Texas Bankruptcy Court: Debtor's Noneconomic Rights under LLC Agreement Are Estate Property Protected by Automatic Stay

Summary

This article discusses whether bankruptcy law modifies or terminates certain rights under an LLC agreement. The Bankruptcy Code invalidates ipso facto clauses in executory contracts or unexpired leases that purport to modify or terminate the contract or lease (or the debtor's rights or obligations under the contract or lease) based solely on the debtor's financial condition or the commencement of a bankruptcy case for the debtor. It also invalidates state law, rather than a contract, that purports to alter the property interests of the debtor. A more difficult situation arises when those interests are on the outer bounds of property of the estate.