Why do I ask about real estate? For starters, I ask about real estate because the Chapter 7 trustee who reviews your case is likely to ask you at your meeting of creditors whether you’ve ever owned real estate. If you say yes, the trustee will want to know what you did with the real estate, how much it’s worth, and so on. I like to know the answers to important questions like these before they pop up at the meeting of creditors so that if there are going to be any potential problems, we can address them ahead of time.

What are some potential problems with real estate ownership that could crop up? One example is that even in this economy, you might have equity in your real estate – i.e., it might be worth something – and the amount of equity you have in the property can take up some or all of the limited exemptions available to you. This can have an effect on how much property (including personal property) you’d be allowed to keep after the bankruptcy.

Also, if, for whatever reason, you gave away your real estate – including signing it over to someone else (like a relative) just because you couldn’t afford the mortgage payments anymore, you are likely to have a problem. A transfer like this can look like a fraudulent transfer prior to bankruptcy.

In case you’re thinking ” I didn’t commit fraud,” the term “fraudulent transfer” as used in the bankruptcy setting is a specific legal term that has a specific meaning and is defined broadly in the law. It does not necessarily require intent to commit fraud. It’s just that Congress decided it didn’t like the idea of people dumping assets before filing, probably because it didn’t want people trying to look poorer when they had assets they could have sold to pay their debts but gave away those assets instead.

As a result, I like to ask people about real estate ownership. In case you are thinking of not disclosing current or prior real estate ownership to your attorney, think again – the trustee can take steps to independently research your property ownership situation and find things out. It’s better for everyone that you disclose everything to your attorney so that they can help you figure out the best course of action before you file for bankruptcy.

If you are in NJ and thinking of filing for bankruptcy, consider calling Jennifer Weil for a free telephone consultation to discuss your financial situation at 201-676-0722.

Photo by The-Lane-Team.