Legal Question in Bankruptcy in California

We sold our kids a home we owned and they were $50,000.00 short of qualifying. We put a $50,000.00 lien on the property in case the home was sold someday then we would get our money. The kids filed Chapter 13 bankruptcy but now have asked us to sign a Substitution of Trustee and Deed of Reconveyance for the $50,000.00 to make it easter to now file a Chapter 7. They told us they could only file Chapter 7 if we signed this form. We feel, they only want to ""not owe" us the money. Will they not be able to file Chapter 7 without us signing this form? We know they need to file for bankruptcy, they are very deep in debt. Is this even legal. Is this considered a Preferencial Transfer (gift) and would both parties be in trouble with the federal government? I realize the value of the home has significantly deceased and the money is not there, but we'd still like to keep the lien in place if possible. We fear if we do not sign the above form, the kids will not let us see the Grandchildren. This has been suggested by them. It may be time for tough love at our expense. Any information or suggestions would be appreciated.


Asked on 10/29/11, 9:27 am

3 Answer from Attorneys
Tony Carballo Carballo Law Offices

What you are being asked to do makes no legal sense. I cannot see any advantage in the bankruptcy to your kids and big problems if you do as they asked, both to you and them. Therefore, something is definitely wrong or there is a lot more to the situation than you know or understand. Hire an attorney to investigate and advice you even if you are willing to give up the $50,000 as a gift.

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Answered on 10/29/11, 1:21 pm


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