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effect of Ch. 7 filing on Partnership interest
Message
Thanks, that's what I always thought. Even where, as here, the debtors are the sole partners of the P/S, the partnership assets must be separate otherwise there is no legal reason to ever form a partnership, right? The value in the P/S is the asset of the debtors' estate.
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
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----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Monday, December 06, 2004 1:03 PM
Subject: RE: [cdcbaa] effect of Ch. 7 filing on Partnership interest
Mark:
As Steve said, the assets of all general partners are exposed in a bankruptcy of the partnership. As you have noted, the opposite is not true. In other words, in a bankruptcy of the partner, the trustee does not have direct recourse to the assets of the partnership, but is limited to the financial interests of the debtor partner.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem
500 N. Brand Blvd., #460, Glendale, CA 91203
Tel: 818-507-6000 Fax: 818-507-6800
* Personal & small business bankruptcy specialist cert. by State Bar of CA Bd of Legal Specialization.
Business bankruptcy specialist cert. by Amer. Bd. of Certification
-----Original Message-----
Sent: Friday, December 03, 2004 10:49 PM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership interest
I read 723 and I don't see that it says exactly that. It seems to talk about going after the general partner of a partnership's personal assets, not the partnership's assets. In this case, the debtors are the sole partners. Can the Trustee really go after the partnership assets, which consists primarily of deposits held for customers of the partnership, without first paying the partnership's liabilities?
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
************************************************
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----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Friday, December 03, 2004 5:40 PM
Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership interest
Hi, Mark: Just a note of caution. Not only are partnership assets at risk, BUT ALSO THE PERSONAL ASSETS OF THE GENERAL PARTNERS. See Sec. 723. Don't consider filing unless each general partner can deal with the risk.
The post was migrated from Yahoo.
Just a thought, you might want to investigate incorporating the
business moving forward, which would clearly make it a separate
legal entity and could keep operating after the Petition is filed.
To the extent the corporation has value that would be reflected in
the stock owned by the debtors, to which any available exemption
could be applied.
Mark Jessee
> I thought that general partners were also PERSONALLY liable for the
> partnership debts as well as each other's debts that were incurred
on
> behalf of the partnership. Since the partnership is not a separate
> legal entity solely responsible for its own debts, I think your
clients
> would have to list all their own personal debts and personal
assets as
> well as all partnerships assets and partnership debts in their
Chapter
> 7.
>
>
>
> In other words, they and the business are one- in the eyes of the
> Bankruptcy Court. I don't think the partnership debts take
priority over
> personal debts should any partnership assets be ever liquidated.
If your
> clients are PERSONALLY liable for ALL debts, personal and
partnership,
> then all assets-both personal and business- are all at risk in a
Chapter
> 7case unless they can be exempted.
>
>
>
> As far as the deposits held for customers, this money hasn't been
> earned (or has it been?) since services have not been rendered. So,
> wouldn't these funds be considered money simply held in trust for
> customers? I don't think they would be deemed part of the
Bankruptcy
> estate if they have not been earned as of the filing date. Of
course,
> the bigger question would be whether the Trustee would allow the
> business to continue its operation post-filing and to allow use of
the
> money for which it was intended.
>
>
>
> Sounds like a mess. Any chance of possibly doing a Chapter 13?
>
>
>
> Ray Bulaon
>
>
>
> ________________________________
>
> Sent: Friday, December 03, 2004 10:49 PM
> To: cdcbaa@yahoogroups.com
> Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership
interest
>
>
>
>
>
> I read 723 and I don't see that it says exactly that. It seems to
talk
> about going after the general partner of a partnership's personal
> assets, not the partnership's assets. In this case, the debtors
are the
> sole partners. Can the Trustee really go after the partnership
assets,
> which consists primarily of deposits held for customers of the
> partnership, without first paying the partnership's liabilities?
>
>
>
> ***********************************************
> Mark J. Markus
> Law Office of Mark J. Markus
> 11684 Ventura Blvd. PMB #403
> Studio City, CA 91604-2652
> (818)509-1173
> (818)509-1460 (fax)
> e-mail: bklawr@b...
