Protecting House in Bankruptcy - Posted by TNT

Posted by Redline on March 07, 2000 at 23:24:27:

I’ve been told by bankruptcy attorneys that if there is no equity in a house, and you continue to make payments on the house - you will not lose the house.

What would be the point? The trustee only sells things that have equity to pay off other debts. No equity? No sense in selling the asset.


Protecting House in Bankruptcy - Posted by TNT

Posted by TNT on March 04, 2000 at 17:46:30:

A friend and his wife have around 200,000 in debt. They own their home with little equity in it. If they declare bankruptcy, can they protect their home in a Land Trust of some kind. What arrangement would you suggest? or is it even possible to protect something like that.

P.S. the home is their primary residence.

Re: Protecting House in Bankruptcy - Posted by Dan in Dallas

Posted by Dan in Dallas on March 05, 2000 at 16:47:41:

Don’t know if I’ve lost my mind or what, but seems to me I remember hearing something about (in the state of Texas) that you could keep your homestead and 1 acre (if urban) or XXX acres if rural, plus a car, tools of your trade, etc.

What’s the deal…have I slept through some changes??

Re: Protecting House in Bankruptcy - Posted by MDonovan FL

Posted by MDonovan FL on March 05, 2000 at 10:20:56:

Any transfer of their property (to any entity) that is not exchanged for close to market value will be deemed a fraudulent conveyance and the property will be recovered from the buyer. There are only two possibilities that may work here. The first is to transfer the property to a family limited partnership and try to hold off the creditors for a year. The year delay will allow the transfer without fraud. The other is to deed the property to an offshore corporation. The US bankruptcy has no jurisdiction in other countries. Choose a country like Costa Rica that has no financial treaty with the US. I consider this immoral and I would not do it, but it is done nevertheless.

Check with a attorney. I may be wrong about these ideas since it has been over a year since I studied the subject.

May be able to protect their home…Even with a Bankruptcy - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 04, 2000 at 21:33:04:

Depending on which state the home is located in and that states interpretation of the bankrupcty code one may be able to protect their “homestead” residence.

For instance in Florida at least recently when filing either a Chapter 7, or 13 a debtor was able to elect to “exempt” their personal residence or homestead property from creditors.

Many savvy debtors who were having financial problems (former Baseball commissioner Bowie Kuhn, convicted inside stock trader Paul Bilzerian are examples) liquidated their assets and converted them to cash which they then then used to Purchased expensive residences in Florida. They then moved into these homes which in some cases were debt free and then declared them their “constitutional homesteads”. Then they declared Bankrupcty in Florida.

Now with lots of equity in their homes, and living in their expensive Florida home their homestead became immune from creditors. Florida was called “Debtors Paradise” as a result.

My advice is to seek counsel from a bankruptcy attorney who specializes in the arcane and sometimes mysterious laws created in and for bankrupcty court in your particular state.

Michael Morrongiello

Re: Protecting House in Bankruptcy - Posted by William Bronchick

Posted by William Bronchick on March 04, 2000 at 20:21:01:

The cannot use a land trust to protect from BK. If they file for straight BK (Chapter 7), they will lose their home. If they file for CH13, they may be able to keep it.

I have an excellent article on this subject on my site: http:.//

Re: Protecting House in Bankruptcy - Posted by Joe Kaiser

Posted by Joe Kaiser on March 04, 2000 at 21:17:52:

While it isn’t possible to move assets around to keep them out of the bankrupty, I do believe that (1) if they have little or no equity, and (2) they continue making payments, they may in fact keep the house.

The trustee may be inclined to abandon the asset since there’s no equity. I’m not certain, but I think that in such a case, you keep making the payments, you keep owning the thing.


Re: Protecting House in Bankruptcy - Posted by William Bronchick

Posted by William Bronchick on March 05, 2000 at 13:20:28:

In a Chapter 7 case, the owner is looking to discharge the debt, so the lender will move for relief from stay and foreclose. However, the borrower, if he has no equity can try to exclude the house from the bankruptcy. Doesn’t happen that often, but is is possible.