Bankruptcy client in Oklahoma was formerly married, and owns a home under his name only. Bankruptcy client has two minor children. Bankruptcy client met a new girlfriend. The girlfriend lives with him, but a couple years ago lost her job, needed surgery, and doesn’t have medical insurance. She’s still unemployed. He’s no longer able to support the both of them financially, and has racked up high medical and credit card bills b/c of girlfriend’s unemployment & medical problems. He has a full time job. With that said, he wants to know if he should declare personal bankruptcy as he’s having a difficult time making his regular monthly payments, in addition to his girlfriend’s bills. Some options may be a Chapter 7 or Chapter 13 bankruptcy, or even a loan mod, but I don’t know if he’ll be eligible for any of the three but Chapter 13. He also asked whether there’s an estate planning device, and in particular a revocable living trust, that might protect his home from creditors. Texas, for example, is unlimited homestead. The bankruptcy code has a look back period to determine which state exemption laws apply. Protecting assets in an irrevocable trust can be very tricky – especially if this person is already considering bankruptcy. You have to make sure any transfer is not fraudulent first and also make sure that no transfer makes the debtor insolvent. If you do it properly ahead of time, the trust you want is an irrevocable discretionary trust.
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