Need Help Planning Bankruptcy

[FU2MI]

Hey Everyone,

First off thanks for stopping by my thread and helping me out!

I'm 27 years old and self employeed. I've been planning on moving to Texas from Michigan now for about a year but with this current real estate market i cannot get any of my houses to sell.

I have 4 houses total, 3 of which (2 rentals and my primary residence) are not worth the balances owed on them. The other (rental) might have 5-15k in equity depending on the sale price. I had planned on waiting for these houses to sell before moving (and spent thousands on improvements in an effort to expedite it) but i've finally come to terms with the reality that it just isnt going to happen. Not in the time frame that I'm willing to put up with, anyways (less than 5 years!!)

So I'm left with 4 houses and no way out. Trapped.

I have about 20k in credit card debt that I have spent making purchases for myself and for my business/customers. My company continues to make money and do well...but i'm basically working for nothing as all my money goes towards assets that arent worth anything...not to mention that I have to dish out about 300-1300 a month to cover mortgages that the rental agreements fall short on. On top of that I do not have any savings...all the money that comes in, goes out in one way or another. All the mortgages are current as of this month and my credit is PERFECT...sad to think of this!

I was considering letting the 3 rental houses go into forclosure now while waiting to move to Texas come January(let the banks take them back and get judgements against me if they wish). I could continue to work and pay off what I can until January (so it looks like i'm at least making an effort) where I would then move (let the primary residence fall into forclosure) and be unemployed for 6 months in an effort to help my case for Chapter 7 bankruptcy. I would live off the savings that I had accumulated from now to January...not abusing or racking up what isnt necessary to live day to day.

Now, the real trick is moving the assets that i have now out of harms way before filing chapter 7. I purchased these houses starting at the age of 20 and have poured a ton of money and hard work into them with the hope they would appreciate and turn into a solid investment. Well, along came the housing crisis. Now they arent worth anything near what i paid and the areas around them are turning into slums. I dont mind handing the houses back, along with the work and money i have into them...but I'll be damned if the banks get anything else I've worked so hard for.

So what do you guys think? I was going to sign over my hobby car (mustang) to my girlfriend, along with my boat (just an old 4 winns) to shield them from being seized. I have a loan out for my pickup truck but they can have that back as well as far as im concerned...i'll get a small car while i rebuild my life.

I thought about filing chapter 7 now but with working for myself and making the money i do i dont believe i'll pass a means test (hence the reason to move and be unemployed for 6 months)...

My company has value, but I'm not sure if there is a way to sell it and shield the income i make from it (perhaps to give to my girlfriend to buy a house for us). Perhaps I could sign control of it over, and then it be sold...ahh who knows.

I'm not sure how long a forclosure takes, or how the judgements work after the forclosure is complete (say i completed bankruptcy and the forclosure completed, could they then file a judgement?)

Does the court look at vehicle/title transfers within the last year/6 months?

It's a big ugly mess, and it sucks...but what can you do. sleepless nights and stress and close friends these days...


Thanks for taking the time!

[JRScott]

First off don't transfer any property to any insider, including your girlfriend. For you to trade it to her she would need to give you fair market value. Failure to get fair market value will result in a trustee reversing any such gifts/trades and seizing the assets anyway.

You list all inside trades for the past year, and if the trustee does a title search which he will do he'll find out if you don't list it, which is bad.....as he might take it as bankruptcy fraud and you don't want that. Typical look back on land is 2 years but they can go further back up to 10 in some cases.

Have you considered attempting to short sell any of the properties, you'd have to have the mortgage lenders approval and a buyer, but it might keep you out of bankruptcy. Another option might be a deed in lieu of payment. You might could attempt one of those.

Keep in mind also that you can't file after moving to another state I think for several months possibly 3 or 4, can't remember. In addition you have to use MI exemptions if you haven't lived in TX for more than 2 years.

[Flamingo]

There are so many people in your shoes right now trying to figure out what to do. Huge article in our local newspaper yesterday basically mirroring your situation and what folks are doing. Many folks panic and want to dump in this economy even if their house is below its value. However they still can afford to pay for the house. What do they do? Wreck their credit and walk away from a house they have worked for for years and then not maybe be able to get another house after foreclosing? Or ride out the market until it's upturn which will occur. As with stocks, some people sell on the first sign of trouble. Some ride it out and don't sell. There are risks to both but usually the people who can sit tight and not sell make out the best, depending on the situation.

You have a lot of personal decisions that only you yourself can make but as pointed out in the previous post, do not make any inside transfers of any of your property. You are just asking for big problems. Since you are in business yourself, do you have a financial adviser you can talk to or a CPA that can give you some guidance as to what might work for you or what to do as to your properties? The market is suspected to start to rise slow next year. Best of luck to you...

[Help!]

Yes, listen to JRScott's advice. One of the worst things you can do is to try to shield assets by putting them in someone else's name. The law in most states (check for TX) is "the better part of 180 days" which specifically means you can file on day 91 after you have moved. You didn't mention your income, but if it's above the median you will want to explore the means test... the low unsecured debt total actually works against you there.

[FU2MI]

Hey Guys,

Thanks for the replies.

If Detroit wasnt already such a depressed area I wouldnt mind riding out the tide. But I expect this area to turn into one gigantic "Flint" within the next 10 years (ever see roger and me?)


Just an honest assessment. I dont ever see the high paying low skill jobs this area thrived on for so long ever coming back...not with cheap right to work labor down south.

[Phillymanhere]

Forget about the shielding of assets. The courts can look at your bank statements and assets going a ways back, and you will be asked to sign your name to legal documents. You will be committing fraud and perjury if you shift assets and don't tell the court.

The way to do this is to start talking to bk lawyers in your area. Call and schedule meetings with 4 or 5 of them. These are initial consultations, and usually they are free (the lawyer is meeting you and in effect trying to get your business or see if your case is right for them).

The attorney will tell you what moves to make legally, moves that won't backfire on you.

If you are planning to file pro se (representing yourself), then spend days reading up on forums on this site to come up to speed on the law.