Selling an Asset before filing

[BRomo]

I have an ownership interest in an entity which owns real property. It pays me about twenty five hundred a quarter. I can sell it for about 80 thousand to one of the other partners. If I sell it today, and simply live on it for "normal and expected" expenses, etc., and file a petition when it's gone, can I anticipate an objection from anyone? How long should I wait before I file after I sell it, and why? Thanks!

[HHM]

Seems sort of a waste to "live on it".

It might be helpful if you filled in your situation a bit...why do you think you need to file BK, what income do you have, what other assets...etc.

The key to your question is good faith. 1st, is $80k a reasonable market value for your interest (e.g. if you tried to sell it to a disinterested 3rd party, what would that person likely pay). As to what you do with the money...that really depends on your circumstances. For example, if you are already not paying your creditors, get $80K, already earn $5000 per month in income, and simply blow out the 80K (even if the expenses were reasonable), that would be looked on as bad faith.

[tobee43]

we were not in exact situation, but one very similar. we waited almost 2 years to file but still had to list our situation as it included a deed transfer and dealt with an out of state property that the trustee had no interest in at all.

as hhm points out, is this reasonable market value for your share? in our case it was a loss, and all attys involved said the trustee had we not resolved the issue prior to our filing would have given the other owner first opportunity for the buy out. then, of course all proceeds would have been divided by the trustee and some distributions to the creditors.

if i correctly recall the petition, it says it's within 2 years..if you can wait that long after the transaction you can legally and honestly answer NO to the question. we were just under the 2 year mark and i had to include it in our petition. it really wasn't that bad as we were able to prove the value of the property at the time was indeed a loss for the other partner as they also paid off a mortgage so were in debt to the tune of big bucks to this poor person, whom was also listed on our bk. not a nice situation to be in, but a reality we had to deal with and face.

best of luck!

[BRomo]

thanks HHM. I've been unemployed for two years now. I've drained my assets. I live in a modest apartment, I really have nothing and I know that I qualify for seven. The 80k is legit - I don't think I can get more for it from a third party. If I file now, the trustee could sell it, right? so I'm thinking I should sell it, live on it, and file later. Is it bad faith if I don't pay the credit cards, etc. but use it to pay my rent, medicines, utilities, etc. etc. (living expenses)? I could certainly spend it all on just that. I get it - selling it now and spending 80k on an around the world trip or new boat would be bad faith, but I have no intention of that. Just need to pay living expenses. Your thoughts? Hope that helps. Thanks again.

[TheBajan]

We had the same situation. Last June we sold the assets held by our corporation and netted roughly 35K. We had been running on empty for a while but we were still current on everything. This all took place a couple of days after we found [but hadn't retained] our attorney. We let him know that we were about to sell this asset and close the corporation. We also told him what we planned to do with the money. At that time, our minimum cc payments were $3200 a month and our first and second mortgage totaled another $2500 without any insurance or taxes escrowed. My husband was being activated for six month military orders a week later. Our hope was to live on the money, attempt to have him activated into a permanent position, and avoid BK all together. We continued to pay all of our creditors and I prepared two budgets. One that represented what our future might look like if our hopes were realized and we avoided BK, and another that represented what we would have to do if we filed.

Obviously, my husband's military hopes didn't pan out and he returned to his low paying job. In addition to that, my mother lost her home and began planning to move in with us. We used roughly $10k to convert an unfinished space in our home into a full one bedroom efficiency apartment for her. Halfway through the project, she decided to move in with my sister instead. In October, we missed our first cc payment and in November we missed a payment on our second mortgage. We retained the attorney in December and we filed in early February. Our trustee never said anything about it. We kept good records of all our transactions so we had a paper trail of how we spent the money. He didn't question it but we were prepared in case he did.

Hope that helps
The Bajan

[despritfreya]

There is nothing wrong with you selling an asset before you file bk so long as you get fair consideration for it.

1. Document how you arrived at the sales price.

2. The entire transaction needs to have a paper trail meaning no cash - purchase/sale documents signed, checks issued to the proper party, check deposited in that party's bank account and document, document, document how the funds were spent.

3. Once funds are spent think about filing bk - just remember that you have to disclose the transfer and you need to be able to account for the sale proceeds and show that you got a fair value for the asset you sold.

4. Under no circumstances should you turn any of the funds over to anyone related to you even if you owe that person money. You spend the funds in the ordinary course of your living expenses.

Des.