Section 541(a)(1) Bare (Naked) Legal Title

 

Situations arise whereby an additional name is added to a title for estate planning purposes. In fact, the person that has been added might not even know their name was added; they have not given or received any proceed in relation to the title, so while the person has an interest in the title, there is no equitable interest. This is sometimes known as “bare legal title” or "naked title".

So, if the person with the bare legal title files bankruptcy, can the Trustee reach this interest in the property? Is the property part of the bankruptcy estate, thereby possibly putting the Trustee in a position to force the turnover of the property?

While I have not done an exhaustive review of bare legal title as it applies to bankruptcy, there is limited case law surrounding this topic.  However, I recently ran across a case I found interesting, United States v. Whiting Pools, Inc., 462 US 198 (1983) where bare legal title is addressed in footnote 8 as follows:

Section 541(a)(1) speaks in terms of the debtor's "interests . . . in property," rather than property in which the debtor has an interest, but this choice of language was not meant to limit the expansive scope of the section. The legislative history indicates that Congress intended to exclude from the estate property of others in which the debtor had some minor interest such as a lien or bare legal title. See 124 Cong. Rec. 32399, 32417 (1978) (remarks of Rep. Edwards); id., at 33999, 34016-34017 (remarks of Sen. DeConcini); cf. § 541(d) (property in which debtor holds legal but not equitable title, such as a mortgage in which debtor retained legal title to service or to supervise servicing of mortgage, becomes part of estate only to extent of legal title); 124 Cong. Rec. 33999 (1978) (remarks of Sen. DeConcini) (§ 541(d) "reiterates the general principle that where the debtor holds bare legal title without any equitable interest, . . . the estate acquires bare legal title without any equitable interest in the property"). Similar statements to the effect that § 541(a)(1) does not expand the rights of the debtor in the hands of the estate were made in the context of describing the principle that the estate succeeds to no more or greater causes of action against third parties than those held by the debtor. See H. R. Rep. No. 95-595, pp. 367-368 (1977). These statements do not limit the ability of a trustee to regain possession of property in which the debtor had equitable as well as legal title.

5 Ways To Avoid Debt And Bankruptcy

  

I know this article’s title is about staying out of debt and avoiding bankruptcy, but how does one get into debt in the first place? While the question may seem complex, the answer is really very simple. All it takes is a few swipes of a credit card, that financing companies are more than happy to give to you, and there you are, in debt. And to make sure you get into debt, the credit card companies will make sure to raise your credit limit if you are not already in debt.

So, what are some tricks to staying out of debt before having to look at alternatives such as bankruptcy? Here are 5 suggestions I found in a Yahoo finance post that are straight forward, but sometimes we need to be reminded when we can’t see the forest because the trees are in the way. So, anyway, here we go.

First. Use cash, use cash, use cash. That is, always use cash. The above text serves as a good introduction. Using cash will make you think twice about your purchases. It forces you to think about how much you are spending, instead of simply handing over a credit card. It has the additional advantage of not having to worry about how to pay that credit card later. It makes it much more difficult to overspend, and give you an incentive to more closely budget your money.

Second. Track spending. This obviously goes along with budgeting, but when you track your spending, you can see where you money is going, and what spending habits may need to be adjusted. It is the unnecessary spending that can lead to debt.

Third. Spending Triggers: Avoid Them. Some people spend money on things based on outside pressures. These pressures include stress, relationships, having a good day or a bad day, social pressures, credit cards, boredom, social media pressure, addiction, etc. The next time you spend on something you do not NEED, pay attention to what is causing you to make the purchase; what is behind making this impulse purchase.

Forth. Saved Payment Information: Delete It. Making electronic purchases can, in some ways, be worse than using a credit card at the store. At the store, you are at least forced to retrieve your credit card and tap, swipe or insert it to use it. When you make an electronic purchase, all you have to do is click on a button to make a purchase if your payment and shipping information is stored on the device. This currently seems to be the ultimate in impulse spending.

Fifth. Set Goals. When you are focused on a goal concerning your financial stability, or the purchase of something you need (or not need), it will help you focus on how your money is allocated. You will spend more attention to purchases, and how the purchase is either helping or preventing you from obtaining your goal.

The above is not a comprehensive list of things you should do to keep you out of debt, but it is a great start. For further advice, if you can find a conservative bankruptcy attorney in your area, that is, one that puts bankruptcy as a last case alternative to handling debt, he or she should be able to give you some excellent advise toward helping you avoid the need to file bankruptcy, and can also give you advise on things to do, and to avoid, that will keep bankruptcy as an option should you find it necessary to go down that road.

Student Loans; The End Of COVID-19 Forbearance

For those enjoying the COVID-19 pandemic forbearance on making federal student loan payments during 2021, it is time to pay attention to those payments again, as payments will start as early as February 1, 2022. If you feel that you are not ready to make payments again, you are not alone. Most federal student loan borrowers (89%) believe they are not secure enough to begin making payments again, even though they are employed, according to the Student Debt Crisis Center.

However, regardless of how you feel, the forbearance will be ending shortly. If you believe you can not make payments, you may want to see what is available. I expect there may be additional repayment programs or refinancing offers put in place to help get a handle on this crisis.

If you find yourself in this predicament, you may want to consult with a student loan advisor, or a consumer advocate attorney in your area. It is usually advantageous to be proactive in these type of situations.