circumstances. You should consult an experienced attorney concerning your particular factual situation and any specific legal questions you may have.

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Answered on 3/07/12, 9:53 am


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