Addressing Special Asset Issues: Assets Shared with Others
Debts and Assets At its core, bankruptcy is about debts and assets. You are looking into bankruptcy because you need to manage your debts. Under “straight bankruptcy” this is mostly done by discharging (legally writing off) those of your debts that you can and want to discharge. Under “adjustment of debts” this is mostly done by reducing how much you will have to pay on your debts, often radically reducing how much you pay. The goal of both types of bankruptcy is to give you a fresh financial start.
Your assets come into play in getting you that fresh start. In most cases you do not need to give up any of your assets. That’s because for most people everything they own is protected in various ways, mostly by being “exempt,” legally beyond the reach of creditors. But getting to that point can be a lot more involved than may at first appear.
Your Assets in Bankruptcy When a bankruptcy case is filed on your behalf, everything you own at that time comes under the jurisdiction of the bankruptcy court. This includes not just all your tangible, physical stuff, but absolutely all your “legal or equitable interests” in property. That includes tangible property that you don’t possess (for example, a second vehicle that is on loan to a friend), property that you have a legal right to but haven’t received it yet (such a wages earned and not yet paid), and property that you share ownership in (such as your shared interest along with your siblings in a long-time family vacation home that your parents have handed down to the next generation).
The rest of this blog post focuses on this last category—shared assets. Shared Assets Most people don’t have any shared assets, other than those they own together with their spouse. If you are not married, there’s a good chance you do not have any shared assets. And if you are married, most likely you would be filing a bankruptcy with your spouse so that assets that you share with your spouse would not be an an issue.
If you DO share in the ownership of some asset, it may well be the kind of thing you’d not think about when making a list of what you own. You may never have had any practical control over it, so it may not come to mind as something that belongs to you. It may not be tangible, so you may not even think of it as being an asset at all, much less one that is partially yours.
Here are a few examples to help you make sense of this. Assets Held Jointly or in Common The vacation home mentioned above, shared among you and your siblings, is an example of an asset held jointly or in common (depending on how it was deeded to you and your siblings). Your parents may have bought the place many decades ago, and you may still think of it as theirs even if they legally gifted it to the next generation a while ago. One of your siblings may manage the financial details of the property so you may well not think you have a legal interest in the place. You may not have been able to contribute financially to its upkeep for years so that you feel whatever interest you may have had earlier has been lost. You may even genuinely not know if you do have any rights in the property and, if so, exactly what those rights would be, or what they would be worth. And finally, candidly there’s a good chance you’d rather NOT think about the situation, but instead shove it out of your mind, and so neglect to mention it to your bankruptcy attorney.
Marital Assets When Only One Spouse Is Filing Bankruptcy It’s often not easy to determine your share of the ownership rights to assets that you own together with your spouse, when you are filing bankruptcy alone. And coming up with values for your share of them can be a real headache. This gets extra interesting when that property is owned jointly with each spouse having a right of survivorship, or if you live in a community property state like Texas. This could easily be the topic for an entire blog post—or a few of them. At present we can only say that if you are in the relatively unusual situation of contemplating filing bankruptcy without your spouse, you will want to thoroughly discuss its potential effects on your marital assets.
Shared Business Interests If you’ve owned any kind of business involving someone else, or even if you owned it alone but in the form or a corporation or limited liability company (LLC), you need to be aware of your ownership share in that business and inform your attorney about it.
A Jointly Held Claim Another kind of shared asset that you can easily forget is a claim you may hold against someone for injuring you or your property, in which one or more other people share that claim along with you. For example, if you are part of a long-running class action lawsuit for potential injuries from a defective pharmaceutical drug, and are not actively involved in the lawsuit because you are not a lead plaintiff, you may well not think of your claim as an asset for bankruptcy purposes.
Conclusion The simple and most important thing to keep in mind about shared assets is to tell your attorney about them. In most situations, assets can be protected in bankruptcy. But only if your attorney is aware of them.