Legal Columns

BANKRUPTCY

Will Your Real Estate be Liquidated If You File Bankruptcy in the United States? 08/11/2017

People consider filing bankruptcy due to high levels of debt in the U.S., but ironically, some of these people own real estate in Korea that are of high value. In some cases, these real estate properties may be difficult to sell, it may not generate any income, their relatives and family members may be living on the property, or in some instances the parents may have transferred the property to their children’s names without the children even knowing about it.

The question of how to deal with real estate property when filing bankruptcy in the U.S. can be quite complex. In certain cases, debtors who have a lot of debt in the U.S. cannot visit Korea and also might simply give up on dealing with their real estate property in Korea. These debtors who are looking to file bankruptcy often ask the question, “What happens to my assets in Korea when I file bankruptcy?”.

Under the U.S. Bankruptcy Code, the trustee who administers and manages the debtor’s estate is supposed to have the right to dispose of all assets, wherever located in the world, of the debtor. As such, if the property of the debtor who filed bankruptcy is located in China or Korea, such property should be included in the debtor’s estate that will be administered by the trustee.

There are some cases where a debtor does not disclose the details of their foreign assets on their bankruptcy petition or to their bankruptcy attorney. However, when a bankruptcy is filed, the trustee will conduct an intensive investigation into the debtor’s assets, income and debts. If the trustee discovers any undisclosed assets, such as overseas real estate, a serious issue will arise where the trustee may suspect that the debtor is trying to conceal assets. Therefore, it is very important to reveal all of your assets rather than trying to conceal any of it.
Furthermore, just because you disclosed your foreign assets, it does not necessarily mean that all of it will be liquidated by the trustee. In some cases, the trustee may not be willing to sell it to pay off creditors. For example, in one of our recent cases, our client owned a small property with his parent’s graveyard on it. The trustee wanted to sell the property, but our attorneys put forth a strong argument to the trustee stating that the property was not worth enough to pay off much of his debts, and that it would also be a tremendous mental burden to relocate his parent’s graveyard to another location. Consequently, the trustee abandoned his efforts to try and sell the property.

Additionally, Korean courts have jurisdiction over real property in Korea. Therefore, a U.S. court or trustee cannot enforce their authority over a property in Korea without the cooperation of a Korean court. There are many instances where the Korean courts are not willing to take on additional work and cooperate with the trustee and as a result, any attempts to sell the property may be abandoned by the trustee. Each bankruptcy case is unique and requires strategy and skill. As such, it is important to consult an experienced bankruptcy attorney to accurately assess how to deal with your bankruptcy case.

If you have any questions about filing bankruptcy, please contact us at mail@songlawfirm.com.