Reporting Property Owned by Others When Filing Bankruptcy


bankruptcy (Photo credit: ruminatrix)

Personal Questions

What happens when you file bankruptcy, and you are keeping other people’s property for them? Do you have to list their property on bankruptcy documents as well?

These questions were asked during a bankruptcy forum website session by a blogging debtor. The debtor blogged, “My 21 year old son is back home living with me and brought his own furniture, etc. Do I have to claim those items as my personal property since it’s in my house? Also, my youngest son will be leaving in July to join the Navy. Are his possessions considered property that I’m holding for someone else?”

An Individual and Personal Matter

Filing for bankruptcy protection is an individual and personal matter. Most individuals, depending on the amount of disposable income they make, either file a Chapter 7 or a Chapter 13 bankruptcy. In either bankruptcy filed, the debtor is required to fill out personal asset schedules on the property they own. These schedules will be used by the bankruptcy court to check against state and federal exemption laws which allows the filer to keep the unsecured assets listed under most circumstances.

When you file bankruptcy as an individual, you need only report the assets you personally own on the schedules of assets. The debtor in the illustration does not need to list either of her son’s assets on the filing schedules. What she may need to do, though, is be willing to prove the assets belong to her sons and were not given to them by her just before filing. Hiding assets is considered fraud by bankruptcy courts and is prosecuted regularly.

Not including the assets of your grown children in the bankruptcy is the same as not including the assets owned by your husband if you are not filing jointly and live in a non-community property state.

Filing a Chapter 7 is the type of bankruptcy most affected by assets you list because all non-exempt assets YOU OWN will be liquidated to pay off unsecured debts. The bankruptcy court trustee will not take assets owned outright by other adults in the family if you are filing as an individual. Most Chapter 7 bankruptcies are no asset cases where the individual does not own any non-exempt assets to liquidate.

Unfortunately, when it comes to maintaining a household used by husband and children, you will have to list the household assets, including children’s toys and clothes, if you contributed to the cost of the assets and the household expenses in any way. The house may be in the spouse’s name, but each asset is viewed by the bankruptcy courts separately and in relation to the filing individual debtor.

Filing Bankruptcy Can Be Complicated

Determining what assets are non-exempt and individually owned can be a complex undertaking for people not familiar with bankruptcy laws. It is widely recommended that a layperson use a bankruptcy attorney when filing either a Chapter 7 or a Chapter 13 bankruptcy, especially if the Chapter 7 is an asset case.

Enhanced by Zemanta
The following two tabs change content below.