> web: http://www.bklaw.com/
> ************************************************
> Confidentiality Note: This e-mail is intended only for the person
or
> entity to which it is addressed and may contain information that is
> privileged,
> confidential, or otherwise protected from disclosure.
Dissemination,
> distribution, or copying of this e-mail or the information herein
by
> anyone
> other than the intended recipient, or an employee or agent
responsible
> for
> delivering the message to the intended recipient, is prohibited.
If you
> have received this e-mail in error, please notify us immediately at
> (818)
> 509-1173 or e-mail us at bklawr@b... and destroy the
> original message and all copies.
>
>
>
>
>
> ----- Original Message -----
>
>
> To: cdcbaa@yahoogroups.com
>
> Sent: Friday, December 03, 2004 5:40 PM
>
> Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership
> interest
>
>
>
> Hi, Mark: Just a note of caution. Not only are partnership
> assets at risk, BUT ALSO THE PERSONAL ASSETS OF THE GENERAL
PARTNERS.
> See Sec. 723. Don't consider filing unless each general partner
can
> deal with the risk.
>
>
> Steven L. Bryson
>
> Certified Specialist
>
> Personal & Small Business
>
> Bankruptcy Law
>
> (310) 477-
4555
>
>
>
>
>
>
> Yahoo! Groups Sponsor
>
> ADVERTISEMENT
> click here
>
The post was migrated from Yahoo.
When it comes to the filing of a parntership bankruptcy or a
bankruptcy for a partner, I believe it is wise to begin with the
question of whether or not there is a partnership agreement. Under
the Uniform General Partnership Act, as adopted under the California
Commercial Code, unless in writing, the code provides for the
dissolution of the partnership upon the filing of a bankruptcy by any
one of the partners. Therefore, begin with the written partnership
agreement, if any, and go from there. See what the partnership
agreement provides. If there is no integrated partnership agreement,
but other documents settting forth the rights and liabilities of the
partners to the partnership, look at those documents. You may have a
colorable argument for a written, albeit nonintegregated, partnership
agreement.
Once you complete this initial analysis, you can move on. If their
is no partnership agreement, the Corporations Code controls, and just
like a corporation, the assets of the partnership are first exhausted
to satisfy the debts of the partnership, and to the extent
insufficient assets exist, the partners are jointly and severally
liable. Therefore, your next analysis is the assets and liabilities
of the partnership. Whether the partner guarantied the debt is only
important in light of a partnership agreement that specifically deals
with the issue, otherwise, the code controls over individual
liability of the partners.
Also, each of the other partners will have contributory liability to
the other partners to the extent of their disproportionate
contribution. Therefore, for an individual partner's bankruptcy, you
must schedule the partnership liabilities, schedule the partnership
as a creditor, and schedule the partnership as a co-debtor. You must
schedule each of the partners as creditors, and as well as schedule
them as co-debtors. In Schedule B, you must schedule claims against
each of the partners and the partnership as assets of the estate. In
doing so, you preserve the partner's rights and discharge the
partner's debts.
Greater analysis may be required with respect to whether any of the
partnership debt was incurred in a manner or means that may give rise
to claims of nondischargeability, including whether your debtor
partner may have misappropriated any partnership assets, giving rise
to a claim for determination of nondischargeability for defalcation
in a fiduciary capacity. Remember, each partner is the fiduciary of
all other partners, and to the extent the partnership was insolvent
at the time any of its liabilities were incurred, each partner had a
fiduciary duty to creditors, just as a corporate officer of an
insolvent corporation would have!
Definitely, a bankruptcy involving a partner is complex and requires
complex analysis. From a professional perspective, be sure to
document the relationships between partners, on the one hand, and the
partnership, on the other hand. Make very clear to the client who
you represent and the extent of the possible ramifications of the
filing. Suggest to the client that each of the other partners, as
well as the partnership seek their own counsel concerning the effect
of the client's filing on the partnership and each of the partners.
