What is the name of your state (only U.S. law)? Bankruptcy is exclusively federal law.
Suppose I sue an LLC for a huge tort. The damages are huge, so instead of spending the next twenty years with the company's profits garnished, the owners of the LLC liquidate it and start a new company under a new name, but with the same business (for example, instead of John's Grocery, LLC, it becomes John's Food, LLC).
I'm reading in a business law textbook that, whan Chapter 7 Bankruptcy (the kind he would be filing) is filed, the assets are liquidated, and the debts are paid off in the following order of priority:
1. Secured creditors (those with collateral, such as the mortgage).
2. Costs of liquidating the assets so the following debts can be paid off.
3. Unpaid wages and independant contractor fees.
4. Some claims of farmers & fishermen.
5. Refund of security deposits.
8. General, unsecured creditors (such as stockholders and bondholders).
It doesn't say any mention of tort debts, so where do tort plaintiffs stand in that list of priority, or are they completely SOL? Even if tort debts can't be bankrupted, just like stafford loans, how can you force an entity that doesn't legally exist to pay anyone anything? Add that to the fact that, unless the LLC-owners co-sign for the contract debts, they have nothing to loose, personally.
What would be a person's recourse (if any) in that?