In In re Kimball, Ch. 7 Case No. 24-11036-pmb, 667 B.R. 487 (Bankr. N.D. Ga. 2025) (click here for pdf) , the Lender foreclosed on commercial property owned by a limited liability company on August 6, 2024. The LLC, in turn, was owned by an individual Debtor who had filed a Chapter 13 case on August 4, 2024, two days before the foreclosure sale. The dispute centered on the fact that the LLC had been administratively dissolved by the Georgia Secretary of State in October 2022 and was still administratively dissolved on the date the Order was entered. Debtor argued that because the LLC was administratively dissolved, the real property became part of the Debtor’s Bankruptcy estate and the foreclosure sale was stayed.
The question posed by this case is easy to state. Does the sole owner of an administratively dissolved Georgia limited liability company have an interest in real property that was at all times titled in the name of the limited liability company that is sufficient to render the real property “property of the estate” under Section 541 of the Bankruptcy Code such that the property cannot be foreclosed upon after the owner files for bankruptcy without violating the automatic stay of Section 362(a) of the Bankruptcy Code? The answer, although requiring a bit of explanation, is similarly easy to state. No, he does not.
Judge Basier noted that Georgia law expressly provides that “[a] limited liability company administratively dissolved continues its existence…” O.C.G.A § 14-11-603(b)(3).
[T]he remainder of O.C.G.A § 14-11-603 makes clear the “administrative dissolution” is a temporary state that is intended to be resolved by the dissolved entity curing the matters that led to its dissolution.6 This is apparent because the limited liability company is given five (5) years to seek “reinstatement,” O.C.G.A § 14-11-603(b)(4), and during that lengthy period its exclusive right to use its name is maintained notwithstanding its purported “dissolution.” O.C.G.A § 14-11-603(b)(6). It is further apparent because, in cases where reinstatement occurs, the limited liability company is treated “as if the administrative dissolution has never occurred.” O.C.G.A. § 14-11-603(b)(4). Based on the foregoing, it is simply incorrect to say that the LLC “no longer exists,” such that it could no longer be the owner of the Property.
A member in an LLC has no interest in specific LLC property, O.C.G.A. § 14-11-501(a), and the administrative dissolution of the LLC did not create any new rights of a member. Further, “[n]o evidence was presented that the Debtor took any action during the almost two (2) years he claims that the LLC did not exist to transfer record title to the Property to himself, which would have required the execution of a deed by the LLC in his favor and the recordation of that deed in the real property records. None of that was done. Instead, the Debtor continued to treat the LLC as if it existed and owned the Property.”
The Court concluded that the Debtor did not have an interest in the real property, and the property was not property of the Bankruptcy estate. Therefore, the foreclosure sale was not stayed by Section 362.
Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years. You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com. For more information, click here.