The Hidden “Gotchas” in Bankruptcy – Interview April 2018

Katherine: Hello everyone, and thank you so much for joining us on “This Needs to be Said”. Our friend, attorney Ron Drescher, is here with us on Today, and we’re going to continue to help you understand bankruptcy and how it can help you reset your life. There’s something that Ron is going to show us today that’s going to help us navigate this even more, and he’s calling this the hidden “gotchas” in bankruptcy. Attorney Drescher, thank you so much for joining us again on This Needs to be Said. How are you?
Ron Drescher: I’m great, Katherine, how are you doing?
Katherine: I am fantastic. You know, every time I think I can listen to one of our interviews after we do them, and I say, “Oh, you taught me is much more and I think I’m so smart,” you come back with something else that lets me know I can’t do this on my own. Outside of the fact it’s not legal, but I’m just thinking, oh I’m so smart, I’ve been listening to him, and I see the benefits of bankruptcy, but now you have something else that I don’t even know what you’re going to bring today, called Hidden Gotchas and Bankruptcy. Now what? What’s the only thing or things you need to watch out for?
Ron Drescher: One of the things is that we have … when you file bankruptcy, all of your assets come into the bankruptcy case. I’ve always liked to think about it like it’s a big stack. Everything you own goes into that stack. That’s pretty easy when it comes to bank accounts, and when it comes to cars or jewelry or furniture or homes or things like that, or retirement accounts, they all go into this stack. But what’s scary, is that stuff that we might own and not even think we own, that also goes into that stack. When that happens, you’ve got to be really careful. The number one thing that you think you own, is inheritance. I’ll give you an example. Let’s say somebody dies from whom you might inherit. Let’s say it was your mom or your dad and they had a house that was in their name. They didn’t leave a will, but you’ve got a sibling.
Ron Drescher: You let the house go, maybe you’re living in the house, maybe your sibling is living in the house, maybe the house is being rented out. You never do anything with the house, it continues to be in your parents’ name, then you decide, you know what, I’m going to need to file bankruptcy because I’ve got some other debt problems. You go to the bankruptcy lawyer, and the lawyer sits down with you and takes down a list of what you’ve got, and they say, “Where are you living?” You say, “Well, I’m living in this house.” They say, “Are you renting it or do you own it?” And the client says, “Well, neither, because it was my dad’s house, but he died and so I’m living in the house.”
Ron Drescher: Your lawyer is going to tell you, “You know what, you have an interest in that house.” And you might say, “No, I don’t have an interest in that house, because it’s not in my name. Never been put in my name. How could that possibly impact my bankruptcy?” The answer is, it impacts your bankruptcy because you have what we call an expectancy interest. That is an interest right now that … you may not think you own it, it may not be in your name, it may not be a thing that you can easily go and sell, but it is an asset, and if you don’t list it in your bankruptcy, and somebody finds out about it, you could lose your discharge and the trustee can then go and grab that property and by himself, do a probate, take title to the property, sell that property out from under you, and out from under your sibling.
Ron Drescher: You didn’t even know that you were an owner of that property. That comes up all the time in my practice. Granted, there’s nobody pushing you most of the time, to transfer property into your own name, until let’s say somebody wants to sell the property, or you want to split the proceeds, or something like that happens. Many, many, many times people never transfer the title to a property that their parents owned, and so you just go about your business, not even realizing that that’s an asset that you have. If you file that bankruptcy and the trustee finds out that you have that asset, you can have a lot of problems. That could be a very serious gotcha.
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Katherine: The question is, is this something that if I was the one living in that house, and didn’t realize I owned it, is it something that I could’ve done so I didn’t have to include the house, is the goal to include the house, or not include the house? I want to be clear.
Ron Drescher: Let’s assume the house is a valuable asset. The important thing to know is, how do I preserve the asset? There may be a lot of different ways that you can preserve the asset that maybe it involves you not filing bankruptcy right away. Maybe it involved your transferring that interest and waiting for a few years before you file the bankruptcy. Maybe it involves actually filing a chapter 13 instead of a chapter 7, and paying your creditors. So there are a lot of different things that you might be able to do, but the key thing is don’t get surprised. Don’t file the bankruptcy and then realize, oh no, I’ve got a problem. I own this property and now I’m going to lose it.
Katherine: That’s why we have you. I say that every time, but that’s why we have you. All right, you said number one, so it sounds like there’s some more “gotchas” that we need to be looking out for.
Ron Drescher: Number two gotcha is if you owe money to family or a significant other and you’re paying them. Let’s say every once in a while, let’s say you owe $5,000 to your mom. You come up with $1,000 and you pay her back. You come up with another $1,500 and you pay her back. Then, six months later, you file bankruptcy. Your trustee can sue your mom to get all the money you repaid to her during the year before the bankruptcy.
Katherine: Why?
Ron Drescher: That’s the law. For most creditors, the trustee can come back during the 90 days before the bankruptcy. You know Katherine, a lot of people are familiar with that law, that preference clause act law, which is very, very frustrating to a creditor who’s done nothing wrong but still gets sued by a trustee to get back money that they were paid for a legitimate debt. But what’s especially painful, is if you are a family member and you loaned your kid some money to help them out, and the kid has done their best effort to pay you back, and then you get sued to return that money. Nobody wants their parents to get sued, or their girlfriend, or their boyfriend, …
Katherine: That’s damaging possibly to the relationship. Wow.
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Ron Drescher: Nobody wants that. That’s another thing you really have to look out for. One of the things that I do to help my clients in that situation is I … obviously when we’re doing their intake, and we’re going through all their documentation, we want to know, have you paid anybody back? Have you paid any relatives back? Do you own any money to your relatives? Sometimes they say, “Yeah, I just paid back my brother. You know what? You have two choices. Your brother could either return the money now or we could put off the bankruptcy for a year. I’ve done that. I’ll put off bankruptcy for an extended period of time in order to plan around that. That’s a very upsetting thing to people, because one of the questions I get all the time is, is my bankruptcy going to impact other people? The other people could be a co-owner of property, it could be a family member, it could be a spouse, it could be a business, it could be an employer, it could be a child.
Ron Drescher: Sometimes the bankruptcy will impact another person. And you have to know that. I love to tell people, “No, it’s not going to impact the other person, and it’ll be fine.” That’s not doing anybody any good. So I do tell them, “Yes, this is going to impact this other person and here’s how it’s going to impact them, and here’s what to do about it.”
Katherine: I know we’re running short on time today, and it sounds like we have more to cover on the hidden “gotchas” in bankruptcy, am I right?
Ron Drescher: There are many of them, but those are the two I really did want to talk to you about today.
Katherine: Okay, great. We can always continue this conversation in our future interviews if you choose to, but in the meantime, I want to let the audience know how to get in touch with you outside of “This Needs to be Said”.
Ron Drescher: The two best ways, you could call the office at 443-438-1966, or you can go to the website, drescherlaw.com. D-R-E-S-C-H-E-R-L-A-W.com.
Katherine: Awesome, thank you so much for joining us on “This Needs to be Said” attorney Drescher. Until next time, have a super day.
Ron Drescher: Wonderful, thank you so much, Katherine.
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