Bankruptcy Blog

Basketball article stub icon (Photo credit: Wikipedia)

The University of Kentucky won the  NCAA Basketball National Championship last night by beating the University of Kansas 67-59. It was the first time any college has won a national basketball  title while led predominantly by freshmen. Kentucky started three freshmen and two sophomores last night in the final game.

Anthony Davis, Marquis Teague, and Michael Kidd-Gilchrist, the three Kentucky freshmen starting in the title game, are arguably three of the best basketball players in the country at their positions. All three have expressed an interest in joining the NBA draft this year while opting not to return to college for their sophomore years. Davis was recently awarded the AP “Most Valuable Player Award” for being the best player in the country and will surely be a franchise builder in the NBA if he elects to participate. In turn, that means the young man’s future could be lined with stardom and millions of dollars.

If the three freshmen leave Kentucky early to join the NBA, they would support a growing controversy and concern for the academic world about recruiting their kind to play basketball for college teams. Commonly called “one and dones” in the current college world of sports, these types of student athletes undermine what collegiate institutions say about themselves. In a report conducted by Kentucky on retaining students, University President Lee T. Todd, Jr. was quoted as saying, “We can make progress, but our ability to do so will depend on continuing to move forward in expanding our faculty and devoting resources on proven strategies to ensure student success and retention.”

Seth Davis, a sports writer for Sports illustrated, takes a different point of view in the argument. He wrote, “Yes, Kentucky’s Anthony Davis, Marquis Teague and Michael Kidd-Gilchrist probably will leave school after their freshman seasons to play in the NBA… If that starting five happens to win the national title, it wouldn’t signal the downfall of western civilization. It wouldn’t make a mockery of the sport…Yes, the Kansas starters are all in at least their third year of college. Does that make them better people than the Wildcats? Of course not. It means they aren’t as desirable to the NBA…If you’re like me, you went to college to acquire the knowledge and skills required to embark upon a more lucrative career than those generally available to people without college degrees. If a player leaves college for a multimillion-dollar contract, has he not achieved that goal?”

Regardless how the controversy plays out, one question both the institutions and sports writers are not addressing is: are all of these college freshmen basketball stars potentially heading for a destiny with bankruptcy because of a lack of preparation?

According to a Toronto Star news article written in 2008, 60% of the NBA players go broke five years after they retire. The statistics seem high, but if they are remotely true, they should raise legitimate concerns for both educational institutions and sports writers alike.

Not all freshmen “one and dones” will go into bankruptcy after entering the NBA, but if more than 20% of them do, isn’t it fair to question the wisdom of not doing what you can to help prepare these young men for the pitfalls of stardom and wealth?

Related articles

• Winn: How UK’s one-and-dones won a title (ncaa-tournament.si.com)

One of the most common questions on our bankruptcy forum is, “Can I qualify for bankruptcy?” This question is important, but equally important is whether or not you should file for bankruptcy. This blog will address who can qualify for Chapter 7 and Chapter 13 Bankruptcy and also what considerations should be made prior to filing for bankruptcy protection.

Can I file Chapter 7 Bankruptcy?

If you are an individual, married couple, corporation or partnership you might qualify for Chapter 7 Bankruptcy. If you file Chapter 7 Bankruptcy your qualifying, unsecured debts can be immediately discharged. In 2005, however, bankruptcy laws were updated to make it much tougher for debtors to qualify for Chapter 7 Bankruptcy.

How do you know if you can file Chapter 7 Bankruptcy? Prior to filing Chapter 7 Bankruptcy you must pass a means test and prove that either your income is less than the median income for your state or you do not have enough disposable income to repay your debts. There are several online calculators that can provide general information about whether or not Chapter 7 Bankruptcy is an option for you.

Can I file Chapter 13 Bankruptcy?

If you cannot file Chapter 7 Bankruptcy you might wonder if Chapter 13 bankruptcy is an option. Chapter 13 Bankruptcy is available to all United States citizens; however, the debtor’s outstanding unsecured debts must be less than $307,675 and secured debts must be less than $922,975.

