Don’t wait until it’s too late!

For most people, bankruptcy is their very last resort. So, they usually don’t talk to a bankruptcy attorney until they are in serious financial trouble. A lot of my clients waited until they were hit with a garnishment, repossession or foreclosure before coming to talk to me about their options. But, waiting too long can be very dangerous.

Here is a recent example: I met with a couple last week that had built up over $90,000 in credit card debt over 10 years. They were spending $2,000 per month on minimum payments for the credit cards. They finally realized bankruptcy was their only way out, so they scheduled a free appointment to talk to me about their options.

This couple was in serious need of a Chapter 7 bankruptcy. But, while talking to them, I discovered a huge problem that prevents them from filing any type of bankruptcy for at least another year. The husband was a partial owner of a farm shared with his father. When the husband started getting into financial trouble, he gave away his partial ownership of the farm to his father. The family wanted to protect the farm in case the husband was ever sued by one of the credit card companies. That made sense at the time.

But, this type of real estate transfer causes huge problems in a bankruptcy. If a person gives away an asset or sells it below market value, within a certain period of time, the bankruptcy trustee has the power to avoid the transfer. In this example, that means the trustee would sell the farm, give the father his share of proceeds and the husband’s share of the proceeds would go to pay the credit card companies. The family farm would be gone.

Every person I meet gets a list of 33 things to avoid when considering filing bankruptcy. One thing on my list is: Don’t give away any assets, especially real estate! If this couple would have talked to a bankruptcy attorney earlier, they could have prevented this problem. So, if you are considering filing bankruptcy, talk to an attorney to make sure you don’t cause any problems for yourself. Don’t wait until it’s too late.

-Dustin R. Hurley, practice limited to consumer bankruptcy