- 1). Provide information to the bankruptcy court demonstrating that absolutely no personal assets or personal guarantees were utilized in establishing or supporting the LLC. Oftentimes, the owner of a LLC needs to provide a personal guarantee, as well as additional collateral (including a personal residence), to obtain initial financing. If that is the case, the court likely will consider your home to be part of the bankruptcy assets.
- 2). Obtain a specific order from the court excluding your residence from the assets of a LLC bankruptcy case. You must demonstrate that no personal assets or pledges were used in furthering the operations of the business.
- 3). File a motion with the bankruptcy court confirming that your residence is exempt homestead property in the LLC bankruptcy case. Taking this step is necessary if the court deems your residence to be an asset. As long as your residence is not a luxury property, the house will be protected and set aside to you in the bankruptcy case. The court may deem real estate valued at a price of 30 to 50 percent above the median price for property in the community as a "luxury residence."
- 4). Obtain an order from the court declaring that even though your residence is an asset involved in the bankruptcy, the property is exempt homestead property that cannot be used in satisfying the debts of the business.
- 5). Negotiate a reaffirmation agreement with the lender that holds the mortgage loan on your residence. (This step is unnecessary if your home is paid off and you own it free and clear.) A reaffirmation agreement provides you the ability to pay off the balance due and owing on your home mortgage loan despite any discharge order or payment plan issued by the court in the LLC bankruptcy case.
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