Chapter 13 Bankruptcy does not liquidate debts immediately but allows you to create a 3 or 5 year debt repayment plan. Because you will have to make regular payments to your Chapter 13 debt repayment plan the bankruptcy court will expect that you will have an income. If you do not have a job it will be difficult to prove that you can make the necessary debt payments.

Due to the complexity of filing Chapter 13 Bankruptcy most debtors consult with a bankruptcy lawyer prior to filing. It is not necessary to have legal help, but a bankruptcy lawyer can help

debtors review their assets and liabilities, create their Chapter 13 Bankruptcy schedules, file the Chapter 13 Bankruptcy petition and develop the Chapter 13 debt repayment plan.

Is filing bankruptcy right for me?

Another really important question that each debtor should ask is, “Is filing bankruptcy the right decision for me?” Bankruptcy will negatively impact your credit score and will remain on your credit report for 7 to 10 years. Bankruptcy may also make it difficult to make large purchases on credit or to get a loan with a good interest rate. Debtors should evaluate all of their other debt repayment options before filing bankruptcy.

Next, each debtor must understand what bankruptcy will and will not do for them. For instance, if your debt is unsecured debt: credit cards, medical bills, or unsecured personal loans, filing bankruptcy may discharge your debts or allow you to restructure your debt payments. If your debts are mainly child support, federal student loans or tax debts filing bankruptcy will not eliminate these debts and may not be the best choice for you.

The subject of debt being repaired on a credit report recently came up in a bankruptcy discussion on an internet bankruptcy forum website. The original question posed was about how you can remove a bankruptcy from your credit report. It seems the blogger surfed the web on the subject and found many lawyers who made the claims they could remove a bankruptcy from your credit report and repair your credit.

The blogger left the readers with these two questions: “Has anyone been successful using these kinds of services or any others? And did anyone here use [any law firm] and get good results?” The difficulty in answering these two questions is that it requires a lot of time and energy to research the answers.

The bloggers first question he left the readers with might best be asked, “Is there any such thing as a legitimate debt repair?”

The answer to that question is simply yes, but the answer has to be qualified to compensate for all the scam companies that try to make money off the weakness of those who are suffering from poor credit scores. The Federal Trade Commission(FTC) posted a consumer alert in October of 2008 warning people to be careful of these types of scams.

Seal of the United States Federal Trade Commission. (Photo credit: Wikipedia)

The FTC alert warned consumers to be careful to avoid such scams. “Attorneys at the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation making those claims. The fact is there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.”

The truth is anything a lawyer can do for you to repair your credit, you can do free for yourself. All it takes is determination, time, knowledge and effort to accomplish the task. That is why some people would rather pay legitimate companies to provide this service.

Any debt owed must be satisfied before you can clear up an incorrect credit report. There is a legal process you must go through before the credit report will remove any errors on the report.

Any law firm that advertises to clean up your credit, if legitimate, must tell you what the fees for their service are up front, and they must not receive payment for their services until the report has been legally cleaned.

As to removing a bankruptcy from your credit report, you, nor any lawyer, can legitimately remove a bankruptcy from a credit report, unless there is a legitimate legal reason for doing so. A bankruptcy will remain on your credit report for up to 10 years. To try to remove a legitimate claim on a credit report without legitimate legal reasons is against the law and might be construed as fraud.

As a matter of fact, there is really no reason to remove a bankruptcy from your credit report. You can rebuild your credit after a bankruptcy with legitimate hard work and paying your bills on time, and many rebuild their credit within two years after the close of a bankruptcy.

After closing a bankruptcy, bloggers often indicate on the internet a variety of ways they financially responded to being former filers. It seems, whether ending up financially responding by living within their means or going back to their former lifestyle of spending all depended on the individual circumstances of the filers. Most filers sharing their blogs on the internet I have read, and I have read thousands, have financially responded that their bankruptcy experience resulted in a change in lifestyle of learning to live within their means.

A mother trying to financially live within her means prompted one little 9 year-old girl to say, “You are so cheap that if you sat on a lump of coal, there would be a diamond there when you stood up.”

