How To File Bankruptcy: Listing Your Real Property

How To File Bankruptcy: Listing Your Real Property

By |May 31st, 2013|

This is part of our series on How To File Bankruptcy.

how to file bankruptcyWhen you file bankruptcy, a failure to list all real property you own could sink your case.

During an initial consultation, my client told me of her financial woes in great detail. Every credit card had a story, every debt an attendant nightmare.

When we got to the real property she owned, she duly told me about the home in which she lived.

We were able to save that one, but not the other one.

List All Interests In Real Property

Under the bankruptcy laws, you’re required to disclose on your schedules all real property in which you have any interest whatsoever.

That doesn’t mean you’ve got to tell the court about any property you’ve got your name on – it’s more than that. You’ve got to list:

  1. any house, cooperative apartment, condominium unit, office building, commercial property, rental property, of vacant land;
  2. in which have have any interest – legal, equitable, or future interest;
  3. no matter how it’s held – as owned outright, as a cotenant, as community property, or in which you have a life estate;
  4. no matter where it’s located – even if it’s outside of the United States or on another planet;
  5. even if you’ve got a mortgage or lien on the property.

You don’t have a choice about this disclosure, and you don’t have any options. Part of filing for bankruptcy protection is the disclosure of your assets – and real property is a type of asset.

Describing The Property

As part of the bankruptcy schedules, you’re going to need to describe the property with as much accuracy as is possible for your trustee to identify and work with it. For example, you’ve got to provide the following information:

  • description and location of the property;
  • the nature of your interest;
  • the current value of the property; and
  • the total amount of all secured claims (such as a mortgage, tax lien, or mechanic’s lien).

How To Value Real Property

The value of your real estate is the amount you would reasonably expect someone to pay for it.

Value is not the amount shown on the tax assessor’s notice. And it is not what you paid for it a few years ago.

The only way to be sure of value is to have a licensed appraiser do a full-blown appraisal on your real property before you file bankruptcy.

Sometimes you can get by with less – an opinion letter from a real estate broker, for example. But that’s a decision you can make only once you know your goals in bankruptcy and with respect to the property.

Failure To Disclose

If you don’t list a piece of real property, you lose it. That’s exactly what happened to my client.

As I mentioned, she told me about her home during the consultation. As a result, we were able to plan accordingly and protect her interest in the real property.

She did not, however, tell me about the house in Barbados. In fact, she told me in writing that she owned no real property outside of the United States (yes, I asked). We didn’t list the property, and we couldn’t protect it in her bankruptcy case.

When it came to light (as it always does), the trustee sold the house in Barbados and used the proceeds to pay some of my client’s creditors.

It would have been so much easier had she disclosed the property.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.