Legal Question in Bankruptcy in Virginia

I need help. I mortgaged a house for a friend back in 2005. His mother (now 85) put down her life savings $250,000 and I mortgaged the rest as a favor (stupid I know, but that's not the point).

I got in financial problems an sought an attorney to declare bankruptcy, but told him that the house was for sale but the equity wasn't mine and that I didnt' want to jeopardize her money in any way should the house sell.

Now the trustee won't let us close on the house and is trying to take half of the equity to pay my debts. If he takes half of this woman's money, not only will I just never forgive myself, but how can I possibly recover it? Would I even have a case to try to sue my bankruptcy attorney to make him pay? I would have waited to declare if he hadn't told me not to worry about it.

In addition, my friends mom has every right to turn around and sue me for the other half, which WAS NOT put in the bankruptcy filing b/c of what the attorney said. Now she has no claim to the other half in bankruptcy AND I won't be able to dismiss that debt in the bankruptcy defeating the whole purpose of filing to begin with. I could just die!!


Asked on 1/28/12, 9:22 pm

2 Answer from Attorneys
Daniel Press Chung & Press, P.C.

It sounds like the friend's mother ("mom") has a decent case for a constructive trust over the property, such that you have bare legal title and the trustee would get nothing, but this is very fact-dependent and never a sure thing. If you never paid anything towards it and never used the property, it is a better case for her/you. With big money at stake, it is not surprising that the trustee is pursuing it. Mom needs to defend against the trustee's efforts (maybe agree to the sale if she wants to sell anyway and then fight over the proceeds).

As for your lawyer, two things - he may be right, and in any event you would not have a claim for malpractice because (1) the malpractice claim may also belong to the trustee, and (2) you did not suffer any legal harm because the property was not yours to begin with (unless it was, in which case the trustee is in the right).

As for mom, she should have been given notice of the bankruptcy as a co-debtor on the mortgage loan, so it should be discharged. But even if not, she will be able to file a claim if she has to surrender property to the trustee.

Mom needs to see a bankruptcy litigator asap. You should discuss these issues with your lawyer, and if you are not happy with your lawyer's advice/representation, you can certainly seek a second opinion.

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Answered on 1/29/12, 7:38 am


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