Bankruptcy is a tool used by people to help them get their lives back on track. In most cases, filing for bankruptcy is going to have no effect on your friends or family, with the possible exception of your spouse. However, there are instances in which your filing for bankruptcy could harm your loved ones. The chances of this happening are higher if you file without an attorney.
Here’s What You Need to Know:
One of the ways filing for bankruptcy can affect loved ones is when you share ownership of property together. For instance, if you share ownership of an asset – we’ll use a home as an example – with someone, and you fail to exempt the home in the bankruptcy, a bankruptcy trustee can take the entire house, even the portion that’s in someone else’s name.
In a Chapter 7 bankruptcy, the bankruptcy trustee is legally allowed to sell property owned by multiple people, even if no consent is given and even if only one of the owners is filing for bankruptcy. As long as the person filing owns an interest in the property it can be sold.
The key to protecting property in bankruptcy is to exempt it. This allows you to protect certain assets and prevent the trustee from confiscating these assets to sell. Unfortunately, there are limits as to what can be protected, so it’s not always possible to exempt property that is co-owned by you and another party. In these cases, the co-owner should be paid his or her fair share, but this isn’t always under the best of circumstances.
Can’t I Just Transfer Ownership?
You might assume that if you share ownership of property with someone and you need to file for bankruptcy, you can just transfer your portion of ownership to that person. Not only is this not going to accomplish what you intend to accomplish, it could get you into legal trouble. Selling or giving away property just before filing for bankruptcy without receiving reasonably equivalent value is considered fraud. Transferring assets can be viewed as trying to hide those assets, something that is illegal and can get you into trouble. Furthermore, any property affected by transfer can still be confiscated by the trustee.
For more information about how a trustee can deal with hidden assets, check out this article from NOLO.com.
In Chapter 7, you release ownership of everything you own and the trustee decides what to do with it. When properly exempted, the trustee is unable to do anything – ownership of the property is protected. Bankruptcy gives you options for protecting property when you file, but the only way to ensure the protection is valid is to work with an experienced attorney who understands the law and knows how to complete the exemption process.
Never File for Bankruptcy Alone
It’s common for people to assume that filing for bankruptcy is as simple as filling out forms and “declaring” bankruptcy. Unfortunately, this leaves not only you vulnerable, but also your loved ones.
If you are considering bankruptcy, it’s important to speak to a professional about your situation. He or she can help you protect your assets and ensure your loved ones are not harmed by your financial struggles. Never assume everything will work out and that a bankruptcy trustee or the court will understand your mistakes or unique circumstances. It’s always better to work with an attorney.
For more information or to schedule a consultation, contact the Law Offices of Robert M. Geller at 813.254.5696.