Park Ridge, IL asked in Bankruptcy for Illinois

Q: Can my Sister buy a condo and rent it out to me if I am in a Chapter 13 bankruptcy?

Basically, I am going through a divorce and need to move out. Since buying a condo would be cheaper than renting an apartment, my sister has offered to buy a condo and rent it out to me. Would this be allowed if I am currently in a Chapter 13 bankruptcy (without my spouse) or would they look at the purchase and try to claim some type of fraud?

EDIT:

The "secretly funded" is where I struggle. I just don't have the lump sum to give right now. My initial thought is to pay her rent for five years and then she could refinance to add me to title. Would this be okay?

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3 Lawyer Answers
Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: Your sister can buy anything she wants and rent it to whomever she want.

Lloyd M. Nolan agrees with this answer

Lloyd M. Nolan
Lloyd M. Nolan
Answered
  • Chesterfield, MO
  • Licensed in Illinois

A: As long as this transaction is not secretly funded by you, there is no issue. Your sister is a gem to do this for you.

W. J. Winterstein Jr.
W. J. Winterstein Jr.
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: I agree with the prior to answers. The bankruptcy rules and statutes target transactions in which "value", e.g., money's worth, leaves the debtor's estate, not where some benefit is incoming to the estate.

And assuming that you have a 5-year Ch. 13 plan, at the end of which you should receive a general discharge of all debts shown on your Schedules, or the holders of claims have been given notice of your bankruptcy and filed a proof of claim (the discharge may reach claims of creditors not listed in your bankruptcy Schedules if those creditors had notice of your bankruptcy filing, but that usually ends up in more litigation, and it is far better to check your Schedules to list everyone who even just thinks you owed them money, whether you agree with that or not, even if the amount is unliquidated, contingent or disputed).

Just one added note- keep a close eye on developments in your divorce case. Assuming that you were ordered to pay support to the ex, for spousal or child support, those amounts can be changed with a change of circumstances of either party.

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