Legal Question in Bankruptcy in Virginia

Re: Brother's Bankruptcy

If your brother files a Chapter 7 bankruptcy in Virginia, his share of ownership of the Ontario property may become part of the bankruptcy "estate," meaning that the bankruptcy trustee could sell the property, divide the proceeds among the co-owners, and use your brother's share to pay creditors' claims. I suggest you consult bankruptcy counsel if and when your brother files.

Richard S. Stolker

301-294-9500

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Re: Brother's Bankruptcy

His interest in the account and property will be an asset of the bankruptcy estate. The trustee will have the right to administer it, either by selling his interest in the property, partitioning the property (i.e., selling a portion of the acreage if it is susceptible to such actual partition), or seeking leave of court to sell the whole property and distribute the respective shares of the proceeds to the co-owners (to do the latter, he has to establish to the satisfaction of the court that the benefit to the bankruptcy estate outweighs the detriment to the co-owners). As for the account, the trustee would be entitled to his proportionate share of the account.

Transferring the property or the account now could cause problems, as it would be a fraudulent transfer and recoverable if made within a year (and possibly more) of the filing. If in satisfaction of his debts to the co-owners, it could be treated as a preference rather than a fraudulent transfer, but it would still be recoverable if within 90 days of filing, and probably within a year of filing since you are family and thus insiders.

There may be counter arguments, such as treating the whole thing as a partnership, which may allow netting of the assets and his liabilities to the partnership, but they would depend on the facts. You should seek competent Virginia bankruptcy counsel sooner rather than later. Please let me know if I can be of assistance.