holding the deed to my parents house--what should i be thinking about?
December 18, 2013 3:07 PM   Subscribe

My parents are moving to florida (previously--they ended up in Lehigh Valley). They are also in the midst of filing for bankruptcy, and have asked that I therefore hold the deed to the new house. Help me wrap my head around this.

My parents are probably the world's least financially responsible people. My mom has not worked since the 70s, my father just retired from a job with no pension. They both get social security. My father has filed Chapter 11 twice before in his life, and will be again sometime within the next year. The original goal had been to file prior to closing on their house so they would be in the clear there in regards to their creditors. My father's attorney had advised him that his income for the past 6 months is too high to file, so they are holding off.

Their main source of funds right now is the inheritance my grandfather left my dad. They are paying for the house in cash with this money. Currently my aunt is holding this money for my dad, again, due to the massive number of creditors out for them.

So basically my aunt will be wiring the funds for the purchase, and the contract has been revised to be in my name. I will hold the deed until my parents are in a place where it can be safely transferred back to them

I have mixed feelings about this whole thing, as my parents and I have a very complicated history. I am also SUPER financially responsible and feel a bit put out--if not for me NOT being like them, what would they be doing? Me swooping in and solving their problems is a pattern that kind of brings me back to my childhood o' mess.

Putting the emotional aspects aside, I am wondering what, if any, negative implications there are for me here. This will be closing before Jan 1--what am I looking at tax wise? I am insisting they purchase homeowner's insurance so if god forbid anything happens on their property I am not liable.

My father has assured me he will pay me back for any tax/other expenses I could incur. I would like to have this put in writing. What type of attorney should I be looking for here?

My wife pointed out that there may be benefits to me as well here--since legally I will hold the asset. could I theoretically take a loan out on the house's equity?

Finally, now my parents are throwing around "well, if we transfer it back to us" as opposed to "when we transfer it back" which makes me wonder if this will turn into a longer term arrangement.

Basically, I have no idea where to begin with this, I do plan on consulting on attorney, but any info you could start me off with so I know what I am even talking about with the attorney would be very much appreciated.
posted by msjoannabanana to Work & Money (21 answers total)
This sounds to me like it might be illegal in some way, as some sort of fraud against the bankruptcy process. I'm not an attorney, but that would be my first question for one.

If the attorney says it's not illegal, my next question would be "please explain to me any and all ways this could come back to bite me."
posted by Juffo-Wup at 3:13 PM on December 18, 2013

a bankruptcy filing requires an accompanying schedule of assets. hiding assets by not listing them in the schedule is called bankruptcy fraud. ten years in leavenworth or eleven years in twelveworth.
posted by bruce at 3:17 PM on December 18, 2013 [11 favorites]

Yeah, what bruce said. I'm still not a lawyer, but a quick googling reveals that what your parents have in mind appears to involve multiple federal crimes, committed by both you and them:

posted by Juffo-Wup at 3:20 PM on December 18, 2013 [2 favorites]

It seems like they can keep their house even if they file:

If you want to keep paying on a debt after bankruptcy you can. After bankruptcy you can pay anybody you want to pay. In fact, after you file bankruptcy there are some debts you have to keep paying. For instance if you have a car, truck or house loan, even though you list the debt in your bankruptcy, if you want to keep the car, truck or house, you have to keep paying on the debt. More importantly, you need to know this: As long as you stay current on the loan and keep the property properly insured, you are protected under the law and you get to keep the property.
posted by showbiz_liz at 3:21 PM on December 18, 2013

Talk to a lawyer right away and lay all of this out for them. I will be very surprised if you get any advice other than NO NO NO.
posted by bearwife at 3:21 PM on December 18, 2013

Yeah, a quick read of any "do your own bankruptcy" book will make it very clear that this is completely illegal.
posted by MsMolly at 3:22 PM on December 18, 2013

Wait. Their new house? In Florida? Florida with the LEGENDARY homestead exemption that is enshrined in their Constitution?

This is why you shouldn't make decisions about your assets without involving your bankruptcy attorney, because it can lead to you doing some really silly things.
posted by Sequence at 3:22 PM on December 18, 2013 [6 favorites]

My parents are probably the world's least financially responsible people.

This is the only part of your question any of us need to read to know that you should not become financially entangled with your parents. Spend a few seconds thinking of all the ways this could go horribly wrong: your parents could stop paying homeowners insurance and then burn the house down and then you could be responsible for an abandoned property. Your parents could not bother to pay the property taxes, leaving you with the financial liability. As others have mentioned, this whole scheme may be illegal and certainly is sketchy as hell. Something could go wrong and lead to a lawsuit and you could be liable because you own the property. They could hire contractors to do a bunch of work and then never pay them, leaving you with massive liens on the property. Who even knows, financially irresponsible people come up with new ways to screw over their friends and relatives all the time.

OK, now that your few seconds are over realize that you should absolutely not do this. No no no no.
posted by medusa at 3:23 PM on December 18, 2013 [15 favorites]

If this sounds like what your parents want to do is hide their assets from the trustee. It's a felony. I would not help anyone is such a scheme, let alone "the world's least financially responsible people." Even if it weren't, I would not be involved in any such scheme with "the world's least financially responsible people."

I think your aunt is putting herself at risk as well. Hiding assets from a bankruptcy court is no joke. It's called Section 152.

My father has assured me he will pay me back for any tax/other expenses I could incur. I would like to have this put in writing. What type of attorney should I be looking for here?

