The games people play before they get to bankruptcy court

Everyone knows that lawyers and regular people speak different languages.

Lawyer, of course, speak legalese. And are very attuned to rules, regulations and legal implications.

Most other people speak so they are understood, and and depend on traditional and practical rules to guide them through their lives.

It turns out Kathy Cruz, a bankruptcy lawyer in Arkansas has coined a hilarious phrase for the ordinary dealings that people engage in — she calls them “generally accepted people practices,” a twist on CPA’s concept of GAAP, or standard accounting practices.

According to Cruz, these include putting relatives names on the titles to their property (or taking them off again), buying goods on credit for friends and relatives that can’t afford them on their own, and setting up secret bank accounts for relatives instead of writing a will.

None of these common practices are illegal, or even wrong, on their own, but they will really set off the alarm bells once a bankruptcy case is filed by anyone involved in these “people practices.”

When the legalese of bankruptcy law kicks in, transactions like these are all considered “transfers” in our own legalese, and need to be gone through with a fine tooth comb before a bankruptcy case is filed.

As bankruptcy specialist Cathy Moran points out, you need to go over this kind of stuff with your bankruptcy lawyer before you file a case. At a minimum, consider reviewing

* Whether you have changed the title to any asset;

*Whether you are holding anything that really belongs to someone else;

*Whether anyone has recently died and left you an inheritance you haven’t collected.

*Whether you are on the title to anything that really belongs to another;

*Whether there is anyone holding assets for you in their name;

*Whether you have you taken a loan or cosigned a loan for someone who was unable to get credit themselves;

*and whether you are on anyone else’s bank accounts.

Ironing out these common “people practices” with your bankruptcy lawyer at the start of the case rather than halfway through, will save you a lot of grief later, for sure!

 

By Doug Beaton

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