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Resort developer pushed in to individual bankruptcy

A wealthy resort developer from a state outside of Massachusetts has learned from own experience that even one-time billionaires can face financial challenges and mounting unpaid bills. However, in this man's case, and rather than the man filing for bankruptcy himself, one of his creditors is using a process to force him in to bankruptcy involuntarily so that the creditor gets payment.

The creditor happens to be a state taxing authority that claims the man owes tax on a loan he took out some years ago to support one of his many business ventures. He disputes that he owes the tax. The reason the taxing authority has attempted to force the businessman in to individual bankruptcy is because it wants access to a trust fund that some have suggested the man set up in order to shelter his money from collection.

While the man appears not to contest that the taxing authority can push him in to a personal bankruptcy, he is currently arguing about in which federal bankruptcy court his case must be filed.

This man's story illustrates two lessons for Massachusetts. First, although relatively uncommon, creditors may at times elect to try to put a person (or business) in to bankruptcy without that person's consent. This is a procedure called "involuntary" bankruptcy.

Second, for those Massachusetts residents who choose to file bankruptcy in order to eliminate debt, they must remember that they will not necessarily be able to keep all of their property. In this man's case, he apparently took great effort to protect his property from his creditors by forming a trust; however, at this juncture, it appears his creditors will eventually get access to those funds anyway.

Careful financial planning prior to a bankruptcy may help a debtor keep most if not all of his or her property after a bankruptcy, but in the end, a person may have to trade some of his or her property in exchange for the fresh financial start a bankruptcy affords.

Source: WZVN-HD, "Court: Montana can pursue ex-billionaire bankruptcy," Matthew Brown, Dec. 18, 2012

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