Boy, are you asking the wrong question. Your serially bankrupt father assured all of his creditors, many of those times in writing, that he would pay them timely. Did he keep those promises? I would never lend your father a dime.
posted by Tanizaki at 3:30 PM on December 18, 2013 [4 favorites]

This is why you guys are the best. Thank you for pointing out what I was incapable of seeing. I will be getting myself to my own attorney ASAP and won't move forward unless someone can prove this is above board to me!
posted by msjoannabanana at 3:32 PM on December 18, 2013 [3 favorites]

Here's the appropriate NOLO Press page you should refer them to.

Will the trustee find property that I don't disclose in my bankruptcy paperwork?
posted by MsMolly at 3:43 PM on December 18, 2013

They are moving to Florida, you say. I think your parents can have their cake, and you will not have to eat too.

I do a lot of real estate investing in Florida. Florida has some of the strongest homestead laws in the country. Your primary residence can not be taken from you easily in Florida.

I would consult a Florida real estate attorney. Seriously. Between various laws protecting retirees (an important interest group here in the Sunshine State) and the Florida homestead laws, I think their is a very good chance that your parents can buy a primary residence in Florida and not be at risk of losing it in bankruptcy. Better for them, better for you.
posted by Flood at 5:18 PM on December 18, 2013 [1 favorite]

On top of all that, the Florida exemptions are partially or wholly inapplicable in the case of persons recently moved to the state, particularly following the 2005 bankruptcy reform law. I really have to wonder at what your parents are thinking and whether they are being advised by a competent or ethical attorney. There are definitely things you may do in exempting assets and things you can possibly do depending on your situation but also things you must never do if you have any hope of getting the bankruptcy judge on your side (note, in bankruptcy, the trustee effectively acts as a proxy for the creditors and has the responsibility to act on their behalf, but can only do so with the assent of the judge IANAL but I am managing my parents' money in a Ch13 proceeding). Personally this sounds like it falls in the latter category.

I'll just share something from our own experience. My dad formerly had a checking account in the name of the business. Even though it had been closed for over a year by the time the 341 Meeting of Creditors took place, one of the banks showed up and wanted answers as to whether that entity owned any assets that had been hidden from the court (answer: no, it was just a DBA). They must have been really keen on this as they asked two or three questions about it. So it's not even just the trustee you have to worry about -- it could be a creditor who does this sort of thing all the time (like a bank) or just one with a smart or alert (or tipped-off) lawyer.

Finally, concealment of assets as bankruptcy fraud may not have a statute of limitations that runs out, ever [eHow link]:

Under federal law, once a discharge has been denied or granted, the statute of limitations for bankruptcy law is five years. However, if the case involves the concealment of assets, then according to the U.S. Attorney General's Criminal Resource Manual, "a debtor who receives neither a discharge nor a denial of the discharge and who commits the crime of concealment of assets could have the statute of limitations begin to run on the date of dismissal or on the last day a discharge could have been granted or may have no statute of limitations at all."
posted by dhartung at 5:20 PM on December 18, 2013

Get your own lawyer to look at this and provide a written opinion. If the answer is no, you show the parents the opinion so you have something to show them.
posted by Ironmouth at 5:39 PM on December 18, 2013

I really have to wonder at what your parents are thinking and whether they are being advised by a competent or ethical attorney.

That's why you should get your own lawyer. Although my experience is that clients often attempt to decieve their bankruptcy lawyersm
posted by Ironmouth at 5:51 PM on December 18, 2013 [1 favorite]

don't do it without hiring a lawyer. who will likely tell you not to do it.
posted by jpe at 6:16 PM on December 18, 2013

Why would anybody tell you this is a good idea?
posted by oceanjesse at 8:04 PM on December 18, 2013

I do a lot of real estate investing in Florida. Florida has some of the strongest homestead laws in the country. Your primary residence can not be taken from you easily in Florida.

I do a lot of practicing law in Florida. The constitutional homestead exemption does not mean that a debtor or anyone in cahoots with him can conspire to hide assets from the trustee and bankruptcy court. That's a great way for a ticket to a resort where you can turn big rocks into little rocks.

OP, don't take our word for it. You plan to consult with an attorney. Please do that before you doing anything in this proposed scheme.
posted by Tanizaki at 8:21 PM on December 18, 2013 [2 favorites]

It sounds like you are proud of your financial responsibility--don't compromise that by aiding your parent's dishonesty. If they can't afford to pay off creditors, they can't afford to buy a house. The house money should go toward settling their debt.
posted by agatha_magatha at 9:11 PM on December 18, 2013

You wouldn't be holding the deed to your parents' house. You'd be holding the deed to your house. If you don't think your parents would be good renters -- and there's plenty of evidence they won't -- then shut this deal down.
posted by sbutler at 9:48 PM on December 18, 2013 [3 favorites]

lawyer here, but of course IANYL.

sbutler has it. the house will belong to you and your parents will essentially be your tenants.

your father's intention is to have you buy the place and keep the deed to hide assets from his creditors, so pay attention to that. it's still clearly a bankruptcy asset-concealing mechanism.

not only are you about to be complicit in fraud, you are about to buy a house you don't live near and be a landlord from however far away. are you excited to deal with maintenance issues and property taxes and pissed off neighbors? are you excited to be financially entangled with your parents again? are you excited to take a loss when the whole thing goes to shit and you sell in less than five years?

are you excited to pay legal fees to be told what you already know, which is that this is a TERRIBLE idea and you should not do it?
posted by zdravo at 6:03 AM on December 19, 2013 [1 favorite]

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