QUESTION
Do secured lenders have the ability to pursue individual LLC members in a Chapter 11?
Asked on Feb 09th, 2012 on Bankruptcy - Florida
More details to this question:
An LLC filed for Chapter 11 bankruptcy. The business confirmed a plan of liquidation and had a number of secured lenders. The 2 members of the LLC personally guaranteed the loans. The deficiency claims for the secured lenders are in a class with the other GUC's. A liquidating trust is formed for this class. By definition, the creditors of the GUC class are treated as being paid in full for their claim for the amount distributed/contributed to the LT. Do secured lenders still have ability to pursue individual LLC members, even though their deficiency claim was treated as being paid in full on their creation of the liquidating trust?
1 ANSWER
The purpose of the lender obtaining a personal guaranty from an individual is to protect the lender from not being paid in full from the primary obligor. As in this case, the LLC cannot satisfy the lender's claim so it can pursue the individual guarantors.
Answered on Feb 09th, 2012 at 12:15 PM