Dear Bankruptcy Adviser,
We are thinking about bankruptcy due to very high debt. The problem is high interest, and the debt is just going up. We think bankruptcy is the only solution, but we have a home in Mexico that is all paid for. Our question is whether that house will be lost if we file for bankruptcy, or is that property safe?
-- Alex
Dear Alex,
This might be a tricky case, but ultimately you could receive your legally entitled protection through bankruptcy. Obviously, it is impossible for me to say whether the property is protected. I don't know what state you live in or what other assets you own, so I will give a general answer and say you ought to consult with an attorney.
When you file bankruptcy, the court assigns a trustee to review the filed documents. One of the trustee's jobs is to find assets that cannot be protected, sell those assets and pay creditors. The trustee makes money when creditors are paid. Typically, trustees get paid $60 for the majority of cases assigned to them. But every once in a while a case comes along in which assets exist that cannot be protected.
We don't want that to be your case. It is not very likely that a trustee will want to deal with the complications of selling a property outside of the United States, but it is possible.
First, make sure you are taking the appropriate actions:
Be very careful before filing your bankruptcy. You will need to determine the value of this asset prior to filing your case because the property must be listed in your petition as an asset. An appraisal is the best way to determine property value, but that might not always be easy to do. You could contact a local real estate agent in your hometown to value the property.
Another way I have my clients' handle this issue is through tax records. The tax collector likely has a pretty decent idea of what your property is worth and this information typically is filed with some agency within or near your hometown.
Be just as careful in avoiding certain actions you should not take:
If you do file bankruptcy, do not avoid listing the property in your petition. This is the best way to get into the most trouble and make the trustee want to work extra hard to dismiss your bankruptcy or go after the asset.
Additionally, do not transfer the property out of your name. This will make it almost impossible to protect the asset and could result in more trouble than it is worth.
People can file bankruptcy without an attorney. In California, about 20 percent of cases are filed without legal assistance. However, when property is involved, you ought to discuss your case with an attorney in your area. A competent attorney can advise you on how to legally protect the asset and determine its value.