29 May I Didn’t File For Bankruptcy! How Can The Trustee Sell My House?
I had a client come in to see me recently. She had received a notice from a Chapter 7 Trusteethat the Trustee was going to hire a real estate agent to market and sell the client’s house.
The client had not filed for bankruptcy, so how was this possible?
The answer became apparent after reviewing the notice from the trustee:
- The client’s ex-daughter-in-law had filed for bankruptcy;
- When the ex-daughter-in-law was married to the client’s son, the client had donated an interest in her home to the couple;
- Although the client and the ex-daughter-in-law had seen an attorney to prepare the Act of Donation to properly transfer an interest in the house to the newly married couple, they did not do the same to set aside the donation after the client’s son and the ex-daughter-in-law divorced; and,
- The ex-daughter-in-law did not think to mention to her bankruptcy attorney that she had an interest in the client’s house because she did not think she owned an interest in the client’s house.
Why was it important that the donation was not properly set aside?
Because the ex-daughter-in-law’s interest in the client’s house was ultimately (and properly) discovered and disclosed to the trustee during the bankruptcy. Since the was an asset of the ex-daughter-in-law’s bankruptcy, it was property of the estate and subject to being sold to pay the ex-daughter-in-law’s creditors.
While fortunately we were able to resolve this problem to the client’s satisfaction, this case does illustrate two things:
- In this instance, the cost of hiring an attorney to properly set aside the donation would have been minimal. The failure to do so resulted in a fairly costly process to resolve this issue and avoid a sale of the client’s house.
- When in doubt, tell your bankruptcy attorney about any assets that you have or have owned and given away. Under certain circumstances, pre-bankruptcy planning (such as, in this instance, the possible delay in filing the bankruptcy to permit a timely and properly prepared transfer of the property back to the client) can often be used to avoid problems such as the problem that occurred here.
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