Even though you may be filing a Michigan bankruptcy, either Chapter 7 or Chapter 13, you must disclose all of your assets no matter where they may be located, including real estate and other property located overseas, to your attorney for disclosure in your bankruptcy petition.
Under penalty of perjury, you are required by Federal law to list all of your assets and all of your debts in a Chapter 7 or a Chapter 13 bankruptcy petition. All assets, regardless of location, must be valued and will be subject to liquidation by the Chapter 7 Trustee in a Chapter 7 bankruptcy, or may contribute in terms of general value toward the amount you must pay in a monthly Chapter 13 bankruptcy payment plan payment, although no assets are ever liquidated by the Bankruptcy Court or a Trustee in a Chapter 13 bankruptcy.
Why Does Overseas Property Need to Be Listed in a Michigan Bankruptcy?
When you file a bankruptcy petition, you are creating a “legal estate” containing all of your personal assets, and the location of those assets is immaterial. That “bankruptcy estate” is subject to the administration of the court via individuals called Bankruptcy Trustees who are assigned to your case by the Court upon filing. The roles of these Trustee is different, depending upon whether you are filing Chapter 7 or Chapter13, but, in essence, the bankruptcy estate is not much different than, say, a probate estate that comes into being when someone passes away without leaving a proper will or estate plan. That probate estate is subject to the administration—distributing the deceased person’s assets to their legal beneficiaries—of a probate court judge or magistrate. In a Michigan bankruptcy, the bankruptcy estate contains everything that the filing individual owns. And it is all subject to the “administration” of the Bankruptcy Trustees.
In Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, “administration” means that, if the asset cannot be “exempted,” or “protected” by your bankruptcy attorney, it will be seized by the Chapter 7 Trustee, sold off, and the value distributed to your creditors whose debts are to be otherwise discharged.
In reality, in most Chapter 7s, no one loses anything: the “exemptions” that we at The Hilla Law Firm are able to use to protect your property, whether in Michigan or elsewhere, are sufficient to protect most of what the average household posseses. And, where they are insufficient, the Chapter 7 Trustees are generally happy to work out some sort of a payment plan or settlement rather than to have to deal with actually selling the property off. However, the value of the property in “fair-market” value terms is important.
That is, what the property could actually be sold for is key. Property overseas may or may not be equivalent to the same property’s value in the United States, and the local currency must be taken into account.
For example, in one of my earliest Chapter 7 cases in Detroit, I represented a very nice elderly woman who had immigrated to the United States from Jamaica, and she still owned a home there. Further research revealed some key facts regarding this property: 1) it was government-assigned housing in a sort of public housing block (and, thus, not a mansion by any stretch of the imagination); 2) the value of property in Jamaica was significantly less than in the United States; and 3) the market for the sale of these sorts of housing units was almost non-existent. Thus, in dollar-value terms, this home was easily exempted and protected, and the Chapter 7 Trustee further showed no interest in dealing with the disposition of property in that location, as Chapter 7 Trustees must always be able to demonstrate to the Court the cost-benefit basis of any liquidation they may undertake.
But it was very important that my client did not assume that she did not have to tell me about this property. As it turned out, there was little danger of her losing it, but I needed to be able to conduct the proper research prior to filing.
In Chapter 13 Bankruptcy
As mentioned, no property is ever liquidated in Chapter 13 bankruptcy. However, we must still undertake the same disclosures of assets and the same application of the statutory exemption protections “on paper” in the bankruptcy petition. If you have property that would be lost if you had filed a Chapter 7 bankruptcy rather than a 13, the non-exemptible value of that property can result in your Chapter 13 plan payment being a little higher than it would have been had you not owned that property. Again, full disclosure ahead of time so that we can conduct the proper research and draft a quality Chapter 13 plan for you is key.
My advice to my Michigan bankruptcy clients is simple: list everything that you own. Always. If you’re not sure if it needs to be listed, list it anyway. Attorneys can only work with the information that is given with them, and it is incorrect to assume that a United States bankruptcy trustee will not be able to reach extraterritorial property. In fact, Chapter 7 Trustees in particular are very experiened and very skilled at locating property and locating a potential buyer for that property, even overseas.
If you are a considering filing a Michigan bankruptcy, please contact me at (866) 674-2317 or email@example.com to schedule a free, initial consultation.bankruptcy, chapter 13, chapter 7, michigan bankruptcy, real estate in bankruptcy
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