Here are some excerpts of recently posted comments made by bloggers on the internet, and how these filers have financially responded to bankruptcy:

• It’s now just past a year that my Chapter 7 was filed…I am *finally* back to where I have a little breathing room. I have a tiny emergency fund, and am trying to eliminate student loan debt that could not be discharged in the BK…The part that is troublesome to me is that I think maybe I’ve gone far too much to the other extreme. It’s like I’m terrified of spending a dime that I don’t have to, and I resent most of them that I *do* have to spend.

• My wife and I have had to learn to live frugally and with placing needs before wants…Any splurges benefit our little 2 year old boy…We are able to save for rainy days and retirement, owe no one anything, save for the mortgage on our house…but its a great feeling of having the weight of debts off your shoulders and not living in fear, and knowing you will make it.

• I have a hard time just sitting and watching the TV. Usually I have a book in hand that I am reading, or I have the laptop on my lap and am checking this site, or working on my hobby. If I knitted or crocheted, that would be in my lap…I just can’t be sitting doing nothing.

• We were very wealthy, had no worries…Nine years of an enemy with serial suits broke us…We have NEVER been happier with the reevaluation of our life and values.

• I have found that being broke means taking a big step back in relationships. I worry/dread about being invited to weddings and parties where gifts are expected… it’s embarrassing to always be unable to give. Friends ask us to go out to dinner or events and we have to invent excuses why we can’t go. We used to just charge it, of course.

  

  2004-2007 Toyota Prius photographed in College Park, Maryland, USA. (Photo credit: Wikipedia)

• After bankruptcy I became c-h-e-a-p. Now everything is a tradeoff if I buy this, I go without that. I sort of took it a couple steps farther. I now drive a hybrid car, I only purchase clothes discounted and the real money saver? I coupon. I don’t mean a little coupon use. I COUPON! My grocery budget goes so much farther, it is insane. My 9-year-old daughter says that I am so cheap that if I sat on a lump of coal there would be a diamond there when I stood up. I just never want to be in a situation again where I have to face people that I owe money to and tell them that I can’t pay.

Filers of bankruptcy are just normal people like you and me. The details on how you financially respond after bankruptcy varies from individual to individual. Whether you remain a coal or hatch into a diamond, post bankruptcy can provide you with a fresh new start.

Related articles

• Forums Can Be Great Sites for Information and Support (betterbankruptcy.com)
• Chapter 7 Bankruptcy for a Family of Four (betterbankruptcy.com)
• Bankruptcy and the Stress Experienced After Filing (betterbankruptcy.com)

When you fall behind in paying your creditors the money you owe them, your creditors have various powers to address the situation.  Your creditors can contact you in an attempt to receive payment, report your delinquent (or non-existent) payments to the three credit bureaus, potentially file a lawsuit against you to receive a judgment for the money owed, or sell the bad debt to a collection agency (who likewise can file a lawsuit against you for the money owed).  With a judgment against you in hand, whether it is the original creditor or a collection agency, they can potentially garnish your wages, place liens on your property, or take other legal steps to obtain the money you own to them.

Protection of Social Security Benefits

Many people, especially those who are receiving the benefits because they are disabled, rely on Social Security income to maintain a minimum standard of living.  Therefore, when it comes to Social Security Benefits and creditors, it is important to understand what protection the law gives people related to these benefits outside of declaring bankruptcy.

Section 207 of the Social Security Act reads as follows:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

What the wording noted above means is that creditors cannot seize Social Security benefits through a levy against your property, garnishment against your wages, or any other legal method.  Section 207 provides this protection from creditors over Social Security payments regardless of why you are receiving those payments, whether the payments relate to retirement, disability, or as a death benefit to the surviving spouse.

Other Points to Remember

Section 207 of the Social Security Act may only protect your Social Security benefits from creditors if you can prove that a given balance of funds is from Social Security payments.  If you co-mingle Social Security payments with other account balances or other income streams, it may create confusion in the eyes of the law and increase the chances that a creditor can seize those funds in spite of the protection offered by Section 207.  Therefore, you would be wise to have your Social Security payments sent to a bank account used solely for those Social Security payments, so there is no confusion from a legal perspective on the source of the funds.

