Case Law
In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003)
On filing, the trustee took not just the economic interest but the right to control the company, and sold its real estate.
Short answer: when the sole member of an LLC filed Chapter 7, her entire membership interest passed to the estate, and the trustee “obtained all her rights, including the right to control the management of the LLC”, and could cause the LLC to sell its real property.
The citation
- Case: In re Albright
- Citation: 291 B.R. 538 (Bankr. D. Colo. 2003), decided April 4, 2003
What the court held
A charging order protects the autonomy of the original members… In a single-member entity, there are no non-debtor members to protect. The charging order limitation serves no purpose in a single member limited liability company.
, 291 B.R. 538The reasoning was followed in In re Modanlo, 412 B.R. 715 (Bankr. D. Md. May 19, 2006), and cited approvingly by the Florida Supreme Court in Olmstead.
The planning lesson
Bankruptcy is the great leveler for entity planning. 11 U.S.C. § 541 vests the debtor’s entire interest, economic and governance, in the estate, and § 541(c)(1) voids state-law provisions that would limit the transferee to assignee status. Even Nevada’s exceptionally strong charging-order statute has yielded to § 541 in a reported decision. Any analysis that stops at the state LLC act is incomplete.
Why this matters for your plan
Reading the cases is not an academic exercise. Every one of these decisions turned on something a planner controls: when the structure was created, how much control the settlor kept, whether the governing-law choice was backed by real contacts, and whether the client told the truth on the record. We build to the way these disputes are actually litigated, because Elizabeth litigates them. To discuss how your situation maps onto this body of law, call (858) 755-6672.
A necessary caveat
These summaries describe published decisions. They are informational only, are not legal advice, and do not predict any outcome. Case law changes, and the result in any dispute depends entirely on its own facts and procedural posture. Consult a qualified attorney about your circumstances.
Citation status
KeyCite as of August 8, 2026: Yellow. No direct history. Seven negative citing references; the most negative is Gallan v. Bloom Business Jets, LLC (D. Colo. Aug. 20, 2020) (distinguished). Modanlo itself is distinguished in In re Reifler (S.D.N.Y. Aug. 25, 2023).
Treatment signals change. Verify current status before relying on any decision.
Related resources
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Common questions
Frequently asked
What happens to a single-member LLC when the owner files bankruptcy?
In In re Albright the entire membership interest passed to the Chapter 7 estate, including the right to control management, and the trustee was able to cause the LLC to sell its real property. The court held the charging order limitation serves no purpose where there are no non-debtor members to protect.
Does bankruptcy override state charging-order protection?
It can. Section 541 of the Bankruptcy Code vests the debtor's entire interest in the estate and ยง 541(c)(1) voids state-law restrictions on transfer, which is why charging-order exclusivity that works against a state-court creditor may not hold in bankruptcy.
This website is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Every situation is different; please consult a qualified attorney about your specific circumstances.
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