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CA Lawyer
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I own a half million of rental property and a couple hundred

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I own a half million of rental property and a couple hundred thousand in 401k/ira accounts. Can I incorporate the rental property into a business and protect myself from creditors in a bk in IL?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  CA Lawyer replied 5 years ago.
That's a really interesting question.

First of all, the 401k and IRA are exempt, so they shouldn't be an issue unless for some reason they weren't tax exempt contributions.


I do have a couple follow up questions however...

1. How much is your income per month? How many people in your household?

2. With the half a million in rental property, how much of that is in equity? Do you owe anything on the properties (secured debt)?

3. Do you have any other major assets?

4. What type of debts are causing the problem?
Customer: replied 5 years ago.

1. 2,000 - 3,000$/month net

2. 90% ($450,000) 150k-primary home free and clear

3. 12k$ car, 10k$ boat

4. legal fees from a child support/custody case specificaly a GAL that has screwed everything up purposely to soak fees and a pyscho one night fling that resulted in a child and $325k of legal fees so far

Customer: replied 5 years ago.

also it is just myself for the 2nd part of question one.

 

thanks

Expert:  CA Lawyer replied 5 years ago.
There are some problems with transferring assets before a bankruptcy filing.

First, there is a code provision that says if you hide, destroy, or transfer assets to hinder or evade creditors that you are not entitled to get a discharge in bankruptcy.

Second, transfers within the past two years must be disclosed on your bankruptcy forms in the Statement of Financial Affairs. A transfer like this would probably be considered fraudulent.

Transfers to trusts within the past TEN years must be disclosed on your bankruptcy forms.

Transfers to an insider (related person, corporation, etc.) are particularly suspect.

Fraudulent transfers made prior to bankruptcy can be avoided during the bankruptcy by the trustee (ie. the court can order the transfers rescinded so the estate gets the property).

In any situation, you would be looking at two years to wait before filing if you transferred the property and even then could be denied a discharge. In that time, you could probably be sued and the property recovered.

There may be other ways to do a filing, I can't recommend it to you, but potentially converting the property into exempt assets. That is not considered fraudulent. However, even just your home is well over the exemption amount so it doesn't seem that there would be a way to work it out.

For unreasonable attorneys fees there are a number of other options that are potentially better than bankruptcy. Attorneys cannot legally charge unreasonable fees. There are public assistance services that help you with complaints against attorneys for excessive fees. Here is one from the Chicago Bar Association: CLICK HERE.

CA Lawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 1655
Experience: Bankruptcy Attorney
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