In addition, remember that the protection the Social Security Act provides for Social Security benefits against creditors does not extend to the government or the Internal Revenue Service (IRS).  You still have to pay any applicable taxes on your Social Security benefit payments, and if you fail to do so, the IRS can potentially seize your Social Security funds to satisfy the tax owed.

Hiring a Bankruptcy Lawyer

Keep in mind that the information above is general in nature and should not be considered legal advice.  If you want legal assistance, you should speak with a bankruptcy attorney.  Even if you are not considering declaring bankruptcy at this time, a bankruptcy attorney can advise you on what protection the law provides for different types of property in your state.  And if filing bankruptcy becomes a necessary option, a bankruptcy attorney can help you take the right steps to complete the bankruptcy properly.

Related articles

• Social Security Disability Lawyer – Do they ever work for free? (disabilitybenefitshome.com)
• SSI and SSDI and medical costs (disabilitybenefitshome.com)
• SSDI and expediting Disability Reinstatement (disabilitybenefitshome.com)
• Social Security Administration – Can I get SSI if I get SSDI? (disabilitybenefitshome.com)
• Social Security Administration Disability and Divorce (divorceattorneyhome.com)

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Divorce can be a messy process.  Aside from the emotional and relationship issues that going through a divorce creates, it can result in a number of financial issues and questions that you need to address as well.  And if you throw creditors into the mix because one or both spouses are behind on their bills and you believe bankruptcy is an option that you should pursue, it can complicate the divorce proceedings even further.

So if you are considering divorce and believe you may need to file bankruptcy as well, following are some of the key points you should consider.

Need for Bankruptcy

When someone has financial issues, bankruptcy is a term that can come to mind quickly, perhaps too quickly.  While bankruptcy can be a powerful and at times necessary tool to get a fresh start from a financial standpoint, it also has a long-term negative impact on your credit.

Therefore, you should keep in mind that there are alternatives that you should consider before considering bankruptcy.  Although there are a number of organizations that advertise they will help people get out of debt who are actually in the business just to make a quick buck, there are legitimate companies and not-for-profit groups that you can discuss your situation with to help evaluate what all your options are.

While bankruptcy may be the way you need to go in the end, you should take time to consider other options first.

Types of Bankruptcy

If bankruptcy is necessary, keep in mind that there are two primary types of bankruptcy for individuals.  Chapter 7 bankruptcy provides for the elimination of most types of debt.  Chapter 13 bankruptcy allows a person to reorganize their debt through use of a payment plan.

A bankruptcy attorney can help you evaluate which type of bankruptcy is the right option for you given your situation, considering the types of debt you have and the implications the bankruptcy may have on the divorce proceedings.

Shared Debt

If you and your spouse have debt that is in both of your names, keep in mind that if only one of you files bankruptcy, the other spouse will often still be responsible for paying the debt.  While you declaring bankruptcy may keep creditors from pursuing you to collect the money owed, the creditors can (and very likely will) pursue your spouse for the money.

How are Disability Payments affected by Bankruptcy?

One of the strains in life that often leads to divorce is finances, when there just is not enough income to pay your creditors.  This may be especially true if one spouse cannot work and is receiving disability payments such as Social Security.

But remember that if you are receiving Social Security benefits because of disability and you need to file bankruptcy, Congress has passed laws that protect those disability payments from Social Security from being at risk in the bankruptcy, because disability payments were deemed too necessary to someone in need maintaining a minimum standard of living.  While there are a number of factors you should consider before filing for bankruptcy, you should not let fear that bankruptcy may take away your Social Security benefits be one of those factors.

Hiring a Bankruptcy Attorney

Remember the information above is general in nature and should not be considered legal advice.  As noted at the start of this article, either divorce or bankruptcy on their own can be complicated, but when coupled together, they can be especially difficult to navigate.  Therefore, if you are dealing with both of these situations, you should speak with a bankruptcy attorney who is familiar with the bankruptcy laws of your state and can evaluate your individual and unique situation in light of these laws.  A bankruptcy attorney can help make sure your property is listed correctly so that your Social Security benefits and any other assets you have are viewed in the best possible light by the bankruptcy court.

