Beware the Bankruptcy Consequences of Do-It-Yourself Legal Forms

May 31, 2013

The old adage “penny wise, pound foolish” is taking a new expression in the form of legal forms. A Texas bankruptcy debtor learned this lesson the hard way in the last few months when the $10 legal form that created her living trust resulted in thousands in after-the-fact, bankruptcy and appellate court costs.

 

In an attempt to avoid probate issues for her son, the debtor sought to put her home in a living trust by using a do-it-yourself form. When she declared bankruptcy some time later, however, the bankruptcy trustee objected to her attempt to claim an exemption on an asset she did not own. Agreeing with the bankruptcy trustee, the bankruptcy court ruled that did not own her home for purposes of her homestead exemption. By her own actions, the court determined, the trust owned the home.

 

Fortunately for the debtor, the district court to which she appealed the matter found that her trust was not properly created and, therefore, never owned or controlled the asset. In the end, the debtor was able to claim the homestead exemption and hold on to her home.

 

That’s good news for the debtor, but it’s even better news for individuals trying to decide whether pre-packaged legal forms are a good idea. Be careful! While low cost, quick resolution do-it-yourself legal forms have their place, it’s important to be mindful of their unintended consequences, including how they may impact your bankruptcy filing.

 

Want to know how your prior legal actions may impact your present bankruptcy filing? The attorneys at the Dallas firm of Fears Nachawati may be able to help you. Contact our professionals today for the advice and support you need.

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