Yesterday, I was discussing a “Debt Relief Agency” as it is defined in the Bankruptcy Code. Part of the angst I have with the whole debt relief agency provisions is that I am – by definition – only a debt relief agencies to “assisted persons.” Debt relief agencies have certain specific obligations… but only to “assisted persons.” Before I continue writing, I’m going to take some aspirin; this analysis made my head hurt.
Posts Tagged ‘Unexempt assets’
The Peculiar Parallel of Debt Relief Agencies and Madonna
Thursday, March 11th, 2010
In yesterday’s blog, I suggested that some attorneys – namely on Craigslist – were not complying with the BAPCPA imposed requirement that they disclose that they are a “debt relief agency.” That might not have been completely fair.
Certainly, when an attorney fits into the definition of a “debt relief agency”, they must disclose that fact and are obligated to comply with additional disclosure requirements. But, if an attorney does not fit into the definition of a “debt relief agency”, may they still represent individuals in consumer bankruptcy matters? The answer is yes… and that raises some interesting questions.
Debt Relief Agencies… Part II
Wednesday, March 10th, 2010
As I mentioned earlier this week, the US Supreme Court issued a ruling upholding the BAPCPA requirement that attorneys be considered “debt relief agencies.”
So we’re clear: I did not go to debt relief agency school. I went to law school. I’m not a member of the Boston Bar Association Debt Relief Agency Steering Committee; it’s the Bankruptcy Steering Committee. I’m not a member and author for the American Debt Relief Institute; it’s the American Bankruptcy Institute. I’m not a debt relief agent. I’m an attorney.
Now that I’ve cleared the air on that, let me share with you some of my concerns with this decision and its implications.
Unintended Consequences in Estate Planning
Wednesday, July 29th, 2009
Remember yesterday when I discussed talking to your parents about their debt? I think it’s important for families to start talking. I also think it may be important for parents to speak to their adult children about debt, especially when you hear what happened to a client of mine.
My client did not know that his parents had gone to an estate planning attorney. The parents created a life estate in their home, leaving a remainder interest to their adult children. The life estate gives the parents the right to live in their home until they die, and then upon their death, the home will pass to the children without having to go through probate. The children have what is called a remainder interest. They do not have the home, but they have a future interest in the home.
This nifty estate planning tool created havoc when one of the parents’ children (my client) filed for chapter 7 bankruptcy protection. In chapter 7, the unexempt assets of the debtor are sold to pay creditors. The debtor did not list the asset because he did not know he had an interest in his parent’s home (neither he nor his then attorney asked). Since it was not known, it was not listed, and since it was not listed, the debtor did not claim it as exempt from liquidation.
The chapter 7 trustee learned about the interest presumably by scouring public records. When the trustee got wind of the future interest, he asked the court for permission to sell the interest to the highest bidder. The Bankruptcy Code allows the trustee too sell the debtor’s interest in the property: something the parents did not plan for when they were putting together their estate plan and trying to preserve their home for all of their children.
I will relay how this saga ended another time. For now, I will say that it ended up costing the debtor a lot of money, and causing the entire family anxiety that they did not need. If the debtor had told his parents that he was in debt and needed to file bankruptcy, there still would have been issues to resolve. However, both the debtor and his parents could have been proactive instead of being reactive. Rather than reacting to the trustee’s attempts to seek an order of sale, they could have taken some time to think through other options before starting the bankruptcy process. These folks never got to that point because no one in the family really talked to each other about what was going on. The parents did not mention the estate plan, and the debtor did not mention the bankruptcy, or the reasons why bankruptcy protection was needed.
It’s hard for adult parents to admit to their kids that they have financial problems, and for very different reasons, it’s hard for adult kids to have to admit it to their parents. But actions have consequences. And as this debtor, his siblings and his elderly parents learned, not talking about it can also have unintended consequences. Be proactive, and don’t let this happen to you, your kids, or your parents. Start talking.
