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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2568
Experience:  Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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Another bankruptcy Question please. I am destined to file

Customer Question

Another bankruptcy Question please.
I am destined to file bankruptcy hopefully before year end. The last inheritance from my parent's Trust which has not taken place as yet (please note I have received and completely spent all other $$ & assets from this inheritance Trust) is part ownership (my 3 brothers and I will get equal title ownership) in their house - total value today approx $360,000 or $90,000 paper value to me. I was required by the Trust Attorney to set up an APPOINTMENT OF CO-TRUSTEE which I established legally back in January 2010 (a third party non family individual - I identified my best friend). I was recently told if I legally dis-associate myself from the Appointment of Co-Trustee Agreement making my best friend the sole Trustee of this Co-Trust, I can officially respond in the bankruptcy process I have no further claims to any inheritance thus protecting / preventing the sale of my parents house that my two brothers live in. Is this correct??? I know I run the risk of honesty with my best friend but am confident that is a non-issue. I also know there is no interest from any of the family to sell or finance my parent's house.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 4 years ago.

Terry L. :

Hi and thank you for your question. In the future, you can request me to answer any further questions.

Terry L. :

That is incorrect. You still have an interest in that inheritance.

Terry L. :

Even if by assigning a trustee, that would somehow transfer your right to the proceeds (which I believe it does not) the trustee in bankruptcy could avoid that transfer since it was fraudulent (meaning you didn't get fair value for the transfer)

Terry L. :

I would say the asset is still an asset for the bankruptcy case, and the bankruptcy trustee could liquidate it, as the trustee steps into your shoes to liquidate any unexempt assets. At best, XXXXX XXXXX can vacate the appointment to bring the asset back to the bankruptcy estate and then can liquidate it

Terry L. :

or basically what would happen, is that the bankruptcy trustee would permit the property to be refinanced to pay the proceeds of your share to the trustee.

Terry L. :

Your only option to protect this interest is by filing a chapter 13 debt repayment to pay back enough to protect the equity.

Terry L. :

do you have any questions JA customer?

Customer :

While the house / the last part of my parent's Trust which says I am to get one fourth ownership in the house has NOT been processed as yet, if it is not processed through by the Trust Attorney at the request of our family members, does that change anything in your mind / answer?? Or, can I change my inheritance ASAP to have the house go straight to my kids preventing this whole house issue or will that be recognized as 'fraudulent conveyance' and also NOT be an option??

Terry L. :

no, it does not. Since the inheritance is due to you, the trustee can wait until the probate or inheritance trust is required to pay out. By changing the inheritance yourself, that is a gift, which would be avoidable as a preference so no difference.

Terry L. :

I don't see anything around the matter, until you get the inheritance, have your family buy your share for fair market value, then spend down proceeds on necessities. (or pay back the debts and avoid BK altogether)

Terry L. :

are you still here?

Terry L. :

if you have any further questions, I'll be happy to answer. thanks

Customer :

That was going to be my last question as to what you think or suggest. I think you have the picture of my situation. By your last comment, if I delay filing BK, the house is processed through to my brothers and me, they buy me out and I spend all the cash on living expenses and back debt then file BK (assuming I am still in the hole!!), I would have to assume the BK Court has nothing to go after (in particular, the house). Yes? No?

Terry L. :

that would be correct if you transfer your interest for fair market value

Terry L. :

so 90k minus liqudation costs

Customer :

Thank you for your time and input.

Customer :

thank you for your time and thoughts. Frustrated and a desperate.

Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2568
Experience: Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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Better Business Bur 15yrs bankruptcy experience. Chicago Bar