Related articles

• Bankruptcy Rules Changed in December of 2011 (betterbankruptcy.com)
• Taxes Due After a Discharged Bankruptcy (betterbankruptcy.com)
• Discharge of Debt in Bankruptcy? (betterbankruptcy.com)
• Bankruptcy and the Stress Experienced After Filing (betterbankruptcy.com)

Automobiles are among the most commonly used engine-powered vehicles (Photo credit: Wikipedia)

In today’s economic world, it is not unusual for an automobile to be underwater in value compared to what you owe on the vehicle. This can become a real issue when you face filing for bankruptcy protection. What are your options on the surrender of a vehicle if you qualify and want to file a Chapter 7?

Problems might arise for you when you file a Chapter 7 and no longer want to keep a vehicle. Most of you need transportation to go to work, seek employment, shuttle your children to and fro, and for a wide assortment of other necessities in this modern world.

Your main problems for giving a vehicle back before, during or after filing a Chapter 7 can be: finding a reliable and affordable replacement vehicle that qualifies as an exempt asset from bankruptcy; surrender of the underwater car at the right time; balancing the amount of cash you will need to either make a down payment on another car or pay in full if exempt; qualifying for another loan even if you can get a down payment; avoiding the automatic stay of bankruptcy from being lifted if the creditor seeks such; and determining when to make a new purchase of a car a secured loan.

Here are some scenarios you might want to consider concerning your options for surrender of an automobile in a Chapter 7:

• When you stop payments on a secured car loan, you are in default. This gives the creditor a reason to start the repossession process. The automatic stay will prevent a repossession unless the creditor seeks to have the automatic stay lifted and is granted such. Keep current on your payments to avoid a repossession unless you are ready to move forward with the surrender.

• If you can come up with a cash to purchase an automobile outright, all you have to do is make sure the automobile you purchase is under state or federal exemption allowances for a vehicle. You will need to purchase the vehicle before you file. This way, you can stop making payments on the other car and surrender it at your own convenience. Be aware that this option can be a disadvantage if removing the car payments from your means test throws you into a Chapter 13 instead.

• If you can come up with a down payment on a new loan someone is willing to finance, a secured loan made when the automobile is without equity will not be liquidated in a Chapter 7. The lien must be perfected to qualify the loan as secured, and the new loan will need to be reaffirmed in order for you to keep the mortgaged vehicle.

• Another option for the surrender of a vehicle is to wait until after discharge of the bankruptcy in order to purchase. If you have enough exempt cash, you can stop making payments on the automobile you want to surrender right after the 341 meeting. The automatic stay will likely postpone repossession until the bankruptcy is closed. If you have been shopping for a vehicle you want, you should be able to purchase the vehicle the moment the bankruptcy has closed.

These are some of the options you have in surrendering a car in a Chapter 7, but it would be wise to consult with a bankruptcy attorney about legal problems you might face in the bankruptcy district you would file.

Related articles

• Chapter 7 Bankruptcy for a Family of Four (betterbankruptcy.com)
• A Chapter 7 Requires a Debtors Statement of Intention (betterbankruptcy.com)
• Are There Good Reasons Not to File a Chapter 7? (betterbankruptcy.com)
• 4 Great Reasons to File a Chapter 7 in Lieu of a Chapter 13 (betterbankruptcy.com)

As part of the series of the article, Stages of Grief Contrasted with the Bankruptcy Process, this final article is being written to share the actual time line of emotions experienced by a blogger. The blogger portrayed the events as real events that happened to the debtor during the bankruptcy process.

The blog written for a bankruptcy forum website is the story that inspired this series. The stages of grief in the time line will be tagged to help demonstrate the real effects of grief while going through the process of bankruptcy.

The time line presented in this story here is not intended to be a model time line because grief can vary from person to person during bankruptcy. Each person handles their emotions on their on time line, and the right way to deal with any emotion during this time is to get you through the stages of grief that is the right way for you.