Best regards. Lou Esbin
> I thought that general partners were also PERSONALLY liable for the
> partnership debts as well as each other's debts that were incurred
on
> behalf of the partnership. Since the partnership is not a separate
> legal entity solely responsible for its own debts, I think your
clients
> would have to list all their own personal debts and personal assets
as
> well as all partnerships assets and partnership debts in their
Chapter
> 7.
>
>
>
> In other words, they and the business are one- in the eyes of the
> Bankruptcy Court. I don't think the partnership debts take priority
over
> personal debts should any partnership assets be ever liquidated. If
your
> clients are PERSONALLY liable for ALL debts, personal and
partnership,
> then all assets-both personal and business- are all at risk in a
Chapter
> 7case unless they can be exempted.
>
>
>
> As far as the deposits held for customers, this money hasn't been
> earned (or has it been?) since services have not been rendered. So,
> wouldn't these funds be considered money simply held in trust for
> customers? I don't think they would be deemed part of the
Bankruptcy
> estate if they have not been earned as of the filing date. Of
course,
> the bigger question would be whether the Trustee would allow the
> business to continue its operation post-filing and to allow use of
the
> money for which it was intended.
>
>
>
> Sounds like a mess. Any chance of possibly doing a Chapter 13?
>
>
>
> Ray Bulaon
>
>
>
> ________________________________
>
> Sent: Friday, December 03, 2004 10:49 PM
> To: cdcbaa@yahoogroups.com
> Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership interest
>
>
>
>
>
> I read 723 and I don't see that it says exactly that. It seems to
talk
> about going after the general partner of a partnership's personal
> assets, not the partnership's assets. In this case, the debtors
are the
> sole partners. Can the Trustee really go after the partnership
assets,
> which consists primarily of deposits held for customers of the
> partnership, without first paying the partnership's liabilities?
>
>
>
> ***********************************************
> Mark J. Markus
> Law Office of Mark J. Markus
> 11684 Ventura Blvd. PMB #403
> Studio City, CA 91604-2652
> (818)509-1173
> (818)509-1460 (fax)
> e-mail: bklawr@b...
> web: http://www.bklaw.com/
> ************************************************
> Confidentiality Note: This e-mail is intended only for the person
or
> entity to which it is addressed and may contain information that is
> privileged,
> confidential, or otherwise protected from disclosure.
Dissemination,
> distribution, or copying of this e-mail or the information herein by
> anyone
> other than the intended recipient, or an employee or agent
responsible
> for
> delivering the message to the intended recipient, is prohibited.
If you
> have received this e-mail in error, please notify us immediately at
> (818)
> 509-1173 or e-mail us at bklawr@b... and destroy the
> original message and all copies.
>
>
>
>
>
> ----- Original Message -----
>
>
> To: cdcbaa@yahoogroups.com
>
> Sent: Friday, December 03, 2004 5:40 PM
>
> Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership
> interest
>
>
>
> Hi, Mark: Just a note of caution. Not only are partnership
> assets at risk, BUT ALSO THE PERSONAL ASSETS OF THE GENERAL
PARTNERS.
> See Sec. 723. Don't consider filing unless each general partner can
> deal with the risk.
>
>
> Steven L. Bryson
>
> Certified Specialist
>
> Personal & Small Business
>
> Bankruptcy Law
>
> (310) 477-4555
>
>
>
>
>
>
> Yahoo! Groups Sponsor
>
> ADVERTISEMENT
> click here
>
The post was migrated from Yahoo.
I thought that general partners were also PERSONALLY liable for the
partnership debts as well as each other's debts that were incurred on
behalf of the partnership. Since the partnership is not a separate
legal entity solely responsible for its own debts, I think your clients
would have to list all their own personal debts and personal assets as
well as all partnerships assets and partnership debts in their Chapter
7.
In other words, they and the business are one- in the eyes of the
Bankruptcy Court. I don't think the partnership debts take priority over
personal debts should any partnership assets be ever liquidated. If your
clients are PERSONALLY liable for ALL debts, personal and partnership,
then all assets-both personal and business- are all at risk in a Chapter
7case unless they can be exempted.
