22 May I’m Filing Bankruptcy But I Don’t Want My Family Members To Know
Most people are not thrilled with the prospect of filing bankruptcy. Most people would rather the whole affair be kept as quiet as possible. While this is understandable, it is sometimes advisible for you to discuss your financial situation with your family members and let them know that you are thinking about bankruptcy.
Sometimes, family members will loan you money to try to help you stave off a bankruptcy filing. While this is no doubt well-meaning, careful thought should be given to whether this really solves the problem or merely postpones the inevitable. A prior post on this blog discusses this at length here.
However, another problem may arise if your family members are not aware that you are thinking about filing bankruptcy. A family member may actually transfer property to you for reasons that may not be clear to you. Obviously, with this asset transferred to you, it may affect your bankruptcy case and just as importantly, affect the property that your family member transferred to you.
Sometimes, as parents age, the parents will transfer or “deed” property to their children as an impromptu will. Sometimes the parents will actually retain a life estate which means that they still own the property for the remainder of their lives but upon their passing, the land becomes the property of the chidren or “remaindermen.” Sometimes the parents will “deed” the property to their children outright without reserving a life estate with the understanding that they can live in “their” home for the rest of their lives.
However, if one of the adult children files bankruptcy, this “remainder” interest in real estate becomes an asset of the estate and could be liquidated, that is sold, to pay creditors. While there may be some legal defenses to this scenario, the best defense is not to allow it happen in the first place. That involves candidly discussing your financial situation with those closest to you.
No one wants to file bankruptcy but talking about the reality of your financial situation with your family members may be the first step to take.
Adrian Lapas, Esq.
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