The bankruptcy trustee can’t take the assets of the LLC. He may be able to take the client’s interest in the LLC, if it has net value that can’t be exempted. The T can’t just take the assets of a separate entity…just the debtor’s interest in the LLC. Ownership in and LLC is not different than shares of stock in a corporation. The trustee can exercise control over the debtor’s ownership interest in the LLC, but that doesn’t mean that the trustee can automatically compel the LLC to liquidate assets. Operating agreements, like buy-sell agreements, are often drafted in a way that gives the other owners a right of first refusal to buy the bankrupt member’s interest if the debtor might be forced to sell. Besides, any liquidation of LLC assets would first go to LLC creditors before anything could be paid to the creditors of the bankruptcy estate. And remember that even if the trustee could force the sale of the ownership interest in the LLC, the operating agreement probably limits the actions another owner can take.
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