Dear Bankruptcy Adviser,
Can I file a partial Chapter 7 bankruptcy, putting in credit cards and some commercial mortgages? My ultimate goal is to get a modification on some commercial mortgages. The income on the properties has fallen, and the interest rate is going up. I cannot meet the new payment. I have asked the lender to modify the loan and he will not do so. I need to know my options.
The best way to answer this question is with a story. I once received a call from a fellow attorney who was hired to collect on a judgment. The attorney learned that the individual who owed the money had sold a property and received a large amount of cash from the sale. However, soon after the sale, that individual filed bankruptcy.
My colleague asked me how this individual could file bankruptcy, yet protect all the money from the sale of the property. I said it was not likely that he could protect all the sale proceeds, especially if the bankruptcy case was filed soon after the sale. That individual would have to show how he spent all the money prior to filing bankruptcy.
The attorney notified the appropriate parties. Even though the bankruptcy case had been closed, the case was reopened and that individual is dealing with some very serious consequences.
The point of the story is to say that you do not get to pick and choose what you list in your bankruptcy paperwork. You must disclose all your assets, liabilities and many of your financial transactions. You cannot keep the good stuff and get rid of the bad. You don’t say whether you want to file an individual Chapter 7, or one for your business. However, you still would not get to pick and choose the assets you disclose.
Since you are signing a document under the penalty of perjury, the information must be accurate to the best of your knowledge.
Of course, you cannot list unknown assets. For instance, if you inherit money after filing, you may need to disclose this information, but you didn’t commit perjury at the time you filed.
The person assigned to your bankruptcy case, called a trustee, must have all the information you have available to you at the time of filing. The trustee will determine two things: if you have assets that cannot be protected and if you have the right to receive bankruptcy protection.
In some cases, there are legal and appropriate ways to protect certain assets. But the only way your attorney can assess your case and liability is by receiving all the relevant information.
In your situation, you need to know the value of all your properties prior to filing bankruptcy. Sometimes, you cannot protect much, if any, equity when filing bankruptcy. This means that some or all of the other properties could be at risk. A thorough appraisal of each property prior to filing may be prudent. Obviously, if you have been trying to sell the properties and no one has offered anything near to what you owe, appraisals may not be necessary.
I don’t want to cause panic immediately. In many cases, you could hold onto the other properties while eliminating debt. The real estate market is still very depressed and this may work to your benefit.
In short, when dealing with multiple properties, you must be very thorough. While you are legally permitted to file bankruptcy without legal assistance, when you have potentially valuable assets you need to know what a good bankruptcy attorney knows. Going blindly into a bankruptcy case could prove disastrous.
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