What am I allowed to do with my rental properties before filing for Chapter 7?
Question Details:
My wife and I own 2 rental properties and will be filing Chapter 7 soon to get rid of our unsecured debt (around $60K). One of our properties is on a lease-option contract, the other is being rented out. They both have very little positive cash flow and I really don't want to kick the tenants out if we lose the homes (as we've been told we will). Is there a way to legally deed these properties over to the tenants that won't get us into trouble with the bankruptcy court here in CO?
You can sell the properties for fair market value, but other than that, the answer is a very clear "no." If you transfer the properties for less than fair market value, the Trustee in your bankruptcy will sue whomever you transfer the property to, for the amount of value transferred. And it could result in a denial of discharge to you (in extreme cases).
You will only lose the properties if there is equity in them beyond available exemptions, most likely under Colorado law (assuming you have lived in Colorado for the past 2 years. You need to consult with an attorney in Colorado about your options and risks.
Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/