Managing emotions - Identifying feelings (Photo credit: Wikipedia)

Time Line Shared in Personal Bankruptcy Story

Here is the time line recently shared by a blogger who had finished his own bankruptcy and was sharing his experience for the benefit of his sister now facing bankruptcy herself:

• Denial and Isolation- “First thoughts of bk: apprehension, worry, shame, guilt… [Felt] some apprehension that I was going to do something wrong or that the judge would laugh me out of court [if I filed]. I had some circumstances that I was worried about…Filed. Felt like the weight of the world had been lifted off my shoulders! Well, except I still had to tell my mom, since I owed her money and she was included in the filing…It is now 5 months post discharge. There are still less than a handful of people who know I filed bk, but frankly I came to realize its nothing to be ashamed about and while I won’t advertise the fact, if my experience can help someone, I have no issue talking about it.”

• Anger, Bargaining, and Depression- “In the middle of my financial crisis: [I experienced] stress, depression, and anger at my ex for getting me into this mess… As I got “used” to the idea of “seeing a light at the end of the tunnel”, [I was] still stressed and a bit shameful.[Since filing], I’ve lost 8 of the 30 “stress pounds” I’ve gained and feel like I can focus on myself now. The last 2 years [during bankruptcy], I have done nothing but neglect myself.”

• Acceptance- “I Made the decision to file (this is the stage my sister is in)… Met with the lawyer. Feeling better. I was doing something! The calls would stop once I filed! Still a little worried…Filed. Felt like the weight of the world had been lifted off my shoulders…After my 341, I felt even better. The worry and apprehension were gone. Yes, I still had 60 days, but the 341 went really well and the issues I was worried about were not really issues at all… Discharge! Ahhhhh, a new life…My daughter is happier, well, as happy as a 13 year old can be lol (kids can sense stress) and I am back to the old me.

The last thing the blogger shared in his blog was to invite you to “please feel free to share your experience.” Sharing your story to a bankruptcy attorney can be one of the first steps to healing from the grief of losing your financial ability to take care of yourself. A fresh start financially can bring you new life.

Related articles

• Mystery to Some Might be Bankruptcy Success (betterbankruptcy.com)
• Bargaining Natural but Can be Dangerous Stage in Bankruptcy (betterbankruptcy.com)
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When you go through a bankruptcy, stages of grief and the emotions experienced from it can sometimes consume you, but these emotions can ultimately produce the hope for healing. As part of the series of the article, Stages of Grief Contrasted with the Bankruptcy Process, this seventh article demonstrates the grief process and how, in the acceptance of the reality of bankruptcy, you can experience healing that allows you to move on with your life.

Acceptance... (Photo credit: Manny Hernandez)

Acceptance Through Grieving

Most who have lost a loved one have successfully gone through the grief process. Never moving on with your life can produce unhealthy results. Nevertheless, all of you move through grief at your own pace, and there are many ways to move through the process.

Eventually, you come to the realization that natural grieving produces the opportunity to go forward with your life. Even though you may never forget your loved one and even though there may be times you still feel the emotions of grief, most will come to the place where moving on is the most healthy approach to your well being and for those who still depend on and love you.

Ministers, mental health workers, family, and friends can provide a service to you through their active support when you are grieving. They can play a large role in helping you to accept healing within the grief process.

Moving forward with you life is a part of the healing process of grief. The best thing you can do, then, is to allow yourself to feel the grief as it comes over you, because resisting it only will prolong the normal process of healing.

Acceptance Through Bankruptcy

Coming to the realization that you are bankrupt and in need of filing bankruptcy can be a very tough process to go through. You can experience a barrage of emotions related to grieving over your financial loss. Our minds are complicated and going through grief over our financial loss is a natural occurrence that can point us in the right direction of healing.

Acceptance of the fact that you must do something about your financial condition is part of the final stage of grief in the bankruptcy process. If your bankrupt state is untenable, you most likely will come to the conclusion that you will either have to endure the stress, phone calls, lawsuits, foreclosures, repossessions, attachments and the like, or to do something about it like filing bankruptcy.

