Selling Property Interest to Sister to purchase health insurance/living expenses

[aquabluesrq]

Hi,

I am considering filing Ch 7 and only have one non exempt asset which happens to be 1/8 interest in real property (~10,000) . I am currently unemployed, and my husband earns well below the median income for our area. We are currently barely scraping by as my husband's tipped income has decreased significantly.

I really need money to help subsidize my rent and Health Insurance. Without health insurance, I am just one medical mishap away from being in debt once again even after filing bankruptcy. My sister has offered to buy my 1/8 interest (we share 1/4 interest) for fair market value to help me out.

My concern is this. Would a trustee be likely to consider this type of sale fraud IF I receive fair market value AND use it for legitimate purposes?

Thanks!

[despritfreya]

There should be no problem if:

1. You document the validity of your claim that you and your sister own a 1/4 interest in the property and that your share of that 1/4 interest is 1/8.
2. The purchase price for your 1/8th interest is fair value (get an appraisal).
3. Your sister cashes you out (you do not take it in installments).
4. You use a title company to document the transaction.
5. You keep copies of everything right down to the check she turns over to the title company, to the check you get from the title company, to the deposit (and deposit ticket) you make. (You may want to open a new bank account solely for the transaction).
6. You document exactly how every dime is spent.
7. You DISCLOSE, DISCLOSE, DISCLOSE the transfer and how you spent the $$ in the Statement of Financial Affairs as necessary per each applicable question.

Des.

[aquabluesrq]

Thank you so much for the in depth info! I've been without health insurance for 6 months now and it is pretty scary to think what COULD happen. Also there's no way we could afford to hire an attorney without doing this. We were quoted $3500 for a ch 7 today at a consultation, and I nearly fell out of my chair! I know we can find an attorney with more reasonable fees, so the search continues! Thanks again for your help! ;)

[frogger]

Cheaper is not always better when hiring your attorney. And.... des (as always) is right on track with his answer to your original question.

[aquabluesrq]

I completely agree frogger! I will admit that this attorney is very good and probably well worth the extra $. It's just that I honestly do not have 3,500 to pay. With me being unemployed and my husband dependent on tips for income(every penny taxed, no hiding tip money here!), it is really hard to save that much money, and making payments on that amount would certainly create a hardship for us as we are barely scraping by at the moment.

I've just been struggling as to whether or not I should take my sister up on her offer to buy me out, or just file and let the cards fall where they may. Id really hate to get the rest of the family involved, especially since I've not spoken to them in over 5 years. At the same time, I am beyond the point of caring. They practically abandoned my sister and I after the death of our father and have been holding this house hostage well over five years now. Their children have lived in the house rent free, and they use it for family gatherings. My sister and I are the only ones not benefiting from the house. I just want to get on with my life, and this is the only thing getting in my way. The attorney mentioned that the trustee may not want the property since I have a very small interest and it probably would be more trouble than it was worth. This, of course, is not a guarantee.

I really could use the money my sister has offered, but I am super concerned that even if I do EVERYtHING legit, the trustee will come down on me. I seem to have that kind of luck these days. Thanks again for the suggestions.

[frogger]

I really could use the money my sister has offered, but I am super concerned that even if I do EVERYtHING legit, the trustee will come down on me. I seem to have that kind of luck these days. Thanks again for the suggestions.

Provided you can document that you sold the property for fair market value and then document where the money went, you're not going to have any trustee problems.

Good luck and we're here to help you.

[aquabluesrq]

Thanks!

[Peeps]

Do you live in a state that would allow you to exempt your share of the equity in the home if you claimed BK? I'm asking because you might have an option to keep the asset safe while you claim BK. Then you could convert it to cash after your case is discharged... free of any fear about what a trustee might do. It sounds like things might get financially difficult in the interim but if you do have a way to protect your interest in the house it might give you a better "fresh start" after BK.

It's just an option and maybe you've already considered it.

Your fear of what might happen without health insurance is warranted, but keep in mind a lot of people have discharged medical debt under bankruptcy. Right now you're planning for an "if" that may never happen. Ultimately you need to do what makes you most comfortable with the process. Best wishes to you, whatever you choose to do.