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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
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Experience:  Licensed to Practice Law
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My parents are thinking about filing for bankruptcy, they are

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My parents are thinking about filing for bankruptcy, they are concernd with losing there house. My dad will be getting a settlement in the future because of my grandfathers wrongful death will he lose the settlement? My dad will be applying for retierment is this ok.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 3 years ago.
Hello and thank you for allowing me the opportunity to assist you.

There are various rules regarding how much equity can be protected in a homestead, but generally speaking if your parents have $75,000 of equity or less (or $125,000 of equity of less if over age 65), then they can protect their house. If they have substantially more equity than that, then the bankruptcy trustee will likely sell the house to repay unsecured creditors. Unfortunately, the future settlement will be considered property of the bankruptcy estate, so those funds will be used to repay unsecured creditors. However, Social Security benefits and most retirement accounts are protected.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.

If the information that I provided is helpful, then please remember to click the green accept button so that I will receive credit and compensation for my time. Positive feedback is always appreciated as well. Thank you and good luck!

Customer: replied 3 years ago.
Clarification, what if the lawsuit for the settlement take another year and my parents bankruptcy is completed way before can they still take form the settlement. We don't know how much or when lawsuit will be over. It's a year and half. Please help!!
Expert:  TJ, Esq. replied 3 years ago.
Hi again.

Yes, I'm sorry to say that the settlement would still be used to repay creditors. When a person files for bankruptcy, all of his non-exempt assets become part of the bankruptcy estate that can be used to repay creditors. Claims that already exist when a person files for bankruptcy, but which have not yet resulted in payment, are considered assets for purposes of bankruptcy. Since the wrongful death claim already exists, the settlement from it will be part of the bankruptcy estate even if the bankruptcy is concluded before the money paid.

I do need to clarify something, however. My earlier answer assumes that your parents would file for Chapter 7 bankruptcy, which allows for their debts to be discharged in a matter of months. If they have assets that they want to keep (such as their house, if it's not going to be protected), then they can file for Chapter 13 instead. A Chapter 13 would require them to make monthly payments to the bankruptcy trustee for a period of 3 to 5 years. But, it would allow them to protect assets that would otherwise be sold. However, the payments to the trustee must equal or exceed the amount of money that would have been available had the assets been liquidated rather than kept.

I hope that helps. Please remember to click "accept."
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 9684
Experience: Licensed to Practice Law
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