Is there any way to preserve an asset in a bankruptcy that was purchased with money loaned to you by a family member?

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Is there any way to preserve an asset in a bankruptcy that was purchased with money loaned to you by a family member?

I loaned my son $1500 last year in a verbal contract to buy a piece of machinery. Now he is looking into bankruptcy and has asked me to supply a document to the effect that I loaned him the money and expect payment at a later date in order now to lose the machine.

Asked on August 31, 2010 under Bankruptcy Law, Wisconsin

Answers:

Mark J. Markus / Mark J. Markus, Law Offices of

Answered 12 years ago | Contributor

I'm not completely clear on your facts.  Him owing you money doesn't protect the asset.  The asset is either protected by virtue of exemptions available under applicable state law (usually the state where the case is filed, but not always), or if there is a valid lien against the property for the value of the property, then that would also protect it.   A lien can be created by the execution of a security interest which must be perfected under the laws of whatever state it is created in.  This must be done at the time the purchase is made.  It cannot be done afterwards and avoid being set aside in a bankruptcy case. 

Mark J. Markus / Mark J. Markus, Law Offices of

Answered 12 years ago | Contributor

I'm not completely clear on your facts.  Him owing you money doesn't protect the asset.  The asset is either protected by virtue of exemptions available under applicable state law (usually the state where the case is filed, but not always), or if there is a valid lien against the property for the value of the property, then that would also protect it.   A lien can be created by the execution of a security interest which must be perfected under the laws of whatever state it is created in.  This must be done at the time the purchase is made.  It cannot be done afterwards and avoid being set aside in a bankruptcy case. 


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