Will the Bankruptcy Court Take My Children’s Property?
The bankruptcy law requires the debtor to list all of his or her assets in paperwork filed with the court. The court requires the debtor to file a standardized form called “Schedule B” which lists all of the debtor’s property. The instructions for completing Schedule B direct the debtor to “list all personal property of the debtor of whatever kind.”
A common question from bankruptcy debtors is, “Do I have to list property that belongs to my child?” The answer is, “It depends.” If the child is a minor, you likely own any property that you purchased for the child, like bedroom furniture, clothing, toys, etc, even if you gave the property as a gift. On the other hand, if a minor child paid for an item from his or her own funds, then you would identify your relationship to the property on Schedule B. For instance, if your 17 year old son worked a summer job to purchase a car with is own money, your disclosure would identify the car and state that it is being held for a minor child. The court cannot take what is not yours.
Property that has been transferred to a minor or adult child with the intent to protect the asset from turn-over during the bankruptcy must be disclosed. These transfers are often attacked as fraudulent and may be lost during the bankruptcy case. The usual problem with this type of transaction is it is done without the guidance of an attorney. State and/or federal exemptions that can protect the debtor’s assets may be compromised when the property is transferred immediately before filing bankruptcy. The legal protections available to you may be lost by this transfer.
Money held in trust for your child is generally not property of the estate. For instance, a bank account set up under the Uniform Transfers to Minors Act (UTMA) naming you as custodian is usually protected. This type of account is irrevocable and the money belongs to your child, not to you. However, funds you contribute to this account during a time when you are insolvent may be found to be fraudulent transfers and the Chapter 7 trustee could obtain the funds to pay your creditors.
Protecting assets belonging to a debtor’s child is usually not an area of large concern. If you have an unusual situation and your child has an ownership interest in a valuable asset, it is important to discuss the best means to protect the asset with an experienced bankruptcy attorney. Don’t leave the protection of your child’s asset to chance. Get the advice you need by calling today.
Question: What Happens To Real Estate That You Own In A Chapter 7 Case When It Is Not Your Residence?
Many people tend to think that they can keep real estate that they own in a Chapter 7 case as long as they are current with the payments at the time the case is filed. However, that is not always true. Debtors must take care to disclose the status of real estate with regard to value, outstanding debt, and payment status to their attorney. No one, including the attorney, wants any surprises.
Facts: Debtor was living between her home and her mother’s home who she cares for. She had a mortgage on her home and her son lived in the house and paid the mortgage. She had approximately $14,000.00 in equity in the home. Her living arrangement with her mother was not disclosed during the consultation, review, or filing appointments.
At court, the debtor informed the Trustee of these things. This was the first time the attorney heard of this arrangement. She had also claimed the equity as an exemption under U.S.C. 11 section 522(d)(1). The Trustee determined this was an asset case and objected to the exemption on the basis that she could not exempt this equity because it was not her residential real estate since she resided at her mother’s home. All of her mail went to that address, her driver license had that address, and this was also the address she used for voter registration. The Trustee later filed a Motion to Sell the Real Estate which the Court granted.
This was not the client’s intention. She wanted to keep her home and eventually move back in permanently with her son. In an effort to save her home, she moved the Court to convert to Chapter 13 which was granted without objection by the Trustee. She must now fund a plan to pay money to her unsecured creditors.
The moral of this story is to fully disclose your assets and any arrangements involving those assets to the attorney. It is a matter of losing assets you think may be protected by exemptions which may not be the case. Those assets can be liquidated through sale in a Chapter 7 case by the Trustee to pay your unsecured creditors for the debts you owe. The attorney can best advise you on how to handle your assets. Remember that what you don’t disclose can hurt you by either losing the asset, forcing you into a Chapter 13, or most harshly losing the asset and not receiving a bankruptcy discharge at all.
Uncontested Divorce: Do You Still Need To Disclose All Of Your Assets?
Many couples who have decided to divorce want the marriage to be over as quickly as possible. This is understandable in light of the emotions associated with everything that the couple has had to consider in coming to this difficult decision. While moving on with life is a desired outcome, moving on by leaving the marriage with little or no assets can lead to resentment and more difficulty after divorce.
In dividing assets, it is just as important to know what one is giving up as it is to know what one is getting. It is encouraged for a couple to agree to the division of the marital property; however full disclosure of assets and debts is the only way to fully understand the complete financial picture of the marriage.
Many may believe that such disclosure is a waste of time since they have already agreed on who gets what. The importance of disclosure comes down the road when one discovers that the other had been putting a good portion of money into their retirement, or when one discovers that their name is on debt that they didn’t know about. Divorcing couples still want to believe in each other and not assume the worst, but these types of scenarios occur every day.
The bottom line is to be informed; know what you are giving up before signing an agreement. It may avoid pain from the past from coming into your future.