Milwaukee, WI Bankruptcy Law Blog

Thursday, June 29, 2017

Can I Keep My Cabin Up North If I File For Bankruptcy?

One of Wisconsin’s hidden gems is the Northern Sky Theatre up in Door County. Their shows have a uniquely Wisconsin flavor, and one of the best of them is “Guys and Does.” The musical opens with a number called “Up Nort’” that perfectly sums up the importance of having a retreat in the woods one can escape to when life gets hectic.

A lot of Wisconsin families have such a place, and oftentimes it is a property that has been in the family for decades. If the owner of a cabin up North faces bankruptcy, handing over the keys to the place can be a crushing blow. Unfortunately, it is difficult to save a vacation property when the owner is filing for bankruptcy.

The Optics Are Bad

If you ask the average person whether someone who files for bankruptcy should get to keep their vacation home, their answer is likely something along the lines of “Heck no!” There’s just a general sense that people who file for bankruptcy should have to suffer some hardships. The bankruptcy laws passed by Congress generally reflect this.

The law generally does not distinguish between a million dollar vacation home on the Gulf and a rustic hunting cabin in the woods that has a greater sentimental value than market value.

It May Come Down To What Chapter a Filing is Done Under

Most people who file for personal bankruptcy do so under Chapter 7 or Chapter 13 of the bankruptcy code. Chapter 7 is the traditional form of bankruptcy where assets are liquidated and debts are forgiven. Chapter 13, on the other hand, provides more of an opportunity to take a pause and get one’s financial life under control through a court-supervised repayment plan.

Whether a family’s vacation home is going to be seized by the courts and sold off to pay debt, or can be saved for the next generation to enjoy depends largely on what chapter of the bankruptcy code applies.

Families that file for Chapter 7 bankruptcy are almost always going to lose the cabin. Families that file for Chapter 13 bankruptcy can often keep the cabin if they can show that it isn’t costing too much money to maintain.

The Best Defense is a Good Offense

The only way to ensure a property is not vulnerable to being taken away if one of the owners files for bankruptcy is to put the property in a trust. This is smart for estate planning purposes as well.

In order for a property in trust to be protected from bankruptcy though, the transfer to a trust needs to have happened well in advance of the bankruptcy filing. Property or other assets that are transferred in anticipation of bankruptcy are often pulled back into the bankruptcy estate.

Have Questions? It’s Time To Talk To An Attorney

Protecting the family cabin “Up Nort’” from being taken away if financial troubles arise is important. These properties mean far more to the average Wisconsin family than the typical vacation home. (Why else would there be a musical written about them!) If you want to ensure your property can be enjoyed by generations to come, it is important to talk with an experienced attorney.


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| Phone: 414-436-8428