The Rights of Creditors - Essay Example

These rights normally depend on the reason for which this debt came about as well as the terms that have been agreed upon between the two parties to the debt (Twomey & Jennings, 2010).

Their rights tend to also deal with the rights of creditors against other creditors. These legislations determine which of several creditors have the right to a particular debtor’s property in cases whereby more than one creditor lays a claim on a given debtor’s property. These creditors may be divided into those who perfected their interest by establishing a suitable public record of the said debt and any other property that is claimed as collateral for this debt and also by if the given debt came to be as a purchase money security interest (Twomey & Jennings, 2010). Creditors may request a court of law to set aside a fraudulent conveyance that is designed to put the property owned by the debtors out of the creditors’ reach.

In Nebraska, the property or money of a limited liability company cannot be seized by creditors to pay off the personal liabilities or debts of the owners of the limited liability company (Gless, 2008). If Adam opts to change his company to a limited liability company, Benhur as well as other creditors to the business will have to be aware of these rights and limitations in case the business acquires this legal status. However, there are other means through which creditors may use to go after the company while trying to recover the debts personally owed by the owner of the business (Gless, 2008).

This can be achieved through the following means:
- Obtaining a court order that directs the LLC to be liquidated by selling all of its assets.
- Foreclosing the business based on the debtor-owner’s limited liability company ownership interest.
- Getting a charging order that directs the company to pay the monies distributed to the debtor owner.

The state of Nebraska allows personal creditors of an LLC owner to get a charging order that is drawn against the membership interest of the owner. This is an order that is given by a court of law directing the business manager to authorize payment to the business owner’s person for any profits or income that would otherwise have been distributed to the debtor member. It should however be remembered that creditors that possess this charging order will only be able to get hold of the owner-debtor’s financial rights but will not have the power to actively manage the LLC.