This question emerged in a Chapter 7 bankruptcy proceeding in 2017 where a man owned a home which had two mortgages. After getting married and having three children, he incurred over $60,000 in student loan debt to obtain a master’s degree. Then once his mother-in-law needed to move into their home, the man and his wife decided to purchase a second home for her instead. So should this individual been able to keep both houses?
In this particular case the Chapter 7 trustee did initial claim abuse and ask for a discharge, however, they failed to prove abuse and the courts found the same. Bankruptcy courts generally try to uncover if an abuse of the bankruptcy process has taken place by the debtor, and to prevent them from taking unfair advantage of creditors. If abuse is found, it often means the dismissal of the bankruptcy case without the discharge of any debts or in some extreme cases criminal charges. The main take away here is that no two debtors have the exact same situation and that it is important to be as clear and transparent with the courts as possible. Should the individual from our story have tried to deed the house over to his mother in an attempt to hide the asset, the courts would not have looked favorable on the Chapter 7 bankruptcy case.
Chapter 7 bankruptcy is often times called a liquidation bankruptcy. This is due to the fact that the bankruptcy trustee assigned to your case will sell the assets needed to satisfy your creditors. Even though your creditors deserve to be paid what is owed, Chapter 7 bankruptcy, in some situations, will allow you to keep certain items under predefined exemptions. Make sure to ask an Ohio bankruptcy attorney if Chapter 7 bankruptcy is right for you before attempting to file this type of court motion.