{"id":640,"date":"2016-03-01T21:54:05","date_gmt":"2016-03-02T02:54:05","guid":{"rendered":"http:\/\/www.michaelsmithlaw.com\/blog\/?p=640"},"modified":"2023-11-28T13:37:31","modified_gmt":"2023-11-28T18:37:31","slug":"llc-interests-members-bankruptcy-part-v","status":"publish","type":"post","link":"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-v\/","title":{"rendered":"LLC Interests and a Member&#8217;s Bankruptcy, Part V"},"content":{"rendered":"<p>[The other articles in this seven-part series are here: \u00a0<a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy\">Part I<\/a>,\u00a0<a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-ii\" target=\"_blank\" rel=\"noopener\">Part II<\/a>, <a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-iii\" target=\"_blank\" rel=\"noopener\">Part III<\/a>,\u00a0<a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-iv\" target=\"_blank\" rel=\"noopener\">Part IV<\/a>,\u00a0<a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-and-a-members-bankruptcy-part-vi\" target=\"_blank\" rel=\"noopener\">Part VI<\/a>, <a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankuptcy-part-vii\" target=\"_blank\" rel=\"noopener\">Part VII<\/a>.]<\/p>\n<p>We are considering the nature of the economic and noneconomic rights of a member of a limited liability company and whether, if the member enters bankruptcy, the bankruptcy trustee acquires\u00a0those rights. \u00a0As explained in Parts III and IV, the member\u2019s economic rights are property rights that belong to the bankruptcy estate in accordance with Section 541 of the Bankruptcy Code, but the member\u2019s noneconomic rights are contractual in nature and, therefore, are potentially subject to Section 365 of the Bankruptcy Code, under which the trustee must assume an executory contract and comply with its conditions in order to exercise the rights it affords. One of the leading bankruptcy cases to address the question is\u00a0<em>In re Ehmann<\/em>, 319 B.R. 200 (Bankr. D. Ariz. 2005):<\/p>\n<blockquote><p>While the parties disagree on several relevant legal principles, a dispute that is absolutely central to the motion to dismiss is whether the Trustee&#8217;s rights are governed by Bankruptcy Code \u00a7 541(c)(1) or by \u00a7 365(e)(2).\u00a0In a very general sense, the latter provision, if applicable, permits the enforcement of state and contract law restrictions on the Trustee&#8217;s rights and powers, whereas the former provision, if applicable, would render such restrictions and conditions unenforceable as against the Trustee. Because \u00a7 541 applies generally to all property and rights that the Trustee acquires, whereas \u00a7 365 applies more specifically to executory contract rights, the answer to this question hinges on whether the Trustee is asserting a property right or an executory contract right.<\/p><\/blockquote>\n<div class=\"read_more_link\"><a href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-v\/\"  title=\"Continue Reading LLC Interests and a Member&#8217;s Bankruptcy, Part V\" class=\"more-link\">Continue reading \u203a<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>[The other articles in this seven-part series are here: \u00a0Part I,\u00a0Part II, Part III,\u00a0Part IV,\u00a0Part VI, Part VII.] We are considering the nature of the economic and noneconomic rights of a member of a limited liability company and whether, if the member enters bankruptcy, the bankruptcy trustee acquires\u00a0those rights. \u00a0As explained in Parts III and [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-640","post","type-post","status-publish","format-standard","hentry","category-limited-liability-companies"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>LLC Interests and a Member&#039;s Bankruptcy, Part V &#8212; Indiana Business Law Blog &#8212; March 1, 2016<\/title>\n<meta name=\"description\" content=\"We are considering the nature of the economic and noneconomic rights of a member of a limited liability company and whether, if the member enters &#8212; March 1, 2016\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-v\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Michael R. Smith\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"LLC Interests and a Member's Bankruptcy, Part V &#8212; Indiana Business Law Blog &#8212; March 1, 2016","description":"We are considering the nature of the economic and noneconomic rights of a member of a limited liability company and whether, if the member enters &#8212; March 1, 2016","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.hpindiana.law\/business-blog\/llc-interests-members-bankruptcy-part-v\/","twitter_misc":{"Written by":"Michael R. 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