I have an LLC that is now in chapter 11. It is current on Interest payments and loan payments. But, the bank took funds from our personal account to cover a shortage that may happen at a later date. They did not have a jugdement against us. They did not get permission from anyone including a judge. They did not notify us they were doing this.

Can they legally do this?

ScottGem

Doesn't sound like it, unless you linked the accounts. Sounds like you may need an attorney.

shader

Go back and read your loan note and related docs. Every loan note, unless specifically excluded, allows for the right of setoff, meaning they can take money from your account(s) to cover past due payments, pay for insurance coverage if needed, or make up shortages on real estate escrows, etc. They don’t need permission or have to notify you, and set off is only done as a last resort when the borrower won’t pay. Taking money for future problems seems like a reach especially as the loans are current. Unfortunately, banks are now using very broad language in the right of set off, meaning if they feel there is any hint of a problem( in this case C/11) they can take steps to protect themselves. If this language is not in your loan docs, you have a case.