How can I protect my real estate assets if my business partner files bankruptcy? 6 Answers as of January 09, 2011

I co-own a house in WA as rental property with a friend with no mortgages. The title is clear under both of our names, and my proportion is 21%. Now all my friend’s houses in CA went into foreclosure. (She hasn't filed bankruptcy yet) We didn't form any business entity, but she agrees to write a partnership agreement, and she wants to transfer her title under someone else's name in order to protect our house. Would the creditor still be able to claim the house even if it is paid already? If so, how would this affect our co-ownership? How can I protect my asset? What needs be included in our contract? Would it be any different if I am an alien?

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Mankus & Marchan, LTD
Mankus & Marchan, LTD | Tony Mankus
If your friend attempts to transfer her interest in your jointly owned property to someone else for less than full value in order to put it out of reach of her creditors, it could be construed as a fraudulent transfer and would not be legally advisable. Your 21% interest in the property should remain, even if the property is sold or transferred - provided that you have no creditors pursuing collection against you. Seek advice from an attorney or attorneys.
Answer Applies to: Illinois
Replied: 1/9/2011
Law Offices of Lady Justice
Law Offices of Lady Justice | Mona Patel
It sounds like you gave quit a few issues that would be very difficult to advise on without in depth detail. Additionally,the transfer of property to hide it from the bankruptcy trustee is violating federal law especially with the enactment of the new bankruptcy abuse prevention laws. I can not give advice on an issue that is fraudulent or a willful violation of the bankruptcy code or intent to deceive a bankruptcy trustee.
Answer Applies to: California
Replied: 1/6/2011
Greifendorff Law Offices, PC
Greifendorff Law Offices, PC | Christine Wilton
Any transfer of property by a debtor, shortly before bankruptcy may be a preferential transfer and avoided by the trustee. Be careful.

You need legal advice that cannot be effectively provided to you via an email. Your "friend" needs to consult with a bankruptcy lawyer.

Your value in the equity of the home you co-own cannot be taken; however, the home may be sold and your portion of the proceeds would be paid to you.
Answer Applies to: California
Replied: 1/5/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
She can not transfer assets with the idea of hiding them from the bankruptcy trustee. That is a crime and she can go to jail for that. You should see a lawyer ASAP.
Answer Applies to: California
Replied: 1/4/2011
Carballo Law Offices
Carballo Law Offices | Tony E. Carballo
If you own 21% of the house that will not be part of the bankruptcy estate. Just your partner's share go into the bankruptcy estate. If she cannot exempt her share of the house then the bankruptcy estate will take the house and the trustee will sell it and you will receive 21% of the proceeds of the sale. Your share is not at risk so long as you can prove that you own that share of the property. Transferring the property will do her no good and will probably do her a lot of harm including being accused of bankruptcy fraud and the transfer can be set aside by the trustee anyway. She could be denied a discharge and even face criminal charges. She will have to declare the transfer of the property in the bankruptcy petition and if she doesn't then she could be committing perjury also. There is nothing really you can do and probably nothing that you need to do so long as it is clear that you own 21% of the property. If not, then start getting your evidence together such as the source of the downpayment documents, etc. You might be able to buy your friend's share of the house from the trustee if you want to keep the house and can afford to do that. The trustee can sell the house even without your permission with a court order but you will be entitled to your share of the sale proceeds if you can prove you own 21% of the house. Whether or not you are an alien does not matter. Tell your friend to make sure she consults with a local bankruptcy attorney before doing anything. What she is planning to do as far as transferring the property before filing is very dangerous and you should stay out of it completely. If you are found to be involved in a conspiracy to commit bankruptcy fraud you will also have serious problems.
Answer Applies to: California
Replied: 1/4/2011
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    You should really consult with an attorney. Transferring title of the property prior to filing is a bad move. This can be seen as a fraudulent transfer and the court can avoid the transfer and order the property sold.

    Bottom line is that the court has the power to liquidate her assets to pay off her creditors. So, you really need to consult with someone to make sure that you are protected.
    Answer Applies to: California
    Replied: 1/4/2011
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