Bankrupcy question

[kir]

Hi Regarding JV and bankruptcy:

Two business partners, both on title for an investment property. Later, circumstances are such that one JV declares bankruptcy.

Can the trustee dictate a forced sale? To make things a little intersting, say the bankrupt partner only owns 49%.

I ask since I don`t want a JV partner that may go bankrupt and obviously an early exit may not be desirable.

Another related question is can the other JV partner use the investment property as a collateral without the consent of the other JV partner?

I guess I need more education on JV, the improper usage of collateralization, and bankruptcy implications.


Kir.

 

[Pheenix]

Hi Kir

Very good questions and I suspect they have been discussed before, you should search the forum for other relies.

However, the answer is it depends. A good lawyer will help here but I suspect the answer is to put provisions in the agreement which will prohibit the use of the property as collateral for other purposes. This is easier said than done, in practical terms. Just because there is an agreement not to will not prevent it nor prevent a lender from trying to enforce their security interest.

Then it becomes a question of how to force the `defaulting` partner out. This can be covered, in the agreement, by allowing the other partner(s) to buy the problem portion out or find a replacement - at a discounted value.

Don`t know if you can register the existence of the agreement on title or not.

Brad