Pre-bankruptcy considerations - re: Investors w/substantial RE holdings

Through the course of my SS business, I ocassionally bump into someone who owns not only a primary residence about to be foreclosed on, but several other properties to boot.

Property management is definitely not this person’s forte, yet the economy has been dealing a blow to even seasoned investors. Many landlords are facing challenges because of tenants losing jobs and that doesn’t mean they are poor business person, but it does create a lot more turnover!

I prefere using a Title Holding Trust to facilitate keeping nuisance liens encumbering title transfer, yet I’d really like to better understand the case law regarding investment property, bankruptcy and asset protection.

Of course, I could just refer the folks to a bankruptcy attorney but long before then, I’d like to make sure we’ve done what we could to protect assets. I hope to help them reduce stress by trying to get on top of the vicious downward spiral and at least saving a few assets.

Anyone have any recommendations for texts on the study of asset preservation techniques prior to a bk? We’re not trying to hide assets yet if one 2nd mortgage is attached to one property, and it becomes a difficiency judgment, it would be good to plan that other assets could be sheltered from the debt burden of some other property that has run-afoul of profitability.

What I already know on this case, is that each property should have/could have been held by a totally separate entity. That was these folks first mistake – keep title in their personal name and not splitting these up across multiple different LLC’s. A good treatise on the subject?

There is a 10 year clawback period for bankruptcies for self-settled trusts. All other trusts provide no protection in BK.

Convert all assets into exempt assets making sure fraudulent transfers are not a concern. Any other type of planning is fraud and will result in a dismissed bankruptcy, liquidation of non-exempt assets, and non-discharge of debt. A good way to learn what works and what doesn’t is a visit to the local law library. Start reading the bk cases.

personal guarantees bind the debts to the debtor regardless of the use of an entity.

This only works if you give up ownership and control of the property and entities. Otherwise, they are considered assets that can be liquidated to pay debts.

Staring here will give you a good overview. The site also has actual cases you can read.
http://www.assetprotectionbook.com/