As far as the deposits held for customers, this money hasn't been
earned (or has it been?) since services have not been rendered. So,
wouldn't these funds be considered money simply held in trust for
customers? I don't think they would be deemed part of the Bankruptcy
estate if they have not been earned as of the filing date. Of course,
the bigger question would be whether the Trustee would allow the
business to continue its operation post-filing and to allow use of the
money for which it was intended.
Sounds like a mess. Any chance of possibly doing a Chapter 13?
Ray Bulaon
________________________________
The post was migrated from Yahoo.
I read 723 and I don't see that it says exactly that. It seems to talk about going after the general partner of a partnership's personal assets, not the partnership's assets. In this case, the debtors are the sole partners. Can the Trustee really go after the partnership assets, which consists primarily of deposits held for customers of the partnership, without first paying the partnership's liabilities?
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
************************************************
Confidentiality Note: This e-mail is intended only for the person or
entity to which it is addressed and may contain information that is privileged,
confidential, or otherwise protected from disclosure. Dissemination,
distribution, or copying of this e-mail or the information herein by anyone
other than the intended recipient, or an employee or agent responsible for
delivering the message to the intended recipient, is prohibited. If you
have received this e-mail in error, please notify us immediately at (818)
509-1173 or e-mail us at bklawr@bklaw.com and destroy the
original message and all copies.
----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Friday, December 03, 2004 5:40 PM
Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership interest
Hi, Mark: Just a note of caution. Not only are partnership assets at risk, BUT ALSO THE PERSONAL ASSETS OF THE GENERAL PARTNERS. See Sec. 723. Don't consider filing unless each general partner can deal with the risk.
The post was migrated from Yahoo.
The H&W (debtors) are the sole partners. Thanks.
----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Friday, December 03, 2004 5:40 PM
Subject: Re: [cdcbaa] effect of Ch. 7 filing on Partnership interest
Hi, Mark: Just a note of caution. Not only are partnership assets at risk, BUT ALSO THE PERSONAL ASSETS OF THE GENERAL PARTNERS. See Sec. 723. Don't consider filing unless each general partner can deal with the risk.
The post was migrated from Yahoo.
Hi, Mark: Just a note of caution. Not only are partnership assets at risk,
BUT ALSO THE PERSONAL ASSETS OF THE GENERAL PARTNERS. See Sec. 723. Don't
consider filing unless each general partner can deal with the risk.
The post was migrated from Yahoo.
Just need to refresh my recollection on this:
H&W are partners in a partnership which is a general contracting business. As such, the partnership receives deposits from clients prior to work being done, etc. Of course, the partnership has some assets (the bank account, etc.).
When H&W file a Chapter 7 case, must the partnership assets and creditors be included, or is it sufficient to just list the value of their interest in said partnership?
Also, is it necessary for the P/S to stop doing business when the Ch. 7 is filed?
They are concerned about losing money on deposit from clients and not being able to continue their business (among other concerns).
Thanks...
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
************************************************
Confidentiality Note: This e-mail is intended only for the person or
entity to which it is addressed and may contain information that is privileged,
confidential, or otherwise protected from disclosure. Dissemination,
distribution, or copying of this e-mail or the information herein by anyone
other than the intended recipient, or an employee or agent responsible for
delivering the message to the intended recipient, is prohibited. If you
have received this e-mail in error, please notify us immediately at (818)
509-1173 or e-mail us at bklawr@bklaw.com and destroy the
original message and all copies.
Just need to refresh my recollection on
this:
H&W are partners in a partnership which is a
general contracting business. As such, the partnership receives deposits
from clients prior to work being done, etc. Of course, the partnership has
some assets (the bank account, etc.).
When H&W file a Chapter 7 case, must the
partnership assets and creditors be included, or is it sufficient to just list
the value of their interest in said partnership?
Also, is it necessary for the P/S to stop doing
business when the Ch. 7 is filed?
They are concerned about losing money on deposit
from clients and not being able to continue their business (among other
concerns).
Thanks...
***********************************************Mark J. MarkusLaw
Office of Mark J. Markus11684 Ventura Blvd. PMB #403Studio City, CA91604-2652(818)509-1173(818)509-1460 (fax)e-mail: bklawr@bklaw.comweb:
The post was migrated from Yahoo.