The following is a true story. (Happened probably about 15-20 years ago.)
There was a multi-millionaire real estate tycoon who had a son in some religious order. The father, wanting to help out his son, gave him outright a decent sized building in Manhattan (IIRC). The son had the building in his name with no debt on it, and he hired a management company to run it, and he was able to live comfortably off the proceeds.
Then one day the RE market went down and wheel of fortune turned on the father, and he began getting hounded by his own business creditors. So the day came, and he went to his son and asked for the building back (or perhaps only that he let him use it for collateral - I don’t recall this precisely, but it makes no difference here). He told the son that he was in temporary financial straits, and he needed access to this collateral to tide him through this difficult time, and that once he had his business turned around, he would restore the building to his son as before.
So now the son had a dilemma. On the one hand, it’s not just that it was his father asking him, but the only way he had the building to begin with was that his father gave it to him. How could he allow his father to go BK rather than give it back? OTOH, if his father was unable to turn it around, he himself would be wiped out as a result. And what’s more, he personally didn’t think his father would be able to turn it around, and if you look at it from that angle, his father would also be better off if he refused to return the building. This way, at least something would be out of reach for the creditors, and if his father went BK, he could share or return the building at that point, and something would be saved from the wreckage.
I think it boils down to the relationship, and just how rational the father is. With my father, I would describe my reasons why I didn’t think it was a good idea. But if he still asked, I would simply sign it back over to him. But I know my dad, and I trust his judgment even more than mine sometimes.
But we need to know more about this particular father.
No matter how rational the father is as a general rule, there’s no one who could be completely rational when staring bankruptcy in the face. The father is obviously going to be biased in favor of assuming that he can pull it off he got the building back.
If the situation is that dire, then the best option is probably to let the father go ahead and file a Chapter 7, discharge all his debts, and then give him the building, or otherwise help him start over. This avoids the possibility of the building being lost to creditors.
I really like the last answer. That said, a lot depends on the details. I hesitate to give a definite answer to something like this. I don’t have principals.
I’d consult with an experienced attorney and follow his/her recommendation. This isn’t a moral dilemma. It’s a financial and legal dilemma. Since I am not a lawyer or a financial whiz, I wouldn’t have any way to know which would be best.
Additionally, with as many assets as this guy apparently has/had, and buying/selling real estate, I am willing to gander that he’d be filling chapter 13 instead of 7. 13 bks can get horrifically complex.
Of course. That’s what the guy himself believed. But the problem was that his father didn’t think the situation was that dire, and therefore disagreed that this was the best option.
No, it’s a moral dilemma, but one that arose from a financial/legal dilemma. Consulting a lawyer or financial whiz is not going to help. Because the father is an experienced businessman, and intimately familiar with his own business, and is not going to be swayed by some financial or legal expert telling him he should go BK. No, he was going to continue to maintain that he could save his empire if only he had some temporary capital. And no one knows for sure that he’s wrong.
The core question is when you have a difference of opinion in this circumstance, what do you do? That’s a moral dilemma.
Here’s what actually happened: he consulted a religious leader, who advised him to give it back.
That person said that even if he was right that financially they were both better off by not giving it back, his father would believe for the rest of his life that he had gone bankrupt because his ungrateful son refused to let him have the building back after he himself had given it to him. This would create a rift in their relationship that could never be healed, and was worth more than money.
After he gave it back, the father failed to keep the business alive, went BK anyway, the building was seized, and the son left the religious order to get a real job.