Bankruptcy attorneys, bankruptcy forums, friends, and family members can provide a source of helping you in acceptance of your insolvency. This service is important in getting you to a place in order to file bankruptcy when you need it.

Filing bankruptcy is an opportunity for you to move forward with your life and get a fresh new financial start. Acceptance of the fact you are bankrupt and in need of starting over may be the most healthy conclusion you can make for your condition, but refusing to accept insolvency for what it is may only prolong the healing process of bankruptcy.

Related articles

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If you have ever looked for a quick and easy way to transfer real estate between family members, you may have used or have at least heard of a quitclaim deed.  A quitclaim deed, which is often mistakenly referred to as a “quickclaim deed,” allows someone to transfer his rights to real property, such as real estate, to another person.

A quitclaim deed is similar to a warranty deed except that it does not offer the clear title protection provided with a warranty deed.  Therefore, whereas a title company will use a more formal warranty deed to execute the transfer of property and provide a guarantee of clear title, quitclaim deeds are typically used to transfer property between family members or others who know and trust one another where the need to warranty a clear title is not as important.

But what happens if you have received property from a family member using a quitclaim deed and now you have to declare bankruptcy?  What if you have recently transferred the property back to that family member or you are wondering if you can give the property back just before you declare bankruptcy?  Read on to find out what you should consider if a quitclaim transfer of property has occurred (or you are wanting it to occur) just before you declare bankruptcy.

Binding Nature of a Quitclaim Deed

A quitclaim deed is a binding legal document, the same as a warranty deed or other legal documents that may be used to transfer real property from owner by one person to another.  This is true even though any individual can execute a quitclaim deed, as opposed to having the deed executed and filed by a title company or an attorney.  Therefore, if a quitclaim deed is executed properly—that is, if it has all the appropriate signatures, is notarized, and is filed in the county where the property exists—then the legal transfer of property from one person to another has taken place and has been recorded in the public record.  The transfer is as legitimate as when a title company files a warranty deed as a part of you purchasing a home from a home builder.

As a result, if the person who received property through a quitclaim deed needs to declare bankruptcy, that property they received through the quitclaim deed is a part of the person’s assets.  The person declaring bankruptcy would need to include the property in the list off their assets on the appropriate bankruptcy paperwork.  This is true whether the person is considering filing Chapter 7 or Chapter 13 bankruptcy.

Quitclaim Transfer Just Before Bankruptcy

If you need to declare bankruptcy and you transfer property you previously received through the filing of a quitclaim deed back to the original property holder (or to anyone else for that matter), the bankruptcy court will by default assume you are trying to hide the asset and commit fraud.  It is a common practice for people declaring bankruptcy to transfer their assets to someone else just before declaring bankruptcy in an attempt to keep that property from being used to satisfy money owed to creditors.

Hiding a Quitclaim Deed Transfer from a Bankruptcy Court

It is generally unwise to attempt to hide the transfer of property from the bankruptcy court even if that transfer was performed using a quitclaim deed.  As noted above, if a quitclaim transfer of property was executed properly and filed with the county, it is considered a binding legal transfer and is available for viewing in the public record.  A bankruptcy court can potentially identify through the public record any property that you have that you have failed to list in your bankruptcy.  Such an attempt to hide assets and deceive the bankruptcy court can result in your entire bankruptcy being thrown out.

The information above is general in nature.  While it is accurate in terms of how bankruptcy courts will generally view the transfer of property away from someone before that person declares bankruptcy, there could be other details in your individual situation that are relevant that cannot be addressed in this forum.  Therefore, it is important to speak with a bankruptcy attorney about your situation.  A bankruptcy attorney will be able to evaluate your unique case and advise you on what options you have before you declare bankruptcy.

Related articles

• A Quit Claim Deed and How Filing a Bankruptcy Might be Affected (betterbankruptcy.com)
• Chapter 13 Dismissal and Why It Might Happen (betterbankruptcy.com)
• Chapter 7 Questions and Potential Answers (betterbankruptcy.com)
• Report of No Assets in a Chapter 7 (betterbankruptcy.com)
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