I own a condo in Florida and have some equity in it. My bills are too much and i'm going to file for chapter 7 bankruptcy. I want to extract any equity out of the home and pay back personal family debts and then file for chapter 7 bankruptcy. Does anyone know the proper procedure on attempting this. Should i divulge this to my attorney?
The Bankruptcy Court is going to check everything going back about 5 years. If you transferred large sums of money, took out an equity loan on your house, damn near anything that looks like you're trying to hide or transfer assets, your a** is going to be grass.
You cannot pay back personal family debts and not pay off your other creditors. You are going to create a huge problem for yourself with the courts if you try.
Your only option is to tell your family that you'll pay them back at some future date after the bankruptcy is over with. The courts look at personal family debts the same way they look at any other debt and you aren't allowed to show preference over debtors, e.g., pay one guy off and not pay another.
If you take any equity out of the condo, the court is going to want to know where the money is. When they find out you paid family members with it, you'll be screwed.
By the way, remember all those Enron executives that went to jail? One of the things they were convicted of was looting the company of assets just before the company filed for bankruptcy. You don't want to go there. It's a bad idea.
Another addendum: You asked if you should divulge it to your attorney. Yes, you should. And when you do, he is going to tell you that you can't do it. All property transactions, like taking out a home equity loan, have to be divulged to the court. Not to mention, taking out a home equity loan would put another lien on the house. That is public record and recorded with the county. Do you really think they aren't going to notice that you pulled the money out just before you went into bankruptcy?
